|Government Assessment for the Purposes of Section 5 of the European Communities (Amendment) Act 1993
Mr. Clappison: A very good one.
Miss Johnson: It was a very dismal one, and I can run through the track record if the hon. Gentleman eggs me on. We suffered two of the deepest and longest recessions for half a century, and one of the largest booms; we invested a lower share of GDP than any other G7 country in the last international economic cycle between 1982-93; our productivity performance was poor; unemployment claimant count rose by 50 per cent. and unemployment reached 3 million in 1993.
Mr. Clappison: The h Lady is picking and mixing. She said productivity was poor; does she dispute the figures that I quoted from her documentsthe Government concede that it is an important subjectwhich show actual productivity as lower than it was under the previous Government?
Miss Johnson: I shall happily come in a moment to productivity, on which I have several things to say in response to the hon. Gentleman's earlier points.
We predict that net borrowing will be 1.1 per cent. of GDP in 2005-06 compared with 3.6 per cent. in 1996-97 and 7.8 per cent. in 1993-94. The Government are firmly on course to meet their tough fiscal rules. The shadow Chancellor said last week that the Conservative party currently has no fiscal rules.
The hon. Member for Hertsmere alleges that since 1997, UK growth has lagged behind that in the euro zone and the United States. It is worth comparing the 2 per cent. growth in the cycles from 1979-97 with the 2.7 per cent. growth from 1997-2000.
The hon. Gentleman is interested in the savings ratio, in which he places great store. The savings ratio is forecast to rise from its current level in the next few years to 6 per cent. in 2003. However, the figure for net wealth is very important and that figure, as I said in Treasury questions on Thursday, shows that net wealth has grown by 25 per cent. since 1997. We have the success of the introduction of individual savings accounts with 9.3 million accounts opened in the first year and £28.4 billion invested; we have the future of stakeholder pensions and the pensioner credit. We must look again at the circumstances of inflation in the early and mid-1990s; savings inflated through most of the 1990s as households sought to rebuild their finances after the dramatic recession of the early 1990s and the resulting hit on people's savings and prosperity.
The hon. Gentleman is interested in productivity, and so are Labour Members, because it is an important issue.
It should be stressed that manufacturing productivity is still growing strongly at 3.5 per cent. It was at 2.6 per cent. in the second quarter of 1997, but the average over the period 1992-97the period of office of the previous Governmentwas 1.8 per cent. The record on business investment as a percentage of GDP in 1999 is, at 14.3 per cent., higher than in the United States. Inward investment is of course at record levels. We are still viewed by the international community as a prime destination for investment. All the international comparisons show us at the top of the league tables for receipt of international investment.
We have done a huge amount to increase investment. Business investment reached a record 14.3 per cent. of GDP in 1999. The United Kingdom has 40 per cent. of the stocks of United States and Japanese direct inward investment in the European Unionthat is based on 1998 dataand Government investment is set to more than double to almost £20 billion, or 1.8 per cent of GDP, by 2003-04. In addition, we can describe the environment in which that is happening. Business tax has been adjusted to help business. Corporation tax has been cut from 33p to 30p, and for small companies from 23p to 20p. Those are the lowest ever levels, and they are the lowest of all the major industrialised countries.. Capital gains tax has been cut from 40 per cent. to 10 per cent. for longer-term investments. The tax bill for small companies has been cut by almost 25 per cent. since 1997.
Mr. Clappison: Where does the Minister think that business organisations such as the Confederation of British Industry and the Institute of Directors got hold of the idea that an extra £5 billion in tax has been levied under the present Government, and that there has been regulation costing an extra £5 billion?
Miss Johnson: In fact, the CBI is very annoyed about the way in which its comments have been reported. Digby Jones agreed that we have the lowest regulation and taxation in Europe, and he praised the Government for establishing a stable macro-economic platform.
Mr. Peter Luff (Mid-Worcestershire) indicated dissent.
Miss Johnson: I do not know why the hon. Gentleman is laughing. I assume that he is laughing at the CBI and Mr. Digby Jones, to whose comments I am referring.
Mr. Luff: I am reluctant to intervene.
Miss Johnson: The hon. Gentleman has not been present, so I do not intend to give way to him. I should be happy to give way to his hon. Friend. The CBI press notice states that the Government can provide a favourable business environment, but that ultimately the responsibility for competitiveness rests with companies. In an interview, the comment was made that the Government have provided the necessary environment, and that it is absurd to think that business is leaving the United Kingdom. The reverse is true.
Mr. Peter Bradley (The Wrekin): The writers of a double-page spread in The Daily Telegraph last Friday could not find any former Conservative voters who were prepared to vote for that party at the next general election. A reason given by one small business man was the extremely beneficial policies of the present Government, including, if I remember rightly, the reduction in corporation tax, which he said was an ``absolute blinder''.
Miss Johnson: I am grateful to my hon. Friend for highlighting the Government's further successes, ably helped by a spread in The Daily Telegraph, which I am sad to say I missed. I must revisit it.
On productivity, growth in the whole economy will, at 2.5 per cent., be up. Manufacturing productivity is growing at 3.5 per cent., which is, again, an increase on the figure for the second quarter of 1997. The hon. Member for Hertsmere entered into a debate with several hon. Members about the tragic closure of the Luton Vauxhall car plant.
Mr. Clappison: The Minister is selecting various aspects, but I selected the prime table that appears at the beginning of the Government's document. Does she agree that the labour productivity forecast in the table, which takes labour productivity as a whole rather than selectively, is worryingly low? It is 1.1 per cent., which is lower than it was from 1990 to 1997.
Miss Johnson: We agree that productivity performance is the key to long-term growth and sustained increases in living standards. We aim to start to close the productivity gap with other major industrialised economies over the next decade. During the past three years, the Government have worked to secure a platform of macro-economic stability that provides a sound basis for raising productivity. I outlined several measuresmy hon. Friend the Member for The Wrekin (Mr. Bradley) highlighted onethat are assisting business. I appreciate that a long-term view has always been difficult for Conservative Members, but it is long-termism that will tackle the issue of productivity. Our long-termism goes beyond the years mentioned in the Budget 2000.
I had started to make a point about Luton when the hon. Member for Hertsmere intervened. He rightly remarked on the sad fact that 2,000 jobs are to be lost at the Luton car plant, but we agreed that that will be part of 5,000 job cuts to be made by General Motors across Europe. About 2,000 of the losses are expected in Germany. Given the circumstances of the Vauxhall car plant, his political point was not well made. The main reasons for the closure are believed to be the overcapacity of car production in Europe, General Motors' heavy losses in the third quarter of the year and the expectation of significant losses in the final quarter of the year. I therefore trust that he will not pursue the point.
I shall mention one or two of the many gains that have been made in manufacturing under this Government just in the past couple of months, so that the Committee is aware of the other side of the coin. There have been 2,000 new jobs at the Swan Hunter shipyard in the north-east, 1,052 new jobs at JDS Uniphase in the south-west, and 1,700 new jobs at British Aerospace in Wales. As the editorial of the Financial Times says today, Britain is not going through a manufacturing crisis, and recent announcements have had more to do with the restructuring of bloated industries than with any problems in the country.
Mr. Borrow: In my constituency, Leyland Trucks went into receivership under the previous Government and had to be resurrected by Lancashire Enterprises and Lancashire county council. It employed about 600 workers at the time of the general election. Is my hon. Friend aware that its work force now number more than 1,000 and that the company is doing well? That is a manufacturing gain.
Miss Johnson: I am grateful to my hon. Friend for reminding me of that huge success in his constituency under adverse conditions. I know that it was much due to the local partnership, which as he mentioned involved the county council. A success was made out of the previous Government's economic failures, which is what we are now trying to do on a national scale as well as locally.
Several points were made about the climate change levy. It is important to state that the levy does not hit the competitiveness of UK industry. The levy is expected to be revenue neutral for the private sector and broadly neutral between services and manufacturing. The revenues are recycled to business through a 0.3 percentage point reduction in employers' national insurance contributions and additional support for energy-efficiency measures.
Firms can also benefit from the £150 million of Government support for energy-efficiency measures and an 80 per cent. discount to energy-intensive sectors that agree targets to meet the Government's criteria. There are exemptions from the levy for electricity generated from new renewables, and electricity used in good quality combined heat and power plants.
The hon. Member for Hertsmere was keen to raise the question of state aid. Throughout the process we have kept Commission officials informed of developments on emissions trading in the UK. The UK is also an active member of the European climate change programme working group on flexible mechanisms, which is looking into the development of emissions trading within the EU. The state aids application will be taken forward in the normal way, but the Government are confident that approval will be givenbecause an incentive will be temporarydelivering a genuine environmental benefit that will be open to both foreign and domestic companies within UK operations.
|©Parliamentary copyright 2000||Prepared 18 December 2000|