WOOL TEXTILE INDUSTRY

HC Deb 19 July 1973 vol 860 cc715-24

The Minister for Industrial Development (Mr. Christopher Chataway)

With permission, Mr. Speaker, I should like to make a statement about a scheme of assistance for the wool textile industry under Part II of the Industry Act 1972.

The wool textile industry, most of which is situated in assisted areas, has not in practice been receiving the assistance available under Section 7 of the Industry Act, as it was felt that the criteria for that assistance were not suitable to the particular needs of wool textiles and that an industry-wide scheme was desirable.

The purpose of the scheme now agreed is to secure a viable long-term future for an industry of considerable regional and national importance. It is based on detailed work carried out by the Economic Development Committee for the wool textile industry over the past year. It is designed to help a basically successful industry, which has in the past suffered from low profitability and lack of investment, maintain its competitiveness by rationalising its production facilities, improving its structure and eliminating uneconomic capacity.

The scheme has four main elements. First, firms which re-equip will receive capital grants of 15 per cent. of the cost. Secondly firms which re-equip and rebuild will get capital grants of 20 per cent. Thirdly, for wider-ranging and major projects which include elements other than the renewal of physical assets, we are offering concessional loans or interest relief grants with equivalent effect. But we have to balance the need to strengthen the industry with the need not to create surplus capacity.

As a condition of the assistance I have described, firms will accordingly be required to scrap existing equipment to the extent of at least 90 per cent. of the capacity of the new equipment in the case of carding sets, spindles, looms and dyeing machinery, and of 100 per cent. in the case of combs, and will have to demolish vacated buildings. Fourthly. we are offering grants to encourage the elimination of marginal capacity.

The scheme will have effect from today's date and we shall require projects to have been approved by the end of 1975 and to have been completed before the end of 1977. We are setting minimum figures for the eligibility of projects of £50.000 for re-equipment, £50,000 for rebuilding and £25,000 for improvements to existing buildings. A total of £15 million within existing expenditure provisions is available for the scheme.

It is the view of the Economic Development Committee, with which I agree, that there will be no significant redundancy as a consequence of this scheme. Indeed the major need is to secure that the industry does not lose experienced and valuable manpower and is able to provide stable and attractive conditions. There will, however, obviously be a significant need to retrain and redeploy people affected by schemes of rationalisations and restructuring. To achieve that we are encouraging the employers and the trade unions to agree on a code of practice. I believe that they are making good progress.

Consultations about the scheme under Articles 92 and 93 of the Treaty of Rome have been entered into with the Commission.

The scheme will be kept under continuing review to ensure that it is being operated so as to secure that the assistance is contributing to the longer term rationalisation of the industry.

A copy of the scheme will be placed in the Library.

Mr. Benn

I thank the right hon. Gentleman for making a statement which was first delayed and then leaked. Much of it appeared in yesterday's issue of The Times. A massive subsidy is involved of approximately f15 million with, as I understand it, no public participation or control. There is involved the re-introduction of investment grants. In fact, there are involved four different types of grant, which represent a reversal of past policy.

First, is the right hon. Gentleman satisfied that the scheme will be more satisfactory than the schemes for the cotton textile industry? Further, how does the amount involved compare with what the Atkins Report recommended—namely, £40 million investment by 1975?

Secondly, though the right hon. Gentleman says that he hopes there will not be redundancies, will he give the House an estimate of how many people might become redundant under the scheme? Have the unions agreed in advance to the provisions? As the right hon. Gentleman says that £15 million of public money is to come without increasing public expenditure, from where are the savings to be made? Will the right hon. Gentleman make a statement about that?

Thirdly, has the Common Market Commission agreed to the scheme? I ask that in view of the embarrassing answers which the right hon. Gentleman had to give to an earlier Private Notice Question.

Fourthly, the right hon. Gentleman says that discussions have been entered into. Has the Commission agreed? Will there be parliamentary approval for the scheme? Will there be a debate and decisions made in the House? Will there be a provision for repayment? How much public money has to go into private industry for that industry still to qualify as free enterprise?

Mr. Chataway

The right hon. Gentleman said that there have been reports about the scheme in the Press. He will appreciate that over a long time there has been consultation within the EDC and with the unions and management concerned. The Atkins Report, of course, was published and it is inevitable that consultation has been very public.

The right hon. Gentleman asked whether the scheme will be more effective than previous schemes for the cotton textile industry. We have sought to learn from the successes and shortcomings of the cotton textile reorganisation scheme of 1959 which, I believe, on balance was valuable to the industry. In some respects this scheme follows the 1959 precedent.

It is the belief of the EDC, on which the unions are represented, that the scheme will not result in overall redundancies. The code of practice which the unions and the employers are working out together will, I hope, have the assent of both sides.

The forecasts made in the White Paper on Public Expenditure of the likely expenditure in the regions as a result of the Industry Act were such that this expenditure falls within those forecasts.

I am sure that the right hon. Gentleman is well aware that he now has the reputation of being a Cassandra with feet of clay—[Interruption.] The right hon. Gentleman has sought to spread anxiety on so many occasions without any success. My officials have had extensive informal discussions with officials of the Commission. We have taken its observations fully into account. We have not yet secured formal clearance. That necessarily involves some discussion with other member States which is not complete. We are satisfied that the scheme meets the Commission's guidelines on aid to the textile industry.

Mr. Wilkinson

Does my right hon. Friend agree that if this decision is a reversal of policy, it is a decision by Her Majesty's Government which implements the recommendations of the Hunt Committee on intermediate areas which the Opposition when in government refused to implement?

Further, does he recognise that this is extremely welcome news for Yorkshire and for Scotland because it represents a decision to invest in success at a time when the wool textile industry, as far as cloth and tops are concerned, increased in volume its export performance over the past 12 months by no less than 25 per cent.? The Regional Development Officer of the Yorkshire and Humberside Economic planning region has said that the Yorkshire region could experience a boom of no less than threefold in coming months. Does my right hon. Friend agree that this is the sort of decision which gives great hope to the region and to the wool textile industry, which is of immense importance to Britain?

Mr. Chataway

I am grateful to my hon. Friend. I agree that the industry is achieving considerable success at the moment. It is meeting 90 per cent. of the home market and exporting £150 million, which is nearly one third of its production—[Interruption.] Why Opposition hon. Members should decry its success, I do not know. The plain fact is that the industry during past years has suffered from low profitability because of much outdated equipment and buildings. Therefore, there is a need, if we are to ensure the industry's long-term success, to encourage rationalisation and greater efficiency. The scheme will have a considerable environmental effect, particularly in Yorkshire and Humberside, as it will lead to the demolition of some of the worst old buildings which still disfigure the region.

Mr. Torney

Is the right hon. Gentleman aware that a year or so ago there was considerable worry among the operatives in the textile industry in Bradford about the security of their jobs and redundancies, which at that time were widespread? Does he think that it is wise —I welcome the investment which he has announced—that the money should be given without some public, ministerial or parliamentary control to ensure that the employers do not create redundancies because of rationalisation, as they have done in the past?

In a leading article in yesterday's Bradford Telegraph and Argus attention was drawn to the gross discourtesy of the Minister in allowing leading representatives of the industry to come to London on Tuesday in the expectation that the statement would be made, when it was not. I hope that the Minister will not tell me that it was not made because of pressure of parliamentary business, because he knew last Thursday what the parliamentary business was to be. The leading article said that the woolmen's comments were unprintable. The incident has shown a complete lack of co-ordination between Government Departments.

Mr. Chataway

I am sorry that some journalists were inconvenienced by the timing of the statement, but I have the responsibility to make the statement to the House first. On the major question which the hon. Member raised, this is a scheme into which both unions and management have put a great deal of work over a considerable period and it follows the thorough study in the Atkins Report. The hon. Member need not feel that the interests of the employees or the unions will be overlooked in the scheme. The industry is in a healthy condition today, whereas a year or two ago it was not. One of the features of the wool textile industry has been the cyclical nature of the business. This is not a short-term scheme to deal with such difficulties. It is a scheme aimed in the long term to make a successful industry even more successful.

Miss Joan Hall

Will the Minister say how the scheme will affect training, because one of the biggest problems of the industry at the moment is the shortage of labour? Will it be a matter of taking workers from other industries? How does the scheme fit in with the Government's wages policy? A lot of thew firms will be interested to know how it fits in with the Government's policy on profits.

Mr. Chataway

Obviously, there will be no exemption for this industry from the laws which apply to other industries. However, there will be a need for substantial retraining, and this is one of the matters which are currently being discussed between my Department, unions and management. I hope that by that means and by creating better conditions in the industry, not least more attractive conditions of work, in the long term the industry will be able to attract sufficient labour.

Dr. Summerskill

There will continue to be concern among those who work in the industry in spite of the Minister's welcome announcement as long as there is a feeling among young trainees that they may be made redundant when they are 40 or 45. There is a feeling among the middle-aged employees that they are now no longer of any use, and the threat of redundancy still casts a great shadow over the industry. The announcement will not be wholeheartedly welcome unless that threat is removed.

Mr. Chataway

The industry employs about 100,000 people—it is still a big industry. The fact that it is able now to compete so effectively in world markets is a guarantee of its continuance. But, obviously, the scheme is intended to contribute to its efficiency and, therefore, to its continuing ability to employ people on attractive conditions.

Mr. Powell

Will my right hon. Friend make clear whether this taxpayers' subsidy is to be paid to these firms because they are winners or because they are lame ducks, or something in between?

Mr. Chataway

There is a certain similarity between this scheme and the cotton textile reorganisation scheme of 1959 which my right hon. Friend supported.

Mr. Powell

I spoke against it.

Mr. Chataway

In preparing this scheme in the early stages I read with considerable care the debates on the cotton reorganisation scheme and I was particularly struck by the speech which my right hon. Friend made on that occasion which, with qualifications, supported the scheme.

Mr. Powell

I spoke against it.

Mr. Chataway

My right hon. Friend went into the Lobby on its behalf.

Mr. Powell indicated dissent.

Mr. Chataway

I believe the action which was taken then with good effect on the cotton textile industry is well justified in this industry. The wool textile industry has had difficulties associated with outdated machinery and buildings but it has shown that it can be highly successful.

Mr. David Steel

At first sight the scheme appears to be an imaginative and conditional form of assistance to the industry in the development areas. Is the right hon. Gentleman satisfied that the minimum eligibility figures he has specified of £50,000 and £25,000 will not inhibit the development of small wool firms which may also require this assistance? Has the right hon. Gentleman any forecast or estimate of the proportion of the £15 million which will find its way to the industry in Scotland?

Mr. Chataway

It will be difficult to make forecasts in answer to the latter part of the hon. Member's question, although the amount going to Scotland will obviously be a minority part since the minority of the industry is located in Scotland. It was thought right to set the minimum figures at the specified levels because there are now in the industry too many small units and there is a need for rationalisation. I do not deny, however, that there is a need for small specialist units, and if they do not qualify under this scheme they will be able to apply for Section 7 assistance under the normal arrangements of the Industry Act.

Mr. Skeet

Will my right hon. Friend indicate the amount of money the industry has spent since the Atkins Report of 1969? The important part of this scheme is the investment in new machinery. Is it likely that that machinery will be acquired in Europe or in the United Kingdom.

Mr. Chataway

There is no doubt that a certain amount of the machinery will be imported since some European manufacturers have a considerable strength in the production of such equipment. I naturally hope that as much of it as possible will be bought in this country.

I agree that the provision of new plant and machinery is extremely important but the encouragement for reorganisation, restructuring and the construction of new buildings is of equal importance.

Mr. David Clark

Does the right hon. Gentleman realise that the people in Yorkshire can give him only two cheers for the announcement? We welcome the injection of capital into the industry, but the Minister did not give the other half of the equation. What is in this for the workers? Has the Minister forgotten that 40,000 people have lost jobs in the industry since June 1970'? Why is there no mention of a redundancy scheme in his statement, since I believe there was mention of the matter in the discussions in the Economic Development Council?

Mr. Chataway

We do not expect there to be any significant overall redundancies. The scheme has the support of both sides of the Economic Development Council. I know that the hon. Member will have been most encouraged by the big fall in unemployment in Yorkshire and Humberside and by the general health of the region.

Mr. Benyon

Is not this industry currently one of the most prosperous in the country, as witnessed by the recent reports of the companies concerned? In that case why could not these funds have been provided through normal commercial channels?

Mr. Chataway

These firms over a substantial period have not been able to invest on an adequate scale, and the particular nature of the textile cycle has been, in part, the reason for that. It is an industry which, given the encouragement to take the necessary steps to render it more efficient, is most likely to succeed. The scheme therefore represents investment which will be of substantial benefit to the regions concerned and to the nation.

Mr. Benn

May I ask the Minister to answer the question I put to him earlier? Will the scheme require parliamentary approval? It is a £15 million scheme under the Industry Act. I think that by an oversight the right hon. Gentleman failed to answer the question.

Mr. Chataway

If there were any project which amounted to over £5 million, it would require us to proceed by affirmative resolution.