Engineering Industry

HC Deb 04 December 1980 vol 995 cc437-518

Mr. Speaker

I have selected the amendment in the name of the Prime Minister.

4.3 pm

Mr. John Silkin (Deptford)

I beg to move, That this House, appalled at the dramatic decline in the engineering industry, calls upon Her Majesty's Government to reverse its destructive economic policies before the damage becomes irreversible. It is an underestimate to talk about a dramatic decline. We are witnessing a catastrophic decline, which has teen happening over the past 18 months. In tabling their amendment, the Government are running true to form. They are seeking to blame everyone but themselves. The amendment implies that there has been no decline daring the period that the Government have been in control of our destinies. The reverse is true.

In the 1980 Budget—and I mean the Chancellor's first 1980 Budget and not the one delivered on Monday of last week—manufacturing output was forecast to come down by 4½ per cent. below the average of 1979. However, bad as that was, in the first five months of 1980 it was already down by 7½ per cent. In the June-September quarter it was 11.4 per cent. lower than in the same period last year. That is not all. It is not only a question of output but also a vital question of employment. Employment in manufacturing industry is falling fast. Since May 1979 over ½ million jobs have been lost in that sector—that is, one job in every 13.

In the engineering and allied industries the position is in some cases even worse. Those industries account for a little more than 40 per cent. of manufacturing output. Here the output declined between May 1979 and September 1980 by 15.7 per cent. Jobs in these industries account for something over 45 per cent. of manufacturing employment. They are down by 208,000 in the same period, which is an enormous total for what was already a declined industry. It is 6.5 per cent.

What is even more horrifying for the future is that skilled craft workers and technicians now account for 12 per cent. of the unemployed. During the past year the numbers have been rising at twice the rate for other occupations. If we go back to the days—which seem so long ago—when Britain had an unemployment rate of about 1.4 per cent., we find that very few of the unemployed were skilled workers, or, if they were, they were travelling between one job and another. That is not the case today. The trouble is that when people leave skilled occupations now they rarely return. It has often been said that once a man leaves a job the future goes with him.

It is not only a question of skilled workers leaving the industry. The number of school leavers accepted for training as craftsmen and technicians is lower than in any year since 1973, which was a bad year. Last year the figure stood at 23,320. This year it has fallen to 20,000.

The Government are seeing that industry — and engineering industry in particular — if and when it recovers, is unable to take advantage of the new skills and technologies that will be necessary if we are to keep our place in the world. I can demonstrate that more clearly by referring to the skill shortages in engineering jobs. In 1979, which was bad enough, there were three vacancies for every five unemployed skilled engineers. This year there is only one vacancy for every five unemployed skilled engineers. The difficulty is that once they leave they never come back. We are therefore dealing with a permanent loss of skill and technique.

What has been the cause of that rapid decline in the past 18 months? I shall deal with the other points in the Government amendment later. Let us first consider what they omit—the decline between May 1979 and today. I can do no better than enliven the House, if that is the word, with a quotation from Lord Trenchard, in a weighty speech delivered in 13 November, only a matter of three weeks ago, at the annual dinner of the Chemical Industries Association in London. That must have been a rather gloomy dinner—perhaps a bit of a wake. But never mind, the noble Lord had his word of cheer for them. He said Britain's industry needs to be something of a Houdini to help us through some of the pressures that are mounting at the moment. These include a recession, high interest rates, energy prices and the high exchange rate. It is interesting to note that the noble Lord appears to have been saying that industry should look towards helping the Government. That is what his speech came to. The view of most of us is the reverse. We believe that Government should help industry. There is Government responsibility in all the areas that he mentioned.

I admit that Lord Trenchard, while a loyal figure, is not the world's most original thinker. In a way, he could be described as the poor man's Joseph. What conies out in the stratosphere of the mind of the Secretary of State for Industry is transmuted into somewhat baser metal when it reaches—

The Secretary of State for Industry (Sir Keith Joseph)

The right hon. Gentleman would do well to remember that, unlike both himself and myself, Lord Trenchard has had a career of great success in manufacturing industry.

Mr. Silkin

That depends on which manufacturing industry we are discussing. I believe firmly in the making of sausages, and will go to the stake to have my sausage. That is Lord Trenchard's experience. His experience as a thinker, while making his sausages, is rather more in question. His sausages are very expensive. His remarks were interesting. What he said, in plain man's language, is totally in line with the philosophy of the Secretary of State. If my memory is correct, 18 months ago, in the first debate on regional aid, the right hon. Gentleman assured me that his job was not to intervene to help industry—that would be the wrong impression of his job—but to create a prosperous economic climate within which industry could flourish. Judging by the effects of that philosophy during the past 18 months, he does not really have a full-time job. I wonder what he does with his spare time or, indeed, what he does with his time at all.

We get some clue from The Economist of 15 November, which tells us that the right hon. Gentleman tends to ask industrialists summoned by his Department why they have come to see him. Or else, bored by their plodding exposition, (whose drift is rapidly grasped by his alpha mind), he disconcertingly picks up his private letters and once even his own income tax return while businessmen drone on about the effects of the Government's policy on factories north of Watford.

That does not take up much of the day. It has the double advantage that he has disposed of his income tax return and signed his letters. The Economist is a serious paper. I recommend Conservative Members to read it, if they can read.

What does the right hon. Gentleman do with the remainder of his morning? There is always the daily letter of resignation from the National Enterprise Board to be thrown into the wastepaper basket. The afternoon can be profitably spent agonising over his fanatical encouragement to build tower blocks of flats when he was Minister with responsibility for housing, or in agonising over his reorganisation of the National Health Service. If only the remainder of the day was so constructively employed.

The Government have their responsibilities, but the trouble is that they are shrinking from them. The Government amendment, like the extract from Lord Trenchard's speech, talks about world recession. They blame the lift in oil prices. For heavens sake, who has got the oil? We have. Japan and industrialised Western Europe do not have their own oil. It would be no wonder if the lift in oil prices heightened their recession. In fact, the growth of unemployment has been greater in Britain than in any of those countries. There is only one other country in Western Europe that is self-sufficient in oil, and that is Norway. In Norway, because it plans industry and uses funds from oil properly and does not waste them, the figure of unemployment is 1.4 per cent. But then Norway has a Labour Government.

Mr. Roy Hughes (Newport)

Norway is not in the Common Market.

Mr. Silkin

There is no doubt that that helps also. In any event, the Government can do something about the recession. They cannot simply brush it aside and say that there is nothing that they can do. There are good and experienced people who can tell the Government what to do. A moment ago the right hon. Gentleman chided me for my remarks about Lord Trenchard, although I was merely referring to him as an original thinker rather than as a sausage maker. I can quote those who are engaged in the industry — for example, the Institution of Mechanical Engineers. In its report on the machine tool industry it said that the Government should follow Japanese and American examples and use Government-controlled plants to assist the launch of new British machine tools. That is not surprising when one realises that Britain, which once exported all the machine tools in the world, is now importing nearly as much as she exports. The same report calls for provisions in Government contracts for developing machine tools and other equipment required for the efficient manufacture of products.

Another example is the CBI, which is calling for greater investment in industry. That is a turn-around from those who at one time deplored subsidies for industry. They now understand what it is all about. We are behind other industrial countries. I agree with the right hon. Gentleman about that. But we are behind other countries because of the lack of money for research and development. A lack of investment so often affects not only investment in plant, machinery or buildings, but investment in the skills and the human side, which is so necessary. We once led the world in that respect. There is a lack of ability to develop and market our innovations. That is part of the trouble.

The CBI points out that manufacturing output in the first two years of this Government will have fallen by 14 per cent. There is a significant point about that percentage drop. As the CBI points out, it is worse than during the slump of 1929–31. When the right hon. Gentleman and his friends look around for alibi No. 1 and come to the world recession, it is time that the truth was told. Certainly the world recession has its effect, but the truth is that it is the Government's own policies that are making the world recession infinitely worse for Britain.

The Government amendment suggests that the difficulties faced by the engineering industry can be overcome only by achieving international competitiveness. The trouble is that the Government do not understand why we are not competitive. Their alibi No. 2 is to blame it all on the trade unions and the workers, and to say how greedy they are. That is not so. The truth is that the deflationery policies of the Government are causing the fall in productivity—a fall of nearly 8 per cent. since May 1979. If the policies of the right hon. Gentleman and his Government are so good and are working, why has there been a fall in productivity on so gigantic a scale at the same time as there has been a growth in unemployment?

The noble Lord mentioned the high exchange rate as though to suggest that industry was liable to be penalised for that—penalised, yes, I agree with that—and as though it was to blame for the rate itself. He talked about the exchange rate as one of the prime pressures on industry.

I read the speech of Sir Maurice Hodgson. I was put in mind of it when I read the report of Lord Trenchard's address at the annual dinner of the Chemical Industries Association. Sir Maurice is the chairman of ICI. When he referred to the understandable losses that ICI had had to face during the previous six months he put the blame on the exchange rate. He said that to offset the increase in the exchange rate ICI would have had to sack 40,000 employees. He pointed out that that would not have been possible because it would have resulted in the destruction of the company's potential and its ability to continue. He added that, in addition to having to sack 40,000, the company would have had to achieve a level of productivity higher than that of any other chemical company in the world.

I do not think that the right hon. Gentleman has grasped the fact that the non-competitiveness of United Kingdom exports — this applies very much to mechanical engineering products—is due not to price factors but to non-price factors. United Kingdom engineering products are becoming less sophisticated than those of other countries, especially those of Germany and France. The United Kingdom's relegation to the lower divisions is taking place at an increasing tempo. We are failing to produce high value goods in the quantity and quality that is required.

The decline is due to several factors—for example, slow adaptation to the customer's needs and poor design. However, it is not due to high prices caused by high labour costs. My authority for saying that is the NEDO study of January 1980 entitled "UK's Performance In Export Markets". The report contains a comparison of the engineering products exported by the United Kingdom, France and West Germany between 1962 and 1974, It is instructive. It indicates that the prices of United Kingdom products would have needed to rise at a rate 4 per cent. per annum lower than that of the rate of increase of German prices to counteract the quality weakness of United Kingdom goods.

That comes back to lack of investment and lack of investment in research and development. It comes back to a certain extent — I turn to the one part of the Government's amendment with which I have a degree of sympathy—to the long-term decline. The Government talk of that decline in terms of decades, but I talk of it in terms of over a century.

My approach is rather different from that taken by the Government. I submit that the reason for the decline is the love affair between the Conservative Party Establishment in general and the financial centres of the City of London. The reason lies with that rather than with industry.

It is significant that the right hon. Gentleman should say that he as Secretary of State for Industry and I as his shadow have no experience of industry. That is not a criticism that he would make of at least three of his appointees to nationalised industry chairmanships. However, they are accountants or merchant bankers. They have nothing to do with such a dirty occupation as industry or engineering. That is part of the trouble.

I agree that the decline has taken place over a long period. It was one that the Labour Government understood. That is why that Government set up the Finniston committee. It is one of the great tragedies of this moment that the Government in their amendment accept that there is a long-term decline yet do not have the courage to go right through with it and make the necessary response.

The entire Finniston report should have been implemented. I was about to comment on the Government's half-baked scheme, but in fact it is not baked at all. Their substitute scheme does not have the slightest: possibility of having a real effect on the future of British engineering. I make the pledge on behalf of the next Labour Government that they will put into effect the recommendations contained in the Finniston report. We regard them as vital.

There will be no immediate revolution in engineering. It will take perhaps 10 years before the full effect of the Finniston measures will be finally felt. We are in for along and difficult period.

What are we to do in the meantime, while the Government's measures are intensifying the dangers and the destruction of engineering industries throughout the country? The Opposition's motion is right when it claims that the damage may be irreversible. I fear that that is becoming evident in some sections. Action will have to be taken and taken rapidly. First, there must be massive public intervention. We can improve the quality of products only by investment and by the expenditure of investment in human skills. That applies especially to research and development. It applies also to new plant and machinery, so that we have an up-to-date industry.

That is a task for a revitalised National Enterprise Board, and it is precisely that board that the right hon. Gentleman is impeding. He is not doing so intentionally. I acquit him of any malice. He has long ago—well, during the past 18 months — given up his rather schoolboyish desire to wring the NEB's neck. I think that that was his wish before taking office. He accepts that the board has to exist. However, he is not allowing it the opportunity to live and to play its proper part.

Mr. Kenneth Carlisle (Lincoln)

What conclusion does the right hon. Gentleman draw from the failure of Alfred Herbert, which was taken over by the Government and which failed so badly?

Mr. Silkin

I draw many conclusions. I shall be presenting the House with an illustration that will meet the hon. Gentleman's argument. I could have mentioned Alfred Herbert, but I decided to mention a parallel example. I hope that the hon. Gentleman will be all attention when it comes.

Private investment has failed our industry. Its condition has been made infinitely worse by what the Prime Minister was boasting about this afternoon. The total destruction of exchange control has allowed money to flow out of Britain at a rate of £1½ billion in the past year or so.

Private industry itself is not blameless. Between 1968 and 1974 BL was in private hands. It made a total profit during that period of £74 million. That was not princely, but it was, clearly, a profit that amounted to some millions. Of the £74 million, £70 million was distributed in dividends and £4 million was ploughed back into the company. That is the real truth and the fact is that we are still suffering the consequences of that.

Sir Keith Joseph

Will the right hon. Gentleman repeat his figures and give his source for them?

Mr. Silkin

BL's total profit between 1968 and 1974 was £74 million, of which £70 million was distributed in dividends while £4 million was ploughed back for investment. I made that statement in the House about 12 months ago. The right hon. Gentleman did not contradict me then. That is because the facts are not in dispute.

Mr. Geoffrey Robinson (Coventry, North-West)

Was not the source the Ryder report?

Mr. Silkin

That is absolutely right.

At the Birmingham motor show the Prime Minister went straight for the Mini Metro. She said "This is what we should be doing." She was saying something of the sort at Question Time. She was saying "We should all do our best to encourage the buying of British cars. Our cars can be very good." What made the Mini Metro? Would it have been produced in the old days, when the £70 million was being channelled back to the shareholders and only £4 million was going into investment? Of course it would not. It was public investment that made the Mini Metro, and it is insufficient public investment that is now preventing British Leyland from sweeping the world. That is the truth of the matter.

Sooner or later, action will have to be taken. In the meantime, my fear—and this is why the motion refers to "irreversible" damage, or its potential—is that the action will be later rather than sooner. I appeal to the Government. This is the only way. It does not matter about their philosophies, or saving their face. For heaven's sake, they should help to save our country.

There are other things that the Government must do in the immediate future. They must bring down the exchange rate. Of course, the right hon. Gentleman has been very unlucky. Ten days ago at Question Time I put this very point to the Secretary of State. I asked why on earth he did not bring down the exchange rate, as it was one of the factors that was having so much effect on our exports, our engineering and on our manufacturing base generally. The right hon. Gentleman replied in a rather superior tone of voice that I might have noticed that the value of the pound—the exchange rate—was indeed falling. Five minutes later, it was rising again. The Government have the power to bring down the exchange rate. Incidentally, they can do so by bringing down the interest rate and thereby kill two birds with one very powerful stone.

Sir David Price (Eastleigh)

We have heard a good deal about why the exchange rate should be brought down, and there is a good deal of force in the right hon. Gentleman's argument. Will he tell the House what he thinks the rate should be at the present time and what measures he would take to achieve that figure if he were in my right hon. Friend's position?

Mr. Silkin

As the hon. Gentleman knows, there are a large number of technical measures. I first met the hon. Gentleman many years ago when he was in a position of responsibility which would have told him exactly what might have been done at that time. I do not propose to talk about those technical measures, but anyone who has been in Government knows what they are. As to what I think should be done, if I have to teach the Secretary of State, I am willing to take him behind the Chair and do so there. Everyone knows that there are reasons why one does not talk about what needs to be done at a particular moment. It would be totally irresponsible for anyone to do that. If the hon. Gentleman does not know that, he has been in the House for a long time without learning one of the most important things.

The hon. Gentleman asked a much more important question. He asked what ought to be the proper exchange rate. I would say that sterling is about 30 per cent.—perhaps 40 per cent.—over-valued.—[HON. MEMBERS: "About $2?"] Yes, about that, or perhaps even a little less—about $1.90 or $1.80.

The other thing that needs to be done is to increase home demand. The Government amendment refers to "international competitiveness". If one looks at the orders in the engineering industry, a very significant figure stares one in the face. Export orders are 9 per cent. down. The Secretary of State for Trade is always boasting that exports are holding up pretty well. Although they are not very good, with the exchange rate as it is, they are perhaps holding up tolerably well. But home orders have fallen by 30 per cent. during the Government's period of office. The reason for that is the lack of demand in our own economy.

Here we come to one thing that the right hon. Gentleman never seems to understand. I must be very careful of the words that I use. I must not say that he is running, or in control of, anything, because he resents such descriptions. However, he has a kind of observer status over a number of different industries — steel, shipbuilding, the motor car industry — in the public sector as well as in the private sector. The astonishing thing is that he never seems to understand the correlation between those industries and how much they are interlocked. If the demand for British motor cars falls, so will the demand for steel. The right hon. Gentleman wonders about that and then says "It is extraordinary. We are producing less steel more expensively". A holy light then comes into his eyes, and he says "Oh, yes, I know —it is all the fault of the trade unions". It is nothing of the sort. It is the fault of a deliberate policy of deflation, which is stopping the proper demand while at the same time, because of the over-valued pound that the hon. Member for Eastleigh (Sir D. Price) and I were discussing, subsidising foreign imports by that same figure of overvaluation, be it 30 per cent. 40 per cent. or whatever. That is the effect.

I turn to the next interim measure that the right hon. Gentleman and the Government must take if we are to save British industry, namely, the introduction of import controls wherever an industry is threatened. What we are witnessing is not Government intervention in industry—there the right hon. Gentleman is quite right — but Government intervention in finance for the benefit of the financiers. That is totally at variance with what is needed in industry.

What we are therefore witnessing in industry is something much more terrible. In time of war, the military policy of scorched earth is designed to save a country from foreign invasion. But the right hon. Gentleman's industrial scorched earth policy is encouraging the foreign invasion of our own industrial base. That is what is happening as a result of Government policy. That is the basis of what they are doing and that must be corrected before the whole of our industrial base is destroyed. It is for that reason that I call upon my right hon. and hon. Friends to join me in the Lobby tonight.

4.38 pm

The Secretary of State for Industry (Sir Keith Joseph)

I beg to move, to leave out from "That" to the end of the Question and to add instead thereof: this House, recognising the pressures on British engineering caused by world recession and international trading conditions, believes that the industry's difficulties, which have been building up over past decades, can be overcome only by achieving international competitiveness.

I had hoped that the right hon. Member for Deptford (Mr. Silkin), although legitimately seeking to make arguments to justify his advice to his right hon. and hon. Friends to support the Opposition motion, would seek to give an analysis that would not be excessively partisan. The right hon. Gentleman has acknowledged that the problems of the industry and, indeed, of the economy go back many decades. He has acknowledged also that there is a world recession. But, in general, he has tried to give the impression that all our problems are the fault of the present Government. From experience, I know of the hard work involved in being an Opposition Front Bench spokesman, but the right hon. Gentleman's analysis was very selective and very short. In the time available I shall genuinely try not to omit any of the main factors that I think should be considered in discussing the motion. I shall not flinch from saying those things that I believe need to be said about finance or management, or, indeed, about the Government's failure to achieve their own objectives.

I was waiting to see whether the right hon. Gentleman would also take as non-partisan an approach to such an important subject as I think the House is justified to expect, even though we are engaging in a party political debate. He acknowledged, at least by one reference and a number of allusions, the subject which I regard as almost the most important of all—the primacy of the customer. There was a reference to that in the right hon. Gentleman's speech. He acknowledged, even if only by quoting from the Government amendment, the importance of competitiveness. He went on to comment on how he sees competitiveness. However, I waited in vain for any reference to the part that Luddism, restrictive trade practices and overmanning—[HON. MEMBERS: "Oh!"]—have played in the cumulative decline of our engineering industry.

I regret that I must reject the right hon. Gentleman's diagnosis, although I shall try to touch on the various parts of it. In my view, his remedies would make things worse. There is one common factor in all his remedies—more protection, massive public intervention and a reduction in the value of the pound — which is that they involve massive extra public spending. That certainly applies in two cases, and probably in all three. The right hon. Gentleman did not for a moment explain where that massive extra public spending would come from. Would it come from compensating cuts in public spending elsewhere? I doubt whether it would. Would it come from extra taxation? [HON. MEMBERS: "Yes."] Would it come from extra indirect taxation, or extra direct taxation?

Mr. John Silkin

I think that the right hon. Gentleman is challenging me. I did not talk about this aspect, because I have spoken about it in the House previously. Quite a good start might be made if the right hon. Gentleman were to ensure that taxes were actually paid.

Sir Keith Joseph

I doubt whether this Government have been any different in their intense efforts to collect taxes from the previous Government.

I was exploring the possibility of where the right hon. Gentleman might get the money. There might be a shade more success in collecting; taxation, but that is at the margin The right hon. Gentleman acknowledges that the money would not come from cutting public spending elsewhere. Would it come from extra borrowing? If so, that would put interest rates up even higher. Would it come from extra printing? If so, that would put inflation up rapidly.

There is no way in which to finance massively increased public intervention and investment without doing at least as much damage to the industry which the right hon. Gentleman is seeking to help by way of extra interest costs, extra inflation or extra taxation. That leaves out of account altogether what I should have thought was to be the generally acknowledged inability of politicians and civil servants, no matter how good their intentions, to get the place, type or timing of investment right. Essentially, it is far better to leave investment decisions as decentralised as possible. Lord knows, because of approvals by both Conservative and Labour Governments, we should all realise how massively over-invested we are in respect of the British Steel Corporation.

Mr. Robert Hughes (Aberdeen, North)

Does not the right hon. Gentleman recall that the Prime Minister made some strictures against the previous Conservative Government about the decentralisation of investment decisions? When they made money available for investment, it went into wholly unproductive and speculative building. Why do not this Government undertake investment and have some control over it?

Sir Keith Joseph

Oh, dear, there is so much with which to quarrel in that short intervention. In the previous Conservative Government's intense and well-intentioned efforts to reduce the level of unemployment, they increased public spending thinking that they were doing good, but we know what the result was. It was that industry realised that a stop would follow the go, did not invest—

Mr. Geoffrey Robinson

rose—

Sir Keith Joseph

No, I shall not give way. Industry did not invest in the way in which the then Government hoped that it would. It invested in property, and the Conservative Party has tried to learn the lessons arising from that occasion.

Mr. Geoffrey Robinson

rose—

Sir Keith Joseph

No, I shall not give way.

The right hon. Member for Deptford is still not in agreement with his right hon. Friend the Member for Leeds, East (Mr. Healey). This afternoon he again peddled his panacea of increased protection. Cannot the right hon. Gentleman recognise that increased protection will treat the symptoms but not the disease? It will not encourage our industry to be more competitive. It will remove one of the main stimuli to increased competitiveness. It will invite retaliation, increase inflation and do grave damage to the country. I am not the only one who thinks so, because the right hon. Member for Leeds, East has said so in words that are crisper, more vigorous and more effective than the words that I am using today. I regret that I cannot accept the argument that the right hon. Gentleman's remedies would meet the need.

The right hon. Gentleman ventured a judgment that the value of the pound should be lower, but he knows perfectly well that the value of the pound is fixed by the decisions of scores of millions of people across the world who make judgments each day. [HON. MEMBERS: "Rubbish."] Labour Members say that I am talking rubbish. However, it is not only the governors of the central banks or the treasurers of the multinational companies who decide what currency to buy, hold and sell. It is the scores of millions of traders across the world who lead and lag in favour of one currency and against another every hour of every day in every continent.

The right hon. Gentleman dismisses that miracle of market co-ordination and thinks that we can control the value of the pound. Even if we were willing to pour all our national reserves into the process, we could not be sure that the pound would end at a level that would optimise the conflicting interests of this country.

Mr. John Silkin

rose—

Sir Keith Joseph

I shall give way when I have finished this rather convoluted sentence. To the extent that the value of the pound is relatively high, our inflation rate is lowered, and to the extent that the value of the pound is relatively a shade lower, our trading is made easier. Those are conflicting interests. Even if we had all the money to do so, it is unlikely that we could achieve the optimal answer which the right hon. Gentleman takes for granted.

Mr. John Silkin

The right hon. Gentleman has answered my question in his later sentences, but the truth is that he does not want the value of the exchange rate to come down. He knows perfectly well that it could. For example, if he took 6 per cent. off interest rates it would help industry enormously, and it would also reduce the value of the pound. However, the right hon. Gentleman has just confessed that that is not what he wants, because if the value of the pound went down inflation, on which the Government have given their pledge, would go up.

Sir Keith Joseph

I must resist the temptation to follow every fascinating error made by the right hon. Gentleman. Now he goes beyond the CBI and talks of a 6 per cent. reduction. With the 2 per cent. that has just taken place, that would be 8 per cent. in a matter of weeks, yet the right hon. Gentleman wants massively to increase public spending. Where will he get it from? He would not raise the money that we are raising today, let alone the vastly increased sums that he proposed. I regret that there is precious little common ground—I had hoped that there would be far more—between the diagnoses of the right hon. Gentleman and that of the Government.

I think that from the right hon. Gentleman's speech and the evidence in it there may be some common ground that jobs and the standard of living depend on a competitive trading base—not just engineering, but the whole of the manufacturing and service industries. All jobs in the non-tradeable public sector as well as in the tradeable sector depend on our being competitive. Jobs in the public sector are supported, at least in part, by taxes raised directly or indirectly from the trading sector.

At the centre of the trading base, which has to be competitive if it is to grow and flourish, is engineering. Therefore, the subject of the debate today is crucial. The health and vitality—

Mr. Derek Foster (Bishop Auckland)

Will the right hon. Gentleman give way on the point about competitiveness?

Sir Keith Joseph

I am coming to that.

Mr. Foster

Is it not true that British industry has lost about 30 to 40 per cent. of its competitiveness during the past 18 months to two years and that two-fifths to a half of that has been the direct result of the over-valuation of the pound? There is ample evidence of that within the right hon. Gentleman's reports. Is he saying that the Government will stand by and watch and do nothing, or can do nothing, about it?

Sir Keith Joseph

I do not contradict the hon. Gentleman. About two-fifths of the loss of competitiveness during the past two years has been due to the movement of the currency, but the other 50 to 60 per cent. has been due to huge pay settlements. [HON. MEMBERS: "Oh!"] How can Opposition Members deny the proposition that at a time when productivity was—

Mr. John Silkin

Falling.

Sir Keith Joseph

The right hon. Gentleman says "falling", but let us say "stable". At a time when productivity was at best stagnant — perhaps falling — wage settlements averaged more than 21 per cent. That was a direct onslaught on our price competitiveness. I should be fascinated to know how Opposition Members can justify denying that proposition. I do not deny that competitiveness is a wider matter than price, but price enters into it as an important factor. The answer is that the bulk of the loss of competitiveness over the past two years has been accounted for by wage and pay increases.

Mr. Stanley Orme (Salford, West)

What about the engineering workers' pay?

Sir Keith Joseph

If the right hon. Gentleman tempts me, I remind him of the engineering workers' strike. Was that a contribution to competitiveness?

Mrs. Gwyneth Dunwoody (Crewe)

rose—

Sir Keith Joseph

Our competitiveness has suffered savagely.

Mrs. Dunwoody

Will the right hon. Gentleman give way?

Sir Keith Joseph

I should rather not. I have scarcely started.

Competitiveness is a whole range of things—design, development, research, marketing and punctuality—but price is also of great importance.

What I have said so far about the importance of customers and competitiveness must surely be common ground. I should have thought that it would also be common ground that nearly every other developed country is having a tough time. Unemployment has risen sharply in most countries, except Japan. It has not risen as much in all cases; in some cases more, in others less.

Mr. Joseph Dean (Leeds, West)

Will the right hon. Gentleman give way?

Sir Keith Joseph

No.

Mr. Dean

Briefly?

Sir Keith Joseph

No, not even briefly, not even to my parliamentary neighbour. I must make progress.

Nearly all our competitors are experiencing sharp increases in unemployment. We have had to accept a sharp rise in unemployment from a higher base than that from which our neighbours started because of the high rate of unemployment that we inherited from the Labour Government and the cumulative loss of competitiveness over decades.

It is common ground that the customer, the consumer, matters and that competitiveness is the key. It is common ground also that there is a recession and that our neighbours are also experiencing sharp rises in unemployment. It is surely also common ground that in the world market there is a whole range of new formidable competitive producers of engineering goods. They come not only from Japan, the Far East and South America but from other parts of the world. I suspect that they are only the advance guard of our new formidable competitors. Mercifully for this country, they are not only competitors, but markets. They represent a severe challenge to our industry, but they are markets as well as competitors. Therefore, we have a certain amount of common ground.

I shall now sum up the proposition that I shall try to support in a way that may not meet with the entire agreement of the Opposition.

I claim that inflation bred by Government overspending, and uncompetitiveness bred largely by the unions—I shall sustain that claim in a moment — are job destroyers. The differential rate of inflation and the differential degree of Luddism have made unemployment in this country much higher than it need be, even in a recession, and higher than unemployment levels in many other industrialised countries.

Against that background, I turn to the engineering industry. It is a wide industry, with a large number of sectors within it. Mercifully, there are many contrasts. There are some gloomy stories from many parts of the engineering industry, but even in the gloomiest areas some firms are doing well and there are some success stories. There are whole sections of success stories, but, inevitably, even in the success sectors some firms will be doing less well than others. Some sectors are very competitive; others are less competitive. Although we cannot measure it, I believe that there is an irregular shift from the less to the more competitive sectors of engineering within and between firms.

Engineering still remains a key agency for increased prosperity, a better standard of living, improved pensions and more jobs. It is upon innovation in the engineering industry that much of our prosperity and jobs have been built. I think that it will be common ground that the inventiveness and talent that put us where we were as pioneers are as abundant as ever. The skills in the laboratories, on the shop floor, in the workshop and even in the boardroom are as good as they ever were. Despite discouragement over many years, we still have a great abundance of talent, yet for 20 years or more—possibly generations — we have experienced a decline in our competitiveness.

We have been leapfrogged, in our standard of living, in our public services and in the buying power of pensions, by our neighbours and competitors who envied us 25 to 30 years ago. We know that not from an assertion by a Minister but from the fact that in recent years our shop windows have habitually been crammed with goods made in foreign countries because the average British man and woman judge them better value -for money than British goods. Our share of the markets at home and abroad fell substantially, as my right hon. Friend the Secretary of State for Trade said. We are now holding it stable and we must hope that it will grow.

For many years—this must enter into the diagnosis—we have had a differentially higher inflation rate and poorer productivity than our competitors. In the 1950s we were overtaken by many of our neighbours. In 1975 the Germans and the French had 60 per cent. higher productivity on average in engineering than did the United Kingdom.

Why have we had higher inflation and lower productivity than our competitors? This is where we have to try to seek common ground. It has not been because of bad intentions. Good intentions have been running out of this country's ears. We have had the differential inflation because Governments have overspent, over-taxed and aver-borrowed. The result has been inflation, and inflation crowded out industry. High Government spending has crowded out industry and taken the investment resources, raised interest rates and made investment intentions harder and harder to reach, so that we have had not as little investment as hon. Members seek to pretend but less investment that might have Peen ideal.

Mr. Geoffrey Robinson

Does the right hon. Gentleman agree that the level of capital investment in our engineering industries has been less than half per employee of that of our major competitors, such as France, Germany and Japan?

Sir Keith Joseph

The hon. Gentleman is falling into a trap. If we have roughly double the number of men in any establishment to produce the same output as the Germans or the French, then of course, per head we have calf the investment. That is the trouble. The hon. Gentleman confirms it. We are overmanned, and by that standard we are far worse off. The wage earners of this country receive less pay as a result, and their parents receive lower pensions.

Mr. Geoffrey Robinson

There is a fundamental issue that is raised here. Are we overmanned, or under-invested? What comes first in industry? The right hon. Gentleman does not know. He knows a hit about the construction industry. He was the chairman for two years of a family firm. I will tell the right hon. Gentleman that it is the investment that comes first, and the manning levels follow the investment that is put in. It is because we have not invested that we have ended up with manning levels relative to our under-investment.

Sir Keith Joseph

The hon. Gentleman has to explain why it is that in car companies, such as that at Halewood in Liverpool, and in companies in Fleet Street and others all over the country modern investment is overmanned. I have here a publication of the Engineering Employers Federation, in which there are comparisons of productivity, manning and investment. It is the likelihood that many unions — not all — will insist upon overmanning that inhibits investment decisions. It reduces profit. It reduces the capacity to keep the resources to invest. On every ground, I maintain that many unions—not all unions—are the main agency for the destruction and the abortion of jobs.

One of the reasons why our productivity has been low is that we have nationalised so much of our industry and the nationalised industries have been seen as havens of job security. [Interruption.] It is true. We have only to look at the report of the Monopolies and Mergers Commission on the London postal service to see just one example.

Mr. Donald Thompson (Sowerby)

And the railways.

Sir Keith Joseph

And the railways, as my hon. Friend says. There are many examples of where low average productivity in nationalised industries has contributed to low average productivity in the country as a whole.

The explanation for our higher inflation rate and our lower productivity rate is that successive Governments have failed to create a climate as encouraging as our neighbours have tended to create for enterprise and effort.

In particular, Socialism and trade unionism have tended to misunderstand the processes of prosperity and job generation. The late Anthony Crosland, who wrote a widely admired hook on Socialism, time and again expressed his conviction that the problems of production had been solved. I have not looked at his book in readiness for the debate, but I suspect that he did not identify the problems of satisfying the consumers across the world against intense competition from not only our former competitors but a whole range of new ones.

Anthony Crosland tended to ignore the primacy of the customer, and so do most trade union and Labour leaders. They focus on production as if production were enough by itself. The argument is never focused on satisfying the customer, nor is it focused on the relevance of competitiveness, the importance of being competitive and the necessity for profit earned in competition.

Trade union and Labour leaders alike have either not understood or not explained the importance of high productivity and competitiveness. Luddism—overmanning and restrictive labour practices — has been widespread—not universal—and has been forced on management by the strike threat. Many firms enjoy admirable labour relations and have an international standard of productivity and competitiveness, but they are not the average.

I am delighted to say that I think that much of modern industry—the newer industries—has admirable labour relations and good productivity. But all too many engineering and other firms are places where, even with the most effective— or nearly the most effective—management, the lack of comprehension of the interests of their members by trade unions makes overmanning and restrictive labour practices a habitual way of life. This is particularly true in the nationalised industries.

Dr. Jeremy Bray (Motherwell and Wishaw)

With regard to the climate that the Government can create for industry, has the right hon. Gentleman read the remarks of his own Chief Scientist to the effect that while Governments may not be very good at picking winning products, they ought to pick—and are failing to pick—winning technologies? What is the right hon. Gentleman proposing to do to support those technologies?

Sir Keith Joseph

I have, of course, read the remarks of the Chief Scientist in the Department of Industry and his argument that the country should be training what I think he calls generalist technicians. I may not have the phrase quite right, but he is arguing for people with scientific and engineering skills and general management ability. He tries to identify technologies which, through the requirement boards, and through the research and development funds that the Department still has available, we seek—in combination always with private enterprise—to support. My right hon. and learned Friend the Chancellor of the Exchequer has just announced, at this very difficult time, a modest further increase in funds precisely for the purpose of helping research and development.

This Luddism, this constant effort to obstruct efficiency, has squeezed profits, so that in the engineering industry they now scarcely exist and after allowing for inflation do not exist at all. This Luddism has seized far too much of value added and has contributed overwhelmingly to the increase in unemployment that we have experienced and are experiencing.

Our trade unions, unlike those in other countries, are far too little concerned with the size of the cake and far too much concerned with cutting it up. Our trade union movement is unique in the developed world. I claim that those who suffer are the members of trade unions and their parents, the pensioners. We understand that people intensely dislike the loss of jobs, but in most other countries it is recognised that the way to minimise loss of jobs is by being co-operative, so that the firm may be competitive.

Mr. Stan Orme

Running to the dole.

Sir Keith Joseph

I am arguing that the more that work forces co-operate in achieving competitiveness, the less they will have to run to the dole. I understand that there are easy arguments and easy anecdotes today, but over the country as a whole it is the accumulating blunting of competitiveness by Luddism over decades that has led to the surging unemployment of today. Many trade union leaders and members understand all that I am saying and agree with it, but all too often the performance on the shop floor destroys jobs, inhibits investment and penalises trade union members and the country as a whole.

Mr. Gregor MacKenzie (Rutherglen)

I have been listening to the Secretary of State delivering what many people may regard as an offensive lecture on the evils of trade unionism. Perhaps he should direct some of his comments to British management. Some hon. Members feel that competitiveness is concerned with marketing, planning, design and proper investment decisions, but we have had a long lecture on the evils of trade unions from the Secretary of State. Perhaps he should talk about the attitude and co-operation of trade unions in the microelectronics industry. That would be a far more effective way for the Department of Industry to get cooperation from trade unions and management at the same time.

Sir Keith Joseph

I shall deal with management in a moment.

I should like to say a word about trade unionism in general. I carefully said that in many firms and in some industries there is admirable co-operation and high productivity. My comments concerned many, but not all, trade unionists and trade unions. Of trade unionism in general, I would say that what may have arisen in part as a noble impulse to safeguard workers has become an obstruction to the achievement of affluence for wage earners and the whole country and a prime factor in the growth of unemployment.

The right hon. Member for Rutherglen (Mr. MacKenzie) said that management bears the key responsibility for performance. I do not deny that, but management has worked in a discouraging climate. Effort and enterprise have been discouraged, the Government have taken too much of the resources, and a huge percentage of management's time and energy has had to be devoted to coping with Luddism. That emerges from every analysis. It is made the more difficult because for decades— and increasingly in recent years—there has been an imbalance of power in favour of the unions. It has been a difficult period for management. The quality of management is as varied as human nature. It ranges in quality from the excellent to the far from excellent. If it is any comfort to Labour Members, I acknowledge that the key factor in achieving excellent industrial relations and high productivity is trust in management, which takes years to build up. Management has a huge responsibility, but it has had difficult conditions in which to exercise it.

Mr. James Hamilton (Bothwell)

rose—

Miss Joan Lestor (Eton and Slough)

Will the right hon. Gentleman give way?

Sir Keith Joseph

Considering all the difficulties, it is a miracle that we have done as well as we have in engineering and in industry in general. I give way to the hon. Member for Bothwell (Mr. Hamilton) first.

Mr. James Hamilton

Does the right hon. Gentleman concede that the lecture that he has given has been biased against the trade union movement? Does he further concede that management has a responsibility if Luddism prevails—I do not accept that it does— and does he accept that some of the machinery in our factories is very much out of date? On that basis, how does he expect workers to give a better performance?

Sir Keith Joseph

I accept that, but it is a grave indictment of the right hon. Member for Deptford, who opened the debate for the Opposition, that throughout his speech he ignored the part that Luddism in all its forms has played in blunting our competitiveness and thus causing unemployment.

Mr. John Silkin

rose—

Sir Keith Joseph

Does the right hon. Gentleman intend to quarrel with my use of the word Luddism? If so, I shall substitute the words "overmanning and restrictive labour practices". Will that be pedantic enough?

Miss Joan Lester

Will the right hon. Gentleman explain why the criticism that he makes of what he calls Luddism comes second, if not third, in the Finniston report to criticisms of management and lack of investment? Why does he not address himself to solutions rather than repeating himself in this boring fashion?

Sir Keith Joseph

I am sorry if I have bored the House, and it is true that I am repeating myself, because I do not say anything in the House that I do not say outside. I am answering a debate that blames the Government for the decline of the engineering industry, and what I am saying is relevant.

The right hon. Member for Deptford is not entitled to make easy points about financial priorities in this country. He put some of the blame for the engineering decline on the City, but at a time when Governments overspend and have to borrow vast sums of money they tend to distort all sorts of priorities in order to get that extra money. That must be taken into account.

I have now received an interesting increase of understanding about the figures given by the right hon. Member for Deptford in connection with British Leyland. He said that in the years 1968 to 1974, of £73 million net earnings, £69 million went to shareholders. The figure of £73 million net earnings was struck after about £430 million had gone to investment. The right hon. Gentleman either cannot read—

Mr. John Silkin

But I can.

Sir Keith Joseph

The right hon. Gentleman claims that in the period 1968 to 1974 only £4 million went into investment. The fact is that £430 million went into investment.

Mr. John Silkin

The Secretary of State can read, but he cannot count. I took the period 1968 to 1974. If the right hon. Gentleman looks at the figures for those years, he will find that I ant right and he is wrong.

Sir Keith Joseph

The right hon. Gentleman is simply repeating his assertion. The figures have been looked up, and I shall send him a photocopy of them. I assert that the £73 million net earnings were struck after £430 million had been devoted to investment in British Leyland during those years.

Mr. Geoffrey Robinson

rose—

Sir Keith Joseph

I disagree with the right hon. Member for Deptford on his diagnosis and prescription, so it is necessary that I should say something about what is to be done.

The Government's task is still to create the framework about which right hon. Gentlemen tease me. We have not created the right framework because the transitional costs — the recession, inflation, high borrowing and high interest rates—are damaging. But they are transitional costs, and, as they diminish—inflation has already come down and interest rates have come down a little—it will be clear that the other changes that we have made will create a more encouraging climate for industry. To achieve that, we have to spend less, borrow less and print less, so that we get inflation and interest rates right down.

The right hon. Member for Deptford spoke as though he had never been a member of the Government led by the right hon. Member for Cardiff, South-East (Mr. Callaghan). Is it necessary still to repeat in the House the eloquent, brave and vigorous warning that the then Prime Minister issued against any further attempt to spend our way out of unemployment?

Mr. John Silkin

Too long ago.

Sir Keith Joseph

Truth is not altered by a few years. The right hon. Gentleman said in 1976—

Dr. Jeremy Bray

At the Labour Party conference.

Sir Keith Joseph

Yes, and it is no less good for that. He said We used to think you could spend your way out of a recession and increase employment by cutting taxes and boosting Government spending. I tell you in all candour that that option no longer exists and that in so far as it ever did exist it only worked on each occasion since the war by injecting a bigger dose of inflation into the economy followed by a higher level of unemployment as the next step.

Mr. John Silkin

Does not the right hon. Gentleman understand that there is a great difference between what happens in one period when, for example, public expenditure is at a certain level and output is at another, and what happens some years later? If the right hon. Gentleman's prescription were meant to be something for all time, it would have applied, let us say, in 1946 or 1947. He knows perfectly well that it would have been wrong at that time.

Sir Keith Joseph

The right hon. Gentleman is wriggling.

Mr. John Silkin

I am not.

Sir Keith Joseph

The then Prime Minister spoke at that time of the lessons of the entire post-war period. I have to tell the House, regretfully, that we are spending about as much in Government expenditure as we were then.

Mr. Robert Hughes

Unemployment is higher.

Sir Keith Joseph

Unemployment is high, above all, because of attacks on competitiveness by the trade unions—[HON. MEMBERS: NO."]. It is not the only factor, but it is the key one. It is the Government's duty to have not more nationalised industries but fewer. It is not in the interests of the unemployed to have more protection. However, I believe that there is scope — it is not massive, but it is marginally useful — for more enlightened public purchasing, and that we are seeking to achieve. It will not be achieved overnight, however.

The task of being and staying competitive is firmly that of the engineering industry as for every other part of industry. Many firms in engineering are competitive in spite of all the difficulties. Many more firms are seeking these days to identify and supply premium products, products that will be acceptable to consumers the world over. All firms want, in their own interest, to be competitive.

If the Opposition want to help, perhaps they should try to play their part in changing perceptions. There is common ground between both sides that consumers matter and that competitiveness is important. It is common ground also that there is a recession and that we face formidable new competitors from all over the world. Let the Opposition, therefore, teach that part of the truth that they tend to deny, not to understand or to shield: that in every other developed country trade unions on the whole understand the link between efficiency, efficient working practices, competitiveness, good pay and secure jobs. Who would be better at teaching that truth than the self-proclaimed friends of the wage earners?

Mr. Norman Atkinson (Tottenham)

Is the right hon. Gentleman saying that the only hope is to outlaw the trade unions?

Sir Keith Joseph

It would be so helpful if Labour Members would emphasise the importance of customers, competitiveness, co-operation and profit. We shall talk too, but Ministers are often heard only when they are strident. Managements have a huge job in the private and public sectors in teaching the economic facts of life, in building up trust with their work forces and in communicating effectively those facts of economic life. Surely, therefore, what I have said is common ground. It is familiar enough.

Mr. Les Huckfield (Nuneaton)

Not at all.

Sir Keith Joseph

"Not at all" is an exaggeration. Much of what I have said is common ground and was greeted in the silence of acceptance. Some parts were not.

Mr. James Hamilton

We were bored with it.

Sir Keith Joseph

Well, I have seen audiences that were apparently a lot more bored in this House. Though we vote against each other tonight, the real interests of the country will not be served by the Opposition's diagnosis or by their prescriptions. Their diagnosis was slight, and their remedies would make things worse. The question for the House, in addition to the motion, is whether the Labour Party will be part of the cure or remain part of the problem. I hope that the House will reject the motion, and I ask my right hon. and hon. Friends to support the amendment.

Mr. Deputy Speaker (Mr. Bernard Weatherill)

Before I call the next speaker I remind the House that a great many right hon. and hon. Gentlemen are seeking to catch my eye. Short contributions to this important debate will be generally welcomed.

5.25 pm

Mr. David Watkins (Consett)

I shall, of course, comply with your request for a brief speech, Mr. Deputy Speaker. I declare two interests, both of which appear in the Register of Members' Interests. The first is that I am a sponsored Member of the engineering section of the Amalgamated Union of Engineering Workers. I am proud to have been a member of it since I was 16 years old. The second is that I am a consultant to the Gauge and Tool Makers Association.

I am prepared to accept the view of the Secretary of State and my right hon. Friend the Member for Deptford (Mr. Silkin) that there is a longstanding decline in the British engineering industry. Towards the end of his contribution, the Secretary of State said that he would tell us what the Government were going to do about it, and that was manifestly the shortest section of his speech. That indicates that they have not the faintest idea of what to do.

I was taught at school in the 1930s that Britain was the workshop of the world. I was still prepared to believe that when I started to serve my apprenticeship in the 1940s in the exceptional conditions of the Second World War. I now know that even then that was not true. That comes back to the comment by my right hon. Friend the Member for Deptford that the decline goes back over a long time, to well before the First World War, and it parallels the decline in the British capitalist system. I noticed that the Secretary of State was nodding in agreement at one stage. He suddenly stopped nodding at my last remark, but I stand by it.

Sir Keith Joseph

I was going to tell the hon. Gentleman to examine the invisibles.

Mr. Watkins

If the right hon. Gentleman wants to look at the invisibles, I remind him of the invisible nature of his Government's policies to deal with the problems that we are discussing.

Even allowing for the longstanding decline, in the 1930s and after the Second World War about three-quarters of world shipbuilding was still conducted here, but now the amount has become negligible. It is no good the right hon. Gentleman blaming nationalisation for that trend. Without nationalisation, shipbuilding here would have been wiped out long ago. Last night the House considered an EEC directive the purport of which is perhaps to reduce still further the level of shipbuilding in Britain.

The Secretary of State made an interesting and positive remark when he referred to "enlightened public purchasing". I wish to refer to the gauge and tool industry from precisely that point of view. This section of the engineering industry is certainly not so much in decline, but it is under threat. It is a vital component of the engineering industry, with a turnover in excess of £400 million a year, and the value of the products which depend upon its output is incalculable. The plain fact is that one cannot do anything in engineering, in electronics or in almost any other industry without the products of that particular industr.

Furthermore, it represents some of the highest levels of skill, not just in this country but in the world. It is essentially an industry of small firms, which are so often said to be the salvation of our national economy, yet it is now under threat because of the refusal of so many British customers to buy British products.

I cite some figures relating to imports. In the first half of 1979, our imports in this section of the industry were £23 million. In the first half of 1980, they were over £37,800,000. In a particular section, punches and dyes, the import figure increased from £3,477,000 in the first half of 1979, to £12,010,000 in the first half of 1980.

The Government talk about enlightened public purchasing. That is relevant, but, at the same time, their complacent laissez-faire attitude contrasts strongly with the examples of the policies and attitudes of other Governments. For example, the French Government, the Japanese Government and the Government of almost every country that is comparable with Britain sustain rather than inhibit their industries in these respects.

Mr. W. E. Garrett (Wallsend)

My hon. Friend and I are very close, in doe sense that we are both sponsored Members of the engineering union. We have a very close interest in the industry. What has not been understood in this country is that our industries must in some cases face a 100 per cent. import tariff, yet we in Britain refuse to put such a tariff into effect. I am not saying that we should or should not do this. We must look at the matter very closely. I hope that my hon. Friend will enlarge the argument much more strongly.

Mr. Watkins

I shall not enlarge the argument more strongly, because of the time factor. However, my hon. Friend has succinctly expressed the situation that I am describing.

The Government should exert much more pressure to ensure, for example, that Government Departments and agencies and nationalised industries are more prepared to buy British gauges and tools. The Government use their authority in he areas over which they have control to impose a wages policy. Therefore, there can be no argument but that they would be much more enlightened in their public purchasing and public policies in general if they applied pressure to help our engineering industry.

I turn to the decline of engineering as an aspect of the problems of the regions. One of the most appalling features of the regions is that engineering, which was introduced into the regions with Government aid, under successive Governments, to compensate for the decline of older industries and to provide alternative employment, is itself now folding up catastrophically. I cite some specific examples from my constituency. Messrs. Three Rivers Construction Company, a small go-ahead company with a considerable export track record, is now down—this has all happened in the last 18 months — from employing 70 workers to employing 22. Those 22 are now working short time. Thorn Lighting, a subsidiary of a large concern at Harelaw in my constituency, is down from 350 workers to 200, and they are working short time. Messrs J. H. Taylor, manufacturers of farming machinery, are down from employing 110 workers to 60, and they are working short time. Anthony Carrimore, which is now a subsidiary of York Trailers, once employed 400 workers but is now employing 70.

Those are not old or obsolete plants. They are firms that are occupying new or newish plants, every one of which I have visited. Contrary to what the Secretary of State was saying, in every one of those plants I met on equal terms management and trade unions, and E found a high level of co-operation and responsibility and a regard for the common problems of each of those companies. Furthermore, every one of those companies clearly had a strong sense of being there to replace old industries. They are all working, or they have worked at some time, with regional aid for the express purpose of replacing older and declining industries.

Foremost among those that come into that category is the Ever Ready dry battery factory at Tanfield Lea. I recall the opening of that factory by the late Anthony Crosland when he was President of the Board of Trade in the late 1960s. This is a totally automated factory. It was a very large capital investment and was the most modern dry battery manufacturing factory in the world, bar none. It was designed to work up to employing 1,500 people. Now it is employing 750—half the number projected—and they, too, are working short time.

The most ironic example of all of the rundown of industries specifically provided to replace older and declining industries is the Ransome Hoffman Pollard ball-bearing factory at Annfield Plain. This has a particularly interesting history in regard to regional policy. It was opened in 1952 as part of the old Ransom and Marles company. It was a pioneering effort in regional policy originated by my right hon. Friend the Member for Huyton (Sir H. Wilson) when he was President of the Board of Trade, the object being to compensate in the North-East for the anticipated rundown of the coalmining industry. Early in the 1970s it was amalgamated with other ball and roller bearing manufacturers in order to form RHP. One of the reasons for that amalgamation was to ensure the retention of British control over the bulk of the market. If that amalgamation had not taken place, control would have passed into either Swedish or American hands.

The Industrial Reorganisation Corporation, the forerunner of the NEB, provided much of the necessary capital to allow the amalgamation to take place. The money was certainly paid back, but that does not alter the fact that RHP was brought into being only by State intervention and public money.

Three week's ago to this day, with a total disregard for the public interest and with a total lack of consultation, the closure was announced, with 1,250 redundancies in an area that has already been devastated by the closure of the BSC works at Consett, with 3,700 redundancies, and with all the other redundancies that I have mentioned, and with many more.

The major point that I am making is that these are all examples of the decline not of old industries but of modern engineering plants that were built up to provide alternative employment and to replace older and contracting industries. I well recall that at the last general election the Conservative Party specifically denied the charge made by the Labour Party that Conservative policies would turn the North-East into an industrial wasteland. In practice, that is exactly what it is turning into. Since so much of this has happened over the last 12 months especially, there can be no doubt that Conservative policies are a major factor in making it go that way.

It was announced only this morning that Stelmo, an engineering firm based in Ashford in Kent, is opening at Consett and hopes to provide 80 jobs. Relatively, that is a drop in the great ocean of unemployment with which we are faced, but, nevertheless, it is infinitely welcome. Mr. Ken Jessop, the chairman of Stelmo, said: We were most impressed to find that instead of an encounter with disillusioned men whose moral fibre had snapped, we found a work force full of vitality, eager to help and to learn. That is a deserved tribute. It contrasts very much with the diatribe against trade unionists and workers by the Secretary of State. It comes from a man with practical experience in the engineering industry. I only wish that this Government could find it in their hearts to be as sympathetic.

5.40 pm

Sir David Price (Eastleigh)

This debate is inevitably a replay, in part, of the two debates last week on unemployment and economic policy. I should like to say a few words about economic policy. As hon. Members have pointed out, it directly affects the fortunes of engineering. I should also like to put one or two thoughts to the House on the engineering question.

I should like to make clear where I stand personally in the debates about economic policy. I confess that I am totally agnostic on some of the more detailed theories of economic policy and the rival ideologies. I remain highly sceptical of the practicability of over-certain economic theory whether from the Right or Left of the economic spectrum. My reason is simple. What we call the economy is far more complex than can be defined in a simple equation. Those econometric models by certain academic gentlemen and ladies may be interesting intellectually, but they do not assist the actual management of the economy.

The variable factors are far too numerous and elusive to be precisely identified, let alone to be measured accurately and on time. One cannot run the economy by reference to any particular set of statistics. If that was possible, one could run the economy with a young graduate statistician. That would certainly cut Government overheads. That is not to say that the various and, heaven knows, numerous monetary and economic statistics available to the Government do not have relevance. Of course, they have relevance, but they do not tell the whole story. Therefore, they must not be allowed to control all the action.

I believe that I carry the hon. Member for Tottenham (Mr. Atkinson) with me when I say that I take my stand on what was stated by the late Arthur Balfour, a distinguished Member of the House, who, when asked what his principles were, replied: My principles are the principles of common sense: to do what seems to be right in any given set of circumstances. That is my approach to these problems. The other principle that I stand by is the rules of simple arithmetic. They cannot be denied. Thus, there is no economic policy that can distribute resources that do not exist. The real question that arises is how to create further resources.

Two facts seem crucial to our economic discussion. They are too frequently underestimated but are central to the fortunes of the engineering industry. First, we in this country do not live in a closed economy. We are part of an open economy. The openness of our economy has been reinforced, whether we like it or not, by floating exchange rates and by the abolition of exchange control. I say to the right hon. Member for Deptford (Mr. Silkin), who is not in his place at the moment, that my alternative to the argument in which he is engaged with my right hon. Friend on exchange rates is that I wish that we had been a founder member of the European monetary system. There would not have been nearly so much swing in the value of the pound. This is not, however, the occasion to argue that issue. I make the point in case the right hon. Gentleman accuses me of not being responsible.

The openness of the economy leads to certain consequences. The world market is the pace-setter for our successes and our failures. We do not do our own thing in isolation unless we reconstruct what in shorthand I would call a siege economy. I know that certain Opposition Members want a siege economy. It produces a viable model, but with it a great number of penalties, especially on the standard of living. I hope, however, that we shall not enter upon too ideological a debate.

There are two factors about the world scene to which I should like to draw the attention of the House. The first is that the scene is dominated by the increasing price of oil which started in 1973–74. In the case of Saudi Arabia, the more moderate, responsible and sensible of the major oil producers, the increase since 1973 amounts to over 800 per cent. In the last year, taking the August-to-August figures, the increase has been 67 per cent.

The effect throughout the free world has been vast. Our generation has gone through a hydrocarbon revolution every bit as important as the steam revolution of 100 to 150 years ago and also, I suggest, every bit as important as the so-called chip revolution that we are supposed to be entering.

The fat cats in the world today are the leading OPEC countries. Unfortunately, most of them are big earners but very low spenders. If there is a case for a Keynesian reflation of the free world economy, it must come from the OPEC countries. They are the people to do it. Here I agree with recent observations by my right hon. Friend the Member for Sidcup (Mr. Heath) in relation to the Brandt report.

I wish that we could have a sort of King Khalid plan rather like the Marshall plan 30 years ago which could release a whole recycling effect from these heavy oil revenues, estimated by The Economist in August to be of the order of $100 billion this year. The effect of such a sum at the centre of a new economic vortex could be vast. No one would benefit more if the opportunities were seized than British heavy engineering.

The other factor is that the Western world is in recession. That cannot be denied. Unfortunately, we are suffering rather more than our competitors. Speaking as an engineer—engineers like giving figures—I should like to quote from the OECD August-to-August figures for 1979—80. The figures are annual rates. In Canada, industrial production is down 3.6 per cent. In France, it is also down 3.6 per cent. Italy is static. In Japan, industrial production is up 5.9 per cent. In the United Kingdom, it is down 9.3 per cent., in the United States it is down 4.4 per cent. and in West Germany it is down 4.8 per cent. That is the background to the present problems of our engineering industry.

The hon. Member for Consett (Mr. Watkins) fairly pointed out that the decline has been in progress throughout the lifetime of most hon. Members. What we see, however, is that when the world environment moves into stagnation, if not actual recession—

Mr. Martin Flannery (Sheffield, Hillsborough)

Will the hon. Gentleman give way?

Sir David Price

I hope that the hon. Gentleman will forgive me. The hon. Member for Consett and I are dealing with the same point, and I do not wish to detain the House for too long. When the world trading environment goes into recession, our engineering deficiencies become magnified. Lack of competitiveness, in one form or another, becomes increasingly evident. So long as one exists in an environment of world expansion, one can muck along. We were doing that, but we were not doing as well as our major competitors. This is seen in the motor car industry. It shows particularly clearly at the moment.

Over the past 15 years from 1964 to 1979, in the whole of Europe, the EEC and non-EEC countries, but excluding the United Kingdom, the output of motor cars increased from 5.74 million to 12.6 million. In the United Kingdom, it declined from 1.87 million to 1.07 million. Those are chastening figures. We would require a long debate to analyse why it has happened.

I take seriously the injunction of Mr. Deputy Speaker not to detain the House for long. I should like, however, to point to three basic factors. There are many more that one could put is to why our engineering industry has for so long been in decline. The first is that we in this country have been suffering from a cultural antipathy to manufacturing industry and particularly to heavy engineering. The image of the dark Satanic mills has persisted for far too long. There has been an unholy implicit alliance between the aristocratic Right and the intellectual Left that making things is not for us and only for them. I am one of "them".

That view was expressed remarkably well by Monty Finniston and his colleagues. Their report states: It is internationally acknowledged that Britain is a country rich in inventiveness and creative talent. Yet, with some eminent exceptions, there inventive talents have not been harnessed effectively by manufacturing industry because, compared with Continental Europe and the large part of the world which has followed its lead, there have been neither the cultural nor the pecuniary rewards in this country to attract sufficient of the brightest national talents into engineering in industry. Great prestige attached to science, medicine and the creative arts, so that to be associated with their activities is to share in that esteem, but there is no cultural equivalent in Britain, and hence no basis for according similar esteem, to the European concepts conveyed in German by 'Technik'. I agree with that totally. I am lucky to have ended my formal education in an American university, after a British one. In America there was no problem of two cultures: there was only one, and it was across the board. I am happy to tell the House that as one who has read both the arts and engineering. I do not say this to swank. I benefited enormously by it, and I wish more people would do it. I believe that we suffer from the cultural lag in the attitude of our schools and universities towards manufacturing industries.

Having started life in ICI as a work study engineer on the shop foot with a stop watch—and no one can start rougher than that—I believe that the second factor is the antipathy amongst modern Britons to working in large mass-production assembly factories. It is possible to get people there only by paying very high wages compared with other jobs. When that high pay falls back for one reason or another, naturally the compensating advantage of the high pay is lost and people become dissatisfied.

My own view is that in this, as in so many other areas, small is beautiful. I believe that in human terms the very large factory is unmanageable. It is possible to manage vast investment, as we do in heavy chemicals, but the industry is labour-light and, therefore, it is possible to cope.

But tremendous human problems arise when enormous numbers of people are working in great assembly plants. We use such phrases as "job satisfaction" and so on, but in such circumstances they become a sick joke.

I do not wish in any way to make a party point or to attack anyone. Let us look at the new Escort plant at Halewood, which is having so many labour difficulties. I do not believe that it is because the workers there possess an excessive amount of original sin. The difficulty lies in the nature of mass production.

The modern Briton, unlike the Japanese or the German, does not like working in that sort of environment. The person who can be the most unto-operative shop steward—and I could use a stronger word to describe him but for your presence, Mr. Deputy Speaker—in a smaller environment will be an important member of the team and even indeed, the leader of the team. I could produce personal evidence in support of this proposition.

Therefore, we have to think this through again, and I should like to know whether Sir Terence Beckett, who has a lot to tell us politicians, could explain as the former boss of Ford what he thinks about this. This is a major factor, because the motor car industry is the centre of two great vortexes of orders going in through subcontractors and sub-subcontractors in engineering. It is, therefore, of key importance.

I come to what I see as the third factor, and here I declare a personal interest. It is the anomalous position of middle management, starting from the foreman upwards. I have been a middle manager and I am vice-president of the Institution of Industrial Managers. There is a strong feeling among my friends in industrial management that they have been caught in the middle of a squeeze between the CBI and the TUC, with neither of whom do they identify themselves entirely. They feel that they are disregarded as the third man in industrial bargaining. On behalf of my friends in industrial management, I ask both the Government and the Opposition to call in the third man from the cold and to start consulting him, because he feels left out completely.

There is much that we can discuss and analyse constructively in considering the failings that we find in our engineering industry. They are failings which are exposed when we are in this unhappy economic position of world recession. The hon. Member for Consett knows a great deal about these matters, and I am sure that he shares with me a sense of dejà-vu, bearing in mind the number of times that we have both made speeches of this kind in the past 25 or 30 years. But we have to press on, and the most important factor is to bridge this cultural gap.

I conclude with a quotation from Dr. Samuel Johnson: Words are the daughters of earth, and things are the sons of heaven. Let us bring back some of the sons of heaven. Come back, Telford! Come back, Brunel! Come back, Watt! We need you.

5.55 pm

Mr. A. E. P. Duffy (Sheffield, Attercliffe)

The hon. Member for Eastleigh (Sir D. Price) thought there was a danger that this debate might be a re-run of earlier debates on Government financial and industrial policies. It need not be if right hon. and hon. Members prefer to look at the impact of those policies on the sections of engineering with which they are acquainted, and that is precisely the task that I have set myself.

The Secretary of State for Industry, in appealing to the House to reject the Opposition motion, seemed to be turning his back on the experience which he must surely have of the region which he represents in the House. Anyone who doubts the severity of the impact of Government policies on British industry or the gamble being taken by the Government in allowing those policies to run their course could not do better than look at the cradle of British industrial society, the Yorkshire and Humberside region, in which the right hon. Gentleman's constituency is located.

A spate of redundancies has left business men and trade unionists gasping for breath. Unemployment figures are out of date before they are published. Doubts are being entertained quite seriously in this old industrial heartland whether the industrial base can survive. Yet, historically, the region is an area that has nurtured basic industries. It is where it all began. That has resulted, of course, in many areas becoming dependent on one specific industry and the component work. Textiles, coal and the port of Humberside spring readily to mind. But there has also developed a substantial engineering industry in West and South Yorkshire, the latter being mainly a spin-off from the steel production area of Sheffield.

Of all the industries in Yorkshire, none has become more sophisticated than engineering nor has given rise to a more stable level of employment. Now, technological changes are taking place in Sheffield which are resulting in the loss of jobs. Secondly, the concentration of Special Steels has brought about a reduction in the number of units operating in both Sheffield and Rotherham.

The steel industry in South Yorkshire produces steel for the engineering and aerospace industries in general. Cutbacks in these industries, therefore, have a knock-on effect. In addition to the motor industry being affected by imports of finished products, especially from Japan, steel in South Yorkshire has also been hit by the dumping in this country of many qualities of special alloy and stainless steels. Such unfair competition, coupled with high interest rates and the high level of the pound, has caused companies to pull out of certain export markets and also to cut back on stock levels and, ultimately, jobs.

As a result of these facts, coupled with the cutbacks in Government spending, the demand for steel in the United Kingdom is much reduced. The result is that, in South Yorkshire alone, BSC reduced its work force between 1968 and 1978 by about 6,000 jobs. Since 1978, the situation is well known. A 10 per cent. reduction in the work force in January 1978 was effected with the loss of some 1,500 jobs, and the latest cutbacks are taking effect but cannot be fully itemised, though we feel that about 2,000 jobs will be lost.

In the private sector, the job reductions are just as serious, with many companies shedding jobs. The effect of short-time working in disguising redundancy is apparent, and many companies are barely surviving and are making plans only on a week-to-week basis.

Let me illustrate what I say by citing the experience of just one firm in my constituency, that of Johnson and Firth Brown. I start by giving the City's view, that Johnson and Firth Brown is a prime victim of the squeeze on manufacturing industry. Three-fifths of its capital is tied up in the beleaguered special steels sector. The strength of sterling has shattered the profitability of some of its more important businesses. Its finance costs are soaring, since it has a high level of borrowing, mostly on a floating rate basis

The result is that its shares currently sell at little more than one-third of their net asset value. The stock market values this steel, wire and engineering group—I know of none more impressive in British engineering—at less than it has spent on fixed assets in the last three years alone.

According to Mr. Philip Ling, the group's general manager, "We shall only know in retrospect whether we approve of Government policies. It's like having an operation without an anaesthetic. If it saves your life you will be grateful later, but while it is going on you scream like hell."

Johnson and Firth Brown has plenty to scream about at the moment. Domestic demand for a wide range of its products has fallen by a quarter and more since the spring. The bulk of its work force is on a four-day week. In some parts of its business it is fighting a desperate struggle to protect itself against imports, which have been sucked in by the strength of sterling.

Export profits have also been severely hit. According to Mr. Ling, its products are technologically advanced, its plant is first-class and its costs compare well with any of its international competitors. It has taken generations to establish a pre-eminent position in important overseas markets such as Canada. It will be understood why my mind kept running in the direction of this firm while I was listening to the Secretary of State this afternoon. Hardly anywhere in the right hon. Gentleman's speech could I find any correspondence between the view that he took of industry in general and this prime firm in the private sector.

If Johnson and Firth Brown pulls back now in meeting demand from its overseas customers—say, for rolls, in which the company specialises — it fears that it will never recapture those customers. So it is persisting with its export efforts, even though, in terms of profits the results at present are negligible. Johnson and Firth Brown has not yet suffered permanent damage from the recession, and it may — I am just prepared to concede this — emerge as a leaner and more efficient business. But none of us can be sure.

This brings me to the first of the points I wish to make. I have not been describing a weak company, the kind of company that presumably some hon. Members think would have gone to the wall with or without the present policies. I have been describing a firm which, in the words of the CBI, figures among the best run and the most efficient firms in our country but which is now increasingly running into profound difficulties. Secondly, it is clear that industry has started to question the Government's competence, even where it still shares the stated aims of the Government.

Thirdly, there is a special feeling of nakedness in regions such as Yorkshire and Humberside, the old industry heartland, and especially in such regions as South Yorkshire, because the Government are dismantling the regional development policies.

Fourthly, there is widespread concern about what industry calls the "energy paradox"—the fact that this country enjoys a larger and more secure supply of precious fuels such as coal, oil and gas than any other European competitor yet the price of those fuels to our industry is often far higher than it is abroad. The demand for a fair energy policy will get louder.

The same goes for local rates, because industry and commerce feel that they are being obliged to carry an increasing share of local taxation. Last year it rose to almost 40 per cent. of the total valuation roll. On other fronts there is a growing demand for action, for example, to limit imports as my right hon. Friend the Member for Deptford (Mr. Silkin) said in opening, and to encourage greater industrial training. No doubt my hon. Friend the Member for Nuneaton (Mr. Huckfield), in winding up, will say something on that subject, because I know what great store he sets by industrial training.

Finally, industry is worried that, without a policy for reinvesting the massive oil revenues, the North Sea could turn out to be a liability. If the North Sea is causing unwelcome problems, it is being increasingly argued, the funds from it should be used to make things a little easier in other ways.

6.6 pm

Mr. Chris Patten (Bath)

I shall take up the final remarks of the hon. Member for Sheffield, Attercliffe (Mr. Duffy) a little later. First, there is one matter on which he and I—and, I think, the whole House—can agree. It is that engineering is the core of manufacturing industry in his country, responsible for about one-fifth of our total exports. Therefore, this is an important debate. But it is also a little curious, first, because, as the Finniston report made clear, it is extremely difficult to make a hard and fast distinction between engineering and the rest of manufacturing industry, and, secondly, because of the terms of the Opposition motion.

The assumption which seems to lie behind the motion, and which lay behind much of the speech of the right hon. Member for Deptford (Mr. Silkin), is that the serious problems of British engineering began in May 1979. The hon. Member for Nuneaton (Mr. Huckfield), in opening the debate on i he Finniston report last summer, made a very interesting speech, in which he quoted the first two paragraphs of the Finniston report, which are themselves quotations, one from the TUC and the other from the Bank of England. The TUC and the Bank pointed out how our decline in manufacturing industry had been going on for at least two decades. The Finniston report contains barrel loads of statistics showing the decline in sales, in manufacturing output, in employment and in profits. The report says: The decline of British manufacturing competitiveness relative to her major competitors has progressed insidiously over many years".

Coming up to date we see that a recent excellent publication—it makes good, interesting reading—by the short-term trends working party of the Engineering Employers' Federation paints a grim picture of the British engineering industry today. It sets out particularly gloomy prospects, except in one or two areas, such as pumps, valves and mining machinery. But it also shows that the problems that engineering is facing today have been at times as bad or worse in the past.

I should like to draw attention to one set of statistics, showing that the fall in sales and new orders in 1974 and 1975 was actually steeper than that for 1980 and the forecast for 1981. Not even the right hon. Member for Deptford could claim that my right hon. Friend the Secretary of State for Industry was responsible for that. Indeed, I go further. Even my right hon. Friend would not say that he was responsible for that situation in 1974–75.

In saying that, I do not pretend that the engineering industry does not face particularly serious problems. I make the point because I think it absurd to discuss this issue with the sort of back partisan political terms which the right hon. Member for Deptford used in much of his speech. It is ludicrous to pretend that the problems of the engineering industry are entirely the result of the recession that has taken place under this Government and that everything was hunky-dory under the last Government.

The main criticism with some intellectual respectability that has been made of present policies is that perhaps the Government should have done more to slow down the appreciation of sterling. The right hon. Gentleman spoke of that several times, but every time he was asked to say how he would do it and how he would enable firms to increase their competitiveness, which they are losing because they cannot increase their productivity to take account of the increase in the level of sterling, he became unusually coy. At one moment I thought that he was going to retreat behind the Official Secrets Act.

I do not want to appear too sycophantic, but when I look at all the ideas that are put forward for trying to bring down the rate of sterling I find it difficult to be convinced by many of them. One or two of the predecessors of my right hon. and learned Friend the Chancellor of the Exchequer did not have the same problem as he has. They found it as easy as falling off a log to bring down the level of sterling. Some of them made a career out of it. One of the least fair of the very unfair criticisms that are made of my right hon. and learned Friend is the criticism about the sterling exchange rate.

The only suggestion made by the right hon. Member for Deptford was that we should bring down interest rates, by, I think, 6 per cent. Only recently the Shadow Chancellor argued that we should have a public sector borrowing requirement of £18 billion. I am not the biggest hawk on the subject of the public sector borrowing requirement. I could bear a slightly higher PSBR with equanimity, but even I would concede that a PSBR of £18 billion and a 6 per cent. cut in the minimum lending rate would not add up. We could not manage that without a considerable increase in the money supply. There would be not a small reduction in the exchange rate but a run on sterling. There would be all those scenes of 1976 again, scenes which produced the statement quoted by my right hon. Friend at the beginning of the debate.

Sir Hugh Weeks, who is not the greatest fan of this Government's economic policies, argued recently in his admirable Economic Comments, published every month by a firm of bankers—I think, Leopold Joseph and Sons—that Until inflation falls to a consistently low level, it is difficult to see any action being taken which would have the beneficial effect on industry of a weaker pound and a lower rate of interest. I wholly agree.

Finniston made clear that price was not the main reason for the decline in sales of British manufactures over the past few years. Even the National Institute, that rather Keynesian body, in its study of the engineering industry in Britain, Germany and the United States, pointed out that the main reason for the increased share of world trade in manufactured goods and engineering gained by Germany was its greater technological strength than ours, despite the level of its exchange rate and despite the level of its wages.

I should like next to consider whether the decline in British manufacturing in general and engineering in particular matters and then to consider what we can do about the underlying reasons. I ask whether the decline matters, because some people say that it does not. Two eminent economists, Forsyth and Kay, have been writing articles recently saying that we can make the best use of our North Sea oil revenues by running down our manufacturing base. I was pleased that the Governor of the Bank of England shot that argument down in flames in his Ashridge lecture. I very much hope that what he said will be endorsed at the end of the debate as representing the views of not only the Bank of England but the present Government. It was an important speech.

Others have argued that to be worried about the rundown in British manufacturing is to be guilty of spurious moralising. I think that that is what Mr. Sam Brittan has called it. A great deal of damage would be done by the argument that the industrial communities of Britain should go over to operating Kentucky Fried Chicken franchises, or whatever the economic journalists have in store for them. Apart from the fact that I think that it is reasonable to moralise about that, the problems of living in a rentier society have been recorded in countless works of European literature. One does not have to be a student of Proust to believe, as I do, that a society which used its revenues from the North Sea to pay unemployment benefit could not be valued as highly as one that used them to promote gainful employment, so that people could add their own labour to the exploitation and investment of the nation's resources.

Lastly, I want to consider what we can do about the underlying reasons for our decline: the low productivity, which has been mentioned on a number of occasions, and our tendency, which has been mentioned on numerous occasions since the Mitchell report in 1960, to import dear and to export cheap—in other words, our technological decline.

It is possible to recover a position which in some senses has been slipping since the First World War. After all, the French engineering industry—admittedly, smaller than ours—has been turned round over the past few years. But one thing that we must remember when we consider how we can do it is the point that the Brookings Institute report eventually came to after endless algebraic formulae—that there are no new, simple answers; there are only the same old, complicated questions.

That point is also made in the report by the Sussex European Research Centre on the machine tool industry in Europe. It said that there was no secret weapon of success but called for an X efficiency, as though it was talking about something with which one cleans one's teeth. It did not say what it was.

Some people have gone further. The pilot study done by the Engineering Employers' Federation on the productivity and performance of the machine tool industry, published in 1979, says, after showing how bad firms could become better and — not surprisingly — arguing that good firms perform better than bad firms: in the last resort there is little that bodies such as the government can do to determine the level of productivity in British industry.

That is perhaps excessive, but there is some truth in it. The Brookings report was really making that point when it said that at least this Government could ensure that we did not suffer from inflation as well as from relative industrial impoverishment. Brookings went on to make a desperately gloomy observation: Because the productivity problem originates deep within the social system, one needs an optimistic disposition to suppose that a democratic political system can eliminate that problem.

That is conceivably taking gloom to suicidal extremes, but I agree that there is no chance of dealing with that problem unless we can create a climate that is more favourable to the enterprise system.

Other countries, such as Sweden, Germany and the United States, have been fortunate that their political process has not confused the pursuit of political objectives, such as social justice, equality of opportunity and even equality of results, with the ownership and management of industry. They have found other ways of spreading political and economic power and they have managed to do that, in most cases, more successfully than we have.

There is not much chance of the Labour Party changing its attitude to such matters under its new ownership. However, members of the Conservative Party have a responsibility to start thinking about ways in which we can involve individuals far more in the ownership and management of industry as we pull out of the recession. We shall do that at least to some extent this year because the business cycle has not given up the ghost after several centuries. We are better advised to spend more time considering such questions and less on picking over monetary statistics, as if they were tea leaves in the bottom of the cup, trying to find out what the future holds in store.

6.20 pm

Mr. Joseph Dean (Leeds, West)

I welcome the opportunity to speak in the debate since I am a timeserving engineer and secretary of the Amalgamated Union of Engineering Workers group of Members who initiated the campaign for such a debate. The serious position in the engineering industry has developed not only in the past two years but over a considerable time. I agree with the hon. Member for Bath (Mr. Patten) about the important part that the engineering industry plays in Britain's economic strength. Historically, the industry has made the greatest contribution to our wealth and to our strength as a nation.

The statistics show the deterioration that has taken place and the important part that the industry plays in our economy. The 1980 figures show that of the 8.5 million people employed in the manufacturing process in the United Kingdom, 3 million are involved in the engineering industry manufacturing process. Between 35 per cent. and 40 per cent. of people employed in manufacturing industries are involved in the engineering industry. The statistics show that in the last decade the industry has lost over 600,000 jobs. That is a tremendous number by any standard.

Periodically, emotive debates take place in this Chamber and in the media about the loss of jobs in the mining and steel industries. However, the job losses in those two industries are not as great as the number of jobs lost in this important industry. That has gone unnoticed because it is not an emotive industry. It is a broad-based industry and involves a mass of people manufacturing components and metal goods.

I was saddened and disappointed by the repetitive remarks by the Secretary of State. I think that he is sincere and believes what he says. However, he is wrong to assume that the way back to prosperity lies in the surrender of the trade union movement. He said that the behaviour of the trade unionists was a major component in the decline of the industry. He said that it was a major factor.

Sir Keith Joseph

Will the hon. Gentleman give way?

Mr. Dean

No, I will not give way. The Secretary of State did not give way to me, so touchè.

The right hon. Gentleman said that high Wages were another factor. I left school when I was 14 years of age in the mid-1930s. My commencing wage in the engineering industry was 10s. a week. That was massive. I worked in the industry until I came here in 1974. Nobody ever Idled me with high wages, and I was a highly skilled engineer. Some of the most highly skilled men in machine tool making are among the lowest paid because of their lack of bargaining power. Some semi-skilled workers, because they are involved in quick processing and produce goods which are ordered before they are made, have a much higher bargaining power and they capitalise on it.

Let us not kid ourselves that the 3 million-plus engineering force is well paid. It never has been well paid. The most substantial rise that was ever received was a result of the first phase of the social contract. I never knew a national settlement in the engineering industry which came anywhere near 10 per cent. Engineering employers are intransigent. They are hard to deal with. If the Secretary of State builds his hopes and makes his calculations on engineering workers being overpaid and irresponsible, he is wrong.

The Secretary of State referred to the engineers' strike last year. Does he realise its dimension? One would have thought that it was a major stoppage in line with the steel strike. In fact, it did not total seven days, and that was spread over several weeks. Can the Secretary of State recall when the industry last called a major strike? It must be over 20 years since it did that. Where is his strike-ridden industry?

The Secretary of State talked about competition. Figures published last week show that eight of our major competitors have a far worse industrial record than we have. What is the Secretary of State talking about? Who is he comparing us with?

I wanted to intervene in the Secretary of State's speech when he was discussing this, but he refused to give way. He appears to be doing as the Prime Minister did at Question Time. He is doming a Japanese kimono. He talks about the low percentage of unemployed in Japan. He should tell the full story, if he knows it. Many employees in Japan are protected by law so that in no circumstances can they be made redundant. I was in Japan two years ago and I was told that if employers had the same facility as British employers to discharge labour the level of unemployment in Japan three years ago would have been the same as that in Britain.

We should compare like with like. We hope for future lift-off, but that will have to come from our young people. The seed corn of any industry is its intake of young people, be they artisans or university graduates. In 1970 the engineering industry had 144,000 apprentices. The number has dropped to almost half. We are in a dangerous position with so few youngsters coming into the trade. In the 1930s the engineering industry was beginning to pick up, because it was thought that we would have to fight a war. Although low paid, we were able to get jobs and learn skills. It is sad that the youngster leaving school today does not have the opportunities that were there in the 1930s. It is said that we have made progress since then. We have not progressed very far.

The skillcentres and job opportunity schemes started by the previous Government do a good job and train people to a high standard of skill. I have worked at only two factories. Only two companies are left producing steam turbine engines, and the one that I worked for is probably the larger. I made steam locomotives, so I did not lead a nomadic life. That factory had a large school to train youngsters in high technical skills. However, no matter how well people are trained outside the factory, they cannot compete with factory-trained apprentices, who learn the job through the men they work with. We need educational facilities to train engineers, combined with factory training. We shall then produce highly qualified technical engineers who know their job. The emphasis should be on training on the shop floor in order to produce the necessary manual or machine skills, although that is a rapidly diminishing possibility.

The misery of the reduction in the engineering industry is that highly populated areas, which once were tranquil and had few social pressures, are becoming industrial deserts. Manchester is one of the largest engineering centres in the world. In large areas of that city there is now nothing left. Sheffield is the same. I am sad to say that that is also happening in Leeds, the city that the Secretary of State represents. The workers in Leeds are among the lowest paid of any major city in the country. It has no history of militant trade union action but is losing jobs. Is that the fault of factory workers?

J. I. Case is moving out of Leeds to Cornwall. Doubtless the hon. Member for Truro (Mr. Penhaligon) welcomes that. The company states that the grants in Cornwall are attractive and enable it to move there. The Secretary of State took away the intermediate aid from Leeds. Was he sent to this House to represent the people of Leeds? He is smashing their industry.

Mr. David Penhaligon (Truro)

Will the hon. Gentleman give way?

Mr. Dean

No.

Mr. Speaker

The hon. Member for Truro (Mr. Penhaligon) should be patient. He may have a chance to speak later.

Mr. Dean

In Leeds over the past four to five years, between 4,000 and 5,000 jobs have been lost. The deterioration in the number of jobs is accelerating.

The Finniston report is a wonderful report, which points the way to a planned engineering industry that can cope with the future, expand and deal with increasing technology. However, that is in the distance. What about now? Youngsters leaving school who want to become engineers cannot wait 10 years. By then they will have become frustrated and will be part of the permanent army of unemployed. The Government can help. The Chancellor of the Exchequer last week took one step in the right direction by making a 2 per cent. reduction in MLR. He should listen to the CBI and other responsible organisations and reduce it still further.

We should also consider import controls. We must try to keep a basis for our youngsters to be educated in our factories to cope with the future instead of being forced on to the dole. The Government cannot stand aside and pretend to play it perfectly clean. I have visited Japan and other countries. They do not apply the standards that we do over import controls.

I shall throw a dangerous stone into the pool. "Today in Parliament" this morning had a broadcast from the other place, where Lord Peart made some mundane remarks. In the past two years I have visited Army depots and had discussions with Service men. I am not a pacifist. Although I am not in favour of a nuclear deterrent, I believe that we need substantial defence forces to stop people trying to have a go at us. Army people say that if they do not have logistics behind them they cannot stop the invader in front of them. In the 1930s people suspected that there would be war, and the pump was primed. Even then, those who had to bear the brunt of stopping Hitler initially had inadequate resources and weapons because of the damage done to the engineering industry by the slump in the 1920s and 1930s. I hope that it will never happen, but if the pump had to be suddenly primed now we have no basis to do it. The Government talk about defence, but the state of our engineering industry at present puts us almost back into a Home Guard situation.

I hope that the House will have serious regard to the motion tabled by the Opposition. It is not good enough for the Secretary of State to sit back and blame the larger part of the problem on high wages, bad trade union behaviour and restrictive practices. The problem has come about over a long period, and I do not blame only the Government for it. But the sad fact is that during the past 18 months the problem has accelerated to an alarming rate. The Government should take immediate action to stop the bleeding.

6.40 pm

Mr. Bob Dunn (Dartford)

I apologise to the House for the fact that I shall not be able to stay for the remainder of the debate. I shall, however, return for the Front Bench replies. My hon. Friend the Member for Eastleigh (Sir D. Price) quoted Arthur Balfour. I would rather quote the words of Benjamin Disraeli, who said: Damn your principles! Stick to your party.

The hon. Member for Nuneaton (Mr. Huckfield) will, no doubt, reaffirm the view expressed by his right hon. Friend the Member for Deptford (Mr. Silkin) that public funds should be invested in research and development and that those funds should be raised by increases in indirect and direct taxation. It is important that the House and the country know precisely how a future Labour Government intend to fund their investment programme.

I must declare a constituency interest in the problems facing the engineering industry. My constituency of Dartford has for decades seen the growth and development of engineering workshops, small, medium and large. As an industrial sector, it has given much employment in North-West Kent. It has contributed enormously to the prosperity of that area.

Two considerations must be taken into account in the debate. First, the engineering sector of manufacturing industry has had to bear the oft-quoted conditions of world and domestic recession. That cannot be denied. Secondly, as the evidence and statistics indicate, engineering has suffered a persistent and recognisable decline over a period of three decades. As the second consideration affects the enormous structural change that British industry has undergone, it is perhaps the most significant, and it is to that end that I wish to direct my remarks.

In 1970, about 3.7 million men and women were employed in engineering and related industries. By 1974, that figure had fallen to 3.2 million and by 1978 it had declined further to 3.1 million. The projected figure for 1980, excluding marine engineering, shows a further decline to 2.9 million. Clearly, the trend that I have outlined gives anxiety to Members of Parliament such as myself because the concentration of engineering employment and the consequent spin-off of industrial activity mean that, inevitably, the welfare of smaller feeder firms that supply the larger concerns with goods and services is tied up with the success and failure of engineering enterprise.

It is disturbing for a town like Dartford, with strong family traditions of service in local engineering workshops, to witness the decline of opportunities for youngsters to take jobs in engineering that are both varied and well paid. That position is not new, nor is it likely to improve unless certain ground rules exist for improvement. The industry must acquire the ability to adapt to changing needs. Far too many engineering workshops operate under a narrow discipline and have historically relied on a limited specification for their product range. That range has been made less attractive, or even redundant, by technological and competitive changes.

Clearly, engineering plant management must recognise and select the markets in which it operates and identify the onset of decline at the earliest opportunity. Changes in product range or a redefinition of market can be helped by the application of research and development facilities funded either through private activity or by means of academic research.

In the debate we have heard many figures quoted relating to expenditure undertaken for research and development activities. It is with no joy that I tell the House that Britain is consistently fifth—trailing behind France, Germany, the United States and Canada. Much more needs to be done, but not in the way outlined by the right hon. Member for Deptford. He wants to raise taxes, both direct and indirect, to pay for research. The development of better links between schools and industry must take place. An article in the Financial Times on 10 January stated: It has long been recognised that one of the reasons for the UK's relatively poor economic performance is that too few of the country's ablest people have been attracted to careers in manufacturing industry. The activities of designing, making and selling useful artifacts are not accorded the same status and respect as they are in West Germany and other parts of Continental Europe.

In another article on 18 April, the Financial Times stated There is a widespread view among leaders of British industry that shortages of first-class professional engineers may be hampering the nation's chances of economic recovery. Warnings about engineering recruitment difficulties come most frequently from companies in the high-technology industrial sectors.

I am sure that every hon. Member would agree with that view.

It is true that union restrictive practices have delayed progress in engineering workshops. I know from my experience of plants where machinery has been installed and labour maintained to watch over it, precisely because of the attitude of trade unions. The company faces a bill for the machinery and a bill for employing labour to stand around watching the machine work. Some of our local engineering workshops are affected when they compete abroad because of the lack of information given by Government Departments to engineering workshops that might wish to bid for contracts abroad. The West Germans and the French are better at telling their local firms when they give grants for overseas aid. They tell them the amount of the grant, the purpose for which it is given and its extent. Unfortunately, there appears to be a delaying factor in Britain. Firms often find out from the press or by reading the journals of their industry about the details of overseas grants given by the Government to overseas Governments. We may want the Government to attach the same strings to the application of grants to overseas Governments as those applied by the French and German Governments.

During the past 18 months I have visited most of the engineering workshops in my constituency, which has a heavy engineering base A message came over not for import controls nor for any fancy deals behind the scenes nut simply for industry to be given the chance to exploit entrepreneurial opportunities. The Government must get on with the task of reducing the size of the public sector.

6.48 pm

Mr. David Penhaligon (Truro)

I almost feel ashamed to speak in the debate when I compare myself with the two Front Bench spokesmen. I appear to have a substantial disadvantage in that I have spent most of my working life in a factory. The two Front Bench spokesmen gave the impression that they had never walked through a factory door in their lives. I left school at 16 and became a fitter And turner apprentice for a company in my county. I left that firm at the age of 30 when I found something else, to do, after running the research and development department and becoming a member of the Institution of Mechanical Engineers. I claim some experience of engineering. I intend to make a number of comments about engineering in the broadest sense as I see it.

On the whole, British engineering has arrived at the wrong end of the market. The products of British engineering are under-researched. The engineering industry is over-manned. There is undoubtedly, and tragically, a reluctance to use new equipment—it is not sensible for Labour Members to deny that — which, without any doubt, discourages management from installing new equipment when it is clearly needed.

It is tragic that engineering does not appeal to the nation's best brains. When l visit sixth form colleges I discuss long-term economics. I often reflect on the fact that not enough of those with the best brains wish to enter engineering. I usually ask the group of young people before me — the sixth formers in our local schools usually represent the best brains of that year in our constituencies—to tell me how many of them want to enter engineering or industry. I regard myself as lucky if one hand is raised. Very often, not one young person wants to go into productive industry and make something. That is a fundamental long-term tragedy for a nation that relies on engineering.

The craft apprenticeship scheme that I entered has been virtually abandoned. There is hardly a craft apprenticeship scheme left. The institutes and universities have made it a near impossibility to transfer from one grade of apprenticeship to another. I was; desperately lucky to have the opportunity to do so.

I think that all those background comments are true and require considerable attention. They bear on long-term trends. The problems did not start in May 1979, October 1974, February 1974 or June 1970. The trends are long-term and tragic and the House has not given them enough attention.

We are now in a period of decline and the rate is more rapid than that in any similar period for the past 20 years. I put much of the blame at the Government's feet. The major cause of the difficulty is the international value of the pound. It has removed competitiveness from many firms. The firms that were marginal are now making serious losses. Firms that were making a reasonable profit are now marginal. It is only firms that were exceptionally profitable that are now buoyant. Given the spectrum of goods that Britain manufactures, the number of firms in the latter category is tragically very few.

Rank-Toshiba had 2,700 employees in two factories in the West Country. It employed 2,000 at Plymouth. The value of the pound put the final nail in the coffin, and there will soon be only 200 employed by Toshiba at Plymouth and the factory at Redruth is to be closed. If it is not the pound that has caused the short-term dilemma, it is the interest rate.

I relate an incident in my constituency which has not resulted in any major redundancies but has brought attention to facts of which we should be aware. Thanks to considerable help from the previous Labour Government, a tin mine in my constituency was eventually bought by Rio Tinto-Zinc and is now a viable concern. There was an announcement that it would cost £8 million to reopen the mine. The £8 million was merely an extra sum after the previous bankruptcy.

Over most of the past 18 months, even Rio Tinto-Zinc has been paying 20 per cent. in interest charges on the £8 million. That means annual interest charges of £1.6 million. The mine employs only 300 people. Before a man enters the mine, drills a hole, starts the mill or turns on a rock drill, he is carrying £5,000 a year on his back. However, the mine seems to be surviving and I offer those concerned my congratulations. The load that I have described is of the sort that can amount to the straw that finally breaks the camel's back.

In the short-term, the Government must reverse their policies on the international value of the pound and on interest rates. In the longer term, there must be a fundamental change in our attitudes towards relationships within industry. The nature of those relationships provided for me one of the major reasons for becoming involved in politics and for joining the Liberal Party. When I was in industry, I was aware that the word "profit" was regarded by most members of the company on the shop floor as a dirty word. I never regarded it as that. I always took the view that there was nothing wrong with my company making a profit that giving some to David Penhaligon would not put right. I wanted to work for a successful company. I wanted a system operated that meant that when the company was successful, was profitable and was breaking into new markets, some of the reward would come immediately to me. I considered that it was at least partially my effort that was making the company successful.

I advocate substantial profit-sharing in industry so that those who work for successful go-go-go companies, use new equipment, encourage the management to put in more new equipment, accept new working methods, cover new markets and place more products in the market place will enjoy immediate financial reward.

I must warn the Government that in the long term the mass of the work force is not prepared to have such little positive influence over the way in which a company is run. The day is coming when we must look for a new settlement. That will mean that if an industry is to be successful it will have to be a partnership. There will have to be an equal partnership between those who provide the capital and those who provide their labour. We must have an industrial system that treats each group as an equal and gives each half of that mutual enterprise half the votes in electing those who control their mutual destiny.

Engineering has a bearing on the living standards of us all. That applies whether one is an accountant, a Member of Parliament, an old-age pensioner or someone who was tragically disabled from birth. The success or failure of engineering will make as great a contribution to our standard of living as anything else that I can think of within the economy. Britain is an industrial nation. It will survive only if it has strong industry. I cannot see an economy satisfying the population if it does not include a massive and strong engineering sector.

I do not blame the Government for the long-term trend. However, in common with the Labour Government, they have not done a great deal to reverse it. The short-term and terrible decline that we are witnessing is the Government's responsibility. I beg them seriously to consider the possibility of massive reductions in interest rates and the value of the pound so as to start a recovery. I believe that that can be done only if we have a draconian pay policy.

I do not deny that there are problems in the economy. If a severe pay policy is the only way to overcome those problems, I pledge the support of the Liberal Bench for such a policy. If we carry on as we are for the full duration of the Parliament, great areas of the industrial sector will disappear for ever. That will be a tragedy of the first order for an industrial trading nation.

6.58 pm

Mr. Donald Thompson (Sowerby)

Many hon. Members have spoken of the West Riding and the interaction and mixture between textiles and engineering. In my constituency, at least six out of every 10 jobs are in manufacturing industry. That is a far larger ratio than throughout the country generally. Therefore, the debate is important to my constituents.

Men in Sowerby manufacture machine tools, injection moulds, automotive parts, boilers and valves. They carry out engineering work for the oil industry's exploration. They make fire extinguishers and wire and bend tubes. They are engaged in the entire gamut of light engineering. They have worked in and developed those industries in very small firms. The largest engineering firm will have only 300 to 400 employees. Perhaps one or two will have a hundred or so more.

I have spoken to many of my constituents' firms this week. None of them has asked — no employers" association has asked—for protectionism. That seems to be the last thing that they want. As the hon. Member for Consett (Mr. Watkins) pointed out, they want fair trading and a lessening of non-tariff barriers to trade, which, unfortunately, exist in the EEC as much as they exist in the rest of the world in countries such as Brazil, Denmark, France and Germany, with its special testing systems and testing houses. These non-tariff barriers to trade should be, and must be, attacked immediately. The workers ask for that time and again, but they do not ask for protectionism.

Firms are beset with all the problems that were mentioned so eloquently by the hon. Member for Truro (Mr Penhaligon), but their greatest problem is that of inflation. Over the long term, engineering firms must plan for, and have a run-up of, up to two years in respect of some jobs. Having quoted two years previously and found that inflation has eaten 30 per cent. or 40 per cent. into their prices, they lose competitiveness.

The strong value of the pound also affects that long run-up period as well as our competitiveness abroad. The firms to which I have spoken tell me that in the Far East and America the strength of the pound is a far greater factor than it is in the Middle East. Those firms are also experiencing great difficulty because of high interest rates. That applies equally to stock or to call-off. Many light engineering firms make thousands of articles which can be called off by the customer at his request. It is part of their job to have those articles ready when the customer wants them. They must have them ready when the customer wants them. They must have them ready in the warehouse so that they can be delivered on time. When times are good, it is marvellous to have such orders, because a firm can make another thousand such articles and put them in the warehouse in the knowledge that they will be called off in, say, four months. However, with interest rates as they are and with inflation as it is, such a policy is dangerous and difficult. It eats more and more into profits.

My right hon. Friend the Secretary of State will be delighted to know that in Luddenden, where the River Ludd runs, there is a firm called Sagar Richards. It suffered greatly during the one-day engineering strike, which was even more disastrous to industry than the steel strike which followed. That firm has told me that it now has the best and most realistic trade union atmosphere that it has ever had in its history. A new realism has come into the engineering industry vis-à-vis the unions. All firms must welcome that.

The whole country welcomes the new realism of the miners in recently accepting a commonsense settlement. Many of the firms in my constituency deal with the National Coal Board. Labour Members have said that nationalised industries should look for and purchase engineering products within Great Britain. We must make that plain not just to the chairmen of the nationalised industries but also to the buyers—the men who sit in their offices and come to a decision. Later on, they must justify their decisions by all sorts of figures and facts, but they must be told in no uncertain manner by all of us to look more assiduously at British engineering products. They should not take the view "Five years ago we tried to find that sort of borer, lathe or machine, but we can no longer find it." They should look again, because British engineering is looking for opportunities. I am convinced that nationalised industries and public bodies will find engineering firms more eager than ever before to satisfy their demands.

Several hon. Members have quoted from letters that they have received from firms. I have received a letter from Nu-Swift International Limited, which makes fire extinguishers. It is typical of many firms in my constituency. I am sure that this letter is typical of many of the letters which right hon. and hon. Members have received. The company gives me the title of "Rt. Hon." but that is a mistake, not flattery. It states: Dear Mr. Thompson, How's this for a bombshell? 1. From the 1st January, 1980, gas prices to us from the North Eastern Gas Board were increased by the equivalent of 36.57 per tent. 2. Last Thursday we had discussions with officials of the North Eastern Gas Board covering gas prices which we are going to be expected to pay for 1981. To our amazement, the North Eastern Gas Board are asking for an increase on 1980 prices of 30.76 per cent. One does not have to be a mathematician to see that in two years the North Eastern Gas Board prices to us have increased by a phenomenal 78 per cent. You, being the Member of Parliament for this constituency will I know, readily realise the damage which this kind of exorbitant and unnecessary increase will cause to industry in our district, and on our viability as successful employers. Nu-Swift as you know, exports well over 40 per cent. of its volume production. We are more than ever running into problems of price caused by an over-valued £, and if nationalised industries like the North Eastern Gas Board are allowed to get away' with increases of this nature, then Britain's exporters without doubt will soon be relegated to the backwoods for ever.

I shall end by quoting from the letter so that I am not accused of missing anything out. It continues: We have sent copy of this letter to the Engineering Employers Federation, of which we are members so they can also add their weight to our plight. Is the time fast approaching when the government of the day should start to give industry some rebate on energy consumption, so that we can at least endeavour to be more competitive overseas? With all good wishes. It is signed by Ivan Don, the chairman and managing director.

I offer that letter to my hon. Friend the Under-Secretary as one of many that I have received. He knows about the sort of letter which hon. Members representing engineering and textile areas receive the engineering industry has fought a hard battle against inflation and it is prepared to continue that fight. It sees a light at the end of the tunnel. However, it cannot go on much longer with high interest rates and the recession, and it looks to the Government for some help.

7.9 pm

Mr. Michael Martin (Glasgow, Springburn)

Not so long ago in my constituency, it was practically unknown far any worker to travel out of it to his place of work, because three large railway workshops were located within the constituency which employed several thousand skilled and semi-skilled men. Only one railway workshop is now left. It ill becomes the Secretary of State to attack the nationalised industries, because, were it not for British Rail engineering workshops, there would be no industry left in my constituency.

It also ill becomes Conservative Members to attack the trade unions. There have been many changes since I entered engineering in 1960. The major change that I have witnessed has been the co-operation that has built up between the trade union movement and management. That is evident throughout the country. Certainly, in any factory hat I have had the opportunity to visit the message has come across that industrial relations are second to none. Despite that, there are redundancies, and it is wrong to dame the unions.

We were able to prove that the British Rail engineering workshop in Springburn was the best workshop in the country to carry out repairs on the advanced passenger train. Repairs are even more important than building the train's engine, because more work is involved. British Rail has given us a commitment that it is prepared to allow the work to take place in Springburn. However, we do not yet know how much capital the Government are prepared to put into the advanced passenger train. I hope that the Minister will be able to give an indication tonight, because the workers in my constituency are extremely worried.

When I left school in 1960, I was very lucky to get a position as an apprentice sheet metal worker. Many other young boys did not have that opportunity. It was galling that five years later employers were saying that they had plenty of vacancies for skilled men but not for unskilled men. 'That is what is happening now. It is galling to think that if the economy takes a turn for the better in four years' time young people leaving school now will have the same problem. It will be the same old story. They will not get jobs, because they are unskilled.

The Government recently announced that they would put more money into youth opportunities schemes. The principal of the Springburn college of engineering told me that there are 42 empty places in his college. Because of the recession, employers are not sending apprentices to the college. The principal is prepared to take boys and girls into the college and to give them full craft training according to the requirements of the engineering industry training board. He has approached those in charge of the youth opportunities programme and has been informed that finance provided for that purpose cannot be used for craft training. That is nonsense. The staff are willing to carry out training, yet we cannot use money that the Government have made available for schemes, such as clearing derelict sites, to train apprentices in skills. As has been said, apprentices are the seed corn for the future of the industry.

Today I spoke to the assistant general secretary of the sheet metal workers' union. I understand that, for the first time in his experience in the industry, he can no longer find places for apprentices who in their second, third or fourth years find themselves redundant. No matter how bad things have been in the past, if an apprentice has been made redundant the union has been able to find him a place somewhere in industry. This is a scandal, because young apprentices and their parents make sacrifices in order to train for skills. Apprentices now find that after two or three years they cannot complete their apprenticeships. The Government must do something about this problem.

I have heard many stories—no doubt many of my hon. Friends have heard similar stories—of employers using the recession as an excuse to get rid of active trade unionists in their employ. I heard only today that because redundancies were to take place in a particular firm the management felt that men over 56 should go rather than younger men. The shop steward in that firm was over 56 and he had to go.

It is a scandal that we have reduced the consultation period regarding redundancies. Less time is now given for trade union officers to become involved in the redundancy consultation period. I ask the Government to look at this problem. There is evidence that action is being taken against people because they are upholding trade union principles.

7.16 pm

Mr. Jocelyn Cadbury (Birmingham, Northfield)

I agree with the hon. Member for Glasgow, Springburn (Mr. Martin) about the difficulty of apprentices finding new places when they lose their jobs halfway through their training. This is a serious matter which I have encountered in my constituency in the Midlands.

There is common ground, to use one of the favourite phrases of my right hon. Fried the Secretary of State for Industry, that the engineering industry has been in decline for many years. This is true of the West Midlands, where, since 1975, the number of people employed in engineering has fallen by 58,000, or 9.3 per cent. The region is facing a particularly bleak period. There is widespread short-time working in engineering companies.

It is absurd to argue that all our problems have been caused by the Government's policies over the past 18 months. Opposition Members must not forget that we are in the middle of a world recession and that other industrialised countries are sharing in the suffering. In the past six months, industrial production in the United States has fallen by 10½ per cent. compared with the previous six months. The recession is hurting everyone, but it is hurting our industry more than that of other countries.

We have heard many explanations for the decline of the British engineering industry and I agree with many of them. It is true that there has not been adequate investment in engineering. It is also true that management has not given a strong enough lead.

I agree with my hon. Friend the Member for Eastleigh (Sir D. Price) that in this country there is, or has been, a prejudice against a snobbish attitude on the part of what he called the aristocratic Right and the intellectual Left against intelligent people going into industry. This is, and has been, a serious problem.

I should like to isolate two particular causes of the decline in the engineering industry and to suggest some possible remedies. The first, and, I believe, the most important, cause is the failure of the British engineering industry to raise productivity as fast as have its foreign competitors. Furthermore, I am convinced that our poor performance in productivity has more to do with the way that we organise and deploy manpower inside our factories than with the level of investment in plant.

The second cause is the shortage of well-qualified, high-calibre engineers available to the industry and the lack of attention paid by British management to what Sir Monty Finniston rightly calls the engineering dimension.

The West Midlands region has many splendid examples of nineteenth century factory buildings that are still in use. They are fine specimens of industrial archaeology, but they are not necessarily the right shape to accommodate modern machinery. Even more serious is the fact that inside these factories there are nineteenth century systems of organisation. I refer specifically to the way in which the work force within both the engineering and manufacturing industries is still organised along the lines of traditional crafts.

I do not wish to place the blame for that on the trade union movement. It would be wrong to do so. I blame everyone—management, unions and the Government—for this. To some extent I blame also our own history, which is responsible for the development of the craft unions, but I want to draw on my experience in industry to demonstrate how the situation affects efficiency in British industry, particularly from the point of view of industrial relations and productivity.

At Joseph Lucas, where I worked as a personnel officer, there are currently in the whole organisation 20 different trade unions. In most Lucas factories there are five or six major unions. Multi-unionism causes two main problems. First, it makes good industrial relations more difficult, because wage negotiations are vastly more complicated in a typical company such as Lucas, where one is dealing with a whole range of different unions, than they are in a typical foreign company with only one union.

At Lucas, if the management comes into conflict with only one of the many unions with which it is negotiating, a dispute may occur that brings the whole factory to a halt. This could be just as damaging as if differences had arisen with all the unions. In other words, multi-unionism increases dramatically the probability of disputes occurring. This runs right through the whole of the engineering industry, and particularly the motor car industry.

The second major problem that is caused by multi-unionism is that it is very much harder to raise productivity in a factory where there is a series of unions. I shall give an example from my own experience, and I hope that the House will forgive me if I shift from the engineering industry to a somewhat softer industry, the food processing industry, to which I migrated later in my career.

In my first job in the food factory where I was employed, I was a production foreman, and I very soon discovered the limits to the authority of the production manager in his own department. Although I was responsible for the efficiency of my own department, I had to rely on maintenance sections that were completely outside my own control.

Let me tell the House the procedure that I had to go through to get a machine repaired. This happened to me on several occasions. First, I had to call an electrician, who had to take the fuse out. Then I had to call a sheet metal worker to remove the guard. Then I had to call a fitter to do the actual maintenance work. But if the metal through which the fitter was required to drill a hole was more than 3 millimetres thick, I had to call a special gentleman called a millwright. Having done that, I then had to call them all back in the reverse order — the fitter, the sheet metal worker and the electrician. It was an administrative feat to get them all back in the right order and all at the right time. Incidentally, the men on the shop floor all agreed with me that it was a totally absurd system. I have talked to union officials on many occasions since then, and they also agree with me that there must be a better way of organising our affairs.

That fragmentation of craft groups was reflected a long way up the organisation, for not only were there all these skilled men; each skilled man had to have the appropriate foreman to manage him. An electrician had to have an electricians' manager. A sheet metal worker had to have a sheet metal workers' manager, and so on. It was reflected in the whole organisation, right the way up. It meant that there was overmanning not only in terms of the numbers of craftsmen but in terms of managers.

All this springs from a multi-union system of industrial organisation which is totally outmoded and which exists in no other industrialised country. Anyone visiting our company's American factory would find a totally different position. In a given department there is one man, called a mechanic, who is responsible for all the maintenance in the whole department, and he walks around with all his tools, anticipating trouble. The House will not be surprised to learn that in the skilled areas our American factory is about four times as productive as its British equivalent, even though the plant in some cases is more sophisticated in this country than it is in the United States.

What is the solution? I do not think that it is an issue about which Governments and, indeed, hon. Members can do much directly, but I believe that British management and unions must face the issue of multi-unionism. Management must give a lead. When a new factory is built, management must insist that membership is confined to a single union, if possible.

Our company has done this successfully at a factory at Chirk in Wales, where all the people in the operation belong to one union, the Transport and General Workers Union. That includes electricians, fitters and sheet metal workers. In addition, semi-skilled production workers are encouraged to do their own maintenance. People cart be seen on their own machines with tools, repairing them. This results in a much greater degree of job satisfaction for the production operatives. It also makes for a far higher level of efficiency.

It is also up to union leaders, at national level, to pursue union amalgamations with far greater energy than they have shown in the last 30 years. We could arrange matters so that there were factory trade-offs. For example, GKN could agree that it would have all its people in the Amalgamated Union of Engineering Workers, and Lucas could agree that its employees would all be in the Transport and General Workers Union. It may sound farfetched, but that is the way that we shall have to go if we are ever to compete with our foreign competitors.

A further reason why cur engineering industry has fallen behind arises from the shortage of well-qualified, high-calibre engineers. There is general agreement that the status of the engineer in this country is too low.

Some years before Sir Monty Finniston brought out his report, Dr. Pope of Aston university published the results of his research, in which he showed that the brightest university students with scientific backgrounds tended to opt for pure science when they went to university, rather than reading engineering. I believe that they were encouraged to do that because of the snobbery of the academic community, which saw engineering as a second best. This bears out what the hon. Member for Truro (Mr. Penhaligon) said a few minutes ago. It goes some way to explain why, as a nation, we are good at inventing things but poor at exploiting them commercially.

In Germany and France there has never been this division between pure science and engineering. The advancement of knowledge in these countries has always tended to go hand in hand with its practical and commercial exploitation. As Finniston says, if we are to reverse the decline of our engineering industry we must ensure that the man who applies scientific ideas, the engineer, is esteemed and paid as well as his colleagues in France, Germany and the United States in fact, we need in this country the equivalent of "Herr Doktor Ingenieur".

That is precisely the issue that Sir Monty Finniston faced in his report, and I am disappointed that the Government do not intend to implement the Finniston recommendation to make the proposed engineering authority a Statutory body. By making the body statutory, my right hon. Friend would have given it teeth and would have made sure that the recommendation was carried out effectively.

The Under-Secretary of State for Industry (Mr. Michael Marshall)

I have listened with great interest to what my hon. Friend has said. I ask him to try to keep an open mind on this question. It is fair to say that the emerging consensus that led us to go for the chartered route, as opposed to the statutory route, was such as to suggest that we could meet the Finniston objectives with that route. I know that my hon. Friend is a fair-minded man. I hope, therefore, that he will keep an open mind on this question and wait to see what we come up with.

Mr. Cadbury

I am sure that my hon. Friend is right. I am fair-minded, and I have listened to what he has said.

Mr. Ernie Ross (Dundee, West)

Will the hon. Gentleman give way?

Mr. Cadbury

No. I should like to develop my arguments a little further, and then I shall give way.

The example that I shall give will illustrate what I have said about the need for that body to have some teeth. The report suggests a new qualification for a graduate engineer, entitled "registered engineer". To qualify for that title, a person would have to obtain a university degree, which would have to be followed by some sort of practical experience. The report suggests a rigorous programme of planned and accredited training and experience in industry.

There would be a package — an academic degree followed by some experience in industry.

That combination of academic and on-the-job training is regarded by Finniston as essential if we are to produce engineers who are capable of solving practical engineering problems in the commercial world. There has been criticism that graduate engineers who go into industry are not oriented towards the solution of practical problems. It has been argued that that is one of the reasons why industrial design in this country is not as good as that of our competitors.

The training programme recommended by Finniston would ensure that once the engineer had completed this package of training he would compare favourably with his French and German engineering colleagues, but the body will have to be powerful to ensure that the employers provide two or more years of training that is worthy of this professional qualification. A statutory body would be more likely to ensure that the employers provided a high standard of training, worthy of the new qualification, than would the body that the Government propose to set up.

Bearing in mind that one of the essential objectives of the report is to raise the status of the engineer, a statutory engineering authority would ensure that once the engineer was registered his status would be conferred upon him by law. He would be on the way to enjoying the standing of his French and German colleagues. The body that the Government propose to set up under the Industry Bill will be toothless and a pale shadow of what Finniston proposed. It will not be very different from the Council of Engineering Institutions, whose members have failed to achieve any breakthrough in the status of the engineer in the last 15 years. I ask the Government to think again on this matter. If they feel unable to do so, I hope that they will turn their attention to the other recommendations of the Finniston report.

Finniston stresses that teachers should encourage their pupils to continue the study of mathematics, at least until O-level. That is vital if there are to be enough students attending university who at least have the option of taking an engineering degree. That depends upon an adequate supply of qualified teachers. Unfortunately, there is a shortage in that area — of crisis proportions. It is a scandal that in Birmingham people who do not have mathematics O-level are teaching mathematics to young people. That means that many young people who might have become engineers will be precluded from a career in engineering simply because they have never received a proper grounding in mathematics. That is a prescription for de-industrialisation, and the matter needs to be taken in hand by my right hon. and learned Friend the Secretary of State for Education and Science.

If we are to reverse the decline in the engineering industry, we must face the need to improve productivity. Management and unions must face the specific problem of multi-unionism, which I have attempted to describe. At the same time, hon. Members, the Government, management and the universities must take the engineering dimension more seriously and ensure that Finniston's recommendations are carried out.

7.35 pm

Mr. David Stoddart (Swindon)

Many Conservative Members have referred to trade unions and to restrictive practices. The hon. Member for Birmingham, Northfield (Mr. Cadbury) seemed to imagine that if there were simply one trade union in any large factory all the problems would be over. The Conservatives are living in cloud-cuckooland and they do not understand industry if they believe that. Leadership in industry should come from management. It is the failure of management to lead that has so often led to difficulties on the shop floor.

First, there has been a failure of leadership by management. Secondly, there has been lack of consultation — the belief that management has a monopoly of wisdom. That is not true. We have not made new products, we have not made them cheaper, and we have not made them more efficiently, simply because many managements are often unable to consult those who do the job, because they do not believe that those people can teach them anything.

There is a third major problem that contributes to low productivity and other problems in industry—namely, namely, discrimination. Discrimination in British industry is rife. No doubt that has much to do with the industries and with our social patterns. Workers on the shop floor are treated as second-class citizens. Their conditions are completely different from those of people who work in offices, engineers, solicitors, clerks, and so on. So long as ordinary working people—those who make the goods, those on the shop floor, those who operate the machines—are treated as second-class citizens, they will respond to management in that way.

Those three problems need to be resolved, and they will not be resolved until managements understand the problems. The hon. Member for Northfield instanced a factory with which he was associated, where, because only one union had been built up, many of the problems were alleviated. Like my hon. Friend the Member for Glasgow, Springburn (Mr. Martin), I have a railway workshop in my constituency, at Swindon. Unfortunately, we shall not yet be able to maintain the advanced passenger train or the high-speed train. In 1973 British Rail decided to close that workshop, but it was saved by a combination of management and workers who persuaded British Rail that the workshop should be kept open. Since then, despite the fact that there are a number of trade unions in that factory, there has been co-operation of the first order between management and unions, to such an extent that productivity has been improved and recruitment has increased. It is a highly successful and viable organisation. The workshop was kept open because of leadership from management, consultation and no discrimination. Therefore, the problems outlined my some hon. Members are not as bad as they believe.

We are talking about the decline in the engineering industry. It is an indictment of the leadership of this country that, when we travel around the country by rail or Underground or when we visit factories, we see things that are crying out for attention. We see British Rail carriages and wagons dropping into decrepitude. We see our London Underground system breaking down because of lack of staff and maintenance, and yet there are 2,164,000 people out of work, a large proportion of whom are engineers. They are either skilled engineers or are capable of doing an engineering job. A good proportion of those who have been made redundant could remake our railway and Underground systems. There is plenty to be done, and yet we fail to achieve the organisation to allow it to be done. Accordingly, Britain, its services and its factories will slide further and further down until practically nothing is left. Our industrial base will be destroyed and, when North Sea oil runs out, by heaven we shall feel the pinch. It is essential that our manufacturing industry is rescued and resuscitated, and that will require many forms of direct action.

I am a sponsored Member of the EETPU. A decline is taking place not only in mechanical engineering but in the domestic electrical appliance, heavy electrical and consumer and industrial electronics industries. Only yesterday Parliament was lobbied by workers in the consumer electronics industry who were concerned about their jobs, which they see disappearing every day. They were anxious to continue to do a good job of work for the country. They know the problems. They know that there is a problem of low demand, which is caused to a very large degree by Government policy. They know that the problem has been caused by the flood of imports.

It is clear that factories have closed down and industries have been wiped out because we have failed to take the necessary action to protect them. In electronics, the audio equipment industry has been virtually wiped out by Japanese competition, as has the radio industry. In 1973 a company called Garrard Engineering, which has for many years manufactured record decks—even before the war it made gramophones — employed 4,200 people. This year, that number has fallen to 230. That demonstrates the extent to which the British electronics industry in my constituency has declined. It has declined not because it has not produced a reasonable product but because we have allowed the floodgates to be opened to permit the Japanese, who have a protected industry, to unload their goods on to our home market. The same story could be told throughout the domestic appliance industry.

Washing machines are another such case. One would think that Britain could make washing machines to supply most of the home market. However, 50 per cent. of it is supplied by imports. Even the Bendix washing machine, which until recently I thought was a British machine, is being manufactured by the Italians, in circumstances that are, to say the least, suspicious. Many countries are doing the same thing—manufacturing in suspicious circum- stances. I suspect that we are being made monkeys of and hat goods are being dumped in this country to the disadvantage of workers in our electrical industry.

The Prime Minister and her right hon. Friends keep telling us that a new attitude is needed in industry and that British workers must behave like the Japanese. Those in the consumer electronics industry have been doing just that—the Prime Minister said so only today at Question Time. They have improved their methods as much as have industries in many foreign countries. The Secretary of state and his ministerial colleagues also complain that workers are pricing themselves out of jobs. However, in Dorset Kenway Engineering, which makes food mixers, was told by its 500 employees that they would take a £10 a week cut in pay. In spite of that offer, the company still closed down.

When I visited factories in the South-West during the recess, the complaints of the workers to me were not about wages. They complained on three points—high interest rates, the high exchange rate for the pound and high energy costs. The hon. Member for Sowerby (Mr. Thompson) complained about the last and he blamed the gas board. He should blame his Front Bench. The Government imposed a 10 per cent. surcharge on gas last year, they are doing the same next year and they will repeat the operation the year after. The gas prices that industry says are a big element in production costs are being jacked up by the Secretary of State and the rest of the Government.

It is a crying shame that this country, with such a great background of engineering — consider the great engineers and the great products we have produced—is now in such a spiral of decline that it is almost impossible to see how the position can be altered and how we can reassert ourselves. That will not be achieved while the Government remain idle, believing that market forces can arrest the spiral of decline. They cannot. The Government will have to intervene in industry. They will have to impose selective import controls to protect our industries from a massacre by unfair foreign competition.

I do not want restrictions for their own sake: I want to save British industry. It is reasonable for this country to do just that, to say to other countries "So far and no further." We should absorb their imports only in so far as we have the economic ability to do so, but if we do not have that and controls are not imposed eventually there will be no trade for anyone. The Government can take action. They should do so, and urgently.

7.49 pm

Mr. John Butcher (Coventry, South-West)

I should like first to pursue the remarks of my hon. Friend the Member for Birmingham, Northfield (Mr. Cadbury), who, as a fellow Midlander, shares an almost overwhelming interest in that aspect of the engineering industry which subcontracts on a very large scale to the motor industry. One cannot discuss engineering in the industrial heartland of our country without discussing the motor industry.

Over the past 15 years, the industry has been used as a milch cow by various Governments. It has been used almost as a part of our economic regulatory processes—a hoist in deposits required for cars here, a change in the levels of payments there. In the days of Butskellism, fine tuning and demand management, this industry found itself having to adjust to cycles of differing demands with bewildering rapidity of change. As such, the industry could not plan. It suffered from increased costs. It found that it was very difficult to organise its stock position, and so on

The central employer in the domestic motor industry is British Leyland. BL has suffered from two problems, which are described in the words "Stokes" and "Ryder". These were corporate men par excellence. They played their corporate games. They designed their grand schemes. They moved resources here, there and everywhere. But, in the final analysis, they forgot how to build cars.

Subsequently, a management and a work force became very confused. Eventually, the Seventh Cavalry arrived in the form of Michael Edwardes. I doubt whether there is an hon. Member of this House who would not wish Sir Michael Edwardes well. Many people have been deeply impressed by his tenacity and his courage. We hope that he stays at his task and sticks at it for some time to come. However, I should like to put on record two cautionary notes which we should express to him. These concern his attitude towards buying British.

Sir Michael Edwardes has gone abroad to bring Back a car called the Bounty, which he will be building at Cowley. This car is urgently required. It satisfies a gap in the model range. But I am bound to report that the major component manufacturers, in the Midlands particularly, have found extreme difficulty in tendering for the supply of components for this car. They maintain that in Spain, for example, where a foreign car is also built—the Ford Fiesta — there are fairly strict requirements on the component value of the assembled car. I suppose that the peevishness which these major component manufacturers feel is to a certain extent understandable.

Having said that, however, I believe that there is another aspect to this problem, and that is the retooling of BL in order to expand its domestic production of wholly British model ranges. I hope that if, or when, BL comes back to the Government and asks for additional sums of money, we shall say to BL that it must exhaust all avenues of inquiry when it comes to tooling, re-equipping and the purchasing of machine tools for the new plants to produce the new models. There is surely some area here for coordination. We can surely use public money in this regard to map out those special products, in robotics and so on, which we shall require in the future in our repetitive process industries.

En passant, I should like to mention the short-time working compensation scheme. I am tempted to propose a vote of thanks to my right hon. Friend the Secretary of State for Employment, because the feedback that I have received from Coventry is that he has got it exactly right. He has certainly reduced the percentage amount payable to employees under the scheme, but by extending the period to nine months he may be helping a large number of companies in the Midlands to get through the trough in demand, so that they may maintain their skilled labour forces and keep the teamwork going for the time when this recession has finally stopped — what is the word?—regressing.

Sir Keith Joseph

Deteriorating.

Mr. Butcher

I am grateful to my right hon. Friend.

Mr. Allen McKay (Penistone)

This scheme may be helping industry in the hon. Gentleman's area, but it is certainly not helping industry in my area. By the reduction of the percentage amount to 50 per cent., the sum is reduced below the guaranteed wage. People have been informed that they can either take a cut in wages, to make up for that cut in the temporary short-time working compensation subsidy, or the works will close because the firm cannot afford to pay the guaranteed wage.

Mr. Butcher

That is a decision that particular firms will have to make. Without knowledge of the precise details, I would not pretend to advise them.

Much mention has been made of investment. It is worth referring to some very pertinent figures. I am informed that between 1969 and 1979 we saw Government consumption grow by 29 per cent. In the same period, we have seen public sector investment fall by 21 per cent. while private investment has grown by 32 per cent. From these figures we can surely find some basis for consensus or unanimity in the House in the view that many hold that there is an imbalance between revenue and capital expenditure which has been building up in the public sector for many years.

In the Government's attack on this aspect, I wonder whether we should demand some support from Opposition Members, because only when we can reduce the balance of revenue expenditure can we effect a shift of resources into capital expenditure and public purchasing policies. I hope that Opposition Members will check their motivation, and their loyalties—perhaps understandably so — to certain large public sector unions when they exhort us to carry on with the feedbag, the public sector nosebag, and keep the imbalance between revenue and capital expenditure.

It is worth reporting two items from the tapes that we have seen this afternoon. I understand that this very day the director-general of the Engineering Employers' Federation, Mr. Anthony Frodsham, has announced that his members should, wherever possible, cut prices rather than grant generous pay increases. Of course, he has to do this—and we hope that he will continue to do this—in the context of our short-term problems. But I hope, again, that there will be unanimity in the House that there is nothing intrinsically wrong with high wages provided that they are based on high productivity.

Here again, we must look at the trade unions' record on this matter. We have to look at the balance of trade union membership and try to understand why productivity has, perhaps, not been top of the agenda when wage negotiations have been conducted over this period.

A second item of news on the tapes today is that GEC's profits have risen by £34½ million to £189.7 million. This week it has announced a £68 million investment programme in a high-technology area. It is forming a medical electronics corporation which is to involve a partnership between the American Picker Corporation and the Cambridge Instruments Company. In other words, GEC is going out to buy technology. Ironically, it may even be importing the technology to provide the jobs in production in high technology in this country.

That is precisely what the Japanese did. I am delighted to see that even a company as well managed as GEC—perhaps this is because the company is as well managed as it is—is not too proud to go out and take this route.

Mr. Ernie Ross

The hon. Gentleman does not seem to understand exactly what is happening in industry. My union represents engineers who have developed highly advanced technological medical machinery in EMI, but, because of the Conservative Government's cutbacks in public expenditure, the same machinery, which was designed by British engineers, now has to be bought from American companies.

Mr. Butcher

I think that there is a very chequered story attached to that particular product. I would not wish to debate here publicly the management decisions made on that product development, but there are very heavy hints in the trade press that the product had far too much money committed to it before the market was sorted out. I feel that EMI went very quickly into an area which it did not understand fully. To take a company with that base and to try to sell to the medical market without the sales force and the marketing strategy required was a very dangerous thing to do.

From the right hon. Member for Deptford (Mr. Silkin) we heard the old familiar story. He has asked, naturally, for an increase in investment. The right hon. Gentleman said in that part of his speech where he did project policy that he would meet the cost by increases in direct and indirect taxation. I hope that the hon. Member for Nuneaton (Mr. Huckfield), when he comes to speak, will try to explain what would happen to demand—which is now the key question — if we increased direct and indirect taxation at this stage.

Mr. John Major (Huntingdonshire)

A few days ago, the right hon. Member for Leeds, East (Mr. Healey) postulated the remarkable conception of a 12 per cent. minimum lending rate and an £18 billion public sector borrowing requirement. If it is to be funded by increased taxation, does not my hon. Friend agree that it postulates a potentional standard rate of income tax of 42p in the pound, which would mean a dramatic decline in domestic demand?

Mr. Butcher

I am grateful to my hon. Friend for his intervention. I have every admiration for his expertise in this field. If he informs me that it is 42p in the pound, I can assure the House that that is right to the nearest decimal point.

Many remarks have been made about industrial relations and the shortage of skilled labour. The hon. Member for Leeds, West (Mr. Dean) hit the nail on the head. In the engineering industry particularly, wage differentials have been eroded. I believe it is true that the Amalgamated Union of Engineering Workers has changed the composition of its membership over this period. Many highly skilled men who are members of the AUEW are deeply hurt, if not suspicious, of the fact that they are being swamped in their membership by the semi-skilled and unskilled members of the union. When the AUEW goes to negotiate national wage agreements, it has tended to forget these skilled men.

The hon. Member for Leeds, West and my hon. Friend the Member for Northfield looked at the history of the development of unions. It was right to do so in this debate. The trade unions, when founded in the nineteenth century, were based on skilled crafts. They were monopolistic, skilled crafts. We find today that these skilled people are totally outnumbered by unskilled and semi-skilled workers, and particularly by the public service unions which now possess the political clout at Labour Party conferences.

It is fair to point out, in examining the Labour Party's attitude to public expenditure and the balance between revenue and capital, where the political power lies inside the TUC and where it manifests itself at Labour Party conferences. We should enter a plea for a more flexible approach within the larger single unions. It is there that the original impetus for negotiation comes. It is there that a lot of good can be done in rectifying the erosion of differentials.

The hon. Member for Leeds, West referred to Japan and rightly pointed out that in that country there is a system which protects workers from redundancy. It is a paternalistic system. It encourages mobility of labour, not just between geographical locations but between industries. Unfortunately, this does not happen in Britain. A shameful example of an attempt at this same philosophy occurs in the notorious Dock Work Regulation Act, which guaranteed no redundancies for workers in various parts of the country, admittedly for political reasons. I believe that this was instigated by Mr. Jack Jones. Instead of letting flexibility, all we have had is inertia, immobility and an atrophied sense of resentment that, somehow, someone who lives in Liverpool or the East End of London must continue to live in Liverpool or the East End. I do lot see that the legislation has been at all helpful in the context of labour mobility.

During the last 25 years, the Japanese have moved from primary industries and textiles into shipbuilding and heavy engineering and from there into high technology. If one were to talk to a Geordie this evening, one would find that his father was complaining 20 to 25 years ago about unfair competition from Japanese shipbuilders. If one talks to his son today, one finds that the son complains of the unfair Japanese competition in information technology. I am not singling out Tyneside for any reason. We see there something that is manifest in various parts of the country, particularly the regions in the North. Where other countries have changed and have encouraged flexibility so as to move into new industries, we have sat back and asked about the latest public sector programme that will supply us with jobs. We have the attitude that the jobs must always move to the man. The man rarely moves to the job. Those gentlemen in the 1930s who suffered immensely to make the move to Slough will find that their sons in Slough do not have the same spirit of adventure.

I find myself 100 per cent, in agreement with one remark of the hon. Member for Swindon (Mr. Stoddart). [have been fortunate in that I have been able to move over the last 12 years into virtually any industry in my capacity in the computer business. I can go to an engineering company one day to talk about stock control and to a service company another day to talk about the sales ledger. With this ability to wander at will, I have been able to look at the precise phenomenon that the hon. Gentleman named, the two-tier, traditional—one is tempted to use the word "class"—system of some of our large employers. I do not like the use of the word "class". I prefer to use the word "attitude". In many companies, however, there are the grubby dining room and mass canteen facilities for the work force and the private, hidden-away, discreet facility for the managers. If we wish to make a comparison with Japan, Germany and the United States, this situation illustrates the fundamental truth. There is teamwork in those countries that shows itself in the facilities provided for the workers-. Here, we are still archaic.

Mr. James Hamilton

I have just returned from Japan. It is interesting to note that Japan has the closed shop in the shipbuilding industry, the engineering industry and the computer industry. The workers in the computer industry fared no better than the workers in the same industry in my constituency. The difference was that there was supplementary benefit, if one can use that term, from the Government to those industries. That is what gives them some advantage over our people.

Mr. Butcher

The Japanese economy is based on high productivity and ever-increasing high wages. There is a totally different attitude to life from the work force. I am afraid to report to the House that a closed shop in this country, in my view, would be the precursor of a drift into syndicalism if applied throughout our industry in the same way as the industrial relations in Japan permit unionisation.

I should like to recount one further small incident reflecting attitudes. I remember sitting one evening in a cafe outside Heidelberg in Germany. I noticed the construction workers coming back from work. To a man, they all sat on the tailboard, took off their concrete-encrusted shoes and overalls and put them in brief-cases. They walked home. One could not distinguish the professional, the accountant, the engineer or the road-maker in that street in Germany by his dress. They have an expression in Germany "We are all capitalists now." They have reaped the benefit of that.

8.9 pm

Mr. Geoffrey Robinson (Coventry, North-West)

I shall be brief. I am pleased to follow the hon. Member for Coventry, South-West (Mr. Butcher), who represents the neighbouring constituency. I should have listened to him with a great deal more attention if he had addressed himself to the real problems that face Coventry, the very heart of our manufacturing industry, forming as it does part of the West Midlands. He said nothing about the terrible and deteriorating situation that is faced there, thanks largely to the policies that we have had to suffer for the last 18 months.

I say that because I think that there is general agreement throughout the House, including the half dozen hon. Members who have been on the Government Benches during this most important debate, that no one as yet has challenged the statement that manufacturing is vital to the economy. No one has suggested that we could be a service economy and could do away with manufacturing. Nor has anyone challenged the fact that the deterioration of the manufacturing sector—[Interruption.] I shall slow down my rate of delivery if the capacity of comprehension of Government supporters is so limited. No one has challenged the fact that the continuing deterioration of the manufacturing sector is of fundamental concern to the economy as a whole. Nor has anyone challenged the fact that the engineering industries within the manufacturing sector are of the utmost importance.

I do not want to bandy statistics across the Floor of the House, because we have had enough of those today, though I am afraid that I shall have to take up certain of the inaccuracies of the Secretary of State for Industry. If we go back 15 years, we find that the engineering industry was defined in those days under the SITC and represented beween 50 and 60 per cent, of our visible exports. Since 1964, that has declined to 38 per cent. The trend has continued under both Tory and Labour Governments. Until now, it is also correct to say that it has deteriorated more or less with a uniformly distressingly slow momentum.

The difference is that under this Government it has been given a massive push in the downward direction. The combined effects of the high value of the pound, unprecedented high interest rates, massive increases in nationalised industry prices, above all in energy prices, and the massive cuts in the capital programmes of the nationalised industries have plunged us into a deflation whose effects have had an unprecedentedly severe effect on the manufacturing sector.

That much must be accepted on both sides of the House as a fact. In the last 18 months, the drop of 14 per cent. in manufacturing output to below what it was in 1974, the rise in unemployment to more than 2 million and the prospective rise during 1981 to more than 3 million have been unprecedented in our post-war economic experience. That much we can take for granted, including even the fact that the pressure downwards, the vortex of decline into which we have been plunged, has viciously and deliberately been made worse in the last 18 months.

Mr. Major

indicated dissent.

Mr. Robinson

The hon. Member for Huntingdonshire (Mr. Major) shakes his head. It is a fact. The level of unemployment, the decline in manufacturing, the rates of interest and the cuts in the capital accounts of public expenditure are unprecedented.

Mr. Major

I was shaking my head because the hon. Gentleman said that it was deliberately inspired. Clearly, that is not so. What is more, it has been said several times within the last hour that the high rate of sterling has a significant effect on the problems of industry. Can the hon. Gentleman tell me how he would reduce the present rate of sterling and keep it down?

Mr. Robinson

I am grateful for that intervention. If we cannot condemn the Government for their deliberate intent so to depress the economy, we must condemn them for their incompetence. It can only be one or the other. I am happy to condemn them for their incompetence as opposed to their bad intentions.

As for the hon. Gentleman's question about sterling, yes, get interest rates down. Interest rates make a big impact on the rate of sterling.

Mr. Kenneth Carlisle

How does the hon. Gentleman explain the fact that American interest rates are now higher than ours and yet the pound has not declined significantly in relation to the dollar?

Mr. Robinson

It is because the American economy suffers from just as deep-rooted an endemic weakness as does the United Kingdom economy, but the Americans do not have oil. We have the oil, and that is the reason for the difference. But it is not just the oil. The Secretary of State for Industry made it clear that millions of people are investing in sterling because of the high interest rates. They could come down considerably, but they do not come down because we have never had a clear, unequivocal statement that the Government want to decrease the value of sterling and want it at $2. I had the misfortune to hear the Prime Minister say on IRN the other day that many countries would give their right hands to have the rate at which sterling stands at the moment for their currencies. Of course, if the Government make no statements, they talk up our pound, and that is exactly what the Government are doing.

I deal now with the three or four seriously misleading remarks made by the Secretary of State in reply to my right hon. Friend the Member for Deptford (Mr. Silkin). In the first instance, the right hon. Gentleman tried to introduce a new concept of financial accounting. I am sure that he did not intend to mislead the House. It is unfortunate that he is not here now to explain exactly what he meant. With some prompting from the official Box, he tried to explain to my right hon. Friend the Member for Deptford that Leyland's profits were a great deal more than my right hon. Friend had indicated and that, indeed, they were some £400 million more. Thus we have a new definition of "profit".

We have profit before tax, which is the normally accepted accounting practice. We have profit before interest and tax if it is desired to boost profits a bit higher. Now, we have profit before Joseph, interest and tax, which means, before declaring the profit, also taking out capital expenditure and depreciation. The right hon. Gentleman said "If we do that, we have £400 million that Leyland has invested in capital equipment over the six-year period. If that is taken into account, it reveals a marvellous effort on the company's part."

However, I have to take my share of the blame. For some of those years I was financial controller of British Leyland, and it included the only year in which the company had a positive cash flow. I can tell the House that in every one of those years I said that the company was not investing enough. Looking at the figures affecting British Leyland and its competitors at the end of that period, we see that British Leyland had about £700 per employee of capital investment, whereas Ford and the other major competitors—Renault, Volkswagen and the rest—had between two and a half and three and a half times as much, so good was the performance of British Leyland in those years.

The Secretary of State tries to be an honest man, plagued though he is by his own indecision and his congenital incapacity to make up his own mind, or perhaps he does not know it. But when he consistently talked of Luddism, to the annoyance and insult of many of my right hon. and hon. Friends who know what it is to be on the shop floor working machinery, to be conveners and to be shop stewards, and when he referred to it about a dozen times as the major weakness in our industrial performance in the engineering industries, he betrayed a woeful and quite unworthy ignorance. I do not think that it was malevolence. The right hon. Gentleman was not trying to insult. He merely demonstrated his basic ignorance of manufacturing industry.

The right hon. Gentleman does not know what he is talking about. He should not be in his present job. He should be back in All Souls, where he would do a much better job. That is his great tragedy. He missed his career in life. He knows himself that he does not really like manufacturing. He does not even believe that he should have his job. He is the one who says that the Government should have nothing to do with industry. It occurs to me that he occupies the position of a Colonial Secretary in a Labour Government: he ought to be working himself out of his job. He should not be there. But he is there, and we have to deal with him.

The right hon. Gentleman demonstrates that he does not understand the relationship between capital investment and employment. Luddism and overmanning are not the problem. The problem is under-investment.

The hon. Member for Coventry, South-West picked up his crib a: one stage during his speech. I believe that I have the same crib. It is from the Engineering Employers federation. I am sure that the hon. Gentleman will confirm that that is the source of the figures that he quoted. I picked it up, too. I do lot think that there is much in it to use. It is stuff that we know. What was to be used is; what is not there. The Secretary of State had the booklet before him, and I challenged him to quote from it. There is not a figure there for capital investment per employee in the United Kingdom. Nor is there a comparative figure for capital investment for each of our major competitors, although the Secretary of State indicated that there was.

While the booklet says how bad is the gross value added per employee compared with that of our major competitors, it makes no statement about the level of capital investment per employee. That must be the direct measure. Indeed, the direct functional relationship between output and the employee is a function of the investment per employee.

I telephoned the federation this morning and asked where the figures were. I said that it must have them, but I was told "No. We never look at those figures. It takes weeks to get them out." Therefore, I went to the Library. I regret that I could obtain the figures only for 1977, but they are quite interesting. The figure for capital investment is £750 per employee for engineering industries in the United Kingdom. What is it for our major competitors? I asked for the figures for France, Germany, Japan and the United States. The average figure is £1,700—two and a half times as much. We are told that that has no bearing on the matter, but to argue about the necessity for improved productivity and far capital investment is like arguing about which is more desirable or necessary — eating or breathing. Both are necessary.

I think that we all agree that we could do better on productivity, but does anybody seriously believe that productivity is not related to capital investment? Is there my one who fails to realise that the level of productivity and output in this country is so low because: our capital investment is so low and who does not accept that a direct and inescapable function of capital investment is the level of manning and that investment must come before, and determine, the levels of manning? Any such person falls into the same category of ignorance as the Secretary of State I apologise to my right lion, and hon. Friends for laving had to deal with the Secretary of State, but he wanted to put some fundamental misconceptions across on us.

I have two further points. The first concerns the increase in the value of sterling and its effects on the levels of competitiveness of British manufacturing industry. I think that over a three-year span the rise of sterling has contributed about two-fifths towards our decline in unit labour costs, which I think both sides of the House will agree are the best measure of competitiveness;. In the past 15 months, when we have had the real bite from sterling, when we have seen it go through the roof, the ratio has been completely inverse. I shall be grateful if the Minister will confirm that and that in the past year the contribution from the revaluation of sterling towards the decline in our competitivenes has been about three-fifths, as stated by the economic correspondent of the Financial Times two weeks ago.

When we start from a position of decline, a decline that we all accept has gone on ever since the Second World War, and when we have less than half the capital investment of our competitors, how in heaven's name can industry cope with a deterioration in competitiveness over which it has no control, owing to the movement of the exchange rate—be it 40 per cent, or, even worse, 60 per cent.? There is no way in which whole sectors of British manufacturing and engineering industries can cope with a deterioration of that order. There is no way in which any country's industries could cope with it. No country has ever had to cope with so rapid a deterioration due to a causal factor over which it has no direct control.

I come, lastly, to the question of the recession, the great alibi, the great excuse, the one reason that the Government can put forward to explain that there is nothing that they can do about the situation. Output and unemployment seem to me to be the two key criteria for defining a recession, and I am sure that all hon. Members will agree. I challenge any hon. Member to name one country other than the United States that has suffered a drop in output and a rise in unemployment anything like that suffered by the United Kingdom. The rest will grow by only 2 per cent, next year. That is terrible. But we have to decline by 3½ per cent. What will it be in the following year— 1½ or 2 per cent.? If the Government's forecasts for this year are anything to go by, and if we have to plus them up in the way that we have for this year, it will be 2½ or 3 per cent. We see a 14 per cent, decline in manufacturing investment, and manufacturing output at the lowest that we have had, even lower than in 1974. Where is the world recession?

We are told that our exports are holding up magnificently, despite sterling. The reply to that is "Just wait. Look at the intake of orders." Our present exports reflect the position of 16 to 18 months ago. The intake of orders is nose-diving like the rest of the economy. The Prime Minister said that the whole world was suffering from a terrible recession — suffering equally. Equally, my eye! Only one country is suffering as we are, and that is the United States. All the rest are doing much better.

Let us take the movement in world trade. Whichever period one chooses between one year and two years, world trade in the goods that we export has grown by between 5 and 9 per cent. We have managed to maintain our volume of exports, but that is a poor performance. We have lost our market share, the most important thing to any industry in the home market or the world market.

I think that I have been brief. I have dealt with the four fundamental mistakes that the Secretary of State tried to put over on the House. I shall be grateful if the Minister who winds up the debate can correct me on any one of them.

We face the most critical point in our manufacturing history, far more critical than anything we faced before or during the last war. Unless we face it, realise how critical it is and take the necessary measures — which must affect our education system and must give our industries a breathing space, in terms of both protection and devaluation of sterling — we shall reach the point at which no Government will be able to control the social implications of our levels of unemployment.

8.27 pm

Mr. John Browne (Winchester)

I rise in support of the speeches of my hon. Friends the Members for Coventry, South-West (Mr. Butcher) and, particularly, Birmingham, Northfield (Mr. Cadbury), who made a major and interesting contribution.

I thought also that I would agree with the speech of the hon. Member for Swindon (Mr. Stoddart), at least initially, when he talked about certain failures of management, with which I agree. But I do not agree with talk about the failures of the Government's policies. The history of the failures and ills of the engineering industry and most of manufacturing industry goes back far further than the life of this Government. How could the 18 months of this Government have had such a dramatic effect on an industry?

I should like briefly to talk about what I see as the failures in management, the trade unions and the Government. First, I think that it is true that many managements have ignored what is called the product marketing mix. We have failed dismally in many areas, engineering included, to maintain up-to-date design of our products.

Many industries are producing products designed for the markets of 10 to 20 years ago. We have failed in that. We have also failed, because of a combination of circumstances, to maintain the quality of production for which we were once famous and for which people paid a premium and which gave our products added profits. We have failed to meet delivery schedules and, as a result, people buy products from other countries. We have been uncompetitive in our after-sales service.

All that has been shielded by both Socialist and Conservative Governments through regular devaluations of the pound so that we compete only on price. People faced with goods in a shop or yard which are badly designed, delivered late and subject to a bad after-sales service cannot afford not to buy them, because they are so cheap. That devalued pound is highly inflationary.

As my hon. Friend the Member for Northfield said so effectively, restrictive practices in the trade unions caused overmanning and higher costs in many industries, including engineering. That did great damage to our world-wide competitiveness.

Fragmented unions create an added cost and reduce our competitiveness further. We have experienced an abuse of trade union power by the driving of the employers' side of the bargaining table to accept wage demands totally unrelated to increases in productivity. Such settlements are marvellous in the short term. A trade union leader can tell the boys that he has managed to achieve a 26 per cent, increase. However, if production is minus 6 percent., jobs are put on the line the next year or the year after. Such problems have occurred for decades and we must face them.

This year, average wage increases amount to 26 per cent, while inflation is running at between 15 per cent, and 17 per cent. Production is down to minus 4 per cent, or even minus 6 per cent. This cannot continue. Most of the jobs involved are in jeopardy.

Another problem is the trade union resistance to new technologies. That is fatal when our only chance of remaining a developed nation is to embrace technology and to take on the technological revolution. As a result of the resistance, which management has accepted, we have low technology manufacturing base and chronic overmanning, and we are uncompetitive. The results of that are low profits and increasing unemployment.

The hon. Member for Coventry, North-West (Mr. Robinson) spoke of the relationship between investment, profits and competitiveness. The State-owned industries have shown to a graphic and vivid degree that throwing dollars or sterling at the problem will not solve it. Massive investment has taken place in State-owned industries. The results are appalling, even on a national scale. On an international scale they barely enter the chart.

Mr. Geoffey Robinson

There is some validity in what the hon. Gentleman says. However, does he agree that the claim by Sir Michael Edwardes in relation to British Leyland is that finally, by screwing ourselves up to invest in the Metro, we have achieved international levels of competitiveness and manning? If that can be done in one nationalised industry, should it not be extended throughout British industry?

Mr. Browne

If the hon. Gentleman is referring to the Metro specifically, I hope that he proves to be correct. However, I have my doubts about the Metro.

Both Labour and Conservative Governments have been guilty. The level of taxation has discouraged enterprise and risk-taking. New companies have not been formed and ideas have been thrown on to the scrapheap. New products have not come in and new jobs have not been created. That has discouraged investment in plant and equipment.

Secondly, these Governments have presided in the past 20 years over a dramatic decline in the standards of education, particularly mathematics and applied sciences, as my hon. Friend the Member for Northfield said. We have poured enormous amounts of money into such areas as sociological studies and ignored the basis of our education, particularly engineering, which we are now troubled about. All Governments have been guilty in the past of building into legislation an imbalance over wage bargaining. One side of the so-called bargain is entirely favoured. We are now paying the price. Both parties have been guilty in the past of encouraging overmanning for political reasons, because they have not had the courage to face high unemployment. They have encouraged State industries, and put pressure on private industry, to maintain jobs that were never profitable. We are now having to pay for that.

Uncompetitive companies have been shielded by subsidised services, often subsidised orders and devaluation of the pound. The hon. Member for Coventry, North-West made much play about sterling. I do not agree with him about the impact of interest rates on sterling. There are other factors. The relative inflation rate, the balance of payments and the petro element are far more important than interest rates. The House would do well to remember that in the early days there was $2.80 to the pound and not $2.36. Comparing the general value of sterling on the Smithsonian parity, it is now three-quarters or less of its value in 1971. Although we have recovered from $1.56, we were then right at the bottom of the barrel. Sterling is not strong. It is not nearly as strong as it was even 10 years ago.

As I said, the ills of the engineering and many other industries in this country go back a very long way. This Government have been in office for only 18 months. I fail to see how they can have caused the great ills of the engineering industry. Their policies are fundamentally realistic, although it is a pretty grim reality. [Interruption.]

The hon. Member for Nuneaton (Mr. Huckfield) laughs or sniggers. That is amazing. The reality that we are ill facing is very grim. The Government's policies have exposed and not caused the problems. We are looking at what we have created, perhaps together, over 20 years. It grossly unfair to blame the Government and suggest that they have caused the problems.

When the recession comes to an end, the engineering industry will be seen to have come through, although there will be slimming down and much reorientation, which is crucial to enable us to grasp the technological revolution and to start to be competitive again. Many of the questions raised in the debate will be answered in the market place by management, unions and workpeople in the engineering industry. We shall emerge with a stronger industry, with more technology, improved product design, better quality and a greater accent on delivering on time. In short, the engineering industry will emerge more competitive.

I urge Labour Members not to press the Government to save uncompetitive companies but to do much more to encourage; new and small businesses, to revive the competitiveness of industry and to create new and profitable jobs. It is only by those profits that we can have the standard of living that we have grown to expect. If we do not have that competitiveness, we shall lose it.

Mr. Deputy Speaker

Before I call the next speaker, I must tell the House that it has been intimated to me that the replies will begin at 9.10 pm. There are 14 hon. Members who wish to take part in the debate. If speeches are kept short, I shall be able to call a good number of them.

8.41 pm

Miss Joan Lestor (Eton and Slough)

The hon. Member for Coventry, South-West (Mr. Butcher) said that re doubted whether the children of the people who came to Slough to seek work in the 1930s would show the same initiative to move, because they wished the jobs to be brought to them rather than that they should move to the jobs. There would be little point in the children of the Welsh and the others who came to Slough to seek work row moving away, because there: is nowhere that they can go to find work. It was hinted that Slough is an area to which people from the Midlands and the North should come to find work. I have news for the House.

Conservative Members said that it is not fair to blame the Government for the decline in the engineering industry. That is true. It is not fair to blame them for all the history of the engineering industry. But the decline in the small firms in my constituency since the Government came to power has been more rapid, dramatic and tragic than anything that happened in Slough in the 1930s. That h the whole point about what is now taking place. Slough has a huge industrial estate and a variety of industry, largely small light engineering. Many of the employers do not live in Slouch, which is typical of so many employers v/ho do not live in the areas where their workers live. Many of them supported the Government because they were told that help would be made available to small firms. They are now faced with redundancies, closures and a recession the like of which Slough has never seen.

I was glad to hear some hon. Members refer to the Finniston report. Listening to the Secretary of State when he opened the debate, I thought that the only thing that he had heard of was the Luddites. One would have imagined that the Finniston report had never been written and its recommendations never made. The very countries that were held up by the right hon. Gentleman and some of his colleagues as examples to Britain were referred to by Finniston. The way in which they conduct their industry, the financing of their industry and the attitudes of their management are examples that the Finniston report recommended that Britain should follow. That is a recognition of the failure of Britain in many degrees to deal with the position.

One of the tragedies in Slough is the number of small firms of long standing that have closed, never to reopen. Another tragedy is associated with apprenticeships. It is true that we should pay more attention to physics and mathematics in our schools. That is one of the points made in the Finniston report. It is also* true that people who might have taken up apprenticeships in firms in my constituency can no longer do so because the firms have closed. Other firms that might have taken on apprentices will now not do so because they are fearful of the future. The whole area is no longer able to take on apprentices. We all know that if industry wants a skilled man or woman in four years' time, he or she must be trained now. But what is the point of telling youngsters in our schools to study mathematics and physics, obtain an apprenticeship and become an engineer when they are surrounded by firms that are closing down? They know that there will be no opportunity for them to exercise the skills that they have learnt. That is the vicious circle in which we have placed ourselves.

The Government fought the election on two main platforms. One platform was that Labour was not working. There was the implication that a Conservative Government would get the country going again. Secondly, Conservatives told us that they would give us more of our own money to spend as we liked. We all know what happened to that one. The Conservative Party cannot fight an election on the basis that Labour is not working and say after 18 months "It is not our fault. The responsibility lies with the Luddites. It is everything other than the Government's attitude that is wrong, including the long-term decline of industry."

I was struck by the way in which the Finniston report highlighted the different attitudes of management in many of the countries that are held up to us as examples and contrasted with attitudes in Britain. The report indicates that the manager who has been trained in the industry, who has an acquaintanceship with and a knowledge of what he is managing and who is identified with the enterprise and the end product of his firm makes a much better manager. Firms overseas which have been quoted in this place and held up as examples have managements with a far greater identification and a much better relationship with those in their employ, those whom they are managing, than the managements that characterise British firms.

Those factors were not mentioned by the Secretary of State. He claimed that it was all the fault of the workers, the Luddites. For example, he did not refer to lack of investment. The main features of the Finniston report, which chart a course that the country could take in engineering, were totally ignored by the right hon. Gentleman. He was prepared to criticise only one area. He did not refer to the tremendous study that was undertaken by the Finniston committee and the information that we now have about some of the problems in the engineering industry.

When my right hon. and hon. Friends talk about investment in industry, Conservative Members ask constantly "From where will you get the money?" They ask us whether the money will come from more taxation. This is an issue that was touched upon by my hon. Friend the Member for Swindon (Mr. Stoddart). I do not understand the logic of a Government who are prepared to spend £7 billion on unemployment benefit that is raised by direct and indirect taxation when we have unmet needs, when our industry is collapsing and when so many more skilled men and women are becoming unemployed.

How can the Government say that they cannot afford to finance industry and to provide guaranteed investment for the engineering industry when they are able to find sufficient money to ensure that people will remain idle for the rest of their lives? That is an immoral policy. It will do nothing except put back Britain's engineering industry 100 years.

8.48 pm

Mr. Tony Speller (Devon, North)

It is in a way strange that one of the few hon. Members in the Chamber who represents a constituency with green fields rather than bleak factories should dare to interpose in a debate that has been concentrated on the dangers facing the engineering industry.

I shall make three points that perhaps are of some value. First, we must consider demand. That is epitomised by all the foreign vehicles, fridges and television sets that we see about us. Secondly, despite all the sorrows and talk of sorrows, there is hope. There are glimmerings in my constituency and in the surrounding area of good things still existing and of better things to come. Thirdly, I do hot believe that any hon. Member on either side of the Chamber and in whatever party was not well aware that sooner or later the engineering industry was in for trouble. Surely, we were all aware of that as we entered any supermarket or any shop in the High Street selling appliances. It was obvious that shops were not selling British appliances.

It perhaps ill befits me to talk about heavy engineering. However, in the area I represent there is the most efficient use of engineering products in agriculture. From where do the products come? It is sad that not enough come from British factories. The demand is present, and praise be to the good work of the Government in agriculture. Even some of the cash is available. However, the products do not come from British factories. Some people may blame the trade unionists, and others blame the management. I suspect that we are all at fault, because we insist on blaming someone else for the frailties of ourselves and our country.

My life's work has been associated with the drawing office, which is the hand-maid of the engineering industry. It is the drawing office which produces the plans for the machines, but it is almost impossible to buy British goods for the drawing office. In the main, the factories in my constituency are small, efficient and prosperous, but I find that the machines which they have installed come from the United States, West Germany and Italy. Sadly, they do not come from our great Midland areas. The fault for that must lie with everyone, not just with one side or the other. It is no solution to say "You must buy British" if at the end of the day that means buying equipment which is less effective, less competitive and less profit-making in the world markets. Those are simple but self-evident facts.

In most of our factories, the product range is the same damned old range of years gone by. That is not what the customer wants. The attitude seems to be "It is what I wish to- make as a manufacturer." I resent that, as do the customers. As a result, they buy elsewhere.

I have just returned from a brief trip to some of the West African ex-colonial areas where, sadly, we left behind a legacy of everyone being a bureaucrat or chief but no one working in a factory. It is all very well to say that we should make resources available, but should not resources be directed towards making engineering the prestigious job that it was a century ago, when the aristocrats of the working world were those who created things? Where do our children go now? They may want to be teachers— there is nothing wrong with that—or bureaucrats. Like many hon. Members, they may wish to take up the law as a profession. I wonder how many hon. Members have actually worked with the products of our engineering industry and have come to know some of our own frailties.

This is not intended to be a parochial speech, but I should like to refer briefly to my area, which has been a development area. I pay great tribute to my predecessor, who worked extremely hard to attract industry. While there are problems associated with any recession, there are still men working full time and, happily, people on overtime. The reasons are not hard to find. There has never been any fat in our industries in the far West. They could never afford it, because communications took away that fat. They have had to contend with lack of roads and communications. Therefore, the industries in that area have to be good, tight and highly competitive. As a result, there are now good labour relations, with everyone working together to survive and, later, to prosper. Those industries are export minded and North Sea oil conscious and are looking for new markets.

We all receive letters, good and bad. I received one a couple of days ago from a private firm which is setting up a small industrial estate—a mere 12 sites of 1,500 to 2,000 sq. ft. It states: We understand from our architects that they sent to you copies of the plans for our proposed development at Raleigh. Since this application was publicised in the local paper, we have been approached by numerous companies and individuals interested in the units and it would appear, as we thought, that there is a desperate need for such units"— in this case, in Barnstaple. We thought that you may be interested in hearing about the response so far and we shall be most pleased to let you know of any further developments.

There is a demand. The goods that come from overseas and are sold in the High Streets represent that demand. We have the ability and the skill. There is no sense in backbiting. It would be much better if we worked together. If we cannot bury our hatchets, at least we can sharpen them and look for some export targets.

8.54 pm

Mr. Stan Thome (Preston, South)

We have heard a great deal from Conservative Members about Luddism, under-activity production fears, indecent exposure and various other matters. It can be summed up in the old song—"It's the workers what gets the blame". Looking back over the last 45 to 50 years, one sees that it has always been thus.

I lived near the Trafford Park area of Manchester for many years. It had the greatest industrial concentration in Europe. Now, it is composed largely of warehouses. The workers are also to blame for that, if we accept the views put forward by Conservative Members.

Lancashire was a major industrial centre. Dick Kerr's of Preston—now GCE—the British Aircraft Corporation and Leyland Vehicles ware household names in Lancashire. I propose briefly to deal with the problems of lie British Leyland bus and truck division.

This debate is about the decline of the British engineering industry. On Monday, British Leyland announced that 1,483 jobs were to go at its truck division —more than 10 per cent, of the work force. In a recent debate on unemployment, I referred to 2,500 redundancies. Many British Leyland workers fear that the next job loss in the new year will total about 1,000.

How does this situation arise? In the view of the work force—I think rightly—it is primarily due to the policies pursued by the Government. In 1979, the total United Kingdom truck market was approximately 80,000 units. In a document issued recently by the management, it has estimated that in 1981 it will be 45,000 units. In other words, in about 12 months there will be a drop of nearly one-half in the: volume of the; market.

In 1978 the heavy vehicles division of British Leyland, vim a revenue of £440 million, suffered a £90 million loss. In 1979 the division broke even. A significant loss is expected in the second half of this year, but no figures will lie released, for commercial reasons, it is said. Management decisions that have been taken over recent months have responded to the market, British Leyland has invested heavily in the bus and truck division. It has a great product range, it has marketed vigorously and the work force is highly productive, but the company has been deliberately pilloried by Government policies. The strength of the pound has caused extreme difficulties in the company's drive to improve sales, yet the Prime Minister, almost weekly, talks about lack of productivity, delivery dates, high earnings, the world recession and other matters.

With regard to high earnings, I hope that hon. Members on both sides of the House will note that, despite the arguments that were put forward about the need for workers in British Leyland to accept the 6.8 per cent, increase in earnings to protect their jobs, that has not produced the desired result. In consequence, jobs are more threatened rather than less.

Reference has rightly been made to the pound and the exchange markets. British Leyland's bus and truck division work force accepted a low pay settlement on the basis of job security. The works committee and the workers are this week involved in discussions on what action they should take to maintain their jobs. I observe that in a recent speech, reported in the press, Sir Michael Edwardes was confident that he had the shop stewards and the trade unions in British Leyland in the palm of his hand. He claimed that he could handle the shop stewards. His language is an open invitation to a serious conflict. Notwithstanding that, it is apparent that the major blame for contraction must be placed at the door of the Government, whose economic and industrial policies have created the shrunken market that now faces British Leyland truck division.

It is interesting to look at the question of supplies to the motor car industry. On Merseyside, a further 925 jobs are to go at Girling's, Bromborough. That company supplies British Leyland and others with brake linings and associated components. Girling's faces a decline in the market. One reason for this is import penetration from its own factories in France and Germany, where they can manufacture more cheaply because of the present value of sterling. Figures for the British truck market in June 1980 showed that British manufacturers produced 79.4 per cent, and 20.6 per cent, was imported, of which Volvo and Mercedes took 10 per cent.

Given present trends, imports are likely to rise. Hino is an illustration of that possibility. We need a radical change of policy. It is unlikely that the present Government will provide that. The sooner they depart, the better it will be for British industry and the British people.

9.3 pm

Mr. Kenneth Carlisle (Lincoln)

In the short time available, I shall concentrate on one point that has been mentioned several times in the debate, namely, productivity. I think that the House is united in the view that if we wish to compete and if we want our engineering industry to grow again, we must be more productive. The Opposition feel that this can be achieved primarily through investment. I certainly agree that investment is very important. But if they want investment, they must also accept: the need to control inflation, because long-term inflation militates against investment. If people are to invest, they need certainty. Rising inflation of the kind that we have had over the past few years has made it very difficult for businesses to plan and to give the security for investment. It has also gobbled up the extra cash in financing their stocks.

If we are to control inflation, we must look very carefully at the economy. In my view, the prime cause of inflation is simply that we have been living beyond our means. We have borrowed and spent money without earning it. We have spent money that we did not have. That means borrowing or printing money, and that means inflation. Therefore, if the Opposition genuinely want investment, they must seek to bring down inflation, which must mean that they wish Government expenditure to be controlled.

We must also accept that investment is not the only way to increase productivity. I am sure that the hon. Member for Coventry, North-West (Mr. Robinson) would agree with my right hon. Friend the Secretary of State that we must end restrictive practices. Our productivity as a country has been lower than that of our competitors, not only through lack of investment but because our machinery has been overmanned. The hon. Gentleman, in his business, will have recognised that. My hon. Friend the Member for Birmingham, Northfield (Mr. Cadbury) gave a vivid example of what actually happened. That experience is widespread. My own experience in an industrial engineering city is that if the recession is doing one thing, it is helping to get increased flexibility of manning.

Under great pressure of events, my experience is that management and work force have better contact and are trying to work their machinery much better than they have for many a long year. Therefore, we can hope to come out of this recession. If we keep these improved work practices, our productivity will naturally go up as demand improves. If at the same time we fight to control inflation and bring it down to 9 per cent, and then to 5 per cent., business will have the confidence to plan ahead to invest. We shall have better productivity and better manning of machinery, and the atmosphere of low inflation in which we can invest. Those two things together, which are both needed, can help our engineering business.

9.5 pm

Mr. George Park (Coventry, North-East)

One thing on which there has been agreement today is that there has been for some time, and there still is, a decline in British engineering. Our concern is over the acceleration of this decline, and we need go no further than the first nine months of the year, in which, according to Government figures, employment in engineering fell by 178,000 and in manufacturing as a whole by 400,000.

In the Department of Employment category covering engineering manual workers, there are now over 12 people for every vacancy. There have been more bankruptcies in the first six months of this year than there were in the whole of last year, and one in three of them applied to metal manufacture and engineering.

There has been much talk today about productivity, but surely it is a fact that nowadays good productivity depends much more on good equipment than on sheer physical effort. Therefore, it is depressing to see the decline in the machine tool industry. But before machine tools are produced or purchased one has to have a product, and this requires a continuous programme of research and development. Before one can research and develop, there have to be trained personnel. It goes right back down the line.

It is significant that the last official figures for research and development are for 1975, because companies are not forced to divulge how much they are investing in research and development. But it is a fair bet that in the current circumstances, because of the squeeze on profits, these investments are minimal, except where the Government are putting in the money. They are squeezed because profit margins have been badly mauled by high interest rates and an overvalued pound.

In the West Midlands we are heavily dependent on engineering, and we have seen that the overall decline in Great Britain has tended to concentrate in the West Midlands. We have had to bear the loss of 32 per cent, of all the engineering jobs that have gone between 1966 and 1977. These losses continue.

Since the sackings, or many of them, emanate from the motor industry, I should have liked, given time, to touch on the difficulties within that industry, but time does not permit me to do so. I should, therefore, like to direct my attention to a speech made by the director general of the National Economic Development Office, in which he called for a long-term industrial strategy. He wanted a reduction of interest rates, but he felt that this would ease only the short-term position and would not deal with the fundamental long-term position. He thought that the main thrust on the Government's part should be towards sustaining and improving the human and technological capability of the industry. This was one of three points that he raised, but, unfortunately, we know very well that the Government intend to pass the responsibility for industrial training back to the employers. In their present position, this must mean a deterioration in already inadequate provision.

Individual involvement in companies smacks far too much of industrial democracy, and that will get buried. North Sea oil revenues are to be dispersed in such a way that it will prevent their effective use in industry. Meanwhile, the Finniston report, which would have given status to engineering as a profession, has been effectively strangled, and the National Enterprise Board is in disarray. The Government say that industrial policy should be left for the most part to individual firms. Indeed, the Government make a virtue of having no industrial policy in the traditional sense. But they cannot escape the ultimate responsibility for setting the right framework in which industry can flourish.

The Government's policies on a host of factors, including public expenditure, monetary targets, taxation, interest rates, bank lending, exchange controls and industrial assistance—I apologise for banging them out like a machine gun — are accelerating the decline in engineering. The Government should heed the words of the Secretary of State for Employment when he says that the nation is deeply troubled and looks for leadership. For the sake of the nation, we must hope that we do not look in vain.

9.10 pm

Mr. Les Huckfield (Nuneaton)

The debate today has been interesting for the industrial experience that has been imparted, which obviously came from the shop floor in the case of this side of the House and from the House of Commons Library in the case of the other side. Many of the contributions from Conservative Members — apart from that of the hon. Member for Birmingham, Northfield (Mr. Cadbury) and one or two other Conservative Members, such as the hon. Member for Coventry, South-West (Mr. Butcher), who is dragged in occasionally because of his experience in industry—were completely devoid of industrial experience.

I return to the figures to which my right hon. Friend the Member for Deptford (Mr. Silkin) and other hon. Members referred — the figures from the Engineering Employers Federation short-term trends working party, which were published in November 1980. The hon. Member for Bath (Mr. Patten) saw me reading the pamphlet and tried to draw the attention of the House to the fact that much of the decline had happened under the Labour Government. I accept that, but I hope that he will dare to tell the House that the acceleration in decline that has taken place under this Government has been greater than that under any other Government since the war. The decline in metal manufacturing, the sector that we are discussing today, is 18 per cent, below the 1979 average in terms of output. That did not happen under a Labour Government or under any Government since the war.

Mr. Chris Patten

Will the hon. Gentleman look at table 2 of the indices of sales and net orders, and at the percentage changes for 1974 and 1975? There was a minus 18 per cent, figure for 1974, and a minus 22 per cent, figure for 1975. He should compare them with the admittedly gloomy figures forecast for 1980–81 and then tell me that the position today—I know it is bad—is uniquely appalling in comparison with some of the difficulties that we have had in the past.

Mr. Huckfield

I am glad that the hon. Gentleman is referring to sales and orders that would have been placed under a Conservative Government, but he cannot escape the fact—

Mr. Chris Patten

What, in 1975?

Mr. Huckfield

The hon. Gentleman must know something about the ordering and investment cycle, and le must realise that those orders would have been placed under a Conservative Government.

Mr. Chris Patten

What about 1978?

Mr. Huckfield

I am saying that those orders were placed during the period of office of a Conservative Government. It is the output that has declined, and in metal manufacturing the fall in output in the third quarter of this year was 18 per cent, below the average of 1979. That is a disgraceful figure, and it is a deliberate and direct result of the Government's policies.

I refer to the projected fall in investment and to the fact that the Government's policy on exchange rates means that since 1975 our industry has suffered a 50 per cent, price disadvantage compared with that of Japan. In mechanical engineering alone, 27,000 jobs disappeared in the first 10 months of this year. The hon. Member for Bath may have a point when he says that we cannot blame the present Government for everything. Certainly, the decline that we have discussed this afternoon has been long-term, reaching back to before the beginning of the century. I blame the Government, however, for having deliberately sat back on I heir hands and done nothing.

The Finniston figures are well known. They show a declining market share in practically every sector and that once-thriving sectors, like motorcycles, office equipment and cutlery, have practically disappeared. They show that our productivity has, by comparison, fallen in many sectors. Also, as the many reports from which hem. Members have culled their facts and figures have shown, our engineering industry is concentrating on low-value, less advanced products, which means that we tend to export cheap and import dear.

There is little difference between the two sides of the House on that analysis. However, we on the Labour Benches worry because the Government believe that in some mystical way North Sea oil can even take the place of manufacturing industry. I hope that the Secretary of State for Industry has read the Finniston report. It does not agree with much of what he said this afternoon. Paragraph 1.12 on page 13 deals specifically with that point. It states: There is no prospect that the contributions from natural resources (including North Sea oil and gas or coal) or growth in ether sectors of the economy can generate wealth on the scale which can be earned by manufacturing industry".

We are specifically told, therefore, that the contribution to the gross national product by the manufacturing sector cannot be replaced.

The hon. Member for Bath quoted my references in our recent Friday debate on the Finniston report to similar views being expressed by the Bank of England and the TUC about the decline in our manufacturing performance. For those two bodies to express the same view about the Government's policy was a substantial achievement. Now, however, the Bank of England, the TUC and the CBI as well are saying the same. When that happens, it is surely time even for the present Secretary of State to think again.

I predict that our North Sea oil surplus—our North Sea buffer—gives us possibly 10 years in which to do something about regenerating our manufacturing base.

The difficulty is that if we are to get up to the kind of skilled levels in engineering that Finniston was predicting, that alone will take five and a half to six years just in terms of training the people involved. In other words, if we do not act soon on Finniston, it will be too late within the time constraints and the time frame that we have.

Finniston put his finger on it when he said: The Engineering Authority would provide both a focus and an impetus for improvements in all the diverse aspects of the engineering dimension, at national and company level, considered in this Report. A great many of our recommendations"—

I hope that the Secretary of State is listening— rest in some degree upon the establishment of the Authority and we cannot stress too strongly the importance we attach to this particular proposal.

I do not think much of the compromise solution put forward by the Government so far. The Under-Secretary of State—the hon. Member for Arundel (Mr. Marshall)—was urging his hon. Friend the Member for Northfield to be patient and to give it time. What he was saying was that the Government's preferred solution was based on consensus. Of course, it is based on consensus—the consensus of the engineering institutions and their council, which have been precisely the institutions that have brought about the kind of failures that we have been discussing. The Under-Secretary says "Be patient, because it is based on consensus", but it is based precisely on the consensus that has failed this country, and particularly the engineering industry. That is why I say that we cannot base any solution on the institutions that have failed engineering. We can base a solution only on setting up the authority. I am very glad that my right hon. Friend the Member for Deptford has given that commitment today.

If the Secretary of State examines any of the objective or independent analyses of the engineering industry, he will see that the solutions to these problems are complex—much more complex than the rather offensive diagnosis that he made. I say that because I feel that many of my right hon. and hon. Friends were offended by his diagnosis today. There were 1930s overtones in what he said—not just 1930s British overtones, but 1930s German overtones as well. [HON. MEMBERS: "Rubbish."] When the Secretary of State constantly refers to trade unions in the way in which he does incessantly in the House, and when he constantly refers to Luddism in the terms that he always uses—and he is talking directly and only about the trade unions—I and many of my hon. Friends detect such overtones. I find those kinds of continuing references to a trade union movement that has made a substantial contribution to British manufacturing industry offensive. I hope that the Secretary of State will read some of the reports that he bandied about today.

The Secretary of State referred to the pilot study of performance and productivity in the United Kingdom engineering industry which was produced by the Engineering Employers Federation in July 1979. Although he waived it about in support of his argument, what a pity it is that he did not read page 34, where it says: Too often the assumption is made that productivity gains are mainly brought about by finding ways of persuading direct workers to work harder. That is not the position taken in this report. Both our statistical analysis and our list of characteristics of successful firms, suggested by firms themselves, confirm that the problem is much more complex, and that its solution lies principally in other directions.

The other directions referred to are matters such as: Management approach, company size, product and marketing strategy, manufacturing strategy, research and development".

But, most significantly, industrial relations and payment systems are listed last in the order of priority which the Engineering Employers Federation pilot study seeks to give. The factor to which the Secretary of State attaches the greatest importance is the one to which the Engineering Employers Federation, in its pilot study, attaches the least importance. It places much greater emphasis on management, research and development and other factors to which I have referred.

The right hon. Gentleman went on to talk about high pay being responsible for the present situation. His view was that wage-push inflation was driving firms out of business. If the right hon. Gentleman wants to deny that, I shall give him the chance.

Sir Keith Joseph

I was saying that high earnings increases, unaccompanied by any increase in productivity, were a major factor in creating unemployment, particularly in the last two years, when it has accounted for about three-fifths of the reduction in our competitiveness. I was also saying—I am grateful to the hon. Gentleman for giving way—that it is in earnings, coupled with productivity, in other words, unit labour costs, where we suffer most, thanks, I say again, to uncomprehending trade unions.

Mr. Huckfield

The right hon. Gentleman has said it yet again. In his eyes it is all the fault, and only the fault, of the trade unions. I am glad that the right hon. Gentleman was tempted to the Dispatch Box. Again, he has not read the evidence that is available. I should like to refer to the Sussex European Research Centre's 1978 study of "Engineering in Britain, West Germany and France". This is a recent and authoritative study. It must have been brought to the right hon. Gentleman's attention, because I know that he listens occasionally to his advisers.

The right hon. Gentleman said some specific things about pay levels. The report states: In Britain, there are indications, if only faint, that branches with high pay levels are quite often those with high profit rates.

The report also says that the main difficulty was that the fact that one got high profit rates did not mean that one got high investment. The right hon. Gentleman should place much greater reliance and emphasis on the independent studies that have been carried out — not on his own biased, subjective and personal opinions, but on independent, objective studies into the industry about which we have been talking.

Mr. Chris Patten

Will the hon. Gentleman give way?

Mr. Huckfield

I have given way to the hon. Gentleman once. If one studies the report of the Engineering Employers' Federation and that of the Sussex European Research Centre, one sees that there is little to confirm the conclusions to which the Secretary of State has come.

The House is entitled to ask how we are to get trade union co-operation with management when the Secretary of State expresses the views that we have heard this afternoon. How will we get the spirit of consensus and harmony that he was trying to encourage when he makes these remarks about trade unions? How does the right hon. Gentleman, who claims that high pay settlements are closing down firms, explain the Bowater closure at Ellesmere Port, where the management says that this is one of its most efficient plants, based on internationally recognised comparisons, and it still has to close? How does he explain the closing of International Harvesters at Doncaster when again, by international comparisons, the company says that it is its most efficient plant? How does he explain redundancy upon redundancy and closure upon closure when the firms themselves have made it clear that the reason for the closures and the redundancies is either the high exchange value of the pound or the high interest rates which are the deliberate result of his Government's policy? We have example after example of precisely that happening.

I wanted to go on to talk about the growth sectors in engineering. I was hoping to hear about them from the Secretary of State, because the Sussex research unit, the Henley centre and various other people have identified growth sectors. However, I suppose that the Secretary of State does not think that he has a role in identifying growth sectors. Perhaps that is why we did not hear of any growth sectors that his Department had identified. When I was in the Department, it had identified several "winners". I wish that we had heard a bit more about them from the Secretary of State today. As I say, it may be that he does not think that that is his job any more.

Let us consider some of the industries to which my hon. Friends have referred. Looking, for example, at the car industry, is it not tragic that the prevalent suspicion in the industry is that Talbot is on the brink of pulling out of this country completely, that Vauxhall has all its plants on the temporary short-time working compensation scheme and that the Ford management, because of its worry about what it has just seen in Japan, is gradually shifting the emphasis of production away from this country into other parts of Europe and, possibly, other parts of the world? Does it not worry the right hon. Gentleman that he has chosen to treat British Leyland in such a way that, at the same time as the French Government are prepared to use every available fiscal and financial resource to ensure that Renault and Peugeot-Citroen will lead the world in automobile engineering, he insists on keeping British Leyland on a kind of drip feed, because that is the basis of penury which he insists upon for supporting our only domestically owned car manufacturer?

Mr. Kenneth Carlisle

The hon. Gentleman is not being fair. Surely, we have given a huge amount of money to British Leyland, year in and year out, and we are pledged to do so in the next two years.

Mr. Huckfield

The last Labour Government committed £1,500 million in expenditure terms to British Leyland, beginning in 1975. This Conservative Government were asked in October 1979 for £2,000 million by a joint delegation consisting of management and unions. Last December the Government gave British Leyland, in new money, a mere £200 million.

Mr. Kenneth Carlisle

Mere?

Mr. Huckfield

Every other major manufacturing Government in the Western world with which we are competing directly are willing to put twice as much this year and every year into their car industry and into many other industries. That is the kind of comparison that we have to make.

From international comparisons, one concludes only that this Government will go on behaving as though there is nothing that they can do. They are behaving as though the decline in cur manufacturing industry, especially our engineering sectors, is the inevitable consequence of economic forces that are totally beyond their control. That is how they conduct their industrial policy.

I reject that attitude totally. It is economic nonsense. They know that there is a great deal of economic support and public assistance that they can give. If the Secretary of State asks from where the money is to come, how about stopping some of the North Sea oil money from being invested abroad for a start? I remind the right hon. Gentleman that since his Government abolished exchange controls about £3,000 million which could have gone into factories and jobs has been invested abroad.

We have now a deliberate attempt on the part of the Government to prevent North Sea oil spending power from being spent in this country. North Sea oil spending power is being dissipated on imported consumer goods, unemployment benefits and tax handouts to the rich. That is where the North Sea oil money is going. When the Secretary of State asks where we shall get the money from, that is the answer. That is what we can afford to do. Those are the kinds of policies that we should be pursuing.

Under this Government's economic policy, we are going down exactly the same route as the Dutch economy went down when it had the brief advantage of North Sea gas. We are moving into a balance of payments surplus and a period of continued currency depreciation. As happened with the Dutch, our industrial base is simultaneously diminishing. With that lesson before us, it is not the Dutch that we should be following but the Norwegians. If we manage the economy as the Norwegians do theirs, perhaps we should be proud to have unemployment at only 1.4 per cent.

We should have a relaxation of the ridiculously strict attitude to the public sector borrowing requirement. We need import controls, a depreciation in the international exchange value of the pound and a fall in minimum lending rate.

Perhaps the Conservative Party represents the kind of people who, at the end of the day, can afford to leave the country. We represent the working people who have given their working lives to manufacturing industry. It is on behalf of the people whom we represent, on behalf of their jobs and on behalf of British industry that I urge my right hon. and hon. Friends to join me in the Division Lobby to save British industry and to save the jobs of the people whom we represent from the Secretary of State and the Government's Policies.

9.37 pm

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

want to make a constructive speech, but first perhaps I may deal with some of the remarks of the hon. Member for Nuneaton (Mr. Huckfield), who claims that there has been a bigger decline in the recession this time than at any time before. He must know that every recession in the past 25 years has taken us deeper than the previous one. What is happening now is no different from what has happened before, It reveals the relative decline of British industry more starkly than it has been revealed before.

The hon. Gentleman gave the House some figures and suggested that there had been a decline of about 18 per cent. in the metal manufacturing industries. But we are debating the engineering industry. At least half the hon. Gentleman's figures come from the steel industry, which we know is in decline. The hon. Gentleman is shaking his head. If he looks at the Employment Gazette, he will find that I am correct.

The hon. Gentleman attacked my right hon. and learned Friend the Chancellor of the Exchequer for having ended exchange controls on the movement of capital out of this country. My right hon. and learned Friend did that to take the pressure off sterling, in order to encourage sterling to go abroad. The hon. Gentleman has heard one hon. Friend of his after another say that sterling is too high. When the Government do something about it, the hon. Gentleman attacks them for doing it.

The right hon. Member for Deptford (Mr. Silkin), whom I congratulate on his safe return to the Shadow Cabinet, attempted to castigate the Government. It is easy to say how difficult the problem is, but he showed his difficulty when he started to propose the remedies, such as massive public intervention. We heard tired, worn-out, rejected concepts. The prescription of an £18 billion public sector borrowing requirement was suggested by his hon. Friends. That is a prescription either for tax at such a level that it destroys motivation, and so destroys the opportunity for the expansion of British industry, or for printing money so that we return to rip-roaring inflation. I am sure that the House will reject that prescription.

I do not underestimate the seriousness of the problems facing the engineering industry. It is serious for employers who have experienced a 7.4 per cent. fall in output since 1978. It is serious for workers because of the 5.1 per cent. decline in jobs.

As a party and as a Government, we care very much about the rising levels of redundancies and unemployment. I say that with a deep personal concern. My father became unemployed in the 1920s depression after working in the shipbuilding industry. I recognise the personal and family problems and the loss of esteem that comes to many. I recognise the understandable feelings of resentment. The hon. Member for Eton and Slough (Miss Lestor) suggested that it is better to subsidise jobs than to pay unemployment allowances. If it is so easy, why did unemployment double when the Labour Government were in office?

The hon. Member for Consett (Mr. Watkins) referred to the serious position in his constituency and the rising number of redundancies and levels of unemployment in his region. He referred to Ransome Hoffman Pollard. I share his deep concern about the problems. I hope to pay a further visit to Consett to see whether the Government can do anything more to help in practical terms. I join the hon. Member in his welcome to Stelmo. When I spoke to Mr. Jessop, the chairman, he said that he was delighted that Consett has a good, co-operative labour force which is keen, helpful and prepared to accept shift work. That is a good commendation for attracting industry to the town.

Mr. Watkins

I quoted Mr. Jessop in my speech. I also said that providing 80 jobs, which is welcome, is a drop in the ocean in an area which is moving to 50 per cent.-plus unemployment. I appreciate that the Minister has visited my constituency. I can assure him that he will receive a warm welcome when he comes again.

Mr. Mitchell

We must ask why the decline in the engineering industry has taken place and examine what can be done about it. The first reason is that there is a world recession. My hon. Friend the Member for Eastleigh (Sir D. Price) mentioned that, as did my hon. Friend the Member for Birmingham, Northfield (Mr. Cadbury). I shall give the House the latest three-month figures from the Engineering Employers Federation survey—a working party made up of employers, trade unionists and the Government. In that three months the United Kingdom experienced a 6.3 per cent. fall in industrial production. By comparison, France experienced a 6.6 per cent. fall, West Germany a 9.4 per cent. fall and the United States a 19.8 per cent. fall. No one can suggest that Britain is alone in the recession or that our recession was more severe in recent months than in other countries.

That is not the whole picture. There is a world recession, but there is something inherently wrong with our set-up. Too often United Kingdom firms are not competitive. Why? We have been told time and again that it is because of the level of sterling. However, the level of sterling today is no higher than in 1973. Since then, two distinct things have happened. For convenience I shall divide the period in two—from 1973 to 1978 and the subsequent period.

Between 1973 and 1978, engineering industry output per head—productivity—rose by 2.1 per cent. Engineering earnings rose by 106 per cent. Earnings doubled for an increase in productivity of only 2.1 per cent. Is it, therefore, surprising that we have difficulty in being competitive? Labour Members will say that that is not the whole story, and they are right. Wages also increased in our competitor countries. However, we increased our wages by 51 per cent. more than our competitors—all for a 2.1 per cent. increase in productivity. In addition, our competitors' productivity increased massively during that period. Naturally, the result was an enormous decline in our competitiveness. However, throughout the period from 1973 to 1978 we were able to cover that up and escape from it by devaluing, cheapening and debauching our currency. Year by year our currency went down and we were able to escape the consequences of our folly. During that period the dollar relationship to the pound fell from 2.45 to 1.92—29 per cent. in trade weighted terms.

In the period from 1978 onwards, the chickens started to come home to roost. In that period we paid ourselves 20 per cent. more for no increase in productivity, but our escape route was denied us. No longer could we escape by reducing the value of our currency. North Sea oil revenues created a situation in which, across the world, company treasurers, individual traders and Chancellors of the Exchequer in small countries felt that they could invest their money in this country with safety and security. Sterling therefore rose by 15 per cent. Our escape route has gone, but sterling is no higher than in 1973.

Who is responsible for what has happened to the engineering industry in the period from 1973 to 1980? The industry's competitiveness has steadily declined, but it is only since sterling ceased to be able to be reduced that our chickens have come home to roost and we have had to face the consequences of our folly. Year after year, Conservative spokesmen have warned of the consequences of pay increases not covered by productivity. Those warnings have gone unheeded. I say with all the sincerity at my command that that warning stands today. Those negotiating wages, not only in the engineering industry but throughout British industry, must recognise that if pay increases are not covered by increases in productivity they will lead directly to increased job losses.

Mr. Joseph Dean

The recent settlement of the Confederation of Shipbuilding and Engineering Unions was around 8 per cent. Does the Minister consider that extravagant?

Mr. Mitchell

The question is whether it is covered by productivity. My hon. Friend the Member for Coventry, South-West (Mr. Butcher) said that there was nothing wrong with high wages. I agree with him, provided that there is increased productivity to cover them. Increased productivity leads to increased profit which can be shared. The problem is those who try to share in the profits when they have not been made.

As I go around the country, I see that all is not gloom. My hon. Friend the Member for Devon, North (Mr. Speller) made it clear that in his part of the country industry is not doing too badly. It is those who are tied to the motor industry, and especially those tied to low and middle technology, who are in trouble. Electronics, high technology, the aircraft industry and scientific instruments are areas where trade is not too bad at present. Indeed, 23 per cent. of mechanical engineering firms report that their production is held back for lack of skilled workers.

My hon. Friend the Member for Bath (Mr. Patten) rightly said that with competition it is not only a question of price but of design, marketing, delivery and after-sales service. I recently visited Cornwall, not far from the constituency of the hon. Member for Truro (Mr. Penhaligon). I toured a factory and saw a piece of machinery that had been delivered recently. It was Japanese. I tut-tutted about that and asked whether the firm had sought British quotations. It said that it had done so but that the Japanese had been able to provide exactly what it wanted and at a slightly cheaper price. I thought that that was a pity. The firm said that when the machine was delivered a Japanese gentleman called on the same day, complete with a paint brush, with which he touched up the bruising on the machinery that had occurred during transit and installation. That is after-sales service of a standard that, I am afraid, we all too often do not achieve in Britain. It was tragic to find that, even after the machine had been installed, the firm was still receiving belated quotations from British companies. In terms of salesmanship and efficiency in marketing, that is not good enough.

Not enough has been spent by industry on research and development, modern investment, design and marketing. The key question that we must ask ourselves is why it has not been spent. Both sides of the House are agreed that money should be spent on those things. The money has not been spent because productivity has been too low, profits have been too low and not enough money has teen available for investment. When profits have: been made, too much of them has been grabbed by the trade unions instead of being ploughed back into business. The main reason why money has not been invested in growth, research and development and new products is inflation.

Between 1973 and 1978, prices in Britain doubled—and a Conservative Government were not in office. What did that mean for industry? Every business throughout the engineering industry has been cash-hungry. The level of prices doubled, which meant that double the money had to be tied up in work in progress, in stocks and in raw materials. All that money went simply to help the firms to stand still instead of going into research and development, new products and an expansion of business. Those five tragic wasted years, when business had to plough in double the money to stand still, pre-empted by inflation the resources that should have gone into the new investment for which Opposition Members have been calling.

If we are to lay the foundations of recovery, it is right that our first attack should be on the forces of inflation. That is the Government's first priority. Following that, we can start to witness the resources and profits of industry ploughed back into new products, new growth and new jobs. Surely, that is what we all want to see.

Yesterday I met a man who had eight products in the pipeline. He would like to bring them forward. He has not been able to do so for lack of resources. That is a tragedy that is repeated time and time again throughout British industry.

My hon. Friend the Member for Sowerby (Mr. Thompson) said that inflation is the greatest single problem that industry faces in his constituency. How right he is, not only for the reasons that I have given but for the reason that he gave—namely, that firms that quote for delivery on exports two years ahead find that by the time they come to deliver their profit has been eroded by inflation and they do not have the money to plough back into the expansion of their industry. The control of inflation is the key to resources being available for investment.

My hon. Friend the Member for Northfield talked about productivity and not merely investment. Of course, it is important to have new machinery and more investment. It is important however, that we use the investment that we have properly. My hon. Friend drew attention to his work experience that told him that to repair one machine in a British factory required an electrician, a fitter, a millwright and a sheet metal worker. The equivalent repair in an American factory was carried out by one man, a mechanic. It is that unnecessary overmanning that is a source of so much of our failure to compete.

The hon. Member for Sheffield Attercliffe (Mr. Duffy) talked wildly about the Government dismantling regional development policies. The hon. Gentleman does a grave disservice, both to regional policy and to the problems of those who are unemployed in special assisted areas, in suggesting that the Government are not maintaining, as they are, substantial assistance to industry. In the special development areas there is regional development grant of 22 per cent. There is selective financial assistance under section 7. There are various forms of assistance under the product and process development scheme. That is a 25 per cent. grant. There is Government assistance for microelectronics. I wish that the hon. Gentleman would speak to his hon. Friend the Member for Leeds, West (Mr. Dean), who complained about one of the companies in his constituency moving to Cornwall, to a special development area. The hon. Gentleman illustrated that the policy of concentrating help on the areas of greatest need is working in that instance.

I do not deny that British industry has been going through a tough year. That applies to engineering and the wider area of industry generally. However, Labour Members can help a great deal. They can help by talking to the trade unions and explaining to them that it is essential to have their co-operation.

Mr. Les Huckfield

Tell the Secretary of State that.

Mr. Mitchell

When management knows that investment will lead to the right manning level and will not result in the same number of employees standing around the same machine and not operating it, it will invest much more often than it is prepared to do at present.

We are laying the foundations for business expansion. First, we must get inflation under control. The minimum lending rate has already come down by two points and it will come down further in due course. Finally, there is a sense of realism on the workshop floor. That has been mentioned by several of my hon. Friends. We should seize the opportunity to build bridges. We should rid ourselves of the "them and us" attitude and seek unitedly in British factories to build what consumers want at a price that they are prepared to pay.

Question put, That the original words stand part of the Question:—

The House divided: Ayes 234, Noes 294.

Division No. 10]	[10 pm
AYES
Abse, Leo	Cook, Robin F.
Adams, Allen	Cowans, Harry
Allaun, Frank	Craigen, J. M.
Alton, David	Crowther, J. S.
Anderson, Donald	Cryer, Bob
Archer, Rt Hon Peter	Cunliffe, Lawrence
Ashley, Rt Hon Jack	Cunningham, G. (Islington S)
Ashton, Joe	Dalyell, Tam
Atkinson, N.(H'gey,)	Davidson, Arthur
Bagier, Gordon A.T.	Davies, Rt Hon Denzil (L'lli)
Barnett, Guy (Greenwich)	Davies, Ifor (Gower)
Barnett, Rt Hon Joel (H'wd)	Davis, Clinton (Hackney C)
Bennett, Andrew (St'kp't N)	Davis, T. (B'ham, Stechf'd)
Bidwell, Sydney	Deakins, Eric
Booth, Rt Hon Albert	Dempsey, James
Boothroyd, Miss Betty	Dewar, Donald
Bottomley, Rt Hon H.(M'b'ro)	Dixon, Donald
Bradley, Tom	Dobson, Frank
Bray, Dr Jeremy	Dormand, Jack
Brown, Hugh D. (Provan)	Douglas, Dick
Brown, R. C. (N'castle W)	Douglas-Mann, Bruce
Brown, Ron (E'burgh, Leith)	Dubs, Alfred
Buchan, Norman	Duffy, A. E. P.
Callaghan, Jim (Midd't'n &P)	Dunn, James A.
Campbell, Ian	Dunnett, Jack
Canavan, Dennis	Dunwoody, Hon Mrs G.
Cant, R. B.	Eastham, Ken
Carmichael, Neil	Ellis, R. (NE D'bysh're)
Carter-Jones, Lewis	English, Michael
Cartwright, John	Ennals, Rt Hon David
Clark, Dr David (S Shields)	Evans, loan (Aberdare)
Cocks, Rt Hon M. (B'stol S)	Evans, John (Newton)
Cohen, Stanley	Ewing, Harry
Coleman, Donald	Faulds, Andrew
Concannon, Rt Hon J. D.	Field, Frank
Conlan, Bernard	Fitch, Alan

Flannery, Martin	Morris, Rt Hon A. (W'shawe)
Fletcher, Ted (Darlington)	Morris, Rt Hon C. (O'shaw)
Foot, Rt Hon Michael	Morton, George
Ford, Ben	Moyle, Rt Hon Roland
Forrester, John	Newens, Stanley
Foster, Derek	Oakes, Rt Hon Gordon
Fraser, J. (Lamb'th, N'w'd)	Ogden, Eric
Freeson, Rt Hon Reginald	O'Halloran, Michael
Freud, Clement	O'Neill, Martin
Garrett, John (Norwich S)	Orme, Rt Hon Stanley
George, Bruce	Owen, Rt Hon Dr David
Gilbert, Rt Hon Dr John	Paisley, Rev Ian
Ginsburg, David	Park, George
Golding, John	Parker, John
Gourlay, Harry	Parry, Robert
Graham, Ted	Pendry, Tom
Grant, George (Morpeth)	Penhaligon, David
Grant, John (Islington C)	Powell, Raymond (Ogmore)
Hamilton, James (Bothwell)	Price, C. (Lewisham W)
Hamilton, W. W. (C'tral Fife)	Race, Reg
Harrison, Rt Hon Walter	Radice, Giles
Hart, Rt Hon Dame Judith	Richardson, Jo
Hattersley, Rt Hon Roy	Roberts, Albert (Normanton)
Haynes, Frank	Roberts, Ernest (Hackney N)
Healey, Rt Hon Denis	Roberts, Gwilym (Cannock)
Heffer, Eric S.	Robertson, George
Hogg, N. (E Dunb't'nshire)	Robinson, G. (Coventry NW)
Homewood, William	Rodgers, Rt Hon William
Hooley, Frank	Rooker, J. W.
Horam, John	Roper, John
Howell, Rt Hon D.	Ross, Ernest (Dundee West)
Howells, Geraint	Rowlands, Ted
Huckfield, Les	Ryman, John
Hudson Davies, Gwilym E.	Sandelson, Neville
Hughes, Mark (Durham)	Sever, John
Hughes, Robert (Aberdeen N)	Sheerman, Barry
Hughes, Roy (Newport)	Sheldon, Rt Hon R.
Janner, Hon Greville	Short, Mrs Renée
Jay, Rt Hon Douglas	Silkin, Rt Hon J. (Deptford)
John, Brynmor	Silkin, Rt Hon S. C. (Dulwich)
Johnson, James (Hull West)	Silverman, Julius
Johnson, Walter (Derby S)	Smith, Rt Hon J. (N Lanark)
Johnston, Russell (Inverness)	Snape, Peter
Jones, Rt Hon Alec (Rh'dda)	Soley, Clive
Jones, Barry (East Flint)	Spearing, Nigel
Jones, Dan (Burnley)	Stallard, A. W.
Kaufman, Rt Hon Gerald	Steel, Rt Hon David
Kerr, Russell	Stewart, Rt Hon D. (W Isles)
Kilroy-Silk, Robert	Stoddart, David
Kinnock, Neil	Stott, Roger
Lamborn, Harry	Strang, Gavin
Leadbitter, Ted	Straw, Jack
Leighton, Ronald	Summerskill, Hon Dr Shirley
Lestor, Miss Joan	Taylor, Mrs Ann (Bolton W)
Lewis, Ron (Carlisle)	Thomas, Dafydd (Merioneth)
Litherland, Robert	Thomas, Jeffrey (Abertillery)
Lofthouse, Geoffrey	Thomas, Mike (Newcastle E)
Lyon, Alexander (York)	Thomas, Dr R.(Carmarthen)
Lyons, Edward (Bradf'd W)	Thorne, Stan (Preston South)
McCartney, Hugh	Tilley, John
McDonald, Dr Oonagh	Tinn, James
McElhone, Frank	Torney, Tom
McKay, Allen (Penistone)	Varley, Rt Hon Eric G.
McKelvey, William	Wainwright, E.(Dearne V)
MacKenzie, Rt Hon Gregor	Walker, Rt Hon H.(D'caster)
Maclennan, Robert	Watkins, David
McNally, Thomas	Weetch, Ken
McTaggart, Robert	Wellbeloved, James
McWilliam, John	White, Frank R.
Marks, Kenneth	White, J. (G'gow Pollok)
Marshall, Dr Edmund (Goole)	Whitehead, Phillip
Marshall, Jim (Leicester S)	Whitlock, William
Martin, M (G'gow S'burn)	Wigley, Dafydd
Mason, Rt Hon Roy	Willey, Rt Hon Frederick
Maxton, John	Williams, Rt Hon A.(S'sea W)
Maynard, Miss Joan	Wilson, Gordon (Dundee E)
Mellish, Rt Hon Robert	Wilson, Rt Hon Sir H.(H'ton)
Mikardo, Ian	Wilson, William (C'try SE)
Millan, Rt Hon Bruce	Winnick, David
Mitchell, R. C. (Soton Itchen)	Woodall, Alec

Woolmer, Kenneth	Tellers for the Ayes:
Young, David (Bolton E)	Mr. Joseph Dean and
	Mr. Austin Mitchell.

NOES
Aitken, Jonathan	Emery, Peter
Alexander, Richard	Eyre, Reginald
Ancram, Michael	Fairgrieve, Russell
Arnold, Tom	Faith, Mrs Sheila
Aspinwall, Jack	Farr, John
Atkins, Robert (Preston N)	Fell, Anthony
Baker, Kenneth (St.M'bone)	Fenner, Mrs Peggy
Baker, Nicholas (N Dorset)	Finsberg, Geoffrey
Beaumont-Dark, Anthony	Fisher, Sir Nigel
Bell, Sir Ronald	Fletcher, A. (Ed'nb'gh N)
Bendall, Vivian	Fookes, Miss Janet
Benyon, Thomas (A'don)	Forman, Nigel
Benyon, W. (Buckingham)	Fowler, Rt Hon Norman
Best, Keith	Fox, Marcus
Bevan, David Gilroy	Fraser, Rt Hon Sir Hugh
Biffen, Rt Hon John	Fraser, Peter (South Angus)
Blackburn, John	Fry, Peter
Blaker, Peter	Galbraith, Hon T. G. D.
Body, Richard	Gardiner, George (Reigate)
Bonsor, Sir Nicholas	Gardner, Edward (S Fylde)
Boscawen, Hon Robert	Garel-Jones, Tristan
Bottomley, Peter (W'wich W)	Glyn, Dr Alan
Bowden, Andrew	Goodhart, Philip
Boyson, Dr Rhodes	Goodhew, Victor
Bradford, Rev R.	Goodlad, Alastair
Braine, Sir Bernard	Gorst, John
Bright, Graham	Gow, Ian
Brinton, Tim	Gower, Sir Raymond
Brittan, Leon	Gray, Hamish
Brocklebank-Fowler, C.	Greenway, Harry
Brooke, Hon Peter	Griffiths, E.(B'y St. Edm'ds)
Brotherton, Michael	Griffiths, Peter Portsm'th N)
Brown, M.(Brigg and Scun)	Grist, Ian
Browne, John (Winchester)	Grylls, Michael
Bruce-Gardyne, John	Gummer, John Selwyn
Bryan, Sir Paul	Hamilton, Hon A.
Buchanan-Smith, Hon Alick	Hamilton, Michael (Salisbury)
Buck, Antony	Hampson, Dr Keith
Budgen, Nick	Hannam, John
Bulmer, Esmond	Haselhurst, Alan
Burden, Sir Frederick	Hastings, Stephen
Butcher, John	Havers, Rt Hon Sir Michael
Butler, Hon Adam	Hawksley, Warren
Cadbury, Jocelyn	Hayhoe, Barney
Carlisle, John (Luton West)	Heath, Rt Hon Edward
Carlisle, Kenneth (Lincoln)	Heddle, John
Carlisle, Rt Hon M. (R'c'n)	Henderson, Barry
Chalker, Mrs. Lynda	Heseltine, Rt Hon Michael
Channon, Rt. Hon. Paul	Hicks, Robert
Chapman, Sydney	Higgins, Rt Hon Terence L.
Churchill, W. S.	Hogg, Hon Douglas (Gr'th'm)
Clark, Hon A. (Plym'th, S'n)	Holland, Philip (Carlton)
Clark, Sir W. (Croydon S)	Hooson, Tom
Clarke, Kenneth (Rushcliffe)	Hordern, Peter
Clegg, Sir Walter	Howe, Rt Hon Sir Geoffrey
Cockeram, Eric	Howell, Ralph (N Norfolk)
Colvin, Michael	Hunt, David (Wirral)
Cope, John	Hunt, John (Ravensbourne)
Cormack, Patrick	Hurd, Hon Douglas
Corrie, John	Irving, Charles (Cheltenham)
Costain, Sir Albert	Jenkin, Rt Hon Patrick
Cranborne, Viscount	Johnson Smith, Geoffrey
Critchley, Julian	Jopling, Rt Hon Michael
Crouch, David	Joseph, Rt Hon Sir Keith
Dean, Paul (North Somerset)	Kaberry, Sir Donald
Dickens, Geoffrey	Kimball, Marcus
Dorrell, Stephen	King, Rt Hon Tom
Douglas-Hamilton, Lord J.	Kitson, Sir Timothy
Dover, Denshore	Knox, David
du Cann, Rt Hon Edward	Lamont, Norman
Dunn, James A.	Lang, Ian
Eden, Rt Hon Sir John	Langford-Holt, Sir John
Edwards, Rt Hon N. (P'broke)	Latham, Michael
Eggar, Tim	Lawrence, Ivan
Elliott, Sir William	Lawson, Nigel

Lee, John	Ridley, Hon Nicholas
Lennox-Boyd, Hen Mark	Ridsdale, Julian
Lewis, Kenneth (Rutland)	Rifkind, Malcolm
Lloyd, Ian (Havant & W'loo)	Roberts, M. (Cardiff NW)
Lloyd, Peter (Fareham)	Roberts, Wyn (Conway)
Loveridge, John	Rossi, Hugh
Luce, Richard	Rost, Peter
Lyell, Nicholas	Royle, Sir Anthony
McCrindle, Robert	Sainsbury, Hon Timothy
Macfarlane, Neil	St. John-Stevas, Rt Hon N.
MacGregor, John	Scott, Nicholas
MacKay, John (Argyll)	Shaw, Giles (Pudsey)
Macmillan, Rt Hon M.	Shaw, Michael (Scarborough)
McNair-Wilson, M. (N'bury)	Shelton, William (Streatham)
McNair-Wilson, P. (New F'st)	Shepherd, Colin (Hereford)
McQuarrie, Albert	Shepherd, Richard
Madel, David	Silvester, Fred
Major, John	Sims, Roger
Marlow, Tony	Skeet, T. H. H.
Marshall Michael (Arundel)	Speed, Keith
Marten, Neil (Banbury)	Speller, Tony
Mates, Michael	Spence, John
Mather, Carol	Spicer, Jim (West Dorset)
Maude, Rt Hon Angus	Spicer, Michael (S Worcs)
Mawby, Ray	Sproat, Ian
Maxwell-Hyslop, Robin	Squire, Robin
Mayhew, Patrick	Stanbrook, Ivor
Mellor, David	Stanley, John
Meyer, Sir Anthony	Steen, Anthony
Miller, Hal (B'grove)	Stevens, Martin
Mills, Iain (Meridan)	Stewart, Ian (Hitchin)
Mills, Peter (West Devon)	Stewart, J.(E Renfrewshire)
MiscamptMll, Norman	Stokes, John
Mitchell, David (Basingstoke)	Stradling Thomas, J.
Moate, Roger	Tapsell, Peter
Molyneaux, James	Taylor, Robert (Croydon NW)
Monro, Hector	Tebbit, Norman
Montgomery, Fergus	Temple-Morris, Peter
Morris, M. (N'hampton S)	Thomas, Rt Hon Peter
Morrison, Hon C. (Devizes)	Thompson, Donald
Morrison, Hon P. (Chester)	Thorne, Neil (Ilford South)
Myles, David	Thornton, Malcolm
Neale, Gerrard	Townend, John (Bridlington)
Needham, Richard	Townsend, Cyril D, (B'heath)
Nelson, Anthony	Trippier, David
Neubert, Michael	Trotter, Neville
Newton, Tony	van Straubenzee, W. R.
Normanton, Tom	Vaughan, Dr Gerard
Oppenheim, Rt Hon Mrs S.	Viggers, Peter
Page, Rt Hon Sir G. (Crosby)	Waddington, David
Page, Richard (SW Herts)	Wakeham, John
Parkinson, Cecil	Waldegrave, Hon William
Parris, Matthew	Walker, Rt Hon P.(W'cester)
Patten, Christopher (Bath)	Walker-Smith, Rt Hon Sir D.
Patten, John (Oxford)	Wall, Patrick
Pattie, Geoffrey	Waller, Gary
Pawsey, James	Walters, Dennis
Percival, Sir Ian	Ward, John
Peyton, Rt Hon John	Wanren, Kenneth
Pink, R. Bonner	Watson, John
Pollock, Alexander	Wells, John (Maidstone)
Porter, Barry	Wells, Bowen
Powell, Rt Hon J.E. (S Down)	Wheeler, John
Prentice, Rt Hon Reg	Whitelaw, Rt Hon William
Price, Sir David (Eastleigh)	Whitney, Raymond
Proctor, K. Harvey	Wickenden, Keith
Pym, Rt Hon Francis	Williams, D.(Montgomery)
Raison, Timothy.	Winterton, Nicholas
Rathbone, Tim	Wolfson, Mark
Rees, Peter (Dover and Deal)	Young, Sir George (Acton)
Rees-Davies, W. R.
Renton, Tim	Tellers for the Noes:
Rhodes James, Robert	Mr. Spencer Le Marchant
Rhys Williams, Sir Brandon	and Mr. Anthony Berry.

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 32 (Questions on amendments):—

The House divided: Ayes 290, Noes 233.

Division No. 11]	[10.14 pm
AYES
Aitken, Jonathan	Fairgrieve, Russell
Alexander, Richard	Faith, Mrs Sheila
Ancram, Michael	Farr, John
Arnold, Tom	Fell, Anthony
Aspinwall, Jack	Fenner, Mrs Peggy
Atkins, Robert (Preton N)	Finsberg, Geoffrey
Baker, Kenneth (St.M'bone)	Fisher, Sir Nigel
Baker, Nicholas (N Dorset)	Fletcher, A. (Ed'nb'gh N)
Beaumont-Dark, Anthony	Fookes, Miss Janet
Bell, Sir Ronald	Forman, Nigel
Bendall, Vivian	Fowler, Rt Hon Norman
Benyon, Thomas (A'don)	Fox, Marcus
Benyon, W. (Buckingham)	Fraser, Rt Hon Sir Hugh
Best, Keith	Fraser, Peter (South Angus)
Bevan, David Gilroy	Fry, Peter
Biffen, Rt Hon John	Galbraith, Hon T. G. D.
Blackburn, John	Gardiner, George (Reigate)
Blaker, Peter	Gardner, Edward (S Fylde)
Body, Richard	Garel-Jones, Tristan
Bonsor, Sir Nicholas	Glyn, Dr Alan
Boscawen, Hon Robert	Goodhart, Philip
Bottomley, Peter (W'wich W)	Goodhew, Victor
Bowden, Andrew	Goodlad, Alastair
Boyson, Dr Rhodes	Gorst, John
Braine, Sir Bernard	Gow, Ian
Bright, Graham	Gower, Sir Raymond
Brinton, Tim	Gray, Hamish
Brittan, Leon	Greenway, Harry
Brocklebank-Fowler, C.	Griffiths, E.(B'y St. Edm'ds)
Brooke, Hon Peter	Griffiths, Peter Portsm'th N)
Brotherton, Michael	Grist, Ian
Brown, M.(Brigg and Scun)	Grylls, Michael
Browne, John (Winchester)	Gummer, John Selwyn
Bruce-Gardyne, John	Hamilton, Hon A.
Bryan, Sir Paul	Hamilton, Michael (Salisbury)
Buchanan-Smith, Hon Alick	Hampson, Dr Keith
Buck, Antony	Hannam, John
Budgen, Nick	Haselhurst, Alan
Bulmer, Esmond	Hastings, Stephen
Burden, Sir Frederick	Havers, Rt Hon Sir Michael
Butcher, John	Hawksley, Warren
Butler, Hon Adam	Hayhoe, Barney
Cadbury, Jocelyn	Heath, Rt Hon Edward
Carlisle, John (Luton West)	Heddle, John
Carlisle, Kenneth (Lincoln)	Henderson, Barry
Carlisle, Rt Hon M. (R'c'n)	Heseltine, Rt Hon Michael
Chalker, Mrs. Lynda	Hicks, Robert
Channon, Rt. Hon. Paul	Higgins, Rt Hon Terence L.
Chapman, Sydney	Hogg, Hon Douglas (Gr'th'm)
Churchill, W. S.	Holland, Philip (Carlton)
Clark, Hon A. (Plym'th, S'n)	Hooson, Tom
Clark, Sir W. (Croydon S)	Hordern, Peter
Clarke, Kenneth (Rushcliffe)	Howe, Rt Hon Sir Geoffrey
Clegg, Sir Walter	Howell, Ralph (N Norfolk)
Cockeram, Eric	Hunt, David (Wirral)
Colvin, Michael	Hunt, John (Ravensbourne)
Cope, John	Hurd, Hon Douglas
Cormack, Patrick	Irving, Charles (Cheltenham)
Corrie, John	Jenkin, Rt Hon Patrick
Costain, Sir Albert	Johnson Smith, Geoffrey
Cranborne, Viscount	Jopling, Rt Hon Michael
Critchley, Julian	Joseph, Rt Hon Sir Keith
Crouch, David	Kaberry, Sir Donald
Dean, Paul (North Somerset)	Kimball, Marcus
Dickens, Geoffrey	King, Rt Hon Tom
Dorrell, Stephen	Kitson, Sir Timothy
Douglas-Hamilton, Lord J.	Knox, David
Dover, Denshore	Lamont, Norman
du Cann, Rt Hon Edward	Lang, Ian
Dunn, Robert (Dartford)	Langford-Hort, Sir John
Eden, Rt Hon Sir John	Latham, Michael
Edwards, Rt Hon N. (P'broke)	Lawrence, Ivan
Eggar, Tim	Lawson, Nigel
Elliott, Sir William	Lee, John
Emery, Peter	Lennox-Boyd, Hon Mark
Eyre, Reginald	Lewis, Kenneth (Rutland)

Lloyd, Ian (Havant & W'loo)	Roberts, M. (Cardiff NW)
Lloyd, Peter (Fareham)	Roberts, Wyn (Conway)
Loveridge, John	Rossi, Hugh
Luce, Richard	Rost, Peter
Lyell, Nicholas	Royle, Sir Anthony
McCrindle, Robert	Sainsbury, Hon Timothy
Macfarlane, Neil	St. John-Stevas, Rt Hon N.
MacGregor, John	Scott, Nicholas
MacKay, John (Argyll)	Shaw, Giles (Pudsey)
Macmillan, Rt Hon M.	Shaw, Michael (Scarborough)
McNair-Wilson, M. (N'bury)	Shelton, William (Streatham)
McNair-Wilson, P. (New F'st)	Shepherd, Colin (Hereford)
McQuarrie, Albert	Shepherd, Richard
Madel, David	Silvester, Fred
Major, John	Sims, Roger
Marlow, Tony	Skeet, T. H. H.
Marshall Michael (Arundel)	Speed, Keith
Marten, Neil (Banbury)	Speller, Tony
Mates, Michael	Spence, John
Mather, Carol	Spicer, Jim (West Dorset)
Maude, Rt Hon Angus	Spicer, Michael (S Worcs)
Mawby, Ray	Sproat, Ian
Maxwell-Hyslop, Robin	Squire, Robin
Mellor, David	Stanbrook, Ivor
Meyer, Sir Anthony	Stanley, John
Miller, Hal (B'grove)	Steen, Anthony
Mills, lain (Meriden)	Stevens, Martin
Mills, Peter (West Devon)	Stewart, Ian (Hitchin)
Miscampbell, Norman	Stewart, J.(E Renfrewshire)
Mitchell, David (Basingstoke)	Stokes, John
Moate, Roger	Stradling Thomas, J.
Monro, Hector	Tapsell, Peter
Montgomery, Fergus	Taylor, Robert (Croydon NW)
Morris, M. (N'hampton S)	Tebbit, Norman
Morrison, Hon C. (Devizes)	Temple-Morris, Peter
Morrison, Hon P. (Chester)	Thomas, Rt Hon Peter
Myles, David	Thompson, Donald
Neale, Gerrard	Thorne, Neil (Ilford South)
Needham, Richard	Thornton, Malcolm
Nelson, Anthony	Townend, John (Bridlington)
Neubert, Michael	Townsend, Cyril D, (B'heath)
Newton, Tony	Trippier, David
Normanton, Tom	Trotter, Neville
Oppenheim, Rt Hon Mrs S.	van Straubenzee, W. R.
Page, Rt Hon Sir G. (Crosby)	Vaughan, Dr Gerard
Page, Richard (SW Herts)	Viggers, Peter
Parkinson, Cecil	Waddington, David
Parris, Matthew	Wakeham, John
Patten, Christopher (Bath)	Waldegrave, Hon William
Patten, John (Oxford)	Walker, Rt Hon P.(W'cester)
Pattie, Geoffrey	Walker-Smith, Rt Hon Sir D.
Pawsey, James	Wall, Patrick
Percival, Sir Ian	Waller, Gary
Peyton, Rt Hon John	Walters, Dennis
Pink, R. Bonner	Ward, John
Pollock, Alexander	Warren, Kenneth
Porter, Barry	Watson, John
Prentice, Rt Hon Reg	Wells, John (Maidstone)
Price, Sir David (Eastleigh)	Wells, Bowen
Proctor, K. Harvey	Wheeler, John
Pym, Rt Hon Francis	Whitelaw, Rt Hon William
Raison, Timothy	Whitney, Raymond
Rathbone, Tim	Wickenden, Keith
Rees, Peter (Dover and Deal)	Williams, D. (Montgomery)
Rees-Davies, W. R.	Winterton, Nicholas
Renton, Tim	Wolfson, Mark
Rhodes James, Robert	Young, Sir George (Acton)
Rhys Williams, Sir Brandon
Ridley, Hon Nicholas	Tellers for the Ayes:
Ridsdale, Julian	Mr. Spencer Le Marchant
Rifkind, Malcolm	and Mr. Anthony Berry.

NOES
Abse, Leo	Ashton, Joe
Adams, Allen	Atkinson, N.(H'gey,)
Allaun, Frank	Bagier, Gordon A.T.
Alton, David	Barnett, Guy (Greenwich)
Anderson, Donald	Barnett, Rt Hon Joel (H'wd)
Archer, Rt Hon Peter	Bennett, Andrew (St'kp't N)
Ashley, Rt Hon Jack	Bidwell, Sydney

Booth, Rt Hon Albert	Hart, Rt Hon Dame Judith
Boothroyd, Miss Betty	Hattersley, Rt Hon Roy
Bottomley, Rt Hon A.(M'b'ro)	Haynes, Frank
Bradley, Tom	Healey, Rt Hon Denis
Bray, Dr Jeremy	Heffer, Eric S.
Brown, Hugh D. (Provan)	Hogg, N. (E Dunb't'nshire)
Brown, R. C. (N'castle W)	Homewood, William
Brown, Ron (E'burgh, Leith)	Hooley, Frank
Buchan, Norman	Horam, John
Callaghan, Jim (Midd't'n & P)	Howell, Rt Hon D.
Campbell, Ian	Howells, Geraint
Canavan, Dennis	Huckfield, Les
Cant, R. B.	Hudson Davies, Gwilym E.
Carmichael, Neil	Hughes, Mark (Durham)
Carter-Jones, Lewis	Hughes, Robert (Aberdeen N)
Cartwright, John	Hughes, Roy (Newport)
Clark, Dr David (S Shields)	Janner, Hon Greville
Cocks, Rt Hon M. (B'stol S)	Jay, Rt Hon Douglas
Cohen, Stanley	John, Brynmor
Coleman, Donald	Johnson, James (Hull West)
Concannon, Rt Hon J. D.	Johnson, Walter (Derby S)
Conlan, Bernard	Johnston, Russell (Inverness)
Cook, Robin F.	Jones, Rt Hon Alec (Rh'dda)
Cowans, Harry	Jones, Barry (East Flint)
Craigen, J. M.	Jones, Dan (Burnley)
Crowther, J. S.	Kaufman, Rt Hon Gerald
Cryer, Bob	Kerr, Russell
Cunliffe, Lawrence	Kilroy-Silk, Robert
Cunningham, G. (Islington S)	Kinnock, Neil
Dalyell, Tam	Lamborn, Harry
Davidson, Arthur	Lead bitter, Ted
Davies, Rt Hon Denzil (L'lli)	Leighton, Ronald
Davies, Ifor (Gower)	Lestor, Miss Joan
Davis, Clinton (Hackney C)	Lewis, Ron (Carlisle)
Davis, T. (B'ham, Stechf'd)	Litherland, Robert
Deakins, Eric	Lofthouse, Geoffrey
Dean, Joseph (Leeds West)	Lyon, Alexander (York)
Dempsey, James	Lyons, Edward (Bradf'd W)
Dewar, Donald	McDonald, Dr Oonagh
Dixon, Donald	McElhone, Frank
Dobson, Frank	McKay, Allen (Penistone)
Dormand, Jack	McKelvey, William
Douglas, Dick	MacKenzie, Rt Hon Gregor
Douglas-Mann, Bruce	Maclennan, Robert
Dubs, Alfred	McNally, Thomas
Duffy, A. E. P.	McTaggart, Robert
Dunn, James A.	McWilliam, John
Dunnett, Jack	Marks, Kenneth
Dunwoody, Hon Mrs G.	Marshall, Dr Edmund (Goole)
Eastham, Ken	Marshall, Jim (Leicester S)
Ellis, R. (NE D'bysh're)	Martin, M(G'gow S'burn)
English, Michael	Mason, Rt Hon Roy
Ennals, Rt Hon David	Maxton, John
Evans, loan (Aberdare)	Maynard, Miss Joan
Evans, John (Newton)	Mellish, Rt Hon Robert
Ewing, Harry	Mikardo, Ian
Faulds, Andrew	Millan, Rt Hon Bruce
Field, Frank	Mitchell, Austin (Grimsby)
Fitch, Alan	Mitchell, R. C. (Soton Itchen)
Flannery, Martin	Morris, Rt Hon A. (W'shawe)
Fletcher, Ted (Darlington)	Morris, Rt Hon C. (O'shaw)
Foot, Rt Hon Michael	Moyle, Rt Hon Roland
Ford, Ben	Newens, Stanley
Forrester, John	Oakes, Rt Hon Gordon
Foster, Derek	Ogden, Eric
Fraser, J. (Lamb'th, N'w'd)	O'Halloran, Michael
Freeson, Rt Hon Reginald	O'Neill, Martin
Freud, Clement	Orme, Rt Hon Stanley
Garrett, John (Norwich S)	Owen, Rt Hon Dr David
George, Bruce	Park, George
Gilbert, Rt Hon Dr John	Parker, John
Ginsburg, David	Parry, Robert
Golding, John	Pendry, Tom
Gourlay, Harry	Penhaligon, David
Graham, Ted	Powell, Raymond (Ogmore)
Grant, George (Morpeth)	Price, C. (Lewisham W)
Grant, John (Islington C)	Race, Reg
Hamilton, James (Bothwell)	Radice, Giles
Hamilton, W. W. (C'tral Fife)	Richardson, Jo
Harrison, Rt Hon Walter	Roberts, Albert (Normanton)

Roberts, Ernest (Hackney N)	Thomas, Jeffrey (Abertillery)
Roberts, Gwilym (Cannock)	Thomas, Mike (Newcastle E)
Robertson, George	Thomas, Dr R. (Carmarthen)
Robinson, G. (Coventry NW)	Thorne, Stan (Preston South)
Rodgers, Rt Hon William	Tilley, John
Rooker, J. W.	Tinn, James
Roper, John	Torney, Tom
Ross, Ernest (Dundee West)	Varley, Rt Hon Eric G.
Rowlands, Ted	Wainwright, E.(Dearne V)
Ryman, John	Walker, Rt Hon H.(D'caster)
Sandelson, Neville	Watkins, David
Sever, John	Weetch, Ken
Sheerman, Barry	Wollbeloved, James
Sheldon, Rt Hon R.	White, Frank R.
Short, Mrs Renée	White, J. (G'gow Pollok)
Silkin, Rt Hon J. (Deptford)	Whitehead, Phillip
Silkin, Rt Hon S. C. (Dulwich)	Whitlock, William
Silverman, Julius	Wigley, Dafydd
Smith, Rt Hon J. (N Lanark)	Willey, Rt Hon Frederick
Snape, Peter	Williams, Rt Hon A.(S'sea W)
Soley, Clive	Wilson, Gordon (Dundee E)
Spearing, Nigel	Wilson, Rt Hon Sir H.(H'ton)
Stallard, A. W.	Wilson, William (C'try SE)
Steel, Rt Hon David	Winnick, David
Stewart, Rt Hon D. (W Isles)	Woodall, Alec
Stoddart, David	Woolmer, Kenneth
Stott, Roger	Young, David (Bolton E)
Strang, Gavin
Straw, Jack	Tellers for the Noes:
Summerskill, Hon Dr Shirley	Mr. George Morton and
Taylor, Mis Ann (Bolton W)	Mr. Hugh McCartney.
Thomas, Dafydd (Merioneth)

Question accordingly agreed to.

Mr. Speaker

forthwith declared the main Question, as amended, to be agreed to, pursuant to Standing Order No. 32 (Questions on amendments).

Resolved,

That this House, recognising the pressures on British engineering caused by world recession and international trading conditions, believes that the industry's difficulties, which have teen building up over past decades, can be overcome only by achieving international competitiveness.