HC Deb 02 April 1976 vol 908 cc1765-823

11.4 a.m.

Mr. Michael Neubert (Romford)

I beg to move. That this House urges the Government to give early evidence of its determination to encourage greater productivity and profitability in industry in the interests of increased investment and expanded opportunities of employment. Just as every idea has its time, so every motion has its moment. Who could deny that at the end of a week which has seen five strikes paralyse British Leyland—a company to which £1,400 million of public money is committed and on which so many workers and their families as well as their fellow-countrymen depend—this is an apt subject for discussion today?

At times like this it appears that car workers have been overcome by a collective death wish, urged on by their lemming-like leaders to be the first over the edge of the cliff. We are told that last year British Leyland lost the equivalent of 5,000 man-years through strikes. That is the equivalent of 5,000 men at British Leyland being unemployed for a full 12 months or, in terms of production, 137,000 lost cars. When we consider that one of British Leyland's problems is not just its productivity, its ability to produce cars given the workers, but the fact that it does not have enough cars to sell in a market crying out for its models, the tragedy is all too clear.

The tragedy is brought home by interviews such as that which took place in a television news bulletin, at the beginning of this week, with an Amalgamated Union of Engineering Workers' convener. I do not quote his exact words but I am sure that I do him justice when I say that he said "I couldn't care a tinker's cuss about the company's problems. My job is to secure better wages and conditions for my members." If that is the quality of leadership at shop-floor level, if that is the length of sight the workers' leaders have, and if that shows their intellectual grasp of the problem facing us, perhaps our sympathies ought to go out to the car workers.

It is clear that the situation facing British industry is serious. Industry may be afflicted not just with a malaise but with a fatal malady. This subject does not rest entirely with the car industry; it rests with industry in total. The importance of industry to this nation's well-being should not be underestimated. It accounts for about four-fifths of our visible exports and three-fifths of our total exports. The fortunes of British industry are very much the fortunes of each individual citizen. That is the justification, if any were needed, for bringing this issue before the House once again.

I have claimed that every motion has its moment and that this is the moment for this motion. It could, however, have been brought forward at any time in the past 10 years, such has been the prevailing pattern in the industry over that time. It is a great economic loss to the country that this situation should continue. My starting point is the level of production generally, which in recent months has been running at about or below the level of the three-day working week of two years ago.

It is an interesting, if not fascinating, fact that during the first quarter of 1974 production reached a level of 96½ per cent. compared with the same period in 1973. Behind that simple statement lie a host of inferences and implications, which could be examined in detail. For example, there is no doubt that stocks were reduced during that period and that extra hours were worked during the three days available. There is no escaping the principal conclusion, the fundamental fact, that this showed how abysmally poor our productivity level is. In crude terms it means that in half a week—and for many people three days is half a week—we managed to achieve nearly as much as we normally achieve in a full week.

In practical terms, people are taking home a week's wages for half a week's work. This is not only a serious economic factor; it is serious in personal terms for the people engaged in industry. There can be nothing more stultifying or sterile than to be in a job that only half exists, or perhaps does not exist at all, whiling away the time until the end of the day. In a recent television programme by a critical, if somewhat outdated, Amercian commentator, perhaps the most galling scene was that of shipyard workers at Sunderland calling and shouting to be let out a quarter of an hour before their due time had expired. Theirs is an industry which is very seriously threatened, as the Minister knows only too well.

There are long parts of the day in which no work properly exists for many workers in British industry, and it is not surprising that they turn to strikes, disruptive action and meetings in working hours as a means to alleviate boredom. As I know from personal experience, nothing is worse than montony, having a job which does not exist and trying to fill out one's time to look as if one is working. In these terms, this is a tragedy for our country.

In consequence of this low level of production, virtually any section of British industry can provide examples of serious overmanning and poor productivity. Figures produced by the British Steel Corporation and supported by others from the United States show that for every 100 tons per year produced by a man in the British steel industry, the output of a French steel worker is 140 tons, of a German 160 tons, of an American 200 tons, and of a Japanese 250 tons.

These are frightening figures. They mean that the bad news for this country comes not just from Ghent but from all over the world. It is ironic that at Llanwern we had the most efficient blast furnace in the country, but it lay idle for a year because of disputes. The choice of the man most prominent in the disputes to light the furnace at the end of those tragic 12 months proves why the English sense of humour rightly has the reputation of being unique.

I wish to concentrate specifically on the British car industry because there is a wealth of information available on it, ranging from the Ryder Report, that rushed-out parliamentary potboiler which sought to meet an urgent situation, through the more considered Report of the Expenditure Committee to perhaps the most authoritative document, the Report of the Central Policy Review Staff—the think tank—on the future of the industry.

I also take the car industry because of its importance to this country. I do not wish to overlook its success, which last year led to an increase, of 38 per cent., in exports, total sales of £2½ billion, and a net favourable balance of trade of £1½ billion. This is very important. The motor vehicle industry is highly complex, with the different sectors making different contributions. Very often the focus rests on the car-making side. This is where the threat has been in recent years and where evidence of poor productivity is most easily available.

Ford, at Dagenham, is outside my constituency, but it is an important company for many of my constituents and for many people throughout the country. One wonders why the CPRS figures are not quoted more often. Certainly levels of production rarely find any prominence in ministerial speeches. Perhaps the words in King Lear are true: Truth's a dog must to kennel. Or, as T. S. Eliot said: Human kind cannot bear very much reality". But the reality is breaking in on us and facts must be faced. It should not be condemned as unpatriotic to bring them to people's attention and publish them as widely as possible. The facts of the CPRS Report are damning and significant.

The CPRS makes clear that, The British car industry has serious competitive weaknesses. The obligatory side-swipe at management is taken, which may be earned, and other criticisms include, There are too many manufacturers with too many models, too many plants, and too much capacity. These are the responsibility of management. Other severe weaknesses are poor quality, bad labour relations, unsatisfactory delivery record, low productivity, and too much manpower. With the same power at his elbow and doing the same as his Continental counterpart, a British car assembly worker produces only half as much output per shift. That is a significant statistic. These weaknesses basically arise on the shopfloor and it is on the shopfloor that they must be corrected. We have sought to elude this conclusion in recent years by urging that more investment is needed, but it cannot be denied that with the same power at his elbow, the British car worker is not competitive with his counterparts elsewhere in the industrial world.

In the Ford organisation there are plants in different countries making virtually the same cars. Ford at Dagenham, makes the Cortina and at Genk it makes the Taunus, which is very nearly the same car, in all but 5 per cent. of its details. Standard hours are set for the completion of both cars. While the Belgians are 6 per cent. or 7 per cent. off their target time for production, the Dagenham workers are 65 per cent. off target. That may seem bad, but it gets worse. The workers at Halewood produce an Escort identical to the one produced at Saarlouis, in Germany. The Halewood workers take more than twice the target time for production compared with the Germans, who are about 10 per cent. off the target time.

There are no alibis left. It may be claimed that we need more investment, but that is not the reason for the examples of poor productivity which I have given.

To take another example, in terms of added value, the Opel firm in Germany are peak performers with a production per man of something like £6,000. If we take that as 100 per cent., in comparison, Ford in Germany is 98 per cent., Renault in France 90 per cent., Ford in Dagenham 69 per cent., Vauxhall 59 per cent., Leyland 44 per cent. and Chrysler 41 per cent. That is the measure of the difference between our car companies and their productivity per worker in terms of added value—created wealth—and some of their competitors in Europe. It will not have escaped the attention of the public that their money is being put into the two bottom companies.

As a trading nation, we need to create extra wealth. We depend on it not only for our wages and welfare but for new investment and a competitive position in world industry. This fact was brought home to me on a recent visit to the Bristol division of Rolls-Royce engines. Many examples of marvellous British technology are produced there, and I was shown a small amount of crude metal, costing no more than £30 which, by the end of the process, was turned into a sophisticated piece of high technology worth the equivalent of a new Mini.

This is where our productive expertise ought to be put to good use. We have ingenuity and skills which are renowned and respected throughout the world. That is where we should be concentrating our efforts. Until the discovery of oil off our shores, we had always been an island of limited resources, based on coal mines and surrounded by a sea of cod—both of which have been the scene of intermittent hostilities recently. We must depend upon our ingenuity and skill rather than on resources which are available to us by accident of geography or history.

Added value is a useful concept in political terms. "Profits", which is the concern of my motion, is a pejorative term. After being abused by politicians throughout the decades it takes on a meaning that is undeserved. We are probably irreparably handicapped for making the profits we need if we as a nation are to turn the corner. On the other hand "added value" specifically indicates the process of creating new wealth. On that new wealth must depend the improved prosperity of the British people. From it people will be paid wages and salaries, and from it investment sources will be found. If there is to be an improved standard of living it will be from that new wealth.

Dr. Frank Jones, a Fellow of the Royal Society and a director of Philips, has extended the added value concept to other industries. Plessey—another company which has a branch in my constituency—in comparison with Sony, the Japanese manufacturer, has a figure of added value per worker of under £3,000, whereas for Sony the figure is over £10,000. That is another illustration of the scale of difference, which the motion highlights, between our productivity and that of our competitors.

There is a much greater disparity between the way in which that added value is spent in this country and in Japan on wages and salaries, pensions and other welfare contributions. For Sony that contribution is about 38 per cent. and for Plessey it is about 75 per cent. Generalising between British and Japanese companies, one finds that whereas the Japanese might take half-and-half for these purposes, the proportion in England is much higher. In Germany there is a lower contribution from added value to wages and salaries. In America it is lower still, at 45 per cent., 55 per cent. being retained for dividends, investment and new capital development.

The Cambridge Economic Group's report, which started this gloomy week, points out that since 1965 the increase in income, in real terms, is £5,200 million and the increase in claims on that income is £16,400 million. That shows an inflationary gap of £11,200 million, which, as we know to our cost and as will be confirmed on Tuesday, has been financed by reducing stocks and borrowing abroad.

The report put it well by saying that this was a succinct way of demonstrating simultaneously our poor performance in terms of productivity and competitiveness and an unwillingness to accept the consequences in terms of lower living standards. That comes out in the recorded utterances of Hugh Scanlon, who, when forced up against a wall, will finally claim as his reason for pressing for more money for his members that they are poorly paid by comparison with their counterparts on the Continent and elsewhere. That is not an economic justification. That improved standard of living has to be earned, and we are patently not earning the standard of living we enjoy. Inevitably, that standard of living has to be forgone and a lower standard of living accepted, or we have to improve our productivity and reach the levels of production achieved elsewhere.

It follows from this that profitability in British industry is pitifully low in real money terms, in return on capital and in tax yield. No one would dispute that contention. In case anyone should try, I shall draw one or two illustrations. It has been shown that in five of the nine years between 1965 and 1973, retained profits did not go to meet the tax interest and dividends claimable on them. Therefore, money was not available for investment. We are always handicapped by not having the latest figures, but one can assume, without being prejudicial, that in the past two years the position was worse. In 1960 the return on capital before tax was 13 per cent. By 1974 it had declined to 4 per cent. After tax the equivalent descent was from 9 per cent. to zero. One can imagine that many companies make real losses, whatever may be the apparent Inflation-made profits published in the newspapers without proper commentary or explanation.

There is, therefore, this outdated belief that British industry is profitable, that there is profiteering, and that individual members of our community are securing a much bigger share of the proverbial cake than they should, but that is not so. We cannot test that theory to breaking point but we have already seen the consequences through workers now beginning to understand that unless their company is profitable their jobs are at risk and redundancies are inevitable. Unemployment is higher now than it has been at any time since the war, and it is likely to persist and possibly get worse.

We must look to an improvement in profitability. One factor, apart from the general recession and poor performance in productivity, is the Price Code, an instrument of price control introduced nearly four years ago and intended to meet a short-term need. It was a quid pro quo to achieve wage restraint, at that time statutory, now voluntary. It was introduced in a hurry and was related to the historic background of the time, in particular to the five years from 1968 to 1973, which are irrelevant in 1976. In two of those years company profits were geared to performance. The Price Code can hardly be relevant to the post oil price increase era, yet still that basis of measurement is used.

After a period of inflation which reached its peak at 26.9 per cent., we have the delusion that prices are being controlled by the code. They are, in small measure. The Code hurt. It cut into price increases, but only at a time of maximum inflation. It is contended now that the Code is at best ineffective and at worst damaging to the few companies that can make profits over their reference levels.

The Price Commission's Report on the action of the Price Code shows that profits generally are well below 50 per cent, of the Price Commission's reference levels—well below half what the Government would permit companies to earn if they could. One might say that an instant argument for retaining the Price Code is that it does not affect the companies. But companies do not operate on a smooth flow of profitability over the years. Many companies, by the nature of their products and services, are cyclical, others fluctuate. The reason why companies have survived for so many years is that they have weathered the bad years by resources garnered in the good years, whereas the Price Code takes no account of fluctuations of that order. It does not allow companies to market when demand is strong and when prices can be put at a high level, so as to reap the benefits in the interests of the slacker years when there is a lower level of production and enable companies to keep on staff and employees.

There are other more minor but none the less significant and irritating aspects of the Code, particularly in terms of productivity. There is the double productivity deduction. One aspect of this is the deduction for allowable cost purposes of 20 per cent. of any increase in labour costs. With the first full flow of labour pressures building up, it has been a penalty on the company to make that deduction, because the company had no chance at all of achieving a productivity gain equivalent to 20 per cent. It merely had to pay up and look big about it. Therefore, it is something of a misnomer, if not an actual deception, to call it a productivity deduction.

In the old days, productivity was a potent factor in wage negotiations, but the extra wages were paid only when productivity was achieved. Nowadays it is just a device for increasing wage awards. Then there is the fact that, because profits are controlled by reference to unit costs, if a company can reduce its costs it does not benefit, because that reduction has to be passed on to the consumer.

It may be argued that it is fine for the consumer, but that is the short-term approach to industry's problems which is proving so damaging, because there is no incentive on companies to reduce their profits in this way. As they are allowed profits on a percentage of turnover, this merely has the effect, unless they are able to increase turnover, of lowering the actual profit they are allowed.

Productivity and profitability are two key factors in the need for new investment. This is very much the message of our time. Investment can come only from improved profits and improved return on capital invested. Capital is not only invested by companies from the profits they make; it is invested by small savers, by institutional savers, but that can be encouraged only if they can see a sufficient return for their money to make it worth their while, otherwise they may find that investing their savings in objects for the household gives a better return.

In the more elevated circles, restricted though those now are, this may take the form of investment in gold, silver, precious stones, and so on, but we shall not get investment in industry unless there is a sufficient return, and that manifestly has not been the case, particularly with dividend restraint and limits on company profits. The Government have a chance, in their Budget next week, to do something about this. I hope, too, that they will take note of the need for making other reforms. That is why the motion calls for early evidence of the Government's determination.

I should like to link what I have said this morning with a quotation from a speech made by the Secretary of State for Prices and Consumer Protection on 28th January. She said: To obtain a national consensus on profits is … a major priority. Without it we shall not obtain the productive investment we all need so badly. At a time when the profit squeeze has demonstrated its damaging effects on investment and jobs, there is a growing recognition on the part of employees that job security depends vitally on the profitability of their enterprises, and that profitability is very much dependent on productivity, income restraint and industrial peace. That puts it very well, but it is not sufficient for Government Ministers to make speeches of that character and courage to the Financial Times counter-inflation conference, as in this case, or to a meeting of finance houses in the City. They must have the courage to go out and put the message to the public—and in particular to the workers in industry.

Let Ministers make speeches of that order on the occasion of the Durham miners' gala. Let them celebrate Labour Day by revealing to their supporters, and to people of all parties in the unions, that unless productivity improves, and unless profitability is no longer to be regarded as a dirty word, their jobs are at risk. Let Ministers state clearly on such occasions that we are being sustained in our present faltering standard of living only by the generosity of overseas lenders, that this cannot go on, and that they know it cannot go on.

This is the issue which is leading to a loss of loyalty among union members towards their leaders. As long as the leaders can deliver the goods in terms of increased pay and secure jobs, they will have their members' support, but once they fail and the members see that their incomes in real terms are slipping very badly and that their jobs are being lost in hundreds of thousands, month after month, the leadership will have lost the strength of its support. That, presumably, is a matter of some concern to the Labour Government.

Taxation does its deadly work as well. If we want evidence of the poor profitability of British industry at this time, we can see it in the figures of the tax revenue for the current year, where corporation tax accounts for 7.9 per cent., its lowest since it was introduced 10 years ago, whereas income tax, which falls on an increasing number of us—virtually all of us nowadays—takes for the first time more than half the tax revenue. That is the balance which is so fundamentally wrong in Government strategy.

At this time, on Friday 2nd April, looking forward to next Tuesday's Budget, we must hope that the Chancellor of the Exchequer will take the opportunity to remedy many of these very clear needs of British industry and of the British people at large.

I hope that the Minister, in his reply, will favour the House by not reading copiously from his well-thumbed copy of the Chequers conference communique, because few people can have very great confidence in that. It was undermined right at the start by the Chrysler negotiations—which had already begun—when it was revealed that despite that conference statement, short-term expedients and, in particular, political considerations in the face of the Scottish National Party onslaught in Scotland, counted more with the Government than did the needs of the country in the longer term. As long as that attitude persists, we cannot solve these fundamental problems.

It is, after all, a matter of great concern to people to know that their industry is profitable and that it can still be the basis for this country returning to the prosperity it enjoyed for so long, and could enjoy again, given our skills.

A week is a long time in politics. Five months is approaching infinity in regard to industrial strategy. If we continue on this course we shall impoverish future generations. We are living on borrowed time and borrowed money. We are taking the future from our children and our children's children by mortgaging this country up to the hilt. If we do not arrest this catastrophic course, they will not thank us for it. We are trustees for those future generations, and have no right to a standard of living that is way beyond our present means.

11.38 a.m.

Mr. Ernest G. Perry (Battersea, South)

I congratulate the hon. Member for Romford (Mr. Neubert) on his good fortune once again in winning a place in the Ballot for a motion on a Friday. I believe that this is the second time the hon. Gentleman has won it since he has been a Member of the House.

The hon. Gentleman's actions and those of his party somewhat belie the terms of the motion. He asks the Government to intervene and do something about increased investment in industry. Every time the Government try to do this in any of our major industries, however, the hon. Gentleman and his hon. Friends do everything they possibly can to prevent the Government carrying out such a policy. What the hon. Gentleman said in his speech bore no real relationship to his motion.

At one stage in his speech the hon. Gentleman referred to the report last weekend from the Cambridge Economics Group, and its gloomy predictions for this country. I think that the hon. Gentleman surpassed the Cambridge Economists with his own gloomy predictions for the country in the very near future, although he is not usually the sort of Member to adopt a very gloomy attitude. This morning, however, the hon. Gentleman has been spreading gloom rather like a farmer spreads muck on his fields. I am surprised that at a time like this, just before the Budget, we should find ourselves listening to a gloomy speech of that type.

In just a few moments the hon. Gentleman glossed over such matters as taxation, investment, the Price Code, the oil crisis, profitability, unemployment, productivity and dividend restraint. He went through all those subjects extremely rapidly as though they were of secondary importance and could be dismissed in moments. However, each of the subjects on which he touched is sufficiently important to justify a motion to itself and for the House to spend a day discussing it.

I took exception to several of the items which the hon. Gentleman discussed. He sought to blame our ills on the ordinary person below the executive class. He spoke of people getting a full week's pay for half a week's work.

Mr Cyril Smith (Rochdale)

It looks as if that may be the case among a great many Government supporters this morning.

Mr. Perry

I hope the hon. Gentleman is not suggesting that Members of Parliament get a full week's pay for half a week's work. There are a great many hon. Members who come from the provinces, from Scotland and Wales, from the North and from the South-West who have to return to their constituencies on Fridays because that is the only day when they can see their local authority representatives to try to solve many of the problems of their constituents. I hope that no one will denigrate an hon. Member who is not here on a Friday. I happen to be a London Member. I see a surfeit of London Members in the Chamber this morning. There are at least three present. London Members regard it as a sacred duty to come here on Fridays to show their constituents that we are here.

But do not let us think badly of hon. Members from the far North, from the South-West, from Scotland and Wales and even from such remote places as Rochdale who cannot always be here on Fridays. Usually they are working in their constituencies attempting to solve the problems of their constituents. It is unfair to say that Members of Parliament should be here 24 hours a day and seven days a week. I resent it when it is suggested that Members of Parliament are fully paid but work only three days a week. I suppose that there are no harder working people in this House than those who occupy Mr. Speaker's Chair. They put in a tremendous number of hours, as do Front Bench spokesmen on both sides of the House. Therefore, if anyone makes that kind of suggestion, I reject it straight away.

The hon. Member for Romford spoke of workers below the executive level who do not pull their weight, who do not do their jobs properly and who might be said to "skive off" all the time. He spoke of workers rushing to get out a quarter of an hour early and so on. But let us put the blame where it belongs. If the management of a firm cannot organise its workpeople so that they do the job they are supposed to do, it is management which is lacking. What is more, this this area of inefficiency—because I admit that that is what it is—exists not only on the factory floor but in the boardroom as well. I know that most directors spend all their time in the business trying to make their firms profitable, but there are the skivers on any board of directors who would rather be on the golf course than on the shop floor talking to shop stewards and foremen. This applies is ail sections of British industry. We have to put the blame on certain people, and some of them are politicians.

I remember the 1959 General Election, when the then Prime Minister, Mr. Harold Macmillan, a man whom I greatly admire, used that famous phrase You never had it so good ". It was the way he said it on television and over the radio that won him the election. However, it was an incentive to people to think that all was well, that they were all right and that they did not have to change their ways. But this country has to change its ways if it is to survive in this economic world.

However, we shall not solve our problems by playing off one section against another. It was the Conservative Party in power from 1970 to 1974 which introduced the Price Code, about which the hon. Member for Romford spoke. Lord Barber, then Anthony Barber and Chancellor of the Exchequer, realised the dangerous situation that the country was in, and in full sincerity and earnestness he literally gave away hundreds of millions of pounds to help wealthy companies and wealthy taxpayers in the hope that it would be reinvested in industry. Unfortunately, the money did not go into industry. It went into property investment.

I shall not give the figures this morning, but I have obtained some statistics from the Library showing the capital exported from this country since 1972–73, and they show that it was twice as much as the amount of capital imported for development. The amount of capital sent out of this country for development abroad far exceeds the amount of foreign capital coming in. I see that the hon. Member for Woolwich, West (Mr. Bottomley) is bursting to intervene. I do not want to give the figures, since I happen to know that they will be given in the course of a maiden speech by one of my very good Friends. The figures are in the Library, and they show that the amount of capital going out of the country during this period is more than double the amount coming in.

Mr. Peter Bottomley (Woolwich, West)

May I refer the hon. Gentleman to an answer given yesterday by the Chief Secretary to the Treasury, who said that there was a net capital inflow in 1975. 1974 and 1973?

Mr. Perry

I shall have to compare the figures supplied to me by the Library with what the hon. Member says. One of the problems in this House is that people draw different conclusions from different sets of figures. I cannot take up in any detail what the hon. Gentleman said, because the figures supplied to me are reliable since they come from the Library's statistics department, and I am prepared to accept them. However, I do not suggest that what the hon. Member for Woolwich, West said is not true. This is merely another indication of how careful we have to be about what we say when we are discussing figures of this kind.

Mr. John Garrett (Norwich, South)

Is my hon. Friend aware that the hon. Member for Woolwich, West (Mr. Bottomley) is almost certainly confused about this matter? He is referring to investment in manufacturing industry, whereas as a result of inflation very little capital went into manufacturing industry. Instead it went into the financial institutions. On the other hand, when the last Conservative Government were in office, as a result of the encouragement to British industrialists to invest, the amount of investment abroad trebled.

Mr. Perry

I am obliged to my hon. Friend for that information. However, I do not agree that the hon. Member for Woolwich, West is confused. I have listened to him on many occasions. I know that he examines problems in detail and tries to find solutions. I give him full credit for that.

As my hon. Friend the Member for Norwich, South (Mr. Garrett) pointed out, that was what happened in 1972, 1973, 1974 and 1975, and the Chancellor of the Exchequer tried to check it. Unfortunately he failed, and that failure led to many of the crises about which the hon. Member for Romford spoke.

My main object in speaking this morning is to say that I agree with most of the terms of the motion but that the actions of the Conservative Party belie the terms of the motion. Every time that the present Government try to help firms, we have lengthy debates about why we should not do it. Often when a piece of legislation of this kind goes upstairs to Committee, barriers are put in the way of getting it through the Committee stage. It is happening now. The Opposition call for Government help, investment and resources to assist certain industries. When the Government respond and the necessary Bill goes to Committee, the proceedings are delayed in order to create a political log jam.

The Minister of State, Department of Industry (Mr. Gerald Kaufman)

Is my hon. Friend aware that today is a day off for me from Standing Committee D on the Aircraft and Shipbuilding Industries Bill? In that Committee we have had 44 sittings—107 hours—in which the Opposition have been frittering away time which is essential to the salvation of the shipbuilding industry and to the progress of the aircraft industry. The hon. Member for Colne Valley (Mr. Wainwright), who is a member of the Committee, has in disgust given up attending because of the antics that are going on.

Mr. Perry

I am grateful to my hon. Friend for his comments. I know of his devotion to duty in that Committee. He provides an answer to the hon. Member for Woolwich, West, who remarked how lazy MPs were. The hon. Member should go to the Committee Floor—perhaps he even attends Committees—and there he will sec Members sitting for 12 hours a day on matters of vital importance to the country. MPs should be given credit for that.

Mr. Michael Marshall (Arundel)

I am sure that the hon. Member will want to put the record straight in view of his knowledge of Committee proceedings. For the Minister of State to whip in that swift "commercial" was disgraceful. Those of us who read the Official Report of the Committee's proceedings know that many views are put forward from the Government Benches by prominent Government supporters. One point which comes through repeatedly is that it is wrong to bring aerospace and shipbuilding within one Bill. That view is shared on all sides of the Committee as well as in the House.

Mr. Perry

To some extent I must agree with the hon. Member for Arundel (Mr. Marshall). The Government may have made a mistake. I do not intend, however, to criticise the legislative procedure or how Bills are put together. My concern is to stress the devotion to duty of hon. Members on both sides of the House. I reject the hon. Member's suggestion that my hon. Friend the Minister of State got in a quick "commercial". It is sometimes difficult for Front Benchers to do that, but I am grateful to my hon. Friend for what he said. It is wrong for barriers to be placed in the way of the Government's attempts to assist industry.

I agree with the motion that we need better profitability. The word "profit" is not such a nasty word today as it was 50 or 100 years ago. Even the Soviet Union recognises that profitability and profits oil the wheels of progress. We hope, however, that profits are used to enhance investment and for the benefit of everybody in the country. To that end I want greater productivity and profitability.

The hon. Member for Romford should not take such a gloomy view. If we stop blaming different parts of society for our troubles, if we stop laying them at the door of the factory worker or the board of directors and instead join together in a co-operative effort between all sections, the country will pull itself out of the rut it is in. That is the task which confronts us and which on Tuesday my right hon. Friend the Chancellor of the Exchequer, with the help of the House and the country, must try to perform.

11.56 a.m.

Mr. Cyril Smith (Rochdale)

I agree with much of the speech by the hon. Member for Battersea, South (Mr. Perry), and particularly with his remarks at the end. I equally agree with his opening compliment to the hon. Members for Romford (Mr. Neubert) on having secured two opportunities to move motions. We have had many debates on the problems of British industry. I am not sure how far they go towards solving its problems. I suspect sometimes that industry might find it easier to solve them if less was said in this House. Nevertheless, as politicians I suppose that we must react to matters of public interest and concern. Certainly the importance of British industry should not be underestimated.

The problems of productivity, productive investment and profitability are of prime interest. I find nothing objectionable about profit and the profit motive, and many Labour Members agree with me. We are concerned not with profit but with how it is made and what happens to it. Those are the key factors, not the pure principle of making a profit. I share the concern of Labour Members about how profit is made and what use is made of it.

Another key question is the extent to which taxation is used as an incentive for industry to invest in new, more productive methods. What is required in any review of taxation is an examination not only of the levels of tax but of the method by which it is applied. In the last 13 years I have been building up a small business and I have been intrigued by some aspects of taxation. The point came for my company that we were compelled by law to pay a dividend even though we did not want to do so. This shows that companies do not always get encouragement to reinvest capital. It illustrates the need for a review of the method by which taxation is applied. Obviously everyone looks for opportunities to pay less tax, and we view with great anticipation next Tuesday's Budget in view of the noises that have been made in the period leading up to it. Certainly, anything that is done to reduce taxation will be welcomed by all sections of the community.

In the end, however, we have to understand that if we want as a State to assist the poorer members of society who are unable to assist themselves, such as pensioners and the disabled, or if we want the finest education system in the world, we have to pay for these things. The only way to pay for them is by taxing people, but it must be done in a reasonable way which nevertheless ensures that there is sufficient money in the kitty.

My basic purpose in intervening in the debate is to say that I am a little surprised that the motion does not refer to the need for a new approach to industry. Over the years we have tried to patch up the leaks to keep out the water rather than come up with a new approach to industry and by industry, with a new method of organising industry.

I am talking about a matter which is now exercising the Bullock Committee's inquiry into worker participation in industry. Industry needs long-term stability, faith in the future and a fair return on investment. It needs to feel that it is guaranteed a long-term future and that the changes of political philosophies, reflected in changes of Government, will not directly affect its economic concept over time.

Industry needs a fundamental change. That fundamental change must be the development of a partnership between workers and shareholders. That is one of the long-term solutions to the problems of British industry. New methods of reduced taxation, increased profitability and so on are all very well in their place, but a new approach and concept are required so that works councils, for example, become meaningful.

I was the secretary of a works council 30 years ago. In retrospect, I realise that what we got were the crumbs off the table. It was meant to keep the workers happy. It had no power. It did nothing. It ran a sports league and occasionally passed a resolution about, for example, a bus being required for workers at 5 o'clock in the morning. That was as far as we were allowed to "interfere". We want meaningful works councils which have a direct influence on the policies of their companies.

The Liberal Party believes in supervisory boards and the rights of employees to serve on them. Indeed, I hope that the Bullock Committee will arrive at that conclusion—that remains to be seen—and will influence the Government to arrive at the same conclusion. The only major difference of opinion between the Liberal Party and the Government, when the matter becomes a reality next year, is likely to be on the issue of who should represent the workers. Will representation be confined to trade unionists or will it be extended to elected representatives of workers who are not members of trade unions? I suspect that that will be the only major difference between the Government and my party on the question of worker participation in industry.

The Liberal Party believes in the principle of profit-sharing. I practise that principle in my own company. I have often wondered over the years how much effect it might have had on wage negotiations if workers had known that they would share directly in cash in the company's annual profits. No one is advocating a 100 per cent. pay-out of profit or anything of that kind. Workers are not daft. They understand that part of the profit must be used for reinvestment and so on. However, what they cannot understand is how one fellow can have a cream-off of five figures from the profits when their own cream-off is their weekly wage and nothing else at the end of the year. I have often felt, particularly during the last five or six years, that if employees knew that wage restraint which resulted in increased profit would inevitably mean a percentage of that increased profit going back to them in cash at the end of the year, as well as to a certain group of people, it would have been a greater incentive for them to accept some kind of wage restraint.

Reference has been made to the problems in the car industry. I hope that the toolmakers in that industry will return to work. The Government's pay policy is right. I can say that, having voted for it. That is more than hon. Members on the Benches behind me can say for themselves. It was intriguing for me to see the Deputy Leader of the Opposition on television last year urging the nation to support the Government's pay policy when in fact he had been unable to do so in the Lobby. I suppose that is how politics work. However, I voted for the Government's pay policy, so I am entitled to urge that it should be upheld by all sections of industry and to point out to the toolmakers in the company concerned that they have a responsibility to the nation as well as to themselves. Those problems will be solved in time—in days or in weeks. Such problems come and go.

We need a new approach and new ideas. We need something different. We need to create a partnership, as the hon. Member for Battersea, South said. We need all people to feel that they are part of our great industrial empire. They should not feel that they are merely people who come on a Monday and go on a Friday with what is in their wage packets and that that is all they have to do with it. They must be made to feel that they are part of the whole.

The problems of British industry will not be solved merely by new methods of taxation, increased productivity or profitability. They will be solved in the long term only by creating a partnership between workers and shareholders, a partnership which the Liberal Party has advocated since 1928.

12.7 p.m.

Mr. John Garrett (Norwich, South)

I regret that I missed the early part of the speech by the hon. Member for Romford (Mr. Neubert) when he introduced this important subject, but I was engaged on business of the House.

I intend to range rather more widely than did the hon. Gentleman. I propose not to refer to Budget matters but to focus principally on the accountability of management in industry and on who calls the managers to account. In doing so, I shall touch on some of the themes contained in what I thought was a very thoughtful and perceptive speech by the hon. Member for Rochdale (Mr. Smith).

Clearly, no public policy is more fundamental than industrial policy. Britain's industrial performance underpins our survival as a nation and ultimately provides the means for all the social and welfare expenditures of the Government and for advancing the quality of life of our people. There is also no question that our industrial performance over a long period has been wholly inadequate to provide the economic growth required to satisfy the rising aspirations and demands of our people for better living standards.

British industry has not been able to hold its own with its competitors. We have a record far inferior to that of our competitors in the growth of industrial output, productivity, exports and the ability to resist imports of manufactured goods from abroad.

British industry's relative failure in competitiveness and innovation was first noticed in the 1860's—100 years before any question of price controls—and since then books papers and reports have been produced by the thousand analysing our relative decline and proposing solutions to the problem. But the decline has continued. It has continued through periods of interventionist and laissez-faire policies, it has continued despite political sloganising and exhortation and it has continued as, inevitably, Governments have tried a variety of means to encourage employment, investment, technological advance and improved management.

We now know a great deal about the course of the decline and the possible causes of it. Some factors are clearly historical. It appears that for a very long time there were major structural imbalances in our manufacturing industry. Britain continued to specialise in the basic industries of the Industrial Revolution—coal, steel and simple textiles—when Germany and America were developing to a far greater extent than we were the new technologies of electrical equipment, chemicals, vehicles and metal-working machinery. Up to the present time, our national expenditure on research and development has been heavily biased towards aviation, atomic energy and computers, whereas German expenditure on research and development has been almost entirely on machinery industries, which have a good export record.

There has also been an imbalance of markets for our manufacturing industry. For a very long time, until recently, British industry relied heavily for its overseas sales on protected Commonwealth markets which, on the whole, required less sophisticated equipment than American and West European markets. Therefore, there was less pressure on us than on others to be in the forefront of the commercial application of advanced technologies, some of which originated in this country and were taken up by others before we brought them to the market place.

We know that British industrialists invest less in their home manufacturing facilities than do our competitors. British investment in new plant and equipment is at a far lower level than German, Japanese, French and American investment. That has been true for a very long time. It has been attributed to the cautious attitudes of British management—although the level of our investment abroad has always been relatively higher than that of our competitors—and to low levels of profitability in Britain, although our investment was low even in the early 1960s when returns in general for manufacturing industry were three times what they are now.

It is true throughout the world that there is a decline in return on investment in manufacturing industries: this is something to do with the marginal productivity of each new piece of investment in advanced industries. The problem has also been attributed to the sources of finance for British investment. This is a much more important criticism. British companies have traditionally relied upon the stock market for finance, while in Germany, France and America much medium-term finance has come from the banks. As a result, in Germany, for example, banks have become willing to become shareholders and to monitor and intervene in the management of companies to safeguard their shareholdings.

More than 50 per cent. of British shares are now owned by institutions which have hitherto rarely tried to protect their investment by acting upon a board of management but have usually simply switched their holdings elsewhere when they did not like the way in which a company was being run. In recent years the Bank of England has signally failed to pressurise institutional investors to intervene in companies whose shares they hold. As the institutions were not interested, and individual shareholders in large companies are virtually powerless, there has been no one to call boards of directors to account for their performance. The crucial question is the accountability of boards of directors for the use they make of the resources they control.

Even when investment takes place, the return on it in this country is markedly less than it is in other countries. The reasons for this have been attributed to overmanning, bad industrial relations and the idleness of the British worker. Certainly there is overmanning in industry. There would be little problem in overcoming it with adequate policies for retraining and creating new jobs. The problem is that much of the reduction in overmanning is required in areas of already high unemployment, in areas in which regional policy has failed and has not so far created sufficient new sources of employment or job opportunities.

Our industrial relations record was at about the international average until the Conservative Government's venture into industrial relations law. The British worker works long hours, has less sick leave, indulges in less absenteeism and has fewer holidays than his counterparts, and he works at roughly the same tempo. Therefore, charges of idleness against him are certainly quite unsubstantiated.

Manufacturing procedures and systems have not been developed as fast in Britain as in other countries. This is crucial to the question of improved productivity. The rate of diffusion of good management practice from the best firms to the worst appears to be inordinately slow. When I first became a management consultant in the 1960's, management consultants were getting most of their business from teaching companies the arts of work study, which were developed in the United States at the turn of the century and incorporated into normal manufacturing procedures in the United States and Germany in the 1920's and introduced here in 1926. The other main activity of consultants at that time was the installation in British industry of budgetary control which was first developed in 1919. Therefore, there was a 30-year lead time between the time at which a new manufacturing of operating procedure was developed abroad and its being taken up here.

I believe that the question of the diffusion of the best management practices is crucial. The success of British management in agriculture and in retailing, in which our management is as good as any in the world, lies partly in the speed with which the best practice is translated throughout those industries, whereas in the engineering industry it can be years before the best management practices are taken up by the doziest companies.

I believe that the heart of the problem lies with management—its competence, status, training and provenance, and particularly who is to call it to account. I also believe that both sides of the argument indulge in dangerous stereotyping. Both Left and Right have an image of management which falsifies the issues. Spokesmen for private enterprise often maintain that our driving, dynamic business men want only to be left alone to maximise profits for the good of all of us. Spokesmen for the Left often maintain that private enterprise capitalism is concerned only with maximising profits regardless of the human costs that result. The truth is much more complex than either of those arguments assumes.

Today in this country we have managerialism rather than capitalism. Industry is run not by owners but by technocrats, and the aim of the technocrat is usually not to maximise profit but to have a quiet life, preferably with regular promotion. All my experience in looking at the behaviour of top management—and there is plenty of research evidence that confirms this—indicates that, although management is happy to play lip service to the ideal of profit maximisation, its behaviour shows that it really aims to make only sufficient profit to keep the share price up and to avoid a take-over.

Management rarely gives a thought to the shareholder. Why should it? The shareholder cannot call management to account. This attitude is especially entrenched in British management, where to be a thruster is to invite suspicion. I conclude that, until management is made accountable to the community for the results that it achieves, we shall never improve our industrial performance.

Management is a low-status occupation in Britain. The public service and the City pay much more. The best young brains do not go into management, because it appears to be an unworthy occupation. Places for engineering students are grossly under-subscribed. As a Member for a university constituency, I know that places for social science students are oversubscribed 10 times. We produce fewer than 300 graduate production engineers a year, and the number is declining. I recall a figure in relation to the great university of Oxford, which has seven professors of theology but only one of engineering. That is an indication of the general relative importance of our educational priorities.

Mr. Peter Bottomley

I do not know whether I may be able to help the hon. Gentlemen's argument, but I remember reading last week that more people applied last year to take a degree in Welsh—although that is a great language—than in production engineering.

Mr. Garrett

That helps the argument—and I thank my Member of Parliament for making the point. In our education system at large there are no industrial priorities. Industrial policy is constituted on an entirely different frame of reference, and there is no planning for industrial support.

We were late in the field of management education, and it is still inadequate. It is always an interesting lesson to compare an American factory with a British one. It is noticeable that as soon as one walks through the door of an American factory one is confronted by the graduate foreman, who has had an education in engineering, in statistics and in the useful arts of management, whereas more often than not our foremen are promoted straight from the shop floor with virtually no formal training at all. Too often boards of directors still get there by connection, by social origin rather than management expertise, and I have found them to be wholeheartedly despised by middle management.

Above all, we waste talent in our industry. Workers are rarely consulted about the organisation of the factory, operating methods, systems and procedures. They are rarely given the opportunity to manage themselves, to use their initiative for innovation and development or to use their creativity and energy. A suggestion scheme is not consultation. I remember a works council on which I served being primarily concerned with the quality of canteen tea, what collections should be made for charity and whether or not there should be a pedestrian crossing outside the factory gate. That is not consultation. Telling workers about management policy is not consultation. A month's notice rather than a week's notice of redundancy is not consultation. Three workers on a board is not consultation. What we need is a structure of genuine consultation, before decisions are made, at the level of the factory and the office.

My prescription for improving British industry is not particularly novel. All the suggestions that I am about to make have been discussed at one time or another, and some of the institutions and procedures which I should like to see exist in embryo already.

The key question, to my mind, is accountability. I believe that the public accountability of large-scale industries should be enforced by compulsory planning agreements. Why are managements nervous of this? A planning agreement should have three main aims: first, to provide a means of enabling worker representatives to consider and advise on, and participate in, corporate plans; second, to examine corporate plans in the light of national industrial objectives and to display corporate objectives and achievements; third, to enable Government assistance to industry to be devoted to specific projects rather than general support. That seems to me to be perfectly acceptable to management, as long as the Government end is handled by competent planners—analysts and not civil servants. Therefore, at the Government end of manning agreement there should be a planning agency, but not the Department of Industry.

This system of accountability should be set in the context of an overall industrial and trade planning system, establishing broad industrial aims, examining the sectoral strengths and weaknesses of our industrial structure and identifying the gaps in what might be called our industrial portfolio—for example, the areas where imported goods dominate the home market, such as office machinery, textiles and footwear, or where we have a relatively low world market share.

A variety of measures could be devised to close those gaps—selective import controls, Government-owned or supported plants set up for import substitution, use of Government research and development funds, joint ventures between the National Enterprise Board and home or foreign manufacturers, and a national export marketing corporation. The National Economic Development Office is competent to carry out the analysis but it has no experience of running anything or following up with executive action. We need a body similar to the Industrial Reorganisation Corporation, which was destroyed by the previous Conservative Government.

The State must take a hand in the direction of investment. We cannot leave these matters to the whims of financial institutions. It is essential that we have a State investment bank to channel savings into industrial activities where the national need is greatest and where the Government can monitor results.

The Government should also promote the diffusion of the best industrial management practice throughout industry. The issuing of bulletins is not enough. The best way is to set up reference plants using the best methods to demonstrate what can be done.

We have put £25 million into the ferrous foundry industry to improve the function of that industry, but it would have been better if some of that money had gone to set up a State-owned, or partly owned foundry, using the best known methods as a reference point for the rest of the industry.

Management is a less tangible area for public policy. We need far better management training. We could use the NEB and its subsidiaries as a nursery for competent management. More important, by training, encouragement and patient development we could bring shop floor workers into management by reorganising their working methods and establishing a formal structure of co-determination in the plant. The NEB should be setting out to establish that pattern now.

All of those measures would help to develop and make accountable private enterprise managerialism. The proposals also presuppose a determination to extend public control and ownership into the manufacturing industry and to re-create new manufacturing industries under public or joint ownership. Whether they be commanding heights or lame ducks, large corporations must be brought to account for their economic performance, not only for growth and profitability but for the extent to which they meet social needs and take best advantage of the abilities and talents of the workers. In the dominant corporations, accountability can be achieved only by public ownership or control. But intervention on this scale will only work through a new machinery of industrial government which is expert, analytical and able to plan and monitor. It is time to construct that machinery.

12.23 p.m.

Mr. Peter Bottomley (Woolwich West)

I enjoyed the speech made by my experienced and honourable constituent, the hon. Member for Norwich, South (Mr. Garrett). I am glad I shall not have to answer him at my surgery tomorrow.

The hon. Member for Battersea, South (Mr. Perry) did not read the motion carefully enough, because it does not call for more Government interference in industry but urges the Government to give early evidence of its determination to encourage greater productivity and profitability in industry". What the hon. Member said is rather like saying, if one were dealing with the Children and Young Persons Act, that we want to interfere with the "way in which" parents bring up their children, rather than encourage parents to do that.

My hon. Friend the Member for Romford (Mr. Neubert) gave evidence of the comparative levels for value-added production, the levels of output of people employed and the rate of return in terms of production or value added for a certain amount of investment. We should not say who is to blame, because we all share blame. We should ask what we can do about it. It is important that we do not look for new answers. Too often we ask about a party leader's new policy to solve an old problem. I do not believe we are likely to discover a totally new approach which is different from everything which has been tried and found to work before.

I now turn to the question of planning. For about 30 years we have had nationalised industries which, presumably, have had the benefit of the best brains within the industry. When, for instance, the steel companies were amalgamated, presumably the best managers and trade union officers were kept on. Steel has been nationalised for about nine years and the coal industry for longer. To what extent has planning within those industries been effective? The management of those industries has been effective to some extent. I am not sure, however, that the planning in either of those two industries, or in British Rail, has given us long-term, firm guarantees of security or improved output or that they have done better against the general rise in the cost of living than any other industry.

It is a very difficult task to run down employment in any of those industries, and I recognise the contribution that the people concerned have made in reducing the number of employees. That task has to be done. One cannot say, however, that the planning procedures in those industries have been that much better than those in other, declining industries, such as bread manufacturing, which has not had any planning agreements. That industry may not be quite a monopoly but it is an oligopoly situation, as the nationalised industries were before they were amalgamated.

The proposals for planning agreements suggested by the hon. Member for Norwich, South, for worker participation, for corporate objectives and for Government assistance to be related to specific projects are not new. The better companies already practise worker participation, and regional employment programmes go across the board. Therefore, one cannot argue about specific projects. Investment grants and incentives are normally made for specific projects. The better companies using participation and involvement should be used as the models for the rest of industry.

People who are compelled to adopt the best practice will probably miss the point. I remember the story of a retail store which saw that its competitor was opening an hour later on a Monday morning. The manager of the store thought that he should perhaps do the same. He put up a sign on the door saying that the shop would not open until an hour later on Monday mornings. When he was asked why he was doing this, he said that he did not know but that the shop next door was doing it. What he did not know was that the time was being used next door for staff training, briefing and explaining how to get rid of much of the paper work in that chain. To impose on the unwilling or the ignorant the best practice—or the best procedures, which turn into the best practice—does not necessarily do much good.

The areas in which Britain is efficient—retail management and farming—perhaps give more of a clue to the old answer. If we have the NEB and large planning agreements, and if we bring back the IRC, are we not throwing back to the Establishment the power to determine everything that goes on in the country? Is that the kind of democratic centralism which we think is the answer to so many of the problems of our national life? I suggest that it is not.

The expression "the national needs" has been used. The best determinant of many national needs—the case of defence, which we debated for the past two days, is different—is the aggregate of individual demand. I am thinking of such items as footwear, motor cycles and motor cars. In our Western industrialised society we must choose whether we should give the best, fair, firm and long-term guarantees to people as customers, as users of goods and services, or as producers. We are in danger of trying to give too many guarantees to ourselves as producers.

I heard someone say that the best way to get the best brains into productive industry might be to give all civil servants a month's notice and guarantee everyone a job in industry for the next five years. I do not agree, although I have great respect, as did the speaker, for the brains of those in the Civil Service. I do not think that many civil servants would claim to be able to run industry or lay down guidelines better than the managers and people working in all grades within industry.

If we are to return to the old answers of trying to take the aggregate of individual needs and desires as the national need, which seems to me to make sense, we must recognise the present employment situation. We have 25 million people at work.

Mr. Ernest G. Perry

Drawing wages and salaries?

Mr. Bottomley

I think that that figure includes the self-employed.

There are 10 million job changes a year. Some of them are made by people in casual employment and some by school leavers who can obtain only temporary work until they enter a job which may lead towards a career. Too many have to go into work where there is no career, a matter to which we all agree we need to pay much more attention. But those job changes also have the effect of helping productive industries and service industries to adjust to people's demand for goods and services.

Some well-meaning proposals, including some that I sometimes make, would lead to a far more rigid structure of industry. If that happens, we shall all be made far worse off. Our poor performance in terms of value added, productivity and surplus—profits—has resulted from our being too rigid. As motor car buyers we may decide that a car we have bought for the past 10 years is no longer what we want and decide to buy one of the four which appear from a Which? report to be better. If our choice is a car made overseas and sold at a competitive price, we help to create balance of payments problems. If our industrial production is to change as fast as our preferences when we are making consumer choices, we must be willing to have our industry, and ourselves as industrial producers, adjust just as fast.

I wish that for a debate such as this, especially for a speech as good as that of my hon. Friend the Member for Romford, the Press Gallery were full. There is no point in talking about the country's situation without letting the facts go beyond those in the Chamber and those who might read Hansard. Everyone in the country should know the figures which were presented about an hour ago. I hope that people in industry—managers, trade union representatives and all employees—will make it their business to discover for their own industries the comparative figures for production per man, value from investment, the amount of investment being made and the market demand for their products.

One can obtain no guarantee of employment from any Government, however well-meaning. One can have it only by satisfying the customers as well as, if not better than, one's competitors.

12.36 p.m.

Mr. John Cockroft (Nantwich)

The motion has matters the right way round. More employment will come from more investment rather than vice versa. In this country, however, the trend for a long time has been to preserve low-productivity jobs, and, if necessary, create them.

The British steel industry's productivity, for example, is between one-fifth and one-seventh that of the Japanese industry. One receives no credit—certainly the Chairman of the British Steel Corporation received none—for pointing out such figures. In the motor industry the amount of capital equipment behind each worker is about £1,000. At the Volkswagen works in Wolfsburg, Germany, it is about £2,500. Such figures for this country are the result of low investment over many years. In real terms, investment levels in Britain have for a long time been between one-half and one-third of those of most of our international competitors. This means differences in equipment available which will take many years to make up, but that is no reason for not starting now.

One of the factors behind this is that under every Government, for as long as most of us can remember, "profit" has been a dirty word. People have regarded profit as something which went to the bosses and had no effect on the standard of living of the worker on the shop floor. To that extent "profit" is uniquely a dirty word in this country. I remember that during the 1974 election campaign a Conservative voter asked how I justified the fact that the profits of a major British company had doubled. The announcement had been made that morning. The fact was that the rate of return on its assets, even with the doubled profits, was about half that of its major international competitor.

Such figures must be pointed out much more often. Company taxes and other taxes are now piled one upon another. The Sandilands Report was invaluable for pointing out that large sections of British industry were making little or no money in real terms.

I should like to say a few words about worker participation, about which I used to write a great deal when I was on the Daily Telegraph. The subject has become very fashionable in the past year or two, particularly in the Labour Party, but my party has shown relatively little interest in the problem until recently. The trade unions have been visiting Germany to study the subject. The secret of the German's success is not in having workers on the boards. It is relevant in some cases but not in others. It was in any case forced upon the Germans by the occupying Powers. However, it is very successful at the boardroom level.

The Germans have a knack of defusing problems before they reach crisis stage, which we so often suffer. They have effective works councils, and directors on the main board often talk to the workers about profits and export figures. Until very recently that has not been common in this country. Even when that has been done in this country is has often been done by fiat, by legal thrust from the Government. It has not always been done voluntarily.

A firm which has had some considerable success in its labour relations is Guest Keen and Nettlefolds. I have at long last nearly finished the book I have been writing about that organisation. By means of works councils, by dealing with disputes on the factory floor, the company has established a close degree of contact with its work force. It has been able to defuse disputes to a considerable extent, thereby preventing them reaching the terrible state of affairs that we find in many of our major industries. It is a great tragedy that many of our industries can be completely immobilised on a Monday morning almost at the drop of a spanner. That is something that must be changed as soon as possible.

12.41 p.m.

Mr. Michael Marshall (Arundel)

This has been a valuable debate and one which I have very much enjoyed. I welcome the way in which my hon. Friend the Member for Romford (Mr. Neubert) introduced his motion. I believe that he has done us a service by introducing it. I congratulate him on the way in which he spoke. He spoke without a note, but is was clear that he spoke with great knowledge after having made considerable researches. I shall try to take up a number of the points that he made along with other points that have been made by hon. Members from both sides of the House.

I hope that the Minister of State will agree that today has been typical of the sort of Friday proceedings that we enjoy. We welcome the hon. Gentleman to the Chamber. We are glad that he is back among us down on the coal face and away from the rarefied atmosphere of the proceedings in Committee.

It is fair to say that on a Friday—I think I can say this loudly without fear of being overheard in the Press Gallery—we often have a constructive debate and achieve a dialogue, as opposed to the debates in which we try to stand in prepared positions. I invite the Minister to lay aside some of the more powerful and forceful party political lines that I know he can put across with great verve We hope that he will bring his considerable mind to bear on the genuine problems that British industry faces. We shall be genuinely interested to hear what he says. We recognise that he holds high responsibilities. We are concerned about British industry and we want to help. That is why we have tried to take a constructive line.

My hon. Friend the Member for Romford was right to highlight the basic problems of productivity and profitability. Those are the main themes that I shall develop. However, before doing so I shall take up some of the remarks that have been made by Members from both sides of the Chamber.

My hon. Friend the Member for Romford displayed a valuable degree of sophistication when considering these matters. When he spoke about the added value concept, I believe that he brought to bear an important way of thinking about our problems that we have heard little enough about in the House. Equally, he was right to say that, when people such as Mr. Scanlon talk about the need for British workers' pay to be at the same level as the pay that is received by workers in other countries on the Continent, it is necessary for them to recognise that higher wages must be earned.

There is a temptation to make comparisons which are not valid. We must compare only like with like. If we consider a take-home pay situation in this country and relate it to the equivalent in deutschemarks or French francs, we must take the cost of living and tax implications into account. If we are to make comparisons with international salaries, my hon. Friend is right to stress that salaries can be justified only by the profits that are earned. He is right to say that a comparison should be made only on a proper like-with-like basis.

My hon. Friend also talked about the Price Code. His views about the real impact of the Code which has led to reduced profitability and investment need stressing. My hon. Friend has drawn attention to something which has not been emphasised sufficiently. Equally, he is right to describe certain productivity aspects of the Price Code as bogus, as hiding real wage increases.

I am sorry that the hon. Member for Battersea, South (Mr. Perry) has left the Chamber. I think that he slightly overreacted to some typical Friday badinage about the number of Members present. I agree that it is not the number of Members present but the quality of the speeches that is of prime importance. I think it will be agreed that the speeches have maintained a high standard.

The hon. Gentleman made a basic point that is generally recognised—namely, that Members from both sides of the Chamber are anxious to take the opportunity on a Friday to catch up with constituency work. It is rightly put on record that we do not regard the turnout on a Friday as a measure of the importance of the subject to be discussed. There are other important subjects on the Order Paper, and I know, Mr. Deputy Speaker, that you hope to reach some of them later. That is why I intend to be reasonably brief.

The hon. Member for Battersea, South made a balanced speech. I am glad he made it clear that our proceedings in Committee are important and the Government and Opposition Members contribute to them. I hope that I shall be able to turn to aerospace and shipbuilding without straying beyond the bounds of order, and before the Bill which is now in Committee is considered on Report. It is at the back of our minds that my hon. Friend's motion cannot be divorced from many of the Government's present plans and legislative proposals.

I welcome back among us the hon. Member for Rochdale (Mr. Smith), whom I have not personally had the opportunity of greeting. I hope that he is restored to full health. The hon. Gentleman put forward a view that would find acceptance on both sides of the Chamber when he spoke about participation and industrial democracy. The real problem is that, although most of us accept those words, we find that there are wide differences of view about what they mean in practice. The hon. Gentleman will know that within the trade union movement there are considerable divergences of view. There are differences, for example, about worker representation. However, we agree with the broad thrust of the hon. Gentleman's argument. I hope he will accept that expression.

The hon. Member for Norwich, South (Mr. Garrett) brings to these matters a considerable degree of experience which we recognise. As a former consultant myself, I know of the important work he has done over many years. I do not quarrel with his analysis of the longstanding nature of the decline of British industry. His professional view of the low rate of investment in British industry was fair. The level of investment causes concern to anyone who considers the immediate problems with which we in the House are sometimes preoccupied.

When the hon. Member for Norwich, South analysed the causes of the problems—for example, the low rate of investment—he made one or two points with which I must quarrel. I accept what he said about marginal returns, but I quarrel with him in some degree about the question of sources. The hon. Gentleman referred to a basic difficulty for which we in the House have a responsibility—namely, the lack of stability which has applied during the post-war period and the way in which British industry has been unable to plan investment or the way in which it will operate.

For example, let us consider the British Steel Corporation. The Minister of State will be aware that in the nine years of life of the Corporation there have been no fewer than 17 Secretaries of State, almost one Secretary of State every six months. That is typical of the way in which we in this place have not succeeded in achieving a degree of stability and a good relationship between Government, Whitehall, Parliament and the nationalised industries.

The problems of investment are matters that we all understand. The hon. Member for Norwich, South said that we are all looking for a profitable, vigorous and alert British industry. He was basing his argument on the now famous words of the White Paper which preceded the Industry Act. I agree with his analysis about the problems of attracting the best brains. I agree that only a profitable, vigorous and alert British industry will attract them.

We now have a chicken-and-egg situation. The difficulties of British industry are a disincentive to our best brains. The massive increase in GNP taken up by the public sector—it is now almost 60 per cent.—means that more graduates choose to enter the inflation-proof pension and job security form of life which Government service seems to represent.

My hon. Friend the Member for Woolwich, West (Mr. Bottomley) also gave us a fair assessment of the problems of the inter-relationship between this place, the Government and nationalised industries, and I think that he was right to warn against imposed theoretical solutions. The way in which he put his case seemed to be yet again the classic warning that we should all resist the Whitehall knows best" approach to life.

My hon. Friend the Member for Nantwich (Mr. Cockcroft), who has not been able to stay, spoke with all the quality of his experience in the steel industry, engineering and the Treasury and as a journalist. When he made the point that "profit" has been regarded as a dirty word in this country, he made an argument which is very close to my heart. The time really has come when all of us on all sides of the House ought to go up and down the country arguing that it is lack of profit which is immoral and which means loss of investment and loss of jobs. I believe that part of the duty of every person who wants to see this country succeed, is to ensure that profit is fairly earned. While we may argue about what that means, let us at least bake the cake before we start dividing it up.

The motion calls upon the Government to encourage productivity and profitability. It is right, therefore, that we should look with a critical eye on the Government's present actions and current proposals. I shall listen to the Minister with particular interest, and I have tried to nudge him in a friendly way to deploy his talents on this subject, perhaps not directly in line with the brief which has been put before him.

We clearly need new thinking if we are to succeed in this area. When we are debating matters of productivity, I think that the most immoral thing is the Government's own actions in respect of the squeeze on profitability which has caused many of our present problems. The way in which the Government have acted and the way in which they have approached their relationship with the nationalised industries bring us squarely to the one area where the Government cannot possibly escape the charge that they are themselves responsible in matters of productivity over large areas of our manufacturing industry which are now nationalised.

When we talk about the other public services—energy, transport, British Rail, the Post Office and so on—although there are arguments about the degree of the monopoly I do not believe that there is a vast divide across the Floor of the House. For those of us who came to this place because of the involvement of the Labour Government in manufacturing industry, this is the dimension which is of most concern. I declare a past interest as a former participant in the independent steel industry for 16 years. It is no satisfaction to me to feel that my fears about the nationalisation of steel, which prompted me to come into politics, have, alas, been more than justified.

I am trying to urge the Minister today, when considering productivity, to take the example of the British Steel Corporation and see what lessons we can draw from it. I recognise that there are lessons to be drawn at this moment from the motor industry, as my hon. Friend the Member for Romford brought out so powerfully. The Minister and his colleagues will have to bring to bear a good deal of new thinking if they are to have any chance of avoiding the grievous mistakes of the Government's relationship with the British Steel Corporation.

What features have been highlighted by the present Government's relationship with the British Steel Corporation? In broad terms, it is the old cry of "When will they ever learn?". In aerospace industries there is no doubt that expectation of job preservation is already building up. There is no doubt that in companies like Vosper Thornycroft, near my own constituency, there are real fears that nationalisation is founded on such very insubstantial ground. If large engineering groups or major industrial groups with activities in Scotland, Wales, the North-East or elsewhere are brought together, the industrial logic which maintains employment is destroyed in various parts of the country.

The experience of nationalising the 14 largest steel companies producing over 1 million tons, while administratively tidy from the Whitehall point of view, was a classic mistake. Had I conceded the principle—which I do not—that there was an argument for the nationalisation of steel, the argument I would have wished to see was about nationalisation by bringing in companies which could have some proper interrelationship, some kind of helpful efficiency through working together, rather than simply working on the basis of size and the arbitrary shopping list. Once more I fear that we are back in the worst of these aspects. The question of job security is now one of the cruellest of this kind of proposal. Everyone knows that rationalisation is bound to mean redundancies. It is a fact of life that many of the economic arguments can no longer be sustained when they are applied to a merged body. I believe that the Government—indeed, the Labour Party as a whole—have shown an incredible lack of modesty when they come forward with proposals for more nationalisation.

If the Government could make some concession to the view that there have been problems in the nationalisation of steel, and if an attempt was made to learn from those lessons, those of us who are perhaps trying to put forward constructive views would feel that there was some point in the dialogue. But we simply get the assertion that nationalisation ipso facto is a good thing. It is the whole problem once more of the relationship between central Government and industry which has to be looked at not only by the Government but by this House. There is a place for hon. Members on the Select Committee on Nationalised Industries to play their part. It is noticeable that a much more constructive dialogue is going on in Committees of that kind than in the kind of arguments the Government employ.

I have to put on record as indicative of this kind of mishandling of nationalised industries by the Department the whole question of top management, the way it is treated and the way in which it is actively discouraged. Anyone who goes around the plants of the British Steel Corporation, as I have the opportunity to do, must be saddened by the loss of morale which is undoubtedly a fact of life, and hon. Members who know the facts will know this is the case.

This process was brought to a head recently by the disgraceful way in which Sir Monty Finniston was hounded from office. The Minister knows that some of us had been trying to get an announcement of some kind about this for some time. It was a very shabby business at the end of the line. The way in which we hope to run our industries will not be improved if there seems to be a witch hunt every time someone who runs one of them has the courage to stand up and spell out unpalatable facts and fight for his corner against the Minister of the day.

It is not for me to be quite so sympathetic to Sir Richard Marsh because, frankly, I do not know the circumstances. What I do know is that anyone in this House who has had conversations with him in recent years will support me when I say that he has made it absolutely clear that the lack of consistency in Government planning has been one of the greatest bugbears which British Railways have had to face. If we do not tackle this question of the relationship between the Government, this House and the nationalised industries, we shall never give productivity in the nationalised industries a fair crack of the whip.

The Government fail to recognise criticism about the cult of bigness. Nationalisation is the classic way to create this bigness. Many of the ways in which whole regions of the country are thrown into the melting pot have resulted in people holding fears, certainly in the Steel Corporation, about this process. This will increasingly be the case in aerospace and shipbuilding and in the motor industry. We have, almost by definition, to establish a strong centralising authority in the initial stages of nationalising industries. In the way the Government have gone about things, it seems to be well-nigh impossible to remove those centralising shackles. Anyone who talks to people on the shop-floor in the steel industry will become aware of their feeling of remoteness. This stems from the autocratic, centralised relationship which seems to be locked into the Government's approach to the nationalised industries. We hope that the Minister will have some comments upon this aspect today.

I want to strike a constructive note. We must get away from the sterile thinking that has dominated many of our debates. Even now I urge the Government to rethink their policy of futher nationalisation. If they were willing to look in more detail at the proposals for aerospace and shipbuilding, we could see ways in which an economic case could be argued as against the pure principle of nationalisation. However, I am a realist and I recognise the inability of the Government machine to stop steamrollering over everyone in its path once it begins to roll. At least it might be said that in looking to the future we should urge upon the Government the consideration of a public-private, fifty-fifty type of approach. This works with a number of companies in the steel industry.

With that inter-relationship of public and private capital, it is remarkable how companies prosper. I shall not mention the names of any companies because I fear that by the mere fact of highlighting their lack of problems I may be making them hostages to fortune. The Minister will know the companies in the steel industry to which I refer where this arrangement has had a remarkably good effect in terms of labour relations and profitability, enabling the companies to do a great deal better than others in the same industry.

The Government ought to take a constructive and positive attitude towards our membership of the EEC and encourage and facilitate companies in the nationalised sector which are developing in the European market to go in for more joint ventures so as to become involved in an argument that is not couched purely in terms of State ownership.

The Government's thoughts on profitability have stemmed too much from the emotoinal basis that "profit" is a dirty word. This was something I tried to dispel earlier. On the whole, we should be charitable and try to suspend our judgment today. The Budget is in the offing. We hope that the Government will recognise some of their failures and deal next week with the attack on industry which has so far not only affected the large industries but has particularly affected small businesses.

Although today's debate has been wide-ranging, I regret that we have not had the chance to discuss small businesses in greater detail. In relative terms, the attack on the 800,000 small businesses which employ 500 or fewer people is not as fully appreciated by the public as it might be. It stems very often from what might be regarded as accidental exploitation by Government. It stems from the weight of bureaucracy on small businesses and from the fact that Governments of all parties have tended to assume that every company can deal with paper work as though it had a head office organisation comparable to ICI.

Governments of all parties must tackle that problem with more vigour. The present Government have a direct and immediate responsibility in matters such as VAT. There is the example of the way in which multi-rate VAT has affected the boat-building industry. This issue has been brought up time and again, and I pay tribute to all hon. Members who have raised it. Multi-rate VAT brings many of the worst features of the purchase tax arrangements back to our system. We hope that the Government's remedy is close to hand. They ought to show some sympathy and understanding.

If the 800,000 small businesses in the country were encouraged, as a result of more profitable activity, to employ just one more person each, many of our unemployment problems would be on the way to being solved. Equally, when we talk about profitability on a wider scale, involving the largest companies, the advance corporation tax arrangement introduced by the Government is a typical example of the way in which they have clobbered business. Having half strangled the patient and put out the eyes of industry, the Government mock industry for its blindness when its profits do not reach international standards.

We now have the Chequers strategy. Despite some of the cynicism, which has been fully justified by recent events, I should like to think that the Minister will be able to assure us that he stands by that strategy and that at least some of what seem to be the sensible and sound criteria to be found within the strategy will be operated in future. It is clear that they have not been brought to bear on problems in the past.

My hon. Friend the Member for Romford brought out most effectively the problems of the motor industry. He speaks with great knowledge of Ford. Many of his constituents work at Ford's. We have an incredible situation whereby the Government announced their Chequers strategy and within a few days went ahead with decisions which effectively mean subsidising competition within the motor industry. Money is being poured into British Leyland. I see today the effect on the pound that the tragic situation there has brought about. At the same time, money is poured into Chrysler so that it may compete with British Leyland. This reductio ad absurdum would be laughable if it were not so extensive and tragic in terms of the long-term future of our country.

The Government's industrial policies are now in a sad, confused and contradictory state. In many ways they reflect "ad hocery" of the worst sort. I urge the Minister to accept the motion, which does no more than reiterate many of the objectives which the Chequers strategy put forward to the nation. The motion certainly puts forward a constructive approach which has been reflected on all sides today. Let the Government eschew dogma, let them give British industry a chance to thrive. As a start, we look to the Minister to accept the motion, which has been moved with such exemplary skill by my hon. Friend.

1.7 p.m.

The Minister of State, Department of Industry (Mr. Gerald Kaufman)

I join the hon. Member for Arundel (Mr. Marshall) in congratulating his hon. Friend, the Member for Romford (Mr. Neubert) on the motion which he has allowed the House to debate today, on the painstaking way in which he has assembled his material and the skilful way in which he presented it. Many of the points the hon. Member for Romford made will be accepted by all hon. Members. At the same time some hon. Members, including my hon. Friends, were right to draw attention to a certain lack of balance in assigning responsibility for our problems.

It is perfectly true that there are shortcomings in our labour relations over far too many areas of British industry. But the problems of British industry, the deep-seated malaise which has been taking effect for decades rather than a few years, would not be remedied if all the shortcomings in labour relations were eliminated and if the inequities of the Price Code alleged by the hon. Gentleman were solved, even by the abolition of the Code itself.

There are very deep-seated problems in British industry, to which we shall be able to turn our attention only when the recession is over. We must use the period of the recession to lay the foundation for dealing with problems which will remain, even after the intermediate recessional problems are over.

My hon. Friend the Member for Norwich, South (Mr. Garrett) in his extremely well-documented and constructive speech drew attention to a number of these problems including, in particular, the low level of investment, to which the hon. Member for Nantwich (Mr. Cockcroft) also alluded.

One of the most devastating passages in the Ryder Report on British Leyland—about whose labour relations we have heard a great deal today—was the part, which burned itself upon my mind, pointing out that of £74 million profits, no less than £70 million had been distributed in dividends. If ever there was a two-figure indictment of the previous management of the company, that was it. The Ryder Report made it clear that the existence of the antiquated machinery and equipment on which our cars had to be turned out was due to the shortfall in investment.

Despite all the problems of labour relations, it must be remembered that the workers in Leyland have a magnificent achievement to their credit. They are the biggest exporters in British industry. More than any other workers, they have been making the money, earning the profits and providing the wealth on which so much of our superstructure rests.

The hon. Member for Arundel drew attention to work practices in shipyards, especially in Sunderland. I have recently visited a considerable number of shipyards in connection with my ministerial responsibilities and the Aircraft and Shipbuilding Industries Bill. In Sunderland I visited Austin and Pickersgill Ltd. and Sunderland Shipbuilders Ltd. The hon. Member should take into account the superb craftsmanship and devotion to work of the workers in that industry and of the Sunderland workers in particular. We shall soon have the Pallion Yard in Sunderland—one of the most modern yards in the world. It will be to the credit of the British shipbuilding industry and will put Sunderland ahead of almost everywhere else in the world. Let us look at the positive aspects as well as the negative ones on which we sometimes tend to dwell too long.

My hon. Friends the Members for Battersea, South (Mr. Perry) and Norwich, South were right to draw attention to one aspect of the inadequacy of British industry to which the Opposition did not refer—the shortcomings of management. Time and again bad labour relations are due to bad management. The hon. Member for Rochdale (Mr. Smith) drew attention to this in his constructive speech and he is right to refer to the extremely important role which can be played by the expansion of industrial democracy.

As the hon. Member and others made clear, industrial democracy does not begin and end with workers on the board. I have had 17 meetings with shop stewards from aircraft factories and shipyards in the past few weeks and, of more than 400 shop stewards, only one opposed workers on the board of directors as a solution to our industrial relations problems. Industrial democracy must work up from the roots of British Industry and this is what we shall be seeking in Government amendments to the Aircraft and Shipbuilding Industries Bill when it returns to the Floor of the House very soon. The amendments, in response to requests from some hon. Friends, will provide the basis for a greater advance of industrial democracy in these industries than has been achieved in any other industry in this country, whether publicly or privately owned.

The hon. Member for Arundel said in an earlier intervention that he had been a great student of the proceedings of the Committee stage of the Aircraft and Shipbuilding Industries Bill. When we have had 44 sittings which have taken up more than 2,000 columns in Hansard, it is difficult to have read every word, especially when so much of what has been said by the Opposition in order to fill in time has made less than good sense.

It is a great drudgery to read through these Committee proceedings, and I would not blame the hon. Member if he did not see some of the things I said. I acknowledged at a very early stage many criticisms of previous nationalisations, the shortcomings of publicly-owned industries and the need to find new forms of public ownership. The hon. Member referred to the dangers of a centralised bureaucracy running the aircraft and shipbuilding industries, but I have already given a commitment to introduce on the Bill's Report stage an amendment laying down a decentralised form for these industries.

The chairman of the organising committee for British Shipbuilders has said that his headquarters will be staffed by less than 100 people and the chairman of British Aerospace has made similar remarks.

Mr. Michael Marshall

I am delighted to draw out the Minister on this subject on the Floor of the House, because not everyone reads reports of the proceedings of his Committee as I do. No doubt he will recollect that his distinguished predecessor, Sir Richard Marsh, gave many similar assurances when the steel industry was nationalised. We want very much more clear-cut and cast-iron assurances. We hope the amendments to which he referred will be practical and properly thought through and not just a window-dressing exercise.

Mr. Kaufman

The amendments will provide for the decentralisation of these industries. Ministerial assurances may be excellent, but a legal provision in an Act of Parliament is much better.

The hon. Member for Arundel was helpful in the way he avoided too many references to party differences, but he went a little over the edge when he delivered strictures on the Government over the decision to end Sir Monty Finniston's term as Chairman of the British Steel Corporation. Sir Monty has completed his term within his contract. That did not happen in the case of Lord Hall, who, as Chairman of the Post Office Corporation, was hounded out of his job in mid-contract by the then Conservative Government. That Administration replaced him with Sir William Ryland, whom they now constantly criticise, even though they appointed him to put right the errors that were allegedly taking place under Lord Hall's chairmanship and which they used as the reason for dismissing him in such an undignified way.

I refer to these matters in the happy atmosphere of a Friday only because the hon. Member for Arundel raised them first. He referred to the loss of morale in the steel industry that had been caused by Government interference. The greatest interference of any Government in a publicly-owned industry in the last 30 years was that of the Conservative Government, which set up a joint steering group to interfere with the development plan of the British Steel Corporation.

For the first time, and, I trust, for the last, a group of civil servants was put together with the British Steel Corporation to trawl over the development plan. That is one reason for the great delay that occurred in the emergence of that plan, and one reason for the tremendous loss of morale in the British Steel Corporation at that time. It is a bit too much for us to accept the accusation made by Conservative Members that we interfered in the activities of the British Steel Corporation when the Conservatives set up this constitutional monstrosity to investigate the activities of the British Steel Corporation—even on one of these happy consensus days.

Mr. Michael Marshall

I do not wish to break up the party spirit, but what the hon. Gentleman said cannot go unchallenged. He will recognise by the same token that I have been arguing a basic precept. When there is interference, problems arise whoever is in Government. The hon. Gentleman has been carrying out much the same process in the closure review that has been sitting for two years without having reached a conclusion about Shotton and Port Talbot.

Mr. Kaufman

There is a difference. When we were debating the constant interference in the British Steel Corporation's activities by the Conservatives when they were in government, my right hon. Friends the present Secretary of State for Employment and the present Secretary of State for Industry moved a motion from the Opposition Front Bench saying that when a Labour Government came to power there would be a closure review. Those words in that motion were transferred almost intact to our February 1974 election manifesto and therefore became an election pledge. If the hon. Gentleman is rebuking us for fulfilling an election pledge, I realise that that does not often happen in the Conservative Party and might therefore be a matter for rebuke.

Mr. Peter Bottomley

Without going into the constitutional implications of a joint study group, will the Minister say how the setting up of a joint group of members of the British Steel Corporation and civil servants differs from a planning agreement?

Mr. Kaufman

The hon. Gentleman fails to understand the nature of planning agreements. As I do not wish to take up time from the important debate which my hon. Friend the Member for Goole (Dr. Marshall) is to introduce, I shall send the hon. Member for Woolwich, West (Mr. Bottomley) a copy of "The Contents of a Planning Agreement", thousands of copies of which have been distributed to trade unions and others. That document will explain the great difference between fiddling Government interference in a nationalised industry through a joint steering group imposed on that industry and voluntary planning agreements. My hon. Friend the Member for Norwich, South wishes that they were not voluntary, but they are, and that is the policy set forth in the Industry Act 1975.

The hon. Member for Arundel rightly referred to the problems of small firms. I shall not refer to them, but if the hon. Gentleman is around when we get to the Adjournment debate he will have the opportunity of listening to his hon. Friend the Member for Harborough (Mr. Farr) and myself dilating upon that topic.

The hon. Member for Arundel in his concluding words asked whether I would accept on behalf of the Government the motion moved by his hon. Friend the Member for Romford. I am happy to do so. The hon. Gentleman urges the Government— to give early evidence of its determination to encourage greater productivity and profitability in industry in the interests of increased investment and expanded opportunities of employment. I am happy to accept the motion, because the Government have provided such early evidence by a multitude of actions since they came to power.

The motion begins by drawing attention to the present state of British industry. It would be foolish to disguise the fact that there is both a short-term and a long-term problem. As I said, when that short-term problem is overcome, there will be a deep-seated long-term problem to be dealt with. The performance of British industry is of crucial importance to our overall economic performance. Manufacturing industry alone accounts for some 30 per cent. of GDP and more than 80 per cent. of visible exports.

The long-term problem can be seen from one or two stark facts. One is our persisting balance of payments difficulty. Although we have made great strides in our export performance over the years, the same balance of payments difficulties have repeatedly limited our freedom of manoeuvre and constrained growth during boom years. Another is investment, to which I have already referred.

It is all very well to say that the workers do not produce as much as they should from the equipment they have, but all to often, as the hon. Member for Nantwich (Mr. Cockcroft) said, the equipment is insufficient and too old. Investment per head in manufacturing in Britain has been less than half the level in, for example, Germany or France, for many years.

My hon. Friend the Member for Battersea, South referred to the "never had it so good" years of Mr. Harold Macmillan. As a one-time opponent of Mr. Macmillan as a parliamentary condidate—when I won a lot of votes—I should like to take this opportunity to congratulate him on the Order of Merit that he has received today. Mr. Macmillan has many virtues to his credit, and he is one of the most estimable political figures of recent generations. At the same time, if I were gathering together his laurels, the attitude of his Government towards deep-seated industrial problems would by no means be assembled among them. Those "never had it so good" years were the locust years for British industry—the years in which our present-day standards of living were fostered while the standards of living of the future were flung away. We shall look back on those years as some of the worst years that led to the foundation of our present appalling economic problems.

Although investment as a proportion of manufacturing output is not greatly different from that in France and Germany, output per head is only half the level elsewhere, and each addition to our capital stock produces only half as much output as it would in West Germany. That is where the hon. Member for Romford is right. This situation has persisted under a succession of Governments and reflects the poor efficiency with which we use our resources, both of manpower and capital.

I think the House will agree that it is to the credit of the Government that they have grasped the nettle and set in hand the development of a longer-term industrial strategy to tackle these fundamental problems. I assure the hon. Member for Arundel that we fully stand by the industrial strategy which was launched at Chequers five months ago. We do so because only on the basis of that strategy can we begin to deal with these problems.

The short-term problem is, of course, familiar to everyone. We are passing through the deepest world-wide recession since the 1930s, and a major trading nation like ours cannot hope to insulate itself against such events. But it would be fair to say that the situation in industry over the past two years has been aggravated by the inheritance from the previous Government of industrial discord and higher rates of inflation, generated in part by the policies of the previous Chancellor of the Exchequer, Lord Barber, to whose shortcomings reference has been made.

We, for our part, have done a great deal to enable industry to weather the storm and to encourage investment so that it is better prepared for the coming upturn in world trade and the domestic economy.

By the end of 1974, inflation was having a disastrous effect on company liquidity, and many companies were facing the prospect of bankruptcy. My right hon. Friend the Chancellor, in his Budget of November 1974, gave tax relief on increases in stock values and carried this forward last April. Since then he has indicated that some form of relief will continue and that there will be no general clawback of relief already given. Entitlement to relief is already about £4,000 million, and companies have already improved their cash position by £2,000 million. I do not think that our most hostile critics would deny that this has had a major impact on company post-tax profitability.

Equally, few would deny that reducing the rate of inflation is the single biggest contribution that can be made to improving industry's profitability, confidence, willingness to invest and ability to compete world-wide. I am glad that I did not have to make the contentious point that the Conservative Party did not wish to involve itself one way or the other in this counter-inflation policy. The hon. Member for Rochdale was good enough to say that he voted for it. Some of my hon. Friends voted against it, although the overwhelming majority voted for it. But the Conservative Party could not make up its mind what to do.

Mr. John Garrett

Will my hon. Friend agree that, although it is true that the Government have given capital relief and stock relief, this has not led to any increase in investment? Does he derive from that the fact that it is much less beneficial to industrial investment simply to shower tax reliefs on industry, rather than absolutely specific ones tied to specific investment projects?

Mr. Kaufman

My hon. Friend has made a very important point which may be added to the point made by the hon. Member for Rochdale in his speech—that profits as such are not so important as the manner in which they are made and what is done with them. I accept that fully. I have never been one to challenge the importance of profits, and have pointed out again and again to workers' representatives that it is profitability in both private and publicly-owned industry, that can create the wealth to provide the social services that our party expects to create, but profitability does not necessarily do that unless the profits are used for the right purpose. I drew attention to the two terrifying figures from the Ryder Report about what British Leyland did with its profits, which led to the appalling obsolescence of its equipment.

Mr. Neubert

Does the Minister agree that there is a simpler lesson to be learned from the debate, namely, that there is a very plausible link between productivity and investment? Unless investors can be assured that if they spend their capital—whether from profits or elsewhere—on equipment which allows labour-saving reductions to be made, overmanning levels will be reduced, they are unlikely to invest, because they will be unable in those circumstances to achieve the return which they should insist upon for themselves and for their shareholders.

Mr. Kaufman

Of course. My hon. Friend the Member for Norwich, South pointed out the importance of dealing with overmanning. I say to the hon. Member for Romford, in no partisan spirit, that one of the great problems in this country is that industry, undermanned or overmanned, has a great burden of non-productive activity to carry on its back. I refer, for example, to the overmanning in local government resulting from the local government reform put through by the Conservative Administration.

Before my hon. Friend the Member for Norwich, South intervened so tellingly, I was referring to the Government's efforts to deal with the problem of inflation. It must be accepted that although inflation is still far too high our current inflation policy has been markedly successful in bringing down the rate of inflation. This is evidence of our determination to act and not just to pontificate. But we still have a considerable way to go in bringing our rates down as much as we should like. We have some way to go before we bring them down to the level of the best of our competitors, but no one doubts our determination to succeed.

In our White Paper "The Attack on Inflation"—which the Conservative Party could not vote for or against—we recognised that in a mixed economy the investment of the private sector has mainly to be paid for out of profits, and that both public and private industry will need adequate resources if they are to increase investment in the future.

In the White Paper on industrial strategy, to which the hon. Member for Arundel referred, we carried this a stage further by undertaking, in the immediate future, to give priority to industrial development over consumption and even over the Government's social objectives. It was a hard thing to do, but we decided to do it, and I have made clear again and again to political audiences that the cuts in the expenditure programme on social services are necessary in order to make room for the increase in the expenditure programme on industrial investment, since without an increase in industrial investment and industrial production, the wealth to provide the social services will simply not be there.

We have acted on this. The recent public expenditure White Paper made it clear that public expenditure programmes over the coming years have been framed to leave room for the balance of payments and the resources needed for industrial investment. Moreover, within total expenditure a higher priority is being given to expenditure which is designed to maintain or improve our industrial capability ". All this provides generally for greater investment by industry. But we have been extremely active on a selective basis over the past year or so, encouraging investment directly which will increase productivity and profitability, will put us in a better position to respond when world markets pick up, and will provide a firmer foundation for expanded stable employment opportunities.

Since last April we have allocated £120 million to help bring forward capital projects put off because of financial pressures and uncertainty about the future. These projects must be commercially sound and they must make a contribution to improving the balance of payments. So far, we have approved assistance of about £32 million for 27 projects, involving a total investment of nearly £200 million. The great thing about these projects is the amount of further investment they generate.

The projects include expansion of Ransome Hoffman and Pollard's production facilities for ball bearings, a new BP acetic acid plant, a new pharmaceuticals plant for Reckitt and Colman, and an expansion of Lucas CAV's capacity to produce diesel engine fuel injection equipment. The assistance generally will expand job opportunities and is bringing forward investment in machines for the economic upturn. A considerable number of further applications is currently under consideration, which could involve investment of the order of £500 million, and a correspondingly large contribution to the balance of payments.

We have also introduced industry schemes to deal with the problems of particular sectors. So far, we have allocated £25 million for the ferrous foundry industry, £20 million for the machine tool industry, £20 million for the clothing industry and an extra £3 million for the wool textile scheme.

Other possibilities are coming forward. Among those we are considering are paper and board, printing machinery, and an extension to the ferrous foundries schemes. These schemes are designed to meet the particular needs of the industry. We expect the industry itself to define its requirements clearly, and the problems of its future development. The schemes are therefore tailored to demonstrated needs. For example, the ferrous foundries scheme is aimed at assisting companies to modernise and re-equip to overcome the problems created by historical under-investment, and to improve conditions in these new installations. The machine tools scheme is focused on the development of new products and the rationalisation and improvement of production. The clothing scheme is aimed at improving productivity and efficiency by the introduction of new plant and—in the case of smaller companies—the improvement of internal production arrangements.

I know that the House will accept that these schemes are addressed to the heart of the motion that we are debating today. The Government's new instruments of industrial policy will also have a key rôle to play.

The hon. Member for Woolwich, West referred to planning agreements, as did my hon. Friend the Member for Norwich, South. These will be concerned particularly about the need for greater productivity, more worthwhile investment, and expanded opportunities for employment. We hope to be able to make a statement shortly about the progress we are making in implementing the system.

My hon. Friend the Member for Norwich, South referred to the National Enterprise Board. I am rather upset to see that there appears to be some turmoil in the Conservative Party about the NEB. A very senior former employee of the Conservative Central Office is making the most serious allegations about the attitude of the Conservative Party to the Board. He is implying, greatly to my horror and dissatisfaction, that the Conservative Party is thinking of retaining the NEB, should the day arrive when the Conservative Party returns to power. Of course, it is not for me to get involved in any way in this private grief of the Conservative Party. No doubt Opposition Members will sort out their problems in some way or another.

Meanwhile, we have the National Enterprise Board, and I am very glad to say that it has made a very good start——

Mr. Michael Marshall

Perhaps the hon. Gentleman will take it from me, as one of those mentioned in the report, that he should never believe everything that he reads in the newspapers.

Mr. Kaufman

The trouble is that newspapers are Tory newspapers. That is why I do not believe them. The hon. Gentleman is asking me not to believe Tory newspapers. I am happy to do that, on the condition that, when we next have a debate on an industrial topic and he quotes a Tory newspaper as evidence, he will not expect me to take it seriously.

The hon. Member for Woolwich, West appeared to laugh in satisfaction when I said that the NEB had made a very good start. Apart from its widely reported rôle in some consortia for overseas projects, which are extremely important, it has taken an important initiative to prevent erosion of capacity in the machine tool industry, which would otherwise lead to shortages and delays in the supply of machine tools as the economy recovers. In the light of consultation with the Machine Tool Trades Association, it has announced that it is willing to provide finance on commercial terms to companies for building machine tools for stock. This proposal will help employment in the industry and should benefit both the NEB and the companies concerned.

The motion draws attention to the need for greater productivity in industry. In addition to improving our capital base, we must also make better use of our work force. Training can make a major contribution to this. This means both training for the young, as they begin work, and retraining for the not-so-young when their skills become obsolete or redundant—as must inevitably happen in our fast-moving society—to ensure that industry develops and remains up to date. The Government have put massive resources into this—some £200 million this year, via the Training Services Agency.

We have also allocated £20 million to the Manpower Services Commission to expand training opportunities. This is especially aimed at young people, to make sure they are brought into the labour force with useful skills.

It is vital that all those with skills should use them to the full. This is a matter for good industrial management. It is wasteful both in human and economic terms to do otherwise.

We must also ensure that workers are mobile as between different areas of the country and between declining and expanding industries. But it is important that this should be done in a way that recognises the rights, feelings and needs of those affected. This is the point made by the hon. Member for Rochdale. Workers are no longer to be regarded as pawns to be shifted around the industrial chessboard. The Employment Protection Act helps to enshrine these rights, and the new approach of the Employment Services Agency and its job centres is there to help also. Also, in our approach to manpower we must not forget the importance of job satisfaction, the quality of working life and the right to participate in decision-making.

This is the most important aspect of progress in British industry. Without the right of workers to participate in decision-making rather than, at best, being consulted and, at worst, simply being told, there is no hope for progress in British industry.

I have outlined some of our actions that are aimed at improving industrial performance and coping with the immediate pressing problems of industry. But, unlike our predecessors, we have not lost sight of the longer-term problems of our comparative industrial performance, to which many hon. Members referred, and of the need for a more strategically-planned attack on these problems.

Our approach to this has been based on recognition of the fundamental fact that the responsibility for improving productivity rests largely with management and workpeople on the shop floor. This was reflected in our determination that the development of a longer-term industrial strategy should take place on a tripartite basis, and this is why we have done this through the NEDC.

The development of this strategy is already well under way. Following the discussions in NEDC in November and January, nearly 40 specialised sector groups are developing five-year strategies for their industries and, as a guide to more immediate action, are identifying what steps can and should be taken by Government, management and unions now to avoid constraints of capacity or manpower in the coming upturn. Early evidence of the willingness of these three parties to take the steps necessary to secure our future will be seen when the reports and recommendations from the first round of discussions are brought together for the NEDC in June.

But the aim of this strategy is basically longer term. It will call for consistent and concerted action over a long period. The Government, for their part, are prepared to frame their industrial policies in accordance with the developing strategy, and to integrate manpower and other economic policies so that they reinforce each other in pursuit of the aims of the strategy.

I have taken the time of the House to outline some of the action that the Government have already taken to pursue the aims set out in the motion and briefly to explain how we are developing our longer-term strategy. Against this background—a record which I claim is impressive within the constraints and within the period in which we have had the opportunity to operate—I congratulate the hon. Member for Romford on his motion, and I have no difficulty in accepting its terms on behalf of the Government, because we are already implementing it.

Question put and agreed to.

Resolved, That this House urges the Government to give early evidence of its determination to encourage greater productivity and profitability in industry in the interests of increased investment and expended opportunities of employment.

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