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other European country. If we include 1979, manufacturing output increased by about 12 per cent., which was faster than the increase achieved by most other European countries. It was certainly faster than that achieved by the previous Labour Government, when manufacturing output fell.If we consider the raw investment figures, it does not look as though it has increased very much in real terms. However, the quality of the current investment is much better. During the 1960s and 1970s, much of that investment was directed by civil servants and politicians and was wasted ; money was invested in unwise projects. A great deal of the investment in the 1980s was of a far higher quality. Investments were made as a result of a myriad of market decisions. They tended, therefore, to yield better results. I suspect that the hon. Member for Dunfermline, East (Mr. Brown) would question that assertion.
Labour's magic solution for our industrial strategy is just as much a red herring now as it ever was. They want a return to the bad old days when politicians made decisions for business men, while preaching that profits are bad and have to be equated with greed or crude materialism. That is hardly likely to help British industry. Simplistic solutions, such as a Government-directed industrial strategy, have been tried before and have failed.
The extent to which such a solution persists in Opposition circles is based on a misreading of Japan's success. Many people hold the mistaken belief that Japan's industrial success is founded on a successful state-industry partnership, as embodied in Japan's Ministry of International Trade and Industry. MITI is not nearly so powerful as is made out by those who use the MITI myth as an excuse for their own failure, or to lobby for more subsidies or more protection at home. Many of Japan's most successful industries have completely shunned MITI interference. In the 1950s, for example, MITI tried to consolidate the Japanese car industry and to produce a people's car on the lines of the Volkswagen Beetle. That was a complete failure. None of the Japanese car companies agreed to co-operate with MITI. The record of the Japanese car industry since then speaks for itself.
Many of Japan's most successful industries have received little help or guidance from MITI. I could quote many examples, but three will be sufficient--photocopiers, excavators and motor bikes. All three have had little involvement with MITI. However, many of Japan's least successful industries have been the recipients of large amounts of MITI aid. A MITI- sponsored restructuring of the aluminium industry left it very weak internationally. Many point to the Japanese steel and shipbuilding industries as the supposed paragons of MITI's interventionist approach. However, when a team of economists visited Japan in 1968, at a time when its steel and shipbuilding industries were rapidly overhauling those of Western countries, they found that MITI's aid to the steel and shipbuilding industries was almost insignificant and that other factors, such as Japan's underlying structural competitiveness, accounted for their success.
Other industries where MITI supposedly had a large hand in Japan's success were computers and electronics, semiconductors and components. However, MITI's subsidies to those industries were minuscule compared with the overall research and development requirement of the companies involved. All the OECD, GATT and World bank reports show that Japanese subsidies to the electronics industry were lower than those for the
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electronics industries in Europe and the United States, where such subsidies have often been disguised in Pentagon or NASA budgets. There are many reasons for the failure of interventionist policies. Far too often, decisions on whether to invest money are made for political rather than for commercial reasons. A classic example is the British steel industry since the war. In the early 1960s, a private sector steel company was told that it would be given a licence to build a plant in Wales only if it built part of the plant at Ravenscraig in Scotland.Too often, when Government subsidies are about, it is the most powerful lobbyist--not the industries that really need the money--who gets the largest slice of the cake. Too often, the industries that are promoted by politicians are simply unsustainable for the underlying fundamentals of the economy. Quite often, they are simply too advanced.
I am thinking, for instance, of the attempt by the European Community to foster a semiconductor industry. So far, it has been an abject failure. It has swallowed vast sums of money, yet the European semiconductor industry, in international terms, is something of a joke. Too often, interventionism leads to the creation of national champions. They often have semi- monopolistic positions in their home markets, and the result is to divide up the overall market, leading to a plethora of national companies, very few of which are strong global competitors.
This, surely, is the story of intervention in Europe as a whole. Consider the electronics sector or even the car industry in Europe. Over the years, almost every European Government have played the game of subsidising, aiding and protecting their national car industries. National car industries, national steel industries and national electronics industries in Europe have fairly strong positions in their home markets, yet Europe as a whole has very few international players.
Above all, intervention and subsidies almost always lead to misallocated investment and wasted resources--resources that could better be employed elsewhere in the economy. Consider, for example, the huge sums of money and the huge amounts of skilled manpower that were invested in Britain's nuclear power programme in the 1950s and 1960s in an attempt to build an indigenous nuclear power capacity to rival that of the Americans. At the time, everyone knew that it would be cheaper to buy American technology. One must ask how much more good the vast resources and the investment in highly skilled manpower that went into that project could have done if market forces had directed them elsewhere in the economy.
Those are the reasons for the failure of interventionist policies. I urge hon. Members who may be inclined to point mistakenly to the supposed successes of interventionist policies in Japan to point, instead, to the failures of interventionism elsewhere. When I say that, I am not referring just to the eastern bloc. A sorry array of developing countries thought that the way to industrial and economic success was to have a centrally planned and controlled economy, with politicians, rather than business men, making the decisions. All those countries are now paying the price.
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Consider the disastrous state of the Brazilian and Indian economies. Consider the way in which Brazil and India have tried to build indigenous computer companies, to develop space programmes and to engage in other types of nonsense. In those cases, the failure of interventionism is very stark. Having politicians make decisions that business men should be making leads to complete misallocation of resources, and that harms the overall economy.Mr. Keith Mans (Wyre) : Does my hon. Friend agree that Brazil is now taking our route--reducing interventionism and encouraging foreign investment with no strings attached?
Mr. Oppenheim : My hon. Friend is right. I am full of admiration for President Collor and what he is trying to do in terms of liberalising the Brazilian economy, tearing down trade
barriers--Brazil was one of the most protectionist countries in the world-- encouraging foreign investment and the internal economy and privatisation. I am also full of admiration for the way in which he is combining that with a strong environmental policy aimed at maintaining the Amazon rain forest and looking after the rights of the Indians. Truly, President Collor is a great man, but he is struggling with all the vested interests and all the heavy baggage of Brazil's industrial and economic history. Looking at Brazil's present position, I fear that his plan may fail, simply because the burden of the past is far too great. I wish him the best of luck, and I certainly hope that he will succeed.
My hon. Friend's intervention came at an opportune time. I was just about to say that, bearing in mind the almost indecent haste with which central planning is being abandoned all over the world--not just in the eastern bloc, but in countries such as Brazil and even, to an extent, India--the Opposition might finally have got the message and might have dropped their predilection for interventionist policies and industrial strategies. That is not to say that there are not lessons to be learnt from countries like Japan and Germany, which are sometimes wrongly held up as being interventionist paradises. There are lessons to be drawn from Japan and Germany. However, the contention that those countries have succeeded as a result of interventionist policies is simply wrong.
Certainly there is plenty that Governments can do to help their economies. For one thing, both Japan and Germany have excellent, although not expensive, education systems. Clearly, in this country we have much to do to gear our education system more closely to the needs of industry. That is something that the Government can do. On the surface, it appears that Labour have grasped how crucial to the economy is a successful edcucation system. However, their answer is simply to throw more money at education. That ignores the fact that the Japanese spend less per pupil than we do, yet their results are far better.
Mr. Robert B. Jones (Hertfordshire, West) : Does my hon. Friend agree that the education system in Germany reflects what we started to have --technical schools, grammar schools, and so on--and that that is precisely what Labour, when in power, have tried by every means to eradicate?
Mr. Oppenheim : My hon. Friend makes a very good point. Indeed, the parallel could be extended to Japan.
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Germany and Japan both have two-tier education systems and there is no in-built bias against vocational education such as one so often encounters in this country. In academic circles there is no snobbery regarding vocational education. There are, of course, other reasons for the success of German and Japanese education. One is the concentration on literacy in science and maths, and another is that children there work 42 to 50 per cent. longer hours than do children here. We can learn many lessons from their highly successful education systems.The point that I was making is that throwing more money at education, in an attempt to gear it better to our economic system, is unlikely to succeed. That ignores the fact that the least successful education authorities-- least successful in terms of results--are those that spend the most money. Incidentally, all those are
Labour-controlled. I do not see how appointing peace studies inspectors, or keeping one quarter of total funds back for central administration, or packing school governing bodies with political supporters of the local council, all of whom have an innate hostility to industry, or having economics teachers who preach the supremacy of socialism, is the way to gear our education system to the needs of industry.
Another lesson that we can learn from the Japanese and the Germans is that public spending must rise in line with what the nation can afford, and that encouraging savings is a good way to bear down on over-consumption and inflation and, at the same time, help to provide a pool of capital for industry. Unfortunately, everything in Labour's policies--from the investment income surcharge to the encouragement of high-spending, low- performance, left-wing education
authorities--demonstrates that they have not yet grasped this fundamental truth.
The Opposition spokesman claimed that his opposition to the privatisation of BTG was to a large extent based on the need to retain a Government-run research base in Britain. I contend--although I accept that this is not a very fashionable view--that lack of research is not our problem. It is worth remembering that Britain is still a net exporter of industrial technology licences. Japan and Germany, on the other hand, are still net importers of industrial technology licences. We need not so much to improve our research and development as to improve our production and marketing capabilities. The best research and development in the world does not do much good if one cannot produce the goods properly and get them to the market effectively.
Here again, we can learn lessons from the Japanese experience. It is worth remembering that in the early years of Japan's industrial development, the Japanese were major purchasers of industrial licences. That was often sneered at as being simply copying, but it helped the Japanese to develop extremely fast. It also allowed them to concentrate more of their resources on production and marketing. Of course, as Japan became more powerful as an economy in the 1960s and 1970s, it moved on from simply copying or reproducing western products to improving those products, and in the 1980s, as it became the leading economy, it started to innovate far more and to conduct far more of its own research.
The same happened in the United States. In the early phase of industrial development in the 19th century, it was sneered at by the British as being a mere copier, but the Americans, in turn, moved from being mere copiers to
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being improvers, and eventually became great innovators--and now, in their turn, they sneer at the Japanese as copiers.The cycle of economic development for nations in terms of technology and research goes from copying to improving and then to innovating. It is natural for an economy at the top of the scale to innovate. For an economy such as Britain's, which is trying to grope its way back to some sort of industrial respectability after many decades of abject decline, it is important to spend more of its resources on improving manufacturing and marketing rather than on basic research, much of which, historically, has been exploited by other countries because our manufacturing production and marketing capabilities have not been as strong as they should have been, despite some major improvements in the past decade.
Far more important than a state-sponsored research body is to encourage industry to look further afield and be more prepared to buy in licences from abroad and be more open-minded about buying in technology from overseas. The "not made here" attitude that has characterised much of British industry since the war and led industry to be less than open-minded about foreign technology has done our industry a great deal of damage and shows that the need for a state-run research body is extremely dubious.
The Opposition spokesman said that he would not renationalise BTG if Labour came into office. If that is the case, why do the Opposition oppose its privatisation? I believe that this is part of a sorry charade of inconsistency by the Opposition. They have opposed every privatisation programme put before the House by the Government. Yet companies such as Amersham International, Rolls-Royce and British Airways have proved that they can be far more effective international competitors in the private sector.
Mr. Robert G. Hughes (Harrow, West) : Surely there is no mystery about why the Labour party is opposing this measure, as it has opposed every other privatisation measure. The reason was made clear in a statement by the hon. Member for Dagenham (Mr. Gould). On BBC's "On the Record" on 17 September 1989, he said that the Labour party is against all privatisations because they provide for the element of private profit-making. That has always been the basis of its position. Presumably the Labour party is against anyone making any profits out of anything.
Mr. Oppenheim : There seems to be a dichotomy in the Opposition's attitude. They are always telling us that our industry must do better and that they believe in manufacturing, but there is still an inbuilt bias in the attitude of many Opposition spokesmen--not all, since some of them have come on recently--against profit, which they equate with greed and crude materialism. It emanates from their view that human nature is perfectible and that anyone who moves away from their idea of the perfect society should be discouraged and kept down. They seem to believe that politicians and civil servants should make all the decisions.
The Labour party should look at successful economies such as Germany and Japan where there is no inbuilt hostility to money-making, business, commerce and profit. They do not have the outdated 19th-century attitudes that still permeate the British Labour party. As I said, the Opposition have opposed every privatisation measure, but companies such as Amersham
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International, Ross-Royce and British Airways have proved that they can be more effective in the international marketplace when freed from the control of politicians and civil servants. None of those companies has asked to go back into state ownership. All over the world, countries are not nationalising their industries but privatising them. They are not increasing state intervention in industry, but reducing it. It is sad that the Opposition spokesman and Opposition Members in general have not yet learnt that fundamental lesson.6.4 pm
Mr. Simon Hughes (Southwark and Bermondsey) : If I were an employee, perhaps an engineer, of the British Technology Group listening to the debate, I would think that there was a great philosophical political debate going on above the head of my organisation. The hon. Member for Amber Valley (Mr. Oppenheim) made some perfectly valid and pertinent points about comparison between us and Japan and Germany, and so on. However, we are not talking about just another public sector industry. We are not talking about the steel industry, the coal industry or a company such as Cable and Wireless which, as part of the manufacturing sector, happened to be in public ownership. We are talking about a unique institution which, to use the words available to every hon. Member in the first sentence of the note provided by the House of Commons research staff, is the world's leading technology transfer organisation.
BTG is one of the bodies created intentionally by the Government as an amalgamation of organisations in the public sector to do a specific job. BTG's job is to be a bridge between science, learning and invention and manufacturing, production and economic success. The argument about whether it should be in the public or private sector does no justice to the correct analysis of the role and function of BTG which is that it is there to provide a particular form of assistance so that the private sector can do its job properly. It is there so that science and invention can pass on, through a group of people with expertise, the ability to make us successful, whether we sell our licences to this country or abroad. Therefore, the great polemical debate is out of place.
I hold no brief for a general renationalisation or public ownership programme that may or may not be advanced by the Labour party at the next election. My hon. and learned Friend the Member for Montgomery (Mr. Carlile) and I, together with all our other colleagues, do not have a partisan public/private sector view. We do not have a dogmatic view about whether things are better in the public or private sector since this depends on all sorts of circumstances. We are not against the idea that the market place is usually the best way for corporate enterprise to succeed. However, we are talking today about a different and unique body. If we focus our attention on the nature of BTG, we can begin to address its concerns and the concerns of many others about its future if it takes the path that the Government have charted for it in the Bill.
The Minister prayed in aid the support for privatisation of the senior management of BTG against the wishes of the majority of its work force. The parallel that suggested itself to me was the recent example of the popularity among a small minority of people in certain sections of the health
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service for self-government of hospitals within the national health service, against the view of the majority of the work force who would rather the hospitals remained integrated as part of the local district health authority.I understand that there may be a view within the management of BTG which says, "We think that we can go out into the big wide world and, because we are already profitable and successful, we can go on being more profitable and successful." However, there are other considerations which I hope that the Ministers will address. To be honest, I have not heard them adequately addressed yet. I was sad about the Minister for Corporate Affairs' speech. He is capable of making an intelligent and cerebral speech, but he made a party political knockabout speech, which belittled his intelligence and the importance of the issue.
The first matter--I shall be brief because this was dealt with by my hon. and learned Friend the Member for Montgomery and in exchanges across the Floor--is that the Government have not come clean about the advice that they have been given. It appears that the advice that they have been given internally is in favour of keeping BTG in the public sector.
It also appears from the partial consultative exercise with the universities, that they also do not want a privatised BTG in the form envisaged by the Government. The Under-Secretary quoted the majority view of the universities and the Committee of Vice-Chancellors and Principals. A majority of them wanted BTG to continue as a private foundation or trust-- as a special body in which they conjointly had an interest and which would act as the technology arm to which their research activities could be linked. The universities did not argue for the wholesale divorce of BTG by letting it go off into the private sector sea to be bounced around and bought and sold by whoever came along under whatever conditions were imposed, let alone while we have not heard of those conditions because the Government have no idea about them.
Next, the hon. Member for Amber Valley considered whether we should tie up significant public funds in an organisation that could function equally well in the private sector. He knows--as does anybody else who has considered the issue--that we are not talking about large amounts of public sector funding or about the Government pouring enormous sums into this particular pit, let alone into a bottomless, non-profit-making pit which is a drain on the economy.
It is exactly the reverse. BTG's total income last year was £29.5 million. The operating profit after tax was just short of £7 million. Of course there is a drain if it must pay off a certain amount to the Government. It has to pay a significant amount and that may be an argument for changing that relationship. The £6 million which is siphoned off may be able to be put to better use, but that is not an argument for saying that it is a big drain when looked at as a whole or that it is a loss- making enterprise. It is not. It is successful and we are talking about relatively small amounts of money if we consider the public exchequer expenditure overall.
If we bear that in mind, the argument should not be whether to cast off BTG and let it go unprotected into the private sector or whether it stays where it is. We could properly debate alternative models for BTG. Certainly, my colleagues and I would not argue against that approach, although there are certain criteria that must be fulfilled before we would be happy about any new model.
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The Government have commissioned a study, the conclusions of which they have not shared with us, so this is a debate in the dark. We conclude, therefore, that the reason that BTG is on the agenda is that it has been spotted as a remaining public sector enterprise about which the Government have a straightforward and dogmatic view. That is the only justification.The right hon. Member for Morley and Leeds, South (Mr. Rees) is, coincidentally, a constituent of mine and a near neighbour of the BTG's headquarters at the Elephant. He has an interest in this debate and I shall be brief in order to allow him to catch your eye, Mr. Deputy Speaker. He asked one of the most pertinent questions : how do we know that the new regime will guarantee the three Is that he identified, of which I shall mention just two--the integrity, and independence of the enterprise that the BTG has been? We are worried that Britain will lose a resource which is currently so successful because it has the confidence of scientists and of inventors. Those people can go in confidence to BTG knowing that their ideas will be respected and not be at risk of being exploited or put into the private sector without the protection that they seek.
The danger of the loss of independence is that the supply of ideas and inventions will cease. That is obvious. If the new regime does not have the same integrity and if scientists and inventors do not believe in it as a body in the scientific and research technology world, they will not use it. They will not supply the ideas and inventions as they have in the past.
The BTG is trusted not to disclose ideas to other people. It is trusted not to pinch ideas and to pretend that they belong to someone else or to sell them at a profit. It is trusted to give a good technical assessment of an idea. It is trusted to ensure that the procedure for licensing the technology will work and will be carried out effectively.
As BTG is in the public sector, there can be no conflict of interest. In the private sector, there is bound to be such a conflict. Yesterday for the first time I visited, relatively privately, one of the private hospitals that have sprung up in my constituency. It is opposite Guy's hospital. It is important to see what is happening. The private sector must have a conflict of interest about where it takes its patients from or what it does to maximise its profits, because it is a profit-making enterprise. If a body is in the private sector and has a profit-making motive, there will be conflicts of interest--whether to maximise profits or to maximise investment and research, and we risk losing the technological advantages that BTG has had.
Will people have the same confidence in a profit-orientated private sector company that they currently have in a commercial but non-profit orientated company which is in the public sector and seen to be accountable to Parliament? Clearly one must at least be sceptical, and the probable answer is no.
Another concern is that there is a special relationship between BTG and the science funding organisations, as mentioned by the hon. Member for Bedfordshire, North (Sir T. Skeet). The logic of his intervention would be to privatise the research councils. There would be no merit in keeping any agency close to Government to ensure that activities of scientific research and of technological importance were carried out. I heard the rather unusual view of the hon. Member for Amber Valley that Britain should reduce the amount of its research, not increase it.
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Mr. Hughes : I listened carefully. He argued that we should concentrate on manufacturing and production rather than on funding research which is then used abroad. I am not against concentrating on manufacturing and production, in which we have been weak, but I dissent strongly from the view that we can afford to reduce the amount of research carried out in Britain, let alone
non-private-sector-led research.
One of the greatest problems that the scientific research community continually bemoans is the fact that scientific research in Britain is too demand led by the private sector and that there is too little blue sky research. Pure research is now at a premium in terms of funding. We risk creating the same problem in the context of technology that we already have in purely scientific research. This is a problem which we should address now rather than bemoan later. Another of the merits of an organisation such as BTG has been that it has been a long-term institution. It has supported people for two, four, six, eight, or 10 years to develop their ideas to fruition. Sometimes a good idea can take eight or 10 years before it generates profits and may need experts working together to support it from its original concept to exploitation. In the private sector, the danger would be that long-term, difficult ventures would not be supported. The private sector would go for short-term profits. There would be no guarantee of long-termism. Additionally, all the factors that have been built up as a support--the additional education given to researchers in BTG, the benefit of a cross-relationship between people from different disciplines working together in a sort of technological hothouse--are at risk of being lost.
The real threat to BTG is that the Government would take a dogmatic view if the Bill were passed. Parliament would enable it to be sold. We would have no guarantee that we should retain close to the Government or to the public sector anybody at all to be accountable to Parliament and to carry on the work which, according to any record or assessment, has been extraordinarily successful. Why on earth are we running the risk of throwing away what has proved itself an eminently successful, complementary part of Britain's industrial, technological and scientific activity in the past 20 or 30 years? There have been many failures in industrial terms, but BTG has not been one of them. It has been one of our successes and it has brought about many of our successes. It seems folly to throw away a proven success for a future that is, at best, extremely uncertain. 6.19 pm
Dr. Keith Hampson (Leeds, North-West) : I am in something of a dilemma. I appreciate the arguments put so effectively by many of my hon. Friends, and I apologise to a couple of them whose contributions I missed-- especially my hon. Friend the Member for Bedfordshire, North (Sir T. Skeet), whose approach, I suspect, is similar to mine. On the one hand, it seems to me to be eminent good sense to privatise BTG. We have heard from a number of hon. Members just how unnecessary many of the bureaucratic regulations are. It seems quite unnecessary, for example, that BTG should have to go to Ministers in respect of certain levels of investment and to have its appointments approved. Also unnecessary is the general
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involvement of Government officials in scrutinising BTG and so on. BTG should simply be getting on with making sound academic and commercial judgments.On the other hand, Opposition Members--and, I suspect, my hon. Friend the Member for Bedfordshire, North--have made valid points about the national interest. Collectively, Britain has been under-investing in research--I stress the word "research". I fully accept the central point of my hon. Friend the Member for Amber Valley (Mr. Oppenheim) that, in many respects, there is no point in researching unless one can develop products from one's research. Nevertheless, the research itself is fundamental.
As the hon. Member for Southwark and Bermondsey (Mr. Hughes) pointed out, one must strike a balance between blue sky research and research that is directly industry-driven. That balance was skewed the wrong way, and the Government have rightly tried to swing it back to ensure that there is more industry-related research. There is a huge investment at stake, and in the past we were simply not using our talents as well as we should have been in the generation of products. We have an unrivalled Nobel-prize-winning record, yet many of the break-throughs that we were achieving were being developed elsewhere--notably in Japan.
The Government have established various means of getting the higher education institutions and research establishments to relate more closely to industry and to discover what industry wants. The LINK initiative immediately springs to mind. We have also encouraged universities to develop science parks. Moreover, as I said in an earlier intervention, most universities now have their own company structure through which to try to exploit their research efforts and patents and that has been very valuable. But we cannot swing the balance wholly in favour of near-market research. There is still a vital need for blue sky research--research driven by the exigencies of the research programme and the ideas of those pursuing it which, throughout our history, has thrown up breakthroughs that are directly relevant to product development that no one initially foresaw. We have under-invested in relation to our major competitors--notably the Japanese and Americans. A high percentage of our research investment is geared to the military--a consideration that the Japanese do not have. In large measure because of the short-termism of the City's outlook, British industry has shown an unwillingness to invest in its own plant and research facilities, just as it under-invests in training. Since the war, we have had a history of economic cycles and, in periods of downturn, when management rightly have to cut their overheads, the two first victims tend to be training and research.
As a result, whereas we have remained fairly static in terms of civil research investment, our competitors have steadily moved ahead. One can look for figures that approximate our research effort to those of our competitors and compare percentages of GDP, but even in those terms the gap is widening. Our economy has not done terribly well ; percentages of GDP hide the real truth--that, in absolute terms, the amount of cash that we invest is much smaller than that invested by Japan, the United States and even Germany.
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That problem must somehow be addressed. The Japanese and the Americans are trying to establish increased collaboration between the academic, higher education and research worlds and companies. The promotion of such collaboration was precisely the role conceived for BTG--or its predecessor body--which was to act as a sort of academic broker. When the group was first launched--at a time when there was a shortage of all the other initiatives to which I have referred--it was the only body that was pretty close to industry and knew some of the directions in which industrialists wished to develop products. The group could scour the higher education markets to find out where research was being done and then establish the extent to which potential development from it was possible.Most of our major competitors do that in one way or another. The Japanese economy is driven by huge corporations which are ruthlessly competitive, even within the electronics and car industries. Nevertheless, when the Select Committee on which I have the pleasure to serve went to Japan to look at the information technology industry, we found that, in all sorts of different ways--some direct and some indirect--the Japanese Ministry of International Trade and Industry encouraged pre-competitive research effort and collaboration. In the light of that, the United States has had to encourage its companies to engage in pre-competitive research collaboration.
The decision to privatise BTG does not mean that there is not a need for Government, industry and research establishments to work together under partnership arrangements that enable them to make the best use of the limited investment available. On the other hand, Opposition Members are to prone to confuse mission and ownership. I remember vividly our arguments about the polytechnics. For more than a dozen years, I argued that polytechnics should be removed from local authority control and made part of our national investment in higher education. We heard the parrot cry from Opposition Members that the distinct mission of the polytechnics was to relate closely to their local communities and to serve the requirements of local commerce and industry. Opposition Members said that the polytechnics should be owned by the local community--in other words, the council. That is nonsense and has been shown to be nonsense. Universities, which were not owned by councils, engaged in distinctive local community activities and served local industry. Leeds university is an example. Moreover, since the polytechnics have been removed from councils' control, they have continued to be geared primarily to the local community. There is no reason at all why BTG should not continue to be the academic broker that it has always been. The academic community has trusted BTG with its ideas in the past. Why should it not continue to do so? It is conceivable that one of the options that the Government will consider is a management buy- out. If that happens, BTG will have the same people, and largely the same approach, and it should command the same trust.
The brokerage role is very important, but it could be even more important. I would expect the BTG in the private sector not just to tap the brilliance of our own research effort but to open itself to a wider range of partnerships, enabling it to tap into research elsewhere in the world.
I do not know whether hon. Members mentioned the two notable examples during my absence from the
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Chamber. Because the BTG is a state corporation, it was prohibited from having access to French research endeavours. The French Government did not want the British Government to get their hands on projects that they were funding. As we all know, there was an attempt to establish a joint venture agreement with a Spanish company to tap in to research there. That was exactly what should have been done. British industry should have access to the research effort worldwide. The Spanish Cabinet became involved in the negotiations, and the whole thing fell flat.There are perfectly sound reasons why the brokerage role could be even greater and more successful for Great Britain Ltd. if BTG were privatised, provided that it is not sacrificed on the anvil of total free market forces and, as soon as it is privatised, a large predator does not come along with the narrow, short-termist thinking which prevails so often in the City. It could buy it up and then either wipe it out of existence or divert it into some other international conglomerate's interest. That predator could be a Japanese bank. It has already been said that BTG should not become locked into a particular part of its activities. For example, the group has a wide range of connections and partnership arrangements with the pharmaceutical industry. Clearly it would be wrong for one company to be allowed to buy up the group.
I finish with this plea. We must examine the options for the privatisation format--a trade sale, a management buy-out, or a consortium, which was mentioned earlier. I should like to know exactly what a consortium would entail. I foresee that the best solution would be to put the group in the private sector, with strict guarantees for all academics who have patents with it already, so that the present arrangements are not at risk.
There should be guarantees that the present relationship, partnership and trust with the academic world will remain, so that exploitation and transfer of technology can continue. We could also consider a Government golden share, at least for a short time, so that the trust can be maintained and people abroad can see that the group is not vulnerable to immediate takeover by predators. French and German companies, for example, or the German Government could then believe that we had a respected body which was not Government-owned but was Government-protected. Companies or Governments would then be more ready to participate in collaborative efforts on research initiatives. If we can establish a framework which gives those guarantees, the university world, the industrial world and Britain as a whole will benefit.
6.32 pm
Dr. Lewis Moonie (Kirkcaldy) : I have listened with great interest to the speeches of Opposition Members this afternoon. The hon. and learned Member for Montgomery (Mr. Carlile), the hon. Member for Southwark and Bermondsey (Mr. Hughes) and my hon. Friend the Member for Glasgow, Central (Mr. Watson) made thoughtful speeches, which added to the opening remarks of my hon. Friend the Member for Dunfermline, East (Mr. Brown) many questions which the Government must answer. I shall pass mercifully over most of the speeches made from the Conservative Benches. Words
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such as "banal" flitted through my mind as I listened to them, but perhaps it would be more merciful not to allocate the term to any individual.Yesterday I read an interesting snippet in one of the newspapers. It gave a quote from a Conservative Member of the European Parliament, Lord O'Hagan. He referred to "Calibans of the intellect" on the right wing of his party. Until I heard the Minister's speech today, I wondered exactly what Lord O'Hagan had in mind, but it is all much clearer now.
The Government have presented a pretty thin case for privatisation. We can see why the Secretary of State conveniently chose not to introduce the Bill, but to absent himself from the premises. Clearly, one debate this month with my hon. Friend the Member for Dunfermline, East was enough for him.
Instead of using the generous time available to him to present a coherent case, the Minister for Corporate Affairs spent his time largely on childish abuse. In doing so, he gained no respect for his superficial and flippant attitude to a serious issue.
As today's debate draws to a close, it is worth taking a few moments to reflect on the statutory function of the British Technology Group, as laid down in the Development of Inventions Act 1967. They are :
"(a
(securing, where the public interest so requires, the development or exploitation of inventions resulting from public research ) (b
(acquiring, holding, disposing of and granting rights (whether gratuitously or for consideration) in connection with inventions resulting from public research )
(c
(promoting and assisting, where the public interest so requires, research for satisfying specific practical requirements brought to the knowledge of the Corporation, where they are of opinion that the research is likely to lead to an invention ; and)
(d
(assisting, where the public interest so requires, the continuation of research where it appears to the Corporation that the research has resulted in any discovery such that the continuation may lead to inventions of practical importance.") Those four points outline the importance of the national interest in the debate today, an importance which was not properly touched on by the Government. Assuming that those remain the key objectives of the British Technology Group, it is surely up to Ministers to show why those objectives would be better served in the private sector and how they propose to safeguard them. The comments made so far have sadly been of little help.
For example, in the interview with The Observer to which my hon. Friend referred, the Secretary of State said :
"The bureaucratic constraints which inevitably impose themselves on statutory bodies are preventing BTG from achieving its full potential. The Government's objectives are to ensure that more, and stronger links are forged between industry and science."
What bureaucratic constraints cannot be removed? How will privatisation of BTG strengthen links between industry and science? Sadly, the substitution of dogmatic assertion for clear argument is all too typical of Ministers today. That is why they have failed to convince anyone of the necessity for or the validity of privatisation. They have failed to convince the vast majority of the staff of BTG. They have failed to convince inventors, whose patents are handled by BTG. They have failed to convince eminent scientists working in research. They have failed to convince financial observers. I refer the Minister for Corporate Affairs to comments made when privatisation was first mooted two years ago to
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back up the assertion that privatisation was necessary. They have certainly failed to convince, and in this instance also failed to consult, the vice-chancellors and principals of the universities. The Government have even failed to convince their own advisers. Despite their reticence, we know that Ministers were advised in 1988 that BTG would be better left in the public sector. That is why they have refused to publish any part of the report. It was not because of any issue of commercial sensitivity or anything else : it was merely that the conclusions of the report are inconvenient to Ministers. How, otherwise, can it be right to privatise now, when venture capital is scarce, rather than two years ago, when it was still plentiful? It is not as if the alternative of a private company has not been tried before by the Government. In the mid-1980s, the then Secretary of State for Defence, the right hon. Member for Henley (Mr. Heseltine), impatient with what he regarded as the inefficiency of BTG in the public sector, set up Defence Technology Enterprises to capitalise on innovatory ideas in his field. The money was provided, somewhat reluctantly, partly by BTG and partly by private institutions. The company came back to the funders for more money a year later. It came back again a year after that. By that time, BTG had had enough and said, "No thanks, we are not putting up any more money."Two years after it had been set up, Defence Technology Enterprises folded, unable to cope with the twin problems of under-capitalisation and the demand from City investors for an immediate return on their money. Is that what the Government have in mind today for the British Technology Group?
I wish briefly to recap on the reasons why we oppose the sale of BTG. We do not believe that the traditional arguments which the Government advance in favour of privatisation hold in this case. There will be no extension of share ownership. The shares are worth only about £35 million, assuming that the Government abstract the £20 million-worth of working capital which BTG must retain in order to function. I can hardly see the Government selling that off. Little revenue will accrue to the Treasury. The costs of the sale are already substantial and are likely to go up still further. Opportunities for competition after privatisation are likely to decrease rather than increase. There is not the slightest justification for the sale on grounds of efficiency, because BTG is already highly profitable in the public sector.
It is in the national interest to have a public sector body to take responsibility for developing ideas from publicly financed universities and polytechnics. It has a crucial role, as it allows a long-term view of projects to be taken. The sale of BTG represents the Government's abandonment of one of the few examples of long-term thinking within their Administration--BTG will be abandoned to a market that acts as though it is unaware of the meaning of that phrase.
BTG owns a stock of 8,500 patents, and the cost of renaming them will be enormous--again, a waste of money. It regularly takes legal action against people who infringe its patents, but that may not necessarily be true of a private company that is constrained by the demands of its shareholders for a return on their investment. Perhaps the most important reason for opposing privatisation now is the one that made the Government
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refrain from privatising two years ago--the many conflicts of interest and problems that will beset the Government when they try to sell the company. Those problems were highlighted in the report to the Government by their advisers. I am certain that no sensible person would be in favour of a single large company being given the go-ahead to buy BTG, although some might be attracted by that idea. There is nothing in the Bill to suggest that the Government have found a way out of their dilemma.I have listened in vain for the slightest logical justification for the proposed privatisation of BTG. That absence has led me to the inescapable conclusion that, once again, dogma has triumphed over reason, prejudice over good sense.
It is no accident that BTG has flourished in the public sector. The translation of new ideas into successful products and techniques is a long, hard process beset by disappointment and frustration. That task needs patience and the ability to see beyond the next quarter's figures or the next year's dividend.
A consideration of the range of products and inventions with which BTG is now presently associated gives one some idea of the hard task undertaken by it. In science, it is considering assays of blood constituents and the production of monoclonal antibodies. In materials technology, one of the key areas of development today, it is considering the production of high- performance plastic fibres. It is also involved with the development of advanced semiconductors. Its pharmaceutical work includes the development of anti-cancer drugs, various pain killers and the therapeutic use of monoclonal antibodies. BTG is also responsible for a wide range of potentially beneficial products in engineering and electronics.
A long-term approach is sadly lacking in most sectors of British industry. Perhaps I have a biased view, as I worked for several years for the pharmaceutical industry, which is the best exponent of such an approach.
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