COMPANIES (ASSISTANCE) (Hansard, 15 November 1966)

The subject which I wish to raise tonight follows closely the debate that has taken place in the last hour and a half.

I wish to say straight away that the difficulty that I face in looking at this question of Government assistance to the small and medium-sized firm was one which came about when I approached a number of sources in London to ascertain what type of information was available to help the small and medium-sized firm. I got some surprising answers. Indeed, in two cases the well-stocked libraries were not able to offer anything other than a couple of brochures which were available to industry generally.

To show that the situation is not much better in the House of Commons, I approached the Library here, specifying that I required literature dealing with the small and medium-sized firm. I got statements dealing with the Development Areas Order, 1966, and some pictures and booklets about Cumbernauld. I am all for the enthusiasm of the Board of Trade, but this is part of the problem of trying to ascertain what services are available to small and medium-sized firms.

I want to make another observation before dealing with the aims and objectives of Government policy towards the small and medium-sized firm. Some years ago when I was concerned with a management organisation various views were expressed by managers towards the rôle of the Labour Party and the Labour Government, and I think they ran something like this: Labour as such was anti-business, or it could not care less, or its protection of the trade unions made it 399 opposed to the business system. Incidentally, I was never quite sure what was meant by "the business system".

One thing, however, seems quite clear. The assumption that Labour policy is anti-industry is one that should have been removed many years ago. It should be stated that a Labour Government is concerned with the development of the forward-looking enterprise of industry and it is concerned to provide assistance. I think that some of the errors that have been made in describing Labour policy in this way have not helped in the last two years of Government life.

There are three objectives of Labour policy in government. One is to plan and to use planning as an instrument in the efficient running and development of industry. The second is the proper use of science and technology, and the third is to support the small and medium-sized firm. I shall not deal with the first two objectives here, because I want to concentrate on the sort of Government assistance which is given to the small and medium-sized firm. It is true to say that one of the difficulties that the small and medium-sized firm faces is the feeling of isolation, that too much attention is given to the larger unit. In the earlier debate which took place, the question whether or not the C.B.I. was representative of the small and medium-sized firm obviously has some validity.

First, we must be clear what we mean by the small and medium-sized firm, and also we must consider the impact that it has on British industry as a whole. According to the Annual Abstract of Statistics, there are 55,000 manufacturing establishments in this country; 54,000 employ fewer than 1,000 people; 52,000 of the 55,000 employ under 500. This is a very tidy sum of organisations which are small, which are not likely to make the headlines, which are not likely to command a great deal of interest in the columns of our newspapers, but which, nevertheless, are making an enormous contribution both to the productive and the exporting life of the country.

It is also interesting to examine some of the detailed information associated with it. In the engineering and electrical goods industry, nine out of 10 firms employ less than 500 people. In clothing and footwear, out of 7,095 establishments, 400 only 22 have more than 1,000 employees. To take one other example, that of textiles, out of 5,559 establishments, only 54 have more than 1,000 employees. Although statistics can often give a distorted impression to a particular subject these figures survey a field which is often ignored and sometimes mutilated because of the enormous emphasis given to the larger unit. The British economy will depend for a very long time on smaller unit operating, and it is perfectly relevant for any Government to give close attention to what has happened.

There are three things associated with Government aid and assistance. The first is mechanisation and production; the second is concerned with export and trade; and the third is concerned with the individual worker relationships. It has been a practice for some time for national type organisations to be wholly sponsored or given considerable grants by the State. I have in mind organisations like the British Institute of Management and the British Productivity Council. It cannot be denied that a considerable job has been done by those and other organisations. I would mention that we are in the process of welcoming and supporting the year recently inaugurated by the British Productivity Council dealing with quality and reliability.

Here, the case is well taken that, with direct support from the Government, we see an opportunity opening out for companies—particularly small and medium-sized companies—to be made aware of ways of raising efficiency and productivity and, in this case, relating it to a specific item, the quality and reliability of the goods.

Surveys which have been carried out in Europe, America and in this country have shown that the costs of maintaining quality range between 4 and 14 per cent. of a firm's gross turnover. That gives an average of about 10 per cent., which means that a large amount of money is lost in the scrapping and reworking of goods. When investigations relating to quality and reliability are carried out, we find that considerable savings can be made. To give an example, in the case of one company, Clutson and Kemp, of Coalville, it was established that not only were savings made, but relations between management and trade unions have improved enormously.

401 We have an example here of a national organisation, with Government support, making a great effort to establish a particular problem and trying to solve the problem. Therefore, the point behind this and many other attempts to improve productivity is concerned with the initiative shown by the State, and the communication; in other words, the information which is made available by the State to a particular organisation.

These are very difficult areas, and, in replying to this debate, I hope that the Minister will take the opportunity to explain the sort of initiative which has been taken by the Board of Trade. I would like to suggest that the National Productivity Year, which was another example of B.P.C. initiative, was not perhaps quite the success that had been anticipated. I should like to think that the present Q.R. year will be much more successful. Not only in terms of this year, but in all sorts of other ways, in terms of manufacturing and production, it would be useful to know exactly what the Government would like to do. They have to show initiative in visiting, meeting, persuading, urging and facilitating the sons of things about which industry wants to know.

My experience of dealing with small and medium-sized firms suggests that the doubts and conservatism which is reflected by management and ownership is organic. Perhaps I might tell the House of one experience which I had when I was the educational director of a management training centre in Essex. I visited a small firm to try to persuade it to give some attention to the question of improving its interest in educational facilities, and generally to consider management techniques. This was not a revolutionary idea, and yet the works manager said, quite bluntly, that the firm had its share of the market with its customers, and it was not concerned about increasing its capacity or worrying about market research.

That is not an isolated experience. It has been borne out by other people engaged in industrial liaison work who are concerned with meeting industry in a very bare state. This is far removed from the sort of impact and initiative taken by the C.B.I. This is dealing with the almost organic conservatism on the 402 part of industry which is not only unaware of the change, but is highly suspicious of anything concerned with organisational improvement.

We ought to give some attention to the other organisations which receive Government aid and assistance through their member companies. Although I have not the time, nor would I wish, to itemise them, but I must mention the Rural Industries Bureau, which receives about £250,000, and its technical services are very valuable. I can think of some recent examples. A small firm producing baby clothing was encouraged to engage in a Government study. Before the study the wage bill was £7,300. After the study this increased by £1,000, and the turnover of the organisation increased by nearly 20 per cent.

There are many other examples of the Rural Industries Bureau being concerned in dealing with some of the industries of this country which have been protected for many years. It has encouraged managements, in consultation with the workers, to consider ways in which improvements can be brought about. I fully support the way in which the Bureau has tackled its job, and about 2,000 visits have been made in the last year to nearly 1,000 firms.

I am also aware of the proposal put forward by the Centre for Interfirm Comparison, because here is an important technique which is not simply to encourage studies of specific companies, and is not just an overall survey of industry. For many years this organisation has been trying to get companies within an industry to look at their resources to see how far they can be improved. It has made these investigations into about 50 industries, including machine tools, chemicals, clothing, and textiles, and it has also been responsible for similar surveys outside this country.

This type of activity highlights the weaknesses of organisation and is ideally suited for the small and medium sized firms which do not have the specialists which the larger organisations have. I hope that the Minister will take the opportunity of saying what sort of initiative the Board of Trade is likely to take with organisations like the Centre for Interfirm Comparison. I am sure that he would not doubt the sort of work it 403 is doing is valuable not only to industry, but to the nation as a whole.

The second broad area of Government interest is the one dealing with trade and exports. The small firms find it difficult to know where to turn. Possibly they have had experience of trying to go to agencies and libraries. They know that they will be given a massive amount of material, and it is difficult to sort out what it is that they want to have answered.

I congratulate the Board of Trade on producing a booklet by Michael Shanks which goes a long way towards explaining in detail the way in which one can become operational in exports. The problem is not merely one of putting the man in touch with information, although I have stressed the importance of this. It means also that once the manufacturer has sold his goods abroad, he arranges with the retail stores that there is a follow through.

This is one area of our exports which troubles me. When I was in the United States I checked on the way that things were done. This was a purely private matter because I wanted to buy some goods. I checked on the extent to which some of our manufacturers and large stores bother with after-sales service. I was told by a senior sales organiser in a large store in Philadelphia that the French and Germans take a great deal of trouble to provide new catalogues, new facilities and new displays, but that somehow the British never get round to it. In reference to the goods that I was looking at I should mention that although the firm concerned was of international repute it was particularly bad at this.

I therefore suggest that the State should take an interest in this aspect of the question, and that it might consider sponsoring a survey—certainly a much more discriminating survey than the one I attempted myself in a small way—throughout the whole of the United States, selecting key centres—because this is one of our main markets—to see the way in which our goods are being marketed and where we fall down. This is very important because the image that I got from the companies concerned in this country and from the main centres in 404 New York is very different from the impression that I got at the point of sale.

The other point to bear in mind is that the debate has now begun on British membership of E.E.C. The small and medium-sized companies will soon want to know exactly where they stand, and we have a right to know in what way their needs will be met. There is no hostility in this matter; there is no doubt about the desire of the small and medium-sized firms for Britain's entry into Europe. I am reminded of the survey carried out by the British Association of Chambers of Commerce, which showed that 41,000 out of about 56,000 replies suggested that the firms concerned were in favour of Britain's entry.

The third and last area in which assistance and aid are necessary is that of worker relations. A great deal of legislation has been put forward in the last few years by the previous Conservative Government and the present Government to try to involve the State, to a much greater extent, in what happens in industry. The large organisation is at an advantage here, in that it has a greater range of specialists and so is able to utilise to a much greater extent the influences which are reflected in society as a whole.

By this, I mean that the small and medium-sized firms tend to run their businesses as autocracies. Although there are some advantages in this—it can be said that the whole thing is personal, and we can point to works managers and general managers who know the names of all the members of the staff—we have also to recognise the fact that in these small and medium-sized firms the changes that are reflected in our society are not always too obvious.

Therefore, by training and encouragement the State must increase its responsibility in this direction. The job itself cannot be done by the State. The Minister, however, may like to consider the possibility of using existing organisations. I am reminded of the British Association for Commercial and Industrial Education in this connection, which is particularly suited to take on the rôle of training staff, and particularly retraining. We have had many discussions about the need to retrain staff made redundant, and to examine what can be done by training staff.

405 I think of the job done by the Esso Company, at Fawley, some years ago, when, as a means of introducing a package deal, it was possible for the company itself to bring about the retraining of employees. But in the small and medium-sized firms this is not possible. In view of what I have said it is sometimes not even considered desirable. This question must be looked at more seriously.

The other fact, tied up with the question of employee relations, is that the State has an interest in what is happening. It is reflected in recent legislation—the Prices and Incomes Act—which involves the State deeply in what happens between managements and trade unions.

I return to the original comments made by management about the attitude of Labour towards business. These are wrong and I hope that they will be dismissed. Management and workers have much to gain from Government interest and activity in industry and business and the State has a responsibility to support those units which might be isolated from the advantages of large units because of the latter's expertise and the way they can use science and research and produce meaningful technology.

The State also has the responsibility to provide confidence in industry so that industry can make its decisions without constantly worrying about whether there will be a change of policy. The State should provide this confidence and I suggest that industry should prove by its actions that it deserves it.