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Prescribed Drugs (Compensation)
Sir Michael McNair-Wilson (Newbury) : I beg to move,
That leave be given to bring in a Bill to provide statutory rights to compensation to sufferers from serious side effects from prescribed drugs ; and for connected purposes.
Alongside, and complementary to, the great advances in medical science-- [Interruption.]
Mr. Speaker : Order. Would those hon. Members who do not propose to remain in the Chamber please leave quietly?
Sir Michael McNair-Wilson : Alongside, and complementary to, the great advances in medical science and surgery that have taken place in the past 50 years has been the introduction of new drugs which, in their efficiency and effectiveness, have helped to banish so many of the illnesses that were common when I was a boy. Diphtheria, measles, scarlet fever and even tuberculosis, which were once the scourges of our nation's health, are now of little consequence. I name those diseases ; I could easily name a dozen others that have ceased to be serious and epidemic illnesses-- [Interruption.]
Mr. Tony Banks (Newham, North-West) : On a point of order, Mr. Speaker. I apologise to the hon. Member for Newbury (Sir M. McNair-Wilson), but I cannot hear a word that he is saying. This motion is very important.
Mr. Speaker : I quite agree that it is important. I have already appealed to hon. Members to leave quietly, and I appeal to those hon. Members remaining in the Chamber to listen to what the hon. Gentleman has to say.
Sir Michael McNair-Wilson : As it notches up its successes, the pharmaceutical industry has moved on to tackle new challenges and, as I speak, the Committee on Safety of Medicines--the watchdog body that decides when a drug has progressed sufficiently through its clinical trials to be licensed--is considering between 10 and 20 new drugs for which the manufacturers are seeking a licence. A licence is sometimes thought to mean that all the known side effects of the drug have been established. That is not so. As Professor Bill Asscher, the chairman of the Committee on Safety of Medicines, said recently in a "World at One" news programme :
"The policy has always been to advise Ministers to license drugs early so that the Committee can study them after they are being used, by proper post -marketing surveillance."
He pointed out that a licence means that, in clinical trials, a drug has been found to be effective, safe and of quality. But he added :
"You don't know until you've used a drug in a very large number of people precisely what problems there might be."
Professor Asscher then explained that his committee relied on a voluntary reporting scheme whereby GPs fill in yellow cards commenting on any unexpected side effects that they notice when using a new drug. The monitoring scheme produced 20,000 reports last year, and is continually being assessed by the committee. The scheme depends on the diligence of the GPs, and makes one realise that the fact that a drug has been licensed in no way guarantees that it will not create harmful side effects. If it does, what recourse to compensation is open to the victim? In theory, the Consumer Protection (Registration of Professional Chemists) Act 1988 could be called in aid, as it imposes a liability on manufacturers of defective products without the need to prove negligence. However,
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I am told that the cost of a complex drug claim would be prohibitive for a family not on legal aid. That must be wrong. A drug is a product. An analogy could be drawn between a new drug and a new car : both will have been rigorously tested by their manufacturers before going on sale. In the case of the new car, it will have been driven for thousands of miles before appearing in the showroom. However, if, after it is available to the public, it begins to show unsuspected faults, the manufacturer will recall the model and have the defects put right.At that point my analogy breaks down. It is possible to recall a car and put it right, but what about someone who has been severely damaged by the side effects of a drug? I mean lasting damage, not just a massive skin- peeling rash like the one that I developed after being given a particular medicine in hospital but of which there is now no trace. I am referring to serious, drug-induced side effects. Thalidomide is the classic example, but it is not an isolated case ; other examples are Opren the arthritis drug, Myodil, the heart drug Pexid and the steroid Prednisolone. People who were given high dosages of steroids in the 1960s now have bodies cruelly deformed by their side effects. They will carry those abnormalities to the grave.
The latest addition to the list of drugs giving serious cause for worry is another heart drug called Corwin. It was licensed in May 1988 ; by 1989, the monitoring system used by the Committee on Safety of Medicines had shown that the drug could cause deterioration in patients with severe heart failure. Other information from the yellow-card "adverse drug reaction" monitoring scheme indicated that it was sometimes being used inappropriately in such patients. In January this year, the Committee on Safety of Medicines made recommendations severely restricting the use of Corwin. It is continuing to monitor the situation.
The exact number of people suffering from severe drug-induced side effects is not easy to establish. Professor Asscher is reported to have stated that 7 per cent. of all admissions to hospital are due to the serious side effects of modern medicines. By anyone's standards, it is a matter for concern. Yet our pharmaceutical industry seems indifferent to the question of compensation, refusing to admit liability and effectively challenging the victims to sue if they can afford it--of course most of them cannot. Just occasionally, one of the drug companies seems willing to accept its responsibility : in the 1970s, ICI set up a £10 million voluntary compensation scheme for victims of its heart drug Eraldin.
Then there is Danny Heffernan, now 23 years old and only 4 ft 4 in tall. He discovered that his stunted growth was caused by very high dosages of steroids. After an 11-year battle he persuaded Glaxo, the makers of the drug that had affected him, to offer an out-of-court settlement.
I do not believe that the present situation is good enough, especially as we now know that licensing by the Committee on Safety of Medicines in no way certifies that a drug is free of side effects. To that extent, I believe that Parliament should insist that our pharmaceutical companies set up a compensation fund. I suggest that they should be required by law to do so.
I believe that we should use the West German example for the sort of law that I have in mind. The West German drug law of 1976 has a section that reads :
"If as a result of the administration of a drug intended for human use which was distributed to the consumer within the purview of the law a person is killed or the body or the
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health of a person is considerably injured the pharmaceutical entrepreneur who placed the drug on the market within the purview of this law shall be obliged to compensate for the harm caused to the injured party."The Germans have that law. The Swedes and the Finns have comprehensive pharmaceutical injury insurance schemes, designed to compensate for injuries caused by drugs. Drug importers and manufacturers share the cost of funding the scheme. I can see no reason why we should not follow those examples. I hope that the House will give me leave to bring in my Bill.
Question put and agreed to .
Bill ordered to be brought in by Sir Michael McNair-Wilson, Mr. Jack Ashley, Mr. Spencer Batiste, Mr. Churchill, Mr. James Kilfedder, Mr. Austin Mitchell, Mr. Michael Morris and Mr. Nigel Spearing.
Prescribed drugs (Compensation)
Sir Michael McNair-Wilson accordingly presented a Bill to provide statutory rights to compensation to sufferers from serious side effects from prescribed drugs ; and for connected purposes : And the same was read the First time ; and ordered to be read a Second time upon Friday 20 July and to be printed. [Bill 187.]
BILL PRESENTED
Declaration of war and commitmentof troops abroad (Constitutional arrangements)
Mr. Harry Cohen, supported by Mr. Tony Banks, Mr. Andrew Bennett, Mr. Jeremy Corbyn, Mr. Ron Leighton, Mr. Ken Livingstone, Mrs. Alice Mahon, Mr. Chris Mullin, Mr. Peter L. Pike, Ms. Dawn Primarolo and Ms. Clare Short, presented a Bill to ensure that war cannot be declared or troops committed or kept abroad by Her Majesty's Government without the approval of the House of Commons : And the same was read the First time ; and ordered to be read a Second time on Friday 20 July and to be printed. [Bill 186.]
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Points of Order
Mr. Harry Ewing (Falkirk, East) : On a point of order, Mr. Speaker. In recent times, some hon. Members have raised points of order about those being called at Prime Minister's Question Time, and we have rightly been told that we did not have questions on the Order Paper. I have noticed in recent weeks that hon. Members, particularly Conservative Members, who have been called at Prime Minister's Question Time did not have questions on the Order Paper. Today, two of the three hon. Members whom you called from the Conservative Benches--I am not questioning your selection--simply did not have questions on the Order Paper. I am beginning to wonder what the trouble is in going into the Table Office to table questions to the Prime Minister and to try to catch your eye--
Mr. Speaker : Order. I find it difficult to understand what the hon. Member means. Surely he is not suggesting that I should not go across the Chamber to get a proper balance, because that is exactly what I did today. I am anxious to ensure that those who have nil scores and who had not put a question to the Prime Minister were able to do so. Today I did just that. All hon. Members who were called at Prime Minister's Question Time had a nil score, and that was their first opportunity to ask a question.
Mr. Ewing : Further to that point of order, Mr. Speaker. That is precisely the dilemma. When hon. Members have previously raised this point of order, we have been told by you that we had not tabled questions to the Prime Minister. I would certainly object if you did not preserve a balance between both sides of the House. However, has your advice on previous days now been changed, and do we no longer require to table questions to the Prime Minister in order to catch your eye? Until recent weeks, my understanding has been that we should have questions down to the Prime Minister to try to catch your eye.
Mr. Speaker : I do not know from where the hon. Gentleman got that idea. I hope that the whole House will agree that I should seek to strike a fair balance. The hon. Member for Oxford, East (Mr. Smith) has, during this Session, put three questions to the Prime Minister, and he asked question No. 2 today. For supplementaries, I seek to give an opportunity to those who have not put a question, and that is exactly what I have done today. I hope that that is of some comfort to the hon. Member.
Mr Tony Banks (Newham, North-West) : Further to that point of order, Mr. Speaker. Hon. Members understand that, unlike the Pope, you are infallible in the Chamber. However, you have just said that you call hon. Members who have a nil score. The whole House knows that you keep an accurate record, but from when was the nil score dated? That is an important point. If we are to have nil scores, what about a penalty shoot- out?
Mr. Speaker : The House would do best to leave these difficult decisions to the Chair-- [Interruption.] I am not prepared to have my arm jogged by hon. Members who seek to ask questions. However, if an hon. Member has a legitimate constituency interest in a departmental question, that is a different matter. I cannot accept bids for Prime Minister's Question Time.
Mr. Jeremy Corbyn (Islington, North) rose --
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Mr. Andrew Faulds (Warley, East) rose --Mr. Speaker : No, let me deal with this first. The hon. Gentleman who raised the point of order has already had an opportunity to put a question to the Prime Minister. I do not exactly know when-- Mr. Tony Banks Exactly.
Mr. Speaker : Well, it does not state the date on my list. The hon. Member for Falkirk, East (Mr. Ewing) has also put a question to the Prime Minister.
Mr. Faulds : As a nil scorer, Sir, may I await your future pleasure?
Mr. Corbyn rose --
Mr. Speaker : Order. The answer to the hon. Member for Warley, East (Mr. Faulds) is yes!
Mr. Richard Tracey (Surbiton) : Further to that point of order, Mr. Speaker. I have every respect for the views of Back Benchers, as I am one myself, but while in no way wishing to question your judgment, perhaps you will bear in mind that it often appears to Conservative Members that too many opportunities are given to the Opposition Front Bench, and especially to the Leader of the Opposition, to ask two or three questions, at rather great length.
Mr. Speaker : That is perennial. Some Leaders of the Opposition have not risen as many as three times, but that has become a practice in recent years. The more times that Front-Bench spokesmen rise, the less time there is for Back Benchers. That should be borne in mind.
Mr. Corbyn : On a point of order, Mr. Speaker.
Mr. Dennis Skinner (Bolsover) rose --
Mr. Speaker : No, just a minute. I understand that the Opposition Treasury team is anxious to proceed with the Finance Bill. Mr. Skinner rose --
Mr. Speaker : I shall take the hon. Gentleman.
Mr. Skinner : I think that you have a point about the Opposition Front Bench and you must take that into account, Mr. Speaker, but you said that if an hon. Member raised a constituency matter, he or she would be in with a fair chance. I reckon that, on that basis, if any hon. Member mentions the National Union of Mineworkers, and I am the only sponsored NUM Member standing, I must have a chance. That is roughly what you are saying.
May I have an assurance that the deputy Prime Minister registers only half a score, which means that an hon. Member would get another chance if the right hon. and learned Gentleman answered for the Prime Minister?
Mr. Speaker : Of all hon. Members, the hon. Member for Bolsover (Mr. Skinner) is certainly not deprived in any way-- [Hon. Members :-- "Hear, hear."]--and the reason why he is regularly called-- [Interruption.] --I must say this in defence of the hon. Gentleman-- is that he is always here.
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Orders of the Day
Finance Bill
As amended (in the Committee and in Standing Committee), further considered.
New clause 2
Capital allowance : manufacturing incentives
1. This section shall have effect only in relation to trading companies whose activities consist wholly or mainly--
(a) in the subjection of goods to a process so as to produce finished or partly finished manufactured goods for sale on a retail or wholesale basis and
(b) of activities falling within such classes, groups or activities set out in the Standard Industrial Classification issued by the Central Statistical Office as may be prescribed by way of regulations made under this subsection.
2. This section shall have effect only in relation to accounting periods which end after 31st July 1990 and begin before 1st August 1991.
3. Where this section applies, subsection 24(2)(a)(i) of the Capital Allowances Act 1990 shall have effect as if for 25 per cent. in that subsection there were substituted the percentage specified in subsection (4) below, and subsection 3(2) of that Act shall have effect as if for one twenty-fifth in that subsection there were substituted the percentage specified in subsection (5) below. 4. The percentage specified in this subsection is where A represents the total number of days in the accounting period which either fall before 1st August 1990 or fall after 31st July 1991, and B represents the number of days in the accounting period which fall within the period starting on 1st August 1990 and ending on 31st July 1990.
5. The percentage specified in this subsection is where A and B have the meanings assigned to them in subsection (4) above.'.-- [Mrs. Beckett.]
Brought up, and read the First time .
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Mrs. Margaret Beckett (Derby, South) : I beg to move, That the clause be read a Second time.
On Sunday in a television interview, the Foreign Secretary, when discussing some matters of some difficulty and delicacy, was drawn almost in passing into observations on the differences between the economies of our European partners and our own. He referred especially to the German economy, saying that it has, indeed, become more successful than our own by
"doing the things and taking the steps we failed to do." We know--this has become more apparent in recent days--that we have a divided Government. Perhaps among all the different causes for dissent, the greatest rift is opening up between those who, like the Foreign Secretary and occasionally the Lord President, not only recognise but admit the difficulties of our economy, and those who, like the Treasury Front-Bench team, still assert, in the teeth of all the evidence, that we have had an economic miracle and that our present problems, which even those right hon. and hon. Members cannot completely ignore, are temporary and will be short lived.
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I recognise that it is a bit of a cheek for the Lord President to take the high-minded tone as he was presiding over our economy when much of the damage was done, but we must at least give the right hon. and learned Gentleman some credit for admitting his error now. In contrast, today's Treasury Ministers still seem determined--no doubt, for short-term political gain--to undermine their own and their country's long-term interests by encouraging misplaced optimism. It undermines their own interests because the more they seek to convince people that the difficulties are temporary, the less likely people are to pay attention to their exhortations to cease borrowing and to save. That would all be less important, although worrying, but for the fact that the Government's refusal to acknowledge that there is a problem leads to their rejection of any remedy. That is why we await with considerable interest the reaction to our new clause. It is, indeed, a modest step and should commend itself to any Government, with the slight exception of a printing error in subsection (4) which reads "1990" instead of "1991". I am sure that that will not deflect the Chief Secretary from giving it serious consideration. The new clause is a modest step. It would alleviate a little the burden of high interest rates on businesses and the additional pressure on them to reduce manufacturing investment. That is just the type of step for which industry is calling. The new clause aims to give temporary additional financial help to companies by accelerating somewhat the capital allowances that they would otherwise have received after 1991 and bringing them forward into 1990 and 1991. It also aims to increase the rate of writing down allowances to 40 per cent., rather than 25 per cent., and 10 per cent. rather than 6 per cent.As I have said, the new clause is a minor and modest measure. While it does not commit the Treasury to the additional relief in the long term, to which Treasury Ministers have been so resistant, it accelerates the relief that would have been given anyway in later years and gives that relief at a time when the state of the economy is causing particular difficulty and when manufacturing industry and investment is so hard pressed.
One of the most damaging myths of the Thatcher years, promoted so heavily by the former Chancellor, the right hon. Member for Blaby (Mr. Lawson), is that manufacturing is no longer of critical importance to our prosperity. That statement from the former Chancellor of the Exchequer revealed a great deal about his attitude. The reason why he advanced a proposition so ludicrous to most Opposition Members was not even that he believed it himself but that he had to find something to explain away the problems that began to be evident in the mid-1980s following the devastation of our manufacturing industry presided over by the now Lord President. The Chancellor needed to show that the devastation, to which even he had to admit, did not matter too much, so he came up with the idea that it was because manufacturing did not matter so much any more. He argued that the improvements in earnings from internationally tradable services--the so- called invisibles--more than made up for any deficiencies in manufacturing earnings which were apparent even then.
Unfortunately, time has overtaken that argument because invisible earnings themselves are becoming invisible and that excuse is no longer credible even to Ministers who are used to believing or putting forward 10 incredible things a day, particularly at the behest of the
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chairman of the Conservative party. Now, instead of trying to explain what is happening in terms of the overall record on manufactured trade and the statistics that summarise our position, the Government have taken to talking loudly, rather fast and somewhat aggressively about particular aspects of policy which they claim, if they are particularly selective about their statistics, show some degree of success. Of late, the Chief Secretary has talked about output, productivity levels, exports and so on.The Opposition certainly welcome any signs of improvement in the vitally important manufacturing trade on which Britain depends for its prosperity, but the selected figures that the Government use are usually, if not always, completely unrepresentative. In fact, they represent a period of recovery from catastrophe rather than a record of success. It is rare indeed for Ministers to dare to examine the entire record of their period of stewardship.
We gain the clearest picture of where the country stands as against our competitors by considering just two of the many confusing different sets of statistics that tend to be put before us in such debates. Those two sets of statistics encapsulate the picture. One set represents the results of our overall performance, never mind the bit on output, productivity or exports. The overall results of our performance in manufacturing is perfectly summarised by our balance of payments deficit. The second set of statistics, which provide the underlying contributory factor behind that balance of payments deficit, are those concerning the levels of investment in manufacturing industry.
Let us first consider the statistics preferred by the Government. I will put them in context to help the Chief Secretary with the argument that he will no doubt advance. The most favourable statistics that the Government can put before us relate to the increase in manufacturing productivity. Some of my hon. Friends argue--I concede that the argument has some force-- that if one throws hundreds of thousands of people on to the dole there is bound to be some improvement in productivity. Apart from that, however, we recognise that some improvements in productivity have occurred and we welcome them, even if the pace of such improvements is now, unfortunately, slowing down.
The Opposition argue, with more force, that if investment per capita had been higher in earlier years, productivity improvements might not only have come earlier but have been more soundly based and thus not have needed the impetus of large-scale unemployment. Those are the caveats that one must enter against the best figures that the Government can produce.
We often hear in the House and elsewhere about the increase in manufacturing output. Not so long ago, the Chief Secretary made a speech about the improvements that he has recently witnessed in manufacturing output. He said that in the past three years that output has risen faster than the gross domestic product as a whole. That is fine, but he also went on to say that that
"indicated a marked turn-around compared with the historic performance of manufacturing industry"
That statement suggests to us that whoever else should be consulted about the history syllabus, it should not be the Chief Secretary. The historical record of manufacturing output as a percentage of GDP shows that, from 1948, there was a general gradual rising trend, followed by an unprecedented nose-dive between 1979 and 1981, since
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when it has been more or less static. There has been a slight improvement on the more or less static record that preceded the latter part of the Government's record, but there is no doubt that output is nowhere near the levels reached between 1948 and the late 1970s. It is rather strange to define the last few years as "historic". The scale of the nose-dive that occurred in the early 1980s is equivalent to between 3 and 4 per cent. of GDP. That is the order of magnitude of our balance of payments deficit and that decline in output is directly linked with it.We are delighted to note the recent growth in manufacturing exports. It is more than welcome, but there is a long way to go before we can overcome the volume of manufacturing imports, which, between 1979 and 1989, has risen to more than double the rate of manufacturing exports during the same period-- the period since the Government came to power. Such are the factors which have contributed to the accumulation of our massive balance of payments deficit that summarises the overall effect of our manufacturing performance. If we want to take a historic moment from the years of the Government's stewardship it is 1983 when, for the first time since the industrial revolution, manufacturing trade in this country went into deficit--it has continued to decline ever since. Even the appearance of such a deficit is alarming enough for a country that still earns its living, and must continue to do so, by manufactures. The size and scale of the deficit--some £16 billion last year on manufacturing goods alone-- is the most alarming feature of all. Equally alarming is our failure to take the steps most likely, even in the very long term, to redress that balance.
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That leads on to the question of investment. Just as manufacturing is the source of our wealth and the engine of growth, so investment is the engine of manufacturing. Our record on investment is worse than appalling--it is frightening. Apart from productivity, the Government's other boast in terms of recovery is of the recovery in company profitability. That is good and my hon. Friends and I are pleased to see company profitability improve, but where did that profitability go? If it went into increased investment at all, it went into increased investment overseas--investment by acquisition rather than investment for growth of the kind being carried out by our competitors. That is the main reason why Britain, in too much of its manufacturing, has lost its competitive edge.
That has not happened everywhere. There are companies in Britain that are world leaders in their fields, and we applaud them. We are delighted to have them and we are grateful for their performance, but it is no coincidence that those companies, the leaders in their fields, are the firms which invest. It is no coincidence that they put money into research and development and into training, and that they plan long term instead of considering investment, as some of the Prime Minister's favourite industrialists do, only if it results in profits in two or three years' time. Nor is it any coincidence, most of all, that those companies plan to expand and grow and not simply to stand still.
The Chief Secretary may be familiar with a study carried out by Warwick university and quoted in the MBA review in June 1989. It suggested that four out of five United Kingdom companies considered that their sales
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objective should be to defend the status quo and their existing market share. In Japan, four out of five companies considered that their sales objective should be to grow, to overtake and to take the market shares of their competitors.The Chief Secretary may have had a chance to study papers presented at a recent conference sponsored by the Department of Trade and Industry on innovation in industry and on the needs of high technology. Apart from the many papers that commented in depth on the fact, for example, that we were the only country to cut spending on civil research and development in recent years when our competitors were increasing their spending on those items, a senior industrialist pointed out that some of the most famous Japanese companies took 20 years of planning, investment and expansion to become world leaders in their fields, to take over from previous world leaders--frequently American companies--and that they succeeded, at least in part, because they set themselves the goal rather than to stand still.
The Opposition believe that Britain and British manufacturing industry need most of all to foster a culture of sound management devoted to investment and growth. We greatly regret that that culture has been undermined by the decade of Conservative rule, which instead has fostered admiration of tycoons and asset-strippers and has rather sneered at people who look for long-term prosperity rather than making a fast buck.
The consequences of the lack of that general culture are most evident when we consider our record on investment. Manufacturing investment as a proportion of gross domestic product fell sharply in the recession period 1979 to 1981. Indeed, as a level of expenditure in constant prices, only in the last couple of years has it recovered to just above the 1979 level. But when one examines the position not in terms of constant prices, but as a percentage of GDP--the percentage of wealth available and the indication of the commitment of our country to investment in our future--one sees that it has still not returned to the lowest level achieved between 1974 and 1979. The Government prefer to talk about business investment, which includes investment in such things as car parks and casinos, rather than about manufacturing investment, but even as a percentage of business investment, manufacturing investment has fallen in recent years by as much as 7 per cent.
I said earlier that many of us would argue that productivity might have improved more soundly and earlier if investment per capita had been at higher levels. Investment per person employed in the manufacturing sector has been so disastrous that among the 18 countries of the Organisation for Economic Co-operation and Development we come 14th, above only one or two immediate neighbours such as Greece and Portugal.
Equally disturbing are the developments in industry, such as the increased number of bankruptcies. I am sure that the Chief Secretary has received the recent Dun and Bradstreet report showing that more than 11,600 firms went bankrupt in the early part of this year and that the pace of failure was quickening. Against that background, the forecast from the Government and others is that our levels of investment are declining while those of our competitors are increasing all the time. That forecast is true both of the Government's favoured business investment and of manufacturing investment. The most
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recent Confederation of British Industry forecast shows that investment intentions are at their lowest level since 1982, with the balance of future investment intentions at minus 8 per cent. --and the Government's reply to those problems is nothing, absolutely zilch. It has been stated that when the Department of Trade and Industry-- for once taking an interest in industry which the then Secretary of State for Trade and Industry did not find out about in time--asked McKinsey and Co. to examine our electronics industry, its report cast doubt not just on the industry's prosperity, but on whether it could survive at all. Yet despite that worrying report on a key sector of industry, the Government did absolutely nothing.In the 11 years for which the Government have held office, our ability to supply our own need for manufactured goods has steadily declined, and with it the underlying strength of our economy. That has been reflected in our historically catastrophic balance of payments deficit. That is the road to ruin, paved not with good intentions, but with weak excuses.
The Opposition believe, as does most of British industry, that we must take steps of the kind set out in a minor and modest way in the new clause if Britain is not to be left even further behind as our competitors plan, invest and grow to meet the challenges of the single market. More than that, we need a vision for the future--a different culture for manufacturing industry.
The Opposition's vision for manufacturing industry is not a plan to increase company earnings per share by fiddling the accounting rules or having more takeovers. It is not a scheme to push up the nominal returns by delaying much-needed investment or squeezing up profits by cutting back on training. The Opposition's vision is of a British industry which extends its knowledge through research, and expands its capability through training and its output through investment. That is the reason for the new clause which, if carried, would represent a minor contribution towards helping British industry to continue to invest despite the problems heaped on it by the Government's failures. If the Government are not prepared even to consider such a helpful but minor step, for which the Government and the Chief Secretary know that industry and the Opposition are calling, it will be a clear signal to British industry, to the country and, most of all, to our competitors, that Britain has given up the race for 1992.
The Chief Secretary to the Treasury (Mr. Norman Lamont) : I want to respond briefly to the remarks of the hon. Member for Derby, South (Mrs. Beckett) ; I shall then listen to other contributions and, if I catch the Chair's eye, I may be allowed to respond to them later. The new clause is about a short-term acceleration in the rate of tax depreciation for investment in equipment and building by manufacturers and other industries, but the hon. Lady turned the debate into a rather more general discussion of the economy. Many of the issues that she raised have been debated many times before--for instance, at Question Time.
First, the hon. Lady alleged that there had been no improvement in recent years in the British economy. We, of course, refer to the marked step- change in growth. The hon. Lady chose to concentrate all the time on manufacturing--for her, it was the only measure of
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economic performance. Of course manufacturing is an extremely important part of our economy, but it is wrong to suggest that it is the only measure of economic success.When assessing overall economic policy, the real measure should be a combination of growth and inflation performance over the decade. Judged by those two criteria, the performance of our economy in the past decade compares well with that of our competitors and better than it did before. That is certainly true of growth. We are going through a lower period of growth now, but even taking account of this year's lower growth rate we shall have grown faster over the past decade than the EEC average, and we certainly compare much better with our competitors in growth terms than we did in the previous decade. So growth is the most appropriate measure to employ. The hon. Member for Derby, South sought to dismiss the growth in manufacturing productivity as merely the result of de-manning. Of course there was a considerable shake out in the early 1980s, but that just shows how uncompetitive British industry was. There was a strong concealed unemployment element in British industry, and most business men and manufacturers admit that the problems faced up to in the early 1980s had to be faced up to ; and that has helped make British industry more competitive and profitable.
I was pleased to hear the hon. Lady acknowledge for once that there has been a considerable increase in the profitability of British manufacturing and business--it is extremely important. Where on earth is investment to come from? It must come from profitability. There are all sorts of arguments in which statistics are bandied about, but it is an indisputable fact that the profitability of British business is, thank goodness, higher than it has been for several decades. That is extremely encouraging.
Mr. A. J. Beith (Berwick-upon-Tweed) : I have been following the right hon. Gentleman's argument closely. He said that we should use two measures of economic performance : growth and inflation. He went on to talk about growth but somehow omitted to talk about inflation, which is not only much higher than that of any of our key competitors but scoops up much more in corporation tax and therefore places a greater burden on industry.
Mr. Lamont : The Government repeatedly make it clear that we regard our inflation as unsatisfactory and unacceptably high. I did not make the usual speech about performance under the last Labour Government because we are always accused of delving too much into the past and of exploiting it. It is, understandably, something which Opposition Members prefer to forget. The inflation record of this Government is incomparably better than that of the Labour Government, but even that is not so relevant as the fact that the policies that the Opposition advance are likely to bring a return to high inflation, especially because of their attitudes to public spending.
The hon. Lady also spoke about investment. She did not say explicitly but presumably believes that the corporation tax reforms that were introduced by my right hon. Friend the Member for Blaby (Mr. Lawson) when he was Chancellor of the Exchequer are inadequate for encouraging investment. When Labour was in power corporation tax was 52 per cent. We have reduced it to 35 per cent. and have got rid of the allowances.
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4.15 pmIs that a good bargain? Is it better for business to have higher profits, a better rate of return and permission to keep more of its profits, or is it better to have a much higher rate of corporation tax which subsidises and provides an incentive by way of allowances to investment? I do not think that there is any evidence that the new system has damaged investment because since it was introduced we have seen strong investment growth.
In the past three years business investment has grown by 40 per cent. Non- residential investment is a higher proportion of our GDP than of the GDP in any other country except Japan. The hon. Lady says that we should talk only about manufacturing investment. I reject that argument, just as I reject the argument that we should talk only about manufacturing when discussing the economy as a whole. We must look at investment in all sectors.
It was amusing to hear the hon. Member for Derby, South say that business investment included car parks and all sorts of "frivolous" investment. It includes important investment in the retail sector and in tourist facilities, some of which employ many people. It is not correct to say that the only investment that matters is in manufacturing. As the hon. Lady said, manufacturing is important, but it is by no means the whole story.
Since the new tax regime was introduced, there has been strong growth in investment. Britain has been enjoying an investment boom. One of the reasons for problems about inflation and on the current account is that the enormous boom in investment has exceeded domestic savings. The suggestion that the new structure introduced by my right hon. Friend the Member for Blaby when he reformed the corporation tax system has damaged investment is not borne out by the facts. If it had damaged investment, we would not have an extraordinary and continuing good record on inward investment. We get a larger proportion of American and Japanese investment than any other country in the European Community. Foreign companies come here for many reasons, and among them is the tax regime. They like the fact that we have one of the lowest corporation tax rates of any country. When the new tax regime was introduced, Labour strongly opposed it, but I still do not know the Opposition's precise attitude. Of course, Labour has opposed many things in the past. The Opposition seem to jettison everything right, left and centre and nobody quite knows what they stand for. We certainly do not know their stance on capital allowances. I hope that when the hon. Lady speaks again she will make it clear whether she wishes to see a system with capital allowances that subsidises investment through the tax system. Such a system is not necessary to encourage investment. It is not especially desirable, nor does it encourage the best sort of investment.
Opposition Members scoff and laugh at the phrase "quality of investment". When we say that the quality of investment is better today, we simply mean that the rate of return earned on investment is higher than ever before. We want a tax system that does not subsidise people to invest purely in quantitative terms. We want a system that encourages people to retain their earnings and ensures investment in the most profitable areas.
The hon. Lady is right to say that investment is what matters for the longer term, but it must be investment in
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