House of Commons Hansard Debates for 1 Nov 1995

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Manufacturing output rose by 0.5 per cent. in the first quarter, to a level less than 1 per cent. above that before the recession. Manufacturing output in 1993 was less than 1 per cent. higher than it was in 1973. In 1979, manufacturing output accounted for 30 per cent. of the economy, and more than 7 million people were employed in the industry; by 1993 the figure had fallen to around 20 per cent., and 4.3 million people were employed. Millions were unemployed in areas such as mine.

It could and should have been different. Let us consider the Pacific rim countries. There is no suggestion in Japan, South Korea or Malaysia that manufacturing is inferior: it is seen as essential to the development and prosperity of those countries, whose financial policies are directed towards efficiency. They have decided what they are good at, and they pursue policies that maximise their effectiveness with complete dedication.

The Asian tigers, as they are known, are increasingly involved in higher technology production, firmly based on a deliberate industrial policy. South Korea, Taiwan and Singapore have established domestic semiconductor industries. A recent study carried out by the Organisation for Economic Co- operation and Development concluded that that was encouraged by Government support for start-up costs and research as well as by protection. In South Korea, the Government identified semiconductors as a strategic industry in 1983. They provided a $400 million support package, and the industry has now become the largest outside the OECD area.

A planned economy can work. We must do the same: we must recognise that we can never compete with the emerging nations on a basis of low-added-value, low-pay processes. If we are to grow and develop as a nation, we must concentrate on what we are good at. We must realise that high-added-value, high-quality manufacturing is our future. If we try to compete by forcing wages and conditions down, we shall end up competing with Somalia and Bangladesh--and we shall lose. That is why Labour's policy of introducing a national minimum wage will help parts of industry that are committed to planning for the future on a realistic basis. They know that to pay their workers the rate for the job is not a waste of money, but an investment. They also know that training their staff is the most important investment of all.

Mr. John Sykes (Scarborough): As the hon. Gentleman knows, I am a manufacturer in the north of England. The policy of a large manufacturer in my area--a food processing company--is to produce and sell goods in the area that it supplies: if it wants to supply food products in England, it will build a factory there. It wanted to do the same in France, but because of the excessive costs--the minimum wage and other social costs--imposed by the social chapter, it could not afford to build a factory there; instead, it doubled the production line in Scarborough. Does that not prove the hon. Gentleman wrong?

Mr. Sutcliffe: I do not think that it does. It is interesting that the hon. Gentleman should mention France: we should be competing with France, Germany and the other industrialised countries, rather than with third-world countries.

There is a good deal of hype about what a national minimum wage should be. I hope that there will be sensible, planned discussion between the social partners--

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employers and trade unions--to arrive at realistic figures that can be managed by industry. A good industrial strategy would ensure that the minimum wage set standards and promoted high self-esteem among the work force; it would not opt for a low-wage economy in which people competed for jobs priced at around £1 per hour. That would be totally unacceptable. I am convinced that a national minimum wage will boost Britain and its manufacturing base.

The unskilled and the poorly educated have suffered most from the rise in unemployment. The Tories have failed to invest not only in new technology and industry, but in the skills of the work force. In an internationally competitive global economy in which investment capital is mobile, the key factor in competition is a highly skilled work force.

Among the 21 countries in the OECD, the United Kingdom lags behind all but Turkey in terms of the proportion of 17 and 18-year-olds in education. Currently, 180,000 17 and 18-year-olds are not receiving education, work or training: that is a national disgrace. The Government have slashed the training for work budget by 29 per cent. since 1992. In 1994, the economic adviser to Lloyds bank warned that Britain was in danger of becoming a low- skill economy unless investment in training for manufacturing jobs was increased. Low skills will discourage industry from adopting better technology, further increasing the need for better training. That downward spiral is probably the greatest threat to the opportunities now facing the United Kingdom's manufacturing industry. All good companies know that working with their employees is important. That is why 47 of the top 50 manufacturing companies in the United Kingdom are trade union organised: good industrial relations set the scene and the environment for success, and we should try to help work forces to develop them.

We must concentrate on innovation and design, yet the amount of money that we as a nation spend on research and development has consistently gone down. Today's research is tomorrow's product and, increasingly, major players throughout the world are committed to long-term development priorities as they realise that new products have longer and longer lead times and need more and more development.

Britain is doing just the opposite. In 1990, our industrial investment in research and design as a percentage of industrial production was almost the same as it was 20 years before. In the same period, comparable spending on R and D in Germany, Japan and France had doubled, and in the United States of America it had increased by one third.

Britain has no representative in the top 25 companies in the international table of research and development spending. That is partly because British companies pay out an increasing proportion of company profits in dividends, rather than use them for reinvestment. We need to ensure that the strength of our financial sector also becomes a source of strength for our industrial sector because, as a whole, investment has greatly decreased as well. From 1979 to 1993, the average investment level, as a share of the UK economy, was the lowest of the 18 countries in the G7 and European Community. As the Bank of England pointed out in its August 1995 inflation report, investment is 20 per cent. below its level in previous recoveries.

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In Britain, investment per worker in manufacturing is 30 per cent. below that in Germany and the United States, and only one quarter of that in Japan. In its recent summer forecast, the Treasury revised down its forecast for growth in business investment from 10.75 per cent. in 1995 to 4.75 per cent. On OECD figures, in 1994, the United Kingdom had the lowest level of investment as a share of the economy at 15 per cent., compared with Germany at 22 per cent. That leaves the UK with an investment gap of £46 billion relative to the investment share in Germany.

If we consider the past 150 years, every time it was possible for us to take the wrong decision, we did so. We have consistently placed barriers against manufacturing and, even worse, successive Governments have moved the goalposts at depressingly regular intervals. I think that we have had 12 Secretaries of State since 1979. We must create a level playing field by introducing policies that help with the consistent development of a sound manufacturing base and discourage the speculator, the dawn raider and the asset stripper.

All the key players, especially financiers and industrialists, have roles to play in reversing Britain's consistent under-investment. We should shift the onus of proof in a hostile takeover bid and require the company seeking control to demonstrate that its success will be in the public interest. We could launch a business development bank for small businesses which would specialise in providing direct long-term investment in the expansion of the productive economy. When we have those policies, we must leave them in place so that businesses can plan ahead. Planning is vital for all businesses. The Government claim to understand and support business, yet everywhere I go in my constituency I meet businesses, small and large, that are depressed and outraged by the lack of understanding shown of their concerns at all levels of Government and of the civil service. An example of that was the business rate in Bradford, which went up by 40 per cent. The local authority would never have imposed such an increased burden on local business, but the Government, who have total control over the business rate level, showed no signs of understanding the potentially disastrous effect that such a rise would have.

One measure that virtually every business person I meet advocates is the introduction of fiscal measures to reduce tax on profit retained in businesses, so that investment can be stimulated. It is not just businesses that want that. Every trade union with members in manufacturing wants such growth, as do all academic economists. I am proud of Labour's investment budget for Britain because it contains manufacturing investment incentives. It shows an ambition for the country that the Government do not seem to share.

The only people who are against incentives are those at the Treasury, which perhaps comes as no surprise. The Treasury has never understood manufacturing and never will so long as recruitment and promotion is based on such a narrow and prescribed basin. There are many things that any Government should do to ensure that manufacturers can do their job effectively. Efficient transport policies must be pursued. In my region, improvement of the A650 is desperately needed. Such work has been on and off for the past 25 years.

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Throughout that time, lorries have been sitting in traffic queues in residential areas while the firms they have been delivering to waited in angry frustration. According to the Automobile Association, one mile in every seven in our motorway network, and more than 4,000 miles of our primary roads, need urgent repair.

The electrification programme has cost hundreds of millions of pounds. When it is finished, the Government will have created such a disastrous shambles in the railway industry that no one will want to run mainline trains on it. The example of the channel tunnel rail link sums up how Britain lags behind. French trains travelling at 185 mph from Paris on some of the newest track are forced to travel at little more than 50 or 60 mph from Dover to London. As ex-President Mitterrand said, the channel tunnel opens up two worlds of travel: high-speed through France, followed by a leisurely look at the English countryside.

My constituency is even further disadvantaged by the increasingly poor links to London. Without a modern, integrated transport system, Britain's manufacturing industry is at a disadvantage as soon as the product leaves the factory gates.

There must be a national ambition for Britain and a visionary economic plan to promote key industries, because no country of Britain's size can hope to survive without a strong home manufacturing base. Every opportunity that has presented itself in the past 16 years has been wasted. North sea oil was viewed as a great opportunity, and it should have been, but consider what happened. Because of short-term attitudes and incompetent financial management, the oil forced exchange rates up, which inevitably meant that the price of manufacturing goods rose in comparison with our competitors. The Government stuck their head in the sand and hoped that the problem would go away. The only thing that went away was a large chunk of our manufacturing base.

The Government have always been driven by their relationship with the City, which has never genuinely supported manufacturing industry. That relationship has been the most damaging in modern British history. It has created a short-term approach that looks for the quick fix of privatisation, rather than the consistent support of manufacturing, which creates wealth and prosperity in the long term. The Tories have not understood manufacturing industry and in some sectors they have welcomed its decline.

As we enter the 21st century, Labour recognises that the working environment has changed. New technology and new information networks need to be harnessed to promote an industrial development policy that uses the population's skills to their maximum, rather than allowing hopelessness and disadvantage to damage the fabric of society. Britain has a great history of manufacturing and, if we are not to sink into oblivion, it must be our future as well.

In the past 16 years, we have had an industrial policy, or rather lack of one, characterised by incompetence, indecision and the short-term view. Two million unemployed people is unacceptable, in terms of the cost of unemployment both financially and socially. Regions such as Bradford, which I represent, do not deserve to be treated in the way that they have been. What are the Government doing about facing that challenge? They are looking to have tax reductions of 1p and 2p.

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The countries that will succeed in this new global marketplace are not only those that have sound public finances, but those that invest in the skills and technologies of the future. Many partnerships have been established between the public and private sectors and at our party conference I was happy to see the relationship with British Telecom. The fact that we are going to have laptop computers on every desk in the education sector is superb.

Britain still has world-class companies, but few of them. We need manufacturing policies that are dynamic, thoughtful and consistent. Within 18 months, the Labour Government will deliver those. This debate is about not talking Britain down, but making certain that we develop and expand our economy so that manufacturing can regain its rightful place as part of Britain's future.

11.47 am

Mr. Matthew Banks (Southport): I am most grateful to you, Madam Deputy Speaker, for allowing me to catch your eye. It is a pleasure to be able to follow the hon. Member for Bradford, South (Mr. Sutcliffe). I agreed with one or two of his points. I have no doubt that my hon. Friend the Under-Secretary of State for Trade and Industry will deal with the rest of the hon. Gentleman's speech in his usual robust fashion.

Where I beg to differ in particular with the hon. Member for Bradford, South is in his remarks on a minimum wage. In an intervention, my hon. Friend the Member for Scarborough (Mr. Sykes), who brings so much experience to debates on these subjects, referred to the experiences of his company. I welcome his presence and hope that he will speak in the debate shortly.

The hon. Member for Bradford, South thought that a national minimum wage would be a boost for Britain. It would be a boost only for costs and unemployment.

As right hon. and hon. Members know, I represent Southport, which is a seaside resort. It is not known for its heavy industry. It is a tourist resort and a major part of the local economy is the residential and nursing home sector.

I recently had the pleasure of inviting my hon. Friend the Minister for Competition and Consumer Affairs to Southport. When he visited my constituency, he had the opportunity to meet, over lunch, more than 100 local business men and women. He heard of their experiences, their concerns and their wish to see red tape cut further. He heard about their successes and we were able to draw attention, even in a seaside resort, to what is often called in Southport back-street development--it is that sort of town and that is where industry has to thrive.

There are many businesses that employ only a few people; I can count them on several hands, not just on a few fingers. There are businesses in my constituency that employ just a few people, but which export to more than 30 countries. For too long, Conservatives have had to listen to Opposition Members claiming that British manufacturing industry is in decline.

Mr. Sykes: The so-called experts.

Mr. Banks: My hon. Friend knows, as I do--I mean no discourtesy to any Opposition Member--that Opposition Members do not have the experience that he has had. We shall, no doubt, hear from him later.

Mr. Sutcliffe: I said that 22,000 jobs had been lost in Bradford in four years. Is the hon. Gentleman saying that

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those jobs have not been lost and that we have not suffered from a large rise in unemployment in the area? Could the situation have been altered? Are the figures that show how far down the prosperity league table Britain is accurate? If not, why not?

Mr. Banks: If the hon. Gentleman had listened to what I said, he would know that I was not referring to Bradford or to job losses. If he is kind enough to pay attention over the next few minutes, he will hear me make a number of my own points. The House is a good judge of character. I recognise that the hon. Gentleman is battling for his constituency this morning and I know that he will not mind if I battle for mine too.

I return to the so-called decline of manufacturing industry. It is a myth; nothing could be further from the truth. The myth of manufacturing decline has been expounded by those who take no account of qualitative economic indicators and who are unable to escape from their old socialist methods of measuring everything in terms of quantity. The percentage of our gross domestic product and employment accounted for by manufacturing industry has certainly decreased over several decades. That feature is, however, mirrored in other major economies and it is mainly a result of productivity increases and efficiency gains.

It is true that, until the Conservative Government came to power in 1979, our manufacturing performance was poor. During the 20 years up to 1982, Britain's share of world manufacturing exports fell by half and our major industries were propped up by nationalisation and riven by strikes. For various reasons, on which I shall expand in a moment, the trend has been reversed. Not only did the number of manufacturing companies increase by 27,000 in the 1980s, but manufacturing exports increased by 66 per cent. in the decade, and the growth in import penetration was slower than in any of the other six major economies. The United Kingdom has also received far more inward investment, a third of which has benefited our manufacturing sector alone, than any other country in the European Union. The United Kingdom has attracted more than 40 per cent. of Japanese and United States investment into the European Union as a whole. Some 434 new investment decisions have been made in 1994-95 alone--we are barely into the 1995-96 financial year--creating or safeguarding almost 90,000 jobs. Companies such as Lexmark, Ford, Toyota, Nissan and Jaguar did not have to invest in the United Kingdom. They did so in no small measure because of what a Conservative Government have achieved.

As a result of inward investment, we are already, for example, a net exporter of televisions. I confidently predict that we shall shortly become a net exporter of cars. The basis of this turnaround has been the promotion of genuine competition, which has been achieved by winding down import restriction arrangements and exposing our manufacturing to the rigours of the international market.

Mr. Denis MacShane (Rotherham): Will the hon. Gentleman give way?

Mr. Banks: In other words, companies that could not cope with competition did not survive. The result was the great shake-out of the 1980s in which overmanning and other inefficient practices were banished. On that point, I give way to the hon. Gentleman.

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Mr. MacShane: If the turnaround is due to the rigours of world competition, why did the Government feel it necessary to give a £80 million bribe or subsidy to Ford to keep Jaguar production in the west midlands? Without that massive Government subsidy, Ford would have moved Jaguar production to the United States. Is that an example of the competitive market?

Mr. Banks: I am delighted by, and support, the Government's action in that respect. I have no doubt that, if the hon. Gentleman catches your eye, Madam Deputy Speaker, and decries the Government's action, the employees of the company will listen to what he says and wonder whether he speaks for new Labour, old Labour or himself.

I return to the inefficient practices which, I hope, have been banished as a result of the hon. Gentleman's intervention. The promotion of competition is still being carried forward relentlessly in the form of the second competitiveness White Paper. In addition, successive Conservative Governments have implemented a combination of policies which have created the right economic framework in which our companies can compete abroad and in which foreign firms can locate here.

Privatisation, deregulation, the reform of over-powerful trade unions, investment in skills and training and tax reform have all contributed to the success story to which I am referring. The United Kingdom has low interest rates, low inflation and low taxation. We have a fairly sound transport infrastructure, we have skilled and hard-working labour and a work force unhindered, in comparison to the 1970s, by repressive trade union power. Let us not forget that we also have rapidly rising productivity. The only thing that we do not have is the social chapter, which would impose unnecessary costs and burdens on all British industry, not just manufacturing industry. In 1979, it cost the taxpayer £50 million a week to prop up the nationalised industries. I shall take British Aerospace as an example. Since privatisation, productivity has risen by 150 per cent., and it has become our largest manufacturing exporter. British Steel has at least doubled its sales over the past decade to become one of our largest exporters. We could also consider what has happened at Rover, Short Brothers, Rolls-Royce, Amersham International, Vosper Thornycroft and many others. It was the courage of the Conservative Government that made privatisation possible and, because of their work forces, those companies have been able to take advantage of the economic conditions to which I have referred.

Mr. Sykes: My hon. Friend mentioned British Steel. Stones Bitter wanted to do a television advertisement in Sheffield which extolled the virtues of the steel and the beer. The company sent a team up to Sheffield to film what people might think of as a normal steelworks, but it found that there were no grimy men doing the work because the modern steelworks were automated and efficient. The film crew had to go to Czechoslovakia to film a steelworks where there were grimy men and things were done in the old-fashioned way. I make the point because British Steel is a completely revolutionised firm, although the policies that the Labour party is trying to introduce would destroy British Steel before one could say Jack Robinson.

Mr. Banks: I am most grateful to my hon. Friend for making a powerful point. He underlines what I was saying about improved efficiency and productivity.

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It is clear, though, that the recession has taken its toll in terms of lost capacity. To underline the point made by my hon. Friend the Member for Scarborough, that loss does not reflect poorly on our manufacturers. Lack of demand was largely the cause of it, not incapacity to supply. Indeed, sharp falls in manufacturing output have been mirrored abroad, especially in Germany and Japan. Recession can, of course, cause permanent damage, but the success of what the Government have done for manufacturing since 1979 in the United Kingdom can be measured by how well the industry has recovered after recession. Manufacturing output is back to record levels. The production of cars for export, for example, has almost trebled since 1988, and business surveys suggest that output and exports remain good.

In the light of that achievement, I listened with great interest to what the hon. Member for Bradford, South said and I shall listen to what other Opposition Members say later in the debate if they catch your eye, Madam Speaker.

Trying to decide what the Opposition stand for depends of course on to whom one is listening; whether it is the right hon. Member for Sedgefield (Mr. Blair) and his backroom boys or one or two of his hon. Friends on the Back Benches. It seems that all Opposition Members hanker after a sort of ludicrous Utopia, where manufacturing is everything and other sectors of the economy are overlooked. Their answer to improving manufacturing industry is to subsidise--they have no qualms about that word. They are antiquated--I am referring to subsidies, of course, not Opposition Members.

Although it is an honest pronouncement of their party's policy, subsidy has no place in the new Labour vocabulary--just like "socialist" or any phrase with the words "pips" or "squeak" in it. No, the Labour party now likes to refer to assistance, or aid, or investment. I fail to see how throwing money at manufacturing industry, or at anything else, without a hope of ever seeing a return can be labelled an investment.

Every policy which the Labour party recommends ought to be stamped with a sort of health warning. Imposing the social chapter on our firms, a minimum wage, opposing privatisation: such policies can seriously damage our manufacturing industry. Those policies may appease Opposition Members' sponsors in the trade unions, but they utterly fail to offer any help or hope to our manufacturing industry.

The competitive position of British manufacturing will be improved by competitive exchange rates and the fruits of major inward investment projects. Combined with the promising economic outlook, it is likely that Britain's manufacturing base will continue to show growth and not a diminishing trend. It is typical of Opposition Members to run down British manufacturing industry. The real question in 1995, or as we move towards the 21st century, is whether manufacturing industry can survive without a Conservative Government. I ask it, I doubt it, and I sincerely hope that the sector never has to find out.

12.3 pm

Mr. Ian Pearson (Dudley, West): The future of manufacturing industry is crucial to Dudley's future. Two out of every five people of working age in my constituency rely on the manufacturing sector for their jobs--almost double the national average. They cannot all

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work at Merry Hill, one of the biggest retail complexes in Europe. Nor can they all work at the Child Support Agency, also located in my constituency--although judging from the time that that agency takes to reply to letters from Members of Parliament, a few more employees might help.

We have a proud manufacturing tradition in Dudley and in the west midlands generally, and we mean and need to keep it. The country needs us to keep it and needs our manufacturing industries to grow and to succeed in world markets. There are some positive signs: the expansion at Rover, Fords's decision to build the new model Jaguar at Coventry, and plans for expansion at Toyota, to cite but a few. More west midlands companies have become world class, and I fully acknowledge that. The Japanese "transplants" have had a significant effect in bringing that about, not only in the automotive components supply industry, but in the manufacturing sector generally, through the demonstration effect that their modern manufacturing techniques have had. Company de-layering, cell manufacturing, the continuous improvement philosophy and benchmarking, for instance, have all produced benefits for British companies that have gone down that route.

Nevertheless, we still do not have nearly enough world-class companies, and, according to the most recent quarterly survey by the Confederation of British Industry, manufacturers in the west midlands are gloomier than all others in the country about economic prospects. It is a salient fact that manufacturing investment in the second quarter of this year is still 15 per cent. lower than it was at the beginning of 1990. My local training and enterprise council is telling me that labour shortages are already affecting manufacturing industry in the black country.

Only yesterday, the National Federation of Building Trades Employers warned that there would be 100,000 job losses over the next two years, and the Engineering Employers Federation reported that 8, 000 engineering jobs were likely to be axed across the country over the next year.

I acknowledge that Ministers are concerned about the manufacturing sector and are starting to say some of the right things, but they still have to do the right things. Since 1979, the manufacturing sector has seen its share of gross domestic product fall from 29 per cent. to 22 per cent. It has also lost 2.9 million jobs. That is a greater percentage of the work force than that lost in the United States, and the sector has lost jobs at a rate three times faster than in Germany. Research for the Government's second White Paper on competitiveness, published earlier this year, revealed that British companies are failing to match the productivity of United States firms in any of 12 key sectors of industry, and in only one are we exceeding German levels.

After 16 years of Conservative Governments, views from the boardrooms of British businesses reveal a damning indictment of Government policy. An Association of British Chambers of Commerce survey in 1994 found that more than one company in five reported that red tape had inhibited growth and prevented them from taking on people. This year, an Institute of Export survey shows that 47 per cent. of companies expressed the view that banks did not meet their needs.

Mr. Sykes: On the subject of deregulation, why did the hon. Gentleman's party vote against the Deregulation and Contracting Out Bill?

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Mr. Pearson: The Labour party is fully committed to the principle of deregulation, but we do not believe in the way the Government have been going about it. If I may, I should like to make progress. The CBI surveys have consistently reported that more than one in 10 firms employing fewer than 500 people consider late payment to be a problem. The chambers of commerce told the Select Committee on Trade and Industry that there was a

"patchwork quilt of provision"

of business support and that firms

"perceive themselves to be at a disadvantage compared to their international competitors where different structures of business support exist."

Small and medium-sized businesses in my constituency, of which I talk to many, confirm all of that evidence and more. They tell me that they want a stable macro-economic climate to give them the confidence to invest and to make sensible decisions. They want access to finance on appropriate terms, the ability to get their goods to market efficiently, to be free from unnecessary regulation and red tape, to have an effective business advice and support network if they need it, and otherwise to be left to get on with running their businesses and making profits.

That does not seem too much to ask, but most of those businesses feel badly let down; they feel that the Government have not delivered the goods. They blame the Government for the recession. They still have problems with the banks. For more than a decade people have been waiting for the Government to put their hand in their pocket for the Dudley southern by-pass and the extension of the A4036--and they are still waiting. None of the business people to whom I talk believe that there is less red tape now than three years ago, and most, although they think that the business links scheme is a step in the right direction, are sceptical about whether that initiative could ever be of any use to them.

Dudley's manufacturing companies, like those in the rest of Britain, deserve better than that from the Government, and I shall outline how a different approach could be taken. I shall then highlight three areas in which action is needed. Clearly there are more such areas, but other hon. Members wish to speak in the debate.

At its heart, a new approach needs to take on board the facts pointed out by the business academic Michael Porter, who said: "while national government has a role in upgrading industry the role of state and local governments is potentially as great or greater".

The Government need to recast regional policy completely. Competitiveness must run through it, with the Government recognising that in future the regions and cities across Europe will compete with each other as much as co -operate with each other to attract, develop and maintain high quality companies and industries.

That is already happening now, and it will rapidly intensify. In the west midlands we compete head to head with Baden-Wu rttemberg in Germany and Emilia Romagna in Italy. In terms of gross domestic product per head, recently published OECD figures rank those areas eighth and 10th respectively in the EU, while the west midlands is 46th.

Regional selective assistance needs to be transformed into a strategic tool for assisting companies to upgrade their competitive positions. Regions should be required to

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produce clear statements of their aims and objectives, and of their strategies for development based on improving competitiveness. For most regions, those strategies should focus more on developing and supporting indigenous manufacturing business than on attracting inward investment. They should look to broadening and expanding industrial clusters, harnessing new technologies and helping more companies to understand what it takes to be world class.

The three areas that I intend to highlight are accessing finance, dealing with red tape, and late payment. I remain convinced that Britain needs a vehicle for channelling long-term loans to companies at reasonable rates of interest. Companies in Germany and Japan have been able to benefit from such arrangements for years, and we need something similar here.

Simplification of tax legislation would be a major step towards cutting red tape, as anyone who has served on the Finance Bill Committee will recognise. The Government need to grasp the nettle firmly, as they do with tax collection, by forming a unified agency and merging the Inland Revenue, the Contributions Agency and Her Majesty's Customs and Excise.

On late payment, I know that there are arguments both for and against the introduction of a statutory right to interest. On balance, I favour a statutory right on overdue commercial debt. I do not imagine that it would be used extensively, but if the Government and their agencies led the way by paying promptly, that could, over time, help to change the payment culture in business. Here one may cite the drink-driving legislation as an instance in which the law has played a part in changing attitudes. With the move to self-assessment of income tax, the Inland Revenue will have a legal right to interest on late payments: what is good enough for the business of government should surely be good enough for business itself.

12.13 pm

Mr. Stephen Timms (Newham, North-East): I congratulate my hon. Friend the Member for Bradford, South (Mr. Sutcliffe) on his success in obtaining the debate and on his excellent speech, which set out the tragic decline of British manufacturing, especially over the past 16 years, and eloquently described the steps that we need to take to reverse that decline. I am also pleased follow my hon. Friend the Member for Dudley, West (Mr. Pearson) and during my speech I shall reinforce some of what he said.

There is some scope for agreement across the Chamber in that we all agree that a strong manufacturing sector is vital to the British economy. We have not always been able to agree about that. In the early 1980s the Government seemed happy to see swathes of British manufacturing shut down as a necessary price for some greater economic benefit. In 1983 our national manufacturing trade balance went into deficit for the first time, but the Government did not appear unduly perturbed.

I welcome the recent change in tone in Government statements about manufacturing--for example, last year's announcement of the London manufacturing initiative--and I hope that it heralds a real change in substance that will become apparent in the months ahead. It would be wonderful to see the imaginative proposals about

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encouraging manufacturing investment made this morning by my hon. Friend the Member for Dunfermline, East (Mr. Brown), the shadow Chancellor, taken up by the Government.

In London, manufacturing employment has halved in the past 15 years, while the overall level of production has remained steady. That startling conjunction illustrates success in improving productivity but highlights the dismal stagnation in the volume of London's manufacturing. Manufacturing has fared badly in comparison with services, and since the mid-1980s London has de-industrialised more than any comparable city in the OECD countries.

The effects of that decline have been devastating in the area of east London that I represent, especially through persistent sky-high levels of unemployment. None the less, manufacturing levels in east London are still twice the London average. East London, especially the Lea valley and the Thames gateway, remains London's manufacturing centre, and east London will be a key barometer for assessing the success of the London manufacturing initiative.

In making my proposals, I want to be constructive and, I hope, optimistic about the future, without hiding the scale of the challenges that we face. There are four key areas in which Government action can support renewal of the manufacturing sector in east London.

First, regeneration activity and support for manufacturing need bringing together. In the past--in the early days of docklands, for example-- regeneration and property development initiatives combined to displace industry, by boosting land values and encouraging manufacturers to sell up and leave. Industrial land was developed for housing or offices, because those brought the fastest profits. It is time for us all to be clear that successful regeneration needs manufacturing, and that property development which sweeps away manufacturing is inimical to regeneration. Three quarters of London's development land is in the north-east quadrant, concentrated in the Lea valley and the Thames gateway, and the Government have identified those areas for targeted support. I warmly welcome that.

The task now must be redevelopment for high-grade industrial purposes such as technology parks and modern manufacturing plants--modern locations for modern industries. English Partnerships should be instructed to invest strategically to support manufacturing regeneration. I welcome the new development being undertaken by the docklands development corporation in the royal docks, which will promote an international exhibition centre, a university college, a technology centre and high-technology manufacturing. Among the projects now being considered for single regeneration budget funding by the Government office for London is the royal docks technology centre, which would provide vital research and development support for east London manufacturing, in partnership with universities. Partnership between public and private sectors, as exemplified in that bid, is the key to attracting and creating the "patient money" that alone can achieve the long -term economic success that London needs. The result could be high quality locations for companies in the new and growing sectors, such as electronics, pharmaceuticals, information technology, biotechnology and environmental technology.

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The Government's existing regeneration programmes can be used to achieve in east London the high-quality sites that those new sectors demand. It is astonishing that London has only 7 per cent. of the technology park floor space that Birmingham has. Elsewhere, technology parks have been developed by universities on their vacant land, but London's universities do not have that vacant land. It is not physically possible for them to follow the successful examples of Cambridge, Surrey and Heriot-Watt universities.

Land is, however, available in east London. City challenge, assisted area status, urban development corporations, English Partnerships and regional challenge should all point in the same direction to achieve locations for modern manufacturing. As yet, they do not. There is no need for extra money, but there is a need for a more strategic application of the existing money. There are single regeneration budget bids before Ministers at present which aim--like the royal docks--to strengthen east London's manufacturing. Those bids deserve support.

I also welcome the recognition of the importance of improving the links between industry and universities. That is obviously right. If the next industrial era is to be an information age, the extension and exploitation of the knowledge base is critical. Strong industry is best organised in clusters, whether in the potteries or in silicon valley. They allow firms to sharpen each other's competitiveness and pull in the skills and support services that firms need. In turn, that strengthens the cluster.

In an information age, higher education is vital in enabling industry and clusters to develop. This is not just about providing links to research, but about investing to produce entrepreneurial graduates and young people whose study turns into business ideas and who are then actively encouraged to found new companies.

Clusters are regional, as are the strongest industry-university links. My hon. Friend the Member for Dudley, West referred to the changes that are needed in regional policy, and he has drawn Members' attention to the increasingly impressive contribution of agencies such as Greater London Enterprise and others around the country. Colleges and universities must rediscover their regional roles inside society and the economy.

The technology foresight programme and the White Paper on competitiveness-- to which reference has been made--are right to envisage better bridges between universities and industry. A partnership between universities and innovative small and medium-sized companies will be especially important, as few smaller companies on their own have the resources for long-term research. Their well-being--and a large slice of our future prosperity-- will depend on their ability to establish and sustain long-term partnerships with universities.

Universities can stimulate the creation of the new companies of the information age as well. If we overlay the different trends in east London, we discover a high density of manufacturing employment and a high density of unemployment. We also discover that there are low levels of post-16 education take-up and low levels of jobs in the modern information-based economy. Those trends are accompanied by the highest birth rate in the United Kingdom, which portends a troubled future unless the relationship between education and training on the one hand, and manufacturing expansion on the other, is developed a long way beyond its current state.

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Mr. Sebastian Coe (Falmouth and Camborne): The hon. Gentleman has referred to the importance of linking education to industry, and the dismantling of the binary divides certainly helped in that direction. If the hon. Gentleman is so committed to the right kind of technical education, why would his party--given half a chance--abolish city technology colleges?

Mr. Timms: I see precious little evidence that city technology colleges are tackling any of the issues that I have raised in the debate. They are irrelevant, and they are not addressing the key issues.

Local collaborations are emerging with enormous potential for good. The Government are still not focused and do not act to give incentives to such collaborations--no matter which Department or Minister is involved. That fundamental problem has not yet been tackled successfully, despite the establishment of the regional Government offices and the overarching persona of the Deputy Prime Minister.

We need to create the right infrastructure, particularly in transport and communications. I start with a compliment. Much has been achieved in east London. In transport infrastructure, the docklands road system, the light railway and the Jubilee line extension are major and positive achievements. I was intrigued by the phrase used by the hon. Member for Southport (Mr. Banks)--a "fairly sound transport infrastructure"--to describe the position in the United Kingdom, but the key element in the transport infrastructure in east London remains uncertain.

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