Industrial Policy and Manufacturing

Michael Meacher Excerpts

Thursday 22nd November 2012 Commons Chamber

[Mr Michael Meacher (Oldham West and Royton) (Lab)]

I, like others in the Chamber, congratulate my hon. Friend the Member for Corby (Andrew Sawford) on his excellent, confident speech. I am sure that we will see a great deal more of him in the Chamber.

Today’s debate is about one of the most important and neglected areas in British politics: the abandonment of industrial policy under the embrace of neo-liberal capitalism has, in my view, been one of the most catastrophic errors of the past three decades. It has been a fundamental mistake to believe that the massive switch away from manufacturing to services, particularly financial services in the City of London, is a sustainable model for the British economy. The last time Britain had a current account surplus was in 1983, 29 years ago. In the last 55 years, Britain has had a surplus on its traded goods in only six years. By 2010, as my hon. Friend the Member for Luton North (Kelvin Hopkins) noted, the deficit in traded goods had reached a staggering level of £100 billion a year. The surplus on services, at £49 billion, could cover only half of that. This year, the deficit is likely to reach £110 billion or £115 billion, or 7% of our GDP.

A yawning and still increasing deficit of such magnitude cannot continue for long without our foreign creditors, like any bank manager, calling time. The only way to reverse this steady slide towards collapse is by addressing the real causes of decline via a major and sustained revitalisation of our manufacturing capacity. The need for that is unimpeachable. In 1950, our share of world trade was 25%. Today, it is 2.3%. That marks a catastrophic decline in our position as a world leader in manufacturing compared with just 60 years ago, which largely reflects three factors: our gross neglect of industry when other nations were fast recapitalising their manufacturing base; the disastrous assumption under deregulated capitalism that leaving it all to the market would best safeguard Britain’s interest; and the maintenance over most of the period of an over-high exchange rate, putting the City of London’s interest above that of the nation’s industrial base.

Clearly, it will be difficult to reverse that slide into economic weakness, but we have no alternative but to focus all our efforts on doing so. The first requirement is to stave off any further economic collapse by switching away from a self-defeating deficit-cutting strategy to a public sector-driven jobs and growth strategy. That should be funded by diverting a tranche of any future quantitative easing to direct investment in industrial development, by taxing the ultra-rich—that is, the thousand richest people in the UK who, according to The Sunday Times rich list, have increased their wealth in the past three years by no less than £155 billion—or, and this will no doubt be preferable to Government Members, by taking advantage of the lowest bank base rate for 300 years by borrowing the relatively small sum of £150 million to secure an investable fund of £30 billion, which could certainly kick-start the economy.

The real medium-term challenge, of course, is the realignment of the economy away from finance and in favour of manufacturing. It has been talked about regularly but very little has happened. First, as everyone knows, and as other Members have mentioned, there is a continuing shortage of skills, aggravated by a slippage of standards in science and technology education in schools and universities. Secondly, access to finance is a major problem. There is clearly a gap in the market for specialised banks focusing on small businesses, manufacturing services and green investment which needs to be met.

Thirdly, I believe that we have a national interest in preserving industries and companies that are integral to Britain’s economic survival. The disastrous consequences of leaving Britain’s key industries and strategic companies uninhibitedly exposed to foreign acquisition or private equity buy-outs and asset stripping, which no other advanced industrialised country would allow, are clearly a lesson that I hope has been learned. There are many other things that need to be done, and we need to do them.