HC Deb 14 June 1965 vol 714 cc31-40
The Minister of Technology (Mr. Frank Cousins)

With permission I should like to make a statement about the machine tool industry.

My Department is engaged upon a full study of this industry. Some of the problems and the need for action are already clear from the trade statistics and from studies already made, notably in the valuable report of the Machine Tool Economic Development Committee. I welcome the undertakings given by the manufacturers' representatives to press for action on increased capacity, building up research and development and qualified staff, increased specialisation and elimination of wasteful duplication, and the development of British machines to replace a number of types where we rely on imports.

They have given similar important undertakings about improvement of deliveries by holding larger stocks and making more use of merchants, strengthening selling arrangements, and about establishing closer links with the electronics industry.

Finally, they have agreed to initiate a review of the factoring of imported machine tools by British manufacturers. These undertakings are an important step forward, and I shall keep in close touch with the progress made in implementing them.

The Government will play their part. To assist the industry to develop and produce more of the most advanced and efficient types of machine tool, there will be a considerable increase in research and development contracts. The National Research Development Corporation already has a number of projects under examination, and the new Act will enable it to make a greater contribution on terms which should find wider acceptance in industry. Industry must respond by producing forward-looking and imaginative ideas for new machine tools.

Another method of supporting new development is to order pre-production models, and the Government are prepared to do so for approved new types. The industry should take early advantage of this.

By these means I hope that promising ideas which, because of lack of finance or lack of firm orders, companies have felt unable to exploit, will go ahead. In giving support we shall favour arrangements which associate machine tool manufacturers with electronics and control engineering firms.

The National Engineering Laboratory at East Kilbride will be built up to give further support in the research field, and its expanded activities should yield ideas for development projects. A major effort will be mounted at N.E.L. and at appropriate machine tool, control engineering and user firms on the application of numerical control to manufacturing processes and the use of computers to assist design; the latter offers eventually prospects of dramatic economies of time and money in translating designers' ideas into manufactured products. A powerful computer will be needed and my Department is negotiating for a suitable British machine. Until one can be made available, an American computer will be used.

The machine tool industry is too fragmented. Some small firms make valuable contributions. Others cannot support adequate development teams or take full advantage of the abilities of their highly-skilled workers. The concentration of the industry into stronger units which can better meet the needs of industry must, therefore, be encouraged. The Machine Tool Trades Association agrees on this, add the industry itself must take the lead in the process of concentration and rationalisation. The Monopolies and Mergers Bill is, of course, not intended to hinder desirable mergers which improve efficiency.

Some progress is already being made, but is unlikely to be sufficiently rapid if left to normal market forces. One of my Department's industrial advisers will give particular attention to methods of promoting concentration, and the placing of development contracts and preproduction orders will be directed to the same end. I do not rule out the possibility that other Government action may be needed.

My Department has also studied the serious difficulties created by the cyclical pattern of machine tool ordering. Amongst suggested remedies is the proposal that the Government should share in financing building for stock in slack periods. Whilst building for stock can help smooth out the cycle and shorten delivery dates, I am not at present satisfied that Government assistance is needed. I am, however, setting up a working party to study this question further.

The Government accept the recommendation that the machine tool holdings of Government establishments should be reviewed with a view to replacing older types with more modern machines wherever it is economically advantageous to do so.

My Department is examining the recommendation that Government contracts should encourage advanced methods by stipulating the use of particular manufacturing techniques in appropriate cases.

The universities have an important part to play in advancing machine tool technology. The Government have drawn the attention of the University Grants Committee to the E.D.C.'s recommendations in this connection and the U.G.C. take account of them in making its allocations. I pay tribute to the example set by the Machine Tool Trades Association in the financing of university scholarships. I hope that it will feel able to extend this valuable scheme. A number of additional Government postgraduate awards are available for next October in the field of technology. It is important that these should be taken up; they should help to meet the needs of the machine tool industry.

Finally, I am setting up in my headquarters an expert machine tool unit, whose functions will include acting as a focal point for co-ordinating research and development in Government establishments with that in research associations, N.R.D.C., universities and in industry. This unit, in conjunction with Government research stations, will be developed to provide a technical advisory service to Government and public users of machine tools and, if desired, to private purchasers.

It is my belief that if the machine tool industry and Government press forward with the measures I have outlined, they can make a significant contribution to the modernisation of British industry.

Mr. Marples

Does the right hon. Gentleman realise that his statement is as long as it is disappointing? One's first impression is that it is woolly, that it lacks precision, and that it sets up a lot of committees.

I should like to ask the right hon. Gentleman three questions. On 2nd March he said that he would not hesitate to come out openly if there was a case for public ownership. Does his statement mean that public ownership has no part to play in his plans?

Seven months after becoming the Minister of Technology the right hon. Gentleman says that he is engaged on a full study of this industry, and that he is proposing to set up a working party to study machine tool ordering. He also says that he is examining recommendations that Government contracts should be used in a certain way, and that he is setting up an expert machine tool unit. How can this prolonged uncertainty do anything but harm to this industry? How does the right hon. Gentleman reconcile this continuing uncertainty and lack of decision with the promise made seven months ago that Labour was poised to swing into instant action with its plans?

Thirdly, how much Government money will be expended on the proposals set out in the statement?

Mr. Cousins

I am surprised that the right hon. Gentleman should complain about the length of the statement, having regard to the fact that a complicated industry is under review. I have not the slightest doubt that I would have been subjected to criticism had the statement been so short that it did not indicate our intentions.

The right hon. Gentleman asked whether this meant that we had no ideas about public ownership. He may have noticed that I have said, and I repeat, that if necessary I would come forward quite openly to do so. If at any time I feel that it is necessary to do so I shall come to the House, and I hope that the House, and not one side only, will recognise that what we are trying to do is to improve the relationship of the economy to the country's requirements, and that if we had to claim that there was need for public ownership of the industry we would do so and get the right hon. Gentleman's support.

With regard to the working party, I would remind the right hon. Gentleman that there have been a series of studies of this industry spread over a period of time. We have waited for the Report from Sir Steuart Mitchell's Committee, and we have now received it. We have acted along the lines of many of the recommendations in the Report. We have gone into the problems which the industry has put forward. We have discussed these and we have acted in line with what the industry felt.

It is not possible to say how much it will cost. It is not likely to be very expensive in the initial stages, because what we are proposing to do which will cost money is, in the main, to purchase prototypes, if there are suitable ones that can be put before us, and that is not likely to be an immediate prospect.

Mr. Shinwell

Does my right hon. Friend know that for seven years Questions have been asked of previous Governments about the need for expanding the machine tool industry? Can he explain why it has been left so long to seek an expansion of this industry? At the same time, can he explain his state- ment about the difficulty of obtaining a British computer, and having to obtain an American one? Who is responsible for this—the present Government, or the previous Tory Government, or the machine tool industry itself?

Mr. Cousins

I would remind my right hon. Friend that the delay in dealing with the problems of the machine tool industry, as is the case in respect of many industries, is a relic of the past, and is not the fault of the present Government.

I said that we had considered securing a British computer, but it is not possible at this time because no British computer can do the job of work that is required. [HON. MEMBERS: "Why not?"] Because nobody has manufactured them in this country, because they have not been encouraged to do so. There is no computer in this country which will meet the requirements of the automatic programming of tools which are capable of taking up to five axes in cutting, and there is not likely to be one for a number of years. That is why we have temporarily had to take the Univac 1108.

Sir H. Legge-Bourke

In view of the right hon. Gentleman's reply to my right hon. Friend on the subject of nationalisation, does not he realise that if at one moment he says that he broadly accepts the recommendation of the E.D.C. which has reported on this matter—and which all of us admire—and in the next moment he says that he will hang a Sword of Damocles over the industry should it ever become necessary in his opinion, it is not likely to solve the problems of the industry, and that the sooner he gets the situation sorted out the better?

Mr. Cousins

There is no Sword of Damocles hanging over the head of the industry. For the first time the Machine Tool Trades Association and the industry in general are beginning to recognise the problems facing them. It is possible to circumvent the cyclical nature of the trade if certain steps are taken. We have welcomed the proposals put up by the E.D.C. and the machine tool trade for dealing with this problem and we have said that we will watch these proposals carefully. I have said that I would not hesitate to bring before the House anything that I regarded as being required to deal with this situation if these proposals were felt not to be dealing with it.

Dr. Bray

Is my right hon. Friend aware that he is to be congratulated on bringing to the House his reactions on the E.D.C. Report before that Report has even reached the Library? Will he take steps to see that a copy is placed in the Library? Is he aware that his statement seemed to refer to only two working groups, one of which is to look into the extremely important question of the cycle in machine tool demand? Is he aware that this cycle is now at its peak, and that it will be urgent in the course of the next few months to take action to make sure that orders for new machine tools do not fall off? Will he therefore place great urgency on the work of this working party?

Mr. Cousins

I will see that a copy of the Report is placed in the Library. On my hon. Friend's second point, we regard it as a matter of urgency, and we have had discussions on it recently with representatives of the trade association, who also recognise that it is easy to be complacent when order books are full. At the moment there is a tendency for a setback in orders, which has meant that the industry has been able to give shorter delivery dates. The two things ought to be married together, but they are not. One of the things that holds up trade and causes the importation of machine tools is the time lag in deliveries. When this time lag is reduced it is because of a falling off in orders for British machine tools.

Mr. Lubbock

Can the right hon. Gentleman say what action manufacturers have taken to put into effect measures for the recruitment of qualified staff? How many qualified scientists and engineers does the industry employ at present and what plans have been made for increasing the rate of recruit-melt? Secondly, in regard to the considerable increase in research and development contracts, can the Minister give us some idea of the budget relating to this part of his statement? Can he say what projects he has in mind and whether all will be carried out through the N.R.D.C. or whether any will be placed direct with the industry? Has he any projects in mind in connection with ordering pre-production models and can be say whether any orders have been placed so far?

Finally, what did he mean when he said that other Government action may be needed to press ahead with the consolidation of the machine tool industry into a smaller number of groups?

Mr. Cousins

This may mean fiscal assistance, too, but it is a step which cannot be taken by my Department; it will have to be dealt with by the Treasury.

On the question of qualified staff 1,000 specialist staff are employed. This amounts to between 4 and 5 per firm, which, in some instances, is not sufficient to deal with the specialised requirements of small firms. These projects will be carried out mainly by the N.R.D.C. We have given it much more satisfactory terms under Section 4 of the Act to enable it to deal with these. It has already taken up some important projects. I would not like to name them at the moment, but it is considering half a dozen now.

Mr. Snow

My right hon. Friend mentioned the question of the factoring of imported models. These factors are too often both exporters and importers. It would be healthier for the industry if more direction were given to, and more interest was taken in, net exporters. Has my right hon. Friend's attention been drawn to the restrictive practices of machine tool manufacturers in refusing to exhibit in mixed exhibitions abroad?

On the question of Government procurement, will my right hon. Friend give more favourable consideration to those who are net exporters?

Mr. Cousins

My hon. Friend's latter point will be a difficult one to determine at a given moment. What we are seeking to do will fit in with my hon. Friend's views, namely, to encourage Government purchasing and procurement from those firms who are advanced, which means those who are likely to be in the export trade. We shall certainly take up the other two points.

On the subject of factoring, I laid particular emphasis on this in my statement because this is the first time that the industry has taken upon itself the responsibility for determining that factoring must be looked at, because it is a very profitable venture for some firms, but not very good for the total economy of the country.

Mr. Hugh Fraser

Will the right hon. Gentleman also consider, when setting up these various committees, having conversations with his right hon. Friend the Chancellor of the Exchequer on the question of investment allowances? They are the key to the whole issue of the machine tool industry. A lot of what he is saying is interesting, but is perhaps beside the point.

Mr. Cousins

This subject is under review between the Chancellor's Department and my own Department. We recognise the value of this incentive.

Mr. Dalyell

Does my right hon. Friend realise that those of us who have visited the N.E.L. at East Kilbride will know of the uplift that expansion will give to those who work there? As the N.E.L. expands, what will be done to create a happier and closer relationship with industry and the University of Strathclyde than previously existed with the University of Glasgow and the Royal College?

Mr. Cousins

This, again, is a matter of which we are aware. We are conscious of the problem that has existed there and have taken certain steps to ensure a happier relationship between the N.E.L., the industry and the University of Strathclyde.

Mr. Heath

May I press the right hon. Gentleman further on the question of investment allowances? How can he reconcile his own attempts to encourage a wider use of our machine tool industry—which is what he said—with the provisions of the Finance Bill, devaluing investment allowances, which is what the Chancellor is doing? Does his reply mean that the Chancellor will table further Amendments to the provisions relating to investment allowances, to meet the point?

Secondly, is the right hon. Gentleman aware that in those countries which have succeeded in evening out the trade cycle —as is the case in Sweden—it has been done through fiscal measures and not through the attempts which the right hon. Gentleman is making? If the right hon. Gentleman wants to remove the Sword of Damocles from over the industry, does not he realise that the only way to do so is categorically to say that he will not attempt to nationalise the industry?

Mr. Cousins

I repeat again that I do not agree that there is any Sword of Damocles hanging over the industry. Nor does the industry feel that there is. There are some hon. Members who would like to imagine that there is, but this is not felt in the industry.

The right hon. Member for Bexley (Mr. Heath) can press me, but I will give no further answer beyond saying that the Treasury and my Department are discussing the whole question of fiscal arrangements—but not exclusively for the machine tool industry—as they affect capital equipment for industry and the effect of this, in its turn—[HON. MEMBERS: "Oh."] There is no problem about this. This has been a subject under review for a very long time.

If I could continue answering the point put by the right hon. Member—yes, we are aware of this, we are aware of the details of the holding back of the taxable portion of the profits for use in the re-equipment of industry during a recession. We are also aware of the Machine Tool Trades Association's own proposals. We are not satisfied that these are necessary at this time, but we are examining them.