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Mr. Skinner : It is £4.5 billion.
Mr. Livingstone : That is £4.5 billion which could be released for further investment.
The second aspect of the motion is, in many senses, more important. In the short term, much could be done by releasing military expenditure for use in more productive areas, but why do we have that military expenditure? As my hon. Friend the Member for Dagenham said, it is because we want a huge military to protect our overseas assets. It is part of the old imperial tradition. If one owns much of the rest of the world, one wants a big army in case the locals try to take it back, as they did with the Suez canal. That is logic. One must consider the core of investment strategy in the City of London. The City behaves as though it has no loyalty to the people of this country. Investment abroad is its primary concern. It is prepared to find the money to build a factory in America, France or Germany that it is not prepared to build here. That is not merely short-termism but a psychology within the City which has no loyalty to Britain. One could tow the City of London to the middle of the Atlantic and leave it there. We would be better off without it. Through pressures on successive Governments, the City has been able to structure all British law relating to the economy to benefit its own interests rather than those of the productive sector of the economy.
Mr. Quentin Davies : Does the hon. Gentleman know the net contribution made to our present current account by the City and financial services?
Mr. Livingstone : It is nothing like so important as the hon. Gentleman thinks. I was not joking when I said that we would do better without the City of London, because its distorting effect is much worse than the short-term money that it can earn from overseas investments.
Let us consider the City's track record. It has just had 14 years of freedom under a Conservative Government and it has done exactly what it wanted. The first acts of the Thatcher regime were to loosen all financial constraints on the City. Money flowed out of Britain on a grand scale. Money from North sea oil, which could have been used to modernise Britain and to create a dynamic European economy, was invested abroad. How did the City fare? How did it manage that overseas investment? What did it
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do? Most of the money was put into property in America and Japan, just before the property market collapsed. Another vast amount was put into the American and Japanese stock markets, just before they collapsed. The high point of the Thatcher strategy of outward investment was a net balance of about £86 billion in 1986. Since then it has declined to £29 billion--it has been liquidated.If the £120 billion invested abroad during Mrs. Thatcher's time as Prime Minister had been retained in Britain and used to modernise our infrastructure and to create modern high-tech factories, that wealth would still be here generating jobs and wealth. What happened? A lot went to savings and loans and all sorts of barmy schemes throughout the world. The City of London has had a disastrous impact on the British economy.
About a month ago, I went to the opening of an extension of a factory in my constituency called Contactum, which is the last factory in Britain to make the wall sockets into which one inserts plugs. All other wall sockets have to be imported. That factory is tremendously successful and high-tech. There is nothing in it that does not match the best of German and Japanese production. Contactum has continued to invest. I did not need to ask the reason for its success. It is a family firm and does not have shareholders or the structure that burdens so many other British companies, which constantly must look over their shoulders to see whether the shareholders are getting their share.
Mr. John Sykes (Scarborough) rose--
Mr. Livingstone : The hon. Gentleman should not attack me until I have finished as he might find something even juicier to have a go at.
Investment has been the first call on Contactum's profits each year. Year by year, it has bought the most modern plant and has been able to match our overseas competitors. It is the only British company producing wall sockets which has survived. That is the lesson for British industry in many other firms. Managers have to worry about whether the banks will pull the plug if a nice big cheque does not come out of the profits that year. That is the first call on their profits. During the Thatcher boom years we heard a lot about wages needing to be scaled down.
Mr. John Townend (Bridlington) : I am delighted at the hon. Gentleman's conversion to the importance of the family business. Does he agree that during the period when the last Labour Government were in power family businesses were not looking over their shoulder at the bank manager- -but were worried to death lest any member of the family died out of turn and the business had to be sold for estate duty purposes? Under this Government's reforms, whereby shareholdings can be handed from one generation running the business to another generation without estate duty having to be paid, family businesses continue to expand.
Mr. Livingstone : I shall arrange a tour of the factory for those Conservative Members who are interested and I shall leave it to them to try to persuade the people who own and manage that factory to vote Conservative. It was not something that I was going to try, because they did not seem to me to be great fans of the Conservative Government. They do not feel that the Government have
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any interest in industry. The managing director's speech was almost exactly the same as mine--a fact which came as something of a surprise to both of us.Ms Abbott : Does my hon. Friend agree that it was typical of the 1980s and of Mrs. Thatcher's attitude to industry that her favourite industrialist was Hanson, who knew nothing about making things or selling things? What he did, time after time, was to buy up going concerns, whether it was Imperial Tobacco or Ever Ready, strip out their assets and their pension funds and then move on. That was her type of industrialist--someone who knew how to play the stock market and how to strip out assets.
Mr. Livingstone : The classic example is the film "Wall Street" which depicted that in its worst excesses. What was the end result? The regime that presided over that attitude in the United States has been defeated by the American people. They have elected a President who says that now it is not a question of competing in military terms ; Bill Clinton recognises that we have to compete in economic terms. That is the new world. The reality is that nobody is going to get into a hot war. What we are now into is a much more vigorous trade war.
Mr. Sykes : I am sure that Conservative Members are all interested to see the new economic guru of the Labour party coming among us to dispense his wisdom. Perhaps he thinks that he is David Icke. Even David Icke, in his wildest dreams, could not have dreamt up more schemes that would crucify jobs than the Labour party--schemes such as the social chapter, which would put thousands of people out of work, and the minimum wage, which would put thousands more out of work. How does the hon. Gentleman square that with what he is talking about today?
Mr. Livingstone : The choice facing every modern industrial economy is whether to go high-tech, high wage and high skill or to go low-tech, low wage and low skill. Alone of the G7 nations, Britain has taken the low road. All the other major nations are going high-tech and increasing their training, their investment in education and their investment generally. They recognise that they have to compete using the skills of their people-- and increasingly their intellectual skills. I remember the memorable words of the then Chancellor of the Exchequer, Nigel Lawson, at a City dinner. He said with pride that we are becoming a low skill, low wage economy. The other G7 nations have realised that there is no future in going downwards. There will always be third world nations able to compete successfully against us because they will be able to pay their work force less than we do, having perhaps even more truncated trade union rights than we have. The only route for Britain to take is the high skill, high-tech route. That is why the Labour party, whatever disagreements we may have about individual aspects of the economy, is committed to industrial regeneration and to rebuilding our industrial base.
That brings me to the most devastating point of all. There is talk now about the green shoots or recovery, but let us look at what is happening day by day in our economy compared with the rest of Europe. By the second quarter of 1992, United Kingdom investment had collapsed to 15.4 per cent. of GDP. That was 25 per cent. below the peak of the last British cycle, but already this
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year our investment is 25 per cent. below that in the rest of Europe. Already this year, we have taken decisions that will lock us into further relative decline, further relative loss of productivity against our major European competitors and further loss of markets. If we look at what is happening, we have to ask ourselves how we are coming out of the recession. As my hon. Friend the Member for Dagenham said, when was the last time we were in a recession and still running a balance of trade deficit? On every other occasion in the stop-go cycle, when we were at the bottom of a recession we were back in the black. The Government would then start a boom and make a mad dash for the electoral cycle in the hope of being re-elected. We are running a trade deficit of 2 per cent. of GDP, just under £12 billion, in the depths of the worst recession since the 1930s. As soon as there is any upturn in consumer spending, that deficit will escalate. I predict that before two or three years are out the deficit will probably have doubled and that we shall be running a 4 per cent. of GDP balance of trade deficit which will unleash a major economic crisis, as a result of which the Government of the day will return to the politics of recession to resolve that crisis. People ask me whether I see the green shoots of growth coming. Yes, this year will not be so bad as last year, and next year may be a bit better still, but, after that, we shall be locked into the crisis which will inevitably return because we have again neglected our manufacturing base.I was delighted by the Prime Minister's interview in The Independent . I wondered what the Government might do structurally and physically to give it effect, but the Prime Minister's recognition that the collapse of our manufacturing base has been a disaster was correct and welcome. It was a tragedy that, because of pressure from the Thatcherite wing of the Tory party, he felt that he had to recant those words at Question Time the next day. Until Britain recognises that there is no short cut out of the recession, other than by sustained investment and the reconstruction of our manufacturing base, we shall lock ourselves into year after year of continuing relative decline.
As hon. Members will have noticed, the motion on the Order Paper is not official Labour party policy.
Mr. Livingstone : It is Labour policy, but not shadow Cabinet policy. Front-Bench spokesmen tend to ignore a large amount of such motions. I agree with everything that my hon. Friend the Member for Dagenham said, but he suffers overly from tact. He was very tactful in gently chiding Front-Bench spokesmen about what they should say and do. In politics, people notice much better if you kick them hard with a hobnailed boot. Nothing that I am about to say is meant to cause the Front-Bench spokesmen pain. I say it only with the best of motives. I want to see my hon. Friend the Member for Newcastle upon Tyne, East (Mr. Brown) in government and Labour winning the next election. I am sick and tired of our losing elections because we do not get our economic policies right.
Leaving aside the debate on the personal standing of the Leader of the Opposition or on military expenditure, the core issue of the last two elections was whether people
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believed that we could improve the quality of their economic life. On both occasions, we failed to demonstrate that we could do so and believed that we could secure victory by manipulating the media or holding a rally in Sheffield to divert attention from the fact that the figures did not add up. I do not want us to repeat those mistakes.My hon. Friends the Members for Bolsover (Mr. Skinner) and for Hackney, North and Stoke Newington (Ms. Abbott) and my right hon. Friend the Member for Chesterfield (Mr. Benn) and other members of the Campaign group did a bit of a disservice to the Labour party in the past few years. We did not rock the boat hard enough. We did not want to be seen to be undermining the leadership and we kept a bit too quiet when we thought that official policies were not adequate. I confess that I listened many times to the shadow Chancellor--the present one and his predecessor--launching devastating attacks on the Tories. I agreed with every word, the Press Gallery was full and it was wonderful stuff. The people of Britain knew that the Tories were useless at running the economy and they wanted to hear what we would do. It is not enough to attack the Tories' mismanagement of the economy. People do not need to be told that they are hurting and that they run the risk of losing their jobs. They know that.
Labour should be saying what we intend to do and how it will be paid for. If we wish to expand investment, we should say where we intend to find the money to do so. In one small way, Mrs. Thatcher was right : she repeatedly managed to explain to the British people that the national economy is no different from the family budget. Of course, some things can be done with the national economy which cannot be done with the family budget. Broadly speaking, however, in the long term a country cannot spend more than it earns. That is our problem now : the Government are borrowing because they are spending more than they are earning.
Mr. Jenkin : How much more did the Greater London council spend than it earned when the hon. Gentleman was in charge of it?
Mr. Livingstone : As I pointed out several times to your father--
Madam Deputy Speaker (Dame Janet Fookes) : Order. Could the hon. Gentleman be a little more careful about his possessive adjectives?
Mr. Livingstone : I apologise. As I pointed out to the then Secretary of State for the Environment, we were much better monetarists than the Government. While I was its leader, the GLC stopped borrowing to pay for its capital programme. We paid for it with revenue year by year. Each year that I was leader of the GLC, we reduced its indebtedness. I do not believe in borrowing one's way out of recession. One can increase borrowing for a limited time for limited objectives, particularly for investment, and if the markets see that that is credible they will sustain it, but one cannot borrow as a substitute for strategy.
When I left, the GLC's debt was less than the day I was elected. I often used to embarrass Mr. Patrick Jenkin, as he then was, by pointing that out and saying that I hoped that one day the Government would be as good monetarists as the old GLC. I remember the lesson that I learned in the mid -1970s when I was a GLC back bencher and interest rates suddenly mushroomed. Because of the scale of the
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GLC's debt, interest payments were the first call on its resources, which meant the savaging of so many of our programmes. Things were off balance. I am a good old monetarist--you will not get me on that one.Mr. Richards : The hon. Gentleman said that when he was leader of the GLC he raised increased revenue in order to meet commitments. If he were Chancellor of the Exchequer on Tuesday, how would he increase Government revenue?
Mr. Livingstone : I would increase the top rate of tax to 50 per cent. and aim to claw back money from those who have done very well. One of the things that I find most depressing is the fact that the Labour party, having gone for a tax policy at the election which hit the average male worker in London who earned £21,000 a year, now appears to be going to the other extreme by talking about no tax increases at all. I want substantial tax increases for the top 10 to 20 per cent. of people who have done so very well under this Government.
Mr. Skinner : Perhaps my hon. Friend could say imediately that, if he were the Chancellor of the Exchequer, he would calculate how much the richest 1 per cent. of people in Britain received in tax cuts during the Thatcher years. He will know that in the first 10 years they received £26.2 billion, which is nearly enough to finance the health service. We would claw it back and ensure that it was used for the health service and for education and to ensure that people had roofs over their heads instead of sleeping in cardboard boxes. Having done that, we would use some to help pensioners and, as a result, my hon. Friend and the rest of us would be elected again and again. We do not need lectures from the Tories, who are now running an economy which is £50 billion in the red--about £1 billion for each week. At the previous three elections, the Tories told the electorate not to vote Labour because we would borrow, but this Government have done just that on a larger scale than any Government since the second world war. The Tories are the last people to lecture us about how to manage the economy.
Mr. Livingstone : I agree with everything that my hon. Friend has said. We could do more without increasing taxes on ordinary families. The tax burden on ordinary families is horrendous. We have heard a great deal of nonsense about how this Government have been a tax-cutting Government. In fact, they have merely changed the taxes. Income tax has been dramatically reduced at the top and the burden has been placed on value added tax and, for a while, poll tax. Taxation has become more regressive. The Government are taking more tax out of the pockets of the British people now than on the day Mrs. Thatcher came to office. They have been not a tax- cutting Government but a tax-shuffling Government.
I want the restoration of the top levels of tax. We should claw back money from those who have done so well in the last 14 years, and the money should be distributed to pensioners. Another economic fact of life is that if we distribute wealth from from the wealthy to the poorest, the poorest spend it on the things that they need to improve their quality of life immediately. That, in turn, creates employment because they usually spend it on goods that are not imported, whereas the wealthy often spend their money on other things. That is why countries that have the
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most extreme inequalities of wealth have the most savage economic cycle. The more one narrows the extremities of wealth, the more one can smooth out the boom and bust of the economic cycle.Mr. Heald : Does the hon. Gentleman agree that pensioners were the fastest rising income group in the 1980s, with a 35 per cent. rise in incomes in real terms? Pensioners have done well under the Conservatives.
Mr. Livingstone : The hon. Gentleman should sit in my surgery on Monday nights and explain to pensioners how well they are doing on £54 a week when they live in London. They would laugh--or perhaps not. My pensioners are quite good, so they would probably string the hon. Gentleman from a lamp post and enjoy that immensely. Pensioners have been some of the main sufferers. The first act of this Government was to cut the link between pensions and earnings so that there is only a link with inflation-- but the prices of things that pensioners buy have been rising at well above the normal rate of inflation year by year. Our pensioners are impoverished compared with pensioners in the rest of Europe.
The Labour party must get its figures right for the next election. I want never again to be in the position I was in in 1992. People stopped me on the streets and asked me to explain how Labour's tax policies would affect them. I added up how much better off they would be with our rating policies rather than the council tax and what they would lose as a result of the national insurance contribution cut-off point being wiped away and ended up feeling like an accountant on a street corner. Some people said, "I think I can afford that", whereas others said, "I can't afford that."
We must get the figures clear next time. We must take Mrs. Thatcher's strictures about the family budget and the national economy. If we want to spend more on investment and on training, we must be precise about where we shall make cuts. There are two areas in which we should make cuts. The first is defence, as is said in the motion. Secondly, we should change the patterns of investment in the City of London so that the City becomes subordinate to the national economy and not the predominant factor in it. We are not poor. We have all the wealth that we need to modernise the nation within five or 10 years and to catch up with the leading nations in Europe in terms of the quality of life and what we can do for our people. The problems are the lack of political will and the distorted priorities of the Conservative party.
I ask my Front-Bench colleagues to be precise. I do not want four more years of sound bites and relaunches of policy again and again. I want us to spell out what our macro-economic policy is. We must explain who will pay and where resources will be released. We must explain how many people we shall put back to work. My hon. Friends would do well to consider the Campaign for Full Employment launched today by my hon. Friend the Member for Dagenham. We have come to accept that we cannot have full employment, but that is nonsense. When I was asked recently on "Question Time" what the level of unemployment should be, I said that I thought that we could get it down to a couple of hundred thousand, which was the turnover rate of people going from one job to another. Everyone looked at me as though I was mad. We have allowed the Government and the media to convince us that full employment is a phantom from the past. We
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went through a long period of technical full employment. I grew up in that system. I remember that in 1961 there were riots outside the House of Commons and the Young Socialists pushed the doors open and got in. The restrictions and barriers were introduced as a result of that riot. Unemployment had reached the horrendous rate of 500,000 and it was inconceivable then that unemployment could go beyond that.As my hon. Friend the Member for Bolsover (Mr. Skinner) said, we must put people back to work. There is a range of actions that could create jobs. Let us not forget the billions of pounds on which councils are sitting which could be used to create a proper house building programme. In all those areas, we can persuade the British people that we could manage the economy more successfully than the Government. It should not be difficult. We must be far more precise and specific. Sound bites will not work. I hope that no one will be offended by what I have said. I say it because I wish to see us win. I wish to see us begin to transform the British economy, so I intend to be a little more assertive in the coming years than I have been in the past few. I intend to pont out the deficiencies of the economic policy and of the speeches on the economy being made by my Front-Bench colleagues.
12.48 pm
Mr. Mark Wolfson (Sevenoaks) : I am delighted to follow the hon. Member for Brent, East (Mr. Livingstone), who was engaging and totally candid, as he always is.
I congratulate the hon. Member for Birmingham, Selly Oak (Dr. Jones) on her good fortune in securing this debate. She has done us all a service. Her motion has demonstrated to all in the House today and to the country that the left wing of the Labour party is alive and well. Its policies are in good order and I shall be able to assure those of my constituents who suggest that the Labour party now has far more sensible policies and that there is less difference between Conservatives and Labour because the left wing is marginalised that that is not the case at all. I thank those Opposition Members for what they have said this morning because it is important that the country should not forget that the left survives. I wish them well in their campaigns to change what they regard as unsatisfactory policies of those on their Front Bench because their success will assure the continuation of the Conservatives in government.
The motion suggests that, under the Government's economic policy, we are a low-tech economy. What about aerospace, the chemicals industry and pharmaceuticals? Rolls-Royce has been mentioned and is a good and relevant example of a high-tech industry in the private sector that has to be immediately responsive to the need to change its structure when the market changes. In the old days, nationalised industries could never make that response.
When I first became a Member of the House, Sir Anthony Meyer--not, as I think we all realise, a noted supporter of Thatcherite policies--said that he bitterly regretted the fact that, as the Member of Parliament representing Shotton, he had resisted restructuring and job losses at that plant, in the interests, as he thought, of his constituents. Much later, we had a British steel industry which was too large and which had not responded over
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time to the contraction of the market for steel, so that when the change ultimately came, it was far more dramatic and damaging than it would have been had the industry been more flexible.Mr. Jacques Arnold : My hon. Friend has referred to Rolls-Royce's response to the market. In fact, the company is responding to significant defence cuts in this country and elsewhere, and any job losses will be as nothing compared with those that would result were the proposals of the hon. Member for Brent, East (Mr. Livingstone) to be implemented.
Mr. Wolfson : My hon. Friend is right. Rolls-Royce is having to respond to two market factors--the decrease in defence demand and the cut in air travel and the present limited demand for aero engines. No company can fly in the face of those two factors if security of employment for those who remain and the health and viability of the company are to continue in the long term.
Dr. Lynne Jones : The hon. Gentleman is referring to nationalised and privatised industries. Is it not the case, however, that, apart from the monopolies, the industries that have been privatised face deep structural problems and falling share prices? In the past, they needed the protection of the public sector to nurture them through difficult times of the kind that they are now facing, with no support from the Government.
Mr. Wolfson : I can in no way agree with the hon. Lady. I cite the steel industry as an example. As a nationalised industry, it was a disaster. No matter how much public money was poured into it, once the market for steel was no longer there, it could not survive. Does the hon. Lady really think that it is a good use of public money to continue to pour it into industries that could support themselves and respond to market demand in the private sector? Public money should go into public services ; that is where the Government put it. I am sorry that the hon. Member for Dagenham (Mr. Gould) has left the Chamber. He made several points and I had sympathy with some of them. The hon. Gentleman and other hon. Members referred to concern about short-termism in relation to the view that the City of London takes of industry. My views coincide with some of the views that have been expressed.
I am uneasy about the fact that there is still--industrialists confirm this --a gulf between the view that the financial institutions take of industry and the view of industrialists of where their future best lies. I should like to see some change in the tax arrangements so that they discourage short-term investment and encourage longer-term investment. I agree with the hon. Member for Dagenham that training and research and development should bear more obviously on the strength and health of a company and its future when it is being considered for takeover or merger.
In its thinking and in what it says to the public, the Treasury should make clear the difference between borrowing money for infrastructure investment and borrowing money for current expenditure. It is vital that the Treasury makes that distinction because a company must also make such a distinction. We now have an electorate which is financially quite sophisticated. The
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electorate finds it hard to understand why the Treasury does not make that distinction as clearly as it is made in private industry. In relation to the City, I want to refer to the problem of pension funds. The CBI is addressing the fact that employee pension funds generate a great deal of the money that may be invested on behalf of the members of those funds in such a way that it does not contribute to the long-term financial needs of the industry in which those pension fund members work. Increasingly, companies involved in the provision of pensions will look to investment that contains a longer-term view than is currently the case.Comparisons have been drawn with Germany. I do not draw a comparison between socialist or conservative thinking in terms of the Governments in Germany or Britain. However, bankers in Germany appear to have a much deeper understanding of and direct involvement in industrial management than many bankers in the City of London. For many years, I was a personnel director in the City. It was very difficult, if not impossible, for young, developing bankers in the City to be exposed directly to the day-to-day problems, or even the wider strategic problems, of industrial development. That is a weakness in our banking system. There should be more career switching between industry and the City. There is now quite a big switch between the civil service and the City. However, we should focus on a switch in career between industry and the City and not simply between the civil service and the City.
I want now to consider briefly the economy and whether we are turning the corner. I have been something of a sceptic of the Chancellor's claims in recent months that we are coming out of recession. I am not immediately impressed unless there is evidence in my own area and constituency of greater confidence returning. I now see that evidence. Confidence is a key factor. The CBI survey shows that there was more optimism in December and January than there was last October. The survey also shows that there has been a major change in the confidence of small and medium-sized companies, which is now at its highest level since the recession began in 1988. The Institute of Directors holds a similar view. There are clear signs that industrial production in the fourth quarter of 1992 was 1 per cent. higher than in the previous quarter. Those are encouraging signs, although they will not solve the problem overnight. I accept that it is likely that unemployment will continue to rise, because new growth in the economy will take a long time to impinge on unemployment. I entirely appreciate the terrible difficulty in human terms of high unemployment and the risk of social disruption. I do not accept the argument, which it may be heretical for a Conservative to advance but I have no fear of advancing it, that crime is not linked to high unemployment. I am not saying that unemployed people are criminals, but young men in particular who have no work and did not have the benefit of apprentice training from older people, as happened in the past, are more likely to get into trouble than those who have jobs and the ability to earn money and, therefore, have a more secure and complete place in our society.
For me and my hon. Friends, just as much as for Opposition Members, unemployment is an evil which we want to eliminate. The argument is about how best to do
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it ; in that context the competitiveness of British industry is crucial. I will give one or two international comparisons. Contrary to what the Opposition have said, our manufacturing industry has performed well. Between 1985 and 1990, manufacturing import penetration grew more slowly in Britain than in any of the other big six economies. The penetration here was 6.7 per cent. compared with more than 10 per cent. in Germany, Italy and the United States. In France and Japan, import penetration was more than 25 per cent. I accept that we need to reduce import penetration, but the figures demonstrate the increased competitiveness of British industry compared with the other big six economies. That increased competitiveness is largely due to the shake-out in the early 1980s. It is quite wrong to argue that British industry is not competitive. It needs to get much better, but it is stronger than it was at the beginning of the 1980s.Dr. Berry : Why did the hon. Gentleman choose to start with 1985 and finish with 1989? I seem to recollect that the Conservatives came to office in 1979. This is 1993.
Mr. Wolfson : I accept that during the major shake-out of smoke- stack industries in the early 1980s and the necessary restructuring of large parts of heavy industry there was a decline. As a result of that shake-out, Britain is now far more competitive. Since 1981, exports of British manufactures have increased by 66 per cent. That is significantly faster than for any of the other economies of the big six. Between 1983 and 1990--I am taking a wider spread--
Dr. Berry : Will the hon. Gentleman give way?
Mr. Wolfson : Perhaps the hon. Gentleman would allow me to finish the point. Between 1983 and 1990 manufacturing suffered a slight decline as a proportion of GDP, but that decline was mirrored by similar declines in the economies of other members of the big six.
Dr. Berry : I appreciate that starting from 1983 gives a slightly wider spread, but could the hon. Gentleman explain why he did not start in 1979 and finish in 1993? Could it be that he has been reading a copy of the handout from Conservative Central Office and using the statistics in it in the way that a drunk uses a lamp post?
Mr. Wolfson : No. I answered the hon. Gentleman's question clearly. I accepted that a major restructuring of British industry was necessary and essential in those years. Before we came to power in 1979, industry had become grossly uncompetitive as a result of Labour party policies and the unnecessary sheltering of industries from international competition. In particular, nationalised industries always knew that, ultimately, the Government would pick up the tab. That took away from managements in those industries the incentive to be competitive and effective.
Dr. Liam Fox (Woodspring) : Perhaps my hon. Friend would like to point out to Labour Members that Britain's share of manufacturing exports fell faster in the 20 years up to 1982 than at any time in Britain's history, and that that coincides with the period when the Labour party was in office more than at any other time.
Mr. Wolfson : I thank my hon. Friend for that appropriate point.
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Dr. Lynne Jones : Will the hon. Gentleman give way?
Mr. Wolfson : No, I shall not give way any more. I have given way quite a lot, and to the hon. Lady, as it is proper that I should. I welcome the Prime Minister's emphasis on the importance of manufacturing industry because, during some years of the Conservative Government, we did not give it sufficient emphasis. We argued that the service sector would be the major growth sector. We looked to it, and Ministers placed particular emphasis on it, to the detriment of the country's understanding of, and the readiness with which it would give key importance to, manufacturing industry. I am not suggesting that we ever denigrated manufacturing, but I welcome the fact that we are now putting the health of manufacturing industry higher on the agenda. I am sure that my hon. Friend the Minister will emphasise that point when he sums up the debate.
1.7 pm
Dr. Roger Berry (Kingswood) : I do not want to spend too much time criticising the Government's economic record--that is far too easy--but, before I speak about where we might go from here, I want to make one or two factual statements, because the record should be clear and not misrepresented.
We have unemployment on a scale comparable to that of the 1930s. It is not just that we have 3 million claimants--11 per cent. of the labour force-- with that figure rising every month for the past 30 months and accelerating over the past half year. For reasons that I shall not go into in further detail, if we measure unemployment on the basis that the Government inherited in 1979, there would be4 million on the dole. Unemployment now is on the scale of that which was suffered in the 1930s. It is an horrendously serious issue and it must be taken on board.
The Government's record on economic growth is miserable. They have the worst record of any post-war Government. If we resist the temptation to start in 1983 or 1985 and to stop in 1989 and, instead, examine the Government's record from 1979 onwards, over the 14 years the rate of growth has averaged 1.5 per cent. a year. Under the most recent Labour Government, it was 2 per cent., and it was 2.4 per cent under the Labour Government who preceded that Administration. It is astonishing--I note that my statement has not been challenged--that the Government continue to peddle the myth that they have a good record, and even more astonishing that so many people continue to accept it. The hon. Member for Stamford and Spalding (Mr. Davies), who is no longer in his place, talked about a recession under the Labour Government. We were told that he would abandon rhetoric in favour of facts and hard argument. The hon. Gentleman was clearly off the wall. I asked him when last, in the midst of a recession, we had such a large trade deficit. I have not examined the pre-war period, but, since the war, there has not been any time when we have had a trade deficit of the present magnitude. It is the worst recession since the 1930s.
The second worst recession since the 1930s was from 1980 to 1982, a period just before the statistics begin in the Government's handout. Even then, we had a current account surplus. It is impossible for anyone who is honest about these matters to disguise the fact that our trade deficit is a chronic problem.
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Dr. Lynne Jones : Is it not also true to say that never in our history since the keeping of records had we had a manufacturing deficit until 1982?
Dr. Berry : It is true that there had not been such a deficit since the industrial revolution. My knowledge of economic history does not go back to pre-Tudor times. Perhaps there was a deficit during the stone age.
When we talk about the Government's economic record, we are immediately accused of talking Britain down. During Tuesday's debate on unemployment in the manufacturing sector, we were told repeatedly by Conservative Members that those of us who highlight the facts of the recession and Britain's economic crisis are talking Britain down. I started to count the number of times Conservative Members made that comment, and I ended up counting the number of times that the Secretary of State for Employment did so. The Secretary of State made the comment on 17 occasions, about once every two minutes. I have taken account of the right hon. Lady's long interventions, some of which my right hon. and hon. Friends remember rather well. Every two minutes the defence is used that we who point out the facts are talking Britain down.
The Government's records on unemployment growth and trade are the worst of any Administration since the war, and when we point that out we are blamed for making things worse.
Dr. Liam Fox : As the hon. Gentleman is so keen on pointing out what the Conservative Government inherited in 1979, perhaps he will take into account the fact that when the Labour Government were in office the inflation rate averaged 15.5 per cent. Perhaps he will tell us what effect that had on the incoming Conservative Government in terms of growth potential.
Dr. Berry : If we compare that level of inflation with the various rates that were experienced in other comparable advanced industrial economies--
Dr. Fox : Because of oil price hikes.
Dr. Berry : I am grateful to the hon. Gentleman for reminding me. The House will recall that I compared the Government's growth record of 1.5 per cent. with the Labour Government's record of 2 per cent. I forgot to say that the Labour Government had to face two oil price hikes and did not have the benefit that this Government have enjoyed of £100 billion of North sea oil revenue. It is astonishing how incompetent the Government have been, but we are not supposed to talk about it. If we do, we are talking Britain down.
I suppose that I am not supposed to talk about 1,400 more redundancies at Rolls-Royce in Bristol, which will affect many of my constituents. If I do so, I shall be accused of talking Britain down. I suppose that I am not supposed to say that there is record unemployment in my constituency-- indeed, it has trebled over the past three years. I am not supposed to say that. We are not supposed to state the facts and ask the Government to respond. The Government's lame excuse is always that we are talking Britain down.
Mr. Heald : The motion suggests a £7 billion cut in defence spending. How would the hon. Gentleman's constituents in the defence industry like that? Mine would not like it.
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Dr. Berry : People in my constituency and, indeed, throughout Bristol recognise the vulnerability of their jobs to defence cuts. They want the resources currently being devoted to defence spending to be transferred slowly to non-defence civilian manufacturing. Year after year, under this Tory Government, thousands of jobs are destroyed at Rolls-Royce and British Aerospace in Bristol. The savings from the defence reductions must be reinvested in manufacturing industry so that those companies and others like them are given support.
In our debate yesterday, I could not help but reflect--my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) remarked on it-- that 20 years ago the then Prime Minister, the right hon. Member for Old Bexley and Sidcup (Sir E. Heath), took Rolls-Royce into public ownership because market forces could not be left to run loose and destroy the company. There is a little ditty about that which goes :
"The people's flag is deepest blue ;
We've nationalised Rolls-Royce for you ;
And when the profits rise again ;
We'll flog the buggers back again"--
which is what they did. That previous Conservative Prime Minister recognised that the aerospace industry both depended on and deserved Government support.
I hope that nothing that I have said suggests that I am anything other than enthusiastic about the Government adopting a far more interventionist and supporting policy towards Rolls-Royce. That is what I said yesterday, it is what I have said today, and it is what I shall continue to say.
With such massive unemployment, it is difficult to understand the Government's grotesque indifference to unemployment, which has become so commonplace. Their justification for paying so little attention to mass unemployment, other than to devise ways of reducing the figure while not creating any jobs, has been that they had to eliminate inflation. They said that that should be the prime target of economic policy and that everything else would follow from that.
By whatever device--tight monetary policy, medium-term financial strategy or an overvalued exchange rate, the latest device--apparently we have only to control inflation and there will be growth and full employment. We are still hearing that story. It is a simple economic argument ; indeed, it is so simple that it is staggering in its economic illiteracy. There is no evidence that smashing the economy, closing factories and putting people on the dole results in low inflation--anyone can do that--and, hey ho, almost immediately there is rapid growth and full employment, with inflation just happening to stay at its low level. It is extreme Mickey Mouse economics. On every occasion that the Government have deflated the economy to reduce inflation there has been higher unemployment--which, in the infamous words of the Chancellor, is "a price worth paying". My constituents do not think it is a price worth paying.
The trading performance of the British economy is a major structural problem. The Government are antagon-istic towards public sector borrowing, but they have a cavalier attitude to private sector borrowing. Conservative Members claim that the 1980s, was a wonderful, triumphalist period of Thatcherism. During that time, private consumption as a share of GDP increased by a record 7 per cent.
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