Mr.RogerKing (Birmingham, Northfield)It is about two years ago that I had the pleasure of introducing a debate during a similar operation to the past 12 hours on the subject of the British motor industry. If my memory serves me right, I drew an early spot and the debate lasted three hours. It was noteworthy that so many colleagues attended because the debate started the right side of midnight.
I make no apology for introducing a similar, or even identical, subject this morning, because the British motor industry is our largest manufacturer. It employs more people than any other manufacturing industry. We could possibly say that it is our largest industry, including agriculture. Its importance to the country is substantial, and especially to the midlands, where the production of motor vehicles, components and accessories employs a great number of people.
The history of the industry is well documented, but it is a salutary reminder when one appreciates that in the late 1950s we were the second largest car producer in the world—second to the United States. Today we have slipped well down the league to about seventh or eighth in production capacity. More cars are made in the midlands than anywhere else in the country. We have examples of mass production at the Austin Rover plants and the small, but valuable, production of Jaguar cars at the other end of the market.
manufacturers—firms such as Luca, GKN, Tube Investments and Triplex — which are almost household names, not only in Britain but throughout the world. Indeed, seven of the country's top ten component makers are based in the midlands; the importance of the industry to that area is shown by that fact alone. About 40 per cent. of manufacturing jobs in the industry involve people employed in Birmingham, and in the midlands as a whole, more than 50,000 jobs are involved with car production.
Considering the importance of the industry, one would hope that it would receive absolute priority in all forms of industrial planning and that Governments of all political persuasions would do their best to ensure its expansion and development. However, in many respects Government acted in an unhelpful way. In the 1950s, when production was substantial and we were number two in the world after America, the need to expand caused Governments of the time to dictate to the industry to where it should expand, and developments took place in the north-west of Scotland and South Wales, where plants for the production of components, cars and commercial vehicles were established.
It is clear in retrospect that that was a bad move, but at the time there was the problem of providing jobs for those areas. The rate of unemployment in the west midlands was so low that finding people to man the production lines involved taking the jobs outside the midlands area. Although the motor industry objected strongly at the time, because it felt that concentrating capacity in or near its home base was conducive to improved productivity, It had to accept the Government dictates of the day if it wanted to achieve the greater production that it needed.
1253 The results were seen in the late 1960s and early 1970s, with lengthy production lines, sometimes as long as 300 miles between plants, and that only helped to hinder the development of the industry as it strove to compete against foreign domination. The incursion into western Europe by Japanese motor manufacturers began to take place in the early 1970s. They found an opening principally because the quality and design of many of our cars in production here left much to be desired.
We have always had the expertise to design cars which are technologically adventurous, and throughout the history of the industry we have produced many innovations. Possibly the most substantial was the advent of the Austin and Morris mini cars in 1959, when the introduction of front wheel drive in tiny mass-produced vehicles was something of an innovation. The design of those cars was highly innovative and set the trend; the vast majority of cars of under two litres are now produced with front wheel drive.
The trouble was that, while the design was good, its detailed execution was not, and the problems involved in producing vehicles to a quality and price to enable a profitable return to be made somehow did not occur in the way that the then British Motor Corporation hoped.
Many other United Kingdom motor manufacturers tried to emulate that design process. The old Rootes Group produced a rival to the mini that was called the Hillman Imp, which turned the Issigonis theory on its face and put the engine in the back of the car. The car was well received by the motoring press and the public initially, but flaws in quality control virtually condemned the car to languish until its demise 10 years later as an also-ran. That was the reaction of the motoring public.
The problem of providing cars for the purchaser that he could use with the utmost reliability was one that the Japanese were able to overcome. Their cars were not adventurous—they had no technological advantages over our indigenous products—but they had quality and reliability. Once the Japanese industry gained a foothold in Britain and a reputation, and in Europe generally, they were able to retain it. The Japanese are now foremost in design innovation and it cannot be said that they are merely copying the West. They are playing their part in pushing back the frontiers of technology in car design.
Nowadays we tend to refer to the European car market and not the United Kingdom market. The result of joining the European Community is that we must look to a wider area of car production, and in western Europe the capacity of car factories exceeds the number of sales that are likely to be gained during a 12-month period by about 2.5 million vehicles. This over-capacity is not helped by the number of vehicles that are imported into western Europe, some from the Comecon countries and many from Japan.
Jobs in industry depend upon our industry providing products that will enjoy design acceptance—in other words, products that the public will want — and a recognition of quality. Much has changed over the past 10 years or so as the industry has realised that to get the employment and the profits that it requires, it must meet the competition head on and produce the vehicles that the public want to buy. In the west midlands, that realisation is translated into jobs and prosperity for the region.
The Longbridge car plant in my constituency has experienced improvements in productivity and rationalisation over the past five or six years. The plant had struggled on for many years with a large work force—at one time 1254 there were about 21,000 employees. It produced cars of questionable quality, design and market acceptance. I used to work there, so I can vouch for what I have said. The advent of the BL corporate plan and the leadership of Michael Edwardes, as he then was, caused the management drastically to rethink. That was borne of necessity because technically BLMC, as it then was, was bankrupt as a result of it being unable to sell cars in the numbers that would enable it to embark on an investment programme to produce new models. We faced the challenge of bringing the industry into the latter part of the 20th century.
The corporate plan set out the development of a new range of cars and Longbridge has seen the development of the Metro over the past four years. It is an outstanding example of what the British car industry can achieve. That is true of design and production capabilities and the capability of the work force. The number of cars turned out per man per year has risen substantially. At Austin Rover the number has increased from five in 1979 to 14 in 1984. Taking just the Metro line at the Longbridge plant, the number has increased to 50 per man per year, and the aim is to achieve 60 per man per year.
Much of this improvement has resulted from automation. This is an outstanding example of how awork force has come to terms with the challenge of modern production facilities as the company has sought to meet the challenge, from not only Britain but overseas in producing cars for the world market.
The position of the other manufacturers is more complex. The other major manufacturers are owned by multinational companies. Vauxhall is owned by General Motors and Ford is a company in its own right. They have sought to develop the "world car" concept, which has meant that design and development have to a large extent taken place outside Britain. Much of the production capacity of those companies has been taken over in producing cars from kit form and certain components. Other components are imported from European factories.
The manufacture of components in Britain has decreased. The overall United Kingdom content of cars has fallen considerably, and this is certainly the case with Vauxhall. Some observers say that only 22 per cent. of Vauxhall can genuinely be said to be United Kingdom sourced. Of course, this is not exactly helping the British motor industry, especially the component industry. We must ask the multinationals whether this trend will continue or whether they will encourage more home production. This is a timely reminder, as Vauxhall is not a dwindling force on the United Kingdom Market. It is a formidable company which, over the past three years, has increased market penetration to 15 or 16 per cent., and at times to even higher levels. Its Cavalier model has been in the top three places since it was first produced. Most of the components of that car are imported.
Will this policy continue? Do the Government believe that they should discourage the element of multinational content and encourage British manufacturers to provide many of the necessary components? Why does the glass for cars have to come from overseas? Glass is extremely heavy and difficult to transport. There are British glass manufacturers. Given the volume of imports, I should have thought that it was in order for British manufacturers to produce the glass needed for Vauxhall cars.
There may well be cost and production reasons for importing glass from the continent. For how long will we 1255 put up with this non-commitment to United Kingdom component suppliers while Vauxhall occupies such a prominent place on the market?
Job opportunities in the motor industry have dwindled over the years, although I am happy to report that in Longbridge extra jobs have been created as a result of automation, better products and a step-up in production and sales. During the past 18 months, about 2,000 people have been taken on, 1,400 of whom are in new jobs and 600 of whom have replaced those who have left. The present labour force in that complex now numbers about 10,500, and about 20 per cent. of it was not employed by the company two years ago. Therefore, substantial job opportunities are available in the motor industry, which we wish to encourage.
The main problems facing the industry are a lack of customer demand, or too many manufacturers trying to satisfy that customer demand. The many ways in which demand for cars could be increased have been trotted out before, but I make no apology for mentioning them again.
The motor car is the only product to attract a special rate of tax. Both VAT and the 10 per cent. car tax, which was introduced as a temporary measure over 10 years ago and remained ever since, are added to the price. One cannot understand why the car has remained the one recipient of that special tax. Neither Japanese videos, Taiwanese radios nor any other product is taxed in that way. The British motor industry cannot understand why that extra tax should be levied, which artificially increases the price of a car.
The industry has made in clear that if that tax were removed, it could make up the revenue of the Chancellor of the Exchequer by increased sales and production. It has been argued that if the 10 per cent. car tax were removed, importers would take up the possible extra sale of 100,000 cars a year. Certainly that may have been true some years ago, but that is no longer the case with the resuscitation of Austin Rover as a formidable member of the manufacturing clientele that provide bread and butter cars. Austin Rover could well take the lion's share of the extra sales. It is up to the Chancellor to accept the challenge put to him by the motor industry that over three years the equivalent of that 10 per cent. special car tax will flow back into his coffers as a result of increased sales. Furthermore, the increased sales will bring an improvement in employment prospects and therefore a net gain from the unemployed seeking employment in the car industry.
The Chancellor could consider other aspects, such as VAT on company cars, which affects only a modest number of purchasers. In many cases the company car is a business tool. One must distinguish between company cars provided as a perk and not used for company business, and those which are a business tool, and which a sales or engineering representative, for example, may use in his job visiting customers and getting orders. It is as much a tool of his business as a desk top computer, a telephone or a desk. Yet the business can reclaim the VAT on all those items except the genuine company car. It seems to be grossly unfair that the car should be singled out for this special treatment, and one hopes that the Chancellor will look benevolently upon the genuine company car.
There is no difficulty in sorting out a genuine company car and a company perk. We already do that in regard to 1256 the cut-off point for tax on the size of car that a company provides to an employee. For example, on a car that is more than 1800 cc, one's personal tax liability is greater than it is under 1800 cc. That cut-off point seems to have been decided arbitrarily by someone. However, if a person travels 18,000 miles on company business, he qualifies for a reduction in personal tax liability because he is a genuine company car user. If a person does more than 18,000 miles on company business, the car might well be eligible for a VAT reduction, as it is obviously being used in a genuine company way.
I look to the Chancellor to cut VAT and to have a look at the personal cut-off point. I am not ashamed to admit that Austin Rover is disadvantaged by the 1800 cc limit. It does not have an engine that comes into that bracket. In that area, its engine sizes are 1.6 litres and just under 2 litres. Many European manufacturers and the other so-called United Kingdom manufacturers—General Motors and Ford—have produced engines that fit just under the 1.8 litre level, and they are brought in from many continental factories.
If, for once, we could be patriotic, wave the flag and stimulate the British element of our industry, at a stroke the Chancellor could raise the cut-off point for personal tax liability from 1800 cc to 2 litres. That would hurt no one. It would not hurt Ford or GM, who would continue to make 1.8-litre cars quite satisfactorily. But it would help Austin Rover to find an extra market for its 2-litre cars, which on a company basis is at present not so attractive as the 1.8-litre competitor cars. One hopes that the Chancellor will try to stimulate interest and business in the motor industry by adopting some of these modest measures.
The Government are a substantial purchaser of cars. It appears that over the last few years much of their purchasing has been of continentally derived vehicles. For example, the policy of the Ministry of Defence has been to buy Vauxhall Cavaliers in very large numbers —2,000 to 3,000 over the last 18 months alone. Do not the Government have a buying policy which, in addition to seeking the right product at competitive prices, asks manufacturers about the United Kingdom content of the product that they wish to supply? I hope that tender documents in future will request the United Kingdom content of the product being offered to Ministries.
Some observers would say that the Cavalier languishes at around 22 per cent. United Kingdom content, but it is no more than 50 per cent. even on the most optimistic assertion. The Montego has a 92 per cent. United Kingdom content, but at present is not purchased by any Ministry. Fortunately, the cars that we see in New Palace Yard are totally British in content. In addition to the Chancellor's bringing about some fiscal encouragement for the industry, one would hope that the Government generally would continue to back it with hard cash by buying the products that are made largely in this country, and insisting that manufacturers tell them how much of the product is made in this country.
One of the challenges that faces western Europe is the desire of member states to clean up car exhaust systems, and the extra cost that that is likely to mean to the European and British motor industry. With the very substantial vehicle population moving about Europe, the degree of pollution varies according to the state of the car engine and how well it has been maintained.
1257 The determination by the environmentalists to clean up the car exhaust systems is in many people's eyes an encouraging step forward. I will not say that car exhausts should not be cleaned up, because I think that much work can be done. The Germans in particular seem to have taken a number of panic measures in order to protect their forests, which they believe their motor industry and cars are destroying.
Of course, none of that can be proved beyond all shadow of doubt, but the very substantial presence of the environmentalists in Germany—the so-called Greens—has ensured the instigation of legislation on a European bais on the quality of car exhaust emissions. The result has been the EC arriving at stringent plans. This will mean a substantial extra cost to motor manufacturers throughout Europe.
Not many motor manufacturers in Europe are operating profitably at present, certainly none in France. Some motor conpanies will get Government assistance. The French Government will bail out Renault, giving it interest-free loans. It will no doubt eventually provide cars that will meet the standards. In our own country the challenge facing Austin Rover is to produce cars using money borrowed from the market place, albeit underwritten by the Government but paying substantial interest rates as well.
Many of the requirements laid down by the EEC are hard to meet with presently available technology. Austin Rover has set its heart on the development of a lean burn engine, an engine that uses more air per element of petrol than is used currently, and a cleaner exhaust is the result. But since the EEC directives set down slightly stricter standards, the alternative method of cleaning up exhaust emissions, the exhaust catalyst, will have to be used. That will add substantially to the price of a car, as well as to the running costs. It has been estimated that about a 10 per cent. power loss will be involved, so that an extra 10 per cent. consumption of fuel can be expected if bread and butter saloons use a catalyst.
When BL laid down its corporate plan envisaging £1.8 billion expansion over five years, it included an element for improving its vehicle exhaust emission to a standard acceptable under the EEC directive arrived at on 20 March this year. Since then a much more stringent directive has been introduced, and one wonders how much extra cost will be involved, principally by Austin Rover, to meet the standards laid down in that directive. That cost was not actually included in the corporate plan. I have heard mention of sums as high as £200 million as the extra cost of cleaning up exhaust emissions.
More to the point is the fact that the directive on which the Chancellor of the Exchequer lifted his reserve and which we assumed to be the directive involved is actually subject to a number of technical alterations. I would welcome a reply from my hon. Friend the Minister on this point. What element of technical alteration is allowed under that directive? I know that much of it is confidential negotiating, but a set of rules is laid down by the directive. We have lifted our reserve on them. Does that mean that we have accepted that requirement and those regulations, or does it mean that we have sort of accepted them but are able to negotiate large elements? The British motor industry, certainly Austin Rover, would like to know, because time rolls on and commitments have to be made 1258 in terms of money and engineering time. To delay for long means that the industry will find it ever more difficult to meet the time scales laid down by the EEC.
One element that is discouraging the British motor industry is the level of Spanish competition. That is an old issue, which has been debated many times in the House, but it is still extremely relevant. Indeed, it is more relevant now than it has been over the past few years. Spanish ears are coming into the country as a result of the dispersal of motor manufacturers to Spain, where labour costs are sometimes 10 per cent. or 15 per cent. below ours. As the industry has developed—it is now exceeding ours in the total number of cars produced—much of that production has been exported throughout Europe, principally to this country. Every Vauxall Nova that is sold in this country is Spanish-built and an increasing number of Ford Fiestas are similarly assembled in and brought into this country from Spain.
In addition, Spain has its indigenous car manufacturer, SEAT, which is now busily about to launch its product range into the United Kingdom market, commencing in October this year. A dealer network is already being set up and cars have been tested and developed and found to be extremely competitive. In fact the engine was designed by Porsche, which is a household name for quality of engine design. Therefore, it is not like a cheap east European car, but is an extremely competitive product in price, quality and design innovation.
The problem with Spain is that she has set up import tariffs to prevent us from sending our products over there in any quantity, and we have virtually no import tariffs against Spanish products coming into this country—the legacy of the 1970–71 agreement with the then EEC, when Spain was largely an agricultural country. She had no industry. The EEC felt that her industry should be encouraged. The result is that, as that industry has been encouraged and is developing into a formidable motor industry, we have the one-sided arrangement whereby I and most motor forecasters predict that about 130,000 Spanish-derived cars will come into the country in 1986 compared with about 3,000 British cars going back to Spain. That is deplorable, because many of those Spanish cars are competing with our home-produced products.
Those who buy a SEAT in this country and who handle SEAT cars will be acting unpatriotically. There is no need for the company to have a presence in this market place. The only way that we should like SEAT to come into this country is if we could send one of our cars to Spain in exchange for one SEAT coming to this country. Those who buy SEAT cars from October onwards had better be aware that when they do so, they are buying people in this country out of a job. That is what it amounts to. They need to think carefully, however attractive the product might appear, that it represents a one-sided trading system and a hammer blow to the British motor industry. I hope that every dealer will be boycotted and that nobody will buy SEAT cars until Spain voluntarily allows us a fighting chance to sell our cars in the Spanish market.
The motor industry has to get over many little obstacles. One is the registration suffix or prefix. It is happening again this year with the C registration. Factories work overtime so that there is an enormous park of cars of all colours and specifications and then the market dives steeply after 1 August to the dead month of September. No other European country presents its motor industry with such a Becher's brook of an obstacle. It was introduced at 1259 the request of the motor industry which felt that it would be better to have two peaks, the other being at the end of the year.
United Kingdom manufacturers met between 70 and 75 per cent. of home demand then and were able to cope with that hiccough in sales. They now meet about 42 per cent. of home demand. Importers simply ask foreign factories to turn production away from their home markets when everyone is on holiday and not in a car-buying mood to the United Kingdom market, where everyone is on holiday but in a car-buying mood. Importers are encouraged to dump in Britain at a time most convenient to them as European sales are in a trough. Our manufacturers have to gear up production every year for the peak and then face terrible problems afterwards.
Who will seize the opportunity to do away with the registration suffix or prefix? The Department of Trade and Industry? The Department of Transport? There is no reason why we could not be issued with a permanent number plate. Regular sales throughout the year would help our motor industry enormously. The troughs also cause havoc for the myriad component manufacturers. We need a Lord Beaverbrook of the motor industry. We must encourage the industry to produce and to expand the market for its products. Trading opportunities with other countries must be fair. Legislation affecting the industry should not cause it delay and expense. The industry is a major source of employment and prosperity. It must be clear that if we do not ensure that what we buy is made in the United Kingdom, we cannot be blamed for job losses. "Buy British" is a hack cliché, but never has it meant so much as it means in the motor industry.
§ Mr. Tam Dalyell (Linlithgow)After a long day and a long night I am grateful for this opportunity to raise the problems that face British Leyland at Bathgate, but before doing so I should like to refer to the speech of the hon. Member for Birmingham, Northfield (Mr. King), who has performed a service to the house, and to raise three matters.
First, I echo his question about public purchasing. Are we sure that every Government Department asks about the United Kingdom content not only of cars but of other vehicles? Of one thing we can be quite certain that in France it is inconceivable that any public authority would buy other than French. The same is true of West Germany and of every other country in the world. The British tend to be ultra-silly about this. If everybody else follows such a policy, it is about time that we began to look after our own interests. From now on, therefore, everybody should ask about the United Kingdom content of vehicles.
I also echo the hon. Gentleman's question about exhaust emissions and exhaust regulations. My hon. Friend the Member for Livingston (Mr. Cook) and I went to Uxbridge a fortnight ago to see Mr. David Andrews and Mr. Les Wharton, the managing director of Leyland vehicles, in relation to Bathgate. It would serve no purpose to deal in detail with what they said about engines, but they told us that the emission regulations, for which the House of Commons is indirectly responsible, made their problems infinitely more difficult. We may have to develop new technology, but, as the hon. Member for Northfield said, what do the Government think about the 1260 time scale within which this country is supposed to operate in terms of the European Community regulations? And what is the Government's policy on emissions? Do we think that we are being fairly treated? In particular, has the Minister anything to say about the particular problem for British Leyland of the emission regulations as they will effect the good engine that is still made at Bathgate?
Thirdly, may I follow up the hon. Gentleman's question about Spain. He referred to the dealer network. I am reluctant to call anybody unpatriotic, but there will be extremely sad consequences for well established dealers. I shall mention just two Tennants and Carmichael Baxter. Do the Government have a policy in relation to Spanish entry laws, which will alter the position, and also in relation to our entry into the Spanish market? These are highly relevant questions.
The House will excuse me for returning to the problem at Bathgate. It is still the largest machine shop in Europe. Ministers, and certainly the Scottish Office, acknowledge the very responsible leadership of Jim Swan and the joint shop stewards committee. It is also acknowledged that the engine is a good product and that other good products are made at Bathgate, However, it is faced with a very considerable problem and the Minister knows what it is.
My hon. Friend the Member for Livingston and I were most courteously received by David Andrews and Les Wharton, and we have an invitation to return any time we wish. This is part of a dialogue in what I hope will be a rescue operation.
My specific questions this morning are as follows. Is the Department of Trade and Industry prepared to take part in the rejuvenated working party, which involves the Scottish Office, the Bathgate area support enterprises group—under the leadership of Michael Fass and Bob Mears—and West Lothian district council? The Scottish Office, especially Mr. Gavin McCrone, is working very hard on this. Do the schemes put forward by BASE interest the Department of Trade and Industry?
An especially difficult problem in relation to the British Leyland corporate plan for the future is whether British Leyland, should some phoenix arise, will be prepared to grant manufacturing rights on regional terms to anyone who can retain a manufacturing capacity at the Bathgate site. After all, this is the heart of industry in central Scotland. I am not one for going over history. but I should tell the Minister with responsibility for the west midlands that, in the late 1950s and early 1960s, a decision of a Tory Cabinet—it was the Macmillan Government—against the wishes of Sir George Harriman, to whom I have talked, and other leaders of the motor industry, brought tractor manufacture and vehicle manufacture to Bathgate. It is not right, after so much money has been raised locally through the district council and the community, for the Government to wash their hands of the matter. When Mr. Les Wharton says, "We are in the business of truck manufacture, and others must look after the community," I understand what he means; but there are governmental responsibilities in this. Although Leyland may say, "We are in the business of truck manufacture", nevertheless, morally and otherwise, there are overwhelming reasons why the Government should be deeply involved.
Will the Minister say this morning that his Department will support the working party and the schemes put forward by the shop stewards and by BASE? He will discover that there is much good will among his ministerial colleagues and officials at the Scottish Office.
1261 I have constantly raised with the Minister for Overseas Development the question of trucks for the Sudan and Ethiopia. On his return from Ethiopia, the Minister told me that one problem is that, in east Africa, they are so committed to Mercedes and Fiat that it is doubtful whether the Ethiopian authorities want Leyland trucks. There are £40 million worth of good trucks sitting in the car park at Bathgate, many of which would be highly suitable for east Africa. Could there be proper discussions with Leyland and with the aid authorities to discover whether, if problems arise with the supply of spare parts, Britain could do something to alleviate the immediate problem?
I understand what the Minister for Overseas Development told me, but it is not beyond human wit and governmental will to overcome that problem. The British commercial vehicle industry has a considerable potential contribution to make to the desperate need for transport in the developing countries of Sahel Africa.
I would like the Minister's comments on all those points, if possible, by letter or by meeting. I would ask especially that senior officials of the Department of Trade and Industry should be available in August to take part in the ongoing discussions in and around Bathgate.
§ Mr. Alan Williams (Swansea, West)I congratulate the hon. Member for Birmingham, Northfield (Mr. King) on giving us the opportunity to have this debate. I congratulate my hon. Friend the Member for Linlithgow (Mr. Dalyell) on pursuing, as he always does, the campaign to ensure that Ministers are fully aware of the problems facing Bathgate and the opportunities available through the truck capacity that is standing idle.
There is a growing consensus on the essential need for us to sustain a British-controlled capability in the car industry. In the late 1960s the Labour Government undertook the saving of the collapsing British Leyland. We were berated by the right hon. Member for Leeds, North-East (Sir K. Joseph) for daring to intervene with public funds to save the company. That was despite the fact that so many other firms and jobs depended on the survival of the company. One can welcome the conversion, and say that we are glad that at last the Conservative party has recognised what we were advocating in the 1970s. We had to put up with several years of diatribe for doing something that nearly everybody would now recognise as an essential service. That is particularly true with regard to the number of jobs. The industry has over 180,000 jobs, and over 500,000 dependent jobs. As the hon. Member for Northfield said, it sustains many other jobs in the glass, rubber, steel and other sectors.
The industry is critically important to the technological future because we need its demands for, for example, plastics and electronics if we are to stay in the forefront of those industries. It is astonishing that there was ever any doubt in the mind of the Conservative party about the desirability of saving British Leyland.
The collapse of BL was the ultimate saga in the collapse of private enterprise in the car industry. British Leyland became the dustbin of the car industry. Every time a private firm ran into difficulties, the automatic idea was, "Add it on to British Leyland." As a result, an unplanned managerial nightmare, which we had to unravel, arose 1262 from this unplanned conglomerate and the residue of the collapsing private sector industry in the car sector in the United Kingdom.
Our industry has not been helped by the somewhat erratic and eccentric policies pursued by the Government in relation to the pound and interest rates. It is anomalous that we have high interest rates to keep up the value of sterling, thereby putting our industry at the maximum disadvantage, while the Japanese are using all their efforts to keep the yen low to keep their industry at an advantage in world trade.
It is hardly surprising that our industry has lost so substantially, particularly when it is then crippled by the interest rates that are being used to create the prejudicial atmosphere for sterling in which our industry has to export and fight import penetration. It is hardly surprising that while exports are £4 billion, they are less than half the level at which they stood 10 years ago.
The hon. Member for Northfield is right to emphasise, as we all are, that all the import penetration since 1974 has not been the failure of our indigenous car industry to compete. Nearly all the import penetration has been as a result of the deliberate self-interested managerial decisions of Ford and General Motors. We should not apologise for rubbing the noses of these companies every possible time into the fact that here investment policy has been having a damaging effect on the pattern and structure of the industry. That has added to a great many of the uncertainties we face.
In the early 1970s, Henry Ford said there would never again be any investment in the United Kingdom. I was lucky enough to be involved in the negotiations to get the Bridgend engine operation. That was at the end of the 1970s and the first break from the personal policy decision of one man who had dominated the investment patterns of Ford for most of that decade. It is also useful to emphasise, as the hon. Gentleman did, that models such as the Nova and the Fiesta are providing substantial numbers of jobs for overseas workers rather than for British workers.
The hon. Gentleman and my hon. Friend the Member for Linlithgow correctly highlighted the ridiculous situation which is allowed to continue in relation to Spain. One of the great scandals of the car industry is that Spain, with well developed and sophisticated high technology, has been able to impose penal tariffs on imports from Britain and the rest of the Common Market, while Spain has free access to those markets. As the hon. Gentleman said, Spanish penetration into this country next year will be over 100,000 units. When one relates that to the total production of British Leyland, one sees what is happening to sabotage our own car industry.
In 1979 at a TUC seminar in Wales on microtechnology, one of the senior trade unionists talked about the new technology and described how we would have to encompass it. He made the point that he and a deputation of trade unionists had just been to Spain, and he said at that time:
Let us be honest. There are Valencia people straight out of the lemon fields who are producing a better quality car using the latest technology than we can produce anywhere in the United Kingdom.That high technology Spanish industry has been allowed to pirate the trade desperately needed by our own industry. For General Motors to be operating with a 22 per cent. UK content is a scandal. That company has had major Government assistance over the years and expects a high 1263 proportion of the British market and wants free access to it. On the other hand, we do not have free access to its productive plans and capability. It is strange to think that General Motors would be the first to howl if this or any Government were to suggest they were going to allow a Japanese company to establish an operation in this country with an as low a British content as GM by its policies takes as its right to insult us with. It has actually removed its design and research and development base from this country.The points made by hon. Members about public purchasing are valid. I know the difficulties and I do not pretend it is all that easy. We tend to play a straight and honest game when it comes to public purchasing. I remember an occasion when I tried to get the Home Office to intervene with police forces which were buying BMWs. "Oh no," said the Home Office, "It is absolutely imperative that each police force has complete discretion to decide which model of motor cycle or motor car is suitable for its own area. They know their areas best and must be given freedom of choice." No such freedom of choice is allowed to police forces anywhere else in the world.
I was disturbed as, I am sure, was the Minister, when the managing director of BL Technology, British Leyland's research and development unit, told the press earlier this year that because of lack of investment, inadequate Government support and a dearth of designers, engineers and other technologists, we were falling so far behind in R and D capability that we may already be "below the critical level." I am sure that the Minister agrees that if that is true, we need to remedy the situation. The managing director suggested that there were already few designers left in the United Kingdom who were capable of producing an automatic gearbox and that there would be no engine design capability left in Britain within a decade. I hope that the recent announcements about BL will help to avoid that possibility. Perhaps the Minister will tell us what effect they will have on sustaining our capability.
We welcome the Ford engine project. I am sure that it is particularly welcomed in Dagenham. Can the Minister tell us whether that will have any R and D benefits?
It was disturbing to learn that Jaguar, one of our prestige companies, still has difficulty in recruiting engineers at salaries of up to £20,000 to carry out expansion of output and work on the new model. I suppose that that is hardly surprising when we realise that we produce half as many engineers—as a percentage of the relevant age group—as do the Japanese. When I became a Minister and inherited the problems of the British motorcycle industry I found that the Japanese had more graduate engineers employed in R and D than we had workers employed in the production of motorcycles. Private enterprise lived on the seed corn and put nothing back into the industry. That industry no longer exists in this country.
There is a shortage not only of engineers but of funding, certainly compared with other countries. The managing director of BL Technology said:
It is likely now that total output in research and development spending in the UK motor industry has fallen to below £200 million".1264 But about 95 per cent. of that is new model work. In other words, only about 5 per cent.—£10 million—is going into truly original research.Our record of Government support is worrying. The United States Government are putting £1 billion of support into R and D in their motor industry, but the figure in the United Kingdom falls short of £3 million. Small wonder that we are way behind the Japanese, the West Germans and the Americans in R and D spending.
Even if the Government decide to increase the funding of R and D work in the motor industry, we shall remain at the whim of decisions taken overseas. It is significant that the only British controlled unit, BL, has a 92 per cent. domestic content, whereas the American controlled General Motors has a derisory 22 per cent. We are unique in the extent to which we have allowed ourselves to become dependent on overseas decision-makers in the industry. Virtually 60 per cent. of British car production is controlled by the Americans or elsewhere overseas. This compares with only 30 per cent. in Germany, less than 5 per cent. in France and the United States and nil in Japan and Italy. It is small wonder that our components manufacturers feel that they are particularly vulnerable when they are dependent on the vagaries and uncertainties of tactical decisions taken by men still lingering in the shadow of the now dead world car concept in Detroit and other overseas centres.
With regard to sustaining the British control capability, at least the new technology has made this easier. It has invalidated the world car approach, and means that a medium-sized firm such as BL has now an excellent chance of competing successfully.
However, I accept completely, as I think the industry does, that R and D is an area in which the economies of scale are still a significant factor, and it is difficult for a medium-sized firm to sustain within itself the full R and D capability that is needed.
The trend towards a technical relationship with a strong overseas partner such as Honda therefore makes sense, but in terms of R and D only. We do not want to see a closer integration, with BL slipping along the same path that was taken by Ford and General Motors, or decisions being taken overseas, which, although no doubt very sensible and in the interests of the overseas board of directors, are not in the interests of British industry, and the British car industry in particular.
§ The Parliamentary Under-Secretary of State for Trade and Industry (Mr. John Butcher)I join Labour Members in thanking my hon. Friend the Member for Birmingham, Northfield (Mr. King) for providing the House with an opportunity to debate again, and perhaps at a significant moment, the future of the British motor industry.
Before I deal with the major themes that have run through the debate, may I say that I will of course take up each of the points and queries that right hon. and hon. Members have raised. I shall also refer the repeated but relevant recommendations of my hon. Friend the Member for Northfield on company car tax, reclaimable VAT on company cars, the tax break point and whether there should be an 1800 cc or a 2000 cc cut-off point for higher level of personal tax liability and, indeed, the 1265 Government's purchasing policy, to the attention of my right hon. Friends not only in the Treasury but, in one particular case, in the Ministry of Defence.
The right hon. Member for Swansea, West (Mr. Williams) made a thoughtful and considered speech, and identified a number of areas on which there is agreement in the House. In one area, he may inadvertently have introduced a little controversy. He asserted that BL and the British motor industry generally may be denying itself, or may be being denied, the resources to involve itself in the leading edge technologies and the development of them as they apply to the motor industry.
It may be a little presumptous for me to offer an invitation to the right hon. Gentleman on sombody else's behalf, but a Mr. Roy Axe, in Canley, Coventry, who heads the BL design team, has a formidable group of young designers working round him using the best hardware and software, some of it developed by BL systems. I know that they would be delighted to host the right hon. Gentleman. While he was there, I would be delighted to take him to Warwick university to meet Professor Bhattacharyya who has implemented some very good work in manufacturing systems engineering, not just for BL but for others. If the right hon. Gentleman tells me that he has just met him, I shall withdraw the invitation.
§ Mr. Alan WilliamsI have had invitations, but I am grateful to the Minister. It is interesting that the very points that I made about capability were made by the managing director of BL's research arm, Mr. Harry Sheron. That was reported in the Financial Times on 6 March.
§ Mr. ButcherThat gentleman may have had his own reasons for making those comments, but I think that they would be challenged by people both outside and inside the industry. There are people within BL who would demonstrate that the company is making very big strides, especially in manufacturing systems engineering and in bringing forward the very latest design techniques.
On the shortage of engineers, perhaps aptly, later today my Department will be issuing the final report on skills shortages as they affect particularly the areas of high added value engineering. There are also shortages in the information technology industry. Of course there are shortages and, of course, the Government must do their bit to help resolve that, which is why my right hon. Friend the Secretary of State for Education and Science has announced an additional £43 million of expenditure in that area.
I am sure that the House will remember that when Jaguar wanted to take on a number of apprentices greater than its immediate requirements, it was the local trade unions who said that they would not look well on that because the additional apprentices would be paid at below the historic rate, although the rates of pay would have been equivalent to those paid to German apprentices. Therefore, we each have our responsibilities to face when we try to remedy the problems of skills shortages and especially when we try to obtain more, relevant and high value work experience for our young people—the future engineers in the automotive industry.
The hon. Member for Linlithgow (Mr. Dalyell), in a helpful and courteous speech, asked for a number of assurances and for attention to two or three areas. He joined my hon. Friend the Member for Northfield in requesting the Government to ensure that our public 1266 purchasing is enlightened, and whereas it might have to be GATT and EEC-proof, we should at least recognise enlightened purchasing which would involve implementing policies on purchasing that make it more likely that one is buying British because those British products have become the best.
There is a happy alliance between the needs of the customer to obtain value for money. By using proper and close relationships with buyer and supplier, we can ensure that suppliers can improve their performance over the medium and long term and, therefore, on merit justify the decision to buy British.
The hon. Gentleman mentioned the Bathgate area support enterprise group—BASE. He will recall that we have said that in the first instance it would be a matter for my hon. Friends the Ministers in the Scottish Office. There is an industry Minister in that office. In the first instance —not because we wish to be negative or unhelpful—we say that it is their responsibility to build those bridges, and any Minister welcomes efforts at self-help and developments which involve co-operation between the public and private sectors to try to produce jobs in areas such as Bathgate where structural change has taken place. That is the biggest machine shop in the United Kingdom and there are undoubted skills on that site which everybody wishes to see deployed to the fullest possible extent.
I visited the Sudan three and a half years ago and at that time there were many British trucks on the roads, although they were not BL trucks. I shall communicate to the Minister for Overseas Development, who will be participating in a later debate, the comments of the hon. Member for Linlithgow.
We have been discussing what is a job creation programme. On many occasions in the House we discuss job creation. But the job creation programme that could have the most dramatic impact on our economy and on the unemployment queues is that programme which results in an increase in Britain's share of world trade in manufactures. Hon. Members may be familiar with the figures. In 1964, the United Kingdom had about 14 per cent. of the world's share of trade. By 1979 it had gone down to 8 per cent. The CBI tells us that each 1 per cent. represents 250,000 jobs. Thus, in one way or another, our economy was so weakened during that period that, in effect, we exported 1.5 million British jobs. To get back a significant proportion of those exported jobs would indeed make major inroads into the numbers unemployed.
In the British motor industry we have BL employing 81,000 people; Ford, 57,300; Vauxhall, 20,053; and Talbot, 7,109. They together account for over 90 per cent. of car and commercial vehicle manufacture in the UK. We have a number of independent and specialist manufacturers in both sectors, including Jaguar, Rolls-Royce, Lotus, TVR, and Reliant. The components industry, to which hon. Members have referred, includes large multinational companies such as Lucas and GKN and numerous small specialist companies, in all employing about 200,000 people. In the main, the motor industry provides the bulk of its employment in the west midlands and south-east regions.
The good health of the industry, with an increase in its share of the domestic market and an improvement in exports, could bring about a healthy increase in the number of jobs available in manufacturing industry generally. When we discuss job creation, we should ask ourselves what a certain Government measure or request 1267 to the Government would do for our competitiveness in our endevour to increase our share of world trade and, therefore, increase the number of jobs in the economy.
We are coming up to the peak buying period for cars. At this time somebody in the House usually appeals to the nation's consumers to buy British. This time there is more reason than ever for British consumers to note the rapid improvement in the quality of Britsh cars and in the level of productivity of our car plants—there has been a truly dramatic increase, particularly at Longbridge — to examine the changes that have taken place on the shop floor and in the style and professionalism of management. It is surely correct for us to say that those who are really concerned about job creation, which includes the vast majority of the public, should think hard, if they are exercising a buying decision, about which car to buy with a new registration plate attached to it. I know that by saying that there will be a few people who will put pen to paper immediately to tell me, "I bought British, but the car that I bought was of poor quality, it did not perform and it was a rogue. I shall never buy British again." I know the contents of such letters almost by heart. I shall not report the name of my most famous correspondent, but there is a solicitor in Bristol who seems to enjoy responding to any exhortation to buy British. I take the opportunity of advising him that I have noted his past letters. I hope that he no longer has reason to complain about the quality of his car.
There has been a dramatic improvement in the quality of British produced cars. It is time for consumers to look again at British products in the interests of consumer satisfaction and in the broader issues of the British economy. In so many respects, we have a good story to tell.
The level of import penetration in our markets is uncomfortably high. That is in part a consequence of our recent industrial history. For a number of reasons, the industry failed to meet the needs of the consumer. This has been the not unexpected consequence of a more general industrial malaise. There has been too much capacity across Europe and the industry has been chasing too few customers, which has resulted in disorderly and unprofitable levels of pricing. Our component suppliers and assemblers are starting to perform again. They have re-entered the competitive race and they are matching our competitors on quality and price.
I know that the House will not wish me to delay it for too long. However, I shall respond to the comments made about multinationals. It is common ground between the Government and the multinational vehicle producers that it is necessary for a better balance to be struck between what these companies sell in the United Kingdom and what they manufacture or source here. This applies as much to components and materials as to complete vehicles. In order to encourage an improved balance, we have had and are continuing to have meetings with senior management at Ford, Vauxhall and Talbot to get across our message of concern and I hope that the companies are now aware of the seriousness of our intent.
I shall take the three companies in turn. A quiet revolution has taken place at Talbot. It has declared its intention to manufacture a significant proportion of its new mid-range model, the C28. at its Ryton plant, 1268 commencing at the end of the year. I welcome that. We welcome the continuation of the contract with Iran, which is still extremely significant.
Ford is committed to raising the British-built share of its car sales in the United Kingdom although much depends on how successful it is in improving the performance of its car plants in Britain. In the past three years, the contribution from Ford's British assembly plants has increased from 51.6 per cent. to 57.3 per cent., but if Ford could achieve full utilisation of its installed capacity in Britain, the percentage would rise significantly. At present, the United Kingdom content of Ford cars built in Britain averages 80 per cent. and the overall EEC content of its cars averages 92 per cent. Ford also makes in Britain all its trucks, tractors and Escort vans for the whole of Europe and exports large volumes of engines and other major components to Continental plants. Recently announced plans for the manufacture of new engines at Dagenham and transmissions at Halewood are important in this context and I applaud them.
I am encouraged by Vauxhall's recent concern with respect to broad balance and in particular by the fact that it has set up a high level task force covering General Motors' operations in Europe as well as in the United Kingdom. The function of this task force is to investigate ways of improving GM's performance with regard to United Kingdom sourcing. The Government expect that the task force will arrive at positive recommendations for improving the current state of affairs by which Vauxhall produces here less than half the cars that it sells in the United Kingdom. Even in those cars, the average United Kingdom content does no more than hover around 50 per cent. The Government look to Vauxhall to support its declarations of intent with positive demonstrations of its determination to move in the right direction. I hope very much that these demonstrations will be forthcoming. I know that the. fleet buyers in particular will follow these developments with great interest.
The message is clear. The companies, wherever they have not done so, need to attain international levels of competitiveness. Once that is achieved, the United Kingdom will look for the same contribution in terms of investment and jobs as has been diverted in the past, to locations abroad. The contribution of the multinationals must be commensurate with the gains that they derive from our markets.
Of course, the Government seek to take a lead in our public purchasing policies by encouraging all major public purchasers to think carefully about the local content of vehicles before buying them. Individual consumers can also contribute to the future of the vehicle industry.
Within Europe, I know that our trading terms with Spain, especially the imbalance in the vehicle sector, has been a deep grievance throughout the industry. As hon. Members are aware, this problem originated in the agreement between Spain and the Community which was signed in 1970, before we were even Community members. We have now addressed this problem under the terms of accession of Spain to the Community.
There are three principal measures that should be helpful. First, all the Spanish import duties against our cars will be phased out over seven years, and one half of that cut will be in the first three years. Secondly, Spain will be required to impose VAT, rather than her present tax regime for imported cars, from 1 January 1986. This will lessen discrimination against imports——
§ In accordance with Mr. Speaker's Ruling—(Official Report, 31 January 1983; Vol. 36, c. 19)—the debate was concluded.