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Mr. John Maples (Lewisham, West) : The hon. Gentleman said that part of the Labour party's policy for reversing the balance of payments deficit would be to negotiate to join the exchange rate mechanism of the European Monetary System. At what exchange rate does he think we should join?
Mr. Brown : The exchange rate that is best at the time for British industry. Does the hon. Gentleman expect the Chancellor to tell him what the right exchange rate is at the moment? I am talking about a negotiation- - [Interruption.] The hon. Member for Lancaster (Dame E. Kellett- Bowman) should take this problem a bit more seriously. I am talking about a negotiation to enter the European monetary system, out of which will come the proper rate that is best for British industry. But an exchange rate that moves from DM3.20 to DM2.60 and then to DM2.80 is not what British industry wants.
After 10 years of this Government, after the £65 billion which the Government have had in oil revenues, £23 billion from privatisation sales and another £20 billion from land and other sales, after all the promises, all the claims, all the boasts that our problems would be solved, and after all the sacrifices that the people have made, people ask why it is Britain, not our competitors, that has the biggest trade gap, the worst inflation and the highest interest rates. What sort of transformation is it when we see inflation at 3 per cent. in Germany, 3.5 per cent. in France, 2 per cent. in Japan and moving towards 8 per cent. in Britain--higher than any of our major competitors? Yet it was Britain that was promised zero inflation by its Government.
After all these years, when we have had all these claims of an economic miracle, Germany is growing by 3 per cent., France by 3 per cent. and Japan by 4.5 per cent. this year, but we are lucky if we are growing by above 1 per cent. What is the excuse, when Germany has an interest rate of 8.5 per cent., France 11 per cent., Japan 7.5 per cent., but we in Britain still have 15 per cent., after months of sacrifices by millions of home owners hit by rising mortgages and thousands of small businesses squeezed by high interest rates? Yet it was Britain that was supposed to be enjoying an economic miracle. How, after 10 years, can we explain this failure?
I have here an important speech which was made last Tuesday but which the Government machine seems to have overlooked--a speech by the Leader of the House, made possible by the terms of his new position as deputy Prime Minister, which gives him the time, and indeed the solitude, in which to reflect on past errors. What does he say in this speech, in this barely audible voice from his
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internal exile? What is he trying to tell us in this account of a day, or perhaps just an hour, in the life of Geoffrey Denisovich? He asks"why, after 10 years, there are trade deficits."
He says :
We need to ask why in some very basic, low-tech fields, let alone high-tech ones, there are trade deficits that really do not need to exist."
Worse still, he presumes to answer with a confession : because we have paid insufficient attention to manufacturing industry. Manufacturing industry, he says, needs
"more priority, socially and economically".
He goes on :
"We need to place success in manufacturing higher on our national scale of priorities."
He says that manufacturing
"is an indispensable dynamo of a successful modern society." He goes on to say that we need Britain
"enhancing its manufacturing fire power in every sector" and that improvement in the manufacturing balance is
"a key part of the task ahead for the nation."
Mr. Phillip Oppenheim (Amber Valley) : No doubt the hon. Gentleman is aware that manufacturing output has increased under this Government. Would he also confirm or deny that, during the course of the last Labour Government, manufacturing output fell?
Mr. Brown : The hon. Gentleman seems to forget that growth overall, taken year by year, on average was higher under the last Labour Government, even when we were faced with major oil problems. If the hon. Gentleman wants to talk about telling the truth, let me remind him of what he said to his electorate in Amber Valley in 1987 : "The Conservative Government has put an end to fast rising prices once and for all.
I return to the speech of the deputy Prime Minister. In October, when he addressed the Conservative party conference he talked about the importance of manufacturing ; in January, he criticised our manufacturing failures ; now, in February, he calls for a manufacturing strategy to innovate, invest and internationalise. Three times now, he has denied the Prime Minister, not a bit for the spot to be vacated by the Secretary of State for Wales, but a speech of penitence. The leading zealot of the first wave of the Thatcherite revolution is reappearing 10 years on as an embittered dissident. After some blinding revelation, there was an astonishing conversion somewhere on the road to Dorneywood. There is no longer an economic miracle, a supply-side transformation or a trade deficit of no consequence. After 10 years, there are no longer any answers from the deputy Prime Minister, there are no solutions, only questions. Where there was certainty, there is now confusion ; where there were promises, there are now excuses ; where there was truth, there is now admission of error ; where there was hope, there is now disillusionment ; and where there were answers, there are now only questions.
Where do the Government stand now, with the Secretary of State for Wales clearing his desk? The last remaining supporter of an industrial strategy in the Cabinet is now preparing to leave the Cabinet to spend more time with his family. The former Secretary of State for Employment called our training failure mind-boggling, and then quickly left to go back to his family. Now even the deputy Prime Minister is semi-detached. Who are left carrying the torch onwards? The Secretary of State for Trade and Industry and the Prime Minister, the last two
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survivors of the glad, confident morning, are now the last devotees of a threadbare faith, the Darby and Joan of the last faltering months of the Thatcherite revolution tottering downwards towards the sunset and their inevitable fate. Yet those are the people who told us they had created an economic miracle.What does the Secretary of State for Trade and Industry propose now? When the nation believes that he has gone too far, he is still seized of the view that he has not yet gone far enough. We should remember that the Secretary of State for Trade and Industry came to his Department with something of a reputation as the author of what used to be called the flagship policy--the community charge--and as the Minister who advised the nation that if they wanted an alternative to tap water they should drink Perrier.
What does the right hon. Gentleman's Department propose when businesses are going bankrupt at a very fast rate; when there have been more redundancies and closures in the past weeks than in many years of the 1980s ; when businesses are reeling from what the Government admit in official figures is a 67 per cent. increase in interest rate charges facing businesses, with winding-up petitions reported to the Lord Chancellor for the last quarter up by 46 per cent.; and on top of that, there is a long-term investment gap facing our country?
Even with North sea oil, we are investing a smaller share of our national income in ourselves than most of our competitors over a decade. The training gap has grown, with more young people leaving school early without qualifications. There are more people in our work force with no major qualifications. There is a research gap and a regional gap, with the economies of the north growing at half the rate of the economies of the south.
What does the Secretary of State for Trade and Industry propose? Instead of helping to bridge the regional gap, there will be a 26 per cent. cut in regional and industrial support, which will fall by £100 million to 1993. Instead of helping to bridge the innovation gap with our competitors, there will be a 4 per cent. cut in support for industry, including innovation, which will fall by £30 million to 1993. Instead of helping to bridge the research gap, there will be a 23 per cent. cut in general industrial collaborative projects, a 10 per cent. cut in advanced technology programmes, and a 3 per cent. cut in the research and technology organisation programmes. Instead of acting as a partner with industry to bridge those gaps with our competitors, there will be cuts in the Department of Trade and Industry budget totalling 27 per cent.
The right hon. Gentleman has been running down his responsibilities, with the ultimate goal of creating the first Department in British history devoted to doing absolutely nothing. Sunrise industries are looking in vain for help from that sunset Department, which is not so much open for business, in the language of his predecessor, as subject to a closing down sale.
We have a Secretary of State who believes genuinely that it will be better for industry when the last civil servant refuses the last export credit to the last struggling manufacturer in the land. It is the invisible hand guiding the invisible Department. It is not only a Department that does nothing but a Department with an ideological commitment that nothing shall be done. He is a Minister with more of a past, I am afraid, than a future. Nothing suggests the short-termism of his Department--
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The Secretary of State for Trade and Industry and President of the Board of Trade (Mr. Nicholas Ridley) : The last thing I want to do is spend more time with my family-- [Interruption.]Mr. Brown : I do not know whether that is a promise or a threat. With the experience of the Secretary of State for Wales and that of the last Secretary of State for Employment, I was beginning to believe, until the right hon. Gentleman spoke, that the Conservative party had become the party of the family.
Mr. Thomas Graham (Renfrew, West and Inverclyde) : Is my hon. Friend aware that the people of Scotland would like the Secretary of State to spend more time with his family? Is he further aware that, in the working men's and unemployed people's clubs, the right hon. Gentleman is known as a Minister who works like two men, Laurel and Hardy?
Mr. Brown : If the Secretary of State wishes to stay on, I am sure that the electorate will shortly disappoint him. Nothing suggests the short -termism of his Department better than the right hon. Gentleman himself. Last year, it was the Water Bill. Next year we shall have the water colours. He is a Minister here today, his Department gone tomorrow. He is totally oblivious to the immediate problems that industry faces with high interest rates.
When the whole nation outside the Cabinet--and even the deputy Prime Minister, it seems, inside it--recognises that the trade deficit is a problem ; when the consensus is that an industrial strategy is required ; when the capacity of our industrial base is an issue causing increasing concern ; when there is a clear need for a budget for industry ; when the CBI is telling the Government to put investment before personal tax cuts ; and when the Engineering Employers Federation and others have a joint budget submission demanding that attention be given to the problems of industry, our complaint against the Government is not just that they preside over the highest interest rates, the worst inflation and the biggest trade gap of our major competitors. It is not only that to have a consumer boom without adequate sustained long-term investment in our capacity was bound to be unsustainable and lead to the problems that we now face, sucking in imports, causing pressure on interest rates and creating inflationary bottlenecks. It is that, worst of all, the Government have no policy for Britain other than to repeat the mistakes that they have already made.
We are talking about a do-nothing Budget this year, a give-away Budget next year, another expansion of credit, another short-term consumer boom and another Lawson boom under a different name, but again, all without the necessary investment in training, research and capacity. It is a do-nothing year--merely an interval between making the mistakes and repeating them. We have a Government who do not respond to the economic cycle now but are dominated by the electoral cycle. When we need a Budget for skills, for technology and for investment to build for the future rather than to paper over the cracks of the present, our fear is that we shall be subjected to a Budget not to invest for the nation for tomorrow but simply to tide things over for the Tory party today.
Let us consider the problems that anybody charged with responsibility for the industries of this country should address--first, research and development. When Britain already spends only half as much a year on civil research
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as Germany and France, when we have half as many scientists pro rata in our work force as Japan and Germany, when market forces have clearly failed to produce the goods in the last 10 years, and yet when in Britain the Government are spending half what the Germans spend on innovation, with a smaller share of our national income being spent for that purpose than in France, Denmark, Italy and the Netherlands, what have the Government done?The Government have abolished the micro-electronics support programme, the opto-electronics scheme and the single industry support schemes, they have cut support for innovation which, according to The Engineer magazine, has "fallen sharply" in electronics and in information technology, and even last year, they spent less than they promised to the House. They spent only £440 million instead of £510 million. There is less and less and less under this Government. If we could not succeed in many of the newest industries in the 1980s with minimal support, how are we to succeed in the new technologies of the 1990s with next to none?
The same is true of the regions. When unemployment rates in the north are still twice those of many regions in the south, when, even on the Government's own indicators, only 20 to 25 per cent. of the extra small businesses have come to the northern parts of the country, when only 30 per cent. of venture capital is coming to the north as well, and when high- technology employment has fallen in the regions, except Wales, what do the Government do? They cut spending further and further on regional development support. They even spent less last year than they said that they would in the published figures. They refuse to listen to the sensible demand coming from the regions that there be effective development agencies and enterprise boards to create new opportunities and technologies.
Mr. Roger King (Birmingham, Northfield) : Will the hon. Gentleman solve a problem for me? He has mentioned regional development and regional aid. One way to establish that aid is to have an adequate road system. The Government have pledged themselves to improving our road system and the CBI has asked for that in its document "Trade Routes for the Future". The Government have adequately funded a road system programme, revolving over 10 years, at a cost of £12 billion. Why is it Labour party policy, as laid out by the hon. Gentleman's hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott), to abandon the "crazy" road spending programme?
Mr. Brown : I fear that the hon. Gentleman deliberately seeks to misunderstand what my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) says. My hon. Friend has drawn attention to yet another imbalance in the Conservative party's approach to the affairs of our nation. The Government refuse to invest in rail in the same way as they invest in roads. We want to achieve a proper balance in our infrastructure.
When I talk about the importance of regional policy, Conservative Members would do well to take into account the fact that railways are extremely important to the development of the regions, as is investment in new technologies and in training. We must ask ourselves whether the Germans are cutting their industry budget,
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whether the French are cutting their export services or whether the Japanese are cutting support for new technologies.Is it not the case that all those countries are investing in the future in a way that this Government, by abandoning the responsibilities that the Department of Trade and Industry has traditionally undertaken, are not doing? We need assurances today from the Secretary of State, and I hope that he will give me specific and precise answers to my questions.
Will the Secretary of State guarantee that regional policy is not to be further dismantled on the road to being abandoned? Will he assure us that support for innovation will be no worse than in Germany, Italy, France and our other European competitors? Will he tell us that Britain will secure its share of collaborative funds for research and development? Will he assure us that there will be no further rundown, rationalisation or privatisation of the Government's responsibilities to industry? Will he tell us that he will introduce no further export charges for advice and support, because they debilitate the attempt of industrialists to succeed in the export markets?
What of exports, so important to the future of this country? What of the new trading opportunities before us in eastern Europe? The Hungarians, the Poles, the East Germans and the Russians are asking for information technology and we send them the hon. Member for Wokingham (Mr. Redwood). The East Germans ask for up-to-the-minute technical know-how and we send them the Earl of Trefgarne. The Poles and Hungarians are asking for farming technology and we are sending them the Minister of Agriculture, Fisheries and Food.
Later this year, the Americans will give billions of dollars in new aid as part of a package. The French are buying into major enterprises, and the Germans are sending trade missions, often involving the whole boards of major companies. In the next few weeks, the British are sending them the Secretary of State for Trade and Industry.
Is it not tragic that, just at the moment when we should be considering how to build trading links to last over the years, we seem more interested in exporting dogma than goods and services? Where we have deficits, not only with western Europe but with eastern Europe, surely it makes no sense to cut export services, to cut the Export Credits Guarantee Department, to cut many of the services that, traditionally, have been performed by the Department of Trade and Industry, and to charge businesses that can ill afford to pay because of high interest rates.
At the end of almost 11 years of this Conservative Government, the best that we can hope for is that inflation will fall to about 6 per cent. at the end of the year--although the Government used to promise that it would come down to zero. The best that we can hope for is a trade deficit which, we understand from official figures, will be about £15 billion-- something unheard of before this Government came to power. The best that we can hope for is that interest rates will slip down by 1 or 2 per cent.--but they will still remain the highest among our major European competitors.
During these past 11 years, the Government have failed even to address the long-term problems that they claimed to have conquered during the first five-years. They have squandered £65 billion of oil revenues with no thought of tomorrow. That is the meaning of short-termism.
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What will be their excuses now? They cannot say that they need more time, because they have already had 10 years. They cannot say that markets alone will deliver the goods, because for 10 years they have not. They cannot say that they are the victims of international economic problems, because our competitors have had to face the same problems and many have done better. They cannot blame the burdens of interventionism, because it is lower in Britain than in other countries. They cannot blame an over-regulated labour market, because they claim to have led the way in deregulation.Who is left to blame--the Churches, Brian Redhead, the left-over intellectuals of the 1960s, the Archbishop of Canterbury or the West Oxfordshire Eighteen? The truth is that, having blamed everyone else, the Government have no one left to blame but themselves.
Our complaint is not simply that, for more than 10 years, the Government have been unfair and unjust--charges that may not especially concern them ; it is that, on the economic issues, on which they asked us to judge them and for which all the sacrifices have been made, they have been hopelessly inefficient and terminally incompetent. All that is left are the short-term electoral expediencies of short-term Ministers in a Cabinet dominated by 10 years of short-termism--thankfully, with only a short term to go. They are running out of oil, they have run out of ideas and they have even run out of excuses. Now time is running out for them.
4.38 pm
The Secretary of State for Trade and Industry and President of the Board of Trade (Mr. Nicholas Ridley) : I beg to move, to leave out from "House" to end of the Question and to add instead thereof : "congratulates Her Majesty's Government on policies which have achieved the highest rate of economic growth in the European Community, the largest increase in manufacturing productivity of any major industrial country, and record levels of industrial output, investment and exports ; welcomes the continuous fall in unemployment for 42 months, and the creation since 1983 of nearly three million jobs in the United Kingdom ; and commends the resolve of Her Majesty's Government to bear down on inflation and to continue with the supply side policies which have contributed to these achievements."
I rather enjoyed the speech of the hon. Member for Dunfermline, East (Mr. Brown). It was a good Dunfermline high school debating society effort, but it did not contain a grain of Labour party policy. I advise the hon. Gentleman to spend more time with his family, because he is wasting it here. His ignorance was demonstrated by the advance notice of today's debate which he tabled last week, in which he referred to the balance of payments deficit. He should know that payments balance, so there cannot be a deficit on the balance of payments.
The hon. Gentleman based the debate on one month's trade figures. How often has it been said by Ministers of all parties that one month's figures are of little value as an indicator of trade performance? It is the trend that matters. The total value of our overseas trade each month--visible and invisible--is about £35 billion. So purely random movements of 2 or 3 per cent., which are common, can move one month's current account balance either way by many hundreds of millions of pounds. These random movements tend to cancel each other out over a long period, which is why it is the trend that matters.
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Moreover, single consignments can distort a whole month's figures. The hon. Gentleman referred to the erratics. I think that he got it right : the quotation from the dictionary referred to geological oddities of a bygone age. Curiously enough, in this case they are. They are diamonds which are re-exported at considerable profit to the country. In January, 400 million-odd were imported.The monthly figures, which cause the hon. Gentleman such glee when poor figures are first published, are subject to considerable revision when more complete information becomes available. For example, the originally published December deficit of £1,100 million, which we regarded as unnaturally low at the time, has now been revised down to £800 million. Perhaps that will convince the hon. Gentleman of the folly of constructing an elaborate edifice on one month's figures. He is keen to run Britain down when the figures appear bad, but he is not to be seen anywhere when they are revised upwards and show a better picture.
I return to the trend, which is healthy. Export volume in the last three months, excluding oil and erratics, was 4 per cent. higher than in the previous three months, while import volume was 1 per cent. lower. Compared with a year earlier, there is an even more striking result : export volume is up by 11 per cent. and import volume is up by only 2 per cent. There is no doubt, on the basis of those figures, which the hon. Gentleman is not listening to, that the trend of both exports and imports, including the January figures, is firmly in the right direction.
The Opposition may not like it if I give too much good news, but the value of our visible exports in 1989 was 14.4 per cent. higher than in 1988. Among the high spots were a 95 per cent. increase in exports of telecommunications equipment to the United States and a 75 per cent. increase in exports of road vehicles to Japan, to more than £150 million last year. That is a turnabout. Exports of road vehicles to all destinations increased by 33 per cent. Exports of iron and steel since privatisation rose in value by 36 per cent. My right hon. and hon. Friends will note with satisfaction that excellent evidence of rapid recovery in three major industries which were mutilated by the interventionist policies of the right hon. Member for Chesterfield (Mr. Benn) in the 1970s.
I fear that I have to disappoint the hon. Member for Dumfermline, East. Mr. Ian Taylor (Esher) : The figures that my right hon. Friend has given of the improving trend of exports as against the fairly static level of imports surely justify the conclusion that the country had a problem not because of competitiveness but because of the surge in demand domestically. Therefore, that entirely justifies the Government's policy of increasing the cost of money to bear down on demand.
Mr. Ridley : My hon. Friend is right, unlike the hon. Member for Dunfermline, East. The problem is that, great though the increase in production is, the surge in demand has overtaken it.
I fear that there is more good news. It looks as if the encouraging trends will continue, both in exports and in imports. In 1989, our exporters almost certainly increased their share of world trade, despite what the hon. Gentleman alleged. The prospects are good for expansion
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of the volume of world trade itself. The Industry Act forecast last November predicted that the volume of world trade would expand at the healthy rate of 5 per cent. in 1990, with the volume of world trade in manufactures expanding at 6.5 per cent. If our exporters maintain or increase their share of world markets, as they are doing, that will mean further healthy export growth. Export order books are good and are growing. Export opportunities will grow even more rapidly if we have a successful conclusion to the Uruguay GATT round, a topic which the hon. Gentleman has never mentioned. I do not think that he even knows about it.Mr. Giles Radice (Durham, North) : When the Government came to power, there was a balance in manufacturing between exports and imports. In 1989 there was a £17 billion deficit. How does the right hon. Gentleman explain that? Does it matter? If it does, what is he doing about it?
Mr. Ridley : The hon. Gentleman missed the fact that, in the early 1980s there was a considerable surplus. For one of the very few times in our history, we had a surplus of visible trade, excluding oil. These matters go up and down according to the success of industry, and we can now see the growing success of British industry which I have described.
Against those successes, and against the huge opportunities for us to trade in the world, the hon. Member for Dunfermline, East excelled himself in an article in The Mail on Sunday 10 days ago. He said that the solution for us all was to rush to eastern Europe and supply British high-quality consumer goods to the inhabitants of those poor countries so recently delivered from Socialism.
My first question is, why has Socialism not already delivered the goods? Surely it should have been supplying everyone with all the lovely products resulting from state intervention, state investment banks, nationalisation and national plans. The best thing for the hon. Gentleman to do is to hope that we will all forget that eastern Europe adopted the very policies that he advocates. If hon. Members want to see planning in action, they should go and stand in a bread queue in Bucharest, or put their names down for a telephone in Warsaw. Then they will see the results of policies like those of the Labour party.
The hon. Gentleman had the grace to admit in that article that east Europeans have no hard currency to pay for our goods--another first for Socialist economics. But he had an answer for that, too : it came to him in a flash of inspiration--barter. They could pay in radishes and raspberries, sauerkraut and slivovitz.
We have been trying to do barter trade with the eastern bloc for 20 years, which is why our trade with all those countries amounts to less than 2 per cent. Is that really all that the hon. Gentleman can suggest--to go back to the mediaeval system of barter, with failed Socialist economies? Or is it a forlorn attempt by him to exonerate the failure of Socialism in eastern Europe? I know that he does not like it, but he might as well take it. Those of us who have been here for a few years remember Lord Callaghan telling us in 1960 : "I have not the slightest doubt that the economic measures and the Socialist measures which one will find in countries of Eastern Europe, will become increasingly powerful against the uncoordinated, planless society in which the West is living at present."--
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[Interruption.] As some hon. Members were shouting and may not have heard that, with your permission, Mr. Deputy Speaker, I will repeat it :"I have not the slightest doubt that the economic measures and the Socialist measures which one will find in countries of Eastern Europe, will become increasingly powerful against the uncoordinated, planless society in which the West is living at present."--[ Official Report, 15 December 1960 ; Vol. 632, c. 679.]
The noble Lord has become an older, wiser man. I hope that he will teach the hon. Gentleman the lesson that people in eastern Europe have learnt : Socialist economic policy results in economic disaster.
Our efforts here are directed towards helping the economies of eastern Europe to move towards a proper market system based on hard currency, private ownership, no plans, no intervention, and proper market pricing. The way for us to help is through major private investment. This is the message that my Ministers and I shall take to eastern Europe in our travels, and we shall be taking teams of senior business men with us to show how British industry can provide the practical help that Eastern Europe needs. Barter, my foot!
Mr. Bob Clay (Sunderland, North) : If the Secretary of State is advocating no plans, no intervention and plenty of investment, can he explain why his Department and unelected officials in Brussels have, between them, refused to allow entirely private investors to buy shipyards in Sunderland so that they might build ships that are required and for which there are orders? These people are themselves shipowners and would require no state subsidy whatsoever. Will the Secretary of State explain why his Department intervenes only to prevent people in the private sector from investing in shipbuilding in Sunderland?
Mr. Ridley : The hon. Gentleman should address that question to the European Commission, which, quite rightly, seeks to enforce the agreement with us to make it possible to aid the hon. Gentleman's constituency through the enterprise zone and many other measures. These measures have been of far more value than would be the enterprise with which the Commission insists we do not proceed. As I have said already, the trade deficit is the result of demand in the economy being in excess of productive capacity. Measures taken by my right hon. Friend the Chancellor of the Exchequer to curb excessive demand are working. This is clear from the trend in retail sales and in house prices. The slackening of demand is already reducing the growth of imports, and will continue to do so. The Industry Act forecast predicted that 1990 would see a continued fall in the rate of import growth. That, too, is being borne out. Industry is expanding and will have room to export more.
The trade deficit is still too high--there is no argument about that. But the deficit, high though it is, is not a sign of industrial weakness ; it has arisen because demand has been growing even faster than production. Because they love to knock British industry, the Opposition, in the face of the evidence, cling to the allegations that the deficit is the result of weakness on the part of our industry.
So how is our "unco-ordinated, planless" industry doing? Manufacturing output is at record levels. Since 1981 it has risen by 32 per cent., not the 17 per cent. that has been quoted. In the period 1986-89, the volume of manufacturing output alone increased by 19 per cent. That
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is not evidence of manufacturing decline. Nor do I take any lessons on the subject from the representative of a party whose last period of office saw an actual fall in the volume of manufacturing output. Productivity in manufacturing industry in the United Kingdom has risen by almost 60 per cent. since 1980. That represents a rate of growth unmatched by any of our major industrial competitors, and certainly unmatched by any planned or co-ordinated Socialist Government anywhere. It is in sharp contrast with our record in the previous 20 years, when we were at the bottom of the league table for manufacturing productivity growth. In the early 1980s, there was an overdue correction of the heavy overmanning that had been brought about with the encouragement of the Labour Government, but in recent years a continuing strong improvement in productivity has gone hand in hand with an expansion of production. Could any of the credit for this be due to the Government's supply-side policies?Mr. Graham : When the Secretary of State goes to eastern Europe, will he tell the regimes there that half of Scotland has lost more than half its manufacturing jobs since this Government came to power in 1979? In Strathclyde alone, more than 166,000 manufacturing jobs have been lost under the jurisdiction of this Government. That is an indication of the planning that will denude Scotland further and further until it is just one big estate for game hunting by the rich.
Mr. Ridley : I think that if I were to tell, say, the Poles what the hon. Gentleman has asked me to tell people in eastern Europe, they would be rather shocked. It is likely that the rates paid to people in Scotland who are on benefit are higher than the industrial wages paid to many people in Poland. The hon. Gentleman has no idea how lucky he is. Unemployment in Scotland is very low compared with previous figures, simply because so many new jobs have been created. [Interruption.] I did not say that. I said that those on benefit are probably better off than people in Poland who are in full-time work. The decline in the profitability of industry through the 1970s was both a symptom and a cause of its difficulties. That trend has been decisively reversed. By 1987--the most recent year for which firm figures are available--the rate of return in manufacturing had recovered from 4 to 8 per cent. There is little doubt that it has risen further since, and it now stands at a level not seen since the 1960s. This enables three quarters of the funds for capital investment to be found from internal resources, thus enabling companies to invest despite high interest rates. Good profits help firms to raise more money through the stock market for investment. The "unco-ordinated, planless" industry that we have has also had record investment. Opposition Members always lay great stress on investment. I suspect that the volume of investment is often of less significance than its quality and the efficiency with which it is exploited. Nevertheless, investment trends are also very encouraging. In the last seven years the growth of investment in the economy as a whole will have been twice as fast as the growth in consumption. Business investment has grown by 40 per cent. in the last three years alone. Manufacturing investment grew by 12 per cent. in 1988 and by 5.5 per cent. in 1989, and now stands at a record level. It takes a considerable amount of misplaced ingenuity to portray that record as failure.
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The result has been a revival of industrial prosperity across the whole country. Unemployment has fallen for 42 consecutive months, and now stands at only two thirds of the European Community average. Mr. Win Griffiths (Bridgend) rose --Mr. Ridley : I know that these figures are not popular with the Opposition, but they had better listen to the truth. Unemployment has fallen for 42 consecutive months, and now stands at only two thirds of the European Community average. It has fallen sharply in every region. We have the highest level of employment in our history--26.5 million people in jobs. Is the hon. Member for Dunfermline, East ashamed of our success in helping his constituents to a better life? The largest percentage falls in unemployment in the past year have been in Scotland, Wales and the North.
Since March 1986, the combined unemployment rate in the north-east, the north-west, and Yorkshire and Humberside has almost halved--from 15.9 to 8.4 per cent. In Dunfermline, the unemployment rate has fallen from a high of 17.7 per cent. to the present figure of 10.1 per cent. Why did not the hon. Gentleman mention that to his constituents in the tear-jerking account of his hard-working week that was published in The Guardian on 3 March? We all felt particularly sorry that he had to catch the 7.30 train to Newcastle--a train on which I travel frequently. I am sorry that he was so inconvenienced by having to make a speech there.
Mr. Win Griffiths : I acknowledge that unemployment has fallen over the past 42 months. Nevertheless, in all the standard planning regions north of the line from the Severn to the Wash, over 660,000 fewer men are employed today than in 1979, and in Wales 60,000 more men are out of a job. Is not that a sad comment on the current state of affairs? There is a huge disparity in the development of the economy : there are 305,000 extra jobs for men in the south-east, and 660,000 more men unemployed in the north and west.
Mr. Ridley : I cannot confirm all the hon. Gentleman's figures off the top of my head, but I believe that unemployment in Wales alone has fallen by 23 per cent. over the past year. What the hon. Gentleman has drawn to our attention is the migration from the north, Scotland and Wales to the south that has taken place over the past few years. I hope that that trend is now reversing ; I believe that it is.
The Government's policies are spreading prosperity across the nation. That is why the old arguments about the north-south divide are heard so seldom now, except when the hon. Member for Dunfermline, East tries to keep them alive. The truth directly contradicts what he said : the north is now experiencing faster economic growth than the south, and doing better than the south.
The story is of record increases in production, productivity, exports, profits, investment and employment. Of course there is more to do, but the hon. Member for Dunfermline, East ought to first acknowledge that the 1980s have probably been the best years for British industry since the 1880s. He prefers to go on griping, however.
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Labour says that there is not enough training and not enough investment, and that too little is spent on research and development. The hon. Gentleman asked about research and development : let me give him the details for 1987, the most recent year for which I have figures. As a percentage of gross national product, private sector investment in research and development was 1.8 per cent. in West Germany, 1.9 per cent. in Japan 1.1 per cent. in the United Kingdom and 0.9 per cent. in France. The hon. Gentleman got the figures wrong ; our investment is not less than half that of Germany, and it is more than that of France. Of course the investors could do better, but this is not a poor performance.The hon. Gentleman complained that there are too many takeovers, and that industry suffers from short-termism. It is the Labour party which is suffering from short-termism ; it wants to take advantage of any quick trick that it can find to fill up a Supply day debate. I agree with the hon. Gentleman that we need to continue carrying out our task of improving the country's record of training. He ought to know that the Government are setting up training and enterprise councils to improve training--involving expenditure of some £2.5 billion a year--but he did not mention it.
Foreign investors know what a favourable climate the United Kingdom provides for manufacturing enterprise. In the past 12 months, major new investments have been announced by Bosch, Toyota and Fujitsu. Digital Equipment has expanded its operations in the north and in Scotland ; Reinhagen of West Germany has invested in Coventry, Murata of Japan in Plymouth and Koyo Seiko of Japan in Barnsley. Nearly 40 per cent. of United States investment in the Community, and one third of Japanese investment, comes to Britain. West German firms have invested more in the United Kingdom than in any other Community country. Inward industrial investment is running at a rate of £4.5 billion a year. There is the evidence that industry thrives on Britain's "unco-ordinated, planless" environment. If it is good enough for Japanese, Germans and Americans to invest and manufacture here, why is it not good enough for the hon. Member for Dunfermline, East?
Inward investment has had other benefits for the British economy. I am sorry that the hon. Gentleman has not acknowledged them, but I was heartened by an article by Victor Keegan in The Guardian last week, which spelled out the success of such investment. I agreed particularly with Mr. Keegan's point that overseas production and managerial techniques had had a catalytic effect on British industry. There can be no doubt that foreign investment is leading to improved product quality and management in British industry.
The motion refers to interest rates. Of course high interest rates are unwelcome to private borrowers ; of course they have an impact. Their purpose is to make saving more attractive and borrowing less so, and thus to reduce the pressure of the excess demand that was properly identified by my hon. Friend the Member for Esher (Mr. Taylor).
Mr. Graham Allen (Nottingham, North) : Will the Secretary of State give way?
Inflation is by far the greater evil, and it is absolutely right for us to place its defeat at the top of the agenda. The
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main impact of high interest rates is on people with mortgages. I sympathise with them, for I know how difficult things are for them.Mr. Ridley : Can the hon. Gentleman explain why so many Labour councils have chosen such a difficult moment to impose such extravagantly high community charges? If the Labour movement cared anything for the people who are suffering from the high mortgage rates, it would have done its utmost to moderate the charges rather than stoking up the problem.
We should not exaggerate the effect of interest rates on business. First, it is less the cost of borrowing than the availability of attractive investment opportunities that determines the scale of new investment. When investments yield returns of 25 to 30 per cent., as some do, borrowing at 10 to 15 per cent. still makes good sense. Secondly, while short-term and variable interest rates have risen sharply, interest rates for fixed-rate finance at medium and long term remain substantially lower. That is often the form of finance best suited to the needs of a manufacturing enterprise.
Mrs. Alice Mahon (Halifax) : Will the right hon. Gentleman give way?
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