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The Economy
Question again proposed, That the amendment be made.
7.23 pm
Mr. John Redwood (Wokingham): I congratulate the hon. Member for West Bromwich, West (Mr. Bailey) on his speech. I particularly enjoyed the parts where he tried to represent the views of his constituents to the Government. Many of us think that that is a noble and important task. It is a privilege that we all share in the House and I hope that he will carry on doing it. He will discover that one of the problems of being a Back Bencher whose party is in government is that those on the Front Bench will expect him to agree with anything that they propose, even when it is not in the interests of his constituents. We look forward to his being a more robust contributor on behalf of his constituents than some of his right hon. and hon. Friends. If he proves to be so, we shall carry on giving him an easy ride. If he fails, some of my right hon. and hon. Friends may be a little less charitable than I have been on this delightful occasion, when he rightly spent most of his time on his constituency and its problems.
We had a ridiculous performance from a puffed-up Chancellor. This was the man who once admitted to the competition for new Labour soundbite of the month the extraordinary phrase, "endogenous growth theory". He did not win the soundbite prize with that. As Chancellor, he has been less good at soundbites. He has just come up with another absurd one, "No more boom and bust", while creating both at the same time. He would more successfully be dubbed "Mr. Endogenous Tax Chancellor" because he is the man who cannot resist taxing anything--any money that he sees straying around the economy in private pockets, purses, or bank accounts.
One of the most effective soundbites that was generated by someone other than Mr. Endogenous Growth Theory himself in the run-up to the general election even had a tune to go with it, which was quite catchy. It was, "Things can only get better." I have been out and about in my constituency, and travelling the length and breadth of our once fair and great country to see whether things are getting better now that we are more than three and a half years into a Labour Government and whether people think that things are getting better.
I began by talking to people in the textile industry. I asked them if they felt that the industry was stronger, bigger and more positive than it had been when the Labour party came to office. I discovered that those in the textile industry feel that they are being flattened by this Government's insouciance about manufacturing in general and textiles in particular.
Under this new Labour Government our biggest clothes retailer, Marks and Spencer, has had to announce that it will have to switch a large proportion of its purchasing from British to foreign-made textiles to stay in the very competitive market that Labour has helped to create by its clumsy, high-tax and high-regulation policies.
I have no direct interest in textiles--I have declared my interests in the Register of Members' Interests. I have talked to people with direct experience of the industries that I wish to discuss. I can assure the House that people in the textile industry believe that they are being
sandbagged by regulations, taxes and a Government who do not seem to care when, week after week, mills and clothing factories close.
Mr. MacShane: Hansard will tell us exactly what the right hon. Gentleman said, but am I right in thinking that he just stated that Marks and Spencer suffered because of the highly competitive market created by the Labour Government? What is wrong with that?
Mr. Redwood: I was saying that in a competitive marketplace the Labour Government have made it difficult for a retailer that wants to sell domestically produced clothes. The taxes, regulations, interventions and interference of this Government have meant that Marks and Spencer has had to switch. Under the Conservatives, it bought most of its clothes in Britain and was proud to do so. That happened year after year, whatever the conditions. Now that we have a Labour Government, the largest purchaser of our manufactured clothes that retails in this country has decided that it must slash dramatically the amount that it buys in Britain because the Government have made it too dear to make things in Britain.
Mr. Salmond: Unlike the right hon. Gentleman, I have textile businesses in my constituency. When I speak to people in those businesses about the problems, which are substantial, the first thing that they tell me is that they are due to the exchange rate. Why has the right hon. Gentleman not mentioned that? Could it have anything to do with the fact that one of his colleagues was attacking the Liberal Democrats for proposing a devaluation? With all his experience of talking to all these companies, is the right hon. Gentleman trying to tell us that they did not talk to him about the sterling exchange rate?
Mr. Redwood: They talked about total costs against the revenue that they can earn from selling the product. The main problem is the cost of making things in Britain. Of course, the exchange rate is an important part of the equation when one considers whether to buy from France, Germany, the United States or Britain. If one combines an economic policy that deliberately drives the exchange rate and interest rates much higher than those of our partners and competitors with a policy that increases the taxes, costs and regulatory burden on British business, one ends up with an explosive mixture that does enormous damage to manufacturing.
I have issued warnings about this for many months and years. I was the one who forecast that we would have a manufacturing recession. I did not forecast a general recession, although that is what the Labour party would like people to believe. Hansard shows that I specifically forecast a manufacturing recession, which is exactly what we have had. It was foreseeable and avoidable. It was deliberately caused by the Government's macro-economic policy and other specific policies that they pursued on manufacturing.
Mr. Beard: The right hon. Gentleman just suggested that the pound had been driven to higher levels by the policies pursued by the Government. Which Government policy does he believe has driven the pound to those heights?
Mr. Redwood: It is the combined impact of all the Government's policies--high tax, high interest rates and
the semi-independent Bank of England. Had they had a different attitude towards tax and spend in the first couple of years, I suspect that the Bank of England would have set different interest rates and we might have had a more acceptable exchange rate. One can never prove those counter-factuals or hypotheticals. However, I remember making proposals on the general movement in economic and tax policy and regulation that would have produced a better mixture of the exchange rate and the interest rate, and would have kept some of those factories open.
Mrs. Beckett: Since the right hon. Gentleman attributes the increase in the exchange rate to the Government's policies, will he explain why two thirds of that increase took place before we were elected to power?
Mr. Redwood: The important point is what has happened since 1997--[Interruption.] The right hon. Lady must start to take responsibility for what has been happening in the country under the Government who she supports and of whom she is a member. In 1995, when the Conservative Government were in power, BMW came to Britain and said that it was the best place in Europe bar none in whom to manufacture cars. It put a lot of money behind that judgment. Recently, unfortunately, it pulled out and said that Britain was now the worst place in western Europe in which to make cars. What had changed? We had a change of Government, and the Labour Government have presided over a sharp increase in the value of sterling against the European currencies.
Mr. Jim Cunningham (Coventry, South): Will the right hon. Gentleman give way?
Mr. Redwood: I shall give way when I have finished my point. I am trying to deal with the serious point made by the Leader of the House. The Government have presided over a big increase in the value of the pound against continental currencies and a big increase in the margin of interest rates--we have much higher rates than continental countries in the euro bloc. There were bigger increases in regulation and taxation than competitor economies experienced, so it is no wonder that the Government got into an awful mess.
Mr. Cunningham: The right hon. Gentleman wants to be careful when he talks about BMW, as there was a highly productive labour force at Rover. He is suggesting that it is something else, but everyone knows that there is overcapacity of 20 per cent. in the motor car industry.
Mr. Redwood: That does not mean that closures have to occur in Britain. As we heard earlier in the interesting exchanges on the sad events in the past two days at Luton, we do not make enough cars to meet all the domestic demand. The matter therefore has something to do with costs and competitiveness. The Chancellor of the Exchequer has been puffing himself up for three and a half years with all sorts of competitiveness and productivity initiatives. However, the sad truth of life is that in this crucial manufacturing area, whether it concerns textiles, steel, cars or other activities, we are clearly less competitive--at these exchange and interest rates, with this regulatory burden and with these costs--
than we were when the Chancellor began his initiatives three and a half years ago. That is why factories are closing and jobs are being lost under his watch. It is also why international investors in manufacturing are now saying that Britain is not the best place in western Europe bar none in which to make things, but the worst.
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