Read the Third time, and passed.
1. Mr. Stern : To ask the Chancellor of the Duchy of Lancaster if he will place in the Library a report on the extent to which British civil aerospace projects are assisted out of defence budgets, and the equivalent figures for the United States of America.
The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Robert Atkins) : Precise figures are not available but, given the vastly greater size of the United States defence budget, the civil aerospace industry in the United States will have benefited over the years to a much greater extent that has been the case in the United Kingdom.
Mr. Stern : I am grateful to my hon. Friend for that reply, but is it not deplorable that the United States Administration should criticise European aircraft manu-facturers such as Airbus for having an element of subsidy when in the United States there is a vastly greater subsidy through the defence budget for which figures are not even published? Does my hon. Friend agree that the announced failure of the Boeing 747-400 to achieve a certificate of airworthiness may be connected with the same problem in that these days slightly higher standards of safety are often demanded for civil aircraft than for what are basically military aircraft?
Mr. Atkins : As ever, my hon. Friend represents his constituents in British Aerospace, which makes part of the Airbus as well as many military components. His points are entirely fair. I caution him a little about his comments on the Boeing 747-400, because I remind the House that there is a substantial input of British manufacturers' equipment, for example, from Rolls-Royce. None the less, the point is well taken that Airbus will play an important part in the future of European aerospace in competition with the United States.
Mr. Gerald Howarth : Does my hon. Friend agree that the success of Airbus is even more remarkable considering the fact that it was not borne on the back of a military project? Does my hon. Friend not agree that the fact that
Column 300orders have been received this year alone worth £2,000 million to British Aerospace is a tribute not only to the European dimension but to the skill and technology available in the United Kingdom?
Mr. Atkins : My hon. Friend, like me, has flown in the A320. He will perhaps appreciate it better than me because he has a pilot's licence whereas I do not and am, therefore, guided by experts in this sector. My hon. Friend's points about the success of the Airbus are extremely good. It is one of the greatest success stories of European aerospace in which, of course, British Aerospace plays a large part, and all are to be congratulated on the achievements, especially when in competition with the American aerospace industry.
The Chancellor of the Duchy of Lancaster and Minister of Trade and Industry (Mr. Anthony Newton) : Competitiveness involves numerous factors including quality, reliability, assurance of delivery and after- sales service. In relation to price competitiveness alone, unit labour costs in United Kingdom manufacturing compared with those in other industrial countries, allowing for the effects of exchange rate movements, are thought to have been on average the same in 1988 as in 1979.
Mr. Graham : Does the Minister agree that in 1979 we had a manufacturing trade surplus of £5 billion but in 1988 we had a deficit of more than £14 billion? When will the Government do something to reassure Britain that we can recover our position at least to that of 1979?
Mr. Newton : That is a rather odd question from someone who would presumably have supported the last Labour Government under whom--by comparison with the stability of our competitiveness on the index that I have mentioned--competitiveness dropped by 25 per cent. between 1974 and 1979.
Mr. Charles Wardle : As well as efficiencies in output and product costs, is not competitiveness about getting the product that the customer wants tomorrow into the market before our rivals? If that is so, should not British companies be investing a large proportion of their profits today in research and development?
Mr. Newton : Yes. We do all that we can to encourage increased R and D, not only in this country but through the important collaborative mechanisms of the European Community. The important point is that United Kingdom companies, not least those involved in manufacturing, now have the profitability enabling them to do just that.
Mr. Gould : May I attempt to help the Chancellor of the Duchy with his apparent difficulty in handling some of the statistics? Will he bear in mind that there was an immediate and substantial loss of competitiveness in 1979 upon the Conservative Government taking office due to their insane exchange rate policy? The true comparison is therefore not with 1979 as a whole, but with the first quarter of 1979, and it is that comparison which shows such a huge loss of competitiveness. The figures--if the Chancellor would really like to hear them--show that on
Column 301actual labour costs the index figure for 1979 was 99, but for the first quarter it was only 90. [Interruption.] I know that the Conservative Members do not want to hear this. [Hon. Members :-- "Ask a question."] I am about to ask a question, but first we must get the facts clear. That comparison shows not only a huge loss of competitiveness on actual labour costs but an even greater loss on normalised unit labour costs.
Will the Chancellor therefore-- [Interruption.] I will not be deterred by shouting. I want to put my question. In those circumstances, will the Chancellor refrain from making claims about competitiveness which are disputed and denied by his own statistics and by our experience in the market place?
Mr. Newton : If there is any difficulty about statistics I venture to say that it is experienced in Dagenham and not in Braintree. The biggest single effect on Britain's competitiveness in 1979 is not be measured by the statistics mentioned--it was the winter of discontent and the shambles of industrial relations.
Mr. Bill Walker : Does my right hon. Friend agree that any fool can create the conditions in which products can be given away at enormous loss? The sales figures may be good, but such a policy eventually leads to bankruptcy. Such were the conditions that we inherited in 1979 and which prevailed throughout 1979 until the Government were able to bring in the changes that have produced eight years of continuous growth and continuous profits.
3. Mr. Eadie : To ask the Chancellor of the Duchy of Lancaster which of the seven major industrial countries have a higher manufacturing productivity level than the United Kingdom, and which have a lower level.
Mr. Atkins : No reliable comparisons exist for absolute levels of manufacturing productivity between different countries, but available figures show that in the 1980s the United Kingdom has had the fastest rate of growth in manufacturing productivity of the seven major industrial countries.
Mr. Eadie : Given the information that the Minister has offered to the House, he must agree that we start from a low base due to the slaughter of manufacturing capacity in industry in the early 1980s. The Minister must be concerned that our training performance is much lower than comparable EEC countries. The import of industrial machinery is helping to increase our manufacturing capacity, but does the Minister not find it worrying that as a result of the policies of the 1980s we no longer have the indigenous capacity to make that machinery?
Mr Atkins : I prefer to take the hon. Gentleman back to the 1960s and the 1970s rather than just the 1980s. Between 1960 and 1970 the United Kingdom's average growth rate was only 3 per cent., and it was only 1 per cent. between 1970 and 1980. Since 1980 our rate of growth has averaged 5 per cent. Of course, productivity
Column 302can always be improved and we recognise, as much as the Opposition do, that productivity must be improved if we are to maintain our competitive edge in world markets. We are making up for the difficulties that we had in the 1960s and the 1970s. I am sure that I do not need to remind the hon. Gentleman of them as his party was as much in power then as mine.
Mr. Anthony Coombs : I welcome the huge improvement in manufacturing productivity over the past 10 years, but is not the gap in absolute terms between ourselves and the Germans and Americans still too wide? In this context, does my hon. Friend share the concern of many Conservative Members about the offer recently made by the Engineering Employers Federation of a 6 per cent. wage increase and a reduction of one and a half hours in the working week? Of even more concern is the rejection by the trade unions of that substantial offer, which plays into the hands of our competitors just as we are catching them up.
Mr. Atkins : My hon. Friend is right to draw attention to the possibility of uncompetitiveness resulting from high wage increases which are not related to productivity. His point is well taken. I was interested to learn recently that a survey by the German chamber of industry showed that the rate of manufacturing productivity of German companies in the United Kingdom is greater than in Germany.
Mr. John Garrett : Does the Minister agree that the rate of increase in our manufacturing productivity is now falling, and that its absolute level is still way below that of our main competitors? Will he explain how that can be radically improved, given our inadequate investment in machinery and plant, and in management, supervisory and craft training?
Mr. Atkins : As the hon. Gentleman well knows, training matters are for my right hon. Friend the Secretary of State for Employment, and I should be the first to welcome the training initiative being taken in that Department. Clearly, there is always room for better management. The enterprise initiative, which forms part of what the Department of Trade and Industry is doing, has proved to be one of the most popular schemes that the Department has produced. It includes "Managing into the 90s" which is encouraging middle managers in small and medium-sized companies to recognise that productivity is one of the most important factors influencing their increased competitiveness as we move towards the 1990s and the turn of the century.
Mr. Newton : As I stated in answer to my hon. Friend the Member for Colne Valley (Mr. Riddick) on 20 April, the Post Office board accepted a conditional offer by the Alliance and Leicester building society for Girobank, and I endorsed its decision. Detailed negotiations between the two parties are continuing with a view to completion as soon as possible in the coming weeks.
The regulatory authorities will need to be satisfied and my consent will be needed before a sale can take place.
Mr. Lloyd : Does the Chancellor appreciate the very real fears of those who work in Girobank that the regional offices, particularly the headquarters of Girobank in Bootle which has more than 3,500 employees, could be jeopardised by the takeover? What discussions has he had with the building society to ascertain its plans for the future and what can he say today to assuage the fears about job losses?
Mr. Newton : Yes, I appreciate that uncertainty necessarily gives rise to some anxiety and I am anxious that the matter should be resolved as soon as possible. I have not had direct discussions with the building society. The Post Office is selling Girobank, subject to my consent. As I have told a number of Opposition Members, including the hon. Member for Bootle (Mr. Roberts) on a number of occasions, it seems unlikely, to put it mildly, that anyone would wish to buy Girobank without being interested in preserving and developing one of its major assets--the centre of Bootle.
Mr. Barry Field : Does my hon. Friend agree that the Alliance and Leicester is a good organisation to bid for Girobank because it has a history of innovation, particularly in setting up a successful financial company? Does he also agree that it is far better for free enterprise to run the Girobank, rather than the pot pourri of Parliament, the Civil Service and the Post Office?
Mr. Allan Roberts : Has the Alliance and Leicester building society given any indication whether it has the £50 million required for investment in Girobank's future? Will that money be forthcoming? Will there still be a need for a second centre, probably in the north-west of England, as currently proposed by the Girobank? What talks are taking place between the Alliance and Leicester and the Girobank work force prior to the sale? Will the Minister give an undertaking that if he gives his ministerial consent he will make that announcement in a statement to the House and not in a written answer?
Mr. Newton : On the last point, I cannot add to what has been said to the hon. Member by my right hon. Friend the Leader of the House in a letter. I have repeated the information in a letter that I am writing to the hon. Gentleman today. With regard to the contingency centre that is proposed for Wigan, I have made it clear that I cannot commit a prospective purchaser of the Girobank to any particular proposal at this stage. Talks with the unions, particularly on the issue of timing, are a matter for the Alliance and Leicester in the light of its other discussions. As for the hon. Gentleman's first question, I would not like to put any particular figure on what we would expect the Alliance and Leicester to invest--that, too, would be a matter for its own judgment.
Mr. Henderson : I wish to raise a more serious matter relating to the sale of Girobank, and one which is wholly contrary to Government policy and the public interest. Is it true that the Co-operative Bank made an offer for Girobank substantially and significantly above the conditionally accepted offer of £130 million made by the Alliance and Leicester, and if so, what explanation can the Minister give for the sale of Girobank at a knockdown price?
Mr. Newton : I know of absolutely no basis for the hon. Gentleman's suggestion. It is certainly the case that a number of expressions of interest were received, in some instances amounting to actual bids. Those, of course, were commercial in confidence and have been treated as such.
The Parliamentary Under-Secretary of State for Industry and Consumer Affairs (Mr. Eric Forth) : I hope to meet my European Community counterparts and Mr. Van Miert, Commissioner with responsibility for consumer issues, at the Council of Consumer Ministers which the Spanish presidency has planned for 1 June.
Mr. Turner : Is the Minister aware of the concern expressed by consumer organisations in the United Kingdom that unless we make progress and take much more care of the consumer interest in this country--and take it much more seriously--consumers will lose out in 1992?
Mr. Forth : I am aware of the concern to which the hon. Gentleman has referred, but I admit that I share none of it, for two important reasons. First, the consumer will benefit enormously from the development and fulfilment of the single European market, having always stood to be the main beneficiary. Secondly, consumers in this country are better served than those in almost any other country in the Community by our legislation, and by the extent to which they are represented and the Government listen to their representatives. I am confident that the concern that has been expressed is entirely unfounded.
Mr. Forth : My hon. Friend asks an interesting question. He may like to know that in the 10 months for which I have had the honour to occupy my present position there has not yet been a meeting of Community Consumer Ministers, and he may take some reassurance from the possibility that when I complete my year in office they will have met only once.
Mr. McCrindle : The purchase of a house is the largest single financial transaction in which most of us engage in our lifetime, and it also happens to be the only investment not included in the ambit of the Financial Services Act 1986. As rather stronger consumer protection applies in this regard in other EEC countries, and as the implication is that my hon. Friend will not be meeting his fellow Ministers too often, will he explore that point on 1 June to see whether we are a little behind some of our competitors?
Mr. Forth : I have some good news and some bad news for my hon. Friend. The bad news is that that item is not on the agenda for the meeting on 1 June ; the good news is that, having been involved--as my hon. Friend will know
Column 305--in an extensive review of house buying and selling over the past few months, I shall shortly reveal the outcome to an astonished world. I am sure that my hon. Friend will be delighted with that outcome.
Ms. Quin : Has the Minister seen the consumer manifesto for the European elections published by the London-based "Consumers in the European Community Group"? Has he also seen the manifesto published by the Consumers Association entitled "1992 and the Consumer"? Will he urge Tory Euro candidates to support the proposals in those manifestos, some of which will no doubt be considered at the June meeting? Following the example of other Ministers, will he veto the proposals because they include health and safety matters and oppose them no matter how beneficial they are for consumers?
6. Mr. Harry Greenway : To ask the Chancellor of the Duchy of Lancaster how much inward investment there has been in manufacturing industry in the past year ; what was the figure five, 10 and 15 years ago ; and if he will make a statement.
Mr. Newton : The latest available data relate to 1987 when net direct inward investment in United Kingdom manufacturing was £2,582 million. The corresponding figure for 1984 was £1,056 million, for 1979 £1,049 million and for 1974 £468 million. These figures, together with recent announcements such as those by Fujitsu, Bosch and Toyota, clearly indicate the enhanced attraction of the United Kingdom as a base for manufacturing industry.
Mr. Greenway : Does my hon. Friend agree that those figures are an excellent indication of the competitiveness of this country and will be good for jobs here? Will he try to encourage investment in the television technology industry with a view to producing television equipment which could show the Chamber as it is--if our proceedings are to be televised-- rather than in the truncated form proposed in the Select Committee report published today? We should have the Chamber televised as it is or not at all.
Mr. Newton : There are clearly a number of views on how wise it would be to televise the Chamber as it is. I shall leave hon. Members to make their own judgment about that. In reply to my hon. Friend's broader questions, I can tell him that we shall continue to do all that we can to encourage mobile international investment in Britain to contribute to the further strengthening of our manufacturing industry.
Dr. Reid : The figures that the Minister has given for inward investment are very impressive. Is he aware that the equally impressive figures issued by the Scottish Office and "Locate in Scotland" are under investigation by the Public Accounts Committee and the National Audit Office, which found that the figures had overestimated the amount of inward investment by 50 per cent.? Why should we believe that the Minister's figures are any different from those given by the Scottish Office?
Mr. Newton : I am aware of the argument to which the hon. Gentleman refers, but obviously when it comes to figures about the exact number of jobs created there is scope for a certain amount of argument. [Hon. Members :--
Column 306"Fifty per cent.?"] There is clearly no room for argument about the contribution that is being made by new direct investment to the creation of new jobs on a large scale or about the contribution that that is making to the strengthening of the British economy.
Mr. Baldry : Will my right hon. Friend confirm that there was about £5 billion of overseas investment in Britain last year--a 20 per cent. increase on 1987? As is demonstrated by Fujitsu in County Durham, Bosch in Cardiff and Sony in Basingstoke, the Government have created a climate favourable to overseas investors, who wish to invest in Britain because they know that we now have a successful business climate.
Mr. Brown : The Conservative party enthusiastically closed down the traditional industrial base of the north-east of England on the promise that new sunrise industries would be set up. Why then is there a balance of trade deficit in the sunrise industries and why are no British sunrise employers going to the provincial centres of England?
Mr. Clark : The overall value of the business is £16 billion. The high tech sector of international trade is an extremely complex subject. The hon. Gentleman and the House will be interested to know that the United Kingdom is in surplus with the European community to the tune of some £600 million. France, Italy and Germany are all in deficit in sum vastly greater than ours. Even the United States is in deficit in information technology. It is a western problem and the solution is elusive.
Sir Ian Lloyd : In view of their immense importance to the performance of British science and technology, can my hon. Friend say what proportion of the deficit is accounted for by supercomputers since that is a proportion of the deficit about which no one should have any complaint?
Mr. Clark : No. supercomputers are sourced only in the United States. They are essential. My hon. Friend is right. As he will know, in the United Kingdom the system of a harmonised array of secondary computers is much cheaper and in some cases gives the same results.
Mr. Kennedy : When the DTI is attempting to find an answer to Britain leading the way and pioneering much of information technology, why does it end up with such a woeful deficit in terms of trade, not with Europe but with other parts of the globe? What has the DTI done to try to find the answer that the Minister thinks is so elusive?
Mr. Oppenheim : Surely the elusive answer to the trying problem should not include the type of protectionist measures being erected by the European Community, including quotas, voluntary restraint agreements and spurious anti-dumping duties. Such moves not only put off the evil day when the European industry has to sort out its own act but substantially raise prices to European consumers of the products. Should not our Government, of all Governments, should be fighting harder in the European Community to stop such nonsense?
Mr. Alan Clark : The share of imports in United Kingdom manufacturing sales was 34.3 per cent. in 1985 and 35.8 per cent. in the 12 -month period ending in the first quarter of 1988. In other words, it was very little changed, although I recognise that that may not have been the answer for which the hon. Gentleman was hoping.
Mr. Clelland : Is the Minister aware that the difference between imports and exports has increased by 33 per cent. since 1979? Can he name any Government in this century who have had a worse record in trade deficits? If he can, will he give the statistics to verify his statement?
Mr. Clark : I admire the hon. Gentleman's footwork in rapidly changing the substance of his question. The answer to the first one was precisely what he did not want. In fact, our manufactured exports by volume increased by 5 per cent. in the last quarter. That is an annualised rate of over 20 per cent. Certainly, imports continue to grow, but that is a function of consumer choice spread across many sectors. It is a function of capital goods and a function of the demand for semi-finished products.
Mr. Roger King : Is my hon. Friend aware that one way of fighting import penetration is by import substitution, with British manufacturers producing the goods that we want? Is he aware, for instance, that the arrival of Toyota is extremely welcome in the British motor car industry, as indeed is the total amount of investment announced by manufacturing and component industries of around £7,000 million? Is not the way forward to produce all the products that we want for the home market and for export?
Mr. Clark : Certainly it is one way forward, among many. One of the most beneficial effects of inward investment is the disciplines imposed on components suppliers as a result of the local sourcing proportions that are required and the increased quality that is spread right across that sector.
Column 308manufacturing industry will fall and that in service industries rise? If so, is not that attitude fundamentally misplaced, in that most service industries require a very large number of manufactured goods, which ought to be produced in this country, and that they will themselves eventually be replaced by machinery?
Mr. Clark : Shifts in balance between various sectors of the work force have nothing to do with Government policy. The greatest increases in productivity usually arise in factories that are the most highly automated.
Mr. Nicholas Winterton : While I appreciate my hon. Friend's unique role in standing up for British manufacturing industry, does he agree that if manufacturing industry has a broader base it will be able to supply more of the machinery and materials required in the manufacture of export goods- -which would be to the advantage not only of employment but our balance of trade?
Mr. Clark : At the risk of further incurring the mockery of our erstwhile colleague Mr. Parris, I entirely agree with my hon. Friend's absolutely valid point. The level of inward investment is such that as it seeps through the economy, and as its disciplines on component sourcing are imposed--there is no doubt that their requirements must be maintained--it will have a progressive effect that will contribute to overcoming the problem that my hon. Friend identifies.
The Parliamentary Under-Secretary of State for Corporate Affairs (Mr. Francis Maude) : My Department is providing a comprehensive service to help business prepare for the single market that is constantly updated and expanded to take account of progress on single market-related measures. It is for firms themselves, whether they are in the manufacturing sector or in others, to take whatever steps are necessary to compete.
Mr. Pike : Does the Minister acknowledge that all the surveys show that while manufacturing output is expected to increase in the Community as a whole after 1992, it is expected to fall in the United Kingdom? That development is expected to be accompanied by falling employment in manufacturing regions such as the north-west, Scotland and midlands. What action will the Government take to ensure that the projected loss of 200,000 jobs is not allowed to occur and that workers in manufacturing industry are not again sold down the river?
Mr. Maude : What happens to jobs and to businesses will depend on the ability of businesses to produce goods that customers want to buy--at a price, time and quality that they demand. Nothing that any Government can do will override that. All the surveys that I have seen indicate that the successful completion of a single European market that is not overburdened with regulations, and which is a genuine free market, will lead to increased employment, output and wealth.
Mr. Page : Does my hon. Friend agree that one of the best ways to give British manufacturing industry opportunities in 1992 is to ensure not only a strong internal demand for its products but exceeding support to the "Better Made in Britain" campaign? Will my hon. Friend say whether any examination has been made of the correlation between manufacturing investment and production volumes, and what levels of manufacturing investment are in his opinion necessary to create the desired balance of trade?
Mr. Maude : It is clear that businesses must make their own decisions. They must estimate demand for their products and how to meet it in the most effective way. It is not for me to express the Government's views about the way that businesses should run themselves. It is for businesses to decide these things for themselves. They are doing that rather successfully, and I do not propose to try to second-guess them.
Mr. Hoyle : Does the Minister agree that the Government can help from the point of view of the economic climate? Does he further agree that interest rates can be a deterrent to business expansion and new investment? Can he estimate the loss of manufacturing jobs if some aid is not given to industry? Why are the Government not providing the infrastructure to enable industry to flourish in the regions so that it can meet the competition that will arise in the 1990s?
Mr. Maude : Investment in the infrastructure is as high as investment in manufacturing industry-- [Interruption.] --and both are at extremely high levels. The hon. Gentleman is right only to the extent that the economic climate for business is extremely important. That is why business in Britain is continuing to do well. He will be reassured to know that, despite the levels of interest rates being as high as they are, the investment intentions of business remain high.
Miss Emma Nicholson : Does my hon. Friend agree that in the run-up to 1992, one of the most important areas is information technology manufacturing and that one of the best ways to encourage a stronger IT manufacturing base for Britain would be to encourage the greater use of European rules of Government procurement and to encourage major users, including the public sector, to buy either from the United Kingdom or on a reciprocal basis from our European partners? That would have the crucial and necessary effect of opening up the so far closed French and German markets, given that the Italian and Dutch markets are already open. Is he aware that at present our weakness is in hardware and software manufacturing and not in custom-built software?
Mr. Maude : I have no doubt that when the public procurement markets of Europe are properly open to free competition, businesses in this country will be able to supply that demand effectively and competitively.
Mr. Caborn : The Minister will agree that the preparations for 1992 have been assisted by the European regional development fund. Is he aware that the Commissioner, Bruce Millan, is on record as saying that any commitments that have been entered into with the regional development fund and the IDOX scheme will be honoured? Will the hon. Gentleman now give a commitment on behalf of Her Majesty's Government that