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Mr. Bercow: I understand the vantage point from which the right hon. Gentleman approaches currency movements and prospective entry to the euro. However, is he content--as apparently the Secretary of State is--that under the terms of the treaties there is no entitlement for national Governments or Parliaments to influence the decision-making bodies of the European central bank in its conduct of monetary policy?
Mr. Wigley: I am not altogether convinced that Governments influence the Bank of England's decisions in the United Kingdom. Governments are entitled to opinions and I agree that those should be voiced and heard. However, there needs to be a coherence on Europe if we are to enjoy the stability that is necessary for our manufacturing sector. That is why I am looking for a commitment from the Government not only to entering the European currency zone but to creating the circumstances that will enable that to happen, and to happen as soon as possible.
We need three changes. First, we need the clear commitment to which I referred. Secondly, we need lower interest rates to help lower the pound's parity and, if inflation is seen as a threat, to use taxation as a tool to dampen it down. Thirdly, we need to ensure that the terms of reference of the Bank of England include a responsibility to keep an eye on what is happening to employment as well as inflation. Those terms exist in the United States, and I believe that they should apply here as well.
These changes are particularly important for manufacturing industry in Wales. We have as many as 348 manufacturing plants in Wales which are owned by overseas corporations, and they employ some 75,000 workers. They are in Wales not to sell to the Welsh market or even the UK market. They are there, overwhelmingly, to sell to the European market, and they need a level playing field to do so.
These are symptoms of something fundamental. We don't have to look far for some of the causes. In 1998 manufacturing businesses invested over ten times as much in research and development in the South East--£1.9 billion--than in the North East--£164 million.
Secondly, we should learn in Wales from the experience of Ireland and the way in which its GDP per head has increased not only beyond that of Wales but of the UK. The most important tool used by Ireland was the lower corporation tax rate, which acted as an incentive to attract and expand industry. We need to take advantage of the provision allowed within the European rules for operating aids of this sort to be permissible at least within the objective 1 areas in the UK.
Mr. Mark Hendrick (Preston): Does the right hon. Gentleman accept that the corporation tax rate set in Ireland at the time was discriminatory, with foreign firms encouraged to invest by being given a preferential rate of corporation tax? I think that that has since been outlawed in the European Union.
Mr. Wigley: I accept that that is exactly what happened. It happened with the agreement of the European Union, and the recent agreement, that will run for the best part of the next decade in Ireland, allows a lower rate of corporation tax to continue there. As there are objective 1 areas in not only Wales but Merseyside, South Yorkshire and Cornwall and derogation for operating aid is possible within those areas--as the Prime Minister recognised in his statement following the recent Nice conference--it is within the Treasury's powers to reach agreement. I was encouraged when the Select Committee on Welsh Affairs included in its report last week a specific call for regional variations in taxation, which I welcome. That policy is supported by the Lib-Lab government in Wales. I urge the Secretary of State to persuade the Treasury to make such provision possible.
Thirdly, the House needs to consider other opportunities for improving regional competitiveness in the UK. I draw attention to a report published by Robert Higgins of the centre for advanced studies at Cardiff University, entitled "An Index of Competitiveness in the UK: Local, regional and global analysis". Wales ranks last but one in the UK regional competitiveness index. The report's summary states:
Mr. Kelvin Hopkins (Luton, North): I add my congratulations to my hon. Friend the Member for Falkirk, West (Mr. Joyce), who is not in the Chamber now. As a friend and admirer of his predecessor, I would welcome him on this Bench. I shall speak to him afterwards.
We should take no lectures from the Tories about jobs and manufacturing. In the two worst British recessions since the second world war, the Tories showed that they had contempt for manufacturing. Swathes of it disappeared and millions of jobs were lost. When Nigel Lawson was Chancellor of the Exchequer, he was heard to say that manufacturing did not matter any more; the economy could be left to operate by itself; and the financial and service sectors would be enough. Some Opposition Members now seem to be changing their minds about manufacturing and share our view.
Mr. Bercow: The hon. Gentleman spectacularly misquoted my right hon. and noble Friend, Lord Lawson of Blaby. In view of the hon. Gentleman's enthusiasm for the former Chancellor's judgments, does he agree with Lord Lawson when he famously and succinctly said that the business of government is not the government of business?
Mr. Hopkins: The hon. Gentleman's intervention illustrates the profound difference between us. I was about to state my belief that it is the business of government to intervene, to ensure that the economy operates well and to the benefit of the people--which is a different point. If I had time, I would make greater criticisms of Lord Lawson--whose management of the economy led directly to the chaos at the end of the 1980s and early 1990s. The Tories showed malign indifference to the fortunes of manufacturing. They created a casino economy in which people were more interested in making money than in making things. Buying, selling and gambling are interesting and one can make money doing them--but they cannot sustain an economy for long. I suspect that we are seeing crocodile tears today.
We congratulate the Government on getting 1 million more people in work. There is no question but that many sectors of the economy are doing well, but some have done less well and there are concerns about manufacturing. In my constituency in my first year in Parliament, there were two serious closures with a significant loss of jobs, at Electrolux and a smaller firm named Coulters. More recently, there was the announcement about Vauxhall that many of us are campaigning to reverse. I have written to my right hon. Friend the Secretary of State, trying to convince him to use Government efforts and even Government money to persuade Vauxhall to reverse its decision and stay in Luton. The short-term cost of sustaining Vauxhall's car manufacturing in Luton would be far less than the cost of letting it go--in terms of extra benefits payments, the loss to the manufacturing sector and the effect on the balance of trade.
Clearly, the pound is overvalued at present. I agree with the hon. Member for Twickenham (Dr. Cable) that there is a problem with overvaluation against other currencies as well as eurozone currencies. I support the Government in resisting the siren voices that are calling for immediate
Fixing the value of the pound, then entering the euro even at an appropriate exchange rate for now, would not necessarily be appropriate in the long term. Although currency stability is wanted, a single currency is a different matter. The postwar stable exchange rate system produced the highest employment and growth in our history. That is the best way to run the developed world and the world economy--using a system of managed exchange rates at sensible parities, not a single currency.
I recently attended a conference that was addressed by Vaclav Klaus, until recently Prime Minister of the Czech Republic. He is not of my political persuasion but made the strong point that single currencies work only in coherent, integrated economies in which the factors of production are genuinely mobile. They do not work when one tries to push together different economies. There are some historical precedents; Vaclav Klaus used the example of the Czech Republic and Slovakia.
There are, historically, problems surrounding investment in manufacturing, but the latest four quarters for which figures are available show slightly higher investment than in the last four quarters of the previous Conservative Government. That is not good enough, but it is better. Manufacturing production is also 2.5 per cent. higher. It is not yet a total disaster, but if nothing is done about the currency and investment, there could be greater problems in future.
I want to see not just Vauxhall saved but the whole motor manufacturing sector boosted by short-term Government assistance and appropriate macro-economic policies, to make sure that the industry is sustained. I have made the point before in the House that Britain is still a net importer of motor products. It does not have overcapacity. We ought to sustain the industry and expand motor manufacturing and other sectors. We must maintain a substantial manufacturing sector, not just let it go. The previous Government's hands-off policy did not work. We must intervene.
Last year saw a record trade deficit in goods, which is most worrying. That deficit is more substantial in respect of non-EU countries, which suggests a problem not just within the European Union but with the rest of the world.