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Mr. Bercow: Perhaps the hon. Gentleman will answer the question that the President of the Board of Trade ducked a few moments ago. If Dr. Tietmeyer, the president of the Bundesbank, proves to be correct, and entering the single European currency entails the cession of sovereignty over direct taxation policies, would that, for the hon. Gentleman and his party, represent a constitutional bar to joining the single currency?

Mr. Chidgey: It is the same question, and the same answer. That is a matter for the Germans to worry about. Clearly it is not the policy that we are pursuing.

Before I develop the policies for which we have long argued, I shall define the disease that is gnawing at the heart and vitals of British industry--the disease that the Conservatives failed to diagnose, let alone cure. It is widespread. It afflicts much of the British manufacturing sector. Recent announcements by some of our major

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manufacturers--Rover and Vauxhall--have merely served to highlight it. It is important to reflect on the views that they put forward in the press recently.

Both companies said that they were looking to move their components subcontracting from the United Kingdom to continental suppliers, because productivity is not high enough in the UK. Subcontracting is a misnomer, because, as many hon. Members who represent manufacturing- based constituencies know, the subcontracting part of the motor industry is the major part. Press comment that our major manufacturers are to seek supplies elsewhere has a fundamental effect on the economy of those towns and those industries.

Vauxhall and Rover are seeking to movetheir subcontracting to continental suppliers because productivity is not high enough in the United Kingdom--compared to that of German manufacturers, who have been prepared to take a long-term view of investment in tools and machinery. British firms still seem to be more inclined to rest on their laurels in economic good times and not invest in the future. They will lose if they do not take radical action now.

Dr. Ladyman: Will the hon. Gentleman give way?

Mr. Chidgey: I shall continue, if I may. The fewer interventions there are, the more opportunities there will be for other hon. Members to speak. Hon. Members should take that on board, as this is a short debate.

Even more worrying, at the time of its announcement and since, Vauxhall has made it clear that the high value of the pound was only one element in the package. Low productivity, which is the result of industrial short-termism and unwillingness to invest, was a more serious issue. For a Government who claim that the punishingly high value of the pound and high interest rates are a result of their preparedness to pursue a long-term anti-inflationary policy, the charge of short-termism in industry is serious; for a Government who have consistently set out a vision of developing a high-skill, high-wage economy--which I agree with, and which my hon. Friends support--losing valuable jobs to continental firms is hardly an auspicious start.

The culture in Britain has to change towards investment, or more jobs will be lost and more industries will join those that were killed off by previous Conservative Governments who sat on the Treasury Bench for those long years. That change requires a long-term strategy. If Ministers were listening to what I am saying, they might reply that they have been in office for only a year and have 18 years of Tory misrule to put right. I am not blaming the Government for the culture that they have inherited, but it is clearly their responsibility to introduce policies to change it. I listened with great interest to the remarks of the President of the Board of Trade. They were encouraging, but far more needs to be done if we are to put our manufacturing industry back on a sound base.

Liberal Democrat Members have long argued that making Britain competitive is not about economic dumbing down and competing on price in world markets. We cannot do that, and neither should we want to. We share the Government's view that we should aim to

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compete on quality, with the best in the world. For that reason, I look forward to the White Paper on competitiveness. I hope that it will propose realistic solutions to some of the most ingrained problems, which the Government have been elected to tackle.

It is perhaps symbolic that the Conservative Opposition decided to initiate the debate only two days before the announcement of the comprehensive spending review. The President of the Board of Trade gave us a little insight by putting her hand into the sweetie jar and pulling out a few interesting issues for us to suck on, but there is much more that we need to know. We can but hope that this long-awaited review will include a significant shift towards long-term planning in the industrial sector. The Liberal Democrats will judge the review on how much increased investment in education and training is provided. I know the battles that go on.

Mr. Brian Cotter (Weston-super-Mare): Does my hon. Friend agree that the Engineering Employers Federation recently announced that engineers were having severe problems in meeting--and, indeed, quoting for--contracts, because of the lack of skilled personnel?

Mr. Chidgey: My hon. Friend makes a telling point. Lack of skills is a major problem in industry, and I shall set out what we need to do if we are to give industry opportunities to compete effectively.

There must be much greater investment in education and training. The minimum must be the right to two days a week in education or training for everyone aged between 16 and 18, and there must be an entitlement for everyone to have a period in education or retraining to reskill, at some stage in their lives: as industry develops, technology changes and skill requirements change, so we must change our work force to fit those requirements and to ensure that we do not have another skills shortage looming over us all the time.

We need to expand our higher and further education system, and we must repair the damage that was done under the previous Administration, but that means investment in quality education, not paying lip service to it by increasing numbers for inferior courses. We need a clear commitment to invest in training. If we achieved that, we could start to tackle the skills shortage and do more to calm wage inflation than would any proposal from the Conservative Opposition. Although taking the initiative on training would help to ameliorate upward pressures on wage inflation in the medium term, the Government must also act to remove some of the short-term pressure for further rises in interest rates.

There has been an interesting discussion between Labour and Conservative Members about how important or unimportant it might be for us to join the European single currency; however, let us consider the facts and what is happening in manufacturing industry. Hon. Members really must do something: the most recent survey by the Engineering Employers Federation suggested that, in the second quarter, the balance of engineering output declined to minus 7 per cent., the first time in five years that a negative has been recorded. That is the sharpest adverse quarter-on-quarter change ever recorded. Over the same period, the balance of export orders fell for the sixth consecutive quarter, to minus 25 per cent. The balance of domestic orders fell from plus

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11 per cent. in the previous quarter to minus 12 per cent. this quarter. At the same time, employment in the sector fell by 12,000, and capital spending plans are weakening sharply, with a positive balance of only 4 per cent.

To add more information and to emphasise the point, the Institute of Directors business opinion survey for June showed that weak overseas markets are now considered by 42 per cent. of manufacturing industry to be a factor in the limiting of output, and 57 per cent. of directors cited a lack of orders and sales as the main problem. Optimism in manufacturing industry is running at minus 8 per cent., compared to plus 42 per cent. last time.

There are short-term actions that the Government can take to remove some of the pressure for further rises in interest rates. To reinforce the point, the principal action would be to dampen inflation by taxation of consumer spending to release investment for education and training.

The Conservative Opposition's motion raises concerns about industrial unrest and employee relations policy. Not only did the previous Government have some of the highest ever interest rates and inflation rates; towards the end of their term, as the President of the Board of Trade said, the trend in stoppages of work was spiralling upwards. According to Government figures, produced by the House of Commons Library, from the July labour market trends survey, 278,000 working days were lost in 1994, 415,000 were lost in 1995 and 1.3 million were lost in 1996. That compares to 235,000 days in 1997 and only 72,000 in the first quarter of this year. We know where the fault and the blame should lie.

Liberal Democrat Members believe in a constructive and engaged approach to industrial relations--from employers and employees--overseen by a Government without dogmatic attraction to one side or the other. I shall leave it to Labour Members to decide whether the Government have a dogmatic position or dogmatic attraction to one side or the other. Perhaps we shall find out in due time. Nevertheless, the Liberal Democrats broadly welcome the White Paper "Fairness at Work". We believe that the proposals offer a start to rectifying some of the wrongs done to industrial relations policy under the previous Administration. The White Paper must be developed, and we intend to focus on extending the Government's as yet unrealised promise of industrial democracy to all those at work in this country.

Above all, the Government must tackle the crisis in manufacturing industry. They must give a clear commitment to the United Kingdom's entry into economic and monetary union and act to dampen down consumer spending. They must also release resources from their multi-billion pound war chest to provide the investment that is essential to closing the skills gap and to enabling industry to produce the best and compete on quality in the global marketplace.


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