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The Parliamentary Under-Secretary of State for Industry and Energy (Mr. Charles Wardle): Of course he says that
Mr. MacShane: Of course he says that, says the Minister, but we cannot have it both ways: we cannot have a high-wage UK economy and at the same time offer low wages as a reason for investors to come to Britain.
I am not sure whether Labour Members should be pleased that the Secretary of State for Employment is now repeating the speeches made by the Leader of the Opposition and the shadow Chancellor, or whether it is merely another example from the Department of Employment of the tribute that vice pays to virtue. At any event, the proclamation that the UK is to become a high-wage economy will not play well in the board rooms of Taipei and Texas where investment decisions are being made.
The question of wages is significant. Thomson, France's biggest electronics company, is just moving all its factories out of high-wage Singapore into low-wage Indonesia. If we consider the cause and consequences of foreign direct investment, the role of Governments and Members of Parliament may be more modest than this debate suggests. One third of world output is now controlled by multi-national corporations. In 1993, there were 206,000 multi-national corporations around the world, compared with 3,500 just 30 years ago. One third of world trade now takes place within companies. They and not we are the new deciders of the world economy. That unaccountable power has grown, is growing, and needs to be balanced by a responsible, new world economic system based on a new Bretton Woods system and reforms in the world economic policy-making bodies such as the International Monetary Fund, the World bank, the OECD so on.
A new global social settlement is needed. If it is not achieved, we shall see the rise of nationalist and regionalist protectionism of the kind proposed by Sir James Goldsmith, the Italian fascists in the Berlusconi Government and other reactionary forces. The UK must again opt fully into the debate on the future of how we decide and regulate foreign direct investment. We have to avoid the problem that the United States has faced in paying out huge sums by way of tax breaks or even direct grants to companies and ending up with a net loss in state finances. Hundreds of thousands of dollars have been spent in America for each job.
The search for big-ticket investment, the giant projects, may be a mistake. The most successful state in America in attracting inward investment is Ohio, which has focused on seeking smaller firms based on intermediate or even low technology. I made notes for this speech using a pen handed out by British Airways at the Labour party conference. I am sure that they are available-- [Hon. Members:-- "Declare it."] It is not yet in the register. Where was this pen made? It was made in Switzerland, a country with wages 50 per cent. higher than the UK and a full employment partnership economy, yet one which can make this humble pen at a low cost. I presume that British
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Airways can buy the pen more cheaply there than in the UK. That tells us about middle and low-technology investment.The Minister for Energy and Industry, who has left the Chamber, made much of the 60-hour working week of workers at a firm that he recently visited. He was proud--not like a Japanese general, I must say to my hon. Friend the Member for Middlesbrough (Mr. Bell), but more like a colonial official of the old days--to see workers hard at it day and night, ever willing, ever ready, putting in the longest hours in Europe for the lowest wages. That allows companies to focus on extensive rather than intensive production and on securing quantitative rather than qualitative output.
I met a foundry worker in Rotherham the other day who told me that he worked seven days a week, day and night shifts, to earn just £20, 000 a year.
Mr. Frank Cook (Stockton, North): Is my hon. Friend aware that he was exceedingly fortunate to meet a foundry worker as such workers are very much a diminishing breed in this country, thanks to the Government's policies?
Mr. MacShane: I agree entirely with my hon. Friend. Four million industrial jobs have been wiped out cold-bloodedly since 1980 and we shall pay a price for that destruction of our manufacturing base. The young man whom I met was 29 years old. He looked older than nearly all the Conservative Members present. I would have put him at about 55 or 60. He was exhausted by the long hours that the Minister is so proud to proclaim. For those long hours, he was earning some £20,000 a year. Not only on that kind of wage could he not afford a weekend at the Ritz in Paris, but he would not even be able to find the time. He said that his boss was on £63,000 a year only--far lower than the equivalent executive of a foundry in Germany, France or Italy, because low wages at the bottom drag down wages in middle management as well.
I conclude by paying tribute to the Rotherham economic partnership, which gave me the honour of addressing a group of employers recently. It is a private and public sector initiative. It involves elected representatives and it involves trade unions. I offer that as a model for new ideas and how to make inward investment work successfully in this country. As the world contest for inward investment increases, Britain must offer a new vision of economic development. That has to be based on partnership.
At the Rotherham economic partnership conference, the focus was Rotherham in the world economy. I strongly welcome that outward-looking approach. In general, however--I do not know if my hon. Friend the Member for Morley and Leeds, South (Mr. Gunnell) will refer to this--we in Yorkshire are worse off for inward investment than Scotland and Wales. The Scots and the Welsh are lucky because they have their own Cabinet Ministers and dedicated Departments who can speak, to a certain extent, outside the centralised framework which has so seriously weakened local government in England. If Rotherham is to succeed in securing a share of inward investment, in addition to its own energies it needs to be part of a regional framework which can fit into the
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growing European and global pattern of regions, forming the core of the new economic clusters, which are mutually supporting and reinforcing.We all welcome inward investment in Britain, but it cannot replace the lack of an economic policy for internal growth. Inward investment will be enhanced by three concepts: partnership, decentralisation of power from Ministers and bureaucrats, and opting into Europe. The Conservative party can offer none of those. Labour stands ready. 11.27 am
Mr. Sebastian Coe (Falmouth and Camborne): I was going to preface my remarks with the hope that there were few, if any, hon. Members in the Chamber who would seriously question the proposition that inward investment brings in new jobs, new techniques, new processes and, on occasions, we hope, enlightened managerial techniques. But, having heard some of the remarks of Opposition Members, I realise that I am not on such firm ground.
I do not think that it is possible to underestimate the benefits to the UK economy of inward investment, which often, in the case of hard-pressed areas, provides a significant lifeline to rural and urban communities. The politics and economics of peripherality are inseparable from any discussion about inward investment, whether it be through overseas investment or the domestic mechanism of, for instance, regional selective assistance grants.
In 1993, overseas companies spent some £5.2 billion on 257 acquisitions and mergers. That inward flow, that success story in that year was no different from most years, in which the UK was host to more inward direct investment than any other European member state, in fact, grabbing some 40 per cent. of the European Union total of about £9 billion in net inward direct investment. Net earnings by overseas investors were some £10 billion last year and that has to be applauded, especially the significant increase on 1992 figures, which has been reflected dramatically in increased profitability of non-oil UK subsidiaries and associates. Let us not forget that more than half all net earnings from that sector were in the form of retained profits which, of course, were reinvested in the United Kingdom. There was also an added and very welcome contribution to our domestic tax yield.
The value of inward direct investment assets has more than doubled since 1987. Only last week, an international survey of business found that the UK is set to be the world's most popular destination for foreign investment over the next two years. As my hon. Friend the Minister said, that endorsement comes only a year after a business monitor survey showed that company directors across Europe believe that the United Kingdom has the best potential for manufacturing investment of all the major European Union members.
Since 1979, total foreign investment in the UK has increased nearly eightfold. It is no coincidence that, throughout that period, the solid economic gains of this Government's supply side reforms have helped to free up the marketplace. Trade union reform, for example, has been an undeniable attraction to companies which have been able to negotiate single-union deals.
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I was a member of the Employment Select Committee last year when it undertook two inquiries: one into the import and export of jobs in manufacturing industry and the other into the future of trade unions. On virtually every occasion that a domestic or foreign- based company gave evidence, two overwhelming reasons for siting in this country were given. First, it was said that we were not in a headlong rush to unify welfare payments with our European partners. Secondly, it was clear that trade union reform has made it incredibly convenient for many companies to enter into the types of relationships, mentioned by the hon. Member for Rotherham (Mr. MacShane) a moment ago, which have made a significant difference to joint ventures, and there has been the convenience of single-union deals, which would have been something of a pipe dream before 1979.It is important to remember that, in assessing the benefits of inward investment, we are talking not just about new jobs created, important as they are, but about existing jobs, which are underpinned and safeguarded. The Invest in Britain Bureau assesses that number of jobs as 70,000 for 1993-94 while the number of new jobs created nationally is said to be just under 30,000.
It is perhaps worth highlighting the fact that Scotland accounted for nearly 8,000 of those new jobs while Wales accounted for nearly 4,000. While 83 projects in the west midlands accounted for 3,000 new jobs, nearly 43,000 existing jobs were safeguarded. However, by national standards, the south-west has had more modest success. Twelve projects, which can by definition be described as inward investment, have accounted for some 1,200 jobs and can be said to have safeguarded a further 1,000 jobs.
New jobs may not be created immediately. It sometimes takes time. In the south-west in general, and in Cornwall in particular, the largest sums of inward investment do not involve foreign concerns looking to relocate or even domestic relocation. They come from the public purse. Department of Trade and Industry regional policy has operated in Cornwall since the 1950s. It has been directed towards the underlying problems of the local economy and, just as important, towards increasing the competitiveness of businesses operating in the county.
Many sectors that have traditionally formed the cornerstone of Cornwall's economy are now experiencing severe structural changes, which have made economic regeneration harder. Those changes have occurred in agriculture, fishing and tourism. The rundown of tin mining in my constituency has left Cornwall with its last working mine in South Crofty. Thankfully, that mine has been saved by the writing off of nearly £24 million of Government loans with the assistance of the DTI and by a notable share issue, which was so stunningly supported by many of my constituents and the combined labours of management and the work force. In the south-east of the county, the effect of the Royal Navy cuts--sadly, the impact of the welcome peace dividend--and continuous armed service reviews have meant an average annual loss of income to the area, which is significant and will be difficult to replace.
However, the county has so many positive characteristics that are reflected throughout the region. They include the reputation of the work force for hard work and committed loyalty and an unmatched history in industrial relations. There are excellent facilities for higher and further education, established road, rail and
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air links and port facilities, which belie many common misconceptions about the distance from markets and communications shortcomings.In chasing inward investment, whether it be of foreign origin or domestic, from the public or the private purse, it is inevitable that we enter the political arena of scarce resources. Those who make the strongest cases and the best arguments, those who sell themselves, tend to take the spoils. My constituency has benefited from the positive effects of DTI regional policy. That was certainly instrumental in the location of Contico Plastics to Redruth in my constituency, which is now its European manufacturing base. That is a good example of partnership between the public and private sectors. Jobs have been created and more will follow.
Last year, Cornwall First ran a campaign to attract the national lottery headquarters to the county. Unfortunately, it failed in its primary objective. However, by introducing the county to many potential foreign investors, it secured the contract for Stralfors, a Swedish-owned printing company in Falmouth, to provide the national lottery with continuous printing for its tickets and some of its games--jobs created and safeguarded.
The success or otherwise of public sector funding in attracting inward investment depends on the regional implications of so many other factors. In Cornwall's case, it is not helpful to have utility charges that are significantly higher than in other competing regions. I am increasingly concerned that the disadvantageous effect of price differentials in the cost of water, electricity and gas could act as a barrier to the investment decisions that are everyday occurrences in board rooms.
At present, average water charges are 53 per cent. higher in Cornwall and electricity charges 7 per cent. higher. If hon. Members will pardon the pun, there is growing pressure on the cost of gas, and that is in a county where wages are 20 per cent. lower than the national average and the cost of living is 8 per cent. higher. It has also long been a major source of irritation in the county that, as the hon. Member for Rotherham said, other areas, particularly in Scotland and Wales, receive disproportionately higher benefits from regional policy than Cornwall. However, when considered as an individual entity, Cornwall is very close to the level of gross domestic product per head of population for objective 1 status under the European Union structural funds.
There are calculated to be 25 to 30 agencies and organisations in Cornwall engaged in some form of economic development activity. In the two counties of Devon and Cornwall, that figure rises to nearly 70. I do not wish to detract from their efforts, but I must question the duplication of effort, time and precious resources that are being managed and distributed by so many structures, all tilling the same soil.
In large part, for the business community in my constituency, those agencies and organisations remain a confusion of acronyms. When I addressed a group of small business men in Falmouth the other day, I discovered that the local banks, which still account for so much start-up capital, had little or no idea what those organisations and agencies do. It is also not uncommon to find the same faces turning up on one or more of those organisations.
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I hope that the business link scheme, a one -stop point of contact for information and support for local businesses, will fill the gap and ease some of the confusion. I visited one such scheme in my constituency last week, which is making an exceptionally good start. Regional selective assistance, which takes the form of discretionary grants to support projects in areas of assisted area status, has been very helpful in the location of business in Cornwall. It is right, however, that such grants are not available simply to relocate jobs from one part of the country to another. Yesterday, I was perturbed to have a conversation with a would-be investor in the county, who simply could not remain in business where he currently is. A new sail-making process under licence from the United States of America, which requires the labour skills, size of plant and availability of labour where he currently is, is not available. I shall not belabour the House with the minutiae of detail of the case. Suffice it to say that, halfway through negotiations with the Department of Trade and Industry in Bristol, he finds himself the subject of an approach from a Welsh council to relocate there, supported by the Welsh Office and underpinned by the local training and enterprise council, two jobcentres and the local councils. He is now in a Dutch auction, with offer and counter-offer being made with public money. I am sure that my hon. Friend the Minister has clear views about the acceptability of that case, and I should welcome them.Full-time, meaningful and sustainable jobs are created by the strategic decisions of the business community. When they are the result of overseas investment, it is because our economy offers a more attractive location. That is not a happy accident. It is the synthesis of sound economic policy underpinned by selectively targeted regional policy. It is the economic prerequisite of deregulation, competitiveness, a flexible labour market and continued downward pressure on labour costs.
Here lies a message for future European success: we must guard strenuously against uniform welfare costs in the European Union. If ignored, they will help countries in the Pacific rim to cream off the global flows of inward investment to which we have successfully become the natural home.
11.41 am
Mr. Nick Harvey (North Devon): Like other hon. Members, I enjoyed listening to the Minister give an entertaining Friday morning description of the inward investment that has been achieved and, with justification, claiming some of the credit for it. I welcome the inward investment that has been achieved--the record has been good--and I hope that there will be more in future. I agree that, by attempting to promote successful businesses in the regions where they are needed, regional selective assistance is, in principle, the right way to go about such matters.
However, the Minister was churlish in trying to provoke the hon. Member for Middlesbrough (Mr. Bell) and others into suggesting that they would not welcome the success that there has been in their parts of the world. All hon. Members welcome Samsung's decision to come
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to the north-east of England. I, too, from the south-west, hope to speak to the Minister shortly about a prospect in my constituency. The remarks of the hon. Member for Falmouth and Camborne (Mr. Coe) are only too true. The problem of the south-west, as a peripheral region of England, in trying to compete with Scotland and Wales, is that the public authorities representing Scotland and Wales have more political power and more money than those representing the south-west. However, I pay tribute to the work of officials in the Department's regional office in the south-west and to those to whom the Minister referred who are promoting our cause abroad. It was good that we heard from the hon. Member for Enfield, North (Mr. Eggar) and not from the right hon. Member for Enfield, Southgate (Mr. Portillo). In view of the exchanges that took place, I shall choose my words with care. Let them be simply that the right hon. Gentleman appears to have questioned the value of regional selective assistance. I do not. I think that it has been useful. It is welcome to see the Government pursuing that approach and not that which was promoted by a former Secretary of State for Trade and Industry, Lord Tebbit, who took the view that people should get on their bike and go where the work is. I am glad that the Government believe in intervention and strategic planning, at least to the extent that they see advantage in jobs going where the workers are.Foreign investment in Britain contrasts rather strongly with British investment in Britain. A reminder that playing host to foreign successes is a poor second to enjoying one's own success is probably best expressed by the President of the Board of Trade, when, in 1987, he wrote in his book:
"An ominous development has been an increase in foreign ownership and control . . . When the going gets rough, as it always will in such a cyclical industrial sector, foreign subsidiaries in Britain will bear the brunt of the cutbacks. The skills in Research and Development will be lost."
Those were not the remarks of a conspiracy theorist representing what the Minister chose to refer to as the Neanderthal wing of the Labour party; they are the remarks of the President of the Board of Trade. He could have pointed out that some companies' commitment to Britain can be even less. In many cases, research and development is consigned to the home country or to other centres. That is not surprising when one considers some of the evident infrastructure weaknesses in Britain's manufacturing industry. Nor is it uncommon to see multinationals using British labour as an assembly force of often part-time and peripheral workers while the more secure and skilled work is carried out elsewhere. The President of the Board of Trade himself proved that basic points have not passed him by when, in reference to the sanctity of Rover cars, he said:
"For major parts of the British motor industry to fall entirely into foreign hands would leave it a hostage to decisions in Detroit, Paris, Turin and perhaps Tokyo."
That is exactly where much of the profits are accruing.
Mr. Peter Ainsworth: I wonder whether the hon. Gentleman has read the Trade and Industry Select Committee's report, which was published this year. It considered the potential disadvantages of British inward investment, to which the hon. Gentleman alluded. If he has read that report, he will know that there were few examples of the type of disadvantage that he mentions.
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The report concluded that they were not typical of inward investment generally and that the advantages of inward investment heavily outweigh the disadvantages. I hope that the hon. Gentleman will bear that point in mind.Mr. Harvey: There can be no doubt that the advantages of inward investment outweigh the disadvantages. I did not seek for one moment to suggest the contrary. That was the purpose of my welcoming inward investment. None the less, the fact remains that there are some inherent weaknesses in inward investment, which would not be inherent in British investment. All hon. Members want more British investment, particularly as we come, we hope, out of a long recession. One reason why inward investment has come here has been the transformation in labour markets which has been caused by mass unemployment. It is strange that the Government are so proud that British labour markets have changed by dint of the fact that so many are out of work and that some of those who are in work are on such low wages. That Britain is becoming a low-wage economy is beyond doubt.
It has been a common boast of Conservative Members in recent times that their success in delivering low labour costs has been one of the things that has attracted foreign investment. Indeed, the Minister said as much. That is a curious stance for them to take when one remembers that in 1979, as the Conservatives were determined to sweep out an era that they considered to be unsuccessful, they said in their manifesto that the party wanted
"a high productivity, high wage, low tax economy".
What a pity it is that we have waited 15 years only for the Tories to deliver the opposite of all three. We have lower productivity than many of our competitors, a part-time, casual and low-paid labour market, and we have just experienced the biggest tax hike since world war two. It is reassuring to know that the consequences of those policies have not always escaped the Tories. Their 1979 manifesto went on to state:
"At the moment we have the reverse--an economy in which the Government has to hold wages down in order to try to make us competitive with other countries where higher real wages are paid for by higher output."
That is poignant when one considers the backdrop of continuing decline, and when every country in the EC except Denmark and Greece has managed to increase output at a greater rate than we have over the past 15 years. The trade deficit of the early 1980s has been a recurring problem.
The hon. Member for Rotherham (Mr. MacShane) made the point that many countries in south-east Asia--many of the newly industrialised countries-- which have been successful in attracting investment have done so on the basis of high levels of skill and, in many cases, relatively high pay. Low wages on their own would be one thing, but the country currently bears testament to the fact that low pay buys low skill.
On the sell-off of Rover, the Government announced with not inconsiderable pride that the British work force are paid 25 per cent. less than their German counterparts. Surely, the fact that the German counterparts have vocational qualifications that are three times higher than those in Britain is not unrelated. In a world that becomes more competitive by the day, it is nothing short of a tragedy that we are becoming less able to compete with our high-tech, high-skill and highly productive economic
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rivals. If the hon. Member for Rotherham was perhaps exaggerating slightly when he compared our position with that in Romania, one nevertheless understood the point that he was making.Tory Members referred to the social chapter and the impact that it might have on our ability to attract inward investment. They cannot have their cake and eat it. They tried to claim that the great success of the Government's policy on a broad front is what has attracted investors to the United Kingdom and then in the next breath claimed that it was almost only the fact that we have opted out of the social chapter that attracted investors, and that in the event that the policy was reversed, everything else would be undone. Hon. Members have talked about German investment. We know that German companies, when they make investment decisions, are much better than many of our companies at looking at the long term. No one doubts that, in the foreseeable future, the British opt-out from the social chapter will come to an end. It was only a short-term political device to get the Government off the hook at the time. If one looks ahead two or three years and considers some of the directives that have resulted from the social chapter--I readily acknowledge that they have been too detailed and too prescriptive in their terms--one reflects that Britain has yet again put itself at a disadvantage by not being able to argue those points when they were being considered.
Mr. Charles Wardle: I understand what the hon. Gentleman is saying about the merits of German long-term planning. Why does he suppose that some 1,500 German companies have invested in the United Kingdom?
Mr. Harvey: I welcome inward investment, and I welcome very much German inward investment. My specific point is that the Germans must be reckoning that we shall end up inside the social chapter. If anyone reckons that the Germans have come to the United Kingdom simply and specifically because we are not inside it, they fail to see the quality of German decision making.
We need investment to be made a matter of national urgency. The whole problem of post-war British industry has been a continued pattern of underinvestment. As many hon. Members know, history has proven time and again that British people have great potential for innovation and enterprise. It is a pity that we have seen recently that our home-grown investment has not been the success story that the Government have painted.
As a nation, we need to invest in education and science and technology, and we need to see more commitment to research and development on the part of British industry and the Government. At present, the United Kingdom is 19th out of 22 OECD countries in terms of spending on industrial research and development. Investment is also needed in the national infrastructure--that point was made earlier. We have seen the lowest investment growth of any G7 country over the past 15 years, and the Government have presided over an historic reduction in investment as a proportion of gross domestic product.
Our manufacturing base has declined--it would be an exaggeration to say that it had declined almost to the point of extinction, but it certainly is not the powerhouse that it was previously. Our ability to meet demand with supply is even weaker. Only last month, the Government raised
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interest rates because they were afraid of overheating. They thought that the additional demand in the economy could not be met by our capacity to supply. That says something about the present state of our industry.Tackling financial short-termism and the cost of capital--the figure for the United Kingdom is far in excess of that of many of our competitor countries--is a priority that the Government should be setting. Without the Government needing to resort to dismissing all the help that is given to industry as socialist planning, there is a role for them to provide the structures and support that industry needs. The Government now stand almost alone in the developing world in suggesting that there is not.
Perhaps a symptom of the Government's attitude has been the remarks made by the President of the Board of Trade, who said:
"The most constructive thing the Government could do for business would be to close down the Department of Trade and Industry." Of course, he said that during the time that he was out of government. If that is representative of the views of the President, it is hardly surprising that we end up discussing other people's successes, rather than our own.
11.55 am
Sir Michael Grylls (Surrey, North-West): I listened with great interest to the speech of the hon. Member for North Devon (Mr. Harvey). As he spoke, my mind occasionally wandered, and I thought about my experiences in the wonderful part of the country that he represents. It is one of the most beautiful parts of England. I am afraid that the hon. Gentleman may have been in north Devon too long, because he is out of touch with what is happening in industry. Certainly, his speech did not have much to do with inward investment. If he examined the pharmaceutical industry, he would find that firms such as ICI and Zeneca were leaders; five of the top 12 drugs in the world come from Great Britain. Our motor manufacturing companies are increasing their output every year, and their exports to Europe have increased. Our machine tool companies, having gone down in earlier years through a lot of folly--there is no time to debate that matter today--are now beginning to rise again. I do not know where the hon. Gentleman has been. Perhaps he has spent too much time on the beaches in north Devon--I do not blame him for that. He should raise his horizon a little and see what is happening in the country at large.
I hope that the hon. Member for Rotherham (Mr. MacShane) does not meet too many foreigners, because if he does, we will not get any more inward investment. Talk about a prophet of gloom. He must have spent hours every night dragging out every dismal, boring, negative figure. I might send him on a positive-thinking course, which would make him a little more cheerful. He was Mr. Gloom--pushing everything down and ignoring everything positive.
It is generally accepted that the United Kingdom--we should be thrilled about this--is in a uniquely strong position. That is perhaps strange, given our history. We are getting some of the advantages of developing industrial economies such as Korea and Taiwan. We are
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getting the sort of characteristics which they have been enjoying. They have fast-growing productivity; we have fast- growing productivity in the United Kingdom.I did not hear the hon. Member for Rotherham mention that; perhaps I was not listening at that moment. One of the characteristics of fast-growing economies is that they are based on technological catch-up--they are leapfrogging technologies and putting new technologies in place. As has already been said, they have the advantage of relatively low labour costs.
Britain is in a similar position, certainly with regard to the European Community. In terms of hourly labour costs--these figures were produced by the United States Bureau of Statistics--West Germany has a figure of 152, while the United Kingdom's figure is 76. The figures for other countries are 127 for Belgium, 97 for France, and 95 for Italy--compared with 76 for the United Kingdom. That includes social costs. Let us compare the social costs in Germany with those in Britain. The social costs in Germany almost double the money that the firms have to produce to pay to the men. We are in a uniquely favourable position, and we cannot buck it.
I agree with the hon. Member for North Devon in one respect. Inward investment is not only about the opt-out from the social chapter. It is about all sorts of factors, which have rightly been referred to during this morning. Nevertheless, unnecessary social costs imposed on companies are a real factor. I can give examples of British companies which operate in the German market. They bring British workers into Germany to do the job because it is more economical. I do not suppose that the Germans much like it, but I expect that the British are rather pleased to have jobs in Germany.
Mr. Frank Cook: Does the hon. Gentleman accept that, in addition to the social factors to which he refers, one of the principal elements of added costs in the past 15 years in Britain as compared with Japan and Germany has been the excessive cost of money?
Sir Michael Grylls: That has been true of the British economy for too many years. All Governments--if we can be ecumenical for a brief moment --in the past 20, 30 or 40 years have failed Britain by not keeping inflation properly under control.
The hon. Gentleman cannot point that finger at this Government. We have record low inflation. The hon. Gentleman is perfectly right-- [Interruption.] I gave way to the hon. Member for Stockton, North (Mr. Cook) and he might do me the courtesy of listening. It will take time for business to realise and believe not only that we are in a low inflation period but that we will remain so.
If we are honest, we will admit that we in politics are on trust--on trial is perhaps a better phrase. People out there do not necessarily believe that inflation will remain low for a long time. We have to prove it. The advantages will come when we have had--let us hope and pray--20 years of old-fashioned low rates of inflation. Then there will be a huge benefit to industrial investment. So perhaps Conservative and Opposition Members are not too far apart on that. It is true that there is a lack of faith among many investors about how long low inflation will remain, but I am confident that, while the Conservative Government remain in power, it will remain low.
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The United Kingdom has become like a developing industrial economy such as Korea or Thailand, because, before the 1980s, we were shackled by outdated trade union laws. We reformed those laws. It sounds old-fashioned now to talk about the activities of the National Graphical Association, but it almost destroyed the newspaper industry and the printing industry.Mr. Cook: That might have been no bad thing.
Sir Michael Grylls: Perhaps it might not. Some Conservative Members might say so. I am not sure whether Opposition Members would say so, but I must not stray into that subject. The reform of trade union law has enabled us to be a flexible economy.
To be successful nowadays, whether we like it or not, we have to have flexible hiring. The hon. Member for Rotherham, Mr. Gloom himself, does not like it, but he is living in a different, past world. He has gone back to Geneva to check his Swiss bank account, with his Swiss pen no doubt. I did not really mean that.
That is like a red rag to a bull to the old Labour party--perhaps it is to the present Labour party. It is rather a test of whether the Labour party has changed or not. If it truly wants the number of people employed in Great Britain to rise, it has to accept that that will happen only if we can provide a climate of flexible employment legislation. It is vital that we maintain that.
It is true--even Mr. Delors has said so--that Britain is a paradise for foreign investment. My hon. Friends do not expect me to quote Mr. Delors, even on a Friday, but in that respect, he is bang on. We are getting foreign investment from Japan and many other countries. Those companies bring into Britain the most modern machinery and manufacturing and management techniques. There is cross-fertilisation between them and our British home-based firms.
We are perhaps not terribly good as a country at changing. Industry over many years has not been good at changing, perhaps because we were first into the industrial revolution--I do not know. I believe that some of the ideas, machinery and techniques, such as the just-in-time technology, have come from foreign firms which have set up in Britain and have been a tremendous advantage.
I was in Japan just when Nissan was contemplating an investment in our country. I asked one of the Nissan people what they thought about British component manufacturers. I received an honest reply. He said that one or two of the bigger companies were world class. They exported all over the world and did very well. But he added that the great mass of them, in Nissan's judgment--it had done a study by that period--were not nearly so efficient as they should be. He said, "I think that we will help them." I did not have the impression that it was said in an arrogant way. It was said in a sensible, practical way. He predicted that Nissan, which required demanding standards and prices from its component manufacturers, would have a good effect on our home-based component industry. I believe that that is exactly what has happened.
The advantage is that the component manufacturers which have pulled their socks up, are much more efficient and are doing much better can now export to the continent and supply continental motor firms. Perhaps they would never have been able to do that if they had not been driven
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into it when the huge Nissan company set up in Sunderland, produced lots of motor cars and said, "Supply us if you are good enough."Mr. Peter Ainsworth: Does my hon. Friend agree that we are fortunate that Nissan decided to come here when it did, given that, at the time when it was contemplating the investment, the Trades Union Congress described the potential investment as alien?
Sir Michael Grylls: It shows how out of date the TUC was. I hope that it never utters such words again.
I am sure that inward investment has brought a clear benefit for jobs, broadened our industrial base, brought huge benefits by bringing new technology to manufacturing, management and production, and helped some of our smaller firms which were perhaps a little stuck in the mud. We are stuck in the mud in this place, too, but that is neither here nor there. We are not talking down to anyone. It is perhaps a British characteristic. The influx of ideas and new management techniques is one of the most important things that inward investment has brought to Britain.
I say to my hon. Friend the Minister, "Keep up the good work. Use your influence or perhaps all our influence to maintain the right business climate here--a sensible, flexible business climate with low corporate taxation. Then the investment will continue to come into Britain and all the people who live and work in Britain will benefit hugely."
12.8 pm
Mr. John Gunnell (Morley and Leeds, South): I was highly amused to hear the Minister for Energy and Industry describe me as part of the Neanderthal section of the Labour party on inward investment, especially as I was chairman of the Yorkshire and Humberside Development Association for 12 years, from 1981 to 1993. It was one of the regional development organisations that the Government supported as a mechanism for regional involvement in attracting inward investment.
In that role, I met the Minister of State's predecessors from the early 1980s until the right hon. Member for Hove (Mr. Sainsbury), who recently parted with that responsibility. As I co-operated with all those people, I was entertained to hear that I suddenly became a Neanderthal as soon as I entered the House and sat on the Opposition Benches.
That subject was one of the interesting aspects of the Minister's speech. Outside this Chamber, inward investment means partnership and co-operation. I do not know anyone who does not want to attract industry to the United Kingdom. In the House, that partnership suddenly disappears because so many people are committed to being combative that they cannot see the important issues at stake. If one works for a regional development organisation for 12 years, one obviously experiences some periods of drought when there is no inward investment, and other periods of success when investments go well. One also experiences changes in Government policy. Sometimes the Government want organisations to do such and such, at other times they do not--that goes with ministerial responsibility.
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Some Governments value the work of regional development organisations and accept that one must have partnership between the centre and the regions if one wants to attract investment effectively. Others think that everything should be done from the centre.For the most part, the job was entirely voluntary--until the last year-- and I would not have done it for so long if it had not given me considerable satisfaction. Obviously, part of that satisfaction was gained from achieving a specific success and from inward investment coming to one's area.
The companies whose representatives I met before they decided that they would invest, invested and now operate on Humberside, included Citizen, Pioneer and Kimberley-Clark. Those companies are household names and each of their Yorkshire facilities was won against strong competition from the continent. They are household names partly because of their products, and that is especially true of those companies that make various forms of electrical equipment. Apart from the household names, I met a host of other companies, many from the Federal Republic of Germany, Japan and the United States. Just before I stopped doing the job, I was involved with Exsa--the first Turkish inward-investing company--which recently set up a factory in Leeds.
Those companies came to the United Kingdom partly as a result of work done by the Yorkshire and Humberside Development
Association--work that was done in conjunction with the Department of Trade and Industry, and especially with the Invest in Britain Bureau.
Having done that job for a considerable time, I must make some observations on the factors that are important in achieving inward investment and on some of my worries as a Member of Parliament about the risks that the Government are taking with the future of that investment.
Despite the comments that the hon. Member for Surrey, North-West (Sir M. Grylls) made about my colleague the hon. Member for Rotherham (Mr. MacShane), I agree with the hon. Gentleman's arguments that achieving inward investment involves partnership. It will not work otherwise. The Government alone cannot bring in a company; nor can the regions do so without the Government. One therefore needs co-operation. There has to be a partnership between Government and the agencies that want to attract investment to a region. That partnership has to cross the political divide.
For electoral reasons, local authorities are largely under Labour control. I know of no such authority that would want to turn away inward investment. Achieving a working relationship is all-important. Throughout my time as chairman of the YHDA, there were political differences among the councils in the region. North Yorkshire county council has been solidly Conservative. For at least six of the years that I was chairman, my vice- chairman was a Conservative member of that county council.
I operated with Gerald Turton as my vice-chairman for a considerable time. He was the son of a distinguished former Member of this House. We worked together to ensure that investment came to the region and had no difficulties in doing so. One is trying to get inward investment and to get the proportion of that investment
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