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House of Commons

Wednesday 19 July 1989

The House met at half-past Two o'clock


[Mr. Speaker-- in the Chair ]

Oral Answers to Questions


Manufacturing Output

1. Mr. Kennedy : To ask the Chancellor of the Duchy of Lancaster what is the current level of United Kingdom manufacturing output ; what it was on the same date in 1979 and 1981 ; and if he will make a statement.

The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Robert Atkins) : In the three months to May 1989, the output ofthe manufacturing industry averaged 118, based on 1985 equal to 100. The comparable figures for the same three months in 1979 and 1981 were 108 and 89.6 respectively. Manufacturing output during 1989 has been at record levels, and in the three months to May was 9 per cent. and 32 per cent. higher than in the same periods in 1979 and 1981 respectively.

Mr. Kennedy : The Minister's civil servants, although not the Minister, are to be congratulated on their ingenuity in trying to make a good story out of a disastrous one. Those figures confirm that following the deep recessionary policies of the Government between 1979 and 1981, our manufacturing base has still not recovered to the level that it was when the Government came to office 10 years ago. Is that not a savage indictment of the Government's economic policies and of the damage that those policies have caused to our manufacturing base?

Mr. Atkins : The hon. Gentleman has asked this question in almost the same terms before, and he received a robust answer from my hon. Friend the Minister for Trade. The hon. Gentleman may recall, although he was not here at the time, that we experienced a substantial recession, which also affected the rest of the world, since when manufacturing output has increased to a level that it has never reached before. It is a very good story.

Mr. Kennedy : It has been 10 years.

Mr. Atkins : The hon. Gentleman should be aware that there has been a recession. Growth is now 5 per cent. higher than the previous all-time peak growth in manufacturing output. The hon. Gentleman should remember that if he asks a question once and gets the right answer, it is not worth asking it again.

Mr. Nicholas Winterton : Although there is some good news in my hon. Friend's answer, does he accept that the news could be even better if industries such as textiles and clothing were faced with fair competition rather than

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diabolically unfair competition? There has been considerable investment in those two industries in particular, and they have excellent management and have sought to market their goods internationally, yet they are being undermined by unfair competition. Does my hon. Friend agree that if the Government came into the real world and examined the position of manufacturing industry, the picture could be even better than the one that he has presented to the House this afternoon?

Mr. Atkins : My hon. Friend always speaks vehemently and articulately for the industries in his constituency. As he knows, my hon. Friend the Minister of Trade, who cannot be here today, fights long and hard for the interests of the textile industry in Europe. My hon. Friend makes a fair point, although it is worth drawing to his attention the fact that since the peak of 1979, there has been an 11 per cent. increase in production in textile consumer products. That shows how successful at least part of the textile industry has been.

Monopolies and Mergers Commission

3. Mr. Riddick : To ask the Chancellor of the Duchy of Lancaster whether there have been any changes in the role of the Monopolies and Mergers Commission in recent years.

The Parliamentary Under-Secretary of State for Corporate Affairs (Mr. Francis Maude) : The principal role of the Monopolies and Mergers Commission has not changed, but its role has been extended over recent years by certain provisions in the Telecommunications Act 1984, the Airports Act 1986, the Gas Act 1986 and the Water Act 1989.

Mr. Riddick : Does my hon. Friend agree that the primary function of the Monopolies and Mergers Commission should be to identify and prevent possible monopolies from being created and to stop price fixing in industry? Does he think that the MMC has been extending its functions in recent years by proposing how industry and markets should be structured and run? Is my hon. Friend aware that as a direct result of an MMC diktat on how the gas industry should be run, the textile industry in my constituency will face a massive increase in its gas bills? Does my hon. Friend think that the fact that my right hon. and noble Friend the Secretary of State had to alter significantly the MMC proposals on the brewing industry illustrates that he believes that the MMC has overstepped the mark?

Mr. Maude : No, Sir. I do not agree with my hon. Friend. The Monopolies and Mergers Commission carries out functions given to it by Parliament. It investigates matters that are referred to it either by the Director General of Fair Trading or by my right hon. and noble Friend the Secretary of State. It makes findings and recommendations. It is within the commission's powers to make the recommendations that it has made. We have implemented those that we think it proper to implement, in the way in which we think it proper to implement them. Where the MMC finds monopolies, as in the case of the breweries and British Gas, it is entirely within its powers to recommend action to rectify the public interest detriment. That is what the MMC did and we responded to it.

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Ms. Short : Does the Minister agree that we need a complete review of our monopolies and mergers legislation? In Britain, it is possible to have short-term raiding to break up companies and extract money and to detract from long-term investment in the productivity of our economy. That contrasts with what happens in West Germany and Japan, and it means that our industrial future is being destroyed in the interests of short-term takeovers. We need a new framework of law to encourage long-term investment.

Mr. Maude : The hon. Lady is wrong if she believes that Government action prevents such things from happening elsewhere--

Ms. Short : It is the framework of law.

Mr. Maude : It is not. The hon. Lady is wrong if she thinks that it is the framework of law. We are talking about the way in which markets operate and how companies are structured elsewhere. The hon. Lady is talking about interfering with the right of individuals and companies to sell their shares to a willing buyer. One should not do that unless it is in the public interest. I seem to remember that not all that long ago Opposition Members were complaining about the growth of conglomerates ; now they seem to be complaining about conglomerates being broken up.

Mr. Nicholas Bennett : Does not the increase of between 8p and 10p in the price of beer announced by the brewers yesterday illustrate the importance of the Monopolies and Mergers Commission investigating the brewing industry and of the action that the Government proposed in their statement last week?

Mr. Maude : It was right for us to respond to the report in the tough way that we did and to take the steps that we proposed, which will allow 11,000 more public houses to buy their beer at the cheapest price and from whoever they want. I urge pub customers to look round and find the best price for the beer that they want to buy. Not every brewery has increased its prices, by any means. There is a market and I hope that people will look for the cheapest beer that they can find.

Mr. Clelland : Will the Minister advise the Monopolies and Mergers Commission that it would save Government time, and save it much effort in making its recommendations if it took into account company donations to the Tory party?

Mr. Maude : The MMC might also want to take into account letters such as that written by Norman Willis, the general secretary of the TUC, to my right hon. and noble Friend the Secretary of State, in which he urged that all the recommendations of the MMC should be completely ignored. No doubt that was motivated by his well-known concern for Conservative party funds.

Mr. Andrew MacKay : Does my hon. Friend share the widespread concern about highly leveraged bids? If so, would it not be desirable for the Hoylake bid for BAT to be referred to the Monopolies and Mergers Commission, especially bearing in mind what the MMC said about the Elders IXL bid last year, which was similarly highly leveraged?

Mr. Maude : The House will not expect me to express a view about that case. The Director General of Fair

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Trading is considering what advice he should give to the Government on whether the bid should be referred to the MMC and while we are waiting for that advice, it would be quite wrong for us to comment.

Mr. Gould : In the light of today's news on beer prices, might not the Monopolies and Mergers Commission be forgiven for concluding that its major role today is to provoke powerful monopolists to raise their prices so that the public has to pay the costs of successfully campaigning against the MMC's recommendations? Will the Minister at least reassure the MMC that it does have a continuing role? Will he think of saying something like, "I am minded to implement any recommendations that the commission makes in future if my party's paymasters will let me"?

Mr. Maude : The hon. Gentleman should have a word with his party's paymasters who have been lobbying extremely vigorously for us to ignore every one of the MMC recommendations. The TUC, and the Transport and General Workers Union, have been lobbying heavily. When the MMC finds that there is a monopoly operating against the public interest we must take action, and that is what we have done. Even if we had done everything that the MMC recommended that could not have affected what the breweries decided to do in the meantime.

Enterprise Initiative

4. Mr. Wilson : To ask the Chancellor of the Duchy of Lancaster what has been the total cost of the advertising campaign for the enterprise initiative ; and what has been the average cost per take-up.

The Chancellor of the Duchy of Lancaster and Minister of Trade and Industry (Mr. Anthony Newton) : Expenditure on advertising the enterprise initiative since January 1988 has been about £19 million. Of this, we estimate that some £14.4 million has been specifically directed at promoting the six consultancy initiatives, which would represent an average of about £485 per application.

Mr. Wilson : Will this obsessive reliance on television advertising, which is aimed far more at the electorate than at meeting any legitimate departmental purpose, survive the reign of its architect, Lord Young?

Mr. Newton : Our surveys show that the advertising is reaching about 70 per cent. of the target market and that it is producing an encouraging response from business people. Inquiries about Department of Trade and Industry services have risen by about 20 per cent. this year. I am strongly in favour of having better services that are better known and more widely used to make British industry stronger.

Mr. Dickens : Is it not a fact that this country's success was founded upon enterprise and initiative? I believe that £19 million is a small price to pay to encourage this country once again and to encourage young people leaving school, colleges and universities to think about running their own businesses. Such initiative and invention will make this country great again.

Mr. Newton : My hon. Friend makes an excellent point. The advertising is directed not only at the consultancy initiatives, but at the promotion of the education and enterprise initiative, which this year has contributed to

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65,000 extra work experience places for pupils and to the recruitment of about 5,000 teacher secondments to industry.

Chlorofluorocarbons (Fridges)

5. Mr. Andrew F. Bennett : To ask the Chancellor of the Duchy of Lancaster if he will make a statement about the reclamation of chlorofluorocarbons from redundant refrigerators and freezers.

Mr. Atkins : The recovery and recycling of CFCs used as refrigerants in industrial and commercial refrigerators and freezers is well established and my Department is currently engaged in research into ways of retrieving CFCs from domestic appliances.

Mr. Bennett : I thank the Minister for that reply. Does he accept that the substantial problem relates to commercial freezers and refrigerators and that the problem is smaller for household freezers? The responsible firms that provide large fridges and freezers have been reprocessing for some time, but many small, badly behaved firms have not operated in a similar manner. Something must be done to bring them into line. Some local authorities have started to collect domestic freezers, but as yet they have no way in which to reprocess the refrigerators once they have been collected.

Mr. Atkins : I differ slightly from the hon. Gentleman in that commercial and industrial refrigerators are being retrieved in great numbers, although I accept that there is always room for improvement. The hon. Gentleman no doubt appreciates that the difficulty is that domestic refrigerators use smaller quantities of CFCs and, given that there are about 30 million users of them in the country, a much more sophisticated approach to collection and recycling is required. That is why I said that we are working extremely hard on this matter with the Department of the Environment, as is the refrigeration industry, which has given a great deal of thought and attention to it.

Mr. Thurnham : My hon. Friend will remember that I brought a delegation from the refrigeration industry to see him. What has happened since then? Will he use his best endeavours to persuade all Government Departments to change their specifications to ozone-friendly refrigerants and to follow the Prime Minister's advice? Private sector firms such as Sainsbury have set a good example, but health authorities are still specifying R12.

Mr. Atkins : My hon. Friend speaks with considerable authority because he knows the industry well. As he said, he brought a delegation to me from the refrigeration industry board and the Institute of Refrigeration to talk about those matters. My hon. Friend makes a fair point. I am in constant touch with other Departments with a view to encouraging them to do much the same as we are doing.

Ms. Quin : Are the Government considering the introduction of a nationwide CFC recovery scheme such as that which has been announced in West Germany? Does the Minister accept that it is simply not good enough to leave the matter to individual manufacturers who may be unwilling to take on the extra costs for competitive reasons, making a Government strategy and Government measures necessary?

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Mr. Atkins : The hon. Lady should have realised from my answer that the Government are taking a lead in that respect. However, collection is a matter for my right hon. Friend the Secretary of State for the Environment. I am keen to encourage any local authority initiative in the collection of refrigerants. As I said, the industry is taking many measures to try to improve the position.

Mr. Andrew Mitchell : Should not the Government be praised for having raised public perception of this important matter? Will my hon. Friend congratulate Gedling borough council on the specific initiatives that it has taken, on its own or with other local authorities, to organise the collection and reclamation of old domestic refrigerators and other domestic and commercial freezer units?

Mr. Atkins : The answer to both questions is yes, Sir.

Motor Industry

6. Mr. Andrew Smith : To ask the Chancellor of the Duchy of Lancaster if he will make a statement on the measures he is taking to assist the British motor car industry.

Mr. Newton : The Government's policies are designed to improve the competitiveness of business as a whole. The improved output and exports of the British motor industry are a clear sign of their success.

Mr. Smith : Does the Chancellor recall that at the time of the acquisition of Rover Group by British Aerospace, the EEC Commission was concerned to restrict overall car production capacity within the EEC? What discussions have there been with the EEC since then, and with what result? Can the right hon. Gentleman assure the House that Honda's output from Swindon will have access to all EEC markets and that it will be in addition to, not in substitution for, production at Cowley?

Mr. Newton : The hon. Gentleman knows that the issues at Cowley are separate from the announcement that was made last week about Honda development at Swindon. Our experience with the Commission on Nissan car exports to Europe is a sign of what we can expect on Honda or, for that matter, Toyota exports. The EEC car market has undoubtedly proved rather more buoyant than was expected at the time to which the hon. Gentleman refers, not least in Britain. The EC's current regime seeks not to restrict capacity but to prevent the payment of state aids except on a level playing field basis. The hon. Gentleman will know that in the case of Toyota and Honda no Government aid is being paid.

Mr. Beaumomt-Dark : Does my right hon. Friend accept that most hon. Members welcome the Government's measures, particularly in relation to Honda? Has he noticed that only 10 days ago the hon. Member for Oxford, East (Mr. Smith) was urging the Government to restrict the relentless use of cars? Better the sinner who repenteth, perhaps, but the hon. Gentleman repenteth because he thinks that it will help him with votes.

Mr. Newton : I had not noticed the earlier remarks of the hon. Member for Oxford, East (Mr. Smith), but I am sure that he will reflect on what my hon. Friend has said.

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Mr. Cryer : The Minister will recall that when the statement was made about the Honda plant being installed it was said that his Department would help British component manufacturers to obtain a share of the component capacity in that factory. What means will he use to do that to help Hepworth and Grandage in Bradford, the foremost piston and gudgeon pin manufacturer in Britain, to obtain some of that capacity? If Honda manufactures its own engines it will erode the opportunities for British component manufacturers.

Mr. Newton : The most helpful thing that we can do is to continue what we have been doing--creating a climate that assists the development of efficient and competitive enterprise and the opportunities for it.

Mr. Oppenheim : When we take into account the misguided Government- sponsored mergers of the 1960s, the huge subsidies and trade protection in the form of a pernicious gentlemen's agreement which limited the choice of cars for consumers, has not the British car industry already had far too much help from Government? The best help that the Government can give is not to cosset or guide it, but to tell it to go out and make products that the public want to buy.

Mr. Newton : We have created such a climate and that is why many people are coming here to make cars, thus strengthening our economy.

Financial Services (Regulation)

7. Mr. Geoffrey Robinson : To ask the Chancellor of the Duchy of Lancaster what representations he has received on the regulation of financial services.

Mr. Maude : I receive many representations on a variety of topics relating to the regulation of financial services. We carefully consider those which relate to the scope of the framework of the regulatory system, or the powers under the Financial Services Act 1986 which the Government retain. Those which relate to matters that are the responsibility of the Securities and Investments Board or of another regulatory authority are passed to the appropriate body.

Mr. Robinson : Does the Minister agree that there is enormous disquiet in the country, in the House and in the City in particular about the County NatWest-Blue Arrow-Manpower affair? Does he agree that when the public pays for a report it is entitled to see it? Is he aware that the reluctance of his Department to publish reports gives the impression that it is trying to operate a secret society instead of a major Department of State? Will he give an unequivocal undertaking to the House to publish the inspectors' report on the County NatWest-Blue Arrow-Manpower affair so that we may raise it, as appropriate, in the House before the recess?

Mr. Maude : We shall certainly publish the report as soon as we possibly can.

Mr. Maxwell-Hyslop : Is my hon. Friend monitoring the extent to which the Financial Services Act, which was designed to protect the consumer, is in fact resulting in the rapid disappearance of independent financial advisers and intermediaries who are rapidly being sucked into being

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paid agents of given products? Will this not leave the public bereft of the protection of independent advice under the guise of protecting their interests?

Mr. Maude : I hope that it will not have that effect. I regard the existence of independent financial advisers who can give unbiased advice about which financial products customers should purchase as quite important. At the same time, it is important that people who hold themselves up as being competent to provide such advice should in fact be competent to do so. The operation of the Financial Services Act in the past 15 months has led to the withdrawal of some applicants to join FIMBRA, the regulatory body for intermediaries. Many of those were withdrawn because the applicants had stated on the application form things that were untrue. It is desirable that people who indulge in such behaviour should be prevented from offering their services to the public.

Mr. John Garrett : Will the Minister enlarge somewhat on his reply to my hon. Friend the Member for Coventry, North-West (Mr. Robinson)? Will he confirm that the Secretary of State has received the inspector's report on the Blue Arrow Manpower takeover involving County NatWest and some other leading institutions? Does he propose to publish it before the recess, or does he propose to stifle discussion on the matter?

Mr. Maude : It is difficult to discuss the matter until it is published. I can confirm, as I think the hon. Gentleman already knows, that we have received the report and that we shall publish it as soon as it is proper to do so.

Mr. Beith : Is the Minister able to give an assurance that, under the terms of the Companies Bill, clients of insurance brokers will be as fully protected as all other clients of financial advisers?

Mr. Maude : I am not sure what the hon. Gentleman is getting at. There is no reason to suppose that what he suggests should not be the case.

Mr. McCrindle : My hon. Friend has mentioned the comparative success of the Financial Services Act 1986. Notwithstanding its many critics, does he agree that it is surprising that the one financial transaction that is undertaken by most of us at one time or another, which is perhaps the most important in a lifetime--obtaining a mortgage--is outside the ambit of the Financial Services Act 1986? Why does the Minister not give some consideration to future legislative change to embrace that within its sphere?

Mr. Maude : The lending of money is governed by the Consumer Credit Act 1974. The Financial Services Act 1986 was framed to regulate the provision of investment services and is designed to require all those who conduct investment business to be authorised. The borrowing of money on a mortgage is not an investment. Buying a house may be an investment, but borrowing the money is not. They are two different regimes, and it is proper that they should be. I see no reason to change that.

Trade Statistics

8. Mr. McAvoy : To ask the Chancellor of the Duchy of Lancaster with which Organisation for Economic Co-operation and Development countries the United Kingdom is running a trade surplus.

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The Parliamentary Under-Secretary of State for Industry and Consumer Affairs (Mr. Eric Forth) : In the 12 months to May 1989, United Kingdom visible trade was in surplus with Australia, Spain, Ireland, Greece and Canada.

Mr. McAvoy : I thank the Minister for that answer. He listed five countries with which the United Kingdom has a trade surplus. Will he confirm that we are in deficit with the 19 other countries of the OECD?

Mr. Forth : I can confirm that the hon. Gentleman's arithmetic is correct.

Mr. Marlow : One of the slight problems that the Government have is the balance of payments deficit. As my hon. Friend knows, one of the bases for that problem is the predeliction of the British consumer sometimes to buy foreign goods when British goods are equally good, if not better. Although my hon. Friend himself may not wish to use them, will he tell the House what powers he and the Government have to encourage people to buy British goods?

Mr. Forth : My hon. Friend is well aware--if anything, he knows it better than I do--that as a member of the European Community we are not able explicitly to encourage the purchase of British goods in the public sector. What private companies or concerns do to encourage customers to buy their products is entirely up to them. The Department and the Government generally have always emphasised that when a company makes a product of good quality at the right price, there is no reason why the public should not flock to buy it. One of the things that the Department has tried to do in various ways, and with many policies, has been to give as much support as possible to industry to make good products so as to encourage people to buy British.

Civil Research and Development

9. Mr. Bill Michie : To ask the Chancellor of the Duchy of Lancaster if he has any plans to seek to increase the level of civil research and development spending by British industry.

Mr. Forth : The Government have created a favourable economic climate, which encourages companies to invest in research and development themselves. Industry increased its own funding of research and development by about 30 per cent. in real terms between 1983 and 1987.

Mr. Michie : Even taking that into account, at present British industry is enjoying record profits, mainly off the backs of the workers in industry and those who lost their jobs. Directors are giving themselves massive wage increases. Instead of putting money into research and development, they are putting it into their own pockets. That is quite different from what is happening with our major competitors abroad. They are putting a percentage of their output into R and D, which we are not and we are stagnating.

Mr. Forth : The hon. Gentleman is wrong for two reasons. Largely because of the volume of noise--probably of approval for what I said-- coming from Opposition Members, the hon. Gentleman did not hear me when I said that industry had increased its own funding of research and development by about 30 per cent.--

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Ms. Clare Short : We do not believe the Government's statistics.

Mr. Forth : --in real terms between 1983 and 1987.

Mr. Holt : On a point of order, Mr. Speaker. I distinctly heard the hon. Member for Birmingham, Ladywood (Ms. Short) call the Minister a liar.

Mr. Speaker : Order. The hon. Gentleman is perfectly correct to draw that to my attention. I did not hear it. I hope that the hon. Lady did not say that, but if she did I am sure that she would be prepared to withdraw the remark.

Ms. Short : I said that we do not believe the Government's statistics. They lie to us all the time about statistics. That is my view and I think that that is allowed.

Mr. Speaker : Order. Can the hon. Lady help us to get on and confirm that she did not accuse the Minister of being a liar? That is all that I ask her to do.

Ms. Short : I have just made it clear that I said that it was impossible to believe the Government's statistics because they lie to us all the time. I did not accuse the Minister of lying to us--I was referring to the barrage of statistics that we are given.

Mr. Speaker : Perhaps we can accept that and get on.

Mr. Forth : On the hon. Gentleman's other point, he claimed that we are behind other countries in civil research and development. We are ahead of some, at about the same level as some, and behind others. There is nothing wrong with that. It is hardly reasonable to expect us to be ahead of everybody.

Mr. Oppenheim : Does my hon. Friend agree that all this concentration on research and development can be misleading, bearing in mind that in the world's most successful economy--in Japan--private industry and the Japanese Government spend relatively little on R and D, preferring to concentrate their resources on buying in licences from others, improving their technology and concentrating resources on manufacturing production and marketing?

Mr. Forth : Yes, my hon. Friend is correct. Interestingly, Japan is one country in the league table suggested by the hon. Member for Sheffield, Heeley (Mr. Michie) which invests less than we do. We must try to maximise the effectiveness of the research and development spend in this country. The Department of Trade and Industry has many programmes to encourage collaborative research between higher education and industry, between different companies and within the European Community framework. That is the way to proceed and it will be much more useful to consider the effectiveness of our research and development spend in those terms than to look at the overall figure.

Dr. Bray : I think that the Minister should check his figures. Since the German and Japanese industries spend 50 per cent. more of their own money on research and development as a proportion of their domestic product than British industry does, and since after 10 years of this Government British industry is plainly not increasing its research and development fast enough even to narrow, let alone close, the gap, with Germany and Japan, does the Minister agree that it is necessary for the Government to

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increase their support and incentives for research and development rather than reduce them, as they have, from the peak level by 20 per cent. in real terms?

Mr. Forth : It would be particularly futile and not a good way to spend any of our time for me to bandy figures with the hon. Member for Motherwell, South (Dr. Bray). If he would care to write to me, I am perfectly prepared to indicate-- [Interruption.]

Mr. Speaker : Order. These interruptions take up a lot of time and hon. Members want to ask questions.

Mr. Forth : If the hon. Gentleman would care to write to me I am perfectly prepared.

Hon. Members : This is question time.

Mr. Speaker : Order. The Minister should be able to complete his answer. If he intends to write a letter, perhaps we can progress more quickly.

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