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Lord Shore of Stepney: My Lords, perhaps the Minister would be kind enough to give way?
Lord Simon of Highbury: My Lords, I will, immediately!
Lord Shore of Stepney: My Lords, the pre-Budget Statement carries just the same input of European macroeconomic policy as the Budget Statement and the Queen's Speech.
Lord Simon of Highbury: My Lords, we are both agreed that there is a policy. In my old oil company days, I was fond of saying that performance is strategy. It is important to underline the fact that delivering is a great feature of the Government's requirement and responsibility. We are delivering on the economy. Within the first legislative Session we put in place new frameworks for both monetary and fiscal policy to deliver macro-economic stability. Long-term interest rates are now the lowest for 35 years and inflation is at its 2.5 per cent. target. We were reminded that the latter was nearly 10 per cent. in the early 1990s. The exchange rate is now back down around the level that we inherited, with the inflation we inherited being squeezed from the system. So I think that we are performing.
There are other elements of economic performance which are worth underlining. The economy is continuing to grow. In my view, we have heard some extraordinary statements which could force one seriously to doubt whether the economy is actually growing currently. In fact, it is growing at an annual rate which is still above 2 per cent., and employment is up by 400,000 since the election. Moreover, over 170,000 young people have entered the New Deal and 90,000 people will benefit from pilot programmes for the long-term unemployed. I believe that to be a mark of real performance.
However, the real point is that the latter has come about as a result of some quite tough decision-making. I agree that there were features of the inheritance that were certainly stronger than one could have hoped for when I was in my business life. But I think that we erred on the side of letting inflation back into the system and that we were slow to handle that situation. We had to put a lot of pressure into the system, as I have already described, to ensure that inflation was squeezed out, because industry needs low inflation, low-cost money and a financial background which is stable and understood. I know that I speak for many of my former colleagues in seeing that as the absolute keystone of macro-economic management.
I turn now to the future. On the basis of what I have said, I believe that we are better placed to weather the difficult storms that the global situation can present us with, and indeed still could. We have heard some sensible voices of caution about our capacity to forecast, which I heed with great care. But we are still forecasting growth of 1 per cent. to 1.5 per cent. next year, and that is not so out of line with, I believe, 44 current economic forecasts for next year. Indeed, the average is somewhere just below the 1 per cent. level, so we are in play with half of them and slightly out of step with the other half, which is not a bad place to be.
Of course, all of us will watch the growth rate with care and attention, but I am not sure that we are as out of line as some people have suggested tonight. I can certainly assure the noble and learned Lord, Lord Fraser, and my noble friend Lord Shore that the last time I looked at these statistics--last month--exports to the USA and Europe were still growing but that that was not the case with regard to Asia. Aggregated over the whole of the Asian marketplace, we have seen a significant downturn in the region of around 30 per cent. Although forecasts should always be treated with caution, I believe that they are still sound and that we are in the middle of most people's current expectations for growth for this economy next year. That includes the Bank of England, the IMF and other such noteworthy institutions.
I have tried to set out tonight the foundation for our future success. In my view, and as expressed in the gracious Speech, we shall only achieve our long-term goals through an even more radical modernisation of our economic policy in favour of opportunity, in favour of enterprise and in favour of work. Only the truly enterprising and innovative can hope to take advantage of the global economy. That is why encouraging enterprise and the knowledge-driven economy is at the forefront of our forward agenda. I believe that that
recognises some of the issues which my noble friend Lord Haskel put on the table about understanding risk and delivery and, indeed, how to build entrepreneurialism in our society.I have had the helicopter on macroeconomic management in broad terms and the stability we are seeking. I turn now to the supply side issues raised in the gracious Speech. The pre-Budget report last month set out measures to increase productivity and provide support for enterprise. These apply particularly in relation to the small and medium-sized enterprises within our economy. Areas to be considered were fiscal incentives for small business, support for research, help to broaden share ownership and the wider issue of skills training and the change of culture. These measures will be complemented by the publication later this month by my right honourable friend the Secretary of State for Trade and Industry of a White Paper setting out how we can boost Britain's competitiveness.
I would like to thank the noble Baroness, Lady Sharp of Guildford, and the noble Lord, Lord Wade of Chorlton, for their excellent contributions to the issue of supply side reforms. Whether it was in relation to the skills area and the requirement for further education, or whether it was in relation to the issue of regulation and the need to look at the regulatory package applied to small businesses, both followed very much our ideas. I can ask only for patience to develop those ideas further in a White Paper.
I believe that we are making great strides by concentrating on how to put in place a strategy to tackle our fundamental economic weakness; the productivity gap which exists with our most successful competitors. Two or three interesting speeches highlighted that gap. It is certainly no fantasy. Whether or not we find there to be fantasy in the forecasts, we will not find any fantasy in analysing the productivity gap. It is the main reason for our lower standard of living. Productivity is a fundamental yardstick of economic performance; poor productivity holds a nation back. We are determined to narrow that gap.
Again, I agree very much with the intervention of the noble Lord, Lord Wade, and the theme of advice that in today's world productivity creates the jobs, not central government diktat. Therefore, we must work very, very hard at the issues which lie behind our inability to bring productivity to a higher level. What does that mean? It means that we have to invest more, educate better and train more.
Our purpose for industry is not a criticism of industry. It is an observation about the outcome of a series of policies over decades. Our purpose for industry is to help it to create, add more value, produce better quality products and better services. The University of Industry, which my noble friend Lord Sainsbury will help bring to fruition early in the year 2000, will have the very strong job of training and educating the SME community.
I believe that we are moving in the right direction. We need to do so with pace because the ambition, although simple, will be complex in achieving--and that is to turn Britain into the leading knowledged-based economy of
the world. If I may use an excellent quotation from the noble Baroness, Lady Sharp, we must all try to hi-tech our low-tech businesses. That is the secret. It is the right strap line or sound bite for what we wish to do in a knowledge-driven economy. I could not agree more.In global markets, where products can be made and shipped anywhere and in which production technologies can soon be copied, we cannot base our future prosperity simply on the traditional building blocks of the old industrial economy, such as raw materials and cheap labour. I was interested to get a small lecture on the oil industry from the noble and learned Lord, Lord Fraser of Carmyllie, who has now become an expert since we swapped. However, I noticed that he was pointing out to me that the price of oil was low. Of course, that has its advantages for the community at large. I very rarely hear the other side of the strong exchange rate coin, which is that our input costs in industry are 10 per cent. lower this year than they were last year. By golly, if that does not give industry a benefit, I do not know what does. But I agree with the noble and learned Lord that we have to watch the level of taxation very carefully, as indeed the Chancellor did. That is why it has not been adjusted, but we will keep it under close review.
What we have to do is base our competitiveness on distinctive assets which cannot be so easily imitated--assets based on our creativity and talent. We have to bring them together to ensure a winning process. Competition of the future will be about the process that you put in place. Many people can copy your assets, and your competitive advantage in technology terms can have a short lifetime. But the process by which you put together knowledge, information and value will be the way to win in the future.
That is why we will introduce an electronic commerce Bill in this Parliament. It is estimated that within five years electronic commerce could be a market worth more than £300 billion. Our aim is to create the best climate for the UK for trading on line, so that British companies can build on a competitive market at home and expand those services abroad. The internet is literally transforming industries. We know that and we are determined that Britain shall lead this revolution and not follow it.
Enterprise will flourish best with an active partnership between government and business and between business and the unions. Many of my colleagues behind me have spoken about that partnership. I shall say no more than that noble Lords will have to wait for the publication of the papers. I heard clearly that noble Lords are in support of a sound partnership. I heard the comments of my noble friend Lord Brookman and have taken account of them.
We are talking about the culture of partnership at work, a culture which is already evident in most successful modern companies. As the right reverend Prelate the Bishop of Oxford rightly said, many modern companies espouse these principles, but current employment law does not always foster the objectives. We will correct that by establishing, through the fairness at work Bill, a balanced framework of workable and practical measures for the future. We welcome the
positive remarks of the noble Lord, Lord Razzall, in that respect. We will provide rights for the individual at work, including greater protection against unfair dismissal. We will bring forward measures to establish a forward-looking balance of rights and responsibilities for employers and employees. An efficient and effective financial services industry is also vital for our prosperity, stability and international competitiveness. The financial services and markets Bill announced in the gracious Speech will improve the regulation of financial services and markets.
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