§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Chapman.]9.37 am
§ The Parliamentary Under-Secretary of State for Technology (Mr. Edward Leigh)
I am grateful for the opportunity to explain what the Government are doing to help the United Kingdom to win in world markets. Exports are crucial to our economic well-being. Our export performance has been impressive. I intend to tell the House how the Government plan to build on that success. We lead by example. Ministers are not sitting on their backsides basking in the glow of our current good export performance—and it is good. We are constantly helping industry to do battle with the competition by, among other things, visiting overseas markets with business men.
In 10 days my hon. Friend the Minister for Trade will travel to the far east with 25 British business representatives to fight for Britain in the world's fastest growing market. Department of Trade and Industry Ministers come with knowledge of industry. They have worked and succeeded in business. We know what industrialists and business men require and we are determined to deliver.
Since April last year, as Under-Secretary of State for Technology, I have visited nine overseas markets. My ministerial colleagues in the DTI are planning to lead at least 14 trade missions to some 17 countries in the forthcoming year, covering markets as diverse as Kazakhstan, Colombia and Korea. Much good business flows from such activity.
I shall give some examples of the value of such visits. On my last trip to Latin America I was struck by the huge potential for our consultancy and banking sectors to help countries to take forward their privatisation programme. In both Argentina and Paraguay, where President Rodriguez personally stressed to me his commitment to the importance of privatisation, I plugged the United Kingdom's unrivalled expertise in that sphere. It is now up to United Kingdom business to fight for its share, and I have no doubt that it will come out winning. The Opposition may not like that, but we have a worldwide record in successfully introducing privatisation. As a result, our companies are winning in the world markets. [Interruption.] The hon. Member for Jarrow (Mr. Dixon), an Opposition Whip, keeps making quiet sedentary remarks—if he wishes to come to the Dispatch Box to comment on our export performance, I am sure that the House will be delighted to listen to him. If not, I shall continue to describe what the Government are doing to ensure that this country wins in world markets.
In India I was impressed with the efforts being made to throw off decades of socialist dogma in an attempt to reap the benefits of a free market. India offers an increasingly attractive proposition for United Kingdom business, on whose behalf I lobbied extensively. With one sixth of the world's population and, as a Unilever representative said to me, one third of the world's hair, India is a market which no United Kingdom company with global pretensions can ignore. The Prime Minister recognised that and took a high-level delegation of business people there earlier this year. During the trip, GEC Alsthom 482 landed a £140 million order and British Gas signed up for a 35 per cent. stake in a £100 million joint venture to supply gas to Bornbay.
Another market that I have visited recently is Ghana —our second largest market in sub-Saharan Africa. The United Kingdom is responsible for nearly 30 per cent. of Organisation for Economic Co-operation and Development exports to Ghana, but we can and will do better. The business representatives who accompanied me are writing a report on the prospects for increased trade and investment which I intend to launch at a major conference in London in July.
In the past year, my hon. Friend the Minister for Trade has visited China no fewer than three times, as well as Japan, Hong Kong, Thailand, Indonesia, Korea, Italy, Germany, France, Spain, Portugal and Belgium. He has done all that, and still managed to remain in the good books of my hon. Friends in the Whips Office. Ministers at the Department of Trade and Industry are committed to improving the United Kingdom's export performances, as are all our ambassadors overseas. The potential overseas is enormous—in our traditional markets in Europe and north America and in the dynamic thrusting economies of the Pacific rim, including China. The opening up of that market and the move towards a market-led rather than a state-planned approach will offer enormous export opportunities in the next decade.
Industry has followed my hon. Friend the Minister's lead. We doubled our exports to China in the first two months of this year, on top of a significant increase last year. Industry and Government have to roll up their sleeves, get stuck in and fight, as partners, for business. In such difficult and potentially lucrative markets, we have to do better than our competitors. That is why my hon. Friend the Minister for Trade has visited China three times in the past year, and is going there again soon.
Our export infrastructure is sound. Export performance is excellent and getting better. There are many success stories. The economic outlook is much more promising. All the ingredients are there for export-led growth. I do not want to bore the House with statistics, but shall quote a few to illustrate my point. In 1992, visible export earnings were £108 billion —3 per cent. up on 1991's record figures. In 1992, invisible earnings stood at £108 billion, second only to the United States of America.
In the past three years, the volume of United Kingdom manufacturing exports has risen faster than that of Germany or Japan. In the first quarter of 1993, visible exports to non-EC markets were up 12 per cent. in volume terms over the same period in 1992. I think that my hon. Friends will agree that those figures are not too bad. Despite all the doom and gloom that we hear from the Labour party, the figures show that this country is winning.
After three decades of decline, our volume share of world trade has now stabilised. I could go on, but the House will have got the message. The important issue is how to build on that success. As well as the economic environment, we want the trading environment to be right. We have simplified the tax regime, cut corporation tax by one third, and reduced the tax burden on business by £1 billion in this year's Budget. We have given a high priority to reducing the burdens on business.
We have worked hard to achieve a sensible world trading system. We have worked with the European Commission, other EC countries and the other key players 483 in the Uruguay round. We have used our recent presidency of the EC to press forward with the completion of the single market. We remain committed to encouraging free trade wherever possible. We like to feel that this country leads the movement towards world free trade.
We have also been looking at the way in which we provide support to exporters. With the Foreign and Commonwealth Office, we provide a comprehensive package of support to United Kingdom exporters through overseas trade services. We have more than 2,000 staff in the United Kingdom and overseas. We provide support from basic market research through to supporting 7,000 companies in major trade fairs overseas each year. We provide advice to exporters, small and large, on opportunities world wide. We work with large companies on major projects overseas—if we cannot help, we know a man who can. We have been working since 1989 to make overselves more customer-driven and, with the excellent work undertaken by Foreign Office staff in nearly 200 posts overseas, we have succeeded.
There has been a significant improvement in the quality of the services we provide. That is not our perception; it is what the market tells us. Demand for our charged information services has quadrupled since 1989. Independent research tells us that 90 per cent. of customers say that they would use our services again. However, we cannot he complacent. Our market research has also indentified some weaknesses. We take too long to provide some services—always a criticism of government—so we are working hard to improve where necessary.
Our export promotion effort is constantly evolving to meet the new challenges that we face. I shall tell the House about the specific action that we already have in hand. My hon. Friend the Minister for Trade outlined in a speech to the Institute of Export last November how our commercial export strategy would work. Our aim is to maximise our strengths and minimise our weaknesses. The key is partnership between the Government and industry. We must ensure that Government support to exporters is efficient and industry's response effective. At a national level, we must match the Department's organisation to business needs.
That strategy provided the framework for the fundamental restructuring of my Department's export services announced by the President of the Board of Trade last week. Our objective is to sharpen the focus of our export promotion effort. Changes include the appointment of the new director general of export promotion, the allocation of up to 60 more staff to help and the establishment of two export promotion divisions. The new divisions will develop our capabilities and expertise. They will also draw up strategies for each of our top 80 export markets.
Those new divisions will also work closely with the 100 export promoters being seconded from the private sector. Some 30 secondees are now in place. My colleagues and I have been impressed with the calibre of those that industry has sent us. DTI Ministers recently had a meeting with the secondees, and their quality and enthusiasm were striking. That just shows the value of Departments having an infusion of new blood from the private sector. My right hon. Friend the President of the Board of Trade is determined increasingly to put the DTI alongside industry and that there should be continuous crossovers of staff between the private sector and the DTI. In that way, the DTI will become more responsive to industry's needs.
484 We believe that the initiative of promoting industrial secondees as export promoters is an excellent idea. We hope to have about 100 of them by December, and we hope that as new people arrive they will bring with them fresh contacts. They will also have, and will gradually acquire, more expertise in their target markets, and that in turn will enable them to spot new export opportunities and to encourage companies to exploit them.
This reorganisation follows hard on the heels of four other notable changes which further benefit United Kingdom exporters. In addition to the £700 million announced last autumn, the Chancellor has announced that a further £1..3 billion of cover for key export markets over the next three years will be given. Premium rates have also been cut again to about the average charged by our principal competitors.
This has been a considerable achievement for the President of the Board of Trade. I have been a DTI Minister for two and a half years, and I know that there have been many complaints about the degree of our support for the Export Credits Guarantee Department. Now the President has come out fighting for it. In difficult economic circumstances, and in a tight spending round, he has managed to persuade Treasury colleagues to grant an extra £2 billion to the ECGD, and that is a tribute to my right hon. Friend. We have now ensured that the ECGD is competitive across the world. We can never ensure that it will match the best rates in any one market. For instance, in south America it may be difficult to match the high levels of support provided by the Americans, but, thanks to the hard work of my right hon. Friend and his commitment to exporters, we have ensured that the ECGD is competitive. I am sure that my hon. Friends attending this debate welcome that.
Our support does not end there. We are responsive to industry's needs. We have also provided $500 million of ECGD cover as part of the international package for the former Soviet Union. No doubt that will please one of our new export promoters, Nigel Peters, who tells us:The potential in Kazakhstan is enormous in a market which will be one of the star performers of the 21st century".That is why we are planning a ministerial-led business mission to Kazakhstan.
We have also just reorganised the Overseas Projects Board into new sector groups covering our main capital goods exports. These groups will be headed by leading business people and they will encourage United Kingdom companies to work together more efficiently in pursuit of major project contracts. We aim to double existing sales to non-OECD markets by the end of the decade—quite an aim. Whether we will meet the target I do not know, but we will fight hard to do so.
We have also launched a series of major campaigns aimed at our three largest markets—Europe, north America and Japan. We have created the Whitehall export promotion committee, which will ensure that a constant approach to export support is adopted across Government Departments.
The President's attitude to create a national network of one-stop shops will also assist our export performance. He is wholly committed to the initiative, which will in the end create as many as 200 one-stop shops, dramatically improving the Government's ability to deliver key services to business throughout the country. The initiative will 485 significantly increase awareness of overseas opportunities and provide access to export services locally, be it in Bury, Bolton or Lincoln.
The first one-stop shops will open in the next few months. They will be instrumental in driving home the message that all businesses should consider the opportunities that exporting offers. One-stop shops will fill a large gap in our business support structure.
We believe that we now have the right structure in place. The recent announcement is the final piece in the jigsaw. Our organisation is now a valuable mix of public and private sector skills. To be successful in Government we must have a partnership between the private and public sectors. Ministers also have access to the valuable advice of the chairman of the British Overseas Trade Board, Sir Derek Hornby, and of the 200 business men and women who sit on the board and its area advisory groups.
While we have been refining our strategy and structure and scouring the world for business opportunities in the past year, what has the Labour party been doing? It has launched an industry campaign which failed to pay serious attention to the economic importance of exporting. For once, showing good judgment, the party promptly recommended that we make all the changes that we already had. Phrases about horses and stable doors come to mind.
The Labour party said that we shouldprovide a new analysis of the problems that are holding Britain back".That is an interesting suggestion, and it is why we set up our industrial competitiveness division immediately after the last election. Labour said that we shouldoffer a new partnership between Government and industry".Where has the Labour party been for the past 12 months? My ministerial colleagues and I will soon be accused of not leaving British companies alone long enough to let them get on with their real work. The President is well known for his open door to industry, and the same can be said of my other ministerial colleagues. My right hon. Friend has ensured that the Department is being reorganised to provide an effective voice in Whitehall.
Yet another new idea from the Labour party is that we should set about identifying the export markets of tomorrow—
§ Sir David Steel (Tweeddale, Ettrick and Lauderdale)
I am not sure why the Minister is wasting the time of the House with this part of his speech, unless he intends to propose a toast to absent friends.
§ Mr. Leigh
That is a good comment. A Labour Front-Bench spokesman has managed to be with us today, impressively enough, but I can see an ocean of empty space behind him. Behind me, by contrast, are a number of my hon. Friends who are waiting to speak. Hansard will show the interest that Conservative Members take in exports.
As I was saying, the Labour party had an idea that we should set about identifying the export markets of tomorrow—just what we have been doing since 1990. Our 100 export promoters will continue to advance this work.
All this invokes a sense of deja vu. It reminds me of one of Labour's manifesto pledges last year, when it promised to create a 486revitalised and integrated export service, combining the trade functions of the DTI, Foreign Office and the British Overseas Trade Board".That pledge brings Labour's familiarity with Whitehall into question. We had already set up the DTI/FCO joint directorate to co-ordinate the Government's export promotion programme 12 months earlier. Labour will be advocating votes for women next!
The Labour party says that other countries will steam ahead and leave us behind. The Opposition do not seem to recognise that we are foremost in forging links with our competitors, and we shall be up there with the best of them, if not in the lead, in everything from outward investment, inward investment, strategic alliances and technology transfer to joint ventures. Our policy speaks for itself: the Government have responded to the internationalisation of trade like no other nation.
Of course, creating the right environment and restructuring our export support structure would be no good if companies could not run with the exporting baton. Ultimately, it is the creative flair, energy, commitment and dynamic entrepreneurial skills of British business that will succeed. Our flair for international trading must be reinforced by new generations of industrialists and business men.
I am continually reassured by the success stories of British industry which cross my desk or which I come across in my travels. The President told me of a visit he had made to Vosper Thornycroft on Monday of this week. He was struck by its successful turnround since the management buy-out in 1985, despite the difficulties created by a combination of defence cuts and the recession. The company's outstanding export record since privatisation and the speed at which it has diversified into new market sectors must represent one of the most remarkable industrial success stories of recent years.
Some 118 exporters were awarded the Queen's award for export achievement in 1993. We received 1,582 applications for export and technology awards, the highest for many years. The export winners represent success stories across the industrial spectrum. They range from breadcrumb, cream liqueur and pizza-base manufacturers to a company that developed an automatic cattle dewormer and, for the first time, an entire orchestra.
Since its formation in 1959, the orchestra of the Academy of St. Martin-in-the-Fields, Britain's only non-subsidised orchestra, has made more than 1,000 recordings, including the sound track of the successful film "Amadeus". From a pig improvement company in Abingdon, genetically superior master pigs fly the world, improving breeding stock in markets as diverse as the United States, the Ukraine and Cuba.
All those are examples of the ingenuity and skill which add value to our efforts to improve export performance. I shall give a few other recent examples. North-West Water and Severn Trent Water each won contracts worth more than $350 million to provide water and waste services to a number of municipalities in Mexico City. An international consortium, including the United Kingdom arm of Bechtel, has won a $1.4 billion turnkey project to develop Abu Dhabi's onshore gas production. The project will employ 425 people in Hammersmith and will be worth £200 million to £250 million to the United Kingdom in engineering services and equipment purchases.
As an example of the partnership with industry, Bechtel is making a presentation in our offices next week to 487 publicise this excellent opportunity for United Kingdom industry. Not surprisingly, the presentation is vastly oversubscribed. Our intention is to build on this success. We already export a quarter of what we produce, and per head of population we export more than the United States or even Japan.
As I have said, export volumes have been going up, even over the past few years. Many of our firms are benefiting from a competitive exchange rate, and we are exporting leading edge goods in aerospace, pharmaceutical, electronics and other industries. Let no one say that nobody wants to buy our goods. It is a little perceived fact that on capital goods—often the most sophisticated—we have a favourable balance with the rest of the world.
We shall continue to develop new initiatives. We are not complacent: we know the challenges facing us. We have devised a thorough-going export strategy and we intend to embed it throughout the trading base of the United Kingdom at local and national levels and within government. We have the structure right and we are using the recent changes to galvanise industry interest in the enormous overseas opportunities.
As I have demonstrated, our intention is to lead this export drive with vigour and enthusiasm. The partnership between industry and the Government must succeed, and it will.
§ 10.2 am
§ Mr. Derek Fatchett (Leeds, Central)
I congratulate the Government on allowing time to debate this important issue. It enables us to draw attention to crucial facts about Britain's balance of payments. It is interesting that the Government should wish to devote time to discussing that, because the Chancellor predicted that the deficit would be £17 billion in 1993 and the Oxford economic forecasting group has suggested that, by 1995, the deficit will be more than £20 billion.
The Minister rightly emphasised the importance of exports, but we must look at both sides of the equation by examining the increase in imports. I shall illustrate the problem in relation to manufactured imports over the past decade. The figures that I shall quote are all contained in parliamentary answers by the Minister. The value of manufactured goods from Taiwan increased from £211 million in 1979 to £1,250 million in 1991, an increase of 492 per cent. Japanese manufactured goods imported into the United Kingdom rose from £1,441 million in 1979 to £6,655 million in 1991, an increase of 362 per cent. South Korean manufactured goods increased from £265 million in 1979 to £905 million in 1991, an increase of 254 per cent.
§ Mr. Roger Evans (Monmouth)
Does not that show the benefits to the British consumer of a much higher standard of living and the advantage of cheap electronic goods from the countries that the hon. Gentleman mentions? It is an old-fashioned view to say that we must manufacture everything ourselves.
§ Mr. Fatchett
It may be an old-fashioned view, but I am a realist and I should like to see Britain manufacturing a more substantial proportion of the goods that we consume. This country cannot run a £17 billion trade deficit with an expectation that it will increase. I am sure that the hon. Gentleman has a passing knowledge of economics which is sufficient to enable him to understand that that will again lead to an increase in interest rates.
§ Mr. Fatchett
The hon. Gentleman is hyperactive. He should restrain himself. He has obviously waited a whole week for this debate, so I shall give way to him once more.
§ Mr. Evans
What is the point of the hon. Gentleman's figures? He should realise that there is a £30 billion unaccounted item in the published figures for the balance of payments. The balance of payment figures for all the leading countries simply do not add up. This is old-fashioned economic analysis and is totally exploded.
§ Mr. Fatchett
Given the hon. Gentleman's figures, he was notably in charge of the Maxwell pension fund. To the City and other financial sectors, a £17 billion trade deficit is not looked upon approvingly.
I shall quote some more figures to put the issue in perspective. The United Kingdom's trade deficit in manufactured goods with the rest of the OECD has more than doubled over the past decade from £3,948 million in 1979 to £10,146 million in 1991. Our trade deficit in manufactured goods with the United States has quadrupled from £535 million in 1979 to £2,328 million in 1991. We have a manufactured goods deficit of £4,726 with Japan, £3,920 million with Germany, and £1,651 million with Switzerland.
This country did not have a manufactures trade deficit until 1982, but it has had one in every subsequent year and there is now only one continent with which Britain has a manufactures trade surplus, and that is Africa. The Government are right to draw attention to our overal trade performance, but it is something of an own goal that they should devote time to a debate on the balance of payments deficit.
The previous Prime Minister, Baroness Thatcher, used to lecture us about our need to pay our way in the world. There may have been an element of Yorkshire thrift in the speech by the Minister, who is from Lincolnshire. Baroness Thatcher said that no country can continue to have a deficit of this sort and try to maintain living standards. The pressure of that trade deficit will cause a series of economic problems. It has to be financed and that may be done through higher interest rates. That may push up the value of the pound to a level that is unhealthy for Britain's exports and we shall be again in a downward spiral rather than an upward virtuous one.
I have a statistical point in relation to the Minister's speech. I am delighted with the success of British exporters. The Minister was kind enough to refer to the Labour party's industrial policy document, a document that was warmly received throughout the industry and which showed that the Labour party understands the problems faced by Britain's industrial sector. The Minister quoted from it Labour's support for exporters and our suggestions for further policy developments. He can look forward to a further series of documents, which will show that the Labour party is creating a new partnership with British industry, understands its needs and is looking forward to bringing that partnership into practice when in government.
One figure that the Minister used showed that Britain exports more per head of population than the United States or Japan. The Prime Minister has also quoted those figures and the hon. Member for Mid-Staffordshire (Mr. Fabricant) has read the central office brief and come up with the same ones. That is reassuring. I always enjoy the 489 discipline in the Conservative party which comes from the use of central office briefs. That may have been shattered over the past few months and there may be slightly less discipline, but Tory Members are still able to learn a small number of facts. Perhaps what has coloured the Government's education policies is the Tory party's approach—if one can learn one or two facts and repeat them, one has all the ability that is needed to become a Tory Back Bencher.
That figure comparing exports per head with those in the United States and Japan is accurate, but has to be taken in context. Perhaps I can help the hon. Member for Mid-Staffordshire to flesh out his brief from Conservative central office and perhaps I can help the Minister as well. In 1979, the United Kingdom also exported more per capita than Japan or the United States. I have taken from various figures a list of 25 countries with which to compare Britain's performance on invisible exports between 1979 and 1992.
After 13 years of Conservative Government, in which we have been through a series of economic miracles, with occasional mishaps on the way, our position in the league table has not changed. One or two of the countries below us, and thus one or two of the countries above us, have changed, but Britain remains in the same position. On my league table, we are seventh from bottom, or, if the Minister would like it more positively, 18th from the top.
Let me give a flavour of the countries that do better in exports per capita. They include Singapore and Hong Kong and, in Europe, they include Holland, Belgium, Norway, Ireland, Denmark, Sweden, Iceland, Austria, Germany and France. That interesting league table is not in the central office brief, but it is useful in making valid comparisons with other countries.
I welcome the debate and I shall spend some time talking about imports, but I shall first pick up some of the points that the Minister made. I welcome the emphasis on exports because it shows one thing above all else. After 13 years, after some fashionable economics in the mid-1980s, the Government have at last recognised the importance of manufacturing industry.
§ The Vice-Chamberlain of Her Majesty's Household (Mr. Sydney Chapman)
That is a year out of date.
§ Mr. Fatchett
I realise that keeping quiet for a whole week is difficult for the Whip and that he feels that he has to tell us that, after 13 years in office, the Government recognised the importance of manufacturing industry a year ago. That is encouraging, but I suspect that it may take a little time to persuade manufacturing employers and companies that they have a true friend and a real partner in the Government. The simple fact is that many Conservative Members subscribed to the fashionable theory in the mid-1980s that Britain's future was to be found in the service sector, in no-technology, low-technology industry. That theory came from both No. 10 and No. 11 Downing street when the then Chancellor, now Lord Lawson, and the then Prime Minister, now Lady Thatcher, were still talking to each other.
What is crucial and what is easily understood by most people is that if we are to export, manufactured goods rather than services are what we will export. It would be foolish of me to say that we do not export some services, 490 because clearly we do, but overwhelmingly we export manufactured goods. That further underpins the importance of the manufacturing sector. It makes the point that the Labour party made in its industrial strategy document: that the country needs an industrial strategy and a Government who understand its industrial base and give it priority.
Two nights ago, we had a debate about Britain's defence companies—companies which have a proud record on exports and a substantial investment in skills and research and development. Such companies rely on the Government's procurement policies for their United Kingdom market and on exports. That is a clear relationship. An important element of the defence industry is shipbuilding and my hon. Friend the Member for Jarrow (Mr. Dixon), the Deputy Chief Whip, knows the shipbuilding industry better than anybody.
My hon. Friend knows also that the European Community figures on shipbuilding and the potential for growth in shipbuilding orders predict a 100 per cent. growth in orders for new ships over the next decade. Despite that potential for growth, our industrial base—our ability to meet those new orders—is being reduced. Thus, we have the tragic situation of Swan Hunter, where substantial numbers of highly skilled workers who deal with sophisticated technology are this morning facing the prospect of job losses.
I can imagine us, in a few years' time, having a debate similar to this. Whichever party is in office, we shall be saying that opportunities in shipbuilding have been lost to the United Kingdom because our capacity to compete has disappeared as a result of the reckless decisions taken in the early 1990s. That is the link between industrial strategy and exports and the shipbuilding industry is a good example.
§ Mr. Michael Fabricant (Mid-Staffordshire)
Is the hon. Gentleman suggesting that the shipbuilding industry of the north-east, Jarrow and other parts of the United Kingdom should adopt the same wage rates as those in Korea?
§ Mr. Fatchett
I am not sure how anybody could have come to such a conclusion, but it is good to see a fertile and active mind at work, even though there is no logical basis for what the hon. Gentleman said. Of course, I am not saying that. Shipbuilding capacity has decreased more quickly and more sharply in the United Kingdom than in any other European Community country. That is true in terms of tonnage, capacity and employment. One reason for that is that the Government have given no consideration to the plight of Britain's shipyards, which have built for the military for many years.
Those warship yards could have been converted to civilian yards. They could have had access to intervention funds from Brussels so that extra would have been made available to help them. Swan Hunter could have competed for that growth in civilian orders. Instead, the Government were obsessed with privatisation. The Minister wanted to sell privatisation to the world. That obsession led them to sell Britain's shipbuilding history and future for their ideological purposes. They did it without giving British shipyards access to the intervention funds. They agreed that with the Commission. They sold our history and future at that point. We are talking of reckless Ministers and a reckless Government, which is why we demand that, 491 when we discuss exports, we link the discussion to our manufacturing and industrial base. The future must be linked on that basis.
The Minister talked about the improvement in Britain's export figures in recent months. There may be a simple reason for that. Britain's currency has been devalued and that has given our exporters a competitive edge. How many Conservative Members present today advocated devaluation as an export strategy before devaluation took place in September? I will give way to any Conservative Member who did not go along with the Prime Minister when he said in September that devaluation was fool's gold. Who of them will rise and say bravely that he or she, before September 1992, argued for devaluation, the real cause of the medium to short-term growth in Britain's exports?
It is good to see British companies taking advantage of that, but I await the comments of the brave Conservative Members, the people of principle, who are willing to take up my offer. I hear the Minister coughing. That is probably the most appropriate reaction in his case because I will let the House into a secret. I suspect that in private he is called a Eurosceptic.
§ Mr. Michael Stephen (Shoreham)
Does the hon. Gentleman accept that he and his hon. Friends were even more enthusiastic than were Conservative Members for joining the exchange rate mechanism in the first place?
§ Mr. Fatchett
That was not the most passionate defence of the Minister or the position taken by Conservative Members before September.
§ Mr. Fatchett
It is easily answered. The shadow Chancellor of the Exchequer and shadow Secretary of State for Trade and Industry were making statements from the early spring of last year to the effect that Britain should favour a general realignment within the ERM. The Labour party's position has been clear on the issue. The Government were arguing that any form of devaluation was fool's gold.
I shall willingly give way to the Minister if he wishes to say whether he believes that returning to the ERM would be advantageous for Britain's exporters. It seems that he does not intend to respond. Will any other Conservative Member defend the position? As I say, the immediate short-term increase in exports has been largely due to the fact that Britain devalued, giving us a competitive currency rate.
I must move on because it is clear that the Minister is not keen to enter the debate about the ERM— [Interruption.] I gather from the Minister's demeanour that he may comment on the matter when he replies to the debate. We look forward to his comments on the virtues of the ERM and our future membership of it, from the point of view of Britain's exporters.
My hon. Friends and I are pleased to see extra money being made available for export credit guarantees. But the Minister will be aware of our concern lest some short-term risks are not fully covered. That could damage Britain's exporters, an argument which is adduced not just by the Labour party but by the CBI and many British companies. I hope that the Minister will relate his remarks to those short-term risks and our ability to cover them.
492 The CBI welcomes the Governments' comment that Foreign and Commonwealth Office expertise will be used more effectively to promote Britain's exports. I do not have a large sample of the efforts of Britain's embassies overseas in that respect. I appreciate that some hon. Members make it their business to visit as many British embassies as possible, presumably to help in the export drive and as part of the fact-finding process of being an hon. Member.
As I say, I have a small sample, but I congratulate the efforts made by our embassies on the exporting front, although I remain concerned over the CBI figures, which suggest that since 1989 there has been a cut in the Foreign and Commonwealth Office budget devoted to export promotion and similar commercial activities. The CBI fears that that reduction is likely to continue. If so, all the good intentions of the Department of Trade and Industry will not necessarily be reproduced in practical terms.
May we be assured that a clear dialogue is taking place between the DTI and the Foreign and Commonwealth Office on those issues? May we also be assured that the Foreign and Commonwealth Office is not cutting its commercial and export promotion staff, a move which could be extremely damaging? Hon. Members in all parts of the House could suggest alternative ways by which the Foreign and Commonwealth Office could make more effective cuts in the interest of the United Kingdom economy.
The Minister omitted to refer to small businesses, an important area of growth in the British economy. The vast majority of small businesses are, by the nature of their services and products, not exporters. But an important group of small businesses, often engaged in high-tech activities, export a great deal. I am frequently told that, for a number of reasons, small businesses find it difficult to export; perhaps the Minister will comment on the issues involved. They say that they find it difficult to get through the DTI bureaucracy and to receive the support and services that they need. The Minister referred to the one-stop shop, a concept which is supported by all, but we must consider other ways to help small businesses to export. Their representatives have frequently floated to me the idea that it may be essential for the Government to pay more attention and provide more resources—I suspect that small sums are involved—to bringing small businesses into a relationship with larger organisations across sectors to help those small businesses get their products into export markets. They have in mind almost a mental relationship, as it were, across sectors.
The DTI may have considered the idea, but it needs examining in greater detail because we must encourage small businesses, particularly those in the high-tech sector, to export, thereby enabling them and the economy to grow. The risks that such small businesses face, by their nature and the capital involved, are great. They need support and it is more likely to come from the Government than from the banks and other commercial institutions.
I began my remarks by relating exports to our overall balance of payments. Crucial to today's debate is Britain's ability, through manufactured goods, to satisfy our domestic requirements. That relates to the balance of payments deficit and I cite some figures from a newspaper that is widely read and respected by Conservative Members. I have no doubt that the figures in The Daily Telegraph came from Government sources, so they can be regarded as authoritative in this context.
493 Neil Collins, City editor of The Daily Telegraph wrote an interesting article in which he examined the way in which Britain relies on imported goods. He referred to six products in which Britain is now more reliant on imports and the figures give a flavour of the problem. In 1971, 70 per cent. of Britain's machine tools were produced by British manufacturers, but by 1991 the figure had fallen to 40 per cent. Any hon. Member who visits a British factory will find that, sadly, more new machine tools in British factories are not produced in the United Kingdom. As I visit factories, I make it a regular practice to ask whether machines were made in the United Kingdom or whether there is a British equivalent. I am told that they had to go to Japan, Germany, Switzerland or Sweden. I do not believe that those senior managers are unpatriotic or are trying to sell Britain short. They would like to buy British, but Britain simply does not have the capacity.
I represent a Leeds constituency. In much of south Leeds, factories produced machine tools that became household names, but sadly they have now all disappeared. The Minister may say that I am old-fashioned, but no effective manufacturing and exporting country can compete and succeed without being able to produce its own machine tools. The figures that I have given show the extent to which that capacity has disappeared.
§ Mr. Stephen
I am sure that Conservative Members are as concerned as the hon. Gentleman about the serious decline in the British machine tool industry, but he offered no explanation of how that decline occurred and why. Could it, I wonder, have had anything to do with the strikes and restrictive practices that were so prevalent in British industry throughout the 1960s and 1970s and were encouraged by his hon. Friends in the Labour party?
§ Mr. Fatchett
An argument based on variables must be time-related. Unfortunately, the events to which the hon. Gentleman referred, even if they occurred and damaged industry as he suggests—that is a matter for argument—occurred earlier than the rundown in capacity, which happened mainly in the 1980s. I suggest that that decline had much to do with the Government's policies.
Over the same 20-year period. figures for domestic household products show that the production of fridges and freezers in Britain fell from 61 to 53 per cent. That is a less substantial decline than in the machine-tool industry, but it certainly is a decline. The production of washing machines fell from 82 to 49 per cent. The production of shoes fell from 69 to 30 per cent. The production of motor cycles—a subject that may take some hon. Members back to their youth—fell from 66 per cent. to only 4 per cent.—a total wipe-out of an industry. The clothing industry, which is dear to our hearts in Leeds because it was one of the most important clothing centres, has experienced a fall from 79 to 56 per cent. Those figures show the extent of the problem, to which the Minister did not refer and I can understand why.
In two weeks' time, I shall visit the Raleigh factory in Nottingham. It is a successful company, but the cycle industry is a classic example of the decline of a very important British industry. Of the 2.75 million bicycles that were sold in the United Kingdom in 1991, 58.2 per cent. were imported. There have been questions—I know 494 that the Minister has been involved—about the nature of imports from various countries into the United Kingdom. I know that companies such as Raleigh are concerned about the nature of that trade in terms of dumping and the extent to which those imports are subsidised. Nevertheless, there has been a substantial collapse in Britain's ability to produce and to meet capacity. The Daily Telegraph also deals with what has happened to our glassware and cutlery industries, but I shall conclude with a further example from my constituency.
§ Mr. Fabricant
Could not the same litany of industries in which manufacturing has declined in the United Kingdom—and it undoubtedly has because of imports—be read out for the United States and Germany? The hon. Gentleman is talking about imports from former eastern bloc countries and the Pacific rim, where, as I said earlier, wage rates are substantially lower.
§ Mr. Fatchett
The simple answer to the hon. Gentleman is that a comparison does not reveal such a sharp decline. The crucial consideration is the collapse in the United Kingdom's manufacturing industry and the loss of jobs and capacity.
I shall give one further example that follows from my earlier point about the balance of payments and shows the extent to which Government policies link together and undermine our manufacturing base. Following privatisation of the bus industry in the mid-1980s, orders for new buses and coaches have declined considerably. At the same time, because of that pressure and the Government's economic recession, Britain's bus-building capacity has been reduced significantly. If, as we hope, we are coming out of recession, if, as we hope for our safety and comfort, Britain's coach and bus operators decide to buy more buses and coaches, and if demand for buses and coaches returns to the levels of the mid-1980s, we shall be able to supply only about two thirds of the demand of the mid-1980s. DAF, Volvo and others will fill the gap. We shall import again. Britain's industrial base is being undermined, our manufacturing industry cannot meet demand and we will therefore have to pull in more imports.
The Minister is right to talk about exports. Hon. Members agree that we need to increase exports and that we need policies designed to achieve that objective, but there are two sides to the equation and I have been dwelling on the second. I noticed that the press reported yesterday some disagreement within the Conservative party about contact with overseas business people, but I shall ignore those internal party difficulties about funding the Conservative party.
It is clear—this is where Conservative and Labour Members differ—that a country cannot maintain its standard of living if it is running a substantial balance of payments deficit. That is why we must emphasise both sides of the equation—exports and Britain's ability to provide for itself. I am not talking about import substitution in the sense of barriers or saying that Britain must impose import controls. I want British products that can succeed in the home market by being competitive, with British industry having the capacity to produce those goods.
The Government did not consider that in their industrial strategy, with the clear consequence that our balance of payments deficit will pull us hack again into 495 high interest rates, overvalued currency and further economic doom and gloom. Every downturn in the British economy since the 1960s, whatever party has been in office, has reduced our manufacturing capacity and increased the number of long-term unemployed people. We start from a higher point in terms of unemployment and a lower one in terms of capacity.
Not only imports but exports must be considered, because if any Government of either party are to provide the personal, social and public services that this country deserves as it enters the 21st century, they must confront its balance of payments problems. Britain must pay its way in the world and that means attending to exports as well as to imports.
§ Mr. Warren Hawksley (Halesowen and Stourbridge)
Thank you, Mr. Deputy Speaker, for calling me so early in the debate. It is interesting that there is so little Opposition support for the motion—I congratulate the Government on the motion. In fact, there is almost a total absence of Opposition Members in the Chamber for this debate. The hon. Member for Leeds, Central (Mr. Fatchett) spent more time dealing with imports and deficits than with the Government's success story on export growth. We are pleased to put that success story on record. In the final quarter of 1992, there was a 5.5 per cent. increase in exports by volume over the previous year. In March, in the non-EEC sector, exports rose by 3 per cent. We can be proud of that record.
Exporters need not just the Government help to which the motion refers but a domestic economy that offers home industries encouragement and confidence. The Government have provided that by bringing inflation under control, reducing interest rates—to encourage the investment that many exporters must make if they are to sell their products abroad—and lowering the level of the pound by withdrawing from the exchange rate mechanism. The hon. Member for Leeds, Central was critical of the Government for not withdrawing earlier from the ERM, but I hope that he at least acknowledges the benefits now of that action.
Exporters must make sure that the quality of their products is high enough. In days of old, Britain could not export abroad because its potential customers were unsure that our goods would be delivered on time.
§ Mr. Fabricant
Does my hon. Friend not consider it extraordinary that the hon. Member for Leeds, Central (Mr. Fatchett), who was once a lecturer in industrial relations—despite having no background in industry himself—did not care to mention that important fact and to endorse my hon. Friend's observation?
§ Mr. Hawksley
I thank my hon. Friend for reminding me of the hon. Gentleman's previous incarnation. In the late 1970s, our exports suffered because of the fear among potential foreign customers that the quality of British goods would not be high enough and that delivery would be unreliable. In contrast, last year this country enjoyed the best industrial relations in the 100 years since records 496 began. That is very different from 1978–79, when the perception of foreign customers after the winter of discontent gave them cause for second thoughts.
It is not enough for the Government to produce money, leadership or even just advice and encouragement. British industry has a great responsibility—having been given that help, advice and encouragement—to sell its goods. My hon. Friend the Minister rightly referred to the partnership that must exist between industry and the Government which has helped industry considerably.
The overseas trade service has been restructured and extended, and even the Opposition welcomed changes in the Export Credits Guarantee Department scheme—£2 billion more cover for projected exports was made available last autumn and the rates are now 25 per cent. lower than in 1991–92, to bring them into line with the average of our competitors.
If exports are to grow, foreign markets must improve. The recession that occurred not only in this country but world wide harmed opportunities for British exporters. That was brought home to me two years ago, when I visited a factory in my constituency that had exported boilers for 40 years. Its owner told me that, for the first time, all his markets were down simultaneously. Normally, if the export climate in Europe were bad, he relied on America, Australia or the far east—one area was always doing reasonably well. Two years ago, that was no longer the case. Today, thank goodness, some economies—including our own—are improving.
As someone who has rebelled against the Maastricht treaty on many occasions and who has grave reservations about events in Europe, I believe that the Government should place even greater emphasis on achieving a settlement on the general agreement on tariffs and trade. That is more important than anything that the House has debated for many hours recently. Mr. Delors must he persuaded never again to interfere in the name of France, or as part of his campaign to become President of France, and mess up the GATT agreement discussions. A new agreement having the full support of Europe and America must he introduced quickly. That would help us more than anything else.
As someone who is sceptical of actions that are often taken in our name in Brussels, I am not sure whether we are allowed any longer to talk about exports to Europe. I am uncertain whether, after the introduction of the single market, we are now part of one common market that does not have imports and exports between those who are in it. I spoke from the no platform during the referendum campaign on Europe and have consistently advocated a free trade area—trade between the United Kingdom and Europe should be free and fair.
Our exporters are at a disadvantage in two respects. What is being done to ensure no repetition of those scenes of French farmers and fishermen blocking our exports? At the time, we heard that compensation was being claimed and that the Government were putting strong pressure on the French.
Government help to exporters must include expression of the strong view that such action will not be tolerated. Every few years, the French farmers or the French fishermen get upset and start closing down the ports. What will the Government do to ensure that such incidents are not repeated yet again?
The export of steel and steel products is of especial concern to my constituency. I am told by my steel 497 producers that they cannot compete with the Italian price. They know that the price at which steel is sold in Italy is lower than the cost of producing it. Are the Government doing all that they can to ensure that we trade fairly within the Community in commodities such as steel? If a subsidy is being paid, as my producers suggest, it is not an approved subsidy, but an unfair one. That makes it much harder for my producers to export to many of the markets into which they would like to go.
I pay tribute on behalf of my constituents to the regional offices of the Department of Trade and Industry. My constituents find that the regional offices have changed their attitude considerably in the past 18 months to two years. In the old days, they found that if they contacted the Department at regional level in the west midlands, the answers that they were given were typical civil servants' answers and almost predictable. In the past two years, they have noticed a considerable change. They have noticed that the Department at regional level is very much more helpful. It not only answers the questions that my producers ask but has introduced initiatives and gives help and encouragement. That is very much appreciated by many exporters in the west midlands.
It is interesting that there was a brief from the Confederation of British Industry before the debate. The hon. Member for Leeds, Central spoke about representations from the CBI. It is interesting that the CBI went on record as saying:The Government's export support services both at home and abroad have shown considerable improvements and increased professionalism in recent years and it is essential that this is now built upon.That is what my constituents tell me of the Department at regional level, and I welcome that very much.
I raise another constituency problem that involves exports on which I have had discussions with the Department—the support that is given for those who wish to participate in international exhibitions and shows. Some constituents in the west midlands recently had problems with participating in the Hanover fair. Most of them run small businesses. In previous years, up to 10 businesses from the Dudley area have participated in the show. They have been supported by the Birmingham chamber of commerce and have come through the scheme organised by the Department.
This year, those businesses found that they had to commit themselves as early as 15 October to paying for the right to be at the exhibition. In the present climate and with their present cash-flow problems, that was far too early for them. I hope that the Department can help by covering the period up to the show, so that those businesses do not have to pay too far in advance, or by persuading people on an international basis that applications to participate in international exhibitions can be submitted later. Perhaps the Government could make the booking and then sell it on at a later date.
§ Mr. Douglas French (Gloucester)
Does my hon. Friend know whether the terms for overseas companies required by the organisers of the Hanover Fair will obtain in respect of German-based companies?
§ Mr. Hawksley
I do not know. I have had correspondence with the Department. Baroness Denton wrote to me, saying: 498The timing of 'cut-off dates' for applications is alway the subject of discussion between officials and group sponsors … but, invariably, they are set in relation to the space booking deadlines set by exhibition organisers.It is the organisers who set the date; I do not know whether it is the same date for all participants. My hon. Friend the Minister may be able to tell us whether the date set for the German exhibitors differed from the date set for the British exhibitors.
The Foreign Office has increased its commercial expertise. The hon. Member for Leeds, Central said that some people had gone around many embassies in the world. I have not been to many. However, over the past few years, the few that I have visited have shown more understanding of the needs of business men and of those who are trying to export.
I mention one story in the press this week which caused some concern to those of us who read it. The Prince of Wales made a trip to Poland. You may have read, Mr. Deputy Speaker, of the fact that he was not allowed to use two Jaguars which were provided by Jaguar for his use. Jaguar has just set up an organisation in Poland to sell its vehicles and it has opened an office there. Unfortunately, the Polish authorities made the Prince travel in a Volvo. The two British Jaguars were allowed to go in the procession, but were not used by him. Such incidents are a great disappointment to exporters. We do not always use to the best of our ability the opportunities that are given by not only ministerial visits but royal visits and other special occasions to push and to encourage the use of British commodities.
I turn with some trepidation to defence exports. It was in my constituency that Walter Somers produced the Iraqi pipe or gun, depending on one's interpretation of the piece of metal exported. Defence exports have not been mentioned at any great length in our debate, although I appreciate the fact that there was a debate a couple of days ago when they were raised. We should realise what a market there is in defence and how successful the British Government have managed to be in conjunction with our exporters. This is one area in which Government-toGovernment experience and relationships are important. That is not so true in other areas, but in defence exports, it is invariably Governments who carry out the negotiations. I have some experience of the matter from my previous constituency of The Wrekin, where GKN produced the Warrior. On occasions, GKN found that Government-to-Government discussions were necessary to conclude satisfactory deals.
In 1982, we sold £1.7 billion of defence exports. That figure is now up to 5.1 billion, and is rising year on year. That is a success which we should try to foster and encourage. I again stress the need for playing fields to be level—a phrase often used in the House. I am nervous because in defence exports, when Governments are dealing with Governments, some purchasers do not use the ethics that British business men use. I am keen that the Foreign Office should do all that it can to ensure that the countries with which it deals treat our bids on the same basis as those from other countries.
The suggestion that other countries and other organisations offer bribes on occasions is a common accusation. It is not easy to prove, but it has been made many times. It is important that the Government do all that they can to help those in defence exports to ensure that there is a level playing field on which they can put in 499 their bids at a competitive level. If that happened, we should be able to increase our defence exports. We have about 20 per cent. of the world market in defence exports. That highlights the importance of defence to our exporters. We welcome the Government's help through the Defence Export Services Organisation.
Exports are even more important to those Members with defence-related industries in their constituencies. Because of the so-called peace dividend, many countries, including our own, will naturally reduce their defence expenditure over the next few years. The defence budgets of Britain and the United States will be cut considerably, but opportunities are available that will ensure that our defence-related industries do not lose out at that time. More opportunities than ever are now available to them to compete in the export market.
I congratulate the Government on their success. The Opposition were not charitable enough to congratulate the Government. They tried to highlight the other side of coin and suggested that our import levels were too high. They may be too high, but we should encourage and congratulate the Government and industry on what they have done. Following devaluation of the pound and the reduction in interest rates, which will lead to further investment in this country, the time is now better than ever for British industry to export. I am sure that the Government will continue to give industry the support that is necessary.
§ 11.1 am
§ Sir David Steel (Tweeddale, Ettrick and Lauderdale)
I disagree with the final point made by the hon. Member for Halesowen and Stourbridge (Mr. Hawksley) about defence exports, but I shall deal with it later in my speech.
The hon. Gentleman began, with great courtesy, by thanking you, Mr. Deputy Speaker, for calling him early in the debate. I am sorry that I cannot make an equally felicitous observation to you, since it seems to me that you did not have much option in my case. When I made an unkind reference earlier to the fact that only the Labour spokesman, the hon. Member for Leeds, Central (Mr. Fatchett), was present on behalf of the official Opposition, he said, sotto voce to me, that he thought that I had been a Member of the House long enough not to have to be here on a Friday. I repeat that publicly only so that the managers of my party may read the Christian and charitable observation that was offered by the Opposition and take note of it for the future.
§ Sir David Steel
Before the hon. Gentleman is encouraged to go too far, may I say that the view taken by my party was that, since I do more travelling than anybody else in my party, this was an ideal opportunity for me to give the House the benefit of my experience.
I am glad to be able to participate in this debate on Government support for exporters. I come from a noted exporting part of the country. I shall be critical of the Government later in my speech, so let me heap praise on them to start with by saying that Scotland as a whole is pleased that in his Budget the Chancellor recognised the importance of the Scotch whisky industry to the total exporting drive of this country. We are very grateful to him for that.
500 My part of Scotland has an unrivalled record in exporting high-quality knitwear, tweed and leather clothing to all parts of the world. The secret of our survival of the recession and the general trend towards import substitution in clothing is the emphasis that we place on quality, both in manufacture and design. There are world famous names in my constituency, such as Ballantyne Sportswear, as well as many lesser known but successful small businesses.
When I was in Buenos Aires a few weeks ago, I turned a street corner and found, to my great delight, a large corner shop with the name "Pringle of Scotland" above it. That is another firm in the Borders region. I went in to see how it was getting on and discovered that the shop had been open for only two weeks. That, again, is a good sign that the Scottish knitwear trade is booming in different parts of the world.
The boom does not apply just to my own area and it does not apply only to the traditional industries. Chemicals, printed circuits and so on are doing well. The general economic lesson is that those firms that engage heavily in the export drive have ridden out the recession better than those that did not.
There is a particular constituency point that I wish to mention before I turn to the wider picture. My local enterprise company has pointed out to me that the grant support for enterprise initiative programmes in the non-assisted areas—I represent a non-assisted area—has dropped from 50 per cent. to a third. It has put forward a good argument, to which I hope the Minister will respond: that for export-dedicated programmes the grant level should be reinstated at 50 per cent. If grant support could be focused on export efforts, it would be worth while increasing the grant level again.
I want to put forward three propositions by means of which the Government could improve what I accept is not a bad record in assistance to exporters. The first relates to the Export Credits Guarantee Department. It is good news that the money allocated for that purpose is to be increased, but I draw the Minister's attention to criticisms that have been made of the recent changes in the Department. Those criticisms are not made by me. They were put to me by a firm that has had 25 years' experience of dealing with the ECGD. In its letter to me it said:ECGD was a great help. When we made an application for cover to give credit to a foreign customer, it was vetted by ECGD and in all cases we got the go ahead. This meant we could comfortably give credit and in the event of any loss we would recover 90 per cent. from ECGD.The letter went on to say that the firm had made only one claim throughout its 25 years experience of dealing with ECGD and that that was for a sum of less than £3,000. The company argues that over that period of a quarter of a century the ECGD has made very good money out of it. The letter also said that, since ECGD was transferred to a private company, NCM Credit Insurance, it has had nothing but trouble from that firm. The Minister may be able to comment on that. I hope that it is not a typical experience, but it is a disturbing one.
The letter went on to say:For a start the staff are offhand, unhelpful and arrogant.The firm went on to give me three recent cases where it had been refused cover. For commercial reasons, I do not think that I should give in the Chamber the names of the companies involved. However, they are in different parts of the world—Africa, eastern Europe and the middle east.
501 All of them are well-established organisations in their own countries. The firm then says that because of the refusal of cover it has beenobliged to ask for letters of credit (confirmed by a London Clearing Bank) or cash up front. This makes selling difficult and therefore does not help exports. I am sure we can go out and export much more provided we are given the necessary background support. The more we export the more jobs we create and the more foreign currency we earn.I hope that the Minister will take note of that criticism. If he wants the details I shall supply them to him. If that is in any way part of a wider picture, I trust that the company that now operates ECGD will be given a bit of stimulus by the Department of Trade and Industry.
My second proposition is that we can do even more through our embassies. I have observed that more people from the DTI are now working in our embassies, but can the Minister give us any figures? This is a helpful trend. I should like the commercial sections of our embassies to be much more of a mixture between traditional Foreign Office appointments and persons assigned from the DTI. My experience suggests that that is happening, but it would be interesting to know to what extent that is the case and to what extent the DTI is planning to increase its representation.
Not all commercial sections of all embassies are at the moment attuned to the needs of small businesses. Small businesses frequently criticise the fact that nationally known companies get red carpet treatment from the embassies whereas they do not. To some extent, that is inevitable, but I hope that our embassies are under instructions to give all possible assistance to smaller firms. One thing that they object to is the fact that the Government, no doubt as part of their cost-cutting exercises, are starting to demand payment for the services of the commercial section of our embassies.
That is a rather penny-pinching approach. After all, every time a job is created through export orders obtained, some £9,000 of public expenditure in Britain on unemployment benefit and income support is saved. The Government should consider that in their search for reductions in public expenditure, which is currently focusing on social security. To make life difficult for the small firms that are trying to earn export orders seems an odd way to go about saving public expenditure.
I agree with what the hon. Member for Halesowen and Stourbridge said about foreign exhibitions; he referred to Hanover in particular. I do not know whether it is a general DTI rule, but it appears that small firms cease to receive support after they have appeared at the same exhibition on three occasions. I do not understand the logic of that. If a firm has exhibited in a particular place and finds it worth while going back, surely it should continue to receive support. There should not be a cut-off rule—if, indeed, there is. I should be interested to know. Such exhibitions are of enormous value, especially to small firms. As I keep saying, smaller firms have greater export potential.
My third observation again relates mainly to the small business sector. There is still a feeling that our banks are less kind to the industrial sector than is the case in other countries. I do not know what the DTI can do about that. I pose the question, without expecting an answer, but the DTI should attempt to encourage and exhort the banks to 502 be more sympathetic to commercial lending. Companies have had to look for ways to tighten their belts during the recession, and consequently there has been a trimming of support for research and development and exporting missions. That might make good short-term sense, but it certainly does not make sense in the long term. If firms need access to working capital to expand both research and development and exporting missions, they should be encouraged and enabled by the banks in that.
In both Japan and Germany—two of our major industrial competitors—co-operation between industry, the banking sector and the Government is much closer than it is in Britain. I am aware that the Government have a scheme that guarantees 85 per cent. of a bank loan, but I am told that many firms believe that they must be almost bankrupt before they qualify. Could that scheme be expanded to encourage more commercial lending?
I said earlier that there were some points about the arms trade on which I would disagree with the hon. Member for Halesowen and Stourbridge. It is an extremely difficult issue, and one of particular sensitivity for him coming from the constituency that he does. However, the House must recognise that there is growing public opinion, not just in this country but world wide, that over-reliance on the arms trade is not something of which we should be proud.
In both the Falklands and the Gulf wars, our service men found themselves up against weaponry and technology that we had sold to Argentina and Iraq. Surely the lesson is that we must be far more careful about reliance on the arms trade. The House has had many debates about Bosnia. One reason why early air cover was not provided by either fixed-wing aircraft or helicopters was that surplus weaponry from the Afghan war, supplied by the Americans to the Afghan rebels, had found its way to the former Yugoslavia. Among that weaponry were shoulder-operated, surface-to-air missiles. Once those are scattered around, it is difficult to provide air cover with any safety.
§ Mr. Hawksley
I accept that our arms exports have been used against our troops in the past, but if we had not supplied them would they not have been supplied by other countries anyway?
§ Sir David Steel
I was about to come to that point; I have not completed my argument.
I said at the outset that this is a difficult issue. However, one step forward has been made during the past year or two, with considerable support from the Prime Minister, and that is the establishment of the United Nations arms register. That is the beginning of getting international control over the spread of weaponry.
I recognise, and in this the hon. Gentleman makes a fair point, that currently one of the biggest sources of arms is the former Soviet Union. A tremendous amount of Soviet Union weaponry is washing around the world fuelling many of the trouble spots, especially in Africa. I have said previously in foreign affairs debates that I was told that AK47s were being sold on the streets of Mozambique for $2 each. The world must stop and take stock of that and ask whether we are right to continue to encourage our armaments suppliers on the same scale as at present.
The hon. Gentleman was correct to suggest that international action is required. However, I do not share the rather cavalier attitude that export credit facilities 503 should be offered to the arms trade. Surely that is one way in which Britain can contribute to reducing that trade. Export credit facilities should be run down and the DTI should concentrate on encouraging firms to move out of the arms trade and into other areas. I accept that that is a long-term ambition, but there must be a deliberate switch in policy to achieve it. I have been slightly side-tracked into discussing the discouragement of certain exports, but it is an important issue.
The Government lost about £21 billion of taxpayers' money in the poll tax fiasco. They lost an unquantifiable amount in their bungling of the European exchange rate mechanism. Therefore, in asking the Government to pump more investment into industry and to encourage exports, we are asking for only a fraction of what they have lost through some of their bungled policies. Let us thank them for what they have done so far, but also encourage them to do even more.
§ Mr. Douglas French (Gloucester)
I declare a business interest as I am a long-standing director of P. W. Merkle Ltd., a company which specialises in the import and export of processing machinery for the plastics, rubber and leather industries. It is my experience with that company which leads me to begin my remarks by concentating on the speech of the hon. Member for Leeds, Central (Mr. Fatchett). He said that recently he had increasingly noticed the presence of foreign-made machine tools in the factories when he visited in his constituency and elsewhere. He is correct in what he says, but he has underestimated the time period during which the change has occurred. It was evident not only in the 1980s and 1970s, but in the 1960s and 1950s. Indeed, for non-ferrous processing machinery the change can be traced back to the 1930s and even the 1920s.
Shortly after the turn of the century, this country stopped producing certain types of processing machinery and had to rely on imports. There were deep and technical reasons for that. I subscribe to some of the views expressed over the years by Mr. Correlli Barnett about the real origins of the change. We must accept that it has not been a recent change; it has been with us for most of the century. For metalworking machinery, the trend has, if anything, begun to be reversed in that some United Kingdom sources probably have a stronger market position now than they had 10, 15 or 20 years ago.
Britain has a remarkable record of export achievements because it exports a quarter of everything that it makes. As the Minister said, exports are still increasing. In 1992, the figure increased by 3.5 per cent. and in January this year we reached the highest-ever export figure—£4.3 billion—to non-EC countries. That is a very great achievement, but it is not good enough because, as the hon. Member for Leeds, Central was at pains to point out, we have a significant visible trade deficit. Last year, exports stood at £108.2 billion and imports at £125 billion. We certainly need to improve in that respect, but what worries me is our trading position with Europe with which we currently have a deficit of £5.1 billion—465.6 billion of imports and £60.5 billion of exports. We have a trade deficit with all but three of the EC countries. We manage a surplus only with Ireland, Greece and Spain. With Germany, our main trading partner, we have a significant imbalance which now stands at £4 billion.
504 However, we can be fairly sure that the reason for that imbalance is no longer the lack of quality products, which it certainly was at one time. It is no longer a question of price or delivery, which used to be the bane of British exporters. In most cases, we are now able to deliver on time as promised. The imbalance is to some extent the result of gaps in the range of products that we have to offer, the origin of which goes back a long time, but it is more due to our marketing skills needing to be sharpened, a lack of promotion, the need for smooth administration of export procedures and inadequate determination to pull out all the stops to win business. We must ensure that the Government give as much support as they can to British exporters, and at least as much as exporters from other countries receive from their national Governments.
I congratulate the President of the Board of Trade and the Under-Secretary of State for Technology on the progress that they have made. In outlining his Department's progress, the Under-Secretary was, if anything, rather modest about his achievements. The Department has developed many initiatives: there are now many more foreign visits and a systematic opening of new markets and reworking of older markets with, as the Under-Secretary said, particular emphasis on India, China and other countries in the far east, as well as countries in Africa, such as Ghana in particular.
Wherever possible, the Department has backed British exporters. It has done so against a background of changes in economic policy, which the Minister mentioned, such as the simplification of the tax system and a reduction in the tax burden. Much hard work is also being carried out to try to secure a satisfactory result to the GATT round, as my hon. Friend the Member for Halesowen and Stourbridge (Mr. Hawksley) said. In addition, there is a continual development of the single market. By any standards, there has been an enormous improvement. I stress that because I should not like the Department to feel that the few shortcomings which I wish to mention detract from the substantial achievements that have been made.
If one considers the views of the Confederation of British Industry, which was quick enough to supply a brief for the debate, one finds an interesting contrast between what it is saying now and what it said two or three years ago. Two or three years ago, it was very conscious of the Government's shortcomings in supporting exporters, hut there has been a gradual change in the views expressed by CBI members. They used to speak of the significant bureaucratic obstacles and excessive paperwork for exporters. They used to emphasise disguised subsidies to foreign competitors and speak of the lack of hard commercial experience of embassy staff and Whitehall personnel. They used to focus in particular on inadequate export credit insurance facilities, but the complaints and criticism are no longer on the same scale.
The Institute of Directors, which represents many exporting companies, has undergone a similar transformation but remains critical in some respects. In December 1992, the IOD made a submission to the Select Committee on Trade and Industry. It reported on the findings of a survey that it had undertaken. In the context of trade with Europe, the survey had identified legal difficulties, administrative red tape, problems with cross-border transaction costs and a high level of subsidies still prevailing in some European countires, and sometimes unfair subsidies at that. They were seen as barriers to the successful promotion of products by British exporters.
505 One in four of the IOD's members referred to legal problems and one in three referred to administrative difficulties and too many regulations.
The IOD's report stated:The IOD calls upon the Department of Trade and Industry to play a more supportive role for UK business in dismantling obstacles to trade.The key to the creation of the European internal market —'the principle of mutual recognition'—is being eroded by a multitude of protectionist non-tariff barriers which block market accessanddistort competition".France and Germany were singled out as offenders in that respect. In some ways, that is not surprising as France and Germany are our largest trading partners in Europe.
Nevertheless, one should not underestimate Franco guile. We recall the infamous occasion a few years ago when the French Government sought by rather devious means to limit the import of Japanese video recorders by declaring that, although they were not placing on them any value or quantity limit, it would in future be necessary for them to clear customs at Poitiers. Hon. Members who are familiar with the geography of France will know that Poitiers is not the most accessible place for customs clearance. I believe that the French placed one customs man in a nissen hut to undertake that task. It was an effective method of limiting Japanese imports. Although it is very difficult to identify further examples, most business men say that such obstacles exist and must be rooted out. It must be the responsibility of national Governments to ensure that other members of the European Community are playing fair, which is not always the case at present.
There is no doubt that the Department of Trade and Industry has made massive progress and I pay tribute to the President of the Board of Trade for his latest initiatives. However, I couple that tribute with a slight reservation that it has perhaps taken longer than it should have done for the message conveyed by British exporters to be translated into action in the Department. One example of its taking too long is the question of export credit insurance, to which the right hon. Member for Tweeddale, Ettrick and Lauderdale (Sir D. Steel) referred a moment ago.
There has been concern about the availability of medium and long-term export credit insurance. One acknowledges the changes that were made in the Budget —a 7.5 per cent. reduction in export insurance premium rates—coming on top of a 20 per cent. reduction last year and additional export credit cover of £1.3 billion targeted especially at Hong Kong, China and other far east countries. While one is grateful for those changes, it remains the case that the CBI, in its brief issued for today, none the less says:Although the increased funding in the Chancellor's Autumn Statement and March Budget was welcomed, some problems remain e.g.—the lack of cover for some markets; the ceilings on cover for others; markedly higher premiums than those paid by UK's competitors; and, for short-term business, uncertainties about the Government's willingness to continue reinsurance of political risk.In the light of that up-to-date comment from the CBI, I urge the Minister to re-examine the issue of export credit cover. The Minister said that the premium rates cannot always be the cheapest and the most competitive across the board. However, it is the case that the CBI, having 506 consulted its members, would not continue to make that point unless it still had worries about the matter. I hope and feel sure that the Minister will give his attention to the matter, perhaps in conjunction with my right hon. Friend the Chancellor.
The lesson repeatedly is that the Government need to realise more quickly some of the difficulties which exporters encounter. My hon. Friend the Minister referred to the three ministerial visits to China in 1992. That is commendable, but some commentators point out that those visits were made to boost business with China at a time when adequate credit cover or cover at an adequate price was not available so that when exporters made their quotations and delivery promises—if business opportunities arose—they were handicapped because of the lack of essential cover. It is a question not only of having the cover in place at the right price but of knowing in advance when negotiating the order that the cover will be available. if it takes—as one hears of some examples—two to three months to get confirmation of whether the cover will be available, an order can be lost before it is started.
I shall refer to the point made by my hon. Friend the Member for Halesowen and Stourbridge about the ethics of doing export business. I hope and feel sure that exporters in the United Kingdom play by the rules—at least, we play by the British rules. By any international standards, our rules must be commended. However, it is a sad fact that other countries do not always play by the rules and there are countless examples of orders being won by our competitors as a result, especially, of the bribing of officials. There is no point in turning a blind eye to that —everyone knows that it happens. We are faced with the dilemma: do we indulge in the same sort of practices, or maintain a more ethical way of conducting ourselves?
It should be possible for the United Kingdom exporters to stand their ground and always deal honourably. I am not for one moment suggesting that we should indulge in bribes. I am suggesting that we need to be acutely aware of the results of such bribes, the fact that they are being made and the need for us to be able to offer something with an equivalent attraction—not in the form of bribe, but in the form of a better deal or better delivery, or something equivalent—which makes it harder for the would-be recipient of the bribe to accept what is being offered. Otherwise, I fear that we shall lose export business, as we are doing at present.
A small firm in my constituency, Agriculture Polymers, has had direct experience of doing export business with Kenya and losing out as a result of the alleged bribing of local officials. That is one tiny example to which I refer, but many companies have encountered the same thing in other places.
§ Sir David Steel
I entirely agree with the point that the hon. Gentleman is making. Since he mentioned Kenya, is not the only way that we can help by having a general attitude in our foreign policy that backs up world financial institutions, as part of the programme of good government, to stamp out corruption in a much tougher way than we have done so far?
§ Mr. French
I agree with the right hon. Gentleman—that is a sensible approach. Indeed, I do not know of any positive, useful and practical proposals that have been put 507 forward by anyone to tackle the problem of bribery. The right hon. Gentleman's suggestion strikes me as being a perfectly constructive one.
There is also some evidence that our embassy staff, as a result of the influence of the combined effects of the DTI and the Foreign Office. have gone through a considerable transformation. However, there have been many examples where they have not been fighting hard enough. I shall quote from a letter sent to me by the managing director of another Gloucester company, Simon Gloster Saro:we are now producing at Gloucester the world's market leader in Airport Crash Fire and Rescue vehicles, but our ability to sell these world wide is restricted by the well known problem of the 'level playing field' when compared to our overseas competitors. Our major competitors in Austria, Holland and France not only appear to be indirectly assisted by their governments but they appear to get more direct assistance and more concessional finance directly available for their business … I can give you an example of one of our major foreign competitors who is in the fortunate position"—this is in the context of supplying firefighting equipment for use at airports, in which Simon Gloster Saro specializes—to have the Austrian Ambassador in person present a soft loan and a quotation to the Government Purchasing Authority for Airport Equipment"—the purchasing authority was in the far east.In spite of the competitor's vehicles being less suitable than ours, and much more expensive, the business was placed in Austria.I am happy to tell the House that that letter was written to me at the end of 1991 and the circumstances which brought that letter about have changed significantly. However, it remains the case that there is a knock-on effect because, if an order is lost in 1991 as a result of the ambassador of the opposing country, if I may put it that way, coming up front and taking an active role in securing the order, once a supplier has got into another country —in this case, Austria got in its equipment the tendency is that the purchaser, having decided on that line of equipment, will continue placing orders with the same source in subsequent years.
So Simon Gloster Saro lost out once and will almost certainly continue to lose out to this customer in the future. That is why the change that has now taken place should have a successively beneficial effect.
I also wish to refer to export opportunities with former Soviet republics. My hon. Friend the Minister referred to Kazakhstan. It is well known that Kazakhstan offers tremendous opportunities. The combined enterprise of British Gas with Agip is an example to everyone. It secured the right to negotiate exclusively with the Government of Kazakhstan to purchase the reserves of the giant Karachaganak gas field. That was a tremendous achievement.
I recall a parliamentary question that was answered on 13 January in which I asked about trade with Kazakhstan. I was able to discover how much export business was done by Belgium, Luxembourg, Denmark, the Netherlands and Germany with Kazakhstan, but, because the figures were not available, I was unable to discover how much export business Britain did with Kazakhstan. I am advised that the figures did not begin to be collected until January 1993.
I was pleased to learn from the answer to another parliamentary question that the Department of Trade and Industry section which previously dealt with the Soviet Union before it split up had been enlarged and 508 restructured. There are now separate sections dealing with Transcaucasia and central Asia. That is a sensible and reasonable division.
However. when Kazakhstan was recognised at the end of January 1991, we appointed as ambassador Sir Brian Fall, who is based in Moscow. He did not present his credentials in Alma Ata until October 1992—nine months later. Since then we have had a small embassy in Alma Ata headed by a chargé d'affaires. Unless there has been a recent change, the ambassador is still based in Moscow. It seems insensitive to the Government of Kazakhstan, who have sought to distance themselves from the Moscow regime, to base our ambassador in Moscow several thousand miles away. Our ambassador should have a role in securing export business. It is essential that the ambassador is located in the country itself. It will be only a disadvantage if that cannot be arranged.
There are some hidden obstacles for exporters. For example, the VAT form 101 "EC Sales List" requires the company that is exporting to include the customer's VAT registration number. The form assumes that if a company is exporting it automatically will not charge VAT. Of course, that is not the case. A company may well sell to an overseas customer for delivery in the United Kingdom. That applies particularly to certain services. If they are deliverable in the United Kingdom, VAT will still be charged, even though the supply is made to a foreign customer.
The form automatically assumes that the customer's registration number will be known. It works on the assumption that the company will have received a piece of paper from the customer placing the order. But if a company receives an order through the post, for example as the result of a direct mail campaign, it may receive back part of the direct mail that it sent out placing an order for the product that it offers. That is the experience of many publishing companies.
In those circumstances, the company does not know the VAT registration number of its purchaser. The amount of work and trouble involved in finding that number may be out of all proportion to the value of the sale. So form 101 is impractical and will cause a great deal of trouble. That is not only my view but that of one of my constituency companies, A. Searle and Co. in Gloucester, which has also drawn attention to form C 1501.
Form C1501 refers to intra-EC trade statistics. It contains several boxes. The form requires the first box to be filled in with the commodity code. But it does not make provision—as A. Searle and Co. has found out—for an invoice including several different items with different commodity codes. The items must be broken down if the form is to be filled in. If they are to be broken down, with a multi-part invoice, considerable extra work is required. A. Searle and Co. asks why it cannot simply give a copy of the invoice to Customs and Excise. That always happened in the past. All the information required was on the invoice. The form seems to be extra and unnecessary.
A. Searle also draws attention to the way in which the form is designed. Two lines are required for every entry. That makes it more difficult than usual to obtain. a spreadsheet computer package to deal with the form. That is especially difficult for small businesses. So I urge that such practical considerations are given careful attention when decisions to require data from exporters are made.
§ Mr. John Bowis (Battersea)
On point of order, Mr. Deputy Speaker. I apologise for interrupting my hon. Friend, but there is a rumour that inflation has fallen to 1.3 per cent. Is it possible to ask for a statement from my hon. Friend the Minister to confirm that?
§ Mr. French
While I do not intend to stray from the subject of the debate, I must say that the figures are good news for British exporters. It is good news that the Government's economic policy has continued to deliver steadily decreasing inflation which will undoubtedly assist our continued export drive. I am certain that Conservative Members will welcome that news. The Opposition are under-represented this morning—there is only one Labour Member and one Liberal Member present, but I am sure that they would also wish to welcome the news.
§ Mr. Don Dixon (Jarrow)
The hon. Gentleman keeps referring to the fact that there are few Members present. If he wishes to test to see if there are 40 Government Members present to form a quorum, I am prepared to call a Division to see whether there are 40 bodies on the premises.
§ Mr. French
If the hon. Gentleman feels that such action would be more helpful than continuing a debate on an important subject, he can take it. However, I think that Conservative Members would prefer to continue debating this important subject.
I congratulate the Department of Trade and Industry and the Minister representing it today. They have achieved a tremendous transformation in the past year or so. They are undoubtedly providing tremendous new backing and helpful support to exporters. My hon. Friend the Minister mentioned the additional export promoters who have been recruited and who will have a significant effect. They are, in the main, people who have spent much of their careers in the export business and do not come to their jobs with merely theoretical views. They have had direct experience of exporting, which is vital if' they are to offer advice to others.
My hon. Friend the Minister mentioned one-stop advice shops which are important. He also mentioned the overseas visits, which are of equal importance. We now appear to have a coherent strategy to promote our exports to the best possible effect. It is a story of tremendous improvement on which I congratulate the Government.
§ Mr. Michael Fabricant (Mid-Staffordshire)
I believe that it was in 1732 that Thomas Fuller said:There needs to be a long apprenticeship to understand the mysteries of the world's trade.I am aware that the hon. Member for Leeds, Central (Mr. Fatchett) has not served such an apprenticeship— believe that his apprenticeship consisted of writing books about industrial relations. I am sure that, were he in the 510 Chamber, he would be as delighted as I am that industrial relations have improved so much over the past 13 or 14 years.
I have served some apprenticeship in industry. Ten years before becoming a Member of Parliament, I formed a company with a colleague, and I have spent the past five or six years exporting broadcasting electronic equipment manufactured in Cornwall. I am the proud possessor of a Trade and Industry credit card—one of the many innovations to have come out of the Department in the past two or three years.
Some of my hon. Friends will know that my political leanings tend to be free market. I am a great believer in the 19th century economist Walter Bagehot, who said:All Governments like to interfere; it elevates their position to make out that they can cure the evils of mankind.On a programme the other day, one of my colleagues said that if there were no Ministers, the civil service would probably continue to run the country perfectly well, but the civil servants were the engines and we were the fuel to provide innovation. I am sure that the civil servants would agree. I notice that not only was Walter Bagehot an excellent 19th century economist, but he enjoyed longevity, as he writes, even today, in The Economist.
Experience in industry often tempers political philosophy. I believe that there is no monopoly on evil or virtue in any contract into which one may enter with a customer. There is no monopoly on virtue or evil in any treaty into which we may enter with a nation or group of nations. Compromise is the hallmark of what happens in the real world.
I have said that I am a supporter of the free market. I recall the former Prime Minister speaking in the House about nuclear defence. She said that we cannot unilaterally disarm while other countries have nuclear weapons. Equally, much as I should like the whole world to disarm and allow a free market to operate, as long as other countries support their industries we must intervene to do the same. That is only logical.
It is important to consider how we intervene. Some years ago, a Japanese Prime Minister said that Japan intervenes, but the difference between Japan's intervention and that of Anglo-Saxon countries—his phrase—was that we intervene to support our weak industries while Japan does so to make its strong industries stronger. That was probably true in the 1970s, but it is no longer true. We are intervening now, delicately but effectively, to support industries that are doing well and to help them to do even better.
How well are we doing? We are exporting 25 per cent. of what we produce. We are a great maritime nation and a great trading nation, and there is nothing wrong with being proud of flying the flag. Our per capita exports are greater than those of Japan or the United States of America.
The hon. Member for Leeds, Central said that I was reading out a Conservative central office brief, implying that there was some lack of authenticity about it. I have certainly read my brief—I hope that the Whip has heard that—but I would add that the information comes from the OECD, the International Monetary Fund and "Eurostat". The information is thus authentic.
Despite the recession overseas, our export volumes are at a record high. We can be triumphant about that. To some degree, our leaving the ERM had something to do with it. It has given us a competitive exchange rate and 511 some of the lowest interest rates in Europe. That will encourage our business men and manufacturers to invest, and they will be able to borrow more easily and service their debts. However, I quite agree with the right hon. Member for Tweeddale, Ettrick and Lauderdale (Sir D. Steel), who said that British banks are often very conservative about lending to manufacturers. That certainly coincides with my experience. It is a sad reflection on banking in this country that our bankers, particularly high street bankers, go to school and university and then straight into banking, with no experience of manufacturing. It is galling trying to put a proposition to a hanker only to be told by some pipsqueak that in his opinion the loan would he risky.
§ Mr. Stephen
Does my hon. Friend agree that the pipsqueak in question is likely to say, more often that not, "I am sorry; I have no authority—the matter will have to be referred to head office"?
§ Mr. Fabricant
I agree with my hon. Friend. It is a sad indictment of banking that there are pipsqueaks not only in the high street banks but in head offices, too. However, there are fewer of them in the merchant banks where there is a far greater tradition of the entrepreneurial spirit of adventurous lending. There is still a gap, although it is being narrowed, between the amounts being lent by high street banks and those lent by merchant bankers. It is sometimes difficult to borrow money for industrial development, but when it can be found interest rates are encouragingly low.
One of the advantages of membership of the ERM was our ability to control inflation. In 1977–78, inflation was 27 to 28 per cent. It was almost impossible to compete in world markets for long-term contracts that had to he priced over six months or a year because prices could not be maintained. Tenderers had to anticipate inflation and set rates abnormally high, making tenders even more uncompetitive.
The news today of inflation of 1.3 per cent., which is the lowest in my lifetime, is to be applauded. I am delighted that we left the ERM and I can see no immediate prospect of our returning to it. I hope that the Government will continue to follow their tight fiscal policy so as to maintain low inflation, low interest rates and competitive exchange rates, while encouraging growth. For the third successive quarter there has been a reduction in unemployment.
Britain enjoys the lowest corporation tax in the European Community. Companies have to operate in an environment that encourages trade and business, and low corporation tax is vital because it encourages not only British businesses but foreign businesses to invest in Britain.
Strikes have been mentioned. As I have said, inflation is the lowest that I have known in my lifetime. Strikes are at their lowest level since 1891, which is well before my birth and, I suspect, before yours, Mr. Deputy Speaker. In 1979, 29 million working days were lost through strikes. The hon. Member for Jarrow (Mr. Dixon) may say that that was the year of the winter of discontent and may wish to be excused from taking the credit for that. However, in 1978, 9 million working days were lost through strikes. Last year, only 500,000 days were lost, but even that is too much.
Over the past 14 years, we have transformed industrial relations, and that is another reason for United Kingdom 512 businesses beginning to thrive again. We have had huge amounts of overseas investment and for that we should again fly the flag. We are but one of 12 EC nations, yet we attract more than 40 per cent. of all new inward investment. That statistic is often quoted in the Chamber, but it is worth repeating. Although it is not the Government's job to run companies, they have lent a helping hand by creating the environment in which business can thrive.
One of the environments that has been created is non-compliance with the social chapter. Jacques Delors has said that this country has become an investors' paradise. I think that he was criticising us, but we should be proud of that. The Labour party said that it abstained in the vote on Third Reading of the Maastricht Bill last night because it did not want to support the treaty without the social chapter. As non-adherence to the social chapter has created jobs, it is extraordinary that the Labour party, which I am convinced wants that to happen, still supports a policy that would create further unemployment. Perhaps the true motive for abstention last night was that it did not want to show the divisions within its own ranks.
The Government have given another helping hand—to the Export Credits Guarantee Department. Up to a few years ago, other countries enjoyed an advantage over us. I remember competing in nations in southern Africa and the far east and in Kenya against firms such as Siemens, which had cover from HERMES, the German equivalent of the ECGD. There are similar organisations in Japan and elsewhere. On 6 April 1992, ECGD rates were reduced by 20 per cent. In the autumn statement last year, cover in key markets went up by £700 million and in the 1993 budget, a further £1,300 million went into ECGD cover. So far from being at a disadvantage compared to HERMES, the ECGD now not only competes on an equal footing but gives British exporters a positive advantage over many of its competitors.
I, too, join my hon. Friend the Minister in complimenting the President of the Board of Trade on having extracted money from the Treasury. That is money well spent, which was worth investing. Incidentally, I hope that my right hon. Friend the Foreign Secretary will be equally successful in getting money out of the Treasury when it comes to establishing British embassies abroad. The Department of Trade and Industry and the Foreign and Commonwealth Office are co-operating far better than they used to. It is good to see the DTI having representatives in British embassies. However, we have British embassies in only a few of the 15 new countries that used to be Soviet socialist republics. The German Foreign Office has managed to establish embassies in all 15. We need representation there, as my hon. Friend the Member for Gloucester (Mr. French) has said.
My hon. Friend the Minister has another excellent colleague—my hon. Friend the Member for Tatton (Mr. Hamilton), the Under-Secretary of State for Corporate Affairs, who is in charge of deregulation. That is a subject close to my heart, as I agree with Henry David Thoreau, who said in America as far back as 1849:Trade and commerce, if they were not made of rubber, would never manage to bounce over the obstacles which legislators are continually putting in their way.Let us try to sweep aside as much regulation as possible, leaving only that which assists exporters.
Last night, when we endorsed the European Communities (Amendment) Bill by giving it a Third 513 Reading, we also endorsed the ability of my right hon. Friend the Prime Minister to negotiate subsidiarity into the treaty. Although "subsidiarity" is a ghastly word which means nothing to 99 per cent. of the population, it is a tremendously important facet of the Maastricht treaty. As I said, no treaty or contract has a monopoly on virtue or evil. Nothing is that simple in the real world. Even so, subsidiarity is a vital ingredient.
Let us not forget that subsidiarity can be applied not only prospectively but retrospectively. I hope that that means that we shall be able to sweep aside much of the legislation that this Parliament has had to rubber stamp and which has proved an obstacle to our trade and industry. I am sure that the same has applied in other EC states. I am pleased that we have sent the Bill to the other place, where I hope its progress will be expedited.
The Conservative party and the nation have nothing of which to be ashamed with regard to exports. We must balance supportive intervention with the invisible hand of the free market. Britain will remain and grow as a great trading nation so long as the Department of Trade and Industry continues to balance interventionist policies with support for exporters, a task at which it has been eminently successful in the past couple of years.
§ Miss Emma Nicholson (Torridge and Devon, West)
I am pleased to be here on a Friday. That is an unusual statement to make for an hon. Member who represents a far-flung constituency. I was anxious to be here because of the nature of the debate and because it reflects on my constituency, as it does on most parts of the United Kingdom, for without exports many of the businesses in the area which I represent could not survive. In the modern world, we need Government assistance for exporters, and that assistance can be provided in a variety of ways.
I shall concentrate on many of the problems that companies face in my constituency as they strive to export and survive. I shall refer to some of the ways in which the Government have assisted and will continue to assist and point out ways in which they could do more without indulging in the sort of massive intervention which I could not support.
Industries and exports come in many shapes and sizes, so it may not be inappropriate for me to begin by congratulating Arsenal on the team's wonderful win last night. It not only won the cup final but, shortly before, won the league cup. Much was said by the hon. Member for Leeds, Central (Mr. Fatchett) about the need for manufacturing industry. Perhaps he is not aware that the international coverage of last night's wonderful match earned our television producers good foreign exchange. It is outdated to identify exports simply as coming from the manufacturing and service sectors.
I listened carefully to the hon. Gentleman's speech and regretted bitterly that there were so few Labour Members present to hear it. Perhaps the Labour party was too frightened last night to whip its Members or even to encourage them into supporting the Government's ratification of the Maastricht treaty. I believe that they were wholly wrong to have been so fearful. After all, the Maastricht treaty merely fleshes out many of the concepts contained in the Single European Act 1986. The Single 514 European Act has been not only embedded in our legislation since 31 December but has become a fact, an actuality. Membership of the European Community, together with the Single European Act, will probably do more to assist our exports than any other single Act of Parliament has ever done.
I represent a farming constituency and farmers are hands-on experts on the European Community. It is ironic that sometimes the success of exports reflects adversely on jobs in the United Kingdom. For example, 92 jobs were reported lost two weeks ago in Torrington, a small town in my constituency whose early manufacturing success was built on being Britain's pre-eminent glove producing town. There were two wonderful businesses there in the 18th century. Subsequently, we had English China Clays and some opencast mining, which assisted. Unfortunately, the glove industry has gone. Ladies and gentlemen no longer wear gloves.
At present, because mine is an agricultural constituency, much of the work that Torrington has managed to create is centred on two factories—a dairy business, which recently closed with devastating job losses, and a fresh meat company with a large abattoir, which is owned by Hillsdown Holdings.
I tell the story because it shows the harshness of successful exporting. Dartmoor hill farmers have developed a niche market for small lambs, exported live and on the hoof. Spanish, French and Italian trucks are now loading up with small lambs that weigh about 12 kilos, which is smaller than the normal size that we eat in the United Kingdom. The lambs are transported across the channel and are killed in France, Italy or Spain. They are then stamped as having originated from the country in which they were killed. It is a successful, newly created export trade that has now grown to include export of some of the lowland lambs.
Those 92 job losses in the fresh meat company derive directly from the success of the Dartmoor hill farmers and the lowland farmers in exporting live lamb on the hoof to be killed in other EC nations and stamped as having been bred there. The lambs are then purchased by housewives in those countries, whose families eat the excellent Devon lamb, fondly believing it was bred in their own country.
The result is interesting. The price of lamb is higher on the hoof than it would have been dead weight killed in the abattoirs of Torrington, which has driven up the price of lamb in the United Kingdom and successful exports mean job losses in the United Kingdom.
That story shows the complexities of industry. As much as I welcome the newcomer to the Opposition Front Bench —the hon. Member for Ogmore (Mr. Powell), who is a friend of mine—I regret that the formal Opposition spokesman, the hon. Member for Leeds, Central, has seen fit to leave the debate. I make that not as a party point but because I want seriously to criticise some of the hon. Gentleman's comments.
The hon. Gentleman spoke of manufacturing versus service industries. I took the opportunity to research his background. I would not criticise anyone who received his education at the London School of Economics, became an assistant lecturer there, and went on to become a lecturer at another university. That is nothing to rubbish but a splendid learning curve, and I honour the hon. Gentleman's achievements.
However, as far as I have been able to ascertain, the hon. Gentleman has no experience of industry. His 515 complete lack of experience of industry was reflected in his speech—in the lamentable ignorance he displayed of many of the subjects that he tried to discuss. I am aware that the hon. Gentleman was a lecturer in industrial relations, but, judging from his responses to the interventions of my hon. Friends, I doubt whether he has experience of industrial relations other than in negotiating the salaries of university lecturers. I feel powerfully that experience of industry is a great help when debating a subject of such enormous moment.
Whether an industry is described as being in the manufacturing or service sector is only a matter of internal definition. Those are just labels that we chose to attach to an export product at a particular moment in time. My first 10 years in business were spent in the computer industry —mainly software, and a short time in hardware. That industry has seldom needed Government intervention— and on those few occasions when it has, it proved to be ineffective. It has been a success story despite being left alone, and it is a growing success. I believe that computer software is defined as a service industry.
President Reagan said that the United States should not expect to earn its living in the world by opening doors and bowing and scraping all the time. Nor should this country. That is not my definition of a service industry. I do not believe—and this may be heresy to some hon. Members who are not present—that we can earn our living in the world by pushing up the prices of houses and selling them to each other. That is a false concept of recovery. For no other capital investment or purchase are rising prices seen as a good thing. They are bad. We should seek to keep house prices as low as possible. Judging recovery by house values, as estate agents do, is folly.
The only basis on which the United Kingdom should judge its own performance or recovery is exports. My hon. Friend the Minister pointed out the truth of that in his excellent and outstanding speech, which I warmly welcomed—though we have not yet discussed sub-post offices. Nevertheless, my hon. Friend made a first-class speech by any standard. I will make his point in another way by reminding the House that, of all nations, the United Kingdom needs a high export base. We are not blessed with magnificent natural resources. We have North sea oil, but our coal is deep and difficult to extract, and it is often difficult to obtain a competitive price for it.
As an island nation, we excelled in shipbuilding in the days long gone when ships were a primary way for moving people around. The situation is now different.
We need exports far more than most of our competitors do, and at a far higher level. Some 30 to 35 per cent.. of our gross national product must be created by exports if we are to have a satisfactory balance of payments. Export trade is enormously important; it is the most fundamental trigger to recovery. It is the only valid pointer and it is the one factor which will make the United Kingdom fully competent economically and fully competitive in the international market.
§ Mr. Stephen
My hon. Friend referred a moment ago to the computer industry. Is not that an extremely good example of the artificial division between services and manufacturing? The writing of software is intellectual property and its export could be regarded as the export of services. The computers themselves are hardware and their 516 export could be regarded as the export of manufactured products. In reality, they are both parts of the same integrated industry.
§ Miss Nicholson
I thank my hon. Friend for his perceptive comments. He mentioned the export of intellectual property. I am sure that my hon. Friends, especially the Minister, are well aware that the European Community sees the information market as being of equal value and equal importance to the physical market. Following the introduction of the Single European Act, the Brussels bureaucrats, for whom I have much respect, have set their minds to seeing how we can create a secure and yet free-market framework for the transmission of intellectual property and for the free flow of information. In other words, they have decided that the information market is as important as the physical market.
The hon. Member for Leeds, Central criticised heavily Conservative Members who took the time and trouble to visit British embassies and, although he did not mention them specifically, high commissions. He implied that Conservative Members were going round the world at Government expense and that they were not doing a proper job. I am delighted to tell him that, while a Member of Parliament, I have taken the opportunity, at my own expense, to visit a number of embassies and high commissions and to discuss British exports with the commercial attaches. I have had the good fortune to see the success story that many British industries have achieved in exports.
One of the British success stories in exports that is rarely identified here is the Commonwealth Development Corporation. It is Britain's investment arm of our overseas aid effort. I stress that it is Britain's investment arm because I am well aware that our debate concerns exports and not aid. This effort has been going on since 1947 and is now working in 45 nations. It was gratifying to have the opportunity to be in Papua New Guinea and to see British machinery working on sugar plantations and palm oil plantations. It was wonderful to see the way in which British trade expertise, Government and private, blended together to offer Papua New Guinea the opportunity to build up its trade. That is an export industry which we fail to honour here as we should.
It is interesting to see the revival of a gold mine in Indonesia with British trade expertise—perhaps Department of Trade and Industry expertise in an advisory capacity. It is interesting to go to Thailand to see prawn farming and to see a huge palm oil plantation on degraded land which has allowed dispossessed peasants the opportunity to create a trade.
The United Kingdom is often wrongly criticised by ill-wishers who are British citizens for combining British trade with aid. Having seen how committed British industry workers are to the people whom they seek to serve in the poorer nations of the world, I think that it would be folly to withdraw our expertise. It would lead to the cessation of the beginnings of trade in some of the worst areas of the world that I have ever visited.
Those areas of the world are a lesson to us. In visiting factories in Indonesia or other parts of south-east Asia, the lesson that one learns is harsh: that the competition that we face far outstrips our energies and efforts. It is a shock to see people eagerly going to work in factories, where they work at two or three times the speed of factory workers in many parts of the United Kingdom. They produce goods 517 and package and export them with delight, speed and excellence and with the benefit of a loose free-market structure.
Not for one moment do I want this country to revert to slave labour. Reference was made earlier in the debate to the reason for so many manufacturing companies—manufacturers of machine tools, manufacturing parts, clothing and footwear—having gone into decline, but the reason, surely, must be the effect that over-powerful trade unions once had on British industry. They had British industry round the throat and throttled much of it to death. That fact cannot be ignored.
We cannot pretend that two decades of over-strong unions never existed. We should not cease, therefore, to pay credit to the Conservative Government who, in successive terms of office, have altered the balance and made it possible for British industry again to export successfully.
The Government have embarked upon an excellent initiative in my constituency. I repeat that exporting plays perhaps the most important role of all in Torridge and West Devon. Before I turn to the two companies that I intend to mention briefly and ask the Minister for his comments, may I say how much I admire the Torridge district council's chief executive, Richard Brasington, and his staff for the huge efforts that they have made to link our part of Devon, Torridgeside, with a similar part of France. To build trade links at that level is an interesting initiative. It is going well, and I believe that it will bear fruit.
Many companies in that part of my constituency are exporters. The North Devon Manufacturers Association is an excellent body. One of its key members is Jamestan Engineering Ltd., whose founder chairman and chief executive is Bryan Shugar. Bryan has been discussing with me recently the new export centre that has opened just outside my constituency—but nearby, in Barnstaple—whose purpose is to assist industries in north Devon and in Torridgeside that want to do business in the European Community. He tells me that the centre is supported by the Department of Trade and Industry. North Devon county council, Torridge district council, the Devon and Cornwall TEC, whose chairman, Eric Dancer, is the chairman of Dartington Crystal, which is in my constituency, and the North Devon college—a first-class further education college.
Bryan suggests that this new initiative, the export centre, will provide an excellent opportunity for companies such as his to take the fast route into Europe as and when potential business opportunities there become available.
Mr. Shugar made another point of which. perhaps, we do not take sufficient account; certainly the hon. Member for Leeds, Central did not do so. I am referring to the peace dividend. Mr. Shugar says that there is an inevitable and rapid decline in defence spending in the south-west region. Of course, that must be so, because, otherwise, the peace dividend would be just a fiction. It is therefore all the more essential that we achieve as close commercial links as possible with Europe to ensure our future growth and prosperity.
I shall briefly describe the North Devon Export Centre. Its aim is to assist businesses, especially small businesses, in north Devon to develop profitable sales in Europe and 518 other parts of the world. It will provide advice on the sales potential of members' products; help with locating suitable potential customers or agents; and advise on leaflet and translation needs and on documentation, freight and value added tax.
The centre will arrange meetings and seminars for members on specific European business possibilities. It will produce a broadsheet of members' products for distribution, initially in France and the Republic of Ireland. It will encourage visits to our area by European trade groups and individuals so that they may meet its members. It will develop an information section on all the DTI services, exhibitions and other relevant data. It will provide members with names of translators, freight forwarders, and so on. It will even provide members with a fax service and, if required, help with initial European and overseas mail, for which a nominal charge will be made.
It is a great pleasure to welcome the setting of the centre, which opened only on 4 May. It is very new and is looking specifically at ways to help small businesses to win business in Europe. It is supported by the DTI and the other organisations that I have already mentioned. That is the good news.
This is a good moment for the hon. Member for Leeds, Central to come back into the Chamber. I have criticised him, but now I propose to agree with him on one matter. I, too, have a shipbuilder in my constituency and I want to convey to my hon. Friend the Minister some thoughts from Appledore Shipbuilders Ltd. Its managing director, Mr. Jim Wilson, is as excellent as Mr. Bryan Shugar of Jamestan Engineering. However, his view of the Government's support for exports of British shipbuilding is not as glowing. He has the distinct impression that European shipyards—in particular, Italian, Dutch and German—have been getting more support than British yards.
Appledore has created a niche market in dredgers. Mr. Wilson cited the case of an order from Indonesia for three dredgers which was awarded to a west German shipyard that then subcontracted the work to east Germany. That is not a political statement; it is just a geographical identification. The price offered by the west German shipyard was almost twice that of Appledore, but the German Government made a financial aid offer of 25 years' credit with a holiday for the first eight years.
Mr. Wilson told me that east German shipyards receive 36 per cent. intervention funding, compared with a maximum of 9 per cent. for British yards. He asks that the Government—and, indeed, I as his Member of Parliament —insist that all shipyards build on a level sea.
Mr. Wilson gave another example. Just over a year ago, Appledore was the front runner to receive an order for a dredger from a Belgian owner. The order was blocked because the Belgian Government insisted that it be given to a Belgian shipyard. That was confirmed to him by the managing director of the Belgian shipping company. Perhaps we play too fair and we underestimate the need to be patriotic. I make that suggestion on behalf of the Appledor Shipbuilders.
In a speech last week, the Financial Secretary to the Treasury said:Enterprising individuals are held up as role models on the basis of their record for product innovation, service 519 improvement or production efficiency … They are a testament to the system's capacity to mobilise human inventiveness, drive and originality.It is important to encourage entrepreneurs such as Bryan Shugar and Jim Wilson by recognising the fact that, when they ask to be heard, they are not seeking major Government intervention internally in a free-market system—indeed, most senior business men I know ask that the Government leave them strictly alone—but for the Government to do their best to ensure that other Governments play by the rules that we have already accepted.
As treasurer of the Positive European group, I supported the Maastricht treaty from start to finish, and I know that it will introduce a measure of discipline. I ask the Minister to assure me that he and other Ministers will do all in their power to ensure that the Government and the Brussels bureaucrats manage to level the great unfairness that Jim Wilson has so cogently identified.
Lest the hon. Member for Leeds, Central thinks that I agree with him too much, let me tell him that when the Appledore shipyard was in public hands the work tate was much slower. As soon as it went into private hands, productivity improved immensely. For example, two dredgers were being made instead of one. That made it possible for the shipyard to compete in the wider world.
Mr. Deputy Speaker, you have been kind enough to allow me time to speak this morning for which I am grateful on behalf of my constituents who export and those who wish to do so. I am grateful to the Minister for his work and for the effort he has made this morning. I know that he has been listening and that he will be kind enough to take my thoughts into account.
As a supporter of economic and monetary union, I was sorry that we went into the exchange rate mechanism late and dropped out when we did. Had the Opposition spokesman been more accurate in his perception of me as a woman and not as a man, I could have told him that I sought devaluation as early as February or March last year. Perhaps because of my own history in exporting, I felt that our currency was above its natural level. However, I dislike immensely the fact that we had to devalue, and I am very sorry that it was forced on us.
I look forward to the day when our exports are running so high that we shall naturally re-enter the ERM. Although I am aware that it cannot be soon, I see it on the horizon. With the ratification of the Maastricht treaty, I am confident that the various stages outlined for a single European currency and for convergence will be reached in five, six or seven years, although who knows exactly when?
Under this Government, the United Kingdom is a success story and will be successful in export terms in the future. I urge the Government to continue their good work and the Minister to take my comments on board.
§ Mr. Patrick Thompson (Norwich, North)
I am graterful for the opportunity to take part in what, it is agreed across the Floor of the House, is an extremely important debate on the Government's support for exporters. One thing for which business men have asked continually, perhaps above all else, is stability—economic stability and international stability. This morning, my hon. Friend the Minister, in response to a point of order, delivered the good news that the inflation rate has now moved to 1.3 per cent. on a yearly basis. Surely, that is the 520 sort of good news and stability that our exporters want. I welcome that news and add it to the congratulations that I shall give my hon. Friend the Minister on the Government's other achievements in connection with the work of our exporters and support for them.
I shall refer briefly to international stability. My hon. Friend the Member for Torridge and Devon, West (Miss Nicholson) spoke about the good news last night that the Maastricht Bill received its Third Reading with a good majority. I do not stand back from agreeing totally with my hon. Friend that it was necessary for the Maastricht process to continue because business and industry have been calling on the House to get on with the process—they need stability not only in Europe but in the wider world.
Time and again, we have been warned that failure to ratify the treaty would threaten the single market and the 340 million consumers who are involved in it, weaken our influence on European decisions and make us less attractive for inward investment. The advantages of ratification, which I hope we are well on course to achieving, will be enlargement of the European Community and fresh opportunities for producers to win back Europe's share of the world markets and break out of recession. I am pleased to support my hon. Friend in her remarks on the Maastricht Bill and the achievement last night.
What is more important is economic stability, a low inflation rate and international stability. After all, we can all see the appalling events that are taking place in Europe and elsewhere. All that is more important than the perhaps temporary good news about the devaluation of the pound. Obviously, it is good news for our exporters that the pound has been devalued, but I certainly put the need for economic stability and international stability well above that. I know from recent submissions that I have received from the CBI and others that responsible business people in the United Kingdom share that view.
Britain is a small island. We depend on our talent and our skill. We must interact with the outside world and we must export to survive. My hon. Friend the Member for Gloucester (Mr. French) tempted me by referring to Corelli Barnett and engineering and manufacturing industry in the United Kingdom. I have taken up that theme many times in the past and I shall resist the temptation to do so today, but I was pleased that my hon. Friend briefly referred to that.
I was interested in a great deal of what the Opposition spokesman on trade and industry, the hon. Member for Leeds, Central (Mr. Fatchett), said. During this debate, there has been a measure of cross-party agreement on manufacturing and exports. I would part company with the hon. Gentleman in only one aspect—he was a little grudging in giving credit to my right hon. Friend the President of the Board of Trade and his colleagues for the real achievements that we have made in exports. After all, my right hon. Friend said that he was fighting for Britain. The hon. Gentleman referred to my hon. Friend the Minister for Trade, who has been to China three times, and to Japan, Hong Kong, Thailand, Indonesia, Italy, Germany, France, Spain, Portugal and Belgium—just to mention a few. We must pay tribute to my right hon. Friend and his colleagues for the work that they have done in promoting exports and helping our exporters. I have felt strongly about the manufacturing industry and exports for a long time.
521 As Britain emerges from recession, it is clear that one of the key factors in sustaining recovery will be the success of our exports. Long-term non-inflationary growth is more likely to be achieved by expanding our exports than by allowing domestic demand to grow too rapidly, thereby sucking foreign imports. It is clear from the recent high level of exports to countries outside the European Community and from the dramatic reduction in the trade deficit to £918 million last March that increased success in exports is already becoming a reality. That is a considerable achievement when many of our EC partners are still in recession and are experiencing falling demand.
I subscribe to the Martyn Lewis school of broadcasting. The more often we talk in the House about good news, the better it is for our morale and the morale of our constituents. So why should I not, with the help of a document which could even be a Conservative central office brief, remind the House that export volumes were at record level in the last quarter of 1992 in spite of the economic slowdown of our major trading partners?
Why should I not remind the House that recently United Kingdom export performance was impressive in a wide range of sectors? There were significant increases in 1992 in sectors ranging from electronics to iron and steel, and from bulk raw material to clothing and beverages. So we are building on a foundation for export-led growth. The value of visible exports to non-EC countries in the first quarter of this year was up 20 per cent. on a year ago.
I could continue with a catalogue of good news. I do not see any reason why we should not cheer ourselves up with this good news and give Martyn Lewis more food for his excellent campaign. I am, without hesitation, on Martyn Lewis's side in the matter of news coverage.
The Government already devote substantial and increasing resources to help British companies succeed in overseas markets. They have proved themselves ready to listen to the needs of businesses in our export markets. We now have commercial offices in all our embassies under the management of the joint directorate of the Department of Trade and Industry and the Foreign Office. Those offices are well informed about British industry's products and the economic potential of the countries in which they serve.
The machinery that we need is in place; so are the economic incentives. My right hon. Friend the Chancellor of the Exchequer recently responded to requests for support for exporters by cutting export credit premiums and extending the cover available in key markets by £1,300 million in the next three years. Exporters will also benefit from the reduction in advance corporation tax, the extension of the loan guarantee scheme, improved VAT relief for bad debts and lower rates bills.
In addition, I am pleased that the Government recognise the importance of manufacturers' exports as the cornerstone of any successful export drive. In spite of the good news, there is no room for complacency, as my right hon. Friend the President of the Board of Trade recognises. In the 1980s, oil exports partly displaced manufactured goods in our balance of international trade. Now that oil production has passed its peak, an increase in the volume of manufacturing production for export is vital, as the Engineering Employers Federation has repeatedly and rightly pointed out.
522 My interest in engineering is well known. As a member of the all-party group on engineering development, I listen carefully to any information that comes from the engineers and manufacturers. Engineering exports have risen by more than 29 per cent. since the 1980s, but engineering imports have risen by more than 79 per cent. during the same period. I am sure that my hon. Friend the Minister accepts that those percentages must be reversed if there is to be a lasting revival in our country's economic fortunes.
There is a structural problem to be tackled. Engineering output grew less rapidly than the economy as a whole in the 1980s. If it is to grow more rapidly than the economy as a whole in the 1990s through export-led growth, the capacity of the financial system to fund expansion by customers and suppliers must be in place; so, too, must the capacity to produce when our key EC market revives.
Two points are vital to our future success in exports, one of which is reflected in the anxiety voiced by some of those involved with small businesses in my constituency and by Norfolk and Waveney chamber of commerce. The message has come, particularly from my area, that, despite promises made by the Department of Trade and Industry, smaller businesses are still being given a raw deal in export promotions.
I shall pick up an issue raised by the right hon. Member for Tweeddale, Ettrick and Lauderdale (Sir D. Steel). I always have to rehearse the right hon. Gentleman's constituency so that I can refer to it when he speaks in the Chamber, and I am sorry that he is not here now to hear me get it right. I was interested in his remarks about smaller businesses and how important it is for the Department to give as much support to small businesses as to large ones. Perhaps my hon. Friend the Minister will comment on that later, as it is not a new concern.
I know that it has long been a worry of the Government that a few large exporters account for what seems to be a disproportionately large share of exports. Last year, 50 companies were responsible for 44 per cent. of visible exports. That is why the Government continue to attempt to target export promotion at smaller companies. My constituents in Norwich who have spoken to me on the subject feel that the previous relative lack of success has been due not to a lack of will or understanding by the Government, but to the over-complex proliferation of organisations that offer advice to small companies.
At present, a small business man wishing to know more about how to break into overseas markets can receive advice from organisations including his local council, enterprise agencies, the local chamber of commerce and the local training and enterprise council. In the past, there has been little or no co-ordination in the advice offered by the different organisations and little way of knowing which advice is more accurate or authoritative. I know that my hon. Friend the Minister will say that the Government have made much progress and I welcome that. The pumping of funds for the dissemination of information into organisations that offer conflicting advice is a waste of money and time. It dilutes funds that could be spent more effectively if focused on a single organisation offering already harassed business men clear, simple and straightforward information.
There is a feeling among local businesses and organisations that the establishment of one-stop shops will be a significant move towards solving the problem. Such shops provide a satisfactory way of combining the multiplicity of separate services that are currently 523 available. I believe that more emphasis could be placed on one-stop shops as local centres that can provide information and advice on exports. They could provide the much-needed link between the Department's export promotion and smaller local businesses. They would put our small firms on a more equal footing with their continental rivals by offering them easy access to services that would help to improve the quality of their products, their productivity, competitiveness and export potential.
There need not be a conflict between the priorities of helping established large exporters and helping smaller, less-experienced companies. If the Government provide more effective help to small and medium-sized businesses wanting to export, that would benefit all businesses and the country as a whole.
My right hon. Friend the President of the Board of Trade recently listed three main ways in which the Government could help British trade: by creating a benign economic climate, by promoting better links between industry and education—a subject dear to my heart—and by decreasing the amount of bureaucratic red tape that still cripples competitiveness in this country. I know that progress is being made on the first two aspects, but can my hon. Friend the Minister assure me that enough progress is being made on the last one?
I served as a member of the Joint Committee on Statutory Instruments for a year or so before the last general election. The sheer volume of regulations that poured through that Committee was horrifying—the problem of excessive bureaucracy remains with us. There is an urgent need for further deregulation—a subject close to the hearts of a number of my colleagues. Brian Prime, the foreign affairs chairman of the Federation of Small Businesses, was recently quoted in the press as saying that many British businessess felt that they were at a disadvantage to businesses in other European Community member statesdue to the heavy-handed implementation and enforcement of European legislation in the UK.He went on to suggest thatthe British Government's priority in 1993 must be to redress this imbalance by either ensuring the interpretation of regulations is equal throughout Europe, or by adjusting the British approach to match the more relaxed style of enforcement enjoyed by competitor nations.Mr. Prime's only mistake is that he fails to point out that not all this red tape is imported from Brussels; much of it, as my right hon. Friend the President of the Board of Trade himself conceded, is self-generated.
I know that the DTI's deregulation unit is working to cut unnecessary red tape. I know from recent parliamentary answers that my hon. Friend the Under-Secretary of State for Corporate Affairs is working hard to cut unnecessary red tape, whether it emanates from Brussels or from Whitehall. The difficulty is that I am not yet convinced that we are really winning the battle.
The problem of red tape and of the ludicrous results to which it leads is well known by all hon. Members. I am sure that I need not remind my hon. Friend the Minister of the famous calculation that an average small business owner would have to read 26 booklets and nearly 270,000 words to become familiar with all the regulations affecting him. The mental effect of all that on small business owners can hardly be overestimated. The knowledge that the incorrect completion of a fiendishly difficult import-export 524 document could result in criminal proceedings is hardly likely to foster the confidence and courage to break into foreign markets.
The burden of excessive bureaucracy falls particularly hard on smaller companies. Businesses employing fewer that 15 people spend the equivalent of 2.5 per cent. of their turnover dealing with VAT payments alone, while companies employing up to 500 people need spend only 0.07 per cent. The small business man has to be a jack of all trades; he cannot be an expert on everything. Nor can small entrepreneurs be expected to spend an infinite amount of time on form filling when the survival of their firms is at stake. The system is clearly unfair and is to the long-term detriment of us all.
I recognise that my right hon. Friend the Prime Minister is extremely concerned and has stated more than once that he is determined to tackle the problem once and for all. He is not, however, the first Prime Minister to attack the problem of red tape. The Government have had a deregulation initiative in place since 1985, but so far they have not succeeded in significantly reducing the constant flow of legislation and new regulations.
I hope that my hon. Friend the Minister will provide a great deal of reassurance on this point; I hope that he will tell us that the match is even now being applied to the bonfire of regulations. If he can do that, I will be happy to support him in this, as in so much else.
The big question is: what can the Government do that will make things different this time? An excellent suggestion proposed from several quarters in recent months is that all future legislation should be drafted with a view to supervising the outcome of actions rather than policing the processes that lead to them. That simple measure would effectively reduce the need for a great deal of heavy-handed and restrictive bureaucracy.
An even more simple and effective suggestion, however, is that recently made to the press by my hon. Friend the Member for Havant (Mr. Willetts)—no regulation should be allowed unless it can stand up to two basic tests: what cost does it impose and what are the benefits to consumers?
Red tape has been seen by previous Governments as a convenient way of tackling problems while passing the buck and handing the costs over to private businesses. That may seem like a saving in the short term for the Government, but the unseen long-term costs of such excessive regulations are immense. They are costs to exporters, too. We must not forget that this debate is about helping them.
Tackling red tape will not be easy. It is an endless task that will require many tough decisions. In the end, however, if we want to continue the fight against inflation and to improve our exports—and, ultimately, to save jobs —it is the only course open to us. I urge Ministers to continue their fight, as they call it, for Britain overseas. I congratulate the Government on their excellent progress in helping our exporters. I urge my hon. Friend the Minister and his colleagues to continue to deal with regulations as I have suggested. I hope that the match has already been applied.
§ 1.4 pm
§ Mr. Michael Stephen (Shoreham)
No hon. Member should delude himself or herself into thinking that the success or failure of British exporters is primarily due to what Governments do or do not do. It is essentially a 525 matter for the companies themselves and it depends on the genius of their inventors, the skill of their designers, the precision of their engineers, the flair and imagination of their sales force and the competence of those who manage their finances and employee relations. There is only so much that government can do and our Government are doing it.
The value of the pound is crucial to exporters and I welcome its present competitiveness in world markets. That is of great benefit to our exporters because British goods are now much cheaper to foreign customers than for many years. The other side of the coin is that it is now much more attractive for British people to buy British goods. That applies not just to tangible exports and imports, but to services.
I have the honour to represent a constituency on the Sussex coast which, to some extent, depends on tourism for its livelihood. I am glad that it will now be much cheaper for British people to spend their holidays with us on the Sussex coast than to go to other countries.
As I have said, the value of the pound is crucial to our exporters. The most serious mistake we made for many years was entering the exchange rate mechanism. Before Opposition Members seek to draw any satisfaction from that, I say immediately that Labour and Liberal Democrat Members were much more enthusiastic than Conservative Members about joining the ERM. The problem with the ERM was that it was a wholly artificial system. It was doomed to failure from the beginning, as King Canute would have told told us if he were still alive. It is not without interest that he was a Dane.
The exchange rate mechanism was fundamentally flawed because the value of a nation's currency depends on the decisions of millions of economic decision-makers all over the world. They send signals about what they think of an economy and its management by the Government. To try to distort those signals is rather like fiddling with the oil pressure gauge on a motor car when the gauge shows that something is wrong with the engine. The right thing to do is to attend to the engine.
I do not regard the day of our leaving the ERM as black Wednesday but as golden Wednesday because it gave us the opportunity to adjust our economy to world realities and not to some artificial system. The ERM was sought to be justified on the ground that it was a necessary discipline to control inflation. I have never thought much of that argument. It is rather like saying that the British Government are a set of lunatics who have to be put in protective custody because they cannot be trusted to behave sensibly on their own. That is not the case, because our Government can be trusted to manage the economy sensibly now that we have freed ourselves from the artificial constraints to which we were subjected.
Labour says that it would have devalued within the ERM much earlier, but devalued to what rate? It is almost certain that whatever rate was chosen would have been wrong because economies are dynamic: they change from day to day and from week to week. Whatever rate was decided would have been wrong. We would probably have fixed too low a rate and, as a result, to prevent our currency going through the ceiling of the band, we would have had to pitch interest rates far too low for our internal economic circumstances, and that might have fuelled 526 inflation. Devaluing within the ERM goes against the point of having an exchange rate mechanism, which is intended to fix exchange rates within a narrow b[...]d. If one keeps devaluing down or revaluing up, that makes nonsense of the whole idea, but then it was nonsense anyway.
As a result of our coming out of the ERM, we have been able to manage our economy according to our domestic circumstances and I share the welcome that my hon. Friends have given to the extremely good news that inflation has dropped to 1.3 per cent. That is crucial to our exporters. One of the reasons why they have not done very well in the past 10 to 20 years is that inflation—particularly unit wage cost inflation—has priced our goods out of world markets. That is why we were unable to compete with other countries, particularly those of the Pacific rim.
Exit from the ERM has also enabled us to bring interest rates down to manageable levels, and that is of crucial importance to our exporters. Low rates of tax are of great benefit as well and I am glad that we have one of the lowest rates of corporation tax in the developed world. A flat low rate of corporation tax is the best way to proceed, rather than going in for the kind of gimmicks advocated by the Labour party, such as elaborate capital allowances which are open to abuse.
As to regulation, I entirely agree with the comments of my hon. Friend the Member for Norwich, North (Mr. Thompson). I am afraid that regulation is one of the greatest burdens of British industry and commerce. That is why I am so glad that the Government have taken such a firm stand against importing the social chapter. One can see the results of it in France and Germany, where it renders many of their industries uncompetitive. If that is what they want, let them have it, but we are not having it here.
We want the ability to be flexible and to respond to changing economic circumstances, and to give our managers the right and confer upon them the duty to work with their employees to produce the desired result. They should not be constrained by a remote bureaucratic system telling them what they can and cannot do. For example, there should be no imposition of a minimum wage.
Every hon. Member wants to see workers remunerated fairly for what they do, but what would be the result of telling a small business man that he must pay his people a minimum wage? If he is an honest business man, as most of them are, he would say, "I cannot afford it. My business will not sustain those burdens. If you insist that I pay my workers a minimum wage, I shall have to sack some of them." We do not want that. We have far too much unemployment already. If we were to accept the Opposition's argument, unemployment would go up, not down.
I also pay tribute to the sterling work of my hon. Friend the Member for Tatton (Mr. Hamilton), who has been cutting through red tape. I can think of nobody better qualified to do that job. He has my full support and I am sure that of all Conservative Members. I sometimes see a gleam in the eye of civil servants when one mentions deregulation, because they think that they can create a new Department staffed by a couple of dozen civil servants to manage the process. I am sure that that has not escaped the notice of my hon. Friend.
Education is of great importance to our exporters as well. As I visit exporting businesses in my constituency and elsewhere, I am told of the lamentable quality of education 527 in our state system. They say that they have to provide remedial education when they receive young people from our schools at the age of 16.
That is why I strongly support the courageous efforts of the Secretary of State for Education and his predecessors to do something about that appalling problem.
There are teething troubles in every endeavour. Perhaps there might not have been so many if, with the benefit of hindsight, we had set about the process in a somewhat different way. We have been let down by the educationists who were relied on by Ministers to produce a workable system of testing—but we can debate that matter on another occasion.
I have some experience of the countries of the Pacific rim. I am impressed when I visit them to see their young people queuing up, eager for education, waiting for their schools to open. By comparison, many of our youngsters have to be dragged to school. That is a sad state of affairs.
Reference was made earlier in the debate to the reasons for the decline of some of our great industries. I strongly believe that the decline of the motor and machine tool industries and the shipyards was due in part to the restrictive practices—strikes, general disruption and unco-operative attitude—of the representatives, sometimes self-appointed, of the work force throughout the 1960s and 1970s. Looking back nearly 30 years, I vividly remember the demarcation disputes of the 1960s in the shipyards.
There are, of course, other factors. Hon. Members have pointed out that many more goods are transported by air and road than was previously the case. Many more people travel by air than by sea these days. But the principal reason, in so far as it was within our control, for the decline of those great industries was bad industrial relations. I am glad that under the Prime Minister and his predecessor, we have now got the position right. I hope that Mr. Knapp and his friends in the Rail, Maritime and Transport union are taking note of this debate and appreciate their responsibilities in relation to the future economic well-being of the nation.
The hon. Member for Leeds, Central (Mr. Fatchett) said that the decline of the machine tool industry was not due to poor industrial relations because of the timing. That is wrong, because there are long lead times in industry. If things were going wrong in the 1960s and 1970s, we would expect them to be working through, resulting in a serious decline in the industry as a whole, in the 1980s and 1990s.
It is sometimes suggested by Labour Members that the Government must intervene when industries, especially those which export, are failing. I recall what happened when the right hon. Member for Chesterfield (Mr. Benn) tried to intervene in the affairs of the Meriden motor cycle company. That was a total waste of taxpayers' money.
I also remember—I do not make a party political point because we have also been guilty—the fiasco of Mr. De Lorean in Northern Ireland. Those two examples, and we need no others, should warn of the dangers of politicians and civil servants trying to second-guess business men and interfere in what is essentially the business of business.
Most British companies, many in my constituency, are excellent at their job. I am constantly amazed when I visit them by their technical skill and inventive genius. I shall mention a few because I am proud of them. Link Miles makes amazingly sophisticated computer-driven simulators for the airlines and air forces of the world. Because the people whom they supply have been undergoing serious 528 economic decline, the company's exports have suffered. But it is coming through well and has products that are world beaters.
I also have in my constituency a company called Ricardo Consulting Engineers. It is a world leader in automotive engine design. Its British engineers in Shoreham are designing engines for the motor manufacturers of the world, including those of Japan.
§ Mr. Fabricant
Is my hon. Friend aware that I motor cycled—I would rather use the expression "motorbiked" since that is what true motor cyclists would say—to Turkey? Although I must admit that I used a Japanese motorbike, a Yamaha FJ1200, it was designed by a British company.
§ Mr. Stephen
I am grateful to my hon. Friend. I should not be surprised if it had been designed by one of my constituents.
A company in my constituency called ECC Simulations makes systems for training people to maintain military and other vehicles. It also produces a marvellous simulated device, which it has sold in large numbers to the Swiss Army for training people who guard their mountain passes. Another company, Edwards Hi-Vac, exports high vacuum pumps. Its pumps are so sophisticated that they can create not only a vacuum where there is no air but a vacuum where there are no molecules.
Eschmann Brothers also are at the leading edge of exporting hospital technology. Before I visited the company, I did not know that there was such a thing as a high-tech operating table, but there is. It is made in my constituency and it is exported to hospitals throughout the world.
I was honoured that my hon. Friend the Minister of State for Defence Procurement was able to visit companies in my constituency last week which manufacture goods for the defence sector. Also, my hon. Friend the Under-Secretary of State for Technology, who is in his place, was kind enough to meet representatives last night of local business, commerce and the professions from my constituency. It is important that those people should feel that Ministers are prepared to listen to what they have to say and to learn from their experiences, as my hon. Friend did last night.
The domestic base is extremely important for any exporter, especially in defence. I want to make three short points to the Minister. I made one of them and tried to make the other two in the defence debate the other day. First, the costs of bidding for a defence contract are very high and we must reduce them because they are an almost impossible burden on medium-size businesses. Secondly, we must make it clear that where there is a requirement for training aids—possibly simulator aids for new aircraft being built by the prime contractor—and where the prime contractor is also bidding for the subsidiary contract, the prime contractor must not be judge and jury in his own cause or have an unfair advantage.
Thirdly, as other hon. Members have said, we must make it clear that we are not prepared to tolerate indirect subsidies being granted by other countries to their own manufacturers, and we must fight very hard on behalf of British exporters to ensure the proverbial level playing field. Hon. Members have mentioned the case of steel and Italy, but there are many other examples.
529 Here I pay tribute to a former right hon. Member, Sir Leon Brittan, for the excellent work that he did as Competition Commissioner in stamping out such nonsense in the European Community. I wish him well with the general agreement on tariffs and trade. We could not have a better man in that position.
It is important that Ministers give political help to our exporters, and I was glad to hear of the excellent work that my right hon. Friend the Prime Minister did in India. I also pay tribute to the work that our noble Friend Baroness Thatcher did throughout her term in office to help our exporters to sell their wares throughout the world.
Also of interest is the extent to which gas, water and electricity companies are participating in exports and winning contracts all over the world. This is a great tribute to the outward-looking management attitudes seen since denationalisation.
In defence, export licences are a problem, but after examples such as the Iraq supergun affair and the like, one must not minimise the importance of ensuring that export licences are fully considered by all the Departments concerned. However, I urge the Government to streamline the system, so that potential exporters are not kept waiting many months for licences.
Defence spending is being cut in this and many other countries—and rightly so, because what is the point of winning the cold war if one does not then reduce defence spending? There is a need for diversification and I make that point whenever I visit defence contractors in my constituency. They are well aware of the need to diversify and they are doing so. Companies that used to make combat aircraft simulators are perfectly capable of manufacturing simulators for drivers of trains or heavy goods vehicles and for many other applications. Their efforts would not be much helped by establishing a quango of the kind proposed by the Labour party.
There will always be a need for defence in the world —although I hope at a much reduced level—so there remains a demand for our exporters fully to participate in defence markets. The right hon. Member for Tweeddale, Ettrick and Lauderdale (Sir D. Steel) remarked that it is bad for this country to export munitions to others because they might be used against our own soldiers and he gave one or two examples. I used to be a soldier and I would much rather be on the receiving end of British munitions —especially sophisticated weaponry such as missiles—because I would know more about them and their capabilities than about the munitions supplied by another country. During the Falklands war, we knew—because our French friends were good enough to tell us—more about the capabilities of the Exocet than did the people who were using them against us, which was most valuable.
It is not just the physical product that is important in exports—the financial package is almost more so. British banks are good at dealing with large-scale projects. In the City of London, there are several excellent merchant banks staffed with the brightest and most imaginative people one could hope to find. However, in the middle range, when exporters have to approach clearing banks they do not find such an imaginative approach.
I urge British exporters who cannot secure the right financial package from British clearing banks to take their custom elsewhere—even if that means to Zurich or 530 Geneva. It is crucial that British exporters should be able to assemble the right financial package. Perhaps as a result of such competition, British clearing banks will wake up and change their ideas. I have been invited to visit the regional business centre of one of the clearing banks near my constituency and I shall have some questions to put. I hope that other hon. Members will do the same.
It strikes me as odd that if one wants to buy a house, one can borrow the money from a bank over a term of 25 years at a competitive interest rate—but if one wants the same amount of money for business against the security of that house, the bank will offer a repayment term of only three or four years and it might even say that the money is repayable on demand. The bank will almost certainly say that the interest rate will be much greater than for buying a house. That seems entirely wrong.
We have tended to encourage—and my party must accept any blame that may be attached to it for this—far too high a proportion of our national wealth to be put into bricks and mortar than into manufacturing and exporting.
I was glad to hear that an extra £2 billion has been put into the Export Credits Guarantee Department. That is crucial. If there is any truth in the remarks by the right hon. Member for Tweeddale, Ettrick and Lauderdale about the current administration of the ECGD, the company operating it should be sacked and we should find a company that is capable of doing the job properly. I am as much in favour of privatisation as is any of my hon. Friends, but the corollary is that private companies undertaking work on behalf of the public service should be held to high standards. We should not tolerate the unimaginative attitudes and inefficiency which were so characteristic of the public sector.
I have visited many of our embassies and I have been impressed by the people I have met. However, one still too often hears of British exporters going to a British embassy and just being given a list of suppliers or retailers which they could have got themselves from the public library. That is not what is wanted. When a British exporter goes to one of our embassies or high commissions, he wants the benefit of the detailed local knowledge that the officers should possess applied to his particular problem. There is nothing wrong with asking British exporters to pay something for the services they receive from our missions abroad. We all know that we do not really value something that we get for nothing and that we tend to use it whether we need it or not. If one has to pay some of one's own cash, one thinks about whether the service will be really needed and valued.
I echo the remarks made by other hon. Members about the need to firm up our representation in eastern Europe. It is a critical growth area on our own continent and we must be in there fighting 100 per cent. for the business that is available.
I am glad that the DTI has taken on people from industry who know all about exporting. They will be able to bring a business man's mind to solving business men's problems. I was pleased to hear that the CBI has congratulated the Government on their export services. One-stop shops are an excellent idea, as it makes no sense for six or seven different organisations to offer services. to small business men. The small firms merit award for research and technology—SMART—is to be commended because it encourages innovation. Also in my area, the Federation of Sussex Industries has an excellent computer 531 database which provides detailed and well-tailored information to local Sussex business men who wish to export.
Trade fairs are important and I am glad that the Government have given financial assistance to more than 7,000 British exporters so that they have been able to attend more than 300 events in the past year. I do not think, however that it should be an open-ended commitment, as the right hon. Member for Tweeddale, Ettrick and Lauderdale suggested. Once the Government have assisted a British exporter to go to two or three international trade fairs, that should be it. During that time, the exporter should have built up his own contacts with people in the country concerned and he should be able to stand alone. The scarce money should then be made available to other exporters who have not had the benefit of exploring that market.
We have a long tradition of trade; we are a nation which lives by trade. We export one quarter of all that we produce, which is quite phenomenal. That is a higher percentage of GDP than is the case for Japan and it is because we live by trade that it makes no sense to talk in protectionist terms, as Opposition Members often do. It makes no sense to ban imports. If we ban imports, how can we expect other countries to buy our goods? That is why it is so important for the GATT talks to succeed.
Overseas aid is also important. There are two dimensions to it. One is the sense of moral obligation that those of us who are fortunate enough to live in developed countries must have towards those who live in undeveloped countries. We must help them, because they are fellow human beings.
That is not entirely altruistic, for we are seeking to help those people to develop their natural and human resources and turn their economies into ones that are then able to afford goods that British manufacturing industry can produce. I am not a great believer in export awards. I believe that they are gimmicks. A well-established pattern during the past 20 to 30 years has been that of a business starting up with two men and a dog in a garage. After it becomes successful, it moves to bigger premises, wins the Queen's award for industry and then calls in the receiver. The only reward that a successful British business man really needs is the bottom line of his profit and loss account.
When I carried out research into the figures, I was pleased to see that our exports were up by 3.5 per cent. in 1992. That is no mean achievement when one considers that the western world is going through the worst economic recession for more than 60 years. Also, when speaking of the export earnings of British industry, let us not forget the export earnings of those parts of British industry located abroad. Strange though it it may seem, British companies own a higher proportion of the United States economy than United States companies own of the British economy. People such as Lord Hanson and Lord White who operate out of the United States are earning large sums of money for Britain.
I was pleased to hear the Minister say that the Pig Improvement Company of Abingdon flies its animals all over the world in the service of British exports, which proves to those of us who doubted it that pigs can fly.
The trade surplus in television sets is something of which we should be more aware than we are. We should not deceive ourselves into thinking that just because a television set has a foreign name on it. it has been made 532 abroad. Most of the television sets we use in this country are now made here and we export more television sets than we import. Furthermore, 50 per cent. of all personal computers bought in this country are made here.
Nor must we forget the invisible earnings of the City of London. The financial and legal expertise of the City of London has for centuries earned millions and millions of pounds for the British Exchequer.
I was sorry during the debate on the new Criminal Justice Bill to hear that, yet again, we are to load down the financial institutions of the City of London with more and more criminal offences and more and more regulations, which are extremely expensive to comply with. When we introduce new legislation we should consider the costs of implementing it, compared with the benefits. Sometimes the benefits are marginal.
I congratulate the Government on their positive and practical approach to British exporters, but I have to contrast their attitude with that of the Labour party and the Liberal Democrats. I listened with care to the speech of the Opposition Front-Bench spokesman, the hon. Member for Leeds, Central (Mr. Fatchett), and found it depressing. It was very long on complaints and criticism but very short on constructive proposals.
Of course it is the business of the Opposition to oppose, but opposition does not mean just saying, "You lot have done it wrong", which is almost all that we ever hear from our friends opposite. What the British people expect the Opposition to do is to come forward with constructive proposals for tackling the serious problems that we all face. We have heard nothing, and we hardly ever do hear anything, constructive from the Opposition parties. They are all too ready to carp and criticise and, as a new Member of Parliament, I am, frankly, appalled by their antics, especially at Prime Minister's Question Time.
When we have an opportunity, as we do today from 9.30 am to 2.30 pm, seriously and constructively to debate what can be done to help British exporters, the Opposition are not here. Only one Labour Member is in the Chamber and there are now no Liberal Democrats at all. We all have constituency engagements on Fridays and I should like to be in my constituency today, but it is extremely important for my constituents, and especially the manufacturing companies in my constituency, that I should be here today to represent their interests. I am pleased to have been able to do so.
§ Mr. Roger Evans (Monmouth)
It is a happy sign that this is 1993 and we are debating a motion that is so extraordinarily skewed. If we cast or minds back to the 1960s—the intellectual epoch of the hon. Member for Leeds, Central (Mr. Fatchett)—we would indeed have been discussing the balance of trade and, no doubt, talking about the restriction on or substitution of imports. Happily, in 1993, due to Europe and GATT, the prohibition of imports is illegal. It is the growth, which is so much in British national interests, of the free, open, international market, which is the striking achievement of the age and the one on which our prosperity so fundamentally depends.
Let us not forget that it was the Conservative Governments of the 1980s who recreated the great free trade epoch of the Victorian period. There was the abolition of exchange controls—it was the British 533 Government who started that in Europe; freedom of credit, so that people are no longer rationed and in a queue for funding to buy a house, or whatever; and privatisation of failing, loss-making, state-owned industries. That is the transformation of the world economy, and ours, in the 1990s which provides the opportunities for our exporters.
One might have thought that some semblance of the realisation that the world has changed would have hit the Labour party. As my hon. Friend the Member for Shoreham (Mr. Stephen) said, there might have been some understanding of that. Is not it the duty of an Opposition to understand and explain in a way better and more convincing than any offered from the Conservative Benches? But what do we hear? It was an old-fashioned analysis of the balance of payments. When uncomfortable little matters of fact were put to the hon. Gentleman, I received only in return a discourteous and irrelevant observation about Robert Maxwell, a deceased member of his party, not ours.
What was wrong with the approach taken by the hon. Member for Leeds, Central? Did not he listen to my hon. Friend the Member for Gloucester (Mr. French) explain the problems of filling in one of the Board of Trade forms about exports? Can there be anything more untrustworthy, more fundamentally in the tradition of Attleean Whitehall, than the compilation of our trade statistics? They simply no longer reflect the real world in which we live.
Let us be quite clear. We heard from the hon. Gentleman about a supposed balance of payments deficit. The actual unaccounted for figure in the published statistics of £30 billion is in fact considerably greater. The balance of payments statistics for the principal world economies do not add up. There is an enormous gap that makes a whole nonsense of the statistics. However, perhaps the most fundamental error in that approach is that the Department of Trade and Industry statistics do not allow for the capital growth of British investments overseas. It is simply a year-on statistic, out of date when it is published, inaccurate in its composition because of the very limits of knowledge and the way in which it is compiled, and which, at the end, does not adequately reflect the earnings either of British owned companies in America or the staggering capital growth in British overseas investments in the 1980s, before the recession.
The hon. Member for Leeds, Central, drawing from a faulty analysis, drew the conclusion that a long, continuing balance of payments problem in this country would cause financial problems. I suggest that the currency markets and the City of London have long used a much more sophisticated and relevant intellectual analysis. In the free, open, international market, it is more important to consider the profits of British industry, the income of people in this country and the standard of living.
If one were to proceed to a more sophisticated and relevant analysis, one would go on to say that, if we are to help exports and to promote the free, international, open market, we must overcome the obstacles that have arisen since 1914 in the form of the lack of an international currency and which remain the biggest intellectual challenge to greater prosperity. We cannot return to the gold standard, but the attempt in the European Community to create a free and easily tradeable currency, which would enable everything to be denominated in the 534 same unit, has failed. It is unfortunate that it failed, but that is the important intellectual, policitical and economic issue of the day, and it would be helpful if the Labour party dealt with it seriously.
§ Mr. Evans
"What ERM?" would be the question that the Prime Minister would rightly ask and which I put to the hon. Gentleman. Until 1989, the ERM was extremely successful in suppressing inflation in western Europe and it introduced a certain stability to odd currencies such as the guilder, which were previously rather Latin American. It was a thoroughly desirable process, but it went wrong with the sudden collapse of Soviet communism, the reunification of Germany and Chancellor Kohl's decision to reconstruct in the east without paying for it from taxation. That may have been an understandable political decision, but, once an enormous deficit is run on the fiscal arrangements of the new German state, and bearing in mind that the Bundesbank has a duty under constitutional law to limit growth in the money supply, German interest rates became excessively high which damaged the French economy and was certainly damaging ours. In the interests of Europe, it was necessary to influence our partners and suggest that something better could be done. The bold attempt did not succeed, and it was not the failure of this Government but that of our partners.
If it were a case of re-entering an ERM with interest rates at 8 or 9 per cent., I would be resolutely opposed to it. The intellectual and political challenge is to set up a system to resolve the problems that brought down the previous experiment. That is the issue of the day. It is why the provisions of the Maastricht treaty to control the new European financial institutions, based on sound money, are so important. However, it is not only in the interests of our exporters that we need to solve the problem.
If we are to understand the problems of trade, we need to understand the implications of the free, open, international market which is the striking feature of our era, but, again, the Labour party has failed to produce an analysis of the changing circumstances. The interesting feature of this trade cycle is that it appears to be much more influenced by fluctuations in credit than the traditional trade cycle, which was principally influenced by manufacturing stocking and destocking. It may be that the implications of freedom of credit and of the abolition of exchange controls go very much further than appears to have been misunderstood so far.
The debate is about promoting British trade overseas. In 1993, we should not churlishly denounce our fellow countrymen who buy Japanese computers and Korean electronic equipment. Our increased standard of living has been achieved partly by the breaking down of trade barriers and by the opportunity to buy more cheaply a much wider range of electronic goods. There are occasions when one buys British. But the reason to buy British is when it is best, not simply due to some racist chauvinist folk memory that sits ill in the mouth of the Labour party.
Let us take it a stage further. When we get to the question of consumer recovery, it will be a question of rational choices being made. In the same way, business men will want from politicians and my hon. Friend the Minister not the resolution of their problems but practical day-to-day assistance to protect their trade abroad. The 535 crude old-fashioned use of the balance of payments statistics, which we heard from the hon. Member for Leeds, Central, is inappropriate in the 1990s as a serious intellectual economic analysis.
It is useful to advertise to our business men that there may be areas in which there are opportunities to expand the amount of British trade. Let us be clear. As my hon. Friend the Member for Mid-Staffordshire (Mr. Fabricant) said, certain British industries cannot compete with cheap labour in the far east. Nor should we attempt to compete in those areas unless we can introduce a level of technological advance and capital expenditure that enables us to make them high-value industries. Business men make sensible and rational decisions to exploit the opportunities and should not be biased by misguided political intervention.
Above all, the manufacturing/non-manufacturing dichotomy is such a striking old-fashioned misunderstanding of the modern era. I entirely endorse the observations of my hon. Friend the Member for Torridge and Devon, West (Miss Nicholson) that the old-fashioned analysis simply does not apply to the computer industry where software houses are now apparently regarded as a service sector. It used to be said:What is good for General Motors is good for the United States of America.Do we realise that the stock market value of General Motors is now less than that of MicroSoft, the software house? That is the striking transformation of the American economy. It started to move into continuing world superiority in the Microsoft area barely 12 or 15 years ago.
Business men need the opportunities, but they are the judges of them. The free open market has already changed British industry and is bringing back the opportunities that we lost in the 1960s and 1970s. I feel for my hon. Friend the Minister visiting horrible parts of the world such as Paraguay and Argentina. They are classic examples of tyrannical socialist inbred societies, which have opened up in the modern world under the influence of the Conservative Government. With protectionism, they discovered—
§ Mr. Evans
No, I am about to finish. The fundamental test—I find this deeply shocking from a Liberal—of a liberal open economy is free trade and open markets. The late Mr. Gladstone would have understood that, if not the right hon. Member for Tweeddale, Ettrick and Lauderdale (Sir D. Steel). The point at stake is that the failure catastrophically of the Latin American economies in the 1950s, 1960s and 1970s was rampant protectionism, state intervention and the fact that they were not open to the world economy, as Argentina had been before the first world war in its better and happier phase.
When one opens up industry and business to competition, British industry turns round and wins. That is why we have seen the car industry go from being on its knees in the 1970s to a position where we will have a surplus on car exports within about a year. It is why, despite sneers at the Koreans, the United Kingdom manufactures about half of the personal computers sold in the European Community and the computer press in the United Kingdom is so much more sophisticated in the volume and range of what it covers, compared to what one can buy in France.
536 Free, open and fair trade built our prosperity in the 19th century and free, open international trade will fund our prosperity in the next century. I congratulate my hon. Friend the Minister on what he is doing. I conclude with this final thought. I congratulate my right hon. Friend reviving that ancient dignified title, the President of the Board of Trade. However, I suggest that my hon. Friend the Minister should carry to my right hon. Friend the President this message: may the Board of Trade meet in full plenary session—the Archbishop of Canterbury might lend some moral authority for the importance of promoting British trade.
§ Mr. John Bowis (Battersea)
Before my hon. Friend the Member for Monmouth (Mr. Evans) goes off to summon the Board of Trade, I should like to make a brief speech.
My hon. Friend the Member for Norwich, North (Mr. Thompson) has dubbed this the Martyn Lewis debate. I am sure that if we were able to look up we would see the Press Gallery packed with correspondents who have noted the subject of this debate and, therefore, know that good news is coming! They are here to report our every word and the catalogue of success of my hon. Friend the Minister. That is also why the Opposition Benches are packed, as we can see, with Labour Members who have come to support British success!
The Labour party told us how important the Maastricht treaty was. The treaty had significance for British exports. The Labour party explained that there could not be a referendum on Maastricht because the matter should be left to Parliament to decide. Labour Members came here in great numbers yesterday. The charabancs arrived and Labour Members poured out. They sat on the Opposition Benches and decided to abstain—
§ Mr. Bowis
—in person, as my hon. Friend says. Today the charabancs have left and the abstention is without even the presence.
Meanwhile, with the distinguished exception of the Ettrick shepherd—the right hon. Member for Tweeddale, Ettrick and Lauderdale (Sir D. Steel), who speaks for the Liberal party—only Conservative Members have spoken in the debate. My hon. Friends from north, south, east, west, the midlands, Wales and London have contributed to the success story.
As my hon. Friend the Minister said, we should be proud of the success story, salute the record levels of exports, particularly from the end of last year into this year, and draw comparisons with our competitors in Europe, Japan and America. We should be proud of that success, but we should not be complacent. That is why we are here to spur on British exports. We are also here to ensure that the level playing fields—or the level seas referred to earlier—are achievable.
As my hon. Friend the Member for Shoreham (Mr. Stephen) said, it is industry which exports, not the Government. Industry provides the quality, the price and the after-sales service. It markets its goods and services around the world. The Government can remove obstacles and help to provide the information at home and abroad. It can also help with marketing.
537 Sometimes we should consider what exports are. They are not necessarily things wrapped up in packing cases and shipped out from Britain. Invisible exports are, be definition, not too visible. Often, services provided in Britain for overseas buyers are equally part of our exports. So, too, increasingly is the success story of inward investment, which is bringing former competitors from abroad to produce their goods here and re-export.
Sometimes one looks at a product and wonders whether it is possible to distinguish the home-produced bits from the imported bits. The last time I went to purchase a car I was shown two cars—one which I thought was British and the other which I thought was European. I was mulling it over. The salesman could see what I was up to. He said, "I know why you are hesitating. You think that this is a British car and that one is not. You are wrong. There are more British components in that car than in this car."
More and more companies are coming to Britain, including Nissan and Bosch. Bosch products are no longer manufactured in Germany. They are produced only here and in Spain. So Bosch is now British. That may come as a surprise to our German friends, but it is true.
§ Mr. French
Is my hon. Friend aware that there are British manufactured goods which the manufacturer or distributor deliberately chooses to give a Japanese trade name? For example, Saisho and Matsui videos are sourced in Britain by a British company, Dixons, but deliberately given a Japanese name in the belief that that will enhance the appeal to the purchaser.
§ Mr. Bowis
My hon. Friend has made a good point, but I am not sure what he makes of the name Brother— perhapsit is a Japanese attempt to sell goods to trade union members.
Many interesting and important issues have been raised, particularly on behalf of smaller firms. There have been calls for the need to continue the fight against regulation—for a bonfire of regulations to which my hon. Friend the Member for Norwich, North wanted to set a match. We constantly need to look for the fiche d'impact, which is not a cod that has bumped into Brighton pier, but a way in which to ensure that the impact on small firms is kept under control.
We must be constantly aware of the needs of small firms and support them in exporting goods. My hon. Friend's Department does a great job in assisting small firms in my constituency, particularly those in specialist markets such as fashion, handbags and belts. Small firms in south London that employ only a few people cannot, on their own, take those products around the world, but, with the support of the Department of Trade and Industry, they are able to go to some of the trade fairs, exhibit their products and, we hope, sell out of them. Such action leads to greater employment and exports.
The sum of those small firms creates the success of our exports. I hope that my hon. Friend will continue to provide a flexible response to the needs of small firms through fairs, missions and the excellent idea of the video link to assist small firms in reaching overseas agents in overseas markets.
I also hope that my hon. Friend the Minister will continue to look for new markets. The right hon. Member 538 for Tweeddale, Ettrick and Lauderdale mentioned Africa, and I am particularly thinking of African markets. Export tables show that Africa, below the Sahara, and south America do not feature, but they should do so. I visited Namibia before it gained independence. There was a great trade fair full of Japanese and German manufactured goods, but there were no British products available. Britain enters the markets late—often too late. Scotch whisky and some soap powders, made under licence, have arrived in Eritrea, the newest African country, but already the Japanese, Italian and German markets are making the running. We must encourage and enable our industries to reach those markets. We must assist them by easing the debt burden on such countries so that they can afford to trade.
When my hon. Friend the Minister considers whether British time should be altered, he must bear in mind that, according to the financial markets, our one hour advantage enables them to reach the far east ahead of their competitors. We should not tamper with British time until we are certain that to do so would produce an economic benefit.
When my hon. Friend considers the tourist industry, he should bear in mind problems such as those faced by the Savoy hotel as covered in the press today. It has lost £1 million because of regulations from Brussels. He must ensure that such niggling and costly regulations are removed.
We must carry on encouraging the arts. My hon. Friend referred to the excellent export work of the Academy of St. Martin-in-the-Fields. I know from working on the boards of the Royal National Theatre and the South Bank Centre that such companies have been able to take British excellence abroad, and both perform abroad and encourage people to come to this country to see those excellent performances.
We must use English as the medium to encourage other countries to become closer to us culturally. They will then trade more closely with us. But we must not forget the need for people in this country to learn foreign languages. Sometimes when employees in foreign companies learn English it allows them to export more products to this country than we export to theirs. It is crucial for us to learn foreign languages.
One of the great achievements of Maastricht in relation to exports has been to ensure that, in future, Community countries that sign regulations must uphold them. The non-compliance of the past has militated against British exports. Maastricht will help British exporters to achieve equality of opportunity and that, combined with the excellent work being done in the Board of Trade, will lead Britain to greater success.
§ 2.4 pm
§ Mr. Leigh
With the leave of the House, I should like to say a word or two only, because I see that the hon. Member for Hackney, North and Stoke Newington (Ms Abbott) is here and I want to give her some time to speak.
We have had a good debate lasting some four and a half hours. It has ranged widely from the steamy water fronts of Paraguay to the teeming bazaars of Hong Kong—
§ Mr. Leigh
To some. We all want to pay tribute to the right hon. Gentleman for his lonely battle to raise the standard for all the Opposition parties in this debate. As always, we listened with care to his authoritative speech. Perhaps he will write to me about NCM—he felt that the companies in his constituency were not getting a good enough service. As he rightly said, we should not bandy the names of companies across the Floor of the House, but generally our market testing shows that companies welcome the increased flexibility and more comprehensive range of services that they are receiving from NCM.
The right hon. Gentleman also mentioned the rule about the number of times someone can be subsidised to attend a trade fair. The purpose of the subsidy, of course, is to encourage companies to gain a foothold. He aslo talked about the importance of DTI staff being seconded to overseas embassies. We are aware of that and are always trying to increase their numbers. We all thank the right hon. Gentleman for his contribution, and I hope that I have answered some of his points.
The only other Opposition Member to speak today was the hon. Member for Leeds, Central (Mr. Fatchett) who played the part of Jeremiah. He was not prepared to be the Martyn Lewis of the morning. He is starry eyed about the 1960s. He forgets that we were subsidising loss-making nationalised industries to the tune of £2 billion. Now those same industries contribute an equal sum to our economy. He ignored the fact that our balance of trade has been deteriorating, not for 14 years, but for generations. He ignored the transformation of our economy and the fact that export volumes and earnings are at record levels.
I thank all Conservative Members who have taken part in the debate—my hon. Friends the Members for Gloucester (Mr. French), for Torridge and Devon, West (Miss Nicholson), for Shoreham (Mr. Stephen), for Halesowen and Stourbridge (Mr. Hawksley), for Norwich, North (Mr. Thompson), for Mid-Staffordshire (Mr. Fabricant), for Battersea (Mr. Bowis) and for Monrnouth (Mr. Evans). In their excellent speeches they concentrated on the work that my Department is doing to reorganise itself and become an effective voice for exporters.
540 Many of my hon. Friends mentioned the fact that we have increased ECGD cover by £2 billion. We are increasingly relying on industrial secondees who are experienced in the markets of the future. As my hon. Friend the Member for Monmouth said in an excellent speech, our whole trading position has been transformed in recent years. So much of what the hon. Member for Leeds, Central said looked back to the past.
We are now part of a successful and growing single market. I assure the House that we shall redouble our efforts to achieve a successful negotiation of the GATT Uraguay round. On it depends our future prosperity.
Finally, I hope that this debate will be remembered for the fact that, in the middle of it, the Department of Employment announced that inflation is now down to 1.3 per cent. a year, the lowest rate in my lifetime. That shows the success of our economic policies and the steadfast pursuit by my right hon. Friends the Prime Minister and the Chancellor of policies that will ensure that in the race between nations this country becomes increasingly competitive. Helped by my Department, we will ensure that we increase our exports to the world.
§ Motion, by leave, withdrawn.