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Sir Fergus Montgomery : It is a pity that my hon. Friend did not intervene on the hon. Member for Selly Oak, who was extolling the virtues of what is going on in Germany.
However, it is no consolation for the unemployed to be told that unemployment is a problem the world over. There are some bright spots. A higher proportion of the adult population is in work in the United Kingdom than in any other major European Community country. There is no panacea for unemployment, which is a terrible waste of human resources. The fact that we are paying more and more out in social security benefits is also a terrible waste. If only those people were back at work, we could cut social security payments, they would pay tax and that would help to spark the economy.
I believe that things are in place for economic recovery. Interest rates are down to 6 per cent.--the lowest since 1977 and the lowest in the European Community. Hon. Members on both sides of the House have been appealing for interest rate cuts because they are bound to help industry, small firms and the construction industry, by encouraging people to buy their homes and get things moving there. Inflation is now below 2 per cent. --the lowest since 1967.
I am amazed that the Opposition have attacked us on unemployment. We have already had quite a lot of debate about the effects of the social chapter, of which the hon. Member for Selly Oak is a great exponent. The Prime Minister was absolutely right to opt out of the social chapter of Maastricht because it would increase labour costs and make the labour market less flexible. We should remember that in 1991 Britain attracted one third of all inward investment in the European community. When the Prime Minister opted out, Mr. Delors--who is a pin-up for the Opposition but no pin-up of mine--said that it would
"set a dangerous precedent, setting up one country as a paradise for Japanese investment."
An editorial in The Wall Street Journal about "John Major's gifted leadership"-- [Laughter] --I am glad that the hon. Member for Brent, East (Mr. Livingstone) finds that funny. The Prime Minister won the last election, against all the opinion polls and all the trends at the time. Until the last minute, the Opposition were convinced that the election was in the bag, but I could have told them differently. The reaction on doorsteps in my constituency made me certain that we would have another Conservative Government.
Mr. Nicholas Brown : In Altrincham and Sale?
Sir Fergus Montgomery : Even in Altrincham and Sale the majority can occasionally drop, but it did not do so at
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the last election and it has not dropped since I became the Member of Parliament. The hon. Member for Newcastle upon Tyne, East and I pair with each other in the House of Commons, but I must warn him that if I hear any more of his interjections I shall have to look for another pair.The editorial in The Wall Street Journal noted :
"Under John Major's gifted leadership, the UK has opted out of EC social legislation, including labour policy. The message to the world is that an investment in Britain gives access to the single market without the high labour-cost threshold imposed by the social charter."
That decision was of enormous value.
I do not dispute that the recession has been deeper and longer than anyone imagined. When I was young my parents always told me that it was important to have a profession because if one was a school teacher, an accountant or a lawyer, one had safety, but that has not happened this time ; people who have not been hurt in past recessions have been hurt this time, and it has had a terrifying effect. Many of our trading partners have also experienced economic downturns. In the year ending December 1992, industrial production fell by 3.3 per cent. in West Germany, 8.5 per cent. in Japan and 3.7 per cent. in France--but in this country it rose, albeit very narrowly, by 0.6 per cent.
The Opposition should forget some of the doom and gloom. If we had less gloom and doom from Opposition Members and if they did more to hail this country's achievements of the past few years it could do a great deal to rebuild confidence in this country. If the hon. Member for Selly Oak forces the motion to a Division, I hope that the House will overwhelmingly reject it.
10.26 am
Mr. Don Foster (Bath) : I am grateful for the opportunity to follow the hon. Member for Altrincham and Sale (Sir F. Montgomery). I congratulate him because he was at least honest enough to acknowledge the depth of the recession and the fact that it is deeper and has gone on longer than he and many others had expected. I congratulate him on acknowledging that unemployment is a human tragedy as, sadly, we have not often heard that view from Conservative Members. I am grateful to him for saying that.
The hon. Gentleman asked us not to refer to what he describes as "gloom, doom and despondency". Many Opposition Members have a major problem-- especially since we have been told about the Prime Minister's "gifted leadership"--because we know that if we dare to comment on that "gloom, doom and despondency" we shall be attacked by the Prime Minister during Question Time for talking this country down. I have no desire to do that, as I think that confidence in this country is vital. We know that confidence is an important ingredient in economic recovery. However, we cannot allow that to cloud the issue and we must consider the subject of the motion--the Government's management of the economy. Frankly, if we are to deal with that, there is no way that we can use nice, warm phrases about success and so forth, because the Government have badly mismanaged the economy. As Conservative Members have said, other countries are facing economic difficulties, but that does not alter the fact that measures could be taken to alleviate, or go some way towards alleviating, our problems. I and my party criticise the Government for their failure to take those
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measures. Although other countries face difficulties, as we do, we went into the recession long before many other countries and our recession is far deeper than that of many other countries. The blame for that must be laid at the door of the Government.The future for our economy looks grim. Unemployment is rising. The hon. Member for Birmingham, Selly Oak (Dr. Jones) referred to the large number of national organisations that got into severe difficulties and have had to shed manpower, but an important additional point that the hon. Lady did not mention is that a large number of very small businesses have had to shed staff. My constituency of Bath depends on the small business community. Whatever hon. Members may think about Bath, adult male unemployment there now stands at nearly 17 per cent. I know that the figure is higher in other constituencies, but I am sure it will come as a surprise to hon. Members to be told that adult male unemployment is a problem in my constituency.
Mr. Nigel Evans : At some stage during his speech, will the hon. Gentleman point out that our interest rates are now extremely competitive, at 6 per cent., that inflation stands at 1.7 per cent. and that our exchange rate is extremely attractive, which means that our manufacturers are able to export far more? Will he also point out that in my area of the north-west there is extremely encouraging news? Last Friday, after going to the opening of terminal 2 at Manchester international airport, at a cost of £265 million, I picked up a copy of the Manchester Evening News and saw the headline "Good News" on the front page. The article talked about 50,000 extra jobs being created at Ringway, Manchester ; 6,000 jobs in Dumplington ; 1, 000 jobs in Stockport ; and 500 jobs in Tameside.
Mr. Foster : I am grateful to the hon. Gentleman for his intervention. He made the point with which I began--that it is not all bad news. Some improvements are taking place. However, the hon. Gentleman fails to recognise that a successful economy is one in which we have all the things that he mentioned, including low inflation, but also low unemployment and that the Conservative Government have not brought about an economy in which both of those things happen at the same time.
As the motion points out, much of the low inflation that we have achieved has been at the expense of very high unemployment. We need a series of measures to ensure that we achieve a very much lower level of unemployment. That is what I seek. I am sure that that is what the hon. Gentleman also seeks. In this debate we ought to be considering the positive measures that could have been taken and should be taken by the Conservative party. Sadly, there is no evidence that on 16 March, Budget day, we shall hear about the sort of measures that my party believes would stimulate the economy.
Mr. Jenkin : Does the hon. Gentleman not suppose that if it were possible to create prosperity and low unemployment by spending additional money, every Government in the world would automatically increase public expenditure in order to create low unemployment? The fact is that it does not work. It was a Labour Prime Minister who said, in all candour, that the option no longer exists. When will the Opposition parties learn from
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their own mistakes and realise that the way to create low unemployment is to maintain a low inflation, high incentive and low tax economy?Mr. Foster : I am grateful to the hon. Gentleman for his intervention. It would be helpful if he were to take the Chancellor of the Duchy of Lancaster to one side and have a quiet word in his ear in an effort to persuade him of his particular point, because both I and my party and the Chancellor of the Duchy of Lancaster believe that at the bottom of a recession there is considerable benefit to be gained from short-term borrowing to stimulate the economy.
The vast majority of people listening to the debate will be amazed to learn that the cost of a single unemployed person is estimated at about £9,200 per annum. If we could get some of those people back to work-- and there are measures that could be taken to get them back to work--we should save the cost of their unemployment benefit. The economy would also gain. Those people would then be paying taxes, which would help to pay off some of the increased borrowing that would be required to stimulate job creation. The people listening to our debate cannot understand why such measures are not being taken when so much needs to be done to create jobs.
The hon. Member for Selly Oak referred to the need for further investment in housing, but she did not refer to the fact that there is a £4.3 billion backlog of repair and maintenance work to school buildings and that there is a £1.5 billion backlog of repair and maintenance work to higher education institution buildings. Furthermore, she did not refer to the importance of additional investment in other parts of the infrastructure--in British Rail and the varioius light transit schemes that are being developed in different parts of the country. There are many areas where it would be possible to invest in the economy, in order to create jobs, through initial short-term increased borrowing. In a relatively short period, that investment would generate sufficient income to pay off the debt. Those who are listening to our debate cannot understand why we do not do that.
Before the hon. Member for Colchester, North (Mr. Jenkin) intervened, I was referring to small businesses. Small businesses have a vital role to play in the economy. If we look at what happened after the last recession, we find that between 1985 and 1987 the small business sector--firms employing fewer than 20 people--created 500,000 new jobs. During the same period, companies employing 20 or more people created only 20,000 new jobs. I fervently believe that we should provide much greater support for small businesses, but the Government have failed to do so.
The Conservative party claims to be the party of small businesses. The Advertising Standards Authority ought to look into that claim very carefully. The Conservatives have provided little or no support for small businesses. However, a great deal could be done for them. A reduction in the uniform business rate is vital. Support should be provided for small businesses so that they do not suffer the burden of the late payment of debt. Schemes ought to be set up whereby people from large businesses could be seconded to small businesses to provide them with help.
Mr. Jenkin : The only debate on small businesses that has been held in this Parliament was initiated by a
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Conservative Member of Parliament. In fact, it was initiated by me. The one thing that small business men want is a low taxation, low interest rate, low inflation rate economy. They certainly do not vote Labour in general elections.Mr. Foster : I am not sure whether the hon. Gentleman is aware that I was not advocating that small businesses should vote for the Labour party at any general election. I should certainly strongly advise them not to do so. There is another party that I hope they would be willing to support. The hon. Gentleman is absolutely right. He is the only Member of Parliament who has raised this issue in a major debate, but I am sure that he will acknowledge that my party has frequently advocated support for small businesses. We continue to do so. We shall also continue to challenge the Chancellor of the Exchequer to introduce a wide range of measures in his forthcoming Budget statement to support small businesses.
Dr. Lynne Jones : The kind of technological infrastructure that I mentioned in my speech is of great assistance to small businesses in Germany. For instance, one small, highly innovative company that employs only seven people worked with the institutes to which I referred to develop specialised microchips and develop its market needs, which may lead to greater things. Small businesses certainly have such innovative capacity and need the support that I mentioned in my speech.
Mr. Foster : I am grateful to the hon. Lady, who is quite right. Such schemes are available in Germany ; but similar schemes are available in Britain to help with research and development and such like. I am sure that she will agree that schemes such as support for products under research--SPUR--and the small firms merit award for research and technology --SMART--need a significant financial boost. Perhaps she will join me in urging the Chancellor of the Exchequer to consider imaginative ways of providing support to small businesses. One of the simplest measures that he could take would be to raise the threshold for VAT.
Mr. Nigel Evans : I am one of the nation's 3 million small business people. We warmly welcomed the uniform business rate, because at least we now know that rates will not increase by more than the rate of inflation. Too many small businesses were clobbered by left-wing Labour and Liberal Democrat authorities. Small business people want certainty about taxation, which they get under the UBR, but we do not want the social chapter, which would increase the costs of small businesses. The minimum wage, which the Labour party advocates, would increase labour costs and price people out of jobs. That is the last thing that small businesses want.
Mr. Foster : I am grateful for the hon. Gentleman's intervention. Perhaps he is the first hon. Member to recognise that not just the Labour party is participating in the debate.
I am also grateful to the hon. Gentleman for making the point that small businesses like certainty in taxation. I assure him that not only small businesses but large businesses and individuals would like some certainty about taxation. The hon. Gentleman is a member of a political party which would have people believe that it has reduced taxation, but, as he knows only too well, the total taxation burden on individuals has risen significantly.
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We need only to consider the issue of VAT to realise that that is true. There are three points about VAT that are well worth making. First, people pay a lot of VAT : the average family pays £1,000 a year. Secondly, British people pay much more VAT than they used to : VAT payments have increased by a staggering 178 per cent. since the Conservative party took office. The third point, which perhaps is the most worrying, is that it is undoubtedly the Conservative party's favourite tax. The hon. Gentleman spoke of certainty, so perhaps he would like to intervene again and tell us whether, after 16 March, VAT will be levied at the current level on the same range of goods and services or whether it will change and cause further uncertainty. I am happy to give way if he can answer that question.Mr. Nigel Evans : I am not the Chancellor of the Exchequer.
Mr. Quentin Davies (Stamford and Spalding) : Shame.
Mr. Evans : I thank my hon. Friend for that. If I were, I would tell the hon. Member for Bath (Mr. Foster) what will happen on 16 March. We have had a general election since value added tax was increased to 17.5 per cent. in which the Government won a fourth seccessive term of office and the Liberal Democrats were smashed because people had no confidence in them. The Labour party, yet again, was consigned to the Opposition Benches.
Mr. Foster : Again, I am grateful for the hon. Gentleman's intervention because he linked the general election with VAT. In the election campaign, the Prime Minister made it clear that he had no intention of raising VAT. I assume from his intervention that the hon. Gentleman at least knows that VAT will not be increased. The hon. Gentleman spoke of certainty. There is an urgent need for much more openness and transparency in the preparations for the Budget. The hon. Gentleman seems quite content to be unaware of what will be in the Budget until it is announced on 16 March, but I believe that it would be much more sensible if we adopted the example of other countries and held a more wide-ranging debate than is possible under the motion before the Budget. It would help to resolve some of the uncertainties that face small and large businesses and local councils.
Mr. Heald : On the question of tax and small business, does the hon. Gentleman agree that some of the good news that he mentioned is that corporation tax has been reduced from 52 to 33 per cent. the lowest rate in the EC and that seven major taxes on small business have been abolished, including inheritance tax on family businesses, which is a real bonus to the small business man? Does he agree that that is good news for Britain?
Mr. Foster : I was more than happy to admit earlier that there are some bright spots, and the hon. Gentleman has referred to one or two others, but, sadly, they do not amount to a great deal because of the decline in the small business sector. A wide range of measures, some of which I have mentioned, need to be taken if we are to provide the necessary support to small and larger businesses by investing in our infrastructure and to begin to reduce unemployment.
We cannot forget the earlier remarks that were made about unemployment. Because of the Government's mismanagement of the economy, unemployment is
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allegedly standing at 3 million, but if we were using the same calculation that was used only a few years ago the figure would be 4 million. There are 1 million long-term unemployed people, and far too often we have referred to statistics without emphasising that behind each one is a human being and a human problem. We should always remind ourselves of that.There is now clear evidence about the personal and social problems that arise from long-term unemployment. I am sure that, like me, Mr. Deputy Speaker, you were saddened to read the recent report by the British Medical Association, which stated that there is clear evidence that the long-term unemployed are likely to die younger than those who are in employment. That is a particularly telling point. A bilingual translator who lives near my constituency recently sent the Prime Minister a letter asking, "What can I do to get a job?" The Prime Minister replied, "You had better travel to France and seek one there." That is not good enough. Much could be done by the Chancellor of the Exchequer on 16 March to reduce unemployment. I fear that there is little reason to believe that we shall hear good news or exciting ideas to stimulate the economy from a failed Chancellor of the Exchequer, but I desperately hope that we shall.
10.49 am
Mr. David Lidington (Aylesbury) : I should like to pick up straight away the last point made by the hon. Member for Bath (Mr. Foster) because there can be at least some agreement between our parties. Week after week, every hon. Member is made aware through our postbags and at our advice surgeries of the raw pain of human misery caused to individuals and families by their personal experience of unemployment. However, I fear that there is less agreement on the economic policies most likely to bring about long-term, sustained growth in employment and prosperity for the people of this kingdom. I, of course, congratulate the hon. Member for Birmingham, Selly Oak (Dr. Jones) on securing the debate--I am sorry that she is not in her seat at the moment--but I part company from her on the remedies that she offered. I listened closely to her speech and, in the long catalogue of slogans, I managed to discern four suggestions that I took to be her policies for economic regeneration. Prominent among them, in her speech and in the text of her motion, as my hon. Friend the Member for Hertfordshire, North (Mr. Heald) said, were cuts in British defence spending. I looked across at her colleagues around her while she made those remarks and observed the horror on the faces of those who leap up at every Defence Question Time and in every defence debate, pleading for defence contracts in their constituencies to go ahead.
Mr. Lidington : At least the hon. Member for Brent, East (Mr. Livingstone) is consistent. He has stayed here, but such was the hon. Lady's advocacy that she has driven out of the Chamber the hon. Member for Kingswood (Dr. Berry), who champions the European fighter aircraft, and the hon. Member for Barrow and Furness (Mr. Hutton), who looks after the interests of the military dockyard in his area. There has even been a switch among the members of the Labour Front Bench so that the hon. Member for Newcastle upon Tyne, East (Mr. Brown) can rush to telephone his local newspaper with an assurance that,
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whatever Labour's policy on defence cuts, it will not affect the Swan Hunter contract for an amphibious assault ship, which he so ardently demands in every defence debate and Defence Question Time.Mr. Livingstone : My hon. Friends have left the Chamber to launch the Campaign for Full Employment. They will be right back as soon as they have done so.
Mr. Lidington : The timing has proved most convenient for them. The second policy that I detected in the hon. Lady's speech was that, as part of the new defence policy and part of the effort to maintain employment here, Britain should stop imports of defence-related equipment. She completely ignored the likely consequences of such a move and the reprisals that would be taken against British exports of defence equipment and other goods. For the hon. Lady to protest, understandably, about redundancies at Rolls-Royce and British Aerospace and then to advocate policies of trade protection displays a misunderstanding of economics which, I am afraid, is characteristic of too many members of her party. We then heard about the national investment bank, a resurrected ghost from the 1960s and 1970s. I am sure that the hon. Member for Brent, East will tell us that what we really need for economic recovery is for the Greater London council to be re-established. The old ghosts are coming back to haunt us. The De Loreans of the future will take heart from the speech made by the hon. Member for Selly Oak.
Finally, as one might expect, the Labour party was joined by the official spokesman for the Liberal Democrats. It was said that a little bit more borrowing would not harm us but would magically bring about the prosperity and employment which we are all seeking. A mere £10 billion was mentioned ; a smidgen we were told. There was no mention of how that money was to be raised although we could perhaps increase the top rate of tax, but only a little. We heard nothing about the consequences of such an increase in borrowing, which would lead to higher interest rates. That would be more damaging to hopes of economic recovery in Britain than any other single development, especially when the recovery is beginning but it is still at an early stage.
Underlying the hon. Lady's speech was the fallacy that it lay within the gift of Governments to bring about full employment overnight. If there were a magic wand or such an easy and painless solution, every member of any party would have seized it immediately. The truth is that it does not lie within the gift of Governments. Jobs and prosperity will be provided by British companies selling high quality goods and services to customers here and abroad at a price that the customers are willing to pay. Governments can help to shape the conditions that make commercial success more likely, but they cannot do the work of businesses for them.
I wish to put the dilemmas facing policy makers in the United Kingdom in an international context. The hon. Lady referred to developments on the Pacific rim. I glimpsed them when I visited that region last summer. Without a doubt, the most important event in the world today is the industrialisation of China, especially south China and the towns along the eastern coast of the
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People's Republic. In Hong Kong I was told anecdotes of economic growth in Guangdong province ranging between 15 and 20 per cent. a year. Four million people in the Republic are now employed by Hong Kong companies, with manufacturing being transferred across the border to mainland China. Migration is occurring on a scale seen in western Europe in the late 18th and early 19th centuries, out of the fields, away from agriculture and into the infant manufacturing businesses of China.What is happening is exciting and alarming. We are seeing 1 billion people, the world's largest nation, now following the path already trodden by the likes of Taiwan, Singapore and, of course, Japan. Many countries in the far east are following the path of capitalism and free enterprise which they rightly believe will lead to higher living standards for their people. It is to be welcomed, but it represents a challenge for us.
Those countries have access to very cheap labour and to green-field sites. They have virtually no regulation of business on the ground--for example, of environmental pollution--and they have the low costs associated with countries industrialising for the first time. At the same time, they have access to the latest technology which they can buy off the shelf.
The challenge for western Europe and for the United Kingdom is to adapt our economic policies to take advantage of the opportunities offered by the industrialisation of countries that have hitherto been poor and agrarian and to ensure that our economy is flexible enough to gain new markets, develop new products and find new niches in international commerce so that we keep jobs and prosperity in these islands.
Mr. Mark Wolfson (Sevenoaks) : I am sure that my hon. Friend, like me, is a firm supporter of free trade, but does he agree that, when investigations have been carried out by the European Community into the issue of dumped bicycle imports from China and when such practices have been found to be unfair under EC regulations, we should reasonably expect an immediate implementation of an import tariff? It is a matter of concern to me that that implementation has so far been delayed.
Mr. Lidington : I am not familiar with the details of the case to which my hon. Friend the Member for Sevenoaks (Mr. Wolfson) refers. The general principle that one should strive for world trade to be as free as possible is sound. We should seek an early agreement in the general agreement on tariffs and trade talks. We should try wherever possible to open the markets of the industrialised west to goods and services produced competitively in developing countries, and in central and eastern Europe, because that helps them on the way to prosperity and provides good quality competition for our own industries.
It is right that cases in which the principles of free trade and fair trade are being undermined should be looked into. Sir Leon Brittan is responsible for international trading matters within the Community. He is a committed free trader and I am sure that he will strike the balance correctly in resolving difficult cases such as the one to which my hon. Friend the Member for Sevenoaks referred. I talked about the opportunities for Britain and the rest of Europe that arise from industrialisation in China and in the far east more generally. It is right to congratulate my hon. Friend the Minister for Trade on the successful mission that he led to the People's Republic of China last
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year. It is no accident that our exports to China last year rose by one third to £430 million and that half those exports were in British machinery and in British transport equipment which we are selling to help the industrialisation of that country.We are also marketing our expertise. I found it an interesting vignette both of the entrepreneurialism of British business and of the success of privatisation that Thames Water is now talking to a number of Chinese provincial governments about taking over their water supplies, improving the quality of the water and selling it to industrial and domestic consumers.
Mr. Frank Dobson (Holborn and St. Pancras) : Making a contribution to Communist party funds.
Mr. Lidington : I am afraid that the hon. Member for Holborn and St. Pancras (Mr. Dobson) is behind the times, as always. Thames Water is improving the quality of life for people who have had a poor and wretched existence in past decades. At the same time, Thames Water is strengthening its business, some of which will come back in the form of good profits to benefit this country.
Mr. Dobson : What is the hon. Gentleman's explanation of why Thames Water gave £50,000 to the Conservative party last year?
Mr. Lidington : I am sure that Thames Water gives money to the Conservative party because it believes in sound economic policies which encourage free enterprise to thrive and do not seek to stifle it.
There are challenges as well as opportunities in the changing international climate. Countries that we had previously written off as part of the third world are developing into industrial manufacturing powers in their own right and a new generation of computers and robots is coming into industry and into services in North America and in western Europe.
One of the reasons for the difficulties, especially in constituencies such as mine, where much employment is in service industries, has been that a long and deep recession has been accompanied by structural unemployment--a shake-out in service industries such as banks and building societies as computers have begun to do work hitherto done by human beings. To cope with those two features of life in an international economy that will get more and not less competitive as the 1990s continue, we must develop a work force and an economy that are flexible and adaptable to changes as they arise. These changes will happen whether we wish them to or not.
I have two points for my hon. Friend the Minister which I hope he will take in the spirit of constructive criticism and advice. The first concerns education. I know that my right hon. Friends the Secretaries of State for Education and for Employment are giving much attention to vocational qualifications. From talking to college principals and to head teachers in Aylesbury and the surrounding area, I know that it is a subject about which they, too, are concerned. When I speak to local employers, I find that there is considerable misunderstanding and ignorance about what vocational qualifications mean and about what achievements are signified by a particular certificate or set of initials.
There is an urgent need for the Government, in conjunction with industry, to co-ordinate better their efforts on vocational education and training. They must
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ensure that students feel that they have achieved something of worth when they come out of their course with a certificate and that employers have available a certificate of quality that will be recognisable throughout industry.Mr. Don Foster : The hon. Gentleman raises an important point. I am sure that he accepts that there has been a desire for some years among hon. Members of all parties for parity of esteem between academic and vocational qualifications. The hon. Gentleman may be willing to join me in suggesting that one of the ways in which to get parity of esteem and to achieve an understanding of the importance of vocational qualifications is to integrate vocational education within the national curriculum.
Mr. Lidington : I am grateful to the hon. Gentleman and I will consider his proposal with interest. There is certainly a case not for diluting the basic skills and knowledge that the national curriculum requires pupils to attain, but for seeing how the vocational content of some courses could be enhanced, especially at the more senior end of the age range.
The second point for my hon. Friend the Minister concerns the support given to British exporters. As he will know, I spent an enjoyable year working for our right hon. Friend the Foreign Secretary in the Foreign and Commonwealth Office. I am not someone who habitually goes round knocking diplomats. They generally do a good job, to the best of their abilities, on our behalf. Incidentally, I am amused to note that, although the Foreign Office ministerial team is now staffed entirely, I think, by old Etonians, the permanent secretary is a grammar school boy who started his professional life as a teacher for the Inner London education authority.
I fee that we need to look again at the way in which our diplomatic resources and our commercial support are organised. We have too many people sitting around in embassies in Paris and Washington and in the capitals of free economies--people who spend their time writing out dinner table plans and arranging cocktail parties for visiting Members of Parliament--and too few people working in the capitals of countries such as Korea, Indonesia and some Latin American countries. Our business men need more guidance than is currently available to them on how to enter markets in such countries, where Government influence is important in determining who gets which contract. I hope that we can have a reallocation of support from the open economies of western Europe, where our businesses should be able to get an agent and get on and export by their own efforts, to the countries of the far east, Latin America and so on.
My constituency of Aylesbury has traditionally enjoyed high employment. Although unemployment in the town is still lower than either the regional or national average, there is no doubt that it has risen faster and further than previously in the past few years and is hitting people in all walks of life, including those who had not thought that their jobs might be at risk. Notwithstanding that, what local employers and, in particular, the Thames Valley chamber of commerce and industry are telling me now is in contrast to what they were saying 12 months ago. They believe that there are now unmistakable signs of a gradual economic recovery.
Exporters--particularly people selling outside western Europe--are reporting a healthier order
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book. Even people from some property companies--commercial as well as domestic--say that they are receiving many more inquiries now than was the case even a couple of months ago.What we need are economic policies to ensure that the trends continue and grow stronger. We want them to develop not into a short-lived bubble which will burst in a couple of years' time but into steady, sustainable economic growth, bringing permanent jobs and prosperity for the people of Britain. The lessons of our own history and of international experience teach us that it is a framework of low inflation, low interest rates, light regulation and low taxes which will bring about the economic conditions within which business can thrive. Those are the policies to which the Government are committed and which I am proud to support.
11 am
Mr. Bryan Gould (Dagenham) : I congratulate my hon. Friend the Member for Birmingham, Selly Oak (Dr. Jones) on initiating the debate and on the terms of the motion, which represents a commendable attempt to strip away self-delusion--about our ability to survive in prosperity without making and selling things that people want to buy, about the capacity of a failing, middle-sized economy to maintain a defence burden appropriate to that of a world power and about the ability of our industry uniquely to survive and prosper without the sort of help from Government that industries in other countries take for granted.
It might be thought that the Prime Minister--if he can be assumed to speak for the Government--has at last recognised the truth of some of those points. In the interview in The Independent, he appeared to renounce the view held by earlier Conservative Governments that we could survive without manufacturing. We have yet to see any sign that either the Prime Minister or the Chancellor has the faintest idea what to do about it, but if they have indeed renounced that view, they have done so in the nick of time.
The decline of manufacturing is well known and I do not propose to rehearse the details of it. Suffice it to say that, as a proportion of our gross domestic product, as an employer of our labour and as a source of investment, manufacturing is in decline. That is not because British people have lost their taste for manufactured goods--far from it--it is simply that they are now supplied by the manufacturing industries of other countries. That is why, under this Government, we fell into deficit on manufactured trade for the first time in our recorded history. That is why we have a huge proportion of import penetration. That is why large parts of our manufacturing capacity have disappeared and why our economy is now narrowly and dangerously based. That is why we are encumbered with a tremendous balance of payments deficit, even in the depths of recession, which must be a major inhibitor to any Government intent on taking us out of recession.
Notwithstanding the temptation to concentrate on recent developments, such as the exchange rate mechanism, it would be a mistake to assume that we have got ourselves into this parlous plight as a consequence of mistakes made in detail and in the short term by the
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present Government. Those mistakes are there--they are legion and they are damaging--but I am sorry to say that our decline as a world economy goes back a long way further even than the present Government. I believe that we pay the price today--this is not a new point, but almost a commonplace--for an excess of short-termism in our attitude to economic policy.I want to explore briefly where that short-termism comes from--why it is now so deeply entrenched in our national psyche and has become a matter of cultural attitude as well as economic policy making. One of the first elements in the puzzle is to be found in the long-running conflict between bankers and politicians or democrats as to who should control the economy. As the country which virtually invented banking in its modern form, we have always had a greater propensity than most to listen to the bankers. We have always been more willing to hand over to the bankers control over central aspects of the economy such as the currency. The bankers' cry is always that if the currency is left to politicians, they will debauch it. They say that, in the interests of stability, they must retain control of the currency.
Whenever that argument has prevailed, it has led to the same outcome. One of its earliest manifestations arose in the immediate aftermath of the Napoleonic wars, with the Select Committee on gold bullion. The domination of the argument by the bankers on that occasion led directly to social upheaval and the Peterloo massacre. We caved in to the bankers again in the middle of that century when we gave them a virtual monopoly over the creation of credit. The picture remained unchanged in the present century. Winston Churchill said that he would rather see industry more content and finance less proud, but he nevetheless committed us to the gold standard. The depression of the 1920s and 1930s was the consequence. The same dominance of the bankers has produced two damaging recessions in the past decade.
That major factor is constantly at work, but in our own experience it has been compounded by a peculiarly British phenomenon. As the world's most successful industrial economy, at some point in the 19th century we became an asset-rich economy. We became preoccupied with our assets and created great armed forces to roam the world to give them physical protection. The impact on our economy was even greater. We ceased to concern ourselves greatly with making and selling things that people on free markets wished to buy because we had protected markets and cheap sources of raw material and food.
We became an economy fixated on assets. In the City of London, we created a great worldwide marketplace where those assets could be traded. The value, and stability in the value, of those assets was the preoccupation of our economic policy makers and it still is today. It is the last hangover of the imperial mentality. Without even being aware of it, we still run our economy as though it were the interests of those who are already well off which matter rather than the interests of those who may wish to invest and create wealth for the future.
More recently, we made the mistake of misreading our own economic history. In the Conservative Government of the former right hon. Member for Finchley, it was concluded that if we wished to rebuild the golden days of the 19th century, when we were the world's industrial leader, we should reproduce the circumstances in which that had been the case. Indeed, we heard echoes of that from the Conservative Benches even this morning. Most
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particularly, it was concluded from that period that Britain was great because entrepreneurs did their own thing, freed from the constraints of government. We were the pioneers : our merchant adventurers and entrepreneurs went out and did things, and no doubt those things were very well done.Other countries, however, seeing that we had got ahead of them, drew a very different lesson about what was required of governments in order to make up the gap. They realised that to close that gap and eventually to overtake, they needed intervention by government and a partnership of government and industry if they were to make proper, directed and rapid progress instead of the fragmented, stop-start progress which had served us so very well in our pioneering phase. Those countries rapidly learned the way to close the gap and they duly performed much better than we did. We, poor simple naive souls that we are, looking at our history drew exactly the wrong lesson when we discovered that we had a gap to make up. We thought that the way to make up the gap was to take government out of the picture. We now wonder why the gap continues to widen when we so mainifestly failed to learn the lesson from other more successful economies.
Mr. Wolfson : The hon. Gentleman was focusing on our not learning lessons which he argued that other countries had learnt in terms of the need for Government intervention. How does he account for the fact that during periods of socialist Governments in this country since the war-- which, mercifully, have been relatively short--we were still subject to stop-go policies and did not make effective long-term progress?
Mr. Gould : I will come to the role of the Labour party and of Labour Governments in a moment, but it is worth observing mildly that under Labour Governments growth rates have been rather higher than under Conservative Governments. That is particularly true of the last Conservative Government compared with the Labour Government who preceded them.
I wish now to consider another modern phenomenon--the body blow delivered to Keynesian economics by the oil price shock in the early 1970s. That knocked the stuffing out of many economists on the left. They then began to say things like, "You can't spend your way out of recession"--as though there were any other way of getting out of a recession. They began to say, "We are all monetarists now." Indeed, under the Labour Government with Denis Healey as Chancellor, the monthly figure of sterling M3--do hon. Members remember that?--was the arbiter of Government economic policy from week to week. Sterling M3 was headline news. If it did not perform as expected, the Chancellor quailed and had to change his policy. Does anyone know what the sterling M3 figure is today? Is it even recorded? I very much doubt it. That is an example of how intellectual fashion can so easily influence even Members of Parliament and so easily set us on the wrong track.
With the revival of what had been thought to be long-dead doctrines of classical economics which we happened to call monetarist, we became convinced that the only thing that the Government could do through economic policy was to establish conditions of monetary stability. Stability was all that mattered. The idea was that if we could choose the level for the rate of inflation or the rise in prices, we might as well choose nil because it made
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