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Mr. Öpik: I was of the belief that the reduction of interest rates was a mechanism by which one could devalue a currency. The right hon. Gentleman appears to feel that the opposite is true.
Mr. Davies: If the hon. Gentleman is speaking about a slow and gradual devaluation that enables us to slide into the euro at a much lower rate, then perhaps we could reduce the interest rates, but how would that affect inflation? Interest rates cannot be reduced for the sake of devaluation alone; other factors must be taken into account.
There has been a decline in manufacturing, partly for structural reasons. Emerging countries have moved into the basic manufacturing activities in which Wales has been especially involved. Years ago, people laughed at Brazilian steel, but that does not happen these days. The emerging countries are producing the basic heavy metals and goods that Wales produced in the past. Structural decline has occurred not only in Wales and Britain, but in Europe and the United States. British Steel was responsible for the reduction from 90 per cent. to 50 per cent. of Wales' share in the tinplate market. That affected the steel industry; less steel can be produced in Port
Talbot because so much of the tinplate market was lost. British Steel was, therefore, responsible for some of the decline.I remember well the benign neglect and antipathy with which successive Conservative Governments treated the manufacturing industry in the 1980s. They had a hatred of the industry and its unions that was seen by the House time after time, year after year. Perhaps reality crept in towards the early 1990s, when it was, to some extent, realised that such an attitude was mistaken. However, manufacturing was a pariah for long periods and was not to be supported in any way.
All Governments seem to have the notion that they cannot touch manufacturing or the markets. The European Union has introduced competition rules that did not exist in the 1970s, and which make it much more difficult, although not impossible, to support manufacturing. The general agreement on tariffs and trade and the World Trade Organisation also make that much more difficult. Governments and politicians have to try to reassert themselves. We must state that we have a role. These rules cannot be made to dominate us when our communities and entire economies are under threat. It will not be easy, but politicians must stand up, rather than allowing matters to drift and fashion to prevent us from assisting manufacturing.
Corus gave three reasons for its decision. Hon. Members can choose which one is the most important, but for me, the main reason is our old friend--or perhaps not a friend--global capitalism. I talk to people in manufacturing industry in my constituency, such as those at Trostre. Enormous pressure is exerted on prices by global forces that none of us can really understand or control. That pressure means that costs must constantly be driven down to try to make a profit at the lower prices.
At our meeting with the chairman and chief executive, he said, in answer to a question that I asked, that we are getting to a point at which there is a world price for steel. I am not a great expert on the steel industry, but having been the Member for Llanelli, where tinplate is made, for 30 years, I have observed the industry. There did not used to be a world price for steel. I can see that the right hon. Member for Caernarfon (Mr. Wigley) is anticipating what I am about to say. There used to be a national steel price and a regional steel price. Indeed, there was a common belief in the industry that the prices were fixed. I do not know whether they were fixed, but if they were, those who fixed them were very clever about it, because the steel industry managed to keep out of the restrictive trade practices court, unlike cement manufacturers, who were frequently before that court.
It was thought that there was an unofficial European steel cartel. I do not blame the industry for that. Territories were carved up, partly because steel is heavy and it costs a great deal to transport it a long way. There was, perhaps, some price fixing, but it is all disappearing. It is significant that the chairman and chief executive of Corus said that we are close to having a world price for steel. He said it as if he could not believe it--after all, he is of that earlier generation in the industry.
We have heard a lot about farming. I do not want to provoke some of my hon. Friends who are not as keen on the farming community, but we have world prices for agricultural products. World prices, whether in manufacturing or farming, are determined by the lowest
costs, which are often in emerging economies outside Europe and north America. When asked about that, the chairman and chief executive of Corus said, "Where is the steel coming from then?" It is coming from Brazil and former Soviet Union countries such as Russia, and Soviet satellites such as Poland and Czechoslovakia. Perhaps it is not very good steel--I do not know. Maybe one could not make tinplate from it; it probably has too many impurities. However, it is pouring into Europe and creating a world price for steel.I understand that the European export price for hot-rolled coil has fallen by $100 a tonne in the past 12 months. The price at the beginning of that period was $300 a tonne, and is now down to $200 a tonne. I am not saying that the price will fall further. Maybe special factors were involved. I am not an expert on the steel industry, but what will happen to Corus if the price falls again by $100 or even $50 a tonne? Where will that leave our industries? All Governments and politicians must pay less obeisance to the market and to globalisation than we have tended to in the past. We must see what we can do; otherwise, our communities and our economies may gradually disappear. That is why Corus should have talked to the Government. Perhaps they could not have provided a solution, but the company did not have an answer either, and it should therefore have consulted the Government. It is better to talk, to get together and try to resolve the problem.
We live in deflationary times but we have a structure for inflation. The marketplace determines the price and the grand governors of central banks--the Basle mafia--decide interest rates and pretend that they are all powerful and that they have made a great impact. That also applies to Dr. Alan Greenspan. Perhaps those bankers are all right when there is inflation, but they are no good in times of deflation. For example, half the Japanese banks have gone bankrupt. In times of deflation, we do not need central bankers, but government. We needed government in the past in such times, and we shall need it again in future if deflation worsens.
I have listed the three factors, and I believe that the third is most significant. Whatever factor is most important, companies should talk to Governments, let them get involved and ascertain whether we can tame the forces that often drive our industry to the wall. It will be a major task to rebuild our communities, but I believe that it can be done. We must try to broaden our manufacturing base. Everybody says that, and it is easy to say, but harder to do. We must broaden our base to include information and communication technology if we can. That will not be done by what my noble Friend Lord Healey used to describe as monetary and financial wheezes. A couple of points off corporation tax and 0.5 per cent. off the interest rate may help--I do not decry such measures--but many of our communities in south Wales have a genuine structural problem.
There is also a structural problem in education, especially in science and mathematics. I do not mean training after leaving school, but basic education in those subjects. Why is the south-east of England powering ahead in manufacturing? Why is the gap widening, as the hon. Member for Meirionnydd Nant Conwy said? Partly because the education and training that people receive there is better than that in Wales. We must match the
best. We must start pursuing excellence again, and stop equating excellence with elitism, which is different. We did it once, and we can do it again. We must show the political will to achieve that. Yes, we must have the resources, the money from the Treasury, but let us show the political will to raise the standard of education and learning in our communities. Then we will solve the problem.5.23 pm
Mr. Dafydd Wigley (Caernarfon): I congratulate the right hon. Member for Llanelli (Mr. Davies) on his speech. I agree with many of his comments, and his point about education was vital. We must regenerate our pride in education and our commitment to it. It is essential to future industries, technologies and job opportunities in Wales.
I congratulate the Select Committee on Welsh Affairs on its comprehensive report, which forms the background to the debate. It makes many excellent recommendations, and I congratulate its Chairman, the hon. Member for Clwyd, South (Mr. Jones) and its members. I congratulate especially my hon. Friend the Member for Meirionnydd Nant Conwy (Mr. Llwyd) on getting so many Plaid Cymru policies adopted by the Committee. His influence is far reaching.
The challenge is to persuade the Government to adopt the Committee's recommendations and not to leave the report on dusty shelves. They need to be implemented. The Minister's opening speech made no commitment to taking any action on the report. As he knows, I have a lot of respect for him, but his speech was awash with complacency. He boasted about action that the Government claim to have taken. Poor people in Wales know the truth; they experience the reality of poverty. No amount of Government spin can change that.
Let us consider some of the economic factors that form the background to the report. Gross domestic product per head in Wales has dropped from 92 per cent. of the United Kingdom average in the 1960s to 79 per cent. now. In 1999, the proportion of working-age people in employment in Wales was 68 per cent., compared with 80 per cent. in south-east England. The proportion of working-age people in workless households in Wales was 16 per cent., more than twice as high as in south-east England.
The employment rate for people with disabilities in Wales was only 31 per cent., compared with 51 per cent. in south-east England. The employment rate for lone parents in Wales was 47 per cent., compared with 56 per cent. in south-east England. The employment rate for those aged over 50 was 56 per cent. in Wales, compared with 74 per cent. in south-east England. Those are some of the background figures to the social and economic problems that Wales is facing.
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