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House of Lords

Wednesday, 19th April 2000.

The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.

Prayers--Read by the Lord Bishop of Rochester.

Lord Erskine of Alloa Tower

James Thorne Earl of Mar and Kellie, having been created Baron Erskine of Alloa Tower, of Alloa in the County of Clackmannanshire, for life, took the oath.

Lord Ponsonby of Roehampton

Frederick Matthew Thomas Lord Ponsonby of Shulbrede, having been created Baron Ponsonby of Roehampton, of Shulbrede in the County of West Sussex, for life, took the oath.

Manufacturing Industry

2.38 p.m.

Lord Islwyn asked Her Majesty's Government:

    What is the present level of manufacturing industry in the British economy as a percentage of gross national product and how this figure compares with 1979.

Lord McIntosh of Haringey: My Lords, industry shares of gross national product are not available. However, the manufacturing share of gross value added has declined since the 1970s, from around 26.5 per cent in 1979 to 20 per cent in 1999.

Lord Islwyn: My Lords, does the Minister appreciate that since the 1950s there has been a steady decline in manufacturing industry as a percentage of gross domestic product? This is a sector on which regions like Wales and the north of England rely for their economic well-being. Does my noble friend recognise also that, despite the success of the services industry, manufacturing industry provides 62 per cent of our exports? Is it not disturbing, therefore, that, for the past six quarters, investment in manufacturing industry has fallen? If we go on like this, we risk sacrificing our future. Cannot the Government prevail on our companies to invest in British manufacturing industry?

Lord McIntosh of Haringey: My Lords, I am afraid that my noble friend is right about the decline of manufacturing industry. However, I have more recent good news in relation to investment. There has, indeed, been a decline in investment in manufacturing industry, but in the fourth quarter of last year--the most recent quarter for which we have figures--there was an increase of 4 per cent. The Government have been trying to increase investment in manufacturing

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industry with our cut in corporation tax to its lowest level ever, with the removal of ACT, and with the 40 per cent first-year capital allowances for small and medium establishments.

Lord Ezra: My Lords, does the Minister agree that, in spite of the fall in manufacturing capacity in the post-war period, nevertheless manufacturing remains a potent force in the economy of the country? It provides 4 million jobs and, as the noble Lord, Lord Islwyn, pointed out, over 60 per cent of our exports. In those circumstances, is it the Government's aim and objective to build on that capacity? Bearing in mind the problems that manufacturing industry faces not only with high interest rates but also with the high value of sterling, do the Government accept that a basic requirement is the increased application of new technologies to industrial processes, for which increased investment is required, thus leading to a closing of the productivity gap between us and our main competitors?

Lord McIntosh of Haringey: My Lords, that is a complex set of interlinking questions. It is the Government's intention to maintain and build on our manufacturing sector because we recognise its importance for the economy and for our exports. Again, I have more recent good news in that exports of goods increased by 7 per cent in the past six months compared with the previous six months. I have already answered the question in relation to investment in indicating the help that we are giving to promote investment in manufacturing industry. It is true that changes in technology demand substantial increases in investment.

Lord Roberts of Conwy: My Lords, in view of the decline, particularly in employment in manufacturing, and as many future jobs will depend on it, should not the Government actively promote manufacturing rather than undermine it by excessive taxation and regulation?

Lord McIntosh of Haringey: My Lords, the Government certainly promote manufacturing industry in this country and through many trade missions abroad. I have given evidence of the extent to which we encourage investment in manufacturing industry through our taxation policies. I reject the accusation of the noble Lord.

Lord Dormand of Easington: My Lords, my noble friend Lord Islwyn mentioned the north of England. I confirm his comments, but at the same time I congratulate the Government on the £100 million which is now earmarked to revive the coal industry even though there is only one pit left in the north-east. That pit has, however, been saved. What have the Government in mind with regard to shipbuilding?

Lord McIntosh of Haringey: My Lords, I was as pleased as my noble friend to see photographs of relieved miners at Ellington colliery. Unfortunately,

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my noble friend asked a Starred Question on the coal industry on Monday half an hour before the Secretary of State for Trade and Industry made his Statement. Therefore, I was not able to give the good news that I knew he sought. The problem with the shipbuilding industry is that the size of individual orders is large and if one order is lost--as happened recently in Northern Ireland--that has a huge effect on employment and on the economy. However, we continue to give the support that we can.

Lord Campbell of Croy: My Lords, are the Government taking into account the fact that manufacturing industry may well suffer from, and be reduced as a result of, the climate change levy as proposed? Given that many firms are energy based but not labour intensive, they will not be compensated by the return of national insurance contributions under the Government's plan. Those firms which employ few people but are very dependent on energy will suffer. Nothing the Government have yet done has been sufficient to correct that situation.

Lord McIntosh of Haringey: My Lords, the imposition of the climate change levy is the only way in which we can fulfil our international obligations to achieve a sustainable environment. The noble Lord is correct to say that parts of manufacturing industry are energy intensive and that they will suffer from the provision. However, a large sector of manufacturing industry has high employment and relatively low energy use.

Lord Randall of St Budeaux: My Lords, does my noble friend agree with me that it is not so much sectors that are the issue here, but rather the kinds of businesses that are being established? If we are to have economic reform and job creation, we must encourage the creation of small and medium-sized enterprises to a far greater extent. Does he also agree that the Welsh economy in particular could benefit from the creation of SMEs rather than relying on big companies investing in the Principality?

Lord McIntosh of Haringey: My Lords, some time ago I mentioned the special help which is being given to small and medium enterprises particularly in terms of first-year capital allowances. My noble friend is right to say that much job creation arises from small and medium enterprises which, it is hoped, will grow into large enterprises.

Waste Incineration: Proposed Directive

2.46 p.m.

The Countess of Mar asked Her Majesty's Government:

    What communications took place between officials in the Ministry of Agriculture, Fisheries and Food and the Department of the Environment,

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    Transport and the Regions during the consultation period for the European Union directive on the incineration of waste.

The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions (Lord Whitty): My Lords, the Department of the Environment, Transport and the Regions leads for the UK in the ongoing negotiation of the proposed waste incineration directive. Since February 1994, when the Commission began consultation on its initial working paper towards a proposal for a waste incineration directive, MAFF officials have been fully consulted by their colleagues in DETR (and its predecessor, the Department of the Environment) in writing, in meetings of interested government departments, and bilaterally. DETR officials are continuing discussions with colleagues in MAFF and other government departments.

The Countess of Mar: My Lords, I am grateful for that reply. Is the noble Lord aware that I sat on Sub-Committee C of the European Communities Committee which considered this draft directive and that at no time was there any mention of an estimated 3,000 incinerators for animal carcasses--I refer to those in pet crematoria, in veterinary surgeries, farms which have on-site incinerators, hunt kennels and the big BSE incinerators--which, if this directive is not amended, will face disastrous consequences? I understand that MAFF was not consulted about the number of incinerators which may be affected although it is responsible for them. Will the noble Lord please ensure that everything possible is done at a European level to ensure that the operators of these incinerators are not penalised and that we have nowhere to destroy our animals?

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