Pre-Budget Report

That is absolutely true. We have networks of skills and surviving skills, which have been thrown on the scrapheap, but they could and should be mobilised for any expansion. It is true that we need a big training programme, as this is one of the bottlenecks in the expansion of manufacturing that needs to be cleared. That can be done through an industrial policy, which we have fought shy of for far too long, but which is necessary. As I was saying, the big expansion overseas, based on a competitive exchange rate in overseas countries, shows that manufacturing can expand and rebuild. It can do so by having a lower competitive exchange rate. We now have the opportunity for a 25 per cent. devaluation, which would make industry and investment in this country profitable again, which it has not been for the last few years. It was certainly not profitable under Thatcherism, which was based on the policy of destroying manufacturing to weaken the trade unions and the power of the country's workers. It was based on the assumption that as a phoenix rises from ashes, the more ashes created in manufacturing areas, the better would be the future of this country. I am afraid, I have to say, that that destructive process was continued under Labour because our concern was to fight inflation, which was done by keeping the pound high at an uncompetitive level, which subsidises imports. That also forces industry to cut its costs and shed labour in a pathetic and almost doomed attempt to stay competitive. This destruction continued and manufacturing shrank—to our shame, while we were in power—from 20 per cent. of GDP to perhaps 12 or probably 11 per cent. now in this recession. We must revive manufacturing and get it back to what it was. But as I look at the policies we have adopted up to now, I see that we are not effectively achieving that. We have "saved the banks", but our treatment of the banks defies belief. Whatever happened to moral hazard? The Governor of the Bank of England goes on about it, but as soon as moral hazard is affected by the banks, brought by their own follies and excesses into a disastrous situation, we rush in with money to pour into them. Manufacturing does not get that money. We poured money into the banks—that is a large part of the borrowing that we are arguing about—and we probably had to do so in order to save the banks, but nothing is going to, for instance, the steel industry in Teesside. What has gone to Vestas on the Isle of Wight, which is the country's only remaining wind turbine producer? What has gone to the manufacturing firms that are closing down and shedding labour, making people redundant? What is happening to them? We shall need their production, skills and output if there is to be any recovery of manufacturing and the economy, but we are allowing them to close down without Government support. The Government have poured money into the banks, and all that the banks have done with it is build up their reserves. They have not passed it on or relaxed their credit arrangements. Manufacturing is experiencing a double whammy. Money is being poured into the organisations that caused the crisis in the first place rather than into manufacturing, which has suffered the consequences, and the organisations that caused the crisis in the first place—the banks—are starving manufacturing of credit, refusing to tide it over until it can inherit the better times. This is a pathetic economic policy. Even the Government's policy of printing money—which is effectively what we are doing—does not really help manufacturing. What printing money does is, by buying back Government debt, buoy up the stock market and asset prices. It helps the financial sector, which holds the debt—primarily the hedge funds that have been selling that debt back to the Government at an inordinate profit to themselves—but it does nothing for manufacturing, the sector that we need to help and support. All the devaluations of the past—the devaluations of 1949 and 1967, the Tory devaluation of 1972-73 and the classic devaluation of 1992, when we were forced out of the exchange rate mechanism—have boosted manufacturing. Productivity and growth have increased, and the whole economy has been stimulated. We cannot let the boost that we have provided now, with a 25 per cent. devaluation, slip away as the last few prizes of devaluation slipped away. We must maintain a competitive exchange rate. More important, we must have an appropriate industrial policy. Exchange rate competitiveness, which means a low exchange rate, is a necessary but not sufficient condition for manufacturing revival. There has to be an industrial policy that will channel investment into manufacturing, help to see it through its difficulties, and break the bottlenecks. Whether we support planning, training, investment, research, design, development or marketing, we must help industry to move forward. We cannot wash our hands of manufacturing if we are to have a viable economy.