John Whittingdale – 2002 Speech on the Manufacturing Sector

The speech made by John Whittingdale on 1 May 2002.

Having had the opportunity to tour some of the exhibition this morning, my first and immediate reaction was to say that clearly reports of the demise of manufacturing in the UK are premature. I therefore want to congratulate the MTTA on putting together such a fantastic showcase for your industry. With over 400 companies exhibiting products and technologies, many of which are as advanced as anything available in the world, you have provided a perfect riposte to those who would write off the manufacturing sector in this country.

Given your importance to the economic health of our nation, I share your surprise – although perhaps not your disappointment – that a Government Minister was not willing to come to Birmingham to be with you. I can only conclude that perhaps he got wind of what you, Mr President, were going to say. However, as the principal Opposition Spokesman for Trade and Industry, I stand permanently ready to step into the Minister’s shoes. I should therefore like to thank you for this opportunity to come to your conference and to respond to your comments on behalf of the Conservative Party.

Like you, I have many criticisms of this Government when it comes to manufacturing industry. But perhaps I can begin by saying something with which everyone in this room will agree as, we are told, do Ministers. Manufacturing matters. A successful manufacturing sector is essential for a healthy thriving economy. You above all need little reminding of the crucial importance to the UK economy of manufacturing industry: it is responsible for nearly two thirds of our exports, over a quarter of our output and 15 per cent of our jobs.

The problems afflicting manufacturing therefore pose a challenge for all those concerned about the future prosperity of our nation. Some of these are not new: The competition from countries with labour costs far below our own. The decline in the attraction of industry as a career among those leaving our schools. And the difficulties of an uncompetitive exchange rate.

Nor I acknowledge did the drop in employment in manufacturing and the fall in its contribution to our national income start with the election of this Government. But there is no doubt that the last couple of years have been exceptionally painful for those in your industry. And it has not been helped by the fact that while you have been mired in recession, the rest of the economy has continued to grow.

For a long time, the Government gave the impression that it did not care about manufacturing, that as long as unemployment stayed down and living standards stayed up, there was no need to give special attention to any particular sector that was in trouble.

However, at the end of last year, that changed. The Secretary of State for Trade and Industry in belated recognition of the importance of your success held a manufacturing summit here in Birmingham. It was attended by some 50 delegates including 5 Ministers, 12 trade unionists and just 7 businessmen occupied full time in the actual running of manufacturing companies.

The outcome was the announcement of £20 million of government money divided between an extension of the Industry Forum and an expansion of the Partnership Fund. The first is essentially a talking shop while the Partnership Fund seeks to bring employers and employees together to solve particular business problems. Among the successes trumpeted on the DTI web-site for the first round of the Partnership at Work Fund is the establishment of an Employee forum at Pizza Express for which the project co-ordinator is a waiter on secondment. I have no wish to knock what I am sure is a worthy project but I think manufacturing industry was entitled to expect a little more.

Shortly after the summit in January of this year, the Secretary of State for Trade and Industry gave a speech in which she once again stressed the importance of manufacturing. This time she said that the decline in output had been exaggerated because of a flaw in the statistics and that the solution to your problems lies in membership of the Euro. It will not surprise you to learn that I do not agree.

Of course, British manufacturers find it difficult to be competitive when the Euro has fallen through the floor. But no one would want to lock us into the present exchange rate for all time. And if the Government do wish to enter at a lower exchange rate, they have given no indication of how they intend to bring that about.

Yet the tragedy is that if the Government really did want to help manufacturing industry, there are several concrete steps that they could take straight away. First of all, they could stop the relentless flow of regulations, which spew from Brussels and from Whitehall.

Of course, I recognise that all Governments regulate and all Oppositions criticise them for doing so. But this Government has taken the art of regulating to new heights. £15 billion added to business costs since this Government came to power according to the British Chambers of Commerce. Last year, a record 4,642 new regulations: one every 26 minutes. By the Government’s own admission, businessmen had to spend 617,000 hours last year completing information requests from the Office of National Statistics alone. And of the forms sent out, nearly half a million went to firms in the manufacturing sector.

Every businessman I meet, every business gathering I speak to, the message is the same: that the burden of regulation is rapidly becoming unbearable and that the flow has got to stop. That was one of the messages in your budget submission. Another was the need to reduce the tax burden. Sadly in neither case did the Chancellor appear to listen.

Even before the Budget, the CBI had pointed out that the cumulative extra tax burden on British business under this Government stood at £29 billion. That adds to your costs and reduces your competitiveness. But of all the extra business taxes that this Government has introduced: the Utilities tax, the petrol tax, the aggregates tax, the tax on pension funds, one stands out for the scale of the damage that it has done to your ability to compete in the world.

If the Chancellor had tried to come up with a tax designed to hit manufacturing industry hardest, he would have found it difficult to have done better than the Climate Change Levy. Across the engineering sector, it has raised operating costs by just under £90 million. And yet it is likely to have a negligible impact in terms of reducing carbon emissions.

That is why at the last election, my Party was pledged to abolish it. Sadly we were not given the chance to do so. But we remain convinced that there are far more effective ways of achieving a reduction in greenhouse gas emissions which do not destroy the competitiveness of our industry at the same time.

Of course, Ministers have repeatedly argued that the effect of the Climate Change Levy is neutral, that it is balanced by a 0.3 per cent cut in employers’ National Insurance contributions. It was not convincing even before the Budget. After the Budget, even that figleaf has been ripped away.

Listening to the Budget, for fifty minutes you must have been happy. Tax credits for R & D, cuts in corporation tax for small firms, increased spending on education, law and order and the NHS. Then in the last ten minutes, business got clobbered with a tax increase of nearly £4 billion. And what is more a tax on jobs, that will hit every employer, no matter whether they are large or small, profitable or loss-making. Having specifically asked for a cut in employers’ NIC in your budget submission, you have instead have been given a direct increase in your costbase. You have every right to be angry.

It is perhaps in recognition of that anger that we learn that the Government is shortly to announce a new initiative: the appointment of a Minister for Manufacturing. It is we are told to be Alan Johnson, one of seven junior Ministers in the DTI. In my view, they should all be Ministers for Manufacturing. But until the DTI can make its voice heard against the Treasury, it will do little good.

After a long and brutal recession, there are at last signs of an upturn in manufacturing in the UK. But if it is to be sustained, it needs to be nurtured by Government not snuffed out. Much of the rhetoric of Ministers I applaud, but it is time it was matched by their actions. It is a criticism which, if I am given the chance, you will not be able to make of me.