Industry (Government Policies)

Part of the debate – in the House of Commons at 9:02 pm on 10 July 1980.

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Photo of Hon. John Silkin Hon. John Silkin , Lewisham, Deptford 9:02, 10 July 1980

I am saying that it is a major factor if one cannot get the funds for private investment in British industry. That must have its effect.

This failure of our manufacturing trade performance has not always been because our prices were too high or because our productivity was too low. I know that the point has been made several times by the Secretary of State. The failure has often been because the quality has been too low and our products out of date. They have been out of date because of that failure to invest, to modernise and to re-equip. The evidence for that is clear. The science policy research unit at Sussex University fairly recently compared United Kingdom and West German exports of about 30 machinery products. It took as examples machine tools, printing machinery and process plant, and it came to an interesting conclusion. It found that Germany outsold the United Kingdom in export markets for 26 of the 30 products. That was despite the fact that German prices were higher than United Kingdom prices. Therefore, it is not always, as the Secretary of State tells us, a question of Britain outpricing itself in the market. It is very much a question of investment, or the lack of it.

During the same decade there has been a conflict, almost an inequality, between two sets of years. There have been years when there has been a period of expansion and growth, and there have been years when there has been either very small growth or a decline. It is interesting to note what happened during that period. When the annual GDP growth exceeded 2 per cent., in every case manufacturing output rose by an annual average of 3·4 per cent. When growth was under 2 per cent., or at 2 per cent., output fell by an average of 1·3 per cent. In a good growth year manufacturing productivity rose by an annual average of 4·5 per cent., and in a bad year by only 0·2 per cent.

That shows an interesting fact. If we are prepared to increase demand and expand, our output rises. That is of vital importance. That would be the policy that a Labour Government would need to impose at this time. It is a policy for now because, when we look ahead to three or four years of Tory government —and I hope that we will not have to look to that—none of us can say what the exact landscape will look like. It will be gloomy, and it will be a more derelict Britain than we have known in our lifetime. If we were to take power at this time, we would have the strategy that Britain requires. It is a policy for expansion. But before we do that we need to protect those industries that are under attack—industries where our home base is being eroded at an accelerated rate.

I was interested to note that that view was taken by a number of my hon. Friends—for example, by my hon. Friends the Members for Nottingham, North, Preston, South, Dundee, West (Mr. Ross), Leeds, West—and by my right hon. Friend the Member for Bristol, South-East (Mr. Benn). They all took that point of view, and regarded it as absolutely vital. But that, by itself, is not enough. It is only a piece of machinery to stop the total demolition of British industry. It is vitally necessary to ensure that British industry responds and moves ahead again. For that we need Government action on a large scale.

I am sorry that the hon. Member for Test is not here. He made a valid point, with which I thoroughly agree. He said that the Government's purchasing policy should be used for the protection and expansion of British industry. As an example of that, he instanced ICL. Opposition Members agree with him that public purchasing is absolutely vital. For that and other reasons, we oppose the denationalisation and the privatisation that has taken place during the past year. We warn the Government that a continuation of that is liable to destroy, to an even greater extent, the basis of British manufacturing. There are rumours that it may now be taking place in shipbuilding. If that were to happen, it would spell the utter destruction of British industries. Therefore, public purchasing is the first requirement.

There must be Government action to ensure that British industry responds to all that the Government can do. There must be pressure on industry to invest, in the same way as in Japan the Ministry of International Trade and Investment—MITI—has given the incentive and drive to Japanese industry and investment. That can be done only by agreeing the goals sector by sector and making planning agreements with individual firms to carry out what needs to be done in the national interest.

That cannot be done, however, unless there is a strong regional policy. There must be a return to the days of the Labour Government, not the destruction of regional policy that we have seen under the Secretary of State for Industry, to which in panic moments he adds the occasional town or part of a town as another industry is destroyed. In addition, there must immediately be a cut in interest rates. The highest interest rates in our history have contributed more than anything to the present failure of British industry to respond to what is happening.

High interest rates affect industry in two ways—first, because firms cannot borrow at a reasonable rate and, secondly, because interest rates are kept at a level where they force the external value of the pound to an unreal rate. All of us accept that, except, apparently, the Treasury Bench, because the poor Chancellor asked "What can I do about it? That is the real value." The answer is simple. If interest rates were cut, the value of the pound would come down, which would make our goods much more competitive instead of having to fight like they are.

My hon. Friend the Member for Ormskirk mentioned ICI as a company which is doing extremely well. But even chemical firms are finding difficulty at present in selling abroad, because they are competing—[Interruption.] I thought for a moment that my hon. Friend the Member for Newham, North-West (Mr. Lewis) was crossing the Floor.

My right hon. Friend the Member for Leeds, East mentioned one other thing which is of vital importance—what we do with North Sea oil revenues. It is a rather terrifying fact, as the Minister of Agriculture, Fisheries and Food pointed out, that £7,000 million a year is needed to support the present number of unemployed—1½ million. That sum could go up to £10 billion if unemployment reaches 2 million, which it is said it will reach by Christmas.

Effectively, of course, North Sea oil revenues are being used, not to support people working in industry or even to support industry, but rather to support unemployment.