European Community (Information Technology)

HC Deb 21 March 1984 vol 56 cc1109-42 7.37 pm

The Minister for Information Technology (Mr. Kenneth Baker)

I beg to move, That this House takes note of European Community Document No. 7619/83 concerning the proposed European Strategic Programme for Research and Development in Information Technology (ESPRIT); and supports the Government's endorsement of the programme at the Research Council on 28th February as helping to strengthen the technological competitiveness of the Community's information technology industry. I am aware that the motion must be set against the background of the current difficulties facing the Community, the breakdown of talks yesterday over the future funding of the Community, and the attempts to establish a solid financial base for its future development. The Prime Minister made clear in her statement today the Government's determination to resolve the difficulties so that we shall have a fairer and more secure Community which can play its full role in the world. My right hon. Friend said: We shall, however, persevere in our efforts to achieve reform of its finances and to make its internal and external policies more relevant to the needs of today's world. I want to see a more effective Community, developing its full potential. Our debate tonight should serve as a signal of our commitment to the development of industrial collaboration in Europe in the vital area of information technology.

The House will be aware that the European Community has for some time been discussing ESPRIT as part of the overall research and development strategy formulated when I was president of the Research Council in 1981. The aim of the programme is to lay the basis for Europe to compete in advanced information technology with Japan and the United States. That Europe has major strengths in IT is not in doubt, but it is clear that these strengths have not always been used to the full. As the introduction to the ESPRIT proposal says, Europe's industry commands only 10 per cent. of the world IT market and less than 40 per cent. of the indigenous European market. Unless we can do better than that, the trade deficits in all IT products will continue to grow substantially. We must improve the position. That has been recognised by the Community and by Europe's IT industry, which have come together in a most encouraging way in the preparation of the ESPRIT programme.

I shall now consider what is happening in Japan and America, as they pose a challenge for Europe. We must ensure that we retain our standing in advanced technology. Europe's competitive position is weaker and our major rivals in America and Japan have embarked upon substantial programmes to maintain or increase their technological lead.

The Japanese Government are reported to be investing some £200 million in their fifth generation programme, which is designed to extend the frontiers of information technology beyond data processing and computation into knowledge processing. This programme, which is only the latest in a series of Japanese programmes which have the stated objective of securing 40 per cent. of the world market in IT, has rightly been seen as a challenge which other countries will need to match. Our own Alvey programme has been set up to provide the national basis for meeting this challenge.

I remind the House that the Alvey programme for cooperative pre-competitive research amounts to some £350 million during the next five years—£200 million from the Government and £150 million from industry. It concerns research into the next generation of computers. It is probably the biggest national research programme since the jet engine.

Other countries in Europe have also set up national programmes—that of West Germany was announced only last week. They have taken the same view as us—that there is a need for a national and a Community effort, each reinforcing and complementing the other.

American industry is also organising itself in response to Japan's fifth generation programme. The strengths of America's IT corporations are well known and are now being pulled together through various collaborative ventures such as the Semiconductor Research Corporation and the Microelectronics and Computer Corporation. In addition to these private sector-led ventures, there are also major Government-sponsored programmes operated by the United States Department of Defence.

The ESPRIT programme covers research and development in five vital areas of information technology. The first is advanced microelectronics. Europe is heavily dependent on microelectronic components purchased from America or Japan and this over-dependence is at the root of our general lack of competitiveness in IT. It is essential to have a national and a European capability to produce the most advanced microcircuits and microchips, as they will help our industries in the early development of hardware. If they are developed in America and Japan first, companies there will develop the ensuing equipment earlier.

Mr. Tam Dalyell (Linlithgow)

It was with pleasure that I accompanied the Minister on a visit to Nippon Electric at Livingston last year. He told me of the enormous sums of Government money that had been poured into that company, which even now employs only some 70 youngsters and a few Japanese engineers. How does all this tie in with the huge quantity of taxpayers' money which, rightly or wrongly, is going to several formidable international corporations? I also represent Hewlett-Packard, and the same argument applies to the Americans.

Mr. Baker

I remember the visit well. Nippon Electric is an important development in the hon. Gentleman's constituency. It is the first stage of what I hope will be a full production facility. At the moment, the large factory that we visited is used for assembling microchips. I agree that it employs only about 70 or 80 people, but it is doing the type of work which has hitherto been done offshore, in Taiwan or Korea. It is interesting that we have reached the point at which the post-assembly of chips is done onshore. Nippon Electric plans to do post-assembly onshore, and I believe that this year or next year it will develop the manufacturing capability for the microchip—the ovens, the baking of chips and the implantation of images on them.

I remind the House that Scotland has been extremely fortunate in attracting a high level of overseas investment in the electronics industry. In addition to Nippon Electric, as the hon. Gentleman said, there is Hewlett-Packard at South Queensferry, the investment of which will produce another 700 jobs. National Semi-Conductor recently announced an investment of £100 million in chip manufacture in Scotland. We also have the Motorola investments in the south of England. Only yesterday I celebrated with Commodore the building of a factory in Corby which is to make about 2 million microcomputers a year, 75 per cent. of which will be exported. That is all excellent news for Britain. We have undoubtedly become a magnet for overseas investment in electronics on a substantial scale. It is therefore all the more important for us to have the underlying research and development in companies and universities to ensure that that thrust continues. I believe that we are ahead of many of our European partners, but that lead will not be retained unless we have our own national research programme and a cooperative international research programme.

There is a consensus that Europe must become more self-sufficient. The research teams in our IT firms and research centres are the basis of our self-sufficiency. The benefits of linking such teams across national frontiers could be substantial.

The second technical area of ESPRIT is software technology. Software development in Europe and elsewhere still has more of the characteristics of a craft than the true engineering discipline which it must become. There is an urgent need for powerful techniques to produce cheaper, more reliable and standardised software. That will lead to higher productivity. The size of the British market for software is estimated to be about £2 billion a year. There are no accurate figures, but it appears to have grown enormously from a few hundred million a year in the middle and late 1970s. The programme of work in software technology is exciting. It is an area in which British organisations—our software houses, larger electronics companies and universities—will be well placed to take part.

The third technical aspect of the ESPRIT programme is advanced information processing in which the thrust will be on knowledge-based systems. This is perhaps the most futuristic part of ESPRIT, as the aim is to develop computers with reasoning capacity to allow the accumulated knowledge and experience of human experts, such as doctors, to be put on to a data base. A huge data base for diagnostic purposes will be much closer to the human mind than the present generation of computers. Such research work is at the very frontier of knowledge and will require work in single processing so that machines can deal with speech, images, how the brain works in cognitive science and human factors.

The three areas which I have so far mentioned cover the key technologies at the core of TT. Their mastery is the key to the application of IT and to the competitiveness of Europe's IT industry. Europe lags behind Japan and America in the supply and use of these systems, and for this reason two other areas have been chosen for ESPRIT because of their growth potential and importance. They are office systems and computer integrated manufacture.

A key dimension of ESPRIT will be that Europe as a whole will be encouraged to work to common standards and conventions. That is of special importance in the IT sector, in which it is not viable for any one company or country in Europe to operate on its own with incompatible products.

ESPRIT should also give a real impetus to collaboration between European firms outside the specific fields of research and development included in the programme. This spill-over effect is already happening. It is for United Kingdom firms to decide the extent of their links with Europe, but Europe is a large market which it is open to our IT industry to penetrate. ESPRIT, European standards and wider collaboration can assist this penetration.

I do not think that we are making anything like the progress that we should be making in Europe in agreeing common standards. It is a very difficult task. There are so many different areas of IT that it will be impossible to develop European products that can be sold easily right across the world unless there is movement on standards. There are so many different bodies and I think that this is an area in which the new European Community will be able to play a much greater and more determining role.

ESPRIT is an ambitious project and it was right to test the commitment of European industry by pilot proposals. The formal ESPRIT proposal was introduced in June 1983 only after a pilot stage which the Community agreed in December 1982. The contracts for the pilot projects were let last year and there were 38 in all. I do not know whether the proposals have been laid before the House, but I should be very happy to see that they are, because they are very interesting.

The United Kingdom was very successful in securing participation in these projects; it is involved in over half of them and in the lead in about one third. So this is a Community programme in which there is a very positive net benefit to the United Kingdom and British companies. We have a more influential and involved role than any other member state of the Community.

The British representation includes major IT companies such as GEC, Plessey and ICL; software houses such as Logica, Scicon and SLD; engineering firms such as Babcock Power and British Leyland; research bodies such as Cranfield Institute of Technology and the Welding Institute Ltd., both outstanding research bodies in the United Kingdom; and several universities, including Newcastle, Southampton and Queen Mary college. The projects in which Britain is involved are wide-ranging. They include a high level computer-assisted design system; a software production and maintenance system; advanced algorithms and architecture for signal processing; standardisation of local area networks; and' the exploitation of real time imaging for arc welding. The British participation in the pilot phase reflects our expertise in these areas. I am sure that the House will join me in expressing pleasure that British companies and universities have taken such a prominent position in the ESPRIT programme and are doing so well.

I have talked to the companies and to some of the universities involved in ESPRIT and the undoubted view is that this is an excellent programme. They have already benefited from co-operating with the French, the Germans, Danish and Dutch universities and Italian companies. This is already beginning to show through in their own research programmes.

When the proposal for the main programme was introduced, it was clear that it enjoyed general support throughout the Community. The Stuttgart summit endorsed ESPRIT as an exemplary project. The United Kingdom has always attached a high priority to ESPRIT, which we see as just the kind of new policy which the Community needs for its future development.

Although there has been strong support for the ESPRIT proposal and a determination that the programme should be established, its scale has posed difficulties. ESPRIT will cost 1,500 mecu over five years. Half of this— some £430 million—will be borne by the Community, the other half by the participants. I am sure that the House appreciates that half the money will come from Community sources but that half will have to be paid by the various institutions and companies which co-operate in ESPRIT projects.

It was therefore necessary to find a basis for financing the programme within the budetary framework for research and development. Essentially, it is a question of priorities, and at the Research Council on 28 February the Community agreed that ESPRIT was of sufficient priority for the necessary funds to be allocated to it over the next five years within the research and development resources available to the Community.

Mr. Dalyell

Would the Minister confirm that almost more money is spent by one Japanese firm, or possibly three Japanese firms, and almost more money is spent by four, if not five, American firms, and that all the money that has been promised to ESPRIT is peanuts compared to what is spent in Japan and America?

Mr. Baker

I would not agree that the sums of money we are talking about are peanuts. This represents a programme of some £900 million—£860 million, to be precise—half of which is going to be provided by companies and half by the research and development body of the European Community. On top of that, we have to take into account all the individual national research programmes. Our own, just in this area, is £350 million. Germany announced a programme last week of £600 million or £700 million. The House will remember that, in the Budget debate on Monday of this week my right hon. Friend the Secretary of State for Trade and Industry announced a further £170 million or £180 million of assistance to high technology, of which £120 million was to be for the development of microchips. We have committed that money over the next six years, in addition to Alvey and ESPRIT, because we want to ensure that the research which is being done in the ESPRIT and Alvey programmes is developed in products that can be sold in the market places of this country and of the world.

At the Research Council member states were also concerned to secure an effective technical work plan and adequate management arrangements for the programme. Important improvements have been made to the original management proposals which will have the effect of involving member states directly in decisions on major projects and the general direction of the programme. This is a point on which we rightly insisted. We have also pressed for much of the management to be carried out by people on secondment from industry rather than by permanent officials. That is a very important change.

As to the technical work plan, considerable effort has gone into drawing up a technical programme for ESPRIT. Industry has been closely involved in this process and many British firms have played their part. I regard this involvement of companies as extremely important as a means of ensuring that the programme is not just a bureaucratic exercise but is genuinely affected by the market place. All who are concerned with sponsoring and supporting research in our laboratories—this goes for previous Governments as well—have been impatient that a lot of our research and development does not get into the market place quickly enough. With programmes such as Alvey and ESPRIT, a system is necessary to pull all this out of the laboratory into developing projects and products.

Mr. Paddy Ashdown (Yeovil)

On this point, I absolutely agree with what the Minister has said. Would he agree that one of the most valuable aspects of the ESPRIT proposal is the yearly review which is going to be conducted and that this will be a very important mechanism to ensure that it does not fall into the hands of the Eurocrats in Brussels? Admitting that, as I see he is doing, will he tell us precisely what form he would wish that review to take? It is nice to have that written into the agreement but it is really the mechanism and the form that that annual review will take that will determine whether it will be effective.

Mr. Baker

We would envisage that the annual review would be undertaken and a report would be prepared by the Commission and the secretariat that deals with the ESPRIT proposal and submitted to the Governments and the Research Council. I should be very happy to make documents of this sort available to the House. What we are doing more and more is make available the research that the Government pay for by publishing the results at an early stage. Some research gets published through scientific journals, but in various other projects—we are going to do it with Alvey, for example, and we are doing it with the office project pilot schemes—we are publishing the results of our developments so that people can benefit from them. I note what the hon. Gentleman has said and I will do as I have said.

Agreement on ESPRIT has been possible only because of the importance which all member states have attached to the programme. As I have said, there has been considerable discussion within the Community on the funding of ESPRIT, its management and the technical work plan. I very much regret that the time scale for resolving these issues was such that the House was not able to debate the proposals in detail before the council decision. The conditions allowing ESPRIT to proceed moved quickly over the days preceding the Council meeting and only fell into place on the day of the Research council meeting, by which time there was a clear necessity to take a decision if the programme was to be agreed in keeping with the original time scale.

Even though agreement had been reached on the main decision for ESPRIT, no progress would have been possible unless the work plan had been endorsed at the same time, and provision was made for this in the decision itself, although subsequent annual work plans will come before the council well before their need to be adopted. I hope that hon. Members can accept it was necessary to endorse the work plan at the Research Council, even though it had not been formally reported on by the Scrutiny Committee.

I have great sympathy with the view that we should try to arrange debates before decisions are taken. In this case, events moved quickly and a decision had to be taken. I regret that, as I would have much preferred a debate. This debate provides an opportunity for hon. Members to give their views on the work plan and the Government will take these into account when considering the Commission's proposal for the next work plans. There are occasions when the timetable of events in the Community does not allow us to debate some proposals in the House. I regret that ESPRIT fell into this category.

I regard ESPRIT as one of the most exciting initiatives that the Community has taken. I hope that it will involve the sort of co-operation that will characterise future development of the Community. It presents major opportunities for Europe to build on its IT capability and to benefit from collaboration. I have no doubt that the United Kingdom must sieze these opportunities to the full. As I said earlier, Europe has to come together technologically if it is to meet the challenge from America and Japan. This programme allows that to happen.

The programme cannot make this happen—that must depend on the universities and the talents and abilities in the companies and the research departments. We are at least providing the means and possibility for that to happen. That is why I hope that the House will endorse this most important programme.

8.1 pm

Mr. Tam Dalyell (Linlithgow)

I thank our colleagues on the Select Committee on European Legislation. My hon. Friend the Member for Newham, South (Mr. Spearing and other colleagues of all parties who do unsung work on a non-party basis for the House have had the good sense to put this subject forward as being worthy of debate. Often the Select Committee does not get credit, so I give it credit for this and for the work that it does on behalf of the House as a whole.

I am in the position of a bad fairy—a bad fairy whose heart wants to believe in ESPRIT but whose head tells him that certain questions should be asked. Therefore, my speech will be in the form of a number of questions to the Minister, but not, I hope, in too curmudgeonly a spirit. He can judge that for himself.

First, on universities and finance, I point out to the Minister that last night, about midnight, a group of us were pleading with his colleague, the Under-Secretary of State for Education and Science, for the department of pharmacy at the Heriot-Watt university to be kept open. In an age when a number of science and technology departments of our universities are being closed, are we sure that money is best spent in this way?

What consultations have taken place with the University Grants Committee about ESPRIT money? The Under-Secretary of State for Education and Science rather wrung his hands—I am not criticising him—and said that as a Minister he could not tell Sir Peter Swinnerton-Dyer, the chairman of the UGC, what to do with the choices that come within its orbit. Does the ESPRIT programme fit in with the priorities of the UGC? Has the UGC agreed on all this? If so, may we have examples of particular university departments that are being helped by ESPRIT money?

My second question relates to personnel. The Minister said that he was glad that personnel were to be seconded from industry rather than that decisions should be made by professional civil servants. I am not one of those who criticise professional civil servants as bureaucrats. Often their decisions are as good as anybody else's, and sometimes a good deal better. What is more, if decisions are not made by professional civil servants, what is the basis of continuity? I should like to know a little abaut the folk who will be seconded. For how long will they be seconded, from where, and on what basis and criteria?

Mr. Rob Hayward: (Kingswood)

The hon. Gentleman asked about education departments that are already involved in this project. Strathclyde university, which is close to his constituency, is already involved in one of the initial projects.

Mr. Dalyell

I do not doubt that; but if there is to be an overall pattern and if all this money is to be put in, there must be an overall plan. This is an important issue, because, without an overall plan, there might be some difficulty in allocating ESPRIT money between universities.

My third question relates to standards. Here my heart goes out to the Minister. For some years I used to have to listen to Mr. Spinelli—enough said—when he was Commissioner for Technology. To be fair to Mr. Spinelli, and particularly to Guido Brunner when he `lad that portfolio, those Commissioners sweated their proverbial guts out to get some sort of standardisation.

I do not want to tell my grandmother how to suck eggs, but the Minister knows that this is all about money. If there is to be standardisation along the suggested line, which the Minister said was an important objective, who will pay for it? Huge amounts of compensation will be involved. Time and again, when I was exiled to the European Parliament and was on the Budget Committee, it became clear that we could have standardisation—for example, the Energy Committee in Brussels was told this—but at a cost! Is this a priority for the European taxpayer? Perhaps the Minister will elaborate on this point about standardisation.

My fourth question is on a fundamental issue. We go back to the Japanese and their fifth generation computers. The Minister will recollect the sum that he told me—I think that the conversation was private, so I shall not repeat it—that was going to Nippon Electric from Government money, of all sources. The sums are substantial. Can we afford to subsidise the great international companies and then, concurrently, say that we must have a European scheme?

Mr. Kenneth Baker

I think that the hon. Gentleman will appreciate that large investment projects, such as that of the Nippon Electric silicon plant, are internationally mobile. The company has the choice of putting the factory here, in France, Germany, Ireland, Italy, or some other part of the world. Therefore, as he knows, we have programmes of assistance to attract those internationally mobile investment programmes to this country. I do not apologise for that, because it strengthens the base of what is happening in Scotland in electronics. One of the reasons why Scotland has done so well in the electronic age is that, with assistance from successive Governments, it has attracted big international companies and a range of investments. It has built up its own attraction. It acts as a magnet, and people and companies come of their own volition. I hope that the hon. Gentleman is not going to say that he wishes us to dismantle such support, because, if he did, we should lose some of those internationally mobile projects.

Mr. Dalyell

I do not want to look a gift horse in the mouth, but the reply to that is that we shall have to go on attracting such people.

Mr. Baker

One is beginning to see that happening in Scotland. Companies are coming of their own volition, because a critical mass has been built up. A critical mass is not just a number of companies in related industries, but changes in the education infrastructures producing a greater number of technicians, electronic engineers or computer scientists. By using the money as catalytic or magnetic money, one is not committed to doing it for ever. One builds up a capability which acts as its own attraction.

Mr. Dalyell

I am not goading the Minister, but I shall be interested to hear in his winding-up speech how the ESPRIT programme will help to create what he calls this "critical mass".

All I am saying is that other firms in the category of Nippon Electric come along to Scotland and other areas, inevitably ask for huge amounts of Government money and be given it. There are so many competing factions for Government expenditure. We should not forget that just up the road from Nippon Electric is Leyland at Bathgate, where many more people are employed. If anything happens to Leyland for want of Government money and looking at the matter from the point of view of employment, I know what most of my constituents will think.

I do not want to be ostrich-like or Luddite about the matter, but I gently ask the question: if we are to attract great international firms, are we sure that we should also put money on this scale into the ESPRIT programme? Is it not one or the other? If the House can be persuaded that the two are complementary, I shall be quite satisfied.

I want to ask a number of specific questions. The document, in page 2, says: Measures taken so far, however, have not been sufficient to reverse the trend, and by and large have only managed to slow down the deteriorating process. The situation threatens now to get dramatically worse: our balance of payments in IT products and services". Could we have some flesh on that? What is the Government's estimate of how dramatically worse it is likely to become? It would certainly be useful if the Minister could tell us that.

That last paragraph in page 3 says: Long lead-time R&D at precompetitive level, sufficiently upstream of the product development phase, would appear a suitable domain for such co-operative action, and one which could be started without delay. It says: could be started without delay". Are we to start it without delay? What is the time

In page 4, paragraph 3, we read that in the sector in Europe of some $5 billion per year and given the fact that the largest American companies active in the field invest every year, individually, some US $2 billion. I do not want to give the figures, because I cannot remember whether I was given the information privately or publicly, but I can say that the Hewlett-Packard investment is enormous in this respect. Furthermore, the distinction that some of us would like to make about incoming companies is that Hewlett-Packard, for instance, to its enormous credit, does its advanced work and research in its international divisions, others tend to use such factories as they have as supplies or sales offices for Europe. I do not mean Nippon Electric. We shall have to wait and see.

However, the Minister knows, as does every hon. Member, that some Japanese firms, which had marvellous intentions when they started, nevertheless had a sales point of getting into Europe. Is that not so? That distinction must be made, and we should be very clear on what basis such firms are setting up.

The document, in page 8, says: By 1980 the trade deficit had reached $5 billion, and according to certain sources, the $10 billion mark was passed in 1982. The problem of the trade deficit is compounded by the fact that Community imports are primarily high technology products—such as central processing units and computer memories—from the United States and Japan, while its exports"— here I come to the point— are the more mature older technology products that formed its past strength but are now only of interest as a replacement market and for the less developed countries. On the question of mature products, can we be sure that the ESPRIT programme and the giving of money will act quickly enough? We come back to the matter of decision-making. One of the striking aspects of the success of Hewlett-Packard is how quickly it gets decisions out of Stamford and its Californian headquarters. That is one of the main reasons for its success.

The Minister must agree that there have been endless delays with the ESPRIT programme. I shall not go into them. How will we avoid delay in the decision-making in the ESPRIT programme? It may be overcome, and it may be just a question of being convinced.

That brings me to page 10, paragraph 17: The main criterion used in defining the R & D work was to be highly selective in order to enable the programme to focus on the key technological factors. Who will carry out the selection-making? I see the Minister's adviser holding up a document. Perhaps it is the same document that I read on this subject, but it does not make clear who is to make the decisions. Here we are concerned with the speed of decisions.

Paragraph 21, in page 12, says: Funds will be made available to launch in the Community cooperative projects of precompetitive industrial R & D falling within agreed strategic technological lines. Agreed by whom? How long will this agreement take? It is easy to make cheap remarks about European decision-making but frankly, after this week, as well as the past years, what evidence is there that any agreement will be reached quickly? We may be told that things will be different in this area from the macropolitical area.

All I can say to the Minister, with total good will, is that I served for four years as a member of the Energy Committee of the indirectly elected European Parliament, and things were sometimes as slow as the Dickensian circumlocution office. Will things be different in future? The Minister smiles. If he can persuade us that things will be different, he is a man of magic. He will have transformed the continent! However, that is counter to the frustrating experience that some of us have had.

The document, in page 14, says: Projects that rely mainly on flexible infrastructure and on individual thinking rather than on a system approach, and require relatively much smaller resources. Such activities, that will be referred to as type B projects, could range from very long term, very speculative R & D to relatively shorter term very specifically oriented R & D". Who will choose those projects? Will it be the people who are seconded? Will it be the Department? I do not cast any contemptuous glances. On the contrary, I think that the civil servants have probably given good advice. Nevertheless, who will choose those smaller projects? Will it be done on a commercial basis? Will it be done on a short-term or long-term commercial basis?

In paragraph 26, we read: The remaining 50 per cent. should normally be provided by the industry itself'. I do not know what "normally" means, but I do know that matching grants in this area takes an immensely long time. I fear that in this whole project decisions could be overtaken by events, because the Japanese and some American firms take these decisions extremely quickly. Does the Minister doubt what I say? One cannot read facial expressions into Hansard.

Paragraph 35, in page 18, says: For the expected overall synergetic effect to take place, access for a project team to foreground knowledge generated by another team working on a different project within the ESPRIT framework shall also be arranged under privileged conditions in as far as such information enables better or quicker results to be obtained from the project which needs it. "Gobbledegook" is an unpleasant word, but I wonder what that means.

Paragraph 37 says: To be meaningful and stimulate the new strategic thinking that must underly the definition and execution of the R & D programme, a Community intervention would have to stimulate a joint long term effort in precompetitive R & D of the same order of magnitude (i.e. of at least 5 to 10 per cent. of the current overall industrial effort). If the document means what it says, we are talking about huge sums of money.

May we have spelt out precisely what global sums are involved from member states such as the United Kingdom, not necessarily this year or next year, but the year after? Are we sure that we will not be involved in slow decision-making in relation to the formidable international, multinational firms? In particular, is there not an overlap between the huge sums that are given as of right to international companies coming to the United Kingdom—extremely welcome though they are—and the kind of project that we have in hand?

The ghost of Mr. Spineli and all that he stands for rather haunts me.

8.21 pm

Mr. Ian Lloyd (Havant)

It is not often that I seek the leave of the House to speak a second time on the same day, and I should immediately give any hon. Member who had the misfortune to be here earlier this afternoon when I spoke consent to leave the Chamber.

I have, as hon. Members may know, a certain enthusiasm for this subject, which I believe to be of immense importance. It is somewhat sad that, although we have been given the opportunity to discuss this subject, only about a dozen hon. Members are able, willing and wish to discuss it, That is a sad matter, because this is probably one of the most important single decisions facing the United Kingdom and western Europe for the rest of the century. That is my firm judgment and I would defend it in any quarter.

The absence of Members is particularly sad today when the whole range of European policy has to some extent been cast in the melting pot. If we were discussing butter mountains and such matters, I have no doubt that the Benches would be crowded. Here we are discussing what could be the most catastrophic deficit of microelectronic circuits, with all that that means for British and European industry towards the end of the century, yet where are hon. Members? Alas, it is a sad matter.

I start by referring to an interesting speech that M. Gaston Thorn made to the European Parliament not long ago. He said that years have been wasted by Member States promoting national champions and feeding intra-Community rivalry instead of exploiting their complementary qualities to meet outside competition. He was referring specifically to research and industrial cooperation. M. Thorn went to say: In all, Community countries have invested more than 2000 million ECU"—— roughly £1 billion sterling— in recent years to boost their information technology industries, far more than Japan and the United States"—— over the period to which he referred But the results have been disappointing. Europe still lags behind—not because it lacks funds or ideas but because it lacks the ability to make a united effort. Today of all days that remark is pregnant with meaning and significance for all of us and for this subject.

There is no doubt about the importance of the ESPRIT programme. It affects the future of many major countries and perhaps it is interesting that the motion does not strongly endorse that programme but merely takes note.

I want to refer to three papers that are involved. The first is the document that has been put out by the Commission to summarise the ESPRIT proposal. It is an interesting document and the hon. Member for Linlithgow (Mr. Dalyell) has saved me a good deal of time by asking several significant questions. It is interesting that last week West Germany announced new spending plans for information technology which will eclipse the EEC ESPRIT programme if they are approved at a Cabinet this week. The German science ministry has put forward an £800 million programme for microelectronics over the next four years compared to aid of £435 million from the EEC under ESPRIT and Britain's £250 million Alvey plan. That is interesting, but sad, because it shows that within the German Government and Cabinet there is a lack of confidence in ESPRIT. I hope that our support for it shows that although we have our own programme in Alvey we do not lack confidence in what can and must be done.

If ESPRIT succeeds it will redress Europe's information technology gap. It has a reasonable chance of overcoming that gap, but some policy is necessary—if not ESPRIT, something else; if not the ESPRIT resources, larger resources; if not spent in this particular way, spent in some other way; if not in the public sector or this particular mixture of public and private sector, in some other, more appropriate and more effective sector in the European context. That we must have. If we have 10 per cent. of the world market and 40 per cent. of the European market after this massive investment over such a Long period, it shows that something is seriously wrong.

The Commission wants to achieve work in long lead time research and development. It wishes to address the large leading edge markets. I am sure that everyone would support that. It wishes to achieve technical parity with, if not superiority over, world competitors within 10 years. That is an ambitious target, but we must have such ambition. To provide the technology base to become and stay competitive such research must be done. That research must be done on advanced microelectronics, software technology, advanced information processing, office systems and computer integrated manufacturing. The overall responsibility, as has been pointed out, rests with the Commission. Should that be so? I ask that because the United States, which is one of the main mountains which we seek to climb in competitive terms—the other being Japan—has obviously gone down a different road.

I want to draw the attention of the House to a remarkably interesting document—a publication of the Department of Trade and Industry. The overseas technical information unit has just produced a report, the author of which is Mr. Baxter, our science councillor in the embassy in Washington. It is an excellent report on Silicon Valley and the United States semiconductor industry. Mr. Baxter describes in the greatest detail how Silicon Valley has come into being, how venture capital supports technology there, and the interesting mixture that has now been created in hundreds, if not thousands, of small thrusting venture capital firms, the average turnover being about $8 million, and the interesting set of organisations which have been established, as it were, halfway between public sector and private research.

The first is the Microelectronics and Computer Corporation in Austin, Texas, with a budget of $75 million and based on industry-wide co-operation between a substantial number of firms. The second is the Centre for Integrated Systems in Stamford, which has a $40 million budget from Government and industry, and represents 80 major companies, including IBM, International Telephone and Telegraph and General Electric. The third is the Semiconductor Research Corporation in north Carolina, which is an organisation put together by 13 United States ship manufacturers, joined now, I believe, by a further six, making it 19. It has already committed $9 million, and will be committing a budget of $30 million in 1984, much of which will be to funnel research into universities—a very interesting concept.

This extraordinarily interesting contrast exists between the highly centralised philosophy and approach in ESPRIT and the very different approach in the United States. It is an interesting question why the latter has succeeded so obviously and effectively, and whether the former is the right device and set of institutions to compete.

The other target—and every hon. Member knows this—is Japan. The United States is now very concerned, and these three organisations have been established because of that concern about the Japanese performance and predominance, particularly with regard to semiconductor manufacture and semiconductor equipment manufacture, which is now assuming much greater importance.

That brings me to the last point that I wish to make, and I refer to yet another document produced by the same organisation in my right hon. Friend's Department. This is a study of the Japanese giant, Matsushita Electrical. It is a particularly interesting document, because it points out in a sense why ESPRIT is important and has been brought into being. It also describes the kind of target that ESPRIT will hit, if it is successful. The House may like to know some of the fascinating details that emerge from this study of the Matsushita organisation's most recent activities in information technology.

The company's sales in 1982 were £10 billion, and its spending on R & D alone was £400 million. That is the basis of the operation with which we are competing. Such large figures sometimes mean very little. I wish to draw to the attention of the House a fascinating description of what the organisation is doing and how, in commercial terms, it offers a dramatic challenge to western Europe and the United States, which ESPRIT is designed to counter.

The company has produced a completely new line of computer-controlled robot machine tools, known as software programmable robots. It has built up a series of three assembly lines making video tape recorders. The United Kingdom is a very large consumer of video tape recorders. I believe that we stand highest in the world in relation to our population, outside Japan. The United Kingdom has about 1 million video tape recorders, but a large market remains to be addressed.

What has Matsushita done? It is aiming not at the United Kingdom, Japan or the United States, but at the world market. It has already developed three computer-controlled assembly lines for the manufacture of video tape recorders. The company takes the view that manned assembly lines have defect levels of 2 to 3 per cent. The company's target is zero defects, and it would like to eliminate manual assembly in as many areas as possible. That is the company's philosophy. The company has done this by establishing production lines. The older ones, which they call M1 and M2—this is nothing to do with monetary compensatory allowances—produce 2,500 video tape recorders a day. The next, more modern version, M3, produces 5,000 video tape recorders a day. The new line now under construction, as described to our science attache, will produce 10,000 video tape recorders a day. The factory intends to turn out 5 million video tape recorders per annum.

What is the significance of this for ESPRIT? On the production line, the company has 127 work stations occupied by what it describes as Pana Robo modules. One is occupied by a human worker. His task, to fix and align the audio head, defied automation when it was being installed, but it will be automated on the next line so that it will go from 127 to one to 128 to zero. The company has developed special machines for this purpose. Its hardware costs for the production line now in operation are $6 million, or approximately £4 million.

The company intends to use production engineering to turn the production of video tape recorders into a mass market. It is now achieving production not only of the video tape recorder, but of the manufacturing equipment behind it. The company's purpose is to cope with 15 per cent. of the world demand for video tape recorders. It expects that prices on the free market will fall by at least 50 per cent. in the comparatively near future. When this is achieved, the replacement market in the United Kingdom, according to its calculations, could be two to three million units a year, with a value of hundreds of millions of pounds.

If our indigenous manufacturers are ever to compete successfully on equal terms, their production facilities will have to be at least on the scale of those developed at Matsushita. We shall therefore have to address the world market, or give up altogether. This applies not only to the United Kingdom, but to every country in western Europe. Indeed, for most countries in the world, the prospect is that video tape recorder sales will produce a constant drain of revenue towards Japan for the foreseeable future. That is the situation that we face with a product that is familiar to practically everybody in the country.

The challenge is immense. We shall not meet it by sitting back and doing the things that we have done over the past few decades, pouring subsidies into industries which, because they are there, we think should go on being there.

My right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) is not present, but I could not disagree with him more profoundly than when he argued the day before yesterday that we must have steel, shipbuilding and motor cars, and that the microelectronics world of information technology was something on which we could not survive. I believe that I have demonstrated otherwise. The Japanese, as a matter of policy, have decided that they will feed their nation on the basis of such industry—the information technology explosion—which, by the end of the century, will be a much larger industry than the world steel industry, the world automobile industry and the world chemical industry. Information technology will be the largest of all, and it is moving rapidly in that direction.

I can see no earthly reason why we in the United Kingdom should not so restructure our industrial apparatus that we take our appropriate share of that market, our appropriate share of the prosperity that it will give us, and forget about the other things. They will not do us much good, they will waste our resources, and they will inhibit our capacity to do this, whether through ESPRIT, or by other methods.

8.39 pm

Mr. Paddy Ashdown (Yeovil)

There are two delicious ironies about today's debate. The first is that we are holding it today. That is ironic, because ESPRIT is a small example—as the hon. Member for Havant (Mr. Lloyd) said in a very perceptive part of his speech—of what Europe might have been had it not been for the closed minds and rather narrow vision that prevailed last night. It is interesting that the Government have significantly excluded ESPRIT from the blockage in the budget proposals. It will be remembered that they decided to end negotiations until they had solved the budget issue. However, they rightly excluded the ESPRIT programme and allowed it to go ahead. Would that they had managed the same imagination last night.

In a real sense, ESPRIT is the sort of transnational operation that the EEC should be concerned with. What a pity, therefore, that the crude nationalism that seems to prevail in the Prime Minister's mind and sometimes in that of Labour Members, and that the narrow vision and little Englander mentality that sometimes prevails with Labour Members, should have prevented either the Labour or Conservative party from recognising that the spirit of ESPRIT—if that is not a Euro-pun—is the true spirit of Europe, and that its success is the single bright spot in an otherwise pretty bleak future as a result of last night's performances.

The second irony has only just occurred to me. It consists of the rather curious spectacle of a Government who are usually committed to the concept of a free market and to non-governmental intervention in helping the economy to get going, nevertheless supporting and espousing—as the Minister has done with great knowledge and enthusiasm—a policy that is anything but free enterprise. It recognises the necessity for Government intervention to be able to make good an industrial deficit. Would that that spirit prevailed throughout the British economy.

Incidentally, it is also ironic that the hon. Member for Linlithgow (Mr. Dalyell) should express doubts about ESPRIT because it is centralised and planned and not sufficiently left to the free market, when the Labour party believes in a centralised and planned economy. It would seem that the new technology is leading not only to new thinking in British industry but perhaps to new thinking in British politics—and a jolly good thing too.

Mr. Hayward

The hon. Gentleman's analogy is unfortunate, because the Government have provide dassistance to several industries—including one, Westlands, in the hon. Gentleman's constituency—because they have recognised that there is a long-term benefit in investing in those industries that remain in a particular market, and in developing their technology.

Mr. Ashdown

Of course there is a good deal of truth in what the hon. Gentleman says. However, if the Government had declared an interest in picking winners—there cannot be a clearer winner, of course, than Westlands—we could understand it, but they seem to be very capricious. Government intervention, and the way in which they have assisted Westlands and the new technologies, would be of benefit to all. It is not only my party that says that, but also recently the CBI.

As hon. Members, including the hon. Member for Havant, who is very knowledgeable on this matter, have said, there can be no doubt about the need for ESPRIT. It is worth quoting the figures as they have not yet been mentioned. In 1975, Europe enjoyed a rough balance in trade in the new technologies and in information technology. By 1980, that had changed into a $5 billion deficit. In 1983 that deficit had increased to $10 billion. It is predicted that by 1992 that deficit will have increased to $16 billion. However, it is predicted that in 1992 the United States of America will have a surplus of $22 billion on that trade, while Japan—for many of the reasons given by the hon. Member for Havant—is predicted to have a surplus of $40 billion.

I am told that eight out of every 10 personal computers in the United Kingdom are made in the United States, and that nine out of every 10 videos are made in Japan. In the world as a whole, 50 per cent. of printed circuit boards and integrated circuit boards are of Japanese manufacture. Meanwhile, it is predicted that in the next five years the world electronics market will have shifted from a total of £195 billion to £450 billion. The hon. Member for Havant and others have said that there are enormously rich pickings for Britain in a shift from our traditional industrial base to the new industrial base. Thus we cannot let the European deficit continue to grow, or let Europe become a subservient partner in the information technology market. There are fruits that have to be gathered.

It is also true that, just because Europe has slipped behind, there has been a transition of key people within European research and development facilities to the production line facilities involved in the new technologies. I am told that Europe spends only 1 per cent. of its total budget on research and development in information technology, although Japan and the United States are now spending some 6 per cent.

Therefore, there can be no argument about the need for ESPRIT. That need is urgent. However, throughout the document on ESPRIT and the Minister's otherwise extremely valuable and useful speech, there seemed to be far too much self-congratulation, which almost bordered on complacency. Perhaps the Minister rejected the statements of the hon. Member for Linlithgow far too lightly. We recognise that ESPRIT is an important programme, standing at £850 million and that it is a commitment to the future. At £350 million Alvey is also a commitment to the future. But the reality is that IBM spends £1.3 billion on research and development every year. That is equivalent to the total for ESPRIT and Alvey for the next five years.

Of course the Minister is right; we must prime the pump. However, it should also be recognised that, given the scale of the current problem, the commitment to ESPRIT and Alvey combined is still not enough. It is the first, not the last, step. The agreement says that we will be driving towards parity and that we are seeking through the ESPRIT programme—the inference is, through the ESPRIT programme alone—to achieve parity in world markets. There is no chance that the ESPRIT programme on its own will take the European information technology industry from its current position, which is significantly behind the rest of the world, into anything like parity. We shall only stem the reversals that the European technology industry has suffered. I hope that the Minister will accept that this initiative is not the last, but rather one to be built on in future. The Government and the EEC cannot rest on their laurels in the face of the facts.

The Minister used the phrase "critical mass". I assume that he means a nuclear analogy—that we have to get to a certain point before the chemical or nuclear operation will continue to work. Of course the Minister is right, and that is a useful expression, but the critical mass has to be contained within an environment that continues to make it work. Therefore, we should see this as the first and essential step that must be expanded on if we are to catch up in world markets.

The Government have made an exception of ESPRIT and have allowed it to go ahead, but why have they not made an exception of the very important new European innovation initiative which is due to be launched towards the end of the summer? I believe that the Government are still blocking that. That innovation initiative provides seed capital for innovation and represents an important new European programme which could greatly help us. In many areas it might be taken as something that would allow the initiatives that could be developed through ESPRIT to be continued and expanded.

I have two points of particular note for the Minister. First, in relation to small business, Mr. Jean Cadiou, the director of the European Community's information technology task force, said in reference to ESPRIT that it would also serve to provide smaller off-beat projects with high risks and high potential returns". That is reflected in the ESPRIT agreement in article 1(2), which refers to companies, including small and medium-sized undertakings". That is a piece of rhetoric and a commitment to the future which I welcome strongly, but we must find out how it will be done.

Constantly and consistently I get complaints from the microcomputer industry and from new technology industries everywhere that small businesses are not getting a sufficient slice of the action even within Alvey. Only the other day, a respected computer manufacturer told me that, despite the attempts that had been made to provide sufficient funding for small businesses, where much of the important initiation, innovation and research is going on, he had given up on the Alvey programme. We must ensure that the rhetoric of article 1(2) is brought into action. The Government should insist that that happens. I ask the Minister how he will ensure that small, new, high-technology software houses in particular get some spin-off from ESPRIT.

The Minister has heard me speak before on the second problem of extra-territoriality. I am sorry to have to bring that up in this debate, and I do not wish to subvert the debate. The Minister knows as well as I do that many people have strong feelings about the way in which the American high technology industry is using COCOM and related agreements to block British and European exports of high technology so that their own salesmen may move in. To give an example, only today I heard of a case in which, while COCOM was being used to block the export of system X telephone exchanges, at the same time the Americans have through the Bell Telephone manufacturing company in Belgium sold no fewer than four units to eastern European countries which are in the business of making telecom chips. That is totally at variance with decent practice.

Whatever we may do to encourage an appropriate degree of information technology development and research in Europe, it is likely to be subverted unless we can protect our industry adequately. COCOM and the operation of the COCOM agreement have not been brought before the House. Given the impact that COCOM is having on the high technology industry in Britain and the impact that it could have if ESPRIT comes to fruition, it is high time the matter was brought back to the House and there was a proper debate on the effect the agreement has on our industry.

We can warmly welcome ESPRIT, not only as an example of what Europe is really all about but as a genuine commitment and a declaration of intent by Europe that it intends to be in the forefront of technology. It is important that we reject too much self-congratulation or complacency. ESPRIT is only the essential first step in what is necessary to put Europe back among the leaders in information technology. While I welcome ESPRIT, I also urge the Government to recognise that much more will have to be done if we are effectively to build on the essential first step.

8.53 pm

Mr. Richard Page (Hertfordshire, South-West)

In this brief contribution I want to make it clear that I endorse the Government's support for this programme. In doing so I shall not touch on the rather sore spot of EC financing. Let us hope that we reach agreement on that soon so that the necessary cash is available to enable the programme to go ahead.

I, too, share the disappointment of my hon. Friend the Member for Havant (Mr. Lloyd) at the fact that this most important debate is not better attended. The consequences of not keeping up with the information technology revolution are devastating when we compare ourselves with the foreign competition. If we review what has happened over the last decade or so, we find once again that our overseas competitors have stolen a march on us. This time we are in companionship with the rest of the EC. To catch up and then go ahead, it is better if we work with the EC and use the combined talents, brains and resources of the EC.

To deal quickly with what the opposition in the United States and Japan have done over the past few years, we see the huge research and development tax credits that are being pumped into the industry in the United States. Large companies are making huge investments and they have a good home base as a market for the products. The Japanese, with their lasar beam type investment and method of picking off the product, have done extremely well. Again they have put a huge investment into those specific areas.

The hon. Member for Yeovil (Mr. Ashdown) apologised for quoting statistics on how we have been doing on imports. I shall not apologise because I think that we should repeat those figures time and time again to show the market that we are losing out on. In personal computers nine out of 10 come from the United States. Eight out of 10 videos come in from Japan. We are losing out on both those markets. If we do not keep putting the achievements of the opposition in front of us at every opportunity, we tend to put them to the back of our mind where they may be ignored.

I should like to ride a personal hobby horse. I do not think we help much in the EC by having an import tax regime that helps completed products as opposed to the components. I see no advantage in havng a tax on made-up computers coming into the country that is lower than the tax on the components that are also being brought into the EC. Surely it must be sensible to have a tax regime that favours the assembly of the components in this country rather than bringing in the completed article from abroad. Therefore, I appeal to my right hon. Friend to maintain pressure on the EC to try to reverse that differential.

The Japanese in particular have identified the areas in which they think they can sell a product and then they have exploited them ruthlessly. In some cases they have made sure that other Japanese companies have not got involved. The banks and various organs of Government have supported one or two firms making specific products. The Japanese have designated information technology as their major growth area for the next 10 years, because they see the huge rewards that they will get. We ignore that decision at our peril. The speed of development is so great that it will get harder and harder to catch up. The difficulty in catching up will become proportionately greater on a geometric rather than an arithmetic scale.

We must remember that while we are embarking on this programme the opposition is not standing still. The House has already heard what the Japanese are doing with their fifth generation computer and what the United States are doing with the billions of dollars that they are pumping into this industry. We also tend to ignore the fact that other countries are leapfrogging various stages of their industrial revolution and that they are moving directly into the electronics industry. To the £850 million, we add our Alvey money and the other EEC countries are putting money in the project. The proposal for a Council decision states: Measures taken so far, however, have not been sufficient to reverse the trend, and by and large have only managed to slow down the deteriorating process. The hon. Member for Linlithgow (Mr. Dalyell) also quoted from that document. I endorse what he said. Our position is stark, if we are to stay in the market. As my right hon. Friend the Minister said, only 10 per cent. of the world market involves EEC industries. We have only 40 per cent. of the EEC home market. I draw parallels with the telecommunications equipment that we had in Britain 25 years ago. Then we had 25 per cent. of the market. Today our share is in the low single figures.

The proposal continues: unless a co-operative industrial programme of a sufficient magnitude can be mounted, most if not all of the current IT industry could disappear in a few years time. One has only to see the cost of our competitors' products to realise that if we do not match that cost we shall not be able to subsidise the products and stay in the business.

I fully support the decision to follow the Japanese laser beam approach. The Japanese have carefully chosen their products which will be highly saleable. An investigation by Professor Bownas a few years ago showed that the Japanese spend a considerable time choosing the product to be made. Once the decision is made, they go like the wind to produce it cheaply, effectively and in huge numbers.

Our EEC resources, small indeed compared with the money used to support the wine lakes and butter mountains, should be channelled into the development of selective products which will give us an industrial advantage. The arguments by universities that the work is too applied or by some industries that the work is too basic cannot be allowed to predominate if we are to prosper in the programme.

I gain a degree of heart from the report when it says: The main criterion used … was to be highly selective". If we are not highly selective we shall lose out. We cannot afford to spread resources too thinly. We must concentrate on specific, tight areas to succeed.

Mr. Dalyell

Who is to do the selecting? That is the problem.

Mr. Page

The hon. Member for Linlithgow anticipates the next point that I want to put to the Minister. Where will the practical control lie in the project selection? Will it be in the management and consultative committee or will it be rolled up inside the Commission? If it is to be the latter, I am worried about the time delay. Speed is of the essence. The opposition is moving so rapidly that if we do not match it or go ahead we shall lose out.

Who will have use of the results of the research work? Will it be protected by patents? Will the industry that does the work successfully have the benefit of the patents'? Will industry have to repay the Commission and will there be free access for anyone who wishes to take advantage of this considerable investment?

I should like to echo some of what the hon. Member for Yeovil said about the way that small businesses can be used in the project. Near my constituency is a small electronics firm—Case. It is an object lesson in skill and expertise. I am delighted to see in the Chamber my hon. Friend the Member for Watford (Mr. Garel-Jones) in whose constituency that magnificent company operates.

I should like to see whether we can help small businesses. Only a few years ago Case employed about 100 people. Today it is desperately recruiting to reach a work force of about 1,000. That is an example of success in the small business sphere.

I urge my right hon. Friend to keep pushing this fast development area at every available opportunity because that is what will provide the jobs, the employment and the income for the future.

I have so far resisted commenting on an area that could be promoted. I am wrestling with a home computer, and I believe that the interface between man and machine could be considerably improved. Anything that can be developed to make computers easier to understand and operate will be successful in the market place. As those machines become more complex fewer people will be able to operate them. I hope that more skill and expertise will be directed to computer development, so that the number of individuals and companies who can operate these advanced machines can be increased.

There is great potential for computer development in Britain and the EEC, and the programme will provide an opportunity to use it. I hope that we shall see rewards flowing to industries in Britain and Europe in the next five years.

9.6 pm

Dr. Jeremy Bray (Motherwell, South)

I thought that it would be for the convenience of the House to spread the Front Bench speeches through the debate, as we have extra time available. I welcome the contributions of my hon. Friend the Member for Linlithgow (Mr. Dalyell) and Conservative Members. My hon. Friend the Member for Linlithgow very properly looked a gift horse in the mouth, as is his wont, and I hope that the Minister will be able to answer his cogent questions.

The enthusiasm for the project that was voiced strongly on both sides of the House would be much more persuasive if, for example, hon. Members could plug computers into the Commons telephone system. It is not possible to use a modem in the House. Strictly speaking, we are not allowed to use acoustic couplers or the Serjeant at Arms will throw us out of our offices. By an extraordinary archaism, while we enthusiastically advocate striving at the frontiers of technology, we go on with cobwebs, oak and brass in the real seat of power. That explains many of the problems underlying the debate.

I am suffering from an acute attack of nothing-new-under-the-sun-itis. The Minister of State was kind enough, before the debate, to allow me to see the director of the Alvey project who is much concerned with the ESPRIT programme. He occupies the office in Millbank tower that was used by Sir Richard Clarke, permanent secretary at the Ministry of Technology in the 1960s. In that room, the i's were dotted and the t's were crossed on the GEC and ICL mergers, arranged under the interventionism of the then Labour Government. I am also glad that the chairman of the British Computer Society's committee on expert systems, Mr. Alex d'Agapeyeff, is advising the Alvey directorate. He was one of my software advisers in the 1960s.

The gurus of Alvey and ESPRIT work in that monument of 1960s brutalism which replaced the old mathematical laboratory at Cambridge in which in the 1950s I learnt to programme EDSAC, the first computer in Britain. In no way has that changed the atmosphere in which they work. I am still trying to discover what there is in the current jargon of intelligent, knowledge-based systems and expert systems that we did not discuss in Claude Shannon's information theory seminar at MIT in the 1950s with Marvin Minsky, now professor of artificial intelligence at MIT. One new feature, however, is the total disjunction between the interventionism of the Alvey and ESPRIT programmes, on the one hand, and the non-interventionism—not to say the nihilism—of the Government's main economic and industrial programmes.

As a consequence of this, the peripheral and even trivial character of the applications and demonstrations proposed under the Alvey and ESPRIT programmes raises serious questions about the rightness of the concept. One must seriously question whether good results can be achieved with so great a stretch and such trivialisation or whether resources will be diverted into such distorted patterns that progress will be frustrated.

Hon. Members on both sides are enthusiastic about more money being made available—and so am I—but the fact remains that recruitment plans for VLSI-trained electronic engineering graduates just for Inmos and National Semi-Conductor oversubscribe by a factor of two the total national supply of such engineers in prospect in the next few years. Within higher education, in both teaching and research, the universities are so preoccupied with cuts and maintaining their viability as institutions that no amount of isolated new-blood money to isolated academics who cannot build up research teams with proper Research Council backing, and no amount of unbalanced development of one department and neglect of another, can possibly produce the manpower and skills needed to carry out, not the kind of programmes for which hon. Members have called today, but even the kind of programmes that the Minister has succeeded in getting through the Cabinet. As a result, in the next year there will be an enormous increase in salaries for VLSI-trained electronic engineers in this country. I leave it to Conservatives to judge the wider inflation consequences of that.

With regard to ESPRIT, I have searched in vain through document 7619/83 for any coherent definition of the problems and the programmes to tackle them on a deeper level than the general waffle of the kind that we could and did write 30 years ago. The nearest that I could find to a concrete example, on page 16 of the annex, was a reference to a high level interface capable of understanding and synthesising the human voice. The document calls for special algorithms for pattern recognition … and ultra high speed computing power operating at 100 million instructions per second. That is getting on for the computing capacity of the human brain, which also has to cover the servicing of vision and the whole central nervous system.

I suspect that if the Minister of State asked biologists working on the structure of the inner ear, they would tell him that that amount of computer overkill on voice recognition is not a sensible approach. If he wants the view of a distinguished applied mathematician able to judge both the biological and computing aspects, I advise him to talk to Sir James Lighthill who has a distinguished record and an interest in intelligent, knowledge-based systems. I would lay a fair bet that Sir James's work on the modelling of the inner ear is far more likely to produce a cost-effective solution to the problem of voice recognition than the romantic overkill of the ESPRIT programme.

We do not know the technical details of the programme, and I doubt whether we ever shall, although the Minister was kind enough to say he would let us have the list of projects. They have been published. The details will remain commercially confidential as that is the whole point of the programme set-up. Therefore, there will not be much publicly judgable information on the real cost-effectiveness of the programme.

As for the underlying logic of the programme, I confess that I am sympathetic to the idea of enabling technologies being, pulled through by demonstration projects, which is the basis of the Alvey project, with a similar concept in the ESPRIT project.

The Alvey major demonstrators under consideration include the Department of Health and Social Security's tax benefit inquiry system, cellular radio, integrated designto-product systems, alert response systems, speech recognition, a groping submersible, and an aircraft cockpit. It is striking that none of these major demonstrators includes any mainstream data processing or process control applications, yet this data processing and process control account for 90 per cent. of the computer programmes written and computing done today.

No inquiries have been made by the Department of Trade and Industry of the biggest and most successful computing operations in this country, which are, I suppose, the transactions systems between clearing banks and their customers and, in terms of profitability, the financial market information in the Monitor service of Reuters, which the investment analysts seem to value, according to press reports, at something like £1 billion. No approach has been made either to the clearing banks with their vast systems or to Reuters to ask what is in it for them.

It could be argued that these ventures are so successful and profitable that they require no support and that no developments are needed. That is an extraordinarily complacent view. The clearing banks' software—and they have the advantage of being the largest bank chains in the world—is basically that of the 1960s. It is rigid and imposes an inflexibility on clearing bank operations of which we have begun to see the consequences in their pace of development, which will become a great deal more severe in the future.

On financial market information, the dirtiest words that can be said in Reuters today are "a new Bretton Woods system", because the consequence of a regime which stabilised exchange rates and the price of financial assets to a greater extent than occurs today would be greatly to diminish the demand for the services of Monitor and diminish the value of those Reuters shareholdings to our press. The press has a very strong interest in maintaining the unpredictability of financial market prices.

The contrast here with the approach taken in Japan is very instructive. In Japan, information utilities were developed by Nihon Keizai Shimbun—the Financial Times of Japan—and the same integrated approach was taken not only to the development of the transaction information that is the basis of the Reuters-type service, but also to the dissemination and analysis of economic models, forecasting, policy design work, and so on, which is all done now within that single network under the control of Nihon Keizai Shimbun, with its close links with the Japanese economic research centre, MITI, and so on.

To go bigger still, it may not have escaped the notice of the Minister of State that next door to the splendid new Inmos factory in Newport is the Business Statistics Office which, if I am not mistaken, is the direct responsibility of the Minister. It is the most comprehensive information system, the most widespread intelligent knowledge-based system, the most expert system, that we have in this country. The Government could not function without it. Yet, at the behest of the Prime Minister's favourite corner grocer, Sir Derek Rayner, the Government are busy dismantling what was once the pioneering statistical system in the world.

There is a most extraordinary statement on the record from Sir John Boreham, director of the Central Statistical Office and head of the Government statistical service.—it is reported in the current issue of Statistical News—in which he says: I am speaking as the Head of the Government Statistical Service in a country which has developed, both economically and statistically. Other countries have other environments which are changing in different ways. A point of fundamental importance (but I shall not mention it again) is that the scientific establishment in Britain is strong enough to take the Government on, successfully on many issues". He is issuing an open invitation to rebellion against the Government. He added: In the United Kingdom the Government Statistical Service now concentrates heavily on serving Government. This is a shift of emphasis since 1981; before that, serving 'society' (which includes industry) received more weight, it still gets some weight, but less than before 1981. The reason for the shift was that the Government decided that it is not an appropriate use of tax revenues to provide a heavily subsidised national statistical sevice, i.e. one for 'customers' outside Government. Whether or not to accept that decision is the question I shall raise at the end. I, obviously, accept it"— loyal civil servant that he is— but some others may not". I cannot conceive how any person of common sense who has looked at the proper organisation of a serious information system can possibly argue that information collected for Government purposes should not be made available in the best possible form for private use as well as for the service of industry.

Why are the Government deliberately playing in the junior league? Why are they actively sabotaging the nation's nervous system? One simple explanation is their politics. The present information technology programme is all that the Minister of State can get away with. Like most members of the Government, I do not for a moment think that he believes in all the hogwash of the Government's medium-term financial strategy, but, unlike other Government members, he learnt in the Treasury and Civil Service Committee what was wrong with it in detail and contributed notably to that learning.

Politically, it was a smart move—and I admire him for it—to launch his information technology campaign while needling the Government on their economic strategy. It was much safer to have him in Government than out, and he makes an admirable Minister. But the price we are paying is the current distortion of information technology policy—the trivialisation of the application, with heavy support for particular narrow lines on hardware and software development.

Should we gratefully accept the industrial support that we are offered and not look a gift horse in the mouth? Undoubtedly that is the reaction in industry and the universities today, which are so starved of resources that no coherent criticism is voiced at all—at least not to the Government or publicly. But, by crikey, there is to the Opposition.

That attitude is perfectly understandable given the relations between Ministers and so on, but that should not be the attitude of the Opposition. In fact, the Government have no coherent strategy on applications, hardware or software production, research or development. The description of the present state of information technology in this country has been eloquently spelt out on both sides of the House, and I do not need to repeat it. However, I am concerned with what we can salvage from the mounting pile of rubble while the Government remain in office.

What lines should the Opposition take in developing and putting forward their own strategy? First, in response to the Government's policy, we should encourage the mainstream data processing and process control users in this country to get stuck into the Alvey and ESPRIT projects and make them into something serious. It is ridiculous that there is no cashless society or process control project on the list of Alvey projects.

I know what the reaction would be if the Minister of State went to Reuters and said, "What about it?" Reuters would ask with whom, in Europe, it could sensibly form a partnership. However, that attitude misses the whole concept of the ESPRIT project, which is intended to form not just international but inter-functional links. Reuters is a well established company with a strong but by no means monopoly position in transaction data for foreign exchange and money market traders. Reuters could seriously go to the central banks and invite their partnership with Monitor in a study of transaction systems for the future and intelligence upon them.

Following the Versailles summit, a study was done on exchange market intervention, under the chairmanship of Philippe Jurgensen. All the serious work in support of that technical study on the effectiveness of foreign exchange intervention had to be done by the United States Federal Reserve Board, and specifically by Dale Henderson in the international department, because nobody in Europe was equipped to do the job. There was nobody in the Bank of England, the Treasury, the French Ministry of Finance, the Banque de France, the Bundesbank or anywhere else. The mainstream apparatus for studying the future of the world's monetary systems should not be left solely in the hands of the Americans. But, if it is not, how is the practical work to be undertaken? Is it not open to Monitor to go to the Bank of England or the Bundesbank and suggest an exercise on the subject? I am sure that the Minister of State would not oppose such a move, and such enterprise and initiative would greatly stimulate the Commission itself. It is recognised on both sides of the House that part of the problem is that the Commission badly needs the stimulus of new ideas.

Those in the mainstream of process control—mainstream control engineers, control theorists, economists and the econometricians—should also get stuck into the Alvey programme.

Hon. Members may not appreciate that there is discontinuity in the Alvey and ESPRIT programmes between the data processing and process control applications, which account for 90 per cent. of computing today, and the systems described as intelligent knowledge-based or expert systems. I would not willingly give way to others in my interest in intelligent knowledge-based systems and artificial intelligence. I have maintained a steady interest in the subject, despite the ups and downs of fashion, for over 30 years. But if that area is to be in any way practical, it must stand upon the shoulders of conventional data processing and process control applications. We must not dismiss 90 per cent. of computer applications, leaving the problems of the applications until we have worked out the IKBS and expert systems. The progress that has been made in data processing and process control is based on the fundamentals of logic and information theory which will have to be reinvented if it is left to IKBS to find a way round simulating them.

Another important area that does not figure in Alvey or ESPRIT and has had much work done on it is finite element analysis. The biggest finite element analysis computation that is done in the world today is weather forecasting. It can be argued that we should not include weather forecasting in an Alvey-type project because it is a one-off, but the same argument and the same mathematics apply to metal and plastic forming processes, fluid dynamics and reaction kinetics. It is a big and expanding area that is extremely scientific and technical. It will not be invented on the back of an envelope or recapitulated in an IKB system. It has heavy computing requirements and is admirably suited to the transputer. Why is there not a serious project on that?

The explanation, when one goes into the matter with experts—I have spent much time talking to them in the past six months—is simply human. It is deplorable that no one in computer science at Cambridge has talked to the control theorists at Imperial college or Warwick or to the economists at the London School of Economics or even in Cambridge during the past 30 years. They are now all too busy in the Alvey directorate or among its expert advisers to look more widely. Unless the Minister and his officials require a wider spread over data processing and process control, tunnel development will continue in important projects.

Let us demystify the language within IKBS and expert systems. We should insist that demonstrations be given to us in simple forms that we can understand and examine. Decision trees are, on the whole, things that are widely distributed in offices, even such as social security offices and others. That is all that an expert system really is, plus a few frills and furbelows. Why can we not have simple demonstrations of decision trees for fault-finding purposes, for diagnosing causes of crashes, risk analysis of metal fatigue, and even choosing which bus routes to take? That is what expert systems are about. Why can we not have a simple programme, such as Visicalc, which does the basic shell work of a programme, which can give us a practical demonstration of what the hundreds of millions of pounds of Government money are supposed to be doing?

The consequence of the route that the Government have taken is that we are embarking on major expenditure programmes, produced by a small minority of interested experts, of a type that it is not reasonable to expect hon. Members to be able to judge. That has happened because of the straitjacket within which the Government's economic and industrial policies are formulated. They are not allowed to be generally interventionist so they must be specifically interventionist in areas of high glamour and total opacity which afford the maximum opportunity to pull the wool over people's eyes as to what they really amount to.

The categories in the ESPRIT programme are somewhat wider and offer more scope for expansion and development of the type that I have been urging. The advanced microelectronics, the software technologies, the advanced information processing office systems and computed integrated manufacture are all capable of evolution in what I think would be generally regarded in customers' as well as suppliers' information technology systems as representing the balance of research needed.

It is certainly the case that ESPRIT at present lacks the focus of the ALVEY programme, but it also avoids some of its eccentricities.

I am entirely in favour of the European co-operation aspects of the ESPRIT programme. For years I have been trying to persuade the Treasury and the Social Science Research Council to take an interest in the French effort on computing in the economic field, and particularly the Moduleco project, into which they have put very substantial resources compared with the scale of any effort in this country.

I have worked as corporate planning and personnel director in Mullard, which is a subsidiary company of a European company operating in this area, and I have seen the sort of co-operation that is possible across national boundaries. I confess that I am somewhat uneasy, though prepared to be persuaded, about the practicalities of working in international consortia. It is a great deal easier to work within a single company, although the relations and rivalries are difficult enough even then. But no doubt we shall learn from experience. Certainly ESPRIT offers a wider range of people a chance of seeing how things are done abroad and what the nature of the market is.

My overall reaction to ESPRIT, therefore, is by all means to go ahead and make the best of it, but not to kid ourselves that it amounts to an information technology strategy. That design of a strategy has to be addressed to the main economic problems and the social needs of the people of Europe.

I have argued elsewhere—so I shall not do so this evening—for the use of information technology within the mainstream areas of Government and decision-making in industry. It will happen, and we will get the linked enterprise, company, industry, national economy, and international models and so on which are needed to operate such systems. We will get the well-informed, democratic, widely distributed decision systems that information technology makes possible.

The market as it is supposed to work, but as this project clearly assumes that it does not work, cannot possibly achieve that spread of an information system, open in access and free for people to use simply by its own internal dynamics. It needs facilitating by the Government, and the Minister of State has taken some actions—most particularly in the educational sector—which will help to facilitate it.

There is a task for, and an essential contribution will be needed from, information technology. I do not think that ESPRIT and Alvey begin to glimpse what that task is. We have to make sure that in the way in which they are conducted they do not positively frustrate the performance of the real task waiting to be done.

9.37 pm

Mr. Rob Hayward (Kingswood)

Having listened to the hon. Member for Motherwell, South (Dr. Bray), I can only describe his speech as surprising in places. There were a number of inaccuracies in the comments he made, but in the light of the limited time available this evening I intend to deal only with his references to the standard of education available in relation to information technology in general.

The impression that we were given was that there were no universities or facilities available which were attractive to any company, whether British, European or any other. I find it somewhat surprising, therefore, that during the past year Wang has been attracted to Stirling because of the facilities available at the university and Hewlett-Packard—to which the hon. Member for Linlithgow (Mr. Dalyell) referred—has been attracted to both South Queensferry and Bristol because of the facilities available at Edinburgh, Bristol and Bath universities. I really feel, therefore, that these comments by the hon. Gentleman were probably the most disparaging of the several inaccurate statements in his speech.

Dr. Bray

I put it in rather carefully phrased terms, and the hon. Gentleman will be able to check it by writing to Inmos and National Semiconductor asking them what their recruitment plans are for VLSI-trained graduate electronic engineers over the next few years, and comparing that with the output of the existing universities. I should like him to do that, as I think that he will find that the demand is approximately twice the existing supply.

Mr. Hayward

If the hon. Gentleman checks the Official Report, he will see that I did not refer to VLSI engineers but to a separate section, with which he dealt in greater detail—the educational facilities available and on offer to high technology and information technology companies.

The hon. Member for Linlithgow made several relevant comments about the development of companies in this country and how they are attracted here. I share his concern about the ESPRIT programme and the potential that it has for operating at speed. This view was also expressed by my hon. Friend the Member for Hertfordshire, South-West (Mr. Page). This is a worthwhile programme, but I am concerned that the European bureaucracy might not act with the speed at which the Japanese and American companies in particular seem to be so able.

We have heard reference to the investment made in a number of places, and there have been comments about the disparity of investment and research and overall employment between Europe, the United States and Japan. Equally, we heard quite often about the magnet that this country is for overseas companies. However, there is a danger that that magnetic effect can be overdone. We are attracting many companies, but put in the context of the amount of money that is going on world-wide today it is a somewhat limited quantity.

I have two particular concerns about the ESPRIT programme. One is the danger that it will be regarded as the ultimate—the be-all and the end-all—when it is not, either on its own or in association with Alvey. We have to encourage companies to invest large sums of money outside those two programmes. If companies invest only in them, and if the Government allow them to do this, we shall fall not merely further behind than we are but considerably further behind, despite the appalling statistics that have been cited by a number of hon. Members.

The hon. Member for Yeovil (Mr. Ashdown) referred to extra-territoriality, particularly in relation to the United States. That concern is held not only by his party but by all parties.

The other aspect of ESPRIT that conerns me is that I have some doubt, despite my originally complimentary comments, about the interrelationship between some universities and industry and about the effectiveness of the way in which they work together on this subject. There is not satisfactory liaison between the two. We should get encouragement from what happens in Germany and France, where industry works particularly effectively with universities on a number of subjects. We might learn and benefit from them.

I do not wish to go over ground that has already been covered by other hon. Members. There has been consistent emphasis on the ESPRIT programme and discussion about how we should work within the European Community. I am concerned that British, French and German companies may work together without directing consideration to countries outside the European Community. For example, Sweden has much to contribute in information technology.

Also, while we must be aware of, and concerned about, the challenge presented to us by the Japanese and the Americans, we should not presume that we cannot cooperate with companies from those countries. There is much to be gained from that as well as from working within ESPRIT, as there is from directing our attitudes and aims well outside the countries and companies of the European Community. In that way we can benefit from investment in research and development that is being currently carried out by those two countries, particularly in the case of companies that are investing in this country, whether Japanese or American.

The hon. Member for Linlithgow was worried about the amount of money that we were contributing in trying to attract companies to this country. He failed to recognise that there tends to be a breeding effect within a few years of any company being established, in that people who previously worked as engineers in a particular company leave that company and set up a small company of their own, which then grows rapidly into a major company. They have seen a gap in the market, a gap in the technology. Technology is moving so rapidly that there is a complete change in technology in general within a period of three or four years.

With those brief comments, I endorse the ESPRIT programme. I hope that it has the effects that the Government believe it will. I hope, too, that the Minister will reply to what I have said this evening, because I have certain worries not only about the programme but about matters outside the programme.

9.45 pm

Mr. Timothy Wood (Stevenage)

I, too, welcome the ESPRIT programme, because its proposals are overwhelmingly desirable. I very much enjoyed the enthusiastic speech of my hon. Friend the Member for Havant (Mr. Lloyd), and I agree with what he said about the importance of information technology in all regards. The development of computer systems and the applications from those systems will make enormous strides during the next 10 or 15 years. One is scarcely talking about an evolutionary process; it is more of a revolution in this sphere. The impact of computer systems will be overwhelming.

As has been said, there is no doubt that within Europe we have gradually been sliding back compared with many of our significant competitors. I, like the hon. Member for Motherwell, South (Dr. Bray), spent a period at the Cambridge mathematical laboratory. I confess that my development in terms of mathematics and logic seems slightly different from his. Many of the developments going on at the time I was there could be regarded as in the van of developments in computers, but some of the developments that are now taking place, which one would like to see taking place in this country, are following far too late behind those in the United States and, in some instances, in Japan.

My worries follow some of those that have already been mentioned. A number of hon. Members have said that we must ensure that moneys made available under the ESPRIT programme are made available in a way that speeds up the development of new technology. It would be too easy to have long discussions about certain projects that should be supported. I was involved in my previous experience in ICL in precisely such discussions on a variety of Department of Industry programmes. Although money was made available in many instances, the discussions that preceded that often took several months, and in this sphere one cannot afford that time.

The other point that I want to raise—it contradicts some of the arguments that were put by the Opposition—is about the quantity of money. In my opinion, the ESPRIT programme should act as a catalyst—not as a major funding activity, not as an expectation that this is the full source of funds for new developments in information technology. It will act as a stimulus, and just a stimulus. Certainly, much larger sums should be spent on development. I have been conscious, as has been touched on by others, of the fact that some of the major developments in recent years—the development of some of the chips that are now in widespread use in home computers, and so on—have been by bodies such as Motorola, Intel, and so on. Small innovative groups have often produced chips that have been taken up by other small micromanufacturers rather than by slow, ponderous and big research efforts.

It is our task to ensure that on the one hand there is the environment and stimulus for small companies rather than the big, fat companies to take the initiative and then to provide opportunity in terms of a market so that those machines and developments have widespread application. One of the tragedies has been that the EEC has not fulfilled our hope of a more effective market for the sale of high technology products. Because the market has been and has continued to be so diffuse, the sales that are the main justification for any development have not followed. That, as much as anything, is the other aspect that must be pursued apart from research and development. Let the Government and the EC provide a catalyst for research and development, but at the same time we must ensure that within the EC we have that big market that ensures that when someone has a good idea it really is marketed on a large scale.

Let me emphasise once more the importance of this field of high technology. Comments have already been made about constraints imposed by the transfer of technology, and so on, from the United States. In computers that is of the utmost importance and we must ensure that individual companies and Europe as a whole develop their ideas and develop them in the van, not five years behind other people.

9.51 pm

Mr. Kenneth Baker

This has been an interesting debate, and I shall try to answer the many points that have been made. I noted particularly the detailed comments of the hon. Member for Motherwell, South (Dr. Bray) about the programme's content. He said that he wanted to demystify the language. By their very nature some of his points were complex and intricate. I shall look carefully at his speech tomorrow in Hansard and I shall certainly draw it to the attention of the director of the Alvey programme and to that of our two representatives on the ESPRIT programme. Some of his points will be of great value to them.

The hon. Member for Linlithgow (Mr. Dalyell) started the debate some hours ago with a series of questions. I fully respect questions that come from West Lothian. I do not think that I can answer them all, if only because I was not quick enough to take them all down. I hope that the hon. Gentleman will accept that those that I do not answer tonight I shall cull from Hansard tomorrow and write to him about them.

The hon. Gentleman asked, as did my hon. Friend the Member for Hertfordshire, South-West (Mr. Page), about how the projects under ESPRIT will be selected. They have to be within the framework of the work plan and there is a deadline for the submission of applications to ESPRIT. The applications will then be examined by a panel of experts drawn from the Community. The larger projects will be put before the ESPRIT management committee, which includes representatives of all member states. We have two members on that committee. The committee will decide which projects are to be approved. A firm commitment is written into the rules of procedure that decisions must be taken within one month as a normal practice, and, exceptionally, in two months. I echo what my hon. Friend the Member for Stevenage (Mr. Wood) said. There is a danger in any bureaucracy, particularly in the bureaucracy in Brussels, that matters will get bogged down in elaborate bureaucratic procedure and one does not want that.

Dr. Bray

If the Minister is not going to reply to any of my points, may I ask whether he has he checked the demand for VSLI electronic engineers in Inmos—never mind the other semiconductor companies that are proposing to invest in this country? Secondly, can he confirm that he has ministerial responsibility for the Business Statistics Office?

Mr. Baker

I can confirm that the Business Statistics Office is responsible to my Department. I am not the Minister responsible but I am a member of the Department in the House. Of course I accept responsibility to answer for that. On the requirement and demand for the VSLI engineers and electronic engineers generally, I accept that there will be not only a national but an international shortage of electronic engineers and VSLI engineers for the next few years. We are trying to ensure that, in the new blood initiative, which the hon. Gentleman dismissed very scathingly, but in which there is a significant increase in the number of teaching posts, and undergraduate and postgraduate posts in the research projects, there is a concentration of resources.

In the general context, we are trying to move the balance of the educational budget for the whole country, over a period of years, more from the humanities to the sciences.

I was pressed by several hon. Members about the importance of small companies in the ESPRIT programme. My hon. Friend the Member for Hertfordshire, South-West and the hon. Member for Yeovil (Mr. Ashdown) emphasised how important it is to involve small companies. I recognise that, because many of the most innovative companies in the area of high technology, and in biotechnology, are very small companies. This involves the talents of one, two or three people. We want to tap those talents, to encourage them and to allow them to benefit from the ESPRIT programme. I will ensure that the points made by hon. Members about small companies are borne in mind strongly by our representatives on the ESPRIT committee. I think it can be accepted that, in the pilot projects, small companies have been involved. One such small company, Knowledge-Based Systems, a spin-off from the Polytechnic of the South Bank, is involved in one of the ESPRIT programmes. I should like to see many more such companies.

On the question of the time scale of ESPRIT, as I have stated, 38 pilot projects have already started. The work planned for 1984 has now been adopted and published. Applications for 1984 have to be submitted by 7 May. These will be evaluated by the experts, and contracts will be awarded from August onwards. The time scale is fast, and I am as anxious as the hon. Member for Linlithgow, and my hon. Friends the Members for Stevenage and for Kingswood (Mr. Hayward), to ensure that the time scale does not slip. I will heed, and follow, their advice.

Mr. Hayward

Are the universities, which may be involved in these projects, satisfied that August is early enough for them to prepare for the ensuing academic year?

Mr. Baker

Six universities are already involved in the pilot projects. The work plan has been published. Ai the universities will regard this as a source of additional funding for some of their research, I am quite sure that the applications will be rapid.

My hon. Friend the Member for Hertfordshire, South-West asked about tariffs, and referred to the adverse effects of the high import tariff on semiconductors. He will know that this has been raised in the House. I believe that the hon. Member for Yeovil has raised it on previous occasions. One result of the high tariffs is to discourage assembly of equipment and sub-assemblies in the EEC, and we deplore that. We have begun the process of persuading our Community partners of the benefits of the reduction in the tariffs, and we are pressing ahead with that as strongly as we can.

My hon. Friend the Member for Hertfordshire. South-West and the hon. Member for Linlithgow asked about intellectual property rights—foreground knowledge, I believe, was the phrase used. I can well understand the problems. It is a difficult and complex subject—who owns the patent rights and who owns the licensing rights. The existing arrangements in the pilot projects are that ESPRIT provides for an exchange of patents and copyright between companies engaged in different projects where that is needed for the execution of the project, or for the exploitation of the results.

The hon. Member for Linlithgow mentioned standards. One of the most useful things that I hope will come out of ESPRIT will be not only industrial collaborador on research and development, but a move towards closer, and agreed, European standards in high technology. This matter was touched upon in the data transmission points that were raised by the hon. Member for Motherwell, South. There is a variety and complexity of standards that hinders the development of the new industries in Europe. The hon. Member for Linlithgow asked what the cost was of moving towards standardisation. I accept that there is a cost in doing that, but there is an equally high cost in not moving towards standardisation. However, it is encouraging that many of the big high-tech companies in Europe are coming together to agree on standards. Without that, IBM will dominate standards not only in America, but in the whole of Europe.

I have been asked about the secondments. Those involved will come from companies in Europe and will work in the small secretariat in the Commission dealing with information technology.

I was also asked about overseas companies. Several hon. Members will know that we have become a magnet for major investment by overseas companies. That is good news for us all and is welcomed by hon. Members on both sides of the House. I agree with the hon. Member for Linlithgow that we do not want those companies just to be sales offices, but, on the other hand, I do not discourage sales offices or screwdriver assembly plants from starting up, because that is the beginning. Hewlett-Packard started as a screwdriver assembly plant near South Queensferry. It has led to another huge factory in Bristol and now to the first research and development facility for that great company outside America. I think that that is a cycle of virtue.

Over the years my hon. Friend the Member for Havant (Mr. Lloyd) has been one of the great proponents of support for information technology and the new technologies. Just when I have persuaded my ministerial colleagues to spend more money on research and development, he gets up and says that it is not enough. He wants more and more. I try to satisfy his demands. We have increased expenditure on research and development in my Department from £100 million per year to £369 million this year. That is one of the largest increases in any Government area of expenditure.

Mr. Dalyell

Bill Hewlett, a member of the Presidential Science Advisory Council, and Dave Packard, who became the Under-Secretary for Defence, would find it strange for Hewlett-Packard to be described as a screwdriver company. That company came to South Queensferry as a very formidable Californian organisation. However, the question is whether they and others have been consulted about ESPRIT. What do the large multinational companies think about it?

Mr. Baker

The role of the multinational companies in both ESPRIT and Alvey is complex, because it depends on the extent to which they have an involvement in our country. The main thrust of both programmes is to develop our own research and development capabilities. I do not seek to be disparaging in talking in terms of screwdriver assembly, but that company started in a very modest way.

However, it has made a major series of investments which we welcome—[Interruption.] However, in response to the hon. Gentleman, I should point out that Alvey has been asked. Some of the companies have been approached and others have approached us. Discussions are continuing. As far as I know, none of the American and Japanese multinational companies has applied to ESPRIT, so that question has not arisen.

I turn to the funds that are available. We are talking about a £900 million programme, half of which is to be provided by the Community and half of which will be provided by industry. There is also the Alvey programme, which stands at £350 million. In addition, on Monday my right hon. Friend the Secretary of State for Trade and Industry announced £120 million for microchip development. Thus, we are committing substantial funds.

In response to my hon. Friends the Members for Kingswood and for Stevenage, I should point out that the money is catalytic. One cannot expect national and international Government funds to bear the whole burden of research and development. The main thrust of research and development must come from the profitability of companies. Indeed, half of research and development in the United Kingdom comes from that source. Thus, the money is catalytic. In response to my hon. Friend the Member for Kingswood, I should say that I do not exclude international co-operation, such as ICL with Fujitsu of Japan. Yesterday I spoke to the Swedish Minister about possible research and development in medicine. ESPRIT does not exclude that.

The debate has shown that there is widespread support. So far as I can see, there is no contention in the House about the need for industrial collaboration in the European context. The challenge from Japan and from America is vivid, real and growing all the time. If we do not develop these industries within a European framework or within our own countries, the trade deficit in these products will grow substantially over the next 10 years.

I should like to express my gratitude to the House for the full expression of its views. I welcome the chance that we have had to debate this important issue. I again express regret that the debate could not take place earlier. I am aware of and strongly sympathetic to the requirements of the resolution of the House of 30 October 1980. Although I reported to the House in a written answer to my hon. Friend the Member for Thanet, North (Mr. Gale) on 29 February, I recognise that this did not fully discharge my obligations to the House. I hope that I have been able to do so in my opening remarks tonight. I commend the motion to the House.

Question put and agreed to.

Resolved, That this House takes note of European Community Document No. 7619/83 concerning the proposed European Strategic Programme for Research and Development in Information Technology (ESPRIT); and supports the Government's endorsement of the programme at the Research Council on 28th February as helping to strengthen the technological competitiveness of the Community's information technology industry.