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Mr. Chidgey: The hon. Gentleman may be interested to hear that I was, I believe, employed in the construction industry at the time to which he refers. I won a by-election, which, as he will know, is not a recipe for continued employment in this place. None the less, I remember saying when I won my seat in Parliament, during that recession, that as a by-election winner I was glad to have a safer job than before. That made the point to my colleagues in the construction industry.
The last time that the CBI quarterly industrial trends survey was as negative as it is now was in 1981, when manufacturing output was falling at 5 per cent. per annum.
I am not trying to talk down British industry. I am proud of what my colleagues in industry have managed to achieve over the centuries and will continue to achieve in the future. However, if we do not recognise the problem we cannot start to provide solutions.
The net result of the slump, and of the Government's failure to act decisively to stabilise the economy and to improve the climate for business, is the forecast of minus 1.2 per cent. growth. If that trend goes further, we could see 400,000 job losses in the next two years.
I would not wish that on any Government, let alone on the individuals who will suffer from it--but that is what we face, and that prospect is what we must address if we are to improve conditions for British industry. Manufacturing industry is now in a life-and-death struggle. Over the past 20 years, employment in manufacturing industry has dropped from 7 million to about 4 million. If that goes on, as the forecast trend suggests, it will drop to 3.5 million in two years.
The Government have to ask themselves how close, if that happens, Britain's manufacturing industry will be to falling below the critical mass that we need to maintain ourselves as an international manufacturing base. How long would it be before Britain no longer had the manufacturing capacity, the resources or the skills to compete with the major players in the global market?
It is a long time since this country was a major manufacturer of machine tools. I am sure that other hon. Members too, get frustrated when they go round factories and see that every machine tool is manufactured in Germany, Switzerland or anywhere else but in Great Britain. We led the world in industrialisation.
Mr. Tim Boswell (Daventry)
rose--
Mr. Chidgey:
May I finish my point?
I could name a host of manufacturing products which have disappeared from the list of products made in this country. Wind farms are one of the greatest ideas for capturing energy resources and developing sustainable energy, yet people who try to buy equipment to build a wind farm in this country find that it is all made elsewhere. We do not even manufacture windmills to augment our energy resources.
Mr. Boswell:
The hon. Gentleman is making a characteristically thoughtful speech. Does he acknowledge that at least half the machine tool use in this country is still represented by home production, and that major machine tool manufacturers such as Germany and Japan also have a lively import trade because there is much exchange of technology and specialisation in that sector?
Mr. Chidgey:
I am heartened to hear that; at least all is not lost. My concern, however, is that we are on the verge of losing all that.
The Secretary of State was quick to follow the Government line of blaming the global economic downturn for the problems that our manufacturing industry faces. The collapse of the Asian markets was mentioned, and the right hon. Gentleman was quick to blame low productivity and poor management for our problems.
The reality is that the collapse of the economies of south-east Asia, Latin America and Russia has had little effect on UK exports. We export more to the Netherlands than we do to south-east Asia, Latin America and Russia put together. In reality, UK manufacturing export markets are predicted to grow. Tables A2 and A5 of the Chancellor's pre-Budget report show that, over the next four years, UK manufacturing export markets should grow at an average rate of 7 per cent. a year. That is our export markets--not the global economy. My concern is that Britain's exports to those markets will grow by only 4 per cent. Why are we taking up only half the opportunities that exist in those growing markets? I ask the Secretary of State to accept the Chancellor's figures.
The reason why we are not capturing those markets or penetrating them as much as we should is the overvalued pound. That is an old cry, and Government Back Benchers will try to drown out that point of view. However, the Secretary of State must agree with his Treasury colleagues that since the Government came into office, sterling has lost more than 10 per cent. of its competitiveness. That has had a direct bearing on how well we can succeed in our export markets for manufactured goods.
Will the Secretary of State accept the acknowledgement in the pre-Budget report that, over the next year or so, the effects of the pound's overvaluation will work its way through into our manufacturing economy in the form of lost orders and lost jobs? Both the high pound and high interest rates are a direct result of the Government's failure to rebalance economic policy.
While businesses are calling for a clear statement on where the Government stand on the single currency, the Government seem content to kick the matter into the long grass--to use a phrase which has become fairly current recently. [Interruption.] Government Back Benchers may criticise, but this matter is very important to manufacturing industry. Businesses need clear guidelines.
The Cabinet seem to be engaged in a curious dance around the issue. The Secretary of State is reported to have said, "When we join the single currency." Then, quick as a flash, the Government enforcer said, "If we join the single currency." Some Ministers say "in", others say "out". It is, "In, out, in, out, shake it all about"--new Labour, new hokey-cokey.
Industry needs a decision. Firms want clear guidance. It is not good enough to stand on the sidelines, watching the game, saying, "If the play is going our way, we might join in." By that time, the game will have moved on, and we will be left for ever on the sidelines in the reserve team. That is not good enough. If the Government are serious about helping manufacturing industry overcome the approaching crisis, they must make a statement of intent. They must set out a clear programme for a referendum and clear proposals for what they intend to do about the joining date for the single currency.
Even if the Government made a statement of intent--and that would be weak enough--it is generally accepted that the process would still take three years. No one in British industry will start to make the preparations and investment that will be needed unless they have clear guidelines.
The Government need not only to try to avert the immediate crisis facing manufacturing industry--and the forecast of hundreds of thousands of job losses--but to address long-term practices. I was interested to hear the remarks of the Secretary of State about how he intends to set up some initiatives to try to improve the skills base of the country, and his response to the suggestions in the McKinsey report. Chapter 3 of the pre-Budget report, on productivity, sets out the problems clearly, and I agree with most of the analysis. However, I find trouble with the proposed solutions. The Government show clear signs of tinkering around the edges and covering the whole lot up with a large dollop of waffle. I want some clear ideas.
The Government are proposing tax breaks for research and development. The Secretary of State may, however, be aware that the Institute of Fiscal Studies has said that such broad tax initiatives are rarely, if ever, able to achieve their objectives. Does the Secretary of State agree that targeting assistance to small, start-up firms--the sort of firms that he was describing--would be far more effective than a broad-brush approach across the whole sector?
Does the Secretary of State agree that the proposed broad-brush tax breaks are a drop in the ocean compared to the extra taxes imposed on business? I do not wish to follow the Conservative party's line of claiming that every measure to try to improve conditions in the workplace should by definition be abandoned. The Secretary of State knows that I do not believe that. Let us be fair and honest, however. When we talk about taxes and tax relief on business, the right hon. Gentleman should know that the money that business is saving through cuts in corporation tax amounts to only about half the additional direct taxes that the Government have placed on business since they have been in office.
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