Orders of the Day — Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 7:39 pm on 10th March 1999.

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Photo of Mr David Prior Mr David Prior Conservative, North Norfolk 7:39 pm, 10th March 1999

As I listened to the Chancellor's Budget statement, my impression was of massive complacency, and that same complacency was exhibited by the Secretary of State for Trade and Industry this afternoon. There was more than a touch of Dr. Pangloss about both statements. Where have the Chancellor and the Secretary of State been for the past year? Do they have industrial companies in their constituencies? Are they aware that orders, sales and profit margins are being squeezed, and that many manufacturing and engineering companies are laying off employees?

Almost worse is the impression that neither right hon. Gentleman has grasped the lesson that the country had to learn so painfully in the 1980s: we operate in a global marketplace, so we have to be the best by the best world standards. It is because this country embraced those two lessons that we were able to attract so many foreign companies during the 1980s and the early 1990s. The benefits of that investment, such as improved working practices and product quality, are still with us today.

Whereas the challenge in the 1980s was for this country to catch up with Europe, especially our competitors in Germany and France, today's challenge is no longer confined to Europe; we have to be better than our competitors in the United States, Asia, south America and other parts of the world. It is becoming increasingly widely recognised that the European way of doing business is not competitive. Take the case of Germany today: many large industrial companies are disinvesting from Germany and reinvesting in new manufacturing capacity in the countries of eastern Europe and south America.

We have to judge the Budget against that background because only if we get right the fundamental decision about what sort of economy we want in this country will we be able to afford in the long term decent pensions and public services and to achieve a high level of employment. Getting that judgment right is crucial, but I believe that, as we adopt an increasingly dirigiste style of government, with bigger government, more interference and more regulation, we build a higher costs base that will eventually lead to protectionism in Europe.

The lead measure in the Budget was the reduction in the headline rate of corporation tax. I welcome that, but have to point out to Ministers that the problem currently facing British industry and commerce is not the level of corporation tax, but the fact that our costs are too high to enable us to compete. Our regulatory costs, employment costs, transport costs, energy costs and administrative or bureaucratic costs have become too high.

Let me give a few examples. Take inspection costs in our abattoirs, which are going through the roof because of new European Union regulations, or the hygiene and welfare standards imposed on our pig and livestock producers. Take the effect of the minimum wage on a company in my constituency that employs a lot of casual workers and now faces the bureaucratic problems of filling in all the forms needed to comply with the minimum wage. Take the effect of the working time directive, which has had a big impact on companies that work in shifts, especially those that have night shifts. Take the effect of the increased recognition of trade unions. Most damaging are the new rules on unfair dismissal, which will deter many companies from taking on new employees. Finally, the social chapter is, in effect, a means of making all EU countries operate at the same level of uncompetitiveness.

When they took office, the Labour Government inherited a culture of business and entrepreneurialism—a culture which had changed dramatically during the 1980s and 1990s. We had embraced the new competition and were able to compete throughout the world. We have now taken a wrong turn, however: just as we were about to embrace success, we have gone off in the wrong direction, towards a more highly regulated dirigiste form of government. I had hoped that the Budget would demonstrate that the Government had taken on board the lessons of the 1980s and early 1990s but, sadly, they have not.