§ Mr. Iain Mills (Meriden)I am grateful for the opportunity to address the House today. I was fortunate to be elected unopposed as joint chairman of the all-party motor industry group. In that context, I will be as impartial in my committee as you, Mr. Deputy Speaker, and your colleagues in the Chair are in the House, to ensure that the all-party nature of my committee continues to be so successful.
I spent 20 years in the car and car components industry before coming to the House. I worked in a tyre factory on the edge of my constituency. I continue my interest in tyres and advise the National Tyre Distributors Association.
I am grateful at being successful in the ballot for this debate. The car and car components industry is very important and it is poised to face challenges. It is successful, but it is almost at the crossroads of a new future in which more companies will merge and there will be further inward industrial development from overseas and particularly from Japan.
So far, we have not seen a huge change, for example, in joint ventures in component industries, but no doubt the completion of the single market will add an edge to such ventures. I am grateful to my right hon. Friend the Minister for Industry for giving up his valuable day to comment on this important subject.
I believe that we have gained through improvements to productivity in components and particularly in car manufacturing. Leading car manufacturing companies have told me that we are now very close to best European practice. By 1996, we shall probably have exceeded that and factories, such as Ford factories, will be at least at best European productivity standards. That is vital.
Our economy has become attractive to investors. People in firms that want to build cars or car components, after scratching their heads and checking their computers, consider our control of inflation, our increase in productivity and our huge changes to industrial relations. My main reason for becoming a Member of this place in 1979 was my involvement in manufacturing industry and the car industry and my frustration with trade union practices.
I was fortunate to be Parliamentary Private Secretary to Mr. Norman Tebbit, the former right hon. Member for Chingford, in the critical five years during the early 1980s when we gave trade union members the rights that they had longed for in respect of democracy through secret ballots.
Overseas investors believe that those changes are important. They regard our achievement after the general election of a stable Government as a unique and important part of their decisions. They will not have to face changes imposed by a Government of a different political view and ideology. They will have my right hon. Friend the Prime Minister, his excellent colleagues and his excellent Back Benchers to show them the way to stability. I apologise to the House for being so self-congratulatory, but such points are important when one talks to people who are looking for investment. It might seem silly—almost like a farce—but such factors are important when people look at a country with stability, low wage costs, high productivity and the keenest knowledge, expertise, training and skills in 668 producing cars and car components. In my view, the United Kingdom is now the best placed country in Europe to manufacture cars and car components.
Therefore, we must be vigilant and careful about how every aspect of Government and European Commission policy affects our business in the car and car component industry. That is why I am most worried about the recent publicity given to car prices and the subsequent report of the European Commission.
It was most important that the Monopolies and Mergers Commission should examine car retailing carefully. It came up with several recommendations including that car dealerships should become multi-franchised. In my old industry that was common practice. One sold different makes of tyres and other components and there was never a problem. However, I can see that in the car retail industry multi-franchised dealer outlets would pose difficulties in terms of stocking components and replacements and giving service for different makes of vehicle. So that discussion will have to continue.
In addition, after detailed consultation the MMC carefully examined retail prices of cars in the United Kingdom. It concluded that there was no substantial difference between retail pricing in the United Kingdom and that in other countries. As my right hon. Friend the Minister knows, that conclusion was made after a detailed consultation involving just about everyone involved.
Subsequently Commissioner Sir Leon Brittan has apparently produced a report. I say apparently because it is one of those reports which are difficult to get hold of. It was first covered in The Sunday Times. At least one major motor manufacturer has said that at the time the only information that it had about the report was from the media. Surely that is not the right way to introduce a report which affects a huge industry directly employing more than 750,000 people. Customers who had read the reports in the media had doubts about whether to go ahead and buy motor cars. They thought that if they waited, and if Mr. Bangemann agreed and Sir Leon Brittan was right, they might obtain lower prices. Indeed, that is a major factor.
The Commission report has resulted in a slowdown in sales at dealers. Dealers contact manufacturers in puzzlement and ask what they should do if people come in and say, "We have read in the papers that the Commission will reduce prices." As a constituency Member of Parliament, one is always pleased to see prices reduced for one's constituents and consumers in general, but with a constituency in the heart of England where car and car component manufacturers surround me, it is also vital that I consider the jobs, stability and future of the industry.
Therefore, I find it extraordinary that the report from the European Commission appears to have been drawn up without consultation, without direct communication with the major car manufacturers or the Society of Motor Manufacturers and Traders. It appears to have used a different way of calculating the index of price comparison from that used by the MMC. The MMC sensibly used all the factors involved, such as the specification of the car, extras and how much they are worth, and what discount is given.
We are used to discounts in the United Kingdom. We might not bargain as people do in southern parts of Europe. When we buy a pullover, perhaps at a superb shop not too far from Victoria street, Marks and Spencer or C and A, we would not dream of bargaining. But the 669 moment that one goes to a car dealer one is ready to bargain for one's new car, because one knows that that is how it is done. People bargain for a new tyre or a new exhaust system, so discounts must be taken into consideration. The EMU, curency differentials and other factors must be used to calculate a true comparison between the price of cars is one wants it to be effective. The MMC did that, but the European Commission apparently did not. It used a snapshot approach which, in one case, covered five different factors but certainly did not allow for any adjustment for the equivalency of currencies. It is outrageous that such a report should have apparently been so secretive, that it should have been leaked to the media and that it did not use the right methodology to ensure that it gave an equivalent comparison.
I was told by Vauxhall, which has carried out an assessment of its dealers, that its prices are comparable with similar European markets. If we examine the 1989 example of a car which was supposed to be 41 per cent. more expensive here, taking into account all the factors that I outlined, we find that it would have been cheaper to buy a Ford Sierra, on an equivalent basis, in the United Kingdom than in France or Germany. Why does the European Commission report apparently say that we are overpricing our cars? According to the press, Commissioner Sir Leon Brittan has even said that he will consider using European law to implement the report.
To come to what is probably the most important part of my speech—I hope that my right hon. Friend the Minister for Industry and our right hon. Friend the President of the Board of Trade will think carefully and review their attitude to this matter. The MMC was right and the industry has moved to adopt many of its conclusions, which differ from those of the European Commission. Even within the Commission—again according to the media—Commissioners Martin Bangemann and Sir Leon Brittan were at odds on the matter.
Despite all those problems, there have been successes, but they should not be jeopardised during the next few years by giving up an agreement on cars imported from Japan, due to the tenderness of our industry's enormous recovery in productivity. The voluntary agreement between the SMMT and Japan Association of Automobile Manufacturers, JAMA, has been highly successful and has kept the number of cars directly imported from Japan to a reasonable level. We have been extremely successful in encouraging inward investment and "transplants"—a strange term—from Japan. I wish that we had been even more successful. That has created 60 or 70 per cent. of local content and an awful lot of jobs for the car components industry, which is important. That is why the encouragement of joint ventures is vital for the car component industry in the future.
It seems that the Government—judging from some of their comments—are not prepared to agree to the new European Commission proposal on the restriction of imports from Japan. While I am normally a free marketeer, I think that we need a transition period without a free market with Japan, which has an unfair base of operations due to the level of the yen and Japan's direct and indirect import controls. Let hon. Members try selling a Rover, Land-Rover, Jaguar or Peugeot to the Japanese. They would find that it is difficult. Yet the reverse is not true. Therefore, it is not a non-free-market solution to say that it should be knock for knock. Until Japan opens its 670 markets, we should carefully control ours in exactly the same way. As it increases our opportunity to export cars there, we should allow more imports. The SMMT-JAMA voluntary agreement ends at the end of this year and some form of control is important, so I urge the Government to agree to the European Commission's proposals.
I shall give a few brief snap shots to illustrate the situation. Despite the recession, there have been successes. There are a number of car manufacturers, such as Land-Rover, in my constituency and others whose employees live there. Land-Rover has done well, particularly with the Discovery. Rover has done well on exports. I congratulate Peugeot on doing particularly well at Ryton. Many of my constituents work there: it is just up the road from Meriden. To achieve the Queen's award for exports is super. Profits may have been reduced, but they remain substantial and effective. Vauxhall, too, has done extremely well with the Cavalier and other models. Despite the restrictive home market, it has done well in fleet sales and exports. Ford, too, has done extremely well during the recession, again mainly in exports.
When I was first elected to the House in 1979, British car and car component exports were dismal, productivity was awful, and delivery and supply incredibly bad. Now, our car and car component manufacturers are succeeding and surviving because of their exports, the quality of their cars and the low cost of their cars due to productivity. Britain is, indeed, a good place to make cars and car components.
I suggest that the Government look again at the crippling effects of the national insurance contribution and of tax on company cars. There is an £18,000 limit on company cars. We are talking not about benefits in kind for rich company directors but about tools of the trade, Sierras, Cavaliers and Montegos, that are used by salesmen to sell British products. Will my hon. Friend the Minister please suggest to the Chancellor of the Exchequer that he reconsider that limit? Will he further suggest that the Government increase the differential between leaded and unleaded fuels? That would be useful in helping to reduce pollution. In addition, if we reduce further the special car tax, could we not pay for that through an increased differential, making polluting leaded fuels more expensive to pay for a further reduction in special car tax, and so encourage more car sales?
We have one of the lowest levels in Europe for the purchase of diesel cars. Ecologically speaking, diesel is certainly a useful fuel in terms of reduced consumption and improved efficiency. Will my hon. Friend please encourage its use?
I know that time is running out. I shall finish with a plea that may seem unusual but is not when one thinks about it. My hon. Friend may recall that I have chaired the Trademark Committee for several years. Car and car component companies have strongly branded products. There is a mark name and brand name for each vehicle. Industry in general is anxious that we make early progress on introducing our trademark Bill which will harmonise our system with the Community directive. My hon. Friend may not be able to reply to this slightly oblique point, but it is important to car manufacturers and others. France, Germany, Spain, Italy and most other European countries have harmonised ahead of the deadline in 1992. May we please consider the Bill which has been debated in the other place? I saw some hope in the remarks of Lord Wakeham that we might consider it this Session. If we do 671 not introduce the Bill by the end of this Session, there will be problems in registering trademarks and this may jeopardise the extremely important Madrid protocol.
§ Mr. Richard Burden (Birmingham, Northfield)First, I congratulate the hon. Member for Meriden (Mr. Mills) on his election as joint chair of the all-party motor industry group and I thank him for his co-operation in cutting down his speech to allow me to speak today.
The motor industry, its manufacturers and associated components suppliers have suffered badly as a result of the recession. The hon. Gentleman and I both come from the midlands, which have suffered particularly badly.
Today I want to discuss not the effects of the recession, but the longer-term problems that the industry faces. One major manufacturer, General Motors, has estimated that by 1995 there could be up to 19 per cent. overcapacity in Europe. That could mean the closure of between nine and 13 car plants across Europe. The industry faces major challenges in respect of the environment in the coming years and it will have to meet those challenges.
The hon. Member for Meriden mentioned Japanese transplants. Of course, at one level inward investment is to be welcomed, but it is important to emphasise that Japanese interest in Britain is based not on an overwhelming desire to bolster the British economy but on a desire to capture increased markets. The experience of the USA shows that unless this investment is handled properly it can have problematic results. In the USA, where Japanese investment has massively increased, for every job created in the car industry about four were lost. Britain is different—we have a much stronger components supply base and we are better placed to cope with these problems, but unless the Government take their responsibilities seriously at local, national and European levels, we are in for problems.
Some useful local initiatives have already begun. I commend to the Minister the activities of groups such as the Motor Industry Local Authority Network which, interestingly, goes under the name of MILAN. It is doing useful and valuable research into the kinds of policies needed at local authority level across Europe to cope with some of these problems. Useful work is also being done at the European Parliament by MEP Carole Tongue and there is a working party looking into the challenges facing the European motory industry.
The need for a national strategy is also vital, to take action to underpin the sort of training, research and investment initiatives that are already being attempted by local authorities and others. Such initiatives need to be delivered locally but must be backed up nationally. It is also important that Britain plays its full part in developing a European strategy for the motor industry—protecting it where development is needed against problems that may be created by too rapid involvement in Japanese transplants. To cope with the long-term structural problems, it is vital that we play our full part in the economic, environmental and social affairs of Europe. That is why it is much to be regretted that such aspects were omitted from the Maastricht treaty and that the British Government sought opt-outs from them.
672 In the interests of the motor industry, which is so vital to my constituents, I ask the Minister to take these initiatives. We are all pleased about the improvement in industrial relations in the motor industry, but the people who work and lead their lives in it and produce the goods on which the success of the British motor industry is based must be given a full say in its future.
§ The Minister for Industry (Mr. Tim Sainsbury)I congratulate my hon. Friend the Member for Meriden (Mr. Mills) on giving the House this opportunity to debate this most important industry. I join others who have congratulated him on becoming joint chairman of the all-party motor committee. I know that he will bring a great deal of knowledge to that position. I am also delighted to have the chance to congratulate you, Mr. Deputy Speaker, on being in the Chair. I hope that our partnership in the Chamber will prove as effective as it has been on behalf of the House on the tennis court.
I appreciate that conditions have been very difficult in the domestic market over the past year, but I am greatly encouraged by the way in which our car manufacturers have coped. Like my hon. Friend, I congratulate them on their export achievements. The motor industry is well aware of the importance of exports. The additional sales enable development expenditure to be spread over longer runs. Exporting helps to keep one in touch with developments in other countries and to measure one's products against the best in the world. As we saw last year, exports provide a counter to fluctuations in home demand. I am confident that the industry will seek to build on the export achievements it has already made.
As my hon. Friend said, we saw last year further progress in making improvements in quality and productivity. Such developments have been marked in the industry in recent years. I am encouraged to note that domestic demand is now picking up. At 138,106 units, new car sales in April were 9 per cent. up on a year ago. It was the first month-on-month increase since October 1989 and has helped to stabilise the previously falling levels of domestic car production.
For the motor industry, as for every industry, the business environment in which it operates is of vital importance. My hon. Friend referred to some of the changes that the Government have made. They have succeeded in providing an environment in which business can—and is encouraged to—succeed. We have reduced regulation, removed administrative burdens and brought inflation down. We must, of course, do more and ensure that our inflation level is one of the lowest, if not the lowest, in the European Community.
Decisions about major investment projects are particularly important in the motor industry. They are likely to take several years to complete and are among the most difficult and complex faced by any business. Such decisions have in the past been even more difficult because of the impossibility of predicting with confidence the inflation rate or the interest rate during and after the investment work.
Other actions that the Government have taken to help the motor industry and other industries have included reducing the burden of taxation not only for companies, but for individuals. The motor industry, like all industries, derives much strength from the component suppliers, to 673 which my hon. Friend referred. Many of those are small businesses and my hon. Friend will be aware of the steps that we have taken to encourage small businesses.
The motor industry, like the rest of British industry, will also benefit from the initiatives that the Government have launched to encourage innovation and to strengthen the links between the academic and business worlds, particularly in research and development. I am grateful to my hon. Friend for highlighting the value to the industry of the Government's step-by-step reform of industrial relations and trade union law. We should not underestimate the importance of the legislation to the revival of the British motor industry, and I am glad that the hon. Member for Birmingham, Northfield (Mr. Burden) recognises that.
Changes in working practices have been a vital part of the increases in productivity. Clearly, they could not have come about under the old arrangements. Such improvements represent the way forward if British manufacturers are to be as good as any in the world in productivity terms.
A further benefit is coming to the industry with the completion of the single European market. I welcome the adoption of the EC whole vehicle type approval system for new cars from the beginning of next year. We shall have to get used to referring to the ECWVTA. It will be of help to the industry.
I noted carefully the points made by my hon. Friend about the special car tax. He knows that such matters are for the Chancellor of the Exchequer and will not expect me to respond to him. I assure him that the points he made will be drawn to the attention of my right hon. Friend. I also noted his comments about diesel as a fuel.
My hon. Friend then dealt with the important question of trade marks. I regret that it has not been possible to find 674 time for a trademarks Bill in the present Session. I appreciate that it is wanted by business in relation to meeting our EC obligations. My hon. Friend will appreciate that there was much competition for time from other measures.
I apologise if I am not able to deal with all the points that hon. Members have raised, having been left somewhat short of time in which to reply. I am not complaining because it was important for the House to hear what they said.
I noted what my hon. Friend said about the European Commission's study of car prices and have seen the letter from our former colleague, Sir Hal Miller. The President of the Board of Trade will be replying to that letter shortly. I do not think that it would be appropriate for me to comment on Sir Hal's remarks about the way in which the Commission undertook its work. However, international comparison of car prices is a particularly complex exercise. So is comparison between separate studies undertaken by the Monopolies and Mergers Commission on the one side and the European Commission on the other. Careful examination of the methodologies and findings of the two studies reveals far more similarities than differences. The main differences were in the presentation of the results and this reflected differences between the objectives of the studies.
I look forward to strengthening my contacts with the motor industry. I have already visited Land-Rover at Solihull. I look forward to visiting Longbridge at an early date. The British car industry has responded positively and effectively to a period of difficult home market conditions. That response demonstrates clearly that we can be confident that the industry has an excellent future.