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points that we did not actually make and rejected recommendations that we did not actually make. That is not a businesslike way in which to go about the matter and was quite unnecessary.As the hon. Member for Havant has pointed out, there were areas in which the Government were able to say that they were acting positively and as our Chairman, the hon. Member for Hastings and Rye (Mr. Warren), pointed out in his excellent opening speech, not intervening is, in a sense, an act of intervention. It is a policy decision. The Government are taking a macho ideological position which does not make sense in the day-to-day world in which we all live. Their attitude seems rather unnecessary.
As the Minister will recall, we had a debate on this subject on 19 April. I am pleased to say that the subject was chosen by my own party and the debate was opened by my right hon. Friend the Member for Yeovil (Mr. Ashdown), who has direct personal interest in these matters and is an enthusiast for information technology. In particular, he referred to the desirability of having a national broadband fibre-optic cable network. The Government have rejected that and have said that they do not believe that that is especially desirable. They said :
"The Government have no plans to require the creation of a national broadband network based on fibreoptic cable."
Again, the Committee did not suggest that the Government should require the creation of such a network. The Committee said that it thought that that would be desirable, and that it was interested to know whether the Government agreed and whether they felt that they would have an input into that network. I must ask the Minister whether the Government believe, just as neutral observers and operators in the game, that a broadband network is desirable. If they do not, the Minister should tell us why. If they do, what contribution are they prepared to make towards securing it? Nobody is suggesting that the Government should require that network or that they should make it happen, but they should say whether they think that it is desirable.
The Parliamentary Under-Secretary of State for Industry and Consumer Affairs (Mr. Eric Forth) : What would the hon. Gentleman do
Mr. Bruce : The Committee is asking the Government to say whether they agree, and if so, what they propose to do. Hon. Members of all parties agreed that a broadband network would be desirable. If the Government do not agree with that, the House should know. Equally, we should know what the Government consider to be the way forward-- [Interruption.] The Minister will have the chance to reply, so these are perfectly reasonable questions.
The Government accept responsibility for the road network. We have debates about it and different views are expressed, but the Government accept the responsibility for ensuring that there is a road network and that it is maintained, updated and from time to time extended. The Government also accept responsibility for the national grid, for gas and electricity. Why do the Government not accept the responsibility for a national information technology grid, which should be in exactly the same category because it is the modern equivalent of those other networks?
If the Government's argument is that they do not have a role to play, either as a participant in the market or as a gentle guider of the market, they cannot point to history as
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showing that the market has always got it entirely right. Most people would acknowledge that although the building of the railways was a wonderful achievement, the private companies involved built a lot of lines in silly places, with gauges that did not match. Many of those lines did not pay and ultimately had to be closed, yet the Government could have had a logical and useful role in standardising the gauge. It seems extraordinary that the Government cannot state the desirability of them making similar contributions in this area. As has already been said, the Government are substantial operators in the market place, as purchasers and users of information technology. I believe that the correct figure for Government expenditure is £1.8 billion per annum, which is about 20 per cent. of the total market. That is no mean and insignificant sum.When the Committee visited silicon valley we saw considerable evidence that that was substantially a private venture and an offshoot of the injection of Government defence spending. The Committee is not suggesting that that is what we should be doing. We are simply making the observation that the needs and the huge budget of the American defence industry caused the spin- off of that massive innovative private enterprise explosion in silicon valley. That example proves that the interaction between Government expenditure and private sector growth and development is inescapable and unavoidable. Therefore, for the Government to say that they are not prepared even to consider the implications of what they are doing in terms of its impact on the private sector is both absurd and irresponsible.
It is not fair for the Minister to say that the Committee is implying that there should be detailed scrutiny. There was certainly never any suggestion that Government expenditure should be used to pull through technology. We simply argued that the Government should give some consideration to the impact of their expenditure on the development of the British information technology industry. We said that where the two could coincide, the Government's interest as a user and the industry's interest as a supplier should coincide, to both parties' mutual benefit. Any sensible Government would surely grasp that idea as being practical common sense and something that could be used to everybody's advantage.
I value this debate. Our Chairman gave a full and excellent exposition of the Committee's work. I defer to him as somebody who knows a great deal about the subject and as somebody with a great deal more expertise than myself.
This subject affects everybody. It is crucial to the development of our economy and our society. The Government should not artificially magnify differences, many of which do not exist. They should not belittle the work of the Committee because although the Committee members have broad backs, the sad thing is that ultimately the Government are not belittling the work of the Committee, they are belittling our industry, which worked so hard with the Committee to give a great deal of useful evidence, which I believe has been brought together in a way which is welcome to the industry. I repeat that the industry would like the Government to respond and to ensure that in 10 or 15 years from now our British information technology industry will be in much better shape than it is now and that the British economy and British society will be much benefited by that fact.
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8.24 pmDr. Keith Hampson (Leeds, North-West) : This is an important debate. It was a privilege for hon. Members--sadly few in number--to hear the distinguished speech made by my hon. Friend the Member for Havant (Sir I. Lloyd), who knows more about the subject than probably any other hon. Member and who has campaigned on these issues for so long. I endorse the gist of his entire speech.
My hon. Friend used the word "depressing" several times. I came to this subject as a total stranger when we began our Committee inquiry. Ministers sit in Whitehall, they are sometimes fairly new in their jobs and are not particularly conscious of the issues, so I stress that, as we as a Committee travelled around and saw the Japanese and American efforts and learned about what our partners in Europe, such as the French, were doing, it was indeed depressing to come back and discover what we are doing.
Hon. Members have used metaphors tonight and have said that information technology is today's equivalent of the railways or the coal industry. I was going to use the example of steam. In so doing, we are searching to indicate the enormous significance of developments in information technology. However, what was not true of the earlier industrial revolutions was the sheer pace of change and the rate of development and progress that there is in this area of information technology. Indeed, that is at the heart of the problem because the continuous and huge cost has conditioned the way in which our rivals throughout the world are handling this issue. Therefore, it is not good enough for Ministers to give the impression that they want to wash their hands of it.
Moreover, it is not good enough for Ministers to say that the Committee proposed solutions which, frankly, we did not. We were simply trying to draw attention to the scale of the problem and to the significance of what was happening elsewhere in the world. We were not saying that there should be an attempt in the words of the White Paper to "impose a best' solution." Where on earth did the Government get that from?
In the same paragraph, however, the Government said something that we would endorse. I hope that the Minister will bear in mind my words on this in the light of his words in our previous debate on this subject on 19 April. The White Paper states : "Government action can be justified to seek to correct failings in the market mechanism". That is exactly what we proposed throughout our report and the Government have not denied that fact. Therefore, there was no point in the Minister saying when he replied to that earlier debate : "The Select Committee was looking for what the Department sees as a more interventionist approach than the Department of Trade and Industry is prepared to support I regret not modern Government policy."--[ Official Report, 19 April 1989 ; Vol. 151, c. 385-6.] We are entitled to ask, which Government's policy? Not that of the Japanese Government. At the heart of capitalism, they pursue a different policy, as do the American Government. In this, as in so many areas, we are marching out of step.
Miss Emma Nicholson : Has my hon. Friend considered the contracting out by the American Government? When I was at the NASA base the other day, I found that the most interesting thing was that it was run by IBM. Did my hon. Friend understand the effects of what he was looking at in the United States of America?
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Dr. Hampson : I shall deal with that in detail in a moment. I was trying to make the point that Ministers are making unfounded accusations about the Committee and that the Government are out of step with what we discovered other Governments were trying to do. The Minister's sentiments were not even consistent with the Government's own approach. Within three weeks of the publication of the Select Committee's report, the Department of Trade and Industry issued a press notice which said :
"Government invests £22 million for extra IT research." I hasten to point out that Ministers had not told us that that was happening. Moreover, the Secretary of State appeared before the Committee for a second time three weeks before a major reorganisation of the handling of information technology in his Department was undertaken, yet we were given no indication that that was about to happen.
The press release to which I have referred is one of several issued by the DTI boasting about what the Department is doing--of an information and engineering advanced technology programme for example, and of £22 million to help electronics to expand the science base of this country. Another press notice is entitled "Semiconductors", and says :
"The Government announced today £16 million for a national programme of research into high temperature conductivity." Where is the difference between what the DTI is doing on a large number of fronts and what the Committee proposed? We proposed that such activities should be openly accepted. We should not be hiding our initiatives and efforts, or the fact that we are doing what other Governments are doing, albeit in an ad hoc way. We argued that there should be co-ordination. The IT effort spans an enormous range of activities. It involves the schools and how we get young people to cope and to become involved naturally with information technology. It involves training teachers. We have an appalling record on that ; information technology coverage in teacher training programmes is wholly inadequate. It involves the awareness of business men and a whole range of other areas' activities--the Training Agency and its training programme for young people and so on.
We have already acknowledged that a Minister in the Department should be the co-ordinating Minister for inner-city policy. Information technology is enormously significant. Is there not a case for saying that we should have a Minister to try to co-ordinate the Government's efforts? That is what the Committee suggested, but the Government said that it was not part of their thinking on these matters.
When it comes to trying to get orders for British industry, every effort-- rightly--is made by the Department and the Prime Minister to win contracts- -for example, for bridges in Turkey--and I give them credit for that, but are we really saying that help for the British construction industry is more important than assistance for information technology--both for the benefit of that industry itself and because of its application? We cannot say that. Information technology will not only be our largest, most important industry ; it will be the industry on which our future prospects depend most heavily. This is what will determine the competitive cutting edge of a
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modern industrial country--the acceptance, use and successful development of information technology. The Government acknowledge that in practice, but not openly.In Japan, the significance of information technology is all too apparent. When we visited Japan we were given a document issued by the Japan Key Technology Center. It contained the huge headline : "Reaching Out Toward the 21st Century"--
and that is exactly what we are talking about. The document describes the use of Government funds to help co-operative research. Despite the enormous power of the Japanese information technology companies and the huge scale of their own research, they still draw on Government funds. If more than two companies are prepared to capitalise a research and development company, they can get 70 per cent. of the capital from the Japanese Government.
They can also get loans. This is an interesting idea, to which I draw the Minister's attention. Loans are available for Japanese companies that enter high-tech research. Such loans cover 70 per cent. of the cost of research projects, and the interest and repayment of the loan depend on the success of the project. That is because the risk factor in information technology is enormously high. If the project is successful, the company pays the money back. If the project does not succeed, the payments are less, or the company does not pay at all.
It is not good enough to say, as so many commentators in this country do, "Well, the Japanese have a different culture." Of course they do, but the idea of trying to bring together the power of the private sector with Government help to co-operate in this immensely costly area is not restricted to Japan. In odd ways, we try it here, and that may provide a little help on the edges, but the Select Committee was concerned about the scale of the investment gap. One finds similar arrangements in operation in the United States--the very heart of capitalism. Why did Congress pass the Joint Development and Research Act in 1984? Because the joint involvement of huge American corporations had been breaking anti-trust laws. Having seen what the Japanese are doing, it was most important for the Americans to encourage similar developments. Congress has enacted proposals giving tax credit relief to companies that are prepared to invest in research projects in universities. In America, we see fundamental research assisted by the Government drawing in private sector investment.
What in any of this does the British Conservative Government disapprove of? Will not the Minister say for once that most of these activities are perfectly within the philosophy and approach of the present Government?
Dr. Hampson : I find that extraordinary. I think that it should go on the public record that the Minister has just quite clearly said, "No." That is out of character with what other Ministers are saying and with some of the Department's own programmes.
We cannot ignore the scale of the Japanese and American efforts. Rather than giving a great deal of detail about what the Americans do, let me draw the attention of the House to a book by a man called Kenneth Flamm, called "Targeting the Computer". The book is the result of a research project examining how public procurement policy and investment programmes in Europe and the
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United States have enhanced the development of computer and information technology. The Europeans have not done things very successfully, as the book shows, but that does not mean that we should not make the effort to do them at all.The book shows how, in the 1960s, the defence programmes, developed largely for the American air force caused a great breakthrough in high-powered computer work. The role of the Defence Advanced Research Projects Agency in the 1970s is central to the book's thesis. Help was given to bright people who had bright ideas in universities in the United States--not specifically for military purposes but because it was thought that the development of technologies such as the Sun workstation would ultimately benefit the military. The Americans were prepared, as a Defence Department effort, to put huge sums of money in, even though there was no immediate or direct benefit. The Americans were funding projects that it would take 15 to 20 years to follow through, and we are seeing the results in the space programme and the like.
Of course the British Government do not have resources on that scale, but it is a matter of philosophy and of our approach. We can do something, just as the French have. The "smart" card is now becoming a practical project. It is cheap enough in terms of unit cost for companies to use in the market. That happened largely because the French Government realised that French companies had something valuable but that the project would be difficult to launch because of the cost. They therefore said that a French man's medical records would henceforth be held on a smart card. That created an enormous market for the private sector to develop. The French Government were not picking winners or telling the private sector to do this or do that. It was an example of a Government entering partnership with private companies, helping to create new markets and helping companies to succeed as far as they could in those markets. That is something with which the British Government, of all Governments, should be concerned.
Even if the Government do not accept the degree of intervention that the Minister might say my remarks imply, they have a role in increasing awareness. The Government constantly talk about awareness in the enterprise initiative. The Committee heard a lot of evidence to the effect that there simply was not enough awareness. We may be having a lot of awareness programmes about Europe. The Government have been spreading knowledge very successfully about the single market. One of the most important factors in helping the country to succeed in the single market will be the adoption of information technology.
We do not have enough targeted programmes under the enterprise initiative for information technology. We do not have enough resources in the teaching company programmes specifically geared to information technology. Let us look at some figures : 41 per cent. of IT managers said that their senior management in this country were not successfully involved with knowledge in IT ; the comparative figure for West Germany was 5 per cent.
The Government have a major effort to make to heighten awareness, even if they do not want to pull through the technologies, help create the markets, develop the partnerships and do something further to develop research. They must do something further on research, even though they do a lot already. They already make
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research grants. I have suggested a different type of loan programme, or, like the American Congress, a tax credit system for companies interested not only in specific developmental work for company use but in pure research.One immediate issue would be of enormous benefit, Increasingly, the Government have encouraged the private sector to help universities and other institutions of higher education. We have a programme of about £1 million to try to lever another £10 million in gifts or donations to higher education. But there is also VAT on charitable donations from companies. A company such as Hewlett-Packard that has been giving equipment to Leeds university is charged 15 per cent. on the value of the high-tech equipment that it is donating. That is absurd. That is the right and left hands of Government not knowing what each other is doing.
We must somehow co-ordinate the Government's effort. The Treasury must believe that short-term cash figures are nothing compared with long-term investment in this country's future. The pay-off in 20-year-olds being able to use the best equipment from
Hewlett-Packard, IBM and so on will be more important than spending £40 million on their grannies getting assistance for medical insurance. If we took the £40 million which we are going to put in to assistance for medical insurance and put it into the programmes that we already have to help companies give more equipment to higher education, it would pay for far more in the longer term.
We are asking whether Britain can win and do its best in Europe and whether we can do the best of which we are capable in the world. The report is trying to tell the Government that Britain must be a winner and that, above everything else, we become a winner through the successful use of information technology. Frankly, the Government must have a more positive response, spend more, be more interventionist and be more prepared to co- ordinate their efforts. 8.41 pm
Mr. Roger Stott (Wigan) : I congratulate the hon. Member for Hastings and Rye (Mr. Warren) and the other members of his Select Committee on Trade and Industry on producing their report on information technology. I agree with most of the contents of the report. Without doubt, the Select Committee's conclusions are a devastating critique of the Government's policy on an industry which, in the words of the hon. Member for Leeds, North-West (Dr. Hampson) is the touchstone of the new industrial revolution. I agree with the Committee's 52 recommendations, but I should have liked to see them go a good deal further.
My one regret is that this debate on an important subject is taking place so late. I should have liked to have a full day's debate, so that the Select Committee's recommendations could be fully explored. I have a great deal of respect for the work of Select Committees. I hope that the Minister has had time to reflect on and repent his rather stupid remarks of 19 April, when he referred to the Select Committee as an
" old-fashioned idea of the gargantuan dinosaur".-- [Official Report, 19 April 1989 ; Vol. 151, c. 385.]
I hope that the Minister has read the minutes of the evidence of 26 April, when some of his hon. Friends were
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particularly offended by his personal reference to them. I hope that he will have the magnanimity to repent and to desist from using such stupid language.Mr. Forth : I ask the hon. Gentleman to re-read that passage. In any case, the last words of my hon. Friend the Member for Leeds, North-West (Dr. Hampson) were that the Government must be more interventionist. I heard him say that, and it will be on the record. Why should I withdraw my remarks, which the hon. Gentleman misquoted, when at least one of my hon. Friends has justified part of what I was saying?
Mr. Stott : That is a matter for the Minister to take up.
Dr. Hampson : Will the hon. Gentleman allow me to correct that? I said that there is no doubt that my hon. Friend the Minister would call my view interventionist. I am talking about nurturing those industries, not intervening and telling them what to do.
Mr. Stott : I hope that we can penetrate the Minister's mind, although I have serious doubts about doing that.
There are three major facets to a debate on information technology. The first is the state of the IT industry, the second is the use of IT by the rest of industry, and the third is the Government's use of IT. I shall concentrate on those three issues.
The Chairman of the Select Committee has already mentioned that we have a huge trade deficit in manufactures, particularly in information technology. I make no excuse for drawing that matter to the attention of the House. Britain's 1988 trade deficit for information technology was £3.9 billion. That was up by 15 per cent. on the year before, and was almost one third of the total deficit in manufactures. In the past four years alone, the deficit in electronic goods, which includes computers, telecommunications and audio equipment, has risen by a staggering 40 per cent.
According to the Financial Times a detailed breakdown of the figures shows that the
"United Kingdom does not enjoy any particular areas of strength." The biggest imbalance was in components, professional equipment and semiconductors, at £1.5 billion. For telecommunications, television and audio it was almost as bad, at £1.4 billion. That is double what it was in the past four years. The only declining part of the deficit from £1.1 billion in 1984 to £1 billion last year was in computer and office machinery, but that was almost entirely due to the assembly operations of United States companies in Britain, such as the one in Scotland--Wang--which is now leaving Britain.
Employment in the United Kingdom electronic and electrical engineering sector has fallen from 752,000 in 1979 to 529,000 in 1989. At the same time there has been, and still is, an increasingly alarming skills shortage. No doubt the Minister will lament that deficit, and claim that all other OECD countries, apart from Japan, suffer trade deficits. That is a fig-leaf that has been claimed by himself and also by his boss, the Secretary of State, in his rather difficult encounter with the Select Committee on 26 April. In two ways, it is an extraordinary defence. First, apart from the rather special case of telephone equipment, in which we are still seeing the legacy of public procurement policies, both in their role of producing strong companies in Britain and the investment programme of British
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Telecom and others, Britain's trade deficit in the other relevant sectors is the largest by far of any comparable countries. Secondly, and even more extraordinary, Japan's strength is claimed as a defence by a Government who maintain that the type of industrial strategy that is followed by Japan is an abomination against nature. In the words of the sour White Paper that was produced by the Government in response to the report :" Strategy' implies attempts to pick winners', to ignore market signals or to impose best solutions'."
"It cannot work," the Government say, yet strategy is precisely what Japan has and what has continued to contribute to its present dominance in information technology.
Having read about the Secretary of State's encounter with the Select Committee. I remembered that he had a rather bruising encounter with my hon. Friend the Member for Rotherham (Mr. Crowther) about the definition of the words "strategy" and "policy". The Secretary of State said that the Government had a policy, but, apparently, his departmental officials told the Select Committee that the Government did not have a strategy for the information technology industry. I, and I suspect many others, do not believe that the Government have a policy or a strategy, no matter how those two words are defined. As the hon. Member for Leeds, North-West said, the Government cannot pick winners in the versions of the alternative policies that have been quoted by the Minister. As the Select Committee recognised, only customers that include the public sector can pick winners in the long term.
Government can, however, do much more to ensure that conditions are created in which winners can come through. People look for winners in the first place. In the words of the Electronics Components Industry Federation, when giving evidence to the Select Committee, market forces cannot be relied on. The Government's fear of committing themselves in any argument about the future is similar to the man who will not leave home for fear of being run over and who spends his time compiling long lists of all those who have been run over in the past.
Japanese industrial strategy has led to some mistakes, of course, but the Minister would feel much more comfortable tonight if he could claim Japanese IT success. Japan is not the only country to believe in the I- word, "intervention". The French-Italian state-owned company SGS Thomson could not believe its luck when it was allowed to purchase INMOS, the developer of the world-beating, leading edge transputer, just as it was moving into profit after the characteristically long lead time following the initial investment in hightech.
The Conservatives never liked INMOS because it was established by the last Labour Government and was in the public sector. I find telling the response of Pasquale Pistorio, the boss of SGS Thomson, when asked how he would feel if he were British and saw such a unique company pass into foreign hands. "I do not know," he said, "I am not British." At one level that was, I suppose, a diplomatic answer, but at another it was extremely revealing. It could happen only in Britain. This is the only country in the world that would sell something as valuable as INMOS to a foreign competitor.
There has been no lack of warning about the parlous state of the British IT sector. The NEDC warned in 1984 that Britain was approaching a precipice. In 1986, the Information Technology Advisory Panel called for a more
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energetic and strategic approach. The Advisory Council for Applied Research and Development, the Cabinet advisory body, and the report to the Department of Trade and Industry from Coopers and Lybrand both called for action. Perhaps the most damning of all was the MacKinsey report into the British electronics industry which pointed a gloomy picture post-1992.The Government have not failed to heed just the warnings. They have done all they can to make the situation worse. They abolished the IT little Neddy and they abolished the post of Minister for Information Technology and gave us instead the Parliamentary Under-Secretary of State for Industry and Consumer Affairs. We always understood that his role in the Conservative party was to stand next to his right hon. Friend the Member for Chingford (Mr. Tebbitt), thus making him appear civilised. The Prime Minister should never have visited upon the Minister who will reply tonight the supposed mantle of Minister for Information Technology, considering that this is one of the most important areas in British industrial activity.
One bright spot in the activities of the Government was the Alvey programme, but that is now almost entirely wound down. The proposals of the Bide committee, for the relatively modest sum of a £125 million follow -on, has been totally rejected by the Government, as the hon, Member for Hastings and Rye pointed out.
Yesterday I spoke to Lord Gregson, who was a member of the Bide committee, who told me that that committee has worked for two years to produce its report and that the Government had done nothing about its recommendations. The tragedy is that that seems to be indicative of the attitude of the Government towards the IT industry. The Government are winding up their support for such strategic projects as fibre-optics and opto-electronics, as well as the micro-electronics industry support programme and software products scheme. They have made it clear that there is to be no significant support for the large-scale integrated microchip, the exact opposite of what is happening in the United States and Japan. Within a few weeks of the Government making that announcement, the American Government announced a $250 million support programme for collaborative research by United States companies into VLSI technology. Therein lies the real difference.
We welcome the ESPRIT, RACE, BRITE and other EC-wide research programmes and we want to see those extended and developed. Although Britain's performance is poor, we must catch up with the rest of our European competitors. Part of the problem, and therefore part of the solution, must be to tackle Europe's general backwardness compared with the United States and Japan. Part of that must be a European-led position on the setting of standards.
We welcome the new DTI push for OSI, even if it is too little, too late. We also think there could be more effort in ensuring that the public sector used OSI equipment. That is an example of the kind of interventionist public procurement policy that can work.
But although European collaboration is an important part of the way forward, it cannot be a substitute for British Government action. A strong research base in Britian is a prerequisite to participation in collaborative EC research programmes. ESPRIT 2 was massively over- subscribed and we cannot pretend that it is a substitute for our own efforts.
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Insufficient research and development is not the only problem holding back Britain. Despite insufficient funding by industry and a lack of resources in the universities, there are still major technological breakthroughs and exciting discoveries made in Britain. Some are brought to the market, and we wish them well. Some are even brought to the market by British firms.There are three factors underlying the failure of British IT to grow in the way that it has grown in other countries. First, British firms have been handicapped in terms of access to funds. There is now a well-researched funding gap for start-up companies, which applies particularly to ventures operating at the inevitably high risk, long-term payback, leading edge of technology. Many of the world's newest large and medium IT companies started out in Califorian garages. British garages have been much less productive. I suspect that that has more to do with the availability of funds to take the development on to the next stage than to any inherent superiority on the part of Californian garages.
Secondly, we have the general structural problems common to all aspects of British manufacturing industry. I will spare the House a lecture tonight on high interest rates, but our easy market for corporate control and the City -induced emphasis on short-term profits has been particularly damaging to the IT industry. The great struggle between GEC and Plessey provides some important lessons.
GEC is in a position to make the bid because of its extraordinary cash mountain. It has run up that cash mountain because it has failed to make new investments, and high interest rates allow it to make a significant return. As the Financial Times has commented : "GEC has no great reputation as an innovator in non-defence electronics. One of the most striking facts to emerge from the MMC report is that Siemens spends three times as much on research as GEC."
GEC no doubt also sees an advantage in building up that cash mountain as a defence against other creditors. GEC has always been profitable, but it has not grown in the same way as other European companies.
Dr. Hampson : As far as I can remember off the top of my head, that is a little unfair. Siemens is so much bigger as a company than GEC. Siemens is worth £14 billion to £15 billion, whereas GEC is worth £3 billion to £4 billion. I believe that GEC's latest account shows that it has been spending about 7 per cent. on research, which is higher than Siemens.
Mr. Stott : The hon. Gentleman may or may not be right, but my point was related to the bid for Plessey. Although GEC has had so much money generated, it has not spent that money on increasing its research and development--which I believe it should have done--in the same way as other European companies.
GEC has always been profitable but it has not grown like other European companies. Between 1982 and 1987, GEC declined by 27 per cent. in value. Siemens, on the other hand, grew by 70 per cent., AEG, another German company, grew by almost 500 per cent., ASEA Brown Boveri, the Swiss-Swedish firm, grew by almost 250 per cent. and Philips by 36 per cent. As GEC is one of our biggest firms, we are entitled to feel disappointed by those statistics. However, the City will be impressed by the
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statistics that they value--profits per employee are almost twice those of any of the other big European electronics companies. The Opposition do not object to profits, but we believe that they should be invested in new products and markets and, especially, in research and development.There is even less excuse for GEC than any of the other companies because so much of its profit--like Plessey--is made from the taxpayer. GEC and Plessey are two of the six companies which were paid more than £250 million by the Ministry of Defence last year. Both companies--I should exempt Plessey because it has attempted to break away from that syndrome-- have preferred the safe yet slow growth markets of defence contracting and other public sector supply contracts to the more risky but higher growth consumer side. Our large electronic companies need a more adventurous and risk-taking attitude and greater market orientation. I hate to think how much time, money and effort have gone into this bid, for no apparent reason. Once again, resources have been drained from the productive sector to profit the financial sector, where all those who make such a good living from the takeover market have made yet another killing.
The third ingredient in Britain's IT industry is the I-word, Government intervention. I am not talking about centralised planning or DTI meddling in the day-to-day operations of individual firms, but about the kind of approach provided by MITI in Japan and the Department of Defence and NASA in the United States, where public procurement is done in a way that maximises spin-off rather than Britain's overly secretive approach.
I was interested to read the comments of the hon. Member for Leeds, North- West, when he was cross-examining the Secretary of State. He said :
"Who are the big buyers in the market? The big buyers, there, are the Government : MINITEL in France, NASA in the United States. From what you are saying, it may be the success of different companies, but it is the use of Government purchasing power that leads to that success."
The Secretary of State then said :
"What has MINITEL led on to?"
If I recall, the hon. Gentleman then rounded on the Secretary of State and said :
"Thousands of small companies have been founded in France on the back of MINITEL. Have your Department checked it out? What I want to know is, have you even bothered to find out? Do civil servants in this country even bother to look to find out what is happening elsewhere."
The hon. Member for Leeds, North-West said that, because, if I recall, he was pretty steamed up. He was right.
A good example of such an approach for Britain would be the introduction of broadband fibre-optics in the communications network, as the Select Committee has recognised. It is an area of technology in which Britain leads the world, both in the strength of the basic science research base and in the application of applied technology, particularly by British Telecom. Such a network would not require huge Government expenditure, bar some initial pump-priming and a commitment to use the network for purposes such as education and training.
By making a commitment to such a network, the Government will ensure that the private sector can make the investment in the new technology and in the new capacity that will be required. Other countries will want to buy the expertise and technology that we develop. As has been said time and time again tonight, this is a rare opportunity to develop a common European approach, through standards setting and by collaboratively funded research in which Britain's industry can set the pace.
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Broadband cable is the infrastructure of tomorrow. It is the river by which information can flow and the Government should begin to respond to that proposition properly instead of trotting out the conclusions of the Macdonald report.I recognise that time is moving on and that other hon. Members would like to participate in the debate. I do not believe, however, that the Select Committee has addressed the matter of high-definition television. The House will be aware that the standard for high-definition television will be a European one. To take advantage of that exciting new technology we must learn some lessons from the past. Television set production in this country has all but disappeared and frankly the Government have just sat back and let that happen. To prevent a further worsening of our balance of payments the Government should be working on--let us use the word that the Minister does not like--a strategy to assist and advise British companies so that we can meet the challenge adequately and play a strong role in Europe. Failure to do so by leaving it entirely to market forces will mean another wasted opportunity and another loss for Britain.
There are a number of questions that I would like to ask the Minister, but I shall confine myself to two matters. What will happen after Alvey 2? How will the long-term research be funded? Does the Government believe that the United Kingdom has a chance to participate seriously in the artificial intelligence expert systems markets of the 1990s and beyond? What is the Government's position on COCOM, given that other European countries are making major strides in selling information technology products and telecommunications equipment to the Eastern bloc? What will the United Kingdom Government do to protect our firms that are penalised by the codes of COCOM?
Over the past few years, the Government have been inundated with reports and advice from many learned quarters, the latest of which is the Select Committee's report. If they fail to respond positively to the advice given to them by the Select Committee and by industry and if they fail to respond to the plethora of advice that they have received in the past, they will stand guilty of abandoning the touchstone of the new industrial revolution. 9.7 pm
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