Only emergency aid can save manufacturing

We are at a defining moment, a historic moment. We have a once-in-a-lifetime opportunity to rebuild the manufacturing base.

We are at a defining moment, a historic moment. We have a once-in-a-lifetime opportunity to rebuild the manufacturing base.

But listen to the view from the City and others who should know better. They say manufacturing doesn't really matter that much any more. Services drive the modern economy. We pay our way in the world by trading ideas, intangibles. The dot.coms are where the action is, not people making things.

This is ignorance. And it is a dangerous ignorance, because if listened to by policy-makers, it will see the slow death of manufacturing.

I say this not because of a sentimental attachment to manufacturing for its own sake. Pining over satanic mills and smoke-belching factories is dead. But our work at the TUC convinces us of two things.

First, manufacturing must grow if we want the economy to grow. The Government's key objective, a faster rate of economic growth, must be based on a strong manufacturing base. Second, we cannot pay our way in the world without making things people want to buy. Forget the nonsense you hear about how we can live on services. Manufacturing makes an even bigger contribution to our export effort today than 20 years ago.

So our starting point is that manufacturing matters. Our first priority must be to face up to the deepening crisis facing the manufacturing sector. Many industries have modernised and their workforces have delivered higher productivity, but they can't live with a currency that is over-valued by 30 per cent against the euro.

But neither can we blame it all on the value of the currency. The strong pound has exposed some long-term competitive weaknesses.

We have an investment gap. Not surprisingly, therefore, we have a productivity gap. We have an R and D gap. We have an innovation gap. And we have a skills gap. And not just in vocational skills. The basic numeracy and literacy of the adult workforce is much lower than in our major European competitors.

The common message I get speaking to trade unionists across all sectors is the feeling that the Government as a whole doesn't give manufacturing the priority it deserves.

Changing that perception must be a top priority over the coming months. Ministers must show - and be seen to show - that they are genuinely concerned at the plight of manufacturing and, as with Phoenix, that they are willing to work in partnership to address the problems facing the sectors under most pressure today.

The biggest threat is the over-valued pound. We know the value of economic stability. But that does not mean we are helpless. It is a myth that global money markets always get it right. By any rational economic judgement, the euro should be getting stronger, not weaker. Speculators think they have a one-way bet - that the only way the euro can go is down.

The European Central Bank (ECB) and the US Fed between them control reserves worth hundreds of billions of pounds. Britain can take the lead in brokering a coordinated response to use those reserves to drive the euro up and the pound down. The Bank of England should be ready to back ECB intervention. And the UK can help by making clear that our own interest rates will go no higher.

We must develop a new industrial policy for a new industrial age. We need immediate steps to strengthen the DTI delivering a pro-active industrial policy. We need every region and every country in the UK to follow the West Midlands and prepare urgent reports on actual and threatened redundancies. Those reports must set out clearly what can be done by government, employers and trade unions.

And the Government must be ready to back its conclusions with a fully funded emergency aid package. The new industrial policy is not just for a crisis. It must become a permanent and central priority for the Government's medium-term strategy.