House of Commons Hansard Debates for 2 Mar 1994

Mr. Jacques Arnold : Will the hon. Gentleman give way ?

Mr. Jones : I shall give way once I have developed this point. The United Kingdom is not matching its competitors in seizing these opportunities. Germany's share of the world market for environmental technology is 21 per cent ; the United States, 16 per cent ; and Japan, 13 per cent. Britain's share of this huge market is estimated at only 1 per cent.

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Mr. Arnold : Can the hon. Gentleman tell the House how we will maintain our traditional markets for our manufactured exports if the right hon. Member for Tweeddale, Ettrick and Lauderdale (Sir D. Steel) continues to attack Malaysia, which is one of those principal markets ?

Mr. Jones : We had that debate yesterday--I am not entirely sure that I saw the hon. Gentleman in the House then.

Many people think that to be environmentally friendly means closing things down, but it is not like that. The future demands that we pollute our rivers and air less. If we give scientists a problem to solve, more often than not they will produce a solution. Environmental technology is big business and Britain should be in it. It pains me when I hear that Johnson Matthey, which is developing fuel cell technology--making energy from water --is doing its research in Reading, but will manufacture its products in Belgium because it is getting help from the Belgian Government.

Another area in which we are about to lose our world lead is clean coal technology which is carried out at the Coal Research Establishment in Stoke Orchard just outside my constituency. We are investing peanuts in that industry, compared with Japan. There are huge opportunities for British business to reap rewards from measures to promote environmental sustainability, but the Government have yet to show the necessary commitment. Indeed, included in an overall strategy to build a new manufacturing base for Britain should be three distinct areas that have already been mentioned : research and development, in which we must invest more ; education, which we talked about yesterday ; and infrastructure, which my right hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith) is always banging on about in the House.

A recent report, "The 1993 UK Research and Development Scoreboard", revealed that only 11 of the top 200 world companies are British. The companies were ranked according to research and development expenditure as a percentage of sales, profits and dividends. That is a sorry score. There is a strong case for providing incentives to encourage research and development in small to medium-sized firms. In my part of the country, there is a serious structural problem caused by the rundown in orders for defence equipment. Good local firms such as Smiths Industries and the Dowty Group have been hard hit with thousands of job losses and, in the case of Dowty, takeover by TI.

There has been much talk in the House and outside about defence diversification and the so-called peace dividend. This country must not spend less on research and development because defence spending has gone down. The money should be transferred to civil research and development. Engineers and design teams are there. There are not enough of them, but there are many good people out there. They are as skilled as anyone in the world and they are ready to make world-beating products for civil markets, just as they produced world-beating military products in the past. The aerospace industry is vital to Britain as an export earner.

I was confused by the word "airframe" in the motion. I thought that the hon. Member for Livingston (Mr. Cook) scored a direct hit on the President of the Board of Trade when he said that the word "airframe" was included in the President of the Board of Trade's book. I am sure that if the

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President of the Board of Trade had drafted his own motion, he would have used the word "aerospace" because aerospace is the net contributor to the balance of trade of some £2.5 billion. It is one of those high value-added industries where Britain has enjoyed, and still enjoys in certain areas, a world lead.

In a debate on aerospace in the House last December, I said that the programme on launch aid should be extended to aerospace equipment manufacturers, rather than being limited to airframe manufacturers. The Leader of the Opposition is right to say in the motion that we cannot allow our great industries such as aerospace to fail. However, there is a danger that they might fail because the Japanese Government have

Mr. Purchase : Does the hon. Gentleman agree that in my constituency of Wolverhampton, Dowty, which he mentioned, has lost more than 400 jobs recently, demonstrating the clear way in which the aerospace component industry has shrunk almost irrevocably ? Is not that indicative of the way in which our aerospace industry has shrunk recently ?

Mr. Jones : It is indicative. As I said, we have a world lead in certain parts of the aerospace industry including, for example, landing gear, which Dowty makes, and propellers. That sounds like old-fashioned technology, but the propellers produced in Staverton just outside my constituency involve sophisticated modern technology.

There is a danger that the older industries in which we have enjoyed a world lead could fall. For instance, Japan has announced its aim of producing a complete aircraft by the year 2015. Only a fool would bet against their achieving that.

High research and development priorities are of limited use in isolation unless we have properly trained people. The Government's record on training and education is woefully short of what is needed in an industrialised nation such as Britain if we are to succeed in the world.

I should have liked Rover to remain independent under British ownership. It is not a happy situation that the only British car manufacturers remaining under British ownership are Rolls-Royce and Reliant and specialist car makers such as Marcos, TVR and Morgan. They are excellent companies, developing new products. I went to the launch of the Marcos Le Mans GT, which, sad to say, few people will drive, as the company makes only one a week.

Mr. Purchase : How much are they ?

Mr. Jones : They cost about £30,000.

Rover needed access to investment funding which British Aerospace could not provide and which did not appear to be available in Britain. Honda was offered a 100 per cent. buy-out, but turned it down. Rover's success in recent years has been because of positive practices within the company by management and workers. It had a positive attitude to partnership and its success was nothing to do with Government legislation. The management made a deal with the work force that they would guarantee employment in return for flexible working conditions. BMW has a lot to learn from Rover on management techniques. It would be illogical if BMW were to do anything but build on Rover's success, but there seems to be no guarantee of that.

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At the Conservative party conference last year, the Prime Minister made some encouraging comments about manufacturing industry. He said that he wanted British industry to be the best and to

"compete on a level basis with the rest of the world . . . make pounds for the UK ; don't make dollars for other people." He said that industry should

"sell abroad and buy at home".

I was encouraged by those statements. I thought that the Government had at last learned of the importance of manufacturing industry. To survive in world industry, we must invest. As the hon. Member for Coventry, South-West said, that investment must be long term and large. Our competitors understand that. Japan, Germany and the United States all have strategic plans to help their industries. I was disappointed when not much happened in the Budget. There was no vision for the future, no statement of direction and no tangible support for industry.

I urge the Government and the Opposition to fire people's imagination with a vision for the future. The United States document, "The National Information Infrastructure--Agenda for Action" is as good a start as any. Investment in infrastructure is vital. Deregulation is also critical to explosive growth, particularly in communications highways, not just in Britain but throughout Europe. I look forward to the report of the Bangemann high-level group, which is looking at issues surrounding the creation of a European information infrastructure. The group consists of some exceptional people, including Peter Bonfield, chairman and chief executive of ICL, and Pehr Gyllenhammar, former executive chairman of Volvo. They are people with vision. Their report to the European summit at Corfu should be studied and acted upon.

There is nothing wrong with British people. Given a vision of a better future, they will work for it and make it happen. I hope that today's debate will start to create that vision.

5.53 pm

Mr. John Horam (Orpington) : My hon. Friends the Members for Coventry, South-West (Mr. Butcher) and for Hastings and Rye (Mrs. Lait) made some interesting points about the comparison between Britain and Germany. They will have heard--the Opposition do not seem to have heard this--of the recent remarks by Gunther Rexrodt, the German Economics Minister. He said, almost in despair, "If only we had done what Britain did in the 1980s. If only we had privatised, deregulated and reduced the tax burdens on industry in the way that the Brits did in the 1980s, we would be in a wholly better position than we are in today."

Such a comment would not come easily to the Germans. After all, Germany is a great and proud industrial nation. It is the home of Vorsprung durch Technik and has a great commitment to technical industrial innovation. Despite that, Germany is prepared to say that what was done in Britain in the 1980s was a real revolution in our approach to industry and manufacturing.

I am pleased to say that that revolution has continued, despite the problems of recession in the 1990s. I welcome what has been done by my right hon. Friend the President of the Board of Trade and his Ministers in connection with competitiveness, which, as he said, is the heart of the

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matter. It is what manufacturing and commerce are all about. I am glad that he has set up the competitiveness unit because it has provided a focus for comparison with the best practice in other countries, which we badly need and from which we can learn. I am glad that the Government have introduced the deregulation Bill. That continues the wide and virtuous approach to industrial practice which we started in the 1980s and which we are now carrying on so successfully. One consequence of that approach is that, apart from anything else, it has provided a raft of new companies in the private sector--British Gas, the electricity companies, British Steel, British Airways and British Telecommunications. They are in the mainstream of big international industries and are major players in a way that they never were in the nationalised sector. Those companies can be added to the existing private sector companies. It is not surprising that we have 22 of the 50 largest companies in Europe. That is the strength that we now have in major industries and we can claim legitimately that it is a product of the supply -side policies of the past 10 or 15 years.

The hon. Member for Cheltenham (Mr. Jones) spoke with great interest about information super-highways. I am sorry to say that that industry was not fathered by the Liberal Democrats or that party's leader. The hon. Gentleman will know that what is happening in that business worldwide is extremely interesting. It is a major new industry which is divided into four or five different sectors, each of which is worth billions of pounds. He will know that Japan has just cancelled £4 billion worth of investment which it got wholly wrong, while British Telecommunications is beautifully placed to take advantage of the wise decisions that have been taken in the past 10 or 15 years.

The hon. Member for Cheltenham said that there is no cable under the streets in his part of the world. In Orpington, the cables are being put in, in the right place--not here--so that my constituents can have free local telephone calls and obtain every television service that they want. That sort of development is happening throughout the country. It shows that Britain is at the forefront of advanced technology, as well as having sizeable companies that can make a major contribution.

We are not talking just about large companies. We are developing medium- sized and smaller companies which we need in order to develop a proper industrial base for the future. Orpington may be seen by most people as a constituency in which the majority earn their living by travelling to the City of London. Indeed, about 15,000 of my constituents travel to the City each day from the various stations in Orpington. Therefore, it is important to us that the City is restored to something like its former health. However, I have found that a new set of high-tech companies is arising before my eyes. For example, A.C.Egerton is in the cable-activated television industry to which the hon. Member for Cheltenham referred. It exports 85 per cent. of its product, employs 400 people and is expanding all the time. That is the sort of modern company which is springing up in Britain. In Orpington, we also have major companies involved in the earth resources industry. For the cognoscenti, that involves the technology used in drilling for oil in the North sea, in which we are a world leader. That is happening at the forefront of technology and is a result of the policies that we have developed over the past 10 or 15 years.

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Whether we are talking about small or large industries, the whingeing and snivelling Opposition motion is backward- looking and wholly irrelevant. We need not talk in terms of constant redundancies, high unemployment or low technology. We are involved in high technology in a major way. I agree with my hon. Friend the Member for Coventry, South-West that we are winners once again, and that we have major opportunities if we will only grab them successfully. The hon. Member for Livingston (Mr. Cook) mentioned that he had spent the morning at the CBI, and that is a valuable thing for a shadow spokesman to do. The hon. Gentleman should have picked up the fact that the CBI is not altogether happy with the industrial policies of the Opposition. What clearly worries the CBI above all--apart from the interventionism and the raft of old- fashioned ideas, reminiscent of the 1960s and 1970s, which the Opposition will bring back if they come to power--is the Opposition's tax policy. Opposition Members have made a lot of the Government's taxation policy in the past few weeks, but their tax policy for companies and for industry would be extremely damaging. The shadow Chancellor, the hon. Member for Dunfermline, East (Mr. Brown), produced a pamphlet before the Budget about tackling tax abuse. He proposed that a number of tax loopholes be closed, and he alleged that those loopholes were exploited mainly by companies in this country. If he were to close those loopholes, he would, by his own calculations, increase taxation on industry. It is estimated that that would put an extra £3.6 billion on the tax and costs of industry during two years, which is roughly equivalent to an increase of about 25 per cent. in the rate of corporation tax.

The hon. Gentleman also proposed, almost in the same breath, a windfall tax on the profits of utilities. My hon. Friend the Minister for Energy will be aware of exactly what that would do to investment and jobs in those industries, and to costs in the rest of industry. That is typical of the Opposition's attempt to square the circle, which they still have not done, between their spending plans and their tax plans. To try to pretend that individuals can be somehow let off and that all the burden can be put on industry is totally misconceived, and will not work.

While I would say that the Government are going in the right direction, there are two threats which I should like to point out. One is the threat that I perceive from the European Union, and the other is the threat that I perceive from the Treasury. I do not put those in any particular order of importance or incompetence, but I will deal with the European Union first.

Many of us have been struck by the fact that the European Union has spent so much time contemplating its own navel. It has built a carapace of new institutions--some of them have merit, while others have not. In the meantime, however, the world outside has moved at an almost frightening pace.

For example, the countries of the Pacific rim, such as Indonesia, with 185 million people, have grown. We always think of China with more than 1 billion people, but there are other countries with huge populations and of huge economic significance which are now growing extraordinarily fast. Those include Taiwan, the Philippines and Malaysia. The far east is a huge market, and will soon account for 40 per cent. of the world's GNP.

In addition, there is India--a giant which is awakening at last. India has ditched its socialist policies, after 40 years

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of attempting to make them work, in favour of a more capitalist approach, and is now growing at 6 per cent. a year. Countries in Latin America have ditched even crazier ideas, and are growing steadily. All those countries are advancing and, looking from a purely European perspective, that is extremely dangerous. In its latest policies, the European Union has begun to show that it is aware of the dangers of some of its practices, but the Brussels bureaucrats are still too embroiled in their ideas of good regulation, good subsidy and protection. That is looking the wrong way, and the world is moving towards a lower taxation, deregulated and privatised regime which the Union still does not understand fully.

My hon. Friends should be aware that, while we must take advantage of the single market, we must play our cards extremely carefully when it comes to subsidies for the steel industry, the GATT round and the common agricultural policy, which is the biggest single piece of damaging protectionism in the world.

I will say something about the link between industrial policy and economic policy. I have long believed that the Treasury, while it has many virtues-- I cannot think of them at the moment--has never really understood industry as well as it might. I was glad that the Permanent Secretary, Sir Terence Burns, tried recently, in effect, to acknowledge that, with a fairly major reorganisation of the Department and the introduction of greater industrial expertise. There has been a conflict over the years, and under both parties --I am not making a political point--between the macro-economic policies pursued by the Treasury and what makes the best sense for industry. We have suffered since the war from that conflict. Now that we have a better understanding of industry in the Treasury, I hope that we can proceed more sensibly.

The Treasury has not held down public spending in the way it ought to if industry is to prosper in this country. One of the great lessons from looking at world industry is that it is clear that countries with a low proportion of GNP in the public sector expand fastest, while countries with a high proportion of spending and high taxation expand slowest. The correlation is almost exact. The Conservative party, as we have always wanted to do, must get public spending and taxation down to a level which industry can afford and which would allow it to prosper. We have a lot further to go, and we have not done very well so far. I hope that my hon. Friends will continue to make that point to the Treasury.

The Chancellor faces difficult decisions about how to sustain the present recovery. There is the critical question whether we will go too slowly, which may make the recovery slightly shaky, and also how far my right hon. and learned Friend must help it by further interest rate cuts. We know the important role that international confidence plays in deciding whether a particular interest rate cut works, and whether it has a favourable effect. I hope that the Chancellor will remember all that when he makes his decisions.

Traditionally, the Treasury--and, even worse, the Bank of England--has always done too little, too late. A besetting sin of the Treasury is that its approach is too cautious, and it has often talked up a recovery to a level far beyond what is justified by the facts. I do not say that my right hon. and learned Friend must lower interest rates now, but he must keep the prospect firmly in mind over the

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next two or three months. The short-term prospects of British industry depend most of all on my right hon. and learned Friend getting those decisions right.

6.8 pm

Mr. Ken Livingstone (Brent, East) : I must say that the President of the Board of Trade's speech was absolutely disgraceful. Listening to it, I was reminded of how worried most Labour Members were when the succession stakes were running. There was not the slightest doubt that an overwhelming number of Labour hon. Members dreaded the prospect of the right hon. Gentleman succeeding Baroness Thatcher. We saw him as our most dangerous opponent, and that was not because we thought he had nice hair.

There was much in his critique of the lack of an industrial policy of Baroness Thatcher's Government with which the Opposition would have agreed. He offered a real alternative, and a break with the dreadful waste of the 1980s. Many felt that a Government led by the right hon. Gentleman and talking about rebuilding Britain's industrial base would strike a chord, and would be seen as a break with the past.

I suspect that many of us thought that, once the right hon. Gentleman finally got the job as President of the Board of Trade that he was after for so long, we would start to see some real changes and an attempt to rebuild our industrial base.

Mr. Austin Mitchell (Great Grimsby) : Does my hon. Friend realise that the closer the President of the Board of Trade gets to the leadership, the less sense there is in his speeches ? Does not the fact that there was no sense at all in his speech today suggest that he is back as a contender ?

Mr. Livingstone rose

Mr. Deputy Speaker : Order. I must remind hon. Members that there is a 10-minute restriction on speeches now.

Mr. Livingstone : I will not take too many more interventions. I was struck by the fact that, in analysing the disaster of the past 15 years, one law which emerges from the way in which capitalism has operated during the past 200 or 300 years is that, year by year, the advantage shifts from those nations which export raw materials to those which export finished products. The Government came to power in 1979, and seemed to ignore that entire sweep of economic history. They threw all their weight and effort behind the oil industry, to the neglect of our manufacturing base.

Now, as the price of oil has collapsed, we find ourselves in a weak position. The Government fail to understand the evidence of the way in which capitalism operates. They have left us in a structurally weak position, which the President of the Board of Trade has done nothing to rectify since he has been in that post. All the talk of how he would intervene before breakfast and after dinner has come to nothing but empty rhetoric. At the same time, he has been winding down what remains of vital industries such as our coal industry. The Government ignore the fact that no one objects to a strong service sector. No one would sneer at the profits that the financial sector could produce. But such factors

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must rest on a solid manufacturing base in an advanced modern industrial society. The Government cannot continue to sustain the rest of the British economy if the manufacturing base withers away. How long can London remain the financial centre if its industrial base continues to wither as it has over the past 15 years ? Financial power will inevitably follow industrial power. We will see the shift of power from the City of London to Frankfurt. I do not mind when Conservative Members do not understand our policies or socialism--that is true even of those Conservative Back Benchers who used to be Labour Members--but I object when they do not even understand their own capitalism, which they are so happy to defend. The position is getting worse. I was struck by some of the arguments of my hon. Friend the Member for Livingston (Mr.Cook) about taking dividends out of profits. We have heard the talk about British workers and their wicked trade unions who screw too much from the profits for wages. We have heard talk about how the last Labour Government forced tax rates so high that industry and commerce were unable to be dynamic. But let us consider the past 15 years and where the burdens on companies have been increased. Wages and central Government taxes constitute less than 25 per cent. of the extra sum being drawn out of companies through dividends.

There is a striking illustration of that on the border of Brent, East and Brent, South--which I share with my hon. Friend the Member for Brent, South (Mr. Boateng)--where the last factory in Britain to make electric wall sockets is located. All other electric wall sockets are imported. I opened an extension to the factory a year or two ago. I was shown around the factory--an example of all that is best of what remains of British manufacturing.

The equipment that the workers were using was as good as anything in Germany or Japan--it was state-of-the-art equipment. Workers were given the necessary time to develop their skills. I then considered how the company was run. It was a family firm of two brothers. The first call on each year's profits was investment. The company did not have shareholders looking over its shoulder. It did not have to wonder whether Hanson might bear down on it if it did not make enough profits. The firm had the same aim as German industrialists--to stay ahead of the game. The first call on profits is investment. We must break the psychology of the Conservative mob, who sit in the Chamber like the City of London at prayer. There are no industrialists among them--they are all fringe bankers, property speculators, lawyers, advertising executives and other sundry parasites. Like many other parasites, they have a valuable role, but they need a substantial and healthy animal on which to live. They are not a substitute for the healthy animal itself. There is no industrial lobby to take up the ideas advocated by El Presidente when he was Mrs. Thatcher's main critic in the Tory party. Until we have an industrial lobby in Britain, we shall continue to decline. El Presidente harangued us about Labour's threat to the defence sector. That sector faces a threat because the balance of the world economy is shifting against it. The fact that we do not have a proper diversification agency and policy means that jobs will be lost because the Government will not intervene to save them.

We should sit down with those who own and work in manufacturing plants and, with a proper academic back-up,

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plan which of our present defence industries we should convert to produce many of the products that we now import because we do not produce them. We should do that plant by plant. Many of those defence industries will remain defence industries, but many will disappear whichever Government are in power in Britain.

Whoever is in power should plan to ensure that those jobs, skills and sites are not lost. Often, those industries have the most skilled work force, working with the most modern plant. They are exactly the workers and plants that should be retooled and retrained to produce in Britain the high- quality finished products that we now have to import from Germany, Japan and America because we do not produce their equivalents. If we were to adopt that approach, it would have the tremendous benefit of reducing the balance of trade deficit. We heard the President of the Board of Trade talk about the tremendous opportunities in the British economy. That was not the message of the Oxford economic analysis that was reported in the newspapers at the weekend. It showed a continuing and horrendous balance of trade deficit that will soon choke off any incipient recovery in the British economy that is not already choked off by Government tax increases. The analyses and estimates of the British economy that are beginning to pile up are gloomier than I first feared, yet we are living in the boom time between the two recessions.

The position will not improve in three or four years' time ; we will be tipping into the next recession by then. We are now at the high point, on an upswing in the economic cycle--we are now at the same point as we were in January and February of 1983, when we were enjoying a boom. That shows how shallow and weak the present recovery is. Back in 1983, the Tories were poised for a triumphal re-election victory on the strength of the recovery, but no one seriously thinks that that can happen now.

It is no good the Conservative party dismissing what we say and do. If it does, it will be defeated. The tragedy is that we could have three more lost years, with factories closing and the continuing erosion and decline of our manufacturing base. I wonder how much longer we can continue before the position becomes irrevocable. We in the Labour party must consider why investment in nationalised industries did not work in the post-war period. It was largely because of Treasury rules. The Treasury strangled our nationalised industries by not allowing them to set a price policy to allow them to pay for investment through the prices that they charged. It forced them to remain dependent on the Treasury. That is why I welcome the Labour party's statement on that subject.

6.16 pm

Mr. Iain Mills (Meriden) : I spent 20 years in the car and car component industry, much of it with Dunlop, and I continue my association with the industry through Committees in the House. I am a member of the Select Committee on Employment. I pay tribute to the late Ron Leighton, who was Chairman of the Committee for eight years and, sadly, left us last year. As the lead Conservative member on the Committee, I had a mixed relationship with Ron in terms of politics, but he was an extremely nice man. I regret his leaving us, and I know that members of the Committee will share my sentiments. I know that his absence from the House will be regretted on both sides.

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In the 10 minutes that I have to speak, I hope to advance a number of arguments, some of which will be reasonable, and some very good. My comments on the lack of an interest rate cut will constitute the less good part of my speech. I urge my hon. Friend the Minister to communicate to my right hon. Friend the President of the Board of Trade the fact that many successful industries, such as the car industry --and others that have been less successful, such as the machine tool industry, where sales have declined, but recently recovered--would be greatly aided by a change in interest rates. I know that there are hon. Members on both sides of the House who believe that interest rates should stay high, but the undoubted recovery in some sectors of the economy would be stimulated by further interest rate cuts. I am not sure quite how the City manages to become so nervous--but only those within it know the reason. As a member of the Select Committee on Employment, I should like to refer to a most important report that we have produced on the future of manufacturing. I do not say that in a self-congratulatory fashion ; I know there are a number of members of the Committee in the House. However, it made a number of significant points. We took the trouble to find out why Britain is the most successful base of inward investment from Japan and Taiwan. It is quite simple : we speak English, we have a similar culture and we have the best unit labour costs in Europe. They want a base in Europe.

As someone who left the motor industry in 1979 after the winter of discontent, when the Labour party had been in charge for an awfully long time and our labour practices were undoubtedly the worst in Europe, I find it extraordinary that the Japanese and Taiwanese come here because they judge us to be the best. The final reason in our report is that they come here because they consider our work practices to be the best in Europe ; they actually admire the way our people work.

Mention has been made of the increase in productivity having nothing to do with Government legislation, but of course it is due to the legislative changes brought about by my right hon. Friend, now Lord Tebbit--to whom I was PPS--in the early 1980s, among others. I enjoyed being on the Employment Bill Committees. I have probably been on just about every Employment Bill Committee since 1979. Against the wishes of the Labour party and the trade unions, we introduced democratic practices which to some extent are now accepted by some sectors of the trade unions. They led to productivity improvements which could not have been conceived in 1979. The Japanese and Taiwanese say that our productivity and working practices are the best in Europe. That enormous achievement could have occurred only under a Conservative Government. It is interesting that Japan and Taiwan invest in Britain because their own unit labour costs are higher than ours. They do not invest in Germany because unit labour costs in the German car industry are about £16.9 per man hour. The costs in our industries are about half that.

Amongst those who are highly competitive in that regard is our own domestic company, Rover. That is one of the reasons why Rover became attractive to BMW. The all-party motor industry group--my co-chairman, the hon. Member for Newport, East (Mr. Hughes), is in his place--has had a number of meetings on the matter. In reply to a question, a representative of BMW said that of course

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unit labour costs were a factor in the choice of Rover as a partner. BMW may have bought Rover, but it was looking for partnership and sees real advantages in Rover's high productivity and low unit labour costs.

It is my view that, although obviously no company would give solid and guaranteed commitments, Britain would be considered an extremely attractive country to manufacture a new small BMW. However, I deprecate some aspects of the sale of Rover to BMW and it is clear from a number of meetings of the all-party group that that feeling is shared on both sides of the House.

The unhappiness expressed by Honda has been caused largely because of the frankly insensitive behaviour of British Aerospace. The Japanese view companies and their involvement in companies almost as a family. It is as if a son were to marry without telling the family. So in selling Rover to BMW, British Aerospace took the huge risk of offending the Japanese company Honda. I deprecate that ; I have said it before and I have now said it for Hansard . However, there is some hope.

Today, in a meeting with Honda, I expressed strong concern and my strong hope that the company would reconsider its apparent decision--according to the media--to leave Rover.

As an engineer and somebody who has worked closely with all three companies, I admire the engineering skills of them all. If one could coin a dream package to compete in Europe in future, the combination of BMW, Rover and Honda would be that dream package. It would have size, access to resources and complementary technology and engineering that would make Fiat shudder--and it is already shuddering--and Ford, the biggest car company, look again at what it is doing.

I urge Honda to reconsider. I am glad to say that the chairman of the British company told me that discussions with BMW have not been concluded. I urge Honda to reconsider as it would be a very powerful partnership.

In the short time that remains, let me move on to other aspects of employment in manufacturing industry. In its report, the Select Committee on Employment urged a number of important factors. We could not reach total agreement in detail on the lack of commitment to the social protocol and the social compact.

The evidence we were given by a number of people both here and in Japan was conflicting to some extent, so I shall put my own personal view with no reference to the Committee. It is my personal view that many of the people we spoke to felt that the cost of committing Britain to the social protocol and the social compact would be crippling. It would definitely disadvantage our manufacturing companies because of the high costs involved.

I understand from my right hon. Friend the Secretary of State for Employment that the direct costs to manufacturing companies in the United Kingdom for introducing those measures could be as high as £25 million.

I found no real conviction in discussions with people such as Padraig O'Flynn, the Commissioner for Social Affairs in Europe. I was given no real reassurance that the olive pressing in Greece and the Spanish wine industry and the collection of grapes would fulfil their obligations under the social compact.

The Committee agreed unanimously that deregulation, particularly that of European regulations, would be an

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extremely important encouragement to manufacturing industry. We have far too many regulations ; perhaps some of them are carried out far too zealously by our own people in Britain, but many of them are imposed on us by Europe.

I finish by saying it is quite good news from the car world that we had new car registrations in 1993 of 1.778 million--12 per cent. above the figure for the previous year and we are looking forward to a slow and steady growth next year. Those figures include manufactures by domestic companies, but in the teeth of the recession Nissan, Toyota, Honda and Peugeot have had a very healthy export sale.

Mr. Deputy Speaker : Order.

6.27 pm

Mr. David Clelland (Tyne Bridge) : The northern region has a proud history of manufacturing excellence. We remain the top region in the country for manufacturing as a percentage of regional GDP. We are top for exporting--45 per cent. of GDP--top for implementation of BS 5750 certificates, top for Queen's awards for exports and technology and top for having the common sense to realise that our manufacturing base has helped us just tread water during the recession. Despite all that, the region is nevertheless a pale shadow of its former self. We have a manufacturing culture in the north which has not been helped by the change in culture nationally.

The past 15 years have seen a declining interest in the fortunes of United Kingdom manufacturing by central Government and our world share of manufacturing trade has fallen still further.

It is now clear that, far from being characterised by a productivity miracle, the 1980s was a period of intensified industrial decline. While, according to current forecasts, it might just be that the bottom of the latest recession has been reached and there may be a slight upturn ahead, the forecasts for employment in engineering are still downwards.

Reductions in demand and improvements in technology might explain some reduction in employment, but they do not explain entirely our failure as a nation to maintain our position and our reputation as a world leader in manufactured goods.

The world still needs ships and power stations, buses and cars and trains and planes, and they are still being manufactured and sold, but less and less by British firms. As our share of world manufacturing trade plummeted, Germany, France, Italy and Japan were increasing theirs, the latter by a massive 400 per cent.. The northern region has seen many changes over the period. We were often told that changes were inevitable as old outdated smokestack industries declined. But the decline hit companies such as Plessey and Marconi, which are at the forefront of technology. Some of the most advanced shipbuilding facilities in the world could be found on Wearside, and Tyneside where Swan Hunter is still struggling to survive despite its skills and technological excellence.

It is not a question of outdated industry, but a combination of a lack of foresight, the absence of an industrial strategy, and a Government who do not understand, appreciate or support the manufacturing sector. Before I am accused of running down the northern region, let me say that there have been positive

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developments there. The northern region has been way ahead of the Government and, I must say, of my right hon. and hon. Friends on the Opposition Front Bench, in realising the importance of partnership in the quest for improvement. The creation of the Northern development company by the region's trade unions and business and local government sectors is an example of how we are able to pull together.

The public sector, through local authorities, provided the light rail rapid transit system on Tyneside, which has proved such a success socially and economically. Again, a consortium of local authorities built and developed Newcastle airport to reach the international status which it now enjoys, and which benefits the regional industry and the regional economy.

As I have already mentioned, there have been some successes in manufacturing, too. Some local firms are enjoying huge success and are producing high-quality, high-tech goods. Again, it was the close co- operation between local authorities and businesses, particularly the work of Tyne and Wear county council--abolished for its pains--that brought Nissan to the north, followed closely by Komatsu and others. But we do not have to kid ourselves that the arrival of overseas branch plants represents a fundamental transformation of the regional economy. The most damaging aspect of the 1980s has been the neglect and decline of the region's indigenous manufacturing base. The branch plant character of the regional economy has become more and more prevalent. Increasingly, the region's future is determined by decisions taken in remote boardrooms, by unelected quangos or in Whitehall.

There is general agreement in the region that something must be done and that we will probably have to do it ourselves. Many in the north are impatient for regional devolution--allowing the region more freedom to set its own agenda and pursue its own priorities. High on the list is the regeneration of our manufacturing sector and improvement of the regional infrastructure.

In the private sector, the manufacturing challenge is the initiative of former north-east business man of the year Karl Watkin of Crabtree Vickers in my constituency. It sets the goal of doubling regional output and trebling exports over a decade. It has the widespread and active support of the region's manufacturers. But there is a common understanding that market forces alone cannot create self-sustaining economic growth any more than will an over-reliance on overseas firms and the service sector.

The ability of the region's manufacturing base to consolidate and grow, and attract and retain firms that have the capacity to prosper, will be critical to its prospects. Again, from within the region, that realisation has given birth to new ideas. I have mentioned the manufacturing challenge and the contribution of the public sector, but the region's academic and research groups are also lending their support. If the finance is forthcoming--I sincerely hope that it is, and that manufacturers, trade unions and local authorities will take note--the local trade union studies information unit and the centre for urban and regional development studies at Newcastle university plan to embark on a research project to contribute to the formation of a policy for the development of the north's engineering and manufacturing base as a means of overcoming the present industrial crisis and rebuilding the region's indigenous strengths.

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Despite all of that regional activity, we will not make sufficient progress at the required rate without the backing of central Government and sympathetic Government policies. As my right hon. and learned Friend the Leader of the Opposition said last week : "It is important that the Government takes the lead

responsibility. It cannot shuffle off these responsibilities to the private sector."

But are the Government up to the job ? To date there have been few signs that they are. We will have to wait for a Labour Government to give us the kind of regional devolution that will have any meaning in that context.

The recently published paper about which my right hon. and learned Friend was speaking outlines the Labour party's policies on regional development agencies and commercial investment banks. It is dedicated to mobilising investment in firms within the regions--the risk capital perhaps to which the hon. Member for Coventry, South-West (Mr. Butcher) referred earlier.

Other aspects of devolution policy will also help the regions. A northern regional assembly, for instance, with power to decide regional transport policy, would give a high priority to improving the communications networks in the region, not least of which would be the upgrading of the A69 and A66 to provide much improved coast-to-coast links, to the benefit of the regional economy. But if such policies are anathema to the present Government, they should at least be doing more to encourage investment in our manufacturing industry.

The current rules for tax relief on new plant and machinery should be changed to allow full relief in the first year on new equipment. That would provide a real incentive to invest, which is badly needed. I am no economist, but why cannot we have different interest rates, with borrowing to invest in new plant and machinery at a low rate and borrowing to buy imported consumer goods at a higher rate ? The Government could also provide industry with long-term planning. Manufacturing industry cannot operate on short-term decision making. That is what northern engineering employers told northern Labour Members at our meeting yesterday. They need a national view about what technology sectors we want to be in. They spoke of the need for a balanced energy strategy and a proper plan for the refurbishment and replacement of power stations, and the future of the nuclear industry. They seemed a little unsure, however, about how that can be achieved now that the industry has been privatised.

Another area of Government influence that is of major importance in manufacturing is training. A number of good apprenticeships are still running, particularly in the engineering industry. Firms are still keen to support and provide high-quality training. But the old concept of apprenticeships only at 16 must surely be out of date. I was the beneficiary of an excellent engineering

apprenticeship--starting at 16 and finishing at 21. While that might have been appropriate at a time of high unemployment, the problem now is that thousands of young people--having left school at 16 or 18--are still out of work when they reach 19, 20 or older. That means that if apprenticeships are restricted to 16 and 17-year-olds--as intended by the Government's modern apprenticeship scheme--many will not qualify because of age. Surely that must be looked at again.

Training in a skill--particularly in engineering--is a rewarding and beneficial experience. Even if there is no

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