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Sir Anthony Meyer (Clywd, North-West) : The hon. Gentleman is making disparaging remarks about inward investment. Did he listen to his hon. Friend the Member for Houghton and Washington (Mr. Boyes) when he intervened strongly during the Chancellor of the Duchy of Lancaster's statement yesterday to point out the enormous benefit that Japanese investment has conferred on his constituency?

Mr. Henderson : I am grateful to the hon. Gentleman for raising that point. We are not opposed to all inward investment. We want a balance of investment in this country and a greater investment by our indigenous

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companies. One reason why companies will not invest in the north is that companies currently located in the south cannot persuade their managements to go north. To companies from Japan, Korea or elsewhere the 300 miles between Newcastle and London and the 400 miles between Glasgow and London are immaterial.

We cannot rely exclusively on Japanese investment for major projects in the regions. If we do accept investment, it must not be on just any terms. We must remind ourselves that Japanese investment in the United Kingdom is for the benefit of Japan, not Britain. We risk becoming an adjunct of the Japanese economy, with all that that entails. We need our own economy, our own product development and our own components industry. We must develop using our own inventiveness, our own new industries and our own research and development. We need our own educational and training investment and we need our own industrial infrastructure. Without that, we will become nothing more than a low-wage, low-skill, branch-plant economy.

Some people have said that we are becoming a screwdriver economy and hon. Members know the danger involved in that. In prosperous times it might be all very well but in difficult times there is nothing for the screwdriver to screw. That means a reduction in output and an increase in unemployment.

Mr. Newton : I do not understand how the hon. Gentleman can make those comments about Japanese companies such as Fujitsu, Toyota and Nissan but not about IBM, Ford, NEC or any of the other major foreign investments that have been here for some time. Nobody in Dagenham talks about a screwdriver economy. Nobody talks about such an economy in Hampshire or various other places in which IBM is working. Nobody who has seen Nissan at work in the north-east talks about a screwdriver economy. Why should it be assumed that that applies to all new investment?

Mr. Henderson : I know that the right hon. Gentleman makes regular journeys to the north-east, but I hope that in future he will take a little more cognisance of what he is told. He will know that the people in the north-east remember the nature of the investment that came from the American economy in the 1940s and 1950s. Companies such as Caterpillar are no longer there. Caterpillar was a screwdriver company and when things became difficult internationally it pulled out. Many companies, including Massey Ferguson and Chrysler, have pulled out in that way. That is the real danger. We need a balance of investment. I am not saying that we should exclude all foreign investment.

Mr. Charles Kennedy (Ross, Cromarty and Skye) : I am listening to the hon. Gentleman's argument with care. He said that we need a balance of investment. I am not suggesting that he believes that we should exclude foreign investment but is he suggesting that, for the Labour party, with the announcement this week, the balance has gone too far in the wrong direction?

Mr. Henderson : I am not saying that the balance has gone off the end. However, if in the future the only investment in parts of Scotland, the north-east and north-west is foreign investment, the economy will become so dependent on inward investment that when we are hit by an international recession those areas will be as badly

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hit as they have been in the past. Some areas, such as Wearside near my constituency, are extraordinarily dependent on inward investment. They will be the first to be hit if there is a world recession, and everyone connected with the investment knows that.

Mr. Bob Clay (Sunderland, North) : Is my hon. Friend aware that a report commissioned by the Department of the Environment from the distinguished accountants, Peat Marwick McLintock, on the housing action trust in Sunderland said that there was no evidence of the Nissan plant having any effect on employment on the estates of Downhill, Hylton Castle, Red House and Town End Farm? The Nissan plant, which already employs 2,000 people and is adjacent to those estates across the A19, has had no effect on those estates, which have high unemployment. Is not part of the problem that because investment is not indigenous, it is highly selective where it employs?

Mr. Henderson : I am grateful to my hon. Friend for his comments. He knows that the problem arises in such areas as a result of skill shortages and the lack of proper training programmes over the past 10 or 15 years.

Mr. John Redwood (Wokingham) : If the Nissan plant is only a screwdriver plant, why do people need skills to work in it?

Mr. Henderson : I have been grateful for other interventions, but that remark is offensive. It is offensive to say that people who work on an assembly line have no skill. The hon. Gentleman should spend 39 hours on the Nissan production line and then make that remark. Why is our economy in the shape that it is? I shall refer to comments made by people who know more about the subject than the hon. Member for Wokingham (Mr. Redwood). Dr. Andrew Sentence, who is head of the CBI's trends and policies group, stated last July in the CBI news :

"High interest rates are a burden on business and are unwelcome at any time. However, they also affect companies, particularly manufacturers, through their impact on the value of the currency." I met the chairman of a company called AWD, which is in the vehicle industry. The Minister is familiar with it and I hope that he will agree that it is a go-ahead company which has considerable prospects. It rescued Bedford Vans, but its chairman is saying that the company will not make the impact that he wants on the market until the exchange rate is industry-based. I recently met a director of Courtaulds in charge of its spinning division in Lancashire shortly before he announced the closure of spinning plants. He made it clear that the problem was not internal productivity but the exchange rate. He said that as long as it was geared to the City and not to the needs of industry, the company could not compete in the world market.

Economists once thought that if demand policies are appropriate the economy will be successfully steered, but history has reminded us that that is not the case. I agree with a speech that the Minister made earlier this year, in which he acknowledged that demand and supply side initiatives are essential. However, it is clear that the Government's policies on the demand side have been pro-City, pro-rich, pro-export of capital and anti- industry, anti balanced economic development and anti the interests of ordinary people.

I observe no supply side miracle. Our failure to improve the supply side is at the core of the problems facing us as

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we build up to 1992. The basic error made by the Government over the past 10 years is that they believed that if they bashed the unions, trimmed the power of workers and gave employers more punch, supply side problems would be solved. That is what happened to British Leyland, but could any hon. Member say that as a result it is a strong, independent company going from success to success? Surely the truth is different, as everyone in the industry knows. It failed to take necessary design, capital re-equipping and marketing measures. I am as pleased as any hon. Member that it is hanging on manfully, perhaps in hock to Honda, but everyone in the industry knows that the basic problem was not limited to labour. That lesson is typical of much that has happened to much of manufacturing industry.

We should now know that the supply side cannot be changed without investing in the future, yet we still spend less on research and development than the Germans, Japanese or Americans. As the right hon. Member for Yeovil said, if the military aspect is extracted from research and development expenditure, the problem is more severe. Is it any surprise that we are ever more dependent on Japanese-designed cars, electronics and engineering products? The Government cannot dodge their responsibilities, as the Financial Times said when attributing blame for the problem in an editorial on 14 March. There will be no supply side miracle while training is so woefully inadequate. Our number of trainees has dropped from 23,000 in 1979 to 8,300 in 1988. Two thirds of British workers have no workplace qualifications, compared with one in five in Germany. Cuts of over £230 million were made in the 1989-90 training budget in real terms. Even in the service industries, about which the Department of Trade and Industry is for ever crowing, 14,500 young French people obtained qualifications in retailing compared to only 1,650 in Britain. Is it any wonder that the Engineering Employers Federation has forecast a deficit in mechanical engineering products in 1989, for the first time this century?

Is not the fundamental policy error of the Government that, unlike our counterparts in the Federal Republic of Germany, they are completely and ideologically hostile to collective and community action? We cannot make improvements in research and development, training, education and infrastructure unless we make a public expenditure commitment. Public expenditure should be accountable. The test should be the value of the service or product that it provides. However, I acknowledge that that has not always been the case. Crucially, public expenditure should be used to stimulate and complement private sector investment and initiative.

The Government know the perils ahead. They know that a further hike in interest rates will not only hit mortgages and further hamper industrial investment but will further exacerbate the trade gap. They know that the pound is likely to collapse when confidence departs and the hot money leaves our shores. They must know that 1992 is a further threat to our economy. If they are honest, they will admit that we still have severe supply side inadequacies.

Regrettably--I believe that the country holds this view--it is too late to change the Government's view. Some

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Conservative Members share the view of Labour Members that intervention is necessary and that we must invest to protect our future. Perhaps we will hear more about that from Wales in the coming week. I urge Conservative Members to join us in supporting the motion.

5.28 pm

Mr. Richard Page (Hertfordshire, South-West) : The title of the debate is fully in keeping with the slogan approach of the Social and Liberal Democratic party. It is long on good intentions and rather short on practicalities. I was privileged to represent Workington in the late 1970s and remember the workings of the Lib-Lab pact. I remember that almost any investment for the future was cut and cut again, so perhaps the House will understand my scepticism about the words of the right hon. Member for Yeovil (Mr. Ashdown) about investing in the future. I have a thought going through my mind that if he ever got near the levers of control the results might fall a little short of his words.

I am grateful that the House has the opportunity to discuss this most important matter, but I am disappointed in the number of hon. Members who are present to listen. Although I include hon. Members of my own party in that comment, we are more in evidence than hon. Members of other parties. We have some good spenders in this House, but we are a little short of earners. As a nation, we must earn money before we start spending it. This is a debate in which we decide how to earn money so that we can spend it on the social programmes the nation requires.

I want to talk about future investment in reducing our balance of payments deficit. In the short term, the Government's policy--which I support--is to have high interest rates which will bring down inflation and reduce demand. I am concerned that high interest rates will, in turn, reduce investment as well as demand. Even if that does not happen, I am equally worried about whether our manufacturing industry will be of a size and capacity to take advantage of the demand when interest rate falls. Will it be in a position to supply the goods that our people require when interest rates come down? I worry that that will not be the case. If I am right, we shall lurch backwards and forwards in a way reminiscent of the stop-go policies of the 1950s and 1960s, only this time we shall use the balance of payments as the crisis indicator.

I assume that it is desirable to bridge the balance of payments gap and to bring our balance of payments into equality ; thus we should define the objectives to be achieved. It is a sad fact--every hon. Member who has spoken so far has made the point--that for some reason our manufacturing industries are poor in investing in three areas--training, equipment and research--when compared with industries in other countries. We can deal with the problem of the balance of payments deficit as a large cake, by taking slices out of it and dealing with each slice at a time. I am glad that manufacturing investment is now up to its 1979 level, but it is still low compared with the other G7 countries and we have to bear in mind the significant point that our investment is still some 50 per cent. lower than Japan's as a percentage of gross national product. However, I do not decry the increase in investment that has taken place, as so many Opposition Members have. It is a significant improvement and long may it continue. But we should have some idea to what

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percentage of GNP should be reached in manufacturing investment if we are to work towards reducing the balance of payments deficit. We must also have some idea what percentage of inward investment is desirable each year and work towards it. I have to smile when I see the disagreements between the two wings of the Labour party over internal investment. I welcome Toyota's investment in the north. It is a tribute to the changing attitudes and atmosphere that the Government have created that the Japanese are looking to this country for investment. I also admire the work done by my right hon. Friend the Secretary of State for Wales in creating the infrastructure in Wales to attract companies to the Principality. I am not saying that the Government should pick winners, because the Government could not pick a winner if we paid them, but the Government can provide the infrastructure to make this country attractive to foreign companies for investment. I am told that during the last two years, the improvement in the balance of payments which will be created by those companies that have gone into south Wales in that period would mean a change of £10 billion to £15 billion to the balance of payments, if it were to be extrapolated over the whole country. That contribution should not be lightly brushed aside.

I know that some people are rather worried about internal investment and inflows of funds. I must point out to them that the most chauvinist nation of the lot in the European

Community--France--has now, for the first time, revised its policy on internal investment and is going out of its way to attract more companies to invest in France, whereas before it was trying to keep them out.

Much has been said about training and the fact that for some reason our manufacturing industries have been poor in that respect. The recent initiatives of my right hon. Friend the Secretary of State for Employment in putting £3 billion into training and bringing in manufacturing industry, which will contribute about £15 billion, will go a long way to bridge the skill gap. It is a funny quirk of human nature that although we have probably the most generous student grant system in the industrialised world, we have the lowest percentage of people going on into further education. That reflects a failure of the motivation of some of our schoolteachers. Britain desperately needs a trained work force to maintain its position in the industrialised world.

Again, we have a low percentage of GNP spent on research. Other hon. Members have already made the comment about the percentage given by the Government to defence. I would like the Government to look at defence as a separate item and see whether it is necessary for them to increase the percentage that goes into the civil side. Although our defence industries make a contribution to the balance of payments, one cannot eat tanks or grow rockets. That part of the economy should not be supported to the detriment of the civil side. The civil side should be evaluated on its own and should not be squeezed out in favour of the military.

I was generalising when I spoke about investment because certain sectors of society and industry have done exceedingly well. For example, the huge investment put into aero engines has produced results. Other hon. Members have mentioned our pharmaceutical and chemical companies. There is no doubt that money invested comes out in the fulness of time in profit, jobs and products. I am afraid to say, however, that as a general

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rule, the lack of skills and the lack of investment in research in our manufacturing industry has led our manufacturers to retreat into niche marketing. Niche marketing is profitable in the short term, but I remind industry, as I remind the House, that niches are a little like castles in 13th century Europe, in that they are soon overrun. We must consider the wider context.

I am reminded of the story, which I am told is true, of the ambassador to Washington at the time of the introduction of television. He was asked to do a Christmas broadcast which would be recorded in advance. The television crew arrived, the ambassador gave the broadcast and when he thought that it was all over the interviewer said, "What would you like for Christmas?" The ambassador replied, "Crystallised fruit." Come Christmas day, the ambassador watched the broadcast. All was going well until, at the end, the camera flashed to the French ambassador. When he was asked what he would like for Christmas, he said, "I would like to see an end to nuclear arms." The interviewer turned to the Australian ambassador who said, "I would like an end to the Korean war." He turned to the Indian ambassador who said, "I would like an end to world hunger." Hon. Members can guess the rest of the story. There is nothing wrong with crystallised fruit in a domestic context, but it does not have much impact on the wider world.

We must look to the targets presented within the European Community, the Pacific rim, the USSR, America and the rest of the industrialised world. We must see what we must do to expand our productive capacity and to build on our present success to achieve equality in our balance of payments. We must then target our objectives and, with Government support for the infrastructure--and the Government should not try to pick winners--we should go for it. 5.39 pm

Mr. Malcolm Bruce (Gordon) : I am pleased that we have this opportunity to debate such an important subject today and that my party initiated it. One of our concerns in the past 10 years has been the weakening of Britain's competitive position. We must be able to pay our way in the world, and our failure to keep up with modern technology is beginning to come home to roost with a vengeance. I am a member of the Select Committee on Trade and Industry. Last year our major report considered Britain's position on information technology. We discovered that there was a remarkable paucity of information about the state of that industry. It was difficult to find out exactly what was going on. Therefore, much of our report was dedicated to asking the Government to play a role in ensuring that more information is available so that Britain can ensure greater participation in the development of that technology and, much more importantly, in its application and use.

Many of us have personal experience of modern equipment. If it did the things that the salesmen said that it would, we would be pleased with the service, but more often than not, it fails to live up to the expectations raised about it. That is basically because we are lagging behind in using that technology effectively and in developing its application.

That presents an interesting contrast with the attitude of our major competitors. When looking for information

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on this, the Committee visited the United States and Japan. It is fair to say that what we saw in Japan scared us because the Japanese are channelling long-term investment into this area on a scale that leaves us gasping and the Americans terrified. If the Americans are terrified, there is no room for complacency in Europe or in the United Kingdom. Indeed, the Americans are so concerned that they have tried to copy some aspects of the Japanese approach in bringing companies together in research and development consortia to try to advance the technology and its application.

Our report also referred to the Government's role in advancing technology through their own procurement policy. However, that view was categorically rejected by the Government, who do not see it as a function of government. That is interesting, because it was explained that a significant component of the success in this area of Japan and the United States was brought about by their Governments' conscious use of their procurement powers to bring on technology. Although the British Government are facing severe competition from highly powerful and successful Japanese and American markets, the one thing that the Government have decided that they must not do is to follow their example. I cannot imagine a more stupid response to a serious situation.

The Select Committee looked at silicon valley, where there has been a wonderful upsurge of innovation and ideas in new product and new systems developments, but when one got to the bottom of it, much of the money came from the United States' defence budget. Although applications ultimately spin off into the commercial market, without being underpinned by defence spending, many of the ideas, products and companies, would simply not exist.

My right hon. Friend the Member for Yeovil (Mr. Ashdown) has already referred to the lack of research and development funding in areas apart from defence, although we do not have a defence budget that is in any way comparable to that of the United States. We must address that issue and ensure that there is some push from underneath as well as some pull from the market. One area on which my party and the Government agree is that the market must be the determinant, but the market alone will not ensure that British companies succeed in developing the new technology.

We must look for opportunities in new markets. There is no doubt that a single European market is an opportunity for greater co-operation and for developing a bigger market. From that market there is the potential to develop markets in the Third world and in the Eastern bloc. We should not lose sight of that because if the economic reforms in the Eastern block are successful, as all hon. Members hope that they will be, those countries will need the technology which we have but which they are a long way from being able to produce for themselves.

I make a specific plea--I hope that the Minister will address this point-- for the British Government to press for a review of COCOM. The Select Committee on Trade and Industry called for that last week and our call was reinforced by the Select Committee on Foreign Affairs. The relevant extract of that Committee's report states :

"The Trade and Industry Committee criticised the unwieldy nature of the system"--

that is COCOM--

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"commenting on the likely extent of trade opportunities lost. We share its view, and are sympathetic to its recommendations including an immediate and radical reduction in the scope of the Cocom list'." I stress that COCOM needs to be able to expand as fast as technology changes. Too often we are in the ludicrous position of British companies being prevented from exporting technology which is already becoming obsolescent but which, because COCOM has not caught up with it, is still on the restricted list. In consequence, we lose market opportunities and eastern bloc countries lose the opportunity to develop their economic performance.

So that there is no misunderstanding, I make it clear that we fully understand the need for COCOM. We are not suggesting that it could or should be swept away because, of course, we must maintain our guard on defence and security. However, as we--the Select Committee on Trade and Industry--said and as the Select Committee on Foreign Affairs has said, COCOM does not apply simply to defence. It is becoming a significant and substantial restraint on trade. I hope that the Government will agree that that is something that the West, collectively, could usefully address.

Although I welcome the Labour party's support for our motion, the hon. Member for Newcastle Upon Tyne, North (Mr. Henderson), who spoke from the Labour Front Bench, tried to suggest that the Labour party was somehow ahead on this matter and that it would address itself shortly to a great and presumably revamped "white heat of technology" initiative. Unfortunately, the tenor of the hon. Gentleman's speech suggested that what was being put forward was some kind of "fortress Britain", which would be narrow and introspective. He failed to grasp the fundamental point that, if we are to be competitive in the market place, we must be in the market place and not protected from it. We agree that the market must be allowed to operate and that our companies must be able to respond to it. "Fortress Britain" may be a superficial populism, but ultimately it would destroy our industrial base by hiding it from the real world.

We believe that the Government have a role to play in ensuring that we have a level playing field and reciprocal arrangements with our non-European competitors, such as the United States and especially Japan, and in ensuring that the single market within the European Community operates evenly and fairly for all of us.

Mr. Kennedy : Like my hon. Friend, I welcome the Labour party's support for our motion, but does he agree that there is a fundamental contradiction in the Labour party supporting a motion that is substantially addressed to information technology issues which, by definition, technically cannot know any national boundaries because information technology is all about the international free flow of information, while at the same time alluding to pulling up the drawbridge around the British economy--which, as my right hon. Friend rightly says, would spell short- term disaster for our country?

Mr. Bruce : Yes, it would, but it also seems incompatible with membership of a single-market European Community. The Labour party does not seem fully to have come to terms with that yet.

We must ask how we can update, compete and keep up to date with new technology and how we can ensure that the new technology that we have will be fully and properly utilised. The Select Committee on Trade and Industry

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concluded that we are a long way from taking full advantage of the capabilities of the technology and using it as effectively as we might.

We saw one or two examples of both success and failure. The most often quoted example of success is American Airlines, which introduced its own computerised booking system, involving all the American airlines, and found subsequently that that system actually made far more money than running the airline did--so much so, that the president of the company, when asked whether he would sell the airline or the system, said, "I will keep the system ; the airline can go."

On the other side of that experience is the Bank of America, which managed to lose $2 billion as a result of failing to introduce a modern and effective information system. When we met officials of the bank, it had got rid of software experts and was trying to see whether it could correct the situation by employing hardware experts. I suspect that the latest reports are not all that promising. This area is very important to the United Kingdom. I think it is generally accepted that our financial services industry is strong, advanced and innovative and, therefore, has substantial potential. It is not perfect--there is no room for complacency--but it is one of our strengths. Indeed, it has been a traditional source of satisfaction to British Governments of all colours that, whatever the state of our balance of trade, our balance of payments in terms of invisibles was always in surplus. But there are some worrying signs that that surplus is reducing.

With the advent of 1993--almost a second, albeit international, big bang-- there is some concern that British financial institutions may see the single market as something against which they have to protect themselves, instead of an opportunity that they have to exploit. I hope that the Government accept that they have a responsibility to try to ensure that when we get agreement on the single market it will be agreement that gives British financial expertise full access to that market. The Government must ensure that access is not restricted by barriers erected by other countries that want to protect themselves from our success. They must ensure that we can continue to develop the application of technology in the financial services area, to our own and the European Community's advantage.

Let me put this debate in perspective by saying that the subject is central to the current state of the British economy. The Government are perpetuating the myth that, in the 10 years since they came to power, we have had an economic miracle. There have been changes, and some of them have been beneficial. I am not arguing that they have all been bad, but I say very forcefully that it remains the case that in the Government's first two years a third of our manufacturing capacity was swept away. The Government's defence is that the firms that were lost were weak and were, by definition, unable to withstand the blizzard, and that the result is a leaner, fitter economy. The trouble is that it is a smaller economy in terms of its ability to enable us to pay our way in the world. We are not paying our way in the world, and the current balance of payments deficit is a direct result of that policy. The position is getting worse, and is likely to get worse still, unless we can create the goods that the world wants to buy, with sufficient added value to enable us to maintain our standard of living. The signs are not good, and the Government's position is extremely vulnerable--and rightly so.

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Mr. Christopher Gill (Ludlow) : I am sure that the hon. Gentleman would concede that when this massive fallout in British industry took place, one of the principal factors involved was that British industry was very weak financially. After a long period of high taxation, it simply did not have the cash resources to tide it over. I should be interested to know what the hon. Gentleman can tell us about his party's views on corporate taxes. Does he feel that those taxes are at the right level now? Does he not concede that this Government have already brought them down to a level that puts them among the lowest in the world? Does he think that there would be more investment in research and development, in training and in capital items if this trend towards lower corporate taxes were continued?

Mr. Bruce : I shall be very happy to enter that debate if the hon. Gentleman can persuade the Government to give us time for it on another occasion. Let me ask him specifically why the Government have not been prepared to introduce tax relief for money invested in long-term research. That is a positive proposal that they could have taken up, but, so far, in 10 years, they have not done so. Radical changes of that kind could usefully be introduced. They might be positive and helpful. That is a direct answer to an irrelevant intervention.

There seems to be a myth that we are moving into a post-industrial era, that we have created a post-industrial society. Looking at our post- industrial society right now, one can define it as meaning short-term profit and long-term bankruptcy. This country cannot sustain 55 million people unless we make goods and provide services that can be sold in the world. At present, we cannot do that. That is the dilemma that we are in.

The consequences of this policy fall very unevenly within the United Kingdom. I do not intend to make a regional policy speech ; I am simply pointing out that Scotland, Wales and the regions of England, which had predominantly manufacturing economies, have suffered disproportionately as a direct result of this change. It is not good enough for the Government to proclaim massive investment in shopping centres as some kind of substitute. Indeed, I think that the building of massive shopping malls on what once were the sites of great industries is actually a symbol of the monumental misjudgment of this Government. Those shopping malls are selling goods manufactured outside the United Kingdom, goods that we do not have the resources to buy. We must find ways of ensuring that at least some of those sites go back into manufacturing. We must ensure that our manufacturing capacity, our manufacturing base, is enlarged. But the Government have no answer to that problem. Indeed, the decline continues.

This is one of the things that they might have made a virtue of. Over this period we have faced progressive and successive privatisation. The Government learn slowly. Initially, and fundamentally, privatisation was simply a means of getting their hands on finance quickly in order to buy votes with the taxpayers' money. One cannot dispute that in that policy they have been successful, but they have suffered because, in the process, they--the free-market Government--have actually privatised monopolies. They have privatised inefficient monopolies, centralised monopolies, inflexible monopolies, and the ones that were privatised earliest have failed to take full advantage of the

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potential for technological advance and market development because they have been protected from the market by the strength of their monopoly.

British Telecommunications may have been profitable, but it has been profitable because technology has been moving fast enough to reap the profits from the customers. But its speed of innovation has been much lower than the speed of innovation in telecommunications systems in other parts of the world. That is greatly to Britain's disadvantage.

We argued at that time that it was a great pity that the Government did not establish, for example, Scottish Telecommunications, which could have been autonomous, and might have developed its own technology relevant to the Scottish economy and the more sparsely distributed population of Scotland. It might have developed something with export potential. It might have been possible to develop new products and new services. Incidentally, the same goes for Scottish gas or Scottish steel. Of course, in the case of electricity that is already the situation of Scotland, but it could be done in England as well.

Mr. Page : Is not the hon. Gentleman completely misleading the House? When the industry was under nationalised control it was a crying shame that investment was not being put into it. The country simply could not afford it. Privatisation resulted in the investment of £2 billion, enabling British Telecom to make huge advances. In the past, the system was being held back by nationalisation.

Mr. Bruce : It was being held back by the Government's public sector borrowing requirement, which, in any case, we never supported. I have always regarded that as the most spurious argument of all. Right now, the Government have a huge surplus, and there are nationalised industries that could make use of it. Indeed, so could the education system. But the Government will not release that surplus, even though the investment would be non-inflationary, would create jobs, and would underpin the wealth of the country in the future.

Mr. Ashdown : My hon. Friend's last point is at the centre of the argument about the Government's irresponsibility in the matter. We can have a theological argument about whether privatisation or nationalisation is good, and a practical argument about whether it is good for British Telecom. But there can be no doubt that no firm in Britain would not distinguish between capital and revenue. What an act of irresponsibility it was to get the money from the privatisation of BT and others and then to spend it paying off this year's bills, instead of reinvesting it in the future.

Mr. Bruce : It was worse in the early years. Tax cuts were used to buy goods which were made outside the country, and that aggravated the problem. That is the crux of the matter, particularly now that the Government have some resources. We must plough those resources into investment--the Government's responsibility is investment research and development and training--and the private sector must be given a climate in which it will invest

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in product development, innovation and new technology. Unless we can do that and add substantial value within the United Kingdom, we will face disaster.

In 10 years, people will realise that, far from an economic miracle, we had a reckless Government who used simplistic assumptions that took a once great manufacturing nation to the brink of bankruptcy and were financed only because they had the windfall bonus of North sea oil, which is now evaporating. We are heading for an awful lot of trouble. Unless this kind of motion is not only passed but acted upon, unlike our European competitors, post-1993 Britain will feel a nasty, cold draught.

6.1 pm

Mr. Robert Hayward (Kingswood) : The motion is split into two parts. The first half is critical of the Government, and the second half puts forward a series of suggestions. It is unfortunate that the speech of the right hon. Member for Yeovil (Mr. Ashdown) was not also split into two parts. He spoke for 38 minutes, and he criticised the Government for 38 minutes. He made not one positive suggestion, with the exception that we should do away with COCOM. He had to withdraw that comment, and the hon. Member for Gordon (Mr. Bruce) clarified it in terms of reforming COCOM.

The right hon. Member for Yeovil used the word "past". He also mentioned in passing the levels of investment. It was one of the thinnest, if not the shallowest, speeches I have ever heard from an hon. Member in opening a debate. He was wrong on gallium arsenide, transputers, and fibre-optic cables in terms of their use by Mercury and BT in docklands, and so on. He could not even get right the constituency of the Minister who replied to his Adjournment debate some years ago. When I challenged him on the brain drain, he had to revert to passing bets, which is a rather childish way of providing information to the House. It was a travesty of a speech, which took 38 minutes of what should have been an important debate.

Much more interesting was the contribution by the hon. Member for Gordon. He made a series of positive suggestions. I agree with several of his suggestions about the long-term requirement to turn round the economy, and the need for investment in various sectors. However, I disagree with one or two points. Obviously, one is his assessment of the long-term future of the economy. Given that the motion refers to education, I was interested also to examine the capital investment which took place in education from 1973- 79. During much of that period, the Government were supported by the hon. Gentleman's party. Between 1973-74 and 1978-79, the level of capital investment in education, particularly in schools, fell by 63 per cent. We are now paying, in terms of the shortages of systems analysts, computer programmers, engineers and the like, for long-term under-investment, particularly by a reduction of 63 per cent. in investment in schools over less than five years.

I wholeheartedly concur with a comment in the Social and Liberal Democrats News of 7 April this year. It states :

"his utterances on this topic only give weight to growing disenchantment with his leadership."

In terms of the requirements that we face for the future--not for the past, as the right hon. Member for Yeovil said--it is significant that there was no suggestion of a long-term SLD policy. I should have thought that we

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could have heard of one during the right hon. Gentleman's speech. I presume that we will hear about one when we debate another motion. Several of my colleagues have referred to inward investment and the internal investment that is now being undertaken by companies within this country. I am pleased to note that the level of investment as a share of GDP is now higher than it has been for the past quarter of a century. I agree with those hon. Members who said that investment is still not high enough, particularly in respect of a commitment to civil and research development. On that point I agree with the hon. Member for Newcastle upon Tyne, North (Mr. Henderson). He referred to inward investment by Toyota, Fujitsu, and Boch. In terms of the competitive nature and the achievements of major companies in this country nowadays, it is significant that, on the same day that Toyota announced its investment in Derby, GPA announced that it would purchase Rolls-Royce engines for every 757 that it included in its order. It is significant also that, in this day and age, an order of £1.5 billion--that is, in round terms--for the British aerospace industry can be hidden on back pages because of other levels of investment.

We should not deny the successes. Equally, we continue to face challenges. For example, the concentration on information technology and telecommunications, upon which much of the debate has focused, is highlighted by the decline in our share of telecommunications exports. About 25 to 30 years ago, we exported about 25 per cent. of all telecommunications equipment to other industrialised and non-industrialised countries. That figure has fallen year in and year out for about a quarter of a century. Our share of telecommunications exports is now down to about 5 per cent.

GPT, in the form of system X, is showing substantial progress in its capacity to compete. The problem is that, while it is trying to develop that product, the world's major competitors among telecommunications manufacturers such as AT and T, Northern Telecom, Ericsson's, Siemens and the like are moving on to the next phase of switchgear, and the investment required by GPT to develop that next phase is not available. Therefore, it is actively looking--whether willingly or not--to tie up with Siemens or some other company. We must recognise that problem in long-term industrial developments in this country. It requires not only investment but a changed attitude by management to training.

For far too long, British management has been unwilling to commit any money to training anybody over 21. The supposition is that once they are over 21, they are trained ; they will learn on the shop floor, office, drawing room or whatever, and that is it. British management must commit far more money to investment in training. It must be willing to take individuals off the shop floor year in, year out, and upgrade their expertise. The vast majority of foremen in German and French industry are graduates. They are required not only to turn over the line and ensure that it continues to produce, but to solve problems on manufacturing lines on a day-to-day basis. British management should adopt a similar attitude. If it does not, it will fail to survive, despite some of the successes that I have identified. For example, it must improve its links with universities. We have some of the best universities in the world. One of the few points on which I agree with the right hon. Member for Yeovil is that

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although they produce excellent ideas, those ideas are not taken up by British industry but go to other countries to be developed.

Mr. Kennedy : I agree with the point that the hon. Gentleman has just made. Why does he think that happens?

Mr. Hayward : Because of the attitude of British management before and after the last war that British industry had captive markets. After that, the attitude was that the state would support industry. I do not think that anyone would accept either of those attitudes as correct. They are not the attitudes adopted by German companies comparable to GEC, such as Siemens and Nixdorf, or by Japanese companies such as NEC and the like. Those companies invest heavily in universities. They fund substantial sections of university courses in a way that British companies have never done. Therefore, there is not a natural feed from the major educational establishments. It is interesting to note in my part of the country that Hewlett-Packards is investing in Bristol where it is close to a major concentration of higher education. It believes that if it puts money in, it will get expertise out. That is the attitude that other British companies should adopt.

I am conscious of the time ; therefore, I shall abbreviate my comments. I want to address to the Government one comment not made by other hon. Members. We need to change the attitudes of all aspects of British society, including the Government. Over the next 10 years the Government should be more nimble on their feet. They should look towards the possibility of reducing the burdens of government. We have too many layers of government. Why not do away with counties? They cost money. Why not do away with a number of London boroughs by merging some of them? The burdens of government put an imposition on industry. It is a cost that we could well do without. The Government should not only ask other people to respond but should also be much more nimble than they have been in previous years.

6.12 pm

Mr. John Redwood (Wokingham) : I suppose that the speech by the right hon. Member for Yeovil (Mr. Ashdown) was never going to be a highlight of the parliamentary year or even of the parliamentary week, but it was not even a sidelight because it was so dim and, as my hon. Friend the Member for Kingswood (Mr. Hayward) said, so lacking in substance. Perhaps the SLD members knew what was coming because only five of them stayed for the duration of the speech--a sure reflection that they had been tipped off about the quality of the debate on this major Opposition day.

Listening to the new "chips with everything" SLD lack of policy, I thought of a comment in the Evening Standard attributed to the right hon. Member for Yeovil :

"Mine's a selective memory. I find it's continually getting rid of things, a bit like a computer when the ram is full."

As I listened to his speech, I thought that the single K ram of the right hon. Gentleman was obviously well overloaded. The chemistry was poor, confusing a substance with a type of computer, the fibre-optics were short on fact, and the statistics were lamentable.

The House was told that investment as a percentage of GDP was static. Yet this country has just been through several years of dramatic growth in investment. As we have already heard, investment is at a record level for the

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1980s. Investment is well above the low level under Labour and under the famous Lib-Lab pact of which we used to hear so much. The House does not hear much now about the successes of the Lib-Lab pact. We have new record levels of investment overall and very high levels of investment in the private sector.

Then the House was told that the country was weak in information technology. We had highly selective examples from someone who does not seem to understand the width and breadth of the industry that is established in this country. The right hon. Gentleman should visit silicon glen or the Thames valley to see the range and depth of the businesses that have been set up by individual entrepreneurs, local businesses and national companies. We have had a large influx of investors from all over the world, aware that this is the country in which information technology is flourishing in many branches. Next we had the incorrect research and development expenditure figures. Hon. Members might have thought that in a speech centred on research and development, particularly Government R and D, the right hon. Gentleman would get the figures right. If we take neutral and fair comparisons in the OECD figures, we find that they show clearly that, in Government research and development expenditure, this country is above the levels of the United States, Germany and Japan in total. If the right hon. Gentleman insists on taking the percentage of GDP spent on civil R and D, again the story is that this country is above the levels of America and Japan.

The deficit in the 1970s and 1980s compared with the best countries abroad was in the private sector. The reason was the profit collapse engineered by the economic policies pursued by the Labour and Labour-Liberal Governments of the 1970s. The Conservative Government's economic policies have rebuilt and are rebuilding profitability. As profits have risen, so has investment in R and D. I am sure that the trend will continue while profits continue to prosper. I welcome the growing strength of R and D in the private sector which should add weight to the high level of GDP in public expenditure terms compared with our overseas competitors. The right hon. Member for Yeovil made a narrow speech based on many errors. I do not think that it was the kind of speech that will bring back Mr. Meadowcroft with his splinter Liberals. I cannot even see it bringing back the Isle of Wight Liberals who do not like trading under the new banner. It might not even keep happy the hon. Members for Ross, Cromarty and Skye (Mr. Kennedy) and for Caithness and Sutherland (Mr. Maclennan) who now sit on the part Bench that is normally reserved for the SDP and who, I am told, are getting rather nervous about defence policies and some other aspects of policy. In the battle of the minnows, the right hon. Member for Plymouth, Devonport (Dr. Owen) is in a different class ; his performance is much better than that of the right hon. Member for Yeovil. If only we had heard the policies of the SLD, we would have known about the pro-inflation policies that the party would like to pursue. We would have heard about high rates, extra local government, an extra level of regional government and the local income tax--all anti-enterprise policies that would cost the people dear, but, fortunately, will never happen.

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Turning to the positive side, I welcome the way in which industry is investing in the country and is beginning to develop in the flexible manufacturing areas new technologies and a new emphasis on quality, on product development and on better management- employee relationships. I think that that will be followed with much wider employee shareholding and employee participation in profit-sharing schemes and the like. The new high-tech and high value added economy requires greater co-operation, based on a shared belief in profitability, investment, incentives and the like. All those are happening as a result of the policies pursued by the Government. There is an area where industry and the Government can achieve more through investment which will help the enterprise revolution and the improvement in the domestic economy--the way that property is used in development. The House has already heard criticism by the hon. Member for Gordon (Mr. Bruce) who does not like to see old industrial sites replaced by new commercial development. I do, if the result is a new factory, built to modern standards with high quality equipment, as it often is, or better shopping facilities, where people can enjoy the fruits of their prosperity and buy the goods and products that they wish to have. I see nothing wrong with a process of renewal from which we can draw encouragement as it progresses.

Many industrial companies see the advantage of redeveloping sites by building new high technology factories to meet the right requirements for emission controls and the recycling of heat and power ; they are providing good working conditions for employees and are responsive to the new product design of the new economy. Those things can flow from well-chosen property developments, which can provide the wherewithal and which can develop the new economy. The forest of tower cranes around many cities is evidence that that process of renewal is now under way. Some companies could do more, and I hope that they will turn their attention to it.

The Government sector, too, could do more. In that area the PSA--for which the DTI is not directly responsible--could do a great deal more to release land and buildings and to encourage the process of renewal. That would not necessarily involve any cost to the public sector, because of the surplus in that estate. The total estate is mind-boggling in size--some 10 million sq m. I would estimate that at least 5 per cent. of that--or getting on for 5 million sq ft--is surplus to requirements and could be disposed of. That would release land and property for redevelopment which could further power the enterprise economy. In addition, there are about 100,000 acres of surplus land in the civil estate where the Government could make further efforts to ensure that it is put on the market and released for enterprise redevelopment.

The Government, when deploying their departmental staff--in the DTI and other Departments--could recognise that rentals, for example, in docklands are £25 per sq ft, yet in Westminster and the west end they are £50 per sq ft. For the price of a short tube or water bus journey, people could be better accommodated at half the rental cost and the process of renewal could be developed, because many central London office premises occupied by Government Departments would be suitable for refurbishment, redevelopment and redeployment as the new economy gets under way.

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