Orders of the Day — Manufacturing Industry

Part of the debate – in the House of Commons at 10:12 pm on 17 May 2000.

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Photo of Patricia Hewitt Patricia Hewitt Minister of State, Department of Trade and Industry 10:12, 17 May 2000

I congratulate the hon. Member for Tewkesbury (Mr. Robertson) on securing a debate on an extremely important issue. It is important not just to his and, indeed, my constituents but to our country.

As the hon. Gentleman readily acknowledged, we had a full debate on manufacturing industry only yesterday. In that debate, he referred to statistics, as did the hon. Member for Tiverton and Honiton (Mrs. Browning). Let me remind the hon. Gentleman that although 160,000 manufacturing jobs have indeed been lost since the election three years ago, that compares with an average loss of 140,000 manufacturing jobs a year under the Conservative Government whom he supported.

Although some manufacturing jobs have indeed been lost over the past three years, for reasons that we well understand, total employment in our country is higher by more than 900,000. Nearly 1 million more people are employed now than have been employed since records began. We have a sound, proud record of rising employment and rapidly falling unemployment.

We may not agree on the statistics, but I can at least agree with the hon. Gentleman about the importance of manufacturing industry. I am increasingly concerned about the tendency of much of the press and some commentators to talk of the new economy and the old economy. That is very misleading. Most of the time, such talk brings with it an implication not only that the new economy is all about dot.coms and the internet and all the very exciting stuff for which I have a certain responsibility as Minister for Small Business and E-Commerce, but that that is all the new economy consists of, and that the old economy—which is always associated with traditional manufacturing sectors—is somehow destined to decline and die. That is, of course, absolute rubbish.

The new technologies—including, but not only, the information and communications technology underlying the internet—are transforming every sector of the economy. They are also transforming every part of the production process and almost all the goods and services that we buy. Therefore, a high-tech, science-based and modern manufacturing sector is just as much a part of the global, 21st century, knowledge-driven economy as the service sector, the dot.com companies and the rest of the so-called new economy.

It is very important that we get that message across to City analysts, to the financial institutions that make investment decisions and to the public. I think that the hon. Gentleman and I might well agree on that point. However, I can assure him that there is no confusion at all within the Government about the importance of manufacturing industry. Moreover, as this is an Adjournment debate, I shall not dwell on the lamentable record of the previous Government, who killed off large parts of United Kingdom manufacturing industry in two disastrous recessions, in the early 1980s and in the early 1990s.

The other thing that is happening under the impact particularly of information and communications technology is that the distinction between the manufacturing and the service sectors is becoming increasingly blurred. It is important that we understand that, too. In a modern luxury car, for example—as the hon. Gentleman said, cars have been somewhat in the news recently—70 per cent. of the value comes from the design, styling and, above all, intelligence—the computing power and the communications power—that are embedded within it. Therefore, it is manufacturing, but it is also services.

Let us consider the example of the internet, e-commerce and dot.com companies that have been so much the fashion recently. As the Minister responsible for e-commerce, I am constantly struck by the sheer volume of manufacturing industry that is required by the internet, the telecommunications and, increasingly, the converging sectors.

Earlier today, I had the pleasure of going to Colt's new internet hosting centre. Colt is not only a rapidly growing British-based telecommunications company, but the first telecommunications company to be licensed after the telecommunications duopoly collapsed some years ago. What I saw there was bank upon bank and row upon row of intensely intelligent, expensive and highly engineered manufactured equipment which are the servers enabling the very secure hosting of websites and other services for Colt's hundreds—and, in future, undoubtedly many more—business clients. That type of facility is developing in many parts of London, which is one of the centres for electronic commerce, particularly in the European Union.

All of that depends on high-tech manufacturing, and ever more of that high-tech manufacturing is being done in the United Kingdom. We are European and world leaders in many parts of the electronics and components industry, which is enormously important to our economic future, to employment and to the standard of living that we can offer our people. Therefore, there is certainly no misunderstanding or mistake on the Government's part about the importance of manufacturing and the need to ensure that the environment is right to get the investment in the high-tech, high-value-added and highly competitive manufacturing base of the future.

The hon. Gentleman and I agree that it is not the proper role of a modern Government to run industry. However, it is the Government's responsibility to create an environment in which modern manufacturing and every other part of the economy can flourish. Our first and most important task as a Government was to create a stable economy—a stable macro-economic environment and an end to the cycle of boom and bust that has bedevilled the British economy not just for the past 20 years, but for the past 30 or 40 years.

The economic cycle has been far more intense in the United Kingdom than in our competitor countries. We have had far higher upswings of unsustainable, inflationary, above-trend growth and far more severe and damaging recessions that plunged home owners into negative equity and businesses into bankruptcy. That was a disaster for manufacturing, for business generally and for long-term investment, because more than any other factor the cycle of boom and bust accounts for the fact that long-term investment in productive capacity in our country has been so much lower than it has been in Germany or the USA, with the result that we face a severe productivity gap. One can argue about the numbers and the different ways of measurement, but one cannot argue about the reality of the productivity gap between us and France, Japan and the USA. That holds us back.

Our first task was to secure economic stability and our first decision was to take the politics out of interest rates by giving the Bank of England independence to set them. As a result, we have not only got inflation down and kept it down, but we have the lowest long-term—and, indeed, short-term—interest rates that we have had for a long time, with no prospect in this or, I think, the next economic cycle of returning to the appalling situation that we had under the previous Government, when interest rates were above 10 per cent. for four years on end, peaking at 15 per cent. I remember only too well the pain and devastation that that caused to home owners and businesses alike.

We are making decisions for the long term and building for long-term economic stability. We are not going to put that long-term stability at risk by trying to provide short-term fixes. As my right hon. Friend the Chancellor said last week, we well understand that the exchange rate between sterling and the euro does not reflect any sensible view of long-term economic fundamentals. We readily acknowledge that that rate creates real difficulties for any company seeking to export into the eurozone. That particularly affects manufacturing.

However, that does not mean that we should seek an artificial devaluation of the currency. It is worth remembering that against the dollar, the pound has been remarkably stable for the past four years. The suggestion that sterling is fundamentally overvalued does not hold water. The problem clearly has much more to do with the weakness of the euro. The hon. Gentleman expressed his view and that of a large part of the Conservative party about the euro, but one reason for our commitment in principle to joining a successful single currency if the economic conditions are met is that it would eliminate the exchange rate instability that has been so damaging and that has created such difficult conditions for manufacturing industry and other exporters.