MOTOR INDUSTRY

HC Deb 26 July 1979 vol 971 cc1061-99

11.57 p.m.

Mr. Jocelyn Cadbury (Birmingham, Northfield)

We have ranged from beautiful North Devon through the BBC world service and now come to the motor industry, and hon. Members are probably in a state of culture shock with the changes of topic this evening.

I was prompted to speak in the debate on the motor industry by the dramatic and tragic news that in the first five months of this year Britain was a net importer of motor vehicles and components. The full measure of the slide that has taken place in our motor in- dustry can be gauged from the fact that in 1977 the surplus on that account was £1.3 billion. By 1978 that surplus had fallen to £776 million, and the deficit for the first five months of this year was £212 million. A further indication of how badly we have done in our motor industry is that in 1973 three-quarters of all cars sold in this country were British made, and last month vehicle importers accounted for 55 per cent. of all new United Kingdom registrations.

It is not always appreciated, at any rate south of Watford, how fundamental the motor industry is to the British economy, but men from Birmingham, such as myself, tend to be rather better informed. In the West Midlands some quarter of a million people are employed directly or indirectly in the production of motor vehicles. British Leyland alone employs 9 per cent. of the working population of Birmingham.

It is not only the assembly of motor vehicles that is so crucial to the West Midlands and to the country as a whole as a source of employment. It is also the production of motor components. The fortunes of such companies as Lucas, GKN, Dunlop and Birmetal are inextricably linked to Leyland, Ford and Vauxhall. Indeed, each year BL spends nearly £2,000 million among 7,000 United Kingdom businesses, and it uses 40 per cent. of the total output of sheet steel from the British Steel Corporation.

But there is a second aspect of the strategic importance of the British motor industry and of BL in particular, and that is its impact on the balance of payments. BL is Britain's largest manufacturing exporter, with overseas sales of about £1,000 million. It is a mark of the significance of the motor industry to our balance of payments that its relative failure to compete both at home and abroad is probably the single most important reason why, despite the benefits of North Sea oil, our visible trade balance has deteriorated so dramatically over the last year.

What is especially worrying is that a rise in the volume of imported components is inevitably following in the wake of the present avalanche of foreign vehicles. If BL's market share declines, so soon afterwards do the market shares of Lucas, GKN and all the other component manufacturers.

Another distressing tendency is for the international car companies—that is, Ford, Vauxhall and Peugeot—to import from the Continent ever-increasing percentages of the vehicles they sell in the United Kingdom. For example, all the new Ford Granadas we see driving around this country were made in Germany, and many of those we see driven by some Government Departments were also made in Germany. One will not find Lucas headlights on these cars. They are all fitted with Bosch equipment. I leave the semantics of that to others to work out.

Because of its importance as an employer and its huge impact on the balance of trade, the House should not be in any doubt about the appalling consequences of a complete collapse of the British motor industry. At the risk of over-dramatisation, I would liken the plight of our motor industry to Britain in 1940, facing the threat of imminent foreign invasion. But I am by nature an optimist—I must be, otherwise I would not be in this House today, knowing the majority I have—and I believe that somehow a Dunkirk spirit will be aroused and we shall ultimately roll back this river of imports from Turin, Wolfsberg and Osaka.

I believe that we now have a chance of success, for two main reasons. First, we have a Government who recognise the need for incentives for workers and managers alike. In particular, they have already rationalised regional policy. Regional policy did grave damage to the motor industry. Over the last 15 years, it induced the managements of the motor companies to scatter their new plants all over the country against their better economic judgment.

I referred in my maiden speech to the saga of the door of an Austin Mini, which travels several hundred miles around England and Wales and visits four factories before it is finally installed on a finished car in my constituency—four factories to make a car door. By contrast, at the Volkswagen plant at Wolfsberg, bits of metal go in at one end and finished Volkswagens emerge at the other end. I congratulate my right hon. Friend the Secretary of State for Industry on his rationalisation of the regional aid programme.

The second reason for my optimism about the future is that BL is now led by a management team which is showing determination in taking the necessary steps to make the company competitive. My hon. Friend the Member for Oxford (Mr. Patten) and I recently had the pleasure of meeting Sir Michael Edwardes, chairman of BL, and Mr. Horrocks, managing director of Austin-Morris. We were reassured to hear that the company's recovery programme is going well. Industrial relations, productivity and quality standards are all beginning to improve. But we cannot expect miracles overnight. BL now has to make up for two decades of poor industrial relations, the low level of investment of the 1960s and the failure in the past to produce new models of the right design.

I think that it is widely accepted that a modern industrial economy cannot exist without a flourishing domestic motor industry. The life of this Parliament will probably decide whether a British-owned motor industry will survive. It took six years for the Germans to turn round Volkswagen. I ask the Government to remember that the British motor industry needs to be given time to recover its strength, and urge them to give their wholehearted support to the industry, and to BL in particular, in the struggle against the four-wheeled invasion from overseas.

12.5 a.m.

Mr. John Patten (Oxford)

My interest in regional policy as it affects the motor car industry is, of course, moulded by the fact that my constituency, Oxford, has a very substantial number of people employed in the BL plant at Cowley. Some 22,900 people—about 13.5 per cent of the working population of my constituency—work in BL.

I wish to restrict my remarks to regional policy, the motor car industry and BL alone. I am sure that all my right hon. and hon. Friends, along with the hon. Member for Nuneaton (Mr. Huckfield) and his right hon. and hon. Friends, if they were here showing their remarkable interest in the motor car industry, would join me in saying that they did not want to see BL spend the rest of its life as a permanent pensioner of the State. The hon. Member for Nuneaton and I may disagree about the future ownership of BL. He may feel, rightly from his point of view, that BL should remain in State ownership. I do not share that view. But I am sure that right hon. and hon. Members on both sides of the House hope that BL will soon be producing motor cars which are not largely subsidised by the taxpayer.

Unfortunately, there are a number of obstacles in the way of this course, and, following the admirable remarks of my hon. Friend the Member for Birmingham, Northfield (Mr. Cadbury) on the structural importance of BL—

Mr. Les Huckfield (Nuneaton)

Since the hon. Gentleman has just entered the House, he will recognise that those of us who represent motor manufacturing industries always do the best we can to present the true facts as we see them. It is not a fact that BL is being subsidised in the way that he describes. British Leyland has to pay interest on the money that it receives from the National Enterprise Board. In turn, the NEB has to pay interest on the money that it receives from the Government. I am sure the hon. Gentleman will realise that BL makes a profit, albeit not a large profit. But in saying that in some way BL is subsidised by the British taxpayer the hon. Gentleman is rather glossing over the true facts.

Mr. Patten

I am grateful for the hon. Gentleman's observations. As he said, I am very new to the House, and I may take a long time to come to the point of my argument. I agree that BL receives its money from a number of different sources. But there is no doubt that a substantial amount of that money, however it is funded, comes directly from the taxpayer, even though there is a financial burden on the management of BL and on the NEB to produce a return in terms of profit.

If I may, I shall return to what I see as four substantial obstacles to BL beginning in the 1980s, as its corporate plan suggests, to make a genuine commercial return to full profitability—an aim which Sir Michael Edwardes and his management team have and, I know, hold very strongly.

The first obstacle is the general state of the domestic economy today. My right hon. and learned Friend the Chancellor of the Exchequer said only yesterday that he found the prospects for the economy in the short term frighteningly bad. That has to be worrying for BL.

Secondly, I do not see that the motor car industry in demand terms has very strong prospects in the next two or three years, especially following the recent oil crisis. I think that we shall see demand levelling off over the next two or three years for new motor cars, except for those which are fuel-efficient at the lower end.

Thirdly, in the United Kingdom anyway, recent figures reveal that the cost of running a motor car increases year by year. The Hertz car leasing firm produced figures today showing that the running cost of the average family car was some 18p a mile. That is a 22 per cent. rise over the cost of running the same car last year.

The most significant problem that BL faces is consequent on the strength of the pound. There is no doubt that the strength of the pound is making BL's position as a competitive exporter and an importer of certain components extremely difficult. This will make the internal generation of capital for future investment, to which the hon. Member for Nuneaton referred, that much more difficult to achieve in the next three or four years.

Hon. Members may say that other car manufacturers in countries with strong currencies, such as Germany, where the deutschemark is strong, manage to export substantial numbers of motor cars for which there is a great demand. That may be the case. But those manufacturers are starting from a much stronger base than that from which BL is starting today. I have no wish to go back over the industrial history of BL during the past 15 or 16 years and try to apportion blame between Government, management, trade unions, work force, investors and the rest. But there is no doubt that BL is in a weak position. The power to generate its own investment capital, which is vital in my constituency of Oxford if the new middle-range car, the LC10, is to go into production in 1981 and 1982, is being severely undermined by the present level of the pound.

What is the position in terms of regional policy? We have clearly not seen the last of BL and its financial relationship with the Government. We also have to look carefully at the role and relations of BL with foreign investors. I applaud the management of BL for its development of trading and manufacturing links with the Japanese firm, Honda. This is critically important. Increasingly, as members of the European Community, we have to look at regional policy not simply within a national framework but within a European and, I suggest, a worldwide framework. Foreign investment, particularly in the motor industry, will become more important.

There are some people who say that BL has made a mistake in stretching its line by joining with Honda, a small to medium-sized Japanese firm. I do not believe that BL is mistaken. Those who say that a link with Renault would have been better are totally wrong. I believe that Renault, a completely State-owned firm, is much more a lame duck than any motor car manufacturing company in the United Kingdom. BL and Renault have comparable work forces. In the motor car division, Renault employs about 104,000 and BL 117,000. Renault has a much greater share of its domestic market, about 34 per cent. compared with the unfortunately low 23 per cent. BL share of the United Kingdom domestic market. Yet on 1978 figures Renault performed less well than BL. BL turned in better after-tax profits.

The temptation for BL management to take an easy course and to turn to a nearby European partner like Renault was rightly avoided. BL is on the right lines in beginning to strengthen its links with Japanese manufacturers such as Honda. I hope that the Government will endeavour to foster these links. I hope that we shall hear observations to that end from my hon. Friend the Minister tonight.

12.15 a.m.

Mr. John G. Blackburn (Dudley, West)

I am humble before Almighty God, before you, Mr. Deputy Speaker and before fellow right hon. and hon. Members at being given this opportunity to deliver my maiden speech. I reveal a large amount of courage to face the packed Benches opposite and the crowded Galleries that have gathered for this momentous occasion.

I am the first Conservative Member for Parliament ever to be elected for my constituency. The first task I have is easy—to pay a sincere, warm and generous tribute to the former Member, Dr. Colin Phipps, who had the unique gift of being a good constituency Member. He was equally respected and popular, and because of that it is a heavy responsibility for me to represent the constituency.

The only gifts I bring to the House are experience and service. The day I completed my education at university, I enlisted as a Regular soldier. I served for four years in the Armed Services of the late King, and on my release I joined the police service and served with some distinction for 12 years. For the last 15 years I have been walking the avenues of industry in the West Midlands. I am, naturally, a trade unionist. In January this year, from a membership in my branch of 268, the 23 souls that gathered re-elected me for the tenth successive year as branch secretary.

My constituency is in the heart of the Black Country. I cannot say that in Dudley, West we produce motor cars, but I can say that we produce the components for that industry. My constituency owes its very existence to men and women and families who have placed their life savings in forming small businesses to serve the engineering industry of the West Midlands, of which the motor car is such an integral part. It was their vision and dedication which brought about these prosperous and successful small businesses.

One of the by-products of those businesses was something called profit. To me, the word "profit" is not obscene. Indeed, from profit come pay, pension schemes, welfare benefits, sports and social facilities and benevolent schemes. Much more important, from profit eventually should come investment; and from investment comes increased productivity and more jobs. To me, these are the fundamentals of the engineering industries centred in the West Midlands. I see here this evening many hon. Members representing constituencies in that area.

Tragically the picture that I have painted is not the one that has been portrayed to me in recent years. I am sad to say that the picture is just the opposite. Bankruptcies have occurred on a wide scale. Because of little or no profit, there are no job security, no job prospects and no continuity. The end product, tragically, is unemployment. When the last Conservative Government were in power, at no time did unemployment in the West Midlands exceed 2 per cent. Today the unemployment rate is 5.7 per cent.

I applaud the concept in the Finance Bill. The word "incentive" appears in that Bill. It refers to incentive to work, to save; incentive to enterprise, to commerce and unions; and incentive to the investor, who has been forgotten, and to the worker and director.

The motor industry could not function without the products from my constituency—steel, rubber and plastics. Those products would not be manufactured without viable small businesses.

I have travelled within my constituency for the last five years. A message is conveyed when one passes a factory called "Bill Hankey and Son Ltd.". That is what industry is about. A father opens a limited liability company business to service the motor industry. Those magic words "and son" are added later. That creates continuity in a family business, and it thrives.

It is not the Government's task to run industry. Governments and politicians are incapable of doing that. The role of the House of Commons is not to run industry. The solemn responsibility of the House is to create an environment and an incentive under which industry can develop and prosper. That is the reason for tonight's debate.

We have languished at the bottom of the league of industrial investment. We must invest in new plant and new machinery in the motor industry. We must have faith in the work forces of the West Midlands and trust them to produce the goods.

The country regards this Government as a Government of vision. The country expects this Government to create the industrial society which we seek. We are all of one mind on that. The people I represent say that they want less government, not more; less legislation, not more; less Government interference, and to be allowed to develop their businesses.

We cannot operate without the strong who can provide for the weak. It is not the Government's task to bail out those companies which behave commercially irresponsibly. The money to bail them out comes from the companies which have acted commercially and responsibly.

It is difficult to develop a components industry to supply the motor car trade without some continuity, some certainty and some planning. It is impossible, without these factors, to plan production, costing, agency arrangements and even publicity and promotional budgets. How can an industry plan when the market is so unstable?

The challenge facing us in this debate is to support every effort by British Leyland to become financially sound. When it does, the small companies in my constituency will know that they have a future to plan for.

Perhaps I may be permitted at this late hour to tell you a bedside story, Mr. Deputy Speaker. It has a close relationship to this debate. A clergyman on holiday went to a local church with his family. As he entered the church, he put 50p in the box as he went in to worship. When the preacher did not arrive, the elders of the church invited him to take the service, which he did. As he was leaving, the sidesman said that whatever was in the box was always given to the preacher. The clergyman's son looked up at his father and said "Daddy, if you had put more in, you would have got more out." That is what this debate is all about.

Dudley, West, the West Midlands and the whole country as well as the Chancellor, the Government and this House have placed their faith and trust in industry and the trade unions to produce the growth we seek. I believe that that faith is not misplaced.

I conclude my maiden speech by dedicating myself to be worthy of the high calling. I can find no higher.

12.23 a.m.

Mr. David Gilroy Bevan (Birmingham, Yardley)

I offer the greatest praise to my hon. Friend the Member for Dudley, West (Mr. Blackburn) for his maiden speech, which I believe demonstrated the great strength he had already shown us in this House as a friend. He has represented his country, himself and his constituents well tonight. He has been an upholder of the law, as the wearer of a uniform, and I am sure that we shall see his long law arm extended for many years as the representative of Dudley, West. I thank him for a most invigorating and sincere maiden speech.

I notice that the occupancy of the Labour Benches has diminished by 50 per cent. in the last few moments. That surprises me because I should have thought that the survival of the West Midlands and the Government's economic policy would be of great importance to the Opposition. Birmingham and the surrounding area have been described as the iron heart of England. But that heart has become weakened and enfeebled by the regional policy of previous Governments. The policy may have been altruistic in the beginning, but it has proved to be a dictum which, while seeking to strengthen the weak, has resulted in weakening the strong.

It has been a dictum which made it more difficult for us in the Midlands to carry out our trade, a dictum which has been beset and bedevilled by previous Governments manipulating the home sales of motor cars with hire-purchase controls, thus inhibiting the export of motor cars. It is an industry which became subject to union pressure to preserve jobs which regrettably were obsolescent. It became overburdened by the man-hours which went into the creation of the end unit, a unit which regrettably ceased to compete, especially with the reduction of the tariff barriers within the EEC. That led to a massive intrusion by foreign motor cars, especially those from Japan.

The Brummies are intensive users of the motor car, probably the most intensive users in Britain. Our economy, and certainly that of Britain, depends in the main on the well-being of heavy industry and the motor car industry. In my constituency—Birmingham, Yardley—as in the constituency of my hon. Friend the Member for Oxford (Mr. Patten), whose erudite contribution I compliment, there is almost total dependence. Probably half of those involved in manufacturing in Yardley are with the motor industry, either with British Leyland or with another of the motor companies.

We hope to see a reversal of that which has occurred at British Leyland. I am certain that my right hon. Friend the Secretary of State for Industry in his pronouncements on regional policy will have helped to an extent, but we feel that we need more than that. At present we are very much a three-horse town or, should I say, a three-car town—Morris, Rover and Metro-Camm. That is the position in Birmingham, and that is the city's weakness. That is its Achilles heel. However the planners plan, they cannot turn the powerhouse of Birmingham into a warehouse. They cannot take away its great capacity for production and make it a service industry city. They must leave with it that native ability of craft to create and to sell.

It is no good Birmingham being merely an assembler of foreign kits, of Meccano sets that it puts together. We ask that our indigenous skills be allowed to remain with us. The Meriden co-operative is threatened. I hope that the outcome will be successful. I have no political bias. Some of my constituents are at risk. They will be out of a job if the outcome of that venture is not a happy one. I wish the managing director of that venture great success in what he is doing.

Any further threat to the Midland motor industry would have a ripple effect which could wet many others and turn into a tidal wave if it reverberated through the West Midlands and the length and breadth of the land. Birmingham could become a ghost town the like of which would make the Klondike after the gold rush seem like a redevelopment area. I am not exaggerating. There would be a reaction and a reverberation throughout the length and breadth of the land.

Within a mile or two of Yardley, within British Leyland alone we have no fewer than 22 units or plants, whether at Rover, Chester Road, Washwood Heath, Lode Lane, Solihull or elsewhere. The total turnover is nerly £1,400 million a year. That is 44 per cent. of total sales. British Leyland employs directly about 164,000 people, including in the West Midlands alone about 78,000 people, and 7.8 per cent. of those are in Birmingham.

Altogether, with dealerships and upward and downward catchments of persons, British Leyland employs about 500,000 people in this country, and £165 million is paid back into the Exchequer in income tax by the employees of British Leyland and about £81 million in national insurance contributions.

A sum of £2,000 million is spent annually between 7,000 businesses of this country and, as was said earlier by the hon. Member for Nuneaton (Mr. Huckfield), a quite substantial amount of interest is paid. Last year, £25 million of interest was paid back to the Government on loans and investments that the Government had put in.

I return to my constituency of Yardley. We have already lost, by rationalisation, motor component factories, and through this rationalisation there has been a loss of jobs. In Wilmott Breeden we have had closures. We must seek to reverse the rot.

I put to my hon. Friend the Minister a suggestion that he may not immediately accept. The Government should consider removing VAT from the sale of motor cars of British manufacture for a limited period, either a year or two years, until they have had a chance to recover.

Mr. Hal Miller (Bromsgrove and Redditch)

Does my hon. Friend mean VAT or does he mean the special car tax?

Mr. Bevan

The special car tax, if my hon. Friend would prefer it that way. I accept the correction.

I also ask that instead of the continuation of international deals, which help in the short term and give strength to a company, a climate should be formed enabling the City institutions to provide, for companies such as British Leyland, the capital needed to produce their own indigenous new models.

The shock figures issued by the Society of Motor Manufacturers and Traders in the first part of 1979, showing a decline into a £212 million loss, for the first time ever in this country, are indeed frightening. That is after an average balance of payments surplus in the motor industry of £1,235 million over five years.

We must ensure that that trend is reversed. We can do it only by creating our own models in the long term and by not being too receptive as individuals of the contributions of the multinationals. Between 1960 and 1978, Britain's car output fell by 0.130 million, while France's increased by three times, Germany's by two and a quarter times, Italy's by three times and Japan's by about 36 times. These are the frightening statistics.

In Germany, France and Italy, imports remained almost the same between 1970 and 1978. In the United Kingdom they have risen staggeringly from 12 per cent. to 50 per cent. and in this quarter, I understand, are in excess of 55 per cent. Some of our Birmingham component manufacturers are working at only 65 per cent. capacity. Our job, therefore, must be to build up, as we can, our own indigenous industries.

There are two other factors affecting us. One is the rising value of the pound—something that we would have cheered a few months ago. This is having the effect of making it more difficult for us to sell overseas. The chairman of a group of Midland companies, some of which are concerned in the motor business, said that his American market is crumbling because of the rising value of the pound.

The second thing that must concern us all is the dedicated intent of the car industry itself to reduce capacity by 5 per cent. in the next year, so as to take account of the fuel position. Of course, there will be less receptivity by the customer as a result of the rising cost of fuel. Therefore, because of the imbalance between productivity and sales, and between Europe, Japan and here, I ask that the Government discuss a common policy of production with our European partners that takes account not of the figures of disadvantage that exist in respect of this country and the Midland producers of motor cars but of an average of those figures over, say, the last 20 years.

I appreciate the plan of my right hon. Friend the Secretary of State for Industry. I think he said that British Leyland would be returned to private enterprise within two years. I hope that I read my uewspaper correctly. I did not read Hansard, and I apologise if that is not correct. However, I would add three covenants—provided that there is no loss of capital, no loss of jobs and no endangering of the West Midlands economy. Otherwise, I am personally happy to accept the mixed economy as it presently exists.

As a past chairman of transport in the West Midlands, I am proud of the part that we have played in developing the public service vehicle. We should be speaking in terms of the motor vehicle, not just the motor car. When British Leyland went up to Lancashire, we lost the Fleet-line and Coventry suffered with substantial unemployment as a result. We have now brought back bus manufacturing to the West Midlands by supporting the Metrobus. When I signed the first £7½ million order for 75 Metrobuses and 75 Titans, I was proud so to do. It preserved 3,000 jobs in Birmingham. It was a socio-factor carried on a bipartisan basis. There are now orders for about 1,100 Metrobuses and about 800 Titans. They are now going fast into production.

There is a mighty and excellent industry in the bus vehicle sector which contributes dynamically to our exports. I urge the Government to preserve, and not remove, the specific bus grant. If we remove that, we shall put in danger the whole of the bus industry and its export earning capacity. I ask the Government not to phase it out but to keep it.

Both the vehicles to which I have referred are excellent. I have driven them fully laden at 50 m.p.h on test tracks without using brakes and using merely the retarder switches They are very advanced.

We are in the process of developing exciting new techniques. British Leyland has just formed a new technological company to develop vehicles for the future. Lucas has its one-ton hybrid, electro-battery vehicle well in development stage, with prototypes on the road. We are trying, based in the Midlands on Metro-Cammell—I have lent my initiative to this—to put together a consortium to build a tri-modal vehicle which will replace the present buses when they run out. It is a vehicle which will move for one-third of its life off fixed overhead electricity input, putting it into a battery layer underneath. It will run off its own energy for two-thirds of its life, the third form being a pod to take diesel when it is outside its energy range. I am convinced that if we put this vehicle together it would earn billions of pounds for this country. There is only one alternative at present, and it is not within this country.

I ask my hon. Friend to consider a Government initiative to put together great private institutional money to prime the pump for this great enterprise, so that this country will hold the initiative in these matters. Apart from a short length of overhead wire—I think at Rotherham—there is nothing on which that vehicle could run in this country. Therefore, will my hon. Friend consider for the West Midlands—the powerhouse, the iron heart of England, the venture place which puts these creations and initiatives together—the possibility of providing what is needed?

We have in the West Midlands two local maxims: "You have to have wheels" and "Get on your bike". Unless we have the wheels we want, engine motivated, in the form we want, we shall certainly have to get on our bikes. As was said in this very House of Commons not two weeks ago by Mr. George Turnbull—ex-managing director at Long-bridge, ex-creator of motor manufacturing in Korea, and present controller of Talbot—we shall not have another chance.

12.47 a.m.

Mr. John Butcher (Coventry, South-West)

I thank you, Mr. Deputy Speaker, and the House for your indulgence in tolerating this soirée, which may appear to have been organised by the West Midlands Mafia. I welcome the contribution of my hon. Friend the Member for Oxford (Mr. Patten).

I join my hon. Friend the Member for Birmingham, Yardley (Mr. Bevan) in complimenting our hon. Friend the Member for Dudley, West (Mr. Blackburn) on his excellent maiden speech. I have had the privilege of hearing him on previous occasions, and I am sure that the House will enjoy his many contributions in the future.

I hope that the House will understand that because of the lateness of the hour, because there are others more qualified than I to contribute to the debate, my remarks will be brief. I shall try to confine them to the interests of British Leyland and the Rover-Jaguar-Triumph division in particular as it affects the population and working people of Coventry.

In recent weeks and months we have seen a set of rather daunting figures. Hon. Members are often fond of using the word "crisis". Looking at the figures alone, one sees that the domestic motor vehicle assembly industry is certainly facing a crisis. In the five months to May this year, there was for the first time ever a deficit on the British motor industry trading accounts. We imported more cars and components, by value, than we exported. That is horrific. We have also seen from the figures of the Society of Motor Manufacturers and Traders that in May 56 per cent. of the cars sold on the domestic market were imported.

As my hon. Friend the Member for Yardley indicated, the stakes are very high. In British Leyland alone we have 180,000 workers. I was told by a spokesman yesterday afternoon that about 220,000 workers in the supplier companies depended on British Leyland contracts. In the Coventry context, about one-fifth of the total work force works directly for British Leyland. All of that is in strong contrast with those halcyon days of the past. My hon. Friend used the word "Klondike". Coventry used to be called the Klondike in the late 1950s. Wages, productivity and morale were high. There was a great deal of pride in the products—with their famous names—which the workers manufactured.

We are entitled to ask, what went wrong? It must be said that British Leyland's problems are not entirely of its own making. In the 1960s and 1970s we would all agree that the motor industry was used by successive Chancellors almost as an economic regulator. Chancellors fiddled around with hire-purchase rates and regulations. They upped and reduced taxation almost at will on what they saw as the most status-riddled consumer durable in the market. Demand, to put it mildly, was erratic through this period. This was no context in which the planners and investors could operate efficiently.

In the mid-1960s and until 1972 we saw a period of stagnation. Output was entrenched at about 1é1 million cars. Then, suddenly came the famous "dash for growth" in 1972. The way my contact in the industry explained it to me this afternoon cannot be repeated in this House, but I can say that the dash for growth caught British Leyland by surprise. From 1é1 million cars in the domestic market there was suddenly a demand for 1é6 million. It was in this environment that the importers first gained that all-important foothold. My goodness, they have built on it since.

Throughout this period we had the famous mergers. The right hon. Member for Bristol, South-East (Mr. Benn) is not present tonight. Perhaps I shall not be thought to be too tendentious if I say that I would have willingly given way to hear the right hon. Gentleman's observations on what happened when he was going through his "big is beautiful" phase. I understand that he is now going through his "small is beautiful" phase. The mergers were messy and disrupted line management. There was also a move towards decentralisation in British Leyland.

The company pushed out tentacles to places such as Merseyside. We all know what happened in Speke. I will not go over that familiar story. I found it rather ironic, when I visited the Canley factory, to see the TR7 once again being built in its natural home after a number of years when the marque had travelled to different homes, years when the company had been unnecessarily weakened. This teaches us that once political decision-making is mixed with economic decision-making the result is an awful mess.

Until Michael Edwardes came along, we were reinforcing failure. That was no way in which to fight an economic battle. The Government are continuing to back BL and, most important, to back Michael Edwardes. More than anything else, Michael Edwardes needs time. I suspect he needs about two years. He also needs support—not cash handouts, not increased public expenditure, not an increase in the role of the National Enterprise Board, but moral and practical support.

The Government and British Leyland believe in fair trade, in equal trade. While BL as a company and we as a country fight fairly, others do not. I notice that my hon. Friend the Member for Oxford and I have been asking the same written question in the past week, about the Ford Motor Company, in the context of Spain. I suspect that we both received an equally blunt reply. I can tell the Under-Secretary of State for Industry, my hon. Friend the Member for Basingstoke (Mr. Mitchell), that the questions were not as naive as they may have at first appeared. There is agreement among many people in the British industry that while we import 30,000 "Trojan horse" Ford Fiestas, there is virtually no reciprocal trading agreement with Spain. To all practical intents and purposes, the Spanish market will not accept BL cars. If it does, it will be in such small numbers that it will not be worth British Leyland setting up a dealership in the first place.

In Japan, to put it mildly, there is obscurantism and bureaucracy. The attitude is "They shall not pass, but we shall not tell anybody why." The Japanese do not break their trading agreements. They are simply terribly cunning and crafty in the way they go about things. To hear BL management talking about what it has to do to get a new model on to the Japanese market is interesting, to say the least.

By contrast, some of our colleagues in Europe have fairly tough controls on Japanese imports. I believe that the Italians have import quotas. The French say that they will allow a 3 per cent. market penetration by one manufacturer but that if there is more they will take unilateral action.

The COMECON countries, I am tempted to say, dump cars on to the British market. Perhaps it is more polite to say that they sell in this country at a cost which is—

Mr. Hal Miller

State-priced.

Mr. Butcher

I take the point made by my hon. Friend the Member for Bromsgrove and Redditch (Mr. Miller). They sell in this country at prices which cannot cover their costs when one adds the costs of transportation and distribution.

Some foreign Governments are, like the United Kingdom, bound by international agreements, but they can support their domestic industries through Government purchasing policies or by nods and winks. I hope that my hon. Friend the Minister will give a few nods and winks to the big public corporations, nationalised industries and Government bodies and, like some of his colleagues in Europe, will get tough with the local authorities and public bodies. I hope that, if it comes to it, he will also get tough with the non-EEC exporters to the British market.

Despite many of the comments which have been made tonight, I believe that there is a great deal of hope for BL and for Rover-Jaguar-Triumph in particular. They are no longer fettered by a restrictive Government pay policy. That is vital to a group of workers who are obsessed with incentives. They talk proudly of the days when they could earn twice as much on an incentive bonus scheme as they got in basic pay. The West Midlanders are materialistic in this respect. Thank goodness they are.

Michael Edwardes can now talk incentives. We have given him some help with our taxation policies. He has his parity scheme almost in operation throughout many of his plants and he is now starting to build bonus schemes on top of that. Michael Edwardes is what my right hon. Friend the Secretary of State for Industry would call an entrepreneur. He reinforces success, and thank goodness that he does.

It is heartening to report that the Land Rover, for example, after an excellent investment policy, is now driving the Japanese out of the continent of Africa. I apologise if that sounds like the language of warfare. "Driving the Japanese out of the continent of Africa" sounds dramatic, but I believe that we are fighting an economic war.

I am pleased to concur with the remarks made by my hon. Friend the Member for Oxford regarding joint ventures. The new car, code-named the Bounty, which I am proud to report will be built on a track at the Canley works, will be a tremendous success. Honda is one Japanese company which believes in reciprocity and playing the game. British Leyland management tells me that it foresees an output of 60,000 cars going into the United Kingdom and European market and that Honda will not sell the identical model, produced in Japan, in those markets. I believe that we have a good economic deal and that it has Michael Edwardes written all over it. In two years he will have the model range that he requires.

should also report that Rover-Jaguar-Triumph is still producing and exporting cars to the value of £450 million per annum.

In my penultimate remarks I should like to draw attention to the experience of Volkswagen in Germany. We all remember that in the late 1960s and early 1970s Volkswagen was in an awful mess. It had a big gap in its range, did not know how to replace the "Beetle" and did not have the money to see through its plans. The company took a Government loan and substantial assistance, and revamped the model range. Just look at it now. I suspect that every hon. Member in the Chamber hopes that we shall see that the pattern has been repeated when we look at British Leyland in two years' time.

I am proud to represent Coventry, South-West and the rather strange, hard-nosed, charming people who work in the motor industry. I value their company and can give them a fair game of dominoes when they want me to.

I had the privilege of touring the night shift at Canley about six weeks ago. I met management and workers whose only concerns were to produce more cars and to work together. In spite of all the past difficulties and the sniping, they are highly motivated people. I hope that the Government will continue down the path on which they have set out and will give those fine people a chance.

1.1 a.m.

Mr. Hal Miller (Bromsgrove and Redditch)

I am glad to have the opportunity to renew the commitment that I and my colleagues from motoring constituencies have in the success of that great industry and in the workers responsible for the production in that industry, on which so many parts of our country depend.

I should like to repeat the compliments paid to my hon. Friend the Member for Dudley, West (Mr. Blackburn). We heard from him the authentic Tory voice of the West Midlands—the small family business setting out to provide what is needed, not only for the motor industry but to make our country great again. The House looks forward to hearing further from my hon. Friend.

I mentioned the commitment of my colleagues to the success of the motor industry, and I wish to explore further the commitment of the Government to the success of the industry. In the election campaign, my right hon. Friend the Member for Lowestoft (Mr. Prior) made plain that the Conservative Party wanted to see a successful motor industry and to see Britain's only major motor manufacturer thriving. He said that the Conservative Party wanted to see BL succeed and was prepared to back Sir Michael Edwardes, his managers and his work force in their efforts to turn round the company.

There was a significant article in the Sunday Telegraph on 10 July in which Sir Michael set out the three requirements for the continuing success of BL. They were continued support from the Government for the investment programme, a reduction in the work force at Cowley and the adoption of competitive standards of productivity throughout the plants. It has already been demonstrated at Long-bridge that the work force is capable of rising to the challenge and the leadership. I hope that we shall hear from the Minister that the Government will be fulfilling their part.

In his statement on the National Enterprise Board, my right hon. Friend the Secretary of State for Industry said: the NEB will have a continuing role for those companies which have been in difficulties and for which it now has a responsibility, as long as the business concerned has a prospect of viability and no solution based on the private sector is available."—[Official Report, 19th July 1979; Vol. 970, c. 2005.] In a question to the Department, I asked about the extent of the Government's commitment to the BL corporate plan which was tabled on 30 March. In his reply, the Minister said that there was nothing further to add to the Government statement of 2 April. Therefore, I should like it confirmed that my interpretation of that reply is correct—that the Government accept the conclusions of the NEB, as reported on page 3, paragraph 1.7—that the BL plan warrants continuing support, for the year 1979, as a means of enabling this country to maintain a presence in the world vehicle industry.

My hon. Friends have ranged widely and largely through the motor industry, with particular reference to the manufacture of cars but also—I was glad that my hon. Friend the Member for Birmingham, Yardley (Mr. Bevan) mentioned this—to the manufacture of public service vehicles.

In that report on the BL corporate plan, there were made plain the various problems on the horizon that are facing the motor industry and the need, therefore, to see evidence of substantial improvements in the performance of BL and the motor industry in the current year. My hon. Friend the Member for Coventry, South-West (Mr. Butcher) referred to the fact that in the first five months of this year imports of motor vehicles and components had exceeded our exports for the first time. That is the size of the cloud that has now come up over the horizon. My hon. Friends have referred to employment and skills. This cloud is a threat to which we must give the most serious attention.

Our industry has to compete not merely in a European industry—which is the logic behind the establishment of Ford of Europe and the new creation of Talbot—but in a world industry, because Ford and General Motors have now moved on to the production of the world car. The significance of these developments is that once the design centres move away from this country, this spells a very real threat to the future prosperity of our components industry. The unique feature of the motor industry of this country is the strength of its components industry, which reaches far and wide throughout the country. My hon. Friend the Member for Sowerby (Mr. Thompson) has experience of this. I have a list of over 100 hon. Members who have motor components plants in their constituencies.

That is the real threat. Once the design capability moves away from this country, it becomes that much more difficult for component makers to sell the original and thereafter the replacement equipment. That is why it may be necessary for component makers to contemplate investment abroad in order to tackle the component aspect of foreign cars at source, and I welcome the relief on exchange controls recently announced by the Government. That is a necessary development, particularly with the increase in the value of the pound sterling, to which several of my colleagues, most notably my hon. Friend the Member for Oxford (Mr. Patten), have referred this evening.

The cloud that has appeared over the horizon has also darkened our commercial vehicle industry. Imports have substantially increased their penetration, which is a most serious development. In this country we have always been proud of and relied greatly on the strength of our commercial vehicle industry. The Government must pay serious attention to the future well-being of that industry and particularly to the question of heavy lorries.

There is a great deal of public misconception about what a heavy lorry is. People imagine that it will be a larger and noisier lorry, but it will be possible, if the Government introduce the necessary regulations, to load the existing vehicles efficiently, and with the improvements in design that are in train the lorry will not be larger or noisier than the existing fleet. There is a great deal of public misconception that the Government have a responsibility to change. The increased penetration of imports of commercial vehicles has been largely based on the adoption of European standards by competing manufacturers abroad. That has threatened the efforts made by our industry and the support given to it.

It is not sufficiently understood in this country that we have a world lead in the technology for developing electric vehicles—and I am referring especially to the electric commercial vehicle. I point to the success of the "London goes electric" programme, under which the several competing battery manufacturers have co-operated with vehicle assemblers to introduce vehicles to the streets of our larger towns where they have a defined commercial role in the carriage of goods over a limited range, with frequent journeys and frequent stops.

We have demonstrated that we have the capability to produce that vehicle. With the assemblers moving to a new generation of commercial vehicle in the 1-ton to 2-ton range, it will be necessary for the makers of batteries and other equipment to reach agreement with them concerning the possibility of offering customers an electric vehicle. It is not within the financial capabilities of the companies at present involved to bring down the cost of the electric vehicle to that of the normal internal combustion engined vehicle because of the economies of mass producing the latter. There are further refinements that need to be undertaken in the scale of production.

Therefore, what is needed by one means or another is some form of development contract or launching grant or something similar to what was done in the "London goes electric" programme, when there was, in effect, a subsidy to the consumer so that the capital price was made the same. Of those alternatives, I would prefer the idea of a development contract.

It is essental that in this country we preserve that world lead, even though we should not run away with the idea that these vehicles will be widely on our roads within the next two or three years. I think that the time span is probably about 10 to 20 years, a period, of course, for which the industry based on the internal combustion engine has given clear undertakings to the Government about refining its own technology to reduce fuel consumption. But it is necessary to press forward with this work in view of the prospect that confronts us of a shortage of fossil fuel supplies, and it offers us the hope again of being able to introduce the most advanced technology as the first in the world.

My hon. Friend the Under-Secretary of State will have noted that there have been very few requests from my hon. Friends for the injection of public funds. It has very much to do with the climate in which businesses have to operate—the climate in which firms are able to reach agreements with their work forces, the climate in which the workers can earn the rewards of their work and have the necessary incentive to produce. Indeed, there is nobody from a motor manufacturing constituency who has not had the plea "Can't we get back to piecework so that we can produce something?"

With this change in atmosphere, the Government have offered people hope and now have the opportunity to consolidate. But, apart from the lead given by the Prime Minister, I commend to my hon. Friend the need for stability in the environment, both legislative and administrative, in which the industry has to operate. I ask that there is adequate consultation and a long enough lead-in period to enable the change necessary to be brought about without undue disturbance.

In that context, I remind the House of the continuing uncertainty regarding the future of the vehicle excise duty and the licensing centre at Swansea. Very few people in the industry can see the reason for changing the system, while accepting that there is an argument for increasing the cost of fuel in order to enforce economies of consumption. But the licensing centre fulfils a vital role for the motor vehicle industry, not just in terms of competitive marketing but, even more importantly in view of public concern, in the possibility of the recall of defective vehicles. It will be necessary for the centre to continue to operate, quite apart from the Government's insistence, no doubt, on wishing to see that cars are still insured and inspected.

There are more than 20 million holders of driving licences, so we are not discussing some minority interest as some of our railway-minded friends might lead us to believe. The public find it difficult to accept that when they still have to send their documents to Swansea annually there will not be a charge for that process, and they do not believe that they will not be conned if there is a change in the present system.

I commend to my hon. Friend the Under-Secretary the need for stability in the legislative and administrative environment and for the demonstration of a commitment to the success of the British motor industry and of confidence in those engaged in it.

1.20 a.m.

Mr. Graham Bright (Luton, East)

The vital role that the motor industry plays in our national economy is clear to everyone. It plays a particularly important part in my constituency, where more than 20,000 people are employed in the giant Vauxhall works. The prosperity of Luton and of much of Bedfordshire depends upon the success of the company, and its return to profitability owes much to the skill of its management and to the character and responsibility of the workers. This is an example to the rest of British industry of what can be done when both sides of an industry work together for a common aim.

Vauxhall's success has been achieved with relatively restricted help from central Government. Since Luton is in the South-East and not the Midlands, industry there does not benefit from regional aid or special assistance to companies of the kind available in intermediate or full development areas. Where this aid has been made available, I believe that the results have been uncertain. The huge sums of taxpayers' money injected into the Chrysler corporation—£46 million in investment loans and £59 million to cover losses to the end of 1978—and the even greater amount, £650 million in equity capital and £150 million in loans over the same period, sunk into British Leyland have led to a distortion in our domestic market.

Leyland has been able to spend vast sums of money without due regard to the harsh realities of financial constraint. such as mounting promotional campaigns to boost its share of the car market. Capital aid on this scale to both Chrysler and Leyland has enabled them to evade the results of their failure to sell their products to the buying public in sufficient quantities.

Vauxhall Motors, which relies on generating investment internally out of profits, has probably suffered by this policy. The income tax paid by Vauxhall workers has been helping to subsidise its competitors, and the logic behind penalising the successful has always escaped me.

There is no good reason why free and fair competition should not exist in the motor car industry. If the public have the chance to choose beween the rival products offered by motor manufacturers at competitive prices, the success or failure of those companies can be measured properly. In its present form, regional policy offers inducements to manufacturers to build factories in areas where they would not otherwise choose to go, and it penalises areas such as Luton where they would settle if they could. This discourages effective investment, and people gain an incentive to be immobile in their choice of work. Hon. Members should recognise that this penalty adds to the cost of production in the motor industry and is inevitably passed on to the purchaser.

We in the House have the responsibility of deciding where public money shall be spent. Vast sums have been poured into the motor industry by the previous Administration. We face the prospect of continuing demands on the taxpayer for regional aid under sections 7 and 8 of the Industry Act. It is our duty to recognise the effects of regional aid and capital investment by the State on the successful private sector of the industry. I do not believe that the successful part of the motor industry should have to face this kind of distortion to the market in the future. I look to my right hon. and hon. Friends on the Government Front Bench to take necessary corrective measures.

1.25 a.m.

Mr. Les Huckfield (Nuneaton)

It was interesting to hear the maiden speech of the hon. Member for Dudley, West (Mr. Blackburn). We recognise that he comes to the House in the true tradition of West Midlands small businesses. I am glad that he paid tribute to the role of those businesses in the manufacture of motor car components. As he knows, some 7,000 companies are dependent upon British Leyland, producing components and supplies for that company. The total employment related, directly or indirectly, to British Leyland has been estimated over a period of time at 1 million jobs. A number of those jobs are in the small companies that the hon. Gentleman mentioned.

It was also intriguing to hear the hon. Member for Birmingham, Yardley (Mr. Bevan), who has already left the Chamber. I noted carefully what he said about the motor car industry, particularly the need to preserve bus grants, introduced by the last Labour Government. If the hon. Gentleman values the continuity of grants, which many Opposition Members recognise have been valuable in the bus industry as an instrument of public transport policy and as an instrument of bus manufacturing, I hope that he will lose no opportunity of pressing his right hon. Friend the Minister of Transport.

It was interesting for me to hear for the first time in the House the hon. Member for Coventry, South-West (Mr. Butcher). I saw him starting to pursue the path towards import controls. I am not sure whether such an approach tallies with the overall philosophy of his party. When he talks about quotas and non-tariff barriers, that is a world familiar to many hon. Members who represent motor car industry constituencies. If he is to continue to advocate in the House some kind of selective import controls, quotas or regulations, I hope that he will be able to make his views prevail in his party.

Mr. Butcher

I was saying that as believers in true, free and fair trade we should look to our Government for the reciprocity that is exercised by other Governments. We would be doing nothing more and nothing less than the Italians and the French. I drew attention to COMECON, which does not compete fairly, and to what we hope is a short-term problem with Spain and particularly with the Japanese. I am not arguing in any way for the breaking of international trading agreements or agreements within the EEC, which I very much support.

Mr. Huckfield

The hon. Gentleman has failed to convince me that he was arguing only in favour of non-tariff barriers. I recognise nevertheless that he was arguing persuasively for some pressure to be put on public authorities in their purchasing decisions. I am glad that he did that. I hope that it is a policy he will pursue with his right hon. and learned Friend the Chancellor of the Exchequer and his right hon Friend the Secretary of State for Industry.

The Secretary of State for Industry, when not talking about entrepreneurs as tigers, sometimes talks about the Government as a wise consumer. I am sure that the right hon. Gentleman does not see the Government in quite the same kind of purchasing role as the hon. Gentleman does. It was interesting to hear the hon. Gentleman go down that path, which has not been favoured by his party recently.

The hon. Member for Bromsgrove and Redditch (Mr. Miller), who has changed his Bench already—perhaps he is working his passage towards the front—made an interesting speech. We recognise his knowledge. He has spoken in motor industry debates frequently. I shall have, however, to draw his attention in future to one of his statements that there had been no requests from that side of the House for injections of public funds.

I may have to hold the hon. Gentleman to that. There has been some peculiar voting by the Conservatives on public funds for British Leyland. I shall mark the record carefully and draw the attention of my hon. Friends to the way in which the hon. Gentleman said that.

Mr. Hal Miller

I cannot say that I am particularly concerned at being under the hon. Gentleman's scrutiny. He will recall that I voted for the British Leyland rescue. So I am not weak at the knees at the thought that I shall be under the scrutiny of the hon. Gentleman and any of his right hon. and hon. Friends whose help he may seek in intimidating me.

Mr. Huckfield

I would hardly come here at half-past one in the morning in a spirit of intimidation. I came here simply to listen to what hon. Members would contribute to the furtherance of our knowledge of the motor industry. I found what the hon. Gentleman said, particularly the way in which he said it, very interesting.

It is interesting to hear Conservative Members make those tantalising declarations of faith in British Leyland. We have heard so often that they want British Leyland to continue and survive, that they want a British-owned domestic manufacturer. The only trouble is that on a succession of occasions they have been found wanting when it came to voting the necessary money. I know that the vote of the hon. Member for Bromsgrove and Redditch has not been as consistent against those public funds as those of some of his hon. Friends, but it is worth pointing out yet again that they say they want British Leyland to survive but are not prepared to vote the money.

Mr. Cadbury

Nonsense.

Mr. Huckfield

I am glad that that is the view of the hon. Member, who has not been here very long. I hope that he will check the speeches of his hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen), who has said a number of times that he would have preferred British Leyland to go into liquidation. We frequently heard that view echoed by Tory Members when they were in Opposition.

The protestations, the declarations and the touching testimony of faith in the survival of British Leyland—particularly the Austin-Morris division—are not quite backed up by the voting for the money to ensure that survival. We shall watch development carefully in view of those touching declarations.

I am glad that hon. Members have recognised that particularly in the West Midlands British Leyland especially provides many jobs. If Oxford is included in the West Midlands area, 104,000 jobs are directly dependent on British Leyland. There are two plants at Cowley and several plants at Coventry and Birmingham. British Leyland is a substantial employer in the West Midlands. Most British Leyland plants are in the West Midlands.

I pay tribute to the hon. Member for Bromsgrove and Redditch for trying to extract a declaration of support for British Leyland from the Secretary of State. However, that declaration has not been made in the House. I pressed the Secretary of State for Industry, as did some of my right hon. and hon. Friends, to give a declaration of faith in the continuity of the investment programme. The Government have not yet made that declaration. They have said that they want British Leyland to survive. However, the Secretary of State has said that he prefers to stand back and to allow the management and unions to get on with it. That falls short of the declaration that I and my constituents require.

Chrysler has not attracted much attention in the debate. I am sorry about that, because hon. Members who represent constituents who work at the three Chrysler plants are worried about their future. I attended the all-party motor industry group meeting when the future of the Chrysler company was laid before us by Mr. George Turnbull.

There is a feeling that some layers of management do not want Chrysler to survive. I do not endorse that feeling but I must report it. There is a dispute at the Ryton plant and there are difficulties at the Stoke plant. I hope that we shall receive more news about the future of the Chrysler plant. We have not the news about continuity that many of my hon. Friends would like to hear.

The debate has been about regional and selective aids to the motor industry. That involves industrial development certificates and section 8 and section 7 Industry Act assistance. I am pleased that the hon. Member for Luton, East (Mr. Bright), recognised that sections 8 and 7 assistance went to the motor industry under the previous Government. The new Ford plant in South Wales, the Vauxhall plant at Ellesmere Port, and Chrysler plants in other parts of the country have obtained such assistance. It is not just a matter of public money going into British Leyland. It is a matter of money under those sections of the Act going to Ford and General Motors.

There are many fears that merely raising the industrial development certificate ceiling will not ensure that investment is generated in the West Midlands. It is feared that the raising of that ceiling will create a proliferation of investment not in the West Midlands but in the South-East.

When the Secretary of State for Industry wrote in "Manifesto for the Midlands" before the general election about the lifting of limits for industrial development certificates, he got the figures wrong. I shall not go into the details of that tonight. However, there is a fear in the West Midlands that the mere raising of the IDC limit to 50,000 sq. ft. certainly does not guarantee automatically that the investment will flow to the area. It can just as easily flow to the South-East. Since we are a member of the EEC, there are advantages in being near to the markets of the Community.

I hope, therefore, that the House will not conclude, just because we raised the ceiling from 12,500 or 15,000 sq. ft. to 50,000 sq. ft., that that is a shot in the arm for the West Midlands. I do not see it like that.

I welcome this opportunity of having a debate. I hope that we shall learn something from the Minister's reply, because that is why I stayed for the debate. My hon. Friends will want to read that reply. I suspect that one or two more of them might have been here had they been encouraged to expect that the Minister might be a little more forthcoming than his right hon. Friend the Secretary of State has been when he has made statements and answered questions on industry policy. If the Minister can be a little more forthcoming, I and my constituents will be glad.

There is concern on this matter. We have not been given the declarations of faith in the continuity of the investment programmes that we have wanted. It is nice to hear the testimonies of faith in the survival of British Leyland. We have heard them before. We want to hear the declaration that the Government's support for the investment programme in British Leyland will continue. We want to be assured that money under sections 7 and 8 of the Industry Act will be available.

We also want a response from the Government to the points made by the hon. Member for Coventry, South West about reciprocity in trade between motor industries. Since we are members of the EEC, external action has to be taken on a common front, but that does not deprive us of the opportunity to use non-tariff barriers. Since there are such barriers in other countries, many of us have frequently said that that is a policy which is open to this Government. I look forward to hearing the Minister's reply.

1.43 a.m.

The Under-Secretary of State for Industry (Mr. David Mitchell)

This has been an important debate. The House should be grateful to my hon. Friend the Member for Birmingham, Northfield (Mr. Cadbury) for opening the debate.

The debate has been noteworthy for the maiden speech of my hon. Friend the Member for Dudley, West (Mr. Blackburn), whom I congratulate on it. His constituency is fortunate in having someone as perceptive and forthright as my hon. Friend. I note that he is the first Conservative Member of Parliament for the constituency. I well understand now why his constituents should have chosen him. He mentioned that he is a branch officer of his trade union. As a former member of the Transport and General Workers Union, perhaps I can say "Welcome, brother."

The points that my hon. Friend made so succinctly about the relationship between profit, investment and the security of jobs certainly find a strong echo in the Government's policies. As my hon. Friend will appreciate, I was especially interested in his remarks about small businesses. He made it clear that it takes more than one generation for many businesses to reach their full potential. How short-sighted we were under the previous Government to tax businesses so that they could not be passed on from one generation to the next. Thus we were beginning to be one-generation behind in our thinking in industrial investment policies.

The debate has included speeches by my hon. Friends the Members for Northfield, Oxford (Mr. Patten), Luton, East (Mr. Bright), Birmingham, Yardley (Mr. Bevan) Coventry, South-West (Mr. Butcher), Dudley, West, and Bromsgrove and Redditch (Mr. Miller). If I may say so, my hon. Friend the Member for Bromsgrove and Redditch is the doyen of the West Midlands Members. I remember visiting my hon. Friend's constituency last year and noting the tremendous knowledge and experience that he brings to the problems of the motor industry.

The House should be grateful to my hon. Friend the Member for Northfield for initiating the debate. First, the debate has recognised the importance of the, motor industry to the nation. It has recognised the importance to small firms of the motor industry as component suppliers and it has recognised the importance of small firms to the motor industry. Most important, it has recognised the responsibility of the industry—men and management—to others. The others to whom it has a responsibility include about 800,000 who are involved in the industry itself and in the component and supply industries, to which a number of my hon. Friends have drawn attention. It also has a substantial responsibility to our balance of payments. It is sad to record the deterioration over recent years, from a £1 billion surplus in 1976 to a deficit for the first time ever in the first quarter of this year of £238 million.

I am grateful to the hon. Member for Nuneaton (Mr. Huckfield) for staying to take part in the debate. The hon. Gentleman must have been very lonely because there are so few of his colleagues sufficiently interested in the motor industry to remain for the debate.

I regret that the hon. Gentleman read into the speech of my hon. Friend the Member for Coventry, South-West a proposition for import controls. I regret that he even ignored my hon. Friend when he drew his attention to the fact that he was misinterpreting his remarks. My hon. Friend referred rightly to the need for reciprocity. I know that the hon. Gentleman, who speaks on the Opposition Front Bench, works on the assumption that the motor industry can survive only if there are endless injections of public money. I cannot go along with that view. It is not a view which will necessarily commend itself to the House.

Our approach to the funding of BL following the admirable Conservative line laid down by the previous Government is to decide whether past and current performance is adequate to justify confidence that an injection of further public money will be a sound investment. The taxpayer would not be content if vast sums were spent on keeping BL alive merely to delay paying for the funeral. However, no decision will be required of the Government for some months. We are watching the company and its efforts with hope and encouragement.

I agree with the hon. Member for Nuneaton that we are discussing an important industry. Total sales amounted to 1.8 million cars, trucks and buses last year. Employment was in the region of 485,000, and the industry accounted for about 8 per cent. of our manufacturing exports.

The industry is uniquely important because it is an assembly industry and there are a multitude of component suppliers who are reliant upon its success. There can be no question but that the Government are anxious to see that the industry is successful, and its activities so far have been designed to help it to be successful.

The Government's policy aim is to create the right framework in which this industry, and, indeed, all our industries, can prosper. That is why we have seen in the Budget changes to restore incentives and to start making it worth while for people at all levels in industry to work to the best of their ability.

I noted the positive response to the Budget from the SMMT. The president of that society has indicated that the incentives in the Budget will encourage men and women at all levels in the industry to produce the extra effort that is needed. I noted particularly that my hon. Friend the Member for Northfield stressed the need for incentives. My hon. Friend the Member for Dudley, West particularly drew attention to the relationship between incentives for management, for workers and for investors. How right he is, for it is in a partnership of those three that we see the very basis for success in running any industry.

My hon. Friend the Member for Northfield drew attention to the past damage which had been caused to the Birmingham area and the West Midlands by some aspects of regional policy. I remember vividly sitting here listening to his maiden speech, when he drew attention to the car door which went through four factories on its way to the assembly line. The position of Birmingham and of the West Midlands has become totally anomalous under the regional policy which was being pursued by the previous Government—anomalous because there were within that area higher levels of unemployment than in many areas which had assisted status.

As I know from my own visits to Birmingham, the heartland of the business enterprise of this country can stand on its feet and it can be enormously successful, but to do so it needs to have fair opportunity. The changes that we have made will help to give it that.

During the past five years, more than £1,000 million of taxpayers' money has been committed to this industry. My hon. Friend the Member for Oxford stressed the need for the industry to be able to stand on its own feet and his confidence in its ability to do so. As guardians of the taxpayers' investment, we are deeply concerned with the successful achievement of a viable, re-equipped and competitive industry in the 1980s.

What are the prospects of the industry as we stand here today? I have to say to the hon. Member for Nuneaton, who speaks for the Opposition, that the Government can guarantee nothing as to the prospects of any industry, because it is upon those who manage and work in the industry that the prime responsibility rests. No amount of public investment can ensure that an industry performs competitively. What we need is continuity of production. We need to achieve European standards of productivity. We need to have energetic management. We need to have good quality. We need a reduction in the immensely damaging number of disputes, many of which are of an unconstitutional nature. In particular, we need to break away from a situation into which we have drifted whereby this month we have seen the motor industry balance of trade—traditionally one of our main areas of strength—move into deficit for the first time.

We can certainly do it. There are no inherent reasons why this country cannot produce motor vehicles at least as competitively as our European neighbours. We have the experience and we have the backing of the components industry, which has many strengths and expertise. I am encouraged by the better levels of performance that BL has achieved, particularly at its assembly plant at Cowley, which is now approaching European levels. In the first six months of 1979, commercial vehicle production has risen by 12 per cent. compared with 1978. My hon. Friend the Member for Yardley, who is an expert in this area, particularly the bus industry, will, I am sure, welcome that.

Central to many of the points that have been made by my hon. Friends is the fundamental difference between us and Labour Members who are not present—that is, the significant change that has been made under this Government which enables management to reward skills, to restore differentials and to make it worth while for skilled people in this industry to bring to the companies for which they work the profit that enables those companies to pay higher and better wages. We should not be seeking to compete internationally on the basis of a low wage economy and low costs through low wages. We should be seeking to compete on the grounds of high skill, high productivity and earning for the businesses the high profits that enable them to pay for the skills that they need.

My hon. Friend the Member for Bromgrove and Redditch posed a number of penetrating questions, particularly with regard to BL's corporate plan for 1979. The responsibility for that rested with the previous Administration. They had to make the decisions on that plan, which they did before the House went into recess. It was their decision to accept the NEB recommendation that a further £150 million in equity should be provided this year, and this was announced in the House on 2 April. Some £73.5 million was paid to British Leyland by the NEB in June. The remainder will be paid in October. The Department expects to receive the NEB recommendations on the 1980 corporate plan towards the end of this year. It will look at these recommendations in the light of the company's performance this year and of its future prospects. I think that that is wholly in line with the concept that hon. Members have been expressing during the debate.

Mention has been made of the proposed BL-Honda agreement. This was applauded by my hon. Friends the Members for Oxford and for Coventry, South-West. We shall adopt a sympathetic approach to any advantageous collaborative arrangement with Japanese or other manufacturers.

I think that it was my hon. Friend the Member for Coventry, South-West who referred to the problem of Spain. I have carefully noted the points that he made. It is undoubtedly a point on which one will seek the degree of reciprocity for which he is looking as the European Community is enlarged in line with expectations.

Important and interesting questions were raised in relation to electric vehicles by my hon. Friends the Members for Bromsgrove and Redditch and for Yardley. The Department recognises the importance of research and development in this area. The key matter is the electricity storage, where the weight of the batteries is a problem. We have contracts with Chloride to develop an advanced sodium sulphur battery for which the Department is contributing £1.9 million. It is also contributing more than £2 million to Lucas to help it with work on powering a new electric vehicle. There will be 120, and the work will have application to the Bedford van. The sum of £400,000 is going to the Greater London Council for an experiment in which it is engaged with 62 vans.

It appears that the right progression for the use of electric vehicles will be vans first, then buses and then on to the private motor vehicle. We are taking a keen interest in the matter. If my hon. Friend the Member for Yardley, who made a special plea for a new initiative, will write to me or see me about it, I shall be happy to discuss it further with him.

I join my hon. Friend the Member for Coventry, South-West in his tribute to the chairman of British Leyland. Sir Michael Edwardes has our full confidence. I am glad that there is bipartisan agreement in the House about the need to see the success of the British motor industry.

My hon. Friend the Member for Bromsgrove and Redditch invited me to pledge my commitment to the industry's success, and that I do. I look to the industry to achieve what is within its potential, which is certainly to make that success for itself.

I return to the remarkable maiden speech of my hon. Friend the Member for Dudley. West, who made clear references to the need for incentives for workers, managers and investors, working together for prosperity and success. That is a theme that I believe we can take not only for the motor industry but for a wider field of our economic life.