European Affairs

I do not mean the previous Prime Minister, who wanted us to go in, but our current Prime Minister, who kept us out—thank heavens. We benefit from that situation, but it will cripple those other countries, not to mention Hungary and the Baltic states, which have been hit in the same way. I shall conclude on an important point. We have a growing trade deficit, and the City's contribution, which has helped keep us afloat, is going to be hit. Furthermore, the contribution of oil, which has also helped keep us afloat, will decline steadily in the next few years. If we are going to pay our way in the world and provide jobs for our people, the only recourse will be to re-expand, reboost and rebuild manufacturing. As is reported in this morning's Financial Times, manufacturing has shrunk; when we were elected in 1997 it made up 20 per cent. of GDP, but it is at 12 per cent. today. Indeed, it is estimated that it makes up only 11 per cent. of GDP currently, because manufacturing is in a difficult situation as a result of the recession. Manufacturing has to remain good if we are to pay our way in the world; we cannot go on borrowing from the world to finance a deficit so that we can go on importing. Revivals have been produced in the past—in 1949 and 1967, and in the Tory devaluations of the early '70s and 1992. We now have the opportunity to give the same boost, as long as we keep the pound competitive and keep money cheap, so that we can rebuild manufacturing. That, however, is a necessary but not a sufficient requirement. To rebuild manufacturing we must also have an industrial policy, channel investment to industry and maintain job clusters and business clusters for development purposes. We have to spend on training and boost industry to facilitate progress. All that is difficult to justify in a European context in which what we can do to invest in domestic industry is strictly controlled. It will all mean competition with Europe, because our main trade deficit is with Europe. We will have to end that deficit and replace it with a surplus, and that will be painful for Europe.