HC Deb 24 March 1983 vol 39 cc1152-69 1.55 am
Mr. Bob Cryer (Keighley)

I am pleased to have this opportunity to debate manufacturing industry at a time when the Labour party has won Darlington by a majority of 2,412. The result establishes Labour as the party that will revive manufacturing industry and reflects the real displeasure and disillusion in Darlington with the wrecking tactics of the Government. Manufacturing industry is crucial to the future of the nation. It is the area where the ability of our people can shape and develop materials to provide benefit for the rest of the nation and other countries.

Manufacturing industry is being devastated to an extent that this country has not known in its history. The glib statistics that the Minister will trot out about some upward move in production pale into insignificance when one assesses the amount of devastation that the policies of the Government have achieved in our manufacturing industry. It is not just industry. We are not talking about some abstract concept in an isolated Mother of Parliaments. This issue is about people. I have received in my mail, like, I suppose, many hon. Members, an extract from The Sunday Post of 20 March 1983. That newspaper apparently wishes to ban glue sniffing, but I want also to ban the circumstances that cause some youngsters to turn to glue sniffing as a way of passing the time. A mother contacted The Sunday Post saying that when her son had left school to work for an engineering firm she had encouraged him to study to better himself. According to the newspaper— He went to night school. He studied at home. But two years ago, when he was just out of his teens, his world crashed. His firm was hard hit by the recession. Andrew's job was one of dozens that disappeared. He spent weeks hunting in vain for a new job. As the weeks of dole dragged on, Andrew became more depressed. His mother noticed he was becoming moody and sometimes even aggressive. The article adds: He was found lying in the street, not far from home, in a stupor. His personality has changed completely in the two years since he became addicted. Once he became so aggressive his mother had to call the police. His mother claims that Andrew is addicted to glue sniffing, that it is a slow poison and that it is killing him. The headline is "Doomed to die." That is a sad symptom of the effects of the Government's policy. The Government will claim that no case can be made on that basis. It is, however, significant that this youngster was made redundant from an engineering firm.

I was brought up in an engineering family. My father, I am proud to say, was a machine tool fitter. I have always admired engineering and hold it above virtually any other occupation. It is the key to the success of a nation. My father helped to build the machines that made the machines. There is not a refrigerator, a gas oven, a vacuum, a television set, a carpet or a wallpaper that is not produced by machines.

The machine tools created in our engineering factories create the machines that produce the background to our community. The creation of this place depended on machines to produce the woodwork, the seats, the stone cutting the whole building. Yet the Government's policies have made inroads into manufacturing industry so deep that one wonders whether it can ever regain the important position that it hold before the Government came to power.

I shall give a few statistics relating to the decline before saying what I believe should be done about it. The Government argue that there was a sort of blur in the past and that although it is now a nastier blur the decline had been taking place all along. That is not true. Taking the index of industrial production in 1975 as 100, manufacturing output was 101.4 in 1976, 103 in 1977, 104 in 1978 and 104.3 in 1979, so there was actually an increase in those years. I shall concentrate on machine tools and textiles. For the latter, there was a slight diminution from 102.8 in 1976 to 96 in 1979.

The fall in the index of industrial production between 1979 and 1982 is remarkable—a drop from 104.5 to 88.3. The Minister may argue that the January figure this year showed a slight improvement of 2.6 per cent. over the last quarter of 1982—an increase from 87.2 to 89.8—but we need an increase of 14.5 to get back to the position that the Government inherited when they came to office. In those circumstances, any slight variation is, as the Chancellor would say, no more than bumping along the bottom.

The number of people employed in manufacturing industry as a whole decreased slightly between 1978 and 1979. The Government clutch at that straw to claim that they are trying vainly to grapple with trends that the Labour Government already faced, so there is little difference between the two periods of Government. Between December 1978 and December 1979 the number of people employed in manufacturing industry fell from 7,130,000 to 6,992,000—a drop of 138,000. Between 1979 and 1982, however, the number declined from 6,992,000 to 5,487,000—a drop of 1,505,000 in three years in what is a crucial potential growth area if we are to use the ability of our people to create and develop products and not become just a nation of assemblers. In textiles, the deline was from 417,000 in 1979 to 291,000 in 1982. In metal working machine tools, the difference between December 1978 and December 1979 was from 65,100 to 65,300, a slight increase of 200. Between 1979 and 1982 there was a decline from 65,300 to 46,100, more than 19,000 in three years. That is a massive decrease, and it and others are entirely the responsibility of Government policy.

In the woollen and worsted sector, which especially affects the west riding of Yorkshire, the decline was from 68,700 in 1979 to 46,400. Between 1978 and 1979 there was a decline of 6,700, but between 1979 and 1982 there was a decline in employment of 22,300. It is no wonder that the people of Darlington declined to support a Government who have so readily and eagerly put people on the dole, especially in manufacturing industry, which is so important to the future of our nation.

I shall dwell on how this affects my constituency of Keighley, where machine tools and textiles are two crucial areas of employment. Between May 1979 and December 1982 there were 1,019 redundancies in textiles, 381 redundancies in machine tool engineering and 634 redundancies in mechanical engineering. The figures were given in a parliamentary answer of 8 February. Many of those made redundant were skilled people, many of them with years of training and experience. They were cast aside, and they are no longer able to obtain an opportunity.

I was talking to a school caretaker who is employed in the local authority sector, which is much loathed by the Government. It is the sector in which they are trying to sack people. He was an engineer and he was lucky enough to get another job after four applications and after going on a school caretaker's course that was run by the local authority. He had left engineering, a skilled area, because, as he said, he could "see the writing on the wall". All that training and experience was thrown to one side. Fortunately, the local authority still needs school caretakers and so he has a job.

When the Prime Minister visited Keighley there was the largest demonstration that she encountered during her visit to west Yorkshire. She visited Peter Black Ltd. No doubt the firm put out the usual red carpet to meet the black Jaguar, well away from those who work or to be more accurate, do not work in the town. She visited the factory because it was one of the few that was not afflicted by short-time working.

I shall recite a list of companies that are so afflicted. Dean, Smith and Grace makes the best centre lathes in the United Kingdom—the firm is on short-time working. Landis Land produces crankshaft grinders. Cars throughout the world have crankshafts that have almost certainly been ground on Landis Land or Keighley Grinding machines. They have been experiencing short-time working. The Minister might trot out the usual argument that we must be more competitive and increase productivity, but the work force of Keighley is skilled, diligent and extremely co-operative in all working practices, especially in textiles. It has not helped to have such a good record, because in October 1982 about 2,000 people had been unemployed for 26 weeks, 801 for between 26 weeks and 52 weeks, 391 between 52 weeks and 78 weeks, 265 over 78 weeks and up to 104 weeks, and more than 500 for over two years.

A town such as Keighley, which depends upon manufacturing, was not in the same position when Labour was in power. In January 1979 unemployment was 5.1 per cent. and it dropped to 4.5 per cent. by May of that year when the general election was held. The Conservatives tried to make out that the unemployment level was much higher. They claimed that it was almost 8 per cent. According to the Government's statistics, the unemployment rate is now over 14 per cent. That is another effect of Government policies on manufacturing industry.

I represent a low wage area. The Yorkshire and Humberside county councils association states in its 1983 regional strategy review Unemployment is above the national and is still rising rapidly. Household incomes are the lowest in Britain. Added to this are serious problems, including industrial environment, dereliction, health, a deteriorating housing stock and rural isolation. The review was compiled by four county councils, including one with a majority of Tories and independents. It is not, therefore, the mouthpiece of an anti-Government organisation.

On 22 March, the local paper, the Telegraph and Argus, carried the following: Easter dole nightmare Almost every Easter school-leaver in Keighley will go straight on the dole. Fifty-six leave school on Friday and only three have jobs. A handful of lucky ones may find a place on the Government's new youth training scheme. After revealing the shock figures, area careers officer, Mr. John Wood, made a plea to local employers: 'Come forward with vacancies for young people, particularly with unskilled and semi-skilled work. That is a reflection of Government policy on manufacturing industry. A plea for unskilled and semiskilled work is an illustration of the decline in the opportunities to apply our people's skills and abilities.

Our manufacturing industry faces massive import penetration in metal-working, for example in cars and commercial vehicles. New vehicle registrations are running at about 50 per cent. a year. That means that the need for skills possessed by engineering designers, and tool fitters who make dies to stamp out car bodies is declining. Engine development is now almost completely centred on British Leyland. The need for tyre design and manufacture has also declined.

Between 1972 and 1982 motor vehicle production in the United Kingdom declined by about 1 million units. The lowest level of car production here since 1957 occurred in 1982. According to the British Textile Confederation, there is a 60 per cent. import penetration of the fabric sector of the textile industry. In some areas, such as the Lancashire cotton sector, import penetration is as high as 80 per cent. Therefore, import penetration is making a severe impact on our manufacturing.

As I have given the background, I shall outline what Government assistance I believe manufacturing industry needs. By and large, it has faced considerable Government hostility. British manufacturing deserves and needs the same type of treatment from the Government as they give to farmers. The Government should give financial support to industry where it is needed. They will argue that that is simply throwing money at the problem and that it is therefore impossible. They throw money at the farmers and never raise a query. The Cabinet is stuffed with wealthy farmers. Why should they not throw money at the farmers? The standards of probity in the cabinet are such that its members would not be allowed to participate in local government as they participate in central government.

British farmers receive more in financial support each year than British Leyland, British Rail and the National Coal Board put together. As far as I am aware, the Government have not raised a murmur of criticism about that. We should revive the sectoral aid schemes to manufacturing industry to encourage investment. That would involve the restoration of exchange control. It is patently absurd to allow the British capitalist class the freedom to do what it likes with its money because it is utterly irresponsible.

In the early 1970s, when the right hon. Member for Sidcup (Mr. Heath) was Prime Minister, he made a famous speech in which he said that everything had been done for the capitalists, but they would still not invest. That is still true today, except that those people invest where they can make a fast buck. They have no patriotism or loyalty to the British working class. They move their money about where it suits them to move it. That is why the removal of exchange control and the resulting free market economy has meant that individual capitalists and institutions have shipped more than £9 billion out of the country in less than three years.

I am not suggesting that we should not allow any capital to go abroad. Exchange control allows just that—the export of a capital is subject to the consent of the Treasury. Moreover, if we are to export goods, of course we have to move some capital abroad to set up distribution and advisory centres or manufacturing or remanufacturing plant abroad, depending on the circumstances.

The elected Government of the day should have some say in that decision-making. People do not go to the polls to allow the tiny number of people who have capital to make decisions that result in life or death for the people who are cast aside when people in their posh offices decide to close down a factory in Darlington or elsewhere. The people of Darlington have returned a Labour man to this House, because they do not trust the Government. The Government's policies are clearly handicapping their lives by rampantly throwing them on to the dole. That is a continuing outrage. We must restore exchange controls—it is an outrage that they were ever lifted—and we must know what is being done with our available capital facilities.

We must also restore the sectoral schemes. It is significant that in the annual report on the Industry Act 1972 for the year ended 31 March 1982, the sectoral schemes that played such a significant role in improving the position of British industry were all introduced by the Labour Government, but they have not been revived. The wool textile scheme was introduced in two stages—the first by the Government of the right hon. Member for Sidcup, when they discovered that market forces did not work and decided to help manufacturing industry through the 1972 Act, and the second by the Labour Government on 29 November 1976. The Minister may not be aware, because he may not have studied the matter closely, that that scheme was the subject of close scrutiny by the Department of Industry. Research into the investment decisions of the wool textile scheme was carried out, and it was found, not, as was commonly thought, that the introduction of more modern methods necessarily produced a reduction in the number of jobs—although that might be a consequence—but that the improvement in quality because of increased investment preserved our position in some markets and enabled us to keep jobs. Following the application of the scheme, there was a slight increase in employment in the areas affected by it.

It was discovered that the scheme encouraged and induced investment, and many investment decisions were made by mill owners. We must reintroduce such schemes. The ferrous and non-ferrous foundry schemes also encouraged a more efficient foundry industry. In that way, a more competitive position is established for a range of products, because foundry work is basic to the metalworking industries. The printing machinery scheme, the textile machinery scheme and the poultry meat processing scheme were all introduced by the Labour Government, but they have not been reintroduced by this Government, although they are badly needed.

The sectoral schemes will develop through the National Economic Development Council. Labour Government schemes were not developed in isolation from industry but were developed by industry in close consultation with the trade unions. The British Textile Confederation has suggested that a scheme for textiles is both necessary and important. It produced a document, which no doubt the Minister has seen, called "A Plan for Action" dated this month, in which it was suggested that they should have in effect an interest relief grant scheme. The federation points out that other Common Market countries provide some financial assistance. Unless we become a united states of Europe with a central government, which is not likely and which will be resisted stoutly by the majority of Members of Parliament and the majority of the population, we cannot keep track of all the schemes of government assistance within the Common Market. We cannot give the EC Commission as a matter of right, an immediate duty to expunge all kinds of industrial aids that exist in France and Italy—for example in the Prato district of Italy for textiles.

Therefore, if we are to have any competitive levels we have to recognise that some sort of parity of support is necessary. That is what the British Textile Confederation has suggested. The idea is not new, because the Department of Industry used to have interest relief grants to give preferential treatment to manufacturing industry. That is right.

I have given that one example, but there are other parts of industry that need further Government encouragement to investment through sectoral schemes. The Government are only running two at the moment. The sector working parties also need more encouragement. They were set up to undermine the position of planning agreements, but none the less have provided a great deal of useful information. They have also enabled the employers and the trade unions to come together and establish in some aspects a common assessment and understanding of the position. They have enabled some shop stewards to meet the management for the first time ever in the history of their firm.

However, the position is that the Government are deliberately downgrading the sector working parties. For the first time in the life of British manufacturing industry, these parties examined the capacity of the industry and the potential export targets, set potential domestic market targets, and studied the likelihood of import penetration. In other words, they had looked in a planned way at the position of their industry to see where improvements could be made and what design and development was needed.

However, the Lombard column in the Financial Times of 9 September 1982, written by John Elliot, who is a correspondent close to the Department of Industry, says: In many ways the TUC could not really have been blamed, if it had voted yesterday to withdraw from the National Economic Development Council and from the council's 50 tripartite industrial committees. For three years, union leaders have regularly failed to make any impression on Ministers in the council's monthly two-to-three-hour meetings. Their ideas have been ignored, and, increasingly since Norman Tebbit became Employment Secretary, they have often felt insulted during the meetings. They have performed the rituals of consensus with a Government which does not recognise the word and with CBI representatives who for too long have preferred back-door chats in Downing Street to open debate about the decline of British industry. Sir Geoffrey Howe, Chancellor of the Exchequer, who is chairman of the Council, constantly repeats his belief and support for Neddy and its committees. But his actions rarely support his words. And Ministers, like Mr. Patrick Jenkin, who insist that in Cabinet he argues hard for industry to be given more help, swings loyally behind Sir Geoffrey and the Prime Minister when the Government's policies are criticised in the semi-public council forum. According to this, the Secretary of State for Industry is arguing in the Cabinet for what I am arguing for tonight. However, in the NEDC he swings behind the Prime Minister who affects the naive, childish and simplistic view that she always does, that market forces will somehow work their way through and all we need is a bit more competitive spirit.

The scheme for the metal working industries will help to revive the machine tool industry. That is important because the machine tool industry is the industry that makes the machines to make the machines, and unless and until we have a revival in the metal working industries, demand for machine tools will continue to sag. I suggest that any scheme for helping the metal working industries should give preference to purchases within the British machine tool industry, although I accept that the criteria would have to be wider, because in some instances the industry might not be in a position to meet requirements for specialised machinery.

There should be more short-term production help for engineering companies. An engineering manufacturing advisory scheme was introduced by the Labour Government, on a limited basis. It has not been properly developed by this Government, and there is room for more development. Certainly, the spring manufacturers association is particularly concerned that the Department of Industry should provide money for short-term development production problems, instead of long-term research and development. Funds are not available, particularly to help the many small firms in the spring manufacturing industry to overcome short-term problems. No doubt, the Minister will tell us that several spring manufacturers have taken advantage of the engineering manufacturing advisory scheme, but specialised support should be given through the industry's research association.

Secondly, the Government can provide help for manufacturing industry by planning trade. All that I ask the Government to do is to interfere in the free market economy and the free flow of trade, in the same way as they have stopped the free flow of ultra-heat treated milk from France into this country. That has come about, I gather, because the Secretary of State's dog does not like the taste of French milk. In my opinion, that is an entirely superficial reason, and I am sure that one could advance more substantial arguments. In addition to his doggy comments, the Secretary of State expressed concern about safety standards. We have a very open market system in this country, and we always react to something when it goes wrong. Safety standards should be imposed on machinery imported into this country at the port of entry, so that they conform to British safety requirements.

We already interfere in the market system—open trading, as it is called—in textiles, through the multi-fibre arrangement, which as the Minister knows, is not a particularly restrictive arrangement. It actually allows an increase in imports—something that is worrying the textile industry. The basis of the MFA was taken in a year when not all the import quotas were used, with the result that the import levels set by the MFA are an increase to 1982 levels, with a further increase on top of that.

The Government have intervened in the market place. They have not allowed the pressures of world circumstances to affect Argentina. They have produced a credit system for Argentina, to help to prop up that country's economy. They will not allow competitive forces to bring down the Argentine economy. If they can do that for Argentina, they should be able to provide similar assistance to British manufacturing industry.

Frankly, I do not believe that the Government will move much in this direction. We shall have to repeat the Darlington victory time after time until we get a Labour Government. Our Labour policy, which is due to be published next Tuesday, will be seen to have the bones of a policy that will be of real benefit to British manufacturing industry.

I put forward these ideas because I am an optimist. I believe that this Government know the harm that they have done puts them at a disadvantage in an election. They know that unemployment is an important issue. They realise that their selfish notion of dividing the nation by having a minority of people out of work and a majority in work is perhaps not working. I put forward the proposal of wider quota controls in many sectors of manufacturing industry. If it is argued that we can only do this by harming developing nations, I must point out to the Minister in anticipation that by planning trade it is possible to give preference to certain countries, including the developing nations.

We cannot do this easily within the European Community. The Government are committed to the EC in an uneasy and unfriendly relationship, but happily Labour is committed to withdrawal. If the Minister argues that that would affect manufacturing industry because we would lose many jobs, that is not true, because other EC countries see Britain as a large and lucrative market and they would be happy to enter into trading arrangements. We would be outside the dominant political and economic decision-making arrangements of the EC. It is only in this way that we can ensure the survival of British manufacturing industry.

Coupled with that, there would be a release of public expenditure through local authorities and the nationalised industries. Public money should be spent not on maintaining a massive and increasing dole queue but on developing real jobs, the sort of jobs that the Conservatives promised during the 1979 election. On these Benches we want to see the trade union movement involved at all levels in the decision-making process in sector working parties and in the factories that are producing the goods and services.

The restoration of manufacturing industry by providing real jobs and opportunities is important not only for the survival of British manufacturing industry but also for the dignity of our work force. I quote from a letter I received from a person who works in manufacturing industry: Dear Mr. Cryer, Please can you help or advise us? I work at … in the … dept, which is a small dept of the firm, … We feel we are being victimised, and hardly know what we can do about it. Because of the present job situation, we feel we must hang on. We work on a collective bonus scheme, and until October had good wages, which we were working very hard for. In October, we were told we had to take a £10 cut in wages, and the bonus rate was dropped accordingly, and although we complained it didn't get us anywhere. We were promised that there would be no more cuts for 6 months, but starting tomorrow, a new bonus scheme goes into operation, which has been solely devised to ensure that we earn little or no bonus.… We did join the NUDB and TW Union"— that is, the National Trade Group of Dyers, Bleachers and Textile Workers— but that was a couple of years ago, and the letter says that the owner threatened to close the department down— unless we dropped out. Everyone was scared of losing their jobs and now there is only two of us still in the union. Last year we were on short time, and government grants, but things picked up and we have been on full time for the last six months. She then talks about the boss and the fact that his son is coming in although he is not qualified and does not appear to have any skills. She concludes: Is there anything that can be done, or is he going to be allowed to trample all over us? That is a letter from a worker in manufacturing industry. Is that the attitude that the Government want to encourage—a supine work force trampled by the bosses? Or do they want a bright, eager, confident work force able to work in parity with the employer? That is the way we should go, with a confident, dignified work force, with hope for young people in an expanding manufacturing sector. This can be done only under Labour carrying out its commitment to reduce unemployment to under 1 million within five years. Many of the new jobs must be in the manufacturing sector.

2.39 am
Mr. David Stoddart (Swindon)

The House is indebted to my hon. Friend the Member for Keighley (Mr. Cryer) for raising the issue of industry and what has happened to it and for giving us his ideas for its future. He made an erudite speech, which reflects his great knowledge of the subject, which arises from his experience within the Department of Industry, when he put in a tremendous amount of work to assist the development of industry, and not least the development of small businesses. I have reason to know that he spent a great deal of time touring the country trying to encourage small businesses, with great success.

My hon. Friend talked of the decline in manufacturing industry. It has gone on at a gathering pace over the past four years. Every day since the last election we have seen the loss of 1,600 jobs. Every day now we see the loss of further jobs in one industry or another. We in the Labour party believe that that cannot be allowed to continue. If it is, there will be not only awful social consequences and frustration, but political consequences, too.

As my hon. Friend said, the Labour party's policy has been put to the people of Darlington and been endorsed by a substantial majority, and it will be put to the people in the country as a whole. It is a policy of reducing the mass unemployment that has been with us for too long. The Labour party, when it publishes its policy next week, will be seen to have realistic methods of dealing with the curse of mass unemployment, which has been brought about by the Government's policies.

We have lost at least 2.5 million jobs since the last election. That loss of jobs and manufacturing production could not have been sustained without the boon of North sea oil. But for North sea oil, this country would be in a catostrophic financial situation. Our balance of payments would be such that the standards of living of the people would be reduced as they have never been reduced before. The Chancellor would have had great difficulty in providing some of the meagre reliefs of the last Budget. Indeed, far from providing reliefs, he would have had to increase taxation substantially.

That great boon of North sea oil should have been used for building and rebuilding our manufacturing industry. It should have been used for investment not only in existing plants in existing industries, but in providing the industries of the future. The Government have signally failed to invest in the industries of the future. By their denationalisation proposals for the Post Office, for example, they are risking investment in the industries of the future. I cannot understand why the Government bring forward such doctrinaire proposals when the need is for public investment in telecommunications and the communications industry generally. That investment will be provided in the last analysis only by the public.

Instead of using North sea oil revenues to rebuild manufacturing industry and industry generally, they are being piped straight into unemployment pay—£15,000 million to 4 million people without proper jobs. It is a crying disgrace that that national asset should be used in that way. Time will run out, because North sea oil is a finite commodity. By 1995 at the latest, on existing estimates, Britain will lose its self-sufficiency. From then it will be down hill all the way unless substantial new reserves are discovered. It is by no means certain that they will be discovered. We have about 12 years to replace the income from North sea oil through manufacturing industry. It is the only way to bring income into Britain to pay for our food and raw materials.

The Government must take urgent action to ensure that investment takes place in our future. That means investment in the industries of the future and also saving existing industries. We hear a great deal about the industries of the future. That is all that some people talk about. But there are existing industries that need investment and need to be saved. It will be no good having an upturn in the economy if we have closed all our steel plants or are unable to produce the steel required for an upturn.

Our industrial revolution was built on the textile industry. There will always be a great demand for that industry. The British Textile Confederation published a document recently in which it was severely critical of Government policies of high interest rates at home and an over-valued currency abroad. These have hurt the industry's ability to export and has enabled its competitors abroad to export great amounts of clothing and textiles to Britain. The greatest threat to the textile industry comes not from the developing countries, but from the EC. The industry is crying out for Government assistance. I sincerely hope that many of the recommendations that have been put forward by the British Textile Confederation will be considered and adopted by the Government.

My hon. Friend also mentioned regional policy. The Labour party has developed its regional policy, which will be published next week. Our policy will not be designed as the policies of the Government are designed—merely to shift jobs from one part of the country to another, from one place with high unemployment to another with high unemployment. That is what is happening with enterprise zones. We predicted that the enterprise zone system would not create new jobs, but would merely shift them from one part of the country to another.

That sort of regional policy will be quite useless for solving the problems of the depressed areas, because it will only do so at the expense of depressing other areas. What is the use of shifting jobs from Swindon to the north-east? We already have high unemployment in Swindon and to shift jobs to the north-east, might help the north-east but it will worsen the position in Swindon.

We want a regional policy which will ensure that new jobs are created and which will give priority to areas with the highest unemployment. I hope that that is the sort of policy that we shall be developing in consultation and cooperation with the trade union movement. I read some headlines in the newspapers this morning about the new accord between the Labour party and the trade union movement. One would think that the Labour party was going to hand over the Government of the country to the trade union movement. Nothing could be further from the truth.

Labour Members believe that the country can be governed only by co-operation and not by confrontation. If we are to gain the support of the British working people to rebuild our economy we shall need real consultation and a real partnership with industry. Believe me, the ordinary working folk of Britain not only have much expertise at their fingertips, which management should give them the opportunity to use, but they have a good deal of common sense, and that is what the Labour party wishes to harness.

I emphasise that the Government's confrontation policies—the creation of unemployment to use as a whip against working people to keep them in their place and keep wages down—will not succeed and are not acceptable to the Labour party. Therefore, we make no excuses at all for making a central plank of our policy cooperation with the trade union movement, industry generally and all sorts of other people so that they can make a contribution to the revitalising of British industry and its fortunes.

I conclude as I began by congratulating my hon. Friend the Member for Keighley on his speech and on bringing this important matter to the attention of the House.

2.53 am
The Under-Secretary of State for Industry (Mr. John MacGregor)

The hon. Member for Keighley (Mr. Cryer) began with a reference to the Darlington by-election. His analysis of the figures is as faulty as his analysis of the problems of manufacturing industry and the strategy that is being pursued to achieve economic recovery, especially in manufacturing. The swing at Darlington is marginal. I fully accept that one cannot translate one by-election result into national terms and it is significant that the hon. Gentleman refused to refer to the Bermondsey result, which was completely different. No doubt he was seeking a crumb of comfort from Darlington.

Goodness knows, he needs it.

Even accepting that by-elections can produce exceptional results, the swing that hon. Members have seen would not mean a Labour Government. I point to the position of the national opinion polls at present. The hon. Member for Swindon (Mr. Stoddart) referred to the common sense of the British public. I entirely agree with him. The national opinion polls show that the people of this country do have common sense, are realistic, and understand the relevance and realism of the policies that the Government are pursuing. They have rumbled the policies of the Labour party.

I do not question the compassion or concern, which the Government share, of the hon. Member for Keighley. However, I feel that his understanding and policies are wrong. It was significant—I do not want to return to the past for very long—that he failed to draw attention to what is happening worldwide and to the fact that Britain is in the deepest worldwide recession for many decades. Unemployment in other countries—which I agree remains intractably high and which we wish to see reduced—has been rising faster than in Britain. As the Chancellor pointed out in his Budget, during the past year unemployment rose by 1.6 percentage points in the United States, 2.3 percentage points in Germany and nearly 4 percentage points in the Netherlands as against 1.4 percentage points in Britain.

Mr. Stoddart

rose—

Mr. MacGregor

Will the hon. Gentleman forgive me if I do not give way? I have listened to a long speech and I have many points to reply to.

Mr. Stoddart

Just on one point.

Mr. MacGregor

Just on one point, then.

Mr. Stoddart

Is the Minister aware that I was recently given an answer that unemployment in this country in the past year rose by 12 per cent., while in France it rose by 6 per cent.? Therefore, unemployment in Britain is rising more quickly than in many other countries.

Mr. MacGregor

The French Government have been pursuing the same short-term and misguided policies as the Labour party pursued in the second half of the 1970s and which have led to so many of the present difficulties. The hon. Gentleman will have noticed that the French Government have had to change tack because the damage that their policies were causing was beginning to affect the long-term strength of their economy.

The background point that I wanted to make was that we were in a less competitive state by the end of the 1970s to face the blitzes and hurricanes of the worldwide recession than most of our major competitors overseas, which had been more successful during the 1970s than we had been in remaining competitive and getting up-to-date in their products and industries. That is the problem that the Government faced. We have had to deal with the worldwide recession and cope with the fact that Britain's competitiveness declined substantially during the second half of the 1970s. Therefore, we have had to tackle deep-seated problems.

It is relevant to point out, as the Chancellor did in his Budget statement, that in our economy domestic demand has been growing at almost 3 per cent. a year in real terms since the spring of 1981. That is a stronger growth of demand than in most other domestic economies.

The challenge is not that there is total lack of demand in our economy, because ours has started to grow faster than in other countries, but to ensure that our recently acquired competitiveness enables us to satisfy the increased demand for products made at home and not for imports.

The hon. Member for Keighley referred to cars, and the motor industry is a relevant case in point. Why did the motor industry decline in the 1970s in the way that he pointed out? There was a huge increase in imported cars because consumers were exercising their choice of preference as to the most recent models, there quality, design and so on. That is why I trust that the hon. Member for Keighley will agree with me that during the past few years Britain has been tackling that problem at its root, and the results are beginning to show through in the new models coming from British Leyland which the consumers are once again buying. Long may it last.

The important point is that the motor industry fell behind in competitiveness and in its models. That is what we are trying to put right. I am sure that the hon. Gentleman will agree that the reception for recent models is very encouraging. Incidentally, housing starts are significantly up, admittedly from a low base. However, this year saw the highest car sales figures for any January. Therefore, the demand is there and the challenge is to get British industry competitive again.

I shall refer briefly to the overall strategy of our economic policy, because it has been much debated in the House recently. I shall then turn to the strategy pursued in my Department in relation to manufacturing industry. It is vital to bear in mind the overall strategy which dominates the particular measures pursued by my Department. Hon. Members will find that manufacturing industry throughout the country totally supports the Government's overall strategy of reducing inflation and achieving realistic wage settlements.

I agree with the hon. Member for Keighley that wage settlements in the textile industry have been moderate. However, the point of talking constantly about realistic wage settlements is to highlight the fact that throughout the second half of the 1970s, and admittedly into the first year of this Government, wage settlements were too high in both the public and private sectors. That led to the increase in costs, that firms in the textile industry with low wage settlements have had to face. Therefore, the need for realistic wage settlements is as relevant to the textile industry and, for example, to the energy industry as it is to any other industry.

I should also mention the strategy of pursuing lower interest rates and of dealing with the supply side. We have been trying to tackle such matters as restrictive practices, overmanning, the way in which many of our products are not up to date, and the lack of innovation in introducing new technology. Mention was made of encouraging investment, but by far the most significant way in which we encourage investment in terms of tax forgone—one side of Government expenditure—is through capital allowances, the tax system, and so on.

Many international and multinational companies are investing in Britain and providing new jobs in the assisted areas and elsewhere. Often, they are attracted by the investment incentives that we provide through the tax system, which have been substantially taken up. Honourable Members should contrast that strategy with that of the Labour party. Both the hon. Members for Keighley and for Swindon have said that new policies will be announced next week. Indeed, we have already had a substantial foretaste of them from leaks in advance of the Darlington by-election and in earlier policy statements. The hon. Member for Keighley referred to them as the bones. However, from what I have seen of the new policies, they are the dessicated, dried bones of a long-dead dinosaur. The strategy amounts to very substantial reflation, to a whole battery of controls and, as has been said, to co-operation with the trade union movement. The substantial reflation contains several Achilles heels. The analyses that have been put through the Treasury model and that have been made by others, such as the London Business School show, that, if there is no substantial wage restraint, within a few years the outcome will be much higher inflation, lower growth, and even higher unemployment than at present. The higher inflation would be critical and would be the policy's real Achilles heel.

With regard to controls, if the hon. Member for Keighley were to ask British manufacturing industry what it wants, he would find that the last thing, it wants is the battery of controls that we have seen in the past from the Labour party and which seem to be coming through more significantly in the new policy.

The other danger is that if one talks to British industry one finds that small and large firms believe that the policy of reducing interest rates on average to below the levels of our international competitors and keeping them there will be crucial to industrial confidence and increases in overall manufacturing investment.

The policy of reflation that the Labour party is pursuing would lead once again to the rocketing of interest rates and would be extremely damaging to industry's confidence and to the prospects of greater industrial investment.

The strategy pursued by my Department—I am concentrating mainly on manufacturing industry, because that is what the debate is about, and I agree with the hon. Member for Keighley that it is important that we have a strong manufacturing base—is to improve our competitiveness in a range of ways: to switch the balance of spending from supporting the casualties of the past to backing the industries and products of the future, and moving the balance of our expenditure within the Department away from support for the nationalised industries and public sector companies towards expenditure on innovation and new technology.

Expenditure on innovation and new technology should not be thought of, as I think the hon. Member for Swindon hinted, as concentrating simply on new industries and products. Innovation and new technology are just as important for existing industries, including textiles, to ensure their up-to-date competitiveness. I see that the hon. Member for Swindon agrees with me.

It is important to stress constantly that the emphasis on innovation and new technology does not mean concentrating on new industries and high-technology industries, as defined. It means bringing that kind of technology into our existing industries and traditional products.

I believe that it is important, and worth stressing constantly, as my right hon. Friend the Secretary of State for industry did in the Budget debate last Monday, that the Government have moved the balance of the Department of Industry's expenditure progressively towards innovation and new technology.

Between 1980–81 and 1983–84, Department of Industry expenditure on nationalised industries and public sector companies will have declined from about 61 per cent. to 34 per cent. while that on innovation, which applies to all the sectors, including machine tools and textiles, which the hon. Member for Keighley mentioned, will rise from 6 per cent. to 18 per cent. We have been able to achieve that switch to the emphasis on new technologies because, in reducing the proportion spent on nationalised industries and public sector companies, we have also managed to eliminate a large number of losses and make those industries more competitive. It is a fundamental part of the strategy and it is why last May we launched our support for the innovation programme, bringing together the Department's assistance for industrial research and development and for increasing awareness of the new technology and promoting its application.

The maximum grant level was raised from 25 per cent. to 33⅓ per cent. That is the way that the Government have been helping the industries that the hon. Member for Keighley was talking about. The higher rate will be retained at 33⅓ per cent. for a further year beyond May 1983.

In cash terms, our support for general industrial research and development, under the Science and Technology Act 1965 has quadrupled from £57 million in the last year of the Labour Government to £230 million in 1983–84. It is an increase of 135 per cent. in real terms.

In addition, a further £55 million will be available in 1983–84 under the Industrial Development Act 1982 to enable companies to undertake innovative capital investment. The support that I have described is available to all companies in the manufacturing sector whatever their size and location. I am anxious to see small companies taking up these schemes as much as possible. It is encouraging that some 60 per cent. of the support under the microprocessor awareness programme goes to companies in the small firm sector.

I have not sufficient time to deal with all the schemes. I have been talking about global figures and showing the switch of emphasis. One important part, if we are to come up to date, is the robots and flexible manufacturing systems. The House will know the extent to which our more successful competitiors have been applying robots in their industries at a very much faster pace than ourselves. That is why we have introduced the robots and flexible manufacturing systems schemes.

Under the Department of Industry's robot programme, we have committed £8.5 million already to help with costs of 61 consultancy studies, 21 robot manufacturing projects and 82 new robot installations involving 150 robots, all going to manufacturing industry. In particular, I am delighted that, of the 150 robots, about one third are going into small firms. In robot manufacturing, we are supporting new job creation. The expansion of Unimation's robot activities at Telford will eventually create 250 new jobs direct and as many again are expected among suppliers.

There has been a good response to the £35 million flexible manufacturing systems schemes. The sum of £1.9 million has already been committed. It may seem a small figure in relation to the £35 million but the scheme was only launched in June 1982. The hon. Member for Keighley will know from his experience in the Department of Industry that it takes some time for industry to assess its position and to make applications under the scheme. There are in addition 46 projects under consideration involving total costs of around £100 million.

I have not sufficient time to deal with the whole innovation area, but I hope that I have already stated enough to show that the switch in emphasis is substantial and that the increase in funds available for these innovation projects and innovation generally is also substantial and that this is an important way of ensuring that our manufacturing industry remains competitive.

Another key element in the Department's policy is the emphasis that we are now putting on small and medium sized enterprises, basically those firms employing fewer than 200 people. The hon. Member for Swindon tried to pay a tribute to the hon. Member for Keighley for his work in small firms. It is, however, significant how little the hon. Member for Keighley mentioned them in his speech. It is important to underline that a great deal of the innovation and of the effectiveness and competitiveness of new industries and existing industries will come through the emphasis we are putting on small firms. We have taken well over 100 measures over the whole range of policy activity to assist small firms. There is one I should like to mention because the hon. Member referred to the machine tool industry.

I refer to the small engineering firms investment scheme which I announced in the House last March and which we had to close because of its enormous success when the demand became so great, even after adding £10 million to the original £20 million. The scheme has been necessary for a number of reasons. One of the most important is relevant to our debate and to the analysis of what has gone wrong. It has been necessary because there has been a lack of investment by small engineering firms in the most up-to-date technology over recent years.

Now, because of the blitz of the world-wide recession, many firms find that they lack the profitability to make the investment and cover all the costs through capital allowances. We have therefore had to top up with a 33⅓ per cent grant. I am much encouraged by the tremendous response to the small engineering firms investment scheme last year. Already, under the scheme, 1,400 firms have been made offers of assistance. Already, £10 million has been paid out to nearly 600 firms. What is important to the machine tool industry and what has encouraged me is that nearly 60 per cent. of the equipment orders will be United Kingdom produced. I hope that, under the new scheme, we shall see that take-up by the British machine tool industry continued.

The Chancellor of the Exchequer has announced our intention to allocate £100 million for the new SEFIS, as it is called. In so doing, I believe that we shall bring substantial help to small engineering firms, to the machine tool industry and to the economy at large. I shall announce the details of the new scheme next week.

The hon. Member for Swindon was quite wrong about the Budget. The measures announced by my right hon. and learned Friend the Chancellor are clear evidence of the Government's continuing action to help industry to cut costs. The measures will help businesses directly by £750,000 million in a full year. Combined with the changes in national insurance surcharge and the national insurance contribution changes announced by my right hon. and learned Friend last autumn, however, the benefit to businesses will be about £1.25 billion in a full year. That comes on top of previous Budgets that have also concentrated on industry.

It is important to bear in mind that the other measures in the Budget, especially the increases in personal allowances, will also substantially help industry. They will help to deal with the problem that many firms have pointed out to me—the difficulty of recruiting because of the "poverty trap". The raising of thresholds will also help in moderating wage demands and by increasing demand and consumption. In that way, even those measures that are not purely and directly industry measures will be of great significance to industry.

On jobs in manufacturing industry, it has always been Labour Governments who have taxed jobs and Conservative Governments who have had to take the taxes off. The previous Conservative Government had to abolish selective employment tax. The Labour Government then introduced—and later increased—the national insurance surcharge, adding to industry's costs a total of £3.5 billion per year. The substantial reductions already made in the national insurance surcharge are worth about £2 billion to the private sector in a full year.

Interest rates are also highly significant in terms of burdens on industry. The decline in interest rates from the peak of 16 per cent. in 1981 has already increased industry's cash flow by about £1,375 million in a full year. That, too, is important and should be borne in mind when one considers the Labour party programme and the way in which it will push interest rates up again.

Equally important, the 1983 Budget is a Budget for enterprise, innovation and the small and medium-sized firm. I hope that the hon. Gentleman will welcome the fact that a further £185 million is being added to the Department's support for innovation programme over the next three financial years, including the sums for the new small engineering firms investment scheme.

The totality of measures taken in four Budgets concentrated on enterprise and small firms represent the most radical change in the tax system in favour of small firms for many years. Increasingly, as the recession clears, the advantages of that will become clear.

I draw particular attention to the change from what was knows as the business start-up scheme to the new business expansion scheme which will run until April 1987. The Budget makes three very significant changes. As more and more small firms, including many expanding ones, become aware of the scheme it will become increasingly important for the improvement of that sector.

One of the great problems in recent years has been the inability of small firms to attract equity investment, which they often need more than additional bank borrowing. In my view, the business expansion scheme will do much to redress the fiscal bias against investment in small firms and to enable equity investment to take place again.

For industry in Yorkshire and Humberside, as elsewhere, the overall strategy is the most crucial factor. Nevertheless, significant sums have been provided in Government financial aid to assist industry in the region. I mention just some of these, including some in the constituency of the hon. Member for Keighley.

Since May 1979, some £200 million has been spent on regional aid to firms and provision of Government advance factories in Yorkshire and Humberside. That aid from the Government has been supplemented by substantial help from European Community funds, including £27 million in loans to firms from the European Investment Bank and £33 million from the European regional and development funds for infrastructure improvements. Listening to the hon. Member for Keighley one would think that nothing was taking place, but these are significant sums. In addition, the region has benefited from many other schemes of industrial support that are available to firms nationally.

Since May 1979, firms in Yorkshire and Humberside have received grants of £33 million under section 8 of the Industry Act 1972. In the same period offers of £ 15 million have been made under the Science and Technology Act 1965 to assist industrial innovation in the region. Many small firms have benefited from the Government's measures to help them, not least by the loan guarantee scheme, under which we have provided about 600 guarantees covering over £17 million in loans to firms in the region.

The Department of Industry's small firms' service can make an important contribution to the prospects of many small firms in the region. One of the greatest contributions that can be made to helping small firms is the provision of advice at the right time in areas in which the firms do not have expertise. Under the Government the small firms' service has expanded considerable. Small firms have also received assistance from the enterprise agencies and in many other ways. The agencies have been a growth area under this Government.

Throughout the country during the 11 months from April 1982 to February 1983 the small firms' service received over 213,000 inquiries, of which over 22,000 were from the Yorkshire and Humberside region. Estimates suggest that about 3,534 of the inquiries received in the region came from manufacturers. In that period over 350 manufacturers received business counselling and management consultancy from the small firms service in the region.

Yorkshire and Humberside has benefited from the expenditure of £53 million under the urban programme. The catalogue of measures to which I have referred for the Yorkshire and Humberside region totals nearly £400 million. There are many other less direct ways in which public money has helped to sustain the region's economy. The National Coal Board, for example, has invested heavily in the Yorkshire coalfield, and in financing the development of the new Selby coalfield there have been associated improvements to roads and railways. The Central Electricity Generating Board is continuing to invest in the Drax B power station. This shows that a great deal of well-directed help has been going to the region since the Government have been in office.

Mr. Cryer

Why has all the well-directed help resulted in a higher level of unemployment in Yorkshire and Humberside than the national average? As the help is so well directed, will the Minister direct help to the Keighley constituency by restoring intermediate area status?

Mr. MacGregor

I do not think that the hon. Gentleman has been listening. I made it clear that the problems that we have been facing included declining competitiveness. Yorkshire and Humberside has a number of industries where that has been a factor. The hon. Gentleman knows that we are concentrating assisted area status on the areas of greatest need. The hon. Member for Swindon said that that would be the effect of the Labour party's new regional policy. In that context, there can be no case for giving aid to Keighley.

We have been taking substantial steps to deal with state aids to textile industries in the other Community countries. I think that the hon. Member for Keighley knows that they have been having their effect. In the past financial year British textile and clothing firms received, or were offered, about £35 million under regional or general assistance schemes operated by my Department and a further £23 million-worth under the Department of Employment's temporary short-time working compensation scheme. These are effective ways of directing aid to the industry. We are carefully considering proposals put forward in "Plan for Action", which was recently published by the British Textile Confederation. As a first step, my right hon. Friend the Secretary of State for Industry has arranged to meet representatives of the confederation next week to discuss their proposals.