Industrial Technologies

HC Deb 27 June 1984 vol 62 cc1114-32 11.42 pm

The Parliamentary Under-Secretary of State for Trade and Industry (Mr. John Butcher)

I beg to move, That this House takes note of European Community Document No. 8018/83 on a Research Action Programme on Industrial Technologies and the supplementary explanatory memorandum submitted by the Department of Trade and Industry dated 14 May 1984; and supports the Government's intention to ensure that Community research in this area should be beneficial in terms of policy objectives of the Community and the United Kingdom. The debate is held on the recommendation of the Select Committee on European Legislation which considered the proposal twice in 1983 but considered that it did not merit debate at that time. Since then there has been a further revision of the proposal based on consultation with member states and industry. The proposal will be considered by the Research Council in Luxembourg on Friday 29 June. The Government are seeking the views of the House so that they may be taken fully into account when the Council considers the proposal.

I should like to begin by saying a few words about the content of the proposal which is the subject of the supplementary memorandum submitted by my Department. The proposal is for a four-year research and development programme covering two areas: basic technological research and the applications of new technologies. Since the original proposal was submitted to the Council, those two programmes have been merged into one programme designated basic research in industrial technologies for Europe—or more simply, the BRITE programme. BRITE forms part of a wider based research action programme on industrial technologies which includes some existing research programmes which have already been considered by the House. The research action programme is itself part of the Community's framework programme—which indicates broad objectives for Community research and development programmes and the balance between them. The framework programme has also been considered previously by the House. Tonight therefore, on the recommendation of the Scrutiny Committee, the Government are seeking the views of the House on the BRITE proposal in particular which is on page 32 onwards in the proposal document.

The central objective of the BRITE programme is to assist in the creation of a significant and advanced techological base upon which European industry can draw. More specifically, the programme will bring together complementary research abilities from different sectors of the Community to work on high priority technical areas. Few would disagree, I think, that industrial competitiveness in the Community over the next decade and beyond will greatly depend on advances being made in a number of technical areas.

The BRITE proposal contains two sub-programmes. The first is concerned with pre-competitive research and development in new materials and technologies and includes a wide range of interrelated themes: reliability, wear and deterioration, laser technology, joining techniques, new testing methods, CAD-CAM—computer-aided design and manufacture—polymers and other new materials, membrane science, catalysis and others. The second sub-programme is concerned with research and development in new production technologies for products made from flexible materials and includes automated handling, joining of flexible materials, automated manufacture and so on. This sub-programme has been broadened, since the original proposal was submitted, to include flexible materials in general and not just the clothing industry. The technology developed will have wide applications across a spectrum of industrial sectors. The programme should provide benefits for industries such as motor vehicles, chemicals, shipbuilding, clothing, construction, machine tools, electrical equipment, furniture and consumer durables.

It is worth noting that the industrial sectors that I have mentioned are estimated to employ over 25 million people in the Community. In the United Kingdom alone I estimate that these same sectors employ more than 3 million people.

I believe that the Scrutiny Committee has done the House a great service, because it is about time that the House examined the thesis that our basic existing industries are also potentially, if not already, becoming high technology industries.

I should have loved the opportunity on another occasion to debate some of Toffler's theses that somehow the smokestack industries—he calls them that, although I believe it is a misnomer—are beyond redemption. I reject that. I believe that, instead of talking about "sunrise" and "sunset" industries, we should start talking about the "sunshine" industries—those established industries which are already trading profitably and wish to remain so by the application of new ideas and intellect, by adding value and by fighting back in the international markets by using the brain power that we find in western Europe.

I refuse to believe that there is any such thing, or need ever be any such thing, as a "sunset" industry. I have recently visited "Mach 84", the machine tool exhibition in Birmingham, and I can see that that industry employs the greatest amount of intellect in adding value to its products and in producing some magnificent facilities. Incidentally, many British companies have learnt the lesson that computer-numerically controlled lathes, flexible manufacturing systems and robotics are for them.

I think that it is important for hon. Members to be aware of the way the technical areas in the proposal were arrived at. They were not arrived at simply by Commission officials sitting in Brussels, nor for that matter by officials of my own Department. They are the result of extensive consultation with industry. Last year, the Commission sought from industry views on what areas of research and development it considered particularly important. More than 700 individual items were put forward, and the list of nine technical themes emerged from this process. The Government applaud the Commission for this practical approach to assessing needs.

The proposal seeks 170 million ecu for a four-year programme—that is, about £106 million—of which 20 per cent. would be devoted to the second sub-programme concerned with flexible materials. It is proposed that the programme will be implemented largely by means of cost-shared research contracts placed with companies and research organisations in the member states.

Taking into account the financial contributions from national sources, a total Community programme of some £200 million would result. Where there are existing national activities in several member states, it is proposed that there should be concerted action—that is, the Community will not share in the costs of the research but may make a contribution to the cost of meetings, workshops and so on to ensure co-ordination of the work. The Government strongly support the concerted action approach in selected areas.

Three important criteria would be applied in implementing the programme. First, the research must be able to lead specifically to technological breakthroughs relating to industrial productivity, product reliability, originality of design or ocher factors which are a key to greater competitiveness. Secondly, the research must be of a pre-competitive nature, and here a balance will have to be struck between protecting the rights of particular research teams and spreading the results to European industry as a whole. Thirdly, the proposals must involve at least one industrial company and must also involve organisations in more than one member state so that the programme will have an authentic European dimension.

The Government take a generally favourable view of programmes of this nature, subject to a broader qualification, to which I w ill return in a moment. En terms of technical content and appropriateness for action at Community level, I consider that the programme could offer benefits for United Kingdom industry. The programme would complement the support provided for British industry by my Department under the support for innovation scheme.

There is no doubt that European industry needs a strong base to remain competitive. It needs a big enough market to cover the costs of research and development. It needs the latest industrial technology so that it can compete on equal terms with world leaders such as the United States and Japan.

In the west midlands I have been able to see at first hand how the timely application of new technology is critical to competitiveness. In the United Kingdom the Government are encouraging industry in these developments. BRITE is designed to link up firms, universities and research institutions across national frontiers. The approach has an underlying prime necessity—to get research results out of the laboratories and into the factories.

The major feature of BRITE in the context of European programmes is that it is led by industry and industrial objectives. It aims to stimulate industry to take new initiatives and allows firm; to make marriages with other firms, research institutions and universities of their choice. There is scope for flexibility, in that firms can select partners before approaching the Commission for support.

The appropriateness of the approach is borne out think, by the very large numbers of expressions of interest in the programme, some 3,000 in the Community as a whole and more than 750 in the United Kingdom—more than half from industry. If the programme is adopted, British industry would be expected to benefit significantly.

In considering the proposal, we must of course get a balance between what is appropriate to support at Community level as opposed to nationally or by industry itself. It is clear that the strict budgetary discipline will have to continue to be applied to all areas of Community activity, including research and development. For this reason the Research Council will be considering on Friday the overall priorities for Community research and development, the resources which are likely to be available in future years, and how the allocation of these resources should be handled. I shall be attending this meeting for the Government.

The Commission has a portfolio of proposed programmes which it wishes to have adopted and it hopes to start these programmes in 1984–85. This portfolio of programmes—of which BRITE is one—serves to flesh out the framework for community research and development which was agreed in outline by the Council of Ministers last year. The meeting on Friday will consider the relative priorities of the proposals of which BRITE is one. This would colour subsequent decisions on allocation of resources to individual programmes. This is background against which the BRITE proposal will be considered at the Research Council on Friday.

I again commend the Scrutiny Committee's decision to bring this report forward, and I welcome this opportunity to take a sounding of hon. Members' views on the sunrise industries.

11.55 pm

Dr. Jeremy Bray (Motherwell, South)

The House appreciates that, as the Under-Secretary is speaking only the day after the resolution of the budgetary problems of the Community, he is not able to tell hon. Members of the scale of the resources that may become available or the priority of the programme within the additional work that the Community will be able to undertake out of the increased own resources. Nevertheless, I hope that he, or his colleagues, will take the message to the Research Council on Friday that the House is in favour of increased spending on a wide range of industries that are not included in the currently fashionable, so-called advanced technological industries, which the Commission limits to information technology and bio-technology.

We need to put the proposals into scale. We are talking of a 170 million ecu programme over four years, which is about £25 million per annum in the United Kingdom. That must be compared with our science budget of £560 million a year and our support for industrial development of £330 million, and, therefore, a science and technology budget of £890 million a year. The £25 million a year will be spent on the basic technologies that, in the Under-Secretary's words, will give an advanced industrial base on which the Community can draw. Given the scale, that claim is absurd.

The hon. Gentleman should include in his visiting the research departments of some of those industries for which he is directly responsible. I invite him to go to the central research laboratories of the British Steel Corporation. He will see there that 0.5 per cent. of BSC's sales is being spent on research. All of it is well spent and thoroughly justifiable, but that is a pathetically inadequate basis on which to build the future of the steel industry. That is the programme for which the Under-Secretary and his colleagues are directly responsible.

I shall now return to science and technology policy after an excursion into the economic policy of the past few years. Most Ministers and officials who are responsible for science and technology have not looked at the statistics that were produced 20 years ago, in our last rounds of serious discussions of science policy, and that have still not greatly changed. I do not mean merely the civil as against military research and development and the volume of activity concerned, but what happens in particular industries and activities within industries.

For example, agricultural research has brought about immense increases in productivity. However, we are now cutting back support for such research, on the grounds that the mismanagement of resources is producing agricultural surpluses. We have managed to produce huge increases in pig production and potato yields from relatively straightforward research that does not even enter into the advanced scientific research with which the research councils think that they should be concerned. It comes from the general run of Government expenditure. We find in that the total misallocation of resources by a Government who are not pursuing a science policy at all.

I welcome the remark of the Under-Secretary, that we should get rid of the idea of smokestack industries, but I refer him to the comments of his own Department in the Government's Expenditure Plans, Cmnd. 8789. In page 18, paragraph 12, under "Scientific and technological assistance", it says: Support for industrial research and development … is increasingly aimed at the new technologies including information technology. By all means let us have increased research and development expenditure on the advanced technologies, but, when they are getting such a disproportionate share already, the rates of growth in the basic technologies that we are discussing in the programme should be much faster.

I observe nothing in the Commission document or in what the Under-Secretary said that gives any indication that the Commission or the Government are yet thinking on the right scale, or have the right approach. It needs to be related to the broad background of industrial policy and, behind that, economic policy. It needs to extend into the areas of education and academic research. In this country and, I believe, in the rest of Europe, there is a readiness to get down to the basic technological research, a readiness to listen and a readiness to alter the old power structures in firms and industries so that the new ideas can surface.

I want to pose some doubts and questions about the programme. I deal, first, with the mode of operation. To alter these pitifully small resources on the basis of inviting declarations of interest and tenders is to cause the research associations, firms, university departments and so on an immense amount of wasted work in over-application for inadequate funds. I understand that ESPRIT has had 450 applications already this year. Only a tiny proportion of those will be short-listed, and an even smaller proportion stand any chance of support. Is the Commission justified in provoking that vast bureaucratic effort by industry, universities and others chasing a few pennies that most of them will not even see?

Secondly, the limitation to less than 50 per cent. of the cost in the basic technological research area cuts out a great deal of the most important work. By definition, the work that is pre-competitive is not worth undertaking by the small or medium size enterprise about which the Commission talks. These are contradictory ambitions—the limitation to less than 50 per cent. and the wish to involve small and medium size firms.

I deal next with the problems of dissemination of results. Heavens above, it is difficult enough to disseminate the results from the "mud on the boots" sort of research organisation such as the Production Engineering Research Association to engineering firms in the midlands. It makes one despair of the problems that the Commission would face in disseminating from Brussels or from laboratories in one country to firms in other countries. The methods of dissemination need to be more closesly linked with the national efforts that are being made. I do not see the declaration of intent to work through national channels by any means as evidence that the problems have been thought through.

Technological research cannot be isolated from the industrial and economic strategy of which it is a part. Industrialists, especially those to whom I talk in the pharmaceutical or electronics industries, think that they are on to a good thing and that they will preside over vast and increasing levels of output while employing fewer people. I find myself asking them how the wealth that they produce will be spent. Will it all be in the form of profit or a return on capital? If the extra wealth is reflected in wages, those industries will have far higher wages than other industries. Those industrialists do not realise that if productivity in electronics is increased hugely and there is only limited demand, the share of gross national product will fall. If, in the extreme case, there is an infinite growth in productivity in electronics and information technology, the contribution to GNP may become minute.

That is no reason for not putting great effort into information technology. If we are concerned with the well-being of society and its longer-term economic well-being, there is an overwhelming argument for pursuing a more balanced distribution of research effort. One should apply the natural criterion that the research spend per man involved in the different industries should be roughly comparable. That would have to be qualified, but it would get us thinking in a direction that at present we do not even begin to grasp.

Even within this pathetic little programme, textiles are getting 20 per cent. although they employ only 5 per cent. of those in manufacturing industry. I welcome the money that that sector is getting and I am sure that it is fully justified, but I am also sure that the other 95 per cent. of the work force in manufacturing industry deserves much stronger support in research and development than it is getting even from this programme.

I wish the Government well at the Research Council meeting. I hope that they will attend, resolved to give this programme high priority, but only as a bait with which to catch a very much larger fish, in moving the research and development efforts of both the Government and the Community in the direction in which they are just beginning to move.

12.6 am

Mr. Ian Lloyd (Havant)

The hon. Member for Motherwell, South (Dr. Bray), my hon. Friend the Minister and I all share a profound interest in this subject. However, I am not sure whether those hon. Members share my sense of bewilderment over the strange sense of priorities that the House sometimes exhibits. Today, we have spent the best part of eight hours debating, in essence, whether or not the deposit of a candidate in a general election should be increased to £1,000. I concede that that is an important topic. However, at a late hour, when the Press Gallery and the Strangers Gallery are empty, and when very few hon. Members are in the Chamber, we are debating the industrial future of western Europe. It is extraordinary that this debate should be given one and a half hours of our time when compared with the time allocated to the previous debate and to many other subjects. It is singularly depressing.

When replying at the Dispatch Box this afternoon, my right hon. Friend the Prime Minister expressed her profound conviction that the application of new technology lay at the heart of this country's future and survival and that of our friends in the Community. There can be no doubt about that. I shall refer in a moment to six quite extraordinary examples that support that. However, first I should like to take up the point made by the hon. Member for Motherwell, South, and reinforce it. He spoke about the scale of research with which we are endeavouring to compete.

Ten days ago the Select Committee on Energy had the privilege of visiting Matsushita outside Tokyo to look specifically at the energy research which that one private firm in Japan was undertaking. We looked at many things which will not interest the House this evening, but: one point will. The total number of employees of that one organisation working entirely on research and development is now 20,000. Of that 20,000, 5,400 are working on energy research and development alone. I suggest that hon. Members need no assistance from me to quantify those figures either in terms of yen, ecu, dollar or other index of significance.

To illustrate the point from another source, of which my hon. Friend the Minister will be only too well aware, this morning I read a document published by his Department describing the factory in Japan which manufactures the Brother electronic typewriter. That had the interesting information that one small unit employing 30 employees had a total output of £60 million per annum, value added £2 million per employee. Those are the facts and factors which we just seem to ignore. We do not, as I understand it, have the capacity to rise to the challenge which this is presenting to Governm nits and to nations in western Europe.

May I be more specific and refer to some of the extraordinary interesting items in the document? The first is the definition of the objective of the programme.

Paragraph 104 says: The objective … is … to stimulate cooperative basic technological research on a scale sufficient to impact European industrial competitiveness.'' That is the important phrase. I wonder what that scale is today. I wonder how many hon. Members realise the extent of the challenge which is coming and the extent of the changes in policy and in industrial structure and in the allocation of resources between research and development and production which is necessary to produce something on a scale sufficient to impact European industrial competitiveness. The document goes on to say: This objective must be kept in mind and dominate decision-taking throughout all stages of the programme. I heartily agree. It must be kept in mind and dominate decision making. But it is unlikely to achieve the widespread attention and concern it deserves if we debate it for a matter of minutes late at night when all have gone home and the House and the country are largely unconcerned.

Paragraph 99 says: The funding estimated to be needed for the various sub-areas is the minimum considered necessary to raise the level of research throughout the Community— again, this is the important question— to the point where it is above sub-critical and consequently will make a useful and significant impact on the technologies concerned. Now let us look at some of the specific cases. Out of the nine areas which are discussed, I want to refer to about six. The first is "Laser technology applications, together with other new methods of metal shaping and forming". The document points out: The potential applications of power lasers in mechanical manufacturing are numerous and far from being fully explored or exploited in Europe … In contrast, MITI in Japan already has a 7 year programme under way in the framework of a project for flexible manufacturing systems. It concludes, rightly: it is crucial that Europe exert itself in this field. What does "exert" mean in that context?

I move on to the next matter, "Joining techniques". The report says: Another area needing more R & D effort concerns the further development of low cost automated welding techniques making use of microprocessors, which should lead both to higher productivity and to a constant higher product quality. This research includes the development of sensors and adaptive control systems. In Japan much attention is being paid to these developments. On electron beam welding it says: Japan is taking the lead in applications". Again, what is our reaction? Is it sufficient? The problem in this whole reaction area is of the order of 10 million to 20 million ECUs, and I cannot help endorsing what the hon. Member for Motherwell, South (Dr. Bray) said about the scale and sufficiency of such a response.

Dr. Bray

I think the scale of the British effort is nearer to £5 million a year, not £25 million, which must be the figure for the whole Community.

Mr. Lloyd

The hon. Member is justified in making that intervention; it merely enlarges and endorses a concern which I think is widely felt on both sides of the House.

The next heading is "CAD/CAM and Mathematical Models", a highly significant area of new technology. This is where the nuts and bolts of the advance, to use an old-fashioned phrase, is taking place. If we get this right we shall get many of the other things right; if we get this wrong we shall be perpetually behind. Once again, the report says: CAD and CAM"— computer aided design and computer aided manufacture— have been the subject of a great deal of work throughout the Member States of the Community but there has been so much R & D in the US and Japan supported by governmental agencies that Europe is now in general well behind the best world practice. What a solemn comment on the industrial policies that we have been following for decades under successive Governments. What a solemn comment on the state in which we now find ourselves—and not only in the United Kingdom.

The next heading is "Polymers, Composites and other new materials". Here again the report is devastating: While the Commission has been strongly advised that the future of Community industry will depend significantly on its ability to produce polymers having improved special technological properties … that ability is facing a dual threat. Need I suggest where that threat is coming from? On the one hand, high quality polymers produced in the US and Japan are already on the market, meaning that a technology lag already exists and must first be compensated. That is another devastating conclusion.

Then there is a reference to Composites, which are multiphase materials combining the essential properties and advantages of several 'traditional' materials". Once again we find that Considerable foreign research is already going on in the fields of macromolecular chemistry, polymers and composite materials. In the US it is taking place in the framework of a University/Industry Cooperative Research Centre Programme … In Japan, MITI is supporting polymer and composite materials research in the framework of its 'Research and Development Project of Basic Technology for the Future Industries'. The next heading is "Membrane Science and Technology". The report says that the technology necessary to transpose the science into practical industrial applications is complex and requires the type of large-scale and co-ordinated work effort that has not yet been successfully created in Europe. Where has it been successfully created? The report refers to developments holding the promise of numerous applications in industry and medicine and says that the technological development and commercialisation of these efforts have largely been centred in the US and more recently in Japan due to these countries' commitment to R & D on this topic". Then comes the point that I should like to make on this aspect: 10 per cent. of total Japanese funds for the MITI programme on basic technologies for future industries or about 50 MioECU". That is just over a third of the total European programme for the whole range of research which this document has in mind. Although I am fully aware that this is, as one might describe it, a topping-up programme, a stimulating programme and supposedly added on to the existing national programmes, I cannot help but endorse the conclusion of the hon. Member for Motherwell, South, which must be held widely in the House, that in relation to the scale of the challenge which we are meeting this is chickenfeed.

In relation to the kinds of discussions that we have been having in this House on whether there should be increased resources for Western Europe as a whole, what possible conclusion can we reach but that those resources are pitifully inadequate and will have to be increased, whether they are taken from the common agricultural policy or whether they are taken from elsewhere in the Community.

The clear and inescapable conclusion that I have reached since my return from Japan is that the West as a whole will not beat the challenge of the Pacific rim countries, unless we come to grips with the whole position and formulate our policies dramatically and fundamentally. This document supports that conclusion, and I am sad and sorry that at this late hour so few hon. Members and probably so few in the country have much idea of what any of us are saying.

12.20 am

Mr. Paddy Ashdown (Yeovil)

It is a pleasure once again to follow the speech of the hon. Member for Havant (Mr. Lloyd). It is a pleasure also to listen to his powerful indictment of the scale of the problem that confronts us and his views on the need to be able to do more than is proposed in the document. I apologise to the House for the fact that I shall be unable to stay for the full course of the debate.

I welcome the document, which contains the very things that we have always believed Europe is about. I well recall that the last occasion on which we debated the new technologies was the day after we had come to something of an impasse in our negotiations with Europe. It is a happy coincidence that we are discussing this matter the day after we have had a better period of negotiation with Europe. Perhaps we are looking forward to this type of international co-operation within the EEC developing in the way in which we have always believed it should.

The document points out that in key areas there have been deficiencies of liaison and co-ordination between and within industrial sectors and between nations. Page 5 of the document states that there has been some duplication in the national efforts to promote these technologies. That is the best example of the way in which Europe can operate to draw together and co-ordinate the moves necessary to create the high technology base on research and development that will be essential, as the hon. Member for Havant so powerfully said, to the need to develop our industries.

I shall touch on, but I hope not repeat, the hon. Gentleman's points. We must remember that the United States and Japan contribute to those types of central coordination Government funding to the level of 100 per cent. of their research and development budgets.

I welcome the points made by the Under-Secretary of State about the implications of the new technology. I agree wholeheartedly that the application of that new technology should not be viewed only in relation to the sunrise industries. Perhaps—a recent report confirmed this—there will be a greater impact, as the hon. Gentleman said, in the application of new technologies to our basic traditional industries. How sad it is, therefore, that those comforting words seem to fall on deaf ears in the Government. The rhetoric of the Secretary of State for Trade and Industry and others is to the effect that the decline of our basic manufacturing industries can be taken with equanimity. That decline has been dramatic. I wish that there was evidence that the hon. Gentleman's views, which he has so comfortingly expressed, were more widely held by the Government, but that does not seem to be the case. We hear constant discussion about the fact that it does not matter that our basic traditional industrial base is withering away, because service industries are coming in to support them.

I agree entirely with the Minister that the traditional industries are not dinosaurs. The textile industry is a classic example of the way in which we have been able to use high technology to reduce unit costs and produce better, more up-market goods with greater added value. That is something to which we can look forward. As the hon. Members for Havant and for Motherwell, South (Dr. Bray) have said, this programme will have a limited impact and contribution but it will nevertheless make a start in that direction.

I wish specifically to welcome certain ingredients of the document. First, I welcome the recognition of the importance of the universities and research institutions in this context. Unhappily, they have not so far been able to make the contribution that they should to research and development application in industry. Again, one's welcome must be tempered with concern that the Government currently seem to be running down the importance and the funding of further education institutions. That is a great pity because they have an important part to play, as the document makes clear.

Secondly, we welcome the emphasis on pre-competitive research. That is vital because only in that way can we bring together the various parts of the industry so that the appropriate research can be carried out for exploitation at a later stage.

Mr. Butcher

I intervene at this stage because the hon. Gentleman has informed he House as a matter of courtesy that he will have to leave earlier than he had planned. In the debate between the service sector and the manufacturing sector, the House may not be aware of the fact that about 80 per cent. of the output of the manufacturing sector is internationally tradeable whereas only 18 per cent. of service sector activity is internationally tradeable. I hope that that information supplied by the Department will be of interest to the hon. Gentleman as it tends to clear one's mind a littel on the advantage to United Kingdom Limited. Nevertheless, the two sectors are complementary and I would not wish to understate the magnificent contribution made by the service sector in generating 280,000 jobs in the 12 months to December 1983.

Mr. Ashdown

I hope that the Minister will not misunderstand my point. The Government seem to have regarded the rundown of our traditional industrial base as something that can be regarded with a certain equanimity. The Secretary of State himself has frequently given that impression to the House. I cannot give chapter and verse, but it has certainly been suggested that we should not worry too much about the rundown of our traditional industries. The Opposition, however, regard the rundown as a matter of considerable concern. In this context, the words of the Parliamentary Under-Secretary of State are most comforting. One hopes that his colleagues at the Department will support his view that traditional industries such as shipbuilding, textiles, car manufacturing and so on can use the new technologies in the way that he described.

Thirdly, the concept of seed money will be usefully applied, but I put in a world. of caution on this. The concept is enshrined in the document on terms of a general rule to the effect that not more than 50 per cent. funding will apply. I hope that that general rule will be honoured more in the breach than in the observance in terms of the impact of the proposals on small and medium-sized industries.

Finally, the concept of added value is a key aspect of the document. The value of a piece of research and its application will be judged in terms of the value added to in the manufacturing process to which it applies. That is a very useful concept.

I wish now to deal briefly with our reservations about a few aspects of the document. First, I echo the reservation expressed by the hon. Member for Havant about the scale of the problem and the level of resources to be applied. With due deference to the hon. Member for Motherwell. South, I should point out that complaints about the level of resources to be applied by the EEC come strangely from the mouth of a member of a party whose leader complained only today that we were putting too much into Europe. There seems to be some contradiction there. I leave the matter there as others have made the point about scale more powerfully than I can.

In relation to small and medium-sized industries the document is perhaps too inflexible. I refer particularly to pages 13 and 14. It is said that small and medium-sized industries may gain access to the funding in several ways, but I believe that each expresses pious hopes rather than realities. They can do so, first, through co-operation with large firms which already use SMEs—small and medium-sized enterprises— as sub-contractors".

That is a nice thought, but in reality one of the factors that is coming into play with the new technology is that because they now give large firms the capacity for small-batch production, it is precisely sub-contractors in the small and medium-size enterprises that are most at risk. The idea that they will be able to get access to funding by using the large firms for which they are sub-contractors will not prove effective.

Secondly, the document recommends that the small firms can gain access through the involvement of co-operative or collective organisations". Again that is a pious hope, but the reality is that small and medium-size enterprises largely expend their energies on surviving and prospering, and do not have much time to gather themselves into effective co-operatives. Thirdly, the document suggests that they might gain access through the involvement of and/or communication with universities". Again, smalland medium-size industries do not have the time for decent liaison projects with universities. Therefore, again that is more a pious hope that an idea that would achieve anything. Finally, the document suggests that the small firms might gain access. through information provided by trade associations, chambers of commerce, government bodies, etc. I suspect that those mechanisms will not prove adequate for providing small and medium-size enterprises with access to this facility in the way that they should. I have always believed that those enterprises, particularly in high technology, need positive discrimination so that they can survive. The document is clear about the way that their contributions could be realised. It says that in many areas they are capable of research and have more innovative structures and brains in them. I hoped that the document would give much more specific advantages to small and medium-size enterprises. I fear that if the scheme comes to fruition, the same will happen as is happening with the Alvey progamme and, to a certain extent, will happen with the ESPRIT programme—the small and medium-size enterprises will be left with the crumbs from the table rather than participate in the way that they should.

I should like to ask the Minister two other brief questions. Should not industries in decline or in trouble be given special consideration for projects? The document states on page 6 that the fact that an industry is in trouble or declining is not in itself a justification for Community assistance. Those industries should not be eligible as a result of decline, but on the other hand should they not receive advice to assist them to know where the new technologies might be applied to lift them out of decline?

Secondly, what right of access to information will enterprises that choose not to contribute to a project have? Will all enterprises within the Community be required to contribute to projects pertaining to them? I suspect not, from the tone of the document, but it would be useful to have some clarification on that matter. What will the access to information for industry be in general? That is a key area, which again has impact on small and medium-size enterprises.

With those reservations, we give a guarded welcome to the document because it seems, as other hon. Members have said, to be at least a first step along a road where I hope we shall travel further. If we continue to build on that initiative, it will, I hope, have the impact that we so desperately need to make our industries, particularly our traditional industries, competitive with others elsewhere in the world.

12.34 am

Mr. Spencer Batiste (Elmet)

It is timely to hold the debate in the wake of the settlement of the long-standing dispute over the European budget, when the nations of Europe might now give their minds more fully to exploiting the real potential of Europe in industrial development. However, I fully accept and recognise the earlier comments of my hon. Friend the Member for Havant (Mr. Lloyd) deprecating the fact that this important debate is taking place so late at night. I wonder whether such treatment of important European issues lies at the heart of the apathy shown by the British electorate in the recent European Parliamentary elections. When the important aspects of Europe are debated, it is important that they are seen to be debated, and appreciated by the public. That is the only way in which the public can get a reasonable perspective of the importance of Europe in our affairs.

The analysis in the report of the weakness of basic technological research in Europe is devastating and accurate. I could not match the eloquence of my hon. Friend the Member for Havant, who emphasised that point over and over again in different areas of research. The only way forward is by co-ordinating local British research initiatives and coupling them, where appropriate, with European progress. It is because I want that progress to be achieved, and because it is so important to our industries, that I am concerned about the detail lying behind the fine principles enunciated in the report.

I declare an interest. I have a strong constituency and professional interest in the engineering, clothing and steel industries, in university research and its exploitation, and as a vice-chairman of the Small Business Bureau, in small business.

The importance of new technology—as has been made plain in the debate—in creating and protecting jobs will have its greatest impact in our traditional industries. It is important to encourage the development of new industries, but it is to our traditional industries that we must look when we consider matters that will have a serious impact on employment. We must be concerned about the development of new technology and its effect on our traditional industries.

The report identifies one of the most fundamental problems facing this country—the gap between research and the exploitation of that research. All too often, bright ideas developed in our universities are exploited abroad because of lack of interest and enhusiasm in this country. It is fair to say that in recent times there has been much improvement in that area, but all who are involved in the universities know that there is still a haemorrhage of good British ideas which are not taken up at home for the benefit of our people and jobs.

The highest priority must be massive Government involvement in the field, but the criteria for European involvement are also important. There is little purpose in duplicating research. If a programe can be carried out at home, that is where it should be carried out. The criteria set out in the report for the European programme are clear, and avoid such duplication. It states that the projects that will be undertaken will have to be limited to those where national endeavour is insufficient on its own. That insufficiency has two different forms. There is technical insufficiency, where the resources of different institutes and different countries must be combined to achieve a breakthrough. Such cross-border pollination is to be welcomed.

Very often, the limitations to national programmes of research and exploitation are financial. While research funding is inevitaby cheaper than exploitation funding, the amounts of money to be devoted to this programme are so trivial in comparison with its scope that it is almost laughable. It has been described as seedcorn. It has also been described as chickenfeed. When one considers the range of projects across which the £25 million or £26 million a year will be spread, and the expensive secretariat and organisation that will be necessary, what will it amount to?

I shall not emulate the passion with which my hon. Friend the Member for Havant hammered home that point, but it lies at the heart of the comments that many hon. Members have made. In comparison with Japan and the United States, Europe is not trying hard enough. It is not putting enough of its resources into this important area.

To adopt an expression from the clothing industry—which is one of the recipients of the programme—we must cut our coat according to our cloth. Either we increase the money to match the projects, or cut the projects to match the money. If not, we shall find that we have nothing at all.

The concept of a European-wide basic technology matchmaker is one of the most important in the report. If we are to succeed, we must be realistic. Proper funding is part of that realism, as is proper staffing. One of the essential ingredients of successful British research programmes has been a combination of technological know-how and commercial nous directing them. The two are important if the technology and the research are to succeed. The report talks merely of the numbers of people who are to be recruited in different grades, but when it deals with the areas of technology to which people are being recruited, the dual aspects to achieve success should be borne in mind.

There is another aspect of realism on which the report is almost silent. Indeed, I have found no reference to it. I refer to the method by which the exploitation of the basic research is to be undertaken. What will happen to the patents and licences that will flow from the work? It is critical to the success of the work that we undertake to develop the vehicle by which the research is carried forward into industry. I have been critical of the role of the British Technology Group as a monopoly channel of publicly funded research in the United Kingdom. Fortunately, that has changed. I hope that my hon. Friend the Minister can assure us that we shall not repeat, on a European scale, the mistake that we made with BTG.

We need to know what is on offer to participating companies. If companies and universities are to put in half of the funding, what will they get out of the programmes? Will they have an exclusive share in the immediate fruits of the research? Will the universities get some financial recompense for providing people and facilities for the programmes, which have commercial exploitation and development at their heart? Those are important matters that should not be left until the research has been completed. They should be tackled early.

I also welcome the report's emphasis on small business participation. The high-flown phrases and noble sentiments about the importance of small businesses at least have the merit of being right. But by what mechanism will the participation of small businesses be effected? The hon. Member for Yeovil. (Mr. Ashdown) dealt with the four routes that were described in the report and expressed much scepticism about each of them. I do not wish to repeat what he said, but I share his scepticism. If we are to be true to the high ideals that have been expressed, sooner or later we shall have to adopt the pattern that has developed in the United states and say, "If public money goes to an area that we believe is important for small businesses, a proporation of the money will have to be reserved for small businesses." A significant incentive would be given to larger companies which participate in the research programme if they knew that their proposals were more likely to be successful if they had a strong small business element. Without that, we shall see no more than lip service for the principle of small businesses. My hon. Friend the Minister referred to 750 applications from Britain under these proposals. I think that he said that half came from industry. It would be interesting to know how many came from small businesses.

We are only 16 years sway from the 21st century and we are making decisions that will determine the strength of our industrial base in that century. I am sure that the way forward is through research and development rather than subsidy. The initiative that we are discussing provides us with an important opportunity that we must seize. We must ensure that our centres of excellence, our universities and our companies participate in the programme to the fullest extent. If they do not, we shall be the technological peasants of the 21st century.

12.45 am

Mr. Richard Page (Hertfordshire, South-West)

I entered the Chamber intent more on listening to the debate than contributing to it, but the more that I have read into the communication from the Commission, the more doubts have been raised in my mind. Having listened to every speech in the debate, my doubts have been reinforced. Apart from adding a few buzz words to our vocabulary—in addition to ESPRIT and ALVEY, we have BRITE and ANT—the effectiveness of the proposed measures is open to doubt.

I do not want to be thought to be against research and development, but it seems that the project is overly ambitious for the funds that are being suggested. I shall not refer to each individual project, as my hon. Friend the Member for Havant (Mr. Lloyd) has done that most effectively. I merely say that each one is a major research project in itself. I know that there is the multiplier hope and the thought that each grant will be seedcorn that will act as a catalyst, but 170 ecu over four years means that Britain will have about £4.5 million to invest or to use as research and development money each year, which is not enough. There has been no mention of reductions for administration costs. These costs have taken an overly large slice of previous projects.

INMOS may not be an especially good example, but it has cost £16 million a year so far. Should we have adopted what is known as the Japanese laser beam technique and used £4.5 million to pick off one subject only rather than spreading the money so thinly?

The communication makes most impressive reading. It is right to draw attention to the role that the more traditional industries can play in contributing to our gross national product. My hon. Friend the Under-Secretary of State raised that important point, and it should be emphasised time and again.

Given the available funds and what it is said the project will tackle, our credulity is being strained, unless my hon. Friend the Under-Secretary of State is to say that additional funds will be made available to keep the project going. I see the project bringing together the researches of universities and industries and attempting to reduce the duplication and overlapping. That will help us to go some way towards that which has already been achieved by the Japanese and the United States. Their research efforts are well co-ordinated and they therefore have much higher efficiency, which is reflected in the dissemination of their results.

I am glad that there is to be an attempt to put a commercial front on the work that is to be undertaken. It seems that it will not be research and development for the sake of an interesting intellectual exercise, which has sometimes been the approach of the more academic institutions.

Consideration must be given to the commercial interests of the companies that will undertake the work and whether the Commission will bring about the international groupings which have been mentioned. There is likely to be a problem with preferential access for foreground information and foreground patents. That is an area of potential excitement. I hope that the ground rules will be made clear to the companies participating in the projects before the research starts.

My final point was raised by the hon. Member for Yeovil (Mr. Ashdown) and my hon. Friend the Member for Elmet (Mr. Batiste), and concerns the small and medium-sized enterprises. I agree with the true words in the report about the value of small businesses, and will not dispute them. However, there is a problem about how we should channel these resources and this research work into small businesses. In 1982, the problem was recognised in the United States and Small Business Innovation Research was set up. That research body was set aside from the larger agencies. It is anticipated that between now and 1987 up to $1.4 billion will be paid to that area of research. I contrast that figure with the £4.5 million that will come into the United Kingdom.

Any contribution to research and development is most welcome, so I welcome the measures. I shall make sure that we do not overreach ourselves. I hope that that comment will be taken on board and mentioned at the meeting in two days time. I hope that special arrangements will be made to ensure that small and medium-sized businesses can participate and make the true and genuine contribution of which they are capable.

1.53 am

Mr. Butcher

It is customary to begin with the remark, "We have had an interesting debate." All hon. Members agree that we are discussing a potent and well-reasoned document, which has considerable merits. We also agree that we wish to see such debates given a higher profile in the allocation of the House's time. My hon. Friend the Member for Havant (Mr. Lloyd), who pleaded so passionately about that, will understand that I cannot advise the Leader of the House or the House itself how to deploy its time. His impassioned comments are, however, on record, and I have considerable sympathy with him, as do many Labour Members.

The hon. Members for Yeovil (Mr. Ashdown) and for Motherwell, South (Dr. Bray) said that resources are a tricky problem because we must ensure that we get value for money in Europe. A succession of speakers may have understated the level of resourcing in that the programme will either directly spend or lever in total £200 million of spending over the four year period. Therefore, we are talking not about £25 million, but about £50 million a year.

We are talking about a research and development effort which is taking place in addition to extant programmes, and about the gap. Fundamental research is going on in our universities, public sector facilities and some industrial companies. At the other end of the equation there is application research, which is more market-oriented. The document drives for the gap, and tries to establish a link between the two and to build bridges between the market place and the laboratory. I hope that in future deliberations my right hon. and hon. Friends will stress that it is additional incremental expenditure.

As a general comparison, the United Kingdom tends to devote as much of its GNP, in percentage terms, to fundamental research and development as does its major competitor in the Pacific basin, and the United States.

With the statistical badinage that has been going on this evening, may I place before the House another rather interesting statistic by way of stressing the need to take another look at the "sunshine" industries? The mechanical engineering sector is turning over £16 billion; the electrical engineering sector is turning over £8 billion and the electronic engineering sector is turning over £6 billion per annum. The nation's bread and butter is still very much in what we have hitherto called the traditional sectors of engineering, which in their own way have been conducting a quiet revolution. It is my contention that these sunshine industries are rapidly becoming high-tech industries. They are applying intellect to their production processes.

Dr. Bray

The Minister said that we spend as much money on fundamental research as the countries of the Pacific basin. I do not know what he means by fundamental research. The figures provided by NEDO and quoted in the book "UK Science Policy" edited by Mr. Goldsmith and published recently give the expenditure on civil research and development per head as £47 in the United Kingdom, £60 in Japan, £73 in Germany and £74 in the United States. We are an equal laggard with France, behind all other industrial countries.

Mr. Butcher

I take the hon. Gentleman's point, but the huge American defence research programme has been mentioned in the House previously, and we have been told how that has had a tremendous spin-off into all types of civil programmes, not least the development of their still burgeoning computer industry. We also have a significant defence research and development spend. It is sometimes criticised by the hon. Gentleman's friends, but it also has a spin-off. We must look at those two elements of our research and development programme to reach a total percentage figure of GNP devoted to research.

The ANT initiative does not relate just to the clothing industry. It includes the footwear, furnishing and leather goods industries. If one adds those four industries together and adds textiles, one finds that there is a significant proportion of employment in that sector.

My hon. Friend the Member for Havant is the chairman of the all-party committee on information technology. He is a major exponent of the benefits of information technology, in particular, and of the application of high technology procedures in general. I listened carefully, as usual, to what he said, particularly his comments about lasers, joining techniques, CAM, polymers and membranes. I take issue with him on one minor point only. I have also just returned from an investigative tour, and I am bound to say that the United Kingdom is very much out in front with CAD-CAM. Many of our American friends will acknowledge that many of the basic breakthroughs in CAD-CAM techniques have occurred, and are still occurring, in the United Kingdom. I see CAD-CAM being used more in our medium-sized companies than in the United States, where I found that it was used much more in the larger companies. I believe that we have a bit to shout about here, and we may be a little ahead of the race with its application.

With regard to BRITE and its funding, it is a matter of building on existing activities and building on deficiencies in the gap to make the relationship between market and laboratory a little stronger.

The hon. Member for Yeovil and a number of other hon. Members talked about the niggardly nature of the funding. One should remember that in the United Kingdom, as a complementary activity from public funds, we have a £220 million support for innovation programmes. Quite a bit of that, under what we used to call the product and process development scheme, goes into the existing and established sunshine industries.

There is no controversy or confrontation between the manufacturing and service sectors. We see them as complementary, and we have all agreed tonight that the service sector will need a strong manufacturing base if it is to survive, thrive and provide additional jobs.

I do not go along win the point of the hon. Member for Yeovil about special r rovision for declining industries. The factor we look for is whether a company—not an industry—is declining or is prepared to fight back. Many industries may be declining, but companies within them may well be thriving. These are the people whom we want to see participating in this sort of programme.

My hon. Friend the Member for Elmet (Mr. Batiste) again voiced his concern that we were not discussing this major issue in prime time. He made some telling points on the efficacy or otherwise, and the volume, of expenditure on research and development in Europe. I hope that he has gained some reassurance from my earlier remarks.

My hon. Friend also made an interesting point about the method of dissemination of the industrial property rights. We shall take on board v. hat he has said, and that will be borne in mind when we put our case in Luxembourg on Friday. We shall also bar in mind his point on srnall businesses, which I shall not relate again, as my hon. Friend the Member for Hove (Mr. Sainsbury), the Government Whip, is in his place. If I interpret his presence correctly, he is saying in the most coded form possible that it is time to press on.

My hon. Friend the Member for Hertfordshire, South-West (Mr. Page) spoke clearly of commercial interests and small and medium-sized enterprises. He is in happy alliance with my hon. Friend the Member for Elmet in championing the cause of small businesses.

I commend page 39 of the report, which deals with this proposition. The report has made a pretty good fist of welcoming the small to medium-sized enterprises. It is not too often that we see a document endorsing the activities of these companies so clearly and with such strength.

With those remarks, I accordingly take note of the comments of the House, which will be borne in mind when these issues are raised in Luxembourg on Friday.

Question put and agreed to.

Resolved, That this House takes note of European Community Document No. 8018/83 on a Research Action Programme on Industrial Technologies and the supplementary explanatory memorandum submitted by the Department of Trade and Industry dated 14th May 1984; and supports the Government's intention to ensure that Community research in this area should be beneficial in terms of policy objectives of the Community and the United Kingdom.