FOOTWEAR INDUSTRY (Hansard, 28 July 1977)

The Minister of State, Department of Industry (Mr. Alan Williams)
With permission, I should like to make a statement on the Footwear Industry Study Steering Group's report. The Group, which included four Members of this House, has produced a comprehensive and most valuable report on the footwear industry. I intend to respond to it positively. There are 55 recommendations for action in the report. Some 23 are directed to Government. Action has already begun on a number of important recommendations.
The Government have examined the report with great care. I am conscious of the need to avoid creating uneconomic capacity in the industry or exacerbating the existing over-capacity in Europe as a whole. The Government are, nevertheless, anxious to give as quickly as possible whatever help they can to the industry consistent with our international obligations, including those within the Community, and with the constraints on public expenditure.
We shall be exploring with the industry the exact ways in which Government financial assistance could be provided to meet the essential purposes behind the recommendations in the report.
I am glad to announce that, in line with the report's recommendation for a successor body to the Steering Group, a new footwear committee will be established, on a tripartite basis, under the National Economic Development Council. Distributors as well as manufacturers will be represented on it.
There are a number of recommendations on training. These will need further consultation between the Industry Training Board and the industry, but I do not expect there to be any insuperable difficulties in providing the necessary finance.
As regards direct assistance to individual exporters, officials of the Departments concerned are arranging to discuss the detailed recommendation in the report with the industry. The aim will be to explore ways and means of using the services of ECGD and the British Overseas Trade Board to the best advantage of footwear exporters.
936 A number of the recommendations on trade policy already form part of Government policy. My Department and the Department of Trade will be meeting with the industry to consider the scope for giving effect to the substance of others. In this connection, I recognise the industry's concern about the increasing inroads which imports are making into the home market and we are considering with the Department of Trade what scope there might be for remedial action.
The report refers to gross margins in footwear retailing but makes no recommendation concerning them. However, I have drawn the attention of my right hon. Friend the Secretary of State for Prices and Consumer Protection to what the report has to say on this matter.
We accept the importance of continuing zero VAT rating of footwear designed for young children and for certain industrial safety footwear, and, as requested, we are looking into the possibility of Government action in relation to the social cost of foot deformities.
As to the recommendation for an investigation of footwear distribution, the Director-General of Fair Trading intends to keep developments in the industry under review, although he has decided that there is at present no monopoly situation.
I know that the industry accepts that Government action alone will not make the industry viable. It is also vital that the industry accepts and implements the recommendations directed to itself in this valuable report.
The footwear manufacturing industry is an important employer and contributes a great deal to the national economy. I am confident that it can have a prosperous future. The Government will do all they can to foster this.

§ Mr. Norman Lamont
May we be associated with the Minister's statement congratulating the Steering Grout) and the Members of the House involved in producing this massive and detailed analysis of the industry's problems?
Is the Minister aware that we recognise the special problems caused to the industry by unfair competition, export subsidies and import restrictions? Can he say whether the Government accept the specific finding of the committee that 937 quotas from COMECON countries are too high and that there is no reason why certain countries, such as Japan, should be allowed to continue to maintain quotas?
Is the Minister aware that we note from the report that the technology of the industry is up to date and industrial relations are good, and therefore action has to come from the industry itself to improve its position in world markets, and that we agree with the Minister that this is more important than Government expenditure?
Lastly, is the Minister aware that the recommendations for Government grants to supplement the salaries of managers, marketing executives and entrepreneurs—which may strike some hon. Members as a rather curious recommendation—underline in a particular case what the Government have always denied in general—that management salaries in this country have been squeezed unduly and that it is in the national interest and in the interests of employment and competitive industry that action should be taken urgently to reverse this trend?

Mr. Williams
I thank the hon. Gentleman for his congratulations to the people who produced the report. I am sure that the whole House will echo his words.
On the point raised about the COMECON countries, we have accepted the first part of the recommendation in the report, that any liberalisation of quotas would have to be done slowly. We have also told the industry that we think it highly improbable that it would be possible to negotiate lower voluntary import levels than apply at the moment. I share the hon. Gentleman's view of the favourable industrial relations within the industry. It is a good omen if management itself now provides adequate initiative to work on the report's recommendations.
The point raised by the hon. Gentleman about Government grants for salaries and so on introduces a somewhat novel suggestion, as I am sure he will appreciate. It is one of the reasons for our having to discuss with the industry precisely what form financial support should take, and whether it can take the exact form that is suggested. As for the general political point that the hon. Gentleman 938 made at the end of his comments, I am sure that he will appreciate that in this industry the situation described in the report is a long-standing one.

§ Mr. John Garrett
Is my right hon. Friend aware that the rapid response of his Department to this important report will he welcomed throughout the footwear industry? Can he inform the House on two further items in the report? First, when will the first sums of money under the £11 million proposed become available, particularly for investment? Second, what progress has my right hon. Friend made with signing a planning agreement with the leading distributing companies. particularly the British Shoe Corporation? He will be aware, of course, that Conservative Members as well as Labour Members of Parliament, manufacturers and trade unionists recommend that a planning agreement be signed with leading companies in the footwear retail trade.

Mr. Williams
I thank my hon. Friend for his kind comments and, in turn, I congratulate him and other hon. Members who gave a considerable amount of time to assisting in the preparation of the report. One of the reasons that we want to have further discussion with the industry on the question of finance is that, clearly, if the finance is to be available we want it to be available as quickly as is practicable. This means that it would be helpful if, instead of trying to provide all the finance under a completely new scheme, which would take time to prepare and process, as my hon. Friend will appreciate from his discussions in the Steering Group, we could identify some sources of finance that are already in existence. That is what we intend to do in our discussion.
In respect of the planning agreement, I hope to give my hon. Friend partial comfort by saying that planning discussions, which are the precursor to possible planning agreements, are already under way with about six companies. Some of these companies are on the manufacturing side and some on the distribution side.

§ Mr. Boscawen
Does the right hon. Gentleman agree that this report will do a lot of good in getting the size and standing of this considerable industry recognised throughout the country? Will he accept 939 from me that the industry generally will welcome the fact that he has announced that a successor body will be set up? Can he say how soon that is likely to be? Further, will the Minister take note that the industry's greatest problem still is the level of imports from countries where wages are considerably lower than they are in this country? Though they may not be subsidised imports, they do grave damage in that shoes are coming to this country below the cost of the raw materials that are in them.

Mr. Williams
I thank the hon. Gentleman for his constructive comments. I agree with him completely about the standing of the industry. I was intrigued by a comment made by my hon. Friend the Member for Rossendale (Mr. Noble) on a recent deputation that the industry is a bigger employer than the shipbuilding industry. That is something which people tend not to appreciate initially.
The successor body has already been authorised. It was authorised at the last NEDC meeting. It is now a matter of making the appropriate appointments to the body. We hope that the tripartite committee will be in operation as quickly as possible, because we want its advice on the implementation of the recommendations in the report—implementation not just by Government but by industry, too.
When the level of imports reaches the 52 per cent. level that it has attained this year, it must be a matter of grave concern. While discussions are taking place in the multilateral trade negotiations about the longer-term issues, we are considering whether Article XIX action may be appropriate, because we have received an application from the industry to use that section.

§ Mr. Noble
Will my right hon. Friend accept that the people who work in the industry in Rossendale will be pleased to hear of the Government's commitment to the report and the steps that will be taken to implement it? Will he also accept that there is a short-term problem and a long-term problem? He referred to the short-term problem a moment ago —the question of imports. Will he acknowledge that people in the industry are urgently requesting action on this matter? Article XIX should be used if imports 940 reach the level of 52 per cent. and there is evidence of market disruption. That will be quite clear if my right hon. Friend examines the number of workers on TES and the number of redundancies.
Will my right hon. Friend also note that in the long term it will be absolutely essential for the industry to be refurbished, particularly in relation to design and marketing? Will he say more in that respect, particularly on the subject of exports?

Mr. Williams
I hope that my hon. Friend is correct when he says that the response will be welcomed in Rossendale. I want the people of Rossendale to know that I am indebted to the rather unusual localised union which exists there and which came to give some advice during the past few weeks when we have been consulting about our response to this report.
As my hon. Friend implies, while the long-term problems are clearly important, if the short-term problems are not dealt with there may not be a long term. That is what worries many hon. Members. That is why we are having the most urgent consideration with the Department of Trade about an Article XIX operation.
I remind the House that substantial action has already been taken to curb imports from certain sources. But I recognise and understand the concern that exists in the industry at this stage. We in the Government are treating it as a matter of urgency.
My hon. Friend asked about the question of design. This is a critically important sector of the industry. It is where the industry has fallen down and it is the reason why we have lost so much trade, for example to the Italian shoe industry. One of the matters which we have to explore—I have already had initial consultations on the matter—is precisely what form boosting the design side of the industry should take. There is no lack of will to do it. It is a matter of finding the most effective way of attaining that objective.
On marketing, as I indicated in my initial comments, we are considering to what extent, under ECGD, further support can be given.

§ Miss Harvie Anderson
On the employment point, will the Minister undertake 941 to watch one of the main supplying units, namely, the leather suppliers? If the Government are to intervene through the National Enterprise Board, will the Minister assure the House that that intervention will not help one area in terms of employment at the expense of another which will lose jobs in consequence?

Mr. Williams
At the moment I think there is no question of a shortage of leather supplies, as the right hon. Lady will appreciate. I accept that no one wants to add to the difficulties, but, frankly, I do not think that the NEB's activities so far in that direction have done so. Nor have my own attempts to save the tannery in the Millom area.

§ Mr. Greville Janner
Is my right hon. Friend aware of the satisfaction which his statement will bring to areas such as Leicester which have always depended greatly upon the footwear trade and where there is, for example, the largest shoe warehouse in the world? Will he also bear in mind, when consulting the new committee, the needs of individual areas where unemployment has been caused through the recession in the industry? Can he assure the House that both in the composition of the new committee and in its consultations careful attention will be given to the special needs of areas so dependent upon the industry?

Mr. Williams
I am appreciative of my hon. and learned Friend's approach, but I am not at all sure that a geographic representation is necessarily the ideal basis for forming this committee. But I shall look at the point, because it was raised previously by my hon. Friend the hon. Member for Rossendale.
I think it equally important that we ensure that all relevant sectors of the industry are adequately represented, and particularly that the distribution side, which was not represented on the previous committee, is represented on this committee. I am sure that, in the long term, there can be no sensible solution to the industry's problems unless we have the distribution side working constructively with the manufacturing side.

§ Mr. Michael Morris
Will the Minister recognise how much we welcome, first, the creation of the little "Neddy" and, second, the general acceptance of the 942 recommendations, but that this is tempered by disappointment that no financial budget has been given to the industry and there was the vague phrase in the Minister's statement. consistent with the constraints on public expenditure"? Although the Article XIX order has now been with the Department for just over two months, there has been no positive response yet. Lastly, the right hon. Gentleman's statement about the BOTB rings a little hollow when the industry is facing a 25 per cent. cutback in resources from that area in the current financial year.

Mr. Williams
I thank the hon. Gentleman at least for his first sentence. I am sorry that I cannot extend the same response to the rest of his comments. He said that he was disappointed that there was no financial budget. If it had been possible to provide a financial budget at this stage, I should have wished to do so. The type of problem that the hon. Member for Kingston upon Thames (Mr. Lamont) indicated in his response demonstrates the difficulties that we are having in finding the appropriate form of financial response to the report. Frankly, I should not have made the statement to the House today had we not been about to go into recess. But, although it will take me a little longer to finalise the financial package, I thought it essential to people in the industry, because of the dangers to morale there, that they should know clearly today, before we go into recess, that the Government and both sides of the House are firmly behind them in their attempt to save the industry.

§ Mr. George
Is the Minister aware that Walsall is one of the few remaining centres of the leather goods industry, an industry closely connected with the footwear industry and having identical problems, not the least being competition from the Far East, notably Taiwan? When he is devising a policy to resuscitate the footwear industry, will he consider that closely related industry which he might assist and thereby help to resuscitate not just one industry but two?

Mr. Williams
I congratulate my hon. Friend on his ingenuity. Certainly, if appropriate information is submitted to me, such as I have had from the shoe industry, I shall be glad to respond as 943 quickly as I possibly can. In saying that, may I add a point that I forgot earlier? The application from the industry has not been with the Government for two months. My recollection is that it came at about the middle of June.

§ Mr. Farr
I recognise the reasons why the Minister made the statement today. Indeed, I welcome the establishment of a new footwear committee, although it is difficult to see how that will provide any extra jobs. But will the Minister again address himself to the question of taking some action under Article XIX relating to cheap imports, particularly from the Far East, including South Korea, and also from certain Iron Curtain countries, which are undoubtedly causing great damage to the home trade?

Mr. Williams
The committee is intended in itself not to create extra jobs but to act as a focal point for discussion of the industry's problems and also as a central committee to ensure that the implementation of the report is carried through as effectively and quickly as possible. As I have indicated, we are treating the Article XIX response urgently. I do not think that I can add anything to my previous comments there. As regards the COMECON countries, I am sure that the hon. Member is aware that rubber footwear from Eastern Europe is already covered by quotas, that all footwear from China is covered by quotas, we have negotiated voluntary restraint with Poland, Czechoslovakia and Romania on leather footwear and we have recently managed to get price adjustments on footwear from Czechoslovakia and Poland as a result of an anti-dumping proposition put to us by the industry. We have achieved some positive results there. I can understand, however, that, with high levels of imports, people will want to see Article XIX action.

§ Mr. William Ross
My right hon. Friend will appreciate that we are heartened by the Government's recognition of the importance of the industry and its problems. He will be aware that Kilmarnock, which is more or less the centre of the industry in Scotland, is already hard hit, and we were more than slightly troubled to hear what he said about the geographic area outlook. If my right hon. 944 Friend can give us an assurance that the Government will not ignore the importance of these proposals to areas that are already hard hit, we shall be satisfied, because we know that he usually means what he says.
There is another matter that worries me. My right hon. Friend mentioned Italian competition. This is something that concerns many hon. Members. To what extent is he inhibited by our membership of the Common Market in taking action?

Mr. Williams
If I may deal first with the latter point, the important thing about competition within the Market, and from other advanced economies, is that it should be on a fair basis. Within the EEC, there are control mechanisms to ensure that that is so. One has to recognise that the Italians' supremacy on the Continent in this respect has arisen substantially from their greater investment in design—there have been some very interesting experiments in design operation—and also because of their much higher capital investment, which is one of the objectives of the report that we are now considering.
On the geographic point, I can give my right hon. Friend the assurance that he wants. I am not suggesting that we ignore it completely. We are dealing with quite a large and dispersed industry, with many large and medium-sized firms. We shall want to take account of major geographic factors, but we must ensure that that does not prevent us from having the proper spread of know-how and ability, while keeping the committee to a size that is operational.

§ Mr. Nicholas Winterton
I join the Minister and my hon. Friends in welcoming the report and expressing thanks to those who produced it.
Is the Minister aware that while this great and important industry faces tremendous competition from within Europe —and also from those countries that might well join Europe in the foreseeable future —a high degree of the unfair competition comes from the COMECON countries?
In reply to an earlier question the Minister said that he did not believe that it was possible to reduce existing voluntary quotas with certain countries 945 in Eastern Europe. Will he say why he is not prepared to try to reduce the quotas that have put this important industry in Britain in a parlous and unfortunate position? I believe that one way of solving the problem is to negotiate rather more realistic quotas with those Eastern European countries that are undermining the industry at present.

Mr. Williams
I think that the same general proposition must apply. Where there is fair competition, industry must be able to stand up against it. Where we have had evidence of possible dumping by the COMECON countries, we have taken action. The recent response of the Department of Trade vis-à-vis Czechoslovakia demonstrates the effectiveness of that, I believe that it has already had repercussions in ordering patterns.
The hon. Gentleman may be aware that the original voluntary quotas were arrived at after hard negotiations with the State trading nations. The Department of Trade has had lengthy negotiations, and these negotiations inevitably go beyond any one industry when we are dealing with State-trading nations. Therefore, one has to take into account a trading package.

§ Mr. Tomney
In this welter of questions, important as they are in relation to trade and industry and imports and exports in the shoe industry, may I ask one important question on behalf of the general public? It refers to my right hon. Friend's statement about style and design.
946 My right hon. Friend will be aware—perhaps he is not aware—that as women get older they get broader in the bottom and broader in the feet. As a consequence, there is a dearth of wider fittings with style and comfort for elderly and middle-aged women. This is a grievous problem for the public. Women can go from shop to shop, hour after hour, seeking shoes to fit them. The market is geared to the young people, with a fast turnover and high profits. There is a problem here—special fittings for special people—which should be met by the industry.

Mr. Williams
I am sure that my hon. Friend is absolutely correct. One of the ways in which some of the exporting countries have managed to erode the domestic market is by selling only a limited range of fittings so that they do not have the same costs in production that our own producers have. This is essentially a question for the Department of Prices and Consumer Protection. I shall ensure that it is brought to the attention of my right hon. Friend and, indeed, of the industry.