HC Deb 16 January 1964 vol 687 cc569-78

Motion made, and Question proposed, That this House do now adjourn.—[Mr. I. Fraser.]

10.26 p.m.

Mr. Peter Tapsell (Nottingham, West)

I am grateful for this opportunity to discuss the stateof the bicycle industry. Raleigh Industries, Ltd., is in my constituency. Its factories provide employment for nearly 10,000 people. Its level of economic activity vitally affects the prosperity of the whole City of Nottingham. The future of the bicycle industry is important to my constituents and to a very large number of people in the Nottingham area, but it is also of more than merely local importance.

The Raleigh Company is the largest manufacturer of bicycles in Britain and the largest exporter of bicycles in the world. Half the total production of this Nottingham factory is sold in North America. I shall return to the export side of the matter in a few minutes, because the bicycle industry has an exceptionally fine record in this respect, but I wish,first, to say something about home sales.

Home sales of bicycles have declined by more than 50 per cent. since 1955, and the decline is still continuing. The reasons are not difficult to find. The rising prosperity of the country as a whole has meant that many families who, only a few years ago, would have had one or two bicycles or a motor cycle now have a small motor car instead. Moreover, the enormous increase in the number of motor cars on the roads has, I suspect, made parents a little cautious about buying bicycles for their young children.

I recognise that it can be argued that this is an inevitable trend in the modern world, and I have never been one to advocate the feather-bedding of industries which have outlived their usefulness. On the other hand, it is no part of the Government's task to accentuate the problems of industries which already have trouble enough. No one could say that a bicycle is a luxury. Indeed, if the congestion on the roads in the centres of great towns becomes worse, as seems likely, possession of a bicycle may be an absolute necessity. Yet the bicycle is at present subject to the top rate of Purchase Tax—25 per cent.

At this point, I would like to express my gratitude to the Economic Secretary, who is sitting besidemy hon. Friend the Parliamentary Secretary to the Board of Trade on the Front Bench. I know that the Economic Secretary and his colleagues at the Treasury have given very careful and sympathetic consideration to the views which have been put to them, andthey have received a depution representing the industry. The industry has appreciated the way in which its case has been heard. I fully understand also that, with the Budget now only a few weeks away, I cannot expect a Minister to give a firm public commitment here and now about tax changes, but I hope that the mere fact that the Budget is now being put into its final form in the Treasury means that this debate is being held at a particularly opportune moment.

Although a Minister from the Board of Trade in going to reply on the wider aspects of his problem, to which I shall come in a moment, I wish to say emphatically in the presence of my hon. Friend the Economic Secretary to the Treasury that here we are dealing with an industry in which the home sales have more than halved since 1955 and in which the products are still bearing the top rate of Purchase Tax. I ask my hon. Friend to make this known to my right hon. Friend the Chancellor of the Exchequer, and to ensure that there is either a big reduction in,or an abolition of, Purchase Tax on bicycles in the next Budget.

If the Treasury is unmoved by the figures of falling home sales of bicycles; if the Treasury feels that the Purchase Tax yield of this industry, about £1,700,000 a year, is something it cannot do without; and if the Treasury points out, what Is mercifully true, that alternative employment prospects in Nottingham are exceptionally good, I hope, nevertheless, the Treasury will bear in mind the fact that we are dealing with an industry with an exceptionally fine export record, as I am sure the Parliamentary Secretary to the Board of Trade will be the first to recognise.

Successive Governments have frequently exhorted industries to export. Here is an industry which really does export. This factory in my constituency is supplying over 90 per cent. of the total imports of bicycles into North America, and this vast business has been built up in the last few years in the face of fierce competition from Europe and Japan. It makes an important contribution to our dollar earnings, and the bicycle industry's total overseas earnings, I understand, amount to £26 million a year, a very considerable figure.

It is an economic platitude to say that an export programme, if it is to be sustained, requires a broad home base. The bigger the home market, the lower the unit costs of production and the more competitive the selling price of its products overseas. This was explicitly recognised by the Chancellor of the Exchequer when he reduced the Purchase Tax on motor cars. I hope he will recognise the force of this argument as it applies to bicycles.

The overseas bicycle markets are very competitive indeed. It is true that there are expanding markets for bicycles in places such as Africa, India, and other developing parts of the world, where the ownership of a bicycle is something of a status symbol as the motor car now is in this country. But more and more of these countries wish to manufacture bicycles themselves, even when in doing so they perhaps produce a less efficient bicycle at a higher cost than could be provided for their home market by the Raleigh factory at Nottingham. Nevertheless, the industry has made very great efforts to export. It has a splendid record in this respect, and I am sure it will continue to do all it can, but if its home base continues to contract it will find it increasingly hard to maintain its export drive.

Apart from the reduction in Purchase Tax for which I am asking, there are certain other steps which it seems to me might help the bicycle industry.

I accept that the industry's advertising could be considerably improved. It should be more imaginative. I would like to see plenty of pictures of healthy, happy cyclists sailing past traffic jams of apoplectic motorists. In the towns bicycling is now the healthiest and most efficient form of travel, and I hope that the industry's advertising experts will make more use of these facts.

I would also like to see more public propaganda stressing fitness—the keep-fit aspect of bicycling. Fitness campaigns are something which we tend to sneer at in England, although we should not underestimate the impact of the appeal for fitness made in America by the late President Kennedy, which led to marathon walks being undertaken by an astonishing number of people. This is something which the British Government should not ignore.

I should like, too, to see greater stress laid by the Minister of Transport on the commuting advantages of the bicycle. My right hon. Friend often sets a splendid personal example in this respect, and I would have thought that as new towns are being developed, in the light of the Buchanan Report and as existing towns are replanned, it would be wise for cycle tracks to be built alongside the main roads leading to the centre of towns. In fact, this may become essential if all movement in the centre of towns and cities is not to come to a standstill in the future. This would necessitate better provision by offices, big shops and Government Departments of facilities for the storage of bicycles and the provision of proper changing rooms for those wishing to cycle to and from work and desiring to change their clothes. Factories are better in this respect, but in many cases no facilities of this sort are provided in offices, shops and Government buildings.

All these are long-term suggestions, but the industry cannot wait. An immediate stimulus to sales at home is urgently required. Past experience has shown that Purchase Tax changes, whether up or down, have a big effect on the home sales of bicycles. Curiously enough, the publicity which a tax reduction attracts apparently produces more impact than a comparable price reduction achieved in another way. When Purchase Tax has been reduced in the past the leap in sales has been considerably more than might have been expected.

The immediate need of the bicycle industry is the total abolition or, at the very least, a major reduction in Purchase Tax, as it is at present levied on bicycles, to safeguard the present large export earnings of the industry and to protect its thousands of workers in Nottingham and elsewhere.

10.39 p.m.

The Parliamentary Secretary to the Board of Trade (Mr. David Price)

It falls to me as a Board of Trade Minister to reply to the speech which has just been made by my hon. Friend the Member for Nottingham, West (Mr. Tapsell). The House will realise that the main burden of my hon. Friend's argument this evening has been directed towards my right hon. Friend the Chancellor of the Exchequer. But, for reasons which my hon. Friend knows and which the House will appreciate, my right hon. and hon. Friends at the Treasury are unable to reply on Purchase Tax matters at this season of the year.

We in the Board of Trade are the production department with responsibilities for the bicycle industry. As my hon. Friend knows, we in the Board of Trade enjoy close and happy relations with the industry. This country has always held a leading position in the world as a producer of bicycles and our bicycle industry has over the years made a substantial contribution to the country's export earnings, to which I should like to pay public tribute.

As with other long established industries, however, the bicycle industry has seen many changes in consumer choice and market conditions, at home and overseas, which have resulted in a decline in the demand for the industry's products. I will give the House a few figures to illustrate this.

If we take the years from 1952 to 1962, production of bicycles for the home market fell from 760,000 units to 580,000 while production for export decreased from 2,870,090 to 1,350,000 units. Over the same period production of motorised two-wheeled machines—that is, motor cycles, scooters and mopeds—for the home trade decreased from 88,000 to 71,000 while production for export went down from 70,000 to 29,000. When we come to passenger cars we find that over this same period production for the domestic market increased from 173,000 units to nearly 700,000 while export production went up from 275,000 to over 500,000.

In terms of machines on the road, about 1 million motorised two-wheeled machines were registered for use in Britain in 1952. By 1962 the figure was 1.8 million—while the number of passenger cars on the road rose in the same period from 2,500,000 to 6,600,000. This enormous increase in the possession of motor cars, and hence, of course, in their production, has been, I think, the basic reason for the decline in the home demand for bicycles. In 1962 the bicycle industry exported no less than 1,300,000 bicycles worth £11,400,000. These 1962 exports were exceeded in 1963. By the end of November, 1,400,000 units worth £12 million had already been shipped overseas. The December figure is yet to come.

In spite of the decline in the demand at home, the bicycle industry is still putting up an impressive export performance and, n these circumstances, it is not surprising that there have been changes in the structure of the industry. There are fewer manufacturers and companies rave merged.

The years since 1960 have seen the completion of a major rationalisation programme within the industry. Production is now concentrated in fewer plants and the industry has a smaller labour force. Employment figures for the bicycle industry alone are not available, but I think we can get some indication of the fall in the numbers employed by looking at the employment figure for the manufacture of bicycles and motorised two-wheeled machines. In this class of employment, there was a decline between June, 1960, and June, 1962, from 41,000 to 31,000.

A large part of the industry is concentrated in Nottingham, and there is also production in factories in the Midlands and elsewhere. The rationalisation of production has meant making difficult adjustments, some of which have been painful, since they have involved the closing of some factories. But these changes have been aimed at strengthening the industry's competitive position in meeting the challenge of changed circumstances. New designs and new models are being introduced by a manufacturing company which is new to the industry as well as by those which have been long established. It has already been said that there are indications that, following a marked decline, the home demand is now levelling out and the efforts which the industry is making may enable it to compete successfully for a better share of the public's rising purchasing power in future.

About three-quarters of the industry's output goes overseas and about one half of the exports go to the United States market in which British machines have always done well and in which in recent years the British industry has increased its large share of the market for imported bicycles. Price-wise, of course, the United States market is very competitive. Our industry fears it will mind it difficult to maintain the same level of trade it achieved so successfully last year. It is understood that it was mainly on this account that redundancies were declared at the end of last year. I believe that the number of redundancies has in the event proved to be less than was originally feared. The difficulties in placing those declared redundant should not prove to be too great, and I understand that most of them have found alternative employment.

In some of the other export markets, for example, in Asia and South America, which in the past have provided substantial outlets for the industry, imports are now limited by restrictions imposed either for balance of payments reasons or for the protection of growing domestic industries. The development of local industries does, however, provide the opportunity for British participation in domestic production as it has in the case of India, to their benefit and ours. The Board of Trade is in close and continuous touch with the industry on these matters and is always ready to examine with the industry difficulties which may arise. These developments in overseas markets, however, do represent a part of the changing circumstances which the industry has to face.

Mr. Cyril Bence (Dunbartonshire, East)

Does the bicycle industry export bicycles like motor cars on what is known as "C.K.D." so that they can be assembled in the country to which they are exported? If that is not done, could the Board of Trade give a lead in creating that sort of trade?

Mr. Price

One would have to look at each individual traditional market in turn, because I understand that the majority of under-developed countries are not prepared to make a distinction in the case of bicycles such as is sometimes made for C.K.D. motor cars. As an engineer, the hon. Member will appreciate that a lot of work is provided in assembling a motor car or lorry in a knock down form, whereas there is comparatively little work to be done on assembly of a bicycle. But if the hon. Member has a special case in mind, I would be glad to consider it.

Mr. Bence

I was thinking of India.

Mr. Price

In India it is almost impossible to get bicycles imported because of the need to protect the infant industry, but I am glad to be able to say that British capital and technique are used in the Indian bicycle industry.

The debate is concerned with the bicycle industry, but the industry also produces mopeds and the problems which affect production of mopeds are different from those relating to cycles. The distinction between motor cycles and mopeds is not always clear to the layman. Exports of mopeds are small and imports—mainly from France and Western Germany, are high—in recent years much higher than the total deliveries of the British industry. From a peak in 1959, the demand in this country fell until 1962, but in 1963 home deliveries increased considerably on the 1962 levels and imports increased even more.

The British industry is making an effort to popularise the moped in this country and has recently produced a lower-priced model. Automatic transmission has just been introduced. At present the engines used are mainly of French design. The cycle industry is exporting a high proportion of its output and it is largely on the grounds that it needs to increase sales at home to provide greater support for its considerable export efforts that it has repeatedly represented to the Government its case for the removal or reduction of Purchase Tax, a case which was extremely well put by my hon. Friend.

All I can say tonight is that the representatives of the industry put their case to my hon. Friend the Economic Secretary to the Treasury at a meeting which they had with him last October. Certainly, the industry and those employed in it could not have a more determined advocate of their case than my hon. Friend the Member for Nottingham, West.

The industry has been assured that its representations will be taken fully into account by my right hon. Friend the Chancellor of the Exchequer. These assurances can be repeated. My hon. Friend the Economic Secretary to the Treasury, who has made a special point of being present for my hon. Friend's Adjournment debate, will, no doubt, have taken careful note of all that my hon. Friend has said on behalf of the industry. Like other Treasury Ministers at this season of the year, my hon. Friend the Economic Secretary has to endure a quite uncharacteristic silence on all tax matters. For my part, I assure my hon. Friend that we in the Board of Trade will continue to do all we can to support the industry's many efforts to earn export orders and to adapt itself to the changing conditions of the home market.

Question put and agreed to.

Adjourned accordingly at nine minutes to Eleven o'clock.