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Mr. Fatchett : I shall give way in a moment, but it may help both my hon. Friend and the hon. Gentleman if I give some more figures. National definitions of unemployment show exactly the same pattern. Despite the Government's attempts to adjust the unemployment figures during their period in office, Britain's economic performance in terms of job creation is shown to be very bad in comparison with the rest of Europe.
For the period from June 1990 to October 1992, the increase in unemployment is sharper. Unemployment was up by 37 per cent. in Belgium ; by 31 per cent. in Denmark ; by 28 per cent. in France ; by 38 per cent. in Greece ; by 27
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per cent. in Ireland ; and by 61 per cent. in Luxembourg. In the Netherlands unemployment was down by 8 per cent ; in Spain it was down by 1 per cent. The increase in unemployment throughout the European Community averaged 19 per cent. Yet again, however, the United Kingdom figure, under this Conservative Government, showed an increase in unemployment of 81 per cent. We are doing considerably worse than any other European Community country.Mr. Cash : In making that extremely important point regarding the increase in unemployment in the United Kingdom, does the hon. Gentleman concede that the period that he has chosen almost exactly coincides with the period when we were members of the exchange rate mechanism? Does he not therefore conclude that that was the major contributory factor which led to higher interest rates than we could afford, together with the bankruptcies caused by the recession, with which his party concurred? Does he agree that by not repudiating the economic and monetary union provisions and the central banking provisions of the treaty, the recession and unemployment will grow even worse?
Mr. Fatchett : I suspected that the hon. Gentleman would make that point. Other members of the exchange rate mechanism experienced considerably lower increases in unemployment. The question, therefore, that he needs to ask relates to the basic strength and structure of the British economy.
The Italians left the exchange rate mechanism at about the same time as the United Kingdom. During the same period, Italy's unemployment increased by 9 per cent. according to the International Labour Office's figures, and by 13 per cent. according to the Italian Government's figures. That is a considerably lower figure than the United Kingdom figure. If the hon. Gentleman wants to do some research, he ought to remember that in any laboratory one controls for variables. I am not sure that the hon. Gentleman has controlled for the variable, which is the strength and the weakness of the British economy.
Mr. Gapes : This country left the exchange rate mechanism in September 1992. Today Plessey-Siemens, a major employer in my constituency, announced 80 job losses, with 33 people to be made redundant by 26 February. Whether we are within or outside the exchange rate mechanism, that is yet another indication of the fact that under this Conservative Government massive job losses continue in manufacturing industry. That is the fault not of the exchange rate mechanism but of this Government's lack of an industrial policy, their failure to invest in training and their lack of a strategy to help manufacturing industry. Since the Berlin wall came down in 1989, there has been a massive reduction in defence industry jobs, including those in my constituency, with the result that in the last few years it has lost about half its manufacturing employment. We need an interventionist industrial strategy on a Europe wide basis. I am pleased that the hon. Member for Wolverhampton, South-West (Mr. Budgen) is so committed to the policies that he outlined. Government intervention is needed if we are to deal with these
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problems. It cannot be left to the vagaries of the market. We need a national intervention policy and a Europe wide industrial strategy, as proposed by the Commission.Mr. Fatchett : My hon. Friend asked me whether I had noticed that the Government left the exchange rate mechanism in September. I did. I sometimes wonder, though, whether Ministers in their subsequent statements remembered what they said prior to September of last year. My hon. Friend made a telling point about the need for an industrial strategy. Labour has been asking for such a strategy for a long time. Our poor performance in manufacturing trade compared with the rest of the world and the rundown of manufacturing jobs will not cease or improve until we have an industrial strategy.
Mr. Budgen : Does the hon. Gentleman agree that within the constitution of the European Community there are already the seeds of a very substantial industrial policy? That must be one of the reasons why some Opposition Members, who may have doubts about sovereignty, none the less believe that this is a practical mechanism for idealistic socialism of the most advanced sort.
Mr. Fatchett : The hon. Gentleman continues to offer the Committee some interesting definitions of socialism. May I suggest that he should wait for the Minister's reply, when we may find out how this Government define industrial policy at European Community level? 4.45 pm
Mr. Ron Leighton (Newham, North-East) : My hon. Friend is making an extremely good speech and has put his finger on some very good points. Is he aware that France and Italy joined the exchange rate mechanism before we did and that when this country was considering joining the ERM the Employment Select Committee asked the Department of Employment what research it had carried out into the effect of ERM membership on Italy and France? We were sent two pieces of academic research which showed that the effect on Italy of joining the ERM was to increase unemployment by 1 million and that the effect on France was to increase unemployment by roughly 500,000.
The chief economist of the Confederation of British Industry said at that time that if Britain joined the ERM and things went well for us within it, unemployment would be increased by 500,000 and that if things went badly unemployment would increase by 1 million. During the period that we were members of the ERM, unemployment rose by about 1.1 million. Are not there dangers for socialists in that type of policy? In France, the socialist Government pursued the franc fort policy, which has led to even more unemployment in France than in Conservative Britain. It looks as though the socialist party in France will be massacred at the next election because of the policy that it pursued.
Mr. Fatchett : My hon. Friend was a very experienced and able Chairman of the Employment Select Committee. Therefore, I have listened with interest to what he said. May I suggest to him, however, that there is a very strong socialist argument for fixed exchange rates? The key argument relates to the level of those fixed exchange rates and the ability to adjust. I suspect that the evidence submitted to the Employment Select Committee varied in
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terms of its conclusions on the flexibility of the exchange rate mechanism and the level of the exchange rates within the ERM. It is those arguments which we should address, rather than arguments about a free market in currencies.Mr. Richard Shepherd (Aldridge-Brownhills) : Has it not occurred to the hon. Gentleman that the slavish adherence of the Opposition Front Bench to the malign policy of the exchange rate mechanism may have contributed to job losses, deflation and unemployment? Is not the essence of the debate that competitiveness often reflects the exchange rate and that adherence, therefore, to what I would describe as philosophical dogma brings about the very objectives that I take it the Opposition Front Bench do not seek? The fact is, therefore, that somebody else's industrial competitive policy depends upon matters that are better argued and determined by markets than by ourselves in this Chamber.
Mr. Fatchett : I wish to make progress, but I shall try to respond to the hon. Gentleman's point. It is a novel notion of political accountability that the Opposition should be held responsible for the policies and consequences of the Government's actions. The hon. Gentleman will remember that in the early autumn of last year, my right hon. and learned Friend the Leader of the Opposition and my hon. Friend the Shadow Chancellor asked for a realignment of currencies within the exchange rate mechanism.
Mr. Shepherd : That was after we left the ERM.
Mr. Budgen : Will the hon. Gentleman give way?
Mr. Fatchett : No, I must make some progress.
Mr. Budgen : Could I make just one point on what the hon. Gentleman has just said?
Mr. Budgen rose--
Mr. Budgen : Will the hon. Gentleman allow me to make just one point?
Mr. Fatchett : I think that the hon. Gentleman would be the first to agree with me if I said that I have been kind to him in terms of the number of interventions that I have allowed so far.
Mr. Budgen : Yes, indeed, but I want to assist the hon. Gentleman.
Mr. Fatchett : Because the hon. Gentleman has been so keen to educate his colleagues about the nature and the dangers of socialism, I am tempted to give way to him on this final occasion.
Mr. Budgen : Will the hon. Gentleman assist the Committee, because I saw many of his colleagues raise an eyebrow at his earlier comments? Why is there a socialist argument for fixed exchange rates? In 1979, Mr. Callaghan said that Britain should not enter the exchange rate mechanism--the poor Mr. Callaghan who had done the honourable thing by resigning when there had to be a devaluation in 1967. Until recently, it was the Labour party which had learnt most from the agonies of fixed
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exchange rates, which are an economic mistake. Will the hon. Gentleman please explain how it is a specifically socialist thing to have fixed exchange rates?Mr. Fatchett rose --
The Chairman : Order. If hon. Members wish to amalgamate the section on economic policy with that on trade deficits, the Chair will oblige, but to date that has not been the feeling of the Committee, and I respectfully suggest that the intervention of the hon. Member for Wolverhampton, South- West (Mr. Budgen) is not covered by the amendments. I should be grateful, therefore, if the hon. Member for Leeds, Central (Mr. Fatchett) would resume his speech. Mr. Fatchett rose --
Mr. Ted Rowlands (Merthyr Tydfil and Rhymney) rose
Mr. Leighton rose --
Mr. Fatchett : I shall give way shortly. It is interesting to see one or two of my hon. Friends with their hands up. That takes me back to my teaching experience, if nothing else. I shall make progress and then give way.
I was trying to show the extent to which unemployment has increased across the Community and how Britain has the worst record, with unemployment growing four times faster than the average. There is an increasing view that the world will divide into a number of economic trading blocs--Japan, the United States and the European Community. I am not sure that that view can be supported. Indeed, it is often simplistic about the flows of capital, but if the European Community is to compete, we need policies--
Mr. Geoffrey Clifton-Brown (Cirencester and Tewkesbury) : Will the hon. Gentleman give way?
We need policies that provide for high-technology industries and for highly skilled, well-paid and secure employment. Statistics show that, as a trading bloc, the European Community has not performed particularly well against the United States and Japan in the past decade. In each year of the 1980s, the Japanese figures for GDP growth were better than those of the European Community. The United States and the European Community have performed roughly the same, but Japan has been growing faster than the European Community. In each year of the 1980s, unemployment in Japan grew slower than in the European Community, and each year somce 1981 unemployment in the United States has grown slower than in the European Community. The European Community has performed relatively poorly against other traing blocs and has experienced a sharp increase in unemployment, with the increase being sharpest in the United Kingdom.
Against the background of relatively poor industrial performance and the growing social problems that are caused by unemployment, we argue that the European Community needs an industrial policy. Interestingly, the Government signed the Maastricht treaty, but on a domestic level Ministers at the Department of Trade and Industry have always resisted the development of an industrial strategy for the United Kingdom economy. Just before Christmas, Neil Johnson, director-general of the Engineering Employers Federation, stated clearly that the
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Government had no strategy for industry, no policy for manufacturing and that they were leaving the fate of British industry to the markets.The CBI, the Engineering Employers Federation and a range of employers' and trade union organisations have been asking for a new partnership between Government and industry, yet at national level the Government resist such a policy. What is significantly different at European Community level that enables the Government to sign up for an industrial policy ?
The Minister must explain that conversion because, although the hon. Member for Wolverhampton, South-West (Mr. Budgen) is no longer present, some other Conservative Members will be interested to know how a Government who profess their belief in free markets for the United Kingdom can adopt a different position in relation to Europe.
Mr. Rowlands : Will my hon. Friend consider what would have happened to industrial manufacturing in Britain if the Government had got their way and remained in the ERM with 15 per cent. interest rates ? That would have devastated our jobs, industrial investment and manufacturing future.
Mr. Fatchett : My hon. Friend is absolutely right. That is why my right hon. and learned Friend the Leader of the Opposition asked in July for realignment of currencies and cuts in interest rates, which would have enabled us to avoid the cold shower of membership of the ERM at a particular rate. My hon. Friend is right, and more jobs would have been lost.
Mr. Leighton : I agree completely with the case that my hon. Friend is advancing and should like to express my gratitude for his answer to my earlier question. I think that he was saying that there is a case for managed exchange rates. Originally, the ERM was supposed to be a system of fixed but flexible exchange rates in which there could have been a realignment, as there should have been. Has he noticed that the ERM has reached a stage at which exchange rates are supposed to be fixed irrevocably, and that, as part of the procedure for achieving a single currency, the Maastricht treaty lays down irrevocably fixed exchange rates- -
The Chairman : Order. I am afraid that the hon. Gentleman is straying. I call Mr. Fatchett.
Mr. Leighton : The point that my hon. Friend made
The Chairman : Order. I have understood the point. The exchange rate mechanism is a separate debate. I have listened attentively-- Mr. Leighton rose--
The Chairman : Order. The hon. Gentleman may wish to rephrase his intervention in a moment, but his previous intervention was out of order. I will call Mr. Fatchett, who may give way again.
Mr. Fatchett : I will make progress, because my hon. Friend will be able to return to those points later.
The Government have accepted the European Community's industrial policy. We would accept the principles and assumptions behind that policy. Some
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Conservative Members clearly do not do so, and the hon. Member for Wolverhampton, South-West will be interested to hear the three assumptions that underpin a industrial policy.Mr. Clifton-Brown : Will the hon. Gentleman give way?
Mr. Fatchett : No. I will continue for a minute.
The three assumptions suggest that an industrial policy and an effective manufacturing sector cannot be achieved without intervention in the economy or the market.
Mr. Clifton-Brown : Will the hon. Gentleman give way?
First, any industrial policy makes it clear that the market alone cannot deliver against a set of social and economic objectives. The market cannot deliver an effective manufacturing sector. It cannot deliver, and has not delivered, in relation to the provision of skills. It has not delivered in terms of regional equality, which is why there are regional imbalances in the United Kingdom and across Europe. It has failed to provide investment-- the seedcorn for research and development and for the development of new technologies and ideas.
Mr. Clifton-Brown : The hon. Gentleman has talked a great deal about unemployment in relation to competitiveness. Does he agree that, when competitiveness was operating at its best in this country--during the 1980s --we created more jobs than all other European countries put together? Having just returned from the United States, does he not agree that, unless we as a Community put the right level of research and development into our industry, we shall never be competitive? Will he therefore deal with the amendment and talk about research and development and competitiveness, not about economic policy?
5 pm
Mr. Fatchett : I am delighted that the hon. Gentleman seems to be picking up the point that I was making. He may later be drawn into conversation with one or two of his hon. Friends. My point, with which he now seems to agree and about which he needs to persuade his ministerial colleagues with reference to the United Kingdom, is that we cannot merely leave the market to deliver in certain respects. I now deal with one or two of the issues to which I drew attention earlier. The first is regional imbalances. It is clear that Governments of all parties have recognised that there are social inequalities because of imbalances among regions. That is why Governments of all parties have had regional policies for the past 30 years and why there is a need for intervention in the market. If we leave the direction and location of industry to the marketplace alone, we shall, as in the past, see the south-east prospering while other parts of the country do not. That is why we have all accepted the need for an industrial policy to deal with regional disparities. Mr. Budgen rose --
Mr. Fatchett : No, I must continue. I have given way to the hon. Gentleman three times--I am sure there must be some biblical reference there. I must make some progress.
It is because of the market that Governments have recognised the need to intervene to provide education and training to deal with our skills deficit. Our criticism of the
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Government is that they have not done enough and that, in terms of skill, there is a real danger that we shall lag behind other countries.Mr. Richard Shepherd : The hon. Gentleman is moving an amendment-- there is a point to make.
Mr. Fatchett : I shall not give way to a sedentary intervention. If the hon. Gentleman allows me to make a little progress, I shall give way to him.
I was saying that Governments have intervened. I share the view, which has been expressed strongly by my right hon. and learned Friend the Leader of the Opposition, that the United Kingdom economy will compete effectively only if we deal with our skills deficit and shortages. That means that we need more investment in education and training.
The same applies to research and development. Because of our failure through the market to provide long-term research and development and long- term investment for research and development, the Government have intervened, often with very limited resources, to ensure that British industry and higher education have the opportunity to develop new techniques, new research and development and new ideas. As a country which recognises the need for an industrial strategy, we must ensure that our research and development is able to compete with that of other countries.
Mr. Richard Shepherd rose --
Mr. Fatchett : Let me finish this point.
The first assumption behind any industrial policy is that the market alone cannot deliver, which is why there is a need for intervention. That issue clearly unites the Opposition and it is why we, like virtually every industrial organisation in the country, have been asking for an industrial policy and why we shall continue to bang on the door for such a policy.
Several Hon. Members rose -- --
Mr. Fatchett : The hon. Member for Aldridge-Brownhills (Mr. Shepherd) has been the most persistent. I shall then give way to my hon. Friend the Member for Newham, North-East (Mr. Leighton).
Mr. Richard Shepherd : I understand the Labour party's position and, of course, through Maastricht, the Government support the hon. Gentleman's contentions. The Labour party could win an election and determine those priorities for itself. The difficulty under Maastricht is that they would then be subject to qualified majority voting. What if the balance of the argument goes against Britain as being an area in which investment should be made? We know that moneys from the cohesion funds will be directed to our competitors in the south and around the Mediterranean. Therefore, such judgments would no longer be within the call of a future or prospective Labour Government and are outside the call of the House. The hon. Gentleman may in fact, by his argument, be undermining British industrial competitiveness because of the distribution of resources elsewhere.
Mr. Fatchett : I fear that in many respects the hon. Gentleman fails to understand the way in which industrial capital has developed in recent decades. We now live in a global economy, and the notion that we can isolate one economy from the others is wholly out of date. The same
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applies to an industrial policy. We must ensure that, at certain levels, there is co-operation. The hon. Gentleman recognises that as part of industrial policy. The notion that we can develop an economy and an industrial policy which is circumscribed by one set of geopraphical boundaries is out of date.Mr. Spearing : Like all our colleagues, I agree with what my hon. Friend says about market forces and their limitations in innovation and investment. However, I draw his attention to the numerous regulations which pour forth from the Community, relating to grants that the Community makes available to institutions of research and innovation. Is it not a fact that the Community itself, or its insitutions, decides the distribution of those grants for innovation in order that the industrial base of the Community as a whole and not necessarily one part of it can, in the Commission's view, be strengthened? Does that not mean that taxpayers' money from this country can be distributed anywhere that the Commission and the Council decide, and that the House will lose its ability to decide?
Mr. Fatchett : My hon. Friend makes an interesting point, but if he reads some of the figures from the Office of Science and Technology, he will see that, under the European Community research and development programmes--cross-programmes, such as Brite-Euran, Esprit and RACE--the United Kingdom is, although not always, one of the major beneficiaries.
Mr. Fatchett : I can say only that I have a set of figures relating to history as it has so far been written and to events that have taken place ; I cannot provide my hon. Friend with predictions about the future. If I could do so, I should probably win the football pools every Saturday afternoon and not be here. The current data show that under the programmes to which he referred, the United Kingdom seems to have done better than other countries.
Mr. Cash : A few moments ago, the hon. Member referred to co- operation, especially in science and technology. It is a very good idea, but article 130h states :
"The Community and the Member States shall co-ordinate their research and technological development so as to ensure that national policies"
are consistent with Community policies. That does not mean co-operation ; it means that we shall effectively have a Community research and technology policy which will be governed by a central policy, and that will kill scientific diversity and competition. Does he not agree that that would be extremely bad news, according to his own argument in favour of co- operation?
Mr. Fatchett : I always worry when criticism of Ministers' effectiveness in European Community negotiations comes from Conservative Back Benchers. It is perhaps a criticism that we should make. In response to the hon. Member for Stafford (Mr. Cash), even under article 130h the British Government, as the Government of a member state, will have the opportunity to influence the development of any research and development policies, and I should have thought--
Mr. Budgen rose--
Mr. Fatchett : No, I shall give way later. In that context, I should have thought that the British Government, who
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do not have one of the best records in Europe of funding research and development and science, might gain as a result of article 130h, as might the British people and institutions.Several Hon. Members rose--
Mr. Fatchett : I shall make some progress and come to the
The Chairman : Order. Hon. Members keep standing up in the middle of the hon. Gentleman's speech. He has made it clear that he will give way in a few minutes. Hon. Members must learn to contain themselves.
Mr. Fatchett : You are kind to me, Mr. Morris. I have looked at last week's Hansard and I suspect that I have given way more than anyone else during my speech. I am glad that I have stimulated so much controversy and thought that I have persuaded hon. Members to wish to intervene. I am sure that hon. Members will allow me to make a little progress.
I said some time ago that there were three principles underpinning industrial policy. The first is that the market alone cannot deliver and the second, which is crucial and which will herald a shift in EC policy, is that industry policy must be more than competition. It was interesting to read the comments of the new EC Commissioner in an interview in last Friday's Financial Times. We always criticised the approach to competition policy taken by the previous Commissioner, Sir Leon Brittan, because he took what we saw as a tight and legalistic approach which did not recognise some of the industrial policy implications. I therefore welcome the statement made by Karel van Miert, the new EC Commissioner for competition policy. In last week's Financial Times, he was quoted as saying : "competition is not the ultimate goal of the economy. The ultimate goal is for the economy to perform for the people, so that everyone gets his fair share and companies have a good environment to prosper, to invest and to be competitive."
Commissioner van Miert then says that he would take a much more flexible approach to competition. He draws attention to the Franco-Italian takeover of de Havilland, the Canadian aircraft manufacturer. What he says, which is central to Labour's view on industrial policy, is that there must be more than the market and that there must be more than competition. We welcome that development and the statements made by Mr. van Miert.
Mr. Budgen : Many of us who find it difficult to understand the changing views of Opposition and Government Front-Bench Members because of the warm consensus between them would like a summary of the hon. Gentleman's understanding of the difference between the two parties. Is he saying that at Maastricht, the Government became converted to a European industrial policy and that he now welcomes that conversion not only to Euro -enthusiasm, but to socialism, but that if the Labour party became the Government, it would pursue those policies with more vigour and with more liberality?
Mr. Fatchett : I guess that at some stage in the debate we may have the opportunity to find out the Government's position on industrial policy. I shall put a number of
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questions to the Minister. I suspect that he may be in the best position to answer all the interventions from the hon. Member for Wolverhampton, South-West.Mr. Roger Knapman (Stroud) : The hon. Gentleman is recommending interventionist policies. Some European countries followed such a policy for some years. Why, therefore, has the EC's share of world trade declined from 25.5 per cent. to just 20 per cent. in a decade?
Mr. Fatchett : The hon. Gentleman says that some Governments have followed interventionist policies ; others have not. The Government who have clearly followed non-interventionst policies are the United Kingdom Government under Baroness Thatcher. If the hon. Gentleman had been here earlier, he would have noted that I quoted unemployment figures that showed that the British economy had performed less well than other economies had in terms of jobs. The hon. Gentleman needs to answer the question why a non -interventionist Government have had such an appalling record on unemployment.
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