§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Sainsbury.]
§ Mr. Simon Hughes (Southwark and Bermondsey)On a point of order, Mr. Deputy Speaker. I rose before the Whip moved the Adjournment.
Several inter-related matters are involved in the previous points of order. Can you tell us to which Committee we should turn to request consideration of matters which, quite properly, are not for you, but which the House clearly wishes to be considered through the appropriate procedure?
§ Mr. Alistair Burt (Bury, North)I thank the House for giving me the opportunity to raise the question of the current state of the British paper industry. The connection between that industry and my constituency is well known. Bury has a long history in the paper trade, not only in manufacture but with the allied trades that manufacture and design the paper-making machinery, the felt-making trade that assists the rollers in the factories and the general engineering trades that have helped the paper industry for many generations.
I now have only three mills in my constituency but there are more on my doorstep and I am pleased to note the presence of my hon. Friend the Member for Bury, South, (Mr. Sumberg) who I know will seek to catch your eye later Mr. Deputy Speaker. The mills in my constituency are spread throughout the area and demonstrate the wide spectrum of paper-making in this country. Olives paper mill in Tottington deals with printing and writing paper, James R. Cramptons and Sons in Bury deals with fibre papers, making, among other things, sausage skins and tea bags. Trinity Paper Mills is based in Ramsbottom and deals with corrugated paper and board, sack paper and other similar papers.
It is an appropriate opportunity for me to pay tribute to those who work in the paper and allied trades in Bury who have been through difficult times, but management and work force alike have worked very hard to look forward to a better future. The current climate in the paper industry is rather different from that of 1982, the last time the industry was raised in an Adjournment debate by the then Member for Bury and Radcliffe, Mr. Frank White, who was well known for his good work on behalf of the industry. At that time the industry was in the depths of a crisis which, at its worst, over the period between 1974 and 1984, cost the country 50 mills out of 160 and nearly 30,000 employees out of a total of 70,000. In 1982 the finger was being firmly pointed at the Government and at high energy costs and their disastrous effect on competitiveness throughout the industry. The industry did not disguise the fact that there were other problems but there was no doubt that the energy crisis, in the first period between 1979 and 1982, made a great and lasting impression on the paper industry.
In 1986 things are rather different. It is not my intention to moan on behalf of the paper industry. I seek to do two things. First, I wish to remind the House and the people at large of the achievements of the industry over the past few years. Secondly, I wish to point the way ahead, while 1258 asking the Government to take note of those factors which may impair the growth of the industry and over which they may exercise some control.
The achievements of the paper industry over the past two years have been substantial. About £600 million has been invested over the past five years, not only in new machines but for upgrading the existing plant. The price of paper in real terms has fallen with consequent benefits to the consumers. Productivity has increased by nearly 40 per cent.; energy efficiency has improved by 30 per cent.; a new training scheme for process employees has been introduced and management and unions alike are to be congratulated on the new working practices that have been introduced.
Exports as a proportion of the United Kingdom production have increased from 10 per cent. in 1979 to 15.5 per cent. in 1985 — a 50 per cent. increase. Demand and home production are now growing well in nearly all sectors. The Government have also played their part in that recovery. If we chided the Government for their part in the energy price increases in the early part of the decade it is only fair that we offer some words of comfort and thank the Government for some of their achievements since then. There have been certain changes in the common agricultual policy of the European Community to enable industry to obtain starch at world prices. There has been a removal of the national insurance surcharge and, at last, there has been a much needed stability in energy prices, albeit at a higher level than the industry would have hoped. There has been the energy efficiency demonstration projects, supported and financed by the Government, which have had a great benefit on the industry.
I shall turn from the real and substantial achievements of the industry over the past few years and deal with some of the concerns and problems of the industry which I would like the Government to bear in mind. The first is a general issue affecting manufacturing industry —interest rates. Concern about the effect of high interest rates on investment is shared throughout manufacturing industry. The balance is always difficult to achieve but there is no doubt that high interest rates hamper growth and the industry and the Government have a vested interest in seeing interest rates fall as quickly as possible. I urge the Minister to take that matter seriously and I urge his colleagues to look at interest rates as quickly as possible.
Secondly, I wish to deal with the exchange rates. The volatility of exchange rates in recent years has cost any importer or exporter dear. It is not the levels of the currency but the speed at which it fluctuates that has caused a great deal of harm. I can graphically illustrate that with a comment in a letter I have received from one of the mills within my constituency. I quote:
Just a year ago, the Franc stood at 11.16—a rate at which business could just about be conducted economically. By July, it had risen to 12.28 and this adverse change of 10 per cent. within five months gave no alternative but to withdraw from the French market almost entirely. With hindsight that was a mistake, because on Tuesday last, the rate had declined to 10.28. But who was to know that within seven months that adverse 10 per cent. would turn around into an 8 per cent. advantage? With this new comfort why not then simply re-enter the French market and enjoy it? Because the customer expects continuity and a guarantee that a supplier will remain in a market long-term. How can my constituent give such assurances in such a chaotic situation? Since the Dutchman can; and the German can; my constituent, the industry and the nation are severely disadvantaged.1259 Exchange rates worry James R. Cromptons and Sons which exports nearly 50 per cent. of its production. I appreciate the difficulties that the Government face when they think about joining the European monetary system, but there is no doubt that the Government should think seriously about the benefits of stable exchange rates. I hope that my hon. and learned Friend will consider that matter seriously.The changes made to capital allowances in recent Budgets are a major worry to industry. The three mills in my constituency report a problem. They believe that the phasing out of those allowances can reduce our ability to match the performance of our overseas competitors. I believe that my hon. Friend the Member for Bury, South may also mention that point.
There are two items of special interest to the paper industry. The first relates to the problem of Kraft liner. The EEC has fixed a minimum price for imported Kraft liner to stop dumping. However, that regulation is being widely breached, affecting not just the case material industry in this country and Europe, but, crucially, the EEC's anti-dumping enforcement credibility. The Department of Trade and Industry's anti-dumping unit has given great assistance to the industry, but the Government must continue to press Europe on that issue. If the European Commission is not perceived to be credible in dealing with dumping, the ramifications, not just for the paper industry but other manufacturing industry in this country, will be widespread and profound.
The second problem relating to paper is that of starch. The EEC has a price for starch well above the market rate. That is connected with the common agricultural policy, because starch is a natural product: without starch some paper processes cannot go ahead. My constituents—and in particular the Olives paper mill — face world competition and are at a disadvantage because of the artificially high price of starch. The industry appreciates the efforts that the Government have made to press their European colleagues on that matter but it hopes that my hon. and learned Friend and his colleagues will do even more.
The paper industry's energy problem has lasted for some time. Costs have now stabilised somewhat. The problem is not as serious as it was, although much damage has been done. It is hoped that such damage will not recur. Great credit should go to the paper industry, which has buckled down to the problem and done all it could to increase efficiency. Credit must also go the Department of Energy, which has had a high profile in encouraging efficiency, promoting schemes and providing material assistance.
I must utter a word of caution. With oil prices coming down, with their consequent knock-on effects for manufacturing industry, it would be folly to penalise industry by seeking an increase in taxation to cover lost revenue. The Government should let manufacturing industry reap the rewards of lower costs and increased efficiency. The Department of Trade and Industry should strongly urge the Treasury not to adopt such a policy. It should not seek to penalise manufacturing industry and use lower oil prices to slap on an extra tax. Hard lessons have been learnt by the paper and other industries. It will be a shame if the industry is not allowed to compete properly now. Further assistance with energy costs, by way of help for the electricity high loaders, would be welcome.
1260 My last subject is foreign aid subsidy. The industry has learnt from the European Commission that instances of apparent infringement of articles 92 and 93 in the paper section continue to increase, as member states either grant aid without notification or apply for dispensation on rather flimsy grounds. Either the Government should press the Commission to enforce the regulations more thoroughly or they should be more liberal. The industry is squeezed all ways. It is accused of trying to play cricket when everybody else is playing a different game. For long enough the Department of Trade and Industry has had one arm behind its back in its dealings with those on the continent who try to assist their industries in an artificial and unfair way. It is time for the Department to be more robust.
As for manufacturing industry in general, the demonstration projects of the Department of Energy have enjoyed great success throughout industry. Is it too much to hope that the DTI will seize on that success and produce a new initiative for manufacturing industry?
I hope that my hon. and learned Friend the Parliamentary Under-Secretary of State for Trade and Industry will allow me to put to him in writing some ideas on a scheme to promote improvements in manufacturing efficiency and quality. A charge that sits uneasily on the shoulders of this Government, particularly in the northwest of England, is that they do not care about manufacturing industry. It is vital that we should lay this charge to rest. This party and this Government must serve all of our people, not just some. Manufacturing industry must once again feel confidence in us. That confidence is lacking.
The paper and board industry is an object lesson in recovery and initiative. It has done everything that the Government have asked it to do. It should be used by the Government as a model for others. It should not have to weather Government-inspired storms. If the Minister considers my remarks carefully, he will find that the paper and board industry in my constituency and throughout the country has not let him down. It is time that people were able to feel that the Government have changed their attitude towards manufacturing industry. They could do worse than start with the paper and board industry, which has already done so much for the country and which promises, with the benefit of competition and of a fairer wind all round, to do so much more.
§ Mr. David Sumberg (Bury, South)I am grateful to my hon. Friend the Member for Bury, North (Mr. Burt) for permitting me to make a brief intervention. He has accurately and eloquently set out the facts relating to the paper industry in Britain. He has rightly concentrated upon Bury, a town which both of us have the honour to represent. It can be described as the home of the paper industry in this country. Time does not permit me to deal with all of my hon. Friend's points, but I endorse and support everything that he said.
Within its boundaries my constituency has the old Lancashire mill town of Radcliffe on Trent. Radcliffe has a proud history. At one time its name appeared in the title of the parliamentary constituency. The history of the town is inextricably linked with that of the paper industry. When I knew that I was to make this brief intervention I spoke to the chairman of the East Lancashire Paper Company. 1261 It is one of the largest mills in Radcliffe. It employs 600 people and recently it celebrated 125 years of paper production.
I asked the chairman what simple message he would give to the Government on behalf of his company and of the paper makers of Radcliffe if he were standing in my place today. He replied instantly, "Tell the Government that we need to invest heavily in modern capital equipment and machinery in order to compete on the world stage. Our foreign competitors are doing it with the benefit of Government subvention and assistance. Either our Government must do the same — I acknowledge the improvements that have taken place in the last few years — or they must enforce fair trading policies on our partners in the EEC." The paper industry in Radcliffe has the tradition, the skills and the will to succeed. I ask my hon. and learned Friend the Minister to give to the paper makers of Radcliffe and elsewhere in Britain the tools with which to do the job.
§ The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Michael Howard)I congratulate my hon. Friend the Member for Bury, North (Mr. Burt) on raising the subject of the British paper industry. He represents a constituency in an area that has a concentration of paper and board mills. I know that both he and my hon. Friend the Member for Bury, South (Mr. Sumberg) are closely interested in the fortunes of the industry and wish to see it succeed and prosper. I share that objective.
This is a timely debate because it will help to register publicly that the United Kingdom has a substantial, forward-looking industry well able to meet the needs of customers here and abroad. The industry suffered badly in the recession with many closures of mills and machines, but it has been fighting back and is keen that more customers should fully recognise its capabilities —as many do already.
There are some notable investment projects both by traditional United Kingdom producers and by overseas investors. In my county of Kent, Bowater at Kemsley has recently spent £12.5 million on rebuilding a paper machine and on the latest converting and packing equipment. The company now has an impressive, large, modern facility with which to challenge other European suppliers. In addition, Reed at Aylesford has rebuilt its newsprint machine to improve its efficiency and product quality. Near Aberdeen, Thomas Tait and Sons is investing £20 million to build the largest fine paper machine in the United Kingdom, again equipping the company to compete successfully in Europe. Multi-million pound investment programmes have been carried out by other United Kingdom companies too, including Wiggins Teape, GP-Inveresk and Tullis Russell.
In many mills new computerised process control equipment has helped product quality and efficiency. The industry claims a 39 per cent. increase in output per man since 1979 among the mills making printing and writing paper — which account for over a quarter of the industry's production. The sector of the industry which has seen the most dramatic recovery is newsprint. By 1983 production had fallen to some 80,000 tonnes, or only some 1262 5 per cent. of United Kingdom demand, but the United Kingdom has secured two major inward investment projects.
Consolidated Bathurst of Canada has invested some £50 million to modernise and reopen a mill at Ellesmere Port. United Paper Mills of Finland has invested £130 million to build a new integrated pulp and paper mill at Shotton in North Wales. This new mill was opened by his Royal Highness the Prince of Wales in December, having been completed ahead of schedule. These are excellent examples of the kind of inward investment that the Government are keen to encourage. The industry can now satisfy about a third of United Kingdom demand for newsprint, and I hope that this capacity will be fully utilised.
Where investment projects have satisfied the relevant criteria, Government assistance has been offered to enable them to go ahead. For example, the Bowater Kemsley project received selective assistance of £1.5 million under section 8 of the Industrial Development Act. Regional selective assistance totalling £6.5 million was offered for the two large newsprint projects at Bridgwater and Shotton. There have been smaller assisted projects too.
A number of companies have undertaken coal firing projects with Government assistance. In some other cases, investment projects have helped to demonstrate innovations in energy efficiency and it has been possible to offer assistance under the energy demonstration scheme. In 1984 the industry is reported to have invested over £6.5 million in energy-related capital projects with an average expected payback of 1.6 years.
The industry is increasingly committed to its energy management monitoring and targeting programme developed in close co-operation with the Department of Energy which has provided financial support. I congratulate the industry on its efforts. I would also like to take this opportunity to acknowledge the hard work and commitment of the British Paper and Board Industry Federation, whose staff has done so much to develop the programme and encourage member companies to apply it. In 1984, the industry used 5 per cent. less energy than in 1983 to produce 12 per cent. more paper and board.
My hon. Friend the Member for Bury, North has made a number of interesting points in his speech, to which I now turn. He referred to interest rates and the importance of keeping them as low as possible. I am sure that he recognises that interest rates will continue to be held at the lowest rate that is consistent with the need to maintain monetary conditions and keep steady downward pressure on inflation. Inflation would cause far more damage to industry if it were to take hold again. The recent moves on interest rates reflect our determination to ensure that it does not.
I appreciate the significance to the industry of exchange rates, but they are ultimately determined by the underlying competitive strength of our economy and the economies of our trading partners. Greater stability in the exchange markets is clearly desirable, but no country can achieve that single handed. We aim, therefore, to achieve it through co-operation with our major trading partners. An example of that was the agreement of the Group of Five countries last September that orderly depreciation of the dollar was desirable. Since then, the dollar has moved towards a more sustainable level and the pound has declined against the mark, the franc and the yen. 1263 My hon. Friend mentioned membership of the exchange rate mechanism of the European monetary system. The Government are ready to join the exchange rate mechanism when we judge that the conditions are right, but the decision must be carefully weighed. Sterling is widely held and traded internationally, and it is subject to different and often opposite strains from currencies that are already in the exchange rate mechanism. Furthermore, it is by no means certain that opinion even in the paper industry is unanimous on this matter.
The changes in capital allowances are in line with the Government's policy of simplifying the tax system and eliminating distortions. The burden of tax administration for companies and Government will be reduced, and companies are encouraged to concentrate on identifying and investing in profitable projects. The changes will reduce overall corporate taxation in the longer term. The effect on individual companies will depend on past investment and profitability and on the availability of unused allowances. Advance notice of the changes has given a secure planning environment. I am aware that the paper federation has already made known the industry's views on capital allowances in its Budget representations to my right hon. Friend the Chancellor of the Exchequer, and I am sure he will consider them carefully.
My hon. Friend the Member for Bury, North also mentioned alleged dumping of Kraft liner. This is an important matter. I fully appreciate the industry's concern. Officials from my Department have asked representatives of the industry to provide additional information, including evidence of breaches in the minimum import price. The Department would be glad to review the matter with the industry, and I believe that the industry's European association is planning to consult again the EC Commission, which has the main responsibility in these matters.
My hon. Friend mentioned oil and the importance of taking advantage of the fall in price. He also spoke about electricity. Electricity prices for most UK consumers are comparable with those on the Continent. The exception is France, where consumers benefit from extensive low-cost nuclear generation. The level of prices is the responsibility of the electricity industry. The Government set the financial framework for the industry to ensure that it earns a proper return. The Government acknowledge, however, that the largest users face higher prices, and we appreciate the difficulties that that causes. Following extensive discussions in the National Economic Development Organisation and with the industry, the Central Electricity Generating Board and the National Coal Board have been working on proposals which could result in lower prices 1264 for the most intensive users, as in the paper industry. The proposals have still to be finalised, but I hope that decisions will not be long delayed.
As for the starch regime, I am pleased to say that considerable progress has been made on the proposals of the European Commission, which are designed to help industrial users of starch in the Community. The Council of Agriculture Ministers will be asked to take a decision on modified proposals at its meeting on 24 February. To a large extent, the proposals meet the desires of the paper and board industry.
I listened to what my hon. Friend said about detailed proposals, which he is to send to the Department, for assistance with various new technologies. My Department is always ready to listen to proposals on that subject. Indeed, support is already given for innovative projects which meet the Department's criteria. The industry has benefited from the relevant scheme. The scheme has been used to assist two projects which are designed to demonstrate to the industry as a whole the benefits of applying new technology. Both are taking place at Thames Board at Purfleet. I am sure that the details are known to those who take a close interest in the industry's future.
My hon. Friend the Member for Bury, South raised, in particular, the East Lancashire Paper Mills in his constituency, and I am delighted that he was given the opportunity of referring to them. That company has also been preparing for the future. I know that my hon. Friend the Member for Rossendale and Darwen (Mr. Trippier), when Parliamentary Under-Secretary of State for Trade and Industry, met company representatives, and encouraged them to keep in touch with the Department. Following the review of regional policy, the mills are now in an assisted area. My officials in the north-west regional office are happy to discuss with the company the question of assistance for any potential future projects.
The industry is too often remembered for its difficulties. It is now aware of the need to spread the message of its successes. An impressive initiative in that direction is the recent publication of a newspaper about companies which make printing and writing paper. The newspaper draws attention to their strengths, and highlights recent developments, especially the large-scale investment for the future which has taken place. I welcome that positive approach, and I know that the industry is considering other possible initiatives.
I hope that between us my hon. Friend and I have said enough to show that paper and board is an industry looking to the future with more confidence and much to offer its customers at home and abroad. I wish it every success.
§ Question put and agreed to.
§ Adjourned accordingly at five minutes past Three o' clock.