Investment in the Future

HC Deb 19 April 1989 vol 151 cc343-90

Mr. Speaker

I must announce to the House that I have selected the amendment in the name of the Prime Minister.

3.50 pm

Mr. Paddy Ashdown (Yeovil)

I beg to move, That this House notes the long-term failure of the British economy to meet the challenges of a competitive and technological world; expresses its profound concern at the increasing United Kingdom trade deficit in the information technology and electronics industries; notes the United Kingdom's gap in computer and other technological skills; and calls upon the Government to boost investment in high tech infrastructure and civil research and development and to work with industry and the education service to create the skills base that is vital to the modern, efficient and innovative economy that the United Kingdom desperately needs, if the next decade is to overcome the missed opportunities of the 1980s. I think that I am right in saying that this is the first major debate for some time on a trade and industry subject. It comes in an afternoon in which the Chancellor of the Duchy of Lancaster, the right hon. Member for Braintree (Mr. Newton), has answered questions on trade and industry matters, and a private Member's Bill on hacking has been introduced. Therefore, it is an important day for trade and industry and I am delighted to be able to introduce a debate of this nature.

I am glad that the Chancellor of the Duchy will be replying to the debate. He and I do not agree about many of the main planks of the Government's policy. However, he is widely respected as someone who considers and is briefed on his subject closely.

I do not want it to be believed that I and my party think that everything the Government have done has been wrong. That is not the case. In the past 10 years the Government have had some considerable achievements. The greatest achievement the Government will have to their name is the democratisation of the trade union movement. That will be their enduring memorial—[Interruption.] I hear the Labour Members sitting in front of me disagreeing. We will wait and see the evidence of history.

One of the Government's most significant achievements is the pursuit of enterprise and self-employment. My argument with the Government on those matters is that they have not gone far enough or fast enough in the direction of the policy they have outlined.

We must ask whether the propaganda we are fed by the Government—that all that adds up to an economic miracle— stands up under examination. The old moss-covered tombstones of British industrial decline still stand after 10 years of Thatcherism. We still have the highest inflation of any major advanced industrial nation; we still have the highest interest rates of any of our major OECD competitors; we still have wage rises racing well ahead of inflation; we still have net investment—investment as a percentage of GDP—which is at best static and, according to some figures, falling; we still have overall industrial production only just blipping above the 1979 level; we still have a continual loss of our share of world markets as our goods fail to meet the right standards in terms of price and, perhaps more important, quality and we still have a trading deficit of unheard of historic proportions which is now seriously undermining the strength of the British economy.

In many ways, all those symptoms are depressingly similar. Far from having an economic miracle in the 1980s we have, standing clear and evident to everybody, the old signposts of British malaise. We have an industrial system which has failed to produce effectively for world markets and has failed to win new shares of those markets. We have not made progress in what I believe to be the fundamental change that the British economy and British industrial base must achieve in the last years of the century if they are to face up to the new challenges. That fundamental change must be away from being a low-quality industrial assembler to being a high-quality industrial producer.

Perhaps a more fundamental change is needed in our industrial base away from a high-resource use, low-value-added industrial base to a low-resource use and high-value-added base. Information technologies are the key to that fundamental change. In The Times on 16 September 1986, the Alvey committee said that the basic economic situation dictates that we must become a net exporter of high technology and high value added goods. That statement was right, but the committee was wrong in the prediction that followed. It said that, if things continued as it calculated when it wrote the report, by 1990 Britain would become a nation in deficit in high technology information-based trade by £1 billion a year. We have yet to reach the end of the 1980s, yet that predicted deficit is already twice as high: it is running at £2.19 billion and growing. In 1984, the figure was £1.8 billion, but it has increased to £2.19 billion. In 1979, we had a surplus in information technology trade that amounted to about 0.5 per cent. of GDP; we are currently running a deficit of just over 0.5 per cent. of GDP.

Many believe, and I am one, that the underlying weakness in our industrial base lies in information technologies. It is essential that Britain corrects that. It will involve not only inventing new technologies but manufacturing and, above all, applying them. Our failure to do so underlies our weakness.

Behind the bold figures of the industrial deficit that. I have given, there are even more worrying facts. Let us consider innovation. Britain is second only to the United States in Nobel prize winners, and per capita our inventions and achievements are greater than any nation. Between the 1950s and the 1970s, Britain had a truly superb record in innovative technologies. But that record is a past record. Our innovative capacity has dropped sharply. In 1963, over 26 per cent. of European applicants for new United States patents were British. By 1985, the figure had fallen by 16 per cent. We are the only major advanced OECD country whose percentage of applications for United States patents has dropped. We now apply for 2 per cent. of United States patents and are below even France as an innovative nation.

Perhaps that is not surprising, as the number of people working in research and development—scientists and engineers—has fallen over the past 10 years. Using a figure for every 10,000 of population, of all the OECD nations we have the fewest scientists and engineers working in the research sector. In 1983, 32 per cent. of engineers were working in research and development, yet now we have only 30 per cent.

Britain has opted out of many of the new technologies, such as the space programme. The Secretary of State for Energy had to go to Moscow to hitch a ride on a Soviet spacecraft sponsored by British industry for us to have any input into the space programme.

Mr. Alex Carlile (Montgomery)

Does my right hon. Friend agree that one of the underlying problems of our poor research base is the dreadful salaries paid to brilliant research scientists? Does he accept that at the Electricity Council research centre at Capenhurst in Cheshire the best salary a brilliant 30-year-old researcher can expect is well under £30,000, which is poor compared with salaries available abroad?

Mr. Ashdown

I agree with my hon. and learned Friend's comment. But that is not the only underlying reason. I shall come on to that subject in a minute. Another reason is the lack of adequate research money to provide researchers with the facilities that they need. As I shall point out later, there has been a major flood of some of our highest and best researchers to, for example, the United States and other nations where they are paid much better.

Mr. Alex Carlile

And to the City.

Mr. Ashdown

If they had been going into industry, I might be a little more optimistic, but they seem to be leaving this country altogether.

These facts show up in our own domestic market. Britain has the fastest growing new technology market, after Japan, in the world, yet our share of our own market and our capacity to even fulfil our own market demands has now dropped massively from 50 per cent. to less than one third in the past seven or eight years. A National Economic Development Council report in June 1988 identified the reason for that clearly—lack of investment.

Investment in research and development is a contentious subject in Britain, as we already spend a higher proportion of our investment in research and development on defence-related research and development than any other nation in a way that frequently holds up the research and development we need in our industrial sector. Even in terms of non-defence research and development, whereas, between 1971 and 1985, all our major industrial competitors increased their research in non-defence research and development, we reduced our research in the non-defence sector. In Japan, it has increased from 1.8 per cent. to 2.8 per cent. of gross domestic product. In West Germany, it has increased from 2 per cent. to 2.5 per cent. It has increased in France and the United States and only the United Kingdom's share of non-defence-related research and development has dropped, from 1.8 per cent. to 1.5 per cent.

I see the Chancellor of the Duchy of Lancaster wondering about those figures. I direct him to the "Save British Science" report which gives the figures. I have them here if he wants to look at them. I ask hon. Gentlemen who may read the Hansard report later to plot those figures on a graph and then to plot on a graph the level of industrial production in each of those nations. They will find that the two curves correlate almost exactly. Nations that have invested more in non-defence-related research and development have seen overall industrial production rise, whereas ours has similarly declined.

Mr. Tony Banks (Newham, North-West)

Does the right hon. Gentleman agree that there is a correlation between the success of both the Japanese and West German economies and the small percentage of gross national product that they spend on defence, as opposed to the large amount that we spend on defence? Most of our research and development is defence-related. Why, then, does the right hon. Gentleman support such a high level of defence expenditure?

Mr. Ashdown

The hon. Gentleman must have missed the point I made earlier. I conceded that Britain is spending 50 per cent. of its research and development on defence and I said that that was one factor holding back the proper development of civilian research and development. Other factors, such as secrecy, are involved, too. In the United States, defence-related projects in which new ideas are developed will move across into the civilian sector, but our own secrecy frequently prevents that from happening here. I could give the hon. Gentleman examples of how that happens.

Government-funded civil research has dropped similarly. Between 1981 and 1989, it dropped from 0.73 per cent. to about 0.5 per cent. In terms of money, that means that £800 million less is going into Government-funded civil research. Even allowing for the extra £100 million that was put aside in last year's Autumn Statement, it means a £700 million drop. It means that as a percentage of gross domestic product, Government-funded civil research will be lower in 1990 than it was in 1981.

But we are not talking merely about a lack of investment in physical goods, research or technologies. We are talking as well about the other component, which is lack of investment in people. In Britain today, the largest and most significant factor holding back production is the skill gap that afflicts our industries.

My hon. and learned Friend the Member for Montgomery (Mr. Carlile) referred to the brain drain. Indeed, at the top level, we are seeing a major brain drain. I visited silicon valley a little while ago; it is a fact of life that the greatest expatriate population of silicon valley, not even excluding Hispanics, comprises expatriates of Britain who emigrated to pursue new technology.

In November 1988, the New York Times made an extraordinary statement about the influx of our intellectual capital into the United States, stating that it composed The largest single influx into this country"— that is, the United States— from a single source since the Jewish professors were forced to leave Germany and Austria in the 1930s.

Mr. Robert Hayward (Kingswood)

The right hon. Gentleman has failed to identify when those expatriates went to silicon valley. Is it not the case that the head of Bell-Labs, the head of Hewlett-Packard's research department and the head of Rolm are all expatriates of this country, but that they emigrated in the 60s and 70s? Is it not also the case that there is now substantial evidence of reverse migration among many of the people who emigrated 20 years ago?

Mr. Ashdown

I can tell the hon. Gentleman precisely what he wants to know, because, as I recall, I visited silicon valley in 1985 when the present Government had been in power for six years. Every person to whom I spoke—they were all either high in the research structures of firms or running firms themselves—had emigrated from Britain since this Government came to power. If there is evidence of a reverse trend, I shall be interested to know it, but I will bet the hon. Gentleman any money that he cares to lay that over the 10-year period since 1979, Britain has lost massively more researchers and scientists abroad than have come to this country.

I turn now to the skill gap as it affects industry. I refer to the National Computing Centre—[Interruption.] Conservative Members may find this strange and amusing, but I do not and nor, I believe, do the people of Britain. In 1988 the National Computing Centre estimated that we now have 6,000 fewer programmers and analysts than industry needs.

On 27 February this year, The Independent published an article stating that British industry is now short of about 30,000 experienced information technology staff. It predicted that unless there is a change of Government policy, by 1993 Britain will be short of about 100,000 experienced industrial information technology staff.

We know that a report published earlier this year by the Confederation of British Industry identified that the skill gap in Britain posed a major barrier for many of our firms. Even in Merseyside, which has high unemployment, 30 per cent. of firms are being held back because they cannot find people with the appropriate skills.

Meanwhile, the number of those applying for information technology-related degrees in our universities is dropping fast. Those figures underlie our industrial weakness and will ensure our continuing decline in information technologies.

However, the picture given by the bald statistics is not the whole picture, because it misses out the central fact which, more than anything else, is a contributory cause of the deplorable position that Britain is now in. I refer to the Government's attitude towards information technology and new industries. I do not pretend for a moment that the Government found themselves in an easy position because they did not.

No one can doubt that Britain was facing a major problem when the Government came to power in 1979, but the Government's inability and unwillingness to tackle that problem effectively now holds them to be indicted. Time and again they have shown that they do not care about British invention and technical skill. Indeed, time and again they have shown that they do not even recognise it; and time and again they have refused to support British invention, so that time and again something is invented in this country, but others then produce it, and we end up adding to our balance of payments deficit by buying it back from them.

I want to give the House three simple examples of how this has happened in the past.

Mr. Tony Banks

Hovercraft.

Mr. Ashdown

Hovercraft is not one of them. Nowadays I do not count it as in the front range of new technology.

Let me take, first of all, the transputer, invented in INMOS, which was established by Labour's National Enterprise Board. The transputer—sometimes known as a computer on a chip—is still 10 years ahead of the field. Indeed, transputers are currently being used by NASA for its communications and radar systems. Much more important, they are being used by the Japanese as the basis of their new laser printer technology. They offer a unique parallel computing opportunity and unique abilities to interconnect with other systems. They are also one third cheaper than any comparable silicon chip mechanism.

For ideological reasons, as we all know, the Government sold INMOS, complete with the transputer, to Thorn EMI in 1984. Almost immediately, Thorn EMI decided to go out of computing altogether, and into music publication, which provided quicker access to short-term profits. INMOS was then put up for sale. Thorn EMI refused to invest any further in the factory in south Wales—at least, it refused to invest significant amounts in it and showed absolutely no interest in making sure that the transputer was developed adequately. The Government—by this time, too late—stepped in and tried to persuade universities and others to use the transputer, but it was far too little, far too late.

Last week S.G.S. Thompson moved in and bought INMOS. Let it be on the record that S.G.S. Thompson is a wholly owned Franco-Italian firm and is less profitable, in overall terms, than Thorn EMI. But it could see a good thing, which our own Government and, I must say, our own industry—the industrial electronics giants—could not see. S.G.S. Thompson has promised to invest in the transputer—something that neither the British Government nor British industry was prepared to do. It has promised to recruit 100 new engineers, and, according to its new managing director, will put limitless investment in what he described as a jewel in the new technology area.

Is it not ironic that, in the very week in which, for instance, Fujitsu has said that it will launch a £400 million factory at Newton Aycliffe to assemble its computers and laser printers, the very week in which we have rejoiced at Toyota moving in to establish assembly plants in the north-east, we have sold one of our own world-beating inventions, and been relegated to the position of an offshore assembly?

Mr. Bob Cryer (Bradford, South)

I agree with the hon. Gentleman's point that the Government have sold a valuable public asset, which could and should have been developed in public ownership. I resent that very deeply. But then the hon. Member talks about a Franco-Italian company taking that asset over. But the United Kingdom is a member of the Common Market. Surely freedom of movement of capital, freedom for predators to go and buy anywhere, is a fundamental requirement of the Common Market, of which the hon. Gentleman and his party have made absolutely no criticism.

Mr. Ashdown

Absolutely, and I would be the last person to believe that a firm like that should not be available to purchasers in Common Market countries. As the hon. Gentleman will discover in a minute, I believe that the European context is essential if we are to be able to develop a decent high technology industry. My argument is not that a Franco-Italian company should move in and buy up; it is that it is extraordinary that, whereas people from France and Italy can see the advantages of a British invention, our own Government and British industry are too blind to see them. I can find few more depressing examples of the short-term and myopic view of this Government.

There is, however, perhaps one—gallium arsenide, in many ways a sister to the transputer. It is a new high-speed chip.

Mr. Hayward

The right hon. Gentleman referred to gallium arsenide as a high-speed chip. It is not a high-speed chip. It is a product on which one can produce a high-speed chip. The right hon. Gentleman also described the transputer as unique. It is not unique. There are a series of competitors. I wish that the right hon. Gentleman would stop displaying his ignorance of high-technology subjects.

Mr. Ashdown: I am delighted to hear from the hon. Gentleman. He is wrong about the transputer. There is no equivalent to the transputer. One or two chips are now being developed which are transputer emulators, but they are not in the same league as transputers. However, the hon. Gentleman is right to say that, technically, gallium arsenide is not a chip. Without wishing to go into long and detailed explanations, let us accept the short term of a chip in the sense that it can at least fulfil many functions of high-speed computers which the silicon chip can perform.

What is unique about gallium arsenide is that it has several special properties. It is light-emitting, its architecture can be varied after it is made, and it is about five times faster than the conventional silicon chip equivalent. What is also important is that it was invented in Britain. Many people believe that it will replace silicon in high-speed computers and certain other applications.

In 1985, the advanced materials and devices committee predicted a world market for gallium arsenide of £9 billion. On 11 March 1985, I initiated an Adjournment debate, backing up that committee and asking the Government to support a programme to develop gallium arsenide invented and developed in Britain. I asked them to set up a structure similar to the Alvey committee to press forward the development of this British invention. That Adjournment debate was answered by the then Under-Secretary of State for Trade and Industry the hon. Member for Coventry, North-East, who is now Under-Secretary of State for Education and Science. Hon. Members can look at columns 125 and 126 of the Hansard of that date. The Minister's answer was disparaging, to put it mildly. He described gallium arsenide as not an easy material to process."—[Official Report, 11 March 1989, Vol. 75, c. 125.] He described it as an "immature technology" when contrasted with the advanced silicon chip technology, and said that the development should be left to industry. He went on to state that the Ministry of Defence was investing some money in it, and he gave the impression that is would have only a Ministry of Defence application.

For the record, gallium arsenide is not now being made in Britain in any commercial quantities. Far from having only a Ministry of Defence application, gallium arsenide chips are at the heart of every compact disc player imported into Britain today.

However, Britain leads the world in some aspects of gallium arsenide technology. Last week I was at St. Andrew's university, where I spoke to Professor Sibbett. He has developed a specific, individual application for gallium arsenide which enables it to produce the fastest laser pulse in the world—so fast that the duration of the pulse in relation to the duration of a second has the same relationship as the duration of a second to the history of the universe. That is important. It will mean that we can develop extremely high-speed computers in future.

I looked at what the professor was doing, and as I left his laboratory one of his researchers said to me, "We have established a world record, and that world record has stood for four years. This will be the basis of new high-speed computers. I have absolutely no doubt that the technology will be bought out, used by others, and that we will import it in high-speed computers in years to come."

I now refer to gallium arsenide's sister technology. Gallium arsenide produces a light impulse. It is a fibre optic which will transmit light, not only in computers but around the country. Again, we have a technology that was invented in Britain—at the British Telecom laboratories in Marplesham. It carries a signal that is thousands of times faster than the conventional twisted copper pairs. The United States study said that in 1991 delivery and installation of fibre-optic cables would be cheaper than installing the twisted copper pairs that we currently have. We will see the development of speeds of transmission down fibre-optic cables increased by perhaps 20 times before the end of the century. The fibre-optic cable offers the possibility of a broad-band, interacting computer communications network for the whole of Britain, possibly reaching into every house.

Conservative and Labour Members seem to think that this is not an important matter. It will be very important. [Interruption.] I am glad to get some support from the Conservative Benches. Just as our Victorian forebears thought it right to construct an infrastructure of roads, railways and canals to carry the commodities to support their industrial revolution, so we will need a modern infrastructure to carry the commodity for our industry. That commodity will be information. A fibre-optic network will be as essential for our future industry, based on high technology, as were the railways, canals and roads in the past.

A great many people have considered whether we might invest in such an infrastructure. The Peacock committee said that we should; so did the Prime Minister's own advisory committee on science and technology. British Telecom appealed to the Government to help it do so. It said: All we want is some kind of horizon from the Government, so we are not planning against total uncertainty. The French, the Japanese and the United States are doing it. The Germans are doing it like mad. Even the Labour party is now proposing that we should do it. I am told that the Labour party will suggest that this should be the centrepiece of its new industrial strategy. I am delighted that the Labour party is at last joining me in the two-year campaign to invest in the new industrial infrastructure that our nation will need.

The Government of course, have said that we should not do it. [Interruption.] Conservative Members will have time to make their statements shortly. Mr. Alastair Macdonald, reporting to the Department of Trade and Industry earlier this year, said that the Government should play no part in this and that we should leave it to the market. I am not suggesting for a moment that the Government should find the £15 billion or £20 billion to make all that investment, but they have a major role to play in stimulating private investment, in creating the interface standards that will allow it to work, in deciding how it will be laid down in Britain and in pump-priming the development.

Any belief that we can simply leave it to a free market and see it develop is nonsense. Under the Government, Britain will not get a modern, extensive, nationwide fibre-optic network. Therefore, it will lose the opportunity to use a British invention which would revolutionise society and provide new opportunities for self-employment and enterprise, for education in the home, for self-health care, for home shopping and for entertainment. The Government are turning their back on all those opportunities.

Is it not ironic that at the same time as the Government are turning their back on helping such systems to come into being, we launched, in January, a satellite television network capable of reaching into every home? What a tragedy that in Britain the telecommunications revolution will be used to give new opportunities to the powerful to shape our minds and to provide soap operas instead of new possibilities for our citizens to shape their destinies for themselves.

Behind all that we must accept that Britain's trade in new technologies has been seriously hampered not only by the United States Export Administration Act, but by the dead hand of the Co-ordinating Committee for Multilateral Export Controls. COCOM is a secret committee, it is not treaty-based and it seeks now to police the export of high technologies between the countries of the West and the Soviet Union. It has completely failed in that task. In many ways the Americans have sought to take unilateral action outside COCOM, which has nearly always resulted in giving American industries and firms —especially large firms—trading advantages over their British or European rivals. Frankly, COCOM's day has passed. The new developments in East-West relations mean that COCOM must and should be reformed. We should insist that COCOM is brought out into the open, that it is properly established on a treaty base and that it is worked on the basis that all the nations who are party to it will act multilaterally within COCOM instead of using their industrial muscle outside it.

So, here is the situation that Britain faces today. We are the only European nation whose inventiveness is falling behind. We are the only European nation in which the number of scientists and engineers in research and development is dropping. We are piling up a bigger and bigger deficit in the information technology trades. We are losing our share of even our domestic market. We are the only advanced nation to be investing less than we were 10 years ago in non-defence research and development. We are losing many of our best brains abroad. We are suffering from a massive and growing skill gap in information technology that probably covers 30,000 jobs today and will cover 100,000 jobs by about 1993. Fewer people are studying for computer degrees than previously and we have far fewer people in our universities than our competitors. We have a Government who know nothing and could not care less about information technology and about the creation of the new industrial base that Britain will need to badly for its prosperity in the future.

Of course, those conclusions are not new. They are all identified in the recent report of the Select committee on Trade and Industry. The Government have responded to them all in their response published in March of this year. I have yet to read a bleaker and more complacent document than that response.

What Britain needs urgently is a strategy for the new technologies, which will invest in research and development, which will invest in a remissible training tax to encourage firms to carry out their own training, which will invest properly in higher and further education, which will invest in a new technology infrastructure, especially in a fibre-optic cable network for Britain, and which will invest in the world-beating products that the country still invents in sufficient numbers.

The Government, of course, know nothing about the meaning of investment. They will leave it to the market. They will stand by and see this nation, whose prosperity and future now lies in building a high-wage, high-skill, high-investment, high-technology economy and industry, become instead a low-wage, low-skill, low-investment, low-technology offshore assembly plant for others.

Of all the indictments that can be laid against the Government, their failure to invest in the future is the greatest and the one for which we will pay the greatest price. That is why I hope that all right hon. and hon. Members, who see for Britain a better future and who believe that the Government have a role to play in building that future, will vote for the motion.

4.28 pm

The Chancellor of the Duchy of Lancaster and Minister of Trade and Industry (Mr. Anthony Newton)

I beg to move, to leave out from 'House' to the end of the Question and to add instead thereof: 'notes the success of the Government's policies in creating a climate in which industry has achieved record levels of output, productivity and investment; welcomes the continuing increase in investment by United Kingdom companies in civil research and development; endorses the Government's policy of supporting collaborative research and development both in the United Kingdom and in Europe; approves the measures being taken by the Government to make education and training more responsive to the needs of industry and commerce; and welcomes the success of the United Kingdom in attracting advanced technology inward investment as a further indication of the strength of the United Kingdom economy.'. Perhaps I might begin by observing—using a word that the right hon. Member for Yeovil (Mr. Ashdown) used once or twice in his speech—that there is something ironic in the fact that he should move his motion in such terms in a week that has seen the announcement of three massive inward investment projects by companies which are world names in information technology, in vehicles and in vehicle components—Fujitsu, Toyota and Bosch. The total of their investments is about 12 billion. The Opposition are well aware that there are many other investments quite apart from those projects. I mention those major examples of recent inward investment projects because, to put it mildly, they hardly suggest that some of the world's most successful industrial countries and companies share the essentially gloomy view that the right hon. Gentleman has thought fit to put before the House.

Mr. Tony Banks

Will the Minister give way?

Mr. Newton

I shall happily give way, because if the debate had been initiated by the official Opposition we would have heard an even more mindlessly gloomy set of propositions.

Mr. Banks

There is an alternative Opposition Front Bench operating today and we and the Democrats are in complete conjunction in our views on this matter. Why is it that the only thing that the Minister can do is to claim great credit for the fact that foreign investors, especially from Japan, are coming to this country? Where is British investment? The Japanese are coming here in order to get a foothold in Europe for 1992 because they know that Britain is the most deregulated country in the whole of Europe. That means that it will be easy for them. They are using us as a doormat, and it is about time that the Minister started to say that.

Mr. Dennis Skinner (Bolsover)

Think about the bridge on the River Kwai.

Mr. Newton

I shall think at least as much about the remarks attributed to the hon. Member for Dagenham (Mr. Gould), who spoke in, I think, the north-east yesterday. He effectively suggested that the north-east was becoming colonised by the Japanese because they are investing there. I wonder whether the hon. Gentleman goes back to his constituents in the Ford plant at Dagenham and suggests that that is an American colony. Some of the major contributors to the British economy over many years have been foreign investors, overseas firms, whose contribution we immensely value. They have contributed a great deal to the British economy, and I do not know why it should be suggested that we should now turn our backs on them.

Britain and its employment and production would be the losers if we were to adopt the attitude suggested by the hon. Member for Newham, North-West (Mr. Banks). He can come back at me if he wants to, but he should bear in mind that much of this investment would come to Europe anyway. The key point is that within Europe it is coming to Britain. If the hon. Gentleman would prefer it to go to France, Italy, Belgium or Germany, let him say so. If not, let him welcome it here.

Mr. Tony Banks

It is coming to Britain because we are a pushover. They know that our conditions of employment and employment rights are so deregulated that they can take advantage. The Government just lay down a doormat for investors from the rest of the world. The Minister spoke about Ford. There is a threat hanging over the future of Dagenham and the investment there. I went to buy a Ford car from Dagenham Motors because I thought that, as I live in the area, that was the appropriate thing to do. I asked whether the Fiesta that I bought was made at the Dagenham plant, which is right behind the showroom. I was told that it was assembled in Spain. What state are we coming to when we buy Ford cars in this country and then find that they are assembled in Spain and exported to Britain? That is palpable nonsense. Where is the investment in British industry, technology and skills? That is what we want to hear about.

Mr. Newton

The hon. Gentleman and I can agree on at least one matter, which is that 10 years ago there was not the remotest likelihood that any of these firms would have come to Britain. He describes the change from his own particular, rather curious, perspective. I described the change as one in which firms see this country as a good place in which to do business and as a good base for operations which, in one industry after another, are becoming increasingly international, for reasons which have nothing to do with the factors that the hon. Member for Newham, North-West has mentioned.

Mr. Eric S. Heffer (Liverpool, Walton)

The right hon. Gentleman is absolutely wrong to say that there was no inward investment 10 years ago. There was a lot of inward investment in all parts of the country, but the difference between this Government and the previous Labour Government is that the latter had a regional policy and tried to get investment in areas of high unemployment and to get industry where it was vital. Unfortunately, at that time a whole series of firms which operated in this country but whose decisions were made in Detroit and elsewhere were closing down.

Mr. Newton

Why?

Mr. Heller

The Minister needs to know a little about economics, but I am not making a speech. I could explain to him in very simple terms the nature of the rotten system that he upholds, which has booms and slumps. If he does not understand that, he does not understand the ABC of economics.

I was the Minister of State for Industry for a period when we were getting that inward investment. It was precisely when inward investment began to taper off that we saw the end of the regional policy.

Mr. Newton

I am conscious of the previous unhappy experience of the hon. Member for Liverpool, Walton (Mr. Heller). He should perhaps bear in mind two things. First, two of those same companies to which he has referred and to which I have not referred—I suppose that he had in mind, in particular, Ford and General Motors —have both in recent months, quite apart from the three large investments in the past week that I have already mentioned, made significant decisions to invest further in this country, Ford with its engine plant in Wales, and General Motors with some futher investment not very far from the hon. Gentleman's constituency.

I ask the hon. Gentleman to recognise something else. Although it is for Bosch, for example, to say, rather than for me to tell the House, precisely what factors influenced its decision to come here, bearing in mind that it is a German company, I gather from my contacts with the company that two considerations that attracted it were the low rate of corporation tax and the good state of British industrial relations. That is why I say that 10 years ago there would not have been the remotest possibility, however much regional assistance had been offered to them, of those companies coming here.

A third point that I mention while I am seeking to deal with the hon. Member for Walton is the significance of Toyota's having decided to come here on a massive scale with no regional assistance at all, because it has not gone to such an area. That is a feature of some significance.

Mr. Timothy Wood (Stevenage)

I would like to join my right hon. Friend in welcoming the inward investment that has taken place, but it is not only inward investment that we are seeing. In my own constituency in the past four or five years we have had both announcements of further investments and actual investment by, for example, Glaxo with £500,000 to be spent in Stevenage in the next four years and 2,000 people involved in research and development. Another 500 people are involved in research and development in Marconi Instruments with a new factory development. Further development is going on in International Computers Ltd., part of the Standard Telephones and Cables group, in Stevenage. All this new investment is being made so that this country can be more prosperous.

Mr. Newton

I am grateful to my hon. Friend the Member for Stevenage (Mr. Wood). He makes very well the point that, although there is a particular drama about so many large inward investment projects being announced in the past week, it is against the background of a widespread increase in investment of all kinds across virtually the whole of the British economy, both by companies overseas and by those business men here who have greater confidence in the country's economy than they have had at any time for a generation.

Mr. Skinner

That line of argument about inward investment would stand up much better if the Government had not been in office for 10 years. When they took office we had a marginal surplus on our manufactured trade; we are now down to a deficit on manufactured trade of about £20 billion and a balance of payments deficit of about £15 billion. According to the Chancellor, despite all the claims about inward investment, it is likely to get worse in the next financial year. If this inward investment is so good, beautiful and wonderful, when will the balance of payments return to a surplus?

Mr. Tony Banks

Where is the miracle?

Mr. Newton

If, for example, Fujitsu makes chips here rather than elsewhere, there will be an export and import substitution effect. The same is manifestly true of Bosch, Toyota and all the other projects that I mentioned. At the same time, they will contribute in various ways, both direct and indirect, to the further strengthening of the competitiveness of the British economy, and are part and parcel of the range of policies with which we seek to meet the needs to which reference has been made.

Mr. Banks

When will we move back into a surplus?

Mr. Newton

No doubt other hon. Members wish to take part in the debate, and I wish to make some progress.

One matter on which both Social and Liberal Democrats and Labour Members sitting below the Gangway happily agree with my right hon. and hon. Friends is the importance of investment for this country's future prosperity.

It is striking that, although during the 1960s and 1970s the United Kingdom was near the bottom of the league by almost any standard of the substantial measurement of investment, since 1980 total fixed investment has grown faster in the United Kingdom than in any other country in the European Community. Manufacturing investment alone—I know how keen Opposition Members are on manufacturers—is estimated to have increased by no less than 9.5 per cent. between 1987 and 1988. All the indicators point to continued buoyant investment this year.

Mr. Doug Henderson (Newcastle upon Tyne, North)

I am not trying to be obstructive, but, if that is the case, why is manufacturing investment now only back to its 1979 level?

Mr. Newton

I shall point to a fact that emerged in the course of my statement on Toyota, which I made to the House yesterday, when I was challenged about the degree of import penetration of the British motor car industry. I made the point then, and I make no apology for repeating it, that for most of the period since the Government took office there has not been a particularly satisfactory level of import penetration. It has been between 50 per cent. and 60 per cent.—but that was about the level which it had reached in 1979. Between 1974 and 1979, the level of import penetration doubled. It will take a long time to overcome the effects of such decline, its consequences for investment during that period, and the decisions that were then made.

Equally, investment in industrial research and development is increasing in an encouraging way, with an increase of about 26.5 per cent. in real terms—more than a quarter—between 1983 and 1987. It should be firmly registered throughout the House that it is against that background of a strong sustained increase in investment by industry that the right hon. Member for Yeovil has brought the motion before the House this afternoon.

Mr. Ashdown

Will the right hon. Gentleman confirm that investment as a proportion of GDP—which is the proper way to measure net investment—is no higher than it was in 1979? The right hon. Gentleman accused me of being gloomy. Is he not gloomy about the fact that today our deficit in information technology is running at £2.9 billion a year and growing? Does he not find that a gloomy picture? Or does he think that it is wonderful?

Mr. Newton

I shall be coming to some of the right hon. Gentleman's remarks about information technology, for I have no desire to dismiss them. I ask him to acknowledge, however, that after more than 20 years in which the economy suffered not only from its failure to invest as much as we would like but from growth in consumption outpacing, consistently and almost relentlessly, that of investment, there has been a dramatic turnaround in the past five or six years. The growth of investment has often exceeded that of consumption by as much as 100 per cent. That remarkable trend has addressed a long-term weakness of the British economy, and has helped to build up its strength for the future.

The right hon. Gentleman talked a good deal about the information technology and electronics sector. Although he considers that sector particularly important, and it helped him to make his case—or attempt to do so—I ask him not to ignore other aspects of high technology, especially aerospace and chemicals, which present a different picture.

No one should imagine that the labels "information technology" and "electronics" mean that those are the only high-tech industries with which the country needs to be concerned. In aerospace, for example, the United Kingdom's capital investment in 1986 was £220 million, up from £133 million in 1983. In chemicals, capital investment in 1987 was running at an annual rate of £1.4 billion, up from some £900 million four years earlier. Investment in aerospace research and development between 1983 and 1987 has consistently remained at a high level, while in the chemical sector R and D investment increased from £735 million in 1983 to £1.3 billion in 1987—a massive increase of 47 per cent. in real terms. In both those high-tech sectors, moreover, the country is running a trade surplus of over £2 billion.

Mr. Cryer

rose—

Mr. Newton

I will give way once more, but then I must get on.

Mr. Cryer

Does the Minister accept that the British aerospace industry has been so consistently under-funded that we have not been able, in conjunction with Airbus Industrie, to provide a range of planes to satisfy British Airways—which is now almost entirely dependent on Boeing, with its highly variable quality of production? Does he also accept that the only small to medium-sized plane, the British Aerospace 146, depends not on Rolls-Royce engines but on Avco Lycoming engines imported from the United States? Is that not a sign of our lack of investment in technologies that will need developing if we are to match Boeing and Avco Lycoming?

Mr. Newton

It is also significant that a considerable number of American aircraft in operation around the world use Rolls-Royce engines. Given the size of this country and of what might be called its domestic market, its achievements in industry are considerable and make a major contribution to our balance of payments.

For understandable reasons, the right hon. Gentleman chose to focus particularly on a different high-tech industry, IT and electronics. In his intervention a few moments ago he implied—indeed, he virtually made his view explicit—that it was self-evident that the United Kingdom should expect to have the manufacturing capability to meet all its high technology needs. He points to the trade deficit in the IT and electronics sector, arguing that it demonstrates a need to channel further investment into it. I noted that he did not refer directly to the point that nearly all the major countries of the European Community and the United States also have IT deficits, and therefore have not gone down the self-sufficiency path that the right hon. Gentleman implied.

Our country has a long history of involvement in research and, as many right hon. and hon. Members said, it has been the home of many great discoveries. It certainly has outstanding strengths in particular areas of scientific research and industrial technology, including many under the umbrella of information technology and electronics. When it comes to instrumentation control systems, for example, and to electronic capital goods such as radar, we had a 1987 trade surplus of more than £700 million. No country is, or is likely to be, a world leader in each and every area of high technology. It is an increasingly global market in which each successive generation of technology demands ever-increasing sums to be spent on research and development investment.

The United Kingdom—no more than the United States, Germany or Japan—will not be able to become a major force in every area of high technology. Therefore, in common with other developed countries, we have rightly, in my view—tended to specialise in those sectors in which British firms have a world lead or the prospect of maintaining a strong position in an increasingly competitive global market.

Interestingly, it emerged from the speech of the right hon. Gentleman that information technology is used to increase the efficiency and effectiveness of industry and commerce, and that that is true whether the IT equipment concerned is manufactured in the United Kingdom or is imported. In his remarks the right hon. Gentleman adverted—almost as an aside—to the undoubted growth in the IT and electronics trade deficit, and to the fact that that deficit was associated with probably the fastest growing market in the world. That is itself an extremely encouraging trend. It is at least as important—it will be possible to argue that it is even more important—to ensure that IT is effectively applied in our manufacturing and service industries as it is that we ourselves should be a massive manufacturer of microchips or whatever. In revealing that the United Kingdom is one of the world's fastest growing markets for IT and electronics products, the right hon. Gentleman indicated one of our country's growing strengths and not weaknesses, as he sought to imply.

Mr. Ashdown

The right hon. Gentleman is correct to say that the proper utilisation of information technology is vital. One thinks, for example, of the way that it has been used to make the textile industry up-market and more competitive. However, the fact remains that Britain is woefully under-equipped to make use of the capital goods that it is buying in to support that deficit. The Institute of Administration and Management's report of 10 July 1988 commented that unsophisticated users of information technology are six times more likely to suffer poor financial results. It went on to comment that that is exactly what we have in Britain today—due to inadequate training levels, an insufficient number of graduates, and in particular a deficit of 6,000 programmers and analysts. The underlying problem is that the Government refuse to invest in education so that we are unable to utilise the maximum capacity of even that IT that we are buying in.

Mr. Newton

The right hon. Gentleman, understandably, rapidly shifts his ground from concentrating solely on our production capacity in relation to IT and electronics. Now that I have made the point that applications of that technology are increasing, which is encouraging, the right hon. Gentleman turns to what he calls the skills gap. I shall refer to that issue later. However, I hope that I have carried the right hon. Gentleman with me in recognising that at least as important as the sheer scale of the production of any particular types of IT or electronics products in this country is the extent to which we make use of those products, from wherever they may come, in developing industry's competitiveness and efficiency.

Capital investment in IT increased by 44 per cent. in real terms between 1982 and 1986, and it is also a leading sector of investment in terms of research and development, with investment in 1987 of nearly £2 billion compared with slightly less than £1.5 billion in 1983. Clearly it would not be sensible to demand of United Kingdom firms that they invest in areas where they cannot compete effectively internationally. It would not be right, as the right hon. Gentleman claimed it would, for the Government to seek to determine where and how United Kingdom firms should or should not invest. That approach of picking winners was tried in the past. More often than not it ended up as the quickest way of picking losers and of sending a good deal of money down the drain. There is no substitute for firms having a knowledge and understanding of the market place determining their own production and investment strategies.

There will inevitably be areas of IT and of other industries where foreign firms have a competitive advantage and where United Kingdom companies will choose to buy from abroad rather than manufacture in this country. That is an inevitable consequence of increased specialisation in the IT and electronics sector and of the need for every country to concentrate on comparative strengths. That is one reason why we welcome the overseas investment to which I referred earlier, which has been an outstanding aspect of this country's success story in recent months and years.

I emphasise the contribution made to this country by firms with which we are already familiar. IBM, for example—and it would be just as possible to talk about Hampshire being colonised by IBM as about the north-east being colonised by Fujitsu—with more than 18,000 employees, is the largest employer, producer and exporter in the United Kingdom's IT industry. In 1988 it exported goods and services worth more than £2 billion, running a positive balance of trade and making it one of the country's largest exporters.

It is encouraging that other world leaders such as Digital Equipment, Hewlett-Packard, Rank Xerox and Datalogic all chose the United Kingdom for their European headquarters. Their decisions are not just coincidental but are positive statements by business leaders of confidence in this country and in its role as a key player in information technology. As was said by my hon. Friend the Member for Stevenage, it is far from the case that our indigenous IT firms are not investing. My hon. Friend referred to ICL, which has spent about £20 million on its United Kingdom manufacturing ability in the past two years, while Research Machines, one of our smaller but growing computer manufacturers, made more than £5 million of capital investment over the same period.

The Government have also created a climate that ensures that firms are much better placed to invest in research and development. Manufacturing profitability in 1987 was the best since 1969, and industry increased its own funding of research and development by about 30 per cent. in real terms over the four years between 1983 and 1987. Apart from that growth in industry's own expenditure on research and development, the Department of Trade and Industry spent more than £500 million on science and technology in 1988–89, and it will spend a slightly larger sum in 1989–90.

I am not sure from the right hon. Gentleman's remarks whether he welcomes this, but the Government have shifted their balance of policies and moved away from what is known as near-market support for research and development to direct support to longer-term ventures more distant from the market. We are putting much greater emphasis on longer-term collaborative programmes of research between companies, and encouraging co-operation between companies and higher education institutions. Many new schemes to promote pre-competitive collaborative research have been launched in the past year. For example, some 11 programmes have been announced and several more will soon be launched on Link, with which the right hon. Gentleman will be familiar. Proposals for such projects are being generated at a healthy rate.

I was particularly pleased that the right hon. Gentleman clearly recognised the importance of international collaboration, especially with the aproach of the single European market. We are supporting the Eureka framework which goes beyond the European Community and is a pan-European programme to encourage industrially led projects with the European Community and other European partners; and, of course, we are supporting many European Community research and development programmes which are complementary to our own.

Everyone in the Department is actively encouraging United Kingdm organisations to take part in community research industrial research and development programmes. Within the framework of those programmes, United Kingdom organisations are taking part in between 50 arid 80 per cent. of the projects, depending on the individual programmes, and have received between 18 and 20 per cent. of the total funding. That is not often sufficiently appreciated when people look at some of the figures to which the right hon. Gentleman referred.

I wanted to make one or two further points about investment, but in view of the time, partly because I have given way several times, I shall move on to the other shortage on which the right hon. Gentleman focused particular attention—the need for training in various skills at various levels. Certainly the time when training could be regarded as a one-off spell between general education and work and when additional training was considered neccessary only when new machinery was installed is long gone. It is encouraging that so many employers in Britain consider training to be a continuous process that is essential if they are to keep up with their competitors at home and abroad. I assure the right hon. Gentleman and the House that that shift towards ensuring that training is more widely accepted as an essential part of a firm's investment and development is being reinforced.

Clearly, not least because of the large increase in the use and application of information technology and electronics, there has been a need to increase the supply of skilled manpower. The surge in demand for IT skills that has accompanied the surge in the market for the processes and products has undoubtedly led to a shortage of qualified manpower. We have sought to respond to that in a variety of positive and constructive ways, although it is manifestly not a problem that can be overcome in weeks or months.

By 1990 the engineering and technology programme will have provided 5,000 extra places at undergraduate and postgraduate level, 80 per cent. of which are in IT-related subjects. That programme and the earlier information technology in higher education initiative have significantly increased the places available for postgraduate information technology training. This year, the funding to help polytechnics and colleges to develop their capacity for applied research has been increased by more than 50 per cent. The high technology national training initiative of the Training Agency provides high-level vocational training courses, the majority of which are in computing sciences and engineering, with an IT component. Currently, some 3,000 students benefit from that programme. Computing and IT is a compulsory element in all youth training scheme programmes.

Those are just some of a wide-ranging set of programmes directed at the very problem to which the right hon. Gentleman drew attention. Trainees on employment training will also be able to undertake training on information technology as part of their individual action plans. We are continuing to monitor closely the evolving pattern of demand and supply for information technology professionals through regular surveys carried out by the Institute of Manpower Studies on behalf of a number of Government Departments and agencies.

Finally, I should mention something which the right hon. Gentleman did not include in his speech—the range of measures that are under way to improve links between business and education, not least the wide-ranging plans by my right hon. Friend the Secretary of State for Employment for the development of training and enterprise councils.

In addition to the need for improvement in the amount and nature of training available in certain places at certain times which is currently being addressed, too many of those programmes were not sufficiently shaped by direct and clear knowledge of the needs and requirements of businesses and business men. The move towards training and enterprise councils to ensure that training is more closely related to the needs that underlie this debate will, in the medium and long term, prove one of the most important and productive changes which the Government has sought to implement.

For reasons that are clear to the House and, I hope, accepted, I have taken a little more time than I had intended. I accept that much remains to be done to overcome the full effects of a longer and unhappy period of decline in many parts of British industry, especially during the 1960s and 1970s. Against the background of recent investment decisions by British firms and those abroad, the change in the past 10 years should be considered genuinely encouraging by hon. Members on both sides of the House. More than at any time in a generation, Britain is investing in the future. We are investing in capital, in skills and in a way which will continue to improve the output, the competitiveness and the trading position of the British economy. While I accept that there is still more to be done, I hope that the right hon. Gentleman will accept, as he did at the outset of his speech, that an immense amount has already been achieved.

5.7 pm

Mr. Doug Henderson (Newcastle upon Tyne, North)

I congratulate the right hon. Member for Yeovil (Mr. Ashdown) on his choice of subject for our debate. I also congratulate him and his party on the wording of the motion, as far as it goes. I was also pleased that he is so eager to endorse the Labour party's next economic programme in advance of its publication. I look forward to his further endorsement when the programme is published.

In the 1989–90 Red Book, which I understand is more than just another document, the Government claimed: As a result of sound financial policies coupled with supply side reforms, progress has been made during the 1980s". I shall return to supply side changes but first I shall address the question of economic progress. In any test of economic progress, it would be reasonable to look at the indices of manufactured output, manufacturing investment, trade, employment, growth and even inflation.

Can what has happened in our economy in the past 10 years be called progress when manufacturing output returned to 1978 levels only in 1987 and manufacturing investment has still not yet returned to 1979 levels? In 1979, we had a surplus of £3 billion on our trade in manufactures, but we now have a deficit of £20 billion. That is reflected in the figures of key industries in our economy. For example, most households spend a large proportion of their income in the car industry, but there is now a £6 billion gap in trade. In textiles and clothing there is a £3 billion gap in trade and in electronics there is a growing gap, as we have already heard, of nearly £4 billion. That is also reflected in our share of world trade, which has fallen by 11 per cent. over the same period.

Can it be called progress when we have lost 2 million jobs in manufacturing industry over 10 years? Notwithstanding the improvements in employment in the past couple of years, which we all welcome, unemployment is still 35 per cent. higher than in 1979, even if we take into account the Government's new method of calculation. Can it be called progress when the north-south divide is greater than it has been at any time in the past 20 years? Can it be called progress when inflation on all indices has all but returned to the 1978–79 level? I remind the Chancellor of the Duchy of Lancaster of the comments of his right hon. Friend the Chancellor of the Exchequer before the 1987 general election when he said that inflation was the judge and jury of the Government's economic policy. I wonder whether the Chancellor is still saying that. I wonder whether the Minister is saying that when inflation is increasing rapidly. It is now double the average in the EEC and is moving relentlessly upwards.

That depressing picture is the real monument of 10 years of Thatcherism. It has bequeathed to this generation and the generation of the 1990s a lower capacity to make things that we need to export and an inability to compete in the modern high-tech industries. We are now a ravenous pool of consumerism for the products of other countries. What will happen when the bubble bursts? Will not deflation be forced on us again? Will not living standards begin to fall and, with a time lag, unemployment again start to rise? All that will have been called progress during a time when we have had the benefit of £78 billion in North sea oil revenues.

Some people may argue that inward investment is a sign of good times. I am not saying that it is not welcome in some circumstances. However, an over-reliance on inward investment is surely an indictment of our industries' inability to invest in our future. I am not opposed to inward investment. As a Member for the north-east of England I realise the importance of Japanese investment to the north-east economy. However, we must recognise why the Japanese are here. They are not here because of any supply side miracle in the British economy. The senior management in Japanese companies will say why they are here. They want to be inside protectionism that they think might occur in Europe after 1992 and if they locate in a country in which English is spoken, they do not need to retrain their middle management in other languages. That is the real reason why Britain is attracting Japanese investment. I think that the Minister knows that that is so.

Sir Anthony Meyer (Clywd, North-West)

The hon. Gentleman is making disparaging remarks about inward investment. Did he listen to his hon. Friend the Member for Houghton and Washington (Mr. Boyes) when he intervened strongly during the Chancellor of the Duchy of Lancaster's statement yesterday to point out the enormous benefit that Japanese investment has conferred on his constituency?

Mr. Henderson

I am grateful to the hon. Gentleman for raising that point. We are not opposed to all inward investment. We want a balance of investment in this country and a greater investment by our indigenous companies. One reason why companies will not invest in the north is that companies currently located in the south cannot persuade their managements to go north. To companies from Japan, Korea or elsewhere the 300 miles between Newcastle and London and the 400 miles between Glasgow and London are immaterial.

We cannot rely exclusively on Japanese investment for major projects in the regions. If we do accept investment, it must not be on just any terms. We must remind ourselves that Japanese investment in the United Kingdom is for the benefit of Japan, not Britain. We risk becoming an adjunct of the Japanese economy, with all that that entails. We need our own economy, our own product development and our own components industry. We must develop using our own inventiveness, our own new industries and our own research and development. We need our own educational and training investment and we need our own industrial infrastructure. Without that, we will become nothing more than a low-wage, low-skill, branch-plant economy.

Some people have said that we are becoming a screwdriver economy and hon. Members know the danger involved in that. In prosperous times it might be all very well but in difficult times there is nothing for the screwdriver to screw. That means a reduction in output and an increase in unemployment.

Mr. Newton

I do not understand how the hon. Gentleman can make those comments about Japanese companies such as Fujitsu, Toyota and Nissan but not about IBM, Ford, NEC or any of the other major foreign investments that have been here for some time. Nobody in Dagenham talks about a screwdriver economy. Nobody talks about such an economy in Hampshire or various other places in which IBM is working. Nobody who has seen Nissan at work in the north-east talks about a screwdriver economy. Why should it be assumed that that applies to all new investment?

Mr. Henderson

I know that the right hon. Gentleman makes regular journeys to the north-east, but I hope that in future he will take a little more cognisance of what he is told. He will know that the people in the north-east remember the nature of the investment that came from the American economy in the 1940s and 1950s. Companies such as Caterpillar are no longer there. Caterpillar was a screwdriver company and when things became difficult internationally it pulled out. Many companies, including Massey Ferguson and Chrysler, have pulled out in that way. That is the real danger. We need a balance of investment. I am not saying that we should exclude all foreign investment.

Mr. Charles Kennedy (Ross, Cromarty and Skye)

I am listening to the hon. Gentleman's argument with care. He said that we need a balance of investment. I am not suggesting that he believes that we should exclude foreign investment but is he suggesting that, for the Labour party, with the announcement this week, the balance has gone too far in the wrong direction?

Mr. Henderson

I am not saying that the balance has gone off the end. However, if in the future the only investment in parts of Scotland, the north-east and north-west is foreign investment, the economy will become so dependent on inward investment that when we are hit by an international recession those areas will be as badly hit as they have been in the past. Some areas, such as Wearside near my constituency, are extraordinarily dependent on inward investment. They will be the first to be hit if there is a world recession, and everyone connected with the investment knows that.

Mr. Bob Clay (Sunderland, North)

Is my hon. Friend aware that a report commissioned by the Department of the Environment from the distinguished accountants, Peat Marwick McLintock, on the housing action trust in Sunderland said that there was no evidence of the Nissan plant having any effect on employment on the estates of Downhill, Hylton Castle, Red House and Town End Farm? The Nissan plant, which already employs 2,000 people and is adjacent to those estates across the A19, has had no effect on those estates, which have high unemployment. Is not part of the problem that because investment is not indigenous, it is highly selective where it employs?

Mr. Henderson

I am grateful to my hon. Friend for his comments. He knows that the problem arises in such areas as a result of skill shortages and the lack of proper training programmes over the past 10 or 15 years.

Mr. John Redwood (Wokingham)

If the Nissan plant is only a screwdriver plant, why do people need skills to work in it?

Mr. Henderson

I have been grateful for other interventions, but that remark is offensive. It is offensive to say that people who work on an assembly line have no skill. The hon. Gentleman should spend 39 hours on the Nissan production line and then make that remark.

Why is our economy in the shape that it is? I shall refer to comments made by people who know more about the subject than the hon. Member for Wokingham (Mr. Redwood). Dr. Andrew Sentence, who is head of the CBI's trends and policies group, stated last July in the CBI news: High interest rates are a burden on business and are unwelcome at any time. However, they also affect companies, particularly manufacturers, through their impact on the value of the currency. I met the chairman of a company called AWD, which is in the vehicle industry. The Minister is familiar with it and I hope that he will agree that it is a go-ahead company which has considerable prospects. It rescued Bedford Vans, but its chairman is saying that the company will not make the impact that he wants on the market until the exchange rate is industry-based. I recently met a director of Courtaulds in charge of its spinning division in Lancashire shortly before he announced the closure of spinning plants. He made it clear that the problem was not internal productivity but the exchange rate. He said that as long as it was geared to the City and not to the needs of industry, the company could not compete in the world market.

Economists once thought that if demand policies are appropriate the economy will be successfully steered, but history has reminded us that that is not the case. I agree with a speech that the Minister made earlier this year, in which he acknowledged that demand and supply side initiatives are essential. However, it is clear that the Government's policies on the demand side have been pro-City, pro-rich, pro-export of capital and anti-industry, anti balanced economic development and anti the interests of ordinary people.

I observe no supply side miracle. Our failure to improve the supply side is at the core of the problems facing us as we build up to 1992. The basic error made by the Government over the past 10 years is that they believed that if they bashed the unions, trimmed the power of workers and gave employers more punch, supply side problems would be solved. That is what happened to British Leyland, but could any hon. Member say that as a result it is a strong, independent company going from success to success? Surely the truth is different, as everyone in the industry knows. It failed to take necessary design, capital re-equipping and marketing measures. I am as pleased as any hon. Member that it is hanging on manfully, perhaps in hock to Honda, but everyone in the industry knows that the basic problem was not limited to labour. That lesson is typical of much that has happened to much of manufacturing industry.

We should now know that the supply side cannot be changed without investing in the future, yet we still spend less on research and development than the Germans, Japanese or Americans. As the right hon. Member for Yeovil said, if the military aspect is extracted from research and development expenditure, the problem is more severe. Is it any surprise that we are ever more dependent on Japanese-designed cars, electronics and engineering products? The Government cannot dodge their responsibilities, as the Financial Times said when attributing blame for the problem in an editorial on 14 March.

There will be no supply side miracle while training is so woefully inadequate. Our number of trainees has dropped from 23,000 in 1979 to 8,300 in 1988. Two thirds of British workers have no workplace qualifications, compared with one in five in Germany. Cuts of over £230 million were made in the 1989–90 training budget in real terms. Even in the service industries, about which the Department of Trade and Industry is for ever crowing, 14,500 young French people obtained qualifications in retailing compared to only 1,650 in Britain. Is it any wonder that the Engineering Employers Federation has forecast a deficit in mechanical engineering products in 1989, for the first time this century?

Is not the fundamental policy error of the Government that, unlike our counterparts in the Federal Republic of Germany, they are completely and ideologically hostile to collective and community action? We cannot make improvements in research and development, training, education and infrastructure unless we make a public expenditure commitment. Public expenditure should be accountable. The test should be the value of the service or product that it provides. However, I acknowledge that that has not always been the case. Crucially, public expenditure should be used to stimulate and complement private sector investment and initiative.

The Government know the perils ahead. They know that a further hike in interest rates will not only hit mortgages and further hamper industrial investment but will further exacerbate the trade gap. They know that the pound is likely to collapse when confidence departs and the hot money leaves our shores. They must know that 1992 is a further threat to our economy. If they are honest, they will admit that we still have severe supply side inadequacies.

Regrettably—I believe that the country holds this view —it is too late to change the Government's view. Some Conservative Members share the view of Labour Members that intervention is necessary and that we must invest to protect our future. Perhaps we will hear more about that from Wales in the coming week. I urge Conservative Members to join us in supporting the motion.

5.28 pm

Mr. Richard Page (Hertfordshire, South-West)

The title of the debate is fully in keeping with the slogan approach of the Social and Liberal Democratic party. It is long on good intentions and rather short on practicalities. I was privileged to represent Workington in the late 1970s and remember the workings of the Lib-Lab pact. I remember that almost any investment for the future was cut and cut again, so perhaps the House will understand my scepticism about the words of the right hon. Member for Yeovil (Mr. Ashdown) about investing in the future. I have a thought going through my mind that if he ever got near the levers of control the results might fall a little short of his words.

I am grateful that the House has the opportunity to discuss this most important matter, but I am disappointed in the number of hon. Members who are present to listen. Although I include hon. Members of my own party in that comment, we are more in evidence than hon. Members of other parties. We have some good spenders in this House, but we are a little short of earners. As a nation, we must earn money before we start spending it. This is a debate in which we decide how to earn money so that we can spend it on the social programmes the nation requires.

I want to talk about future investment in reducing our balance of payments deficit. In the short term, the Government's policy—which I support—is to have high interest rates which will bring down inflation and reduce demand. I am concerned that high interest rates will, in turn, reduce investment as well as demand. Even if that does not happen, I am equally worried about whether our manufacturing industry will be of a size and capacity to take advantage of the demand when interest rate falls. Will it be in a position to supply the goods that our people require when interest rates come down? I worry that that will not be the case. If I am right, we shall lurch backwards and forwards in a way reminiscent of the stop-go policies of the 1950s and 1960s, only this time we shall use the balance of payments as the crisis indicator.

I assume that it is desirable to bridge the balance of payments gap and to bring our balance of payments into equality; thus we should define the objectives to be achieved. It is a sad fact—every hon. Member who has spoken so far has made the point—that for some reason our manufacturing industries are poor in investing in three areas—training, equipment and research—when compared with industries in other countries. We can deal with the problem of the balance of payments deficit as a large cake, by taking slices out of it and dealing with each slice at a time. I am glad that manufacturing investment is now up to its 1979 level, but it is still low compared with the other G7 countries and we have to bear in mind the significant point that our investment is still some 50 per cent. lower than Japan's as a percentage of gross national product. However, I do not decry the increase in investment that has taken place, as so many Opposition Members have. It is a significant improvement and long may it continue. But we should have some idea to what percentage of GNP should be reached in manufacturing investment if we are to work towards reducing the balance of payments deficit.

We must also have some idea what percentage of inward investment is desirable each year and work towards it. I have to smile when I see the disagreements between the two wings of the Labour party over internal investment. I welcome Toyota's investment in the north. It is a tribute to the changing attitudes and atmosphere that the Government have created that the Japanese are looking to this country for investment. I also admire the work done by my right hon. Friend the Secretary of State for Wales in creating the infrastructure in Wales to attract companies to the Principality. I am not saying that the Government should pick winners, because the Government could not pick a winner if we paid them, but the Government can provide the infrastructure to make this country attractive to foreign companies for investment. I am told that during the last two years, the improvement in the balance of payments which will be created by those companies that have gone into south Wales in that period would mean a change of £10 billion to £15 billion to the balance of payments, if it were to be extrapolated over the whole country. That contribution should not be lightly brushed aside.

I know that some people are rather worried about internal investment and inflows of funds. I must point out to them that the most chauvinist nation of the lot in the European Community—France—has now, for the first time, revised its policy on internal investment and is going out of its way to attract more companies to invest in France, whereas before it was trying to keep them out.

Much has been said about training and the fact that for some reason our manufacturing industries have been poor in that respect. The recent initiatives of my right hon. Friend the Secretary of State for Employment in putting £3 billion into training and bringing in manufacturing industry, which will contribute about £15 billion, will go a long way to bridge the skill gap. It is a funny quirk of human nature that although we have probably the most generous student grant system in the industrialised world, we have the lowest percentage of people going on into further education. That reflects a failure of the motivation of some of our schoolteachers. Britain desperately needs a trained work force to maintain its position in the industrialised world.

Again, we have a low percentage of GNP spent on research. Other hon. Members have already made the comment about the percentage given by the Government to defence. I would like the Government to look at defence as a separate item and see whether it is necessary for them to increase the percentage that goes into the civil side. Although our defence industries make a contribution to the balance of payments, one cannot eat tanks or grow rockets. That part of the economy should not be supported to the detriment of the civil side. The civil side should be evaluated on its own and should not be squeezed out in favour of the military.

I was generalising when I spoke about investment because certain sectors of society and industry have done exceedingly well. For example, the huge investment put into aero engines has produced results. Other hon. Members have mentioned our pharmaceutical and chemical companies. There is no doubt that money invested comes out in the fulness of time in profit, jobs and products. I am afraid to say, however, that as a general rule, the lack of skills and the lack of investment in research in our manufacturing industry has led our manufacturers to retreat into niche marketing. Niche marketing is profitable in the short term, but I remind industry, as I remind the House, that niches are a little like castles in 13th century Europe, in that they are soon overrun. We must consider the wider context.

I am reminded of the story, which I am told is true, of the ambassador to Washington at the time of the introduction of television. He was asked to do a Christmas broadcast which would be recorded in advance. The television crew arrived, the ambassador gave the broadcast and when he thought that it was all over the interviewer said, "What would you like for Christmas?" The ambassador replied, "Crystallised fruit." Come Christmas day, the ambassador watched the broadcast. All was going well until, at the end, the camera flashed to the French ambassador. When he was asked what he would like for Christmas, he said, "I would like to see an end to nuclear arms." The interviewer turned to the Australian ambassador who said, "I would like an end to the Korean war." He turned to the Indian ambassador who said, "I would like an end to world hunger." Hon. Members can guess the rest of the story. There is nothing wrong with crystallised fruit in a domestic context, but it does not have much impact on the wider world.

We must look to the targets presented within the European Community, the Pacific rim, the USSR, America and the rest of the industrialised world. We must see what we must do to expand our productive capacity and to build on our present success to achieve equality in our balance of payments. We must then target our objectives and, with Government support for the infrastructure—and the Government should not try to pick winners—we should go for it.

5.39 pm

Mr. Malcolm Bruce (Gordon)

I am pleased that we have this opportunity to debate such an important subject today and that my party initiated it. One of our concerns in the past 10 years has been the weakening of Britain's competitive position. We must be able to pay our way in the world, and our failure to keep up with modern technology is beginning to come home to roost with a vengeance.

I am a member of the Select Committee on Trade and Industry. Last year our major report considered Britain's position on information technology. We discovered that there was a remarkable paucity of information about the state of that industry. It was difficult to find out exactly what was going on. Therefore, much of our report was dedicated to asking the Government to play a role in ensuring that more information is available so that Britain can ensure greater participation in the development of that technology and, much more importantly, in its application and use.

Many of us have personal experience of modern equipment. If it did the things that the salesmen said that it would, we would be pleased with the service, but more often than not, it fails to live up to the expectations raised about it. That is basically because we are lagging behind in using that technology effectively and in developing its application.

That presents an interesting contrast with the attitude of our major competitors. When looking for information on this, the Committee visited the United States and Japan. It is fair to say that what we saw in Japan scared us because the Japanese are channelling long-term investment into this area on a scale that leaves us gasping and the Americans terrified. If the Americans are terrified, there is no room for complacency in Europe or in the United Kingdom. Indeed, the Americans are so concerned that they have tried to copy some aspects of the Japanese approach in bringing companies together in research and development consortia to try to advance the technology and its application.

Our report also referred to the Government's role in advancing technology through their own procurement policy. However, that view was categorically rejected by the Government, who do not see it as a function of government. That is interesting, because it was explained that a significant component of the success in this area of Japan and the United States was brought about by their Governments' conscious use of their procurement powers to bring on technology. Although the British Government are facing severe competition from highly powerful and successful Japanese and American markets, the one thing that the Government have decided that they must not do is to follow their example. I cannot imagine a more stupid response to a serious situation.

The Select Committee looked at silicon valley, where there has been a wonderful upsurge of innovation and ideas in new product and new systems developments, but when one got to the bottom of it, much of the money came from the United States' defence budget. Although applications ultimately spin off into the commercial market, without being underpinned by defence spending, many of the ideas, products and companies, would simply not exist.

My right hon. Friend the Member for Yeovil (Mr. Ashdown) has already referred to the lack of research and development funding in areas apart from defence, although we do not have a defence budget that is in any way comparable to that of the United States. We must address that issue and ensure that there is some push from underneath as well as some pull from the market. One area on which my party and the Government agree is that the market must be the determinant, but the market alone will not ensure that British companies succeed in developing the new technology.

We must look for opportunities in new markets. There is no doubt that a single European market is an opportunity for greater co-operation and for developing a bigger market. From that market there is the potential to develop markets in the Third world and in the Eastern bloc. We should not lose sight of that because if the economic reforms in the Eastern block are successful, as all hon. Members hope that they will be, those countries will need the technology which we have but which they are a long way from being able to produce for themselves.

I make a specific plea—I hope that the Minister will address this point—for the British Government to press for a review of COCOM. The Select Committee on Trade and Industry called for that last week and our call was reinforced by the Select Committee on Foreign Affairs. The relevant extract of that Committee's report states: The Trade and Industry Committee criticised the unwieldy nature of the system"— that is COCOM— commenting on the likely extent of trade opportunities lost. We share its view, and are sympathetic to its recommendations including 'an immediate and radical reduction in the scope of the Cocom list'. I stress that COCOM needs to be able to expand as fast as technology changes. Too often we are in the ludicrous position of British companies being prevented from exporting technology which is already becoming obsolescent but which, because COCOM has not caught up with it, is still on the restricted list. In consequence, we lose market opportunities and eastern bloc countries lose the opportunity to develop their economic performance.

So that there is no misunderstanding, I make it clear that we fully understand the need for COCOM. We are not suggesting that it could or should be swept away because, of course, we must maintain our guard on defence and security. However, as we—the Select Committee on Trade and Industry—said and as the Select Committee on Foreign Affairs has said, COCOM does not apply simply to defence. It is becoming a significant and substantial restraint on trade. I hope that the Government will agree that that is something that the West, collectively, could usefully address.

Although I welcome the Labour party's support for our motion, the hon. Member for Newcastle Upon Tyne, North (Mr. Henderson), who spoke from the Labour Front Bench, tried to suggest that the Labour party was somehow ahead on this matter and that it would address itself shortly to a great and presumably revamped "white heat of technology" initiative. Unfortunately, the tenor of the hon. Gentleman's speech suggested that what was being put forward was some kind of "fortress Britain", which would be narrow and introspective. He failed to grasp the fundamental point that, if we are to be competitive in the market place, we must be in the market place and not protected from it. We agree that the market must be allowed to operate and that our companies must be able to respond to it. "Fortress Britain" may be a superficial populism, but ultimately it would destroy our industrial base by hiding it from the real world.

We believe that the Government have a role to play in ensuring that we have a level playing field and reciprocal arrangements with our non-European competitors, such as the United States and especially Japan, and in ensuring that the single market within the European Community operates evenly and fairly for all of us.

Mr. Kennedy

Like my hon. Friend, I welcome the Labour party's support for our motion, but does he agree that there is a fundamental contradiction in the Labour party supporting a motion that is substantially addressed to information technology issues which, by definition, technically cannot know any national boundaries because information technology is all about the international free flow of information, while at the same time alluding to pulling up the drawbridge around the British economy —which, as my right hon. Friend rightly says, would spell short-term disaster for our country?

Mr. Bruce

Yes, it would, but it also seems incompatible with membership of a single-market European Community. The Labour party does not seem fully to have come to terms with that yet.

We must ask how we can update, compete and keep up to date with new technology and how we can ensure that the new technology that we have will be fully and properly utilised. The Select Committee on Trade and Industry concluded that we are a long way from taking full advantage of the capabilities of the technology and using it as effectively as we might.

We saw one or two examples of both success and failure. The most often quoted example of success is American Airlines, which introduced its own computerised hooking system, involving all the American airlines, and found subsequently that that system actually made far more money than running the airline did—so much so, that the president of the company, when asked whether he would sell the airline or the system, said, "I will keep the system; the airline can go."

On the other side of that experience is the Bank of America, which managed to lose $2 billion as a result of failing to introduce a modern and effective information system. When we met officials of the bank, it had got rid of software experts and was trying to see whether it could correct the situation by employing hardware experts. I suspect that the latest reports are not all that promising. This area is very important to the United Kingdom. I think it is generally accepted that our financial services industry is strong, advanced and innovative and, therefore, has substantial potential. It is not perfect—there is no room for complacency—but it is one of our strengths. Indeed, it has been a traditional source of satisfaction to British Governments of all colours that, whatever the state of our balance of trade, our balance of payments in terms of invisibles was always in surplus. But there are some worrying signs that that surplus is reducing.

With the advent of 1993—almost a second, albeit international, big bang—there is some concern that British financial institutions may see the single market as something against which they have to protect themselves, instead of an opportunity that they have to exploit. I hope that the Government accept that they have a responsibility to try to ensure that when we get agreement on the single market it will be agreement that gives British financial expertise full access to that market. The Government must ensure that access is not restricted by barriers erected by other countries that want to protect themselves from our success. They must ensure that we can continue to develop the application of technology in the financial services area, to our own and the European Community's advantage.

Let me put this debate in perspective by saying that the subject is central to the current state of the British economy. The Government are perpetuating the myth that, in the 10 years since they came to power, we have had an economic miracle. There have been changes, and some of them have been beneficial. I am not arguing that they have all been bad, but I say very forcefully that it remains the case that in the Government's first two years a third of our manufacturing capacity was swept away. The Government's defence is that the firms that were lost were weak and were, by definition, unable to withstand the blizzard, and that the result is a leaner, fitter economy.

The trouble is that it is a smaller economy in terms of its ability to enable us to pay our way in the world. We are not paying our way in the world, and the current balance of payments deficit is a direct result of that policy. The position is getting worse, and is likely to get worse still, unless we can create the goods that the world wants to buy, with sufficient added value to enable us to maintain our standard of living. The signs are not good, and the Government's position is extremely vulnerable—and rightly so.

Mr. Christopher Gill (Ludlow)

I am sure that the hon. Gentleman would concede that when this massive fallout in British industry took place, one of the principal factors involved was that British industry was very weak financially. After a long period of high taxation, it simply did not have the cash resources to tide it over. I should be interested to know what the hon. Gentleman can tell us about his party's views on corporate taxes. Does he feel that those taxes are at the right level now? Does he not concede that this Government have already brought them down to a level that puts them among the lowest in the world? Does he think that there would be more investment in research and development, in training and in capital items if this trend towards lower corporate taxes were continued?

Mr. Bruce

I shall be very happy to enter that debate if the hon. Gentleman can persuade the Government to give us time for it on another occasion. Let me ask him specifically why the Government have not been prepared to introduce tax relief for money invested in long-term research. That is a positive proposal that they could have taken up, but, so far, in 10 years, they have not done so. Radical changes of that kind could usefully be introduced. They might be positive and helpful. That is a direct answer to an irrelevant intervention.

There seems to be a myth that we are moving into a post-industrial era, that we have created a post-industrial society. Looking at our post-industrial society right now, one can define it as meaning short-term profit and long-term bankruptcy. This country cannot sustain 55 million people unless we make goods and provide services that can be sold in the world. At present, we cannot do that. That is the dilemma that we are in.

The consequences of this policy fall very unevenly within the United Kingdom. I do not intend to make a regional policy speech; I am simply pointing out that Scotland, Wales and the regions of England, which had predominantly manufacturing economies, have suffered disproportionately as a direct result of this change. It is not good enough for the Government to proclaim massive investment in shopping centres as some kind of substitute. Indeed, I think that the building of massive shopping malls on what once were the sites of great industries is actually a symbol of the monumental misjudgment of this Government. Those shopping malls are selling goods manufactured outside the United Kingdom, goods that we do not have the resources to buy. We must find ways of ensuring that at least some of those sites go back into manufacturing. We must ensure that our manufacturing capacity, our manufacturing base, is enlarged. But the Government have no answer to that problem. Indeed, the decline continues.

This is one of the things that they might have made a virtue of. Over this period we have faced progressive and successive privatisation. The Government learn slowly. Initially, and fundamentally, privatisation was simply a means of getting their hands on finance quickly in order to buy votes with the taxpayers' money. One cannot dispute that in that policy they have been successful, but they have suffered because, in the process, they—the free-market Government—have actually privatised monopolies. They have privatised inefficient monopolies, centralised monopolies, inflexible monopolies, and the ones that were privatised earliest have failed to take full advantage of the potential for technological advance and market development because they have been protected from the market by the strength of their monopoly.

British Telecommunications may have been profitable, but it has been profitable because technology has been moving fast enough to reap the profits from the customers. But its speed of innovation has been much lower than the speed of innovation in telecommunications systems in other parts of the world. That is greatly to Britain's disadvantage.

We argued at that time that it was a great pity that the Government did not establish, for example, Scottish Telecommunications, which could have been autonomous, and might have developed its own technology relevant to the Scottish economy and the more sparsely distributed population of Scotland. It might have developed something with export potential. It might have been possible to develop new products and new services. Incidentally, the same goes for Scottish gas or Scottish steel. Of course, in the case of electricity that is already the situation of Scotland, but it could be done in England as well.

Mr. Page

Is not the hon. Gentleman completely misleading the House? When the industry was under nationalised control it was a crying shame that investment was not being put into it. The country simply could not afford it. Privatisation resulted in the investment of £2 billion, enabling British Telecom to make huge advances. In the past, the system was being held back by nationalisation.

Mr. Bruce

It was being held back by the Government's public sector borrowing requirement, which, in any case, we never supported. I have always regarded that as the most spurious argument of all. Right now, the Government have a huge surplus, and there are nationalised industries that could make use of it. Indeed, so could the education system. But the Government will not release that surplus, even though the investment would be non-inflationary, would create jobs, and would underpin the wealth of the country in the future.

Mr. Ashdown

My hon. Friend's last point is at the centre of the argument about the Government's irresponsibility in the matter. We can have a theological argument about whether privatisation or nationalisation is good, and a practical argument about whether it is good for British Telecom. But there can be no doubt that no firm in Britain would not distinguish between capital and revenue. What an act of irresponsibility it was to get the money from the privatisation of BT and others and then to spend it paying off this year's bills, instead of reinvesting it in the future.

Mr. Bruce

It was worse in the early years. Tax cuts were used to buy goods which were made outside the country, and that aggravated the problem. That is the crux of the matter, particularly now that the Government have some resources. We must plough those resources into investment—the Government's responsibility is investment research and development and training—and the private sector must be given a climate in which it will invest in product development, innovation and new technology. Unless we can do that and add substantial value within the United Kingdom, we will face disaster.

In 10 years, people will realise that, far from an economic miracle, we had a reckless Government who used simplistic assumptions that took a once great manufacturing nation to the brink of bankruptcy and were financed only because they had the windfall bonus of North sea oil, which is now evaporating. We are heading for an awful lot of trouble. Unless this kind of motion is not only passed but acted upon, unlike our European competitors, post-1993 Britain will feel a nasty, cold draught.

6.1 pm

Mr. Robert Hayward (Kingswood)

The motion is split into two parts. The first half is critical of the Government, and the second half puts forward a series of suggestions. It is unfortunate that the speech of the right hon. Member for Yeovil (Mr. Ashdown) was not also split into two parts. He spoke for 38 minutes, and he criticised the Government for 38 minutes. He made not one positive suggestion, with the exception that we should do away with COCOM. He had to withdraw that comment, and the hon. Member for Gordon (Mr. Bruce) clarified it in terms of reforming COCOM.

The right hon. Member for Yeovil used the word "past". He also mentioned in passing the levels of investment. It was one of the thinnest, if not the shallowest, speeches I have ever heard from an hon. Member in opening a debate. He was wrong on gallium arsenide, transputers, and fibre-optic cables in terms of their use by Mercury and BT in docklands, and so on. He could not even get right the constituency of the Minister who replied to his Adjournment debate some years ago. When I challenged him on the brain drain, he had to revert to passing bets, which is a rather childish way of providing information to the House. It was a travesty of a speech, which took 38 minutes of what should have been an important debate.

Much more interesting was the contribution by the hon. Member for Gordon. He made a series of positive suggestions. I agree with several of his suggestions about the long-term requirement to turn round the economy, and the need for investment in various sectors. However, I disagree with one or two points. Obviously, one is his assessment of the long-term future of the economy. Given that the motion refers to education, I was interested also to examine the capital investment which took place in education from 1973–79. During much of that period, the Government were supported by the hon. Gentleman's party. Between 1973–74 and 1978–79, the level of capital investment in education, particularly in schools, fell by 63 per cent. We are now paying, in terms of the shortages of systems analysts, computer programmers, engineers and the like, for long-term under-investment, particularly by a reduction of 63 per cent. in investment in schools over less than five years.

I wholeheartedly concur with a comment in the Social and Liberal Democrats News of 7 April this year. It states: his utterances on this topic only give weight to growing disenchantment with his leadership. In terms of the requirements that we face for the future —not for the past, as the right hon. Member for Yeovil said—it is significant that there was no suggestion of a long-term SLD policy. I should have thought that we could have heard of one during the right hon. Gentleman's speech. I presume that we will hear about one when we debate another motion.

Several of my colleagues have referred to inward investment and the internal investment that is now being undertaken by companies within this country. I am pleased to note that the level of investment as a share of GDP is now higher than it has been for the past quarter of a century. I agree with those hon. Members who said that investment is still not high enough, particularly in respect of a commitment to civil and research development. On that point I agree with the hon. Member for Newcastle upon Tyne. North (Mr. Henderson). He referred to inward investment by Toyota, Fujitsu, and Boch. In terms of the competitive nature and the achievements of major companies in this country nowadays, it is significant that, on the same day that Toyota announced its investment in Derby, GPA announced that it would purchase Rolls-Royce engines for every 757 that it included in its order. It is significant also that, in this day and age, an order of £1.5 billion—that is, in round terms—for the British aerospace industry can be hidden on back pages because of other levels of investment.

We should not deny the successes. Equally, we continue to face challenges. For example, the concentration on information technology and telecommunications, upon which much of the debate has focused, is highlighted by the decline in our share of telecommunications exports. About 25 to 30 years ago, we exported about 25 per cent. of all telecommunications equipment to other industrialised and non-industrialised countries. That figure has fallen year in and year out for about a quarter of a century. Our share of telecommunications exports is now down to about 5 per cent.

GPT, in the form of system X, is showing substantial progress in its capacity to compete. The problem is that, while it is trying to develop that product, the world's major competitors among telecommunications manufacturers such as AT and T, Northern Telecom, Ericsson's, Siemens and the like are moving on to the next phase of switchgear, and the investment required by GPT to develop that next phase is not available. Therefore, it is actively looking—whether willingly or not—to tie up with Siemens or some other company. We must recognise that problem in long-term industrial developments in this country. It requires not only investment but a changed attitude by management to training.

For far too long, British management has been unwilling to commit any money to training anybody over 21. The supposition is that once they are over 21, they are trained; they will learn on the shop floor, office, drawing room or whatever, and that is it. British management must commit far more money to investment in training. It must be willing to take individuals off the shop floor year in, year out, and upgrade their expertise. The vast majority of foremen in German and French industry are graduates. They are required not only to turn over the line and ensure that it continues to produce, but to solve problems on manufacturing lines on a day-to-day basis.

British management should adopt a similar attitude. If it does not, it will fail to survive, despite some of the successes that I have identified. For example, it must improve its links with universities. We have some of the best universities in the world. One of the few points on which I agree with the right hon. Member for Yeovil is that although they produce excellent ideas, those ideas are not taken up by British industry but go to other countries to be developed.

Mr. Kennedy

I agree with the point that the hon. Gentleman has just made. Why does he think that happens?

Mr. Hayward

Because of the attitude of British management before and after the last war that British industry had captive markets. After that, the attitude was that the state would support industry. I do not think that anyone would accept either of those attitudes as correct. They are not the attitudes adopted by German companies comparable to GEC, such as Siemens and Nixdorf, or by Japanese companies such as NEC and the like. Those companies invest heavily in universities. They fund substantial sections of university courses in a way that British companies have never done. Therefore, there is not a natural feed from the major educational establishments.

It is interesting to note in my part of the country that Hewlett-Packards is investing in Bristol where it is close to a major concentration of higher education. It believes that if it puts money in, it will get expertise out. That is the attitude that other British companies should adopt.

I am conscious of the time; therefore, I shall abbreviate my comments. I want to address to the Government one comment not made by other hon. Members. We need to change the attitudes of all aspects of British society, including the Government. Over the next 10 years the Government should be more nimble on their feet. They should look towards the possibility of reducing the burdens of government. We have too many layers of government. Why not do away with counties? They cost money. Why not do away with a number of London boroughs by merging some of them? The burdens of government put an imposition on industry. It is a cost that we could well do without. The Government should not only ask other people to respond but should also be much more nimble than they have been in previous years.

6.12 pm

Mr. John Redwood (Wokingham)

I suppose that the speech by the right hon. Member for Yeovil (M r. Ashdown) was never going to be a highlight of the parliamentary year or even of the parliamentary week, but it was not even a sidelight because it was so dim and, as my hon. Friend the Member for Kingswood (Mr. Hayward) said, so lacking in substance. Perhaps the SLD members knew what was coming because only five of them stayed for the duration of the speech—a sure reflection that they had been tipped off about the quality of the debate on this major Opposition day.

Listening to the new "chips with everything" SLD lack of policy, I thought of a comment in the Evening Standard attributed to the right hon. Member for Yeovil: Mine's a selective memory. I find it's continually getting rid of things, a bit like a computer when the ram is full. As I listened to his speech, I thought that the single K ram of the right hon. Gentleman was obviously well overloaded. The chemistry was poor, confusing a substance with a type of computer, the fibre-optics were short on fact, and the statistics were lamentable.

The House was told that investment as a percentage of GDP was static. Yet this country has just been through several years of dramatic growth in investment. As we have already heard, investment is at a record level for the 1980s. Investment is well above the low level under Labour and under the famous Lib-Lab pact of which we used to hear so much. The House does not hear much now about the successes of the Lib-Lab pact. We have new record levels of investment overall and very high levels of investment in the private sector.

Then the House was told that the country was weak in information technology. We had highly selective examples from someone who does not seem to understand the width and breadth of the industry that is established in this country. The right hon. Gentleman should visit silicon glen or the Thames valley to see the range and depth of the businesses that have been set up by individual entrepreneurs, local businesses and national companies. We have had a large influx of investors from all over the world, aware that this is the country in which information technology is flourishing in many branches.

Next we had the incorrect research and development expenditure figures. Hon. Members might have thought that in a speech centred on research and development, particularly Government R and D, the right hon. Gentleman would get the figures right. If we take neutral and fair comparisons in the OECD figures, we find that they show clearly that, in Government research and development expenditure, this country is above the levels of the United States, Germany and Japan in total. If the right hon. Gentleman insists on taking the percentage of GDP spent on civil R and D, again the story is that this country is above the levels of America and Japan.

The deficit in the 1970s and 1980s compared with the best countries abroad was in the private sector. The reason was the profit collapse engineered by the economic policies pursued by the Labour and Labour-Liberal Governments of the 1970s. The Conservative Government's economic policies have rebuilt and are rebuilding profitability. As profits have risen, so has investment in R and D. I am sure that the trend will continue while profits continue to prosper. I welcome the growing strength of R and D in the private sector which should add weight to the high level of GDP in public expenditure terms compared with our overseas competitors.

The right hon. Member for Yeovil made a narrow speech based on many errors. I do not think that it was the kind of speech that will bring back Mr. Meadowcroft with his splinter Liberals. I cannot even see it bringing back the Isle of Wight Liberals who do not like trading under the new banner. It might not even keep happy the hon. Members for Ross, Cromarty and Skye (Mr. Kennedy) and for Caithness and Sutherland (Mr. Maclennan) who now sit on the part Bench that is normally reserved for the SDP and who, I am told, are getting rather nervous about defence policies and some other aspects of policy. In the battle of the minnows, the right hon. Member for Plymouth, Devonport (Dr. Owen) is in a different class; his performance is much better than that of the right hon. Member for Yeovil. If only we had heard the policies of the SLD, we would have known about the pro-inflation policies that the party would like to pursue. We would have heard about high rates, extra local government, an extra level of regional government and the local income tax—all anti-enterprise policies that would cost the people dear, but, fortunately, will never happen.

Turning to the positive side, I welcome the way in which industry is investing in the country and is beginning to develop in the flexible manufacturing areas new technologies and a new emphasis on quality, on product development and on better management-employee relationships. I think that that will be followed with much wider employee shareholding and employee participation in profit-sharing schemes and the like. The new high-tech and high value added economy requires greater co-operation, based on a shared belief in profitability, investment, incentives and the like. All those are happening as a result of the policies pursued by the Government.

There is an area where industry and the Government can achieve more through investment which will help the enterprise revolution and the improvement in the domestic economy—the way that property is used in development. The House has already heard criticism by the hon. Member for Gordon (Mr. Bruce) who does not like to see old industrial sites replaced by new commercial development. I do, if the result is a new factory, built to modern standards with high quality equipment, as it often is, or better shopping facilities, where people can enjoy the fruits of their prosperity and buy the goods and products that they wish to have. I see nothing wrong with a process of renewal from which we can draw encouragement as it progresses.

Many industrial companies see the advantage of redeveloping sites by building new high technology factories to meet the right requirements for emission controls and the recycling of heat and power; they are providing good working conditions for employees and are responsive to the new product design of the new economy.

Those things can flow from well-chosen property developments, which can provide the wherewithal and which can develop the new economy. The forest of tower cranes around many cities is evidence that that process of renewal is now under way. Some companies could do more, and I hope that they will turn their attention to it.

The Government sector, too, could do more. In that area the PSA—for which the DTI is not directly responsible—could do a great deal more to release land and buildings and to encourage the process of renewal. That would not necessarily involve any cost to the public sector, because of the surplus in that estate. The total estate is mind-boggling in size—some 10 million sq m. I would estimate that at least 5 per cent. of that—or getting on for 5 million sq ft—is surplus to requirements and could be disposed of. That would release land and property for redevelopment which could further power the enterprise economy. In addition, there are about 100,000 acres of surplus land in the civil estate where the Government could make further efforts to ensure that it is put on the market and released for enterprise redevelopment.

The Government, when deploying their departmental staff—in the DTI and other Departments—could recognise that rentals, for example, in docklands are £25 per sq ft, yet in Westminster and the west end they are £50 per sq ft. For the price of a short tube or water bus journey, people could be better accommodated at half the rental cost and the process of renewal could be developed, because many central London office premises occupied by Government Departments would be suitable for refurbishment, redevelopment and redeployment as the new economy gets under way.

Generally, the economy is performing well and the process of investment is gathering momentum. That process will continue if enterprise policies are pursued fully and if the wider opportunities afforded by a general common market in the run-up to 1992 are grasped and the principles of liberal trading firmly bulwarked in those proposals.

I have heard nothing from the Opposition that implies that there needs to be a great change of Government strategy towards investment. All that has ever been said about investment by the Government has turned out to be true—if business is given its head, if profitability is rebuilt, and if enterprise is supported, investment will follow through. It is high time that the property and the estate of the Government sector were brought up to the same modern standards as the rest of the economy. In so doing, surplus capacity could be released that would make money for the Government and would further the enterprise revolution.

6.22 pm

Sir Anthony Meyer (Clwyd, North-West)

I congratulate the Social Democrats on their choice of subject for the debate, on the wording of their motion, much of which I agree with, on the performance of their leader—in which he appears to have lost interest himself—and, above all, on the brilliance of their timing.

The Government have a good story to tell and, if there is a good story to tell, nobody tells it better than my right hon. Friend the Chancellor of the Duchy of Lancaster. Certainly, in real terms the Government have managed to maintain the value of investment. Of course, that is nowhere near enough. We have only to glance around us to see how lamentably inadequate is the investment now taking place, or planned for the near future, in our roads, railways, city centres, hospitals, education, health and our whole built environment. Those of us who are members of the Select Committee on Welsh Affairs are aware of the depressing contrast between the preparations being made on the French side of the Channel tunnel for communications to the tunnel, not necessarily passing through Paris, and the timid preparations that are being made on the British side.

What is more, the Government appear to make things worse by dragging their feet in all too many of the collaborative enterprises in Europe. I thought that the Prime Minister in that famous Bruges speech made the point that Europe should concentrate on doing the things that we could do better together than alone. However, the Government do not appear to be living up to even the good bits of the Bruges speech. Our record in the European Space Agency, for example, is lamentable. We are being left out. I listened with some joy the other night to Lord Jenkins of Hillhead, who described Britons arriving at the railway station just after the train had gone, grumbling loudly that they did not mean to catch the train anyway, changing their minds, dashing down the line, humping a suitcase in each hand, blessing their lucky stars that the train had stopped at a signal, clambering on board and then complaining that all the seats in the dining car were full.

Of course, the timing of the debate serves to focus attention on the experiment, in quite a different approach to those things, in Wales, where a by-election is taking place. The investment in the environment in Wales, the improvement of communications, the encouragement of research and development and the allocation of enough taxpayers' money for infrastructure improvement—so that they attract much larger sums of private investment—have been part of the approach ever since Lord Crickhowell very wisely did a U-turn in 1979 over the preservation of the Welsh Development Agency. It had been marked down for instant destruction after the 1979 election, but Lord Crickhowell did a U-turn and it was allowed to run on. Admittedly, it had to adapt itself radically in the process. That has been to the huge benefit of the people of Wales and to the unconcealed envy of hon. Members from neighbouring English areas.

Under Nicholas Edwards, as he then was, Wales enjoyed an unfair share of investment projects and major developments, such as the gigantic Cardiff bay project, which will make Cardiff one of the most attractive cities in western Europe.

The present Secretary of State for Wales has taken the process of using public money to create beautiful infrastructure, which sparks off huge private investment, a giant step further. The difference is that he boasts of doing things which his predecessor coyly admitted doing. The difference is more important than a mere difference of phraseology. It is important in the climate that has resulted in Wales, where we have local authorities of all political complexions, trade unions and employers working together in close partnership, which would be labelled in other parts of the country—and by some of my hon. Friends—as "corporatism" and consequently derided. I prefer to call it the human face of capitalism —a capitalism which works well and is in tune with the Welsh temperament. At all events, it brings in the bacon.

A report in The Sunday Times on 16 April 1989 said: Tomorrow Walker will announce that Bosch plans to build a £100 million motor electrics plant promising 1,200 new jobs at Miskin near Cardiff"— surprisingly— right on the border of the Vale of Glamorgan constituency. It went on: Bosch will be the latest, and one of the biggest, examples of foreign undertakings in Wales … Wales has enjoyed a string of new investments since he took office after the last election … Beginning with the location of a Trustee Savings Bank office in Newport at the end of 1987, bringing 2,000 new jobs, it continued with the huge investment at Ford (£726m)" — the biggest engine plant in Europe— expansion of a string of Japanese factories in north and south Wales, and the arrival or expansion of merchant banks in Cardiff. There has not only been new manufacturing industry but financial services, too. The report says that the Secretary of State has also increased the budget of the Wales Tourist Board to encourage more visitors to the valleys, while urban renewal is going ahead in black-spots like Abertillery, Tonypandy, Crumlin and Tredegar. That all adds up to quite a programme.

It was reported that the Secretary of State asked: Where else in Britain is so much action taking place to improve the economy? I can answer that question from my experience, because in my constituency there are such developments. Some of them are more modest and some are a bit controversial, such as the development of a magnificent Victorian castle to provide a home for the National Portrait Gallery. That is not just a great artistic enterprise, but is serving as an attraction for discerning investors and employers who fancy setting up high-grade technological industry or provision for financial services in the area. It makes an extremely attractive complex. Public money has gone into that, but sometimes the taxpayer or the ratepayer receives large dividends in terms of good jobs.

There is altogether a new spirit in Wales, a new readiness to stop squabbling, which is our favourite hobby when there is nothing better to do. Now there is something better to do, and Wales under Walker is getting it done. I suspect that before long the results will be visible.

6.30 pm

Mr. Charles Kennedy (Ross, Cromarty and Skye)

I thank the hon. Member for Clwyd, North-West (Sir A. Meyer) for a delightful speech. I have returned this afternoon from visiting Barry in the Vale of Glamorgan constituency. The hon. Gentleman spoke about the need for an enlightened and constructive public contribution and for co-operation between the public sector and private investors in the infrastructure and communications. He sounded almost as convincing as our excellent candidate, Frank Leavers, at the by-election press conference this morning.

We hear that not many Cabinet Ministers will traipse through the Vale of Glamorgan. They are rather thin on the ground and that is because of the current differences between the Secretary of State for Wales and the other members of the Cabinet on economic policy. At least the Secretary of State for Wales has a friend in the hon. Member for Clwyd, North-West. It was interesting to note the long faces and dry expressions of the Minister and some Conservative Back Benchers as the hon. Gentleman delivered his enlightened speech. I cannot share his optimism about what will happen on 4 May. The hon. Gentleman seems to think that the Welsh love Walker, but I suspect that people in the Vale of Glamorgan will think that they are voting about Maggie.

Mr. Redwood

Many of us supported our hon. Friend the Member for Clwyd, North-West (Sir A. Meyer) in what he said about combined public and private investment. Did the hon. Member for Ross, Cromarty and Skye (Mr. Kennedy) go to the Vale of Glamorgan to try to bring off a last-minute alliance with the SDP?

Mr. Kennedy

That was certainly not my purpose. I am not a business man, but I can recognise bad investments when I see them.

The hon. Member for Wokingham (Mr. Redwood) spoke about my right hon. Friend the Member for Yeovil (Mr. Ashdown), the leader of our party. My right hon. Friend was absent for a short time during the speech of the hon. Member for Wokingham. I am sure that the hon. Gentleman will have noticed that the Chancellor of the Duchy of Lancaster was scarcely present for the debate after he finished his speech. We make no complaint about that because we accept that ministerial duties have taken him elsewhere. [Interruption.] I am grateful for the fact that the Chancellor of the Duchy is conducting the debate rather than the Under-Secretary of State for Industry and Consumer Affairs. The hon. Member for Wokingham was slightly wide of the mark in his criticisms.

My right hon. Friend blinded the hon. Member for Wokingham with science. That is self-evident. We read and hear a great deal about the hon. Member for Wokingham. He is said to be the great white hope, the next intellectual guru, shortly heading for the Front Bench where the Minister is lounging nonchalantly with his feet on the Table. If that is the level of attack that we can expect from Conservative Members who are to be moved in the direction of the Treasury and the Dispatch Box, there is considerable hope for the Opposition.

The hon. Member for Wokingham used such revealing phrases as "things are getting much better because investment is gathering momentum." That is lawyerspeak for the fact that under the Government investment has been in a hell of a mess for a long time. He and his hon. Friend the Member for Kingswood (Mr. Hayward) spoke about skill training and education. As both hon. Members went to some lengths to cast doubt on the figures that we have put forward, it is worth rehearsing the figures again. In his speech my right hon. Friend the Member for Yeovil spoke about investment in science and technology research and development as an estimated ratio of non-defence-related research and development. We have not heard that adequately rebutted in speeches by Conservative Back Benchers any more than we have heard an adequate Government response to last year's report by the Select Committee on which my hon. Friend the Member for Gordon (Mr. Bruce) served.

When one compares Britain with its international competitors one gets confirmation of what we have known for a long time—that in many fields Britain lags woefully behind Japan and the emerging Pacific rim nations in the economic co-operation that is developing there and in the European Community. That is not about to change as a result of anything that we heard from the Minister who had nothing new to offer. However, the matter goes further than that. It is in the universities that much research and development have their seedcorn. I should like to deal with the attention that Britain gives to that.

A study of metalworking in Germany and Britain compared the qualifications of German skilled workers and people in the British work force. The results were quite horrendous. In 1985, 55,000 West Germans were trained and received craft qualifications in mechanical engineering. In Britain the figure was 10,000, which means that more than five times more people qualified in the West German economy. In terms of academic qualifications, Britain now rates 17th out of the top 20 OECD countries in the participation rate of 16-year-olds in full-time education. In Japan 95 per cent. of students stay on beyond the age of 16, but in Britain only 32 per cent. do so. No wonder our economy is having international difficulties.

In debates on education we have heard that in higher education we continue to send a far smaller proportion of our 18-year-olds into the tertiary sector and on to university than is the case in the United States, Japan, the Netherlands, France, Italy and West Germany. The list goes on.

Mr. Richard Page

Does the hon. Gentleman accept that we have a more generous support system for our students in further education than any country in the industrialised world?

Mr. Kennedy

That is about to change too—if it is the case. I hardly think that that is a major Back-Bench argument in favour of Government policy. That is about to change in the tertiary sector, and our revamped training schemes could hardly be said to be generous or productive in achieving their stated objectives for young people. The Government and Conservative Members should look again at the legacy that they are leaving this country.

Mr. Simon Hughes (Southwark and Bermondsey)

Does my hon. Friend accept that in the Secretary of State's Green Paper on student finance the international comparisons showed that European countries that provide the highest level of support for students with taxpayers' money also have the highest participation rate by post school leaving age students? Therefore, there appears to be a direct international correlation between investment by Government in students staying on at school and their attainment. If the Government go along the road that they are going along, we are likely to see a reduction in opportunity rather than an increase.

Mr. Kennedy

I am grateful to my hon. Friend. His pertinent point illustrates the sentiment expressed by the leader of our party when he spoke about our need to move from low quality industrial assembly to a much higher quality industrial product. In reply to the hon. Member for Kingswood, may I say that that requires far more positive encouragement of the role of university departments. While he was right to speak of attitudinal problems in Britain since the second world war, any country that is serious about developing skills, technology and a resource base would not allow some university departments to go to the wall, as ours have, or be substantially reduced in their efforts and ability because of the squeeze on education expenditure of the past 10 years.

The Government's general approach in this debate is similar to their approach in many other matters. They speak of how things are picking up or taking off or are so much better and they always use as their base line 1981 or 1982. They want us to forget the first two and a half years of their administration when we had savage deflationary policies of a type with which the hon. Member for Clwyd, North-West would be most uncomfortable and in which he would find little to commend. Not the least of the deflationary measures was the 1981 Budget, the consequences of which we have been living with ever since.

When Conservative Members say how much things are improving, I can only say that if one hammers any industrial base low enough, when it begins to recover from its contraction any level of growth will show up per capita far more than it would if a more adequate manufacturing, resource and technology base had been maintained. It is for ever an indictment of the Government that they manifestly failed to achieve that in their earlier days in office, so their present success is tempered by the damage done as the result of their general economic approach.

It has been extremely useful that the Social and Liberal Democrats have raised these issues this afternoon, touching on not just many of the broad economic arguments on trade imbalance and so on but, in particular, those "forefront" technologies where, as an island and, historically, a trading nation but also as a nation of declining fossil fuels and one more closely linked to the European Community—a trend that will continue beyond 1992—Britain must find a new competitive industrial role for itself internationally. Much of that will rest on the younger generation and on the technology that will dominate their lives to an even greater extent than at present and soon the research and development, employment and industrial productive opportunities that such technology gives rise to.

Although I welcome the fact that the Labour party will vote for our motion this evening—

Mr. Hayward

Some of them.

Mr. Kennedy

Some of them will, yes, and I welcome that. But although the hon. Member for Newcastle upon Tyne, North (Mr. Henderson) the only Labour Member who spoke in the debate, welcomed the fact that we seem to have something in common in our attitude towards the Government, a lot more modernisation of attitude is required of the Labour party towards these issues before it can claim with any credibility to occupy the political ground, the terra firma, occupied by our party when we argue for the importance of new technology, the greater emphasis that must be given to research and development and the excellent result that we anticipate because of that in the Vale of Glamorgan.

6.44 pm

The Parliamentary Under-Secretary of State for Industry and Consumer Affairs (Mr. Eric Forth)

Before we go any further, we must remind ourselves that this is an Opposition day, its eighth allotted day, although, looking round the Chamber during the debate, in what I was going to describe as the ebb and flow of debate and now think that "gentle gurgle" would be a better description, I noticed that, on my counting anyway, for most of the time there were present one Member from the official Opposition Labour party and two members of the SLD. There was also one Member from the SDP.

Mr. Don Dixon (Jarrow)

I have sat here since half-past four this afternoon—[Interruption.]—and I have been bored to bloody tears most of the time. I have also done a bit of counting. At one time there were only four Conservative Members, and one of them was a parliamentary private secretary. Had there been a vote earlier, the Labour party would have won it, because we had more hon. Members than the rest put together.

Mr. Forth

I am grateful to the hon. Member for Jarrow (Mr. Dixon). I did say that it was an Opposition day. It is not unreasonable for us to expect the Opposition to pay more attention to it and take it more seriously. It was worth making that observation so that we could get the importance of the debate fully in context.

In the early stages of the debate the argument revolved around the state of the economy. The right hon. Member for Yeovil (Mr. Ashdown) spent some time describing an economy that I was quite unable to recognise. The hon. Member for Newcastle upon Tyne, North (Mr. Henderson) followed on the same lines. I was much more attracted to, and identified more readily with, the description given by my hon Friend the Member for Wokingham (Mr. Redwood), who was acknowledged by Opposition Members to be one of the intellectuals and rising stars on the Government Benches.

My hon. Friend was able accurately to describe the development of the economy over the past few years in a way that seems to have escaped Opposition Members. It is a source of continuing sadness and regret that every time we have a debate here, Opposition Members seem to want to describe our economy in such a way that it would not attract any investment from abroad or inspire any confidence from members of our own society. The truth is that Opposition Members are in a state of confusion, not to say schizophrenia, about this. What I should like to know is whether all Opposition Members, particularly in the Labour party, agree with the early-day motion, in the name of three of their hon. Friends, welcoming the arrival of the Toyota car assembly plant in Derbyshire which, it says, will create many genuine, new and meaningful jobs for the people who live in the county and help re-establish it as a centre of industrial development. Some speeches by Opposition Members did not give that impression. I hope that at some point we will have an indication of what Opposition Members think about this influx of investment which fully reflects the confidence of the Germans and the Japanese in our economy—a confidence that Opposition Members may not share.

Mr. James Wallace (Orkney and Shetland)

I am grateful to the Minister for paying regard to the sedentary comment that I made earlier about the hon. Member for Wokingham (Mr. Redwood) being regarded as one of the intellects of the Conservative party. Perhaps the hon. Member for Wokingham will put on record his own sedentary response that he was "the only one".

If the Government are as keen to attract investment as the Minister says, is that helped or hindered by the present high interest rates?

Mr. Forth

The present level of interest rates does not seem to make a material difference either to internally generating investment, which is at a record level, or to the level of inward investment by companies from other countries.

We have had to make interest rate adjustments to deal with inflation, about which the Chancellor of the Exchequer has said many times that he is unhappy and with which he is dealing. Nevertheless it has neither impeded nor hampered the rate of investment, domestic or from other countries, and the development of the economy.

The hon. Member for Newcastle upon Tyne, North said that, without an alteration in the exchange rate—he did not specify either direction or level—many industrialists would be increasingly unable to do business. That seems to be at odds with the experience of the German and Japanese economies which have both—against a very strongly appreciating currency—performed superbly well in exports over many years. If a business is successful, and has a good product which it produces to a high quality, it will export, even over a strong exchange rate parity. The exchange rate bolt hole is no longer available to those who want to take refuge there.

I shall deal with one or two of the points made by the right hon. Member for Yeovil, who, in his lengthy contribution, dealt substantially with information technology. My hon. Friend the Member for Kingswood (Mr. Hayward) pointed out in his trenchant way that he felt that the expertise of the right hon. Member for Yeovil was—let me say—questionable. I use that word because I am in one of my more polite moods.

The right hon. Member for Yeovil was quite wrong in two or three respects. He talked about gallium arsenide —with which I know the House is familiar. About two years ago the Department of Trade and Industry announced the availability of about £25 million for collaborative projects with industry, under the heading of gallium arsenide. It is a matter of great regret to the DTI, but it is true, that that money has not been taken up in full by industry. There have been regrettably few projects. The companies in the private sector—the experts who know what they are talking about—did not see fit to take up what the Government offered. Time and again we see that pattern reflected, and time and again the matter is ducked by Opposition Members. If the Government offer support, but the private sector—the wealth creators, profit makers and experts—do not see fit to take it up, there is not much more that the Government can do.

Mr. Ashdown

The hon. Gentleman is obviously referring to the Plessey experience. However, did not the Government's committee on advanced materials recommend a programme of not £25 million, but about £300 million to help the development of gallium arsenide? When the Government finally moved, did they not do so too little, too late? When Plessey tried to use that money to get back into the market, it discovered that it had been taken away from abroad. Plessey has had to withdraw substantially from developing an invention that could have been ours to produce, instead of ours to buy in from others' production.

Mr. Forth

I do not accept the right hon. Gentleman's analysis. I have given him the facts. If a product is as good as he claims this one is, the window of opportunity will be greater than he has suggested.

The right hon. Member for Yeovil expressed a galactic view on fibre-optics. He came to the House waving something which was halfway between a wand and a panacea—I am not sure which is the most appropriate. He suggested that a universal network of fibre-optics, reaching into every home, so that we could shop electronically on broad band frequencies, would be the saving of the country. However, the right hon. Gentleman failed—as Opposition Members always do—to spell out in detail why that should be done, where there was a demand for it and, much more important, who would pay for it.

In the glib way that we have come to expect from the right hon. Member for Yeovil, he referred to pump-priming, but he did not say which pump was to be primed, to what extent or by whose money. I suspect that, inevitably, it will be taxpayers' money. Those who know what they are doing and have the resources to do it—principally British Telecom and Mercury Communications—have already started to develop such technology and are installing it where they think it appropriate.

It would take 15 years to achieve that which the right hon. Member for Yeovil seemed to suggest could be done in the twinkling of an eye. This is one of those fraudulent proposals which sounds good if it is said quickly, and even better if nobody is told what it will cost, and purports to produce some magical transformation in the economy. However, that will not happen.

Mr. Ashdown

In his disparaging remarks, the hon. Gentleman criticises the Government. They have done exactly that which needs to be done within the confines of Northern Ireland, but not for the whole nation. They have taken the lead in saying what should be established and what the interfaces should be, and showing industry how it could play a part in the investment. If that is good enough for Northern Ireland, why is it not good enough for the whole of Great Britain?

Mr. Forth

That is not what the right hon. Gentleman said earlier. He is talking about interfaces—whatever that means in this context—and about giving guidance. We are always giving guidance—we give it frequently. However, we shall not endorse the right hon. Gentleman's proposal, or the bandwagon on to which Members of the official Opposition have climbed, to produce an unspecified, all-singing, all-dancing network at an unspecified cost.

Mr. Henderson

Is the Under-Secretary aware that British Telecom wishes to introduce fibre-optics, but, under the terms of privatisation, is unable to do so? It seeks changes to its constitution to allow it to do that. It also seeks Government funding, which most countries recognise is necessary if fibre-optics—an important new technology—is to be introduced.

Mr. Forth

The hon. Gentleman, no doubt unintentionally, misleads the House. About 550,000 km of fibre-optics have already been installed. Therefore, he can hardly claim that we are preventing British Telecom from doing so. Discussions are continuing on the best way forward and the nature of the relationship between British Telecom and the Government. It is unfair to suggest that we are blocking the sensible and correct advancement of fibre-optics in a way that can be supported by proven consumer demand. We do not support a pie in the sky approach.

The hon. Member for Gordon (Mr. Bruce) was the only member of the Select Committee on Trade and Industry —or, certainly, one of the few—to participate in the debate. I was slightly surprised that more members of the Select Committee did not attend. I thought they might take the opportunity to expand their thoughts on the matter. The hon. Member for Gordon did so very well.

Mr. Malcolm Bruce

To be fair to the members of the Select Committee, they are on a visit to Edinburgh and Manchester investigating the impact of the single market on the financial services. I have broken my visit to participate today.

Mr. Forth

The hon. Gentleman's priorities are absolutely right. I am not surprised to hear that his colleagues are fact finding. Some of the hon. Gentleman's points were important and it is important for the House to understand the nature of the difference of views between the Select Committee and the Government. As the hon. Gentleman well knows, there is a genuine difference of view.

The Select Committee was looking for what the Department sees as a more interventionist approach than the Department of Trade and Industry is prepared to support. In particular, proposals were made about the role of an information technology Minister, the pull-through concept on information technology and Government procurement.

The Government have taken quite the opposite view. They have stressed over and over again that individual Departments and sections in the Government should be given greater autonomy and freedom to make their own decisions and are, therefore, able to enter a competitive market and buy what they think best for their needs. This old-fashioned idea of the gargantuan dinosaur of Government, directing the sector by procurement policies, is, I regret, typical of Select Committee members but not modern Government policy. There is no point in disguising the fact that there is a difference of emphasis and the Department has a different view from that of the Select Committee.

The hon. Member for Gordon also made a crucial reference to the use of information technology. He made a good case for American Airlines. However, he missed the fact that that involves the area of use. I invite the hon. Gentleman to study again the Government's White Paper which replied to the Select Committee's report. We emphasised that we wished to get the use of information technology on a proper basis and were prepared to help and assist in its understanding and best use. That is not the same as trying to pretend that, in this country, we can compete in every sector of the industry, which is a point that my right hon. Friend the Chancellor of the Duchy made earlier. We shall continue to make the distinction between encouraging proper and effective use of IT throughout the industrial sector and pretending that we can compete with every economy in the world.

As my right hon. Friend said, it is worth emphasising that, while there is no doubt that we have a deficit in certain areas of information technology, we share that with most other developed countries in the OECD. Most countries in western Europe and the EEC have such a deficit, although Japan has not. None of us has managed to beat the problem. I am not saying that this is necessary or excusable, but we have all found it very difficult to deal with and have yet to come up with a complete solution.

This has been a useful debate, although, regrettably, rather thinly attended at times. We have heard some thoughtful contributions, mostly from Conservative Members and we shall certainly consider them when we study today's speeches.

In view of what has been said, I strongly urge hon. Members to support the amendment.

Question put, That the original words stand part of the Question:—

The House divided: Ayes 67, Noes 197.

Division No. 166]	[7 pm
AYES
Allen, Graham	Grocott, Bruce
Alton, David	Haynes, Frank
Ashdown, Rt Hon Paddy	Heffer, Eric S.
Barnes, Harry (Derbyshire NE)	Henderson, Doug
Barnes, Mrs Rosie (Greenwich)	Hinchliffe, David
Beith, A. J.	Hughes, Simon (Southwark)
Bell, Stuart	Johnston, Sir Russell
Bermingham, Gerald	Jones, Martyn (Clwyd S W)
Boateng, Paul	Kennedy, Charles
Buckley, George J.	Kirkwood, Archy
Campbell-Savours, D. N.	Leighton, Ron
Carlile, Alex (Mont'g)	Livsey, Richard
Clarke, Tom (Monklands W)	McKay, Allen (Barnsley West)
Clay, Bob	Maclennan, Robert
Clwyd, Mrs Ann	Madden, Max
Cohen, Harry	Mahon, Mrs Alice
Corbyn, Jeremy	Michie, Mrs Ray (Arg'l & Bute)
Cryer, Bob	Mowlam, Marjorie
Dixon, Don	Mullin, Chris
Dunnachie, Jimmy	Parry, Robert
Eastham, Ken	Patchett, Terry
Fearn, Ronald	Pike, Peter L.
Flannery, Martin	Powell, Ray (Ogmore)
Forsythe, Clifford (Antrim S)	Quin, Ms Joyce
Godman, Dr Norman A.	Rees, Rt Hon Merlyn
Golding, Mrs Llin	Richardson, Jo
Griffiths, Win (Bridgend)	Ruddock, Joan

Sedgemore, Brian	Welsh, Andrew (Angus E)
Sheerman, Barry	Wigley, Dafydd
Sheldon, Rt Hon Robert	Wilson, Brian
Skinner, Dennis	Worthington, Tony
Spearing, Nigel
Steel, Rt Hon David	Tellers for the Ayes:
Taylor, Matthew (Truro)	Mr. James Wallace and
Wall, Pat	Mr. Malcolm Bruce.
Wareing, Robert N.
NOES
Alexander, Richard	Dover, Den
Alison, Rt Hon Michael	Dunn, Bob
Allason, Rupert	Durant, Tony
Amess, David	Emery, Sir Peter
Amos, Alan	Evans, David (Welwyn Hatf'd)
Arbuthnot, James	Evennett, David
Arnold, Jacques (Gravesham)	Fairbairn, Sir Nicholas
Arnold, Tom (Hazel Grove)	Fallon, Michael
Ashby, David	Field, Barry (Isle of Wight)
Aspinwall, Jack	Fishburn, John Dudley
Baker, Nicholas (Dorset N)	Fookes, Dame Janet
Batiste, Spencer	Forman, Nigel
Bellingham, Henry	Forsyth, Michael (Stirling)
Bennett, Nicholas (Pembroke)	Forth, Eric
Benyon, W.	Fowler, Rt Hon Norman
Bevan, David Gilroy	Fox, Sir Marcus
Blackburn, Dr John G.	French, Douglas
Boscawen, Hon Robert	Gale, Roger
Boswell, Tim	Garel-Jones, Tristan
Bottomley, Peter	Gill, Christopher
Bowden, Gerald (Dulwich)	Gilmour, Rt Hon Sir Ian
Bowis, John	Goodhart, Sir Philip
Boyson, Rt Hon Dr Sir Rhodes	Goodson-Wickes, Dr Charles
Braine, Rt Hon Sir Bernard	Gow, Ian
Brandon-Bravo, Martin	Greenway, Harry (Ealing N)
Brazier, Julian	Greenway, John (Ryedale)
Bright, Graham	Gregory, Conal
Brooke, Rt Hon Peter	Griffiths, Sir Eldon (Bury St E')
Brown, Michael (Brigg & Cl't's)	Griffiths, Peter (Portsmouth N)
Browne, John (Winchester)	Ground, Patrick
Bruce, Ian (Dorset South)	Hague, William
Buchanan-Smith, Rt Hon Alick	Hamilton, Neil (Tatton)
Budgen, Nicholas	Hanley, Jeremy
Burns, Simon	Hannam, John
Butcher, John	Hargreaves, A. (B'ham H'll Gr')
Butler, Chris	Hargreaves, Ken (Hyndburn)
Butterfill, John	Harris, David
Carlisle, John, (Luton N)	Hawkins, Christopher
Carlisle, Kenneth (Lincoln)	Hayward, Robert
Carrington, Matthew	Heathcoat-Amory, David
Carttiss, Michael	Hicks, Robert (Cornwall SE)
Channon, Rt Hon Paul	Hind, Kenneth
Chapman, Sydney	Hordern, Sir Peter
Chope, Christopher	Howarth, Alan (Strat'd-on-A)
Clark, Hon Alan (Plym'th S'n)	Howarth, G. (Cannock & B'wd)
Clark, Dr Michael (Rochford)	Howe, Rt Hon Sir Geoffrey
Clarke, Rt Hon K. (Rushcliffe)	Hughes, Robert G. (Harrow W)
Coombs, Anthony (Wyre F'rest)	Hunt, David (Wirral W)
Coombs, Simon (Swindon)	Hunter, Andrew
Cope, Rt Hon John	Irvine, Michael
Cormack, Patrick	Jack, Michael
Couchman, James	Jackson, Robert
Currie, Mrs Edwina	Janman, Tim
Davies, Q. (Stamf'd & Spald'g)	Jessel, Toby
Day, Stephen	Kilfedder, James
Douglas-Hamilton, Lord James	King, Roger (B'ham N'thfield)

Knapman, Roger	Porter, David (Waveney)
Knight, Greg (Derby North)	Powell, William (Corby)
Knowles, Michael	Raison, Rt Hon Timothy
Lawrence, Ivan	Redwood, John
Lee, John (Pendle)	Riddick, Graham
Lester, Jim (Broxtowe)	Shaw, David (Dover)
Lightbown, David	Shaw, Sir Giles (Pudsey)
Lilley, Peter	Shaw, Sir Michael (Scarb')
Lloyd, Peter (Fareham)	Skeet, Sir Trevor
Lord, Michael	Speed, Keith
Luce, Rt Hon Richard	Speller, Tony
Lyell, Sir Nicholas	Stanbrook, Ivor
Macfarlane, Sir Neil	Stern, Michael
MacKay, Andrew (E Berkshire)	Stevens, Lewis
Maclean, David	Stewart, Allan (Eastwood)
McNair-Wilson, Sir Michael	Stewart, Andy (Sherwood)
Major, Rt Hon John	Stradling Thomas, Sir John
Mans, Keith	Summerson, Hugo
Marlow, Tony	Taylor, John M (Solihull)
Marshall, John (Hendon S)	Taylor, Teddy (S'end E)
Marshall, Michael (Arundel)	Tebbit, Rt Hon Norman
Martin, David (Portsmouth S)	Thompson, D. (Calder Valley)
Maude, Hon Francis	Thorne, Neil
Mayhew, Rt Hon Sir Patrick	Thurnham, Peter
Mellor, David	Townend, John (Bridlington)
Meyer, Sir Anthony	Tracey, Richard
Miller, Sir Hal	Trippier, David
Mills, Iain	Trotter, Neville
Mitchell, Andrew (Gedling)	Twinn, Dr Ian
Mitchell, Sir David	Waddington, Rt Hon David
Moate, Roger	Walker, Bill (T'side North)
Morris, M (N'hampton S)	Walters, Sir Dennis
Morrison, Sir Charles	Wardle, Charles (Bexhill)
Moss, Malcolm	Watts, John
Moynihan, Hon Colin	Wheeler, John
Mudd, David	Widdecombe, Ann
Needham, Richard	Wilkinson, John
Neubert, Michael	Wilshire, David
Newton, Rt Hon Tony	Winterton, Mrs Ann
Norris, Steve	Wood, Timothy
Onslow, Rt Hon Cranley
Page, Richard	Tellers for the Noes:
Paice, James	Mr. Stephen Dorrell and
Pattie, Rt Hon Sir Geoffrey	Mr. Tom Sackville.

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 30 (Questions on amendments), and agreed to.

MADAM DEPUTY SPEAKER forthwith declared the main Question, as amended, to be agreed to.

Resolved, That this House notes the success of the Government's policies in creating a climate in which industry has achieved record levels of output, productivity and investment; welcomes the continuing increase in investment by United Kingdom companies in civil research and development; endorses the Government's policy of supporting collaborative research and development both in the United Kingdom and in Europe; approves the measures being taken by the Government to make education and training more responsive to the needs of industry and commerce; and welcomes the success of the United Kingdom in attracting advanced technology inward investment as a further indication of the strength of the United Kingdom economy.