HL Deb 18 January 1967 vol 279 cc142-54

4.0 p.m.

Debate resumed.

LORD SHEPHERD

My Lords, it may perhaps be the wish of the House that we should resume what I can hardly refer to as the debate, but perhaps more correctly may call the duet, between the noble Lord, Lord Drumalbyn, and myself on the Motion that he has placed on the Order Paper. As I see it, we are now embarked upon three debates on economic affairs: to-day, we are debating the "Neddy" Report on Imported Manufactures; next week we are to have a debate on the Motion of the noble Earl, Lord Arran, calling attention to the problems of newspapers, which concerns economics; and the following week a debate on the Motion of the noble Viscount, Lord Watkinson, on the structure of industry and the problem of exports. During those three debates we shall no doubt cover similar ground.

I thought the noble Lord, Lord Drumalbyn, was quite correct when he suggested that to-day's debate goes wider than merely a consideration of the problem of imports. As I was reading the notes of the speech that I hoped to deliver to the House to-day, I could not help thinking of the programme to which a lot of people have referred, Cathy, Come Home, dealing with the problems of the homeless; the problems of poverty; and the problems of families living in extreme poverty, which were dealt with last Monday in Panorama. None of these social problems is going to be cured until we achieve a satisfactory solution and conclusion to our economic problems. Therefore, it is right that we should spend some time in seeing how the field of imports affects our own balance of payments and our industries.

My Lords, I am quite sure that the noble Lord, Lord Drumalbyn, will agree with me when I say that we shall not see a solution to the problem of our export growth, or the problem of meeting the home demand from our own production, until we have satisfactorily achieved a proper structure of our industries and a greater strength in our industries, and in this so much depends upon the quality of management. As I read some of the paragraphs in the Report dealing with the weaknesses of industry, I could not help but feel that the quality of management and the thoughts and design of management contributed a great deal to the problems which are in this Report. We must deal with investment, and I shall have a few words to say about that—I hope happy words—later on in my speech. Certainly we must deal with productivity, and this is another aspect with which I should like to deal in the course of my remarks.

The Report and the figures upon which the Report is based cover the period 1954 to 1964, which was a period during which our share of the world markets declined. It is true that exports rose, but they rose more slowly than those of other major countries. As to imports—and, as the noble Lord, Lord Drumalbyn, has said, particularly in the field of manufactures— there was a sharp rise, resulting in the monstrous deficit of some £756 million in 1964. If the noble Lord will look at the rate of imports for 1964, he will see that they were some 14 per cent. higher than those for 1963, as opposed to a rise in exports of only 5½, per cent. We have seen a considerable difference for the years 1965 and 1966. During 1965, our imports as a whole rose by a mere 1 per cent., while our exports rose by some 7 per cent. During 1966, our imports rose a little more than in the previous year, by about 3½ per cent., whereas our exports rose a further 6½ per cent.

Imports during December, using these seasonally-adjusted figures, were some £507 million, which showed the expected rise from the unusually low levels of October and November, when, of course, shipments were being deliberately delayed because of the surcharge. The increase in December was confined almost entirely to goods which had been subject to the import surcharge. Even so, the total level of imports in December was only slightly higher than the average of £505 million for the first nine months of 1966. I think I should warn the House that there may be still further arrears of shipments from October to November, following the removal of the surcharge, which we may see appearing in the figures for January and February. In the field of manufactures, we find that in 1965 we saw a rise of some 3 per cent. over 1964; and in 1966 a rise of some 7.5 per cent. over 1965. This is still a matter of great concern, and we arc indeed grateful to the "Neddy" Report on this matter.

My Lords, this Report arose from the third N.E.D.C. Report, The Growth of the Economy, in which they were particularly concerned about the very high increase in imports for 1964. The "Neddy" Report covers some ten of the smaller E.D.C.s, covering some 70 per cent. of the United Kingdom imports. The House may be interested to know that 21 E.D.C.s, covering some 12 million workers, are now carrying out an urgent investigation, not only to produce higher productivity, but also to effect import savings. I think one thing should be said, and I am not quite sure whether the noble Lord, Lord Drumalbyn, pointed this out in his speech. By its own definition, this Report was bound to concentrate more on the weaknesses of industry than on its successes. There are very grave weaknesses, but I think we should get the coin quite right by looking at both sides and by recognising the considerable successes achieved by certain companies in certain industries.

The second point made by the Report is that imports are not entirely wicked. We cannot hope to make everything competitive. Other countries import our machines; and no country can have a monopoly of advanced ideas. Furthermore, an increase in variety reduction and international specialisation in many fields may well result in higher imports still. But, of course, there is a vast difference between specialisation, which may well be reasonable and healthy, and uncompetitive ness, which clearly is neither. On the basis of the evidence produced, there can he little doubt on the basic argument which is rammed home in this Report; namely, that with due allowance for special factors and trends, the experience of the past decade would seem to make it clear that a major effort is required to improve British industry's competitive position in the home market, which will of course have corresponding benefits overseas. In other words, a substantial improvement is very much needed in our balance of trade, and a significant contribution to this improvement can come from our trade in manufactures.

My Lords, the "Neddy" study indicated that there was no single dominant reason for increased imports over the whole range of goods that were examined, but it was felt that, among the main factors involved, one was technical performance—and this is something to which the noble Lord, Lord Drumalbyn, referred. There were also the failure to ascertain United Kingdom users' exact requirements (particularly decisive in the case of mechanical engineering products, electronic capital goods and scientific instruments); shortages of capacity, which had enabled overseas competitors to gain, and then to retain, a foothold in the United Kingdom market; a weakness in design, particularly in textiles; and, finally, an insufficiently positive attitude in the field of marketing.

My Lords, the main recommendations in the Report to industry, as opposed to those made to the Government, were, therefore: a reform of the traditional working methods; a rationalisation and reform of industrial structure to secure maximum benefit from specialisation and economies of scale; increased research and development; closer contact between producers and users at the industrial level as well as between individual firms; and encouragement of firms to work to a wider market than the United Kingdom alone and to give more attention to design and marketing.

With that in view the Prime Minister initiated what I think was a landmark in joint effort between Government, management and organised trade unions, the Productivity Conference in September, 1966. From that Conference a working party has been set up to see whether it is possible to develop inter-firm and international productivity comparisons. Work in this field is already in hand in a large number of E.D.C.s, and steps have been taken generally to ensure a systematic survey by E.D.C.s of existing schemes in their industries with a view to identifying gaps. Talks are also in progress to find other ways and means by which inter-firm consultations on details might be developed. The N.E.D.C. working party has also initiated a detailed study of the very wide range of organisations covering a variety of services of one sort or another to industry, on efficiency matters, with a view to producing information and recommendations which will help co-ordinate and publicise the services available. A considerable amount of work is being done following that Productivity Conference and I am glad that a further Conference is shortly to be held, again under the chairmanship of my right honourable friend the Prime Minister.

One of the major points in the Report was that under the definition, "The right climate of investment". The Government yield to no one in their belief in the need for a higher level of real investment if British industry is to compete with overseas suppliers in the home market as well as overseas. This would not be a suitable occasion to develop the many aspects and difficulties of investment. The only effective way of eliminating a balance-of-payments deficit was to decrease the pressures on demand and thus relieve resources for export and slow down the growth of imports which flowed from the July measures. The Government recognise some of the difficulties that are involved in industry and do not regard the situation with any ease. In order to expand our exports and decrease our dependence on imports it is necessary to increase our capacity and to improve the efficiency of the British manufacturing industry. We have given a high priority to this matter and I believe that during 1967 the new investment rates—particularly for the development areas—will have a very significant effect on investment.

There has been a great deal of pessimism about investment. The Government find no real, concrete evidence of any major fall in investments, though clearly there has been a fall in some of the investment in the service industries. But I give this figure to the noble Lord, Lord Drumalbyn—it is bound to be an estimate; I hope he will recognise it is an estimate; but it is based on some checking. I am led to believe that in the field of investment for machinery and plant during 1966 there was an increase over 1965 of some 10 per cent. This is very good indeed and is bound to have an effect when we are able to reflate the economy later in the year. I cannot stress too much that now is the time for companies to plan their machinery requirements, to consult with the machine-producing companies and to make use of what, for some, may be a relatively quiet time.

LORD DRUMALBYN

My Lords. I hope the noble Lord will allow me to intervene. I am grateful for his estimate of what took place in 1966, but that was to be expected. Can he give an estimate for 1967? It is this which is exercising the public very much at the present time.

LORD SHEPHERD

My Lords, I hope that I said—but if I did not I will say it now—that the Government do not believe that there should be any significant fall in investment within the machinery and plant field. There may be a fall in investment in the service industries. If we can keep up the investment in machines and plant, the long-term purposes of industry and Government will have been achieved.

I think I should now say that the Government do not anticipate a major increase in imports during the current year, or even during the following year, once the economy has been reflated. I should like to give three reasons for that. First, the Government have repeatedly made it clear that there will be no general reflation until the overall balance of payments is safely back into surplus. The Government expect and intend to eliminate the deficit this year and to achieve a surplus on the combined current and long-term capital account on the balance of payments for 1967 as a whole. Second, when the time comes for expansionary steps to be taken they will be cautious and selective and not uncontrolled or haphazard. The emphasis will be on measures which encourage exports and, produce investment—indeed, some steps of this kind have already been taken—rather than on consumer and welfare spending. Third, the range of measures being taken by the Government and by industry to make the economy more efficient and more competitive—particularly the standstill on prices and incomes—will gradually reduce the country's excessive dependence on imports. In short, we realise that when reflationary steps are taken they will lead to some increase in imports but we do not expect the rate of growth to be immoderate or more than we can safely pay from the proceeds of exports.

The noble Lord asked a number of questions arising out of the suggestions or recommendations in the Report. I think one of the questions was whether the Government could give some special tax incentive to companies for research and development made on current account. This matter was carefully considered by the Government, but they did not feel, since this was in the field of tax, that they could make any concession, because it would be extremely difficult to limit it to other classes of expenditure. As I will indicate to the noble Lord, we have been able to give further help in the field of the use of new equipment.

The noble Lord also referred to the Ministry of Technology and to what was being done in the field of computers. A great deal has been done through the National Research and Development Corporation, particularly in the development of computers, but also in their use, to see that they become more and more available to industry generally.

My Lords, the noble Lord, Lord Drumalbyn, also referred to purchases made by the Government and by nationalised industries. I think we should recognise that while Government agencies and nationalised industries should, wherever possible, buy British, it would be wrong to impose upon them any form of straitjacket. Clearly this would be dangerous, particularly at a time when we are trying to sell defence material to the United States authorities. In any case, I believe that, were we to endeavour to do this, it would be likely to prove contrary to a number of international agreements.

The Government can help industry by giving a greater amount of information as to materials and goods which they require, and this would help in the matter of development. From all the figures given to me I believe that Government agencies and the nationalised industries do, in fact, buy British where it is right and proper so to do. Perhaps the noble Lord might like some information about what the Ministry of Technology have been able to do, not only regarding computers but also with regard to the machine tool industry. There were a number of schemes during 1965, the N.R.D.C. automated schemes, four of which were involved, some £5 million being made available to I.C.T. for development work. Also in 1965 we made a major contribution in the sphere of softwear for computers; some £2.4 million being made available to Elliotts on condition that these schemes are available where customers and the project have been approved by N.R.D.C.

The noble Lord, Lord Drumalbyn, referred to cotton textiles. This is a field in Which I had some interest When I lived overseas. While the noble Lord apppreciates the difficulties, and the impact on our own cotton industry of cotton textiles from the underdeveloped countries, I think he also recognises that for many countries this is the first step towards industrialisation. I think therefore that one needs to have a degree of sympathy with those countries. The noble Lord, Lord Drumalbyn, will be aware that in 1966 we obtained a comprehensive scheme of import control, and these arrangements will last until 1970. Broadly speaking, they cover imports of cotton yarns, grey cloth, finished cloths and made-up goods. These restrictions refer mainly to the underdeveloped countries. We did not feel it necessary to lay such restrictions upon the more industrialised countries like North America, Switzerland, Australia and New Zealand.

We recognise the difficulties of these underdeveloped countries and we are doing what we can to persuade other countries, particularly the Common Market countries, to take a far greater share of the goods produced by underdeveloped countries. In the case of Japan—and here again I had an interest—the trade is to a great extent reciprocal. We are making major increases in our exports to Japan. The Anglo-Japanese Agreement was specifically designed to ensure that if there were any serious injury to the United Kingdom manufacturers, it would be possible to take action. I do not believe, my Lords, that such a position has yet arisen, but this is a matter in which both countries have an interest, and no doubt the situation will be watched most carefully.

Another question referred to by the noble Lord, Lord Drumalbyn, was that of dumping. As he will know, our antidumping legislation, the Customs Duties (Dumping and Subsidies) Act was introduced in 1957 and was in accordance with GATT rules on anti-dumping. I have heard it said that this legislation has not proved successful. We are, however, having discussions, through the Kennedy Round, to see whether we can bring the United States and Canada into line with the more general international agreements. I would say to the noble Lord that my inquiries have revealed the rather startling fact that we have used our anti-dumping regulations on more occasions than all the countries in Europe combined. We are using these regulations as and when it is necessary. I appreciate the difficulty, and I think the noble Lord appreciates it (I do not know whether it was in this debate or outside that he referred to it), that arises when chemicals are part of a ship-load. This matter is being carefully watched, but until the discussions through the Kennedy Round have been completed I should not like to make any further reference to it.

Reference was made by the noble Lord to the maker-user recommendations and the Restrictive Trade Practices Act. I know that several E.D.C.s have represented that the Restrictive Trade Practices Act 1956 and the workings of the Restrictive Practices Court might have had an inhibiting effect on co-operation within industry. This problem was discussed in the National Economic Development Council on January 4 this year when proposals were made for amending legislation. The Government are now carrying out a very urgent review of these recommendations to see where action is necessary. But my information is that, apart from these particular fears, there is no evidence that any inhibition has occurred.

The noble Lord referred to the question of official statistics. I am quite convinced that you cannot get planning until you have the basic facts. The noble Lord, if my memory is right, referred to the details and figures regarding imports made available to the Government by the Customs and Excise authorities. I know that this has been suggested by the E.D.C.s as a possible source of information, but the noble Lord will be aware that this information is obtained for one specific purpose. It has been the practice in most of our legislation for the obtaining of information that the information should remain confidential and should be used only for the purpose for which it was obtained. My Lords, this is a very difficult problem, which the Government are now sympathetically and anxiously considering. It may well be that legislation may be necessary, but the Government appreciate the views of the E.D.C.s in this matter and are giving the subject most urgent consideration.

LORD DRUMALBYN

My Lords, may I put one point to the noble Lord? Is he altogether right in what he said about information being used only for the purpose for which it was obtained? Is not the position rather that the ban on its use applies where it would be possible to identify particular cases from the information given, rather than that the information should be used only for the purpose for which it was obtained? It surely can be used in a general way, but at the present time the ban is on identification, the use of the information where an importer or customer, or whatever it may be, may be identified.

LORD SHEPHERD

My Lords, it may well be true that we should provide general information, but my understanding of the position of the E.D.C.s is that they rarely need basic information for identification. Having been a merchant, I can understand the difficulties of identifying what imports and exports have taken place.

The noble Lord turned to the question of the gas and electricity tariffs charged to the main industries. The House will remember that Parliament laid a special responsibility upon our nationalised bodies to operate on a commercial basis. Government policy in regard to gas and electricity was set out in paragraph 94 of the White Paper on Fuel Policy issued in October, 1965. In general, tariffs should cover the full accounting costs of the industries, including overheads and surpluses needed to achieve agreed financial objectives. However, we recognise the need for competitive prices. We believe that this is being achieved, although from time to time there are complaints. The Minister of Power is always willing to consider complaints and suggestions and to bear these in mind. Clearly, the nationalised bodies must be able to find the sums required to develop capacity. I do not know whether I have dealt with all the points which the noble Lord raised, but I think that I have dealt with most of them.

Since this is the first debate of 1967, may I conclude by saying that most of us, I believe, were rather pleased to see the back of 1966. It was a year which started for most of us with a degree of optimism, but by the end of the year we were slightly disappointed and frustrated. I think there are clear indications that 1967 should be a much better year. The base upon which our economy rests is certainly stronger than it was at the beginning of 1966, and the trends are favourable.

We have a great many difficulties. Some people wonder whether we can overcome them, and some wonder if we ever will. I should like to paraphrase the leading article, I will not say of my favourite newspaper, but one which I certainly read, because it is apt in to-day's circumstances. The Daily Mail to-day, talking about the Press, says—and I leave out the word "newspaper": There is a lot wrong with the…industry. But there is nothing wrong that cannot be put right. We intend, for our part, to put it right. What has been done should be a guide to the future and should not be a post-mortem.

Consumers cannot be forced to buy goods. They will not buy if they do not feel that they are getting good value, and they will not buy goods out of the generosity of their hearts, or on behalf of some ideal. We believe that the public will buy goods which are efficiently produced, and I believe that this is the right attitude to take. I have said on many occasions that no one owes this country a living. We have to succeed in the field of exports. We will not succeed until we can compete in our own home market. From this Report it would seem that overseas manufacturers have been able to make inroads into our own home market, not because they were specially clever, but because on occasions we ourselves had been inept, perhaps a little idle. These things could be readily put right, and if we were to put them right it would transform 1967.

4.35 p.m.

LORD DRUMALBYN

My Lords, I must express my personal thanks to the noble Lord for having dealt so fully with the various points that I raised. He did not cover all of them; that would have been too much to expect. He said nothing about tariff revision, a particularly delicate subject, and one in which I think we might well be interested at the present time in the Kennedy Round. But he dealt with a great number of subjects. If I may refer to one or two of them, on the subject of electricity I was mainly concerned to question, and to hope that the Government would question, whether it is right to commit to the Electricity Authorities not just the question of covering their costs and seeing that their costs are reflected in charges, but also deciding differential costs on social grounds, which seem to be outside the purview of a nationalised Board of this kind.

Not unexpectedly, the noble Lord was not deterred by my opening caution, that in any favourable comparison made between 1966 and 1964 he must bear in mind the pronounced swing that there has been in the terms of trade, which the Financial Times estimates as equivalent to £250 million. It was not in a Cassandra-like spirit that I raised this debate, and I wholly agree with the noble Lord that all these things are within our power. All I would ask is that the Government should not expect all the contributions to come from industry all the time without themselves playing their full part. There is always a tendency, on the part of us all, to say that "the other fellow should be doing more."

I hope that both Government and industry will do what can be done, and what should be done, in order to ensure that the present situation in which imports still are not increasing will not be reversed, especially when the economic climate turns (and this is one of the fears expressed in the Report), so that there will not be on the upswing the rush of imports which took place on the last occasion. As one last shot, I would ask: will the Government consider the system of prior deposits at a time when the upswing looks as though it is beginning to commence again? I beg leave to withdraw my Motion.

Motion for Papers, by leave, withdrawn.