HC Deb 02 August 1963 vol 682 cc878-88

3.29 p.m.

Mr. Harry Randall (Gateshead, West)

As is usual on a day of Adjournment debates, we have lost time. Consequently, those at the end of the queue begin to wonder whether we shall have an opportunity to address the House. Out of consideration for the hon. Gentleman who has the final subject, I shall attempt to make my speech as brief as possible.

I am very grateful to Mr. Speaker for selecting the subject of the electronics industry in the North-East. I do not think that anyone would deny the need for a new growth industry of this kind in that part of the country. Unfortunately, for reasons which I will explain later, the North-East has not had the opportunity of getting the type of growth industry for which I have been agitating for the last four years.

In view of the continued unemployment in the North-East, I must ask the Parliamentary Secretary to listen awhile to some of the things I have to say so that my constituents will know that this case has been pressed very hard. I am very grateful to the Parliamentary Secretary for all his courtesy during the long correspondence that we have had. The Office of the Parliamentary Secretary for Science, who is also on the Front Bench, has also had some correspondence, even if he knows it only from his noble Friend Lord Hailsham.

I am grateful for all the efforts that have been made to meet me. However, I have not been met and I must, therefore, put the matter before the House. I am a layman in this industry. I am not a specialist, therefore I have no interest to declare, except the urgent needs of my area, the need for a new growth industry, and the desire that the Government should match words with deeds.

I want to refer, first, to the difficulties of the North-East. The first difficulty is unemployment. The labour demand can be measured by comparing the number of unemployed with the number of vacancies. For the second month in succession we have had more unemployed compared with unfilled vacancies than any other area. We have eight unemployed for every job available. With Scotland, we are the worst area in the country. It has happened twice this year. It has happened in the middle of the summer. We shudder to think what will happen in the winter. This is worse than the winter period of 1961–62. Our position is very different from that in London and the South-East where there is a job available for almost every unemployed man.

The position in the North-East has a very distressing effect upon the young. The young cannot get jobs because there are no jobs available. Therefore, there is the problem of migration. About 10,000 people migrate from the North-East every year.

Then there is the industrial imbalance in the North-East. There is a bias in the North-East towards the traditional capital goods industries. These are always the first to suffer in a recession. These industries are coal, steel and shipbuilding. It is not because they are out of date. They have modernised. The very effect of modernisation has been that there are less jobs, apprenticeships and work for the young.

Mechanisation has caused redundancy in coalmining. In Durham, the number of employees fell from 102,300 in June, 1955, to 77,400 in March, 1963, a decline of 24,900. In the first quarter of this year a further 1,000 jobs were lost to the young. I am told that in the next five years there will be a loss of a further 16,500. There is the same story in the steel industry. Since the war £100 million has been spent on new plant, but the tragedy is that too much plant is working below capacity. Another problem in the North-East is shipbuilding. Total orders have been quite insufficient, although it is true that shipyards in the North-East have gained a greater share than others.

Although this may be a sombre picture, it is not a picture of utter hopelessness. I believe that the North-East is an area of potential opportunity. If the area which cradled the first Industrial Revolution is given the necessary help it will be poised in readiness for the second. The North-East has, nevertheless, achieved a good deal. The Team Valley Trading Estate is an example of the progress that has been made. At the beginning of the last war about 5,000 people were employed there. Today, about 66,000 work there. In Durham, we have had a change from the old basic industries to more modern ones and the Team Valley Trading Estate, though spectacular, is not in itself sufficient to solve our problems.

We require a boost. The last Budget provided some sudden advantages and facilities. There has been an extension of development districts and all these things are excellent. However, the Chancellor of the Exchequer and the President of the Board of Trade will eventually have to consider how long the additional facilities, some of them provided in the last Budget, will run, for there is a feeling, certainly in the North-East, that the Government and industry must look at least ten years ahead.

Our real need is for more growth industries to be encouraged to be established in the North. This brings me to the subject of the electronics industry. This is primarily a par excellence growth industry. That phrase was used in the Financial Times of 31st January, 1962. The industry's annual output is worth about £400 million, about 10 per cent. of the world's production in the commodities it produces outside the Soviet bloc. A United States estimate suggests that in about ten years' time the sales of this industry throughout the world will double. The electronics industry is a new capital goods industry. Its products are used for research, production, control and communications. In other words, it is an ideas industry and is typical of the sort of growth industry we need in the North-East.

In speaking about the electronics industry I must make it clear that it should not be confused with the domestic electronics industry which produces such things as radio valves, transformers, and so on. I have an extremely bulky file on this subject, but time does not permit me to relate all the details I have at hand. About four years ago I approached the Minister of Supply, as he was then known, and expressed concern about the failure of his Department's contracts to find their way to the North-East. I was told that there were historical reasons—weapons concept policy, and so on—which, it appeared, acted against the placing of contracts in the area.

In 1961, I raised the matter with the President of the Board of Trade and in a letter dated 23rd November, 1961, the then Parliamentary Secretary, the present Minister of Aviation, wrote that my points were primarily for the Minister of Aviation. His letter went on to say: You must not, however, take it from this that the Board of Trade are not also concerned. On the contrary, we recognise that the North East has available not only training facilities but an excellent and skilled labour force; and we should very much like to see the electronics industry develop there and add further diversification to the area. I am sure that in considering your letter the Ministry of Aviation will have these matters very much in mind. My hopes were built up and I thought that some progress would be made, but on 12th December, 1961, I received a letter from the then Parliamentary Secretary to the Ministry of Aviation, now one of the Joint Under-Secretaries of State for the Home Department, in which he said that while the Ministry was glad to see orders going to the development districts, nevertheless The purchasing policy of the Government requires that financial and technical criteria, and not geographical location, should have an overriding influence in determining where orders should be placed. Surely the policy of the Government, as expressed in the Local Employment Act, should have made it imperative that no major industrial area was left without a knowledge of the techniques of this important new industry. Surely Ministers should see that Government contracts go to this new growth industry in the North-East.

In January of this year one of my constituents put forward a proposal for what might be termed a miniature Ferranti scheme for the North-East. It was based on the "Electronics in Scotland Scheme" administered by Ferranti. In this scheme a contract of £12 million was placed on Ferranti, with the result that there is now a small but nourishing electronics industry in Scotland. The scheme put forward by my constituent was a deliberate attempt to ensure that a major industrial area was not left without a knowledge of electronic techniques. It recognised how out of balance the local scene would be without it, and what a loss of talent would be suffered by the community at large.

But mine was a very modest scheme indeed. It asked the Minister of Avia- tion to place a contract for about £100,000 per annum—not £12 million—on the one substantial electronics firm in the North-East. This company would sub-contract 75 per cent. to the three or four small recently-established firms in the area. The scheme went before the Minister on 12th February, but after several months back came the answer as before, the Ministry was unable to depart from its basic duty in awarding contracts.

What is the present position? The information given to me by people in the industry is that about 70 per cent. of our electronic development and research work takes place within a radius of 45 miles of London. The Minister of Aviation is the largest single originator of research and development work in the Kingdom, and a bigger customer of the electronics industry than all the other home and export customers put together.

This work is of vital importance to the development of new commercial products. Why, then, does it remain in London or within a 45-mile radius of London, leaving the rest of the country bereft and starved of the new technologies and given less opportunity of keeping up to date? Why not a share for the North-East? Why not a share for the North-East for strategic reasons? On this account it would seem to be a necessity, apart from the need to ensure that these large industrial areas axe given some of the "know how" of this new industry.

If confidence and financial considerations are the criteria—and they should be—then surely the North-East should do very well? The Parliamentary Secretary knows that in the North-East we have two universities, two colleges of advanced technology, and a number of technical colleges, which between them train a large number of graduates in electronics and applied physics, but at present most of them are drawn away to the London area.

The North-East is rich, too, in returning Servicemen and merchant seamen who have skills in some of the branches of electronics, but at present most of these men are lost to the industry because of the shortage of openings locally. I take the view that all possible assistance should be given to ensure that no section of the community is deprived of the opportunity to keep abreast of the new techniques upon which industry of the present and the future so much depends. For four years I have been trying to make some progress in this matter. The Board of Trade appears to be on my side. It would like to see the industry develop in the North-East. Only the Ministry of Aviation appears to stand in the way.

It may be that the scheme which my constituent and I put up was too modest. In his reply to me the Parliamentary Secretary did not say this. Indeed, he gave no hint that it might be so, but a recent approach to Lord Hailsham, the Minister responsible for North-East affairs, asking him to intervene suggests that this might be so, because he says that he has asked his officials to discuss with the North-East Development Council the wider issues of the development of the electronics industry in the North-East.

Whilst I unreservedly welcome this news—a gleam of hope at last—I wonder who initiated these discussions. Perhaps the Parliamentary Secretary can help me. Certainly, there was no hint at all in his letter of 24th May. Who initiated those discussions? Was it Lord Hailsham? Or has the President of the Board of Trade expressed a view? Was it because of the continual pressure from the North-East? Or has there been a change of heart at the Ministry of Aviation?

What is more to the point, what is the object of those discussions? This is far more important. Is it to explain away the situation to the North-East? Or is there now a genuine concern on the part of the Government to help the electronics industry in the North-East? The last thing that I would want to do would be in any way to prejudice the discussions which are to take place, and I hope that the Parliamentary Secretary will not think that I am trying to tell him how to do his job when I say that I hope that anything he says this afternoon will not prejudice the discussions. I want them to succeed.

I want to be clear whether the Department is at least prepared to consider helping us in the North-East. It has been a long and frustrating struggle. On the one hand, the Government have urged industrialists to go North. On the other, when the Government might well have given a positive lead, as in this case, all manner of excuses have been found for not giving assistance. Are the Government now seeking to match words with deeds, or is the infant electronics industry in the North-East building up vain hopes? I confess that I am anxious to close this bulky file of mine, but everything will depend on the attitude of the Ministry of Aviation.

Is it too much to hope that this afternoon the Parliamentary Secretary will give us a clue? Are we nearing the end of this four-year struggle, or are the contestants merely coming out for the next round? I hope not. I hope that this afternoon, as a result of this short debate, some light will be shed on this subject and that there will be some hope for the electronics industry in the North-East.

3.47 p.m.

The Parliamentary Secretary to the Ministry of Aviation (Mr. Neil Marten)

I am sure that we are all very pleased to see the hon. Member for Gateshead, West (Mr. Randall) back in the House again and, if I may say so, looking so well after his recent illnesses. I hope that he will have a good rest during the Recess and will not be too worried by his constituents. I am also sure that we are all pleased that after so many months of enforced Parliamentary silence he has been able to have this early opportunity since his return to raise this question concerning his constituency. I congratulate him on his luck in the Ballot.

The hon. Gentleman raised many interesting economic points, but I fear that in the time allotted I cannot answer all of them; indeed, many of them were matters for other Departments. I am sure that his speech will be read in those Departments with great interest, and perhaps they will follow up some of the points which he made.

Clearly, this afternoon I must confine myself to matters which concern the Ministry of Aviation. As the House is aware, the electronics industry is very widely spread. Indeed, I often wonder whether the time will not shortly come when there ought not to be a clearer definition of what is meant by the expression the "electronics industry". The hon. Gentleman quoted some comparative figures relating to what happens overseas, and so on, but it is very difficult to balance one set of figures for one country against our own because of the difficulty of the definition of "the electronics industry". While the Admiralty has a substantial stake in defence electronics research and development, and the Post Office is concerned with the civil telecommunications branch of electronics, the Ministry of Aviation does the majority of business with the electronics industry so far as the Government are concerned.

I should like to deal specifically with the proposition which was put forward by Mr. Loebl, which, in a way, illustrates the point which the hon. Gentleman mentioned. The essence of the proposal is that the Ministry of Aviation should place a fairly large development contract with Messrs. Joyce, Loebl, of Gateshead, which firm, in turn, would place and administer sub-contracts for about 75 per cent. of the value of that contract with three or four smallish electronic firms on the Tyneside. I hope that I have got the proposition right.

I have much personal sympathy with the intentions which lie behind that proposal, but, before deciding whether it is feasible, we have to consider certain criteria. From the extract which the hon. Gentleman read from the previous letter, it will be seen that we are, at least, consistent in our use of words, because the term "criteria" came out in that letter.

In placing contracts, the Ministry of Aviation has, obviously, to be extremely careful about the technical ability of the firms and their sub-contractors, particularly in relation to their design strength and production facilities. The main reason, as I am sure the hon. Gentleman realises, is that, on defence orders in this very sophisticated industry, we expect from contractors not only a "system" approach, but also the ability to take on the responsibility for a whole operational or weapons system or sub-system. Experience has shown that, to do this, contractors must be broadly based and be backed by a formidable amount of experience and expertise of a very high order in research, design and production. In this way, the Government and the country gain very considerable advantages in terms of economies and efficiency in our defence projects.

I am advised—I am sorry to say that this is the advice I am given—that there is no firm in the North-East which will meet those criteria and which could undertake the rôle. What, then, is the answer for firms such as Messrs. Joyce, Loebl, of Gateshead? It is, I believe, that they should seek sub-contracts from the large firms and then, perhaps, forge industrial links between themselves and those large firms. In this way, they can, of course, make a valuable contribution to composite projects, and it is not beyond the bounds of possibility—I do not want to be over-optimistic—that they might, from such relatively small beginnings, develop into one of the large firms themselves and so obtain one of the contracts for a whole weapons system.

The hon. Gentleman mentioned Messrs. Ferranti. In the late 1940s and early 1950s the situation was very different from today. Then, the defence electronics industry was still at an infant stage and we wanted to increase its design strength and expand its capacity. Ferranti of Edinburgh was assisted somewhat on the lines proposed by Mr. Loebl in his scheme to act as a parent company to a number of small sub-contracting firms in the area. They were awarded contracts. But it was, in fact, Ferranti which largely benefited from the scheme and, in the event, there was little sub-contracting because it was found largely impracticable in the circumstances. This casts no aspersion on Ferranti.

The hon. Gentleman may ask why this could not be tried again today. The answer is that we have more than enough capacity to meet our requirements in this particular field at present. In fact, we are faced with pleas for work from several of the large and well-established electronics contractors which are at the moment under-employed. In the circumstances, therefore, I think that it would be wrong for the Minister of Aviation to increase artificially the capacity of the industry.

However, as the hon. Gentleman will know, the Government do help development districts by offering companies in those areas, which have tendered unsuccessfully for Government contracts, 25 per cent. of the order at a price predetermined by the most competitive bid. I shall not elaborate on that scheme now because the hon. Gentleman, obviously, knows about it. Only recently, moreover, the Ministry of Aviation drew the attention of the electronics industry once more to the Government's wish to see work placed in the development districts wherever possible We circulated to the electronics companies a list of those areas and a request that they should regularly seek to sub-contract some part of their work there when competitive considerations permitted.

The hon. Gentleman asked why we could not move a share of the electronics industry from the South-East to the North-East. It is not within the power of the Ministry of Aviation to force electronics companies to move to the North-East. The hon. Gentleman mentioned, also, the ample technical education facilities available in the area. This is a fact well known to my Ministry, and much credit is due to the people there for having made it available.

Nevertheless, we cannot artificially induce the large companies to move out of the area in which they are established when, in their judgment, their efficiency and, hence, up to a point, our defence expenditure would be adversely affected.

I must emphasise that I do not believe that it would be right for us to try to force firms to move. We certainly take steps to increase the inducements, as the House heard yesterday from my right hon. Friend the Prime Minister, but we do not seek to override the commercial judgment of the firms. We on this side of the House believe that in principle the acts of government should affect, as it were, the ground swell rather than the surface movements of industry.

What is our attitude to the North-East? The policy of the Government towards the North-East forms a consistent whole. Various measures have been announced to assist the area to which I have referred. The fact that we cannot do all that the hon. Member would have us do must not lead him or others to think that we have no sympathy with the real difficulties to which he has referred. I have been at pains to try to remove any misconception of what is practicable for us in the context of the matter raised in this debate. We are very ready to discuss the situation at first hand to see whether more can be done without going against the principles which I have mentioned and to see whether there are further opportunities for self-help in this matter.

It was to this end that my hon. Friend the Parliamentary Secretary for Science told the House last Monday that arrangements are being made for a meeting to take place in the North-East between the electronics industry, the North-East Development Council and senior officials of my Department and of the office for the North-East. The hon. Member asked who arranged it and when it was arranged. The meeting will, I hope, take place within a week or two. It is a question of getting a number of busy people together at the right time. That is the only thing holding it up. I would describe this meeting as being a round-up of the situation to see what, if anything, can be done. I hope that the hon. Member will be satisfied with that. Neither he nor I would wish to put an oar in at this stage, certainly not in the House, to disturb the meeting which will take place.

It is the intention that at the meeting there will be not only a detailed explanation of the considerations governing the letting of defence contracts for electronics, but also a wide-ranging discussion on the ways that electronic firms in the North-East can play their full part in the development of this industry, which is so important to the national interest in the defence and civil fields. I hope that the hon. Member will accept that we are getting on with this matter. I am sure that both he and I hope that the meeting shortly to take place will prove to be profitable to all concerned.