HC Deb 07 July 1986 vol 101 cc27-70 3.51 pm
Mr. Kenneth Carlisle (Lincoln)

I beg to move, That this House agrees that manufacturing industry has a central part to play in the future prosperity of the United Kingdom, and, that, in order to succeed in a fiercely competitive world, it must use the most modern manufacturing methods, and market its products with skill; notes further, that the importance of manufacturing must he recognised by society generally and by schools and colleges in particular, so that industry can surmount the present shortage of skills; and believes finally that success in manufacturing can only be won in any enterprise through the united efforts of all the workforce. I feel very fortunate in having won the ballot for a motion today. When I became a Member of Parliament I was told that the chances of any private Member winning the ballot for a private Member's motion during his time in Parliament were so remote that if he did so he could well become a statistic.

I want to debate the future of manufacturing industry, because I know that our success in manufacturing is central to our future prosperity. Some say that we can earn our wealth in other ways and give the impression that the decline in manufacturing is inevitable, and even tolerable, and that service industries, financial earnings, tourism and raw materials can plug the gap. Sadly, they are badly wrong. Although we need a balanced economy and services have a great role to play, manufacturing industry is the engine of our prosperity and generates that essential spark that gives vitality to the rest of our economy.

The Italians were the first bankers in Europe just because they were at the hub of medieval commerce. Insurance and the vast network of wealth that spread from it were born in this country because of our growing commercial dominance, and our tremendous success in the service industries flourished in the wake of our manufacturing prowess in Victorian times. In the same progression we can be sure that Japan, with its present industrial strength, will be the centre for services in the next century. If we cannot reverse the trend in our manufacturing decline, our services will sink in tandem.

To resuscitate and expand manufacturing is a national priority. It is our lifeline to the future. Right now, manufacturing supports one quarter of all our jobs, that is, 5.5 million people. It creates one quarter of our annual wealth and still contributes nearly half of our overseas earnings. The picture and history are grim. This is a story of decline over many years, and its statistics are felt in every household and high street in Britain.

In 1964 we made 14 per cent. of world manufactures, but the figure for 1986 is half that. Our balance of trade in many key sectors, such as motor vehicles and electrical and electronic engineering, has turned from surplus to deficit, and we all know the sad story of our once proud motor bike industry. However, we have a duty also to praise what has gone right. In the past five years huge efforts have been made to reverse the trend. Our steel industry has been saved from extinction and is now one of the most efficient in Europe. Our motor industry has struggled to overcome the despair of the 1970s, and what we do best—our Jaguars and Rolls-Royces—has kept the name of British car making alive in the world. Since 1982 productivity in manufacturing has grown by one quarter.

Mrs. Elaine Kellett-Bowman (Lancaster)

Does my hon. Friend think that there is cause for concern in the Bank of England's bulletin for June 1986, issued today, which states that our labour unit costs rose by only 0.2 per cent. in 1983, but that in 1985 by rose by 3.1 per cent., thus making our competitive position that much more difficult?

Mr. Carlisle

My hon. Friend is right. We cannot regain our position in the world unless we are truly competitive. However, there are outstanding individual successes.

In my constituency of Lincoln, Ruston Gas Turbines is at the forefront of turbine technology. In the past eight years its output has nearly trebled, 90 per cent. of which is for export. During that period it has created a new business in its control equipment department, which now employs 120 people and designs sophisticated controls for turbines. It has invested heavily in plant and technology, and needs people of great skill to hold its own. Although its production has trebled the number of people employed has remained roughly the same, about 2,500. The lesson is clear: to sustain employment in manufacturing in an age of technology a business must be both competitive and expand its sales. There are successes, but we have still not reversed the general historic trend of decline, and we must do that.

In this debate we should all accept that for manufacturing to flourish we need a stable, healthy economy and that, as exporters, we need markets for our products. The Labour party's extravagant plans for a ruinous binge of spending offer no comfort, and its trade policy, which yearns for protection, is not a policy but a mirage of a policy which offers no future for industry.

A crucial task of any Government is to face reality, insist that trade should be fair, fight for an open trading system, which in the end, as a trading nation, we need. It must analyse the reasons for the decline in manufacturing and construct a policy for success.

Mr. David Winnick (Walsall, North)

I congratulate the hon. Gentleman on winning the ballot, but before he turns his arrows to Labour party policy, would it not be wise to deal with the way in which British manufacturing industry has been decimated in the past seven years and the fact that mass unemployment has returned to areas such as the west midlands which was once the most prosperous area in the United Kingdom, but where unemployment is now higher than the national average? Moreover, in parts of the west midlands, such as in my constituency, during the past three years unemployment has been running at about 17 per cent. or more.

Mr. Carlisle

As usual, the hon. Gentleman exaggerates his case. I was arguing that manufacturing has no chance unless the economy in which it functions is stable and has some hope for the future. We all know that under the Labour party's plans the economic structure within which industry would operate would indeed be dicey.

All the recent studies of manufacturing, including the Finniston report on engineering and the House or Lords report on trade, point to a kind of cultural weakness in Britain. In Germany the engineer is revered. Here he has no particular status. His pay is too low, and that of the banker, whose very existence depends on him, is too high. That cultural failing is now recognised in this country, and it must be a major strand of Government policy that such a failing should he reversed from the earliest age in education.

In truth, there is no career finer, more constructive or more valuable for this country than one of making products that one's fellow humans want and need. It is not enough to say that— we must act on it. Much depends on the quality of education and the relevance of our training. We are facing a famine of people with the right skills, and it is a terrible paradox that even at a time of unemployment there are growing skill shortages.

In 1980 Finniston said: We genuinely fear a chronic shortage of engineers over the last decade of the century unless in the meantime there is a major increase in the proportion of young people opting for an engineering career". We now produce 9,000 engineers a year, but if we trained them in the same ratio as Japan, we would have between 30,000 and 40,000 new engineers each year. Our industries spend about 0.15 per cent. of their sales turnover on adult training, but overseas the figure is often between 2 and 3 per cent.

Mr. Eric S. Heffer (Liverpool, Walton)

The hon. Gentleman is clearly referring to professional engineers rather than to engineers who are apprentices. Is he aware that in certain parts of the country apprenticed engineers have finished their apprenticeships but have no hope whatever of employment — for example, on the northeast coast and on Merseyside? Incidentally, even if they manage to get the odd job, they can find nowhere to live.

Mr. Carlisle

I was referring to professional engineers coming out of our colleges of higher education and universities, but I accept the hon. Gentleman's point. There is also a great need for highly skilled engineering workers. Our training must also be directed towards that section, because there is a genuine need. However, the solution is complex and it must grow from a partnership between the Government and industry. Each must do more.

Much has already been done. For example, one welcomes the growth of the TVEI programme in schools, the expenditure of £43 million on the engineering and technology programme to create an additional 5,000 graduates, and the effort of industry in the Information Technology Skills Agency, but we cannot be complacent. We must increase our efforts. We must ensure an adequate supply of mathematics and physics teachers, even though the measures required do not fit snugly into accepted educational thinking. Schools must have strong and working links with local industry. Local colleges of technology must have the necessary facilities, and training relevant to local industry. In higher education, we must reinforce the recent trend to give better support to science and engineering.

Industry must also shoulder its share of responsibility for training. We should aim to make matters more favourable for those companies which do train than for those which do not. We should also insist that in their annual reports companies explain what they are doing about training.

Just as six years ago the Finniston report called for a transformation in training, so recently the Coopers and Lybrand report on training was entitled "A challenge to complacency". On all sides the message is clear —without the skills we cannot succeed. But even if we magically acquire a legion of highly skilled workers, only one fraction of the problem would be solved. It is like a car with one wheel. We must also have good management, rigorous and skilful marketing and investment in new technology.

In the last five years the Government's general industrial support for new technology in industry has more than doubled, after allowing for inflation, but I still believe that we can —and must—refine and extend this, not merely to sustain industry, but to act as a spur and a support in the harsh world of new development. Clearly targeted support is more productive than general regional subsidy.

Mr. Edward Leigh (Gainsborough and Horncastle)

Does my hon. Friend consider that employment in both our constituencies has been helped by the fact that Scunthorpe, with development area status, is siphoning off employers?

Mr. Carlisle

Clearly the proximity of a development area acts as a blight on the regions next door. One of the problems is that four years ago the development areas were more clearly defined. My hon. Friend speaks of a real problem from which we suffer in Lincolnshire.

Management also has a key role to play in the crucial area of human relations in industry. Marks and Spencer always talks about human relations in industry, not just about industrial relations. That is a major reason for its success. However, as a nation we have for too long been locked in an abyss of industrial relations, and we must break out of it before we are left with no relations at all.

Teamwork and involvement are vital. More manufacturers should adopt the use of quality circles, and more still should embrace profit sharing. Only some 550 companies have profit-sharing schemes under the Finance Act 1978, despite the added incentives that our Government have given. It is crucial for good human relations in industry that all the work-force should share in the success of their company, just as they must share the burden of difficulty and failure. Teamwork involves unity of purpose between management and unions for the benefit of both business and work-force. We must add to the incentives for profit sharing and ensure a major and rapid spread of these schemes.

I dare say that there is not a Member of Parliament who at some time in his or her constituency has not witnessed an example of the perilously high cost of these failures of human relations in industry. In my own constituency we are at a critical moment. We have a business called Clayton-Dewandre, which employs 700 people. It is a company of skill and good technology and is a major supplier of braking systems to the British truck industry. Yet that company faces disaster because for more than 20 years there has been a poverty of good human relations. Unless an agreement can be reached very soon to enable the business to face competition, that company will leave Lincoln to manufacture elsewhere, either in the United Kingdom or in Germany.

I am not here to apportion blame, but this is a desperately serious matter both for the people who work in the business and for the city. The root cause of the crisis is not lack of skill, but lack of unity, lack of teamwork and a lack of involvement in the business stretching back more than 20 years, the effect of which has bred distrust and a cynical view of the future. I appeal to all in that business to get together once again to keep it in Lincoln. Events here sadly show just how hard we must work to involve all in the success of their business.

I feel deeply that as a country we have much to do to rebuild and sustain our manufacturing industry. We must radically change our cultural and psychological attitudes towards manufacturing. We need urgent action in education and training. Management must become more receptive, creative and professional.

Mr. Hugh Dykes (Harrow, East)

Will my hon. Friend give way?

Mr. Carlisle

No, I am sorry. Human relations in industry must become human, otherwise there will be no relations and no industry. I believe that the Government understand the problem and are seeking to redress it through a series of measures. I also believe that the Opposition recognise the problem, but they wish to implement policies which would remove us further and fatally from the world market place. The cost of that to the taxpayer would be intolerable, and the cost to the nation and its future incalculable.

Any Government can create only the framework. Without a true marriage with industry, we are doomed to even further decline. There is no greater challenge that faces this country, and therefore no greater challenge that faces this House. I hope that in this debate we can add our weight to the urgency and give an impetus to success.

4.10 pm
Mr. Roy Jenkins (Glasgow, Hillhead)

The hon. Member for Lincoln (Mr. Carlisle) opened this debate with a reflective and interesting speech. The debate is certainly on an important subject and I congratulate the hon. Member for Lincoln on choosing this topic and I believe that we should have a worthwhile discussion on the matter.

Several fallacies have been accepted too freely recently about the position of our manufacturing industry in the balance of our economy. The biggest fallacy is the view that salvation lies in services, and only in services. The corollary to that is that it is inevitable and desirable that over the past two decades there has been a reduction of nearly 3 million in employment in manufacturing industry. That is a massive reduction and represents nearly 40 per cent. of the total in manufacturing industry over that time.

I do not believe that that should have been the case. That has been precipitate and dangerous and it has not been associated with an increase in productivity which has led to our maintaining our relative manufacturing position.

Between 1975 and 1984, Japan increased manufacturing output by 61 per cent.; the United States by 41 per cent.; West Germany by 16 per cent.; Italy by 22 per cent. and our manufacturing output actually fell by 4.5 per cent..

We already have the largest service sector of any large developed economy with the exception of the United States. One might say that that is fine. The United States is the richest economy in the world and has the largest service sector. As a natural development from that, we, as the second richest economy, should have the second largest service sector. Unfortunately, there is a snag in that logic: we are very far from being the second richest economy in the world. All the other advanced economies of comparable size have a substantially smaller service sector and a substantially bigger manufacturing sector than we have. That is especially so in Germany and Japan, and less substantially so in France and Italy.

Mr. Dykes

I agree with the right hon. Member. Does he agree that although the motion proposed by my hon. Friend the Member for Lincoln (Mr. Carlisle) is in every way excellent and effective, as he said, it is surprising that amidst all the references to the need for a much higher investment ratio and new public and private assets in this country, especially for high technology, the United Kingdom invests less than any of the other advanced OECD countries?

Mr. Jenkins

I do not wish to be committed to the terms of the hon. Gentleman's motion. He has opened the subject up by his motion, but I do not think that it contains a complete catalogue of recipes for our present ills in this respect.

Mr. Michael Fallon (Darlington)

Will the right hon. Gentleman give way?

Mr. Jenkins

No, I should like to make some progress.

It is impossible to sustain the belief that a large service sector is the symbol of success. In our case it is the reverse. We have already gone too far in that direction, although some movement in that direction was clearly inevitable and even desirable.

It is important to bear in mind that services are difficult to export. Some are almost unexportable. They can only be performed or consumed on the spot. Even when they can be exported, they are mostly operating—regrettably in many ways—in much more protected markets than goods. I hope that we can make progress to change that position, especially in the European Community. It would be a mistake to count Lord Cockfield's chickens before they are hatched. There is no doubt that services operate in a more protected market than does manufacturing industry.

The position is that 64 per cent. of our labour force is employed in services, which produces only one quarter of our overseas trading income. A little more than 20 per cent. still employed in manufacturing industry must produce the rest. That is a good reason why we should cherish that 20 per cent.

Mr. Fallon

The right hon. Gentleman has correctly concentrated on the large size of the service sector in the British economy. Does he accept that one reason why it is so large is that public sector service employment is included in that definition?

Mr. Jenkins

That is a factor, but it is by no means the only factor, and nor are we the only country with large public sector employment. For instance, Italy has a lower proportion in the service sector but has just as large a proportion of its population in public service employment as we have. The hon. Member for Darlington (Mr. Fallon) has made a valid point, but it does not explain the whole position.

Another fallacy about the balance of industry is that unemployment is essentially technological and therefore inevitable and incurable. I do not accept that, for several reasons. First, it is difficult to reconcile that proposition with the fact that both Japan and the United States—the two countries furthest into advanced technology—have the lowest rates of unemployment. Their rates are very significantly lower than ours. I also do not believe that that proposition has historical validity. The revolution of information technology has not had a greater effect on labour than the vast reductions in the numbers of those working on the land and in domestic services which were features of our changing employment demography over the past 100 years.

The devastating weakness of manufacturing employment and prospects in this country has been caused by a combination of four factors. First, in the past decade and a quarter from 1973 the whole industrialised world, with certain exceptions—the United States in 1983–84 and some of the countries of the Pacific basin—has found it much more difficult to maintain rapid and sustained growth than previously.

Secondly, the United Kingdom was less competitive in manufacturing industry than most other countries, and we still are after seven years of this Conservative Government.

Thirdly, we pursued a remarkably foolish exchange rate policy in 1980 and 1985 which was a very vulnerable period. That has had a permanent effect on manufacturing industry from which we have not nearly recovered. In fact, we are not pursuing a very wise exchange rate policy now, even though it is not as foolish as the policy to which I have referred.

The fourth point is related to demography. This has continued for longer than was expected 10 years ago and has continued to work against us in the sense that more people are seeking to come on to the labour market than come off it. That position should change by the early 1990s.

As a result of these factors we have suffered unnecessary and dangerous de-industrialisation. It is worth remembering as a sombre fact, in view of the other difficulties in the world, that in this country we have effectively twice the male unemployment rate of America, Japan, France, Germany or Italy. That is a pretty devastating criticism of the state of our industry.

One of the dangers of precipitate and excessive closing down of industry is that it is extremely difficult to reverse. Almost by its very nature it is an irreversible process. It is a new thing to look at the 1930s favourably, but it is instructive to consider the precedent of that decade. At the beginning of the decade, unemployment was at about the present level. It was somewhat worse in reality for a short time in relation to the size of the economy then—from 1931 to 1933.

An unemployed man in 1931 suffered far greater absolute poverty than does an unemployed man today, but his prospects of getting a job rapidly became considerably better than has happened in the 1980s. By 1935, unemployment was down to just below 2 million and, by 1937, it was down to 1.5 million.

Perhaps even more important was the fact that the capacity of basic industries was not then permanently destroyed. They had a very bad time in the first part of the decade. That was symbolised, perhaps, by the famous example of work on the Queen Mary at the John 'Brown yard at Clydebank, which was suspended for two and a half years because the Cunard company ran out of money. Work was started again with Government subsidies. The important difference was that the yard was not dismantled or closed. Steelworks, coal mines, heavy engineering plant and even textile mills survived and were available. They were called back into service, sometimes in a slightly different form, first with rearmament and then when the war brought rapidly soaring demand.

I have come increasingly to the view that the Government stand back too much from industry. In my experience, they do so more than any other Government in the European Community. They do so more than the United States Government. We have to remember the vast US defence involvement in industry. They certainly stand back more than do the Japanese Government. To some extent, the motive is the feeling that we have had an uncompetitive and rather complacent industry which must be exposed to the full blasts of competition, and if that means contracts, even Government contracts, going overseas, we should shrug our shoulders and say that the wind should be stimulating.

That process has been carried much further in Britain than in any other comparable rival country. I am resolutely opposed to protectionism. I am sure that it diminishes the employment and wealth-creating capacity of the world as a whole. That would be the result of plunging back into that policy. I also believe, however. that this totally arm's-length approach in the relationship between Government and industry is something that no other comparable Government contemplate to the extent that we do. It is not producing good results for British industry and it is a recipe for a further decline in Britain's position in the Western world. The Government should examine it carefully and reverse it in several important respects.

4.22 pm
Mr. Cecil Parkinson (Hertsmere)

I congratulate my hon. Friend the Member for Lincoln (Mr. Carlisle) on his choice of subject. It is good that Parliament should debate such an important subject in the unacrimonious atmosphere of a private Members' day. Whichever party is in power, the manufacturing sector will remain vital. I do not regard today as a chance to score points. Rather, it is a chance to discuss a vital subject.

I am pleased to join the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) in saying that what is sometimes presented as a choice, but is not, between Britain being a manufacturing or a service country is utterly spurious. We must succeed in both.

I should like to pick up a point that the right hon. Gentleman made. He talked about our exchange rate policy in 1980–81. I was the Minister for Trade at the time and saw many industrialists who said that if the exchange rate was at $2 to the pound we could sweep the world. During that period the Government never charged the rate of interest that matched the rate of inflation. We never had a real rate of interest paid to savers. The Government did not offer a real rate of interest — they offered one substantially below the rate of inflation.

The Government had recently been elected on a sound money platform, following a Government who, until they were stopped by the International Monetary Fund, had followed a very unsound money policy. The world's money markets put a substantial value on sterling. The Government were committed to trying to protect sterling's value, and they were prepared to charge the borrower a higher rate of interest than had been charged before, but never a real rate. People who argue about our exchange rate policy in 1980–81 are saying that the Government should have perpetrated an even bigger cheat on the saver by having a rate of interest which was even further below the rate of inflation.

People such as the right hon. Member for Hillhead are arguing that we should have continued to rob the saver so that we could support the borrower. Put in those terms, it is clear that such a view is not nearly as noble as saying in a rather sweeping way that the Government got their exchange rate policy wrong. I do not think that they did get it wrong. They were seen by the the financial markets as prepared to follow sensible policies and to charge a rate of interest which began to approach, but never got very near to, the rate of inflation. I do not accept the rather dismissive argument that everything can be traced back to the Government's exchange rate policy.

Nor do I accept the statements that are now made so often that they are almost accepted as true that Britain's manufacturing industry is in terminal decline. The facts do not support that thesis. Industrial production last year was clearly recovering dramatically from the low point of 1981. I know that Opposition Members say that 1981 was an all-time low, but if manufacturing was still in decline, the figures would continue to fall. We have reversed that trend. Manufacturing production is growing substantially. To the dismay of our opponents, it should achieve all-time record levels next year.

There is nothing to be complacent about, but the statement that our industry is still in decline is not borne out by any test which any fair-minded person would care to apply. Production has bounced back substantially and is continuing to rise. For the first time, exports of manufactured goods reached a value of £52 billion last year — £1 billion a week. Industry invested nearly £7 billion last year and nearly 6 million people were employed in manufacturing. If we constantly talk about our industry having no prospects, and if we write it off, we will help to produce just what we complain of. Who buys his car or anything else from a business which is about to close down and has no future? For us to dismiss the efforts of the 6 million-plus workers in our manufacturing sector as people who are somehow misguidedly dedicating their lives to trying to breathe life into a corpse is not only to mislead the world and the British public, but to cause damage where we need help and support.

Mr. Dykes

I am sure that we would all agree with that. However, does my right hon. Friend agree that the £7 billion figure that he gave is less than 2.5 per cent. of gross domestic product, the lowest figure of any advanced Organisation for Economic Co-operation and Development investing country?

Mr. Parkinson

That may be the case. However, my point is that to dismiss our manufacturing sector as something that people are not interested in and has no future is to mislead the country and the House. The market was prepared to invest £7 billion in its future in 1985. Perhaps we should be investing more, but £7 billion is a substantial sum of money, and it is put up by people who believe that they are investing in something that has a real future, and so do I.

Let us take the anecdotal evidence. For instance, a constituent came to see me on Saturday who is a director of MFI. He told me that in 1976 MFI imported 60 per cent. of everything it sold. That figure is now down to below 25 per cent. MFI is in fact using more and more British goods because they are excellent value.

Goodness knows, as Minister for Trade I took part in many debates about the textile industry. Last year textile production was near to an all-time record high and textile exports were at an all-time record high. This year the British engineering industry will invest £850 million in computers and software, and a recent survey suggests that outside Japan the British engineering industry makes more use of high technology and engineering computers than any other engineering industry in the world. British industry was in decline for a time, but the decline has been arrested and the climb back has begun in real earnest. There is a very good prospect for Britain in an area which, far too often, we talk about dismissively.

If we apply the wrong tests to the statistics that emerge, we can turn success into failure and failure into success. For example, I heard the right hon. Member for Chesterfield (Mr. Benn) making an interesting speech about the steel industry. He said that we should look at the good old days when steel employed 250,000 people and it now employs only 100,000. To him that was proof that our steel industry was in a state of decline. However, when the steel industry employed 250,000 people it was losing nearly £3 million a day. We had a steel capacity which we simply could not use and which nobody wanted. Therefore, we had 250,000 insecure jobs. We have moved from that position to having the best and most efficient steel industry in Europe producing as much steel with 100,000 people as it used to produce with 250,000. With 250.000 employees losing £3 million a day it is a national asset by the test of the right hon. Member for Chesterfield; with 100,000 employees producing steel at a very competitive price it is a national problem. That is absolutely wrong.

Dr. Jeremy Bray (Motherwell, South)

The right hon. Gentleman is making an interesting point about steel. Is he aware that an even more competitive steel industry in Japan, faced with a similar fall in orders and intense competition from Korea and other new producers, is maintaining its employment and diversifying in order to maintain a policy of lifelong employment? Does he not think that that kind of policy is more relevant in this country today?

Mr. Parkinson

It depends where one starts from. I shall give an example from a different industry in Japan, the motor industry. In 1978 the motor industry in Japan was producing 65 vehicles per employee on average, and we were producing in our worst company, five and a half. At that level of productivity one can start to think in terms of lifelong employment, because one starts at a high level of productivity. However, if one has an industry which is losing substantial sums of money and is unproductive, it is unrealistic to talk of ensuring lifelong employment. The hon. Member for Motherwell, South (Dr. Bray), who studies these things carefully, must realise that.

First, I am saying that it is wrong to talk as though British industry is still in decline. It is starting to recover. It is wrong to draw the wrong conclusions from the available statistics. Industry does not exist to create jobs; it exists to create products. The industries which are efficient at creating viable products produce the best insurance of long-term employment.

Secondly, we continually draw attention to the fact that we have a huge and growing deficit on manufactures. That is true, but the conclusion we draw from that is the wrong one. We say that we need more Government demand injected into our economy. The bigger the level of our imports, the more evidence there is that there are customers here who want to buy. The argument that a deficit on manufactures is somehow evidence of a need for further demand to be injected into the economy by the Government again seems to be drawing totally the wrong conclusion from the facts that stare us in the face.

It was interesting to read in The Times today that a survey of British management said that the first priority for a better industrial performance was to improve the product. I thought immediately of Jaguar. Jaguar is now a highly profitable company selling the same range of motor cars as it was selling six or seven years ago. It has moved from being a disaster to a success because it has improved the quality of its performance. The product is the same, the range has not changed, but the prospects for those in the company and for this country, as the country in which Jaguar is based, have changed. The reason is that the quality of the product has improved out of all recognition.

Far too often in the House, especially in our economic debates, we have arguments about whether an extra £1 billion or £2 billion of Government-injected demand would turn the economy round. If it was as simple as that I might he tempted to join the argument for reflation. However, I hasten to tell the House that I will not, because I think that it is distracting us from the fundamental problem, which is how does this country compete for the business which is there? At home there is a great demand for the whole range of manufactured goods. World trade in manufactures is expanding. The customers are there overseas as well, and the real question which the House, the Government and British industry have to address is how we get a bigger share of the business which is there rather than how we generate artificial demand.

I do not underestimate the difficulties of trade union leaders at a time of high unemployment having to persuade their members that the way forward may be to reduce employment in industries because with new technology and a whole host of advances we can produce more with less people. I recognise the enormous difficulties that that presents for trade union leaders. I believe that we should pay tribute to the many trade union leaders and members who have co-operated with management in improving productivity in British industry.

I end as I began. I believe that if we continue to talk down our prospects as a manufacturing country, and if we continue to talk about our decline as if it were terminal, we must not be surprised if people start to believe us and if we produce the results that we do not want. This country has bright prospects. Way into the foreseeable future, we shall have a very important manufacturing sector. We have a strong service sector. We are prolific earners of invisible earnings. We have substantial overseas investments. Although we talk about it as if it is a problem, we still have energy self-sufficiency.

This country has a very bright future to add to its glittering past, but we shall need, as a country, and especially within industry, to produce that cohesion, that co-operative attitude that is the source of the success of all our major rivals. The question for Britain is: how do we compete? One of the answers—such an obvious one—is: working better together. Britain's future as a manufacturer stretches ahead of her. She has a fine past, but a very promising and exciting future.

4.41 pm
Mr. Don Dixon (Jarrow)

I add my congratulations to the hon. Member for Lincoln (Mr. Carlisle) on introducing this debate. I worked in the manufacturing industry from the time I left school at the age of 14 until I arrived in this place in 1979, I am one of the small band of Members of Parliament who has not only seen but worn a pair of overalls.

The right hon. Member for Hertsmere (Mr. Parkinson) said that union leaders had to be told that we had to have fewer men and more efficiency. But let me talk about the American motor car industry some time ago, when General Motors had just modernised one of its factories. The general secretary of the Automobile Workers Union was invited to come along and see the new automated factory. He was taken round the factory and shown the robots that were doing all the work that was previously done by members of his union. He was taken upstairs for a drink, after he had been shown round. He was told, "There you are. You have seen the factory. You will not be able to get any of those robots into your union." The general secretary of the union said to the manager of General Motors, "Nor will you be able to sell them any of your cars." The point is that if there are no workers,, what is the company to do with the manufactured goods unless it gives them away or gives people the money with which to buy them?

I should like to talk about the north-east. In spite of what has been said by some Conservative Members, we see it as a danger that this country's manufacturing base is being eroded. A survey of the north-east, carried out in the 1970s, showed that 28 per cent. of male employment in the region relied on heavy manufacturing industry. What has happened over the past 10 years — not just the past seven years — in the steel industry, for example? The number of people employed in the north-east has dropped from 22,000 to 7,600. There has been a loss of jobs of almost 21,000 in the north-east, an area that has had high unemployment for a considerable time.

In an intervention, it was said that Scunthorpe had got something at the expense of' Lincoln. I should like to tell the House that Scunthorpe has just got a new steel plant at the expense of Jarrow and Warrington. British Steel has closed its Jarrow and Warrington plants. A private company called Caparo Ltd. has decided to open a plant in Scunthorpe. I met the manager of Caparo and suggested that the company should try and do something in Jarrow. The workers and management in Jarrow were even prepared to carry out a buyout of the plant in Jarrow because it was economical. British Steel wanted nothing to do with that. The problem was not that the plant could not compete, but that there was such a thing as an EEC quota, and we could produce only a certain quantity of steel. When one talks about free competition and producing things economically, one has to take those things into consideration.

Therefore, there has been deterioration in the steel industry over several years. We have lost 21,000 jobs. The number employed in the coalmining industry has fallen from 35,000 to 18,000. It is said that we cannot keep uneconomic pits open. Uneconomic pits have been closed in Durham and Northumberland. Incidentally, it has never once been suggested that we should close uneconomic farms. They are still kept going with Government subsidies.

The number of people employed in shipbuilding and ship repairing in the north-east has dropped from 31,000 to 10,000 — a loss of 21,000 jobs. That does not take into account the 2,600 job losses announced recently by British Shipbuilders or the 825 announced by Swan Hunter.

We talk about training for the future. Swan Hunter has decided to take on no apprentices this year, in spite of a request by the trade union. How shall we build boats in the future? If we have another Falklands dispute how will the Prime Minister get together another task force to go to the Falklands? There will be no one to build or repair the ships unless we have apprentices.

People talk about competition in the shipbuilding and ship repairing industry. A tender was put out recently. If the men in the shipbuilding industry had decided to work for nothing, they could not have undercut the price that the Koreans offered. So, how do we tell the workers in the shipbuilding industry that they should be more competitive? The industry is not competitive because for years there was no investment when shipbuilding was in private hands. It is no good the right hon. Member for Hertsmere shaking his head. I worked in the industry when it was in private hands, and when we had the Patten report in 1962, the Geddes report in 1966 and the Booz Allen report in 1972. Every one of those reports talked about the lack of investment in the British shipbuilding industry, so we do not need lessons about investment. The British shipbuilding industry is in the state that it is today because of lack of investment. While other countries were investing, the private builders in this country would not put a penny into the industry. They were prepared to pay 27 per cent. dividends. When I worked in Hawthorne Leslie, that is what the company paid to its shareholders.

The right hon. Member for Glasgow, Hillhead (Mr. Jenkins) referred to the Queen Mary being repaired on Clydebank before the war. What he said is perfectly true. The workers in Clydebank were lucky. Because of overcapacity, an organisation called British Shipbuilding Security Ltd., which was a firm of merchant bankers, ship owners and shipbuilders, decided not to let ships lie up and rust in the dock, but to close down yards and put on a 40-year embargo. It came to Jarrow. Palmer's yard in Jarrow was one of the best enterprises in the world. The ships came in as iron ore and went out as complete ships. The workers used to roll their own steel, make their own bolts and rivets and put the ships together. They sailed up the Tyne as a complete entity.

In 1934 British Shipbuilding Security Ltd. came along and decided, because of over-capacity, that there had to be rationalisation. Palmer's yard was closed and a 40-year embargo was imposed. The company was embarrassed five years later when the second world war broke out and ships needed to be built and repaired. People who had been trained in the shipbuilding industry were needed to build the ships. They were needed very much. At that time if people worked less than the 47-hour week they were fined by a tribunal. That is how important the shipbuilding industry was when the war started. That is one of the reasons why we should be protecting our industrial base, which is rapidly becoming eroded. Unless the Government are prepared to take some action, we shall have no shipbuilding or ship repairing industry in this country. It will be like the motor cycle industry, which disappeared.

Mr. James Couchman (Gillingham)

The hon. Gentleman is making much of lack of investment in the shipbuilding industry over many years. As I understand it, he is talking about a yard which closed 50 years ago. I suspect that may not be relevant to today's position. What proportion of blame would the hon. Gentleman ascribe to trade union demarcation disputes and the dreadful industrial relations which have pervaded shipbuilding for far too long?

Mr. Dixon

I shall explain the question of demarcation to the hon. Gentleman. I do not want to take up too much time. Many hon. Gentlemen think that demarcation was introduced by trade unions, trade union officials or work men. Demarcation in any industry arises as a result of management practice. I was a shop steward in the shipbuilding industry for almost 30 years. Demarcation occurred when the management decided, in view of past practice, that a particular trade was the best one to do a particular job. Demarcation disputes occur only when there is unemployment. There are no demarcation disputes when there is full employment. If a person who had served his time in a particular trade for five years and had worked on a previous ship found that some of his colleagues were out of work and the management had given the job to another trade, because it was more experienced, a demarcation dispute occurred. I agree that there were too many demarcation disputes.

Industrial relations in the shipbuilding industry were like a jungle. There was no such thing as industrial relations. The management did not care about trade unions. When I worked in the industry, we used to hold bits of steel on plates for the welders and the management refused to provide us with industrial gloves to protect our hands. Every night we used to go home with septic burns on our hands. We had to go to a tribunal in York so that we could get gloves for men who had to hold red-hot plates. That is what industrial relations were like in the shipbuilding industry. They did not exist. Management was interested only in profit. There were no industrial relations under private management.

I could speak for a considerable time on the shipbuilding industry. Listening to some Conservative Members, I think that a lesson on shipbuilding would be appropriate. Some Conservative Members know more about lying on a deck chair on the poop deck than building a ship. One of the problems in this House is that when we have debates on unemployment, views are put forward which would be more appropriately debated in universities than in the House of Commons whose Members are supposed to represent the unemployed.

A firm called N. E. I. Reyrolds in my constituency used to employ 13,000 people. It had over 2,000 apprentices. In fact, it had more apprentices a few years ago than it has bodies on the premises now. The firm is trying to compete overseas and it is trying to obtain orders. One of the problems is that there is no refurbishment or replacement of power stations. The Government should say to the CEGB, "Let us have a sensible programme for refurbishing and replacing power stations, so that we can keep our power industry." Otherwise, there will be no jobs left in that firm.

As well as expanding and improving manufacturing industry, we want a decent regional policy. We have virtually no regional policy. Since the Conservative party came to office in 1979, regional policies have been cut. It is no good the chairman of the Tory party telling people that they should get on their bikes and look for work. If they do, what will happen to the areas which young and active people have left? When people leave an area to look for work elsewhere, they do not take the community centres, old people's homes and hospitals with them. A disproportionate number of old people are left. The Government should have a regional policy and they should put the work where the people are. Unless they do that, we will not solve the housing, schools and hospital problems. If people move from one area to another to look for work, vacant houses wil be left. We require not only a boost in manufacturing industry, but a decent and sensible regional policy from the Government.

I thank you, Mr. Deputy Speaker, for allowing me to intervene briefly and make those few comments.

4.55 pm
Mr. David Knox (Staffordshire, Moorlands)

I congratulate my hon. Friend the Member for Lincoln (Mr. Carlisle) on his good fortune in the ballot, and, perhaps even more, on his choice of subject this afternoon. I do not think that the House discusses manufacturing industry nearly enough. Like the hon. Member for Jarrow (Mr. Dixon), before my election to this House I spent my working life in industry. I have a strong belief in the central importance of manufacturing industry to this country's economic prosperity. I reject absolutely the view expressed in some quarters that manufacturing industry no longer matters and that we should concentrate all our efforts on the service sector. I can think of nothing more damaging to the British economy than a further acceleration in the decline of our manufacturing base. Let there be no doubt that there has been a decline over the past 12 years.

A brief look at the statistics will show, first, that, although the number employed in manufacturing industry fluctuated a little, between 1960 and 1973 employment was fairly stable. Since 1973, employment has fallen by almost one third. Secondly, subject to minor fluctuations, manufacturing output rose steadily from the end of the war to 1973. Between 1973 and 1975, it fell back steeply. Between 1976 and 1978, it rose a little. Between 1979 and 1982, it fell back steeply. Since then, it has risen a little. The position today is that manufacturing output is not only lower than it was in 1979, it is still lower than it was in 1973.

Thirdly, until 1983, the balance of trade in manufactured goods showed a comfortable surplus. Since then, it has shown a deficit which, as output from the North Sea oil starts to decline, is worrying in the long-term. Fourthly, following disastrously low investment in manufacturing industry, in 1981, 1982 and 1983, there has been a welcome increase in the past two years. Nevertheless, investment in manufacturing industry in 1984 and 1985 was still lower than in any year since 1963, except for the 1981–83 period. The figures show all too clearly the decline in manufacturing industry in recent years.

I accept that a decline in the numbers employed in manufacturing is a feature of modern advanced economies, but a fall in output is not. I find that the decline of almost one third in the numbers employed and the fall in actual output over the past 12 years alarming. I find the deficit in the balance of manufacturing trade and the low level of investment equally alarming. For reasons already given by my hon. Friend the Member for Lincoln (Mr. Carlisle), a strong manufacturing base is essential to this country, if only because the export potential of the manufacturing sector is so much greater than that of the service sector—a point made by the right hon. Member for Glasgow, Hillhead (Mr. Jenkins).

Why have things gone wrong? The blame should not be attributed to one source. It is true that in recent years the conduct of management and of the trade unions has left something to be desired, but so, too, has the conduct of successive Governments. I should like to concentrate on the latter. During the past 12 years, under Labour arid Conservative Governments alike, economic policy has not contributed to the expansion of manufacturing industry and, indeed, at times has seemed to discriminate against the expansion of the most efficient and modern parts of the manufacturing sector.

Over this period, Government economic policy has involved a continuing policy of demand deflation, with total effective demand in the economy as a whole being held below the economy's supply potential. Some of the reasons for that have been quite respectable, but the result has been to stifle the expansion of domestic demand for the products of manufacturing industry, especially for new products and the products of capital-intensive industries. Consequently, unit costs have been higher than those of some of our competitors and sales at home and abroad have suffered to the detriment of the British manufacturing sector. In addition, successive Governments have pursued high interest rate policies, largely to maintain the strength of sterling. At home, the effect has been to place a heavy burden of those who borrowed money to invest and to benefit those who put profits into fixed interest securities. That is hardly the way to encourage efficiency in the manufacturing sector.

In recent years, one of the most damaging aspects of Government policy on the manufacturing sector has been. the exchange rate policy. First, for most of the time during the past 12 years, and especially in the early 1980s, sterling has been at a much too high rate in relation to other currencies. The result has been to make British manufactured goods uncompetitive at home and abroad, to encourage imports and to discourage British exports. Secondly, there have been frequent and sometimes violent changes in exchange rates. This is a particular problem for those manufacturers whose primary functions are to design, manufacture and sell products but who rarely have an interest in finance and the financial implications of exchange rate variations.

My final point on the deficiencies of Government is the lack of an industrial strategy. I am not one of those who believe in detailed economic planning — so beloved of the Labour party in opposition and scorned by it in government — but there is much evidence that the industrial strategies adopted by the Governments of countries such as Japan and France enable their manufacturing sectors to perform better than does the British manufacturing sector. In the modern world I believe that we suffer because the Government have no manufacturing and industrial strategy.

We all want British manufacturing industry to expand and prosper. My hon. Friend the Member for Lincoln and others who have spoken in the debate have outlined the measures that they believe industry must take. I agree with many of their points hut, against my criticisms of the policies of successive Governments, I should like to suggest what the Government might do to help our manufacturing industry in the years ahead.

First, the level of total effective demand in the economy as a whole should be brought more into line with the supply potential of the ecomomy. This should be done by increasing public expenditure and by reducing taxation. Not all the extra demand will go into the manufacturing sector, but quite a lot will. Such an increase in domestic demand would enable unit costs to be reduced, would lead to an increase in the demand for British exports and would encourage investment in manufacturing industry.

Mr. Dykes

I apologise for interrupting my hon. Friend's excellent and compelling speech, with which I agree. Does he agree that the urgent need to increase public spending is even more important on capital account than on current account? Does he agree that on capital account once again there has been inadequate investment, which has been cut back much more easily, drastically and quickly than current account spending, which has increased because the rest of the economy remained truncated?

Mr. Knox

I agree with my hon. Friend. The emphasis should be on the capital side but, given the amount of slack in the economy, I see no reason why there should not be an increase in current expenditure as well.

I come to the second point to which the Government should pay attention — interest rates. They must be reduced below their present excessively high level. This would encourage investment by reducing the cost of borrowing money. It would have the added advantage of not giving support to sterling at an absurdly high level, which would be beneficial to manufacturing industry as well.

Thirdly, I believe that Britain should join the exchange rate mechanism of the European monetary system. That would bring exchange rate stability for about 60 per cent. of the country's trade and would remove the unnecessary uncertainty in Europe for our manufacturing sector—a point which is made to me repeatedly when I visit manufacturing firms in my constituency.

Finally, the Government should embark on widespread consultation with industry and the trade unions, perhaps through the National Ecomomic Development Council, with a view to developing an industrial strategy. This would show everyone the direction in which the Government believe the manufacturing sector should be moving. It would enable British manufacturing industry to move forward more confidently and effectively in the years ahead.

5.6 pm

Mr. George Park (Coventry, North-East)

It is clear that the right hon. Member for Hertsmere (Mr. Parkinson), who used to be a member of the Government, is still wearing his Government blinkers. To state the facts is not to talk the country down.

We are indebted to the hon. Member for Lincoln (Mr. Carlisle) for choosing this topic. A minority of 3 million to 4 million unemployed is simply not good enough. It is not good enough to point to the 6 million people in work in manufacturing industry when there are such numbers out of work. What does it take to make the Government realise, as the motion states, that manufacturing industry has a central part to play in the future prosperity of the United Kingdom"? I suppose that it is understandable for the Government to brush aside Opposition protests as something to be expected from an Opposition, but a few days ago the West Midlands Engineering Employers Association met a group of Conservative Members of Parliament and left them in no doubt about the urgent need to halt the decline in that area. Perhaps the most pertinent point made by the association's chief executive was his comment: "If you do not want to lose votes, you must change your policies." He went further, and said, "You must stop pussyfooting around and do something to help ailing West Midlands industries." His feelings were underlined last week by a report by the West Midlands chamber of commerce and industry, which found a marked reversal of fortunes among the 435 firms which were sent a questionnaire. Orders at home and abroad are down, with little sign of new investment to create jobs.

Recently, several hundred people lost their jobs at GEC in Coventry. Last week, several hundred people at a Nuneaton factory lost their jobs. This week, Coventry Climax Forklift Trucks announced that another 90 jobs would go. Former busy factories in my constituency now stand silent and derelict, and in some areas of the west midlands unemployment is nearly 40 per cent. It is futile for the Chancellor of the Exchequer to imagine that service industries can take the place of manufacturing. Services must service something. Leaner and fitter has led to anorexia. The Government have said that they cannot create jobs. That is as may be, but they can do much to make trade fair. They can do something about unfair tariffs and special taxes, such as the 10 per cent. tax on cars.

Foreign Governments assist their industries by their purchasing policies. They do not place orders overseas for basic items of equipment needed in that country. They help industry by various means: in research and development, in energy costs, and, as has been mentioned, in the reduction of interest rates. The Government could do many things. It is ironic that companies say that there is a skills shortage. It would be negative of me to say that one of the first casualties in any recession is training, but it is painfully obvious that our competitors such as West Germany do not follow that course.

In appealing to the Government to revise their policies, there is considerable scope for improvement in industry's attitude to training. It cannot always expect to obtain its skilled labour by poaching. Increased wages, which is another favourite dolly shy of the Chancellor of the Exchequer, is not the reason for industrial decline in the west midlands, which has gone from the top to the bottom of the wages league, despite huge increases in productivity of about 30 per cent. in companies such as British Leyland and Peugeot. They rightly boast of that increase in productivity.

Manufacturing industry is the bedrock on which Britain's prosperity can rest. We cannot prosper by taking in each other's washing. If the Government cast that aside, they also cast aside their future. That does not greatly worry me, but I am worried that Britain is two nations —those in work and those out of work. I wish the latter group to be given some hope for the future and for the entire country to have a thriving manufacturing industry.

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

May I join all contributors to the debate in congratulating my hon. Friend the Member for Lincoln (Mr. Carlisle) on his choice of subject, on the timeliness of his choice of subject and on the manner in which he deployed his argument. He used vivid examples from his constituency to illustrate some significant points. He said clearly, and I agree with him entirely, that there is no inevitability about the decline of manufacturing industry. With other hon. Members who have spoken in the debate he has helped to scotch the myth that we in the Chamber take that view.

My hon. Friend gave a good example from his constituency of the successes and the dilemmas which are posed by success. He referred to Ruston Gas Turbines, which exports 90 per cent. of its output in key areas, but then he said — this issue, among others, exercises us tonight —that that company has had a static payroll but it has trebled the value of its production.

My hon. Friend immediately came to one central truth which should pervade the debate: that it is perfectly possible to crank up the engine of wealth creation, but not to obtain a commensurate increase in employment in the manufacturing sector. My hon. Friend then analysed sonic of the reasons for decline, and invited other participants in the debate — I assume that he also means representatives of the Department of Trade and Industry —to construct a policy for success.

I hope soon to reassure my hon. Friend that inside the Department of Trade and Industry we have matched the adjustments which have taken place in the economy during the past few years. We now have a suite of policies which are relevant for the latter half of the 1980s and the early 1990s, rather than a group of policies which borrow far too much from the prescriptions which failed in the 1960s and 1970s.

The right hon. Member for Glasgow, Hillhead (Mr. Jenkins) spoke on an issue which has exercised all of us —the role of the manufacturing and service sectors and the fact that they are complementary, not competitive. The right hon. Gentleman asked for a catalogue of the recipes for success. I shall not be airing that before the House tonight, but I shall suggest some ideas in answer to the question, "Do we have an industrial policy?" If we have such a policy, is it correct to call it a strategy, or has the word strategy been discredited after the practices of the 1960s and the 1970s? Should we use other language to define our new, and—I hope that the House will agree —formalised objectives in industrial policy?

The hon. Member for Jarrow (Mr. Dixon) spoke passionately, as ever, in defence of the shipbuilding industry and in defence of utilising the skills of his constituents and of the north-east generally. I shall return to that issue in a moment. My hon. Friend the Member for Staffordshire, Moorlands (Mr. Knox) talked about the link between interest rates and the value of sterling, although he was careful to ensure that he reaffirmed the need to control public expenditure generally to give us more freedom to manoeuvre in interest rate policies. It is precisely that dilemma which constantly exercises the wits of successive Chancellors of the Exchequer.

I begin my remarks by following naturally from the comments made by the hon. Member for Coventry, North-East (Mr. Park). In so doing, I am not trying to be controversial by responding to his remarks on employment. Rather, as I hope the hon. Member for Dunfermline, East (Mr. Brown) may concede, as a historian, I am seeking an area of consensus, in terms of our analysis of the problems, from which to proceed. I quote the hon. Member for Paisley, South (Mr. Buchan), admittedly from some time ago, but it has relevance today. In August 1978, the hon. Gentleman said in an article in the Glasgow Herald: The 1,500,000 unemployed is entirely due to an expansion of the workforce in Britain. And over the next decade, an additional 1,500,000 more will he in the labour force. That leaves us, even with improved growth in the economy, facing a possible 3 million unemployed by the end of the eighties. To try to blame this on the mishandling by any Government— Tory or Labour—doesn't get us very far. That gave us a prediction of 3 million unemployed by the end of the 1980s.

Then I turn to a report in which the hon. Member for Dunfermline. East may have had a hand. I hope at least that he would have been consulted about it. It is a report put out by the Labour party's finance and economic affairs sub-committee in November 1976. I believe that there was an attempt to squash it, but the lion. Member for Liverpool, Walton (Mr. Heifer) will remember it clearly. He may recall that the report was not published because, from first reading, it appears to be a full-blown justification to the Labour party, perhaps not to others, for import controls and a massive increase in public expenditure. That will be grist to the hon. Gentleman's mill.

Let me return to the analysis and the projections for unemployment. I quote from Robert Taylor's article in The Observer: Unemployment at 2,500,000 by 1980 is predicted in a gloomy confidential paper produced by the Labour Party's finance and economic affairs sub-committee. He then quoted from the report: 'By 1981 the population of working age will have increased by more than 1,000,000. The actual number entering the labour force is sensitive to a number of assumptions, but the official figure of 774,000 is a reasonable estimate. Thus if the growth performance of 1964–1973 were repeated unemployment would he approaching 2,000,000 in 1980.' The document suggests that this figure is an underestimate. It reckons private investment would need to grow by 8 per cent. a year just to maintain the 1964–1973 average growth of total investment of 3.5 per cent. a year. The document notes such a figure was achieved only once in that period … It also says the 'initial gain in competitiveness conferred by devaluation up to and including the first quarter of 1976 has already been eroded.' Opposition Members may be confortable with the conclusion of the report, which argues for import controls and a massive boost in public expenditure, but I hope that they will not dispute yet again the projection that, if those trends had continued, there would have been the prospect of 2.5 million unemployed in 1980. The authors of that report were not to know then that the worst world recession since the war was on its way. When one adds that factor into the balance, plus the structural defects in our economy that have been developing for decades, Conservative Members could say that those who blame the Government for all the 3.25 million unemployed are, to put it mildly, misguided, or if they are being deliberate, are mischievous. Jobs are the political imperative. I am sure that that was in my hon. Friend's mind when he launched the debate.

We are here to discuss the role of manufacturing industry as a wealth-creation engine so that manufacturing industry can be restored to health and have a multiplier effect on the rest of the economy, in the service sector as well as upstream manufacturing activities. This is a big area where my hon. Friend, some Opposition Members and I could agree.

Our share of world trade has undoubtedly plummeted. It went down from 14 per cent. in 1964 to 9 per cent. in 1979. It is now bumping around the 8 per cent. mark, but there is a sign— I am not in the business of counting chickens today—that at long last trade is starting to increase. The reversal of that decline in our share of traded goods and services is at the heart of the Government's job-creation programme. When the Government go on and on, as we do, about the right products at the right time at the right price and of the right quality, we are talking about the paramount importance of the job-creation programme.

One could argue that, in the 1960s and 1970s, policy was dominated by panacea politics. There was the white heat of the technological and industrial revolution. Does anyone remember that? Can anyone see its effects today? What happened during the 1960s and 1970s, exaggerated and exacerbated by the recession, was the development of a mismatched economy. Many people, and large amounts of plant and equipment, were dedicated to producing things for which demand was low, stagnant and falling, and not enough were dedicated to producing things for which demand was high, rising and dynamic. Our policies attempt to put right that mismatched economy, through either the Treasury or the Department of Trade and Industry, and to begin to tackle the unemployment problem.

Mr. Gerald Howarth (Cannock and Burntwood)

Does my hon. Friend agree that, at that time, because there was no real uplift in the new technologies, and because of the artificial restraint on wages in manufacturing industry imposed by the then Labour Government, many of our best brains and most able skilled people went overseas? Is there any talk of a brain drain today?

Mr. Butcher

There is evidence that managers are returning from, for example, the United States. Indeed, in talking to such people, we are complimented on the great changes that have taken place in British management during the past five years. Once again, British managers are being tough, professional, ambitious and competent. What is equally important is that the work force is being tough, ambitious, professional and competent. The partnership, which we should have been invoking for a long time, is at long last coming together. An example is the increase in productivity and the dramatic reduction in the number of working days lost through disputes.

I am grateful to my hon. Friend for raising that point and I can tell him that the brain drain is not the acute problem with which we had to contend some time ago.

I have been asked whether services and manufacturing are in conflict or whether they are complementary. Of course they are complementary, but I recall—my right hon. Friend the Member for Hertsmere (Mr. Parkinson), who was then my boss, will remember this— that for some time I asked the Department's economists for an answer to the question: "What proportion of manufacturing output is internationally tradeable, and what proportion of service sector activity is internationally tradeable?" The answer has been checked, rechecked and compared with the research of colleagues in Whitehall, and I can now report that, in general, 80 per cent. of manufactured output is internationally tradeable. By contrast, in general, 18 per cent. of service sector activity is internationally tradeable. There is, therefore, no choice, and this has not been disputed when I have spoken from the Dispatch Box: manufacturing must be at the core of our wealth-creation process. It earns a buck for United Kingdom Ltd's people. It is the way in which we pay our way in the world.

However, there is no gainsaying the fact that even in the teeth of the recession the service sector has been a magnificent job creator. About 700,000 jobs have been created in the service sector since 1981–82. It has done so imaginatively; and much of the activity which has been generated is internationally tradeable.

Although manufacturing may thrive again, as it is beginning to do, it may not create enough employment to make a major hole in the unemployment queues. Manufacturing can increase its share of world trade. It can increase its performance; and the income that it earns will disseminate through the economy, the market, the City, the payroll, through subsidiary companies and suppliers to generate jobs in other parts of the economy. That must be at the core of our appreciation of the role of manufacturing.

I do not wish to detain the House on the general issues that would normally come under the heading "Getting the climate right". I shall simply say that any hon. Member who had a conversation with industrialists in 1981–82, and who had that conversation 500 times, as I did during the west midlands initiative, was left in no doubt that their concern centred on inflation, interest rates, exchange rates and public utility costs. We must agree that the same conversation today would produce a less vivid account of the strength of the difficulties facing industrialists. The problems are coming under control.

Dr. Keith Hampson (Leeds, North-West)

On training, which is fundamental to improving the manufacturing effort, will my hon. Friend confirm, that, as was reported this weekend, the Government will set up a "College of the Air" using radio and television to help to retrain young people, and, indeed, adults, or is this simply an extension of the Open Tech?

Mr. Butcher

The best response that I can make to my hon. Friend's question is to extract the answer from my right hon. and noble Friend the Secretary of State for Unemployment — [HON. MEMBERS: "Hear, hear."]— the Secretary of State for Employment. That is not an issue with which the Department of Trade and Industry is involved, but I am sure that the record of this afternoon's debate will invoke that response.

Mr. Park

I should be interested to know what the Minister would say to the engineering employers and the chambers of commerce in the west midlands, because it is evident that the people he is meeting do not belong to those organisations.

Mr. Butcher

I attended the meeting with the Engineering Employers Federation four or five weeks ago and I maintain regular contacts with the federation. I value those contacts, as I do my contacts with the chambers of commerce, particularly those in Birmingham and Coventry. I read their surveys and their analyses of business confidence, and I note the factors that they list. In the next few minutes I shall list what I would say to the EEF.

Mr. Alan Williams (Swansea, West)


Mr. Butcher

I will give way for the last time. I must press on.

Mr. Williams

I am grateful to the hon. Gentleman. A few moments ago he mentioned the need to consult the Secretary of State for Unemployment. Perhaps he will be kind enough to explain which Government Department he holds responsible for that function.

Mr. Butcher

There are times when giving way is unwise. I thank the right hon. Gentleman for making a fairly small point and I hope that he will accept that the Secretary of State for Employment is the Minister who appears to he leading on the question raised by my hon. Friend the Member for Leeds, North-West (Dr. Hampson).

Mr. Tony Baldry (Banbury)

Will my hon. Friend give way?

Mr. Butcher

I must press on. I hope that my hon. Friend will have a chance to speak in the debate.

Six objectives are incorporated in the Department of Trade and Industry's policy. They are designed to tackle the issues by my hon. Friend the Member for Lincoln (Mr. Carlisle).

The first objective is to support and disseminate best practice in getting world-heating products to the market. These are post-research and development projects; they are market driven and product driven. A number of my hon. Friends who have been studying the business and technical advisory services will know that our policies on design, quality, productivity and marketing are working. The clients who receive that support say clearly in post-study evaluations that they value the work done under those heads of account.

The Government do not say "'This is how to design a product'" or "'This is how to increase the quality of your product.'" Practitioners are well respected in the market, the schemes are administered by third parties and the taxpayer covers the costs. We can put the best people into virtually any company with fewer than 500 employees to implement best practice in those key areas. It is about products and market penetration; and that is where jobs will come from.

The second objective is to enhance the competitive environment. Where competition is impaired or does not exist, we introduce the minimum safeguards required to protect the consumer properly, while encouraging efficiency.

There is, of course, a comprehensive competition policy. We believe that competition is the driving force for wealth creation and that it safeguards the consumer and keeps company managements on their toes.

In the past few years, not enough attention has been paid to policy on regulating monopolies, whether in the private or the public sectors. My right hon. Friend the Member for Hertsmere will remember the excellent work done by Mr. Stephen Littlechild of Birmingham university who first brought us the RPI minus X formula, which is a magnificent way of regulating monopolies. We have discovered a way of encouraging British Telecommunications to maximise its return on capital, without putting up prices in its monopoly environment. The formula encourages efficiency and protects the consumer. It may have a big future when we consider other denationalisation proposals and deregulation schemes.

There is also an international dimension to competition policy. It is our duty to promote free markets, whether through the GATT or the EC. I see it as the cornerstone of the Department's efforts during the United Kingdom's presidency of the European Community that we should do all that we can to deliver the truly internal market in the Community.

But — and this is a major but—where international markets are defective, it is not for us to disarm unilaterally. Where necessary, we should secure the multilateral removal of barriers and, if necessary, provide support for British firms that must compete with companies that enjoy support from their own Governments.

The third objective is to tackle the regional legacy arising from the mismatched economy — the unhappy legacy of wasted human resources about which the hon. Member for Jarrow spoke with such fervour. I am sure that the hon. Gentleman agrees that DTI regional policy is not the only method of tackling the problem. There are other ways, including some of the measures recently introduced by the Secretary of State for Employment.

The hon. Member for Jarrow should welcome the changes made to regional policy. He may argue about the expenditure levels, but I hope that he will agree that we were right to concentrate on job creation and conservation as part of our review of regional policy which was implemented just over two years ago.

We have shifted towards selective assistance and away from automatic assistance. We made rigorous checks on the viability of products. It is no use throwing money into a company if the management cannot cope with the demands that companies have to meet in the market place or cannot manage innovation or production development. That is money down the drain.

We made checks to ensure that projects are viable. Those checks are carried out not by civil servants, but by people under the guidance of an industrial development advisory board which is made up of industrialists. We have also said that, under normal circumstances, there will be no simple job shifting from one part of the country to another. I know that that practice caused great discomfort to a number of hon. Members on both sides of the House.

Mr. Tony Favell (Stockport)

Can my hon. Friend assure us that one criterion in judging whether assistance should be given in an assisted area is the effect that it will have on competitor companies elsehwere?

Does my hon. Friend know that printers in non-assisted areas are very worried about new printing companies that are being set up in assisted areas such as Wales? The new firms could drive out of business other firms who cannot compete with the lower overheads of those in the assisted areas.

Mr. Butcher

Job displacement is one of the factors that assessors have to consider. I hope that my hon. Friend will draw some encouragement from the changes that we have implemented. In normal circumstances, simple job shifting will not take place.

However, I am sure that my hon. Friend agrees that there will be occasions when a bid from an assisted area represents the UK Ltd. bid for some inward investment. At that point we may have dilemmas to resolve within our economy, particularly if a United Kingdom competitor feels threatened. That is an excruciating difficulty, but it has to be faced.

The fourth objective is to achieve the maximum economic impact from the United Kingdom's aggregate research and development spending, in the light of rapidly changing markets.

Mr. Gordon Brown (Dunfermline, East)

Before the Minister leaves regional policy, will he agree that to appear to support regional policy, but then to deny areas that have been worst hit by the loss of manufacturing jobs—halving regional expenditure between 1979 and 1985 and halving it again between 1985 and 1989—is to deny the regions any chance of recovery?

How does the hon. Gentleman react to suggestions by former Ministers—the right hon. Member for Henley (Mr. Heseltine) and the right hon. and learned Member for Richmond, Yorks (Mr. Brittan) — that the English regions need development agencies or bodies similar to the Welsh Development Agency and the Scottish Development Agency, which were set up in the 1970s?

Mr. Butcher

That is an interesting proposition, particularly in the context of solving some of the problems of urban dereliction, although I suspect that some members of the Labour party in various parts of the country would oppose such a move. I believe that there are signs of the Birmingham Labour party not being too enamoured of that proposition. I hope that, as a fair-minded spokesman for the Opposition, the hon. Gentleman will concede that one must look at a package of measures when talking about a shift in cash from the south to the north, not least when one looks at the rate support grant settlement and policies emerging from the Department of the Environment. There is nothing for the Government to feel defensive about in terms of resources deployed in the north.

In the time available I want to complete the six objectives. This is the first time in 1986 that we have had a chance to set out the Department of Trade and Industry's industrial policy. If I can do that, I shall resume my seat as quickly as possible.

Our fourth objective is to achieve maximum economic impact from the United Kingdom's aggregate research and development spend in the light of rapidly changing markets. All we are saying is that there is a legitimate role for pre-competitive research spending, but it is right that the Department of Trade and Industry's shift in expenditure should move closer to what the market wants —working with the grain of market forces. Therefore, it is our objective to add the second "D" to the R and D equation. Research, development and design should be the order of the day. That takes us closer to the markets.

The fifth objective is to change attitudes in order to improve the supply and quality of people available to industry and commerce in a world of increasingly international markets. We could argue at great length on why for so long our brightest and best have not been attracted into front-line commercial and industrial management. There has been an anti-enterprise culture, an anti-industry culture and an anti-training culture; but we have learnt through the information technology skills exercise, which I chaired on a multi-departmental basis, that it is possible to bring a new partnership to the business of training and to bring it into the heart of the higher education sector. Private sector companies are now welded into the decision-making process as to which courses in the new technologies, and engineering in particular, should be supported with a mix of public and private sector funds. It is interesting to see the recommendations that are now coming from all quarters that we should take that new partnership upstream into the further education sector. Some would even argue that that should occur in the statutory school sector.

The sixth objective is to secure the broader implementation of the public purchasing initiative. All hon. Members should be aware, if they are not already, that the public sector nationalised industries and Whitehall spend £40 billion a year on services and goods which are bought elsewhere. Some 90 per cent. of that is spent in the United Kingdom. Under the public purchasing initiative, by implementing enlightened purchasing policies we could produce a situation in which those national concerns buy British because it is best and has become best as a result of the implementation of the PPI. That is consistent with our commitments under GATT and the EEC and there is still much mileage available to us in obtaining value for money from that £40 billion.

I am delighted to report to the House that examples of that policy are already under way. We are discussing non-warlike purchasing with the Ministry of Defence. We are discussing supply questions with the Department of Health and Social Security on consumables and medical equipment and the Crown suppliers are already implementing good design policies.

Does that amount to interventionism? Is it a strategy? Not in the sense of industrial strategies of the 1960s and 1970s. There is no bureaucratic or detailed national plan. There are no sector or industry targets. There is no omniscient Department of Economic Affairs and no intervention-driven Ministry of Technology. Instead, we are operating in an environment of a demand economy rather than a comand economy. But there is an objective. It was reported to the House in a written answer on 28 February 1986 when I told my hon. Friend the Member for Crawley (Mr. Soames), who is in his place: The continuing aim of the Department is to increase the national production of wealth, to promote and enhance the vitality and competitiveness of British trade, industry and commerce within a proper regulatory framework and to increase the United Kingdom's share of world trade" —[Official Report, 28 February 1986; Vol. 92, c. 723.] Our objective is to reduce or eliminate barriers which impede British companies' ability to sell goods and services in the international markets, and, secondly, where support is necessary, in terms of policy or spending taxpayers' money, to ensure that such support works with the grain of market forces and enhances rather than undermines the determination of companies to compete.

5.44 pm
Mr. Eric S. Heffer (Liverpool, Walton)

The Under-Secretary of State concluded his remarks by saying that the Government have no plan, no command economy, no sector targets, and so on. He seems to be proud of that fact.

Mr. Nicholas Soames (Crawley)

Of course he is.

Mr. Heffer

Of course he is. But the other side of the coin is that, without any planning of any kind, without any real Government intervention, with the abolition of the National Enterprise Board and the changes that have been described by my hon. Friend the Member for Dunfermline, East (Mr. Brown) in relation to regional policy, we have the highest levels of unemployment in the Western world. Therefore, there must be some correlation between the two.

If we decide that there will be no planning of any kind, that there will be a completely free market, that competition will be rampant, it is not surprising, certainly to me, that there will be higher unemployment and the type of problems that we have at present.

One thing that the Under-Secretary of State said is absolutely untrue—that any sector of the Labour party has ever said that all unemployment in Britain is due to the Government's policies. Nobody has ever said that. What we have said is that the serious nature of the crisis in the Western capitalist world has been aggravated in Britain by the Government's policies. An already serious crisis has been made worse. We are not putting all the blame on the Government. Instead of the Government tackling the problem in an intelligent way, their policy of open and free competition has aggravated it. They have not tried to deal in a serious way with the needs of the British people and of industry.

I am grateful to the hon. Member for Lincoln (Mr. Carlisle) for instituting this debate. I do not endorse all his philosophical attitudes towards solving the problem, but is is clear that he is deeply concerned about it and has rightly raised one of the most serious issues facing Britain today. I agree with the right hon. Member for Hertsmere (Mr. Parkinson) that we want and must have an improved service sector economy, but that must not be at the expense of manufacturing, which is what has happened. We need a good manufacturing sector. We cannot rebuild and re-industrialise our economy unless we have a sound, serious manufacturing base.

Why has the decline taken place? In particular, why has it taken place since the end of the second world war? There are many factors. The first is that at that time we were no longer the workshop of the world. We came out of a most serious war, into which we had put everything, and we probably suffered more than those countries which had been defeated. We accepted the burdens in a way that other countries have not. That was one of the reasons. We also lost our cheap raw materials because, whether we liked it or not, stage by stage we had to agree to various colonial parts of the empire being given the right to self government. That meant that the prices of our raw materials went up and that we did not have the same pool as we had in the past, although it continued to be fairly good because we were members of the Commonwealth.

We also faced greater competition from countries which had previously not been able to compete with us. One of the reasons for that was that they began where we left off. Many of our manufacturers believed that their methods of manufacture were the best in all possible worlds arid that they did not need to change or improve or have new management. They thought they did not need to do things that it was necessary to do. Suddenly they discovered that other manufacturers were using the best of our traditions and leaving us behind.

We have heard many solutions to our problems. I have been in the House quite a long time and I have heard them all. Hon. Members on both sides of the House have told us how we can solve our problems. If I remember rightly, one of the solutions was the Common Market. The EEC was the panacea. We were told that if we got into that we would become more competitive and be able to deal with the problems of our people. We were told that we would have a new market and so on. We joined the NEC— [Laughter.]—the EEC. I have been on the NEC' for quite a few years. [Interruption.]The hon. Member has not had my advantages.

What happened when we joined the EEC? Unemployment did not decrease. I am sure that hon. Members will remember the arguments at the time about jobs for the boys. My God, unemployment has increased. The EEC is no answer to our problems.

There are many other factors. There are new modern things now. We are told that we have to follow the examples of various other nations, one of which is Japan. Have hon. Members read much about Japan? I am sure that many of them have been there and seen the way that the trade union movement in Japan is organised and seen the conditions of the work force. They will also have seen the way that many people live in Japan. If anybody wants to go there, they are perfectly welcome to do so. I am not advocating Japanese policies for our people. Those are not the way to deal with this problem.

We have come to the most fundamental stage in industrial development. This applies not only to us but to all Western capitalist societies. I am not asking Britain to accept all the Eastern European concepts, but I do suggest that there is one we could accept. In Eastern Europe there is a planned economy. East European countries do not have mass unemployment. It is true that the conditions of the workers are not as good as the conditions of workers in the West, and consumer products are not as freely available as they are in parts of the West. Eastern Europe does not have free and independent trade unions. However, we ought to learn from the good things it has and reject the bad, while at the same time rejecting the bad things in Western Europe.

If we are to rebuild our manufacturing base and economy, the way to do it is certainly not to have a command economy like that in Eastern Europe, but we need Government intervention. We need planning for the resources of the economy and an extension of public enterprise in many forms in order to be able to have real planning and not just indicative planning of the sort that we had under the George Brown plan. We need real physical planning so that we can ensure that we have the training, the engineers and the industrial investment that are required. That is the only way forward for British industry. We cannot deal with the problem in any other way.

As I said, I have been here a long time and I have heard all the arguments. Those arguments skim over the surface of the real problem: that we live in a society that does not produce goods for use but purely for profit. While that situation exists we can never genuinely rebuild the economy and create the type of society that is needed to give our people full employment.

I do not argue against those who say that the new technology has so changed society that we will have unemployment. The combination of existing systems of society and new technology are bound to give rise to unemployment. We have to use the new technology as part of a different type of society. That raises the fundamental question: what do we produce for; what is the objective? Is the objective merely to have a profit-making system benefiting a few, or production which benefits the whole of society?

Mr. Couchman

Will the hon. Gentleman give way?

Mr. Heffer

No. My speech will be short. Often in our debates we talk about the skimming effects of one problem as they connect with other problems, but the fundamental question is not often asked and it needs to be asked in a debate of this kind. We have to create a society in which people will work fewer hours. By way of alternative work we can create new opportunities in many other spheres. Perhaps we can give people the opportunity to involve themselves in the arts on a scale that they have never had before.

There is much that could be done, but little is being done. We cannot continue to have a society in which only a small section works and an increasing mass of people do not work. We have to get everyone working and recognise that that means a change in the character of society. Only a democratically controlled, planned, Socialist economy can do that.

5.58 pm
Dr. Keith Hampson (Leeds, North-West)

I hope that Opposition Members will forgive me if I make a party point, which they know I am unaccustomed to making too blatantly. It is that we normally see an Opposition who proudly parade on their sleeves compassion and concern for the unemployed and for manufacturing industry. With the noble exception of the hon. Member for Liverpool, Walton (Mr. Heffer) and a few of his hon. Friends, today they wear the badge of shame, because there are only four Opposition Members in the House for this important debate.

I give credit to my hon. Friend the Member for Lincoln (Mr. Carlisle) for launching the debate. My point about the Opposition is not a petty one, because most of us constantly face a barrage of innuendo, criticism and abuse from Opposition Members on these very subjects.

I have only one point to make about the speech of the hon. Member for Liverpool, Walton. After the war, this country was the victor. It captured and took markets because it had an industrial base and was provided with cheap and easy to obtain raw materials from the empire. The tragedy was that our industrial structure and trade union movement became fossilised in the 1950s. They were fossilised largely by the Labour Government and their programme for state intervention and nationalisation after the war. The Labour Government were followed by Conservative Governments who then fossilised our trade union movement, because that was the period when Churchill and all the Cabinet agreed that there must not be any trouble with the unions. Therefore, the power and privileges of the trade union movement became entrenched in our industrial system. They went far and away beyond anything that was experienced by any of our competitors.

It is absolutely right to say that in the 1960s this country needed the white-hot heat of the technological revolution, but the tragedy is that the Prime Minister of the then Labour Government who enunciated that doctrine failed to deliver. That is what this Government have had to deliver since 1979. It is a slander for Opposition Members to talk about 13 wasted years. The 1960s were wasted by a Labour Government. Now we are having to catch up.

We faced the fact that traditional industries in our industrial cities are running down massively and quickly because of world competition. At the same time new industries, often in the service sector, do not require so much labour. Modern and many older industries find that they can make do with part-time labour or with overtime instead of having to take on large numbers of new employees. At the same time, the birth rate has been increasing, with the result that many more young people are leaving school and wanting work, on top of which there has been a long-overdue demographic change, with women entering employment in greater numbers. That has happened, in conjunction with the world recession in trade because of spiralling oil prices. Therefore, this Government have inherited something that no Government could possibly have avoided. The missed opportunity, if there was one, was during the so-called swinging sixties. At that time, this country's industry was swinging on the gallows. We have yet to recover from it.

All right hon. and hon. Members agree that Britain's manufacturing base is fundamental to wealth creation in the country, but that is not necessarily the same as saying that it is essential for job creation. As my hon. Friend the Under-Secretary of State said, every modern economy, apart from the Japanese, has seen a more rapid rate of growth in the service sector than in the manufacturing sector, simply because structural changes of the kind that I have just outlined are taking place everywhere. That means that we must use our manufacturing base as the basis for wealth creation, but many more jobs, proportionately, must be created in the modern service sector, if we are ever to escape from the shadow of unemployment.

Where does that leave the traditional industrial cities of the north and, until recent years, successful areas like the midlands? My hon. Friend the Under-Secretary of State outlined one of the problems that the Government face. They are doing things, and they believe in what they are doing, but they are not prepared to boast about it. Even today we have played around with words. My hon. Friend asked whether we are dealing with industrial policies or an industrial strategy. Is it or is it not interventionism? Of course it is interventionism. There is no way of avoiding it in a modern economy. My hon. Friend gave many examples.

What is the Government's public purchasing initiative if it is not purchasing by the Government? What is the prospect for the helicopter industry or any major defence industry if the Government are not a major customer? How can we possibly play by the rules of free competition and free trade throughout the world when others do not? How can we—this is a crucial factor that my right hon. Friend the Secretary of State for Trade and Industry must hear in mind—possibly do without the degree of state involvement and protectionism that is afforded by the multi-fibre arrangement in areas like Yorkshire and Humberside?

We are all too well aware that my right hon. Friend's Department—or forces within it —has argued, since the publication of the Silberston report, that the MFA provides a disproportionate subsidy to the textile industry —15 per cent. on clothing—that people otherwise would be able to spend on other goods, thus stimulating the economy. That is absolute nonsense and it is about time that we said that academic studies of that kind are nonsense. It does not follow that people would spend the additional money that would be available to them on British manufactured goods rather than on imports. The degree of dependence of certain limited parts of this country on a major industry is completely ignored. The textile industry is one of this country's major industries. In terms of added value, it is far more important than the aerospace or computer industries, or many of the other essential industries that we think of as being at the heart of the British manufacturing base. Therefore, the Government's role needs to be judiciously used. There is no way out of it.

I pay full credit to my right hon. Friends the Secretaries of State for Education and Science and for Employment for their technical and vocational education initiative. At long last they are trying to change the basic balance of the school curriculum and to make it more vocational in an effort to attract more young people into the world of work and to help them to appreciate that what they learn at school has a degree of relevance to the realistic world of employment that they will enter later.

Equally, we have tried to change the balance in further and higher education in an effort to attract more people into courses that will benefit industry. However, it has taken a very long time. The Finniston committee sat for four years. It began its work in the mid-1970s. A decade later we are still talking about it. An apparatus has been established, but how much influence has the Engineering Council had in trying to tackle the problem?

We have known about the problems and the degree of decline in our industrial cities for a very long time. It was left to my right hon. Friend the Member for Henley (Mr. Heseltine), who is now doing so much to refresh those parts of the Tory party that others cannot reach, to write his report "It Takes a Riot." However, five or six years later we are still conscious that problems remain not only in Liverpool but in other major industrial cities. The lessons are there and what needs to be done is perfectly clear, but we are not acting with the speed or on the scale that is necessary.

Task forces have been launched in eight cities. I am very grateful for the fact that there is a task force in the city of Leeds. However, it has only £1 million to spend and a junior Minister has only a vague responsibility for it. We need to learn the lessons of the urban development corporations and, above all, of the Scottish Development Agency. We need to learn more the lessons of the latter than of the former, because in most of our cities there is not the scale of the problem that is to be found either in London's docklands or in Liverpool. Nevertheless, there are major problem areas.

Therefore, an agency along the lines of the SDA needs to be established and provided with many resources. It needs to have the powers of land accumulation and planning permission. Also, it needs to work in conjunction and partnership with the local authorities. It must not work against them. All right hon. and hon. Members know that the urban development corporations have created resentment in docklands. However, in partnership with local authorities that body could be provided with the necessary resources to rejuvenate an industrial area that is in decline. Then it could move out again and put its resources into another city in another part of the country. That is the main task that must be tackled in the industrial cities of this country.

However, the Government must have the will to do it, just as the same kind of will is needed to tackle the industrial strategy. The very term "strategy" implies comprehensiveness. Our industrial cities need to be considered in terms not just of the environment — fundamental though that is if they are to attract new industry — but of the ramifications of our industrial policy. The Department of Trade and Industry does no such thing. It has no overview of industrial strategy. It has a strategy for individual companies. Therefore, no nationwide strategy is exercised by the DTI over helicopters. The strategy relates just to one company — Westland.

As for the European fighter aircraft, the DTI's view was essentially that of British Aerospace. The Department of Defence was trying to pull in other European partners, and the Department of Trade and Industry was doing its best to frustrate those efforts.

I am sorry that my right hon. Friend the Member for Hertsmere (Mr. Parkinson) is no longer present, because he might have pursued the best line, but in his short time in office, he had the major task of trying to merge the two huge Departments of Trade and Industry. However, from the tenure of my neighbour, my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) — who simply did not believe that there should he such a thing as an intervention policy or even a Department of Industry — we have had Secretaries of State in the Department of Trade and Industry who have not had a conviction that there should be any industrial strategy.

Indirectly, an intervention policy has been pursued all other the place, but it has been piecemeal and there has been no effort to try to get a concerted and comprehensive approach. My hon. Friend the Under-Secretary of State made it clear that he had responsibility for some of the action, that other parts of the Department were responsible for others, and that there is also the Treasury. As we all know, the Treasury is far too dominant.

We have waited for the rebuilding and sustaining of our manufacturing base for a long time. It will not happen spontaneously. All our major competitor countries have Government intervention. Japan is the obvious one, but there is Germany with the purchasing power of its Government and France with its more centralised planning arrangements. Even in the United States—the most free enterprise economy in the world — it is the purchasing power, use and role of the Government that build up huge, powerful, multinational corporations, such as IBM, or the United Technologies Corporation, which bought Westland, and the rest.

In the modern world, we cannot pursue a hands-off, non-interventionist, free trade policy. It is fundamental that we have a comprehensive approach. The Department of Trade and Industry must take a stronger and more initiating lead within Government. Furthermore, we need a machinery, such as a Cabinet Committee, to look at industrial strategy in the way that we have for so long had an economic, but Treasury-dominated, Cabinet Sub-Committee and Committees on home affairs, overseas and defence matters.

6.11 pm
Mr. Gordon Brown (Dunfermline, East)

Both sides of the House will want to congratulate the hon. Member for Lincoln (Mr. Carlisle) on introducing the debate and on uniquely eliciting two Government responses. The first came from the Under-Secretary of State for Trade and Industry, whose list of industrial objectives seemed to get longer as the list of closures got longer, but whose industrial objectives seem to have one thing in common — that they would always cost the Government less money and not involve additional expenditure.

The second response came from the right hon. Member for Hertsmere (Mr. Parkinson), whose selective use of statistics, to say the least, concentrated on the silver linings and ignored the dark clouds that affect our industrial horizon. We should also congratulate the hon. Member for Lincoln on eliciting, in both interventions and speeches, with one notable exception, such a display of proposals for a change of Government policy that I almost thought I was at a reconvened meeting of the Conservative Centre Forward group.

The hon. Members for Leeds, North-West (Dr. Hampson) and for Staffordshire, Moorlands (Mr. Knox) both summed up the extent and scale of the problem that we face. The Government have presided over a decline in our manufacturing industry that is so general that we have lost 1.75 million jobs in the past seven years, 1.5 million of which were in the traditional industrial regions, many of which are now industrial no-go areas that cannot benefit from any expansion in prosperity or growth.

The decline is now so widespread and pervasive that, even on the Government's figures, the collapse of manufacturing investment between 1979 and 1986 is 20 per cent. The decline is so catastrophic that we have reached a unique position in our industrial history. Never before have we imported more manufactured goods than we export, nor sent more capital overseas to be invested in other people's industries than is invested in our manufacturing industries. Nor have we had entire areas of the country, such as the north-west, the north-east, Scotland, and Wales, where there are more people without a regular job because they are unemployed, in part-time employment or on temporary schemes than are employed in all our manufacturing industries, new and old, put together.

We have heard from the Minister, but particularly from the right hon. Member for Hertsmere, the former Secretary of State for Trade and Industry, some highly selective figures about productivity, investment and growth. He said that capital investment in manufacturing industry was at the highest ever level. He ignored the fact that, under his Government, capital investment in manufacturing industry is still markedly below that of 1979. He also said that we had the highest real level of exports last year than at any time in our history. He ignored the fact that, at the same time, we had the lowest proportionate share of world exports than at any other time.

The Government have told us, and the Minister said it again, that productivity is rising fast. It is true that productivity has been rising, but that is a function merely of the fact that employment has been falling faster than output and less is being produced by many fewer people. In other words, the rises in productivity for which the Government claim credit in almost every speech issued from the Department of Trade and Industry are a function, not of higher investment in the economy, because that is not the case in the manufacturing sector, but of higher manufacturing unemployment and a high level of redundancies.

If productivity was helping the economy so that it was at record levels, if investment was higher than it had ever been, if we were in the sixth year of the economic recovery that the Government have claimed, and if we had never had it so good, as the Secretary of State for Employment in the other place has been telling us, will Conservative Members answer a few simple questions? Why is it that, alone of our industrial competitors, our industrial manufacturing output is still 8 per cent. below what it was in 1979, when the Government came to power? Why is it that output in consumer goods is still 7 per cent. below 1979, in metals 26 per cent., in engineering and allied goods, which include electronics for this analysis, 5 per cent., and in other manufacturing industry 12 per cent. below? Why is it that output in these years has risen by 24 per cent. in Japan, in the United States by 14 per cent., and in all the OECD countries by 10 per cent., when in manufacturing industry in Britain it has fallen by 8 per cent.?

The Minister talked about an inevitable fall in manufacturing employment, but perhaps he should take note of the fact that during the years of this Government manufacturing employment has risen in Japan and some other countries, such as Greece, Finland and Turkey. It has fallen by about 1 per cent. a year in America and Canada and by about 2 per cent. a year in Germany, France and Italy. In this country it has fallen by 5 per cent. a year, and by about 25 per cent. during the period of this Government.

The Minister and other Conservative Members will tell us that this is a function of the shake-out, of the move from the traditional industries to the high-technology industries, and I see hon. Members nodding. They feel that the old industries are making way for the new, that the sunset is making way for the sunrise and that the sunbelt is taking over from the rustbelt. These are the things that we hear from Ministers and Conservative Members in their speeches at the weekends.

The truth is rather different. It is a case, not of the old industries making way for the new, but of the new industries making way for foreign imports. The Government have been stifling the new industries almost as quickly as they have been destroying our traditional industries. If in 1979 we had named one sector which might have been expected to do well because of the happy coincidence of oil being found in the North sea, we would have proposed petrochemicals and plastics. Yet, while in 1979 our trade deficit in plastics and synthethic goods was about £100 million, it is now nearly £200 million as a result of what has happened during the past seven years.

Mr. Butcher

The hon. Gentleman has stood at that Dispatch Box in other debates. He will be aware that we have never said that new industries would replace the old. We have often said that the so-called traditional industries become revitalised by the application of new techniques in making traditional products. We have not said that the reduction in employment in the manufacturing sector is inevitable. Indeed, if the hon. Gentleman checks the record, he will find that, unfashionable as it was then, I said that the continuing fall in employment in manufacturing was not inevitable and that with increased performance we could see increased employment.

Mr. Brown

I am grateful to the Minister for making the point that I have tried to make throughout the debate. If the traditional industries were being revitalised, we might expect something to be happening in steel, engineering and allied industries, consumer durables and other traditional industries to give us hope that those industries would increase output and exports, and contribute to our industrial recovery. However, there is no evidence that that is the case. Moreover, even in the new industries, where we should be leading the world, our trade deficits are such that we can look forward only to the prospect of a further erosion in manufacturing employment and further losses in competitiveness compared with the rest of the world.

Mr. Couchman

Will the hon. Gentleman concede that the United Kingdom's preoccupation with the old industries, the sunset industries as he describes them, has left us on the starting line with the sunrise industries, and with severe skill shortages? GEC Avionics is an important employer in my constituency and it wishes to take on 500 people this year. It must go to Australia and New Zealand to find people with sufficient skills for those jobs. At present it has a superb export order book.

Mr. Brown

The hon. Gentleman makes a different point, but I am happy to answer it. He talked about shortages of skills, which is mentioned in the motion tabled by the hon. Member for Lincoln. These shortages are a direct result of the neglect of training during the past seven years, when the Government should have known that skilled engineers, computer operators and manpower for information technology industries would be required. Indeed, the chairman of the Manpower Services Commission, who is an appointee of this Government, not of the Labour Government, has been extremely critical during the past few weeks of the Government's policy of abandoning industrial training boards and of other measures which hubs led to a decline in the number of manufacturing apprentices and trainees. Therefore, if the hon. Gentleman wishes to avoid a shortage of skills in future, he must persuade the Minister to change his list of industrial objectives in such a way that money will be spent on training at an advanced level.

Dr. Hampson

The hon. Gentleman must recognise that unprecedented sums are flowing through the MSC to those areas, despite what he says. The Labour Government talked about these matters but did absolutely nothing. Mrs. Williams tried to persuade the Cabinet to set up something like the youth training scheme and to get in-service teacher training in order to provide mathematics and physics teachers, whom we still desperately need.

Mr. Brown

I hope that the hon. Gentleman will agree that the Government made a grave mistake in abolishing the industrial training boards. I hope he will agree with the chairman of the MSC, who has talked about the absence of provision in the private sector and the ineffectiveness of the voluntary arrangements, in which the Government have placed great faith. On YTS and apprenticeships, I hope that the hon. Gentleman will note that in 1979 more than 250,000 young people were either apprentices or on training courses in manufacturing industry, whereas under this Government's policies the decline in training opportunities in manufacturing industry has been even greater than the decline in employment in manufacturing industries. Now no more than 100,000 young people are in training either in apprenticeships or on YTS in manufacturing industry. That will inevitably lead to skills shortages later, if and when our economy expands.

I hope that the Minister will say, either tonight or later, why it is, if the Government are on course and we are experiencing industrial progress and things have never been so good for 90 per cent. of the population, that we can look forward only to the prospect of ever-increasing trade deficits, even in the new industries. Does the Minister accept his figures, which show that not only in petrochemicals, where we might have expected to do well, but where we have done particularly badly, but in electronics, microelectronics and information technology our trade deficits and the surplus of imports over exports have been rising at a phenomenal rate over the past seven years? If we are to believe a survey carried out, not by Cambridge university, but by Cambridge Econometrics —a body whose calculations are usually accurate—those trade deficits will increase substantially during the next 10 years, and our manufacturing trade deficit, which is already high, could double.

In the face of those problems, surely the Minister's list of abstract objectives, which involve no specific commitments to any measure that would lead to the expenditure of money, must be reconsidered. If we are to lose the place, and if we are to be unable to compete in information technology, computers, petrochemicals and microelectronics, our future as a manufacturing nation is bleak.

We in the Labour party understand that the world of manufacturing has changed and will continue to change. We understand that a feature of that is that there is almost no manufactured item produced in the United Kingdom which is not also produced abroad, and so has a direct competitor abroad. We also understand that we should be most able to compete in precisely those new high value added, research intense, high skill and high technology industries. However, if we are to be able to compete, we cannot surrender spinelessly, talking about the supremacy of market forces, because no other country does that. We must look carefully and pragmatically at how investment in training, science and technology, research and development and plant and equipment can aid an industrial expansion in those industries which would secure the wealth that would enable us to have jobs in manufacturing industry and to see them spin off into the service industries. That is a question, not of abstracts, but of specific policies which the Government should pursue.

What will the Government do in areas such as research and development, and training, having seen it acknowledged by all the agencies, including para-Governmental organisations, that there is a crisis and steps must be taken? What can the Minister do to change the situation where only half our factories use micro-electronics and the other half have no plans to use them, and where three quarters of the firms in the modern world have no access to computers and computer equipment? How can he change the fact that in Japan robots are widespread in manufacturing industry, whereas in Britain not many are available? How can he change the fact that in information technology, acknowledged experts say that 7 million jobs will be created throughout Europe over the next 10 years, yet there is no guarantee that this country — through research, investment or training — will benefit in any substantial way?

How can the hon. Gentleman change the fact that we spend less on civil research and development than almost all our major competitors? In other countries, expenditure on science and technology has been rising by between 9 and 10 per cent. a year whereas here it seems to have been rising by about 1 per cent. Most of all, how can he change the fact that at present we cannot avoid skill shortages in the future and that we will not have the kind of trained and skilled work forces that will be needed if we are to have a successful manufacturing future?

I have mentioned what the chairman of the MSC—a direct appointee of the Government—has said about the abolition of the industrial training boards. He talked about the broken promises of industrialists to provide on a voluntary basis the training that was lost when the industrial training boards were compulsorily wound up. He has talked about the dearth of action by industrialists to cope with the vacuum that was left following the abolition of these industrial training boards.

An MSC study has shown that British companies are spending far less on training as a proportion of their sales turnover than are comparable companies in Japan, the United States and Germany. It has also shown that 69 per cent. of employees are at present enjoying no training and that 25 per cent. of the manufacturing establishments surveyed had no training opportunities on offer.

That is the real world of manufacturing industry, and those are the real problems. We do not need abstract lists of industrial objectives for some distant day in the future to tell us what the real problem is. It is a question of what the Government will do to ensure that the important new industries will win.

As the right hon. Member for Hertsmere should know by his selective use of them, statistics can tell us many things. Is it not astounding that the figures available show that twice as many people in South Korea are in training in higher and further education as in Britain? That is the state to which this Government have brought the country. Seven years ago we might have hoped to compete with the West Germans, but our best hope now is to try to keep up with the South Koreans. Seven years ago we might have hoped to compete with the Japenese, but now our best hope is to be able to compete with the Taiwanese.

Mr. Parkinson

The hon. Gentleman accused me of using selective statistics. I hope he is not denying that we had record exports in manufactures this year and that the decline up to 1981 has now been arrested. Those are facts. Whether we should be doing better is another matter. However, on what does the hon. Gentleman base his assertion that seven years ago we were in a position to begin competing with Japan? As I said, in 1978 Toyota was producing 65 cars per employee, whereas Leyland was producing 5.5. The hon. Gentleman says that in 1979 we were on the verge of being able to compete with Japan. In reality, we were on the verge of going under. If the hon. Gentleman bases the rest of his speech on the assertion that a few years ago Japan was within our grasp and that we have slipped behind, he is ignoring the real world.

Mr. Brown

The right hon. Gentleman would have heard me describe some of his selective statistics had he been present at the beginning of my speech. He again says that manufacturing exports are at a record level. He must accept that our share of world manufacturing exports is at its lowest level ever. That is surely a reflection of our ability to compete with other countries.

The right hon. Gentleman talked about the recovery that has been brought about by increasing investment, but in reality investment in manufacturing industries in the United Kingdom is still below the level of 1979. Will the right hon. Gentleman explain why, after seven years of this Government—after seven years of talk, promises and two elections—manufacturing output is still below the level it had reached when the Labour Government left office? If the right hon. Gentleman can explain that conundrum, he will be doing the House a great service.

Mr. Parkinson

When the Labour Government left office in 1979, certain industries were being maintained purely on the basis of colossal subsidies. At that time the Department of Trade and Industry was spending £2 billion merely on funding the losses of a selection of nationalised industries that were producing products that were incapable of being sold without huge subsidies. There was a substantial block of heavily subsidised production, and the hon. Gentleman's own Government had plans to reduce that capacity. It was not the Conservative Government who evolved the plan to reduce the steel industry to 15 million tonnes, it was the Labour Government, who did not have the guts to do it before the last election. Therefore, we had a lot of heavily subsidised production which the Labour Government were planning to cut out had they been re-elected, but they were not reelected.

Mr. Brown

The right hon. Gentleman has entirely missed the point that I have been making, and I wonder whether he was listening to what I said. My point was that if this Government's record was anything to write home about, we might have expected them to be doing well in the new industries. We might have expected this Government to have had record trade surpluses in areas such as information technology, computers, electronics and petrochemicals. Yet the trade deficit in these industries is worse than in many of the traditional industries which the right hon. Gentleman says must be run down because of outdated technologies.

Like the Minister, the right hon. Gentleman has not explained why under this Government manufacturing output is still below the level of 1979 and, indeed, the three-day working week of 1974. It is hardly a record about which the Minister should boast. No country has had the financial advantages that this Government had when they came to office as a result of North sea oil revenues——

Mr. Kenneth Carlisle

I apologise for interrupting the hon. Gentleman, but when I presented the motion I was hoping that every Back Bencher who wished to air his views could participate. I hope that the hon. Gentleman will bear that in mind.

Mr. Brown

I am grateful to the hon. Gentleman, but the Minister spoke at some length about the sixth point of his industrial objective. However, I have been deterred from completing my speech by the interventions of the right hon. Member for Hertsmere. I can assure the hon. Member for Lincoln that it is my intention to complete it now.

No Government have had the advantages that this Government have had as a result of North sea oil revenues. Those revenues should have gone into investment, training, research and development and science and technology. Instead, they have been wasted on funding ever-rising levels of unemployment, which in real terms shows no signs of falling as a result of Government policies. No Government have so systematically wasted the opportunities that have been placed before them. They have created an industrial desert. They have called it a recovery and have presented it as a triumph of monetarism.

The Opposition believe in the future of manufacturing industry. We will invest in it. We will pay attention to the needs of training, research and development, science and technology and the re-equipping of the vital industries that must win in the export markets if we are to succeed as an industrial nation. The country understands that, and it also understands that this Government have failed.

6.39 pm
Mr. Gerald Howarth (Cannock and Burntwood)

So far we have had a good debate which has perhaps been somewhat dominated by the Conservative Benches. However, we were all interested in the exchange between my right hon. Friend the Member for Hertsmere (Mr. Parkinson), a former Secretary of State, and the Opposition spokesman, the hon. Member for Dunfermline, East (Mr. Brown). Clearly my right hon. Friend scored all the points in that exchange.

Unfortunately, it appears that the Opposition have learnt nothing. We have heard only a minute's worth of their proposals although we have learned that they are now in favour of robots. It is a pity that it has taken them so long to reach that view. When our industries were under their stewardship, they were unable to invest for the future and in robotics for British Leyland. Robotics has saved British Leyland from extinction.

I join hon. Members from both sides of the House in congratulating my hon. Friend the Member for Lincoln (Mr. Carlisle) on securing this important debate and on the terms of his motion, which I entirely endorse. As an international banker, I am not paid as highly as popular rumour would have it. I believe that international bankers are paid a proper rate for the job and I should like to see higher pay in industry. I am worried at the attempts that have been made to polarise the United Kingdom economy into manufacturing and service industries and pitting the one against the other. We need both and we must, as a nation, excel at both

These days, in order to sell a power station to India or aeroplanes to Botswana, it is necessary to provide a potential purchaser with the finance. British architects earn valuable foreign exchange for services rendered to overseas clients and they enhance the opportunity for United Kingdom contractors to secure the follow-up business.

We can be justly proud of the achievements of our service industries in greasing the wheels of industry and in securing overseas business in their own right. London is the undisputed centre of the financial world with more than 500 foreign banks. Lloyd's is the principal insurance market, and foreign companies invariably seek to have their contracts governed by English law as they have the highest regard for our legal profession and for the administration of justice. I would like that spirit of enterprise, confidence and determination which is so evident in the service sector of industry now to pervade the industrial sector. Like my right hon. Friend the Member for Hertsmere I believe that we are approaching the new culture that we are trying to create.

Mr. Nicholas Winterton (Macclesfield)

I have been following my hon. Friend's argument, although it has been brief so far, very closely. I am one of the Conservative Members who has considerable reserve about the positive position of the City of London. Can my hon. Friend explain why the City of London finds it possible to devote hundreds of millions of pounds to takeovers which do not produce additional jobs? Will he, further, tell me why the City can find so much time and expertise to invest money in other paper money by way of foreign currency transactions rather than investing in manufacturing industry? That is the few making a lot more money for the few and ignoring the real needs of this country which lie in manufacturing industry. There is so much money in the City. Why is that money not coming out of the City and into manufacturing industry?

Mr. Howarth

As always, my hon. Friend is very vigorous in his remarks. However, he fails to understand that funds are available. There is no shortage of funding for anyone who has a good idea. To talk about the recent spate of mergers and takeovers is a complete red herring.

Mr. Winterton

No, it is not.

Mr. Howarth

It is. I must tell my hon. Friend who is becoming agitated that I support him in most things. However, he has a perverse deviation on this point.

Mr. Winterton

Perhaps I should ask my hon. Friend to withdraw that remark.

Mr. Howarth

I am unable to support my hon. Friend in that deviation. The banks are falling over themselves to lend funds for any good product or proposition. It is simply not true ——

Mr. Winterton

No, they are not.

Mr. Howarth

My hon. Friend says that they are not. If they are not, there are plenty of Government agencies which are willing to invest money. NCB (Enterprise) Ltd. in my constituency has £15 million at its disposal. It is anxious for anyone to come forward with a good idea which it can support.

Since entering the House in 1983 I have taken a close interest in manufacturing industry in my constituency and I have a special interest in the aerospace industry. Among the companies in my constituency there are Lucas Electrical, a major caterpillar dealer and a company which supplies sports boats around the world from a point which is the furthest from the sea in the United Kingdom—Fletcher International Sports Boats. The picture in my constituency and elsewhere in the west midlands does not accord with the description that I have heard from the Opposition Benches.

There is no doubt that industry has problems. However, there is, also good news and that point was most forcefully made by my hon. Friend the Member for Lincoln (Mr. Carlisle) who moved the motion. I have seen a textbook revolution taking place in my constituency. There was clearly overmanning on a massive scale when this Government came to office in 1979. Under previous Labour and Conservative Governments the unions had been allowed to dictate the level of manning. The result was that the unions, anxious to maintain short-run jobs, ensured that industry was overmanned to the extent that it was completely unable to compete. This 40 years of failure by previous Governments to allow management the right to manage, has been at the heart of our problems.

In seven years we have had to do what our major competitors have done over the past 40 years. That is, we have had to adjust manning levels to the requirements of industry and the needs of the market. This change has been traumatic. Every week hon. Members see the results of this traumatic change in their constituencies. However, I believe it is to the great credit of the Government that they have at long last bitten on the bullet and taken the necessary action to allow management to manage so that at last we can start to rebuild.

Those who say that our economy is now wholly dependent on North sea oil should remember that it constitutes only some 8 per cent. of gross national product. It is not the most dominant sector of our economy. I liken it to Dunkirk. Just as the British Expeditionary Force was fortunate to have calm weather when the little ships returned from Dunkirk, so I believe that the Almighty has smiled on the British economy. He has given us oil, the most valuable commodity of its time, out of the most inhospitable waters, from which we have been able to derive resources which are now providing us with the cushion of opportunity to correct the economy.

We were suffering from overmanning and that has largely been resolved. New union agreements have been made whereby the work force is more flexible in its agreements with employers. Investment has risen by 39 per cent. since 1980–81. The hon. Member for Dunfermline, East referred to robotics. No doubt he has visited Austin Rover where robotics have made a substantial contribution to the revitalisation of that company. Since Jaguar came under new management in the early 1980s, the amount of investment to which my hon. Friend the Member for Macclesfield referred, has been about £100 million. That investment is producing results. Initially that investment displaced men. The move towards the introduction of robotics which was so strongly resisted by the unions and the Labour party stood in the way of progress in manufacturing industry. It is the shackles which outdated manufacturing processes have placed on manufacturing industry which have created the problems.

These changes together with the new determination evident in the industry not to rely on captive markets as in the past but to provide the products at the right price on the right delivery date, is turning the British economy round. The managing director of Jaguar has said that he will go for a zero defect car. It is no good producing an expensive car if people have to take it back to the dealer so many times that they are put off. I salute Jaguar's work in setting an example for the rest of British industry.

I have firms in my constituency which were in difficulty but which are now quietly confident. That is most encouraging. They are taking on new labour, although they are not making a great song and dance about it because they do not want their competitors to know and because there is unquestionably a reluctance to believe that there is a boom ahead. We want quiet confidence—a boom would destroy the manufacturing base because it would immediately suck in imports, and our industry cannot respond to such an increase in demand overnight.

Some of the calls on the Government to take action are right. It is now time for interest rates to come down. They represent a substantial burden on industry. My right hon. Friend the Member for Hertsmere was entirely right about interest rates being unreally low. They are now unreally high. My authority for saying that is discussions with foreign exchange dealers in the City who firmly believe that falling interest rates would be regarded as a sign of strength in the British economy and would not result in sterling going through the floor, thus creating inflationary expectations.

The Government have managed to reduce energy costs to industry by 8 per cent. That achievement has gone unremarked on the Opposition Front Bench. The reduction is largely the result of the Government's action in regard to the National Coal Board — they have ensured that it has become much more commercial.

I urge my hon. Friend the Minister to re-examine the European Community directive on product liability. It is causing industry, especially manufacturing industry, great headaches. It will add to their costs and it is likely to benefit the importer rather than the domestic producer.

I urge my hon. Friend not to relax the green belt. There is plenty of available space in other parts of the country not far from the south-east where there is relatively cheap accommodation. The Government must reconsider rent decontrol, which is vital.

It is not entirely up to the Government or industry to put their houses in order. Industry can do a lot, but I put in a special plea to the fourth estate—our friends in the media. Please will they stop knocking manufacturing industry? Journalists in France and Germany, for example, do not knock their industries. There is far too much knocking of British manufacturing, and less would be greatly appreciated. My message is that industry is prospering under the Government and I hope that it will continue to prosper even more.

6.54 pm
Mr. Michael Fallon (Darlington)

Time is short. I make no complaint about that. I should have liked the hon. Member for Dunfermline, East (Mr. Brown) to have spoken longer as we did not hear enough about Labour's industrial policy. We heard very little, for example, of the extensive nationalisation that was promised in 1983. Has that now been jettisoned from the manifesto? We heard very little about the planning controls and agreements that were sought by the hon. Member for Liverpool, Walton (Mr. Heffer). I look forward to seeing how those discussions proceed. We also heard little about incomes policy and the present negotiations between the Labour party and the trade unions. We did not get quite the full picture of Labour's industrial policy that we expected.

Until the hon. Member for Dunfermline, East spoke, I thought that this had been a useful debate. I thought that it had finally dispelled two great myths about manufacturing industry—that it is doing badly and that the Government are not doing their best to assist it.

I cannot judge whether manufacturing is leaner or fitter than in the 1950s, 1960s or 1970s, but I know that it is a lot healthier than Opposition Members suggest. I know that capital investment of £6.7 billion was made in manufacturing last year — 21 per cent. higher than in 1983, when I was elected to this House. I know, too, that engineering output was up 6.5 per cent. last year, that machine tool exports have increased by 20 per cent. during the past 12 months and that there have been considerable and formidable improvements in productivity in the steel and textile industries.

In the north-east, despite high unemployment and what the hon. Member for Jarrow (Mr. Dixon) told us, scores of manufacturing companies are doing well and making good profits. If there were not, we should not be getting 25,000 people off the unemployment register every month, as happened last year in the north-east. The hon. Member for Jarrow gave two examples, both of which I want to take up. He mentioned steel. He might have seen last Sunday's edition of the Northern Echo which ran and article on the Darlington and Simpson Rolling Mills annual results under the headline: Huge profits add 100 jobs. The company sells steel profiles across Europe and into the heart of America. Profits last year increased by £800,000, or 16 per cent. The profits of £6.7 million have been ploughed back into the company. At the beginning of the year for which it reports, the company employed 645 people. It now employs 737 and will employ 837 people next year.

The hon. Member for Jarrow also mentioned NEI Reynolds and its anxiety about power station work. It is far more worried about the threat to the nuclear power station programme posed by the Labour party's conference resolution at Bournemouth last year. Not many people in NEI will be voting Labour at the next election and seeing themselves put out of work as a result.

It is simply not true that the Government are not helping industry. Some 28,000 jobs have been created by the new regional policy in the north-east alone during the past two years, and a further 10,000 jobs have been preserved. The Department of Trade and Industry's spending is now much better balanced. We get more for the regional aid money that is spent, and we get better spread of support between the new and the old industries. We also have enterprise creation measures which we never had under previous Governments.

Radical government cannot stand still. As well as creating the right conditions of low inflation and helping with the economy, the Government should do two other things to assist manufacturing industry. First, they should target regional policy even more effectively. I understand that a mini-review is going on at the moment. There are still distortions, not simply between assisted and non-assisted areas, but between assisted areas — between development areas and intermediate areas.

The Government must also improve the efficiency of the labour market. An unemployment rate of 13 per cent. is neither tolerable nor efficient, but 23 per cent. male unemployment, as in the north-east, is simply unacceptable, especially when we consider the skills that are wanted in the south and which are wasted in the north. There are men in the north who want to work but cannot because they are trapped in the north in private houses that they cannot sell or council houses that they cannot exchange. I am aware that not all want to move, but it is much more difficult now for people to move than it was in the 1930s or the 1950s, as the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) said. If the Government do nothing else—there were signs last week that we will not do much else— they should radically improve the housing market by making it much easier, by decontrolling rents and relaxing green belt restrictions in the south, to provide opportunities for people in the north who are out of work and have skills to move to areas of the south-east where there are skill shortages.

Question put and agree to.

Resolved, That this House agrees that manufacturing industry has a central part to play in the future prosperity of the United Kingdom, and, that, in order to succeed in a fiercely competitive world, it must use the most modern manufacturing methods, and market its products with skill; notes further, that the importance of manufacturing must be recognised by society generally and by schools and colleges in particular, so that industry can surmount the present shortage of skills; and believes finally that success in manufacturing can only be won in any enterprise through the united efforts of all the work force.

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