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Mr. Ridley : The hon. Member knows that industries thrive or decline according to their competitiveness and the way in which they meet the competition. As he knows, the textile industry has been protected by the multi-fibre arrangement to a degree that many British industries have not enjoyed. The industry has stabilised and has a good export record.

Industrial profitability is at its highest for more than 20 years. The real rate of return on assets rose 6 per cent. in 1979 to 10 per cent. in 1988. Following decades of decline, our share of the value of world trade between major industrial nations has stabilised since 1981. In some markets it has actually risen. The volume of exports was 31 per cent. higher in 1988 than it was in 1979. In the two years 1987 and 1988, manufacturing output rose by almost 13 per cent. and exports by 14.6 per cent. Output in 1988 rose more than in any year since 1973. That is a formidable performance which should not be belittled.

I know that the trade deficit is unacceptably high. My right hon. Friend the Chancellor has taken steps to reduce it. However, the causes of the deficit not in the supply side failure but in the unexpectedly strong surge in consumer demand and record imports of capital equipment for industry. Some of the deficit is to cover investment which will improve supply side performance in the future. This is a transformation by British industry which the Labour party should applaud. The hon. Member for Dunfermline, East is fond of talking about supply side Socialism. That reduced manufacturing output between

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1974 and 1979 by 3 per cent. Since then supply side Toryism has increased it by 12.5 per cent. Let us compare the two.

We have carried out an historic transfer of publicly owned enterprises into the private sector where they belong. Across industry and commerce we have removed restrictions to allow business men to make the decisions and customers to choose. Personal and corporate tax rates have been cut and public expenditure has been restrained. We have made a concerted attack on regulations which burden business. Apart from regional grants, we have almost obliterated industrial subsidies. They make for bad economic decisions. The extent of these subsidies is best seen in the external finance given to nationalised industries. In 1978-79, this amounted to nearly £3 billion. This year, it is estimated that it will have fallen in real terms by 85 per cent. Today, virtually no industrial subsidies remain. Therefore, the reduction in subsidies has been just about matched by the growth in production.

On Socialist supply side policies--

Mr. Alistair Darling (Edinburgh, Central) rose--

Mr. Ridley : I shall not give way for the moment.

The great alternative on offer from the Labour party is, we are told, a new role for the Department of Trade and Industry "to develop strategies, to identify priorities"

for industry. A new role? Does not that sound depressingly familiar? Does the Labour party remember the Department of Economic Affairs? Does it remember the National Enterprise Board? They, too, were set up to

"develop strategies and identify priorities for industry". Where did they leave British industry? Demoralised, shabby and afraid, stifled and battered by Government strategies and priorities and more and more subsidies.

Has the Labour party not learnt the lessons of the 1960s and 1970s? The only new idea is a new name for the National Enterprise Board--British Technology Enterprise. In other words, more subsidy. It also plans to create a British investment bank--not one but a network of regional investment banks. That will involve more subsidy. It intends to introduce new controls on the movement of capital to try to force investment in projects that would not justify investment on any commercial grounds. The Labour party's policy of a medium-term industrial strategy would simply lead to medium-term decline--the sort of industrial decline that the same policies caused in the 1960s and 1970s and which this Government have spent 10 years putting right.

Mr. Robert Adley (Christchurch) : All Conservative Members recognise that industry's future depends largely on industry itself. One role that the Government have to play is to assist in the provision of proper transport facilities. Can my right hon. Friend explain why, throughout the debate on the Gracious Speech, there has been no mention at all of transport? Is my right hon. Friend aware of the strength of the views of the CBI and many others that the profile of the transport debate should be raised? During his speech will my right hon. Friend deal in any way with transport policy in the absence of the Secretary of State for Transport?

Mr. Ridley : My hon. Friend knows that the Opposition choose the subjects for debate. Today they have chosen

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industry and the environment and not, I am afraid transport. I agree with my hon. Friend. Their choice shows the Opposition's undoubted lack of proper priorities.

I should like to return to subsidies. We have eliminated most of our own and are now pressing for others in Europe to reduce theirs. That is at the heart of a genuine single market after 1992. It is a central objective of the single market, and one that we wholeheartedly share, that the market should be both open and scrupulously fair. Industrial subsidy will just not be an instrument of protection for Governments in the Community.

The Labour party's policy review states that the single market will "create great opportunities" for Britain. Indeed it will, but one opportunity that it will not create will be for a Labour Government to re-erect all the subsidies and interventionist policies that they promise us. Any attempt to do so would run into deep trouble. The European Commission is working for radical cuts leading to the abolition of subsidies throughout the Community, and we strongly support its efforts. We shall join it in trying to root out open and covert subsidies on the continent which work against the principles of the single market and put British firms at a disadvantage. I have to tell Opposition Members that nationalisation is out, too. We are already very concerned about the opportunities of state- owned companies on the continent to distort the single market. We strongly support the Commission in working for greater openness about the financing of state companies. They must not be allowed to undercut the competition with their losses made up by Governments. We are also pressing for the liberalisation of public procurement in the Community and the elimination of hidden barriers of all sorts to open markets to our firms. It is simply not on for our firms to face subsidised EC competition or areas of the European market that are protected in other ways.

The Labour party is trying to buff up its Euro image. I wonder whether the hon. Member for Dunfermline, East realises that his industrial policies would lead only to the European Court. Supply side Socialism is incompatable with the realities of the single market. Perhaps the hon. Member for Dagenham has been moved on so that the hon. Member for Dunfermline, East will have the chance to obliterate from the Labour party's review the industrial policies of the hon. Member for Dagenham. He could follow the lead of the hon. Member for Dagenham who has, I note, dissociated himself from the view of the hon. Member for Copeland (Dr. Cunningham) and proposes to replace the community charge with a tax on the capital value of property and a local income tax.

For about four years I have attempted to get the Labour party to spell out the details of its policy on local taxation. The hon. Member for Dagenham has obliged with clarity and in detail. This month he said :

"Labour would look at a wide range of options some of which will be single taxes and some of which will not".

Four years later that is the degree of clarity and precision that the Labour party put to the British people on local taxation. I understand the basis for the recent recycling of the Labour Front Bench. Every time they play musical chairs, the new spokesperson drops the old policies. That is quite right, too, because the old policies are no good.

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The policy review threatens industry with a payroll tax. The hon. Member for Dunfermline, East should listen to this. The policy of the hon. Member for Dagenham would threaten industry with a payroll tax. How high will it be? On what point will it be based? What estimate has been made of the unemployment that it will cause? How much damage is it estimated that it will do to our exports? The hon. Member for Dunfermline, East has a clean sheet--I welcome him to his new duties--so perhaps his first action should be to drop the payroll tax now, as soon as I sit down.

The second area of policy where the hon. Member for Dunfermline, East must clean up the mess left by his predecessor is share ownership, on which the hon. Member for Dagenham gave a pledge. He said that the notion that provision of capital does not bring with it all the rights of ownership and control should be extended to the whole economy. Millions of people who have been given the opportunity to own shares by the Conservative party want to know the answer. Will he come clean this afternoon?

Mr. Dennis Turner (Wolverhampton, South-East) : Is the right hon. Gentleman aware that the Labour party's policy on the poll tax is that we shall abolish it?

Mr. Ridley : I think that the hon. Gentleman did not hear what I said. I was speaking about the payroll tax. Is he aware that his party intends to bring in a major payroll tax on all industrial and commercial firms? Has he asked his hon. Friends what it will be like and how much unemployment it will cause in his constituency? Why is he so shy about it? Why does he not advocate the tax?

I move on to the environment, which is quieter, safer and greener ground. The Government's proper role is, by means of regulations, to ensure that free and fair competition is not undermined, to set and enforce regulatory regimes on monopolies, to prevent abuse and to set standards that protect the consumer and the environment. The Government should secure the necessary levels of environmental protection by setting emissions standards for pollutants and ensuring that they are properly enforced. That is one of the basic principles of a free market economy.

Mr. John Wilkinson (Ruislip-Northwood) : Will my right hon. Friend spell out with more clarity some of his ideas-- [Laughter.] --for the industries of the future such as the space business in Britain? Does he regard the European Space Agency as an expensive club or as a worthwhile sponsor for important industrial enterprises?

Hon. Members : Answer.

Mr. Speaker : Order.

Mr. Ridley : It is a complicated technical issue. My hon. Friend will know that we participate in space projects where we believe that it is to the advantage of British industry and science. He will agree that we should be selective.

We believe in the effective enforcement of high environmental standards. Conservative Governments always have. It was a Conservative Government who produced the first green Bill--the Clean Air Act 1956. It was a Conservative Government who introduced in 1972 the first measure to control -- [Interruption.] --the movement and dumping of hazardous wastes. [Interruption.]

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Mr. Speaker : Order. I ask the House to give the Secretary of State a fair hearing.

Mr. Ridley : The principle of both Acts was the Government setting standards for freely competing companies. They have worked. The Environmental Protection Bill is not the first of its kind, but it is a major measure designed to tackle specific environmental problems. There is an alternative doctrine. It is the doctrine of public ownership with a vague aspiration to behave in the public interest. [ Hon. Members :-- "Rubbish."] It demonstrably does not work. The water industry is an obvious example. Until the creation of the National Rivers Authority, the water authorities were both providers of water and sewage services, and policemen for water quality standards. They struggled manfully to reconcile those incompatible roles but, not surprisingly, found it impossible to do so. In addition, the Labour party cut investment in water by half, in the public interest, and the cleanliness of our rivers and beaches declined accordingly.

Mr. Dalyell : Why did not the Secretary of State consult the chairman of the Nature Conservancy Council before deciding to break it up? He must have known perfectly well that it had offered territorial decision- making within the general framework of scientific research. There may be an answer. Could the Secretary of State give it to his parliamentary colleagues?

Mr. Ridley : I had many talks with the chairman of the NCC and we in the Government concluded collectively to make the decision which will be endorsed by the House when the Bill is introduced later this Session.

We are now putting things right. Our rivers and beaches are cleaner and the NRA will ensure that the improvement is maintained. It will have no conflict of interest. Its focus will be on improving water quality in line with national water quality objectives to be set by my right hon. Friend the Secretary of State for the Environment. That is a proper division of responsibilities. The Government set standards, the regulator enforces them and the operators comply with the standards laid down.

Mr. Paul Flynn (Newport, West) : Is the Secretary of State aware that such has been the success of the NRA in Wales that weeks after it was set up the River Rhymney which flows through my constituency was so badly polluted that all its 10,000 fish were wiped out? Calls made to the NRA could not be answered because it had a minor problem on another river. Is that what the Secretary of State calls success?

Mr. Ridley : The hon. Gentleman must give the NRA time to get on top of these matters-- [Laughter.] He knows perfectly well that if he has such a complaint he can refer it to my right hon. and noble Friend the chairman who will undoubtedly deal with it immediately. My right hon. Friend the Secretary of State for the Environment will say more about our policy for the environment and the important measures proposed in the Bill to be introduced soon.

Mr. Tony Favell (Stockport) : Does my right hon. Friend share my surprise that the British people have allowed the Government to control the water supply for so

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long? Recently I was speaking to an American from Houston who said, "You allow the Government and politicians to control the water supply? What about food?"

Mr. Ridley : My hon. Friend is quite right. I notice that no one has ever suggested that the food industry should be nationalised, because we would get the same sort of standards in that as they have in Communist countries.

The Government's objective is to improve both our economic performance and the environment. We have the right policies in place to do that job. The need now is to get on with the job. It is sad to contrast these exciting policies with the supply side Socialism of the Labour party. It wants to return to the centralised industrial policies of the sort that have failed in Eastern Europe just when the people of Eastern Europe are making it crystal clear that they want no more to do with those policies. Only yesterday, the Polish Minister for Privatisation, in a letter to the Financial Times, wrote that the Polish

"economy is in a disastrous condition, and we want to turn it into a modern market economy as soon as possible".

That is quite right because Socialist supply side policies have been a disaster not just for industry in Eastern Europe but, as is becoming increasingly clear, for its environment. We will believe the conversion of the Labour party to realism and modern policies when it appoints a shadow Minister for privatisation. Does it have to be behind the Poles?

3.21 pm

Mr. Gordon Brown (Dunfermline, East) : Having heard the Secretary of State for Trade and Industry speak this afternoon, I am amazed that the Prime Minister did not see fit to invite him to address the Tory party conference in Blackpool last month. He is the sixth Secretary of State for Trade and Industry in as many years, and each of his predecessors has one thing in common. His period at the Department has been a vital career stepping stone on the way out of government and on to the Back Benches. I accept that in this Secretary of State's case, there is a big difference. When he goes, he wants the Department to go with him. I can imagine the conversation that he had with the Prime Minister when he was appointed to his job. He was being asked to take over a Department with a troubled history which will have to deal with unfinished business over 1992 and financial and banking regulations, with all the competitive challenges of the future and with the loose ends left over from his five predecessors. Did he say to the Prime Minister, "Give me the Department and I will finish the job." or did he say, "Give me the job and I will finish the Department"?

What is the day for the Secretary of State for Trade and Industry now? No longer are there working breakfasts in the inner cities to attend, no longer early morning briefings with Saatchi and Saatchi and the public relations agencies. I accept that the Secretary of State needs no help with his image or presentation. He strides into his Department, with his private office awaiting his every word and his press office ready to broadcast his achievements, and he opens his red box. What does he find? What does he decide--another takeover not to refer, another research initiative not to support, another European industrial collaboration project not to back, another export promotion effort not to support, another golden share to give away? A whole Department devoted to doing nothing. Nothing to do, and 12,500 civil servants to do it with.

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Let me tell the Secretary of State what he should have said. He should have come to the House and admitted that he is faced with the highest interest rates, the worst inflation, the biggest trade deficit of our major competitors, a growth in output that is slowing faster than the growth in demand, a forecast growth for next year of 4 per cent. in Japan, 3 per cent. in Germany but, once oil is taken out, less than 1 per cent. in Britain, and with the failures of the present, matched by the failure even to address the challenge of the future.

What should the right hon. Gentleman have said? First, he should have said that he would learn from the mistakes of running a consumer-based and credit-based boom without adequate long-term, sustained investment to back it up, and that he would not seek to repeat them. Secondly, he should have said that he would end the exclusive reliance on interest rates which is so damaging to the industries that he is supposed to represent. Thirdly, he should have told us that he has proposed to the Prime Minister that the Government should open negotiations to join the exchange rate mechanism according to the objectives laid down by the Labour party. Fourthly, he should have said that his job is to ensure a proper balance between consumption and investment in the economy to guarantee the long-term future of British industry.

That is why the right hon. Gentleman should say that supply side measures are necessary for the future challenges that industry has to meet-- investment in research and technology, investment in innovation and in the regions--so that they can play a full part in balanced economic growth in Britain.

Mr. Adley : The hon. Gentleman has not mentioned transport either. Was it a deliberate decision by the Opposition to avoid a debate on transport? Are they worried that the hon. Member for Kingston upon Hull, East (Mr. Prescott) would frighten the viewers, or do they not think that transport has as high a priority as some Conservative Members think it has?

Mr. Brown : I shall mention some of the problems that result from congestion and the problems that have been created by the Government. The Opposition have issued a statement on the developments that we want in transport. We are more in tune with the Confederation of British Industry, which has complained about the Government's failure to deal with Britain's infrastructure problems.

The Secretary of State for Trade and Industry told us about the silver linings, but he forgot about the dark clouds on the economic horizon. He has forgotten what business men and industrialists throughout the country are saying, and have said in the past few days. At the CBI conference there were complaints about the Government's addiction to high interest rates. Mr. Harry Keeman of Carville said :

"Small businesses are waiting along the edge of the cliff with a view to the abyss below"

as a result of high interest rates. Mr. Roland Long, a member of the CBI, and not a Labour supporter, said : "Soon we will be told that manufacturing is unassailable ; then we should start worrying". Mr. Norman Record of C. and J. Clarke, said :

"What we have had"

from the Government

"is an economic fairy tale."

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Yet the Government still tell us, as the Secretary of State was trying to tell us this afternoon, that we are living through an economic miracle and that the British economy is stronger than ever. They tell us the economic miracle which they have created is for export to other countries--as if other countries would want our high interest rates and the worst trade deficit. They are saying all those things about an economy which is falling into depression as a result of the policies that they have pursued.

Our complaint against the Government is about their mistakes in their approach to industry over the past two years and the fundamental errors of the past 10 years. They have shown a lack of concern for the problems that industry has faced in the 1980s, and a betrayal of the industrial future for the 1990s.

Mr. John Marshall (Hendon, South) : The hon. Gentleman talks about the failures of the past 10 years. Will he remind the House what has happened to the inflation rate and the level of investment over the past 10 years?

Mr. Brown : In 1978, the last full year of Labour Government, inflation was at the European average. At the moment it is well above the European average.

The Secretary of State for the Environment (Mr. Chris Patten) : And investment?

Mr. Brown : The Secretary of State for the Environment asks me about investment. During the oil-rich years of the 1980s, the share of national resources devoted to investment has been lower than that of almost all our major industrial competitor countries. It has not only been lower than that in Germany or in Japan but, as a share of national income, it has been lower than that in Greece, Portugal, Spain and Turkey. That is the situation the Government have brought us to.

Having failed, during the 1980s, to invest in our future, having created an environment in which a smaller proportion of the relevant age group in the United Kingdom goes to college or university than in not just Germany and Japan, but countries such as Taiwan and Korea, and having devoted a smaller proportion of our resources to civil research and development than have our major European competitors, what are the Government creating for our economy? They are compounding their errors.

Mr. Ridley : Since the hon. Gentleman insists on painting the blackest possible picture of the British economy, can he tell us what would be the effect of imposing a payroll tax on British industry? If the economy is as bad as he makes out, that would surely make it even worse.

Mr. Brown : I shall tell the Secretary of State what we are proposing--to do what the Germans do. We are proposing to invest in training. We are proposing to gain a partnership of industry to do so. Business men and industrialists throughout the country are worried about the Government's neglect of education and training.

Mr. Richard Holt (Langbaurgh) : I am interested to hear the hon. Gentleman say that Labour would restructure industry on the German lines. Does that also mean that he would instruct trade unions to reorganise on the German lines so that we had industrialised unions and not the hotch- potch that we have now?

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Mr. Brown : I think that British trade unions would settle for the wages that are paid in Germany. The hon. Gentleman has misquoted me. I did not say that we would restructure industry on German lines, I said that we should have training on a par with that in Germany. Surely it is a noble objective for Britain, as it faces the 1990s and the 21st century, to aim to have the best skilled, best trained and best educated work force in Europe.

Mr. Ridley : Am I to take it that the hon. Gentleman is proposing payroll taxes on the level at which they are paid in Germany, which can be up to 80 per cent. of labour costs?

Mr. Brown : The Secretary of State is trying deliberately to misunderstand me. I said that we want training on a par with Germany. We will introduce measures that will enable us to move towards circumstances in which we have the best trained and best skilled work force in Europe. Is the Secretary of State saying that that objective is not worth while?

Mr. Roger King rose --

Mr. Brown : No, I shall not give way any more.

Mr. Anthony Coombs (Wyre Forest) rose --

Mr. David Tredinnick (Bosworth) rose --

Mr. Speaker : Order. The shadow Minister is not giving way, and two of the three hon. Members who are rising hope to speak later in the debate.

Mr. Brown : I am grateful to you, Mr. Speaker.

We are being left behind in training, in the application of new technologies, in technological innovation and in collaborative research. Having allowed that to happen during the 1980s, the Government's proposals in the Queen's Speech will do nothing to remedy the gaps in training, research, science and technology which have opened up with our competitors.

Mr. Donald Thompson (Calder Valley) : rose--

Mr. Brown : No, I shall not give way.

What are the Department of Trade and Industry's responsibilities? What should it be doing to alleviate the problems of British industry and to help it prepare for the challenges of the future? I have here the job descriptions of the Secretary of State and of the Minister for Industry. What do they say? The Minister for Industry has responsibility for regional policy. What policy? He is responsible for financial assistance under the Industrial Development Act 1985. The Government believe neither in financial assistance nor in the Industrial Development Act. There is responsibility here for what the Government call

"general R & D policy".

Where is that policy? There is responsibility for

"national collaborative R & D programmes".

They have had such programmes but run many of them down. There is responsibility for European research and development. I suppose that that is something that cannot be mentioned in Cabinet. It is something that is knocked down every time Ministers go to Europe. There is responsibility for industrial research establishments, such as the British Technology Group. As Ministers see it, that is a responsibility for running them down. There is responsibility also for the inner cities. Ministers believed

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that the problems of inner cities were solved after a photo opportunity or two last year. There is responsibility also, I may say, for intellectual property.

The Minister who is responsible for regional policy sees it as his job to abolish it. The Minister who is in charge of industrial policy sees it as his job to run it down. The Secretary of State, who is in charge of export credits, sees it as his job to eliminate them. It is the Department of abandoned responsibility. It is not the business which likes to say yes to people but the Department that loves to say no. That is the problem we face.

Nowhere is the problem that British industry faces--and Britain as a whole- -greater than in the trade deficit, which is now approaching £20 billion. Imports from Korea have grown since 1979 by 250 per cent. Those from Taiwan have risen by 350 per cent., and from Japan by 250 per cent. We have a trade deficit with the largest trade deficit nation in the world, the United States. We have deficits with Brazil, Argentina, Chile and Peru. We have a deficit with East Germany, Russia, Poland, Czechoslovakia and Albania. We are told that trade deficits can result from freak figures. Can trade deficits concurrently with 76 different countries around the world result from freak figures?

Fortunately, we are in surplus with a few countries. We are in surplus by £59,000 with the Cook Islands. We are £300,000, surplus with the Vatican City. We are £5 million in surplus with Bulgaria and £10 million in surplus with Andorra. Unfortunately, we have a trading deficit with all the major trading nations with the exception of Canada. New products that were invented and patented in Britain and America have been developed in Germany and Japan and mass produced in Korea, Singapore and Taiwan.

Mr. Tredinnick : Is it not a fact that many of the imports coming to Britain are in the form of capital goods that will go into industry to generate future exports, for which I understand the hon. Gentleman is arguing?

Mr. Brown : I am grateful to the hon. Gentleman for raising that matter, as it allows me to demolish another myth that has been produced by Conservative Members. The share of what are called investment and production goods in the trade deficit is exactly what it has been over the past 20 years. Another problem is that the investment and production goods that the Government describe as goods for investment rather than for consumption include headphones, microphones, burglar alarms, water meters, tailors' dummies, paper trays and hot air balloons. These are hardly goods for investment and production.

Even more worrying is that the trade deficits that we face are greatest not in our traditional industries but in high-technology industries. Nowhere is that more obvious than the deficit in information technology and electronics, which is now approaching £2.5 billion.

What is the Government's response to the problems that exporters face? It is to cut the amount of money available to the Export Credits Guarantee Department. They have threatened to privatise part or all of it over the next few weeks. They have cut support for small firms that are attending trade fairs for the first time. They have cut the availability of export services to many firms by charging them for advice and assistance in a way that has not been done before.

No other oil-exporting country has such a large trade deficit. No other major industrial nation has seen such a

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small increase in industrial output. No other country has seen such slow growth in its manufacturing investment in basic industries. No Government with such a large deficit have shown such little concern for the problems that industry and exporters face. A nation that has progressed so far over the past few centuries by its industrial efforts now has a Government whose policy is to abandon their responsibilities to industry.

Mr. Christopher Gill (Ludlow) : Does the hon. Gentleman support the claim of the unions for a 35-hour week, which would give British industry the shortest working week in the industrial world?

Mr. Brown : I believe that there should be negotiations on such issues, just as I believe that there should be negotiations that lead to a conclusion of the ambulance dispute.

Let us consider some of the detailed problems that industry faces. Even when the market has failed in the business of research and development, even when other countries are spending far more, even when companies, business men and industrialists are begging the Government to introduce schemes that will assist the business of collaborative and national research and development, even when people in the most modern industries, such as microchips, are saying that the Government are forcing them to act with one hand tied behind their backs, what do the Government do? They have ended support for the fibre-optics research and development scheme, they have closed down the opto-electronics support scheme, they have even begun to close projects that they started after 1983, such as the micro- electronics support scheme, and they are now trying to prevent a European collaborative programme in the most advanced technologies.

Mr. James Hill (Southampton, Test) rose--

Mr. Brown : I have given way several times, and I wish to continue with my remarks.

What budget does the Secretary of State propose for his Department? He intends to cut the money available for research and development so that we face the 1990s with fewer Government resources for future technology and new research and development than any other advanced industrial nation in Europe.

Mr. Hill rose --

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