---

11.56 am

Mr. Denis MacShane (Rotherham): I enjoyed listening to the speech of the hon. Member for Eastbourne (Mr. Waterson), especially his animadversions on the minimum wage. It struck me that the United States, which enjoys the highest level of inward investment of any major economy, has just raised its statutory minimum wage significantly, to no detriment to its economy. If the hon. Gentleman had been present in the debate on tourism last week, he would have heard hon. Members point out that we have a balance of trade deficit in our tourism industry because British people prefer--it seems--to visit European countries, where the minimum wage ensures that hotel and tourism industry workers are adequately remunerated and other regulation ensures that the level of training and skills is such that employees provide the kind of warm welcome that attracts our people.

This debate is taking place on a cold December morning. I do not know whether the Secretary of State will be able to return to the House or whether he has to jump on a plane to leave for his week in sunny Singapore. My hon. Friend the Member for Middlesbrough (Mr. Bell) quoted Browning, and there is no doubt that, for the Conservative party and the Government, it will never be "glad confident morning again!" It is all over: I think that this week shows that the game is up. Whether or not we have a general election before Christmas--that would certainly be a Christmas present that the British people would like--it is clear that the Government are now sinking fast.

Mr. Stephen: If the hon. Gentleman's remarks were based on reports of proceedings in the 1922 Committee, I can tell him that I was at that meeting and I do not recognise the newspaper reports as being anything like the truth.

Mr. MacShane: I am grateful to the hon. Gentleman, but my analysis was based on being present in the Chamber yesterday afternoon and on Tuesday afternoon. I doubt whether many hon. Members, even those with long experience in the House, can remember a Prime Minister being so utterly weakened, humiliated and destroyed by the anger of the House at his incompetent policies.

We are here to discuss not the death agonies of the Conservative party, but trade. I am glad that the debate has been called, because it allows us to nail some of the myths that we heard in the Secretary of State's opening speech. The right hon. Gentleman referred to our inflation record. We are not first in the inflation league table in Europe, but 11th. The right hon. Gentleman referred to the record of investment in our country. The French, Germans and Japanese invest, on average, £7,000 per worker, whereas United Kingdom companies invest only

6 Dec 1996 : Column 1321

£4,000 per worker. Private investment--the key to economic growth--has grown by just 6 per cent. since the recession. That is slower than in the mid-1980s and slower than under Labour in the mid-1970s; it is slower, even, than during the recovery of the 1930s.

Reference has been made to productivity, but if we look at the official figures, we see that productivity growth in the United Kingdom is collapsing. The figures for the increase of output per head show that there was 1.3 per cent. growth last year. The monthly data to September 1996 show a negative increase in productivity for nearly every month. Those figures are based on House of Commons Library figures.

The interesting question is: if the economy is doing as well as the President of the Board of Trade said it is, why have investors in this country so little faith in it? Why are they not putting their money where the President of the Board of Trade's mouth is--as it were? This debate will, to quote the Chancellor of the Exchequer, turn into a boomerang that will fall back on the Government.

Much reference has been made to the Conservative central office document--you, Madam Deputy Speaker, correctly but gently rebuked me for quoting from it from a sedentary position. But if we look at page 12 of that document, we see that it is poorly written. It states:

"Labour reject free trade in four of protectionism".

The grammar is wrong and the text is written for illiterates. I can understand why Dr. Julian Lewis, deputy director of research for Conservative central office, has just resigned. I thought it was because he wanted to join the campaign to lead Britain out of Europe, but he is more likely to have resigned because, as a man with a PhD, he is horrified at the shoddy, illiterate standards of writing at Conservative central office. I have found, after long experience, that bad writing often reflects bad thought and bad thought reflects bad ideas. The absence of a coherent set of ideas to guide our country into a happier and richer future has led to the paucity of the Conservative party's policy contributions.

The main reason for the lack of investment in our country is the collapse of manufacturing under this Government. In 1979, manufacturing accounted for 30 per cent. of national output and employed more than 7 million people; by 1995, it had fallen to just 20 per cent. and employed only 4 million people. Industrial production has grown at a slower rate than in 11 other European countries. According to the Budget figures, our trade deficit--particularly in manufacturing goods--will worsen. While other countries are concentrating on achieving a balance of trade surplus, our trade deficit is, according to the Red Book, to rise to £4 billion next year.

It was not 12 years ago that the United Kingdom's balance of trade in manufactured goods went into deficit for the first time since the industrial revolution. The party of Pitt, Peel, Chamberlain, Baldwin, Churchill, Macmillan and Heath, which once ensured that we exported more finished goods than we imported, has turned Britain into a country that has to import finished manufactured goods--not raw materials, as the hon. Member for Ludlow (Mr. Gill) said. Our share of world trade has slumped to its lowest level this century and is now less than the shares of Italy, France, Germany, Japan and the United States.

That might help to answer the question that I ask myself constantly: if we have such a successful economy, why do our own investors have so little confidence in it? I am,

6 Dec 1996 : Column 1322

of course, delighted at any investment that comes into the UK, but Britain has always been a home to inward investment. In the 1920s, Ford and General Motors came here. Those of us who know west London will be familiar with the great Hoover factory which was opened in the 1930s--perhaps the hon. Member for Beaconsfield (Mr. Smith) passes it when he drives out along the A40. This nation has for centuries been open to inward investment and long may it continue to be so.

If we look at the figures since 1979, we find that in only one year was there more inward investment than outward investment. I have no problems with British firms and financial institutions investing overseas--it is their duty to search for the best return possible on the money they are charged with investing--but, again, I have to ask why they will not invest in their own country. Since the current Prime Minister entered office, for every pound that has been invested in the UK, between £2 and £3 has been invested outside the UK, producing jobs and creating wealth in other countries. Some of that money--£25 billion--has been repatriated as rents, but that shows that we are becoming a rentier economy, not a productionist one.

Until we create stable conditions and end the roller-coaster ride in inflation, in the value of sterling and in interest rates, we will continue to face that imbalance between inward and outward flow. To do that, we need a new Government--a Government who will reform corporate taxation and ensure that real investment and real money are put into skills training; a Government who are not committed to promoting only the interests of an SW1, EC2, EC3 and EC4 elite; and a Government who will rebalance the economy, so that the regions of Britain, which are wholly unrepresented on the Conservative Front Bench, can play their part in a dynamic and balanced economy.

Let us turn to some of the reasons adduced for inward investment. As I said, I strongly welcome such investment in the UK. I have been to Taiwan to try to encourage Taiwanese companies to invest in Rotherham and, earlier this year, I was pleased to be at the opening festival--a wonderful morning of Chinese firecrackers--for the new Rexon factory in my constituency. Indeed, under the Chinese calendar, this is my year--the year of the rat--and I pointed that out as a good sign for inward investment in Rotherham by all the Chinese economic communities of Asia. This morning, as a rat--in the sense of being born in that year, according to the Chinese calendar--I invite them all to come and join the skilled work force of Rotherham and locate their factories in my constituency.

The question of the minimum wage and the social chapter has nothing to do with the levels of inward investment. In fact, inward investment, in terms of pounds sterling invested in the UK, peaked in 1989, well before the opt-out, social chapter, minimum wage debate started.

The Invest in Britain Bureau conducted a survey of 200 manufacturing, assembly and research and development companies that had invested in the UK. They were asked their reasons for having done so. Twenty-nine per cent. of the organisations attributed their choice to the need for a European base; the other reasons quoted were the English language, financial assistance, the European single market and--lastly--labour costs.

6 Dec 1996 : Column 1323

The scientific evidence shows that by far the most important reason for inward investment into the UK is the English language. I am convinced that, under a Labour Government, the ability to speak English, which has deteriorated markedly under the Conservatives, will be reinstated as a major educational skill.

The second most important reason for coming to the UK adduced by those companies is that of being in Europe. The tidal wave of demands from the Conservative party--"Withdraw from Europe", "Cut off from Europe", "Detach from Europe", "Have nothing do with the next stage of European construction"--sends a message throughout the world that Britain under the Conservatives, far from being the Pacific rim of Europe, seeks to become the Albania of Europe, detached from the next stage of European construction.

I believe that the Minister for Small Business, Industry and Energy is committed to Europe. I am not sure of the position of his boss, the President of the Board of Trade, but until members of the Cabinet who are interested in British prosperity have the guts to stand up for themselves and say clearly, "Britain will be a strong and continuing member of the European Union, playing its full part in the next stages of construction," the British economy will be on hold.

The other pro-European members of the Cabinet cannot leave it up to the Chancellor of the Exchequer. I pay tribute to him. He is a political opponent of mine, but at least he has the courage to stand up and be counted on the European question, and he is a rock of Gibraltar in the Cabinet, being harried by political opportunists who want to take Britain out of Europe. As the President of the Board of Trade could not find it in his heart to spell out in his speech a pro-European future for Britain, I hope that the Minister will do so.

I turn briefly to the important point that the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) made about regional assistance. A fair amount of that inward investment is determined on a large cheque being signed by the Government to investing companies--reportedly, £200 million for Samsung and £40 million for Jaguar--and such subsidies can distort markets.

As I represent a South Yorkshire constituency, I am worried about the decision by the Northern Ireland Office to offer a £2.4 million grant to the YG group, a Korean cutting tool manufacturing company. The company has already opened part of a factory in west Belfast to export cutting tools--part-made in Korea and shipped for finishing in Northern Ireland--to the UK and elsewhere in Europe. In the opinion of cutting tool manufacturing firms in my constituency, as well as in Sheffield and South Yorkshire, that will have a devastating impact on their market share. At least 250 to 300 jobs will be lost in exchange for the gain of fewer jobs in Belfast. I understand why the Northern Ireland Office seeks any possible inward investment, but £2.4 million might be better spent if it were used to upgrade and promote existing indigenous British factories in the cutting tools industry.

There is some irony in the fact that British Steel, a company which has a strong presence in my constituency, fights strongly in Europe and asks the Government to fight strongly in Europe against subsidies that European

6 Dec 1996 : Column 1324

Governments give to their steel companies in some instances. British Steel is right and I support its stand. However, a Government Department is unfairly subsidising a Korean company to come into the United Kingdom and, in effect, destroy British jobs. That issue needs to be looked at, and I hope that the Under-Secretary will assure the House that that unfair subsidy to YG, the Korean firm, will not be allowed to continue.

The President of the Board of Trade flies to Singapore later today. We wish him well. May the sun shine on his works. He will be visiting a country which is in social terms one of the most regulated in the world. It has a massive programme of social investment in housing. Compulsory savings are levied on all workers to provide for their future, which also provides a huge source of capital for investment and development in Singapore. All that was undertaken by Lee Kuan Yu, a distinguished statesman who, some hon. Members will remember, was secretary of the Fabian Society at Cambridge.

In many ways, Singapore represents the Fabian Society re-created on earth--a world of the Webbs with slightly better food and drink. Whether one wants and whether the British people would be prepared to put up with Singapore's level of regulation on smoking, drinking and crossing the road, I wonder. I hope that the President of the Board of Trade will enjoy his week in that wonderful Fabian city state of Singapore and learn what lessons he can from it.

The President of the Board of Trade will go out to Singapore with one of the most shameful missions that a British Cabinet Minister has ever undertaken in our name. He intends to use his authority to block the efforts of our great ally, the United States, to place child labour on the agenda of the World Trade Organisation.

In the past 15 years, we have seen a great liberalisation of world trade, which I welcome. It is not accompanied in all parts of the world by a fair share of the wealth created and value added for those who create that wealth and add that value. As we look around the world, we see ever greater income equalities, no more clearly than in our own country. We only have to walk a few hundred yards before we start stumbling across beggars in the street--a quintessential hallmark of the Conservative economy. The Government have reintroduced begging as a mass economic activity into Britain. That is also true in too many other countries.

What is most surprising of all is the extraordinary increase in child labour. The theory of pure free trade is that everyone gets richer. Someone mentioned earlier the concept of the rising tide that lifts all boats, but we are seeing a massive increase in child labour. In a debate a few weeks ago, I quoted figures of about 110 million children identified as working around the world. The International Labour Organisation has just produced an authoritative report which shows that 250 million children are in waged work. This is real work. I am not talking about newspaper rounds or helping out on farms. It is waged work, often as bonded or slave labour.

More than 1 million children are commercially exploited for sexual purposes in the sex trade. Children working in agriculture are more likely to die from pesticides or organic chemical poisoning than from childhood diseases. It is the new scandal of the modern world economy. We are increasing, year on year, the number of children forced to work under those conditions.

6 Dec 1996 : Column 1325

That is why the United States and France, and Sir Leon Brittan, among others, have argued that the World Trade Organisation must build the discussion of child labour into its deliberations.

It is shameful to this country that the Secretary of State will seek, next week in Singapore, to veto the discussion of child labour in the WTO. If for no other reason, let us welcome as soon as possible a Labour Government, who will join the United States and other mature democracies to place the child labour issue on the WTO agenda. The Secretary of State said that he was an evangelist for free trade; I am a great supporter of free trade, but free trade that does not allow all who participate in it to get a fair share will increase protectionism. We are seeing that backlash throughout the world from the excluded, the poor and the out-of-work. If we do not construct our trade relationships and economies so that all who participate in them gain from them, and so that children are at school rather than sent out to work for their parents, we shall see a rising tide of protectionism.

Even at this late hour, I urge the Secretary of State to think again as he flies to Singapore, and to join President Clinton in recalling the good name of Wilberforce and those in British history who eradicated evil working conditions. He should tell his ministerial colleagues at the World Trade Organisation next week that he wants child labour on the WTO agenda. In that way, the WTO and all the other forums can be used to eradicate child labour by 2020.

---