It is more of a pleasure to speak following the right hon. Member for Old Bexley and Sidcup (Mr. Heath) as a speaker than as a Minister. When I went to the Department of Prices and Consumer Protection in 1974, I had to pick up the results of the accelerating inflation that the right hon. Gentleman had left us, with his threshold agreements.
Indeed, it amused me to hear the Chancellor trying today—as did the Secretary of State for Trade and Industry last week—to rewrite history, trying to pose horrors of the 1960s as being implicit in the programme that the Labour party is putting forward. The Chancellor referred to the Department of Economic Affairs and to the National Enterprise Board. We heard the same last week from the Secretary of State for Trade and Industry, who said:
Does the Labour party remember the Department of Economic Affairs?
I remember it. I was in it. He went on:
Does it remember the National Enterprise Board? They, too, were set up to 'develop strategies and identify priorities for industry'. Where did they leave British industry?"—[Official Report, 22 November 1989; Vol. 162, c. 122.]
I am happy to tell the House where they left British industry. At today's prices, they left British industry with a balance of payments surplus of £5 billion a year, and the Conservatives were the beneficiaries of that. Not only did they leave the advantage of the equivalent at today's prices of a £5 billion a year balance of payments surplus, but they did it having inherited from the Conservatives a deficit of £5 billion. So if the Government want to go back to the days of the Department of Economic Affairs and the National Enterprise Board, we should not run from that but run to the record books and throw the figures back at the Government.
I am today having a fascinating maiden speech experience, in that I am making my first Back-Bench speech after 22 years on the Front Bench, where I served mainly in economic areas. I therefore feel it appropriate to contribute on a narrow aspect of the issues that are dominating our worries today. I want to talk about what I see as the squandering of a unique and unrepeatable opportunity that Britain had during the 1980s.
I want to fit the events about which we are now worried into a longer-term context, as I genuinely believe we are seeing the return to a problem that has beset the United Kingdom since the second world war—the stop-go syndrome. For the Chancellor and other Ministers to describe what is happening now as a blip either reveals that they have been grossly misled or is an attempt by them to grossly mislead.
We are facing a balance of payments crisis of unprecedented proportion. We must remember that we emerged fom the second world war into an era of balance of payments crises for reasons that I do not need to go into, and which most of us understand. So intransigent were the problems that we faced, as far back as the mid-1940s, that for the next 35 years they beset successive Governments. Every time there was a bid for growth, the drawing in of raw materials and semi-manufactures led to pressure first on the balance of trade, then on sterling, then on the Bank of England to inervene, next on the Government to raise interest rates and then on the Government to introduce credit squeezes. After the go, the stop would inexorably be applied, and we would be in a period of deflation.
That was bad enough, but the consequences produced what we have all come to know as the British malaise—low investment, bad industrial relations and low growth. They produced low investment because manufacturers were determined that they would not be caught again. They were told by successive Chancellors and Prime Ministers that if they invested, this time the dash for growth would be the real one, and then subsequently, as the brakes were applied, they found that they had surplus capacity and high servicing charges. As a result, they became cautious and in turn created the second problem—poor industrial relations. They began to use labour as a capital substitute. As we went for growth, instead of investing, as our competitors were doing, we took on labour and started overtime. When there was a cut back and deflation, we cut labour and overtime.
Consequently, the era of industrial confrontation was born. Out of that hire and fire economy emerged the British sickness—low investment, bad industrial relations, lack of skills and low growth. While we were trapped in that syndrome, our competitors—the United States, the EEC and Japan—were enjoying continuing growth. Every time we touched the accelerator and our gear slipped—as inevitably happened as the brake had to be applied—the gap between us and our competitors widened.
Nowhere was that gap revealed more clearly than in the car industry. Over a period of 30 years, as was revealed in The Sunday Times this weekend, car production in western Europe increased by 375 per cent., whereas in Britain it increased by 15 per cent. Until the late 1970s, we were always bedevilled by the threat of a balance of payments crisis and of stop-go.
Then came a unique fortuitous but finite opportunity for us. It came in the form of North sea oil which brought the double boom of resources, but more importantly—although this has tended to be ignored or not recognised—a shield for the first time against the very balance of payments pressures which had forced every Chancellor to apply the brake.
For the first time, we had time—we had a decade. During those 10 years, which are just expiring, as a result of the overseas sale of North sea oil and gas and the import substitution that it represents, we have had a balance of payments windfall of £128 billion. It was our only chance to go for growth. In addition, it provided resources for the first time—which the Government could use if they wished—of an extra £70 billion in windfall revenue. That money could have been used to modernise industry and update technology, for innovation, growth and investment.
The Government inherited that possibility in 1980, at a time when manufacturing investment in Britain was already at the highest level it had ever attained in the entire post-war period. They had the platform on which to build. Manufacturing investment was at an unprecedented high and the resources were available to boost that investment further. What more could any British Government have asked for? What an opportunity was presented to them.
How did they use that opportunity? The guilty man is sitting on the Treasury Bench. How did the present Leader of the House use it in what he described as his first "opportunity Budget"? This Government, like so many Governments, made their errors in the first six months and spent the rest of their term trying to undo them.
In his first Budget, the present Leader of the House unleashed policies that cut manufacturing industry by 20 per cent. and manufacturing investment by 41 per cent. We had the resources to sustain output at that time, but he cut it. For the entire life of this Government, while they have had that finite resource, instead of manufacturing investment soaring it has only just got back to where it started. In the process, that manufacturing industry, which, as I said, had already been cut back by 20 per cent. in capacity, lost £18 billion in investment which it would have had if the Government had sustained the level of investment applying when they took office. No Government since the war have ever had such an opportunity.
Now, 10 years on, the Thatcher miracle can be seen for what it is—the miracle that never was. Despite that £128 billion balance of payments windfall—it is important to emphasise that figure—at the end of this year the Government will have a net balance of payments deficit for the decade of £15 billion. The existing £15 billion deficit and the £128 billion balance of payments bonus that they had show that the Government have under-produced goods and services on a monumental scale—£143 billion. That is the cover that they have had from the North sea. It is the price which we have had to pay for the destruction of industry and the cutting of investment. The other day the Secretary of State for Trade and Industry had the cheek to say that there was no supply side problem—there is just a gap of £143 billion.
Now oil is declining. Britain has never known failure on such a scale. Future historians will look with wonder and horror at the Government's failure and at the failure of the right hon. and learned Gentleman the present Leader of the House and the Prime Minister to seize the one and only opportunity we have had since the war to break out of the vicious stop-go cycle. It was not a decade of lost opportunity because "lost" implies that there might have been an element of chance in it. It was a decade of squandered opportunity.
The Prime Minister and the Leader of the House are like a family who won the football pools and two years later were bankrupt. Britain won the pools when we found North sea oil and that £128 billion-worth of resources for the country. However, because of doctrinal bigotry, lack of understanding, refusal to consider alternatives and a neglect of the evidence, the Government in their blindness allowed the North sea oil—all the £128 billion—to run back into the sand from whence it came. Now, £128 billion later, we are back where we started: there is pressure on sterling, a brake on growth and firms are revising investment programmes downwards.
The peak riches of the North sea are behind us. There is no rescue for the Government. I submit that we are seeing not an isolated blip, but a return to that inexorable cycle: thanks to the Government's ineptitude, we are back on to the old stop-go treadmill.