House of Commons Hansard Debates for 17 Jun 1994

Mrs. Lait : My right hon. Friend is absolutely right.

I shall return to my previous remarks. One of the worries that business people have is the need to ensure that within that collection of acronyms there are people who have a business background, as well as technical and scientific experts who are required for that sort of job, because often the bottom line is affected by the decisions of those acronyms. We need to ensure that there are sensible negotiating stances, not the well-known stamping of the foot and companies being told that they will be closed within 24 hours if they do not do it.

I shall move on to a different area : business-friendly finance. I have no intention whatever of mentioning the clearing banks, although I am sure that some hon. Members may wish to do so. If I started on the clearing banks, I am sure that I would go on for even longer. The White Paper had great difficulty dealing with late payment. I understand why from the reactions to the proposals that it came up with. The Forum of Private Business asked, "How dare the White Paper not propose

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legislation ?", but the Confederation of British Industry and the Federation of Small Businesses both welcomed the fact that we have not done so. Those are the three principal organisations affecting small businesses, so I have enormous sympathy for the stance that we have taken in the White Paper.

It is sensible to require that particularly large companies, which publish their accounts, include in their annual report and accounts a statement of their payment policy. That would at least put on some psychological pressure and give smaller businesses a handle on how to get some movement on payment.

It is not merely a question of companies, as the Government should also be setting an example. Unfortunately, I know of two cases in my constituency in which the Government have conspicuously not done so. One case involves one of those silent companies that do so well and which we all notice only when something goes wrong. It maintains all the clocks in the royal palaces and that includes Big Ben--we all know when that goes wrong.

During the past 10 years, the company's contract has been with a variety of different forms of the Property Services Agency and therein lies the problem, because, as we are all aware, there have been great changes in the agency during that time. The company's bills were sent to addresses that were vacated, and to people who had left or moved and a very large sum of money was outstanding. The company is small and, eventually, through the use of solicitors, it persuaded whoever was finally in charge to pay the bills. What he or she was not prepared to do, however, was pay for the cost of financing the money that the company had not received, which in many cases dated right back to 1982. The company has had to lay people off, largely because it needed to fund the bills that had not been paid. I very much hope that, as I have alerted my right hon. Friends the Minister for Industry and the Environment Minister, something will be done about that.

To move to a slightly happier note, another company in my constituency called Photek-- a small, high-tech company, involved in image intensifier technology--has been helped enormously during the past few years by Government and European grants, under the SMART and Eureka awards. Originally, when its bills were submitted against invoices, under the system as laid down, it was paid within one month, but it now finds that it is taking one month for the Government to write a cheque. I urge the Department of Trade and Industry, which is responsible for dispersing the money, to look again at its systems because it causes difficulties for small companies' cash flows if they do not receive their grant cheques as they should.

Finance for small business is an issue which has long concerned many of us and we all await the Treasury report. One of the greatest problems, which I come up against time and again, is the need for venture capital of up to £500,000 for companies. With our latest suggestion in the Budget--the Venture Capital Trust--and other encouragements, we are beginning to deal with that problem. We cannot just rely on business angels, however.

I have regularly heard the line about how one can make a small fortune-- start with a large one and go into venture capital. I have sympathy with that view, because I know people who have suffered in that way. We need a culture change. Companies must get away from always looking to overdraft finance. We must change to long-term investment, equity stakes and even to preference shares, which do not dilute an owner's ownership of a company.

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There is also an opportunity for the private sector to come in, as it has done so well in the past, through small investment trusts, enabling any member of the public to take a stake in venture capital--investment trusts designed to invest in businesses needing up to £500,000. We all know why it is so difficult, because the costs of finding venture capital are very high, but something like an investment trust would reduce that cost.

It is a matter of interest that 3Is is at long last coming to the market. It was set up by the clearing banks to avoid being nationalised in 1948 and has proved to be their greatest investment. It has done a tremendous job in providing venture capital. That brings me to the contentious subject of dividends being too high. I tend to believe that one of the closest things that we have to a sensible market is in the City. We have had an unstable economic background for three decades, with high inflation, high interest rates. One has never known which way the economy is going, or whether taxes will go up or down. Some of us remember the 1970s, when we had Budgets fairly regularly. The noble Lord Healey was known for multiple Budgets in the way that other people run multiple stores. We now have a regime that enables us to see clearly our future for the next few years. We set out in the Budget a very clear statement, which the Chancellor reiterated a couple of days ago, of Government policy and the intention to keep inflation and interest rates low and to set out a tax regime. That will bring the stability that is required for a more sensible longer-term view in the City markets. Quite rightly, as they have not known what would happen to the economy in the next one, two or three years, they have looked for a higher return for high risk. One asks for short pay-back terms on investment. Investors rightly want a high return for that risk. We have had a high dividend regime, but, equally, United Kingdom companies have been used to going to the City to get investment. The success of those requests has a direct relationship to the success of the business, its management skills and ability and its profitability. We must try very hard to get over the message that stability is the key to ensuring long-term, worthwhile investments, which will ensure a growing and competitive economy in the long run. Briefly, on the role of the City, which I promised to mention, the key to success has much to do with the skills that it has developed and even more to do with the fact that it sits on Greenwich mean time and hence can deal throughout the world during its working day. Even if we move to European time, with the extra hour, that power will remain. We also have the English language, which is the international language of business. Because of those advantages, we have developed a range of business and financial skills that is not apparent in other European countries.

We are continually being challenged that Frankfurt and Paris will take over from us in Europe. One has only to study the financial structures of those two countries to realise that they do not have the wide range of skills required in the global market. Hence, as long as we remain flexible and the regulators in the City do not become too rigid, we will remain pre-eminent. We must not be complacent, but we will remain pre-eminent in world financial skills, which will keep up our competitiveness.

We are still the second-biggest investor abroad. Our surplus in 1992 was £8.3 billion, and that must be good for

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all of our pensioners and for everybody who has a stake in businesses. Sensible businesses are obviously investing abroad, and hence we are bringing money back into this country at a much greater rate than that at which other countries are investing in us ; their outflows are smaller than the inflows into the United Kingdom. We need to ensure that because of longer-term financial stability, companies will increase their research and development, and that is crucial for our continuing competitiveness. It was with great pleasure that I read today that, practically for the first time ever, British companies are investing in research and development at four times the international rate. Long may it continue. I hope very much that that is a reflection of the creation by the Government of the long-term stable economy which we are all looking for.

It also helps companies to export, and many of the things that I have described lead in the long run to better exporting. The Department of Trade and Industry has done a tremendous job with its export promoters. I chair a committee which is very involved in west Africa, and a year ago it was in the doldrums about the help which it was getting from the Government in terms of exporting. Now, in so far as business men are ever lyrical, they are lyrical about the help they are getting. I know that the response is not just coming in west Africa, and I commend the DTI for that.

It is encouraging going round companies--as I do in my constituency--and seeing the percentage of their products that are going to export. It is no longer uncommon for 85 per cent. of production to be exported, and not necessarily just to the Community. I do wish that we would stop talking about exporting to the Community--we are one single market.

Finally--the House may be glad to know--I would just like to examine the role of infrastructure in our competitiveness. Some hon. Members may have seen today the report by the Henley Centre which says that the area around Cambridge and the east midlands will have the greatest growth in the coming decade. One of the keys to that growth, the report says, is easy communication. I could not agree more. The need for good roads is crucial to this country and we must ensure that we invest wisely and quickly in areas where we do not have good roads at the moment. It is crucial for our economic development, and I say that as someone who has pleaded loud and long for investment in two principal roads into and out of my constituency- -the A259 and the A21. There is a direct correlation between the fact that we have only just got below 13 per cent. unemployment, the quality of our roads and our weak economy. I should like the Department of Transport to move to a system of recognising the economic development potential of roads, rather than a straight mathematical calculation on growth based on the current economy. I am conscious that I have not covered all of the issues in the White Paper, but I never said that I would. I am beginning to run out of puff, and I should just like to draw my remarks to a close.

Mr. John Austin-Walker (Woolwich) : One of the areas of the White Paper to which the hon. Lady has not made much reference is the question of discrimination. I note that the White Paper says that unfair discrimination in the labour market is

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"morally wrong and economically damaging".

Will she prevail upon her colleagues not to continue the filibuster this morning, so that we can discuss the rights of disabled people and their opportunities to enter the labour market ?

Mrs. Lait : I am fascinated that the hon. Gentleman wishes me to continue to discuss the White Paper, which I should be happy to do. I am equally conscious that a large number of hon. Members want to discuss other parts of it, and it is only fair that I should draw my remarks to a close. I commend the White Paper and my motion to the House, and I commend also the long-term policy of the Government of introducing flexibility into our economy and producing economic stability. The need for us as a nation is to rejoice in change, and not to resist change. That is the key to continual competitiveness. 10.34 am

Mr. Jim Cousins (Newcastle upon Tyne, Central) : I congratulate the hon. Member for Hastings and Rye (Mrs. Lait), both on her good fortune and on her choice of subject. When the hon. Lady was the Conservative candidate for Wallsend--a constituency close to my own--I said at the time, "This lady will go far." Of course, in going to Hastings and Rye she has gone about as far as she reasonably could.

Mrs. Lait : I apologise for interrupting the hon. Gentleman's speech so early on, but it is only fair to say for the record that it was not Wallsend--it was Tyne Bridge.

Mr. Cousins : That is even closer to my constituency, and hence even further for the hon. Lady to go.

I knew the hon. Lady's predecessor--Sir Kenneth Warren as he now is-- extremely well. I served on the Select Committee on Trade and Industry with him, and he was in many respects a remarkable man with many fine qualities. One of those fine qualities was arguing convincingly that Indonesian food did not have to taste exclusively of peanuts. It is of course such small, but important, discoveries that make our life in this House so rich and rewarding.In one respect, however, the hon. Lady is very different from her predecessor. I say this with no disrespect to Sir Kenneth Warren, but I could not visualise him speaking for over an hour on a Friday morning. The subject is, of course, extremely important, and I agree with much of the hon. Lady's analysis--although sadly very few of her conclusions. She alluded in her own way to the point at which our approach to these matters should begin, and I share her opinion about that : we must work with the idea that no one in the world owes anyone in this country a living. Any cronyism, complacency, the old person network-- [Interruption.] I appear to have said something entertaining. I am delighted to think that, at such an early point on a Friday morning, I can give rise to such amusement. I repeat the phrase which I think caused the excitement--"the old person network". The "steady as we go" and "It'll be all right on the night" spirit are part of the "back to basics" of very many people in the British economy.

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Mr. Butler : I am terribly grateful to the hon. Gentleperson for giving way. Does the hon. Gentleperson not realise quite how silly phrases such as "old person network" sound ?

Mr. Cousins : As we discover on these occasions, such remarks are intended to give rise to even greater silliness in others. I appear to have achieved my objective in that respect.

Every British institution and enterprise is being tested in the global challenge--including, I may say, this one. This House's ability to discuss matters that are important to many of our people is being challenged and, on some occasions, we do not succeed in seeing those matters through to their conclusion as we should. Such matters are important in a discussion of global challenges, and the way in which banks conduct themselves and the kind of research and development expenditure that we have are fundamental to that challenge. I am sorry that the hon. Lady did not respond as promised to an intervention in which I drew her attention to the disturbing report about the rundown of the City of London. It is, after all, the base for much of our financial information and high-technology services. Every time the hon. Lady was confronted with such institutional issues, she fell back to using the oldest trick, by arguing, "On the one hand this, but on the other hand that." That was her approach to late payment, to research and development, to the evolution of our company structures and, I am afraid, to much else in her speech. The truth is that there is no point in any of us looking back to the 1960s, the 1970s or the 1980s because every one of those decades was a period of relative failure according to some crucial necessary indicator of economic success. Any political party that plays a party game of statistical charades and dresses things up to make relative failure look like absolute success will fail : people will no longer be fooled by such behaviour. Sadly, many of our people expect us to try to fool them. If we are to correct that impression, we must start by not fooling ourselves.

The hon. Lady spoke about the search for stable macro-economic conditions and, although she may have focused too closely on it, I accept that it is important. In the 1980s, we experienced swings from boom to bust. Such experience should guide us on what to avoid in the future and I appreciate that the Government are trying to learn that lesson in their own way. We must avoid reproducing the stop-go economies of the past. The Government's adoption of a multi-speed, multi-track approach to the indicators governing the economic cycle will not do.

At each end of the punt, poling furiously in opposite directions, we have the Chancellor, who is, for the moment, preaching fiscal rectitude, and the Governor of the Bank of England, who has allowed monetary laxity. Each of them is still promising the other that, in some further eddy in the economic cycle, they will change places. Stability is not achieved by setting all the signals at amber and hoping that the trains will not hit each other. Such a strategy will not produce stability; it is simply a posture of informed indifference and neglect. I fear that that represents the macro-economic policy of this Government.

Neither the White Paper nor any other item of Government policy addresses some of the fundamental structural deficiencies in the British economy. We do not

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undertake enough research. We do not draw enough upon the skills and enterprise of every part of our society and every region of our country. We are not sufficiently well trained and our skill levels are not high enough, although I accept that a minority of our population is extremely skilful and well trained. Our investment levels are not large enough, not financed soundly enough and not targeted on the right kind of object. The Government have not addressed those fundamental institutional and supply-side deficiencies. The White Paper merely refers to them as a signal of past failure and indifference and does not offer any real promise of a change of heart.

Mr. Butler : The hon. Gentleman is suggesting that policy is not directed at the correct projects and sectors, but has failed to answer the question, "Who should do the targeting ?" Is he suggesting a return to Government targeting--the National Economic Development Office, NEDO and so on--or does he have some other proposal ?

Mr. Cousins : All the stakeholders in any enterprise must be involved to a far greater extent, because currently too few of them are involved in serious discussions on the future of their enterprise. One of the major deficiencies of the market in corporate performance is the lack of involvement of some of the major institutional shareholders and financiers ; they simply do not engage in a continuing evaluation of companies and their activities. They do not engage in forward looks, to use the Government's phrase, at their investments. "Forward look" is a good phrase, although I do not believe that the result of the effort is that promising.

I deliberately use the term "stakeholder" here because more is involved than the shareholders. It is important to discover who are the stakeholders --the legitimate social partners--because their lack of involvement underpins one of the fundamental deficiencies in the Government's analysis of our problems.

Mr. Butler : I am grateful to the hon. Member for his response to my question. Do I take it that he is not proposing any form of NEDO, albeit known by another set of acronyms or title ? Does that mean that the old Labour party idea of Government centrally controlled investment planning and targeting, to use the hon. Member's expression, will not be proposed by him or by any future leader of the Labour party ?

Mr. Cousins : There is no point in talking about reinventing NEDO, which the Government abolished. It is significant, however, that part of the current work of the Department of Trade and Industry has led to the surreptitious re-creation of many of the sectoral procedures and devices adopted by NEDO. That was exactly the format adopted by NEDO when it got down to business through its sector working parties. In effect, the DTI has re-created that sector working approach. We should not be too bugged about institutional structures, because what the Government have taken away with one hand they have partially reinvented with the other.

It is important to note, however, that the Government have failed to involve all the social partners who were involved in the work of NEDO. It is a pity that although the DTI has re-created the sector working approach it has not involved some of the stakeholders. Sadly, those people have been missed out and I suspect that that is deliberate policy.

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Mr. Nirj Joseph Deva (Brentford and Isleworth) : Is the hon. Member suggesting that politicians and civil servants can spot winners whereas the market and industrialists cannot ?

Mr. Cousins : In the 1980s, we saw the manufacture of losers across all sectors of industry and we must seek to avoid that in the future.

The argument about picking winners is an argument from the past, because what we see around us is the creation of losers. I acknowledge that, to some extent, the White Paper recognised that, because it recommends ways in which the Government can work to try to prevent it from happening again. We should all agree about the importance of such work.

Mr. Sykes : When the hon. Member talks about social partners, is he talking about trade unions ? If he is, what kind of social partners does he think they were to the economy in the 1970s ?

Mr. Cousins : As I said at the beginning of my speech, we cannot proceed to operate a system in which many people are excluded from decision making simply because of some antique stereotype that some other people claim still exists. That is a lesson which my own party has had to learn in its own way and it is a lesson which I commend the Conservative party to learn in its own way. If we are serious about meeting global challenges, we cannot operate on the basis that some people who represent an important interest should be excluded from decision making. We must operate on the basis of partnership.

Mr. Sykes : In that case, will the hon. Gentleman take this opportunity to condemn the antique and outmoded strike that took place on Wednesday ?

Mr. Cousins : As we all now know, Wednesday's strike was a deliberate result of secondary action by the Government. [Hon. Members : -- "Rubbish."] Every commuter in the south-east of England and everywhere else in the country knows it. Just as in the past we sometimes went wrong when we had open caucuses and tea and sandwiches in 10 Downing street, so we should seek to discourage operating by secondary action--nods and winks from senior Ministers on how managers faced with managerial responsibility should behave towards their work force. Let us put things clearly on the table.

Mrs. Gillan : The hon. Gentleman said that every commuter in the south-east knew that Government action caused the strike. He may like to tell that to Mrs. Jo Franks who, when she heard that my Chiltern train line would run throughout the strike, said :

"I wasn't sure whether to believe it at first but I am very grateful. I would just like to thank these people for letting me get to work."

Mr. Cousins : I should be happy to talk to Mrs. Franks, presumably of Amersham or Chesham. Indeed, we intend to do so because, sadly, despite our victory last Thursday, the refreshing new democratic socialism that will take Britain to success at the end of the century has not reached some parts of the country. We have still to convince the Cotswolds and some of those Tory heartlands of their error. Rest assured that we intend to do so. On the evidence of the last European elections, we are well on our way to

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success. A party that comes third in a constituency like Eastleigh must take stock of its position in its own heartlands.

Mr. Butler : May I preface my remarks by saying that Chesham and Amersham are nowhere near the Cotswolds. As the hon. Gentleman travels further south, he will find that out. He may be assisted in his tentative approach towards expressing a view from the Labour Front Bench about the rail strike. I would encourage that, as attempts to get a view from the leadership contenders, apart from the hon. Gentleman, have been unsuccessful. Is he saying that a Government who state clearly, as this Government have repeatedly done, that wage settlements grossly in excess of the inflation rate are not good for industry or the country generally are interfering ? And is the hon. Gentleman tentatively groping towards saying that, with inflation at 2.6 per cent. and holding, an 11 per cent. wage increase is perfectly reasonable ?

Mr. Cousins : If that is a criticism-- [Interruption.] As the question is addressed to me, I shall take it as such. I am sorry that the hon. Member for Milton Keynes, North (Mr. Butler) thought that I was being tentative because I thought that I was simply being gentle. One should not draw a distinction between gentleness and tentativeness. I thought that I was extremely clear in my reaction towards the entirely unnecessary rail dispute which the Government managed to engineer this week.

Mr. Butler : Jimmy Knapp is not a member of the Government--yet.

Mr. Cousins : Jimmy Knapp will end this matter as a hero, in the Chilterns and the Cotswolds and in many parts of the country where, owing to the Government's action, people can no longer travel by train. As a result of their policies, in some parts of the country people will cease to go by train in the future--or, if they do, it will be at a much higher price.

On the question of wage settlements, the 1980s taken as a whole was a period without precedent in British history when earnings constantly exceeded inflation by a factor of between 60 and 100 per cent. That occurred at all points of the trade cycle and in all aspects of the labour market condition. It was a permanent feature of the 1980s. If that is a problem for the hon. Member for Milton Keynes, North-East--I understand that some people might regard it as a problem, although I do not see it as such--he should take the matter up with the Government because it has been a central feature of the British economic experience of the 1980s.

There was just one three-month period in the whole of the 1980s when earnings increases fell below price increases. Strangely, that three-month period coincided with the period that led to the dismissal, by her own party, of the former Prime Minister, Baroness Thatcher--an interesting coincidence which may throw some light on Conservative Governments' earnings policies.

Mr. Trend : Does the hon. Gentleman accept that, during the 1980s, many of the wage increases were accompanied by increased productivity and output and were genuinely earned in that way for the first time for many generations ? What this country needs is a

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high-wage, high-skill, high-productivity and high-output economy, not, as he seems to suggest, a low-wage economy.

Mr. Cousins : I was responding to the point put to me. If the experience of the 1980s, when wages rose roughly twice as fast as prices, is fine, then let us not argue about it.

Mr. Butler : Will the hon. Gentleman give way ?

Mr. Cousins : The hon. Gentleman is back again.

Mr. Butler : I must correct the hon. Gentleman, as he has not responded to the point that I made. It is right that I should give him another opportunity to do so. Does he think that a wage claim of 11 per cent. when inflation is running at 2.6 per cent. and holding is reasonable ?

Mr. Cousins : I find it slightly surprising that a Government say that we should not pick winners and intervene in industry. That matter should be freely negotiated between employers and employees. That is not a matter on which politicians should strike a position. It is a matter of considerable regret that the secretive arm tugging that went on prior to the dispute this week brought that about when the process of negotiation was clearly signalled and was on course for an outcome satisfactory to both parties.

Mr. Sainsbury : This is an important point. I take it from what the hon. Gentleman is saying, on behalf of the Labour party, that he does not think that any Government, of whatever party, should take a view on the appropriate level of growth in earnings in relation to the rate of inflation. Is he saying that, although the Government are an employer and finance employers through the tax system, they should be totally disinterested in the level of wages paid and in wage claims ?

Mr. Cousins : The Government should certainly not run secretive incomes policies operated in a random and arbitrary way and produce the kind of disputes that we have had this week. I remind the Minister that we are here to discuss competitive industry. I hope that he will forgive me if I move on to more substantive aspects. We are dealing with the "classic" Cola of the problems of industry and should move on to discuss the Pepsi Cola.

Mr. Sykes : Before we move away from the subject of wages, which is an integral part of running industry and therefore greatly concerned with competitiveness, will the hon. Gentleman say whether, if he were offered an 11 per cent. increase in his wage, he would accept or decline it ?

Mr. Cousins : The hon. Gentleman must realise that we are not here to debate the rail dispute that occurred this week, or the way that the Government engineered it. That, I am afraid, is clearly on the record. Perhaps we may move on to the subject of our debate now, Madam Deputy Speaker, and discuss the issues before us. Conservative Members seem to want to speak about everything apart from the matter that the hon. Member for Hastings and Rye chose as the centrepiece of the debate.

One of the key things that the Government can do is to act as a good negotiator for British industry in foreign discussions. I hope that the Minister will tell us about the negotiations that are going on in relation to access to the American telecommunications markets. I hope that he will tell us how the Government sought to support British

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Telecom in its arrangements with the American company MCI to gain regulatory access to the American markets for telecommunication services. I hope that he will also explain the Government's reaction to the objections that are being made by French and German telecommunications operators to that agreement, and tell us what steps he is taking to ensure that our telecommunications systems operators have full and free access to French and German markets. That is a critical area for the development of British industry in which the Government have the ability to negotiate on behalf of British companies and British enterprise, in which, as far as we are aware from the outside, no such effective negotiation has taken place. The Government have not stood behind British enterprise and the British telecommunications companies.

As recently as this morning, an important report on research and development was published--the so-called "research and development scoreboard", which emphasises so many of the difficulties that are visible in the performance of British industry. We now discover that only 13 British companies are listed in the top 200 companies on research and development indicators. If we are seriously worried about global challenges, that should cause us considerable anxiety. We also ought to be anxious about the fact that the British companies that did appear in the list had half the commitment, in terms of the relationship of their turnover to R and D, to the other 187. Those are very significant indicators.

Mr. Trend : Will the hon. Gentleman give way on that subject ?

Mr. Cousins : I should like to continue and complete my argument. Those are significant indicators of a failure to perform adequately in the key area of research and development.

We have already alluded to the debate about the retention of dividends and the attitude of the stock market and banks to large dividend pay-outs. That is clearly demonstrated in that research and development scoreboard. The commitment of 187 of those 200 companies--that is, not the British ones--is that they invest in research and development more than 100 per cent. of their pre-tax profits and almost three times the amount of their dividend pay-outs. The 13 British companies that appear in the list contribute to their research and development 29 per cent. of their pre-tax profits and only 72 per cent. of their dividend pay-outs.

That is a clear signal that the financial markets, which measure corporate performance in this country, are not working to encourage research and development in the way that those same markets work in countries that compete with us. That should give rise to considerable anxiety. Business enterprises' commitment to research and development as a share of GDP in this country decreased during the 1980s and we are alone among the Organisation for Economic Co-operation and Development countries in that respect. That should cause considerable anxiety not only about our performance now but about our prospects.

Mr. Trend : Does the hon. Gentleman agree that, although we are all disappointed at the low percentage of money that is put into research and development, the picture in the past couple of years, especially through the past recession, has been much better than it was in the past--that companies have become aware of the importance of

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R and D and that they are putting more money into R and D ? It is a low base, but it is an increasing base and it is good news for the future. That should be emphasised.

Many of the industrialists who gave evidence to the Trade and Industry Select Committee said that the thing that would most encourage them to put more money into research and development with a long-term view was a stable economic base. I believe that that is what the Government have now produced for industry.

Mr. Cousins : Let me answer that argument directly.

I infer from the hon. Gentleman's intervention that he is, in that respect, a Dorrellite, not a Portillo-ite. One of the attractions of the present Government and of the great supermarket of alternative policies on which we can draw is that the Opposition cannot pick the winners. That would not be an appropriate thing for us to do. Who can say whether Dorrellism or Portillo-ism will ultimately be the winner, but at any rate those alternative policies are set out for us and I commend the hon. Gentleman for taking up his position as a Dorrellite rather than a Portillo-ite in that regard.

Sir Michael Grylls (Surrey, North-West) : Will the hon. Gentleman give way briefly on that subject ?

Mr. Cousins : It must be very brief.

Sir Michael Grylls : I am grateful, because I know that the hon. Gentleman has been generous in giving way. He referred to dividend policy. Is he saying that it is the Opposition's policy to legislate to restrain dividends ? If not, what is he proposing ?

Mr. Cousins : I shall discuss that point directly.

One of the indicators of success that is mentioned in the White Paper on competitiveness--the Opposition agree with the Government's Department of Trade and Industry team that it is a true indicator of economic success--is the increasing share of business turnover that is going into investment. That process began at the depths of the recession, which is interesting. As people could not rely on their finances, businesses began to go for organic growth from their turnover and profits.

That is obviously the way forward, but if we are to sustain that development and if it is to become the way that we envisage British industry growing--I am delighted to know that there is more than one Dorrellite on the Conservative Benches this morning--we must tackle some of the key features of the way in which British industry is governed and financed. In five years of the 1980s, the banks put more into commercial property development than they put into manufacturing industry in 15 years. We must correct that. It cannot be corrected by legislation. It can be corrected by Government and others, through the social partners and by creating a culture of investment and growth in enterprise. It cannot be achieved by Government alone and it cannot be achieved by legislation, but the Government are a key player in changing the psychological climate and the investment culture in this country. The Government cannot duck their responsibilities in that respect.

If that is to be done, the stakeholders must understand what is happening. There must be a different relationship of banks to enterprise and of shareholders to enterprise--especially the big institutional shareholders, whose growth has been such a significant feature of the 1980s because of the development of pension funds and other

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financial instruments. One of the most curious features of the entire period of Conservative Government is that the influence of individual shareholders in companies and the proportion of shares that they control have steadily decreased. The fact that their numbers have increased should not disguise the fact that the influence that they exercise and the proportion of the equity that they control have gone steadily down.

The key relationship that has come about, therefore, in measuring the performance of the enterprise, in directing its strategy and in informing the way in which it seeks to grow, is the relationship between the big institutional shareholders and the company board. That cannot and should not be controlled by legislation, but it is something to which the Government can give a steer and a guide through the creation of the right kind of culture. It would certainly be our intention, through corporate governance changes and changes in financing arrangements, by sending signals and perhaps through the tax system--we should look at that--to change that culture and get that relationship right.

I go further than that. If we want to business investment itself to grow as a share of its turnover, the staff of the enterprise must also be fully informed and fully engaged and must fully understand what is going on. That is where the present Government's policy--of not putting an emphasis on social partnership and seeking to opt out of the European works councils arrangement and aspects of the social charter, which bring those social partners together--is undermining the basis for some of the indicators which we could agree are significant signals of a change in our economic culture and an improvement in our economic performance.

The hon. Member for Hastings and Rye gave an example of a company in her constituency--Philips. Philips would have gone down in Britain. It was saved in the Netherlands, because it had the advantage of Dutch company law and the strong stakeholder involvement in which the non-shareholding stakeholders were able to pick it up and turn it around. The hon. Lady should recognise that. She should recognise, too, the absurdity of the fact that Philips's European workers work through works councils, yet the British Government are trying to prevent its British workers from working through works councils. That is absurd and runs contrary to the whole idea of social partnership and of stakeholders sharing in decision making, which is the foundation of our future economic success.

Mr. Butler : Is not the hon. Gentleman ignoring the facts ? When the decisions that led Philips to the brink of imminent collapse were made, those same stakeholders were also involved in those decisions. The same Dutch company law and commercial law informed those same decisions. Nothing changed. There was not a miraculous change whereby the stakeholders suddenly became involved and the company was saved. They were equally involved in the decisions that almost led to its collapse.

Mr. Cousins : It was the structure of Dutch company law that enabled that company to be rescued from a situation in which one of the key networks of shareholders, who, historically, had controlled the company, had made some key errors in terms of investment direction. It was the

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Dutch structure of company law that enabled that company to be turned around. If that company had been in Britain, it would have been taken over or would have gone down.

We learnt the this week that Scrabble, one of our sports, leisure, cultural, service-type contributions to the global market--and a very successful one--is about to fall into non-British ownership. What kind of country are we becoming if we cannot retain the ownership of Scrabble ? A reform of stakeholder relationships to some of the key indicators is at the heart of our own policy of winning for Britain, and a reflection of that, albeit a pale one, can be found in the White Paper itself, and in some of the indicators that are chosen as the ones that we should adopt.

I am conscious of the time and have no desire to speak for as long as the hon. Member for Hastings and Rye, but let me state briefly some of the key areas to which I have alluded, and summarise them as being some of the key ways in which we see British competitiveness being built up. We must look at the workings of the financial system and the way in which it services British industry. We must look at the way in which companies are controlled and run, because in those corporate governance relationships are to be found the foundations of high levels of invest-and-grow policies and strategies to be adopted by British enterprises.

We must look at our performance in research and development in technology. There is some recovery there. We welcome it, but it starts from a terrifyingly low and narrow base. It cannot be right that, as regards our performance in research and development, we rely on one industry, and one alone--pharmaceuticals. The performance of that industry is brilliant and impressive. It is one of the great hopes for our future, but we cannot rely on superb performances in terms of invest-and-grow policies simply in one tiny part of the British economy and in one narrow sector of British industry. That performance must be diffused across the whole of our manufacturing industry.

We must do more about small business. That is another issue on which, when confronted with it, the hon. Member for Hastings and Rye said, "On the one hand this, and on the other hand that." The payment of interest on debt is a key way in which the Government can signal their support for small business. Surely the Government do not have to be told about the power of price signals. Putting a price signal into good payment practice is one clear way in which the Government can assist small business.

We have seen a growth of small enterprises in this country. We should all welcome that and build on it. But the wastage rate of innovation and start- up is staggering and tragic. Since 1979, this country has grown some 900,000 small businesses. We welcome that. But those small businesses have been starting up at the rate of almost half a million a year. Even if we take into account the fact that some of them are very small, the wastage rate, which is represented by the generation of half a million businesses a year, and the survival of only 900,000 in net growth after 15 years, represents human tragedy on a massive scale and the disruption of millions of people's lives. We must find ways in which small business not only comes into existence but is aided to stay in existence. A lowering of that terrifying weight of wastage is a one key way in which we can help our economy to grow.

In talking about competitiveness, there was one issue that the hon. Lady always ducked--social partnerships and social cohesion. We shall look carefully at the speeches that follow, however many there may be, because to talk

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