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The Chief Secretary to the Treasury (Mr. William Waldegrave): As the right hon. Lady is talking about trade, and I am sure that she wants to be fair, will she confirm that the 1980s were the first decade in many decades--the first since the war, I think, although I am not certain about that--in which Britain held its share of world trade and that that record was matched by no Labour Government?

Mrs. Beckett: I have not had a chance to scrutinise the figures that the Chief Secretary gave in the recent debate, but I shall certainly do so. He is arguing that we have stood still while others have continued to improve. What he says does not alter the facts--we had the worst trade deficit of the EU Twelve and last year we had only the second worst deficit.

The problem is that our manufacturing base is small. Output is flat--there has been no increase in the past 12 months. In November last year the Chancellor was, as ever, optimistic. He said:

"Manufacturing investment"--

it is certainly the seedcorn of growth--

"is forecast to increase by over 10 per cent. both this year and in 1996".

In fact, it rose in 1995 by a far more modest 5 per cent. Even in the Red Book the Chancellor is forced to admit that manufacturing investment

"fell from the fourth quarter of 1995 to the second quarter of 1996."

It did not increase by 10 per cent. last year as the Chancellor predicted it would. We do not yet have the full figures for this year; but, far from the forecast rise of another 10 per cent., on the most recent figures, it fell by

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14 per cent. in the last quarter compared to the same quarter a year ago. In fact, manufacturing investment is still, in real terms, below the level it reached in 1979 and probably below replacement levels.

The Government ignore the alarming figures, preferring to boast of high levels of inward investment which can be welcome, although it is wise to remember that not all inward investment creates new plant and employment in this country. A United States utility buying a British utility also counts as inward investment. The Government boast of a greater growth in productivity than in the countries with which we compete--again, we welcome that greater productivity--but they rarely mention that we still have a long way to go to catch up.

It is on the basis of such half-truths that the Government rest the claim that Britain is the enterprise centre of Europe and all the rubbish about Britain being a role model--if only we were fit to be a role model. The whole picture--the whole record of 17 years--shows that Britain is not even in the top three in Europe for growth, investment or even job creation. It is not even in the top half of the league tables.

The Government so dislike having these facts, and they are facts, spelled out to the British people that, as happens with any criticism of their record, they accuse those of us who dare to point them out--the Secretary of State did so a moment ago, sotto voce--of running Britain down. But it is this Government, with their lamentable record of failure, who are running Britain down. Our argument is as different from running Britain down as it is simple to understand. We argue simply that Britain can do better than this.

The Government say that the future belongs to those who prepare for it. Investment is the key to equipping Britain to meet the challenges of the future. That is not only our view but that of the Confederation of British Industry, the Engineering Employers Federation, the Institute of Directors, the British chambers of commerce and the Trades Union Congress, all of which called on the Chancellor in this Budget, as they have in successive Budgets, to protect and, as a priority, to enhance investment in education and training and in the transport infrastructure and to work to make a success of the private finance initiative, but not to use it as an excuse for further cuts in the Government's own capital programmes. All that advice has fallen on deaf ears.

In fact, this Budget is characteristic of much in the Government's general approach. They do not listen but continue to put the short-term interests of their party above the long-term interests of the country. Nowhere is that more evident than in their approach to the Europe Union--an approach, incidentally, which itself threatens the inward investment of which they boast. Inward investors tell me of their worry that decisions on Europe taken by the Conservative party are damaging Britain's interests there and that if we left Europe, they would leave us.

Mr. Andrew Rowe (Mid-Kent) rose--

Mrs. Beckett: I am happy to give way to the hon. Gentleman, who I think is pro-European.

Mr. Rowe: I was wondering whether we are edging towards an implied outline of the windfall tax. It is clear

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from what the right hon. Lady is saying that, provided companies promise that they will continue their investment, they will not be subject to a windfall tax. Her argument is that no damage to investment should be caused by any taxes.

Mrs. Beckett: That was a good try, but I am sorry, I was not edging towards anything. I am not identifying the windfall tax, nor am I discussing it. As the hon. Gentleman may have noticed, I am discussing this year's Budget, which is the subject of the debate, and the Government's lamentable record.

At the Conservative party conference, the Prime Minister declared that Britain had to take part in talks about the handling of moves towards economic and monetary union and that our national interest required a British presence in those negotiations and discussions. I agree. However, that is just as true about an issue on which the Prime Minister does not make the same point--the social chapter. There is a genuine discussion to be had about the social chapter, but it is not the discussion that we are having in Britain, or the discussion that the Conservative party seeks to foster, which is more like Grimm's fairy tales to frighten the children.

There is as little truth in what the Government say about the social chapter as in what they say about tax. Only two issues are covered by the social chapter today: a directive on unpaid parental leave, which was voluntarily agreed by employers and trade unions across Europe, and a directive on works councils, which applies only to large companies that operate in several member states. Although we are not in the social chapter, 99 British companies, from Vauxhall to Guinness--which would have to set up a works council if we were in it--have set one up anyway. We are affected by what is decided under the social chapter, but we have no say in it.

The social chapter excludes industrial relations, despite the Prime Minister's claim to the contrary. It excludes discussion of pay, including the issue of a national minimum wage. It includes a condition that everything that might in future be discussed must be examined with special care for its impact on small and medium-sized businesses. That is all the opposite of what the Government are telling businesses.

Mr. Dorrell rose--

Mrs. Beckett: If the Secretary of State will forgive me, I want to finish this passage. It may answer the question that I suspect is in his mind.

Although no one has ever proposed using the social chapter or any other mechanism to import the social security system of another member state--it is hard to imagine that anyone ever would, because each country has a different system, relating to its different history and social and industrial traditions--Britain retains a veto. My right hon. Friend the Leader of the Opposition has made it plain that Labour would exercise that veto in the extremely unlikely event of such a proposal being made.

Mr. Dorrell: The right hon. Lady's next paragraph did not cover my point. She said that the social chapter contained only two directives at the moment. It is true that the powers contained in the social chapter have been used so far to pass only two new pieces of legislation, but the

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key point is that the social chapter is an empowering provision, setting out the rules for approving new regulations by qualified majority vote. That is why Labour Front Benchers are wrong to imply that Britain would have a choice on which regulations to adopt if we signed the social chapter. Will the right hon. Lady confirm that the social chapter sets out provisions that can be approved by qualified majority voting? Is that right or wrong?

Mrs. Beckett: I am happy to confirm that the reason why the social chapter contains a provision for change by qualified majority voting is that the Government accepted that in negotiations. It is not the result of any action by the Labour party or a Labour Government.

Mr. Dorrell: It was nothing to do with the Labour party.

Mrs. Beckett: The Secretary of State is entirely right. This Government gave up the veto and brought in the procedures for qualified majority voting.

Mr. Dorrell rose--

Mrs. Beckett: I am answering the Secretary of State's point.

It is also true that the social chapter is one area to which qualified majority voting applies. However, the social chapter currently contains nothing but those two directives. Of course further proposals could be brought in under it in future, but in the meantime, as a result of the Government's opt-out, Britain has no say in any further proposals that might come forward. We are affect by the social chapter, but we do not have a voice.

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