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Mr. Michael Clapham (Barnsley, West and Penistone): What does the Secretary of State have to say to the unemployed of Barnsley, following a survey in May this year which showed that 79 per cent. of the jobs that were advertised in Barnsley were advertised at wages lower than would have been possible had the wages councils still existed?
Mr. Lang: The average increase in real living wages in Britain since 1979 is 40 per cent. The wages of a single production worker in Britain are higher than anywhere else in the EU, and the wages of a married man in the same capacity are higher than in Italy or France.
Britain's advantage lies not in having low wages, because we do not have them--[Interruption.] We do not have them, as the figures that I have just given illustrate. Our advantage lies in having the lowest non-wage labour costs of all our major European competitors. That remains vital to creating more jobs in this country.
One of the key factors in making Britain so attractive to inward investors has been precisely the improvement in our competitive position. It is integral to our growing competitiveness and attractiveness as a location for business investment. Last week I was in Bavaria, where I met the chairman of BMW and the vice-president of Siemens Semiconductors, both major international companies and major investors in Britain. In the words of Bernd Pischetsrieder, the chairman of BMW:
The United Kingdom attracts one third of all inward investment in the European Union and more than 40 per cent. of both Japanese and American investment in the Union is based in the UK. Once again, in the first half of this year, we were the top location for German investment worldwide, attracting more than double the amount of investment made in the same period last year.
What is more, more than half the inward investment into the UK last year comprised expansions of existing plants, thus confirming the confidence that inward
investors have in the British economy and the talents of its work force. Our inward investment record is the verdict of the rest of the world on Britain's recent economic achievements.
The inflow of investment into the United Kingdom has also had its corresponding outflow, as British firms have increasingly recognised the need to compete in a global environment. Here, too, our economy benefits considerably. Outward investment allows British companies to develop their competitive strength both at home and abroad. It helps them to gain access to world markets for British goods and services.
Britain ranks second only to the United States in its stock of outward investment. Our total stock of overseas investment amounted to £183 billion in 1994, earning
£22 billion for this country. As a proportion of gross domestic product it is more than double that of any other major investor. We are the largest investor in the United States, and the largest European investor in China.
We are first and foremost a trading nation. We are the fifth largest exporter in the world and we were the only one of the major industrialised nations to increase our share of world exports last year. We export more per head than Japan or the United States. Since 1979, the volume of our exports has nearly doubled. After decades of relative decline, our manufacturers are again competitive in the world marketplace.
Underlying export volumes have risen by 24 per cent. since the beginning of this recovery--to record levels. Our exports to the European Union are growing strongly. Manufacturers exported more than a third more to the Netherlands than a year earlier and exports to Germany and Spain are up by a fifth.
We are also doing well in the world's most dynamic markets. In the past 12 years, the south-east Asian market has tripled in size, but our exports have done even better. Moreover, our exports to south-east Asia have grown faster than those of France or Germany. In the past year, our exports to Japan, Hong Kong and Indonesia have risen by more than a fifth and already this year exports to Japan are up by a third. Last year, we had a balance of payments surplus with Asia as whole, including a surplus with the newly industrialised Asian tigers.
We have been engaged in recent years in the reversal of years of decline and the achievement of long-term structural improvements in our economic performance. The Government have always taken a long-term view. The competitiveness White Papers that we published this year and last show that we have long-term challenges to meet, but we are at last gaining ground lost in the past. The White Papers set out a long-term programme for action for all parts of Government to help improve our underlying performance.
The need to continue to improve our competitiveness is more pressing than ever. The pace of change is accelerating. The world marketplace is becoming increasingly competitive. New challenges but also immense opportunities in the world's rapidly growing markets are emerging all the time. Enterprise and flexibility are essential if our firms are to seize more of the prizes on offer.
That is why we are determined to reduce the burden of regulation on our firms and to continue our fight against backdoor regulation by means of the social chapter. The flexibility of our labour market is one of our greatest strengths, as our competitors acknowledge.
Mrs. Margaret Beckett (Derby, South):
The Secretary of State has been saying recently that the widespread feeling of economic insecurity pervading the country is just a state of mind. One thing that came out of his speech very clearly today is that the Government's state of mind is one of extraordinary complacency, especially in the light of today's poor figures on gross domestic product and total investment.
Who would have thought from listening to the Secretary of State this afternoon that growth in GDP has been revised down to 2.1 per cent. in the past 12 months and that gross domestic fixed capital formation has shrunk by 2.2 per cent. in the past quarter and risen by only a disappointing 0.6 per cent. in the past year?
Against that background, the context within which the Gracious Speech has been set, the tenor of the public debate that the Government have sought to foster and the content of the speech itself, with the exception of the chemical weapons Bill--the only legislation in the Department of Trade and Industry portfolio this Session and a Bill that we welcome, although we will have to scrutinise its exact details--testify to the Government's further lurch to the right. Indeed, the speech, the context and the public debate are all further evidence of the Government's view that, instead of good government, Britain is best served by absence of government.
As a result, we contend that Britain's industrial and economic performance is far too weak. The Government consistently dispute that claim, and the Secretary of State did so again today. There is a clear gulf between us, or perhaps, clear blue water--a gulf of both analysis and prescription. We differ not only on the nature of Britain's ills but on how they may be tackled. Nor does absence of government mean in this case just benign neglect. As the Government substitute party for public interest at every turn, their neglect approaches the malign.
Take the chair of the Conservative party, who used the press launch of the Queen's Speech to explain that its main purpose was not to further the national interest or address weakness in our economy but to smoke out the Labour party. Indeed, take the President of the Board of Trade, the Secretary of State for Trade and Industry, who went to the Confederation of British Industry conference, not to tell members what they should do for Britain, let alone what Britain's Government might do to help them to advance Britain's interests, but to tell them what they should do for the Conservative party.
Look at the changes that are being considered in the timetable for selling Railtrack or Nuclear Electric. The timetable for the latter was already thought to be tight in
terms of safety, yet it is being brought further forward to placate the mad tax cutters on the Tory Back Benches-- none of them apparently present today.
Sir Wyn Roberts (Conwy)
rose--
Mrs. Beckett:
I shall give way to one of the few who are.
Sir Wyn Roberts:
Talking of tax cutting, does the right hon. Lady fully support the shadow Chancellor in his ambition to achieve a 10p rate of tax?
Mrs. Beckett:
Yes, indeed I do. As I hope the right hon. Gentleman is aware, my hon. Friend's suggestions form part of a number of remarks in which he has suggested what sort of tax cuts should be made if resources are available for them, such as a cut in the value added tax on fuel. I hope that we will see the right hon. Gentleman in the Lobby with us, if we have a chance to put that to the vote.
In all those respects, it has become clear that, for this Government, the national interest now explicitly takes second place to the interests of the governing party. As the Conservatives focus on their party alone, they become increasingly out of touch with the people.
The other remark of the Secretary of State that was reported last week--that job insecurity is "a state of mind" and that the reality is different, when 8.5 million people have experienced unemployment since the last general election alone and millions more in every job and profession live in hourly fear, not just of losing their job but of being unable to get another--touches on one of the rawest nerves in middle England and rivals, if that were possible, the insensitivity of a Gerald Ratner or a Norman Lamont. Yet the Government continue to turn their back on proposals like our own for a Government programme to kick-start new employment and training projects, funded by a windfall tax on excess utility profits, even though Britain ranks 20th out of the 24 Organisation for Economic Co-operation and Development countries for levels of job creation since 1979--something else that no one would have understood from the Secretary of State's remarks.
Nor do other international comparisons bring us much comfort. Britain ranks 23rd in the world competitiveness tables for productivity. We were the only country, apart from Turkey, to cut seedcorn investment in research and development, although we were the people who had
£128 billion in today's prices from oil. Our overall record on investment is worse than that of our competitors, and so--we believe as a direct result--is our record on growth. We rank behind all the other G7 countries in terms of our manufacturing investment as a proportion of GDP--our national wealth--and behind every country of the European Union, and we have fallen to 21st in the ranks of the OECD.
In real terms, manufacturing investment was more than 17 per cent. lower in 1994 than when the Conservatives came to office in 1979. Just as we rank low in investment, so we rank low in growth. On growth averages since 1979, Britain is bottom of the league of the G7 countries and in Europe, and this has been the slowest period of growth for the United Kingdom since the 1930s.
That is the whole of the Conservative Government's record--not highlights that were carefully selected to try to present a different picture. It is also their failure: the intensification of Britain's decline as a productive, competitive manufacturing nation.
Between 1979 and 1995, the value of sterling against the German mark halved. It also declined by more than 25 per cent. against the United States dollar and by 70 per cent. against the Japanese yen. In addition, as the Secretary of State mentioned, hourly labour costs in UK manufacturing are lower than in the United States of America, Germany and Japan and yet, with these two significant advantages--a lower currency and relatively low hourly labour costs--much of our manufacturing industry remains uncompetitive in not only domestic but international markets.
A few moments ago, the Secretary of State spoke about the terrible problems that the Conservative Government inherited from their predecessors--a Labour Government. But in 1983, under a Conservative Government, we saw the first ever trade deficit in manufactured goods since the industrial revolution--a deficit that has remained ever since. Only a few weeks ago, that deficit widened further.
Clearly devaluation, whether on its own or in combination with lower wage costs, does not in itself provide the panacea for declining competitiveness: the missing elements are investment and the sustainable increases in productivity that only investment can bring. In most years since 1979, the rate of new investment has been less than the rate at which old plant and machinery were scrapped. Today, the Secretary of State has argued, as Ministers have argued recently, that the increase in manufacturing investment last year was higher, at 11 per cent. That increase was from a very low base, however. As late as 1992, the real capital stock of manufacturing after depreciation was only 1.5 per cent. higher than in 1979.
Nor are we investing in skills. The proportion of 16-year-olds leaving English schools without any qualifications rose this year for the second year running. Two years ago, 6.9 per cent. of children left without qualifications. Today, the figure has risen to 8.1 per cent., and 8.3 per cent. of 16-year-olds failed to gain even one grade G at GCSE.
So in Britain today we have plant and machinery that are outdated, a work force who are low-skilled and, with little investment in plant or people, low productivity by international standards. In consequence, under this Government we have had the lowest average growth in post-war history, as well as the highest levels of unemployment and, for most people, the biggest tax rises.
That is this Government's record, and their remedy is equally disastrous. Recently, Ministers have been forced to admit that Britain is being overtaken by the so-called
"Asian tiger" economies. They claim that that is further justification for their drive to lower wages and working conditions. In fact, the Government's strategy, if such it can be called, is to build a kind of Tory Euro-Disney--a never-never land run on Mickey Mouse economics--in which the people of Britain are being taken for an expensive ride.
But we are not being beaten only by the Asian tigers. We are also being beaten by the high-wage economies of France, Germany, Switzerland, the USA and elsewhere. The strategy of transforming our industrial and engineering centres into locations for low-cost, low-wage, low-skill assembly plants will not help us to compete in the global economy; on the contrary, it will cost us dear. This country's survival and that of our people depend, first and foremost, on our ability to make and sell goods in the domestic and global markets. A year ago, the president of Honda stated:
The Government's neglect of our national interest continues, even when the absence of Government action threatens their own declared policy--as, recently, with takeovers and sales in the utilities. The Government's case for privatisation was that the utilities were monopolies and, as such, were bound to act with insufficient regard for consumer interests. The utilities were not only sold at knock-down prices but split into competing units with the claim that competition would act to protect the consumer and hence help the public interest. Today, we see consolidation and the potential creation of fresh utility monopolies in the private sector, as industries are subject to a wave of mergers and takeovers which the Government are failing to check, and about which the Secretary of State had nothing to say today.
We are seeing a dangerous concentration of power. In the north-west, more than one of the essentials of life-- water and electricity--are in the hands of one private company. We are even seeing essential services fall into the hands of private companies whose base, origins and essential interests lie overseas--for example, in France and the United States. To make matters worse, it is an open secret that such foreign-owned utilities are investing here because they have far greater freedom to ride roughshod over the interests of British consumers than they would at home.
I have written to the Secretary of State more than once, as did my predecessor, calling on him to refer not just individual bids but the entire electricity industry to the Monopolies and Mergers Commission for independent investigation of public and consumer interest. In that respect as in others, Britain needs the industrial strategy that the Government lack--a strategy for investment in Britain's future.
The Secretary of State had little to say today about small and medium-sized firms, although lip service was paid to them in the Queen's Speech. Such firms are often the most dynamic enterprises in any given industrial sector, and in countries such as Germany they form an important part of manufacturing industry. The owners of many small businesses, being hard-pressed for time, work 70 hours or more a week and often face tremendous barriers in getting their hands on information and serious hurdles in the way of obtaining accessible finance. A Labour Government would seek to tackle that funding gap. We have already developed plans to match investors with lenders through tailor-made accessible services at no additional cost to the public purse, using an enhanced network of business links throughout the UK--an idea that the Government, we are pleased to see, are beginning to take up.
We are equally concerned about technology-based firms, which often find it difficult to borrow because of bank preference for collateral. We have advanced ideas for enhanced business links to address that market failure through an equity underwriting scheme that would
underwrite a certain proportion of equity invested by a venture capitalist and in return look to receive a share of profits accrued later.
Another market failure that the Government could address is the lack of information available to so-called business angels. It is estimated that the amount of finance available from that source is £3 billion to £5 billion, yet a major problem for such investors is in obtaining information about potential investments in good industrial and commercial ideas. By working with private sector organisations already involved in matching such investors with companies, we could investigate how a national on-line database could be established and made available. The cost of all such plans could be offset by the rationalisation of existing schemes and an element of profit sharing from the equity underwriting proposal, to make better use of existing resources.
In the long run, many profitable small businesses create their own capital. We want to provide every encouragement for the reinvestment of profits by smaller firms. As part of a review of tax obstacles to long-term investment, we are examining how the balance of the tax take on small businesses could be redistributed, to provide strong incentives for the retention of earnings for investment.
More widely, my colleague the shadow Chancellor recently proposed that in this month's Budget, the Chancellor of the Exchequer should, for a limited, 12-month period, double the first-year tax allowance for new investment from 25 per cent. to 50 per cent.--the kind of stimulus to new investment that is widely accepted as the most effective. We want not only an increase in investment but an improvement in its quality and effectiveness. As a nation, we need to enhance innovation, celebrate it and deploy the best in design because innovation and design are necessary for our national pride, and they are crucial in maintaining our living standards in an increasingly competitive world. Britain has some of the best designers in the world, but they are not put to sufficient use with others in British business.
I was interested to hear the Secretary of State's remarks about his intention to produce a consultation paper on competition and corporate policy, which we will study with interest. We have proposed rationalising the Monopolies and Mergers Commission and the Office of Fair Trading into a single competition and consumer standards office, charged with identifying and dealing with restrictive practices, such as price fixing and rigged tenders, and anti-competitive practices such as abuses of monopoly power.
In the past, the Government seemed to rely exclusively on an administrative approach, whereas we believe that a more prohibitive approach would be more effective. We shall scrutinise the Government's proposals in their consultation paper to see whether, as the Secretary of State suggested today, the Government intend to move towards a more prohibitive approach.
The establishment of the right economic climate for the regeneration of industry is not enough. The training and education of our work force need to be improved. We have the urgent need of an advanced industrialised society competing in hostile, global markets for highly productive, well-educated and skilled people. We need to raise education standards and to foster the lifetime development of new skills. There is no doubt that Britain
has a number of world-class manufacturing companies-- everybody could name some, but there are too few of them.
Much of the country's weakness rests with the short-term adversarial culture fostered by the Conservative party and encouraged since the 1980s. Britain needs to take the long-term view, and that requires partnerships, not division. We need to look to the future, identify fresh markets and opportunities and set out to play a major role in those markets.
In too many industries, such as biotechnology, our lead is under threat from abroad. In other industries, such as fibre optics, our lead has probably already been lost. In others, such as environmental technology, we may still have a lead. It is essential that we seek to stay in the lead--to exploit the opportunities of a new market, as our competitors do.
In 1991, Taiwan took a policy decision to move from a low-cost, low-wage, low-skill economy to higher value, high-tech industries. Taiwan identified 10 sectors of high-tech content in which there would be global demand into the next century, including aerospace--in which Taiwan had no production capacity. Instead of concluding that the country was excluded from such markets, Taiwan set out--the Government working in partnership with industry--to develop plans from scratch. It started planning and building for the future through a partnership between the Government and industry--something that has not happened in this country for the past 16 years.
The responsibility rests on the Government not only to undertake competent macro-economic management but to create the political climate in which a cultural shift in favour of manufacturing can occur. Taiwan and Japan have shown that that can be done. Britain needs to begin to re-create high-quality, high-paying, high-productivity jobs based on skills and investment that generate ever more value added per hour, and to do so on the basis of co-operative relationships between employers and employees.
Most successful world-class companies focus not only on narrow financial criteria but on people and relationships. They involve their employees in a process of consultation and decision making in company affairs. That is the kind of view that is encapsulated in the social chapter, the provisions of which--although no one would have thought so, to hear the Secretary of State today--are already met and exceeded by world-class companies such as Nissan, AT and T, Motorola, United Distillers and many others.
Those provisions are important for achieving basic rights and standards for employees and are accepted by all our European competitors. What the Secretary of State said today about the remarks of my right hon. Friend the Leader of the Opposition to the CBI was profoundly misleading. My right hon. Friend was seeking to address the misleading propaganda coming from the Government about what signing up to the social chapter would entail.
As my right hon. Friend told the CBI, if there are new developments in social policy and legislation, we believe that Britain should be involved in the discussions, arguing our corner, putting Britain's case when those matters are raised with our European partners, and not leaving an empty chair. We believe that the only way forward for Britain is a hard-headed analysis of how to build that
high-wage, high-skill, high-investment and high-employment economy, and then total determination in the bid to achieve it.
We are not alone in our analysis. In pre-Budget submission after pre-Budget submission, the representatives not just of the TUC but of the CBI, the chambers of commerce, the training and enterprise councils set up by this Government and the small business associations have called on the Government to take action to stimulate and to sustain investment. They have called, as we have done, for further tax incentives for investment in research and development. They have called, as we have done, for capital allowances to promote investment, only to be told that they are old-fashioned. They have sought, as we have sought, Government action to improve our infrastructure.
In this year's submission, the CBI pleads for investment in education and training to be protected and has expressed the hope that any tax cuts will not be bought at the expense of Government capital programmes. These bodies are all calling on the Government to cease to absent themselves from the field, and to take up the role that only Government can play.
Labour's project is for national reappraisal and national renewal on the basis of a new consensus, a consensus that speaks to the real condition of Britain today--the consensus that we need to encourage long-term relationships between finance and industry. We need to build economic strength from the bottom up and not just from the top down, and that is why it is important to co-ordinate industrial and economic development at a regional level.
The new consensus states that the interdependence of public and private sectors is more important than the boundary between them, and that is why we propose real public-private partnerships to invest in infrastructure, in addition to what the Government can do rather than in substitution for it. The new consensus believes that small and medium-sized enterprises are the engine of growth in the economy, and that is why we propose new ways of stimulating the small business sector.
"The bottom line is that what you started in Great Britain back in the early '80s other European countries still have to do today."
Foreign firms are showing, by their major investment commitments, their approval and confidence in our policies and our work force. The UK is the No. 1 location for Japanese, United States and Korean investment in the European Union.
"The money game is fine, but industry is the only way for a country to survive, and I wonder how the British expect to make a living in the future."
That was said on the occasion of the acquisition by BMW--which the Secretary of State quoted--of Rover. If that proves how successful we are, I wonder why Rover did not buy BMW.
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