§ Mr. Phillip Whitehead (Derby, North)Ten years ago, or even five years ago, it would have been not merely unnecessary but impossible for me to call for an Adjournment debate on unemployment and severe redundancies in Derby. Derby has traditionally been a buoyant economic area. Both visitors and residents will hear the accents of all the depression areas of the 1930s. People hiked and biked and came in every way to the city to get employment in the worst years of the 1930s.
That buoyancy has survived until recent times. It has been built upon good management, good labour relations and lively and progressive industries. It is, therefore, a particular grief to me to have to call attention today to the severe blow suffered by the largest single industrial complex in my constituency in terms of the redundancies that began two years ago and are continuing at an ever accelerating rate at the British Celanese plant of Courtaulds.
I want to describe how severe this is for the city of Derby and for all those 1029 who have invested their life and work in the plant, and then to look at the overall policy of Courtaulds and how badly it has been affected by the policies of the present Government as well as by the world recession and to ask for action on a number of urgent and specific points.
Over the last 18 months, Derby has lost about 1,500 employees from the work force in the British Celanese complex. Two years ago, 5,500 or more were employed there. Now, the figure is down to about 4,000 and is still shrinking. That is the sort of shrinkage that the textile industry as a whole has suffered since 1974, but in Derby and Spondon it has been concentrated into little more than a year. When a recession of this magnitude and gravity comes to a place such as Derby, things are getting bad.
The closures in Derby have so far involved five separate plants. All the plants that have been closed are now lying idle, and the shadow left by their closure hangs over the whole of the Spondon area, in my constituency, and over the city itself.
The closures are not the result of a long history of bitter labour relations. The trade unions at Spondon have made frequent attempts to involve themselves in discussions about better productivity, work sharing and attempts to maintain some of the plants with reduced manning levels. So far, all attempts have been fruitless, and I fear that there has been too little consultation.
The process began with the closure of the Bonshawe factory, with over 200 redundancies, a couple of years ago. Then the Furzebrook plant closed at the end of last year. Already this year, 740 jobs have been lost at the Celon and Derwent Dyers plants, and 226 jobs went in the acetate plant in the No. 1 shop. Various support arrangements are at the moment under threat and due to go.
That is a total of well over 1,000 jobs, with a great deal of consequent worry for those whose jobs at the moment still exist in Spondon but who must ask what Courtaulds' overall policy is in the light of closures of such magnitude.
I want now to look at the general position of Courtaulds as a whole. Over the past year, and particularly since Mr 1030 Hogg became chairman of the group, 50 of 350 sites have been closed. There have been 12,000 redundancies among the Courtaulds work force. The Minister will know that in the debate on textiles last week and frequently in Adjournment debates on this question the body blow dealt by Courtaulds to whole communities—in Preston, Carlisle and Northern Ireland—has been raised in the House, often in the context of the aid that has been given to this company in development area assistance.
That is not the position in Derby, which has never needed to be a development area, but we are now feeling demoralised by the steady pattern of closures on which Courtaulds has embarked and on which it seems likely to continue. This closure programme—
§ The Under-Secretary of State for Industry (Mr. David Mitchell)Could the hon. Gentleman clarify something for me? Is he asking for Derby to be given assisted area status?
§ Mr. WhiteheadNo, I am not. I would have to say, in all fairness, that other parts of the country have been much more savagely hit by the recession. I am trying to call attention to the consequences for the country and for our whole economy—not just for textiles but for British industry as a whole—of policies such as those which are now being followed by Courtaulds in the light of the Government's general economic policies.
In an interview just five weeks ago, in the Evening Standard, Mr Hogg was quoted as saying:
The trading outlook is much worse than a year ago, so we have responded by increasing the rate of closures—a process which has certainly speeded up since I took over.Mr. Hogg obviously intends that to continue.Later in that article, by the deputy City editor of the Standard, the rather shrewd comment was made:
it might be time to start thinking of Courtaulds as less of a textile group and more of an industrial holding company.At the moment, three-quarters of the capital of Courtaulds is tied up in textiles, but all the signs are that this is not something that the company wishes to continue. It wishes to move out of textiles 1031 into other areas where it may make more profit.What is the company up to at the moment? It appears to be trying to persuade the City of London that it is still a going concern—that it is not ripe for takeover. Above all else, its shareholders must be placated and its share price upheld. The Financial Times on 30 May this year compared the company to others that are trapped with an unrealistic level of payouts:
the Board must fear the consequences for the share price if the dividend were cut".The payout to the shareholders was kept at the previous year's level for the first half of this year and it has been said that that was done by a raid on the deferred tax return of £24 million. It has been possible to make the company look relatively healthy as a result.The Minister knows from my utterances in the House that I am not a particularly strident or partisan figure in these affairs, but I must say that in this matter it is the workers of the Courtaulds group who are being asked to make all the sacrifices while the shareholders are being cosseted and asked to sacrifice nothing. I wonder why. The attempt to maintain the group as it stands, in a state that appears healthy and viable to the City, whatever the cost to the company's work force and its traditional role in textiles, does not seem very sensible.
The City may be the nervous system of capitalism in this country, but it does not supply the sinews, and it does not always supply the brains. The heart and guts of the textile industry in this country in the Courtaulds sector are being torn out by the policy that the group is pursuing. Nowhere is that more so than in the city of Derby.
Last year the group announced a £100 million investment programme, but we have heard little about where the money is to go. The hints we get from the latest annual report suggest that a substantial part of it will go abroad and that the movement away from the textile industry will continue.
At Courtaulds' annual general meeting, Mr. Hogg was pretty blunt about the group's profitability over the coming year. He was equally blunt about the Government's policy. As I would expect, 1032 he supported the Government's counter-inflation policies, but he went on to say:
The effects of the Government's economic policies on interest rates and the influence that these in turn have had on the exchange rate have been extremely painful for industry and especially for the major exporters such as ourselves. Yet we understand the need for the medicine and we are taking it in the hope that it will prove effective in the end against inflation. It is rough political justice … that those who are hit hardest are those whose livelihoods are most directly exposed to international competition.However, rough political justice is one thing; industrial common sense is another. It does not seem wise in the longer term for the Government to pursue a policy of total laissez-faire towards industry if this means (as we think it does in textiles) an erosion of its competitive strength by a dangerous and unnecessary surrender of market position to those overseas competitors whose governments follow more nationally self-interested policies.In that area I share his blunt views.The matters to which Mr. Hogg refers severely affect the position of Courtaulds. As long as sterling remains at $2.30 or above, Courtaulds will have to take on export business in textiles at minimum profit levels. The current exchange rate, combined with high interest rates, is, in the opinion of most commentators—even in the Conservative press—affecting Courtaulds more seriously than almost any other British company. For example, its interest payments last year rose by £4.1 million, to about £26.3 million.
A major shadow hanging over the Spondon plant, when we consider possible future redundancies, is the unfair competition from the United States. In the debate on textiles last week, the advantages of the United States textile industry were mentioned. It has an artificially cheap rate for its feedstocks because of oil and gas prices in the United States, it has advantages of scale and, above all, it enjoys competitive advantages against the pound, because of the artificially high level of the pound, based on our role as a petrocurrency rather than any real body to our manufacturing or exporting strength. The Americans have hit the British market hard over the past year. The Courtaulds management at Derby tells me that the importation of polyester triacetate wool-knitted fabrics, which threaten its market position, has increased nearly tenfold in the past two years. They are now 36 per cent. of the British market, compared with only 4 per cent. only a couple of years ago.
1033 We cannot continue seeing that degree of market penetration by a cosseted competitor. By instinct I am a free trader. I do not believe in an overall strategy of comprehensive import controls. I am not in favour of exporting our unemployment to foreign countries. I appreciate the difficulties that the Government will have, as the previous Government had, in negotiating a new multi-fibre arrangement in the next two years. However, the United States is not a developing country and has artificial price advantages. I therefore cannot see why we should sacrifice the British textile industry with little being done by the EEC or the Government.
I have a number of points to raise with the Minister. The first concerns the Government's responsibility for Courtaulds. In his chairman's address, Mr. Hogg said that he did not believe that the Government could maintain a laissezfaire attitude towards textiles. I do not believe that they can do so towards Courtaulds, either. What does the Minister believe is the responsibility of Courtaulds in the present economic recession? It has been and still is a net recipient of many millions of pounds of Government funds. Do the Government believe that it should stay in textiles, and, if so, at what level of work force and activity?
Would the Government be happy if Courtaulds moved progressively out of that area and concentrated on its other activities, whatever the human and overall costs involved, once we come out of this recession—as surely one day we must—in terms of our manufacturing capacity and competitiveness in textiles? Is it right at this moment for Courtaulds to shift so much of its investment elsewhere and overseas, when investment in British in industry and in competitive plant in the United Kingdom, painful as that may sometimes be for the work force involved and for those who have been traditionally engaged in the industry, ought to be the first priority for a major manufacturer of that kind?
Secondly, have the Government made any calculation of the real cost to British exporters of the present exchange rates and the high level of MLR? What are the Government doing to bring down the exchange rate of the pound? In our recent special debate on the textile Indus- 1034 try, the Government shrugged off that problem and said that there was nothing that they could do to bring the level of the pound down to a more realistic figure. Will that be the Government's position throughout the recession? Will we he told that, whatever the level of economic stagnation and recession, there is nothing that can be done about the exchange rate? Are we to remain, on the one hand, a banker because of our limited role in time and extent as a custodian of North Sea oil and simultaneously see the level of the pound destroy our exporting capacity? At what point would the Government feel that they could intervene? I believe that the time for intervention has already passed.
Thirdly, when will there be action from the Government on antidumping duties, in conjunction with our partners in the EEC, on polyester imports from the United States? What progress has been made in that regard? What answer has been given to the representations from the textile industry, which were reiterated in the debate only the other day?
To be fair, I recognise that Governments cannot do everything. I recognise that all these difficulties did not begin in May 1979. I also recognise, as I think the Minister does, that the depth of the present recession in the United Kingdom has been aggravated by the policies that the Government have followed. When the recession comes, as it now has, with all its gravity, to a place such as Derby, which was one of the buoyancy tanks of the British economy throughout the 1930s, there are signs of terminal illness in the British economy in general.
It is not only on behalf of all the people who have been laid off and the ones whose jobs are now threatened at Spondon, in Derby that I have raised this matter today. I have done so because of the general position of the British textile industry and that of the many thousands of people who are, and hope to remain, employees of Courtaulds.
§ The Under-Secretary of State for Industry (Mr. David Mitchell)In replying to the points raised by the hon. Member for Derby, North (Mr. Whitehead), I seek to speak a second time in the debate, and for that I ask the leave of the House.
1035 The hon. Gentleman is to be congratulated on bringing this subject before the House today, and I am grateful to him for the opportunity to speak about it. He set his comments in the context of the problems of jobs in the city of Derby. It is, therefore, perhaps appropriate that I should start there before turning to the more detailed problems he raised.
The Derby travel-to-work area has a current unemployment level of 5.3 per cent., which is to be compared with a national average of 7.7 per cent. Therefore, Derby is much better off than the national average. We should not get that fact out of proportion. Currently there are also between 850 and 1,000 vacancies in the Derby travel-to-work area, because, as the hon. Gentleman will know, not all vacancies are notified to the employment exchanges. Quite a lot of jobs come to notice through advertisement and things of that sort. If we take the crude recorded figure of notified vacancies and multiply it by the known proportion that are not notified, we are dealing with between 850 and 1,000 vacancies.
§ Mr. WhiteheadIf the Minister has been careful enough to obtain those figures, he will have also ascertained from the employment officials in Derby that the employment position there is now worse than it has been for the past 40 years.
§ Mr. MitchellPerhaps I should not have given way to the hon. Gentleman, because I am not seeking to deny the seriousness of the situation, particularly for those who work for Courtaulds at Spondon and who are being made redundant. I shall deal with that later. Derby is better off than the country as a whole. Indeed, when all the Courtaulds redundancies at Spondon and the other known redundancies in the industry take place, the unemployment level might be about 6.3 per cent., assuming that all who are made redundant register as unemployed. Some will have other plans.
The hon. Gentleman has drawn attention to the effects of the reduction in employment by Courtaulds at Spondon. Courtaulds is, of course, the largest textile group in Europe, with interests in a whole range of textile and clothing manufacture, as well as other activities include- 1036 ing chemicals, plastics and packaging. The chairman recently warned that a serious decline in profit was in prospect for the current year. He attributed that mainly to the difficult trading conditions for fibres and fabrics, where a slump in home demand coincided with competition from imports and difficulties in exporting due to the strength of sterling. That brings pressure on the employment situation in the area.
However, I should stress at the outset—the Government have said this many times before—that decisions as to closures and redundancies are the responsibility of the individual companies concerned. It must be understood that Courtaulds' actions follow on from its own assessment of the prospects. I realise that closures have a serious impact locally. In Spondon, I understand that Courtaulds recently cut 300 jobs at the Furzebrook warp knitting factory and that it has announced the closure of its Celon plant there, with about 660 redundancies. Derwent Dyers has announced about 100 redundancies. I also understand that another 226 site service personnel and other staff are to become redundant.
Textile firms in the Derby area employ about 8 per cent. of the working population. Many people are on short-time working and share the difficulties of textile workers in other parts of the country. The recent textile closures at Spondon must be seen against a background of contraction in employment in the textile industry that is affecting the whole country. The industry has an excellent record of improved productivity over the years, and I realise that the current position is due more to a worldwide recession affecting textiles and the considerable low-cost imports and the difficulties that that places on firms.
It is primarily for industry to decide, company by company, how it tackles the problems that it faces. Firms cannot escape from difficult, in many cases very difficult, decisions. I recognise that the Government have a role to play in helping the industry to achieve a sounder basis for the future. My right hon. Friend the Secretary of State for Trade reminded the House only last week during the debate on textiles of the effort he makes wherever possible to extend the protection given to our industry under the multi-fibre arrangement. I do 1037 not need to repeat the list of the Government's achievements in that field. When the multi-fibre arrangement expires at the end of 1981, we shall do our best to negotiate a successor arrangement for the continuation of tough restraint to help our industry.
There is also difficulty with some imports from developed countries, particularly the United States. The hon. Gentleman has drawn attention to the damage being done by artificially cheap imports of synthetic fibres and products made from them. He will know of the two quotas imposed earlier this year on imports into the United Kingdom of polyester filament yarn and nylon carpet yarn from the United States. We managed to get the EEC Commission's agreement for restrictions on those two products, but not for a third, man-made fibre tufted carpets, where the market was also severely affected.
On polyester yarn, the European Commission Vice-President, Herr Haferkamp, recently said that decisions should be reached before the end of August. Therefore, this is being conducted at top speed.
The hon. Gentleman has already dealt with the matter of warp. He has drawn attention to the unfair nature of the United States' fuel pricing policy. One understands exactly how serious this is for a whole host of industries. It is not only the textile industry which is affected; it is also the newsprint and papermaking industries. But here we have a country which has decided not to pursue a conservation policy in terms of its own oil supplies. That is a decision which we do not control. We may think or even express the view that it is shortsighted for a country with limited supplies of indigenous oil not to pursue a conservationist policy and to price that oil at below the world price and, therefore, to have greater consumption than it otherwise would. It gives its manufacturers a significant short-term advantage—an unfair advantage compared with others. But in the long term it will suffer the most serious consequences as a result of pursuing that policy.
I know that that is small comfort to the hon. Gentleman, whose constituents are concerned about jobs in the short term, but it is in that context that one has to see the situation.
1038 While on the subject of taking steps against competition from developed countries, I must point out that one-third of our industrial production is exported: in textiles and clothing, exports totalled £2,300 million in 1979. If there were a general move towards protection for the textile industry against developed countries' competition, the first to suffer from retaliatory action would probably be the textile industry itself. We have, therefore, to look at this subject with considerable care.
The hon. Gentleman specifically asked me about the future of the company's activities in relation to this narrow area. At his meeting with union representatives on 24 July, Courtaulds' chairman, Mr. Christopher Hogg, reaffirmed the company's view that British Celanese at Spondon was a vital part of the company and had a role in plans for the future. He drew attention to recent investment in parts of the site and the possible construction of a new pilot chemical plant. I hope that the hon. Gentleman will take some comfort and encouragement from that.
The hon. Gentleman also asked me to deal with the problems of inflation, interest rates and the pound. Unfortunately, in the limited time available for what I hope the hon. Gentleman will accept is really a subject for a major debate taking a full day, he must share with me a major concern about inflation. As he will know, monetary policy and the management of the economy at any one time take about 18 months to two years before they show themselves in their effect on inflation. The hon. Gentleman will sadly reflect how pleasant it was for everyone when the previous Government were printing money about 18 months ago; but now all of us have to suffer the consequences of the flood tide of inflation caused by the previous Government's policies. We are trying to deal with that by restricting the money supply, but that makes money more expensive. That is why interest rates are higher.
The hon. Gentleman is right. Sterling is sufficiently high that matters are intensely tough for our manufacturers. That is in large part due to oil, over which we have no control. Treasurers in companies and countries across the world see us as a safe place to store their money. 1039 At the same time, there is an additional part of the value of the pound, caused by high interest rates. The sooner we can get down to Government expenditure, national and local, the sooner we shall be able to take the demand off the supply of money, and interest rates will fall. As they fall, not only shall we see a sound money pattern developing and a lower cost of raising money for industrial developments and for new projects, but we shall take the top slice off the pound.
The policy will work. Unfortunately, because of the legacy of inflation, it is a much tougher policy than we should have wished to have to embark upon. It will succeed, and as it does it will lay the foundations for the prosperity of much of British industry, including the city of Derby and those who work there.