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Mr. Bercow: The hon. Gentleman just referred to the Government's triumph. Does he regard it as part of that triumph that the savings ratio has been more than halved since the Government came into office?

Mr. Beard: Few people in the pubs and clubs of Bexleyheath and Crayford speak of the savings ratio. However, there are many who speak of the advantages of the new deal, of the fact that they are in jobs, of the working families tax credit and of the minimum wage.

Our future depends on our mobilising the abilities of a well-educated, highly trained and well-paid work force so that Britain can compete in the world on the basis of creative design and innovative science and technology.

As the Conservatives, driven by pseudo-nationalism and xenophobia, become the Jehovah's Witnesses of British politics, British business becomes increasingly confident about new Labour's vision of Britain's economic future.

The alternative is to compete using low wages and minimal employment conditions, to out-sweat the sweatshops of Asia. That is the Conservative vision, if such a demeaning prospect can be dignified by the word "vision". That is why they originally opposed the minimum wage, minimum holiday entitlements and legislation on fairness at work. That is why our state schools, universities, and research and development facilities were allowed to decline disastrously and why, even now, the Conservatives would abolish the new deal training scheme.

Britain has contributed immensely towards the shape and substance of the modern world through science, technology, art, literature, commerce, administration, law and democracy. Those days are not over. The frontiers of knowledge and understanding are being pushed further and further into new territory, with Britain to the fore. That is where our future lies. Britain has a distinctive culture and a resourceful people of great ingenuity and talent. We need a Government who can bring out the best in every citizen. This Government are doing that, and long may they continue.

6.39 pm

Mr. Matthew Taylor (Truro and St. Austell): The debate opened with two speeches, the first of which showed clearly that the Chancellor of the Exchequer has every intention of remaining Chancellor after the general election, and--perhaps more important--that he has every intention of being leader of his party after that. The second--an attempt to present an alternative policy from the Conservatives--showed that, although the shadow Chancellor may have ruled out publicly that he wants to be leader of the Conservative party, he ruled out rather more clearly today any possibility that he would be the next Chancellor. Indeed, it is all too evident that he does not believe that he will be the next Chancellor; he makes no real effort to make his proposals add up. I shall return to that point.

I have some comments on the state of the economy that faces us. After something of an economic history lesson, the hon. Member for Bexleyheath and Crayford

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(Mr. Beard) suggested that there had been a transformation and that we were set fair for the future. It is always unwise, when considering an economy, to assume that some new vista has been reached--where all will be permanently well because the golden key to economic management has been found.

The Chancellor is doing a good job. Earlier in the debate, he asked what fiscal rules the Liberal Democrats believed that we should follow. The answer is simple: the fiscal rules that we proposed at the previous general election and which the Chancellor is following. There is thus no reason to criticise them. However, within those fiscal rules, plenty of room remains for debate about policy. The rules tell us nothing about levels of tax or of spend, and little about many of the major economic management issues that need to be tackled.

Mr. MacShane: Will the hon. Gentleman give way?

Mr. Taylor: I will in a moment; if I develop my point, it may help the hon. Gentleman.

I want to focus on an issue where there is a substantial question mark over the Government's handling of the economy: the imbalance in growth between investment and consumption. That is reflected in the serious difficulties in manufacturing and production industries, where there is growth of less than 1 per cent., while service sector growth is in excess of 3 per cent. If we take out the growth in production of mobile communications, the manufacturing figures are even worse. A further reflection of that is shown by the terrible news at Vauxhall.

At a time of so much difficulty in manufacturing, farming and many other industries, especially those that are export-related, why--in economic debate, in the recent pre-Budget report, in the March Budget and in the comprehensive spending review--has the Chancellor not addressed that imbalance in the economy, and the resulting loss of 250,000 jobs in manufacturing and farming since Labour took office? The hon. Member for Rotherham (Mr. MacShane) no longer wants to intervene.

That imbalance in the economy is a serious weakness for the Government. It is something of a surprise under a Labour Government; support for manufacturing and manufacturing export has always been regarded as one of Labour's heartland issues. Had the Labour party gone to the polls at the last general election saying that a Labour Government would pursue policies that would destroy most of the British car industry, it is hard to believe that Labour would have received the same amount of support in those heartland constituencies. We know that there is concern among Labour Back Benchers, because several of them have been brave enough to say so; at least one Labour Front Bencher resigned from office on exactly those issues.

Are there policies that the Government can pursue to tackle the problems in farming, manufacturing and tourism and the decline in household savings--down from 9.6 per cent. in 1997 to only 3 per cent. at present? Business investment growth is down from 7.5 per cent. in 1999 to only 1.75 per cent. this year. Since the launch of the euro, manufacturing investment in this country has fallen by 12 per cent. in real terms. Those issues are real; not only do they have an extremely public impact on the car industry and farming, but they affect many less

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high-profile businesses throughout the country. There may be less publicity for those businesses, but there is equal pain for the people who built them and for their employees. People are losing their jobs and businesses are being lost.

Mr. Miller: The hon. Gentleman knows that I have some knowledge of his constituency, because my late father-in-law farmed there, so I am well aware of many of the issues relating to remote, small farms that he describes. On manufacturing, however, I think that I may have a little more experience than him. Does he agree that an interesting challenge faces companies such as Vauxhall in my constituency? Output is growing constantly as a result of investment in technology. Whatever happens in the petrochemical industry and in other manufacturers in my constituency, output will grow while less people will be directly employed. What is the Liberal Democrat solution to that?

Mr. Taylor: The hon. Gentleman forgets that in the past Cornwall was a county where there was heavy engineering and mining. My experience is the same as that of the hon. Gentleman. In my constituency, Imerys, formerly English China Clays, employed between 8,000 and 10,000 people when I was first elected; the number is well under 3,000 at present, and that job loss is occurring in an industry that is producing more than ever before. That company is a classic example of an industry that is seriously concerned about the international competitiveness of UK production. If we consider what is happening in the car industry, in engineering and in the clay industry, we find that they are all suffering. Our country does not invite the same share of international investment as it did in the past. Hon. Members look surprised, but the share has declined. Companies operating in this country face serious decisions as to whether they can continue manufacturing here.

I have held talks with senior management at Vauxhall, Ford and other companies. They all say that the current level of the pound is a serious problem in attracting investment. That problem is the same for small businesses, such as Charlestown Engineering--now Svedela--in my constituency, which cannot obtain investment within the UK. That company manufactures across the globe, but it is not competitive here--despite the fact that production at its manufacturing centre in my constituency is of the highest quality in the whole group. However, each time that an investment decision is taken, that centre does not win.

Shortly, there may be similar investment decisions on the Nissan Micra. Honda has already taken a decision. The most price competitive sectors are those that are being most clearly hit. Luxury car production is hanging on at Jaguar--although it nearly went to America. However, each of those manufacturers took a decision not to invest in the UK at the most competitive end of the market.

Two issues drive that matter and the Government have failed to tackle them: first, interest rates; and secondly, the linked factor of the exchange rate and the lack of a clear Government policy on the euro. Nobody argues that we should join the euro at present--Liberal Democrats do not argue that, contrary to the caricature that is sometimes presented. Under current exchange rates that would be the worst possible decision.

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However, there is a difference between our strategy and that of the Government: we are prepared to work towards the conditions of entry. The Government have laid out conditions, with which we agree; but they will not pronounce on the extra condition of an effective and competitive exchange rate, even though that is surely the key condition that must be met before anyone could realistically contemplate euro entry.

One wonders what is really happening behind the scenes, but as the Government will not tell us that in any parliamentary answers we shall have to take their official position. That is, in effect, that no action will be taken until the conditions are met. The Government will wait--looking up at the sky--and if at some point the Chancellor believes that a message has come from the heavens that the conditions are met, they will plump for the euro. However, they will not be proactive in achieving a competitive exchange rate or in obtaining any of the other conditions that they set.

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