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Manufacturing Industry

Volume 13: debated on Thursday 19 November 1981

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4.

asked the Chancellor of the Exchequer to what extent his policies are assisting the recovery of manufacturing industry.

Figures now available for the third quarter of the current year show that manufacturing output rose by 1½ per cent., output in chemicals and allied industries by 6 per cent., and output in engineering and allied industries by 2 per cent., compared with the second quarter. This evidence confirms my earlier judgment that the worst of the recession is probably behind us.

How can the Chancellor justify that answer when Manchester city planning department has recently issued a report which predicts the horrific figure of 40 per cent. unemployment in the city by 1985? There is an annual loss of 3,600 jobs in the manufacturing sector, while only 900 are being created. Even in the service sector jobs show a decline. The council has dismissed about 4,000 of its staff. Is this the brighter picture to which the Prime Minister referred in her Guildhall speech, or is it another effort to delude the workers?

I am not responsible for the forecasts of any organisation, even in Greater Manchester. I understand the hon. Gentleman's concern about the present level of unemployment. All are concerned about measures to get that figure to come down rather than to go up. The facts to which I have drawn attention indicate, as my right hon. Friend the Prime Minister stated, that movement is now taking place in the right direction. In order to encourage and accelerate that movement we need to go on achieving moderation and restraint in pay settlements and ensuring that local authorities do not establish an opposite trend by imposing rates that are too high for the survival of manufacturing industry.

Is my right hon. and learned Friend aware that the information that he has given is very welcome? Is he further aware that most industrialists are looking for extra demand? Where will that demand come from?

I am aware that industrialists, not only in this country but in the countries of the European Community, are, to use my hon. Friend's words, looking for further demand. The present prospect for the United Kingdom is that output is moving in the right direction, whereas in many Community countries it is still moving in the wrong direction. That is happening, not because of anything that we are doing to demand in any broad sense, but because industry is recovering its competitiveness and improving its ability to win world markets. That is the right place to win demand.

The Chancellor of the Exchequer is not coming clean with the House about the real facts. Is he aware that industrial output is still 13½ per cent. below the level that the Government inherited at the time of the general election? Even output per employee is well below the figure for 1979. When does the right hon. and learned Gentleman expect unemployment to start to fall? Does he still hold the opinion that he expressed on 30 July, that the recession is now at an end?

I have already stated that the evidence that I have cited, which the hon. Gentleman chooses to disregard, confirms my earlier judgment that the worst of the recession is probably behind us. I should be grateful for the hon. Gentleman's modest welcome for the fact that output is now moving upwards, and not downwards.

Does my right hon. and learned Friend recall that at no time during the life of the Labour Government was it possible for industry to raise money in the market at fixed rates that were commercially attractive? Will he continue to seek to hold down public expenditure until this situation can be turned round?

I am grateful for my hon. Friend's support. The objective of Government policy is to maintain effective control of public expenditure to improve prospects for the private sector.

Is the Chancellor aware that Governments can create demand? Demand is needed in a whole range of areas, including the public sector. Does he agree that 70 per cent. of increased spending on house building and assistance for schools and hospitals would result in more jobs being created in the private sector? Is it not high time that, with more than 4 million out of work, the Chancellor turned his attention to creating more jobs and demand to help people spend more money and thereby get even more people back to work?

The hon. Gentleman will no doubt take longer than others to learn the lessons of the history of the last 10 years. Of course, it is possible, as he said, for the Government to create demand. But experience that teaches us the right lesson is that of each £1 of extra demand created in the last 10 years only 5p went in extra output, while the remaining 95p served only to finance higher imports and higher inflation. The effective way to create demand is for manufacturers, employers and work people to work together to improve their own prospects for securing an expansion of their own output.