Orders of the Day — Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 4:51 pm on 10th March 1999.

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Photo of John Redwood John Redwood Shadow Secretary of State for Trade and Industry 4:51 pm, 10th March 1999

The hon. Gentleman knows the answer to that question. The Opposition will set out the right remedy for the British economy in the prevailing circumstances in the run-up to the next general election. We cannot do more than oppose a wrong idea at the moment. We opposed independence for the Bank of England and we explained that we did so because it would do great damage to British manufacturing. Our prediction has come true. The Chancellor should admit that he got it wrong, apologise, recognise the damage that he has done and try to do better next time with a different policy.

One would have thought that Ministers would care more because the problems are occurring in their constituencies. My constituency of Wokingham does not have a big problem, because it is a high-tech town which is still doing well. However, there are real problems in the industrial heartlands, which are usually represented by Labour Members, especially those on the Front Bench. In the past six months, unemployment has risen by 101 in the Prime Minister's constituency. He should visit it and find out. Unemployment has gone up by 275 in Hartlepool, the constituency of the recently departed Secretary of State for Trade and Industry. It has gone up by 405 in the constituency of the current Secretary of State for Trade and Industry—a huge number of people out of work while the right hon. Gentleman is on the beat, allegedly looking after the interests of British business, yet he does nothing about it.

Has the Secretary of State read the forecasts in the Red Book? They are not my forecasts. For many months, I have been predicting industrial recession; now the Government have caught up with the Opposition's prediction. The Chancellor tells us that, in 1999, manufacturing output will fall by between 1 and 1.5 per cent. That is a recession and it is a long one. No one thinks that the Chancellor is being too pessimistic—indeed his forecasts assume that sterling will fall to help manufacturing industry. However, that is not happening at present; the position is becoming worse.

The Budget predicts a further collapse in our trade balance. I remember the present Chancellor fulminating against any increase in the trade deficit under Conservative Governments. However, he does not even mention the matter in his Budget statement; nor is it mentioned by the Secretary of State for Trade and Industry. Exporters find that the going is extremely tough. What does the Chancellor say in the Red Book, although not in his Budget speech? The deficit in trade in goods and services is forecast to widen to around £ 13¼ billion in 1999". We are told that net exports will be well down on levels recorded last year. There is to be a balance of payments crisis and a collapse of manufacturing exports; the Chancellor foresees a country awash with imports as workers are thrown on to the dole and people buy goods from abroad—exactly what the hon. Member for Ochil (Mr. O'Neill) tells us is happening in his constituency thanks to the purchasing decisions of Marks and Spencer.

How many people might lose their jobs as a result of the actions of this bungling Chancellor? The trade unions are clear—[Interruption.] The hon. Member for Lincoln (Gillian Merron) should not laugh when the Chancellor is criticised by the trade unions. She should understand that sometimes the trade unions are right and that sometimes she should listen to them. The trade unions are fairly clear, saying: We estimate that in the year to quarter 4 1999 total employment could fall by 200,000 to 300,000 and almost all the lost jobs will be in manufacturing. That is quite a forecast, but it is lower than the so-called independent forecast included in the Chancellor's Budget figures, where we learn that the increase in unemployment will be 400,000 as a result of this and previous Budgets.

I wish that I could disagree with the trade union forecasts and tell people all over the country in industrial jobs that things will not be that bad. I want our country to do well and our manufacturing industry to thrive and survive. Unfortunately, the Government's whole strategy rests on people in manufacturing losing their jobs on a grand scale.

The Government tell us that British industry is 20 per cent. behind our continental competitors in productivity. If the Government will do nothing to lower other costs and taxes on business, the reduction in costs will have to come from jobs. Do they really want that? I want the Government to cut other costs and taxes, rather than business having to cut jobs. If the whole of that one-fifth gap in productivity has to be narrowed by losing jobs, the Government are recommending the sacking of 1 million people from the manufacturing areas of this country to bring us into line with Germany. They will not give on the exchange rate, regulatory costs or taxes, so they say that the brunt of the burden of adjustment must fall on jobs. Furthermore, they cannot say that the adjustment will come from rising output, which is what Conservatives would want, because the forecasts are that output will fall as a result of their policies.

To be fairer to the Government, let us be more modest in our assumptions. Let us assume that, this year, the Government want British industry to raise its productivity by only 4 per cent., thus making a small contribution to bridging the gap that they perceive between us and Germany. We should remember that Germany's productivity will also rise. The 4 per cent. increase in productivity, on top of a 1 per cent. output fall—the lowest end of the Chancellor's range—means that 5 per cent. of jobs in industry must go. That is about 250,000 jobs, just for one year's modest narrowing of the gap that the Government think is all important, and which they think must be narrowed by sacking people rather than by the Government mending their own ways. Our forecast of 250,000 jobs to go in manufacturing is modest compared with the upper level of the trade union forecasts. I fear that it will come true. I wish that the Secretary of State would change his speech, change his policy and prevent it from becoming a reality—for the sake of his constituents, if not for the sake of mine.

What does the Secretary of State bring to the party? He brings a trade war between the European Union and the United States of America. Does he not realise that in a trade war there are absolutely no winners? In this trade war, the loser will once again be British manufacturing— which loses from everything the Government do. The Secretary of State seems to see himself as the samurai of the trade war, but he is instead the kamikaze pilot who mistakes the Scottish borders for New York and ends up destroying great chunks of the cashmere and biscuit industries through his suicidal dive.