HC Deb 21 March 1986 vol 94 cc562-78 12.56 pm
Mr. Timothy Wood (Stevenage)

I beg to move,

That this House strongly supports the policies pursued by Her Majesty's Government in European collaboration in research and development in high technology industries, including through Esprit and Eureka; and in addition wishes to see these industries further develop joint manufacturing and marketing projects.. I wish to draw attention to some matters that I find encouraging and others that give me cause for concern. I hope that the encouraging items show the way in which some of the problems can be tackled. In the development of new ideas and in the making of new scientific discoveries, Britain's record in this century is one which any other country would find difficult to match. However, it has been repeatedly stated that in translating that scientific invention into profitable and practical use we have lagged behind.

When Great Britain was in the happy position of being able to sell its manufactured goods to an empire, the impact of international competition was weakened and we could rely upon a market of immense size. That no longer applies.

Although the costs of manufacturing goods may be falling with increased automation and mechanisation, the costs of developing new aircraft, new computer syterns and even new motor cars steadily increase. To fund the investment needed and to obtain a profitable return requires large sales and a large market.

In general, European companies and countries have not been particularly successful in looking beyond their national boundaries. The pursuit of jointly funded projects has been the exception rather than the rule. There has been no particular wish to buy European. The British are slightly inclined to buy British, but the French are more positively inclined to buy French. If no attractive home product is available the average European purchaser is at least as ready to buy Japanese or American as to buy from another European manufacturer. Perhaps that is sensible, but the consequence of a fragmented Europen market is to reduce the sales volumes of individual European manufacturers and thus to deny those manufacturers the funds for the further investment that they need.

About 20 years ago I naively assumed that the EEC would lead to a truly common market, that within a relatively short period the barriers to trade which then existed would be substantially removed. Although some progress has been made it has been disappointingly slow. Even some of the important initiatives that have been taken. are all too easily clogged up with bureaucratic decision-making. In high technology projects a delay of even a few months can turn a profitable project into a financial disaster.

In two areas European co-operation has been encouraging and the benefits have still to be fully realised. One is in the development of information technology and the other is in the design, development and manufacture of major aerospace projects. In information technology the EEC's funding of the Esprit and Eureka projects are proving to be an important stimulus to development effort . Esprit is, of course, related specifically to information technology projects. On a European basis it is an extension of the aims and objectives of the well-established Alvey programme.

The European Commission identified five priority areas of information technology that justify Community effort. They are advanced micro-electronic capability, software technology, advanced information processing, office systems, and computer-integrated manufacture. The Commission also proposed bringing the 12 major European information technology companies, including International Computers Ltd, GEC and Plessey from the United Kingdom, together with universities and other research centres. It has certainly been good to see those companies from different European countries co-operating more steadily together, as well as competing, where appropriate.

The Alvey project has proved to be an important stimulus in bringing together those companies and academic institutions in major research projects in Britain. There are encouraging signs that Esprit is acting as a catalyst for greater co-operation and dialogue between the European high technology companies. Although the Esprit programme is an important catalyst for joint European competitive collaboration between companies, it is naive to suppose that that in itself will enable European companies to compete effectively in the long term.

There is a need to progress further in collaboration on product development, manufacture and marketing. Inevitably, there must be major reservations about how programmes, such as Alvey and Esprit, can respond swiftly and flexibly to encompass the rapid changes that may be perceived in the development of new projects.

When I worked for ICL, on one or two occasions I was involved in putting forward development projects to the Department of Trade and Industry for support. The Government officials examining the project were extremely helpful and constructive in their approach. Nevertheless, by the time that the proposal was sufficiently well formulated to merit support, a substantial amount of work had already been carried out. Furthermore, the nature of such projects is that significant changes may need to be made to them and considerable time may have to be spent on justifying them to those responsible for financial support.

Overall, although one is providing that catalytic help to companies, they often have to spend considerable resources and time, presenting the case for a particular project and considering the case and the possibility whether the Government will believe that the proposed changes can be justified financially. Those factors often act as a slight hindrance, although the end result may be financial support.

The House of Lords Select Committee on European Communities considered Esprit in its eighth report last Session. I agree with its main conclusions, and although I have already touched on most of them, they are worth re-emphasising. Pre-competitive collaboration should be a precursor to collaboration on product development and manufacture. There need to be many more effective moves to create a true common market with the reduction of differing standards, and of border delays and restraints on trade and services. There is also a great need to ensure that a sufficient number of people are properly qualified to exploit the new technologies.

I have often spoken of my concern about the amount of higher education and training that we provide, and I certainly do not wish to expand unduly on that aspect now. I wish to concentrate on how we can further expand upon co-operation between countries and companies, rather than on the more basic requirements of education and training.

Eureka was clearly stimulated by a wish on the part of the British Government to have a European high technology counterpart to the United States' strategic defence initiative. There is no doubt that many high technology companies believe that the United States space programme gave a major uplift to the development of a multitude of new projects, which will have a much wider application than the space programme. It is arguable as to whether research directed to more terrestrial activities would produce the same beneficial effects. However, it is clear that many companies involved in innovative projects believe that the setting of clear national or supernational goals for exciting projects can act as a major fillip to progress.

At the moment, the Eureka initiative is leading to attempts to resolve some of the problems identified as a result of the experience of work on Esprit. There is a major need to open up the European markets in sectors such as standards and public purchasing, and I welcome the efforts made by my right hon. and hon. Friends in the Department of Trade and Industry to make progress in this regard. However, I wonder whether it might have been possible to indentify exciting projects in medicine or communications, for example, where a major European drive could have been attempted and where one might have tried to excite popular imagination on specific projects that might be pursued. There is an opportunity to do such things, and if it is taken up, we might find in this country, as in the United States, that the necessary stimulus has been created.

The European collaboration in aerospece activities has advanced much further than in other sectors. Im my Stevenage constituency, over 8,500 people are employed by British Aerospace. I am delighted that such successful progress is being made in so many collaborative projects. Undoubtedly, the more concerted approach to European purchasing of defence equipment is having a beneficial effect, but that is not the whole story. Aerospace manufacturers have learned that while competing on some projects they can successfully collaborate on others, and that it is not necessary to have a large monolithic organisation to produce major new systems.

Airbus Industrie is a strikingly important example of a European response to the impact of large American aircraft manufacturers in general, and Boeing in particular. With the A300 and A310 having proved themselves in service with many airlines, the orders for the A320, standing at over 100, are well ahead of what many supporters of the project, like myself, dared to hope would be reached at this stage. The clear intent of Airbus Industrie to go ahead with the A330 and the A340 aircraft highlights the prospect of a European range of aircraft that meets the needs of many of the world's airlines. The British Aerospace involvement in the design and production of the wings of this aircraft is a most significant aspect of British involvement. However, there are a multitude of other contractors and sub-contractors making their contribution as well.

I have noticed that there has been a certain amount of speculation about the funding of British Aerospace's involvement in the A330 and the A340 development. The Government support for the A320 programme was clearly of vital importance. However, I believe that at present, apart from possible recycling or rescheduling of that finance, it should not be necessary for there to be further British Government support. British Aerospace has demonstrated to financial institutions that it is becoming a steadily more successful and popular company. That positive picture will, I hope, be reflected in a desire by investors to support this and other investment opportunities that British Aerospace presents.

Turning away from Airbus Industrie, one looks at some of the other aerospace projects which are also most significant. The Tornado aircraft and the European fighter project are other examples of European collaboration. But collaboration is not related solely to aircraft. The development and production of missiles for such systems as ASRAAM and Milan are extremely significant from the point of view of my constituency. There is also a range of collaborative ventures in space and communications development. A whole series of satellite and related systems are being developed in collaborative projects for use both on the Ariane launches and on the United States space shuttles. After last week's encounter with Halley's comet, it is perhaps worth singling out the success of the Giotto project. But most projects are, of course, associated with potentially profitable and useful satellite communications activities.

I could spend a great deal of time eulogising about the multitude of important projects that are being pursued by British Aerospace, many of them in my constituency, but I want to consider further whether there are lessons to be learned from European co-operation in aerospace which should be pursued in other areas of endeavour, in particular in information technology. I believe that a great deal can be achieved but that even now our opportunities are becoming more limited unless Governments and companies move much more rapidly than they have done.

Twenty-five years ago, in computer development, one had in this country several manufacturers producing mainframe computers. They included ICT, Ferranti, Elliott Automation, English Electric and EMI. By a series of mergers of computer interests, those manufacturers were reduced to one—ICL. At the same time, the physically large and slow machines of those days have either become enormously more powerful or have been superseded by desktop machines which are also more powerful, faster and easier to use.

For the small business and home computer market, a whole series of new companies has sprung up and, in many instances, faded away once more. Companies like Acorn, despite the success of its BBC microcomputer, and Sinclair, despite its innovative approach, have found the going much tougher than at one stage they anticipated. Even the United States company, Commodore, at one stage the producer of the most popular home computers, has suffered severely.

While much attention has been devoted to the varying fortunes of the microcomputer manufacturers, the manufacturers of large computer systems have had their own challenges to face. For the past 30 years the world computer industry has been dominated by IBM at least as significantly as Boeing has dominated the aircraft industry.

The huge world market which has been achieved by IBM has meant that that company has been able to devote enormous resources to further research and development. Nevertheless, it has proved possible for other companies—sometimes quite small companies—to develop items varying from processor chips to highly effective printers to floppy disk systems. It is not the case that only if one is very big is the world beautiful.

However, the development of complex systems and software requires considerable resources, and the effective marketing of these systems, together with proper support, after those systems have been sold and installed requires great resources too. ICL, Bull of France and Siemens of Germany, have set up a research centre of technological excellence in Munich. I hope that it will prove to be the small beginning of major efforts to produce larger computer systems and computer networks on a European rather than a national basis.

Large computer systems seem to me to lend themselves at least as easily as aircraft to the development and production of varying parts by different companies in different countries. In a typical computer system one would have not merely the computer processor; one would have various memory systems for direct access memory, or disk drives, or magnetic tape drives. One would also have varying types of printers, display equipment and so on. A considerable variety of components could be developed by different companies if they collaborated more.

A company may first consider whether it is sensible for it to produce a certain item. If it is not, the company looks at the world scene and perhaps picks up one component from Japan, another from the United States, and so on. That may be sensible in the short term but, by acting in that way, the company is eroding its potential markets.

In the end, the potential market is one of the cnicial aspects of success in high technology. A company that does not co-operate with other manufacturers will not create a large market. Many high technology industries will fail if they do not create such a market. The lesson to be learned from aerospace is that the various European aerospace companies have got together, resulting in them being able to market jointly their various products and thus win greater confidence from potential purchasers of their products. In turn, this means that, in 10, 15 or 20 years, they will have more resources for research and development.

How do we best advance this cause? I am not one of those who believe that companies and industries should be led by Governments. It is up to companies to ascertain the ways in which various projects can be pursued together. However, Governments have a role—first, in providing the catalyst in terms of, for example, the Alvey programme, Esprit and, potentially Eureka and, secondly, in creating an environment in which Government purchasing in different countries is co-ordinated. Coordination would mean that the French would not look for a French manufacturer and then look at the world scene, that the Germans would not look for a German manufacturer and then at the world scene, and so on.

It has been said that ICL's market has been excessively protected in terms of sales to the Government. In some respects, that is true, but it has not been protected in terms of the European market. I do not want protection. I should like co-ordination in the way in which we organise our affairs in Europe so that we can create the base to enable our companies to succeed.

Similar considerations apply to aerospace and information technology. They may apply in the longer term to the nuclear power industry, motor manufacturing, and so on. Where there is a need to spend large sums on research and development and on support for the consumer after he has acquired equipment, it is a function of Governments in support of industry, to ensure that the potential is fulfilled.

I hope the House will see that the points I have made are valid and that there is a strong case for reinforcing cooperation on high technology initiatives, and for reinforcing the work in aerospace and in information technology. If we do that, we can become within Europe a highly successful and continuing base for the manufacture of high technology goods. I hope that we will not be reduced to a tourist centre and a place where people come to see what was once the base of an empire but is no longer.

1.21 pm
Mr. Geoffrey Robinson (Coventry, North-West)

I congratulate the hon. Member for Stevenage (Mr. Wood) on initiating this debate. He may have caused more embarrassment to his Government than was the intention when his motion was originally tabled, because it comes hard on the heels of obvious anti-European initiatives against industries that are of key importance to high technology. It comes at a time when we are selling out our helicopter industry to Sikorsky. In that case we barely looked at, and then turned down, a European alternative. It also comes when the Government have embarked on a hell-bent course to sell off Land Rover.

I mildly rebuke the hon. Member for Stevenage for saying that even motor cars cost a lot to develop these days. They always did, but they cost more than ever now because they are at the forefront of the advanced technologies about which he was speaking from his own experience in software and computers and their application in the main areas of the Esprit programme. Motor cars, including Land Rovers, are at the forefront of those applications and to a large extent the health and strength of our advanced technology industries depend on the health, strength and size of our motor car industry. That is why the Opposition were against the Government's proposals to sell off with meaningless undertakings first our helicopter industry to Sikorsky and now, irrespective of the merits of the case, our own vital motor car and truck industry to General Motors.

With considerable help from Tory Back Benchers, we managed for a while to fight back the Government's intention to sell Austin Rover, and all the success it has achieved, to Ford. Far from promoting national and pan-European solutions to our problems, the Government have given up on British management and technology and have turned their back on co-operation with Europe. They are intent on cutting their own expenditure by selling out to the Americans.

Mr. Wood

One of the crucial points I endeavoured to make in my speech was the importance of a large market. If one finds that, for various reasons, a market has diminished, there is no point in wishful thinking about the maintenance of a specific manufacturer. One has to build confidence in a market for the goods being produced, and that must be done by combined development projects and by good after-sales service. Once one has got that market one is in a good position, but there is no point in crying once the market has been lost.

Mr. Robinson

I do not see the relevance of that intervention to the point I was making. I agree there is no point in crying over a lost market. One has to do something about it. One must get back that market share and that is what every other country and every other industry is doing. It is a diversion from the main topic of today's debate, but it is interesting to note something I have not heard said on either side of the House, that Renault, the enormous state-owned French car and truck producer, has made losses in the last few years of £1 billion a year. We hear no debates about the French Government flogging off Renault in part or in whole. As a whole, it is making those losses irrespective of any changes in the management of the company.

We can blame the French Governnent of Mr. Mitterrand for many things, but we cannot blame him for the running of Renault because he has no direct responsibility for it. It was nationalised by none other than General de Gaulle, as hon. Members on the Government side will know. It has remained nationalised and has been run by a succession of distinguished French industrialists. Whatever we may think of President Mitterrand, he has no responsibility for the performance of Renault. The French see the strategic importance of that as they do of Esprit and the other programmes that we must consider today.

I noticed one surprising point in the speech of the hon. Member for Stevenage. I do not know how it will be received by his constituents. He said, if I understood him correctly—I am sure he will take every opportunity to correct me if I am wrong—that he did not think that British Aerospace needed Government support for its share in the development of the wing structure for the new Airbus. He is being quite quixotic in making that remark.

In my experience, dating back to the early 1960s, I know of no aerospace project of that magnitude that has not involved Government funding in some form or another. One can go back to Rolls-Royce and its unfortunate collapse and the humiliation of receivership that it experienced which the Conservative Government then—they may regret it now—forced the company to go through; to the invention of launch aid, a brilliantly innovative concept from the Department of Trade and Industry; and to all the programmes, civilian and defence. They have always needed Government aid, and we must say again, as we did at the last trade and industry Question Time, that it is not enough for the Secretary of State to list a formidable series of barriers and obstacles for the company to overcome and to refuse to give me an explicit undertaking that aid, even in principle, was not ruled out. We are asking for no more than that.

Anyone can sit back and say that the company must be profitable and that the money must come from somewhere else. In all, he rattled off about five obstacles to any Government funding. The harsh reality is that at the end of the day, the Government will have to back the project, and the earlier that that is made plain, and the earlier that the Government come in and support British Aerospace, the better will be the deal that we shall get out of that aspect of European co-operation on the new technologies.

Mr. Wood

British Aerospace has not as yet made an application for aid. My understanding is that it is still considering what its requirements, if any, might be. The point that I was trying to emphasise was that, in view of the major successes that British Aerospace has been having, I see good prospects of further funding being available from the private sector.

Mr. Robinson

Nobody is putting that in doubt. That is not the issue. I am sure that the directors and management of British Aerospace will vigorously pursue every avenue of private finance. The hon. Gentleman is missing the point. What he ought to be doing, if he were doing his job as a constituency Member of Parliament, is joining Labour Members in pointing out to the Government the obvious fact that they will have to support the project. We shall see. If it does not come in that project it will come in some other, but I guarantee there will be government funding, directly or indirectly, behind that project. The Minister shakes his head. I hope that in the coming months I shall reflect with wry amusement on the fact that on this particular issue he has not been correct. Money will be needed. It will be found, directly or indirectly, and I hope that that European area of collaboration will proceed.

We are discussing today the question of European cooperation in advanced technologies against a background of continuing decline. That has accelerated considerably under the Government, but it has been there since the war. Historians and economists trace it back to the 19th century. I am never clear what good it does for us to carry out that form of industrial analysis, which relates our problems to a cultural difficulty, other than that it focuses Government policies on what we should be doing now, which those who look that far back may often fail to do. If I could do that today it would be by merely establishing yet again how great the need is.

There was a debate in the other place in which it was pointed out, and it is worth pointing out again today, just how far Europe and the United Kingdom are behind. If we look at the production of main frame computers, integrated circuitry, and video recorders the figures are alarming. The market for large industrial computers is dominated by the United States with Japan catching up. But eight out of 10 personal computers sold in Europe are made in the United States. Nine of of 10 video recorders sold here are made in Japan. European manufacturers of integrated circuits control only 30 per cent. of our market—that is the Community market—and 13 per cent. of world sales.

It is a long time since Babbage first developed the concept of the computer way back in the 1920s. During the war, with our national effort focused in the dire straits of apparently overwhelming odds, we assembled a team of scientists at Bletchley park, built the British colossus and cracked the German Enigma code. In the post-war period we have seen a progressive decline of our ability to develop and apply some of the billiant fundamental research which has been carried out. That is a commonplace point and one we should never lose sight of.

With equal emphasis, I must also point out that the solution to the problem of our failure sufficiently to develop and apply technology and research is not to cut the research itself. I see no merit in cutting research because, by their very nature and character,-the people who do the fundamental research will not be those who will be out in the hurly-burly of the market place, under the pressure from sales and production, giving us the products needed from the basic research.

The movement for saving British science is not an aberration. It is not a group of academics anxious to preserve their own funding, but a reaction to the cuts in all areas of Government finance for basic research. Cuts will not solve the Minister' s or our country's problems in the application of that research. To give up on what we are doing well will not solve the problem of what we are doing badly. We must think how far behind we are. It was put very aptly in a debate in the other place when it was stated that We are paddling in the shallows to reach the development boat, and that boat has yet to be pushed out."—[Official Report, House of Lords, 25 November 1985; Vol. 468. c. 755.] That is how far we are still behind.

No doubt we shall hear from the Minister a whole series of individual statistics relating to the Brite programme. One does not hear very much about that but it is one of the successful European programmes. No doubt we shall hear about Esprit and the number of successes we have scored there, and about Eureka. Having poured cold water on Eureka and having told the French Government that it was unnecessary and that the private sector would do all that was necessary, the Government, perhaps in anticipation of today's debate, on 13 March gave their blessing to Eureka. However, it did not stop us from doing badly in the first share of the Eureka programme and we have to admit, that to a large extent that was because of the Government's lukewarm, half-hearted support for it.

I accept that the Minister will have to pad out his speech with all sorts of statistics relating to Brite, Esprit and Eureka. I believe that Eureka is the most recent of the European based collaborative programmes. No doubt the Minister will inform us what each of the acronyms refers to. However, I ask the Minister not to lose himself in a wealth of detail relating to each of the programmes, to the proportion of the grant, to carefully chosen statistics arid to other information we shall no doubt hear, but to address himself to two central points. The second point is a great deal more important than the first.

Is there nothing that the Government can do to overcome the two criticisms which are levelled at the present programmes, even by those who are most in favour of them and in some cases by those who are deriving most benefit from them? The criticisms deal with the length of time it takes to get through the bureaucracy.

Inevitable obstacles exist m Brussels. I am sure that they are not created deliberately or because Brussels happens to be the centre of the official administration of the Common Market. They probably exist because, as with our own Civil Service, the problems of discrimination and the problems caused by being fair and undertaking a thorough evaluation, means that the evaluation periods are very wrong.

Does the Minister accept that the difficulties for small companies and universities are a great deal more formidable than those for large companies? A large company can afford a professional lobbyist; it can hire someone to live in Brussels, and he can stay there until he brings home the bacon. That is not the case for the universities since the Government hacked to pieces our research effort and support for the universities, nor is it the case for small companies.

Our heavy research and development effort, which is geared to the defence industry, is dominated by a few large companies. Indeed, it is difficult to get the spin off to the small companies. The pattern that is emerging from the European co-operative programme is similar, in that the beneficiaries are the very same large British companies with the resources to get in and overcome the bureaucracy involved.

I ask the Minister to look at that. Perhaps he will consider the possibility of Government help, by way of advice, introductions and even an increase in our office in Brussels, by which the small companies could be guided through the maze leading to the award of a grant under one of the European collaborative projects.

Mr. Wood

From my knowledge of British Aerospace and my experience in ICL, I know that there are a multitude of cases where small companies are taking part in projects, although the large companies may have initiated the development programme. Therefore, it is not true to say that small companies are being excluded in the way that the hon. Gentleman implies.

Mr. Robinson

I think that, under the Whips' orders, the hon. Gentleman must by trying to spin out the debate. I did not say that small companies were being excluded, but those involved in defence in this country do not have anything like the participation in the European programmes that I am sure he, the Minister, the Government and officials would like. There are problems for them. I am highlighting them and wondering whether the Government, in their wisdom and generosity, could extend a helping hand to the small companies in Britain. I assure the hon. Member for Stevenage, from my personal contact with such companies and knowledge of the matter, that those companies face formidable difficulties—perhaps they are as much in their own minds as in reality—in getting through the necessary process of evaluation.

Speaking in another place, the former vice-chancellor of the university located in the city that I have the honour to represent said in regard to the Alvey and Esprit programmes in Europe—I quote from col. 752—

Mr. Deputy Speaker (Sir Paul Dean)

Order. The hon. Gentleman must paraphrase. I am sure that he can do that.

Mr. Robinson

I meant to say that I would not quote. I apologise.

The former vice-chancellor referred to the need for an expansion of our national programme. He said that our national situation is critical and that we do not attract enough people into engineering. He said that we are not established as far as we should be in Europe, that we should prevent the present national hæmorrhage of skills and first-class talent, and that we need a national effort such as the French have, which is wholly nationalistic in research and development. He called for a major Government initiative.

I suggest something to the Minister that is much less ambitious and more modest. Has he read what was written in the latest edition of the British Plastics Federation's communication, referring to the briefing of the hon. and learned Gentleman's Department? It stated that the DTI outlined proposed changes in the manner of funding R and D, which will lead to an increase in funds for the EEC R and D budget and to a reduction in funds for national R and D programmes. Is that the case?

Does the Treasury really regard everything that our companies successfully obtain from the various European funds—to which, of course, it has to contribute—as involving a necessary reduction from the Department of Trade and Industry's support for the innovation programme? If so, it follows that, on any analysis, Europe, let alone Britain—which is probably the worst off of the advanced nations in Europe—is in a dire crisis in relation to Japan and the United States. That is recognised by every other Government involved, even if it is not recognised by our Government.

The very magnitude of the requirements in Europe means that there will be no United Kingdom funding if the Treasury line is pursued. The Minister shakes his head, but not long ago a Minister in his Department told us that all Government spending was bad. The only logical conclusion to that is that all Government spending should be ended. For many a year we have not had a particularly positive approach to spending in support of industry. I know that much to their credit, officials are resisting the line put forward by the Treasury. They do not want a reduction in the support for the innovation programme. Can the Minister give us an assurance that there will not be that reduction?

One of our major companies, GEC, is very good at getting both national and international grants. It has a proposition under the Eureka project. However, one of the reasons we are doing so badly is that it has been held up on the ground that the Treasury argues that the funding is additional,—a new concept of additionality—and so it cannot put the money into that project since money is already committed under Support for Innovation. Alternatively, money no longer needs to be committed under SFI, because the Government are contributing to the Eureka project. That has been agreed by the companies and has been agreed, in principal, by the Governments. The French Government have put up their 50 per cent. They have put their money where their mouth is, but our Government are dragging their feet. I hope that the Minister will give me a straight answer on that point today.

The scale of resources being committed under the support for innovation programme and under other related programmes is tiny compared with France or Germany, not to mention the two giants whom we are trying to catch up—America and Japan. A distinguished former civil servant has put forward figures for the micro-electronic component industry and they speak for themselves. The French have increased their spending by 500 per cent. during the past four years. The Germans have more than doubled theirs, but we have barely increased ours.

The Government's policy is shameful because it is short-sighted. It is harmful because the Department of Trade and Industry is being humiliated by the Treasury. It is negligent because it ignores the needs of British industries and research institutions. Labour will still work to save British science. It will work to restore the research and development budgets of our universities and research institutes. We will back British enterprise, British technology and British management, in whom we have not lost faith. We will back those institutions in their efforts to co-operate with Europe and to obtain their fair share from Europe. That is the only way forward. While the Government are looking and walking backwards, Labour will have the courage, intelligence and self- interest to back Britain and British brains.

1.44 pm
The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Michael Howard)

I am grateful to my hon. Friend the Member for Stevenage (Mr. Wood) for raising this important subject and I congratulate him on the cogency of his observations. He drew attention to major developments in European co-operation in high technology. There can be no dispute that the success of those industries is critical to the future economic prosperity of the United Kingdom and Europe as a whole. It is especially vital that European industry should and will prove itself competitive in the emerging world markets for new technology if new jobs and wealth are to be created in Europe.

So far, European industry's performce in competing with the United States of America and Japan has been disappointing. In recent years, the Community's share of export markets for high technology has tended to decline while the penetration of imports into the Community in those sectors has increased. Yet this relative competitive weakness seems to be growing at a time when, according to the European Commission, the Community has been and is still spending a larger proportion than the United States of America or Japan on basic research. Unfortunately, Europe's strength in research is not matched by its performance in producing and selling products. We have a good record for winning Nobel prizes, but not for winning new markets. But there are positive signs of changing attitudes towards the better exploitation of research and development so as to sell products, processes and services not just in Europe but in world markets.

That new spirit is shown by the steps being taken to create a genuine common market in Europe, to match the large domestic markets enjoyed by United States and Japanese companies. The Community has had this objective for all of 30 years. But many non-tariff barriers, such as differing national standards, remain in place. The creation of standards which are applied throughout Europe is vital if real collaboration in high technology industries is to be fostered, as is the opening of public purchasing to create a more unified market.

In June last year, the Commission's White Paper "Completion of the Common Market" was welcomed by the European Council. This year, the Netherlands and the United Kingdom, as the two countries holding the succeeding presidencies of the Community for the year, have identified more than 100 specific issues for decision. The process of opening the European markets is of central importance to the encouragement of co-operation by Europe's industry. Many of the individual measures taken to implement the White Paper will have a direct bearing on high technology Sectors such as information technology and telecommunications. In addition, the Eureka initiative—to which I will revert in detail later—will provide a clear link between the completion of the internal market and industrial collaboration by highlighting the measures which industry believes are essential to implement individual collaborative projects.

It is important also to recognise that the Community is playing a significant role in encouraging collaborative partnerships in high technology through aspects of its research and development programme. The most striking example is the Esprit programme, designed to strengthen Europe's capability in information technology by allowing companies to share costs and spread risks through cooperation across frontiers. The United Kingdom strongly backed the Esprit programme from the outset as an exciting and novel initiative. This view has been proved right by the response from industry during the two years the programme has run to date. The United Kingdom information technology industry has responded positively to the opportunities which Esprit offers. About 50 United Kingdom firms and 35 academic institutions are taking part in about 210 projects, which together represent more than two thirds of the work being supported under the programme. The whole programme represents a remarkable demonstration of European collaboration in an important high technology sector.

In computers, the Esprit programme is the centrepiece of European collaboration, but it is backed by a growing number of bilateral links. For example, the British and French Governments are exploring the idea of setting up a forum to encourage cross-frontier links between their two national industries.

The Community is developing programmes for research and development in a number of other areas which are also encouraging co-operation between firms in advanced technologies. The Brite programme is one example, which is concentrating on the application of new technology in more traditional sectors of industry. Another is the Race programme, which is concerned with the development of advanced telecommunications. All these programmes will help to bring together European industry into a collaborative effort which can handle those large or particularly expensive research and development projects which can be more easily tackled at a European level than on a national basis.

A major development in the Community's research and development efforts will take place over the rest of this year with the discussion and agreement on a new framework programme for reseach and development between 1987 and 1991. The process of formulating and considering these new plans has only just begun, so I cannot discuss them in detail today. But the objective of the new programme must be quite clear: to address the research and development needs of European industry and to further the creation of a climate in which collaboration in high technology can lead on to real success in the market place.

Aerospace is another area where European collaboration has been an outstanding success. The current Airbus programme is the largest and most significant example of international collaboration in the field of civil aircraft. It has demonstrated that six European industrialists can combine their manufacturing resources to produce a highly competitive range of aircraft with a market appeal strong enough to challenge United States industry. The Airbus programme has also created the opportunity for numerous collaborative projects among European equipment manufacturers.

Both my hon. Friend the Member for Stevenage and the hon. Member for Coventry, North-West (Mr. Robinson) referred to Government funding of the A330 and A340 projects. As my right hon. Friend the Secretary of State told the House last week, the Department has yet to receive any application from British Aerospace for financial assistance in respect of these programmes. When that application is received it will be considered on its merits, taking into account among other factors the prospects of the project achieving commercial viability and evidence that British Aerospace has tried to obtain private finance.

Mr. Geoffrey Robinson

Will the Minister give me an assurance on a matter to which the Secretary of State refused to respond when Trade and Industry questions were last before the House? It is not a hypothetical question because it relates to what is taking place. If the entirety of the money cannot be found from the private sector and if the other criteria are satisfied, including the criterion of the return on capital that is invested in the project, will the Government then, in principle, not be opposed to supporting the project?

Mr. Howard

I believe that my right hon. Friend the Secretary of State made the position entirely clear in the House last week. I would not wish to add a word to the remarks which he made on that occasion.

I now turn to Eureka. Eureka is designed to stimulate a competitive European industrial capability in advanced technologies by providing an international framework for predominantly industry-based action to improve the exploitation of research and development through creation of collaborative, cross-frontier projects between two or more firms in the 18 member countries. The aim of these projects is to produce high technology goods, processes and services with a worldwide, not just European, sales potential.

So Eureka provides a framework for European business collaboration in advanced technology. I emphasise business collaboration, the essence of the whole concept is that collaboration should be market-led, initiated and carried through on a commercial basis by companies themselves. The Eureka machinery for co-operation between Governments is specifically designed to be flexible and responsive—the minimum necessary to discharge Eureka's two key tasks, which are to provide a network for the exchange of information on, and opportunities for, collaborative projects and a Europewide forum to identify market obstacles to the success of the projects, and to put new impetus behind action to tackle them. These are obstacles such as differing technical standards and protective public purchasing.

Eureka emphatically is not a new international bureaucracy. There have recently been some rather ill-informed suggestions to the contrary. One newspaper had evidently heard that the 18 member countries have agreed to establish a central secretariat. It jumped to the conclusion that this will be some vast unwieldy organisation charged with the task of "co-ordinating the projects themselves". Nothing could be further from the truth—as had been made crystal-clear in a press statement issued by my right hon. Friend the Secretary of State on 11 March when he announced the date of the London ministerial conference on Eureka. The alleged vast new bureaucracy will consist of just half a dozen professional people with a similar number in support. And their job will essentialy be to set up a data-bank and circulate information about Eureka projects.

Some newspapers have contained all-too-familiar calls for public money, echoed by the hon. Member for Coventry, North-West, who remains embedded in the old Labour party attitude of measuring each and every programme by the amount of money that can be thrown at it. Without any real regard to the qualitative nature of the targeting of Government assistance to areas where it can achieve most good.

I shall make two points perfectly clear. The first is that Eureka is not, and will not become, a new international mechanism for funding collaborative ventures. All 18 member countries are firmly agreed on that. Anything of the kind would be costly, wasteful and wholly unnecessary.

Secondly, it is absolutely right that the market itself—private capital—should be the primary source of finance for market-led projects of the kind that Eureka is designed to stimulate. I am certainly not saying that we see no role for Government support for industrial research and development. We of course recognise that, while high technology projects with genuine commercial potential should eventually show a profit, they often involve real risk in the initial research stages. So it is at this point that support from public funds can be justified to help the creation of what will become successful products, processes and services that will benefit not just the firms concerned but in aggregate, the country as a whole.

This is where our support for innovation scheme comes into the Eureka picture. Collaboration between British and European firms is an increasingly important development if those firms are to capture a real share of world markets. The Government are determined to make full and effective use of the SFI scheme to encourage British industry to take part in Eureka. I can put it no better than my hon. Friend the Minister of State for Information Technology, who said:

Collaboration is essential if business in Britain and in Europe as a whole is to remain competitive in new technologies. We are determined to make full and effective use of the resources available under the Support for Innovation scheme to encourage British industrial participation in Eureka. United Kingdom firms participating in Eureka projects are therefore eligible for support of up to 50 per cent. of their share of the applied research costs, and up to 25 per cent. of their share of development costs. Only one United Kingdom firm need be involved in a project to qualify for assistance at the higher level. In other respects, the terms of assistance in each case will be determined under the normal SFI criteria". I should add that, following a recent exchange of views on the Eureka machinery on the support Governments are making available for Eureka projects, it is clear that these terms are very similar to those on which support is available in most other European countries.

Mr. Geoffrey Robinson

It does no good for the Minister to read out a press notice from the Department of Trade and Industry. Will the Minister categorically deny what the British Plastics Federation has circulated, which is to the effect that, as the support for the European collaborative ventures—in support of which all hon. Members stand—increases, the resources made available by the Department for the support for innovation scheme will decrease? Will the Minister please deny or confirm that?

Mr. Howard

The hon. Gentleman persists, as in other aspects of his approach, in inviting the House to regard the matter in black and white terms. He invites the House to adopt a simplistic approach. The House would not be inclined to regard such matters in such a misleading fashion.

There is no fixed approach to the funding of research and development. Of course, we have budgets for spending, but the exact balance between spending on collaborative projects in Europe and purely national projects must depend, as any sensible person would expect it to, on the merits of the applications received.

Mr. Robinson

The French Government have a different approach. The Conservative Government also has a different approach to regional policy, which was to maximise our uptake of European funds. If we reduce our national funding we shall reduce the total funding available to British industry. The French Government ensure that for every franc or pound that they obtain from the various collaborative Europen ventures, one unit of Government funding is provided.

Will the Minister please say whether the Government's intention is to reduce the support available through the support for innovation scheme to national programmes, in favour of European programmes? I am sorry to put a direct question to the Minister but it is better for him to give me a direct reply.

Mr. Howard

I have made the Government's attitude clear and said that applications regarding both collaborative projects in Europe and purely national projects will be treated on their merits. I do not share the hon. Gentleman's perception of the French Government's attitude to the matter. It is probably wise to resist any temptation, although it is a considerable one, to follow him into the highways and byways of French politics. It will be interesting to see whether the new French Government's attitude to the large losses made by Renault is the same as that of their predecessors. I do not necessarily regard the decisions taken across the Channel as being the best touchstone to apply to decisions made by our Government. I am confident that the Government's attitude can stand analysis on its merits and has nothing to fear in comparisons with attitudes and decisions taken by our European Community partners.

The facts about Eureka are that there are already 26 Eureka projects actually going ahead; there are another 50 project proposals in the pipeline; and, in the specifically British context, United Kingdom firms are now involved in discussions on about half of these 50 new proposals. Eureka is still at a formative stage and it is certainly not perfect. But it is developing into a bandwagon on to which companies—British and European—increasingly want to climb. We, as the United Kingdom chairman, are doing our best to ensure that a reality is made of the concept.

It is clear from all the developments I have mentioned that co-operation in the high technology industries is a matter which is taken very seriously in Europe today. There are already many examples, within the Eureka framework and outside, of exciting new joint ventures in high technology involving European companies. I can assure my hon. friend and the House that the Government are playing their full part in encouraging these developments. At the end of the day it will be the degree of flair, innovation and marketing skills shown by our industries themselves which will decide whether Europe can improve its track record in competing for world markets. But the Government are determined to create the right conditions for European collaboration in the advanced technologies, and are working hard with other European countries, both inside and outside the Community, to achieve that objective.

2.2 pm

Mr. Wood

I wish to thank my hon. and learned Friend the Minister and the hon. Member for Coventry, North-West (Mr. Robinson) for their speeches. I commend the motion on the Order Paper to the House.

Question put and agreed to.

Resolved, That this House strongly supports the policies pursued by Her Majesty's Government in European collaboration in research and development in high technology industries, including through Esprit and Eureka; and in addition wishes to see these industries further develop joint manufacturing and marketing projects.