I shall deal first with what I call the manufacturing myth—the myth that Labour Members are the true friends of manufacturing industry. Some commentators paint a picture in which all the recent economic growth that we have enjoyed has been in the retail and service sectors and that none has been in manufacturing. Some say that the supposedly great manufacturing industries of the 1960s and 1970s are all dead or dying. Opposition Members have consistently claimed that, under Conservative rule, manufacturing output has fallen.
The stark fact is that manufacturing output fell under the last Labour Government. Under the Conservatives, manufacturing output has risen sharply, particularly in the past few years, and last year it rose by 4 per cent. Much of the industry in the 1970s was grossly uncompetitive and almost dead on its feet. Not only do we have more manufacturing industry now than we had under Labour, but it is more competitive and in better shape—[Interruption.] Labour Members laugh, but I will give examples to prove my point.
Who would have given British Steel a chance in 1979? Who would have given a chance to our aerospace industry or even to ICI, which had the reputation of being a sleepy, inefficient giant depending largely on our old colonies for its markets? Yet last year, for the first time ever, Britain's pharmaceutical companies exported more than those of any other country.
Our aerospace producing industry recently overtook France to become the world's largest, after the United States and the Soviet Union. Many people in my constituency, including Labour supporters, tell me frankly that industry in the area in the 1970s depended largely on inefficient and uneconomic pits or on old industries which were on their last legs. My constituency has seen a huge growth in manufacturing industrial output and there is now a widespread competitive manufacturing sector ranging from engineering to carpets and from consumer products to electronics.
Just outside my constituency, another of the industrial near basket cases of the 1970s, Rolls-Royce, now has a record order book for its aero engines. At almost every airport in the world one sees new planes with Rolls-Royce engines. My hon. Friends and I are extremely proud of a record such as that, even if Labour Members are grudging about it.
There is no denying that there has been some mismanagement of the demand side of the economy. That mismanagement has been due not to tax cuts, as is often claimed—such cuts injected only £4 billion extra into the economy last year—but to low interest rates in 1987 and 1988, which injected 10 times as much demand into the economy—£40 billion in all.
Those demand side problems should not blind us to the fact that the supply side of the economy has been producing record levels of wealth and output in recent years. Proof of that lies in the fact that, while the demand explosion has undoubtedly meant that imports and inflation have risen, our domestic output has risen sharply as well. The reasons for that enormous improvement in domestic output are better productivity and more competitive industry which has enjoyed an investment boom.
Investment now going into British industry is far better than that which occurred in the 1970s. At that time, investment was often directed by Government into unviable projects such as the creation of ludicrous and unsustainable levels of capacity in the steel industry.
There are other, more positive, though little noticed, signs which bode well for our prospects in the coming few years. For example, our share of world exports, which fell sharply in the 1970s, has stabilised in the last decade. Exports were up sharply in the last year and, in volume terms, they rose by 10 per cent. over the last quarter.
Our exports are now growing far faster than are our imports—[Interruption.] That may not give Labour Members much pleasure, but I have stated the facts. Our export performance is good now. That shows that our economy is more competitive and is responding well to increased demand. Perhaps that does not amount to the economic miracle that some were unwisely claiming some years ago, but it shows that our industrial problems are not nearly so grim as Opposition Members suggest.
Perhaps there never was a real chance of solving in a decade all our deep-seated and long-term industrial problems, many of which go back many years and are the responsibility of many Governments, as hon. Members in all parts of the House will accept. Even so, we now need, above all, a continuation of our successful supply side policies to consolidate the improvements of the last decade. An area where improvement is vital is the education system, which must supply the skilled, trained and educated people whom industry needs.
Conservative policies have produced more wealth and more manufacturing output than ever before. We should not be blinded to that fact by short-term demand problems. To deny that our policies are working risks a return to old-style, pre-Thatcherite policies. It would be ironic if, at the time when every other country, including many Communist states, are moving to more free market systems, we should return to a more controlled, centralised, regulated economy.
We have recently been hearing more a term which, thankfully, we have not heard for a decade. It is "industrial strategy". If we can learn lessons for the future by looking at the past, we can learn much by looking at previous attempts at industrial strategies. Consider, for example, Jaguar, which is topical today. The Government have been accused by the Opposition of allowing Jaguar, supposedly the jewel of the British car industry, to be sold off to foreigners, preventing it from developing into a major independent force in world car markets.
The battle for Jaguar to be a major independent force in world markets was lost not in the last decade but in the two decades before that. When we took office, Jaguar made a paltry 15,000 cars per year. Last year it made more than three times that number. It has been brought back from the brink by Conservative policies. Jaguar was taken to the brink by earlier Labour policies, for it was an industrial strategy of the Wilson Government which decreed that the British car industry should merge.
Industrial strategy and regional policy ordained that the British car industry should build plants in unsuitable places which meant that bodies and engines had to be shunted around the country from the midlands to Bathgate, and to Speke and back again. An industrial policy in the 1970s determined that the volume car business should bleed Jaguar and Land Rover white, so that for years those companies did not have enough investment capital.
That was why the good bits of the old British Leyland empire, such as Jaguar, were virtual industrial write-offs by 1979, making a few thousand cars in out-of-date factories with appalling labour relations and no pride in the job. Opposition Members need not take my word for that. George Simpson, currently the managing director of the Rover group, who worked in that group in the 1960s and 1970s, talking about the late 1960s, observed:
It was a radically different company years ago … riddled with archaic practices. My greatest initial experience when I joined the company was trying to find out which level of canteen I would be assigned to. There were 14 levels of canteen and eventually I was allocated to one where you could have beer or sherry with your lunch.
That was under a Labour Government. That was when Jaguar's pass was sold. That was the legacy of Labour's industrial strategy. Industrial strategies and interventionist industrial policies do not work. Markets work because they represent the individual choices of millions of people. It is sheer arrogance to believe that politicians and bureaucrats can make those decisions for people and that they know better than business men where to invest money.
The investment decisions of politicians are almost invariably clouded by political judgments which usually lead to commercial failure. Those who hold up Japan as an example of supposedly successful industrial planning have grossly misread the causes of Japan's industrial success. I accept that it is always easy for western politicians and business men to claim that Japan succeeded through something simple and easily understandable such as an industrial policy, which supposedly we have not had in the West. However, virtually all western Governments have tried industrial policies, and almost always they have failed.
To believe that industrial planning lies at the heart of Japanese industrial success is to miss the point. Japan has succeeded for many reasons, among which are its intensely competitive internal market, very low taxation, very low Government spending and a disciplined and vocationally oriented education system. Since the war, Japanese Governments have never pilloried profit or sneered at success in the way that Labour politicians habitually do. Japanese companies have taken care to make their employees feel part of their organisation, and they have been open-minded enough to buy in the best technology from overseas. Japan's Governments have provided a pool of low-cost investment for its industry by keeping taxes very low on savings—something which we would do well to emulate. None of those things has anything to do with industrial strategies.
We should not kid ourselves that the Japanese have succeeded through industrial planning, however alluring an excuse that might be, or that all that Britain needs to solve its industrial problems is a little bit of intervention here and a little bit of administrative guidance there. We should not fool ourselves that the right hon. and learned Member for Monklands, East (Mr. Smith) and his friends will get together with industrialists, trade unionists and a few civil servants and solve all our industrial problems. Our economy is not like that.
All those policies have been tried, and they have failed. Those policies gave us the economic planning boards of the 1960s, the National Enterprise Board of the 1970s, and British Leyland, British Shipbuilders, and British Steel, all of which were chronic loss-makers. Those policies will fail again if they are tried again. We should not return to the old pre-Thatcherite agenda which is being rejected all over the world. We should continue with the free market policies allied to improvements in our education system which will steadily rescue us from nearly a century of steady decline.