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Mr. Deputy Speaker: Order. The right hon. and learned Gentleman's speech is time limited.
5.31 pm
Mr. Richard Burden (Birmingham, Northfield): In the light of recent developments in the motor industry, especially at Longbridge and Rover, it is important that I make a brief contribution. I am pleased that I have been
called several times to speak on those matters, but before I make some general comments on the manufacturing issues that arise from them, I must pay tribute to Labour Members with constituencies in the west midlands. They have participated greatly throughout those discussions, they have been tremendously active and they have given enormous support.I also pay tribute to the right hon. Member for Sutton Coldfield (Sir N. Fowler). I hope that that does not embarrass him too much, but he is a member of the Rover taskforce and has played a positive and constructive role in it. It is important to acknowledge that his approach has moved beyond the petty politics in which Opposition Front Benchers sometimes indulge on those issues, which have often been talked about as Longbridge matters. They are not; they have affected all Rover plants, whether at Solihull, Cowley in Oxford, Swindon or the research and development centre at Gaydon. It is important to place that on record because much has been said about what will happen at Longbridge with Phoenix, but there is a guarantee that staffing levels at Cowley--on which the Chief Secretary to the Treasury, my right hon. Friend the Member for Oxford, East (Mr. Smith), has been active--will be maintained when production of the Rover 75 moves from Oxford to Longbridge.
I shall comment on three matters that arise from the Rover experience. The first is partnership. The hon. Member for Tiverton and Honiton (Mrs. Browning) said much about burdens on business and excessive regulation. My right hon. Friend the Secretary of State made the good point that when the Conservatives talk about that, they are referring to people's rights at work. He referred to parental leave in particular. I want to mention another set of rights that are especially pertinent to the Rover saga, because the hon. Lady criticised the European works council directive as an excessive burden on business. In fact, in this country, even under the improvements that the Government have introduced, it is simply easier not to consult workers about their future; sacking them is often easier than in other parts of Europe. The Conservative approach would weaken those protections still further.
The extent to which the trade unions in the Rover saga were able to exert any leverage over the past few weeks related to the improvements that the Government made to the TUPE regulations, which would be weakened by the Conservatives. We must be aware that there will be a greater chance that problems similar to those at Rover will arise if the Conservatives get their way on employee protection.
It is important to pay tribute to the trade unions in the Rover saga for playing an exceptional and positive partnership role. They have been actively involved in the Phoenix project, and I am very proud that it will lead to one of the biggest ever employee stakeholdings in a major company in this country. That is a positive step forward and Opposition Members should learn the lesson that consultation--the involvement of the work force--is not the foe of business; it is very often its friend.
The second issue is that it is sometimes suggested that there is a conflict between our traditional manufacturing industries and the industries we look to for the future. I think that the Rover saga has shown that there is not, and cannot be, an "either/or" in a manufacturing country such as the United Kingdom. That is why it was right to stand by Rover and its employees, and right for the
Government to help to facilitate the deal that was finally reached with Phoenix; but it was also right to establish a taskforce with the aim of diversifying and modernising the regional economy.The taskforce produced clear and specific recommendations. Even in the area surrounding the Longbridge plant, it was suggested that it would be possible to create a high-technology corridor that would not be separate from the motor or automotive industry, but would build on its strengths and also build bridges to the high-tech industries of the future. Yesterday's announcement about Marconi is a further example of that forward-looking approach.
Thirdly, I want to say something about the exchange rate and the role of our banking system. Does anyone who speaks to manufacturing exporters, particularly those who wish to export to Europe, know about the problems caused by the relative strengths of the pound and the euro? Real damage is being inflicted. Although some firms--often they are the smaller firms--do all that we ask of them in terms of raising productivity and improving procedures, if productivity increases are then wiped out by fluctuations in the exchange rate those firms will still face problems, however forward looking and productive they may be.
There are no easy answers. Certainly, the answer does not lie in encouraging the idea that the way out is ruling out closer co-operation with the euro, thereby creating the impression that sterling can be the ultimate hedge currency of the future. That will make the situation worse, not better. We must, however, deal with the problem involving the banks.
Increasingly, multinational companies insist that their suppliers in the motor industry and elsewhere enter into contracts involving euros, and do their business in euros. That is understandable, and it accords with the way in which such companies work. Incidentally, it is also why much of what is said by the Opposition is so irrelevant to their needs. Is it right, however, for the risks associated with such transactions to fall, as they all too often do, on the manufacturers involved--for instance, components firms?
Perhaps there is a lesson for the banks. Perhaps they should consider operating in euros when negotiating with manufacturers. If we are looking to the strength of our manufacturing and components sectors, perhaps the risks can be shared. If they are not shared, there will be consequences not just for small firms, but for our manufacturing sector as a whole--and that means consequences for our economy as a whole, which will affect our financial sector as well as our manufacturing sector.
I hope that the banks will think about how they can play a more proactive role in helping firms through the problems that they are experiencing with the exchange rate. I think that if the approach is right, some of the more forward-looking financial institutions may respond. The Rover taskforce has already produced forward-looking ideas about how banks and financial institutions could involve themselves with the problems--hopefully, they will not be so great now that Phoenix is taking over--that are likely to occur in the components sector following massive shocks to its orders as a result of the winding down of Rover orders. I think that we can build on the
work produced by the taskforce partnership--facilitated and encouraged by the Government--and apply it more generally.For years this country had a bank that was not independent, while Germany had a bank that was independent. Let us consider the way in which the two institutions operated and their relationships with regions and industry. The independent German Bundesbank was much more inter-dependent with the needs of industry than our non-independent Bank. We now have an independent Bank; giving it independence was exactly the right thing to do. We need to talk with the Bank about how its structure can link much more naturally and exactly with our industrial regions because they are inter-dependent in economic terms. Structurally, changes could be made to allow that to happen.
I do not want to get to a stage where there are problems--perhaps such as those at Rover, or other problems--and we need to go to the banks saying, "How can you help?" I want the institutions and culture to be in place, with the banks coming forward and saying, "How can we help? It is our problem. We know about it and we are involved." We need to think more creatively about how to reform our banking system to reflect that.
5.40 pm
Mr. Matthew Taylor (Truro and St. Austell): I came to the debate at only a few minutes' notice because the wife of my hon. Friend the Member for Twickenham (Dr. Cable), who speaks on trade and industry matters, has been taken ill. He had to go to hospital with her immediately before the start of the debate. If my speech is a little rough around the edges--if no less passionate for all that--I hope that the House will excuse me and understand my hon. Friend's situation. Later, I have to go to the Confederation of British Industry. To make that appointment and to do a couple of other things, I may need to leave before the end of the debate. I hope that the House will excuse me in the circumstances.
As Conservative Front Benchers have argued, a wide range of issues is undoubtedly hitting industry at the moment. Some of them relate to burdens that the Government have introduced.
Some of those burdens, as the Secretary of State argued, are legitimate. Only a handful of businesses sought to avoid them in the past, but they were wrong to do so. It is right to seek to ensure that people are paid at least a floor basic minimum wage and floor basic holiday entitlements. Although they are undoubtedly burdens, most businesses always took them on. If all businesses have to take them on, responsible employers will feel that all businesses will fight on a far fairer basis.
There are burdens that should not have been imposed. We argued that paying the working families tax credit through employers and payrolls was a burden that was not right for business. We said that the principle that the Government were trying to extend was right, but not the mechanism. We note that the Chancellor has--almost before the thing is up and running--already announced that that process will end. He has acknowledged the problem.
As the right hon. and learned Member for Rushcliffe (Mr. Clarke) has said, the extraordinary thing about the debate is that those on the Front Benches skirt around--or avoid altogether in the case of the Conservative
Front-Bench team--the issue that is really hurting manufacturing. It is the case, as Ministers argue, that much of the economy in Britain is doing well; there is no doubt about that. It has been doing well for some time and it continues to do so, but the sectors that are being hit are those that rely on a competitive exchange rate: those involved in manufacturing and in basic resources.Those sectors include large industries such as the English china clay industry in my constituency. It is in a highly competitive environment, selling a product that is matched by others throughout the world, although perhaps not quite at the same high quality. However, the raw material is sold by many. Price is absolute for such industries, yet they have been hit by the exchange rate change.
Small businesses in my constituency, such as those owned by Svedala, which manufactures pumping equipment, are also being hit. Jobs are being lost. The problem involves Sweden and South Africa, too, to take examples outside the euro. It is not simply a euro exchange rate problem. Parent companies are transferring jobs out because they simply cannot make it pay to manufacture in this country, although Svedala, the parent company, acknowledges that, in Charlestown, it has the highest-quality plant and comparable, if not better, rates of productivity.
Those are not the issues. The issue is the sterling exchange rate, yet next to nothing is said on that by Conservative Front Benchers because they have no solution to offer. They have ruled out the one thing that might make a difference in the long run, which is to take away most of the problems for most of our trade, which are to do with exchange rate fluctuation, by looking towards the euro.
Conservative Front Benchers have also ruled out even the types of tools used by previous Chancellors of the Exchequer to take on the exchange rate, because they have a bizarre fantasy of being able to increase expenditure while cutting taxes. Such a combination would of course only help to make the problem worse--by running up huge deficits and further stoking the economy. Eventually, such a policy would lead to a crunch, when it became apparent that the figures did not add up.
Government Front Benchers also have not addressed the entry issue, because they will not deal with the one measurable, hard condition for entry--a competitive exchange rate. They are afraid that they might get caught out on the euro debate by mentioning measurable criteria, which they think could eventually prevent the Chancellor from announcing that all is well and that we should join. Ministers will go to any length--at least on this side of a general election--to avoid that debate. However, the cost of avoiding it is being paid in the jobs that are now haemorrhaging from manufacturing industry.
Not only jobs are being lost; whole businesses, and parts of businesses, are going bust. They will not return, as we know only too well from the two previous occasions--in the early 1980s, and in the early 1990s--when high exchange rates knocked out some of our businesses. Only the situation in the very early 1980s was at all comparable to the present one, and the then Conservative Government's response to it was precisely
the same as the current Labour Administration's response now--to say, "We cannot buck the markets. The markets are king, and we cannot take them on."Eventually, however, the early-1980s currency situation was reversed, as always happens in speculative markets. Sentiment changed and--hallelujah!--the pound decreased in value. The only problem was that businesses were permanently lost, as were investment opportunities and an opportunity to take an industrial lead in many sectors. Hon. Members have already mentioned some of the businesses that simply no longer operate in the United Kingdom.
Some people proudly wear on their lapel a little gold pound badge. The irony is that they are the ones who are arguing that the high pound demonstrates sterling's success and proves that we should never join the euro. Previously, precisely the same people argued that we had to leave the exchange rate mechanism, which locked the pound into a fixed relationship with permanently high currencies. Nevertheless, along came white Wednesday and--hallelujah!--the pound fell.
The truth is that those who adopt the little gold lapel badge want to lock us into being the tail on the dog, endlessly wagging one way and then the other. Nevertheless, economically, we are attached to the dog. We cannot escape the fact that, particularly for manufacturing industry, Europe is our market; that every exchange rate fluctuation will hit our industries; or that such fluctuations will lead to boom followed by bust followed by boom. Those people cannot acknowledge that avoiding such fluctuations and cycles is the fundamental reason for seeking to be within the shelter of the euro. If one has to be attached to the dog, it is far better to be in the brain than knocking about as part of the tail.
We also hear both Conservative and Government Front Benchers argue that sterling's strength is due to the euro, not to sterling. They say that sterling's exchange rate demonstrates its strength, and that, if anyone needs to sort out their house, it is those who are in the eurozone. That may or may not be true. However, a few years ago, when the Federal Reserve chairman was approached by European countries complaining about the dollar's weakness and the consequent damaging effects on the European economy, he said, "It may be our dollar, but it's your problem." There is a precise parallel there in sterling's high value.
The Engineering Employers Federation spells out the situation very well in its press release, which states:
- Although output has increased, market share continues to be lost.
Export orders continued to fall for the thirteenth consecutive quarter. Export margins are at 25 year lows and imports continue to gain ground . . . The latest official figures show manufacturing investment was down 13 per cent. in 1999 quarter four on a year ago. The strength of sterling and the associated squeeze on margins and cash flow is forcing firms to adopt a short-term view . . . Productivity rising strongly in both manufacturing . . . and engineering . . . but this is being achieved entirely by cutting employment rather than through increased investment.
Manufacturing is not the only sector with problems. Farming, which we hear a lot about from the Conservative Front Bench, has been hit for six by exchange rate fluctuations, as has foreign tourism, which is a key industry in many Conservative seats, as in many Liberal Democrat seats. As the right hon. and learned Member for Rushcliffe has already pointed out, this is not simply an issue of the eurozone. The value of sterling has appreciated against all but four of the UK's top 30 trading partners. Switzerland, which is not in the euro, but is linked to Europe, is not suffering the same problems. South Korea, Australia, Malaysia and South Africa are all countries not locked into the euro, but sterling is appreciating against them. We are being hit for six in our markets around the world.
The consequences are spelled out by people with the highest levels of experience on all sides.
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