National Economic Development Council

HC Deb 16 June 1992 vol 209 cc777-86 3.30 pm

The Chancellor of the Exchequer (Mr. Norman Lamont)

With permission, Madam Speaker, I should like to make a statement.

The National Economic Development Council and the National Economic Development Office were established in 1962. In the 1960s and 1970s, they provided a helpful forum in which the overall economy and the performance of individual sectors could be discussed and debated. Much useful work was done then, and successive Governments in that period valued the role that NEDC played.

But the era of corporatism has long passed.—[HON. MEMBERS: "Hear, hear."] In the last decade, Governments, not just in Britain but across the world, have pursued more market-oriented policies, the promotion of competition, and the smooth functioning of market mechanisms. There have been radical changes to the structure of business and industry. The number of small firms and of the self-employed has grown rapidly. Large parts of the former public sector have been privatised, and international markets are increasingly integrated.

The British work force have become more skilled and more specialised, with more flexible working practices and more varied career patterns. Trade union membership has declined, and in the private sector, decentralised wage bargaining has become the norm rather than the exception.

Against that background, it is clear that the NEDC no longer reflects the needs and realaties of the British economy in the 1990s. Since its inception, the council has been dominated by producer interests, but its membership and structure cannot hope to represent fully the interests and views of the whole range of industry or of the work force. And, paradoxically, the continued existence of the NEDC in those changed circumstances may actually have inhibited, rather than encouraged, the development of direct contact on specific issues between the Government and trade unions and other employee associations. Accordingly, and after careful consideration, the Government have decided that the National Economic Development Council should now be abolished. [HON. MEMBERS: "Hear, hear."]

The council's sector groups and working parties will also be wound up. Over the years, they made a valuable contribution, and some of the issues addressed by the council and those sub-groups will of course remain on the agenda. Those most closely concerned with the present range of NEDO's consultative activities may decide that they want to continue to liaise with each other, but it will be for them to decide what is done, and how.

The National Economic Development Office has served the council and the sector groups and working parties well, but with the end of the council, and the change in the way that the Government intend to approach more detailed issues, the office itself will no longer have a role. Accordingly, its work will be wound down in an orderly fashion over the next six months. The office will close on 31 December this year.

It is the intention of my right hon. Friend the President of the Board of Trade to offer employment to a small number of NEDO staff in his Department. There may also be opportunities in other Government Departments. Those who do not secure employment in the civil service will be eligible for redundancy compensation by analogy with the usual civil service rules. There will be full consultation with staff and their representatives on the handling of redundancies, and the applicable terms of existing redundancy procedure agreements will be fully honoured.

I should like to make it clear that today's announcement is no reflection on the work done by the staff of the office, or the sector groups and working parties. I wish to add a particular note of thanks to Dr. Walter Eltis for his work as director-general.

The Government continue to attach particular importance to improving the effectiveness of our dialogue with industry. Indeed, in recent years we have consulted more frequently and with a wider range of interests than in the past on complex technical subjects. That is true both in the formulation of domestic policy, and in the development of the United Kingdom's response to the increasing range of draft EC directives as the single market approaches. This partnership has served Britain well, and it will continue. The Government will be alert to the interests of industry in developing policies across the range of its activities. My right hon. Friend the President of the Board of Trade has already announced his intention to reshape some of his Department on a more sectoral basis. He will be announcing details before the summer recess.

The Government remain fully committed to maintaining a close dialogue with industry and with all other relevant interests, but I believe that the decision to bring the National Economic Development Council to an end is the right one. A close relationship between the Government and industry remains as essential as ever if we are to develop policies to create in Britain a strong, dynamic and competitive economy, but the age of corporatism must be put firmly behind us.

Mr. John Smith (Monklands, East)

Does it not pass belief that—unemployment having risen for 24 consecutive months, growth having fallen for seven consecutive quarters and manufacturing investment having been in continuous decline for more than two years; with the number of business failures still rising and at record levels, and with a worsening balance of payments deficit in the midst of the longest recession since the 1930s—all that this wretched Government can do is abolish the only forum that brings together industry, finance and unions to discuss solutions to our deep-seated economic problems? That is an act of industrial vandalism.

Have not the Government noticed that all our most successful competitors encourage, rather than frustrate, the creation of a consensus about the priorities of economic and industrial policy? What makes a Government with such a dismal record believe that it is wise to dismantle a means of co-operation, dialogue and consensus? Is it because they do not like what NEDO has been telling them? Is NEDO paying the price for telling the truth about realities of the British economy?

Is NEDO to be eliminated because, in its report on the lessons to be learned from Germany and Japan, it exposed Britain's poor performance in education and training, and our poor record on innovation? Is it to be abolished because, in its report on electronics, it highlighted the urgent need to improve our technological base? Or is it to be dismantled because, in its report on engineering, it revealed the poverty of our skills in engineering, compared to those of our competitors such as Germany?

Is it not a sad reflection on the Government that they react to criticism—however constructive, expert and well intentioned—by saying that the critics must be eliminated? The Government first ignore the message, then shoot the messenger.

Does the Chancellor recollect that in his book "Where There's a Will", published in 1987, the President of the Board of Trade observed: NEDO's potential value is high, as the one forum where Ministers regularly meet senior representatives of industry, the unions, and the City. The right hon. Gentleman went on to suggest that the holder of his office, not the Chancellor, should take the chair. Is it not the case that, just as the right hon. Gentleman was about to claim the seat, the Chancellor has whipped the chair away?

Is not this the end of all the ludicrous pretences by the President of the Board of Trade that this Administration take a positive attitude to building a consensus for an industrial strategy? Is it not clear to everyone in British industry that as our economic prospects worsen, the Government are more concerned to control criticism than to benefit from the advice of those with real experience of the problems of industry and commerce in our country today?

Mr. Lamont

The right hon. and learned Gentleman's words might have more force if the course of action that we have taken today had not been urged on me by many on the council—many of the industrialists—who think it has outlived its usefulness. The right hon. and learned Gentleman will also find that the director general of the Confederation of British Industry has welcomed my decision. The right hon. and learned Gentleman used to go to NEDC many years ago, but it does not serve the purpose that it may have served in the past.

I made it clear in the statement that we believe that it is right for the Government to talk to industry on particular problems and via particular parts of the economy. That will be done more productively and effectively within Ministries rather than by having the highly publicised and highly politicised meetings that have produced very few results. The right hon. and learned Gentleman referred to various economic developments. I do not see why he thinks that anything in the British economy has been affected by what has happened at NEDC meetings.

Sir Edward Heath (Old Bexley and Sidcup)

If my right hon. Friend's lengthy statement, with its misuse of the word "corporatism", means that in future the vital discussions between all parts of industry for the future of this country will he undertaken by the Secretary of State for Trade and Industry—or President of the Board of Trade, as he prefers to he called—I welcome this wholeheartedly, because it gets the Treasury out of the way. In all my experience of Neddy, the Treasury was a pain in the neck. Now, perhaps we will have proper consultation.

Mr. Lamont

I am pleased that, at least in some spirit, my right hon. Friend can welcome my statement. I am sorry that I have to disappoint him somewhat. As I have already made clear to the CBI and the Trades Union Congress, it is our intention that all Government Departments will talk to both sides of industry about problems that have to be addressed in the interests of the economy. That will continue.

Mr. A. J. Beith (Berwick-upon-Tweed)

Why did the Government reject the CBI's earlier proposal for a smaller and less formal body working to the Department of Trade and Industry instead of the Treasury? Is not the main anxiety of business not what institution it has but whether the Government are taking any notice, which they have manifestly failed to do, of what industry has been saying about training, research and development and transport?

If there is no formal structure, what is to prevent the President of the Board of Trade from choosing merely those bits of industry to which he wants to listen rather than industry as a whole, and listening mainly to the new corporations who luxuriate in monopoly and use the monopoly powers that they have been given in the privatisation process to rip off the consumer?

Mr. Lamont

I entirely accept the right hon. Gentleman's point that it is the macro-economic policies that determine industrial and economic performance. Setting up a committee in Millbank does not solve the problems of the real world and the real economy. Decisions are made by individuals and businesses, not at a sectoral level. As I have explained, my right hon. Friend the Secretary of State for Trade and Industry will be looking at some of the work of the sectoral working parties. He will be seeing how the most valuable parts of that work could be used within the Department of Trade and Industry.

On the right hon. Gentleman's second point, I can assure him that the CBI backs the Government's macro-economic strategy, and has said so publicly on many occasions.

Mr. John Townend (Bridlington)

Is my right hon. Friend aware that supporters of the free market welcome his statement, as it demolishes a pillar of the corporate state that is so beloved by socialists and, it seems, by my right hon. Friend the Member for Old Bexley and Sidcup (Sir E. Heath)? How many bureaucrats are employed by this organisation, and what will be the savings to the Exchequer as a result of his announcement?

Mr. Lamont

I am grateful to my hon. Friend. I must be careful about the use of the word "corporatist". There are 100 staff employed in the council. I have said that normal redundancy procedures will apply and that some staff may find employment in the civil service. It costs more than £5.5 million per annum to run the NEDC.

Mr. Robert Sheldon (Ashton-under-Lyne)

Since the Government have been contemptuous of Neddy for so long, is it surprising that it has had so little effect on the Government? When Harold Macmillan set it up, was it not clear that it was not a corporatist idea but a means of getting Government and industry together? We do not have so many such organisations today that we can dispense with the most important one that we have.

Mr. Lamont

It is certainly not true to say that the Government have taken no notice of what has been said at council meetings. I am afraid that the motivation for the announcement is quite different from what the right hon. Gentleman is saying. It is simply that council discussions have not made a worthwhile contribution to the formulation of policy.

Having participated in those discussions for 16 months, I am genuinely convinced that, when there are specific issues to be addressed, a much more useful dialogue with both sides of industry can be conducted in private, rather than the highly confrontational, highly publicised and highly politicised discussions that we have had in recent years. I accept that the work of the sectoral working parties has had some value, and we shall try to preserve that.

Sir Peter Tapsell (East Lindsey)

If institutional changes are to be made at a time when Britain continues to run a huge adverse trade balance, may we perhaps look at some of the institutions in competitor countries that have contributed to those countries running large surpluses on their trade balance, such as the Industrial bank of Japan and the Export-Import bank of Japan, to see whether we may not have something to learn from them?

Mr. Lamont

I am sure that it is always useful to study what happens in other countries, but it is extremely difficult to translate the institutions of one country into another. It is extremely difficult to make an analysis, above all, of Japan and say, "We wish to incorporate into our economy the institutions that Japan has."

As my hon. Friend will appreciate, the thrust of what I have been saying is that I do not think that, alas, the work done in the council in particular, rather than in the office, has had a big impact on policy making, the performance or the trade balance of the British economy. None of those things will be altered in future, and I do not think that they have been any different in the past because of what has been discussed and done there.

Mr. Dennis Skinner (Bolsover)

While it must be a sad day for those people who will lose their jobs, I must tell the Chancellor of the Exchequer that I cannot agree with my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) about shedding tears for NEDO. Is the Chancellor aware that, in the past 13 years, it has done little to stop the pit closure programme? It has done nothing about the massive balance of payments difficulties that Britain is in.

We have a public sector borrowing requirement of probably £40 billion and, quite frankly, I do not want to see trade union leaders mixing with bosses and supping claret down in the City. I hope that what the Chancellor has said today will prove to them that it is time that they got back to the real job of representing their workers in the many class struggles that lie ahead.

Mr. Lamont

I thought that I was going to agree with the hon. Gentleman when he started off. The first part of his remarks were rather good, but they deteriorated towards the end, not just from the point of view of his right hon. and learned Friend the shadow Chancellor but also from my point of view. But the hon. Gentleman is right: the NEDC has not had a bearing on industrial developments, the developments in the coal industry or other industries. Completely different ways of addressing the problems exist, and I am sure that they will be more fruitfully addressed. I note how the hon. Gentleman describes the NEDC.

I should comment on one point that has been repeatedly made in the exchanges: the description of our balance of payments deficit as being massive. It was 1 per cent. of GDP last year, an amount which is easily financeable. Financing it will certainly not pose a problem.

Mr. Patrick Nicholls (Teignbridge)

Does my right hon. Friend think that it will be lost on the general public that, at a time when the TUC is packing its bags and leaving NEDO, it is about to exercise a controlling influence on the leadership of the Labour party? Is not one of the more attractive aspects of the decision that my right hon. Friend has announced today the fact that this is another area of public life where the baleful influence of the TUC will be reduced?

Mr. Lamont

I note my hon. Friend's comment. The only point that I would make is that of course we shall talk to trade unions, but only when there are specific issues that can be usefully addressed. There has been no point in the regular meetings every three months at that level always discussing macro-economic issues, not producing anything particularly fruitful.

Mr. David Trimble (Upper Bann)

Does this mean that the Northern Ireland Economic Council will also be abolished consequentially? If so, does the Chancellor realise that that will be widely regarded as a retrograde step as the Northern Ireland council has been one of the few sources of decent analysis and scrutiny of the economy there, possibly because it is one of the few bodies that is not a quango appointed by the Northern Ireland Office?

The Chancellor said that he, or his colleague, the President of the Board of Trade, will maintain sectoral sub-committees. Will there be committees operating on a regional basis, because that is just as important?

Mr. Lamont

The answer is no: my announcement today will not affect the Northern Ireland council. The hon. Gentleman may have slightly misunderstood what I was saying. It is not the intention to create lots of committees or to rebuild NEDO elsewhere, and it is certainly not the intention to re-create the sectoral working parties. There are useful aspects that can be kept but, as far as I am aware, there will not be regional committees of the kind that the hon. Gentleman is advocating.

Sir Nicholas Fairbairn (Perth and Kinross)

Will my right hon. Friend and all other hon. Members stop talking about "both sides" of industry? They are both on the same side. They are both in one team. If they cannot talk to each other, why on earth is it assumed that a quango could make them do so? How much has it cost to have all those officials and secretaries talking such nonsense for so long in that ridiculous organisation whose requiem we are attending today?

Mr. Lamont

I agree with my hon. and learned Friend's first point about both sides of industry. That is obviously a correct point. As I have already said, the cost of the organisation was in excess of £5 million a year.

Mr. David Winnick (Walsall, North)

The responsibility for all the closures and the rest that have occurred which have been described by my hon. Friend the Member for Bolsover (Mr. Skinner) lies with the Tory Government, not with NEDO. Is the Chancellor aware that his decision today shows that the Government have no time at all for any continuous dialogue with the trade unions and have contempt for the representatives of working people and for what Harold Macmillan tried to do? However much we disagreed with him in various aspects, nevertheless he tried to moderate Government policy and recognised the necessity for co-operation in industry involving the trade unions. Is not this decision one of sheer spite and malice, which will be recognised as such by a large body of people in the country?

Mr. Lamont

The hon. Gentleman is talking complete and utter nonsense. I know that Opposition Members are instinctively bureaucratic—see a problem and they want to set up a committee. That is their answer to every problem. We all know what the shadow Chancellor wanted to do with Neddy, because he set out his proposals in his manifesto. He wanted it to make a national economic assessment, and he intended to use it to introduce a minimum wage in Britain. That would have done wonders for the British economy.

Dr. Keith Hampson (Leeds, North-West)

Does not my right hon. Friend agree that it is typical that the Labour party still believes that the formal mechanisms of the 1960s are right and appropriate for the needs of the 1990s? Will not British industry fully welcome the dialogue with the Government, which it wants, being conducted more directly and effectively in the revamping of the sectoral groups under the DTI's aegis?

Mr. Lamont

My hon. Friend is entirely right. We believe in dialogue with industry, as I said explicitly. Right hon. and hon. Opposition Members seem to believe more in theatricals than in useful talking.

Mr. Ron Leighton (Newham, North-East)

What assurances can the Chancellor give those of us who are getting worried about the position of the right hon. Member for Henley (Mr. Heseltine)? Under the previous regime, he used to write books advocating an industrial policy and used to say that we should not ignore the deficits. Therefore, when we saw the announcement on the monitor, we thought that we were going to be told that he was to become the president of Neddy, but it is to be abolished. What does it mean? Does it mean that the right hon. Member for Henley has been taken prisoner and that his ideas have been completely swamped in the Government?

Mr. Lamont

What it means is that my right hon. Friend and I are in total agreement on this issue.

Mr. Simon Burns (Chelmsford)

May I congratulate my right hon. Friend on having the courage to take a decision that should have been taken a long time ago? Does he accept that, to ensure a thriving industrial and commercial sector of the economy, it is necessary to have business men with entrepreneurial skills who have the capability to seek and identify the needs of the marketplace and then to satisfy those needs rather than an irrelevant, highly politicised talking shop where the occupants go around in circles, listening to political hyperbole?

Mr. Lamont

I am grateful to my hon. Friend; what he says is right. We talk about an industrial strategy, but what we need is a strategy for low inflation, low taxes and profitability of industry. That is what the country needs, and that is how we shall achieve growth.

Mr. Alex Salmond (Banff and Buchan)

Does the Chancellor accept that one interpretation of the announcement is that it increases the powers of Mr. President who is sitting beside him? Does he believe that the right hon. Gentleman is fully equipped to deal with all the awesome responsibilities being heaped on him? How many extra civil servants will the DTI need to pursue sectoral work previously undertaken by Neddy? Is not the real reason for the Government abolishing Neddy the fact that any analysis of a Neddy report would show that the Government had already abolished economic development?

Mr. Lamont

As I said, it is possible that a few of the personnel employed in NEDO may be found employment elsewhere in Whitehall, and a small number in the DTI. We shall not be increasing numbers in the DTI; we are talking about a small number of officials. I made it clear that we hope that work of value by the sectoral working parties can be preserved and developed, but it can be done in a much more useful way in the DTI than in the existing structure.

Mr. Nicholas Winterton (Macclesfield)

My right hon. Friend talked about the welcome given to the announcement by the Confederation of British Industry. Has he had any consultation with the Engineering Employers Federation or the Association of British Chambers of Commerce about the matter, because they are known to be rather more responsive than the CBI to the needs and interests of manufacturing industry? Does my right hon. Friend accept that manufacturing industry is a vital ingredient in a stable and successful economy? Will there be a forum for manufacturing industry under the new regime?

Mr. Lamont

Both the Engineering Employers Federation and the Association of British Chambers of Commerce are of course constantly engaged in discussing problems with the Government, and their views are very much taken into account in Government decisions. We know that they are very much in favour of dialogue, and we intend to continue discussions with them.

As for manufacturing, as I have said many times, and as I have told my hon. Friend, who I know is deeply interested in and deeply committed on the subject, we see manufacturing as an extremely important part of the British economy, to which we should devote special attention.

Mr. John Spellar (Warley, West)

Before my reincarnation in the House, I was a member of the electronic components committee of NEDO. I assure my hon. Friend the Member for Bolsover (Mr. Skinner) that nobody ever attended for the quality of the lunch. The meetings were attended by many senior chairmen of electronics companies, and very effective dialogue took place.

Dialogue can take place only on an on-going basis rather than on the basis of people being called in on a specific issue. When a specific issue is discussed, no future strategy—in an industry such as electronics, no long-term strategy—can be developed. It will be astonishing to countries such as Germany and Japan that we are taking such a decision to break down the dialogue between Government and industry. Can the Chancellor not show some humility by listening to the views of industry and learning from the experiences of other countries where such a system works so effectively?

Mr. Lamont

I am not sure what the hon. Gentleman would make of the United States or Canada, and I am not sure how he thinks their highly successful economies are performing and how matters there are arranged in terms of discussion between industry and Government. The hon. Gentleman talks about dialogue on an "on-going basis" and says that that is the only basis on which there can be dialogue. That seems to be a recipe for bureaucracy rather than for anything else. Dialogue on specific issues is what we should seek.

Mr. John Wilkinson (Ruislip-Northwood)

My right hon. Friend seems to place all his faith in macro-economic policies, such as maintaining high levels of real interest, and the Treasury as a panacea for the ills of British industry. Will he therefore at least talk to his right hon. Friend the Leader of the House and ensure that he finds time in this place to make it a genuine forum of the nation for debate on industrial issues? Will my right hon. Friend the Leader of the House at least reconstitute at the earliest possible date the Select Committee on Trade and Industry which was admirably chaired in the previous Parliament by Mr. Kenneth Warren, the former Member for Hastings and Rye?

Is it not a fact that industrial experience in this place is gravely deficient, not least in the ranks of Government? Is it not true that probably only half a dozen members of the Government have any real industrial experience? Should they not welcome any dialogue they can obtain with people engaged in industry?

Mr. Lamont

I know of my hon. Friend's great interest in manufacturing industry. I am not in any way altering the balance between macro-economic policy and micro-economic policy, or the the balance between the Treasury and the Department of Trade and Industry. My hon. Friend may like to think of it in these terms. I am simply addressing the forum and the form in which discussions between industry, the Government and the Trades Union Congress take place.

Having participated in those discussions, in my opinion—I know that my right hon. Friend the President of the Board of Trade strongly agrees—the NEDO does not practically today serve the interests of the British economy. It has outlived its usefulness. I will, of course, draw the attention of the Leader of the House to my hon. Friend's point about the Select Committee.

Mr. Alan Williams (Swansea, West)

Is not the small-minded announcement of the abolition of the NEDO today really a smokescreen to cover an intensely embarrassing announcement which the Chancellor had to make? Is it not intended to divert attention from the really crucial point at the end of the statement, which is that we shall return to a sectoral role for the Department of Trade and Industry? Does not that mean that the philosophy that the Chancellor followed in his previous years at the Department of Trade and Industry—the hands-off, non-interventionist policy—is being reversed by the President of the Board of Trade, and that the Chancellor is trying to find a way to hide that fact?

Mr. Lamont

That is not the case. The right hon. Gentleman has considerable talent for seeing plots everywhere; they do not accord with reality. My right hon. Friend the President of the Board of Trade and I are at one on the issue.

Several hon. Members

rose—

Madam Speaker

Order. We must now move on to the next business.