§ Question again proposed.
§ 12.1 pm
§ Mr. David Evans
I take this opportunity to congratulate my right hon. Friend the Prime Minister on her success in the NATO discussions and to say how much I agree with everything that she said.
The enterprise initiative is about small businesses. The small business man has an idea, and he knows perfectly well what he wants to do with that idea but unfortunately it sometimes takes a long time to develop the idea successfully. The initiative will help the small business man in that respect. I like to think that, through his ingenuity and entrepreneurialism, the small business man will find ways to develop his business—even when bureaucracy, local authorities and property owners seem to stand in his way at every turn. Bankers need security. They need all sorts of assurances if they are to help the very small business to develop. Nevertheless, in my experience the small business man usually manages to get the business off the ground one way or another.
I was glad to see from the White Paper that there will be more regional offices to help the small business man whose business has become a reasonable success. To begin with, small business men do not understand what a business plan is or even what cash flow is. They find that out by overtrading and suddenly finding that they need the bank manager's help yet again. That is why I welcome the regional offices. There comes a time, after the business has eventually got itself off the ground, when it needs to take on further responsibilities — in terms of management, expertise, new premises, products, capital investment or banking facilities. Enterprise counselling could greatly benefit the business that is just about to expand beyond all that its owners originally dreamt of. Most business men start by wanting to run a small business, and only in the development of that business do they begin to realise their potential and ability.
I welcome the consultancy process, but, contrary to what has been said, I have not met many civil servants or Government officers with entrepreneurial flair. My experience is the reverse. Unless they are carefully chosen and are prepared to be trained, we may find that we have a typical bank manager type who will deter the entrepreneur from developing his business if it is not copper bottomed, instead of helping him. Can those counsellors who are supposed to direct up and coming entrepreneurs be trained, monitored and reported on yearly or two-yearly?
When a civil servant decides that an entrepreneur can attract capital and the proper quality of staff, it is time for consultancy. Consultants are not what one expects them to be. Indeed, the first consultant I met I quickly headhunted into my business, and I am not the only one to have done that. If one goes through the boards of multinational companies one finds that their members often start as a consultant to the business. Will the Government reconsider carefully the most important step of helping a small business to become an international company which contributes to employment?
When a small business grows into a big business the business man has to decide whether to attract outside capital into it. That can be a frightening process. Again, a counsellor or consultant could help the business to 1297 become a public company. The hon. Member for Yeovil (Mr. Ashdown) said that yuppies were earning £120,000 a year. I am not worried about that. I hope that they earn £120,000 a year, not £20,000. I hope that some of those whom I am talking about become yuppies. I am keen that we should have many millionaires and I do not believe that the public are fooled by yuppies earning £120,000. The public who have invested in BP and so on are sound and intelligent. They have made a long-term investment. They are not worried whether the shares go up and down; they are interested in the dividend, whether the company is making profits and providing employment, and whether they can leave their shares to their grandchildren. I refute what was said about the public being gullible; they are not.
The enterprise initiative will help enormously businesses which need capital and need to plug into the opportunities of the EEC, the European Investment Bank and merchant banks. Businesses do not know how to become public companies. They need independent advice, not from bankers and solicitors but from an independent consultant whom they can trust. That is important for their growth.
The next important stage concerns design. Products need to be designed attractively. In the past some of the goods produced in this kingdom have not attracted people, but now there is a tremendous improvement in the design of all the products on the shelf. If we do not design products and fix prices properly, Japan and other countries will continue to attract our buying public. After all, it is up to the public to decide what they want and do not want. Therefore, I welcome this initiative on design because design, manufacturing and selling are at one.
I like to believe that we are now a nation of house owners and of shareholders. I should like us to be known not as a nation of shopkeepers but as a nation of small and medium-sized businesses, because they underlie the prosperity of this kingdom.
§ Mr. Chris Butler (Warrington, South)
I very much welcome the enterprise initiative and its thrust towards further deregulation of our economy. It is an excellent move. However, I wonder whether it will affect the book trade. I have had several complaints from constituents about the possible imposition of VAT on books. The kind of thing that they say to me is, "Isn't that a tax on something special? Wouldn't it penalise schools and libraries and be a tax on knowledge?" To a large extent, I agree with them.
However, behind those criticisms, I believe that there is an impulse from the book trade itself, which is being rather hypocritical because of the existence of the net book agreement. Through the procedures of that agreement, which is probably the sole remaining instance of resale price maintenance, books have a price greater than the market would bear. Schools, libraries and ordinary people suffer because they are paying higher prices for books than they should. I hope that the Government will consider that distortion of the free market in their enterprise initiative.
I welcome the proposals that teachers should have experience of business world. In the House, we try to achieve the same objective—at least some of us do—through the Industry and Parliament Trust. We go out 1298 from these green Benches into the real world outside. I am not asking somebody else to do what I would not be prepared to do myself.
I regret that in the election not all teachers voted Conservative. When I was canvassing, some who were against us harangued me on the doorstep. It was rather like being back in school and being told off for being naughty. It struck me that that may be something to do with the fact that teachers go to school, then to teacher training college or perhaps to university, and then back to school, so they are thoroughly imbued in the school culture, rather than in the culture of the world outside schools and universities. I hope that through the enterprise initiative teachers will gain greater experience of the wider world, just as we do through the Industry and Parliament Trust.
I noted the words of my hon. Friend the Member for Welwyn Hatfield (Mr. Evans) on the qualifications of counsellors and whether they would have had enough experience of the real world. I should be surprised if they were civil servants. They should be people who have been in business or marketing. Interestingly, although when I was special adviser to the Minister for the Civil Service I was very much in favour of increasing the secondment of civil servants to the world outside, I nevertheless believe that counsellors should come from the business world.
I am glad to report the success of enterprise in the north-west. As one local paper put it:The march toward Warrington/Runcorn by North American companies goes on … There are now some 75 North American companies in Warrington/Runcorn".That is an example of the confidence that the United States has in our economy and in our continuing membership of the European Community.
In October last year the Warrington Guardian reported the intention of Enterprize North West to:build upon the area's booming business success".Mr. Andre Winter of 3i saidWarrington really does seem to be thriving and we are giving new and established companies the opportunity to grow further … People in the area certainly seem special".
I certainly agree with that. He said:They have entrepreneurial spirit and the ability to start up new businesses.In January, the Warrington Midweek Guardian reported thatBooming Warrington New Town continues to break records for attracting new companies … Half year statistics show that 120 companies signed leases to move into Warrington sites, bringing 1,042 jobs.I have never met Eileen Bilton who is very much associated with the advertising for Warrington new town, but she certainly weaves some magic for the area. The general manager of the new town commented that Warrington-Runcorn was meetinggreater success than ever before. We are particularly pleased at the number of jobs created and the high percentage of expansions.In February, the Warrington Guardian reported an investment of £43 million in the town, bringing a further 1,500 jobs. The president of the Manchester chamber of commerce and industry, Mr. Lester George, said that theNorth-West had talked itself into despair and it was only recently that the region had recognised its economic strength … The North-West is poised for expansion and nothing will stop it … The only question is whether business will be permitted to grow to its maximum capability.I draw great inspiration from that new-found confidence in the north-west. The north-west has realised 1299 that retailing stories of doom and gloom will not increase takings. It has also realised that the difference between north and south is not a handicap, but an advantage. After all, in the past, it was enterprise that threw up the great cities of Liverpool and Manchester and beat the south-east into a cocked hat. I am sure that it could do so again. We even have some yuppies in Altrincham.
I think that Mr. George's question whether the northwest would be permitted to go up to its maximum capacity was a sage question. We are already meeting problems of the availability and mobility of skills. In Manchester, surveys show that a quarter of all manufacturers and those in service industries lack skilled labour and find it hard to recruit. That shows the importance of training for jobs and of the enterprise initiative.
I hope that the enterprise initiative will push hard against bureaucracy, as it promises. I know that we have abolished 500 quangos and reduced the number of Government forms to the height of Big Ben, but, small business men, repeatedly tell me that there are still too many chiefs and not enough Indians in our bureaucracy, and that there is still too much red tape.
I have been contacted by a company called Econoloft, which is the largest loft installation company in the United Kingdom. Sadly, it has met the kind of obstructionism about which I am complaining. Its success has been built upon its product of space-saver stairs, which provide access to lofts that would not be possible through the use of traditional stairs. The company has gone through a lengthy process of obtaining 40 determinations from the Department of the Environment on its safety and specifications and has had personal ratification from the Secretary of State for the Environment. However, because of some quirk of the law, individual building control officers can still take objection to that product and say that, in their opinion — only their opinion appears to count—the specifications conflict with the 1985 building regulations.
Some local authorities now have the bit between their teeth and have engaged in criminal prosecutions of that company with all the bad publicity that attaches to such a criminal prosecution. For example, there was a prosecution in Chippenham. I am glad to say that it was dismissed, but, undeterred after the case was heard, the local authority in Saffron Walden has now given notice to the company that it intends to prosecute it for its product. That is expensive, vexatious, time-consuming and harassing for a company that is ambitious to do its best for itself, its region and the United Kingdom. If given its head, it could install its own manufacturing capability for the space-saver stairs, and bring extra employment to the region.
It is precisely that kind of nonsense that the enterprise initiative should snuff out, and I hope that my hon. Friend the Minister will consider the matter with despatch.
Whether the north-west will be permitted to develop to its full capacity will also depend to some extent on what happens in the run-up to, and after the winding-up of Warrington-Runcorn new town. I hope that the Government will take a flexible approach to the receipts of the new town prior to its wind-up, and that those receipts will not simply disappear into the maw of the Exchequer. Those assets are considerable, and are being realised with some despatch. I hope that some of them will be reinvested, so that the industrial parks in the north-west 1300 can be completed. That would chime in well with the Government's general policy of building in incentives for all.
§ Mr. James Cran (Beverley)
I am bound to say that it is extremely difficult to refocus the mind on the subject that we are supposed to be debating—not only because this has been an unusually exciting morning, but because an hon. Member's spirits do not exactly lift when he rises to speak surrounded by serried ranks of empty Benches. Nevertheless, I am not deterred.
§ Mr. Butler
Labour Members made a big fuss earlier this week about an article in The Guardian by Andrew Rawnsley, which accused them of being either drunk, incompetent or lazy. Yet only one of them is here today.
§ Mr. Cran
My hon. Friend has made an eloquent point, to which I do not think I need add. The facts speak for themselves.
I am an enthusiast for the enterprise initiative. I say that having had considerable dealings with the Department of Trade and Industry for some years. In the years before this Government and the White Paper of which the enterprise initiative is part, all that we had from the DTI was interventionism of one sort or another. We looked at certain sectors and decided how they could be improved. We spent £20 billion for 20 years on regional policy, and in the end I do not believe that any of us received the value for money that we wanted.
That is why I consider the White Paper quite revolutionary. This is the first time that I can remember that the DTI has been so strongly associated with the word that was used by my hon. Friend the Member for Welwyn Hatfield (Mr. Evans)—entrepreneurship. I am delighted at that, because I well remember trying to tell the CBI a few years ago that it should sponsor a crusade for entrepreneurship. I believe that this was the way to strengthen the regions of the United Kingdom, make more successful the businesses that were already there, and, indeed, to encourage more new businesses.
I could not interest the CBI in that proposition, for reasons that I need not go into here. In addition, the hon. Member for Yeovil (Mr. Ashdown), who is no longer in his place, spent a long time telling us that the practice of past Governments was right, and that we needed a formalised industrial strategy. What he did not tell us was that it is clear from consulting the business community, the CBI and the Association of British Chambers of Commerce that not a man jack of them wants that sort of industrial strategy.
What the business community wants and what it has got from the Government are the conditions in which it can take the marketing and strategic and other decisions necessary to decide the future of its businesses. I was disappointed that the hon. Member for Yeovil did not give a balanced picture and admit chat there are many people who do not want his concept of an industrial strategy. What we want—it is on offer in the White Paper—is the encouragement of enterprise.
Before the Government were elected to office one began to wonder whether the spark of enterprise had been extinguished from the British public. I almost believed that it had, but, my goodness, look at what has happened in the past 10 years. One can hardly believe that such a transformation was possible.
1301 In the 1950s and 1960s many talented youngsters were not prepared to go into industry and business. I well remember conducting a survey with some sixth formers at the beginning of my career in industry. I asked them whether they would go into business and industry and whether, in due course, they would form their own businesses. I will never forget that 80 per cent. of them said that they were not prepared to go into business and industry, but wanted a nice, easy, cushy number in the Civil Service, the professions or whatever. The reasons for their choice were simple. They regarded employment in industry as dirty, not well paid and, more important, uncertain.
Against this background I congratulate the Government because they have wrought a cultural revolution in the outlook of youngsters and others in this country. The hon. Member for Yeovil did not mention that this revolution is reflected in the fact that since 1980 some 180,000 net new businesses have been established. That is an enormous achievement in comparison to the past.
No doubt some hon. Members would argue that such new businesses are all in the south-east, but that is seen not to be the case if one checks the record. Between 1984 and 1986, 20,000 new businesses were set up in the north of England. Therefore it is clear that this Government's approach is the correct way to proceed because we will not solve the problems of the regions by drafting in unwilling companies by way of regional policy. We will rejuvenate the regions by the "bottom up" approach, by encouraging existing businesses and encouraging people to establish new businesses.
I am aware that the Minister is not complacent about encouraging business. However, when one makes international comparisons—he and I appreciate that there are difficulties with such comparisons—it is clear that the Netherlands has four times our number of small businesses, France and Japan twice that number, and the United States and Germany one and a half times that number. Therefore, we have a fair way to go to make up the leeway, but that is not the Government's fault—it is the fault of previous Governments. I believe that the philosophy contained in the enterprise initiative will go a long way to enable us to catch up with those countries.
My hon. Friend the Member for Welwyn, Hatfield asked how the Government can encourage business. I believe that few previous Governments have known how to encourage business. Let us consider the problem of deregulation. We are all aware that business men resent having to comply with the onerous requirements that the Government and others place upon them. We are aware that the Government are unable to abolish all such requirements completely, but they must reduce them. Therefore, I was delighted to learn from the White Paper—tucked away in one or two lines—that we will receive a deregulation White Paper some time in the summer. That is first-class news, but, for goodness sake, let it not be a recitation of what the Government have already done.
I pay tribute to the Government for what they have done, but I want to see a radical approach in that White Paper. I wish that I had time to outline my proposals, but I must press on The White Paper on deregulation states: 1302All new proposals for requirements on business are examined".
Obviously, that is to ensure that compliance requirements are minimised. That seems to be first-class. The document continues:Gradually,"—that is a word that always worries me—all existing requirements are being examined in the same way.Full marks to the Government for starting the process of gradually examining existing requirements. The problem is that all the difficulties stem from those existing requirements. Therefore, can the Minister tell us how gradually is "gradually" and whether he has a time frame within which the Government expect to go through existing legislation. We are all waiting with bated breath.
The White Paper also states:The system of assessing the compliance costs … is being further developed and departments are being encouraged"—another word which worries me—to identify more targets for regulatory reform.That approach is absolutely right. There is no doubt about that. However, that is passive language. Will the Minister and the Government tell us what it means? The Government's heart is in the right place, but will they move quickly enough? That is what the small business community wants to know.
Another aspect of the White Paper which appends to the initiative is the transfer of technology and co-operative research. We all agree that that is vital. When I represented the CBI — to make it clear to the hon. Member for Great Grimsby (Mr. Mitchell) that I am not ashamed of that — I was always amazed at the unwillingness of many companies — not all companies fall into that category — to innovate. That seems extraordinary because the future of industry is that it should innovate.
I was also worried about the unwillingness of many companies to spend on research and development. Many companies preferred to go to the Government cap in hand, saying that they would spend on research and development if the Government would pay part of the cost. That was excusable when industrial profits were at low levels, but that could not be said now when industrial profits are at the highest levels for many years.
Therefore, this atrocious situation, whereby United Kingdom industrially-funded research and development is lower than that of most of our competitors, should be reversed. That really has to be rectified. The onus is not on the Government; it is on the industrial community to be rather more aggressive. I welcome the innovation proposals. The mere stating of a solution — and it is stated most eloquently in the White Paper — is one thing; it is quite another to implement it.
In this regard I remember spending a lot of time trying to get industry and industrialists to go to universities so that the latter could tell the former what they had to offer. I can assure the very few hon. Members who are present that it was an uphill business. I could get them along only if I could say that there was money on the table. I could not simply say that they should go along and see how much they could get out of universities in terms of technological developments that occur in universities and elsewhere. At some point I should like to hear from the Minister what details he has to catalyse industry to make use of the enormous residue of facilities in universities and polytechnics. We must not forget polytechnics. In the 1303 country at large there are a number of first-class polytechnics that companies should also look to for advice and guidance.
Moving on to the core of what was said by my hon. Friend the Member for Carshalton and Wallington (Mr. Forman), I should like to talk about the enterprise initiative itself. I have enormous respect for small business men. Even though politicians stand for election every five years, we do not take the same risks. Small business men mortgage everything. Some even second mortgage their homes. The companies that they establish do not, however, have strength and depth. That is why the approach that is set out in the White Paper is correct. If a company has no spare resources, it is the Government's role to ask, "How can we help a small and, in some cases, weak business to transform itself into a stronger business that, in 20 or 30 years, may employ many people?" That is why the White Paper is correct.
We should recognise that many companies worry about consultants. They always consider that they are too costly and that, in any case, once they are let in through the front door, one cannot get them out through the back door. The approach of the White Paper will assuage such fears. The Government have generously contributed £50 million to fund the scheme. Some may say that they are not generous, but it should be noted that the Government are prepared to make more funds available in the following two years. Such funds will be welcomed and used by business men who recognise that, these days, the market place is extremely complex and is becoming more complex.
I was slightly worried when I read the section relating to design, marketing, and so on, because I did not see the word "communications". That surprised me. I have no doubt that that does not mean that it is not the Government's intention to encourage communications but rather that the document was written by somebody with a more academic approach than we have. Design is not academic or abstract. It means communicating with customers to ascertain what the customers want. That was not clear in the document. The same applies to marketing. Marketing is not just a sales force; it is a whole company, from top to bottom, being orientated towards selling what it produces. That means upward and downward communication. I hope that, when the initiative gets off the ground, this point will be understood.
In the past few years, my hon. Friend the Minister has played a great part in encouraging industry's awareness of the need for better quality. He knows more about quality than I do, but he and I know that it is not just a matter of computer-aided design and manufacturing but of management communicating with the work force. If one is building a car, one does not just shove on an ill-fitting component so that one can get another unit out of one's factory. Therefore, there is a tremendous need for communication at all levels within British industry.
The enterprise initiative is a solid, revolutionary concept, but many other things are needed to make it work. For example, it is much easier than it was, but it is still difficult for a small or growing business to get finance, particularly loan and equity finance between £50,000 and £100,000. The hon. Member for Yeovil correctly said that there is a shortage of patient money—that is, having to wait five years for one's return. The trouble is, however, that the hon. Gentleman was long on analyses of and short on solutions to the problems. That was fairly typical of the approach that we had from the Opposition Benches. One 1304 solution is the formation of local investment companies, which would take in equity and make long-term loans. My right hon. Friend the Chancellor of the Exchequer is not listening today, and may not even read on Monday what I am saying. Therefore, I might have to write to him about this. That said, I am reminded that my hon. Friend the member for Carshalton and Wallington is parliamentary private secretary to my right hon. Friend the Chancellor of the Exchequer, so perhaps I can rely on him to tell my right hon. Friend what is required. In fact, what is needed to make the idea possible are fiscal incentives for investors in local investment companies.
Taxation is always an irritantߞeven to Members of Parliament—but it will always be with us. However, an increase in the threshold of corporation tax to £250,000 would be welcomed by the small and middle-sized business community.
Another great problem is inheritance tax. If there were more than one Opposition Member present, there would no doubt be a great hue and cry about my suggestion that there should be 100 per cent. relief for business assets. Far too many business men who build up a business over many years then find that it is taxed from under them, and that is quite wrong.
I congratulate the Government on a first-class document.
§ Mr. Hugo Summerson (Walthamstow)
I begin by apologising to the House and to my hon. Friend the Minister because I shall not be able to stay for the winding-up speeches, as I have a constituency engagement this afternoon.
Property is the basic raw material for trade, commerce and industry. In Victorian times and during the industrial revolution, no obstacles were put in people's way by, for example, planning laws. When that great man, Brunel, was laying out the Great Western Railway, he did not have to trot off to his local council offices and apply for planning permission to build Paddington station. He did not have to deal with inspectors and all the majestic panoply of Government interference. He got on his horse—not on his bike; I do not think they were around then—and went out and surveyed the line of the Great Western Railway himself. Those were the days of great enterprise and initiative.
§ Mr. Summerson
I remind the hon. Gentleman that it was Conservatives who brought in the Factories Acts.
Our people have not lost enterprise and initiative. We remain an innovative, resourceful and inventive people but, to a great extent, that is being stifled by red tape. Today, we have to labour under the town and country planning legislation. The first such Act passed in 1948, and since that date, those responsible for administering the legislation have worked out a jargon all their own, as I know from my experience. They give such reasons for refusing applications as, "There is a certain rhythm about the roof scale along this stretch of London road and this should not be disturbed" or, "Such an item would not be a welcome addition to the street scene." I do not know where they get this jargon from—perhaps they learn it at planning school—but it is of no help to the small business man who is trying to expand his factory.
1305 I congratulate the Government on revising the use classes order. This is excellent, but I urge them to go further. They have not really started. I can give another example of obstructionism — that by local authorities. To this day, 43 years after the second world war ended, there are still empty bomb sites in our cities. There is such an empty site only 100 yd from where I live, and such sites can be found in many parts of our great cities. The one near my home was owned by the Greater London council.
Those of us who take an interest in property matters are keeping a careful eye on property auction catalogues. In those we see properties that were formerly owned by the GLC being sold at auction. In many instances the leases on those properties expired years ago. The rents being paid today are at levels that obtained 10, 15 or 20 years ago. Many properties owned by local authorities should be given over for use by business. However, many local authorities do not even know what properties they own. They have no idea and are not interested.
In my area, the London borough of Waltham Forest is controlled by Labour and the council imposed a 62 per cent. rate increase last year and decided to set up an economic development unit. How very helpful to local businesses to know that they can go and discuss that 62 per cent. rate increase with friendly officials at the town hall! Page 31 of the White Paper says under the heading "Inner Cities":The identification of Urban Programme Areas for particular help is a new policy for DTI and recognises the particular difficulties of such areas. A number of inner cities will similarly benefit from the new measures for Development Areas as well as Regional Selective Assistance. DTI is also responsible for coordinating the work of the City Action Teams in major cities and running 16 Inner City Task Forces.That is greatly welcomed. I urge my hon. Friends in the Department of Trade and Industry to confer with the Department of the Environment so that we may have some co-operation between those two Departments. It is fine for the DTI to bring forward this sort of programme. However, obstruction by the local authorities that rule in inner city areas will tend to cancel the benefits of such programmes. We must make full use of all the resources in our inner cities.
§ Mr. Summerson
We must also make full use of people, but, as I have said, people need places in which to work. If some local authorities deny businesses the right to use certain areas and buildings, those people have nowhere to work and will go elsewhere. In its turn, that will put more pressure on rural areas.
I urge the DTI and the D o E to get together and overhaul the planning system. I am sure that hon. Members will have seen the report from the Audit Commission. That sets out local authority property holdings and what little use is made of them. That matter needs to be looked at urgently. Enterprise initiative cannot flourish if it is denied the premises that it needs. It is all very well to talk about trade and industry and about initiative and enterprise, but people need places in which to work and I urge my hon. Friend the Minister to look at that.
§ Mr. David Nicholson (Taunton)
My first pleasant task is to congratulate my hon. Friend the Member for Carshalton and Wallington (Mr. Forman) on his success in the ballot, his choice of subject and the vigorous way in which he put his case. This is the second time in three weeks that I have attended a debate on a motion introduced by a Conservative Member during which the Opposition Benches have been almost empty, save for the token presence of the hon. Member for Great Grimsby (Mr. Mitchell). We all sympathise with him in his lonely vigil.
§ Mr. Austin Mitchell
The hon. Gentleman probably realises that, on Fridays, Labour Members go to their constituents and attend to the disastrous consequences of the Government's economic policies.
§ Mr. Nicholson
Conservative Members, too, have constituents to look after.
I was interested to hear the speech of my hon. Friend the Member for Walthamstow (Mr. Summerson) and his reflections on the planning system, although I do not necessarily follow him to all his logical conclusions. I have just returned from a parliamentary delegation visit to Saudi Arabia, where planning regulations are somewhat in their infancy. What impressed me, especially in the capital city of Riyadh, which is not in the most delightful of spots—it is in the middle of a desert plateau—was the dignity and splendour of modern buildings that have been put up during the past five years.
It is relevant to our debate on enterprise that we should not consider such matters simply in terms of utilitarian financial incentives. Especially in the inner cities, an immense amount depends on environmental considerations and the type of buildings, public or private, that are erected. Indeed, for the past 10 years, Saudi Arabia has been working on a new industrial city on the shores of the Gulf at Dubai. It is a most impressive achievement.
I contrast those achievements with Britain where we have planning laws to an excess, the Department of the Environment building at No. 2 Marsham street — that great tribute to architectural splendour.
It is a pleasure to take part in a debate with my next door neighbour, the hon. Member for Yeovil (Mr. Ashdown). My sorrow at his flitting from the scene must be counterbalanced by the fact that I shall have to leave in three quarters of an hour and will be unable to hear the hon. Member for Great Grimsby and my hon. Friend the Minister.
The hon. Member for Yeovil made an interesting point about venture capital in the regions, and I hope that it will be picked up, if not in this debate, in the Government's approach to such matters. I do not question the statistics that he mentioned, but my impression is that we are beginning to get substantial new life in the regions, especially in the west midlands and my native north-west, which suffered greatly in the recession. As my hon. Friend the Member for Beverley (Mr. Cran) said, new businesses are being created in the north-east at a rate of 6,000 a year and the number of businesses setting up under the enterprise allowance scheme has increased by an average of 30 per cent. each year since 1983.
Manchester is now the second biggest financial centre outside London, with more than 50 banks located in the city. Last year, Japanese, German and Australian banks 1307 set up in Manchester. In the west midlands, which has suffered greatly from the industrial recession, tourism contributes more than £500 million to the economy. Since 1976, employment in that industry has increased threefold to 70,000. One might not think of the west midlands as a typical tourist area, so that is an achievement.
I had some sympathy with the hon. Member for Yeovil when he warned about the new publicity mechanism and the semi-change of name of the Department diverting attention away from its essential tasks. We should not dwell too much on enterprise and lose our essential concern with the rather more mundane matters of trade and industry. The Department of Trade and Industry, or whatever it is called, will be judged by how it assists, encourages and facilitates British industry to export and to regenerate our domestic market.
I inject a note of soberness into our discussion. The latest balance of payments figures from the DTI show, in 1986, a deficit on visible manufactures of £5,307 million, rising in 1987 to £6,542 million. The non-oil visible trade deficit rose from £12,519 million in 1986 to £13,809 million in 1987. Those are large, disturbing figures. The trend, while not savagely upwards, is still upwards. Those are deficits. We must be concerned with those figures.
I mentioned that I have recently returned from Saudi Arabia. Many of the conclusions that I reached on that visit would be the subject of a foreign affairs debate. We visited British expatriates and the embassy's trade offices there. We got the message from those who live, trade and work out there that not enough British companies were showing an interest in that extremely rich market, despite the fall of oil revenue. Saudi Arabia is trying, understandably, to diversify its economy. It is looking for partners in the industrialised world to help in that.
British companies are doing a certain amount, but we were told that more could be done. They wished that more companies would come out—that more smaller and medium-sized businesses would show an interest. They contrasted that with the success of French companies, for example. The point was also made that British companies and perhaps some British expatriates needed to improve their ability to deal with the Arab market. That is an important task for the DTI.
Everyone, including Opposition Members, took them view that Britain has an immense opportunity in a country such as Saudi Arabia at the moment. Last September an offset programme to the substantial Tornado sales from Britain to Saudi Arabia was concluded. That gives British firms a considerable opportunity for joint ventures.
There is another reason why Britain has an immense opportunity in Saudi Arabia. We took on board the impatience of many Saudis with the United States. For many decades, Saudi Arabia has had a close political and economic partnership with the United States, but the people were considerably affronted by the restriction that the United States placed some years ago on the sales of spare parts to aircraft that it had supplied. There was concern in the United States that those planes could be used in Israel. That affront was felt by all the people whom we visited. They are frustrated with the United States' policy on the west bank and the Israeli conflict. They look to what Britain can achieve. That is a matter for a foreign affairs debate, but be not surprised, it gives considerable export opportunities, which can benefit us.
One way in which the DTI can help is mentioned in the White Paper, which states in paragraph 9: 1308One possibility is to make more use of Chambers of Commerce and other regional bodies to deliver services to exporters where they can offer a network of contacts which is close to small and medium-sized businesses with the potential to export.Perhaps I should declare an interest because I am a parliamentary consultant to the British chambers of commerce. They are discussing with the DTI the use of chambers of commerce to identify firms in the £1 million to £10 million turnover bracket, which could export more but do not, and to help to lead them to the point of entry in export markets.
Moving away from the export side of the discussion, that paragraph in the White Paper went on:One other possibility is to use outside agencies such as Local Enterprise Agencies, Chambers of Commerce and firms of management consultants to provide an information and signposting service for the business development initiatives. The advantage of operating in this way would be to extend the range of DTI contacts with industry at a relatively small cost and to use wider networks of contacts with small and medium-sized businesses than is possible even through the extended Regional Office network.My hon. Friend the Member for Welwyn Hatfield (Mr. Evans) welcomed the extension of DTI offices but said that it was important that there should be an entrepreneurial flavour to them. I hope that by using the premises and personnel of chambers of commerce and local enterprise agencies the entrepreneurial element will come in. I am happy to say that a number of chambers of commerce are involved in housing DTI personnel. They include Norwich, south-east Hampshire, Coventry—the Minister will be pleased to hear that; I am sure he played a major part in achieving it — north Staffordshire, Sheffield, central and west Lancashire, Chesterfield, Derby and Nottinghamshire. We hope that there will be more.
My hon. Friend the Member for Harrow, East (Mr. Dykes) referred to the opportunities for enterprise resulting from the privatisation of major industries. I do not want to enter a great argument now about the rights and wrongs of privatisation and what it achieves. But constituents have told me that merely transferring a major enterprise or utility from the public to the private sector does not, on the whole, change the people who work— as managers, or whatever—in that organisation. Many of them, it is said, still maintain the attitudes of the nationalised industry in which they worked before and in which their careers developed. I put that point to my right hon. Friend the Secretary of State for Energy at a meeting last night. I know that, in the privatisation of electricity, he intends to encourage the input of entrepreneurs from outside. It is important not to lose sight of that opportunity in the discussions and developments that ensue from the White Paper.
In view of the time of year I want to give the House one or two reflections on the Budget of my right hon. Friend the Chancellor. It should help to encourage certain activities that are relevant to enterprise—for example, increasing companies' training and R and D activities, and providing incentives to smaller and medium-sized firms to contribute to collaborative research through research associations. The possibility of contributions by local industry to specific non-profit making bodies charged with undertaking activity beneficial to the local community would also be helpful.
There is a consensus among Conservative Members that the high rates of personal taxation need to come 1309 down. The figure generally mentioned is 50 per cent. and I go along with that. The coming Budget is a good opportunity to achieve it. Last week I read in The Times—the Treasury sometimes allows these options to emerge in the public domain to test reaction—that the higher rates might come down to 35 or 40 per cent. We should approach that with care. We are not Saudi Arabia, and cannot afford no income tax or a return to 1939 rates of tax. We still have considerable difficulties and we must consider the political and social realities and pressures in society. I have substantial reservations about that course of action. I urge my right hon. Friend the Chancellor of the Exchequer to try to do much more to make it worthwhile to work at the lowest end of the income scale.
We have done a certain amount about the poverty or unemployment trap through benefits and we got into some trouble over that with regard to housing benefit and other matters. We are approaching the end of that road. We can significantly help and give incentives to those on lower incomes by expanding an idea initiated by my right hon. and noble Friend the Secretary of State for Trade and Industry three or four years ago — a lower employee national insurance deduction for those on low incomes. We should do that rather than assist through a reduced rate tax band. The advantage is that that national insurance reduction would not need to be transferred right up the line. It is a relatively cheap way to help a specific group of people. Employers and chambers of commerce have made that point over many years and I reiterate it today.
My right hon. Friend the Chancellor should also consider giving more incentives to middle management and younger professionals — and I am referring not to the yuppies in the City, but to the professionals in the private and public sectors who pay very high marginal rates of tax. The rise from the present 27 per cent. basic rate to 40 per cent. is extremely steep. I hope that the Chancellor will make that an objective when he presents his Budget.
I hope that the Budget will reinforce and encourage the enterprise initiative that my hon. Friend the Member for Carshalton and Wallington has so fortunately brought to our attention. That enterprise initiative must be related to the important tasks performed by the Department of Trade and Industry, dating back many decades to the days when it was the Board of Trade, to help Britain's trade and industry.
§ 1.6 pm
§ Mr. Graham Riddick (Colne Valley)
As a Member representing a northern constituency, I often hear it said that there is an appalling gap between the north of England and the south of England—the so-called north-south divide. I have always regarded that idea as somewhat simplistic and misleading. It is wrong to imagine that there is nothing north of Watford, but whippets and welfare scroungers, Labour Members, dark satanic mills, Arthur Scargill and squabbling cricketers and brass bands.
Some of Britain's most beautiful countryside is north of Watford. Some of Britain's most inventive and wealthiest people are to be found north of Watford. Indeed, some of Britain's most thriving industries are in the north. It is too simplistic by half to say that there is a 1310 north-south divide. The hon. Member for Yeovil (Mr. Ashdown) made that mistake earlier. I am sorry that the hon. Gentleman is not in the Chamber now. This is the second debate this week in which I have taken part when the hon. Member for Yeovil, having spoken earlier, disappeared to further his leadership ambitions in other areas.
§ Mr. Riddick
That is most interesting.
I believe that the real divide is not so much between the regions, but within the regions. There exists an enormous divide of attitude in the regions. I cannot agree with my hon. Friend the Member for Harrow, East (Mr. Dykes) that everyone has undergone a change of attitude. I fear that that is not yet the case. The real divide exists between the people in the regions who understand the enterprise economy and those who do not understand it. It exists between those who have grasped the opportunities provided by this country's increasing emphasis on enterprise and those who have not grasped those opportunities or are even aware that they exist.
The social divide is between those who have taken the opportunity to buy their council houses and those who have not or, indeed, those who have taken the opportunity to buy shares in the industries that we have privatised and those who have not. The great divide is between those who have started their own businesses and are playing their part in Britain's flourishing private enterprise and those who do not understand or recognise the opportunities and rewards available from that enterprise.
Since the Government came to power in 1979 they have enormously improved the conditions in which private enterprise has to work, as we all know. I see that the hon. Member for Great Grimsby (Mr. Mitchell) is laughing. He should remember that we have reduced direct taxation and reformed the capital taxation system to provide proper incentives for individuals to work hard to produce the wealth that is so vital to this country's well-being. We have reduced the tax burden on small and large companies alike to encourage them to make decent profits. We have reduced the amount of red tape to free more time for the entrepreneur and manager to do what he is best at doing — designing, producing, marketing and selling. We have designed various schemes to help the budding entrepreneur to get off the ground, and the enterprise initiative is probably the best of these. In short, we have improved the overall economic climate so that enterprise can flourish and hard work and talent are rewarded.
As we all know, there is more work to be done; there are more battles to be won and more individuals to be convinced. I return to the question of attitude. Private enterprise, and Britain, will never flourish or achieve its maximum potential until all the people of this country believe in the enterprise culture—until they understand that competition is much healthier than corporatism, and that the ambition to improve the lot of oneself and one's family is nothing to be ashamed of and is much more laudable than relying on someone or something else. It is the age-old battle between those who believe in independence and those who believe in reliance. The real divide is between those who believe in freedom, choice, responsibility, and enterprise, which are the values that 1311 Conservative Members hold dear, and those who believe in dependence and servility to the state—the values in which Opposition Members believe.
It is depressing that no Labour Members are present apart from the hon. Member for Great Grimsby. The hon Gentleman said that that they were all in their constituencies. However, if we were discussing a motion about state support for, or investment in, industry, many Opposition Members would he present — and many Conservative Members would be here to argue against the idea. Conservative Members have won the battle of ideas in many parts of the country, particularly in the south of England but also in the west midlands and in many parts of the north. Many thousands of people in my constituency of Colne Valley understand that success and wealth creation come as a result of hard work and enterprise and not Socialism or what Lord Young called the nanny state. That is perhaps why the good folk of Colne Valley elected me — their first Conservative Member in 102 years. However, the battle of ideas has not been won completely and that is why we have no choice but to continue to give more power back to the people and allow them to run their own lives without for ever having to look over their shoulders to see whether the state, in whatever guise, approves.
The Government must address themselves to several areas to ensure that the enterprise initiative and private enterprise fully succeed. Education is the most important aspect of the whole process and the Government clearly agree. The DTI's excellent White Paper states:The competitiveness of industry and commerce depends on our ability to harness the energy, develop the intelligence and promote the enterprise of our people, especially amongst the young.I could not have put that better myself and I congratulate my hon. Friend the Minister on those excellent words.
I applaud wholeheartedly the Government's objectives to provide teachers and pupils with a greater exposure to the world of commerce, business and industry, but, most important, we must ensure that each individual has a first-class education. That is why the Education Reform Bill, which is now in Committee, is so vital to our well-being. What is so depressing is the way in which the battalions of education producers line up one after another and effectively say to the Government, "How dare you interfere with our God-given right to, and knowledge of how to, educate the children of this country." It grieves me to say this, but often it seems to be opposition for the sake of it. It is indeed a battle between the producers and the consumers of education.
Before I came to the House I worked in industry and spent a great deal of time interviewing people for jobs. When I interviewed for jobs that required O or A-levels, I was horrified regularly at the low level of general literacy and numeracy of many young people. It is not their fault. How unfair it is for them that they did not receive a proper basic education and for the 25 per cent. of Britain's long-term unemployed that they are either innumerate, illiterate or both. How can we expect them to play their part in Britain's ship, HMS Enterprise, if their education has not developed their intelligence, innate skills and ambitions? Our education reforms are a key factor in the Government's enterprise initiative.
I am lucky to have an American student working for me as a part-time research assistant. Earlier this week I told her that I was hoping to speak in this debate and she 1312 did a bit of work for me. Most of all, she put across to me strongly that in America enterprise and business are stressed at all levels of the education system, that in the universities and colleges tremendous stress is put on business and economics, and that people want to study those subjects. In no way is a career in industry frowned on.
My assistant pointed out that the Olympics in Los Angeles were wholly financed by private money and made a healthy profit. It was the first time that it had been done, yet the American people thought it was an admirable idea. If we were to host the Olympic games there would be no question of private enterprise; it would be down to the local councils. There need to be changes in education and attitudes.
One of the bees in my bonnet—as with education this one is not the responsibility of the DTI, although perhaps it should be — which is shared by my hon. Friend the Member for Walthamstow (Mr. Summerson), is that one of the greatest obstacles to economic progress in inner city areas, towns and industrial areas, such as Colne Valley and Huddersfield, is the planning restrictions which can do so much to stifle enterprise, small businesses and entrepreneurs. I want the green belt protected, which is why it is important that we provide land for industrial and commercial development, for use by entrepreneurs in our towns and cities because that is the way in which we create new jobs.
I know of several developments in my own area of west Yorkshire which have been delayed, frustrated or even stopped because of the planning refusals, or the unnecessary planning restrictions and conditions that make the enterprise barely viable or, in some cases, impossible. There are a whole host of reasons for that. Sometimes it is because the plans are contrary to the local plan or because the highway department or the water authority objects. Sometimes the fire regulations make it difficult to proceed; and it is sometimes because of the Government. In my constituency for example, 128 buildings were listed as of historic importance in 1980. By 1987 that figure had increased to1,455—it had been multiplied by 12. When such buildings are listed, we restrict their use for industrial development. Of course, we must protect our architectural heritage, but I believe that that has gone too far.
I hope that my hon. Friend the Under-Secretary of State for Industry and Consumer Affairs will not he too disappointed that I have not referred to many of the proposals in his White Paper. There are not many proposals in it with which I disagree. It is a very good document and I welcome the increased business development help and consultancy that it outlines. I am pleased that it recognises that red tape and bureaucracy equal time-wasting and enterprise-blunting.
The real secret of the success of enterprise in this country lies outside the remit of the DTI. The downward spiral of income tax must continue, as must the reform of capital taxation. I have not touched on trade because I have not had the time. Clearly, the Government's emphasis on high-quality training is excellent. I hope that as British firms continue to prosper they will start to do more and more of their own training. Furthermore, the consistency and stability with which the Government have provided economic policy during the past eight years is of 1313 equal importance to enterprise. However, most importantly, we must get the education system right. We must change attitudes and we must get the planners off the backs of the entrepreneurs.
Free enterprise is at the heart of Britain's economic renaissance. The spirit of invention and enterprise is working in Britain once again as it did 150 years ago. If Government create the right conditions, free enterprise will do the job of reducing unemployment and creating wealth and happiness for the British people.
§ Mr. John Bowis (Battersea)
One of the prerequisites of these Friday debates appears to be to say where we were before coming here. My hon. Friend the Member for Taunton (Mr. Nicholson) has been to the sunny sands of Saudi Arabia. The Opposition spokesman the hon. Member for Great Grimsby (Mr. Mitchell) is from the sunny sands of Grimsby. I have come from the dentist and, for that reason, I apologise to my hon. Friend the Member for Carshalton and Wallington (Mr. Forman), who opened the debate, for being absent. While he launched eruditely into the subject of enterprise, I had my feet up and was flat on my back, being capped—no doubt an experience more often felt by Opposition Members.
I very much enjoyed the speech of my hon. Friend the Member for Colne Valley (Mr. Riddick) and the other speeches that I was present to hear, but unfortunately I did not hear the opening speech. I am sorry that my hon. Friends have been so adamant about the green Benches of the Opposition. It is quite restful on the eye, and I am sure that the hon. Member for Great Grimsby is worth the rest of them put together, with his wit and the entertaining speech that is about to come. Linked to the wit and musical talents of my hon. Friend the Parliamentary Under-Secretary of State for Industry and Consumer Affairs it should be a fine summing-up for a Friday afternoon. We look forward to it.
I refer first to the changes in our society and the need for enterprise initiatives of all kinds to adapt our society to those changes. We must take into account the fact that we are moving from a world in which we spend two thirds of our life at work to a world in which we spend one third of our life at work. That is partly because of shorter hours, the shorter working week, longer holidays and earlier retirement.
We are also moving towards a world where, increasingly, people have more than one job at a time and more than one career during their working lives. We are also moving towards a world where employment in itself is no longer the norm, as more and more people are becoming self-employed. That is where such initiatives are particularly important.
About 700,000 new businesses have been created in the past eight years and the number of self-employed has increased from 1.9 million to about 2.6 million between 1979 and 1986, although the Minister may have more up-to-date figures. It is welcome to note that almost 250,000 people have taken up the enterprise allowance scheme. That is a new way forward, but we have a long way to go to catch up with some of our competitors abroad in encouraging smaller firms.
In Japan, for example, almost 50 per cent. of people work for firms which employ fewer than 20 people and 1314 only 8 per cent. work for firms which employ over 500. The same pattern is apparent in France and Italy. However, in Britain, some 26 per cent. of people work in big firms and only 25 per cent. in small firms.
There is much scope for greater expansion of our small firms sector and of the self-employed sector. The rewards are there to grasp. The recent report from the university of Newcastle, compiled by Doyle and Gallagher, showed that, from 1982 to 1984, only firms which employed fewer than 20 employees were the net creators of jobs. That is significant. The birth and expansion of firms is occurring in those sectors. They are creating the jobs on which the British economy so desperately depends.
Small firms have many benefits. Obviously, managerial control is much simpler, industrial relations problems are fewer and quality is more responsive to customer needs. However, small firms also have to contend with many problems. Their ability to innovate after the first idea is more restricted. They are more likely to have cash flow problems and less likely to have cash for investment and research. They are also less likely to understand marketing and export aspects and the technology that we need to encourage them to tackle. That is not surprising because most small firms start with an individual who has an idea. He does not start as an expert on marketing or man management.
We can give much more support to small firms. I welcome the initiative, particularly the marketing aspect, not only in terms of expanding horizons for the marketing of small firms, but of encouraging small firms to consider the nitty-gritty of advertising. Too often, in small firms' advertisements, one sees the small ad mentality of trying to fit as many words as possible into a confined space, hoping to get the message across. Advice on that matter could go a long way to assist such firms.
I also welcome the changes which will make access to the various schemes easier. For example, under the loan guarantee scheme, since 1981, £600 million has gone to 18,000 small firms. Very few of those grants have been in amounts of less than £15,000, yet the small grants are often the most needed. Grants under the scheme have been most difficult to obtain because of the complicated procedure involved. It is good that the Government and the banks have worked together to ease that problem.
I also welcome a move that is occuring in the EEC. I do not recall that the hon. Member for Great Grimsby has ever welcomed anything from the EEC, except perhaps the fish which, of their own free will, swim into the Grimsby docks—
§ Mr. Bowis
Into the Grimsby nets, and then they go the other way.
The hon. Gentleman might force himself to welcome the movement in the EEC in respect of the fiche d'impact. It is difficult to translate, but it has nothing to do with fish. It does not translate exactly as the enterprise and deregulation unit but it requires all legislation and amending legislation to go to a committee for its impact on small firms. Until it has been through that process, legislation cannot be enacted. There is a lesson for my hon. Friend to preach to his colleagues in some of the other Departments—not least the Treasury and the DHSS—to ensure that their legislation has no unfortunate impact on small firms, as, sadly, it too often has.
1315 I welcome the shift in DTI spending away from the broad regional grants to more selective spending on technology, research and development and advisory services. That is the right way to encourage businesses to start and to grow. In the latter context, it is good to see that spending has increased from about £142 million to £147 million, approaching three or four times as much, over the period of this Government.
Hon. Members have raised the problems of labour shortage and uncertainty over the housing market, among others. Again, I hope that my hon. Friend will speak to his colleagues in other Departments about the effect of the cost of local government on small firms. Progress is being made in many parts of the country, not least my own area in Wandsworth, where the partnership between local and national Government has brought in more new firms—including manufacturing firms. In Battersea, we have reduced unemployment by 19 per cent. in the last year, and in Wandsworth it is down to 9.2 per cent. Wandsworth is the only inner London borough, apart from the City of London, where unemployment is below 10 per cent.
Much of that improvement is due to the policy of keeping rates low so that jobs can be created in the inner cities, and there is a fear that the new uniform business rate will have an unfortunate impact on some small firms. The National Federation of Self Employed and Small Businesses did a survey of its own members, and found, for example, that a new engineering workshop in Norfolk would be paying 219 per cent. more in UBR, a hairdresser in Lincoln 300 per cent. more, a pub in Broadstairs 362 per cent. more and a railway arch workshop in Slough 440 per cent. more. Although the Government are rightly trying to help the north, as opposed to the south, in some of their rate reform policies, when they sayThe more prosperous businesses in the South East will be paying more rates",they must be using a transferred epithet, because businesses in the south-east will pay more business rates whether they are prosperous or not.
I do not wish to cut into the happy duet that we are about to enjoy, but 1 briefly ask my hon. Friend the Minister to pass on to his right hon. and noble Friend the Secretary of State my welcome for his use of 25 employees as the definition of a small firm. In the past, figures of anything from 100 to 250, or even 500, have been used. In fact, about 78 per cent. of firms employ five or fewer people, and the enterprise initiative package will assist those very small firms to grow.
I look forward to hearing what my hon. Friend the Minister has to say, and I am grateful for the opportunity given to us by my hon. Friend the Member for Carshalton and Wallington to debate the matter.
§ Mr. Austin Mitchell (Great Grimsby)
I shall begin the basso profundo part of the duet, leaving the tremolo to the Minister, who has brought the skills of rock opera to the Department of Trade and Industry.
Let me first congratulate the hon. Member for Carshalton and Wallington (Mr. Forman) on winning the ballot. I must congratulate him rather less on the motion, which, had it come from anyone else, would have been regarded as pure sycophancy — a desperate attempt to escalate an hon. Member's career from the higher reaches of Parliamentary Private Secretary. In the hon. Gentleman's case, however, I accept that it is not 1316 sycophancy, but is meant sincerely. I have heard him on this subject before, and I know that he speaks from a genuine concern.
I hope, however, that the hon. Gentleman will admit that the motion has brought an incredible amount of economic illiteracy into the Chamber. Perhaps it is just because it is Friday. It is amazing, when we pick up stones on Fridays, what crawls out from under them. A bigger collection of political twerps and economic illiterates have spoken today than I have ever heard before. Apart from the hon. Members for Harrow, East (Mr. Dykes) and for Battersea (Mr. Bowis), whose speech I enjoyed, the economic illiteracy has been tremendous.
I hope that the Minister can distance himself from some of the nonsense that has been mentioned by Conservative Members. It has been my pleasure to hear all that nonsense because I am Leader of the Opposition (Friday). Warhol said:everyone will be famous for fifteen minutes"—and indeed, everyone will be Leader of the Opposition for a morning—today it is my turn. In that capacity I wish to comment on the essence of the debate, the enterprise initiative document.
Gladstone used to entertain parties of visiting Liberals on his estate of Hawarden, where the great man relaxed by chopping down trees. Lord Randolph Churchill said that all that Gladstone's visitors went away with were chips from the trees that he had chopped down and that that was all he had provided for the people of the country. Churchill said:He told them that he would give them and all other subjects of the Queen much legislation, great prosperity and universal peace, and he has given them nothing but chips. Chips to the faithful allies in Afghanistan, chips to the trusting native races of South Africa, chips to the Egyptian fellah, chips to the British farmer, chips to the manufacturer and the artisan, chips to the agricultural labourer chips to the House of Commons itself.Gladstone was a big man, but the man whose initiative we are debating today is certainly not big. Gladstone was a hairy man, but mine brother Young is a smooth man, a more emollient presence than Mr. Gladstone. Certainly, Lord Young of Graffham did not chop down the trees himself—if we consider those trees to be the great oaks of British industry — they were brought down by the economic insanity that the Government pursued from 1979 to 1982. During that period one fifth of the British manufacturing capacity was closed down and 28 per cent. of manufacturing jobs went. Indeed, 1.8 million manufacturing employees lost their jobs and, for the first time, we became a net importer of manufactured goods.
Lord Young has been sent in to clear up the resulting disastrous landscape created during that period. He has been sent in to pick up the chips and to redecorate the stumps. It is similar to the joke that Adlai Stevenson made of Richard Nixon, namely that he was such a good politician that if he chopped down a great redwood he would stand on the stump and give a speech in favour of conservation. That is not Lord Young's job, he would get an advertising agency to do it for him. Indeed, the budget for the enterprise document and its promotion on television is £6.3 million. That money will be spent lo pull the wool over the eyes of the people.
Lord Young would tell us that the trees have been chopped down for the best possible reasons. Some £6.3 million is being spent on telling us that the DTI is doing more when, in fact, it is doing less. The Conservative party 1317 often claims that the Labour party throws money at problems. It appears that Lord Young throws advertising agencies at problems and expects them to provide some kind of solution. The maxim is, "When in doubt advertise", and the DTI's advertising budget is expanding pari passu with the deficit in manufactured trade.
Lord Young has an advertising budget to tell us that the stump is still flourishing. All that it needs is good advice about its appearance and perhaps a consultative agreement with a painter to redecorate what is left of the stump of British industry.
Lord Young's job as a Minister is not to solve problems, but to conceal them. The Prime Minister has said, "David is not like other Ministers." That may be a compliment, but I am not sure, given the calibre of other Ministers. The Prime Minister has said, "Other Ministers bring me problems, David brings me solutions." Some might wish that that solution was a dilute mixture of tranquillisers or hemlock. That is not my wish. The solution that is brought to the Prime Minister in the initiative we are debating today is smarm—derived from Lord Young's repeated words, "Yes, ma'am." Smarm as the answer to Britain's problems is oozing out of the DTI.
§ Mr. Forman
As the hon. Gentleman is talking about the direction of the DTI under its present leadership, does he not at least pay tribute to the fact that since 1979 the balance of spending within the DTI has shifted dramatically away from propping up the industries of the past towards greater support of innovation and research and development? Is that not exactly what the Labour party would wish?
§ Mr. Mitchell
The hon. Gentleman is still working for that promotion. Of course we welcome that shift. However, it is shift within a reduced and misapplied budget. There is no strategy for the regeneration and encouragement of British industry.
Returning to Randolph Churchill and Lord Gladstone, what does Lord Young say to a nation which now has a higher level of import penetration than any other advanced industrial country? What does he say to a nation in which the imports of foreign manufacturers as a proportion of British output was 9 per cent. in 1966 and is now 48 per cent. — double the proportion in west Germany and in France? What does he say? He advertises. What does he say to an economy which has just had its worst ever monthly trading deficit? He advertises. What does he say to a manufacturing industry that has gone from a £5 billion surplus in 1978 to a £7 billion deficit? He advertises. What does he say to his ministerial colleagues who are now seriously embarrassed at the failure of the DTI to stop that trade gap widening remorselessly this year? He advertises.
The White Paper and its associated documents that have been pouring out from the DTI are an advertising compendium with no substance. They are irrelevant to the real problems.
The problem is that industry was so badly battered by what the Government did between 1979 and 1983 that the industries that survived the economic holocaust caused by high interest rates, an overvalued pound and a depressed and deflated domestic economy because of cuts in Government spending, had to throw overboard research, 1318 design, development and training — indeed, everything that makes for non-price competitiveness. They had to do that simply to survive.
Investment is still down. As a nation, we spend three times less on each individual training system than is spent in Sweden. We produce three times fewer trained engineers than France. Research, design and development have all gone.
Now, in this motion, we are asked to praise the DTI's belated efforts in that direction. Praise is due to them, but it is about time they saw some light. They cannot simply graft on those measures and expect them to take. They cannot expect business to become competitive by grafting on research and design through consultancy arrangements. Research and design spring from competitiveness, they do not produce it. They are a reflection of competitiveness and the dynamic of British industry which begins with price competitiveness and generates profit.
Profits have always been too low in Britain. If we had higher profits we would have invested more, there would have been improved productivity, output and quality. We would have been able to spread research, design, development and model changes in the automobile industry over a larger output, thus pressing less heavily on each unit cost. If we had been able to do that, we would now be more competitive. We cannot graft on competitiveness at this late stage after the prelude of 1979 to 1983.
Competitiveness is a syndrome; it cannot be created by consultancy arrangements. It is a driving desire for change, growth and expansion, a desire to compete and to win in the world market which does not exist because industry has been cowed and battered by what has been done to British industry in the name of monetarism. The danger is that we are now locked into a lower level of output and production. It is difficult to expand beyond it without sucking in imports and worsening the balance of payments.
It is true that there was an improvement between 1986–87. The pound and oil prices came down. Therefore, our exports became slightly more competitive. Productivity went up and unit labour costs went down. The Government were beginning to learn some economic sense—if we run the economy for competitiveness, we can increase productivity and bring down unit labour costs by the expansion that that generates. But we must run the economy to be competitive. The Government were prepared to do that only because an election was in the offing in 1987. It is certainly not the start of an economic miracle.
We shall face serious difficulties in manufactured trade—difficulties to which the enterprise initiative is largely irrelevant. With the dollar coming down, we face the fact that two thirds of the increase in manufactured exports that has occurred since 1979—it is a small increase—has gone to the American market. That two thirds is now threatened by the fall in the dollar. Also, American exports have become more competitive. They are already considerably more competitive in volume terms. Trade that is diverted from the American market competes more bitterly and intensely with our other traditional markets. We are still in the syndrome that the NEDC diagnosed in the 1970s, when Britain turned out products of a lower unit value than France or West Germany but imported high-value goods. That is still true.
1319 Imports are taking an increasing share of the British market. That sounds incredible, after all the praise of the regeneration of British manufacturing that has come from Conservative Members. If British manufacturing has been so powerfully regenerated by the new spirit that the hon. Member for Colne Valley (Mr. Riddick) wanted to make compulsory in schools—he scolded the unemployed for not feeling the new spirit of enterprise—why is it that, between 1979 and September 1987, the percentage of the domestic chemicals market taken by imports increased from 30 per cent. to 40 per cent.? That was in less than 10 years.
The proportion of imports in mechanical engineering increased from 29 to 38 per cent., in electronics from 31 to 48 per cent., in motor vehicles from 38 to 48 per cent., in textiles from 33 to 46 per cent., in clothing from 29 to 38 per cent., in washing machines from 28 to 35 per cent. in 1987, and in televisions from 22 to 37 per cent. If we are so good, why has that happened? It is because industry has been so badly treated by the Government that it has not been able to compete. We cannot make it compete by grafting on the new elements that have suddenly been thought of by Lord Young.
All the basic weaknesses of the British economy still exist. They have to be dealt with—not the peripheral matters with which the enterprise initiative deals. I shall quote various reports that have been produced over the past few months about the state of British manufacturing. I hope that the Minister will give us his assessment of their accuracy. Investment is almost the life-blood of competitiveness — the one thing on which we have to fight back against the world — yet investment in manufacturing is 9 per cent. lower than it was in 1979. Indeed, in large sectors there has been a net disinvestment. We have been living on the seedcorn. The annual industrial survey of the Financial Times in January 1988 stated:In many areas … it is difficult to escape the conclusion that the rising sales of British goods derive less from investment in new products than from competitive prices, stemming from relatively low wages, and a currency level which, until recently at least, has been competitively priced.On productivity, a summary of recent academic research by Warwick university states that Britain is still part of avicious and self-perpetuating spiral of low wages, low morale and low productivity.A CBI memorandum to the NEDC last October states:Britain remains a relatively low-pay, productivity, low profit economy".How will we improve all the things that we are supposed to improve in design if we have a low-pay, low-profit economy, if we do not involve workers, and do not generate investment? The Cranfield-British Institute of Management study, entitled "Managing Manufacturing Operations in the UK, 1975–1985" stated:The regrettable but overwhelming conclusion must be that very little has happened in manufacturing operations in the UK over the last ten years. This is particularly true in the key areas of 'competitive' edge — delivery reliability, lead times and use of new technology.That is the background.
We welcome the provision of help and these consultancy arrangements in design and marketing. There should be a bonanza for the consultancies. They will produce a lot of advice, some of which will be practicable for British industry. It is just not enough. If the Department of Trade and Industry is prepared to 1320 recognise that the state has a role to play in offering these consultancy arrangements, and encouraging manufacturing in this direction, why does it not extend it in other sectors? In our competitor countries, Governments and Government Departments offer help to their manufacturing industry. They offer support, investment, finance and a closer working relationship with Government Departments than British industry has ever enjoyed. Why is assistance offered for sectors such as design but not for all the other problem areas faced by industry, and, in particular, why not for research and development?
Research and development must be the key to new processes and new competitiveness. The DTI has spent £30,000 on a report from Coopers and Lybrand on innovation centres, which I think are necessary for Britain. Coopers and Lybrand found, no doubt because that is what the Department wanted it to find, that innovation centres were not necessary. But Japan has 190 of them, all state funded.
The Lords Select Committee on Science and Technology produced one of the most damning reports on British investment in research and development that I have ever seen. It paints a depressing picture which is contrary to that created by the advertising monstrosity that the DTI is putting out. Lord Young told that Committee that recent Organisation for Economic Co-operation and Development figures for industry-funded research and development in the United Kingdom and competitor countries gave cause for "considerable concern". He was half right. It should have been "overwhelming concern". He also said that he saw it ascentral to the Government's philosophy that the motivation for spending more on R and D must come from industry itself.The problem is that it has not done so. It does not seem likely to do so and the Government are doing far less than they should. If we cut out defence-oriented research and development, the proportions of Government-funded research and development in EEC countries is: Germany 34 per cent., France 26 per cent., and United Kingdom 16 per cent. In other words, we are spending about half per head of what Germany is spending, about 60 per cent. of what France is spending and just a little over what is spent by those industrial powers, Italy and Belgium.
The conclusions drawn by the Committee, which looked in detail and heard evidence from all interested parties on the state of research and development, were:the overwhelming weight of opinion from almost every sector of the research community and from the private sector is that R&D in many fields is underfunded, and in some cases seriously underfunded … These two views should not be taken together to mean that the underfunding is wholly the responsibility of the Government. This is not true. A large share of the responsibility rests with industry, who have failed to invest enough in R&D and to appreciate its importance. Other sections of society, particularly the City and institutional shareholders, have to accept some responsibility. The Committee are concerned at the comparative failure of British industry to undertake and to finance R&D, and its disposition to rely on publicly funded work.That is a crashing indictment of British industry and the Department of Trade and Industry, which has not been encouraging it to spend more on British research and development.
In the light of that failure and of the realities—not the public relations realities projected by the Department through its advertising budget and by Conservative Members reading Central Office briefs — the initiative 1321 that the hon. Member for Carshalton and Wallington asks us to commend is silly, smarmy and irrelevant to the real problems facing manufacturing. It is not a case, as the hon. Member for Yeovil (Mr. Ashdown) said, of fiddling while Rome burns, because the motion commends the increase in the output of firelighter manufacturers and offers them design consultancies on the shape of the briquettes that they manufacture. That is worse than fiddling while Rome burns.
The real problem is the industrial decline that must be reversed. We have wasted the oil opportunity that should have been used to expand the British economy to a new industrial strength. That opportunity was largely thrown away. Let me declare my overseas visits. In November 1987 I visited the United States and not Saudi Arabia. While I was in the United States, Senator Moynihan said that President Reagan's economic policy consisted of borrowing $3 trillion from the Japanese and throwing a party. The Government have taken the wealth from the North sea and thrown a party and, being mean, they have invited only their friends and not the mass of the British people in the way that Reagan invited the mass of the American people.
The Government have destroyed jobs and will be the only Government to go out with fewer jobs than they came in with. Over the same period America has created 10 million jobs by expanding the economy. What will happen in the 1990s when the oil contribution finishes? We will move into deficit in oil trade in 1991. The Government have used the opportunity of oil to destroy much of our manufacturing industry and we have moved into a horrendous and growing deficit on manufactured trade. I ask the Government to tell us what will happen when the oil goes in the 1990s. How will we survive and provide the jobs, preserve our standard of living, and generate growth unless we rebuild manufacturing industry? That cannot be done by the tinkering that is contained in the White Paper.
It is not a question, as the White Paper says, of a hands-off approach to industry. We have to run the economy for manufacturing, and that is what a Labour Government will do. We shall run the economy for growth, for expansion, for manufacturing and for jobs. We will not run it for finance or for the interests of money and those who have it or for high interest rates. We shall put money to work for the people and for industry. That is what any responsible Government ought to do. The tinkering in the White Paper is not reality.
British industry is now in a war, an international struggle for survival, and it is not surviving very well. Survival does not depend on small firms, 94 per cent. of which do not export. Survival depends on the big battalions and on the Government's co-operation with them to rebuild the country's economic fortunes. We send British industry into that international struggle burdened with heavier costs than its competitors. It has heavier rail transport costs and heavier electricity charges, just wilfully increased to fatten up the electricity industry for privatisation. British industry also has heavier interest rate charges than its competitors, and all those burdens are influenced by Government.
We are asking industry to fight that international war with that ball and chain round its leg. It has gone into battle not with protection and help from the Government, because it has been stabbed in the back. Any firm that 1322 invests substantially in research and development and in new products and modernisation, and diverts money from immediate profits to investment is promptly the object of a takeover bid because its share price is depressed by the very techniques of investment that are necessary to survive the international struggle. We send it into battle and we stab it in the back, and Pilkingtons is an example of that. The company then has to spend millions in fighting off the threat of the takeover bid. Lastly, we send it into battle not with Government help and co-operation, but with a Government running the economy for finance. The Government are now killing the goose, the fall in the pound from 1986, that has laid the Government's golden and electoral eggs. The real value of the pound sterling has appreciated by 13 per cent. since the last quarter of 1986. The Government complain about the increase in wages, but there has been a 13 per cent. increase in the real price of the pound. That is a bigger burden on industry than any increase in wages, and it is a direct consequence of the Government's policy of tying sterling to a deutschmark whose value must increase.
The terms of trade for manufacturers are worse than they were in 1981, and disastrous consequences will follow, just as they did in 1981. As the hosannas about success from the grovelling chorus of sycophants from whom we heard today ring loudest, matters are turning sour. We have returned to the stop phase in the stop-go cycle, and all that the Government have to offer to counter it is fatter consultancies. They are an irrelevancy.
The prospects are bleak and becoming bleaker. The balance of payments is widening, and the Government's only answer will be deflation. Exports will suffer and imports will become more competitive. None of that reality emerges from this half-baked, inadequate White Paper which fudges every issue and gives solutions to none of the problems. Essentially, it is the bland leading the blind stumblingly downhill.
§ 2 pm
§ The Parliamentary Under-Secretary of State for Industry and Consumer Affairs (Mr. John Butcher)
I thank my hon. Friend the Member for Carshalton and Wallington (Mr. Forman) for the timeliness of the subject that he chose for the debate. He has done the House a great service in providing us with an opportunity, for the first time in this Chamber, to consider the White Paper and the enterprise initiative and to discuss — fortuitously, only a few days before the Budget—many issues which hon. Members on both sides of the House believe should be aired.
I was interested to hear the latter comments of the hon. Member for Great Grimsby (Mr. Mitchell). When, during his peroration on exchange rates, he launched into an analysis of competitiveness, he illustrated clearly the chasm between his approach and the approach of my hon. Friend the Member for Carshalton and Wallington to what precisely is required in the British economy to make us more competitive. My hon. Friend focused on non-price factors, just as the nations with appreciating currencies, such as Japan and West Germany, focus on non-price factors. If anything gives the lie to the contention of the regressive, unconstructed, backward-looking Labour party, it is this: if it was all about exchange rates, the German economy would be on its knees because it has had to cope with constantly increasing values in its currency, as have the Japanese. But they have insured 1323 themselves against the currency-based erosion of their competitiveness by becoming involved in the issues which my hon. Friend highlighted.
§ Mr. Austin Mitchell
Does not the Minister realise that it is precisely because those countries built their industrial power that they can sustain an appreciation in their currency? We cannot, because we are weaker. If a country's output of motor cars is 3 million, 4 million, 5 million, 6 million or, in the Japanese case, 7 to 8 million, it can spread the costs of research and design over the larger output. British Leyland produces just over 400,000 cars, which is probably about the same figure as in the late 1940s. We cannot afford the appreciation because we have not grown as much as those countries have.
§ Mr. Butcher
The hon. Gentleman is a perceptive man and a well-thought-of member of the Labour Front Bench. If he was giving a lecture on the economic history of the United Kingdom away from the House, he would acknowledge, rightly, the role of leads, lags and trends in an economy. Much of his speech reflected the worst sort of short-termism. He attributed to this Government faults that have been building up in our economy for a long time, especially as the world recession hit our manufacturers harder than it hit most, for reasons that I shall give in a moment. But the Germans have coped fairly easily with an increasing value of their currency because they set the framework of their economic miracle against clear principles back in the period from 1949 to 1953. As I said in a previous speech, their policies bear a strong resemblance to the policies that we put in place, in macroeconomic terms, particularly from 1982 to 1985.
Therefore, when the hon. Gentleman does his United Kingdom tour as part of the listening role of the Labour party, I hope that, when he launches into his lectures in Great Grimsby, Scotland or wherever, he will regale some of his colleagues in the Labour party with the lessons of the German economic miracle and that he will look at the period of German economic history between 1949 and 1953 when Euchen, an excellent economist, and Ehrhardt, an excellent Chancellor, laid the foundations for that German economic miracle, which are similar to the foundations that we laid in this Administration, in the teeth, at the beginning, of a world recession.
I endorse the comments of my hon. Friend the Member for Carshalton and Wallington on non-price factors. He is absolutely right to focus on quality, design and marketing as just three of those non-price factors. They represent the effort, the three enabling skills in a company, that must be deployed to best possible effect. I shall come back to some of my hon. Friend's comments later.
The hon. Member for Yeovil (Mr. Ashdown), who gave his apologies to the House for leaving early, demonstrated yet again that he is the master of the mixed metaphor and that he can give a speech on any subject at any time with the minimum of consideration. Therefore, he is ideally equipped to be the next leader of the Social and Liberal Democrats, or whatever name they will be trading under at the next general election.
Let me look at the meat of the hon. Gentleman's argument. He said that we were not doing enough for small firms. He said that we had policies in place for setting up small firms, but with the exception of the business expansion scheme we were not doing enough to see them through the initial period of consolidation into further 1324 expansion. The hon. Gentleman has therefore completely misread the White Paper; he has completely misread the Department's latest initiative, because there is a whole raft of measures inside the enterprise initiative designed to help small and medium-sized companies to grow and to fill in the missing capabilities that they often find are exposed when they expand from a small company into a medium-sized company and, we hope, with many of them, eventually into a large company.
The hon. Gentleman seems to be stuck somewhere around 1968 in his appreciation of measures required to revitalise Britain's economy. I shall not hazard a guess at where the hon. Member for Great Grimsby is, but I think that he is somewhere between 1951 and about 1975½. I do not think that he is a root-and-branch clause IV man, but he is pretty much into the motherhood statements of the mid-1970s when he puts forward his recipes for recovery in Britain.
My hon. Friend the Member for Harrow, East (Mr. Dykes) talked about change of attitudes. That is remarked on by those who have the advantage of coming back to this country having spent a period abroad. If one talks to a business man who has been away for four or five years and who has returned to the United Kingdom in the past two or three years, such people remark on the demonstrable and sometimes spectacular change in attitudes in the board room where our managers are much more professional and ambitious, and on the shop floor where trade unionists and the work force are rediscovering some of the basic virtues that are the key generators of employment.
I should like to mention the names of some fairly typical people to whom we in the DTI talk, who are not members of the chattering classes but who in many past conversations have influenced the formation of our policy. One, whose observations I have noted over a period, is the trade unionist, Bill Jordan. When the Labour party listens, I hope that it will listen to trade unionists such as him. I assume that when the Labour party and trade unionists meet, their conversations are about getting money for the Labour party. I do not want to damn Mr. Jordan's career by flattering him too much, but he is an expert on the quality campaign and on quality as a means of preserving and creating jobs. I doubt whether that has been on the agenda of meetings held between him and the Labour party research department.
British management skills, as my hon. Friend the Member for Harrow, East pointed out, are key. My hon. Friend the Member for Dover (Mr. Shaw) pointed out that things now are different from the 1960s and 1970s—we are becoming more professional. He, like my hon. Friend the Member for Carshalton and Wallington, returned to the issue of market share, which must be our national obsession. I am delighted to report that, at long last, the remorseless erosion of Britain's share of world trade in exports between 1964 and 1980 has been halted. We have stopped the rot. When future economic historians write about that period they will observe that a seminal event took place in about 1981–82, when that erosion of our share of world trade was halted.
As my hon. Friend the Member for Dover remarked, management skills are desperately important and today's profits, as he rightly said, are tomorrow's investments.
My hon. Friend the Member for Welwyn Hatfield (Mr. Evans) confirmed one aspect of the White Paper, which is that we are determined to get closer to the customer and to take DTI's services out to those who are best equipped 1325 to take advantage of them. We shall use chambers of commerce when necessary; we shall open more offices; we shall listen to and pick up as many tips as we can on the best way of implementing the enterprise initiative. In the case of my hon. Friend the Member for Welwyn Hatfield, a soccer metaphor is perhaps appropriate. In the past five years Britain has started to move up the league table of economic performance in the OECD. It is our intention as a nation to more even further up it. Having decided that we should not be relegated in 1979–80, we have now moved up to a mid-table position and we must now decide whether to go for the championship. It is a long time since we have had the base that we now have from which to work. If we can make that decision, we must not throw the opportunity away—
§ Mr. Butcher
I have learnt on previous occasions in the House never to take sides about soccer. However, my hon. Friend will know that I took just a minuscule amount of pride in the performance of Coventry City in the last cup final. We are today in the position in which, say, Kenny Dalglish was two years ago when he was considering the sort of side to build for the championship—but enough of soccer metaphors. I am now competing with the hon. Member for Yeovil in the mixed metaphor stakes.
We shall pick up the points made by my hon. Friend the Member for Warrington, South (Mr. Butler) about a freer market in books. He was correct to identify the great need in the United Kingdom to provide our teachers with valuable experience in commerce and industry. For the most part, they would welcome that, and I am encouraged by the reaction of commerce and industry to the White Paper. Representatives of the various sectors, such as the Institute of Directors, the chambers of commerce and the CBI, have welcomed our objective of getting 10 per cent. of teachers a year into companies to take a look at the things that will be required of the students in their care when they enter the job market. Warrington and Runcorn has shown that it provides a welcome home for inward investment by providing skilled workers and the right enterprise ethic in the local community. As we have been invited by my hon. Friend the Member for Warrington, South to do so, we shall take a look at the inpediments to trade.
My hon. Friend the Member for Beverley (Mr. Cran), with his great experience as a regional director in Birmingham and as a keen observer of the national scene, made an excellent speech. There is a growing appreciation that we have to encourage our brightest and best younsters to opt for a career in industry and commerce. We need them. There is almost a form of economic warfare in the international market and we need the best people to fight in that battle on behalf of British industry and commerce. I believe that our national culture is changing and that we no longer suffer from the 19th century attitude that our top schools should produce only young people fit to become district commissioners in Africa or colonial leaders in far-flung parts of the world. We want people to lead British industry and commerce in the struggle for world markets.
1326 My hon. Friend the Member for Beverley referred to deregulation. I will communicate to my ministerial colleagues his clearly stated wish that we should take a radical approach to deregulation. My hon. Friend is currently decoding some of the terminology in our documentation and he believes that it sounds rather cautious. If necessary, I will try to persuade my colleagues in the DTI to tune that up and enhance the committment level a little.
Reference was made to the links that must be established between the universities and industry and commerce. My hon. Friend the Member for Beverley will be aware from our recent documentation that a £36 million link programme, the teaching company scheme, has been created. As far as I am aware, that scheme has no enemies. It is universally acclaimed as an excellent way to firm up links between the higher education sector and industry and commerce. Bright young men and women are entering companies on postgraduate projects. They are given specific targets and often surprise the companies by the level of sophistication that they bring to a project.
My hon. Friend the Member for Walthamstow (Mr. Summerson) referred to planning constraints. He brought an interesting nugget of information to the House when he explained that there had been a 62 per cent. increase in rates in his authority coinciding with the authority's marketing efforts in an economic development unit. That often happens in Labour-controlled local authorities. Such authorities seem to produce policies that make their municipalities hostile territory for the private sector and small business men. They indulge in PR massaging. They set up a project which they often call an economic development unit to make a passing statement about their desire to bring employment into the area. For the most part, I am afraid that such action is a somewhat cynical exercise.
My hon. Friend the Member for Taunton (Mr. Nicholson) asked me to consider the trading and export services. I will read the Official Report carefully and respond to him regarding the British Overseas Trade Board.
My hon. Friend the Member for Colne Valley (Mr. Riddick) reasserted his argument that we should do all that we can to make education more relevant to the needs of our economy. Almost in passing he made an observation that could have dominated the debate. This side of the Budget it is probably right that it should not have done so. We have rediscovered over the past four or five years that supply-side economics work. As taxation rates come down, the take increases.
I recall an excellent article in The Sunday Times entitledWho is selling the snake oil?In that article the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) was portrayed as the cowboy who came to town waving a bottle of elixir purporting to be a cure-all for everything from hair loss to digestive complaints. His cure-all was increased taxation for everything. We have discovered that the converse is true. Reducing taxation at corporate and personal levels increases income for the Chancellor of the Exchequer. The country can then decide how to spend the increased revenue.
My hon. Friend the Member for Battersea (Mr. Bowis) who, as far as I can understand, was fresh from a rectification job on his peripheral caries, brought some interesting comments to the debate, especially about job 1327 creation and the role of small firms. We shall continue to examine what small firms pay to local government. That is a matter not for me but for my right hon. Friend the Secretary of State for the Environment, but it is a key factor. Wandsworth is to be congratulated. Some London boroughs introduced nuclear-free zones, whereas Wandsworth is a de facto enterprise zone. Wandsworth is concerned about enterprise because it knows what enterprise does for jobs. I congratulate that brave and imaginative borough.
That takes me to the comments made by the hon. Member for Great Grimsby. He said that he would speak as a basso profundo. He will know that the basso profundo often takes the part of the jester and sometimes the ogre. I suspect that the captains of industry and some trade unionists who read his speech may see him as an ogre because he made a number of suggestions that would turn the clock back to a time when competition in world markets was not as great as it is now, and seriously weaken our resolve to fight for competitiveness. Many of the policies that the hon. Gentleman would advance would undermine and erode the competitive ethic both in the board room and on the shop floor.
The world recession hit us very hard. The weaknesses in our economy had been building up over a long period. If we can put right in one decade what went wrong gradually over about two decades, we shall have done very well indeed.
I do not know any longer where the Labour party gets its information from. The hon. Member for Great Grimsby is a great researcher and I am sure that in the listening campaign he will be a great listener. Let me take this opportunity—unusually in a debate such as this—to mention some people who, in my view, typify the industrial renaissance in this country. They are not necessarily members of the chattering classes and they are unlikely ever to appear on the Robin Day programme. However, they are certainly worthy of a visit from the hon. Members for Great Grimsby, for Dagenham (Mr. Gould) and for Sedgefield (Mr. Blair). Those people, and hundreds like them, have influenced Government policy, perhaps without knowing it. I see that the right hon. Member for Birmingham, Small Heath (Mr. Howell) is in the Chamber, and our first port of call should be the midlands. Opposition Members should go to Lucas, an excellent company, and talk to John Parnaby, who is probably an expert—probably a world expert — on manufacturing systems engineering. He would probably enlighten the Labour party as to current trends in manufacturing sciences and intellectual investment on the shop floor. They could then go to Rugby to see Brian Small at Ingersoll.
§ Mr. Howell
When the Minister calls at Joseph Lucas on his great tour of the midlands, he will not be able to call at its head office in Great King street in my constituency unless he hurries: it is about to be demolished and hundreds of people are about to be made redundant.
§ Mr. Butcher
Yes, and the Lucas company is getting into higher and higher added value. It is becoming more and more successful in its aerospace efforts. It is running a very successful Girling subsidiary. There have been redundancies, but those who observe that market would agree that the company could not have pursued its strategic objectives without some redundancies. It is always difficult for a company faced with strong markets in which it does not have an appropriate investment to decide whether to continue to fight in those markets or whether to fight where they can win. I believe that Lucas has made the correct decision.
Hon. Gentlemen should then move on and talk to Malcolm Fraser at the Council for National Academic Awards. He has some excellent ideas on management development and how to produce a modular system of qualifications for managers which builds bridges from the shop floor to academia and out again. It is a flexible system of management training. Clark Brundin, at Warwick university, together with Khumar Battacharya, has shown that universities can open their doors wide to the private sector and gain immense advantage from it. They, too, have a great deal to say on how to build Britain's industrial and commercial renaissance.
Hon. Members may like to talk to John Kerridge at Fisons. He has taken an agro-chemical company into new areas, higher added value, pharmaceuticals and science-based products. James Pilditch has produced excellent work on best management practice in books and journals of his own authorship. If hon. Members are worried about textiles and the so-called older industries— I have never liked that term—they may care to talk to Louis Van Praag who runs a company called Sabre Textiles.
I know that it is unorthodox to mention names, but they are typical of people who learnt from experience and brought a new dimension to management and a new vigour to their companies.
Design is not an extra and it is not about making products pretty; it is about the concept of a product or a service from its beginning—from the core outwards, It is about design for manufacture or maintenance. It is about fitness for purpose and, ultimately, a product's aesthetic appearance in the past four years British companies have at long last woken up to this and many are starting to reap the benefits.
Quality is not a bureaucratic obsession within a company. To repeat a phrase that I have used previously, quality is about selling products that do not come back to customers who do. It is one of the key job creators, as Bill Jordan in the Amalgamated Union of Engineering Workers would confirm. Quality management is now a well-rehearsed science. It does not cost money. Zero defects are now entering company cultures throughout the country.
We in our enterprise initiative support quality, design and marketing. I pay tribute to the Design Council which has run the consultancy programmes for design, the Institute of Marketing and Tony McBurnie, who is administering that side of the programme, and to the Production Engineering Research Association which has helped us to pursue our objectives in improved manufacturing practice.
During the debate we heard a great deal about management and I have a little more to say about]t. In the past we have learnt, as disseminators and distributors of grants, that it is no good whatever to invest large sums to 1329 reduce the investment costs of a company if the people at the heart of that company are not professional and of the highest capability. Company performance is determined more than anything else by the calibre of the people at the centre of its decision-making process. We as a nation must make a major investment in management skills and those of our work force. When John Egan competes with Mercedes it is not Jaguar v Mercedes, but the skills of the people of Coventry in his work force competing with the skills of the people of Stuttgart. If his people are better trained and educated, he can win that battle. If they are not, he will lose it. John Egan and many other chief executives have pursued their objectives in enhancing the quality of their work forces. That is something about which the whole House should be united and which progressive trade unionists have endorsed over a long time. In my view, the best managers and the more enlightened trade unionists are now coming together and are unanimous on that proposition. Another change that has taken place in the United Kingdom during the past six or seven years is that the "us and them" mentality is at long last disappearing.
As far as the initiative itself is concerned, and the current progress, I can happily report to the House that there has been a major response to the marketing campaign—
§ It being half-past Two o'clock, the debate stood adjourned.