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Mr. Richard Spring (Bury St. Edmunds): I am grateful for the opportunity to speak.
I must say to the hon. Member for Gordon (Mr. Bruce) that I am rather concerned about his apparent fixation with an independent central bank. It strikes me as irrelevant for Liberal Democrats to alight on such a policy when they are entirely committed to a politically and economically integrated Europe. That would effectively mean our losing sovereignty in terms of our economy, given that we would have a single currency and, by definition, a single European bank. Notwithstanding the interest with which the hon. Gentleman spoke of the establishment of an independent central bank, it would prove irrelevant if his party's policies were ever carried out.
Last week, something of seminal importance happened in this country. There was a massive investment in Britain, the largest ever investment in Europe from abroad. I refer, of course, to the £1.7 billion investment in Wales by LG of South Korea. It will create 6,100 jobs, and the spillover effect will create some 20,000 jobs in south Wales in toto.
In the same week--I believe that it was the very same day--300 new jobs were created in a joint venture between Unipart and Honda. Honda has come to this country, and has been part of the great revitalisation of the motor industry. I mention that because economics is not some high-flown theory; it is about people's lives, livelihoods, hopes, dreams and aspirations. If those aspirations are to be fulfilled, we in this country must produce the goods and services that the world wants and we want in our home market; there is no escape from that.
We do not need a plethora of economic statistics to know--especially after last week's massive investment--that something profoundly positive must have happened in this country in the last few years to persuade the South Koreans, and many others, to participate in our dynamic economy.
In the last three years, foreign investment has created 114,000 new jobs, and 285,000 jobs have been safeguarded. Last year alone, 477 new deals were
announced, and 60 per cent. of the companies that located or expanded in the United Kingdom were already established here. Over the past decade, an enormous amount--£100 billion--has been invested directly here in manufacturing and other industries by companies located abroad.
Is that because we provide a single point of entry to the European Union? There is undoubtedly some truth in that: this is an enormous single market, which is available to any investor. There is another truth, however. A third of all the new deals are already European. A total of 1,500 German companies operate here. More German companies are now coming into the United Kingdom than are going into the United States, whose population is nearly five times the size of ours.
What is so significant and exciting about that huge endorsement of our economic success and progress--we have heard nothing of this from Labour Members--is the effect on the gap between the richest and the poorest parts of the United Kingdom, which is now narrower than it has been for 20 years. Fifteen or 20 years ago, there was undoubtedly a discrepancy between the economic performance of different parts of the country. The narrowing of that gap is in large measure due to the vote of confidence given to us by the massive inflow of foreign investment.
Mr. MacShane:
Does the German investment to which the hon. Gentleman referred consist simply of new investment and new jobs, or does it include the purchase of Rover and a large number of banks because of the devaluation of the pound? What part of that investment consists of new jobs, new factories and new investment, and what part involves deutschmarks buying British companies because the pound makes them so cheap?
Mr. Spring:
As I have said, a third of the new deals are European, and a substantial number of those are German. The United Kingdom is now preferable even to the United States in investment terms. That is a huge endorsement of what we are doing. We have the most benign economic environment that we have had since the war.
There is a world shortage of capital, which has begun to increase in the past 18 months, but there is enormous competition for capital investment. Last week, we heard President Mandela speak. One of his most important purposes in coming here was to try to attract scarce foreign investment into South Africa. That is clearly happening all over the world, but--despite the competition to attract capital, and although Europe is, on the whole, not a preferred centre for investment compared with many other parts of the world--we in Britain have been extremely successful, attracting some 40 per cent. of US investment and some 40 per cent. of Japanese investment.
That has happened because, almost uniquely in Europe, we have provided low corporate taxation, low inflation and a business-friendly environment. The creation of jobs has meant a rise in the standard of living for our entire population.
Mr. Rogers:
The hon. Gentleman has described the way in which investment is coming into this country. Does he accept that, on occasion, we have paid a high
As my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) pointed out, under the Government supported by the hon. Gentleman, our manufacturing capacity has almost collapsed. That applies particularly to indigenous companies that do not seem to receive the same support as companies that are bought in.
Mr. Spring:
Following the flow of foreign capital into this country, we have seen improved management methods and employer-employee relations. We have also seen a raising of standards among domestic suppliers, particularly in the automotive industry. Automotive suppliers have been able to supply high-quality goods--the sort of goods that Japanese car manufacturers have wanted. That has had a beneficial effect on the local economy.
What does this mean at the micro level? As I have said, we should remember that we are talking about jobs, livelihoods and aspirations. In my constituency, unemployment is now down to 4.1 per cent., and in Bury St. Edmunds, the main town in my constituency, it has fallen to below 3.7 per cent. The expansion of East Anglia's economy has meant that my constituency now has one of the lowest unemployment levels since the war. The important thing is that we are not getting some souffle-type economic recovery. It has been slow and steady, without the inflationary excesses that have dogged our economic performance so often since the war.
When we think about economics, its application and its job-creation possibilities, we must remember that other industrialised countries throughout Europe are suffering the tragedy of youth unemployment. In countries such as France, the youth unemployment level is about twice the UK level. The European Union average is substantially above our own. In Spain, which has a minimum wage set-up similar to the one advocated by the Labour party, youth unemployment is 41.2 per cent. What a tragedy of blighted human lives. The artificiality of the minimum wage is destroying the prospect of economic growth and employment.
The other side of the coin is that, as unemployment comes down, vacancies grow. In June, they were up another 13,000, to 218,000. We should remind ourselves that we have the highest employment level of people of working age of any large European country.
Until the past 10 or 15 years, East Anglia had not enjoyed the economic prosperity of some other parts of the UK, but, in the first half of 1996, there were improvements in order books, profits, investment spending and jobs.
A survey undertaken by the Lloyd's bank commercial service showed that 40 per cent. of companies were increasing their investment spending. Amid a welter of good statistics, cash flow has improved demonstrably. That is crucial, because about 90 per cent. of the work force in East Anglia, which does not have the industrial tradition of other parts of the UK, work in firms and enterprises of 25 employees or less. Therefore, what happens to small businesses and their cash flow is crucial.
This week, the Organisation for Economic Co-operation and Development annual employment report contrasted the continuing fall in UK unemployment with the rising unemployment in France and Germany. We can contrast our present position only with the shambles of strikes, inflation and balance of payment crises that became indelibly associated with the UK during the 1970s, and no wonder. We had 98 per cent. taxation and a terrifying brain drain, which deprived the UK of a generation of dynamic entrepreneurs, with adverse long-term consequences.
That is one of the main reasons why I felt compelled to get involved in a political career. Travelling the world as a British business man, I felt ashamed to have to apologise for the shambles and anarchy that obtained in the UK in the 1970s. What a total contrast we have today. The huge success in the UK is clear. Our work force is flexible and adaptable. Our employers are not burdened with job-destroying social on-costs, and the trade unions no longer hold our country to ransom.
Manufacturing industry, however, is not the only beneficiary of the economy's improvement in terms of attracting overseas investment. The latest Confederation of British Industry quarterly survey, conducted with Coopers and Lybrand, shows that there is considerably more business optimism in the financial services industries, which are growing at their fastest rate since March 1993, with banks, building societies and life insurers reporting the strongest rises in confidence.
We hear about the elusive feel-good factor, but house prices are undoubtedly beginning to rise--not, as they have in the past, led by inflation, but because the affordability index is so good, and it is attractive for people to buy. They are not spurred to do so by inflation or a desire to beat the price index, but because of increasing confidence, of growing employment opportunities, of low interest rates, of the cash flows that they create in people's budgets, and of the solidity and stability that low inflation brings to the UK.
It is significant that people are reflecting that confidence in taking out new mortgage loans. In the three months to May, new approved mortgage loans were up to £18.1 billion. That compares with £15.1 billion for the same period in 1995. As my right hon. and learned Friend the Chancellor of the Exchequer has forecast, in the second half of 1996, the consumer will increasingly play an important part in the economic recovery.
In June, for example, sales volumes increased for the ninth time in as many months. Consumer spending was at its highest level since January 1990. All that will contribute to a greater sense of well-being and solidity in the months and years to come. Since its peak in 1992, unemployment has fallen by 800,000--we have the lowest unemployment level of any major European country. We are a glorious exception in a sea of rising unemployment throughout Europe.
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