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Industrial Competitiveness

Volume 87: debated on Wednesday 27 November 1985

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asked the Secretary of State for Trade and Industry if he will make a statement on the implications for the competitiveness of British industry of the change in average unit labour costs between 1982 and the third quarter of 1985.

Internationally comparable figures on unit labour costs in manufacturing are available only for the second quarter of 1985. These show that since 1982 unit labour costs in domestic currency rose by nearly 9 per cent. in the United Kingdom, remained broadly constant in the United States and actually fell in Germany and Japan, and reinforce the need for pay moderation if we are to remain competitive.

Does the Minister not agree that the Chancellor's enthusiasm for high interest and exchange rates can, at best, keep the situation as it is, but is far more likely to make it a great deal worse in the near future? Does he agree that that means that the relative decline of our manufacturing sector must continue?

No, that does not follow at all. It is essential that interest rates are set to maintain the monetary conditions necessary to keep downward pressure on inflation. Unless wage increases are limited and linked to output, today's pay rises will be tomorrow's job losses.

Now that inflation is falling steadily and will probably, in due course, go below 4 per cent., is there any justification for the annual round of pay increases that are not linked to productivity?

My hon. Friend is bringing the House back to the statement made during the CBI annual conference at Harrogate, the essence of which was that there should be no wage increases unless they are linked to output.

Is there not a direct causal connection between the sharp loss of competitiveness that is shown in all the indices and the sudden and unwelcome appearance of a deficit in our trade in manufactures? Why have the Government's policies produced this unfortunate concurrence?

I reject totally the hon. Gentleman's assertion that the deficit has been caused by the Government's policies. He conveniently ignores the fact that the trough of 1981 was directly attributable to the overmanning and low productivity that developed under the Labour Government.