Deregulate and compete

Britain’s industrial decline was under way well before the end of last century. David Prior produces pages of statistics to illustrate the point. The UK’s share of the world market for manufactured goods was 41.4% in 1880. By 1960 it was down to 16.5%, behind Germany and the US. Long term GDP growth trailed our […]

Britain’s industrial decline was under way well before the end of last century. David Prior produces pages of statistics to illustrate the point. The UK’s share of the world market for manufactured goods was 41.4% in 1880. By 1960 it was down to 16.5%, behind Germany and the US. Long term GDP growth trailed our competitors throughout this time. After the Second World War the trend worsened.

Until the 1980s, when Britain’s share of world manufacturing output levelled out at around 5%. The long-term rate of growth suddenly matched our competitors. `That is a fundamental change. For the first time in 100 years our share of world trade stopped falling. Manufacturing productivity growth suddenly became much better, but there was a long way to catch up,’ says Prior.

Labour costs, too, came down to about half those of Germany and Japan. It was a process Prior saw at first hand with British Steel. `The real thing about British Steel was we went from being totally uncompetitive, losing ludicrous amounts of money in the early 1980s, to the most competitive steel company in the world.’

He gives the reasons for this transformation in the UK’s fortunes: `One is we’ve got much lower employment costs. Another is not having strikes any more. Flexibility, the end of demarcation+ demarcation used to be a nightmare.

`Investment from Japan and Korea. It’s not just the money, it’s all the management practices and working practices they brought with them.

`Inflation. Low inflation and lower interest rates have made running a business much easier.

`Investment. In the 1960s and 70s it was low. In the 1980s we didn’t do much better than our competitors but at least we started investing more than we used to do.

`Training has improved with initiatives such as Modern Apprenticeships. And self-employment shot up during the 1980s. I think we’re quite an entrepreneurial race.’

Prior stresses: `If you haven’t got competitive manufacturing businesses you’re in trouble. I believe manufacturing is essential to everything else. It’s essential to provide employment – at the end of the day unemployment is a curse.

`There is in this country this bad feeling towards engineers. I find it incomprehensible. The one thing we need more than anything else is good engineers.’

Is it important to have MPs with experience of manufacturing industry? `I think it’s vital to have MPs who are independent minded, which means they must have had a career outside politics. Whether that’s in manufacturing, or industry, or teaching, doesn’t matter so much. But if you look at the make-up of the House of Commons there are very few who have a background in industry or business. That is a great weakness.’

Could this have been a factor in the 1980s, when the importance of manufacturing was not understood by the Government? The idea that the UK would become a service economy gained hold.

`[That was] complete crap. It was misguided stupid nonsense. A competitive vibrant dynamic manufacturing base is absolutely crucial. It was just one of those fashionable fads at the time. Where they were right was that much of manufacturing industry had become uncompetitive – underinvested, badly managed, and that needed a hell of a shake-up.’

Now, he says, `I think the Government does appreciate the importance of manufacturing – all the work they’ve done on competitiveness illustrates that. Also, they’ve spent a fortune attracting overseas manufacturing companies into the UK and I think that’s money well spent.

`The last thing I would want to happen is the Government to interfere more. The Government should provide a good business and economic environment. Any direct involvement is like picking winners again – totally inappropriate.’

Priorities for industry policy, he says, should be the removal of regulations and reduction of the burden of business rates on small business. He would like to see capital gains tax abolished: `Industry’s risk takers are the entrepreneurs – anything to make life easier for them.’

Whereas his father Jim Prior was seen as centre left of the party, Prior characterises himself as centre-right, but adds: `On 90% of issues I agree with him. I agree with 90% of what Kenneth Clarke says. The media concentrate on the 10% but in fact there’s very little difference.’

On Europe he says: `I’m Eurosceptic. Europe can either carry on as it is with high social costs and high unemployment or it will do what the UK and America have done, which is to deregulate and compete. The Social Chapter, minimum wage, working time directive, Euro-style social and employment policies, the single currency, would be an unmitigated disaster for British business. The single currency would be irreversible. Getting out would be impossible without a revolution in Europe.’

What, as a businessman, does he make of Labour’s attempts to persuade the business community that it is not hostile to their interests? `It’s a bit like Orwell’s Animal Farm, where the pigs start walking on two legs: it lacks credibility.’

Prior, then, promises to be a powerful advocate for industry in the new House of Commons. But how much influence does a backbench MP have?`In the House of Commons there are professional mavericks. I don’t intend to be one of them. You have to pick an issue where you can make a difference and take your own line.’ The wrong way is to use `cheap and nasty publicity. If you have a good case, put it to ministers. People underestimate the power of persuasion.

`It irritates me, maverick MPs going forward mouth first. Once your views are in the papers you have a hardened position. In business you don’t take fixed positions. You rarely get everything.’