§ 2.4 a.m.
§ Mr. Hal Miller (Bromsgrove and Redditch)I rise to discuss support for the motor industry. I am happy to find the Under-Secretary on the Treasury Bench, as he shares with me a concern for the industry. He also shares with me many constituents who work in the industry and he has great experience of its problems.
My reason for seeking this debate is that I wish to raise a number of questions which it has not been possible to put to Ministers when statements have been made to the House on releasing further tranches of money for British Leyland.
My object tonight is to try to bring home to the Government the fact that the mere release of additional money under this Vote is of itself not adequate to carry conviction and to give confidence to those working into the industry. That needs to be supported by more consistent action on the part of the Government.
At the same time, I wish to examine with the Minister the strategy on which that support has been based, because I do not think that this House has had the 1156 opportunity of re-examining it since the Ryder plan. We do need to keep abreast of developments since then.
The motor industry is still a major industry in this country, directly employing 600,000 people. The components industry, which supplies it, employs about 1 .2 million people and the dealers who sell the products, employ roughly the same number again, as well as equal amount of capital employed.
The industry, in fact, accounts for £3,500 million of foreign earnings and is responsible for about 5 per cent. of our GDP. The road user, through taxation, supplies about 10 per cent. of the general revenue of the Government and there is a considerable surplus over expenditure on roads, which will rise in the current year from about £1,700 million to £2,500 million. It is no wonder that any Government and any political party must be concerned about the future of this industry.
The figures in respect of Government support are now mind-boggling. The British Leyland figure alone, of £1,400 million—£2,800 million over the five years after inflation—is an absolutely astonishing pre-emption of resources for one industry, and serious questions must be raised about the extent of this commitment in the light of the parallel and later commitment which the Government undertook with regard to Chrysler.
But, as I said in my original remarks, one of my purposes this evening is to try to bring home to the Government the fact that despite this massive input of funds they have not yet succeeded in carrying conviction with the work force, with the component makers, with the dealers, with the public and with Parliament that their actions are consistent and that they have a coherent policy to pursue in respect of this industry.
One needs only to reflect on the recent White Paper on Transport Policy, which proposed a reduction in expenditure on roads. One has only to reflect on the proposed increase in the petrol tax, proposed in the last Budget, or the recent introduction of taxation on company cars which hit Leyland's most successful product and which was bitterly resented by the work force. One has only to think of regional policy, which severely lengthened the production line of many 1157 factories by diverting to opposite ends of the country subsidiary plants, or plants making essential parts for the production, thereby increasing transport costs and delivery difficulties.
There are many other policies, but in the interests of being brief I shall turn from those to the question of necessary confidence and certainty.
I hope that the Government understand that the work force needs to have confidence that it will be allowed to negotiate a common starting date for its pay agreement in British Leyland. This subject was raised during the confidence debate last week, both by my right hon. Friend the Leader of the Opposition and by the hon. Member for Birmingham, Perry Barr (Mr. Rooker). In reply, the Chancellor of the Exchequer said:
This is not provided for in the TUC guidelines and there are great risks if an unfair advantage is taken of the possibility. I believe that there is a real problem for some major companies, for the reasons that my hon. Friend the Member for Perry Barr mentioned. If the management and unions concerned reached an agreement that did not infringe the guidance given by the TUC, I have no doubt that the TUC would consider whether the proposal was acceptable."—[Official Report, 20th July 1977; Vol. 935, c. 1734.]I hope that the Minister has been able to give the matter some attention since the Chancellor spoke, because this is such an important matter that I do not believe that it should be left in the hands of the TUC. The Government have invested our money in this company. They must ensure that that money is protected and that proper use is made of it.I emphasise the warning given by the hon. Member for Perry Barr that unless something is done there is a real danger that that investment will be severely prejudiced. I understand that neither management nor unions will be able to hold the line unless a common starting date is agreed.
I move further, to the question of differentials. The Minister will be aware of the difficulties earlier in the year over the toolmakers' strike. There are differentials between one skill and another, between skilled and unskilled, between those with responsibility and those without. The Minister will be aware of the real difficulties of different rates of pay for the same job in different plants.
1158 There is a further worry on this score, because as recently as this afternoon the Prime Minister said that average industrial earnings were £80 per week. That is not the common wage in British Leyland. Many of my constitutents are drawing about £68 a week. They have made it plain to me that they will go for the average industrial wage in their negotiations.
The Chancellor and the Prime Minister have been telling us that if we are to have single-figure inflation we must have single-figure wage increases. That is a static view. It takes no account of the possibilities of increases in production. I hope that the Minister will agree that if people produce more they should be allowed to earn more.
We must increase productivity. The NEB report admitted fairly and squarely that British Leyland productivity is not yet up to comparable international levels. I am telling the Minister—I am sure that he is aware of this—that British Leyland will not be able to reach comparable international productivity unless the payment system is changed to allow for incentive.
In the recent debate the Chancellor said that self-financed productivity deals would be allowed. The Government have a responsibility to ensure that this policy is applied at Leyland's.
There are other reasons why the work force lacks confidence. There have been failures of management and failures and difficulties on the union side. There have been persistent union rivalries, notably at Cowley, with serious effects. The work force has not always felt confident that the unions are representing their interests. That was certainly the case with the toolmakers.
I could go on further on that aspect, but in the interests of progress I turn to the component makers. There is a great deal of uncertainty and confusion about Government policy. We were told in the CPRS report that the component industry was the main strength of the British motor industry and that it offered the best and most profitable opportunities for the future. The impression given was that the British compenent industry was uniquely strong. There is great uncertainty among the industry about British Leyland's proposals for making further 1159 components in-house—notably exhaust systems, electrical systems, heaters and bumpers.
I hope that the Minister will understand that these component makers see themselves subjected to competition financed out of their taxes, which represents a threat to their production and is liable to draw away scarce managerial and technical skills which are needed for the production of these components. It must also be admitted that there is doubt about the management ability of British Leyland if it cannot get the requisite levels of productivity. Is it in a state to take on additional forms of product? What is needed is for the line to be clearly drawn and for there to be a general understanding so that a general acceptance may be gained of what British Leyland is trying to do in this respect.
I move on to the dealers, who have a larger work force and comparable capital employed. The dealers have serious doubts about the quality of recent production. We have been told in the NEB report that the numbers have been achieved. It was a matter of great regret to me that the Secretary of State insisted on the target numbers being achieved rather than having an equal insistence on making certain that what is produced can be sold. It is no good producing anything unless it can be sold, and there has been real problems about quality. There is a wide suspicion, not only among dealers but members of the public, that British Leyland has gone for numbers rather than for quality.
Those in my constituency who are engaged in quality control have told me that they had to take a back seat in the last three months and their difficulties have been enhanced by a very high rate of labour turnover, which has made it impossible to find skilled replacements for those who arc absent. The dealers are also concerned about the sales policies of British Leyland. Superdeal may have cleared the stocks last autumn, but it led to a great loss of confidence among dealers and among the public, who could not understand why they were able for a short period to buy for a much reduced sum, after which that facility was suddenly available no more.
1160 Dealers are also concerned about model mix, and the need for a new medium car. I shall revert later to that matter of strategy. The public are the next body who are worried, and they need reassurance and certainty as to the drift of Government policy and support for the motor car industry.
All companies' car prices have risen practically uniformly by 6 per cent. quarterly. It must be admitted, and has been admitted to me by a senior executive, that the operation of the Price Code has been such as to make these increases automatic. All companies have been able to charge them without fear of competition because they know that everybody else will follow suit to the same amount. The code has done nothing to hold down the prices of cars and has fossilised manufacturers in their method of manufacture rather than providing incentives to seek raw materials or new ways of doing things.
The public are concerned about quality, the availability of cars and the trade policy, because they see their taxes going to support our industry but at the same time it is not clear what the Government's policy is for the car park—if I may put it that way—and the import trade.
Parliament is the last body I wish to mention that needs to have a better idea where the Government are going in the matter of support for the car industry, how it is to be channelled, and how accountability is to be achieved. I should welcome the current line of thinking, that the NEB should be made more responsible than the Department for reaching these decisions and for the allocation of the additional tranches as and when they are required, but there goes with that the need to hold the NEB accountable in some way, which the House has not so far sorted out. It is not easy to arrive at the manner in which the NEB should be made accountable. It is possible for individual hon. Members to see the chairman or engage in correspondence, but it is not possible to get anything aired in the House. We have a great deal still to do on that.
In the case of Leyland the House must also be concerned that the additional money is still being made available on 1161 the strength of the NEB report, for which we are grateful, despite the reservations in it. We must be concerned, because we have had no answer to the question whether Leyland has been providing its own 50 per cent. to match those funds. My deduction, with which I think other hon. Members will agree, is that it has not been able to do so.
It would be very helpful to the company to be subjected to that discipline. If it has not been able to raise the money out of its trading position, the House might well ask whether it does not possess some assets that should be realised—whether the special products division, for instance, should be sold to make available the funds required in the car sector.
I do not wish to stray further into the question of the way in which the whole of Leyland is organised, and whether that matter should not be looked at afresh with the departure of Lord Ryder, who insisted on a certain form of organisation as part of the Ryder plan. But I emphasise that there must be concern in the House on the question whether Leyland is making its contribution and whether it should be required to do so.
Let me now turn to the way in which this matter is presented to the House. We are always given a global figure—perhaps £100 million to £500 million out of a total of £1,400 million. But it is not immediately apparent to the House that these figures include provision of a new test track with associated facilities. There must be grave doubt whether such expenditure is justified at such a time as this if the company cannot make its matching contribution. There must also be grave doubt about the effect this is likely to have on the motor industry's own test track.
There are other items of expenditure which do not give one confidence that financing is being addressed in a responsible manner. That casts doubt on the enterprise as a whole and has a most unfortunate repercussion throughout the organisation while giving the public further cause to suspect that all is not well. That does not produce an atmosphere in which any of us will be able to contribute towards making a success of the operation.
The strategy of the motor industry in this country must depend very largely on 1162 the international scene which, according to a recent report of the EEC and to the latest issue of the "Motor Digest", is becoming increasingly competitive. Our industry is small by comparison with the industries of the United States and Japan. It seems therefore that there must be a further concentration. The Japanese industry is producing about 6 million vehicles a year, and that is expected to rise to 8 million. Our EEC partners together produce 8 million, and the Americans are producing about 12 million.
Government aid to Chrysler was largely based on the insistence that Chrysler's activities in this country should be fully integrated into the European operation. That provided a great advantage, the fruits of which are now becoming apparent with the success of the Alpine and, provided some of the assembly difficulties at Linwood can be overcome, with the launch of the 424.
We therefore face a situation in which these large national industries are highly competitive and in which the countries of the less-developed world are turning increasingly towards the assembly of motor vehicles. The position in Iran is well known to us, because of that country's link with Chrysler. Perhaps not so well known is that already motor production lot Brazil is running at over 1 million units a year. There is a growing trend of motor manufacture in developing countries.
The third strategic factor which must be taken into account is that productivity is growing faster than the market. That means the likelihood of serious consequences for employment. It will not be enough to put money into the industry to save existing jobs. Part of that money is bound to lead eventually to a loss of employment. We must therefore consider whether the industry can be maintained at its existing level in the manner in which the Government have chosen to operate it.
I am only floating a suggestion this evening, but I think that the Government might wish to consider whether Leyland ought not also to be put somehow on to a European scale.
We have seen the apparent success of the Chrysler European operation. The success of the Ford European operation is well known. We have been happy to 1163 note recently that General Motors proposes to start the production of the Cavalier in Britain.
I wonder whether we should not consider providing the new medium car that dealers so desperately need from a European source, perhaps to English design, as was done with the Chrysler Alpine. It might also be possible, as part of that deal, to have manufactured partly abroad some of the specialist cars on which there is a production bottleneck in Britain now, such as the Rover 3500 and the Jaguar. Although these are advanced and successful designs, the difficulty has always been to obtain adequate production and to ensure that there is sufficient output to cash in on the success of the design. We should pay tribute to those successes.
So far the House has been concentrating on the maintenance of jobs and the funding from tax revenue. We must look rather more deeply at what we are doing on a strategic basis.
I do not wish to detain the House at this late hour. I will therefore draw my remarks to a conclusion with a plea to the Government to understand that right through the bodies I have mentioned there is a need for confidence and for certainty. A coherent policy is required. The House needs further assurances about the Government's strategic thinking, because there is a real need for Britain to become and stay internationally competitive.
I hope, also, that in that connection the Government will give serious attention to imports which are not competitive in production but which are sold here at very low prices, particularly from Comecon countries. A huge dealer network has been set up selling only 17 cars per year per dealer. That cannot be viable. It must be based on the assumption that there will be a heavy increase in throughput through those dealers.
The high level of imports from Japan must be taken seriously, especially in view of Japan's very advanced production facilities, which extend far beyond cars. There is real concern about light vans being assembled in the Republic of Ireland from Japanese parts for export to this country on an internal EEC basis.
1164 I pay tribute to all those in the industry who, in such difficult circumstances, are doing their very best to produce the results, because I know that they are proud of their product, wish it to be successful, and are looking to the Government to take the necessary action.
§ 35 a.m.
§ The Under-Secretary of State for industry (Mr. Les Huckfield)The whole House recognises that the hon. Member for Bromsgrove and Redditch (Mr. Miller) speaks with a great deal of experience of the motor vehicle industry, and I pay tribute, as, I am sure, will hon. Members on both sides, to the constructive way in which he has introduced this debate tonight. I am grateful to the hon. Gentleman for choosing this important topic.
The hon. Gentleman was absolutely right to emphasise the magnitude and importance of the task of maintaining our own motor vehicle producing industry. I am sure that he, for his part, will realise that that was a task the magnitude and importance of which was recognised in the Government's White Paper in January 1976 on the objectives which they had set for the motor vehicle industry.
In essence, the Government take the view that we want to see a viable, substantial and competitive motor vehicle industry into the 1980s and beyond. Our aim is to maximise the economic benefits of having that industry to secure employment and make a positive contribution to the balance of payments, which, as the hon. Gentleman knows, this industry is well capable of making.
May I try to break down that objective into rather more detail? We must have the objective of maintaining one strong indigenous manufacturer of a comprehensive range of products. The second aim which we have set ourselves is to encourage the multinationals to continue to locate as many of their production facilities in this country as possible. Third and over and beyond that, our aim is to create conditions in which both British Leyland and the multinationals operate successfully. That is the framework of the Government's policy within which we see the motor industry operating.
I move on now to more specific details, particularly with regard to British Leyland. British Leyland—I am glad 1165 that the hon. Gentleman recognised this and paid tribute to it—is the country's largest single exporter. Its contribution to the balance of payments now runs close to £1,000 million a year, and, in the Government's view, this contribution fully justifies the massive programme of support which we have planned and designed to ensure the return of British Leyland to full viability. I am sure that the hon. Gentleman acknowledges also that this massive programme of support follows a sustained period of under-investment in the firm.
The larger part of the assistance will be provided as loan capital on commercial terms, and will be repaid. The scale of support is very large—I do not deny that—but it is based upon a careful study of what British Leyland needs to compete right the way across the model range. I know that there have been certain differences of view in the House as to the part or parts of the model range on which British Leyland should concentrate, but the basic Ryder strategy and the Government's strategy is that the company should be a producer of cars right the way across the model range. That is a fairly substantial declaration of ambition and of faith in British Leyland itself.
It is possible to achieve the sort of volume necessary to compete in the mass market and to generate increased sales both in continental Europe and in the United Kingdom and elsewhere only if substantial investment is made. That means, if we are to have that level of investment and production, that we must, as the hon. Gentleman said, have a viable and strong dealer network both at home and in Europe.
It is that requirement and declaration of objectives—that British Leyland ought to produce right across the model range, that it ought to be a substantial producer in this country and in Europe, and that it ought to have a viable dealer network—which underpin the level of assistance which we believe to be necessary.
I come now to the point which the hon. Gentleman made about the Europeanisation, if I may so call it, of Ford, General Motors and Chrysler. It is true that, over the past 10 years in particular, American multinationals have become integrated on a much more European basis. We now talk of dual sourcing and triple sourcing, 1166 with reference to the kind of European strategy that Ford and General Motors in particular have adopted. I note in this context the hon. Gentleman's comparison with British Leyland, which is at present primarily British-sourced. There is strong pressure from the trade union movement that the company should maintain a British purchasing preference policy.
I hope that the hon. Gentleman will also recognise that although British Leyland has recently engaged in opening discussions with Renault, this is a series of discussions which certainly does not carry with it any set of pre-conditions. It is simply a series of very preliminary discussions to examine the kinds of technical collaboration and other things that might take place. I should not like the hon. Gentleman to get the idea that British Leyland was attempting to emulate the European multinationals or to integrate in that same kind of way.
The Government have also recognised that just as half-measures in regard to investment are not sufficient to do the job, so investment alone is not sufficient. Hand in hand with the massive investment that I have just been describing is the need to increase and to ensure improvements in industrial performance, most noticeably in the areas of industrial relations and productivity.
It is no use shying away from the fact that productivity levels in this country, particularly in British Leyland, are not up to those of our Continental counterparts. It is not only a question of investment and of productivity. It is, as the hon. Gentleman indicated, a question of incentives, differentials and some of the difficulties in pay policy about which we have had a lot of discussion during the past two years.
I do not want to lead the hon. Gentleman into a discussion of common starting dates and what is to happen in the next pay round. He will realise that there has been a great deal of discussion on these matters. The Government recognise the need for more flexibility after July 31st, but we also recognise the need not to throw away and not to scatter to the four winds the gains that we feel have been made in reducing the rate of inflation in the past two years.
1167 It is sufficient to take note that there has been agreement in the participation machinery and in the working parties as to the need to move towards some kind of common starting date, but I am sure that the hon. Gentleman recognises that it is rather more complicated than that. I am sure he would not expect me to point the way in any definite direction this evening, but I recognise his concern. It is a concern and a discussion which has been going on for some considerable time.
Just as we have tried to preach the philosophy of making each tranche of financial assistance conditional on improvements in the sorts of areas to which I have referred, so also, in applying this philosophy of each tranche being conditional we have to take into account the need not to create too much uncertainty about the company's future in the minds of workers, customers and dealers. That is the kind of fine balance that we have to preserve. We need accountability. We need to have tranches advanced with conditions attached. Nevertheless, we also need to create certainty and a positive future for all the people involved in this industry.
It is the same on the truck and bus side, although I am sure that the hon. Gentleman will recognise that we have not had quite the productivity comparisons and industrial relations record on that side that we have had in the car industry. Nevertheless, there has been a past history of serious under-investment. There is also a growing need to penetrate West European markets and an increasing need to watch the penetration of the Europeans, and now the Japanese, into our markets. I shall refer to that a little later.
We recognise, the British Leyland board recognises, and the National Enterprise Board recognises, the opportunities and the need to improve the model range in truck and bus, and particularly the need for a new bus and for new trucks. Recent investment decisions and plans have already been announced in this direction.
The hon. Gentleman touched on the way in which British Leyland has been financed, and also referred to the conditional approach which has so far been adopted. The hon. Gentleman may have been somewhat misled by the media's 1168 concentration on production target figures. My right hon. Friend has been talking in terms of the need to meet the targets. The company has been setting the targets and my right hon. Friend has been stressing the need to have continuous production so that the targets can be met.
It was in that spirit that, on 25th July, my right hon. Friend drew attention to the NEB's report on British Leyland. The report shows that production recently has been maintained at high levels and records the NEB's view that real progress towards achieving a radical improvement in industrial relations has been made, although both the hon. Gentleman and I, with our constituency interests, recognise that we still have a substantial way to go.
It was on that kind of basis—that an improvement had been recorded in the last three months—that the NEB recommend that it should be authorised to release a further load of up to £100 million, subject to the NEB being satisfied at each stage that progress on improving industrial relations is continuing.
The hon. Gentleman referred to future financing policy towards British Leyland. As my right hon. Friend said in his statement on 25th July, the Government have not taken a final view. The next tranche will come from the NEB. Certain views have been expressed on this matter by the Industrial Development Advisory Board and others. It has always been the Government's view that the major source of funds for British Leyland would be the NEB. However, no final view has been taken on that matter.
The hon. Gentleman referred to the NEB's guidelines and its accountability to the House. I draw the hon. Gentleman's attention to a debate in this House in which I took part at the beginning of this year which took up a whole Friday. This is no reflection on the hon. Gentleman personally, but, though there have been many complaints by the Opposition about the alleged lack of accountability of the NEB, on that occasion, when we had a whole day to debate the NEB guidelines, there was a sparse attendance by the Opposition. That was unfortunate, in view of the observations that had been made on the subject.
Although we have recognised that the main provider of funds for British Leyland would be the NEB, it has also been 1169 stressed, particularly by my right hon. Friend in his statement in March, that the company must continue to be a major generator of its own funds. If British Leyland wants to go ahead with the basic Ryder plan for the production of models right across the vehicle range, it must be a major generator of its own funds.
I shall refer briefly to the role of the multinationals in vehicles production in this country. I am sure that the hon. Gentleman recognises that they take their investment decisions in a slightly different way from us. Neverless, it has been Government policy to encourage them to continue to locate their production and assembly in this country. We hope that with the transfer of the Cavalier to this country, the increase in employment opportunities now being offered by Vauxhall at Ellesmere Port, the Alpine coming out of Ryton in Coventry and the Sunbeam coming from Linwood in Scotland the assembly policy of the multinationals in this country will continue.
Turning briefly to the components industry, I recognise, because I have had it addressed to me by deputations and on visits that I have made, that there is concern in the motor vehicle industry about the potential expansionist ambitions of British Leyland. I am sure that the hon. Gentleman knows that the components section of British Leyland has announced certain plans recently.
There has been a great deal of suspicion that this components manufacturing expansion will, in some way, be cross-subsidised from other activities. That is not British Leyland's ambition, and assurances have been given in that direction. Because there has been concern about the matter, and because there is a need to discuss the rôle of components in this field generally, a components industry working group was set up under the chairmanship of my right hon. Friend the Minister of State. Therefore, we have now established a forum in which these issues can be discussed.
It is encouraging to note that although some of the multinationals have been talking recently about shifting production out of Europe and into the Far East and other low-wage areas, and although there has been a tendency to move assembly out of Europe, the rôle of British component manufacturers in assembly centres outside Europe is being maintained.
1170 Our components industry has had certain successes, as the hon. Member recognised, in the new assembly areas and in the United States. We have seen the expansion of Lucas and other component manufacturers in the United States. This is very encouraging and we want to see it continue.
Another matter raised by the hon. Member was the supposed or alleged lack of co-ordination between macroeconomic and micro-economic policy decisions. There was a great deal of concern, when the Chancellor introduced the company car tax plans, that these two had not quite meshed. But if the hon. Member looks at the basic strategy behind the decision on vehicle excise duty, and the decision on company car taxation I am sure that he will see that we recognised the deficiency of British manufacturers at the smaller end of the range.
It would have been easy for the Government to penalise the larger end of the market, which would have been to the advantage of small car producers—in the main, importers. I think that the Government's decision was fair. It recognised that in the small end of the range the British presence needs strengthening. We have taken that point on board, and this is emphasised in the declaration of the tripartite working group established by my right hon. Friend. Discussions in that group recognise the need for a better mesh of macro- and micro-economic policy decisions affecting the motor vehicle industry.
Finally there is the question of Japanese imports and the increased Japanese penetration of the market. The Japanese share of the car market has remained stable in the past two or three years at 9 to 9½ per cent as a result of assurances obtained from the Japanese manufacturers. In relation to possible penetration in light vans, trucks and buses, a deputation from the Society of Motor Manufactureres and Traders is going to Japan in September, and I hope that a similar understanding will be reached.
Obviously we recognise the magnitude of the task, following years of under-investment. We recognise the need for new models, a new model strategy and the need for reform of industrial relations. The Government, British Leyland and the NEB are under no illusions about the magnitude of the task.
1171 Nevertheless, we want to have an indigenous motor manufacturer and our own manufacturing capability. It is to that end that our policy is directed. I believe that if we continue to work in the way that we have done, particularly over the past three months, we shall stand a chance of success.