HC Deb 26 April 1990 vol 171 cc597-620 10.42 pm
The Parliamentary Under-Secretary of State for Corporate Affairs (Mr. John Redwood)

I beg to move, That this House takes note of European Community Document No. 10971/89, relating to the Community motor vehicle market; and supports the Government's view that it provides a useful framework for considering the detailed measures which will have to be implemented in the Community to bring about a Single Market in the vehicle sector. The document before us says that the principle of free trade is at the heart of EC policy on motor vehicles. I hope that the hon. Member for Newcastle upon Tyne, North (Mr. Henderson) will welcome that, along with the other points that he welcomes about which I have already read in his press release. We seem to be in some agreement on the need to stand up for those Japanese motor manufacturers which have come to Britain to invest and are now European motor manufacturers. Some member states are unfairly biased against Japanese car manufacturers. The British Government strongly welcome them into the United Kingdom. They are Community-based assemblers, and should enjoy all the benefits of access to the open market of the 12 member states. Indeed, they are entitled to such access under the treaty of Rome.

There is no difference between a Japanese motor car company in the United Kingdom, a United States company in Germany or a Swedish company in France. We do not call Peugeot in the United Kingdom a transplant, and nor should we call Toyota a transplant; it would be pejorative. They are good European-based motor manufacturers.

We must ensure that European Community policy is based upon competition and not upon Euro-champions. There is plenty of evidence that the most successful export industries around the world have been based on strong domestic competition. The Japanese motor industry, for example, which has been most successful, has five major companies with many other smaller competitive businesses as suppliers. The same is true of the British pharmaceutical industry and the German chemical industry, which are major exporters which also thrive with a multiplicity of companies.

The Community document expresses some worries about some aspects of competition and seems to be worried about the superiority of the Japanese motor assemblers in some respects. That is why Britain is keen to welcome them into the United Kingdom so that there can be cross-fertilisation between the domestic industry and Japanese investors, because both parties have things to offer and we can learn from each other.

Japanese design times, for example, for new models are up to a third shorter than for some European manufacturers. I saw that for myself when cutting the ground for the new Nissan design centre at Cranfield earlier this week. Such investments expose how dangerous were the errors of those critics—some of whom were Opposition Members, but I notice that they are not present tonight—who said that Japanese investors here would only set up screwdriver operations. I think that has been well and truly knocked on the head by the commitment of the Japanese manufacturers to research and development and to design in this country.

The fortunes of the British motor industry show perfectly the difference in styles and therefore the results between the bad interventionist policies of the 1970s and the more recent open-market policies followed in the 1980s and 1990s.

Between 1974 and 1979, import penetration into this country doubled from 27.9 per cent. to 56.3 per cent. of the market. Import penetration has stabilised in the 1980s and is now destined to fall. Between 1974 and 1979, United Kingdom car production fell by 30 per cent. Between 1979 and 1989 it rose by more than 20 per cent. In the period from 1975 to its successful privatisation, Austin Rover lost £2.75 billion. Now that it is in the private sector, it is competitive and profitable.

From the bottom point of 900,000 vehicles a year produced in this country in 1982, we have now reached 1.3 million a year and we are on target to reach approximately 2 million, as forecast by the Society of Motor Manufacturers and Traders, at some point in the 1990s.

The progress is not just based upon the welcome investments from Japan. In 1978, for example, Ford sold 392,000 vehicles in the United Kingdom and made profits of £242 million. In 1988 it sold 583,000 and made profits of £673 million. Similarly, Vauxhall UK sold 261,000 vehicles worldwide in 1968, with profits of £1.6 In 1988 it sold 353,000 vehicles, with profits of £152 million, and has produced most welcome results today showing a further large increase last year to profits of £236 million. The figures speak for themselves about the profitable progress, new investment and increased output being achieved by many motor manufacturers in the United Kingdom, both the domestic and earlier inward investors, as well as the new inward investors, which we welcome.

Mr. Roger King (Birmingham, Northfield)

Does my hon. Friend agree that one of the spin-offs of the enormous increase in productive capacity within the United Kingdom is the inward investment of component manufacturers coming to this country and the expansion of our indigenous components manufacturers? In my constituency several European, Japanese and American companies are coming in to set up businesses to produce components to an ever-higher standard, which can only be good news.

Mr. Redwood

My hon. Friend is quite right. There are many inward investments and domestic investments in related sectors. We expect to see that increase. We are looking at a major manufacturing revival based upon motor car assembly and the attendant activities which congregate around successful manufacturing plants.

Mr. Teddy Taylor (Southend, East)

In view of that news and the further good news that the Minister has given, could he tell us before he sits down what is the balance of payments in the car trade with the EC?

Mr. Redwood

We have an adverse balance of payments in motor cars with the EEC. I do not have in mind the exact figures, but we have been importing considerably more in recent years than we have been exporting. I suggest that the increase in output and production that we are forecasting, and to which external forecasters are pointing, will make a great difference to that trade balance over the next few years. That will mean either import substitution in the domestic market or more exports from the United Kingdom. The Government are determined that all the manufacturers in the United Kingdom should be able to export fairly into the European market as well as the world market.

General Motors has recently announced a £160 million new engine plant at Ellesmere Port. Honda is to spend another £300 million on its engine plant at Swindon. It will be producing 100,000 cars a year by 1994. Nissan is already making 75,000 cars a year, and will more than double that output by 1993. Toyota is investing £800 million in car production facilities to make 200,000 cars a year. This week Rover announced 1,200 extra jobs at Longbridge to expand the production of its successful new models.

Mr. Hugh Dykes (Harrow, East)

Bearing in mind the difficulties of recovery and of building up the industry in Britain, will my hon. Friend give us the figures for motor vehicle production in Germany and in Britain at this moment?

Mr. Redwood

I do not have those figures at the forefront of my mind. German motor production is a great strength within German industry, and it has been especially successful at exporting throughout the world, including the European Community.

The burden of my case is that we are well past the worst in the motor industry. Our industry had a terrible time during the 1970s, partly because of the policies pursued by the Labour Government. They threw money at the wrong causes and intervened to no good effect whatsoever. The policies of the 1980s and 1990s which have been pursued by this Government have encouraged the open market in Europe for motor vehicles, inward investment into the United Kingdom, and fair trade terms for our motor assemblers. They have transformed the picture, with the result that Britain is now the preferred location, even when compared with Germany, for many important investments. They are coming here because productivity, profits and enterprise are all thriving. The 1990s will be the decade of manufacturing revival in the United Kingdom. That will be based firmly and squarely on the motor car industry revival and all the attendant industries to which my hon. Friend the Member for Birmingham, Northfield (Mr. King) has referred.

I am sure that my hon. Friends will agree that the fact that Germany has been successful with some industries and has performed well in export markets in the 1980s does not mean that Britain is doing so badly. It does not mean either that we are unable to compete and prosper in the 1990s. I strongly believe that we shall be able to to so. On the basis of the policies that have been identified with our Community partners and the policies that are being pursued in Britain to back enterprise and success, I look forward to great success in the 1990s for the British motor industry.

Several hon. Members

rose——

Madam Deputy Speaker (Miss Betty Boothroyd)

Order. I inform the House that Mr. Speaker has not selected either of the amendments.

10.53 pm
Mr. Doug Henderson (Newcastle upon Tyne, North)

I welcome the opportunity to debate the EEC's consultative proposals on the future of the motor vehicle market. Many reservations have been expressed in the past about the inadequacy of the way in which we deal with documentation such as that which is before us today. I urge the Government to report to the House on any final position which might be presented by the Government to the Council of Ministers on these matters. I ask the Government to accept that they should seek the House's approval of any final agreement on which future European legislation might be based. It would be more helpful if we had some mechanism, such as a European Grand Committee, to deal with legislation of this sort. Such a Committee could make an important contribution without having exclusive rights.

Mr. William Cash (Stafford)

Is the hon. Gentleman aware that the Select Committee on Procedure has produced an excellent report that would take the House back into an earlier stage in the making of legislation? I speak as a member of the Select Committee on European Legislation when I say that we are increasingly concerned that the report was produced several months ago and that the European Community is moving apace in many extremely dangerous and difficult areas. The report should be considered, debated and decided upon in the House as quickly as possible.

Mr. Henderson

I do not disagree with the hon. Gentleman. I am sure that the business managers will consider those matters in the not too distant future.

The Opposition acknowledge that the Commission's communication is a useful framework for consideration of measures on the introduction of a single market for motor vehicles in Europe. The document covers many important issues, of which the most controversial and pressing, as the Minister said, is a common commercial policy, or what people in the country might understand as a trade policy.

Currently, we are a long way from free trade in automotive products, although the Minister argued that we have moved in that direction in recent years. Japanese and other foreign vehicles are subject to trade regulation by quota in many EC countries. The tough regimes of French and Italians are well known as the tough and, to some extent, partisan purchasing policies of their public and quasi-public institutions. The German market is more open to imports from outside the EEC, but that is based on historic strength and advantage, which was alluded to earlier by the hon. Member for Harrow, East (Mr. Dykes).

The United Kingdom market has suffered considerable penetration in vehicles and components from other EC countries and from Japan, although Japanese importers have been subject to controls.

In the long term, freer trade in vehicles world wide will not be achieved so long as there are great imbalances in the trade balances of the major producers and consumers of products such as cars. That fact is recognised by Japanese manufacturers. Pressures will inevitably lead to some protectionism, either overtly with quotas or tariffs or covertly through the purchasing policies of state organisations or other private-sector organisations over which the state has influence. Stability will be achieved only if regulation minimises the fluctuations in trading accounts. Regulation can allow each of the car-consuming countries a share of the action in supplying their home markets and other third-party markets which do not have a car industry and depend on imports.

The EC must aim to free as many restrictions as possible on the importation of vehicles, but that will depend on whether the trade balance remains if not broadly in balance in the long term at least broadly stable. Periodic review will be a feature of future trade policy. External quotas, preferably voluntary, may be required from time to time.

Mrs. Edwina Currie (Derbyshire, South)

So that my constituents who will be working for Toyota understand exactly what the Labour party proposes, when the hon. Gentleman says that external quotas will be needed in the future is he saying that he would support my constituents' home-made vehicles being subject to such quotas into any country in the world?

Mr. Henderson

I am not suggesting that for a moment. I shall deal with that point. I was attempting to establish that negotiations with other car producers will be necessary on the extent to which the EC market can be penetrated by vehicles manufactured outside the EC.

The second important issue in relation to trade—this relates to the point that the hon. Member for Derbyshire, South (Mrs. Currie) made—is whether individual countries' quotas on Japanese imports should be retained. The document acknowledges that there will have to be a transitional arrangement. I recognise and understand that, but 1992 is a process and not a deadline. Policies must allow for stable growth of the Community-wide car industry. The Community must negotiate an agreement with Japanese manufacturers to prevent the EC market from being flooded with a surge of Japanese-made cars. Under the rules of the general agreement on tariffs and trade, there must be an effective safeguard clause which can apply to those products.

The future of the British industry is inextricably linked to the future of Japanese-owned investors in the United Kingdom, such as Nissan and Toyota, and of joint venture companies such as BAe-Rover-Honda. All those cars are British cars. Nissan cars already have a higher British content than some of the models made by other manufacturers, such as the General Motors' Vauxhall group. United States companies such as General Motors and Ford locate in Germany because they believe that the central European location is a telling factor. Japanese companies are increasingly encouraged to locate in the United Kingdom because, among other factors, of the English language and the reasonable geographical location of potential plants such as Toyota in Derby and the Nissan plant in Sunderland. The locations are reasonable in terms of transportation, at least by sea to Europe, if not by rail, and action on the Channel tunnel would be an additional attraction to companies to locate in Britain.

The vehicles produced at Sunderland are north-eastern cars. At Longbridge, they are west midlands cars. The vehicles that will be produced at Derby will be east midlands cars. They must not count as part of any EC-imposed quota during a transitional period or beyond. If Britain loses this argument, Japanese companies would no longer have the same incentive to locate in the United Kingdom, and without Japanese investment the future of the United Kingdom car industry is bleak.

It is totally unacceptable to the Labour party that those cars should be included in any Japanese quota. We cannot allow the European Commission or other European Governments to ride roughshod over British interests in this matter.

Mr. Teddy Taylor

Although the hon. Gentleman, like my hon. Friend the Minister, says that it is totally unacceptable for such a thing to happen, what would be a Labour Government's policy if the Council of Ministers agreed by majority vote on such restrictions on British cars going to the continent for a transitional period of three or four years?

Mr. Henderson

I am grateful to the hon. Gentleman for raising that point. I was about to come to that, if he will bear with me. It is important first to point out that the Government must remember that if we cannot defend Japanese investment we cannot defend our automotive industry. If we cannot defend that industry, like the director general of the CBI I believe that we cannot defend our manufacturing industry. If we cannot defend that industry, we cannot hope to maintain the balance of trade in the long term. These matters must be considered in that context.

Mr. Roy Beggs (Antrim, East)

Would the hon. Member go further and say that we could no longer justify being in Europe?

Mr. Henderson

I will not say that. I will move on to the point raised by the hon. Member for Southend, East (Mr. Taylor). The Government must take a firmer stance.

Mr. Teddy Taylor

What does that mean?

Mr. Henderson

Too often in the past the Government have pretended that they have had no option in Europe other than to be those who hold the jackets. The Minister said that the Government intend to be firm and resolute in negotiations in Brussels, and I welcome that. I hope that their actions will be consistent with the words that have been spoken in the Chamber this evening. The key factor, which relates particularly to the point raised by the hon. Member for Southend, East, is how the Government can make sure that they can deliver a reasonable deal for the United Kingdom in those negotiations.

Those in Europe are under no illusion how a British Government can do that. European manufacturing industry, particularly the car industry, is broadly divided between the northern producers, such as the Germans and the Dutch, and the southern producers who have more protectionist regimes, such as the French, the Italians and the Spanish. The balance of power in any of those talks will lie with the British Government, who are in a clear position to deliver on this matter. They can either make noises to try to reach agreement with the northern countries and carry a majority in that way or reach agreement with the southern countries. The Government have the power to act in this matter and I urge them to use it.

Mr. Cash

The hon. Gentleman talks as though the single market is a market among countries when the truth is that it is a market among companies. With a 70 per cent. trade surplus with West Germany—a 36 per cent. trade deficit against the United Kingdom—and the difficulties that the Seat employees and management are experiencing as against the Volkswagen management and work force combined with their enthusiasm for the social charter in Dusseldorf, does the hon. Gentleman really believe what he has just said?

Mr. Henderson

That is a rather convoluted way of putting it, although I think that I get the hon. Gentleman's drift.

The hon. Member for Southend, East asked what we would do if a majority decision went against the British. The central point is that there is no reason why a majority decision should go against the British because on this matter the British Government are in a position to carry a majority of opinion in Europe. The name of the game is to achieve a deal which can carry a majority in Europe and at the same time protect British interests.

Mr. Cash

Absolute rubbish.

Mr. Henderson

The hon. Gentleman may think that that is not possible, but I believe that it is possible and that a resolute British Government can ensure in negotiation that a deal is struck. I am not about to tell the House what deal a Labour Government would place on the table. If the hon. Member for Southend, East and others wish to come back in a few months' time, the situation may have changed and they may be fortunate enough to be sitting on the Opposition Benches listening to a Labour Government's proposals.

If negotiations do not lead to a satisfactory conclusion for manufacturing in the United Kingdom, and if the British car industry is left exposed or sold short, the Government must shoulder the responsibility. They have the power to act and they should use that power in the interests of the industry located in the United Kingdom and the jobs and the cars that are manufactured.

Many other important matters are dealt with in the documents before us. I am mindful of the time, and I know that a number of hon. Members will wish to speak, but it is important at least to mention some of those matters, especially as I have been fairly generous in giving way.

Mr. Redwood

Will the hon. Gentleman give way?

Mr. Henderson

Now I shall be even more generous.

Mr. Redwood

The hon. Gentleman has been very generous. Hon. Members would like to make sure that they have understood what the Labour party is recommending in the event of the negotiations going wrong. What steps should the Government take?

Mr. Henderson

I should have hoped that the Minister would be sufficiently confident to ensure that negotiations will not go wrong. If he finds himself in difficulty, I shall be happy to have a private word with him, or to refer him to some of my hon. Friends who I am sure will be prepared to advise him.

Technical harmonisation is another important issue. There is clearly a need to achieve technical harmonisation to get the best practices adopted throughout the Community and give our industry a better chance to export to other EC countries. It is also important to introduce new cleaner emissions standards. The United Kingdom should be taking a lead on environmental standards if we hope to make spin-off gains in the component industry and begin to take on the United States market with the export of our vehicles and vehicle components.

State aids will also come into the argument. I believe that they should be incorporated into a framework which allows the less advanced sections of the European industry to develop. Regulations must be drawn up that are consistent with regional policy objectives. I am tempted to raise the recent Scania application to the Department of Trade and Industry for information about state aids that might be available. However, the Minister and I have already had lengthy correspondence about that and in view of the time I will let that matter lie today.

Research and development is another crucial issue referred to in the document. It makes clear that Japanese companies already spend more on R and D than all the European volume producers put together. It comes as no surprise that those Japanese companies can develop a car in Japan in two thirds the time it takes a European-based manufacturer to develop the same product.

Improved competitiveness begins with research and development. Europe should start now and I disagree with the Government in that I believe that we should agree to support European initiatives, not at the expense of initiatives in this country but as an addition to those initiatives. We should try to encourage those in the industry using catalytic public expenditure where necessary—there are already some interesting experiments in that regard—to develop technical centres which can provide information and background to component manufacturers.

We should also consider training in this debate. Once again, however, I am mindful of the time. Suffice it to say that we do not do enough training either in general or in the car industry in particular. If we are to become competitive, we must invest more of our resources in training the people upon whom the industry will depend. The document also refers to taxation policy, but I do not believe that that will be resolved, particularly in relation to the car industry. That is a wider issue and no doubt the House will return to it on another occasion.

This debate is only the beginning of a process that will lead to a new shape in the European car industry. If Europe is to speak with a strong united voice, policies must be adopted which give maximum stability to the industry. Stability must not be used as a cover for inertia. Competitiveness must be raised by better design, engine efficiency, safety standards and technical harmonisation. More resources must be committed to research and development and to training. Japanese manufacturers must come to understand, as they probably do, that trade regulation is necessary to balance trade patterns and European manufacturers must come to understand that if the single market is to be meaningful the automotive industry cannot be exempt from its provisions.

Britain has a special interest in protecting its inward investors who make exportable products and create jobs. We must not flinch from that responsibility. Europe knows, the car industry knows and the British people know that 1992 is on the line. If a satisfactory agreement cannot be reached on the vehicle industry and the vehicle trade, the whole of 1992 will be called into question.

11.17 pm
Mr. Teddy Taylor (Southend, East)

The Minister has had a hard week and we appreciate his presence in the Chamber tonight. I know that he has a busy day tomorrow. However, I am sure that he will agree that it is an insult to the principles of democracy and to the hundreds and thousands of people whose jobs are dependent on the car industry that we should be debating this important plan for the future of Europe's car industry at this absurd hour.

Only a handful of hon. Members are present—fewer than 20. Sadly only two Labour Members are present and some of the minority parties are not represented at all, although as always we have splendid representation from the Ulster Unionist party whom we welcome. It is an outrage that these controversial plans which will fix the future of Europe's car industry should be debated at this absurd hour.

If we were debating the issue at this hour simply because of pressure on parliamentary time, we could understand it. However, there are gaps in the parliamentary programme next week that could have allowed us to debate the issue at a civilised hour. One almost suspects a deliberate ploy, as has happened so often before, to put controversial Euro-legislation into the anonymous late hours of the night at the end of the week.

Mr. Cash

Is my hon. Friend aware that this is the first time that we have considered any European legislation, with its impact on and importance for British industry and commerce, since late February?

Mr. Taylor

How right my hon. Friend is. I emphasise that I do not blame the Minister. I blame the Government business managers who know exactly what they are doing. They should be ashamed of themselves.

These Euro-plans are not meaningless political regulations. They are the basis of laws that will be imposed on the United Kingdom by majority vote, irrespective of the views of this Parliament. Every day we see how EEC laws affect us. Only today, Martin Galvin, a leading fund raiser for Noraid, who has been banned from Britain on grounds of security and public order for years, has had the ban lifted solely because he has somehow acquired Irish citizenship. There is nothing, it seems, that we can do about that, even though our Ministers and Government regard him as a threat to public order.

Trade in cars with Europe is, of course, vital for our balance of payments and for our jobs. Unfortunately, the Minister did not have the figures handy, but, from one of his own answers in the House of Commons, I can tell him that we had a deficit in trade in cars with the EEC last year amounting to £4.6 billion, with one of £3.1 million with Germany alone. In a nutshell, for every car that we exported to the EEC, we imported more than four in return.

I remind the Minister of another answer that he gave me just recently. Sadly, he pointed out that the deficit in trade in cars with Europe was equivalent to all our deficit.

He said: In the first 11 months of 1989 the deficit in total visible trade was £4.6 billion. In the same period the deficit for manufactured goods was £4.7 billion."—[Official Report, 17 January 1990; Vol. 165, c. 308] It is a serious issue which affects jobs. I hope that things will improve as the Minister says, but we have a trade disaster at present.

The creation of Japanese-owned factories in the United Kingdom to produce cars was our chance to reduce the deficit, to promote exports, to create jobs and to encourage further Japanese investment. "Come to the UK," he insisted, "and you can secure the access to the Common Market that you cannot secure from Japan because of EEC restrictions," but, sad to say, we may have conned them. The Euro-plan provides for the possibility of restriction on British cars produced by British workers in those plants for what is called a transitional period. But it would appear that the proposals are unlawful, discriminatory and acutely damaging to the United Kingdom and its investments. We must learn from the Government what they will do if such restrictions are imposed by majority vote.

That question was put by the spokesman for the Labour party, the hon. Member for Newcastle upon Tyne, North (Mr. Henderson)—I wish that we had this debate at a civilised hour so that the people outside the House could hear it—but the Minister did not want to answer. He hoped that things would work out satisfactorily. If the Government worked hard they could solve the problem. But from sad experience we know that, by majority vote, there is a likelihood that there will be restrictions on British cars produced from Britain by British workers. The people of Britain have to know from the Government what on earth they will do if that happens. I should love to know, as labour is now ahead in the polls, what a Labour Government would do. That is something that we are entitled to know. We are not talking about silly Euro-ploys; we are talking about British jobs and about the possibility of attracting Japanese investment.

Much as we respect the Minister, if he does nothing else tonight, will he please tell us what we do if the restrictions are imposed by majority vote? Will we just protest, will we waste time by going to the Euro-court, will we simply go down fighting, or will we retaliate against specified European producers? If we cannot get a simple answer to those questions tonight, we are wasting our time in Parliament.

The plan also proposes strict controls on the import of cars from Japan. A Euro-quota or possibly national quotas extended by means of a voluntary restraint agreement are proposed. Once again, Britain will be the loser. We restrict Japanese imports to about 11 per cent. a year. Italy and Spain permit about 3 per cent. If those basic controls are permitted to continue on a national level in 1992, 1993 and beyond, once again Britain will lose out.

Such restrictions will be welcome in Brussels, where the staff always favour more protectionism. But in relation to our duties under GATT, we cannot ignore the fact that while we levy an import duty of 10 per cent. on Japanese cars, they have no import levy on British cars or Euro cars.

The next plan is to harmonise VAT on cars in the EEC. That of itself will not promote free trade, because all cars are subject to the same VAT in every member state, although the rates vary. There is no question of VAT being charged at different levels for home or foreign-produced cars. The whole issue is bound up with the EEC's obsession with harmonisation and with usurping the powers of national Governments on taxation.

I remind the Minister yet again that the Single European Act passed through the House late on a Thursday night. Indeed, the debate went right through the Thursday night and into the Friday. The whole thing was an acute embarrassment to the Government because we debated it at a time when nobody knew what was going on. During that debate the House was given the specific assurance that changes in taxation and the harmonisation of taxation were subject to unanimity. Our veto, we were told, was firmly entrenched in the legislation.

Sadly, that is not the case, for the legislation says that we are committed to the harmonisation of VAT in so far as that is necessary to complete the internal market by 1992. The Minister will be aware from his contacts and the views of the members of the Commission that if we do not complete it by 1992, they believe that other measures can be taken.

Does the veto extend to these VAT proposals, which the Commission has described as being in advance of single market harmonisation? If the aim of the plan were free trade, I would rejoice. But free trade in the Common Market is a distant vision. Even those laws that have been passed have not been applied uniformly, and I have given the Minister examples from within his Department covering these issues.

The plans of the EEC, as set out in the document before the House, clearly discriminate against the United Kingdom. They will damage overseas investors whom we have tempted here with subsidies and promises. They will entrench the existing protectionism of the EEC. The Council of Ministers will make up its mind and this Parliament will have no say in the matter. What is decided there will be forced on us.

Even so, we can still ask questions. I have set out three simple, basic questions to which we are entitled to answers. EEC membership has played its part, as many of us knew it would, in undermining and partially destroying our manufacturing industry, and that process is still proceeding. Now our car industry will face the music of Brussels. Bearing in mind that hundreds of thousands of British families depend on the car industry for their jobs, income and livelihood—[Interruption.]

My hon. Friend the Member for Harrow, East (Mr. Dykes) may laugh, but he should realise that the appalling deficit in trade with the EEC is destroying jobs in Britain and is harming our prosperity and living standards. There may be other reasons, too. Perhaps they include our folly and the fact that we do not respond. All that is making the lives and living standards of the British people less secure.

If the proposed policy is to proceed, we must have answers to the three questions that I have posed. If we get them, at least we shall have served some purpose by this debate. In no sense do I criticise the Minister. He is part of a Government Department. But irrespective of the part that he and others play in the affairs of government, it is time that the British people were told what lies ahead.

11.23 pm
Sir Russell Johnston (Inverness, Nairn and Lochaber)

If the British public do not know the views of the hon. Member for Southend, East (Mr. Taylor) by now, they must be stone deaf. He has repeated them often enough and, in my view, has remained consistently wrong for most of his political life.

Although the hon. Gentleman, at the beginning of his remarks, endeavoured to convey the impression that I was not here, I agree with him in what he said about the timing of debates such as this. They always seem to occur late at night. Even so, one is bound in the end to accept that if hon. Members are anxious to be here, even late at night—witness the abortion debate earlier in the week—they will come. That reflects not only the decisions of Government managers, but the mood of the House and Parliament's wish to debate certain issues at certain times.

The Minister said that the Government wished to encourage an open European market in motor vehicles; the hon. Member for Southend, East inveighed against all the disadvantages imposed on us by the Community. Will the Minister explain why British mortorists pay up to 93 per cent. more than those in other Community countries for some new cars? I dare say that he saw an article in the Observer on 4 March, which went into the matter in some detail.

The hon. Member for Derbyshire, South (Mrs. Currie) said earlier that she did not want her constituents who work for Toyota to be subject to prejudice. She is quite right.

I feel the same about my constituents in Inverness. Why should they pay £7,145 for a Toyota Corolla here when the price in Greece is only £3,788? The consumer has not been mentioned much tonight, but the consumer is very important, and in my view he is being swindled. A Nissan costs £7,944 in Britain and £4,440 in Denmark. Even the Metro—our own product—costs £6,109 in Britain and £4,041 in France. This is not a new argument, but I have never heard an adequate explanation. Why should a Fiat cost £5,000 in Britain and £3,000 in Holland?

Mr. Dykes

I agree with the hon. Gentleman: it is a grotesque national scandal which has never been properly explained. Is it not even worse that wages and salaries tend to be higher in the other countries that he mentioned, apart from Greece?

Sir Russell Johnston

That is often the case. The article does not mention Germany, but certainly wages tend to be higher in France. Tonight we have a real and, despite the hour, relatively live Minister: perhaps he can explain the price differential.

Mr. Roger King

There is a good deal of confusion about relative prices in Europe. It depends whether consumers are buying the same specification of car in the respective markets. In Germany, many Mercedes Benz cars are simply taxis; in this country, because of the way in which they are sold and the equipment with which they are fitted, they sustain a much higher price.

The hon. Gentleman should not fall into the trap of supposing that the prices that have been listed are those at which the cars are bought. He quoted a price of £6,000 for a Metro in this country and one of £4,400 or so in France. That same Metro could be bought here for about £4,800, but the buyer would have to pay 10 per cent. in special tax which he would not pay in France. The hon. Gentleman must get his facts right.

Sir Russell Johnston

They are not my facts; they are The Observer's. A respectable newspaper says that they are correct, but, if they are not, the Minister can tell me so. The cars involved are identical models. I am not sure whether the 10 per cent. tax differential relates to Britain as against some individual Community members, or applies across the board. That 10 per cent. leaves another 83 per cent. in price difference to be accounted for.

British motor car salesmen often offer discounts. The discount price may not be the printed book price. One may therefore be able to negotiate a lower price. However, there is a considerable price differential between cars offered for sale in Britain and in other European Community countries. I should like to know why. The full reason cannot be the special import tax.

There was a considerable trade in parallel imports for a while. Most of the companies that engaged in that practice have gone out of business. The Observer article says that mostly it was due to obstruction by manufacturers—sometimes apparently with the tacit consent of Government departments. Quadro Cars, of Southampton, one of the few remaining parallel dealers, claims that it faces continuing problems with Customs and the Department of Transport. Mr. Chris O'Keefe, a director of Quadro Cars, said: Most people have packed up this business because of hassle and administrative threats. I thought that this open-market Government were all against hassle and administrative threats. I shall therefore be interested to hear about the Government's attitude to parallel imports.

11–31 pm

Mr. Hugh Dykes (Harrow, East)

This is an important debate about the future of the British and European automobile industry. I am grateful to the Chairman of the Select Committee on European Legislation for recommending that the subject should be debated. I am also grateful for the Government's response.

My hon. Friend the Under-Secretary of State for Industry and Corporate Affairs spoke skilfully for only nine minutes, whereas the Opposition spokesman, the hon. Member for Newcastle upon Tyne, North (Mr. Henderson), spoke for about 20 minutes but the substance of his speech was far less. Nevertheless, I was shocked that my hon. Friend did not know the approximate German motor car production figures, compared with the British figures. Perhaps he preferred to say nothing about them. The chilling reality is that the German figure is about 4.5 million and the British figure is about 1.5 million. That is lower than the Spanish motor car production figure, although Spain's population is only around 40 million.

All of us must hope that there will be a major recovery in the British motor car industry. It is a sad reflection that that will depend on the building up of foreign motor car production, with the arrival of the Japanese. We wish them well. We welcome worldwide competition and their entry into the British market and others. However, British motor car manufacturers ought to have done that.

The weakness of the British economy is very disturbing—writ large in terms of the motor car industry but also in terms of other sectors of British industry. We must unlock the mystery of that weakness before this country can ride high with the other three member states with similar populations that seem consistently to do better in the leading manufacturing sectors.

It was grotesque for my hon. Friend the Member for Southend, East (Mr. Taylor) to suggest that we have a unique motor car market and that the Commission ought not to impose restrictions on Japanese products. I agree that it depends on the contents of that manufacturing process being genuinely domestic, whatever its original provenance. However, my hon. Friend went on to say that although that is so important, there should be no indirect tax harmonisation, or VAT harmonisation in the internal market. The two go together. There should be harmonisation and unification of the market in both those respects.

The continued weakness of the Government's stance is that they say that their main priority is the harmonisation of the internal market, except on indirect taxation. They say that that is unnecessary. The Commission has proposed harmonisation bands. I hope that eventually they will lead to one VAT rate, or to a couple of bands of harmonised rates for different kinds of products. The British Government should respond to that.

I express appreciation—if that is not too risky in political terms—of what the Liberal spokesman, the hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston), said. I hope that my hon. Friend the Minister will have time to respond to his points and to mine. Let us consider Jaguar, for example, with all its boasting and hype about what a wonderful car it is now creating. I suppose that it is, because if we ride round in its cars, they seem to be agreeable motor vehicles, and they appeal to British executives and to some executives abroad. However, Jaguar produces only about 51,000 cars a year in comparison with Mercedes and BMW producing about 1.4 million expensive, luxury cars. That is a disturbing reflection of the relative weakness of the more expensive end of the British motor car industry.

The higher car prices in Britain compared with those in other countries are a scandal. Our economy is still truncated, despite a recovery in recent years and despite a lot of explanation from the Department of Trade and Industry about successes—some of which is, sad to say, a little exaggerated, but none the less welcome in so far as it can be based on statistics and facts. With a lower wage and salary structure in Britain in comparison with several leading continental countries—not all of them of course, because one excepts Greece from that—we see that car prices are fundamentally higher in this country than in other countries.

Mr. Cash

Will my hon. Friend give way?

Mr. Dykes

I do not know whether I have time. While I complete my next sentence, I shall reflect on whether I shall be generous enough to give way to my hon. Friend. Perhaps I shall in a moment. Time is short and these debates are always rather short.

The difference in prices is disturbing. The hon. Member for Inverness, Nairn and Lochaber was right to say that it has never been adequately explained by anybody, from the Government, to trade association spokesmen and individual dealers. No one has ever given us a proper explanation apart from saying "10 per cent. car tax" or that cars abroad may have different features, such a s leather seats.

Mr. Cash

Will my hon. Friend give way?

Mr. Dykes

Yes, because I am in a good mood.

Mr. Cash

I am grateful to my hon. Friend who is a member of the Select Committee on European Legislation. I am sure that, because he is a member of the Committee, he will know from the report that BMW, Mercedes and other luxury cars in West Germany benefit enormously from the deliberately low tax regime provided in the home market by the West German Government for the benefit of improving the advantages that BMW, Mercedes and other luxury cars have at the expense of Jaguar. I am sure that my hon. Friend knows that, and I am sure that because he is such a fair person who wants a level playing field and because he is such a Europhile, he will accept that point.

Mr. Dykes

I agree with my hon. Friend on one point. It may not be a mistake in this country occasionally to look carefully at what our continental friends are doing with various industries and saying that perhaps we should emulate some of their techniques, practices and tax regimes. It is not a weakness or a heresy to say that we should follow some of the foreigners' advice. We could do that with considerable profit. I know that that is regarded as problematical, but it would be a good idea so I am grateful to my hon. Friend for that suggestion.

The difference in prices has not been properly explained. It needs to be, and the Government should institute a major inquiry into United Kingdom domestic car prices to satisfy the consumer. I am disappointed that my hon. Friend the Member for Southend, East did not regard this point as important; it is far more important than his point. The consumers in this country want justice on United Kingdom car prices. They want lower car prices commensurate with their wages and salaries, which are lower than those in France, Germany and even Italy now. They want explanations and they must come primarily from the British Government.

11.38 pm
Mrs. Edwina Currie (Derbyshire, South)

I join other hon. Members in gently chiding the Government for not finding a better time and more time for this important debate. It is important for two reasons. First, the developing British car industry will provide many of the answers to the questions that right hon. and hon. Gentlemen have put already tonight about the state of our balance of trade and about the state of the balance of trade of the rest of Europe with the rest of the world. Secondly, I should like us to have more time—and perhaps we shall on a future occasion—because I should like to pin down the Labour party on precisely what its policy is on trade, on the car industry, on subsidies and, especially, on Europe. Labour Members should bear in mind for starters that if it had been up to the Labour party, we should not be in Europe and Toyota would certainly not have been anywhere near my constituency. I hope that it can overcome its fears about socialism and continue its support for capitalism in the years to come.

It is now exactly a year since Toyota announced that it would move to my constituency. The site is now being cleared and we are hoping that building will begin on the site in early June. In two years, Toyota will be recruiting my constituents. We are expecting about 1,700 jobs in the first tranche and that about 3,000 people will be directly employed a short time after that. Three years from now, the plant will be close to commercial production.

I should like to put on record the fact that I have been very impressed so far by the Toyota company; by its courtesy; the amount of information that it provides both to myself and to other local people, and by its efforts in planning applications and its presentation to all of us—to my constituents—about what it is trying to do and about the factory. Toyota has made tremendous efforts to accommodate the worries and anxieties of local people and to change the plans in response to suggestions that have been made.

There is no doubt that Toyota is a very big spender. The budget for the Derbyshire site was announced as about £700 million, with another £100 million-plus for the engine site at Shotton in north Wales. There is no doubt that by the time the thing is up and running, Toyota will have spent over £1 billion sterling in investment in this country. That is not only the biggest inward investment that Britain has ever seen; it is the biggest inward investment that Europe has ever seen. It is one of the most significant events of recent years for this country.

We have a combination of Japanese money and Japanese expertise for a factory that is being built not in Japan, but in the heart of England. The work force will be British and we are hoping that the research and development will also be carried out locally. The suppliers will be British—indeed, many of them are already there. For example, Pirelli, down the road in Burton-on-Trent, is excited at the thought that it might be putting British-made, Italian-made tyres on those Japanese cars. There is no doubt sthat the cars that my constituents will be producing will be as British as Peugeot in Coventry; as British as Ford in Dagenham; as British as Nissan in Sunderland; as British as Volvo in several places in this country; as British as DAF and Iveco and as British as General Motors in Luton. In other words, the Toyota cars will be as British as Marks and Spencer, fish and chips and our weather, and it is about time that the rest of our colleagues in Europe recognised that and were keen to support a British—a European Community—industry of the highest level and standard that will show a clean pair of heels to the rest of the world.

Mr. Teddy Taylor

What if they do not?

Mrs. Currie

If my hon. Friend wants to intervene, I shall be glad to give way to him.

Mr. Taylor

What shall we do if they do not and if restrictions are placed on the superb cars that I am sure will be produced in my hon. Friend's constituency?

Mrs. Currie

Perhaps my hon. Friend will contain himself for two or three seconds because I shall tell him at the end of my remarks, which I should like to keep as short as possible.

It is a tremendous compliment to the people in Derbyshire that that factory will be established there. That is not because of some of the things to which the hon. Member for Newcastle upon Tyne, North (Mr. Henderson) referred; it is because we have a first-class work force of militant moderates. They do not like to go on strike. They defied Arthur Scargill with great determination and are now ready to go on, in the same kind of sensible, moderate, intelligent, hard-working way to work in this new industry in our area.

We shall be major exporters to Europe and we shall make a huge contribution to the British balance of payments. We shall also knock the competition for six in the European car industry—and they know it. Here we have a contrast, which I ask my hon. Friend the Minister to support, between a privately owned and privately funded British business and the state-owned, state-subsidised inefficient car industry elsewhere in Europe, especially in France and Italy.

My hon. Friend the Minister—I believe that it was he—sent out a lovely little glossy document earlier this week, entitled "Britain in the Community: Europe in the 1990s"——

Mr. Redwood

indicated dissent.

Mrs. Currie

My hon. Friend is shaking his head; he will not accept responsibility for it. The very first sentence reads: Europe is growing up. It's a challenging time to be a European. In every way, the barriers are coming down. Amen to that.

I am a keen European, unlike my hon. Friend the Member for Southend, East (Mr. Taylor)—but not according to the document that we are discussing. I should not have minded if the "Single Community Motor-vehicle market" document had been a bargaining document to help to get Japan to open its doors to British and European trade, but it is not a bargaining document. It is clearly a document that is designed to protect a weak industry. Paragraph 1, entitled, "The Outlook for the Motor-Vehicle Sector", talks about "signs of fragility" among European car producers. That is absolute rubbish as far as the British contribution—even now—is concerned. Vigour and energy are much better signs than fragility, yet the word "fragility" appears several times in the document.

We get the truth about what is going on in paragraph 3.4 (b), which mentions The growing scale of Community production of Japanese makes, which on top of present imports reduces the potential market share for older and less efficient factories. At least the Commissioner has the grace to be honest about the tawdry business that he is up to. I think that it is an absolute, stinging disgrace. The document then says: The Commission is determined to ensure"— not, "The Commission would like to ensure"— that Japanese vehicle exports do not grow to such an extent that they risk creating problems within the Community. Frankly, I think that the Commission has got a nerve and that Commissioner Andriessen should be ashamed of himself. It is quite clear that somebody in the European Community has a fixation not about foreign makes or foreign marques, but about the Japanese. When one goes through the document line by line, one finds that West Germany is mentioned once, Korea is mentioned once, the United States is mentioned three times and Japan and the Japanese are mentioned no fewer than 23 times.

I have to say on behalf of all my constituents that I think that there is something particularly nasty and offensive about the Europan Community's objection to the Japanese and the way in which it seems to be trying to make special rules for Japan. It does not seem to feel that way about the Americans. In 1989, the European Commission approved a state loan of 98 million ecu—about £62 million—to Ford to build a factory in Portugal.

Despite the fact that so many Opposition Members' socialist friends are in the European Parliament, the European Community is not egalitarian about these things either. One of the other state loans to the car industry that was approved last year was for 28 million ecu—£18 million—to Ferrari, which no doubt will have a marginal effect on the pockets of next year's rather less-well-off Ferrari owners all over the world.

I would like, in the best possible tradition of the House having late-night debates, to chide my Front Bench for the approach that it is adopting. It does not seem quite good enough to respond, as the Government do in paragraph 17 of their explanatory memorandum, there is no question of the UK accepting any such arrangement. The motion states that the document is a useful framework for considering the detailed measures". That is not good enough either. I know, and my hon. Friend the Minister knows, that the British Government have the right to go to the European Court. I hope that my hon. Friend will consider that as a possible measure, if necessary. Back British industry and make sure that my constituents and those of my right hon. and hon. Friends who are working in foreign investment businesses have the right to a free market in Europe in the future.

11.47 pm
Mr. Roger King (Birmingham, Northfield)

I disagree with most hon. Members, who have said that this is not a relevant time at which to discuss the future of the British motor industry. Tens of thousands of people throughout the country are building cars in increasing numbers for the export and home markets. To some extent, therefore, we are showing solidarity with the large number of people now at work by debating the future of their industry in Europe.

Some hon. Members have spoken about car prices in Europe. Opening the European market will create a more open market in pricing. Until now, each European country has been considered as a separate profit centre, and the retail sector of the car industry has grown up differently in different parts of Europe. The British tend to part exchange cars, which involves extra overheads for retailers. The discount structure here is wholly different from that in France, for example.

Cars may be cheaper in some markets, but that may be the result of a proper marketing ploy by a manufacturer here. When seeking exports, a manufacturer may keep prices at a strong market level. It may be argued that one of the problems is the fact that the British industry is too keen to get business and reduces the price of its cars to make them more competitive with the indigenous product, but our export figures are hardly likely to grow if they do not adopt such measures.

We have discussed many aspects of the Community documents, and there is no doubt that the United Kingdom car industry has shown a dramatic upturn in profitability and output, as my hon. Friend the Minister said. By the year 2000, forecasters of the industry predict that annual output in the industry could be up by between 2.3 million and 2.7 million units a year. Looking even further ahead, some experts in the industry have predicted that in 15 to 20 years' time—not all that far away—we could be the third greatest car manufacturing nation outside the United States and Japan. In Europe, car manufacturing could be concentrated in Russia, Germany and the United Kingdom. There are tremendous opportunities for us to develop our industry as fast as we can.

The decision, recently announced by the Rover Group, together with its work force, to work towards a 24-hour production process on its engines and transmissions side is a clear sign that we have turned a corner. I lay the reason for this fairly and squarely on the Government's industrial relations policy and attitude over the past 10 years. We have overhauled our industrial relations, and no longer do the Red Robbos and the Moles of Cowley rule supreme. The tendency to call a stoppage at a blow of a whistle decimated the profitability of our car industry, but those days are gone, and there is a new working relationship between the work force and management.

There are sometimes setbacks. For example, investment that was to be made in Dundee was recently cancelled and there have been problems at Bridgend in south Wales. Despite those setbacks, overall we hope that the British motor industry will develop substantially.

Our country's economic future is almost uniquely dependent on this industry. It is the one that can haul us out of our import-export difficulties. The rebirth of one our basic industries is nothing short of an economic miracle.

The Japanese factories that have come, and are coming here, have done so because they recognise that this is a splendid place to make cars, and one that offers them not just a skilled work force, or one that can be readily trained, as we have seen at Nissan's Greenfields site, but the component manufacturers to feed the companies that are set up, and valuable European engineering expertise for products that have been inherently Japanese.

Mr. Cash

It is so important for us to be entirely realistic about what is going on in the European Community as we get on towards 1992. Did not the recent experience of Ford pulling out of Bridgend have a lot to do with trade union practices and the tendency for people to pay themselves more than the worth of what they are producing? The British work force, both management and employees, will clearly have to address themselves to that if we are to maintain the position of the British motor industry in the way suggested by my hon. Friend, whose experience and knowledge of this industry I acknowledge.

Mr. King

I agree with my hon. Friend's sentiment, but Ford is not pulling out of Bridgend. It has decided that the final phase of the new Zeta engine installation will not go ahead, partly because the changing engine requirement means that older units produced there are needed for a few more years. The company therefore needs capacity elsewhere and has decided to go to Germany. That is disappointing. I agree with my hon. Friend that if the work force returns to its previous attitudes, the investment that we desperately need will not be made.

The European document highlights a number of technical standard changes and harmonisations that the British motor industry needs to take on board, and which will help our industry in Europe. Vehicle emissions must be standardised, although we can argue, as we have in previous debates, about whether exhaust catalysts are the right way forward, or whether improvements in engine technology are not the fundamental requirement in producing a cleaner, more fuel-efficient and economical car. Undoubtedly, however, we shall have to support the majority viewpoint that catalysts have a role to play for at least the next 10 years.

We also want to harmonise taxation on cars. I have already mentioned the 10 per cent. special tax in this country. One wonders whether it is the United Kingdom Government's intention to phase out that element of taxation, which in my view is excessive and is only placed upon automobilies in this country, so that we harmonise the tax structure within the European motor industry. If that is the Government's intention, no one will welcome it more than I.

Dismantling internal barriers and encouraging the import of British-produced Japanese cars is the crux of the debate. Certainly, I support my hon. Friend the Under-Secretary of State when he tries to ensure that the Government get the best deal that they can. However, we are overlooking the fact that the document does not specify exactly what the transitional element comprises. It states that in some countries the importation of Japanese cars, whether they are made in a United Kingdom transplant factory or in Japan, is as low as 1.4 per cent. and in other countries it is as high as 44 per cent. I suggest that when the time comes to negotiate my hon. Friend or his colleague would be ready to hear what the transitional agreement could be. It could be exceedingly generous for the transplant factories if I may use that term, and by shuffling production and sales figures throughout Europe we may get by for two or three years quite successfully without bringing a hiatus to the Community. I do not know, but that is a subject for negotiation.

The new factories developing in the United Kingdom will not be up to full manufacturing capacity until the mid-1990s, so we have time to negotiate a workmanlike arrangement with the European Commission. We do not have to go in for a Mexican stand-off and have a high noon duel or shoot-out. A basis for negotiation exists. I think that the European Community will recognise that, given our balance of payment difficulties, we need this vital manufacturing capacity and we need to build up this vital investment and nothing must be done to jeopardise it.

It is not only the countries mentioned in the document which should concern us, however, because if the European Community takes an obdurate view the Japanese car companies may import their requirements from factories in the United States free of all restrictions. If we had a mind to, we could adopt as a negotiating stance the fact that Japanese companies such as Honda, Nissan and Toyota could simply import cars from the United States without let or hindrance.

We should also remember that German transplant factories are being set up in eastern Europe and other eastern bloc countries which are desperate for investment. What is the future of those companies and manufacturing units? One cannot consider the Japanese factories in isolation. We have to take into account the emerging requirements and productive capacity of eastern bloc countries. I hope that my hon. Friend will take due notice of that.

Britain faces a number of restrictions from the European Community which seem extremely one-sided. Recently there have been restrictions on airline deregulation. We are particularly good at that, but other European countries seem to be the opposite, so airline deregulation has been dropped. Road haulage is another area in which we are particularly efficient, but the Germans are not and are therefore blocking developments there. To achieve the free and open market that we all want, Britain cannot always give, give, give. We have to ensure that there is give and take in Europe and that there is genuine negotiation throughout all industrial and commercial sectors.

Mr. Dennis Skinner (Bolsover)

rose——

11.59 pm
Mr. Redwood

My hon. Friend the Member for Harrow, East (Mr. Dykes) asked about figures, and I wanted to be sure that I had them right before I responded to his question. I did not want to quote them off the top of my head. The output of motor cars in Germany in 1988 was 4.3 million. My hon. Friend might like to know that the real gap emerged between British and German production during 1974 and 1979. Over that period, our production fell from 1.5 million to jut over 1 million while German production leaped ahead from 2.8 million to just over 4 million. Since 1979, there has been a slightly higher rate of growth in the United Kingdom than in Germany, but on a much smaller base. The figures that the Government and my hon. Friend the Member for Birmingham, Northfield (Mr. King) have been using imply that the British growth rate will accelerate considerably. I am sure that all of us in this place look forward to seeing the strengthening of the wider British motor industry over the next few years.

My hon. Friend the Member for Harrow, East asked also about the Government's attitude to taxation. We do not believe that tax harmonisation is a vital part of the open market in cars. Each country applies its own tax rates for sales, and there is free competition on that basis. It is far from the truth that our tax is uniquely excessive. Several other member states place much higher rates of tax and duty on cars, and they are equally nervous about harmonisation. It is not Britain alone which is delaying the possibility of tax harmonisation because it does not wish to see revenue loss. In Denmark, for example, VAT is levied at 22 per cent., and there is a high initial registration tax. In France, there is 25 per cent. VAT. There are other countries that have higher levels of tax.

My hon. Friend the Member for Southend, East (Mr. Taylor) asked whether we could block the proposals. I understand that the measure requires unanimity. Progress has been slow because many countries are worried about the tax proposals. My hon. Friend asked also about the trading deficit. Again, I wanted to ensure that my response was accurate. The deficit in passenger cars in the most recent year was £5 billion. My hon. Friend has already given the House figures specific to the European Community and Germany. As he implies, the worst part of the deficit lies in our trade with Germany.

The hon. Member for Newcastle upon Tyne, North (Mr. Henderson) rightly pressed me to say more about the negotiations and the deal that the Government think that they can get. I agree with the hon. Gentleman because I think that we can succeed through negotiation. We are negotiating strongly, and I have made it clear tonight that we intent to win. We take the view that the issue is vital for the nation and for new investors who have come here.

There are three stages in the process. I remind the House that there were rumours when Nissan first came to the United Kingdom that its cars would not be accepted into certain European Community country markets. Nissan cars are being produced, and I believe that there are no blocks on their exit from the United Kingdom into other European markets. That is in part because of the strong representations that the Government made successfully on behalf of Nissan.

I agree with my hon. Friend the member for Northfield that we have some strong points to make in the negotiations. The fact that Japanese cars could be imported from the United States without let or hindrance is an important factor to get across to other member states. Transplant factories, as the Community likes to call them, in other countries mean that positions are shifting as others benefit from transplant locations. Other countries are beginning to see the difficulty in making a distinction between a Japanese holding company, an American holding company, a Swedish holding company, or whatever country may be benefiting their country by inward investment.

As my hon. Friend the Member for Derbyshire, South (Mrs. Currie) implied, there is a good legal process that we believe we could use. We hope, however, that it will not come to that. If the negotiations went wrong for any reason, of course we would take the best legal advice that was available. We would pursue any case that we thought that we could mount, and with full vigour. Our current view is that the treaty position is clear. It gives transplant factory cars the right of entry into other Community markets. We would want to see that right upheld by legal challenge through the courts until we had what we needed for the car plants in the United Kingdom.

Several hon. Members referred to scrutiny. I have always favoured good and effective scrutiny in the House. Wherever there are issues that I am handling in the financial area, which is my remit, I try to ensure that the House is informed at an early stage and that we have the 'opportunity for an early debate on the proposals. The proposal before us, in so far as it relates to the important political points about the negotiations on quotas, voluntary restraint agreements and Japanese cars that are produced in Britain, is timely. Decisions have not been made, and the views of the House will be presented forcefully to the European Community by me and my colleagues to ensure that our position is strengthened by the fact that we have been through a proper democratic process and that the voice of the House has been heard clearly on an important national interest. I agree with the hon. Member for Newcastle upon Tyne, North about the work on technical standards, which we welcome, but more must be done by the European Community. That work will benefit our companies and those elsewhere in the European Community.

My hon. Friend the Member for Southend, East and the hon. Member for Newcastle upon Tyne, North asked about quotas. The hon. Member for Newcastle upon Tyne, North was a little mistaken, because only three European Community counties have quotas. Some others have VRAs, including Britain. I was not sure whether he was saying that it is Labour policy to impose quotas where they have not been imposed before. That would create problems, given the treaty obligations to free trade and the European Community's obligations through GATT. The Government believe that progress in the GATT round is vital to our interests. We therefore do not want people to talk of imposing new quotas and quantitive restrictions when we are making progress in the GATT negotiations.

I agree with my hon. Friend the Member for Southend, East that it is an important objective to create an open market. The Government will handle the negotiations as set out in the explanatory memorandum to ensure that that objective is achieved without undermining the British objectives that we hold so dear to heart.

The hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) made a point not covered by the document about differentials in car prices. My hon. Friend the Member for Northfield provided some of the answers to those differences. One must consider the price without the tax element, the specification, the discount structure and several other complexities. The Director General of Fair Trading is closely considering recent evidence implying a widening of the differentials in car prices. If he thinks it appropriate, he will introduce measures to tackle the problems mentioned by the hon. Member for Inverness, Nairn and Lochaber and other hon. Members which account for those differentials in prices.

My hon. Friend the Member for Derbyshire, South was rightly concerned about the future of Toyota. She played an important role in securing its investment for her constituency and county, which we welcome. She is right that it is an example of dynamic private enterprise. It will do well as a result of its wise choice of Derbyshire and Britain under the Government's attractive pro-enterprise policies.

I agree with my hon. Friend the Member for Derbyshire, South that within the European Community we wish to avoid any sense that we are anti-Japanese. I opened the debate by making clear the Government's position that good Japanese investors are more than welcome. We are extremely positive about them because they have an important role to play in building our industrial future, improving our balance of payments and working with us in the manufacturing revival that is now so clearly under way. The document, which in some places has not worn too well in the translation from French, at times gives too much credence to member states that are anti-Japanese in spirit in some of their statements. The Government will endeavour to ensure that the European Community adopts as fair an attitude to Japan as it does to the other overseas trading partners that we value.

I found Labour's position on the document as unclear as its position on everything else. I can understand the difficulties of the hon. Member for Newcastle upon Tyne, North. The right hon. and learned Member for Monklands, East (Mr. Smith) made a speech in the United States about the wonders of the open market, competition and free enterprise, but we read that the hon. Member for Dunfermline, East (Mr. Brown) is busy adopting and endorsing Labour's policy review on industrial policy. The tensions are obvious for all to see. The Labour policy review is riddled with the failed policies of the 1960s and 1970s. More subsidy, more intervention, more Government meddling with business—those were the policies that demolished the British motor car industry so successfully between 1974 and 1979. Yes, it has taken some years to correct the position, because the dose of bad medicine that the Labour Government gave proved to have a deep-seated effect and to cause enormous trouble.

At some point, the House should return to the more general questions of how to achieve a thriving industry, which policies are best and whether the Labour party will back the right hon. and learned Member for Monklands, East in the free market views that he expressed in the United States or whether it will back the backward-looking views of the hon. Member for Dunfermline, East in his endorsement of the Labour policy review.

Mr. Roger Knapman (Stroud)

Perhaps my hon. Friend will give the hon. Member for Bolsover (Mr. Skinner) a chance to answer that question.

Mr. Redwood

I should be happy to give way to the hon. Member for Bolsover (Mr. Skinner) if he can answer that question.

Mr. Skinner

First, the Minister did not ask the leave of the House to speak twice, so he obviously does not know the rules. Secondly, is he aware that there are anti-Marketeers on the Conservative Benches who stay up for these debates? At the end of this debate, I shall shout no, because I know where I stand on the issue. I hope that the hon. Member for Southend, East (Mr. Taylor) will join me as a Teller, so that we can divide the House.

Mr. Redwood

I am grateful to you, Madam Deputy Speaker, for giving me permission to speak twice.

Mr. Skinner

The hon. Gentleman did not ask for leave.

Mr. Redwood

I took it from your expression, Madam Deputy Speaker, that you had given me that permission. I noticed that the hon. Member for Bolsover immediately had to divert the issue from the important point of how industry can prosper and do well. On this, as on everything else, the Labour party has either no answers or the old answers that failed. I commend the motion to the House.

Question put:—

The House divided: Ayes 36, Noes 0.

Division No. 183] [12.11 am
AYES
Amess, David King, Roger (B'ham N'thfield)
Amos, Alan Knapman, Roger
Baker, Nicholas (Dorset N) Lang, Ian
Boswell, Tim Lawrence, Ivan
Bowis, John Lightbown, David
Brazier, Julian Maclean, David
Burt, Alistair Neubert, Michael
Carlisle, Kenneth (Lincoln) Patnick, Irvine
Carrington, Matthew Redwood, John
Cash, William Renton, Rt Hon Tim
Chapman, Sydney Stevens, Lewis
Chope, Christopher Waldegrave, Rt Hon William
Coombs, Simon (Swindon) Waller, Gary
Dykes, Hugh Widdecombe, Ann
Fallon, Michael Wood, Timothy
Favell, Tony Young, Sir George (Acton)
Garel-Jones, Tristan
Gill, Christopher Tellers for the Ayes:
Goodlad, Alastair Mr. Tom Sackville and Mr. John M. Taylor.
Gregory, Conal
Johnston, Sir Russell
NOES
Nil
Tellers for the Noes:
Mr. Dennis Skinner and Mr. Dave Nellist.

Question accordingly agreed to.

Resolved, That this House takes note of European Community Document No. 10971/89, relating to the Community motor vehicle market; and supports the Government's view that it provides a useful framework for considering the detailed measures which will have to be implemented in the Community to bring about a Single Market in the vehicle sector.