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UK Investment
4. Mr. Livingstone: What estimate he has made of when United Kingdom investment as a proportion of gross domestic product will reach the average level for the EU as a whole. [12651]
The Chancellor of the Exchequer (Mr. Gordon Brown): The higher investment that we seek to meet the Government's objective of high and stable employment and growth requires stability as well as the specific measures that the new Government have taken to encourage long-term investment. The Treasury's economic assessment of Britain in Europe, published on Monday, suggests that to be outside economic and monetary union in the long term could damage investment. That is one of the reasons why we support the principle of a single currency.
Mr. Livingstone: May I start by recording my appreciation to the Chancellor for his wise decision to create a vacancy on Labour's National Executive Committee? Does he agree that the major reason why the British economy is weak and is not capable of joining the currency union is that the former Government neglected
investment? Year by year, we were consistently recording investment levels that were barely 75 per cent. of the European average.
Mr. Brown: I agree with my hon. Friend on his second point. For 20 years, British investment compared with that in Europe has been lower than it should have been. With our cuts in corporation tax and our investment incentives, we intend to raise investment, but what would be most damaging, particularly for inward investment into Europe, would be to reject in principle the idea of a single currency. Thirty per cent. of inward investment in Europe, 40 per cent. of Japanese investment in Europe and 50 per cent. of Korean investment in Europe comes to Britain. The Conservative party should answer this question: why does it oppose the principle of a single currency? If the economic reasons for a single currency are compelling, why will it not support it in the national interest?
Mr. Townend: Does the right hon. Gentleman accept that it is the quality, as much as the quantity, of investment that matters? How does the return on investment in the United Kingdom compare with average return on investment in other European Union countries?
Mr. Brown: Of course it is the quality of investment that matters, but there has to be investment in the first place. I heard the hon. Gentleman on the radio talking about the single currency and his principled objection to it and I must tell him that we would not be serving the cause of British industry or investment in Britain well if we opposed in principle a single currency. To improve the quality of investment requires, first, that there is investment. The Conservative party's policies would ruin the possibility of more investment in our country.
Mr. David Taylor: Is the Chancellor aware that his clear line on the single currency has had the unforeseen effect of trapping four British nationals in an alien organisation? Would he care to comment on the dreadful plight of the hon. Members for Esher and Walton (Mr. Taylor), and for Leominster (Mr. Temple-Morris), the right hon. Member for Henley (Mr. Heseltine) and the right hon. and learned Member for Rushcliffe (Mr. Clarke)? Will he urge his ministerial colleagues to refer their case to the International Court of Justice which, unfortunately, sits at The Hague?
Madam Speaker: Order. As the Chancellor knows, he has very little responsibility for that, but perhaps he could pick one or two bones from that flesh.
Mr. Brown: It is just as well that I have no responsibility for the Conservative party in its present condition. My hon. Friend has made a point which is emphasised by the former Conservative spokesman on Northern Ireland who talked about the damage to business that would be caused by objecting to a single currency. He said that our businesses need to prepare for Europe urgently. That is the man who, until yesterday, sat on the Front Bench for the Conservative party.
Only this morning the former Deputy Prime Minister said that the Conservative party was now at war with business. I must ask the Conservative party whether it supports the principle of a single currency--yes or no. If the economic reasons for it are compelling, why does the Conservative party object to it when it is in the national economic interest?
Profit-related Pay
5. Mr. Fabricant: If he will make a statement on Her Majesty's Government's policy concerning the taxation of profit-related pay. [12652]
Mr. Darling: We believe that profit-related pay should be taxable, like bonus pay and other, similar forms of remuneration.
Mr. Fabricant: I thank the Minister for his answer. Does he recall that, before the general election, his right hon. Friend, the current Prime Minister, visited John Lewis in Oxford street and said that it was a good example--as is the whole John Lewis Partnership--of a stakeholding society? Does he also recall--as far as I recall he was not present in the Committee considering the Finance Bill immediately prior to the general election--that the Labour party spokesman on that Committee said that the Labour party would immediately restore profit-related pay? Is he aware of how betrayed the 34,000 members of the John Lewis Partnership and other such schemes feel because of the lie that we heard in that Committee? Will he now apologise to the members of the John Lewis Partnership and to others who formerly benefited from profit-related pay tax breaks for breaking yet another election promise?
Mr. Darling: If I set aside the hon. Gentleman's rather intemperate remarks, perhaps I can put him right on a number of matters. First, at no time did anyone in the Finance Bill Committee promise, on behalf of the Labour party, that profit-related pay would be restored. I can assure the hon. Gentleman that I was present and, as the then shadow Chief Secretary, had anyone said that, it would probably have been the last thing they would have said on behalf of the Labour party because of the cost involved. What the hon. Gentleman has said is simply not true.
Secondly, John Lewis has an excellent scheme and I am pleased that it has said that it will continue with it. The hon. Gentleman should not make the mistake of believing that a scheme will work only if there is a tax break to go with it. Many employers have schemes that do not rely on tax breaks. The final point that the hon. Gentleman might wish to bear in mind is that, as the parliamentary private secretary to the then Financial Secretary, he voted to abolish the profit-related pay scheme. Therefore, he is in no position to lecture us.
Mr. MacShane:
I was present at all the sittings of the Finance Bill Committee and I can confirm what my right hon. Friend the Chief Secretary has said. If the hon. Member for Lichfield (Mr. Fabricant) had got his hair out of his ears, he would have noted that too.
I invite my right hon. Friend to address the question of employee involvement. Has he seen the remarkable evidence from the United States of the success of employee share ownership schemes? More than 10,000 companies, covering 11 million employees, are now owned partly or wholly by their employees. They are profitable, they are creating jobs and they are adding share value.
Could we have a little more enthusiasm from the Treasury, in contrast with the pathetic lip service paid by the previous Government to ESOPs--employee share ownership plans--on the need to get shares into the hands of employees and to get employees directly involved in the ownership and running of their companies?
Mr. Darling:
I recall my hon. Friend's contributions on that subject during the Finance Bill--some of them were in Latin. Even though we may not have understood some of what he was saying, we could at least see the enthusiasm with which he said it.
The Government are keen to encourage employee participation in every possible way. We believe that it is very much a part of the stakeholder democracy. Companies that involve their employees, in whatever way is appropriate, ensure that their employees share in the success of their companies and feel part of the common effort. That is something we want to encourage. However, I repeat what I said to the hon. Member for Lichfield (Mr. Fabricant)--a tax break is not the only way to encourage that change of culture.
6. Mr. Kirkwood:
What steps he proposes to take to protect the competitiveness of exporting manufacturers in the United Kingdom from the adverse effects of high levels of sterling; and if he will make a statement. [12653]
The Economic Secretary to the Treasury (Mrs. Helen Liddell):
The Government wish to see a stable and competitive pound over the medium term, consistent with our objective of price stability. One key route to United Kingdom export success is to ensure that there is no return to the boom and bust that we saw over the 18 years of the previous Government. We need to allow companies to plan ahead and to be competitive in the marketplace.
Mr. Kirkwood:
I well understand the sentiment behind the Minister's answer. However, is she really aware of the damage to manufacturing exporters caused by the high level of the pound? She will be aware that during the past seven days, Pringle of Scotland--a company that exports the vast bulk of its knitwear--has announced 300 job losses in the Scottish borders.
Will the hon. Lady use her good offices, working with the Minister for Education and Industry in the Scottish Office, to try to produce a package of measures for the communities affected--Hawick, Berwick-upon-Tweed and Galashiels--and to try to save what is left of the knitwear industry and diversify for the future? Will she find time to meet a small delegation from the senior management of Pringle, so that she may hear at first hand about some of the exchange rate difficulties that the company is facing?
Mrs. Liddell:
Manufacturing exports are still rising, but I take the hon. Gentleman's point about Pringle. I have been following the matter in the Scottish press. I commend the hon. Gentleman on his prompt action in contacting my office. I will be happy to meet a delegation from the company, and whoever else it wishes to bring,
Mr. Stevenson:
Does my hon. Friend agree that a core economic issue is how to control inflation while also controlling interest rates and exchange rates? Is she aware that in my Stoke-on-Trent constituency about 500 jobs have been lost over the past six months? If she further aware that one of the main reasons cited for that by the pottery industry, which exports 80 per cent. of its products, is the exchange rate? Will she review economic policy and take fully into account the growing and serious concern about the effect of the exchange rate on manufacturing industry?
Mrs. Liddell:
The Government fully understand and share the concerns of industry and exporters. However, it is important to remember the significance of ensuring that this country does not return to the boom and bust cycle. I recognise the problems in my hon. Friend's constituency, but since the peak in July there has been a reduction in the value of the pound against other currencies. On his point about reviewing economic policy, I remind him that the economic policy that we have embarked on since we were elected on 1 May is aimed at bringing long-term stability to the economy. By bringing long-term stability, which was so lacking under the previous Government, we hope to get on to the sort of economic footing that will ensure that the vicissitudes of the marketplace that are occurring in my hon. Friend's constituency cease to have the same impact.
Mr. Ruffley:
Given the Government's commitment in principle to joining economic and monetary union, will they give a commitment also, in principle, to joining the exchange rate mechanism? If they will not, will it not be merely another example of the Government running scared of British public opinion?
Mrs. Liddell:
My right hon. Friend the Chancellor has made it perfectly clear that we have no intention of joining the ERM.
Mr. Skinner:
Is it not also true to say that, in a highly technological world, people who export must also import if they are to provide their exports? There is an argument about swings and roundabouts in the value of the pound, and we should take no notice of those tinpot Liberals. We should remember that previous Labour Governments have devalued the pound, and previous Labour Governments have not managed to secure a second full term in office.
Mrs. Liddell:
My hon. Friend is right in the points that he makes about the Liberals, who are consistent on nothing. I take the point that he makes, and I can assure the House that the Government intend to secure an economy that is on a stable and sound footing.
Mr. Lilley:
Further to the answer that the Economic Secretary to the Treasury gave to my hon. Friend the Member for Bury St. Edmonds (Mr. Ruffley), does she recall the Chancellor saying that the Maastricht criteria should be applied without fudging? She will be aware that one of the treaty criteria is participation for two years in the exchange rate mechanism without devaluing against
Mrs. Liddell:
The right hon. Gentleman asks an intriguing question. The criterion is exchange rate stability. The House will be interested to learn from him, however, what action the Conservative party is prepared to take, and which faction of the Conservative party has the ascendancy this afternoon as distinct from this morning.
Mr. Lilley:
The Economic Secretary might consult the treaty to learn that the criterion is participation in
Mrs. Liddell:
I will answer the question quite clearly so that the right hon. Gentleman can understand it: the issue is exchange rate stability. I wonder whether he would care to answer my question about the position of the Tory party today.
"the Exchange Rate Mechanism . . . for at least two years, without devaluing against the currency of any other member state."
She has not answered the question why she believes that a two-year apprenticeship in the exchange rate mechanism would be damaging for Britain, whereas a lifelong membership of the more onerous single currency will automatically be in our interests.
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