House of Commons Hansard Debates for 31 Oct 1990

Mr. John Evans : Will the Minister acknowledge that the finest assistance that could be given to small and medium-sized firms in Britain, and St. Helens in particular, would be a substantial fall in the appalling level of interest rates, which is currently crippling them?

Mr. Hogg : As a matter of fact, the best assistance by far is a profitable industry. The House will like to know that profitability in British industry has increased substantially in the past decade. It is up 1.75 times since 1979, up 2.5 times since 1980 and up 3.5 times since 1981. The House will also like to know that between 1974 and 1979 profitability increased not at all.

Mr. Ian Bruce : Following on from that reply, does my hon. and learned Friend remember that during Labour's last period of Government its response to the lack of output from small companies was to increase employers' national insurance contributions by imposing a national insurance surcharge? Does he recall that during the 1980s we removed it progressively and output increased? Has he made any representations to the Treasury about reducing the current high level of employers' national insurance contributions of 11.5 per cent. to perhaps 5 or 6 per cent., which it was in those days?

Mr. Hogg : My hon. Friend referred to an important point. Under the Labour Government of 1974-79, manufacturing output actually fell. If the House would like to have the figures, they are these. In 1974, output was £109.1 billion. In 1975, it was £106 billion. To be more precise, production of cars between 1974 and 1979 fell by about one third, from just over 1.5 million to just over 1 million. So, Mr. Speaker, you can well understand why we regard the protestations of the Labour party that it is a friend of manufacturing industry as simply absurd.

Dr. Moonie : I was wondering where the continentals got the term "thick bricks" from. How does the Minister propose to aid technology transfer by cutting the budget by 40 per cent?

Mr. Hogg : I am afraid that the hon. Gentleman has not studied the matter carefully. The SPUR scheme, which is the most interest--

Ms. Mowlam : What is it?

Mr. Hogg : The hon. Member for Redcar (Ms. Mowlam) wants to know about the SPUR scheme. Well, I shall let her know about it. It has three elements. The first is to assist firms to pay for consultants, to help with the introduction of advanced manufacturing systems. The second is to assist small firms with product developments that have a novel, technological edge to them. The third is to assist with the provision of technological expertise to deal with short-term problems. I should expect ringing applause from the Opposition, but I know that I shall not get it.

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Manufacturing Productivity

11. Dr. Michael Clark : To ask the Secretary of State for Trade and Industry what was the growth of manufacturing productivity in (a) the United Kingdom and (b) other G7 countries during the 1960s, 1970s and 1980s.

Mr. Lilley : In the 1960s Britain had the slowest rate of growth in manufacturing productivity of any of the seven major industrial countries. In the 1970s we again had the slowest rate of growth in manufacturing productivity of any of those countries. In the 1980s we had the fastest rate of growth in manufacturing productivity of any of those countries.

Dr. Clark : Will my right hon. Friend join me in congratulating British manufacturing industry on its remarkable achievement? Does he agree that increasing productivity leads to lower unit costs, which lead to increased sales, profits and investment, which is the best way to expand our manufacturing base?

Mr. Lilley : My hon. Friend is absolutely right. We should congratulate British industry because its manufacturing productivity has increased even faster than that of Japan. Scottish Labour Members make comments about the performance of industry, but we should note that Scottish manufacturing productivity has grown even faster than that of the rest of the United Kingdom. Scotland has outstripped even Japan and I pay tribute to Scottish industry for that. It never receives a word of praise from Scottish Labour Members.

Mr. Eastham : If industrial production was so bad in the 1960s and 1970s and is supposed to be so good now, why do we have the worst balance of payments deficit in our industrial record, of £20 billion?

Mr. Lilley : The hon. Gentleman should realise that a balance of payments deficit normally reflects an excess of demand that is growing even faster than rapid output. If a country spends £520 billion and produces £500 billion worth of output, it has a £20 billion deficit. That reflects not competitiveness, but excess demand. That is why my right hon. Friend the Chancellor of the Exchequer has slowed the rate of growth in demand. The deficit is already diminishing and will continue to do so.

Green Policies

12. Mr. Jacques Arnold : To ask the Secretary of State for Trade and Industry what action the Government have taken to encourage green policies in industry.

Mr. Redwood : In May 1989 my Department launched an environmental programme. It set up an environmental helpline, which has already handled 6,000 queries. In April 1990 an environment unit was set up within the Department and in October 1990 I had the pleasure of launching two schemes- -one jointly with the Department of the Environment, the environmental technology innovation scheme, to encourage research in green technology, and the DTI's environmental management options scheme, to spread best practice in green matters. They are positive steps forward and represent a major commitment to encourage British industry to pursue green policies.

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Mr. Arnold : May I welcome the establishment of the environment unit and the other measures that my hon. Friend mentioned? What financial support are the Government giving to companies, such as Scotts in my constituency, with their environmental programmes?

Mr. Redwood : The funding for the various schemes amounts to £20 million over three years. We expect British industry to fund most research and development into new products and to promote its work to improve standards on pollution control. We believe in the "polluter pays" principle and that the main role of the Government is to set standards, which the House has been doing through the environmental protection measures.

Ms. Quin : Do not we have much catching up to do in this particular area? Will the Minister confirm that West Germany, for example, spends three times what we spend on environmentally related research and development?

Mr. Redwood : I cannot confirm that particular figure and I do not know where the hon. Lady got it. The British experience is not at all bad by international comparison. The standards that we are setting will be good ones, which many parts of British industry can already meet. There are many problems throughout the continent of Europe and the further east, the more difficult the problems.

Sir Hal Miller : Drawing a veil over the environmental consequences of socialist Governments in eastern Europe, is my hon. Friend aware that engineering firms in the west midlands accept the thrust of Government policy to improve the environment, but are concerned about the capital costs of some of the standards under discussion in the technical committees? What contribution is my hon. Friend's Department making to the consideration of those technical standards, taking into account best available technology not entailing excessive cost? Would it be possible to extend assistance provided by the Industry Acts to meet environmental objectives?

Mr. Redwood : My Department is active in discussions with other Departments in Whitehall on the green initiative, for the reasons that my hon. Friend has described, if not for other reasons. We want sensible standards that industry can meet. The purpose of the exercise is not to drive industry out of business, but to provide a stimulus for better practice and better products.

It is also true that green policies do not always mean higher costs and increased difficulty for business. Often such policies mean controlling waste in a business, better control over stocks, a greater effort to be first right, first time and better practice within business. Such policies can cut costs rather than increase them. Part of my Department's message to business is that green business is good business and that business might find that there are offsetting cost advantages in pursuing such policies, which should be taken into account when running through the capital appraisals.

Iraq

14. Mr. Ronnie Campbell : To ask the Secretary of State for Trade and Industry if he will make a statement on the number of firms affected by the withdrawal of contracts from Iraq.

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Mr. Sainsbury : We do not have a complete count of United Kingdom firms affected. The Department of Trade and Industry, the Bank of England and the Foreign and Commonwealth Office have dealt with a large volume of inquiries since the beginning of the crisis. The Export Credits Guarantee Department is in contact with most of the firms that insured their contracts and it will be meeting established claims.

Mr. Campbell : Is not a year a long time? If I had asked this question a year ago, Ministers would have been falling over backwards to tell us about all the wonderful contracts that we have with Iraq. Those contracts were operating at a time when Iraq was fighting a war against Iran, so what has changed?

Mr. Sainsbury : If the Department and the ECGD had not provided the normal range of export help to what was a very good market--a market for civilian equipment and civilian exports--we should have been open to criticism. Since 1983, £2.7 billion of new exports have been secured for the United Kingdom in that market. That must have meant a lot of jobs.

Mr. John Marshall : Does my hon. Friend agree that the only way in which we shall have peace in the middle east is to defeat Saddam Hussein? Those who complain about the costs of losing a few contracts fail to recognise the high stakes for which we are playing. They are the sort of people who would have appeased Hitler in the 1930s. The price of appeasement then was war and the price of appeasement today would also be war.

Mr. Sainsbury : I agree that the whole House, or nearly the whole House, is united in the determination to see that Saddam Hussein gains nothing from his invasion of Kuwait and that his withdrawal from it is total and unconditional.

Mr. Flannery : Is not it a fact that a short time ago we were exporting what were called oil pipes to Iraq, and the Government did not seem to know that we were actually exporting long-distance gun barrels? Will the Minister examine his conscience about that, instead of talking so glibly?

Mr. Sainsbury : The hon. Gentleman is well aware, I hope, that that matter is sub judice.

Research and Development

15. Mr. Moss : To ask the Secretary of State for Trade and Industry if he will make a statement on his Department's and Her Majesty's Government's research and development expenditure as a percentage of gross domestic product ; and what comparable information he has in respect of Japan.

Mr. Lilley : Total Government-funded research and development as a percentage of gross domestic product was 1.0 per cent. in 1988. This was twice the corresponding figure for Japan.

Mr. Moss : As my right hon. Friend is well aware, the Cambridge phenomenon has had important side-effects elsewhere in East Anglia and I hope that those effects will increase in my constituency in the future. Will my right hon. Friend confirm that he is encouraging industry to

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collaborate with university and polytechnic science and technology departments to establish science parks and other developments?

Mr. Lilley : My hon. Friend makes an important point. The success of science-based industries around Cambridge is due to the close collaboration between industry and the university science base there. We are anxious to encourage that throughout the country and so have encouraged the establishment of science parks around

universities--there are now 39 of them and another 19 are planned. I am anxious that we should consider building more around polytechnics and Government research establishments so that they can benefit from similar effects.

Mr. Cousins : Does the Secretary of State accept that the LINK scheme to promote links between industry and higher education, which his Department launched, is in a state of collapse because of the ridiculous red tape and restrictions surrounding the rules of that scheme? That is evidenced by the withdrawal from LINK of Celltech, an important new British high technology company, only this week.

Mr. Lilley : No, I do not accept the hon. Gentleman's premise. We are introducing a new scheme in which it will be much easier for small companies to participate without having to go to the length of collaborating with a range of other companies. An increasing number of applications and programmes are going ahead under the LINK scheme. I am sure that the hon. Gentleman will welcome that and be pleased to know that he was mistaken.

Mr. Conway : Has industry's funding of research and development decreased or increased during the Government's term of office?

Mr. Lilley : Research and development by private industry, which is most important and valuable, has increased substantially since industry's profitability increased. Over the past five years research and development by business went up by 50 per cent. We have increasingly focused Government support on getting better co-operation between universities and the science base and industry.

Information Technology

16. Mr. Martyn Jones : To ask the Secretary of State for Trade and Industry what is the latest estimate of the balance of trade in information technology.

Mr. Douglas Hogg : According to the latest estimates, the United Kingdom had a deficit of £685 million in the manufactured products of the electronics and information technology sector in the first quarter of 1990. Those figures are for hardware only. There are no separate figures for trade in software.

Mr. Jones : Is not that a deplorable gap in a valuable world market? Should not we encourage our own product base in that important sphere? When will we invest in the research and development necessary to do that?

Mr. Hogg : The hon. Gentleman has not reflected on those matters. All major OECD countries, with the exception of Japan, have a deficit in information technology. The United Kingdom has a substantial surplus of £900 million in its trade with the rest of the

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Community, including France, Germany and Italy. I am sure that the hon Gentleman will be pleased to know that output in electronic and information technology industries in the United Kingdom has increased by 37 per cent. since 1985. Perhaps he should do a little more homework before he asks a question.

Sir Ian Lloyd : What view does my hon. and learned Friend take about the fact that we are now almost completely dependent on Japan for the chemicals used in the manufacture of semiconductors?

Mr. Hogg : Whenever possible, we welcome inward investment in those sectors. I am glad that generally throughout the IT industry there have been substantial improvements in our domestic capacity. I welcome that and attribute it, at least partly, to Government policy.

Mr. Mullin : What will be the effect on our trade in information technology of our entry into the ERM at the ludicrously inflated rate of DM2.95? How long will it be before we have to devalue?

Mr. Hogg : I am sorry for the hon. Gentleman because he is normally a bright fellow who does his homework, but he has not done so today. At present our surplus with West Germany is £470 million, our surplus with France is £557 million and our surplus with Italy is £212 million. I expect that happy trend to continue.

Germany

18. Mr. Teddy Taylor : To ask the Secretary of State for Trade and Industry if he will make a statement on the United Kingdom's trade with Germany.

Mr. Sainsbury : Germany is the United Kingdom's second largest export market. Our visible exports in the first three quarters of this year increased by 19 per cent. to £9.4 billion, compared with the first nine months of 1989. Germany is the United Kingdom's largest supplier and our visible imports increased by 3.4 per cent. in the same period, reaching £15.3 billion.

Mr. Taylor : As last year's figures show that for every pound of goods we sent to Germany, Germany sent us back more than £2 worth, and as the deficit was more than double our deficit with Japan, does not that seem to show either a considerable amount of non-tariff discrimination or that the exchange rate of DM2.95 is wholly artificial? Will the Minister examine that problem and see what can be done about our worst trading partner, not our best?

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Mr. Sainsbury : There are clearly considerable opportunities for British companies to increase their exports to Germany. It is our second largest export market and there has been good growth in it. I hesitate to say this to my hon. Friend, but our opportunities to export to that market would be reduced--there would be more obstacles to our trade--were we not both members of the European Community.

Japanese Cars

19. Mr. Austin Mitchell : To ask the Secretary of State for Trade and Industry what discussions he has had in Europe about import ceilings for Japanese cars after 1992.

Mr. Lilley : I attended an informal meeting of Community Trade Ministers and the Commission in September, which discussed that matter. The Commission is proposing a transitional period of continuing restrictions lasting until the late 1990s. The United Kingdom continues to press for early liberalisation. We remain adamant that cars made in the EC by Japanese-owned companies must continue to be allowed unlimited free circulation throughout the Community. I believe that that has now been accepted by other member states and the Commission.

Mr. Mitchell : Has not the Minister got himself and the nation into a trap, because he has not been strong enough or tough enough to get full agreement to the exclusion of Japanese cars made in this country from the Japanese quotas? He is driven, as a result, to want an increase in the Japanese quota ; rumour has it that he has been urging an increase from 11 per cent. to 29 per cent. If so, that would decimate jobs in the British motor industry. Why does not he beef himself up to get those cars included as British?

Mr. Lilley : The hon. Gentleman is mistaken. The voluntary restraint agreement 11 per cent. restriction is no longer being fully met simply because Japanese cars are now being produced domestically, so there is less need to import them than in the past. There is therefore no question of imports of Japanese cars being expected to rise to the figure that the hon. Gentleman stated. He is correct, however, to say that there is still opposition from the Italians and to a lesser extent from the French to reaching an agreement on that. He can always apply his own sanctions and abandon his Fiat motor car if he wants.

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