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Malcolm Bruce (Gordon) (LD): As we would expect, the hon. Gentleman is presenting a very fair analysis of what is going on in the British industrial and manufacturing economy; but is he not opening up a dangerous line of argument? Is he not inviting us to give in to the idea that companies will invest in this country only if we bribe them with taxpayers' money? Surely we want them to invest in this country because it is the right place to be.

Mr. O'Neill: I understand the hon. Gentleman's point, but it is not the point that I am trying to make. I am saying that the engineering supply chain for the motor car industry is currently fragile. We do not want to see a continuing deterioration in what might be regarded as the two UK bankers. Companies such as Jaguar are prestigious, and companies such as MG Rover still account for a large volume of orders, although perhaps not for a large volume of output, but many traditional manufacturing supply chain companies operating in this part of the world and the economy are fragile at present, and if they fell by the wayside Japanese companies would find inward investment less attractive.

Those companies do not necessarily need bribes any more, because we have a good labour force, good industrial relations and high productivity levels. We are confident that there will be demand for our product in the UK. However, they tend to operate on a "just in time" production basis. They need essential spare parts—widgets and so forth—to be close at hand: they need them yesterday, virtually. That becomes rather difficult if the supply chain extends to Budapest or Bratislava.

Mr. John Taylor (Solihull) (Con): Or China.

Mr. O'Neill: Perhaps China eventually. Anyway, I was making that point, not a point about assistance.
 
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Nevertheless, assistance is important. Regional selective assistance is possible under European Union arrangements, although it is on a smaller scale than it was at one time. I understand that the Liberal Democrats in Cornwall and elsewhere in the west country believe that they can go to Europe and get more money because the budget in the area is being cut: that was suggested in a document from the west country that I saw yesterday. There is no magic wand, however, and RSA is nothing like the crutch that it once was.

Mr. Taylor: The hon. Gentleman has visited most of the motor industry so far in his excellent speech, including Peugeot, Jaguar and Longbridge, which makes very difficult reading in the business pages nowadays. However, he has not mentioned another important west midlands motor manufacturer—Land Rover, in my constituency, which is critical to the many surrounding industries that supply it. Will he comment on Land Rover? I shall be content if he merely wishes it well.

Mr. O'Neill: I think that the Ford PAG group, of which Jaguar, Land Rover and Volvo are all part, is vital to the high-quality end of British car manufacturing. We all want those companies to succeed, and I think we are confident that they can. The difficulty, especially in Jaguar's case, is short-term, and we hope that it can be solved. Sometimes when we start discussing the prospects of companies here, we draw attention to them in ways that may not be intended.

Let me take up a point that was made earlier. The Government should realise that if we are to have a research and development-led industry and promote the transfer of technology from the university laboratory to the workshop and larger areas of production, we must be sensitive to the plight of the unincorporated bodies that universities have created. That is an example of the law of unintended consequences, and I shall be very disappointed if the Chancellor does not find a way of dealing with it constructively and sympathetically. It may not be appropriate for him to refer to it tomorrow, but he could do so in his Budget speech, and it could be addressed in the Finance Bill. It should be recognised that it is through investment in science in the United Kingdom that we shall secure continuing development of science-based industry.

We keep talking about India and China in debates of this kind, but they are not necessarily the same. India has been able to invest in its fantastic output of graduates and in the Bangalore information technology areas, to provide world leadership, and to make a far more significant economic contribution than is represented by a couple of hundred thousand jobs in call centres. Apart from outsourcing and those call centre jobs, there are 200 million people in India who would be classified as middle-class. They are potential consumers of many of our goods and services—financial services, Burberry raincoats and scarves, Johnny Walker Black Label and all the luxury products that so many of our businesses should be getting out there and selling.

Many of our ambassadors should recognise that they are there not just to outsource but to outsell those in other parts of the world. Conservatism, with a small "c", and protectionism feature in the thinking of too many of our people.
 
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China is a slightly different matter. It is self-evident that Taiwan, the offshore part of China, has turned its back on the type of manufacturing for which it was famed in the 1950s, 60s, 70s and 80s. It is now the largest single inward investor in mainland China. Its kit is being produced in China and is returning to Taipei and the surrounding area, where only the widgets are added. China may be a workshop, but in Beijing and Shanghai it can be seen that there is a demand for consumer goods. It may not extend much beyond those cities at present, but it will do so at a great rate; and if we are not there selling those goods, you can bet your bottom dollar that the Italians, the Germans and others will be. We must organise a much more concerted push to sell our luxury products.

Rob Marris (Wolverhampton, South-West) (Lab): And our Jaguar cars.

Mr. O'Neill: Yes, those as well. One of the frustrating aspects of visiting China is that if you are going to get knocked over, it is a pound to a penny that you will be knocked over by a Volkswagen. Volkswagen has cornered the market there to a fantastic extent.

We must take advantage of this opportunity. Our country has many of the most attractive features for inward investment. We have a stable labour market, flexibility and high productivity among those employed by inward investors. The Government's economic legacy has enabled us to build on many of those attractions, but if we are to secure the future of the economic success that we have achieved we cannot just depend on the ability of Britain, as currently constituted, to attract investment from within and create the research and development that we need. We must have inward investment as well: there must be a balance.

Those who seek to make economies by doing away with this or that Department should bear it in mind that the civil service and public bodies will be required for many of the functions to which I have referred. Some Liberal Democrats may well want to get rid of the Department of Trade and Industry; but do they want to get rid of the offshore supplies office in Aberdeen, which serves the North sea industry? Do they want to get rid of the expertise of the Department responsible for energy? If they do, there might well be serious consequences—[Interruption.] Oh, they want to get rid of everything but that.

As a Scotsman interested in energy matters, I should point out that such issues are easy game. Across the country as a whole, every one of the bleeding-heart Liberal Democrats who wants to appear liberal would indulge in special pleading for the little niche that is for ever theirs. They may say, "But you couldn't do away with that," but which bits could we do away with? Which bits do they not like too much? Which bits are concentrated only in Tory or Labour seats, or in Victoria street? [Interruption.] They do not like it when the cheap shots are aimed back at them. The truth is that many of us believe that if we are to reform the machinery of government, it is industries such as the hospitality industry that should be reformed. It should be dealt with
 
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by a department of enterprise and industry, rather than by the Department that looks after museums and castles.

2.51 pm

Malcolm Bruce (Gordon) (LD): Perhaps it is appropriate that I should be called after that little diatribe. I should tell the hon. Member for Ochil (Mr. O'Neill) that we Liberal Democrats certainly do not regard energy as a niche market. We have consistently argued—the point is made in our published policy papers—that energy should be dealt with by a department of energy, environment and transport. If we are to meet our Kyoto objectives, it is logical that all the factors that cause emissions be dealt with together, rather than being split among several Departments. I hope that that illustrates that the essence of what we are trying to do is to simplify government, reduce the number of Departments and operate more efficiently.

We believe that it is inefficient for the Government, through the Department of Trade and Industry, to engage with industry by trying to second-guess the market and use taxpayers' money to induce businesses to take decisions that they would take anyway—in which case, the money has been wasted—or to take short-term decisions in order to qualify for tax incentives that do not stick in the long term. There is plenty of evidence to show that in many cases companies are happy to take the money, but that they take a different decision when the money runs out. We are talking about substantial sums, and we have set out the figures in our existing policy documents. We will publish in more detail the logical consistency of our proposals.

I am very happy to debate this issue with the hon. Member for Ochil, and let us be clear: there can be an honest difference of opinion about the proper role of Government in business and industry. In our view, that role is to make life simpler and less regulated, to simplify the tax system and to enable businesses to get on with the job that they do best: running themselves, rather than having to engage too much with civil servants, and having bureaucracies tell them how to run their affairs.

I want to address one or two issues that are of concern to my constituents, as well as other aspects of economic policy. As a Scottish Member of this Parliament, I hope that in the coming years we will develop greater co-operation between Scottish MPs and the Scottish Parliament. Like every Member of this House, I am very worried about the GP out-of-hours service. This issue is relevant to today's debate because it shows there is a crossover in respect of what this Parliament does and what the devolved Parliaments do. Health is a devolved matter, but of course the reality is that the change in the out-of-hours contract was determined by negotiation across the UK. The fact that GPs no longer wish to work such hours might be a reasonable proposition, but it causes difficulties across the piece. UK Ministers need to work with the devolved Assemblies to ensure that we train enough doctors and consultants to cover the service and fill the gaps. I hope that we can do so in future.

I am also concerned about transport. Two of the transport Bills proposed in the Queen's Speech have implications for my constituents, and we need to know the reality of the situation. Are we getting a significant
 
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devolution of strategic decision making to Scotland, or does such legislation constitute an abdication of responsibility for those living north of the border? That issue needs to be clarified.

My constituents were incensed when the Strategic Rail Authority said that it would no longer support the upgrading of the service between Aberdeen and Inverness because of the unexpectedly high and over-budget cost of upgrading the west coast main line. That service runs from London to Glasgow—in other words, it terminates 140 miles from Aberdeen. Although it may be of some benefit to my constituents, most of the traffic between Aberdeen and London is on the east coast main line. It is therefore frustrating to be told that the upgrading of a line that does not directly serve my constituents is being used to justify the cancelling of promised investment.

If the devolution of funding to the Scottish Parliament enables the reinstating of such investment, that would be welcome. If, on the other hand, it means that the UK Government are simply abdicating their responsibility for strategic decisions on rail matters affecting my constituents, that is another matter altogether. I was not encouraged on hearing the Under-Secretary of State for Transport, the hon. Member for Plymouth, Devonport (Mr. Jamieson), say that for franchising purposes the east coast main line runs from London to Aberdeen but that for investment purposes it runs from London to Edinburgh. That makes it clear that there is no commitment to strategic investment in that line, even though it is the main line between Edinburgh and Aberdeen.

It takes nearly as long to get from Aberdeen to Edinburgh as it does to get from Edinburgh to London, despite the fact that the distance involved is little more than 100 miles. If there is to be a strategic decision, it should ensure that remoter parts of the country have access to fast transport, especially given the argument that too many people are flying internally in the UK when they could be taking the train. I would like to agree, but I can assure hon. Members that, as my hon. Friend the Member for West Aberdeenshire and Kincardine (Sir Robert Smith) will confirm, it would be impossible for me to carry out my duties as a constituency Member and to serve in this House if I relied on the rail service. I have no option but to fly, which is regrettable, given the need to address such issues and their long-term environmental consequences.

I have a constituency interest in energy, an issue to which the hon. Member for Ochil referred, but in this debate I want to link together national and constituency concerns. In some respects, the recent increase in gas and electricity prices is entirely understandable, but in others it cannot be easily explained, and it does not seem to demonstrate the efficient functioning of the market. Those of us who monitor the industry know that many long-term gas contracts have come to an end, at a time when oil prices have been rising sharply. That has become an excuse and created a market gap, which has led to an increase in gas prices, but that does not explain why UK producers are exporting gas to the continent, where prices are lower, rather than supplying the domestic market, where prices are higher—unless there is another, perhaps ulterior motive relating to the long-term control of market supply.
 
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I have pointed out that we Liberal Democrats are concerned about the fact that this country's emissions are increasing, despite our obligations and commitments under Kyoto. I do not regard rising energy prices as inherently bad, given that such increases probably encourage the more efficient and environmentally sound use of energy. We nevertheless have to accept that if they jeopardise businesses and increase fuel poverty before the mechanisms to deal with such poverty have come into play, genuine concerns will be expressed in all constituencies, including mine.

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