House of Commons Hansard Debates for 19 Apr 1989

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Enterprise Board. The transputer--sometimes known as a computer on a chip--is still 10 years ahead of the field. Indeed, transputers are currently being used by NASA for its communications and radar systems. Much more important, they are being used by the Japanese as the basis of their new laser printer technology. They offer a unique parallel computing opportunity and unique abilities to interconnect with other systems. They are also one third cheaper than any comparable silicon chip mechanism.

For ideological reasons, as we all know, the Government sold INMOS, complete with the transputer, to Thorn EMI in 1984. Almost immediately, Thorn EMI decided to go out of computing altogether, and into music publication, which provided quicker access to short-term profits. INMOS was then put up for sale. Thorn EMI refused to invest any further in the factory in south Wales--at least, it refused to invest significant amounts in it--and showed absolutely no interest in making sure that the transputer was developed adequately. The Government--by this time, too late--stepped in and tried to persuade universities and others to use the transputer, but it was far too little, far too late.

Last week S.G.S. Thompson moved in and bought INMOS. Let it be on the record that S.G.S. Thompson is a wholly owned Franco-Italian firm and is less profitable, in overall terms, than Thorn EMI. But it could see a good thing, which our own Government and, I must say, our own industry--the industrial electronics giants--could not see. S.G.S. Thompson has promised to invest in the transputer--something that neither the British Government nor British industry was prepared to do. It has promised to recruit 100 new engineers, and, according to its new managing director, will put limitless investment in what he described as a jewel in the new technology area.

Is it not ironic that, in the very week in which, for instance, Fujitsu has said that it will launch a £400 million factory at Newton Aycliffe to assemble its computers and laser printers, the very week in which we have rejoiced at Toyota moving in to establish assembly plants in the north- east, we have sold one of our own world-beating inventions, and been relegated to the position of an offshore assembly?

Mr. Bob Cryer (Bradford, South) : I agree with the hon. Gentleman's point that the Government have sold a valuable public asset, which could and should have been developed in public ownership. I resent that very deeply. But then the hon. Member talks about a Franco-Italian company taking that asset over. But the United Kingdom is a member of the Common Market. Surely freedom of movement of capital, freedom for predators to go and buy anywhere, is a fundamental requirement of the Common Market, of which the hon. Gentleman and his party have made absolutely no criticism.

Mr. Ashdown : Absolutely, and I would be the last person to believe that a firm like that should not be available to purchasers in Common Market countries. As the hon. Gentleman will discover in a minute, I believe that the European context is essential if we are to be able to develop a decent high technology industry. My argument is not that a Franco -Italian company should move in and buy up ; it is that it is extraordinary that, whereas people from France and Italy can see the advantages of a British invention, our own Government and British industry are

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too blind to see them. I can find few more depressing examples of the short-term and myopic view of this Government.

There is, however, perhaps one--gallium arsenide, in many ways a sister to the transputer. It is a new high-speed chip.

Mr. Hayward : The right hon. Gentleman referred to gallium arsenide as a high-speed chip. It is not a high-speed chip. It is a product on which one can produce a high-speed chip. The right hon. Gentleman also described the transputer as unique. It is not unique. There are a series of competitors. I wish that the right hon. Gentleman would stop displaying his ignorance of high-technology subjects.

Mr. Ashdown : I am delighted to hear from the hon. Gentleman. He is wrong about the transputer. There is no equivalent to the transputer. One or two chips are now being developed which are transputer emulators, but they are not in the same league as transputers. However, the hon. Gentleman is right to say that, technically, gallium arsenide is not a chip. Without wishing to go into long and detailed explanations, let us accept the short term of a chip in the sense that it can at least fulfil many functions of high-speed computers which the silicon chip can perform.

What is unique about gallium arsenide is that it has several special properties. It is light-emitting, its architecture can be varied after it is made, and it is about five times faster than the conventional silicon chip equivalent. What is also important is that it was invented in Britain. Many people believe that it will replace silicon in high-speed computers and certain other applications. In 1985, the advanced materials and devices committee predicted a world market for gallium arsenide of £9 billion. On 11 March 1985, I initiated an Adjournment debate, backing up that committee and asking the Government to support a programme to develop gallium arsenide invented and developed in Britain. I asked them to set up a structure similar to the Alvey committee to press forward the development of this British invention. That Adjournment debate was answered by the then Under-Secretary of State for Trade and Industry the hon. Member for Coventry, North-East, who is now Under-Secretary of State for Education and Science. Hon. Members can look at columns 125 and 126 of the Hansard of that date. The Minister's answer was disparaging, to put it mildly. He described gallium arsenide as

"not an easy material to process."--[ Official Report, 11 March 1989, Vol. 75, c. 125.]

He described it as an "immature technology" when contrasted with the advanced silicon chip technology, and said that the development should be left to industry. He went on to state that the Ministry of Defence was investing some money in it, and he gave the impression that is would have only a Ministry of Defence application. For the record, gallium arsenide is not now being made in Britain in any commercial quantities. Far from having only a Ministry of Defence application, gallium arsenide chips are at the heart of every compact disc player imported into Britain today.

However, Britain leads the world in some aspects of gallium arsenide technology. Last week I was at St. Andrew's university, where I spoke to Professor Sibbett. He has developed a specific, individual application for

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gallium arsenide which enables it to produce the fastest laser pulse in the world--so fast that the duration of the pulse in relation to the duration of a second has the same relationship as the duration of a second to the history of the universe. That is important. It will mean that we can develop extremely high-speed computers in future.

I looked at what the professor was doing, and as I left his laboratory one of his researchers said to me, "We have established a world record, and that world record has stood for four years. This will be the basis of new high-speed computers. I have absolutely no doubt that the technology will be bought out, used by others, and that we will import it in high-speed computers in years to come." I now refer to gallium arsenide's sister technology. Gallium arsenide produces a light impulse. It is a fibre optic which will transmit light, not only in computers but around the country. Again, we have a technology that was invented in Britain--at the British Telecom laboratories in Marplesham. It carries a signal that is thousands of times faster than the conventional twisted copper pairs. The United States study said that in 1991 delivery and installation of fibre-optic cables would be cheaper than installing the twisted copper pairs that we currently have. We will see the development of speeds of transmission down fibre-optic cables increased by perhaps 20 times before the end of the century. The fibre-optic cable offers the possibility of a broad-band, interacting computer communications network for the whole of Britain, possibly reaching into every house.

Conservative and Labour Members seem to think that this is not an important matter. It will be very important. [Interruption.] I am glad to get some support from the Conservative Benches. Just as our Victorian forebears thought it right to construct an infrastructure of roads, railways and canals to carry the commodities to support their industrial revolution, so we will need a modern infrastructure to carry the commodity for our industry. That commodity will be information. A fibre-optic network will be as essential for our future industry, based on high technology, as were the railways, canals and roads in the past.

A great many people have considered whether we might invest in such an infrastructure. The Peacock committee said that we should ; so did the Prime Minister's own advisory committee on science and technology. British Telecom appealed to the Government to help it do so. It said :

"All we want is some kind of horizon from the Government, so we are not planning against total uncertainty."

The French, the Japanese and the United States are doing it. The Germans are doing it like mad. Even the Labour party is now proposing that we should do it. I am told that the Labour party will suggest that this should be the centrepiece of its new industrial strategy. I am delighted that the Labour party is at last joining me in the two-year campaign to invest in the new industrial infrastructure that our nation will need.

The Government of course, have said that we should not do it. [Interruption.] Conservative Members will have time to make their statements shortly. Mr. Alastair Macdonald, reporting to the Department of Trade and Industry earlier this year, said that the Government should play no part in this and that we should leave it to the market. I am not suggesting for a moment that the Government should find the £15 billion or £20 billion to

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make all that investment, but they have a major role to play in stimulating private investment, in creating the interface standards that will allow it to work, in deciding how it will be laid down in Britain and in pump-priming the development.

Any belief that we can simply leave it to a free market and see it develop is nonsense. Under the Government, Britain will not get a modern, extensive, nationwide fibre-optic network. Therefore, it will lose the opportunity to use a British invention which would revolutionise society and provide new opportunities for self-employment and enterprise, for education in the home, for self-health care, for home shopping and for entertainment. The Government are turning their back on all those opportunities. Is it not ironic that at the same time as the Government are turning their back on helping such systems to come into being, we launched, in January, a satellite television network capable of reaching into every home? What a tragedy that in Britain the telecommunications revolution will be used to give new opportunities to the powerful to shape our minds and to provide soap operas instead of new possibilities for our citizens to shape their destinies for themselves.

Behind all that we must accept that Britain's trade in new technologies has been seriously hampered not only by the United States Export Administration Act, but by the dead hand of the Co-ordinating Committee for Multilateral Export Controls. COCOM is a secret committee, it is not treaty-based and it seeks now to police the export of high technologies between the countries of the West and the Soviet Union. It has completely failed in that task. In many ways the Americans have sought to take unilateral action outside COCOM, which has nearly always resulted in giving American industries and firms--especially large firms--trading advantages over their British or European rivals. Frankly, COCOM's day has passed. The new developments in East-West relations mean that COCOM must and should be reformed. We should insist that COCOM is brought out into the open, that it is properly established on a treaty base and that it is worked on the basis that all the nations who are party to it will act multilaterally within COCOM instead of using their industrial muscle outside it.

So, here is the situation that Britain faces today. We are the only European nation whose inventiveness is falling behind. We are the only European nation in which the number of scientists and engineers in research and development is dropping. We are piling up a bigger and bigger deficit in the information technology trades. We are losing our share of even our domestic market. We are the only advanced nation to be investing less than we were 10 years ago in non-defence research and development. We are losing many of our best brains abroad. We are suffering from a massive and growing skill gap in information technology that probably covers 30,000 jobs today and will cover 100,000 jobs by about 1993. Fewer people are studying for computer degrees than previously and we have far fewer people in our universities than our competitors. We have a Government who know nothing and could not care less about information technology and about the creation of the new industrial base that Britain will need to badly for its prosperity in the future.

Of course, those conclusions are not new. They are all identified in the recent report of the Select committee on Trade and Industry. The Government have responded to

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them all in their response published in March of this year. I have yet to read a bleaker and more complacent document than that response.

What Britain needs urgently is a strategy for the new technologies, which will invest in research and development, which will invest in a remissible training tax to encourage firms to carry out their own training, which will invest properly in higher and further education, which will invest in a new technology infrastructure, especially in a fibre-optic cable network for Britain, and which will invest in the world-beating products that the country still invents in sufficient numbers.

The Government, of course, know nothing about the meaning of investment. They will leave it to the market. They will stand by and see this nation, whose prosperity and future now lies in building a high-wage, high-skill, high-investment, high-technology economy and industry, become instead a low -wage, low-skill, low-investment, low-technology offshore assembly plant for others.

Of all the indictments that can be laid against the Government, their failure to invest in the future is the greatest and the one for which we will pay the greatest price. That is why I hope that all right hon. and hon. Members, who see for Britain a better future and who believe that the Government have a role to play in building that future, will vote for the motion.

4.28 pm

The Chancellor of the Duchy of Lancaster and Minister of Trade and Industry (Mr. Anthony Newton) : I beg to move, to leave out from House' to the end of the Question and to add instead thereof : notes the success of the Government's policies in creating a climate in which industry has achieved record levels of output, productivity and investment ; welcomes the continuing increase in investment by United Kingdom companies in civil research and development ; endorses the Government's policy of supporting collaborative research and development both in the United Kingdom and in Europe ; approves the measures being taken by the Government to make education and training more responsive to the needs of industry and commerce ; and welcomes the success of the United Kingdom in attracting advanced technology inward investment as a further indication of the strength of the United Kingdom economy.'. Perhaps I might begin by observing--using a word that the right hon. Member for Yeovil (Mr. Ashdown) used once or twice in his speech--that there is something ironic in the fact that he should move his motion in such terms in a week that has seen the announcement of three massive inward investment projects by companies which are world names in information technology, in vehicles and in vehicle

components--Fujitsu, Toyota and Bosch. The total of their investments is about £1.2 billion. The Opposition are well aware that there are many other investments quite apart from those projects. I mention those major examples of recent inward investment projects because, to put it mildly, they hardly suggest that some of the world's most successful industrial countries and companies share the essentially gloomy view that the right hon. Gentleman has thought fit to put before the House.

Mr. Tony Banks : Will the Minister give way?

Mr. Newton : I shall happily give way, because if the debate had been initiated by the official Opposition we would have heard an even more mindlessly gloomy set of propositions.

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Mr. Banks : There is an alternative Opposition Front Bench operating today and we and the Democrats are in complete conjunction in our views on this matter. Why is it that the only thing that the Minister can do is to claim great credit for the fact that foreign investors, especially from Japan, are coming to this country? Where is British investment? The Japanese are coming here in order to get a foothold in Europe for 1992 because they know that Britain is the most deregulated country in the whole of Europe. That means that it will be easy for them. They are using us as a doormat, and it is about time that the Minister started to say that.

Mr. Dennis Skinner (Bolsover) : Think about the bridge on the River Kwai.

Mr. Newton : I shall think at least as much about the remarks attributed to the hon. Member for Dagenham (Mr. Gould), who spoke in, I think, the north-east yesterday. He effectively suggested that the north- east was becoming colonised by the Japanese because they are investing there. I wonder whether the hon. Gentleman goes back to his constituents in the Ford plant at Dagenham and suggests that that is an American colony. Some of the major contributors to the British economy over many years have been foreign investors, overseas firms, whose contribution we immensely value. They have contributed a great deal to the British economy, and I do not know why it should be suggested that we should now turn our backs on them.

Britain and its employment and production would be the losers if we were to adopt the attitude suggested by the hon. Member for Newham, North-West (Mr. Banks). He can come back at me if he wants to, but he should bear in mind that much of this investment would come to Europe anyway. The key point is that within Europe it is coming to Britain. If the hon. Gentleman would prefer it to go to France, Italy, Belgium or Germany, let him say so. If not, let him welcome it here.

Mr. Tony Banks : It is coming to Britain because we are a pushover. They know that our conditions of employment and employment rights are so deregulated that they can take advantage. The Government just lay down a doormat for investors from the rest of the world. The Minister spoke about Ford. There is a threat hanging over the future of Dagenham and the investment there. I went to buy a Ford car from Dagenham Motors because I thought that, as I live in the area, that was the appropriate thing to do. I asked whether the Fiesta that I bought was made at the Dagenham plant, which is right behind the showroom. I was told that it was assembled in Spain. What state are we coming to when we buy Ford cars in this country and then find that they are assembled in Spain and exported to Britain? That is palpable nonsense. Where is the investment in British industry, technology and skills? That is what we want to hear about.

Mr. Newton : The hon. Gentleman and I can agree on at least one matter, which is that 10 years ago there was not the remotest likelihood that any of these firms would have come to Britain. He describes the change from his own particular, rather curious, perspective. I described the change as one in which firms see this country as a good place in which to do business and as a good base for operations which, in one industry after another, are

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becoming increasingly international, for reasons which have nothing to do with the factors that the hon. Member for Newham, North-West has mentioned.

Mr. Eric S. Heffer (Liverpool, Walton) : The right hon. Gentleman is absolutely wrong to say that there was no inward investment 10 years ago. There was a lot of inward investment in all parts of the country, but the difference between this Government and the previous Labour Government is that the latter had a regional policy and tried to get investment in areas of high unemployment and to get industry where it was vital. Unfortunately, at that time a whole series of firms which operated in this country but whose decisions were made in Detroit and elsewhere were closing down.

Mr. Newton : Why?

Mr. Heffer : The Minister needs to know a little about economics, but I am not making a speech. I could explain to him in very simple terms the nature of the rotten system that he upholds, which has booms and slumps. If he does not understand that, he does not understand the ABC of economics.

I was the Minister of State for Industry for a period when we were getting that inward investment. It was precisely when inward investment began to taper off that we saw the end of the regional policy.

Mr. Newton : I am conscious of the previous unhappy experience of the hon. Member for Liverpool, Walton (Mr. Heffer). He should perhaps bear in mind two things. First, two of those same companies to which he has referred and to which I have not referred--I suppose that he had in mind, in particular, Ford and General Motors--have both in recent months, quite apart from the three large investments in the past week that I have already mentioned, made significant decisions to invest further in this country, Ford with its engine plant in Wales, and General Motors with some futher investment not very far from the hon. Gentleman's constituency.

I ask the hon. Gentleman to recognise something else. Although it is for Bosch, for example, to say, rather than for me to tell the House, precisely what factors influenced its decision to come here, bearing in mind that it is a German company, I gather from my contacts with the company that two considerations that attracted it were the low rate of corporation tax and the good state of British industrial relations. That is why I say that 10 years ago there would not have been the remotest possibility, however much regional assistance had been offered to them, of those companies coming here. A third point that I mention while I am seeking to deal with the hon. Member for Walton is the significance of Toyota's having decided to come here on a massive scale with no regional assistance at all, because it has not gone to such an area. That is a feature of some significance.

Mr. Timothy Wood (Stevenage) : I would like to join my right hon. Friend in welcoming the inward investment that has taken place, but it is not only inward investment that we are seeing. In my own constituency in the past four or five years we have had both announcements of further investments and actual investment by, for example, Glaxo with £500,000 to be spent in Stevenage in the next four years and 2,000 people involved in research and development. Another 500 people are involved in research and development in Marconi Instruments with a new

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factory development. Further development is going on in International Computers Ltd., part of the Standard Telephones and Cables group, in Stevenage. All this new investment is being made so that this country can be more prosperous.

Mr. Newton : I am grateful to my hon. Friend the Member for Stevenage (Mr. Wood). He makes very well the point that, although there is a particular drama about so many large inward investment projects being announced in the past week, it is against the background of a widespread increase in investment of all kinds across virtually the whole of the British economy, both by companies overseas and by those business men here who have greater confidence in the country's economy than they have had at any time for a generation.

Mr. Skinner : That line of argument about inward investment would stand up much better if the Government had not been in office for 10 years. When they took office we had a marginal surplus on our manufactured trade ; we are now down to a deficit on manufactured trade of about £20 billion and a balance of payments deficit of about £15 billion. According to the Chancellor, despite all the claims about inward investment, it is likely to get worse in the next financial year. If this inward investment is so good, beautiful and wonderful, when will the balance of payments return to a surplus?

Mr. Tony Banks : Where is the miracle?

Mr. Newton : If, for example, Fujitsu makes chips here rather than elsewhere, there will be an export and import substitution effect. The same is manifestly true of Bosch, Toyota and all the other projects that I mentioned. At the same time, they will contribute in various ways, both direct and indirect, to the further strengthening of the competitiveness of the British economy, and are part and parcel of the range of policies with which we seek to meet the needs to which reference has been made.

Mr. Banks : When will we move back into a surplus?

Mr. Newton : No doubt other hon. Members wish to take part in the debate, and I wish to make some progress.

One matter on which both Social and Liberal Democrats and Labour Members sitting below the Gangway happily agree with my right hon. and hon. Friends is the importance of investment for this country's future prosperity.

It is striking that, although during the 1960s and 1970s the United Kingdom was near the bottom of the league by almost any standard of the substantial measurement of investment, since 1980 total fixed investment has grown faster in the United Kingdom than in any other country in the European Community. Manufacturing investment alone--I know how keen Opposition Members are on manufacturers--is estimated to have increased by no less than 9.5 per cent. between 1987 and 1988. All the indicators point to continued buoyant investment this year.

Mr. Doug Henderson (Newcastle upon Tyne, North) : I am not trying to be obstructive, but, if that is the case, why is manufacturing investment now only back to its 1979 level?

Mr. Newton : I shall point to a fact that emerged in the course of my statement on Toyota, which I made to the

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House yesterday, when I was challenged about the degree of import penetration of the British motor car industry. I made the point then, and I make no apology for repeating it, that for most of the period since the Government took office there has not been a particularly satisfactory level of import penetration. It has been between 50 per cent. and 60 per cent.--but that was about the level which it had reached in 1979. Between 1974 and 1979, the level of import penetration doubled. It will take a long time to overcome the effects of such decline, its consequences for investment during that period, and the decisions that were then made.

Equally, investment in industrial research and development is increasing in an encouraging way, with an increase of about 26.5 per cent. in real terms--more than a quarter--between 1983 and 1987. It should be firmly registered throughout the House that it is against that background of a strong sustained increase in investment by industry that the right hon. Member for Yeovil has brought the motion before the House this afternoon.

Mr. Ashdown : Will the right hon. Gentleman confirm that investment as a proportion of GDP--which is the proper way to measure net investment-- is no higher than it was in 1979? The right hon. Gentleman accused me of being gloomy. Is he not gloomy about the fact that today our deficit in information technology is running at £2.19 billion a year and growing? Does he not find that a gloomy picture? Or does he think that it is wonderful?

Mr. Newton : I shall be coming to some of the right hon. Gentleman's remarks about information technology, for I have no desire to dismiss them. I ask him to acknowledge, however, that after more than 20 years in which the economy suffered not only from its failure to invest as much as we would like but from growth in consumption outpacing, consistently and almost relentlessly, that of investment, there has been a dramatic turnaround in the past five or six years. The growth of investment has often exceeded that of consumption by as much as 100 per cent. That remarkable trend has addressed a long-term weakness of the British economy, and has helped to build up its strength for the future.

The right hon. Gentleman talked a good deal about the information technology and electronics sector. Although he considers that sector particularly important, and it helped him to make his case--or attempt to do so--I ask him not to ignore other aspects of high technology, especially aerospace and chemicals, which present a different picture.

No one should imagine that the labels "information technology" and "electronics" mean that those are the only high-tech industries with which the country needs to be concerned. In aerospace, for example, the United Kingdom's capital investment in 1986 was £220 million, up from £133 million in 1983. In chemicals, capital investment in 1987 was running at an annual rate of £1.4 billion, up from some £900 million four years earlier. Investment in aerospace research and development between 1983 and 1987 has consistently remained at a high level, while in the chemical sector R and D investment increased from £735 million in 1983 to £1.3 billion in 1987--a massive increase of 47 per cent. in real terms. In both those high-tech sectors, moreover, the country is running a trade surplus of over £2 billion. Mr. Cryer rose --

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Mr. Newton : I will give way once more, but then I must get on.

Mr. Cryer : Does the Minister accept that the British aerospace industry has been so consistently under-funded that we have not been able, in conjunction with Airbus Industrie, to provide a range of planes to satisfy British Airways--which is now almost entirely dependent on Boeing, with its highly variable quality of production? Does he also accept that the only small to medium-sized plane, the British Aerospace 146, depends not on Rolls-Royce engines but on Avco Lycoming engines imported from the United States? Is that not a sign of our lack of investment in technologies that will need developing if we are to match Boeing and Avco Lycoming?

Mr. Newton : It is also significant that a considerable number of American aircraft in operation around the world use Rolls-Royce engines. Given the size of this country and of what might be called its domestic market, its achievements in industry are considerable and make a major contribution to our balance of payments. For understandable reasons, the right hon. Gentleman chose to focus particularly on a different high-tech industry, IT and electronics. In his intervention a few moments ago he implied--indeed, he virtually made his view explicit--that it was self- evident that the United Kingdom should expect to have the manufacturing capability to meet all its high technology needs. He points to the trade deficit in the IT and electronics sector, arguing that it demonstrates a need to channel further investment into it. I noted that he did not refer directly to the point that nearly all the major countries of the European Community and the United States also have IT deficits, and therefore have not gone down the self-sufficiency path that the right hon. Gentleman implied.

Our country has a long history of involvement in research and, as many right hon. and hon. Members said, it has been the home of many great discoveries. It certainly has outstanding strengths in particular areas of scientific research and industrial technology, including many under the umbrella of information technology and electronics. When it comes to instrumentation control systems, for example, and to electronic capital goods such as radar, we had a 1987 trade surplus of more than £700 million. No country is, or is likely to be, a world leader in each and every area of high technology. It is an increasingly global market in which each successive generation of technology demands ever-increasing sums to be spent on research and development investment.

The United Kingdom--no more than the United States, Germany or Japan--will not be able to become a major force in every area of high technology. Therefore, in common with other developed countries, we have--rightly, in my view--tended to specialise in those sectors in which British firms have a world lead or the prospect of maintaining a strong position in an increasingly competitive global market. Interestingly, it emerged from the speech of the right hon. Gentleman that information technology is used to increase the efficiency and effectiveness of industry and commerce, and that that is true whether the IT equipment concerned is manufactured in the United Kingdom or is imported. In his remarks the right hon. Gentleman adverted--almost as an aside--to the undoubted growth in the IT and electronics trade deficit, and to the fact that

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that deficit was associated with probably the fastest growing market in the world. That is itself an extremely encouraging trend. It is at least as important--it will be possible to argue that it is even more important--to ensure that IT is effectively applied in our manufacturing and service industries as it is that we ourselves should be a massive manufacturer of microchips or whatever. In revealing that the United Kingdom is one of the world's fastest growing markets for IT and electronics products, the right hon. Gentleman indicated one of our country's growing strengths and not weaknesses, as he sought to imply.

Mr. Ashdown : The right hon. Gentleman is correct to say that the proper utilisation of information technology is vital. One thinks, for example, of the way that it has been used to make the textile industry up- market and more competitive. However, the fact remains that Britain is woefully under-equipped to make use of the capital goods that it is buying in to support that deficit. The Institute of Administration and Management's report of 10 July 1988 commented that unsophisticated users of information technology are six times more likely to suffer poor financial results. It went on to comment that that is exactly what we have in Britain today--due to inadequate training levels, an insufficient number of graduates, and in particular a deficit of 6,000 programmers and analysts. The underlying problem is that the Government refuse to invest in education so that we are unable to utilise the maximum capacity of even that IT that we are buying in.

Mr. Newton : The right hon. Gentleman, understandably, rapidly shifts his ground from concentrating solely on our production capacity in relation to IT and electronics. Now that I have made the point that applications of that technology are increasing, which is encouraging, the right hon. Gentleman turns to what he calls the skills gap. I shall refer to that issue later. However, I hope that I have carried the right hon. Gentleman with me in recognising that at least as important as the sheer scale of the production of any particular types of IT or electronics products in this country is the extent to which we make use of those products, from wherever they may come, in developing industry's competitiveness and efficiency. Capital investment in IT increased by 44 per cent. in real terms between 1982 and 1986, and it is also a leading sector of investment in terms of research and development, with investment in 1987 of nearly £2 billion compared with slightly less than £1.5 billion in 1983. Clearly it would not be sensible to demand of United Kingdom firms that they invest in areas where they cannot compete effectively internationally. It would not be right, as the right hon. Gentleman claimed it would, for the Government to seek to determine where and how United Kingdom firms should or should not invest. That approach of picking winners was tried in the past. More often than not it ended up as the quickest way of picking losers and of sending a good deal of money down the drain. There is no substitute for firms having a knowledge and understanding of the market place determining their own production and investment strategies.

There will inevitably be areas of IT and of other industries where foreign firms have a competitive advantage and where United Kingdom companies will choose to buy from abroad rather than manufacture in this

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country. That is an inevitable consequence of increased specialisation in the IT and electronics sector and of the need for every country to concentrate on comparative strengths. That is one reason why we welcome the overseas investment to which I referred earlier, which has been an outstanding aspect of this country's success story in recent months and years.

I emphasise the contribution made to this country by firms with which we are already familiar. IBM, for example--and it would be just as possible to talk about Hampshire being colonised by IBM as about the north-east being colonised by Fujitsu--with more than 18,000 employees, is the largest employer, producer and exporter in the United Kingdom's IT industry. In 1988 it exported goods and services worth more than £2 billion, running a positive balance of trade and making it one of the country's largest exporters.

It is encouraging that other world leaders such as Digital Equipment, Hewlett-Packard, Rank Xerox and Datalogic all chose the United Kingdom for their European headquarters. Their decisions are not just coincidental but are positive statements by business leaders of confidence in this country and in its role as a key player in information technology. As was said by my hon. Friend the Member for Stevenage, it is far from the case that our indigenous IT firms are not investing. My hon. Friend referred to ICL, which has spent about £20 million on its United Kingdom manufacturing ability in the past two years, while Research Machines, one of our smaller but growing computer manufacturers, made more than £5 million of capital investment over the same period.

The Government have also created a climate that ensures that firms are much better placed to invest in research and development. Manufacturing profitability in 1987 was the best since 1969, and industry increased its own funding of research and development by about 30 per cent. in real terms over the four years between 1983 and 1987. Apart from that growth in industry's own expenditure on research and development, the Department of Trade and Industry spent more than £500 million on science and technology in 1988-89, and it will spend a slightly larger sum in 1989-90.

I am not sure from the right hon. Gentleman's remarks whether he welcomes this, but the Government have shifted their balance of policies and moved away from what is known as near-market support for research and development to direct support to longer-term ventures more distant from the market. We are putting much greater emphasis on longer-term collaborative programmes of research between companies, and encouraging co-operation between companies and higher education institutions. Many new schemes to promote pre-competitive collaborative research have been launched in the past year. For example, some 11 programmes have been announced and several more will soon be launched on Link, with which the right hon. Gentleman will be familiar. Proposals for such projects are being generated at a healthy rate.

I was particularly pleased that the right hon. Gentleman clearly recognised the importance of inter-national collaboration, especially with the aproach of the single European market. We are supporting the Eureka framework which goes beyond the European Community and is a pan-European programme to encourage industrially led projects with the European Community and other European partners ; and, of course, we are

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supporting many European Community research and development programmes which are complementary to our own.

Everyone in the Department is actively encouraging United Kingdm organisations to take part in community research industrial research and development programmes. Within the framework of those programmes, United Kingdom organisations are taking part in between 50 and 80 per cent. of the projects, depending on the individual programmes, and have received between 18 and 20 per cent. of the total funding. That is not often sufficiently appreciated when people look at some of the figures to which the right hon. Gentleman referred.

I wanted to make one or two further points about investment, but in view of the time, partly because I have given way several times, I shall move on to the other shortage on which the right hon. Gentleman focused particular attention--the need for training in various skills at various levels. Certainly the time when training could be regarded as a one-off spell between general education and work and when additional training was considered neccessary only when new machinery was installed is long gone. It is encouraging that so many employers in Britain consider training to be a continuous process that is essential if they are to keep up with their competitors at home and abroad. I assure the right hon. Gentleman and the House that that shift towards ensuring that training is more widely accepted as an essential part of a firm's investment and development is being reinforced.

Clearly, not least because of the large increase in the use and application of information technology and electronics, there has been a need to increase the supply of skilled manpower. The surge in demand for IT skills that has accompanied the surge in the market for the processes and products has undoubtedly led to a shortage of qualified manpower. We have sought to respond to that in a variety of positive and constructive ways, although it is manifestly not a problem that can be overcome in weeks or months.

By 1990 the engineering and technology programme will have provided 5,000 extra places at undergraduate and postgraduate level, 80 per cent. of which are in IT-related subjects. That programme and the earlier information technology in higher education initiative have significantly increased the places available for postgraduate information technology training. This year, the funding to help polytechnics and colleges to develop their capacity for applied research has been increased by more than 50 per cent. The high technology national training initiative of the Training Agency provides high-level vocational training courses, the majority of which are in computing sciences and engineering, with an IT component. Currently, some 3,000 students benefit from that programme. Computing and IT is a compulsory element in all youth training scheme programmes.

Those are just some of a wide-ranging set of programmes directed at the very problem to which the right hon. Gentleman drew attention. Trainees on employment training will also be able to undertake training on information technology as part of their individual action plans. We are continuing to monitor closely the evolving pattern of demand and supply for information technology professionals through regular surveys carried out by the Institute of Manpower Studies on behalf of a number of Government Departments and agencies.

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Finally, I should mention something which the right hon. Gentleman did not include in his speech--the range of measures that are under way to improve links between business and education, not least the wide-ranging plans by my right hon. Friend the Secretary of State for Employment for the development of training and enterprise councils. In addition to the need for improvement in the amount and nature of training available in certain places at certain times which is currently being addressed, too many of those programmes were not sufficiently shaped by direct and clear knowledge of the needs and requirements of businesses and business men. The move towards training and enterprise councils to ensure that training is more closely related to the needs that underlie this debate will, in the medium and long term, prove one of the most important and productive changes which the Government has sought to implement.

For reasons that are clear to the House and, I hope, accepted, I have taken a little more time than I had intended. I accept that much remains to be done to overcome the full effects of a longer and unhappy period of decline in many parts of British industry, especially during the 1960s and 1970s. Against the background of recent investment decisions by British firms and those abroad, the change in the past 10 years should be considered genuinely encouraging by hon. Members on both sides of the House. More than at any time in a generation, Britain is investing in the future. We are investing in capital, in skills and in a way which will continue to improve the output, the competitiveness and the trading position of the British economy. While I accept that there is still more to be done, I hope that the right hon. Gentleman will accept, as he did at the outset of his speech, that an immense amount has already been achieved.

5.7 pm

Mr. Doug Henderson (Newcastle upon Tyne, North) : I congratulate the right hon. Member for Yeovil (Mr. Ashdown) on his choice of subject for our debate. I also congratulate him and his party on the wording of the motion, as far as it goes. I was also pleased that he is so eager to endorse the Labour party's next economic programme in advance of its publication. I look forward to his further endorsement when the programme is published.

In the 1989-90 Red Book, which I understand is more than just another document, the Government claimed :

"As a result of sound financial policies coupled with supply side reforms, progress has been made during the 1980s".

I shall return to supply side changes but first I shall address the question of economic progress. In any test of economic progress, it would be reasonable to look at the indices of manufactured output, manufacturing investment, trade, employment, growth and even inflation.

Can what has happened in our economy in the past 10 years be called progress when manufacturing output returned to 1978 levels only in 1987 and manufacturing investment has still not yet returned to 1979 levels? In 1979, we had a surplus of £3 billion on our trade in manufactures, but we now have a deficit of £20 billion. That is reflected in the figures of key industries in our economy. For example, most households spend a large proportion of their income in the car industry, but there is

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now a £6 billion gap in trade. In textiles and clothing there is a £3 billion gap in trade and in electronics there is a growing gap, as we have already heard, of nearly £4 billion. That is also reflected in our share of world trade, which has fallen by 11 per cent. over the same period.

Can it be called progress when we have lost 2 million jobs in manufacturing industry over 10 years? Notwithstanding the improvements in employment in the past couple of years, which we all welcome, unemployment is still 35 per cent. higher than in 1979, even if we take into account the Government's new method of calculation. Can it be called progress when the north-south divide is greater than it has been at any time in the past 20 years? Can it be called progress when inflation on all indices has all but returned to the 1978-79 level? I remind the Chancellor of the Duchy of Lancaster of the comments of his right hon. Friend the Chancellor of the Exchequer before the 1987 general election when he said that inflation was the judge and jury of the Government's economic policy. I wonder whether the Chancellor is still saying that. I wonder whether the Minister is saying that when inflation is increasing rapidly. It is now double the average in the EEC and is moving relentlessly upwards. That depressing picture is the real monument of 10 years of Thatcherism. It has bequeathed to this generation and the generation of the 1990s a lower capacity to make things that we need to export and an inability to compete in the modern high-tech industries. We are now a ravenous pool of consumerism for the products of other countries. What will happen when the bubble bursts? Will not deflation be forced on us again? Will not living standards begin to fall and, with a time lag, unemployment again start to rise? All that will have been called progress during a time when we have had the benefit of £78 billion in North sea oil revenues.

Some people may argue that inward investment is a sign of good times. I am not saying that it is not welcome in some circumstances. However, an over- reliance on inward investment is surely an indictment of our industries' inability to invest in our future. I am not opposed to inward investment. As a Member for the north-east of England I realise the importance of Japanese investment to the north-east economy. However, we must recognise why the Japanese are here. They are not here because of any supply side miracle in the British economy. The senior management in Japanese companies will say why they are here. They want to be inside protectionism that they think might occur in Europe after 1992 and if they locate in a country in which English is spoken, they do not need to retrain their middle management in other languages. That is the real reason why Britain is attracting Japanese investment. I think that the Minister knows that that is so.

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