Information Technology

HC Deb 12 December 1990 vol 182 cc1077-84 11.56 pm

The Minister for Corporate Affairs (Mr. John Redwood)

I beg to move, That this House takes note of European Community Document No. 6864/90 on a Research and Development programme on Information Technology; and endorses the Government's view that Community support for research in this area should be given a high priority.

The Commission's proposal for the new IT research programme was published on 1 June 1990 as document 6894/90. The DTI submitted an explanatory memorandum on the proposal on 28 June. The Select Committee on European Legislation has reported on these documents. I am speaking on behalf of my noble Friend the Minister for Industry and my hon. Friend the Under-Secretary of State for Industry and Consumer Affairs, who is in Brussels on Government business tonight.

Further research and development into information technology will be the largest single element of the third framework programme. It will provide around £200 million a year of support for IT research which will be carried out by industry, research organisations and higher education institutions. The new programme will have three main objectives—first, to strengthen the scientific and technological basis of the IT industry; secondly, to promote collaboration between companies and the higher education institutions across the EC; and, thirdly, to promote research leading to the development of international standards—an excellent area for Community activity.

A good deal of technology has been developed under ESPRIT—the European strategic programme for research and development in information technology—I and II. This should be available to users. The new programme will devote more effort to technology transfer. In principle, the United Kingdom Government welcome this. We shall be working closely with the Commission to ensure that United Kingdom users of IT can benefit from these new Community initiatives. We are pressing the Commission hard to place more emphasis on research that meets the needs of users rather than just being driven by the technology. We want to ensure that clear priorities for the new programme are established; and that it is properly co-ordinated with research activities in related sectors.

The Government want a strong management committee, with the member states actively involved. We wish to modify a proposal for the special procedure that will allow the Commission to give grants outside the normal competition for proposals. We are critical of the idea and seek transparent procedures and opportunities for all corners to tender.

The United Kingdom Government are participating in the debate on priorities under the budget. We are broadly content with the Commission proposals, but would prefer to see more emphasis on software and business applications, avoiding an over-emphasis on silicon micro electronics. We also wish to see more smaller companies benefiting from the programme.

Mr. Tim Devlin (Stockton, South)

Will the European Community's initiative be targeted through the regional development fund or will it be pan-European, without particular emphasis on the special assisted areas?

Mr. Redwood

It is a programme for the IT industry throughout the European Community, run under its own procedures laid down in the document before the House and intended to assist collaborative projects with more than one company from more than one member state involved in the partnership.

In the past, the ESPRIT programme have provided opportunities for United Kingdom firms. United Kingdom organisations are involved in nearly 70 per cent. of the successful proposals—a high figure compared with that in other countries. Overall, 230 United Kingdom organisations have taken part in a total of 416 ESPRIT projects. The Government have every expectation that the United Kingdom will continue to be a strong and effective participant. We will press home our concerns in the negotiations. I commend the motion to the House.

12.2 am

Dr. Lewis Moonie (Kirkcaldy)

We are discussing one of the most important research fields in the world today. It is no exaggeration to say that it is, above all, on the future development of infomatics that the success or failure of EEC manufacturing industry next decade depends.

The Opposition welcome the commitment of 1,352 million ecu to the programme of collaborative research over the next five years. I might say in passing, however, that that is only a small fraction of the amount that IBM is likely to be spending over the same period. It is important to put the matter into perspective.

It is my duty to question the capacity of British industry to benefit from the framework II programme, given the difficulties that have arisen over the past few years and the Government's apparent inability—exemplified by the hands-off attitude of the Department of Trade and Industry—to realise that such programmes can be only a small part of the national effort that we require.

Let me refer to some of the problems that have beset our industry in the past few years. First, and perhaps most significant, is the recent takeover of ICL by Fujitsu, which effectively spelt the end of our indigenous control of our mainframe computer manufacturing industry. I welcome wholeheartedly the commitment by Fujitsu to continue research and development and manufacture in this country and wish ICL well under the new regime.

I regret, however, that such a takeover had to happen. Can we really stand here with our hands on our hearts and say that it could not and should not have been prevented? Sadly, the short-term attitude prevalent in British business, the lack of available funds for long-term investment and the hostility of successive DTI Ministers to any suggestion of a Government role probably made it inevitable.

A similar pattern can be seen in the loss of the transputer development, with INMOS now in foreign hands. It can be seen in the failure to follow up the undoubted benefits that should have accrued from the Alvey programme. It can be seen in the take-up by Japanese firms of the flat screen technology developed by United Kingdom companies. There is an endless list of missed opportunities, gleefully seized on by our competitors abroad.

There have also been successes and it is important to refer to them in order to put the matter into perspective. IBM maintains hugely successful operations in Britain, as do Hewlett Packard, Digital Systems, Motorola and other foreign companies. But the major worldwide benefits of their success accrue to their own centres of operations in their own countries. Certainly, with Amstrad assembling its highly successful laptops and personal computers here —in my constituency, as it happens—we can draw some satisfaction. But the technology comes from the United States and almost none of the components used in the machines bear a "made in Britain" tag. Even in the production of software, in which we have long held the dominant position in Europe, people abroad are seeking to acquire the skills, which they are capable of developing themselves, by taking over British companies, as happened to Hoskyns earlier this year.

Are we then to welcome a programme from which few truly British companies will benefit? Where is the necessary Government action to underpin our attempts to ensure that they do?

Some general points are worth mentioning. The level of expenditure in Britain on civil research and development is far below that of our competitors. This programme, welcome though it is, is no substitute for that. We suffer from a crippling shortage of science and engineering graduates and, specific to the information technology industry, from a shortage of computer programmers. We also suffer from the ingrained prejudice that rewards and treats the skills of those groups as second class.

The level of skills training in Britain is woefully inadequate and far below that of our competitors—yet the Government have pushed through further cuts this year in the budget for that key area. The level of Government support for industry is a bit of a joke. They are so concerned with avoiding any suggestion of partiality that they have managed to ensure that on the so-called level playing field of Europe Britain is the only side to play without a goalkeeper.

How can we benefit from this imaginative programme of research? Each of the five areas of the programme is vital to the future of the industry. On microelectronics, I agree with the Minister that the programme will be of less benefit to United Kingdom manufacturers and research departments than to those in Europe. The withdrawal of Philips from involvement in semi-conductor manufacture is disappointing and, perhaps, a gloomy prognosis for the future.

Information processing systems and software, which increase the effectiveness of the computers that we use, are also important. Although it is not explicitly stated in the document that we are discussing, the development of the new safety-critical packages is important. They are now often required to run the complex systems that influence our daily lives. I should welcome some comment from the Minister on the Government's attitude to that.

The advanced business and home systems point to an exciting future when they are developed. The computerised manufacturing, design and research programmes could all benefit from collaborative research. They are all vital to our future prosperity. I suspect that, as with previous programmes, British-based programmes and research departments will secure a reasonable share of the available funds, probably slightly in excess of what we might expect based on the proportion of the research carried out. We are effective in taking up EEC money. We have to be, because there is not much available from any other source. I trust that the Minister will tonight give further reassurance about collaborative research, and in particular that ICL will suffer no disadvantage because of its takeover when tendering. I hope that the Department will be vigilant in ensuring that other European companies will not be allowed to do what they have threatened and freeze out ICL from collaborative research projects.

It remains to be seen whether we shall secure any lasting benefit from our research efforts. Given the dismal track record of the Government and the indifference of Ministers to the problem, I fear that the Department may prove to be a burden too great for industry to bear, and that, while we may secure the short-term benefits of the research fund, there will be no long-term benefit to jobs and products.

12.8 am

Mr. Kenneth Warren (Hastings and Rye)

I wish first to declare an interest as I have been involved in the computer industry for many years. Unfortunately, that interest has never led me successfully to obtain any money from any of the programmes, so perhaps I can speak objectively—not that I would not have wished to do so anyway. My experience of watching other people have a go has led me to conclude that people should not have a go unless they have a great deal of money and can afford to bid. The ponderous procedures and the enormous overheads connected with the programmes deny many small businesses the chance of getting any money.

I welcome what my hon. Friend the Minister said. I wish to comment on the programmes as they have been and as they will be. I have one minor pedantic comment to make. The document is stated to be about research and technological development. As an engineer, I always wish that people would stop putting research and development together. There should be no development without production, and research is quite different from development. The overhead structures, the method by which one works and the kind of people used are completely different. People who are associated with development should be associated with production. Running research and development together in the same phrase is the old story of people not understanding how industry should work, and how it does work in the better-run companies.

One notices from the explanatory memorandum that some £1.5 billion has been spent, but there is nothing about what has been done with it or the effectiveness of it. Some of that money was spent as far back as 1984–88. There was some £500 million of Community support with probably an equal amount of industrial investment as well. It would be helpful if the Minister, perhaps not tonight, would be so kind as to look at the need to deploy the quality of results that have been achieved so that one can learn from the value of the investment. It worries me that we are charging forward from 1992 onwards with a suggestion of further substantial sums, which might be correct. When I see moneys rounded off to £500 million and £1.25 billion, I think that there has not been enough investigation about the proposals that the Commission has in mind based on its knowledge of the reality of business and investment.

I notice that the explanatory memorandum says that the scope of the instrument is broadened so that co-operation with third countries, including those outside the European Free Trade Association, may be promoted. The hon. Member for Kirkcaldy (Dr. Moonie) spoke about ICL and it would be helpful to know whether Fujitsu is allowed to bid directly or whether it has to go through ICL and whether ICL is allowed to bid. The Minister may want to consider that rather than refer to it tonight.

On the policy implications of the investment sums involved, the explanatory memorandum says that there are issues on which there will be further discussions, such as the underlying rationale of priorities of the programme. That is putting the cart before the horse. The rationale of priorities should be identified before sums of money can possibly be talked about. We should vote on the rationale of priorities and then vote on the sums of money.

The explanatory memorandum illustrates once again the kind of problems that one runs up against when one looks at Euro-legislation from Brussels. The document published on 1 June uses the kind of verbiage that cannot be taken seriously. For example, "whereas" appears 12 times. In the articles there is no description of what one will be doing, and eventually one reaches page 12 and a reference to the JESSI programme, which at that time had just about collapsed. What is proposed for two years hence on a programme that has already gone into the sand?

The document goes on to talk about work being addressed to the major components of the chain of designing, manufacturing, testing and applying advanced semiconductor products. Again, we are looking at something some years ahead which, with great respect to these wonderful gentlemen in Brussels, has already been in action in Austin in Texas for the past two years. They should take off their blinkers and look more widely at what is happening in the world of information technology, including communications.

I recognise that my hon. Friend the Minister said that we should concentrate more on software, but it grieves me considerably that there should be no reference to the more advanced types of microelectronics, for example based on gallium arsenide technology.

My hon. Friend is right about software, but we must take the software problem by the throat and shake it. When the Select Committee on Trade and Industry, of which I have the honour to be Chairman, looked at information technology 18 months ago, we visited Japan and the Japanese gave us a clear understanding that by the year 2000 all the population aged from 20 to 30 in Japan would be engaged on software production. Something is wrong somewhere. I acknowledge that software, as opposed to hardware, is becoming an increasingly large component of any given system, but I nevertheless hope that we can secure what the document originally asked for. We need to introduce some rationale into the proposals rather than just voting money.

It seems that it is only late at night that we debate the important subject of the workings of the European Community and what it should be doing. The debate before this lasted only 90 minutes, more's the pity, but we cannot return to it. As far as I could see, none of the documents—and none of the other documents dealing with science and technology that we have discussed—mentions the needs of users, to which the Minister very properly referred. Those needs must predominate: this must be a market-led business operation or it is nothing.

More attention should be paid to standards and technical norms, which are not given the priority that they deserve. Given the leadership of the market from research stage to production and development stages, we ought to get the prime users in the Community together. I believe that they could instil in the nations and companies participating—and seeking to participate—in the programme the understanding that the Community's main market is the public sector.

Our Government spend some £4 billion a year on hardware and software for the application—civil and military—of information technology, excluding communications. Half that is spent in the civil sector. The Select Committee tried to persuade the Department of Trade and Industry and the excellent Ministers who were there at the time—I am sure that the even better Ministers who are there now will pay attention to this splendid suggestion—that industry could be given a good deal of leadership if the Government saw themselves as a customer. Given the quality of their purchasing, the Government would indeed find themselves leading their industry forward, enabling it to obtain the investment that it should be granted and, as a result, the success that it deserves.

I commend the work that is being done, but I am afraid that the scepticism of experience always shines through.

12.17 am

Mr. Redwood

I am grateful to my hon. Friend the Member for Hastings and Rye (Mr. Warren) for his comments. We are debating an issue that will come before the Research Council, probably in the early spring of next year; my hon. Friend's comments will be very helpful to my noble Friend Lord Hesketh, the Minister for Industry, who will be negotiating on our behalf. The Government agree that rationale is needed in the proposals and that is what we are injecting into the debate, as I tried to explain at the outset. I agree with my hon. Friend the Member for Hastings and Rye that research is different from development. The purpose of this programme is to finance research rather than development.

My hon. Friend raised the crucial issue of effectiveness. This is indeed a vital issue of great concern to the United Kingdom Government. We believe that our proposals will improve the effectiveness of the programmes and will tackle the just elements of the criticisms voiced comparatively recently in, for example, the Financial Times. That paper made some points that we feel are reflected in our negotiating position; we do not, however, agree with some of the others.

In the past, such research programmes have eventually produced results in terms of products and market developments, but we should bear it in mind that the programme is in its earliest phase and is not designed to produce products directly. Monolight, a small company that benefited from a previous programme, produced an optical spectrum analyser as a result of initial work.

Can ICL, in the United Kingdom, gain access to the funds? Yes, we are told by the Commission that it is still eligible to enter into collaboration with others and bid for the funds in the usual way. We have made that an important part of our negotiations with the Community. I cannot say how easy it is to form collaborative ventures. That is a matter for private sector companies. However, we regard them as wholly United Kingdom companies, as they always were, and as full participants. Therefore we shall do all that we can to ensure that they remain full participants.

The hon. Member for Kirkcaldy (Dr. Moonie) referred to the JESSI project. The board has approved 54 projects to date, 26 of which involve the United Kingdom. Those involved find the projects useful. I agree with my hon. Friend the Member for Hastings and Rye that leadership can be important when the Government are the customer. We shall bear that in mind when considering our procurement policies.

I am glad that the Opposition acknowledge so many good features. They acknowledge that there are many inward investors. It shows that the policies are working and that we are creating exactly the right climate for information technology and its related areas. What good news it is that IBM intends to add to its massive investment here its worldwide telecommunications headquarters. They are to be here in London. It is a sure sign that our industrial policies, based on liberalisation and trusting the market, are doing well.

We welcome Fujitsu's commitments, as does the hon. Member for Kirkcaldy. I am glad that he acknowledged them.

Dr. Moonie

Will the Minister reflect on our balance of trade with the rest of the world in information technology and how it has progressed during the last few years?

Mr. Redwood

I am glad that the hon. Gentleman asked that question. Last year we ran a £900 million surplus in investment technology with the other EC countries. I am sure that he will agree that that is a fine achievement. I am glad that he welcomes the size of the programme. He suggests that we are inactive nationally. That is untrue. We have national programmes, too. The proportion of Government expenditure on research and development is higher than that in Japan and the United States. I am sure that the hon. Gentleman agrees that Japan is also successful in this area.

During the summer of 1990 we announced a national research and development programme in safety critical software. We are encouraging industrial and academic collaboration. We have considerable strengths in that area.

Our policies are creating the right climate and background for a very strong industry in this country. I commend the proposals and our negotiating position to the House.

Question put and agreed to.

Resolved, That this House takes note of European Community Document No. 6864/90 on a Research and Development programme on Information Technology; and endorses the Government's view that Community support for research in this area should be given a high priority.