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Mr. Bercow: Will the right hon. Lady give way?

Mrs. Beckett: I do not recall the hon. Gentleman being one of those who spoke up, so, if he will forgive me, I shall get on with my speech.

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It is only fair to recall that many people, whether in manufacturing or elsewhere in the economy, recognise that a range of factors contribute to present circumstances. Those factors include the unaddressed inflationary pressures that we inherited from the Conservatives. In the context of the debate, it is important not to forget that, from December 1996, the Bank of England pressed the then Chancellor to raise interest rates and thus ease the inflationary pressures that the Bank saw building up. There is also the Asian crisis, with its inevitable impact on growth and exports; and the anxieties about the run-up to the euro.

All those factors contribute to the pressure on sterling; all those pressures contribute to the circumstances in which manufacturing industry finds itself; but none of them is the "creation", to use the word in the Opposition motion, of the Labour Government. The fact that what is happening to sterling is, in all likelihood, the result of a complex interaction of those factors means that dealing with that problem is not, as so many Opposition Members try to pretend, simply a matter of taking back interest rate control from the Bank of England or, indeed, of lowering interest rates. It is possible that if interest rates were lowered without regard for the consequences for inflation, as some Opposition Members appear to be demanding, we would increase inflationary pressure without necessarily achieving a lower exchange rate.

Mrs. Dunwoody: Might not that be a clear indication that we should not even contemplate entering the euro until we are sure that it is in our interests?

Mrs. Beckett: My hon. Friend will be aware that that is the Government's policy. We take the view that it is in Britain's interests to contribute, in so far as we can--as we sought to do during our presidency of the European Union--to a stable development of economic and monetary union and the euro, in case that is one of the factors that are putting pressure on sterling. However, we believe that, if the Government decided to recommend entry, which we would do only if we believed that it was in Britain's national interest, that decision should be put to Parliament and the British people.

Mr. Bercow: Is the right hon. Lady aware of the statement by the president of the Bundesbank, Mr. Tietmeyer, that, within a single European currency,


Does the right hon. Lady agree with that statement, which is obviously important because of its implications for manufacturing industry? If she thinks that it might be vindicated, would the cession of sovereignty over direct taxation constitute for her a constitutional bar to Britain entering the European single currency? Yes or no?

Mrs. Beckett: It is rather silly to ask such a question and then ask, "Yes or no?" I was not aware of the statement that the hon. Gentleman attributes to the president of the Bundesbank, but if that is the view that he has expressed, I strongly, indeed violently, disagree. What is more, I suspect that the German Government disagree. That is their problem, not ours.

Mr. Tam Dalyell (Linlithgow): My question is pursuant to that asked by my hon. Friend the Member

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for Crewe and Nantwich (Mrs. Dunwoody), with whom I usually agree about everything in life. Does my right hon. Friend accept that, as we represent Motorola and the paper industry, which are desperate to enter a single currency, there are two views in the party on that subject?

Mrs. Dunwoody: At the very least.

Mrs. Beckett: My hon. Friend anticipates me. I was about to say that there are at least two views. I understand that there are particular industries where there is urgent pressure and a great desire for Britain to be an early participant in the euro and that, in other industries, the pressure exists without the same force. I can only repeat to my hon. Friend the Member for Linlithgow (Mr. Dalyell) what I said to my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody), which is that the Government believe that the decision should be made by Parliament and the British people, only when it is believed to be in Britain's interests to enter a developing euro.

Dr. Ladyman: Does my right hon. Friend agree that, whether or not we ultimately enter the European currency, our motivation for economic policy should be the same? Our need for a stable competitive currency rate and stable low interest and inflation rates will be identical, whether or not we intend ultimately to enter the euro.

Mrs. Beckett: My hon. Friend is entirely right--those factors are in the interests of the British economy, and they are policies that the Government seek sustainably to pursue.

Before we embarked on an interesting diversion, I was talking about the possibility of lower interest rates and how they might impinge on sterling. Before I leave that point, it is right to remind the House that two thirds of the increase in sterling against the deutschmark occurred before the general election. That means that it was in no way the responsibility of this Government, and that it took place before interest rates had begun their recent rise, so it calls into question the suggestion that present exchange rates are fuelled solely by interest rate levels. The lesson, under Governments of either party, of politically driven exchange rate interventions is that it can have an effect, but that it is not necessarily or solely the one wanted or imagined.

The right hon. Member for Wokingham said that the problem was the pressure on savings, and talked as though an unprecedented decline in savings was exacerbating the problem. As I am sure he knows, that is nonsense. The savings ratio is running at some 9 per cent., which is near its long-run average and nowhere near the levels to which it fell under the Government of which the right hon. Gentleman was a member in 1988, when savings fell to 6 per cent. That is not relevant to the difficulties that some sections of manufacturing--it is not universal--may be facing.

The Government are not prepared to run risks or play games with the economy. We put control of interest rates in the hands of the Bank of England to signal that. Little could be more damaging to confidence than to reverse that policy, as some Conservative Members appear to demand.

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Our extensive consultations with the business community before the election and since have produced a short but heartfelt list of what it feels is needed from the Government. That list is headed by a demand for stability in the management of economic policy, which the business community believes will contribute to economic stability. It also calls for consistency in overall policy making and for investment in skills, transport infrastructure and our science and engineering base. All that was heard, and none of it was heeded, by the Conservative party when in government.

However, in the 15 months during which this Government have been in power, not only the interest rate decision but the decision to set a sound framework for prudent, consistent and long-term reform of public expenditure have laid the basis for the policy stability that the business community seeks. The evidence that that is the right course lies in the fact that long-term interest rates today stand at 5.75 per cent.--the lowest level for 33 years.

Sir Peter Tapsell (Louth and Horncastle): I am genuinely puzzled by the fact that Ministers repeatedly point to historically relatively low long-term interest rates as a sign of optimism, because most commentators regard them as a sign of anxiety that we are heading towards a recession. That is why long-term interest rates in Japan are only 2.5 per cent. and why, in the past six weeks, the yield from the long-term bond in America has fallen by 0.5 per cent., reflecting fears that the Asian crisis will have a knock-on effect. Low long-term interest rates are what happens when the markets think that a recession is coming.

Mrs. Beckett: I hear what the hon. Gentleman says, but I am not prepared to get into a great debate with him about the indications of low or high long-term interest rates. It is strange for him to complain that low interest rates are not a good sign, given that the motion tabled by the Conservative party complains about the threat to manufacturing as a result of the level of sterling, which, it claims, results from the level of interest rates.

Sir Peter Tapsell: I am talking about long-term interest rates.

Mrs. Beckett: Yes, I know.

As I was saying, the windfall tax, which the Conservative party opposed, has funded the start of the new deal for employment. The legislative changes being pushed through by my right hon. Friend the Secretary of State for Education and Employment and his team should foster not just more investment but higher standards from the nursery years through to higher education, which is the push to quality that Britain needs.

We are on the brink of an announcement about the outcome of the comprehensive spending review--the establishment of a three-year framework within which the Government will begin to deal with the backlog of under-investment and decay not only in education or the transport infrastructure, but in our science and engineering base. In each of those areas, an innovative approach to public-private partnership lays the foundation for modernisation and reform, which should deliver not only increased resources but better value for the investment made.

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Earlier today, I announced a step change in science funding, to meet the challenge of a potential step change in scientific discovery and understanding. We believe that the human genome project has the capacity to bring about another giant change, not only in understanding, but in the implications for the quality of life, for our approach to health care and for industrial exploitation, which can flow from using the knowledge that that project will deliver.

Today, we have announced a £1.1 billion package secured over the next three years. There will be a £600 million fund for university laboratories, equipment and infrastructure, funded equally by Government and the Wellcome trust, £400 million in capital and current costs for research councils' new project funding, and a further £100 million from Wellcome towards the cost of a new high-intensity X-ray machine, not only to help keep the United Kingdom at the forefront of human genome research, but to contribute to many other research projects.

I do not suggest for a second that that money will ease the day-to-day problems that confront manufacturing companies in Britain, but it is a hugely important signal that, under the present Government, we shall not neglect that seedcorn investment on which, ultimately, our whole economy--and manufacturing in particular--depends.


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