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The Economic Secretary to the Treasury (Miss Melanie Johnson): I was interested to hear that the Tories left us such a wonderful economic inheritance. Did they? Let us examine the appalling economic inheritance that we actually received from the previous Tory Government.
The Conservatives left Britain's record of economic stability among the worst of the G7 countries. Since 1979, Britain had suffered the two deepest and longest recessions since the war, as well as one of the largest booms. Among the G7 countries, only Canada experienced more growth instability during those 18 years than the UK under the Tories.
In the late 1980s and early 1990s, 1 million jobs were lost in manufacturing and 1 million businesses went under. A total of 2 million jobs disappeared. Interest rates were more than 10 per cent. for four years.
What golden legacy led to Black Wednesday in 1992? On that day, interest rates were 10 per cent. when we started work; 12 per cent. by 11 o'clock; and by 3 pm, they were set to be 15 per cent. That is the record of the Tory Government, who were led by the Black Wednesday horror team of the Chancellor--now Lord Lamont--and the then Chief Secretary to the Treasury, the present shadow Chancellor, none other than the right hon. Member for Kensington and Chelsea (Mr. Portillo).
Poor growth and productivity performance were--at least partly--reflected in under-investment. In every year since 1960, the UK invested a lower share of gross domestic product than the OECD average. During the last full international economic cycle from 1982 to 1993, the UK under the Tories invested a lower share of GDP than any G7 country.
The Labour Government inherited a history of large budget deficits and a steeply rising burden of public debt, while public investment had been neglected. We have no lessons to learn from the Opposition's record of failure and mismanagement--none whatever.
What have the Government done? Let us consider our record. [Interruption.] For the third year running, inflation is in line with our target and is at a historically low level. The economy is forecast to grow steadily--by between 2.75 and 3.25 per cent. this year and between 2.25 and 2.75 per cent. next year and the year after. At one time, long-term interest rates were 2 per cent. or more above those of Germany. They are now level with the German rate--showing that people have confidence in a low-inflation future for Britain. That is a platform from which businesses can plan for the longer term with greater confidence.
I pay tribute to my hon. Friend the Member for Birmingham, Northfield (Mr. Burden) for his work towards the long-term future of Longbridge. He referred to the role of the banks. I emphasise that the Bank of England is keen to ensure that its existing network of 7,000 business contacts relays regional information back to it as part of the process for setting interest rates and making other decisions.
We cut borrowing by £40 billion during our first three years in office. We are on course to meet the two strict fiscal rules--[Interruption.] In the Budget, we decided to lock in greater fiscal stability next year and the year after than we had promised in last year's Budget and in the
pre-Budget Report. Because of the tough decisions we took to cut the deficit during our first two years and lower longer-term interest rates, debt interest payments--
Mr. Deputy Speaker (Mr. Michael J. Martin): Order. We cannot have these conversations between hon. Members while the Minister is speaking--[Hon. Members: "Over there."] Order. I know where the noise is coming from.
Miss Johnson: Thank you, Mr. Deputy Speaker. One can but conclude that, although the Opposition did not know the answers when they were in government and clearly do not know them now, they do not want to hear about the policies that the Government are successfully pursuing.
As a result of the tough decisions we took to cut the deficit, debt interest payments will be £4 billion a year lower, so we shall be able to repay debt. Last year, we repaid £3 billion; this year, it will be £12 billion; next year, it will be £6 billion and £5 billion the year after that. That is indeed the third way in operation.
Let us consider the previous Government's record on manufacturing output and employment. Between 1979 and 1997, manufacturing employment fell by more than 2.5 million. In the early 1990s, when interest rates rose to 15 per cent. for a whole year, manufacturing output fell by more than 7 per cent; manufacturing investment fell by 28 per cent.; and more than 1 million manufacturing jobs were lost.
Since the 1997 general election, manufacturing employment has fallen by about 160,000 altogether. As my right hon. Friend the Secretary of State said in his opening remarks, we should compare that figure with the yearly reductions between 1979 and 1997--140,000 manufacturing jobs were lost for every year of Tory government.
Mr. Bercow: Will the Minister give way?
Miss Johnson: I am sorry, I cannot give way. There is a limit on speeches and many Government Back-Benchers who wanted to contribute to the debate have unfortunately been unable to do so.
From May 1997, output rose by 16 per cent. to reach its highest ever point--in the fourth quarter of 1999. During the past three months, output rose by 1.6 per cent. The volume of manufacturing exports rose 9.5 per cent. in the year to February 2000. Productivity is increasing by about 5 per cent. per annum--the fastest rate for five years. Manufacturing investment rose 4 per cent. during the latest quarter--the last quarter of 1999.
Manufacturing employment continues to contract, but our experience matches that of the United States; roughly the same proportion of people in the US and in the UK are employed in manufacturing. I understand and sympathise with those manufacturing sectors for which the current fall in the euro is a real problem. Such a euro-sterling exchange rate cannot be justified by any view of the long-term economic fundamentals, as my right hon. Friend the Chancellor remarked last week.
However, it would be wrong and counterproductive to adopt the short-term measures proposed by some people, including some Opposition Members. That would indeed be to repeat past mistakes. Instead, we should look to the long term. We must reject a return to the short-term, quick fix that would put at risk the long-term stability that is the foundation for steady growth, investment and job creation. Mervyn King, the deputy governor of the Bank of England, said:
- Stability must be the watchword of policy.
Manufacturing has responded. Productivity among electrical and optical equipment manufacturers has risen by 22 per cent. since 1997 and, in the chemical industry, it has risen by 8 per cent. British car factories are among the most productive in the world. I was saddened to hear some Members talking down our manufacturing business in general and our car production in particular.
Let us consider just one or two aspects of the car industry. I acknowledge that these are difficult times for vehicle manufacturers throughout the world, but a number of recent announcements show the strength of vehicle manufacture in the UK. Peugeot doubled its production in the UK last year; Jaguar achieved record sales and record production; Nissan announced 800 new jobs at Sunderland; and Toyoda announced 400 new jobs in Rotherham. This year, Audi announced an investment of £45 million in Cosworth engineering to expand its site in Northampton, doubling its work force to 1,500. The recent Vauxhall statement, to which the hon. Member for South-West Bedfordshire (Sir D. Madel) referred, announced £189 million of new investment that will create 500 new jobs at the Luton factory. Honda has announced £130 million of investment in Swindon to allow the production of a new model, and last month's sales figures showed that British-built cars increased their sales against the general trend.
Since 1997, more than £2.6 billion of new investment has been announced with 8,750 new jobs created. We accept that difficult decisions must be made, but that is the context in which those decisions are being made. That is the picture of the UK industry--[Interruption.]
Mr. Deputy Speaker: Order. It is not a good thing for the Chair to keep intervening, but there is too much noise in the Chamber. I appeal to hon. Members; the hon. Lady is entitled to be heard.
Miss Johnson: Thank you, Mr. Deputy Speaker. I again draw the conclusion that Conservative Members do not want to listen to the facts of this Government's economic good-news story. It is a good-news story that extends to many sectors of manufacturing despite, we acknowledge, the difficulties under which they are working.
I pay tribute to my hon. Friend the Member for Crosby (Mrs. Curtis-Thomas), because her contribution recognised the wider measures that the Government are taking for business. We have the lowest corporation tax levels ever--businesses' corporation tax bills have been cut by 25 per cent.--and we have introduced the new research and development tax credit, investment allowances, the venture capital fund and the new venture capital arrangements.
I could go on at great length. [Hon. Members: "More, more!"] I would be delighted to go on at greater length, but I am afraid that Conservative Members have shown no inclination to listen as indeed they have shown no inclination, in what they have said today or done since 1997, to learn from the mistakes of the previous Administration. They have not learned from the past. Indeed, in November 1999, the then shadow Chancellor, the right hon. Member for Horsham (Mr. Maude), predicted a sharper downturn, and said that that was not reflected in the Government's complacency at the time. That prediction, as with all the Tories' predictions, proved to be wrong.
In contrast, this Government know how to manage the economy. We are looking to the long term, delivering a platform for stability and steady growth and delivering policies for supporting manufacturing and British industry in the competitive global economy. We are optimistic that British manufacturing and British business can match the best in the world. All that would be put at risk by the Conservative party--the boom-and-bust party that pursued short-term economic policies that produced two of this country's deepest and longest recessions and destroyed millions of jobs in manufacturing.
Question put, That the original words stand part of the Question:--
The House divided: Ayes 173, Noes 337.
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