HC Deb 12 March 1985 vol 75 cc278-84

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Garel-Jones.]

1.24 am
Sir John Farr (Harborough)

I want to raise tonight the subject of the future of the textile and clothing industry. It is a big subject and about half a million jobs are at stake. It is difficult to encompass it satisfactorily in a half hour's debate.

I have to raise four important points that concern members of the industry. Two of them relate to small irritations with the Government. The first is in relation to the British Overseas Trade Board grant scheme. As my hon. Friend will know, a consultation document was published in December 1984. All I am asking my hon. Friend in the limited time available is that he should look at the BOTB consultation document again. Already the pound has fallen markedly against the dollar since December last year. At its earlier level of a few months ago it was estimated that by 1987 there would be the equivalent of a 15.5 per cent. cut in the help to British exporters who participate in overseas trade fairs and exhibitions.

The second small irritation with the Government is in relation to the clothing and footwear equipment scheme—Cloft. It is a year now since the Cloft proposals were put forward by the Government. As my hon. Friend well knows, Cloft involves the provision by Her Majesty's Government of about £20 million to help modernise our textile and clothing industries. Unfortunately, that scheme has fallen foul of EEC rules and regulations. As a result, after 12 months, no progress has been made with Cloft. The industry is becoming disillusioned, particularly when it is well known by hon. Members that some of the continental countries, particularly France and Germany, have key schemes of undercover support which improperly channel many millions of pounds into the support of their home industries. Will my hon. Friend use his best offices to get Cloft off the ground? The sum of £20 million has already been earmarked for the essential re-equipment of some small firms, and so on. Please will he get a move on with that?

The main purpose of my debate tonight is the fear—I use that word advisedly—of the textile and clothing industry about the implications of the Silberston report. It is a real worry to the industry. It is worried lest the Government should seek to form any policy based on any part of the Silberston recommendations. They are frequently based on speculation rather than on firm evidence. Professor Silberston seems to be unaware of the consequences if some of his recommendations are adopted.

For instance, one of the failings of the report concerns prices, inasmuch as the report's assumptions are based on inadequate evidence and solely on the situation in Hong Kong which is a unique case in the textile and clothing trade. The report fails to take sufficient account of the large job loss that would result from a fall in our industry's profitability. The Silberston report mentions a figure of between 10,000 and 48,000 jobs lost if its recommendations are put into effect. Expert sources in the trade calculate that the loss could be as high as 150,000 jobs.

The report is based on the Cambridge model forecast which is produced by a model of an unconvincing nature, and important technical questions remain unanswered. The significance of the barriers to United Kingdom exports is greatly underestimated. There is a genuine risk to our industries of diversion of trade if the European Community relaxes its MFA restraints and other countries retain theirs. That risk is much greater than Professor Silberston assumes.

The report gives insufficient importance to the significance of China and its ability enormously to increase its textile and clothing exports. It fails to recognise that the use of article 19 of GATT to deal with destructive imports, as is recommended, is unlikely to be effective and would have dangerous implications for the whole trading framework. It is also felt that, if the MFA were abandoned, the poorer developing countries would lose out to the benefit of the newly industrialised countries, especially to China. The report's sectoral analysis is too brief and generalised to justify any policy recommendation which can be associated with it.

Professor Silberston points out that there would be a large fall in the industry's profitability if the MFA were abandoned without recognising the devastating effect it would have on employment. The report's treatment of what would happen if the EC abandoned regulation of import growth, but the United States continued it, is trivial and frivolous in the extreme. For instance, it gives only a sketchy account of barriers to United Kingdom textile exports, despite that being one of its main remits from the Government. The report does not measure up to the complexities of the textile and clothing industries, and cannot possibly provide a basis for the formulation of responsible Government policies.

Hand in hand with that goes the renewal of the MFA. About the only conclusion of Silberston with which a sensible person can agree is the recommendation to renew the MFA in 1986, although it then erroneously suggests that the MFA should be phased out shortly after it is renewed. It is the opinion of employers and employees in the textile and clothing industry that there is a strong case for the renewal of a vigorous and effective MFA when the present one runs out.

The MFA has been criticised, but it has encouraged firms to continue to improve their competitiveness. It has not prevented losses in jobs and capacity, but has kept them to a more manageable scale. It has preserved order in world textile trade—without it there would be chaos—and it has helped the development process of some of the least development countries by putting limits on the access to the European market of more competitive countries, such as Hong Kong, Korea and China. Some of the industrialised countries most critical of the MFA themselves limit their textile and clothing imports far more severely than anything done by the EC, under the MFA.

Contrary to what people have said, the MFA has not been used by the EC as a piece of blind protectionism. It has allowed EC import volume from MFA countries to grow by 16 per cent. between 1977 and 1983 at a time when volume demand increased by only 2.5 per cent. It is essential that the MFA is renewed. Moreover, the Government must have a vigorous and firm attitude in negotiating on behalf of Britain and its EC partners.

The textile and clothing industry makes a major contribution to the United Kingdom economy. Its sales of more than £10 billion represent a value added of more than £3.6 billion. That is larger than the value added of the motor vehicle industry, more than half as much again than that of the aerospace industry, and more than three times that of computers. That major contribution to the economy would be undermined by an unrestrained growth of imports from low-wage and state-trading companies, and would be socially intolerable. It would increase the existing pressures on employment in some exposed areas of the United Kingdom where textiles and clothing provide half a million direct jobs. Those vulnerable areas are the north-west, Yorkshire, Scotland, Northern Ireland and inner city areas apart from the midlands.

In conclusion, I shall mention briefly two documents that I received today. The first is from a small employer in Leicester, who applauds the fact that this debate is taking place, although it is late at night. He says that he hopes the Government recognise, the thin line that now exists between survival and closure. Most employers try desperately hard, with little reward (pay below their own knitters!) to keep jobs going, but how can we compete with low-wage workers in the East? That happens even with MFA 3.

The second document is a report from the Manpower Services Commission entitled "Labour Market Trends Midland Region 1985–1987", which states: Low cost imports continue to be a problem and although the Multi Fibre Arrangement … controls the level of imports from third world countries, there is still an agreement that most countries can increase imports by a certain percentage each year. The MFA is due for re-negotiation in 1986 and unless our negotiators are very firm on imports from these countries the market could become inundated with imports at prices impossible to match in this country. In view of the tremendous efforts which have been made by our textile/clothing firms to modernise their production methods to become competitive, this would be a disaster. This sector, being labour-intensive, has been one of the success stories in terms of employment creation in 1984. My hon. Friend the Minister has not seen that MSC report. Indeed, I had not seen it until a few moments ago. With those few words, I look forward to my hon. Friend's reply.

1.38 am
Mr. Frank Haynes (Ashfield)

The hon. Member for Harborough (Sir J. Farr) kindly allowed me to have a couple of minutes in this debate to support him, in the hope that the Minister will reply in a way that will help the hosiery and knitwear industry of Great Britain, bearing in mind the terrific battering that it has taken for several years. Jobs have been lost by the thousand.

The Government must support a renewal of the multi-fibre arrangement, and we would welcome an improvement in the present circumstances of the MFA. I know that the Minister is especially interested in industry and jobs, with special reference to the knitwear and hosiery industry. It is important that the right thing should be said from the Treasury Bench so that we may know that the Government will fight all the way to retain the MFA agreement and improve upon it if possible. If we do not get what we are asking for, there will be massive dumping on our shores at the expense of this first-class industry and the first-class work people and management within it. We need the support of this Government so that information can be fed into and out of Parliament.

I hope that we shall have a good response from the Minister.

1.40 am
The Parliamentary Under-Secretary for Trade and Industry (Mr. David Trippier)

May I begin by congratulating my hon. Friend the Member for Harborough (Sir J. Farr) on his initiative in raising this important subject. I should like to take this opportunity of thanking my hon. Friend and the hon. Member for Ashfield (Mr. Haynes) for the kind things that they have said about me.

I want to assure my hon. Friend that the Government are well aware of the significant contribution that the textile, knitting and clothing industry makes to the national economy. Despite the problems that it has faced over the last few years, it is still very important. It employs 500,000 people, which is 2 per cent. of total employment in the United Kingdom economy, and more than 10 per cent. of the United Kingdom's manufacturing employment. If we take the clothing and knitting industry, it still supplies about 63 per cent. of the home market for garments despite the intense competition provided by developed and developing countries alike.

Mr. Peter Thurnham (Bolton, North-East)

Is my hon. Friend aware that there has been a takeover bid for Tootal, which is a large textile employer? It employs over 8,500 people in this country, including the Osman factory in my constituency. The takeover bid has come from an overseas firm, which has given no assurances as to the future job prospects of employees in this country. Is the Minister aware of this, and will he satisfy himself as to whether there are reasons for it being referred to the Office of Fair Trading?

Mr. Trippier

I am aware of the issue. The Director General of the Office of Fair Trading, I understand, has discussed the bid with both parties and will be advising my right hon. Friend the Secretary of State shortly. My hon. Friend the Member for Bolton, North-East (Mr. Thurnham) will understand that I am not able to anticipate the advice at this stage.

I can assure my hon. Friend the Member for Harborough that the Government expect these industries to which I have referred to continue to play an important part in the economy of the country. In saying this, however, I do not wish to minimise the difficulties that they have had to face during the recession. Many companies have had to make hard and sometimes painful decisions to rationalise and retrench in order to remain in business and to remain competitive. But there are encouraging trends, and profitability is improving. A survey of the nine biggest British companies in this sector shows that their combined profits have almost tripled since 1981, admittedly from a low base. In the clothing industry, after very sharp falls experienced in 1980 and 1981, production has grown steadily in each of the last three years. The turnround in textiles and knitting took place more recently, and increases in output since then have been rather more modest than for clothing.

Despite fierce international competition, the industry needs to try to maintain its position at home and to strengthen its position overseas. Its future lies first and foremost in its own hands. The Government can certainly assist, and are assisting, in such areas as advisory services for good design and helping to spread awareness of its importance. Marketing skills are also important. Similarly, the decisions on whether to invest in new machinery and the extent to which firms carry out research and development must in the final analysis rest with the individual firms.

The Government can help, however, to ensure that the climate in which United Kingdom industry operates is as favourable as possible. I believe that our economic strategy is of central importance—the drop in inflation, the cut in the national insurance surcharge, and the growth in productivity have assisted the industry. During 1983–84, firms in the United Kingdom textile and clothing industry were paid or offered about £66 million under regional or general assistance schemes operated by my Department and the Northern Ireland Department of Economic Development.

Hon. Members referred to the multi-fibre arrangement. In recent months, the Government have been considering what regime should replace the present MFA when it expires in 1986. To assist us in reaching a decision, the Minister for Trade, the Minister for State, Department of Trade and Industry and I have been holding a series of consultative meetings with interested parties. We had a useful meeting with the three major organisations representing the textile and clothing industries — the British Textile Confederation, the British Clothing Industry Association and the Knitting Industries' Federation. We have also seen representatives of consumer organisations, trade unions, retailers and importers, and further meetings are still to be held.

My Department commissioned the report from Professor Silberston because, with the MFA expiring next year, we wanted an independent assessment of the way in which it has affected not merely the textile and clothing industries but the economy as a whole. We asked Professor Silberston to look at two aspects in particular. The first was to consider the effects on United Kingdom exports of textiles and clothing of trade barriers maintained in other world markets. The second was to consider the effects of restraining imports of low-cost textiles into the United Kingdom, including the effects of the industries themselves, on other industries, and on the consumer.

The report is, of course, Professor Silberston's responsibility. The Government do not need or intend to adopt or reject the report as a whole. We must make some judgments on the costs and benefits of the MFA, and the report is a useful input. It is clear that the industry and the trade unions have been critical of Professor Silberston's analysis, while others have questioned whether he goes far enough. We shall consider it in the light of all the views expressed, including those that have been expressed tonight.

Professor Silberston concluded that restrictions on imports of low-cost textiles and clothing raised their average prices to the British shopper by about 5 per cent. The textile and clothing industry has made it clear that it does not accept that figure. The consumers' organisations have stated that they regard it as too low, especially for children's clothes. Rightly or wrongly, however, Professor Silberston calculates that the MFA costs the British consumer about £450 million a year. Strikingly, he finds that much of the benefit from the highest prices accrues to foreign suppliers and estimates that at least half of the cost to British customers is lost abroad in this way, while the rest remains to benefit British producers. Those are only some of Professor Silberston's main conclusions and, as I said, we have received a number of comments and criticisms about them.

In considering what should succeed the current MFA, there are, therefore, many considerations for the Government to take into account. The world trading system based on GATT is extremely important to us as a nation depending so much on trade, and we are committed to its strengthening in the future. For that reason, we very much favour the proposal for a new GATT round to build on its successes and to take them further forward. We must also take into account the commitments made by this and other Governments to make all possible progress towards a worldwide open trading system. We attach great importance to those commitments.

I appreciate my hon. Friend's disappointment about the Cloft scheme, and I share that disappointment. I also understand his disappointment with the decision on the British Overseas Trade Board budget.

I should like to say a few words about the recent negative decision given by the European Commission to our proposed Cloft scheme for investment assistance to small firms in these industries.

The aim of the proposed scheme, which was announced by the Secretary of State during last year's Budget debate, was to encourage small firms in the clothing, footwear, knitting and textile industry to invest in the latest equipment. We considered that although modest in terms of its overall budget, which was £20 million over three to four years, the Cloft scheme, by providing grants of 20 per cent. towards the cost of high technology equipment, would in fact have provided a substantial incentive to firms to invest in such equipment, both in their own interest and to the benefit of the economy at large.

Unfortunately for us, the European Commission, which has the responsibility for enforcing those provisions of the treaty of Rome which governs state aids, has recently been taking an increasingly restrictive line on the provision of such aids in relation to the textile and clothing industries.

We none the less considered as a Government that the Cloft proposals were sufficiently tightly drawn and selective as to prove unobjectionable. In the event, as the House knows, this was not acceptable.

Basing themselves on the improvement in the industry's economic position throughout Europe, the Commission further tightened its attitude towards sectoral aid schemes. It rejected a Belgian scheme in September, and now it has rejected ours. The full text of the Commission's decision has become available to the Department of Trade and Industry only in the last few days. A copy was placed in the Library on 6 March. We are currently studying the detail and propose to have discussions very soon with representatives of the industries concerned to consider where we go from here.

Obviously, the industry is as dismayed as we are at the Commission's rejection of Cloft. It considers the Commission's decision to be particularly inequitable in view of the large amounts of sectoral aid given to the clothing and textile industry in other member states, and my hon. Friend referred to those. We share this view and, even in advance of receipt of the full text of the decision, we have conveyed these sentiments to the Commission in forceful terms and have equally forcefully expressed the hope that the Commission will in future apply its more stringent policy without exception. I am pleased to be able to report that the Commission has not only confirmed that this is its intention but has also indicated that it proposes to take an equally firm line with Spain and Portugal when they become members of the Community.

I should like to assure my hon. Friend that I have taken into account all that he has said. This has been a very useful debate on an important industry, and I am grateful to him for providing me with the opportunity to reply to it. I am very conscious of the importance attached by the industry to the question of the successor regime to the current multi-fibre arrangement. I have listened with great attention to the points made this evening by my hon. Friend and the hon. Member for Ashfield, and I can assure the House that the interests of our textile and clothing industry will be taken fully into account in considering our policy in this very important area.

Question put and agreed to.

Adjourned accordingly at seven minutes to Two o' clock.