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18 Nov 2002 : Column 419—continued
Matthew Taylor: People must bear in mind the fact that, since the creation of the euro, the average growth of the eurozone has been faster than growth in this country. Employment in manufacturing in the eurozone has increased when such jobs have plummeted by 500,000 in this country. In testing whether the British economy is genuinely performing much better than the rest of Europe, the hon. Gentleman must consider my points about the two-speed economy and whether our
economic success in personal income and employment is built on long-term structural achievement or short-term debt explosion—the boom in consumer spending and house prices. If it is the latter, we have no reason to congratulate ourselves because growth is not sustainable in the long term. I believe that we would be better joining the euro, although we must do so at a competitive exchange rate. Frankly, that is more likely while eurozone countries continue to make it clear that they would like Britain to join early than if we join some years down the line when things have settled for them, but are less settled for us. Our past experience in agricultural and fisheries policy is pertinent in that respect.
Matthew Taylor: I have spoken for a long time and have given way many times. I therefore hope that the hon. Gentleman will understand if I do not give way, as I do not want to detain the House.
I shall touch briefly on issues that affect the delivery of Government spending improvements. I have talked a lot about the economic background, but to be successful, it is necessary not just to have an economy that is functioning well but to spend that investment well. I shall sound two notes of caution. First, we agree with the Chancellor and the Government's stance—we cannot allow extra spending to be grabbed by large pay claims rippling through the public sector. We are sympathetic to much of what the firemen say about the lack of change over the years and the fact that there has been no proper review for a generation; nevertheless, a 40 per cent. pay claim was never realistic, and we are glad that the Fire Brigades Union appears to be changing a position that was never deliverable.
Investment cannot be spent on across-the-board pay increases, but in our last manifesto we identified areas of the public sector with a specific need for substantial increases—above all, areas where it is no longer possible to recruit or retain staff in sufficient numbers. If there were ever a sign that pay and conditions are not appropriate, it must be not being able to recruit or retain. That covers trainee teachers, for example, and certain grades of staff in the NHS and other sectors. Leaving things as they are is no more a solution than allowing general wage inflation to take a grip, as it wastes the opportunity for public service improvements.
Secondly, on central control, it is not right for the Chancellor or the Secretary of State for Health to describe as decentralisation and letting go the creation of foundation hospitals that are limited to certain communities and built, not according to local discretion but to whether local managers have followed to the letter and met centrally set targets, irrespective of their application to the locality. That creates not just further centralisation but the great unfairness that some people benefit from health service improvements purely because management have toed the Chancellor's line, following instructions to the last dot and comma.
Other communities, by contrast, will not get investment in their hospital because they have broken a tiny bureaucratic rule or Government target, often for reasons that have nothing to do with local management. In my area, for example, the hospital was downgraded
for one reason alone—debt—as the Government pay for out-of-county treatment of tourists two years in arrears. In the future envisaged by the Chancellor, that would cost the Cornish community millions of pounds of investment in their local hospital, which cannot be right.The Chancellor must therefore let go. He must simplify and stop micro-managing or we will not achieve improvements. Services cannot deliver improvements if they do not give doctors, nurses, teachers and police officers the discretion to do their front-line jobs properly or if the build-up of long-term economic problems is allowed to overwhelm and eventually destroy the effort to make badly needed investment.
6.36 pm
Mr. Martin O'Neill (Ochil): Having had to listen to the last two speeches from Front-Bench spokesmen, I now understand what shadow-boxing involves—it certainly does not involve laying a glove on the Chancellor but on one another.
I welcomed the Chancellor's speech but, to be a bit churlish, I would have preferred him to make the autumn statement first. We are in something of a fiscal vacuum—the likely output and revenue figures as adjusted by the Treasury are central to several issues thrown up by his address, and it would have been helpful to have a more realistic framework. I am glad that the Secretary of State for Trade and Industry is in the Chamber, as the fiscal vacuum is not necessarily matched by a policy vacuum in her work for manufacturing industry. That is welcome—for a period after 1997 her Department was infatuated with issues involving information technology and so on, and did not focus clearly, effectively and consistently on other areas in the manufacturing economy which, it is only fair to acknowledge, it engaged with following difficulties in the car industry. Now, however, it has a more coherent policy. I am not sure whether the seven pillars will be the seven pillars of wisdom, but one—macro-economic stability—has been discussed today.
On macro-economic stability and the firefighters' dispute, in the 1970s I went on strike as a teacher to get a rise. We were lucky as, for about 18 months, we benefited from the Houghton award, getting about 23 per cent. to catch up with what had escaped our grasp in the early 1970s. Within 18 months of our receiving that award, however, inflation was even higher and interest rates were so high that the mortgage payments that my wife and I had to make made the increase virtually worthless. We cannot afford to go back to those levels. If we are going to achieve a settlement in the present dispute, it must be sustainable. We cannot afford to open the floodgates for deals that would destroy or certainly seriously jeopardise this Government's greatest single achievement: economic stability.
Although controlling inflation and keeping down interest rates are important, investing in our manufacturing base is a prerequisite to the survival of the sector. Our dependence on financial services has allegedly become greater—it is a matter of a couple of per cent.—but striving for manufacturing efficiencies will more than anything else impose self-discipline in the economy and be the most effective means of securing long-term economic prosperity.
I do not want to downgrade the financial services industry, but such services will be in decline for some period. There will be difficulties; we have not yet seen the level of lay-offs experienced in the United States. My point is completely independent of the issue of Enron. I refer to the fact that financial services are going through a period of difficulty, and that will be reflected in unfortunate but probably necessary savings, meaning redundancies and lay-offs.
If we want to sustain economic growth in this country, we need not just long-term but short-term improvements in manufacturing. It is highly appropriate that not only are the Treasury and the Department of Trade and Industry working together, but that there is a cross-departmental initiative which will involve investment in skills and people through various training on the shopfloor and of management, as my right hon. Friend the Chancellor has identified.
If we can start to equal the commitment to improvement in skills with that to improvement in equipment, we can go some way to sustaining such growth. Low interest rates ought to be an incentive to businesses to borrow to invest, but sadly, as has been said across the House, we are not investing. These facts do not bear disputation. France, Germany and Italy, with which we must compete and catch up, are still committing more to investment than us. Part of our problem is that, because our currency is over-valued, we are seeking to depress price by using profits to assist in keeping down costs rather than for funding investment in the way that we want.
I hope that the Chancellor will begin to look again at support for investment and at providing investment incentives. If it is good enough to invest in research and development, surely it is good enough to invest imaginatively. I use the word Ximaginatively" because there is a Treasury mantra—perhaps in the case of the Chancellor a Xmetrical sang" that is repeated time after time—that if we give money to potential investors, we are really giving it only to those who would have invested anyway.
Last year, when I thought that investment levels were going to be very low, I was worried that the Treasury might slip in an investment-incentive stream that nobody would take up, and to which they would then point cynically, saying, XWe tried it. We told you so; it is not having any impact." We should persist in trying to find ways of getting investment into industry because across the political divide we have not been successful in doing so over the years.
There are those who argue that if prices are too high on the international markets, it is because we are not in the eurozone. Even though there is an over-valued pound and an under-valued euro, the last thing that we require at the moment is a sterling devaluation. The Liberals can use all the euphemisms they like, but at the end of the day, if there is to be a currency adjustment and it does not quite work perfectly—I broadly subscribe to the idea that if we talk seriously about joining the euro, the pound will fall and the euro will rise—there will be a gap. That gap will have to be bridged by a package of deflationary, monetary and fiscal measures.
It would be wholly irresponsible given the fragility of the international economy for us to jeopardise the macro-economic stability that we are enjoying by
prematurely entering the eurozone. Therefore, although I would like us to join the euro, we must remember that other parts of the world are in many respects unaffected by it. I think of North America, of the fact that China has just joined the World Trade Organisation and of the market possibilities in areas where the United Kingdom can provide goods and services as efficiently and effectively as anybody else. We should not forget the role of exports and trade. The work that has been done in the promotion of Trade Partners UK and the like has gone a long way to helping that matter.There is a somewhat convoluted reference in the Queen's Speech to draft legislation on a nuclear liabilities authority. That will be an important piece of legislation not least because of the problems confronting British Energy. I am aware that there are some who use the problems of British Energy as an excuse to denigrate the whole nuclear industry. I cannot see the UK meeting its international commitments on carbon emissions, whether those made in Kyoto or anywhere else, without investing in the nuclear industry.
The significance of a liabilities management authority—LMA—is that it would assume responsibility for the historical cost component in the nuclear power equation. That would enable a proper debate on the cost of the next set of nuclear reactors. We must take account of that. I only hope that the Government will be able to move quickly not just on LMA but on steps towards a new system of electricity trading arrangements that will encompass the whole UK.
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