§ 2.48 p.m.
§ LORD BIRDWOOD rose to call attention to the development of the engineering industry, with special reference to the needs of the machine tool manufacturers; and to move for Papers. The noble Lord said: My Lords, I wish to 377 draw the attention of the House this afternoon to the engineering industry. My Motion I think can be justifiably criticised for poor definition, but the rather blurred wording was deliberate on my part. First, it signalled the special area of interest that I had in machine tools, and, second, it reflected my own distaste for rigorous classification. But if I am pressed for a definition of "engineering" this afternoon I find myself hiding behind the NEDO classifications which are themselves built on United Kingdom standard industrial classifications for mechanical engineering.
§ The shape of what I will say is simple enough. Neither the Government nor industry would pretend that engineering in this country is without problems. I want to describe what I believe certain of these to be and to put forward certain ideas tending towards their solution. We should set the scene. The figures that follow are mainly from NEDO publications, and since my definitions also come from this source, motor vehicles are not included in these results. For the industry, basic costs—materials and fuels—rose some 8 per cent. last year. Weekly earnings rose by about 9 per cent. The prices we charged for exported products went up by about 15 per cent. The intake of apprentices during 1971 was at least 25 per cent. under that of 1969–70. Total employment fell at the rate of 8½ per cent. and the current state of employment—as if anyone needed reminding—is dismal, with five skilled men out of work for every vacancy.
§ In the broadest terms, this country's exports and economy have grown more slowly than at the rates displayed by our competitors. Our relative importance as a world exporter of engineering products has been carved away to an extent where the rate of erosion should be causing much more alarm than it is. Our visible trade balance at this time for engineering products is, of course, well in the black, hovering around £730 million. With cars, ships and aircraft included—those things we make because we know how to make them well—it represents about one-third of the country's total selling effort abroad. But this is a situation in which all the most significant trends are completely hostile. In illustration may I select one not very 378 esoteric example; namely, the value per ton of exports and imports?
§ Plot this any way one likes, we sell machinery at a much lower value per ton than that at which we buy. At this moment we show a trading surplus because of a good, or a reasonable, demand for simpler machines. Yet would your Lordships not agree that it would be difficult to picture a more vulnerable marketing situation; because sooner or later this demand will be met by the resources of those customers? When the collapse of these markets comes it will come appallingly quickly. Add to this the fact that the value by ton ratio of imports to exports is yet another league in which we are nearer the bottom than the top and the beginning of the end seems that much closer. You do not have to be a graduate statistician to forecast what happens when engineering imports grow faster than engineering exports. Even with the cash value gap comfortably in our favour as it is just at this moment; even if the growth rates were nearly the same—and they are not—there is a predictable point when the trade balance levels off, dips and then dives.
§ I concede that most economic extra-polations are likely to be naïve. Too often we find variables treated as constants. The growth rates we predict for some of our competitor countries would surprise their own economic planners. Even so, growth rates can be plotted and the breakdown point of the trade balances isolated, and it can be done with some accuracy. I think it is due in about 1981, but I believe that we are seeing the first symptoms of it now. I want to emphasise that this analysis is not an academic manipulation of our trade relationships with other countries. From that convergent point there is not an economic undulation. Rather there will be a domino effect, a cascade which will touch every part of our national life. I do not look forward to that.
Perhaps we are not spending enough on research and development. In the economy as a whole, when we go on a fault-finding hunt we can see shortcomings and misdirected efforts in many places. Research and development does not seem to be one. Our R. and D. expenditure as a percentage of the gross
domestic product is nearly the highest of any country; so it seems to be fair to assume that there is no correlation between R. and D. and growth rate, since our g.d.p. growth rate is paralysingly low. If the noble Lord, Lord Davies of Leek, had still been in the Chamber I would have referred the acronym "g.d.p." back to "gross domestic product." Well then, my Lords, is the R. and D. expenditure all in Government or academic institutions, where the result is difficult to ferret out or irrelevant to industrial needs? Again, not so. I quote from a paper given by Dr. Maddock, of the Department of Trade and Industry, just a year ago. He said:
The percentage of gross national expenditure on R. and D. in the U.K. which is spent within business enterprises (as opposed to Government or non-profit institutions) is the same in the U.K. and the U.S.A. and is higher than in any country other than Germany.
So that cannot be the trouble.
§ It is when the R. and D. expenditure is analysed as it is distributed in detail that we can see the discrepancy between the concentrations of R. and D. and the importance of those activities to our economy. Of course the glamour technologies like electronics will carry a larger proportion of research than, say, textile manufacture; but the differences are really far too large and, in the long run, very unhealthy. The status of production engineering is generally regarded as being a problem. Manufacturing times are far too long. Typically, if a manufacturing cycle for a component is 100 days, it will have been worked on for less than five days. Almost any improvement in production engineering techniques, if applied across the whole industry, would help to keep our products competitive. A big improvement would mean that we could virtually undersell any other nation.
§ Industrial relations in engineering is a subject so delicate at the moment that I do not propose to say anything about it except to include it in the basic problem list. Related to it—I think far more closely than people often realise—is the question of inadequate manpower planning and a real unwillingness by manufacturers to build meaningful manpower assessments into their forecasting. To 380 say that marketing is generally poor is to err on the side of kindness. Machine tools are perhaps the most vulnerable sector in the sense that they run some of the greatest risks if their marketing is less than excellent. It is especially distressing to find so many machine tool concerns with no coherent marketing policy and with only the haziest ideas of competitive developments. My Lords, I must qualify that. In the NEDO study of successful marketing practice in machine tools, the good ones, like the little girl who had the little curl, are very, very good. What the report emphasised was the need for the others to aim for the methods of these relatively few excellent companies. As a symptom of the problem the sheer age of most machine tools in use has become a cliché whenever engineering investment is discussed. Figures again! I apologise for them. My Lords, only 19 per cent. of all machine tools are less than five years old; 22 per cent. are between five years and 10 years old, and a huge 59 per cent. are over 10 years old. Roughly, one in five of the machine tools in this country is over 20 years old. That is industrial archaeology; it is not investment.
§ My Lords, the last problem I want to touch on is the most difficult to define, but it is by far the most important. It goes by a number of names: inertia; lack of confidence; resistance to change. I can never understand the surprised tone in which an announcement is made that "once again investment has been slow to pick up"—or some such euphemism. All this money, all these grants, all those incentives—and what? Apathy wearing the face of prudence; laziness calling itself justifiable caution; "Don't bother me", hiding behind "Wait until the bugs are ironed out". We are delightful people to know, but, listening to reasons why changes have not been made, it is as if a huge fatigue is on us. We have become a tired society.
§ It is easy to see how this is reflected in our industry. There is a deep-rooted reluctance to innovate; the audacious is penalised, the timid rewarded. There are too few small high technology companies started, and too many failures even among these. There cannot be many subjects with more red herrings than engineering. We can take off from it into 381 economics, or social problems, or technology, and still keep the discussion relevant to engineering. For instance, everything I have said implies that I accept growth as necessary to an improving society. Perhaps, given a stable population, the heresy of an economically static community may not seem so heretical—but if I develop that, my Lords, I shall be treading on the subject of the second debate this afternoon.
§ In any case, however tempting such trains of thought, I want to narrow my part in this discussion to the second part of my Motion, which deals with machine tools. All the gloomy things I have been saying about the engineering industry apply to machine tools, but with even more vehemence. As an indication of the global depression of machine tool purchasing, I would point out that our machine tool industry increased its share of the world market over the last three years, though it is still below the level of 1963; and last year there was a drop of 26 per cent. in orders from overseas customers. My sources for that are NEDO and The Times.
§ In the first problem area I noted, research and development, the machine tool industry has a significantly higher expenditure as a percentage of total deliveries than the industry as a whole. The Way Report quoted 3.7 per cent., against 2.3 per cent.; that is to say, the machine tool industry spends 3.7 per cent. of total revenue on R. and D., and the rest of the mechanical engineering spends 2.3 per cent. This was three years ago, but the balance has not changed radically since then. Of course figures can be demolished. The one I have quoted could reflect low deliveries just as much as vigorous R. and D., but I believe that the will to expand this activity is present. Of course, if research, the "R." of R. and D. has a cost factor of unity, "D." adds another. Then eight or ten times that unit cost must be spent before there is a saleable product. I believe that the noble Lord, Lord Kings Norton, is going to enlarge on the problem when he speaks.
§ The need for better production engineering is acute in the machine tool sector. Perhaps it is not quite as simple as that: machine tools are just a part of the manufacturing cycle. The need is 382 rather for a fundamental change of attitude in the engineering industry, a change which knits together the elements of production rather separating them. There are pioneers here, and very lonely men they are, too. As it is, the production engineer trails in status when he should be the co-ordinating force in total manufacturing systems. One result of pulling all the production disciplines into a single entity of manufacturing technology would be to break down classifications between the fashionable and less fashionable skills. These classifications are proving a real drag on recruitment of competent or extra competent people into areas where they are very badly needed. Group technology (I am sorry; it is a "jargon" term) is showing what it can achieve in making units with clusters of machines rather than production lines. A by-product of this is a work force divided into cells which bring further advantages in terms of work environment and communication.
§ I must at this stage acknowledge my debt to Mr. Theo Wiliamson, who has done as much as anyone could do to spell out the perils ahead then and to give us so many ways in which to avoid them. I find myself in point by point agreement with his NEDO discussion paper, "Trade Balance in the 1970s", while his fundamental work in integrated manufacturing systems has shown us all what could and ought to be.
Returning to this document, Sir Richard Way's Report of two years ago, I would point out that three areas of research were underlined. They were—I quote:
the need for increased attention to the broad area of metal forming; the desirability of greater concentration of effort on systems of production and integrated systems; and the possible benefits which could be derived from research into standardisation and evaluation standarisation of design techniques and modular construction.
To-day we can see some small evidence of the first two, but not enough, and none at all of the third. Co-operation on that scale, even for survival, may be beyond our reach.
§ Manpower planning is crucial to the machine tool industry. It is, of course, impracticable to look for sophisticated manpower forecasting, in a company of 200 to 300 people, and unnecessary, too, so long as someone in that area is coping with manpower needs. Manpower development is too often subject to 383 political expediency. Over two years ago in this House, I remarked on the need for central control of manpower data. We have models now which could make this a realistic proposition. In passing I would mention the work which is being undertaken at Warwick University, sponsored by the Engineering I.T.B. When this and other projects like it are completely developed, and if they were then to be linked to technology and product-demand forecasting which now exists, we should have the basis for a central information and guidance system second to none; but I am afraid I am cynical about the amount of use to which it would be put.
§ The Marketing of the machine tools is still not as consistent across the industry as it should be. Systematic analysis of customers' existing and future needs, meeting delivery dates (which is basically a marketing problem), evaluating competitive products—all these are vulnerable areas. Inexact cost control has always bedevilled machine tools, even when the same design has been turned out or a decade. Related to cost control, the ratio of direct to indirect workers tends to be wasteful. The record of investment appraisal by machine tool makers is mixed both in their own establishments and as marketing data given to potential customers. These are all severe criticisms and perhaps they make, when catalogued, a needlessly harsh impression. We still have a machine tool industry—just—and we have a reservoir of skill available which can come back into it when it is ready to grow again. But unless remedial action is taken this reassurance could be completely destroyed.
§ My feelings for machine tools are emotional and subjective. The proportion now of our economic mix occupied by machine tools is really quite small. For instance, the number of people employed in the whole industry is less than one-third of the Electricity Council's workforce. If it cannot survive, we are told it does not deserve to. I submit to your Lordships another point of view. I honestly believe that our machine tool industry is for us just as much a raw material as iron or bauxite or natural gas. That is twisting words, I realise, but that is a device to focus attention on the special attitudes which countries have towards their raw materials. They 384 cherish them, hoard them, flaunt them; and when they cannot sell as much as they used to at least the raw materials will not go away. They stay in the ground. With machine tools, if we allow the industry to decay beyond a point of no return, that is exactly what will happen. It will not return; it cannot.
§ Machine tools are basic to any developed economy. I do not want to brush aside the strategic implications of this country stripped of its machine tool capability, but it is a curiously uncomfortable thought. Against a background of the deterioration of 37 per cent. of home orders and 26 per cent. of export orders last year, what can be done to help the industry to survive? We know what has been done and it would not be in order, I feel, to comment on the measures outlined in another place. I am sure that my noble friend will be doing that. In the context of total orders running around £5½ million a month, the announcement of some £10 million worth of Government contracts is useful. It can be regarded as a morale booster for the private sector to make decisions on which they have been holding back. The Way Report set targets of about £5 million a week for a buoyant machine tool industry. Direct orders representing what ought to be a fortnight's production start looking rather irrelevant in that context.
§ In advocating special help for machine tools I have looked for schemes which by-passed either direct ordering or direct funding, but recognised the weaknesses in an industry that nearly bleeds to death every four years of an investment demand cycle. We all know what happens in a company when there is a dramatic drop in orders. The first activities to be trimmed are inevitably R. and D., marketing and training. In a cyclic situation, such as the machine tool industry suffers from, this puts continuity in these areas at risk every time there is a lurch downwards. Naturally, there are enlightened companies which step up these areas when the going is rough, but it is a reasonable generalisation that I have been making.
§ The procedure that I propose would smooth out these anxiliary activities by, in a sense, underwriting them during production lows. What I see happening is companies submitting proposals which describe in detail what they would do 385 if they were running at full capacity—marketing activities, R. and D. expenditure directed by market guidance, training continued at specified levels and so forth: in short, a simulation of a healthy company as expressed in its indirect activities. Satisfying the fund machinery would follow a consistent procedure; but this could be as rigid or as flexible as was eventually decided. Such a system would certainly favour larger firms, but I can imagine also group R. and D. projects conducted in an area or on a machine type basis. There would be administrative problems of course, but if these could be contained inside the government bodies, and not allowed to spill over as impossibly complicated forms and processes, I see no reason why coordinated support for these indirect functions could not be a realistic proposition.
§ Let me come to another point. It is a matter of inverted pride to us that we think up so many bright ideas and other people make money from them. This is so. But, obviously, more new knowledge is produced in the rest of the world than here. So my next suggestion is that we face this head-on and find out how to make money with other people's ideas. Arriving late can do you nothing but good if you take the other fellow's machine apart, correct the flaws, make the improvements that you find his customers want and sell the improved product. I can picture an information service within the scope of the Research Associations offering systematic evaluations of competitive designs—competitive, I hurry to add, in the international rather than the domestic scene.
§ I touched on technological forecasting earlier. What is so frustrating for the onlooker is to know that all the time forecasting techniques are improving and yet the results of this work are so little used. I could not find the proportions of new product development expenditure for sales for the machine tool industry, but I would guess that they are worryingly low; far less than most consumer products, yet with a much longer design and development lead-time inherent. Fore-feeding management with technological forecasts and then guaranteeing that they were used is not a problem that I should like to tackle: but somebody must.386
§ I am reluctant to take part in a discussion on economic incentives. For one thing, I find that most people in industry are confused, bored and irritated by the endless changes. Using the car industry as a regulator has repercussions (as of course it is meant to have) throughout all engineering, and I believe those who say that these constant modifications to the economic variables are having a cumulative adverse effect on industrial investment. We can try—we are trying—100 per cent. depreciation; we can think about negative depreciation, about faster scrapping incentives, about tied aid, about development levies, about the effect of V.A.T., and goodness knows what! A lot of opportunities for favoured nation treatment will vanish as we go into the E.E.C., in any case.
§ There are scores of aspects of this problem that I have not mentioned. I should like to round off by touching on a couple. The first is the relationship between the industry's members and the framework of authorities which surround it. Many of these bodies are changing in quite important ways, and changing the way in which they interact with each other. I should be interested, for instance, to see the stable emergent forms of the Science Research Council, N.R.D.C., the Research Association, the educational establishments, E.I.T.B. and Government training centres, for that matter. That is a lot of people. Yet all of them are generating or processing information which bears upon the decisions a thinking manager must make. I am interested to know how the newly formed Industrial Development Executive will impinge on the day-to-day running of a company. The trade and industry groupings, the professional bodies, must all have their say. And through all this we are still relying on really important items of information being picked out in their true priority by the people who are making (and trying to sell) their products. Ultimately of course each company must shape its own future. It is helping them to have their future that concerns me. Perhaps it is not relationships, but choosing and acting on the right information that ought to be examined. I sympathise with a man trying to run a company in this babble of advice.
I want to finish with another quotation from Sir Richard Way's Report. I have
mentioned this Report two or three times already. This is not surprising, because I believe it to be the single most important assessment ever made of the machine tool industry, and its recommendations still the most urgent. Apart from any other considerations, it is one of the easiest to read, a lesson in clear exposition and argument. In that part of the Report dealing with finance for expansion it is stated:
We have concluded, somewhat reluctantly, that this is an area where the Government or its agencies must be prepared to help if all else fails, not simply to ensure the health of the machine tool industry but to enable it to play its important role in the revitalisation of manufacturing industry generally.
The Report adds that this should not take the form of a subsidy, but should be provided in a way that ensures a normal commercial return on the investment. I am not sure whether that provision should not be modified now. I believe the time for Government help has arrived, and I suggest that it can be given in more subtle ways than we know have been proposed. I am completely confident that my noble friend this afternoon will unravel some of the contradictions that I have mentioned, and I hope that he will air probably more practical and more expert suggestions than mine. I beg to move for Papers.
§ 3.18 p.m.
§ LORD KINGS NORTON
My Lords, I had not intended taking part in the debate on Lord Birdwood's Motion this afternoon, but when I saw that the printed list of speakers was the irreducible minimum I felt that I should like to say a few words, however inadequately, in support of what the noble Lord has had to say on this extraordinarily interesting and difficult problem. One cannot have listened to the noble Lord without some feelings of alarm, but the situation, as I think he made clear, is certainly not without hope. However, there will have to be some serious action before we can change the trends to which the noble Lord drew attention so convincingly and so eloquently.
The success of an industry depends on the advance of its technology and upon the efficient management of its resources. It is impossible really to think of an industry to-day which is not based on technology or, if you prefer the term, on applied science. Certainly that is so of 388 engineering in its many forms. But one cannot help wondering whether, in the sectors of the engineering industry to which the noble Lord has drawn attention, advanced technology and efficient management are quite as prominent as they ought to be. Despite all the work that has been done by the "Neddies" in recent years, I feel that still another appraisal, perhaps from a somewhat different point of view, is necessary if we are to discover what we should do.
At the end of February more than forty of us debated the Green Paper on Research and Development and we devoted a high proportion of two days of discussion to commenting—many noble Lords adversely—on the recommendations of the noble Lord, Lord Rothschild. My own criticism of the noble Lord's ideas concerns not so much what he said as what he did not say. He said very little indeed about development, and no-one else said very much either. The development and the steady application of science is as vital as basic research and is vastly more expensive; and if ever there was an area in which Lord Rothschild's consumer/contractor basis was applicable, certainly this is it. In that debate doubt was cast by several noble Lords, and certainly by the noble Earl the Leader of the House, on the productivity of our research and development and on whether we get a fair return in terms of increased G.N.P. I do not think we do, and I think in the context of this Motion it is worth examining why. I strongly suggest that we should try to enunciate a simple philosophy, which I am now going to dare to enunciate myself in a few seconds. I think we should apply it.
There are two kinds of research and development activity. I well remember what the noble Viscount, Lord Caldecote, said in the debate to which I have referred about research and development being two different activities and not just one: yet we had almost got into the habit of thinking of R. and D. as being one thing. I shall not follow the noble Viscount precisely but I should like to make a clear division between pure and applied research remembering that development is part of the latter. The policy in pure research should continue to be what it has always been and always should be: to finance first-class people to do what they want to do in order to 389 advance knowledge in their chosen field, in the hope that, like Faraday, Rutherford and other great men, they will from time to time produce tremendous results from which new areas of activity and perhaps even new industries may develop. The policy of applied research should be the selection of objectives—objectives which, if achieved, would represent advances on our present status; objectives such as were indicated by the noble Lord, Lord Rothschild, when he defined them in his part of the Green Paper asa product, a process or a method of operation.They should be defined in accurate and realistic terms, and research and development should be done to achieve them.
This all seems very obvious, my Lords; and I am sure there are many people who believe this is exactly what happens. But I can assure you that it does not always happen. There is a great deal of work going on in this country which is not pure research and which is not aimed at practical realistic objectives. The objectives of much of the programmes of applied research in university engineering departments, in research associations and in some Government institutions are too frequently too vague and too general. I believe that the normal course of events ought to be for industry or Government to define an objective which, if achieved, represents profitable advance; for industry to design and construct it, and thereby to expose the gaps where new knowledge is required for progress to be made and for research to be done to supply the facts required. As I said before, this is all perhaps rather trite and obvious, but I suggest that a stern application of that simple policy would eliminate a great deal of unproductive investigation and maximise our research dividends. However, it will get nowhere without people of imagination and drive in the industries concerned.
As many of your Lordships will know, I am familiar with the aircraft industry an industry which last Saturday gave me the most convincing demonstration of its excellence that I could ever hope for, when I flew from Fairford to Hanover in the Concorde—a most remark 390 able, a most wonderful, piece of engineering, which I believe has lessons for a great deal of the rest of our engineering industry. In parts of the engineering industry the ideas that I have mentioned are commonplace but in other parts they are not. I think that in the weaker parts of our engineering industry a more deliberate attack on these lines is needed, using all the resources available to the industry which are there in its own laboratories, in universities, research associations and Government establishments. It would have a number of effects. It would identify the areas in which progress was unlikely without Government aid. As in civil aviation, there are some areas where Government aid is absolutely essential. It would push an industry into building more refined products. As has already been mentioned, too many refined machine tools at present come from abroad. It would expose new areas of engineering activity; for example it would, I believe, show the fields to be conquered in medical engineering. It would, I hope, harness the great talents of our universities which I allege are not being used to the best advantage in the pursuit of realistic objectives. It would indicate what sort of people industry most needs to achieve its aims and it would thereby influence our educational policies.
§ 3.27 p.m.
§ LORD SHACKLETON
My Lords, I intervene only very briefly because I feel that the noble Lord, Lord Birdwood, has introduced a subject of such importance that I should not wish it to be thought, having tried to persuade several of my noble friends to speak, that we on this side were not deeply interested in the matter. I am a little sorry about the imbalance between the two debates, to which the noble Lord, Lord Kings Norton, has referred. Indeed, if there is a difficulty, it is that the noble Lord, Lord Birdwood, has raised so many issues of importance which affect almost the whole of our industrial life. Beyond that, it may be that noble Lords such as the noble Earl, Lord Bessborough—and I am sorry to see that he is not taking part; perhaps I might stimulate him to do so before the debate ends—thought that they would be moderate and keep out of it. But I think this illustrates the value of these small debates.
391 The noble Lord, Lord Birdwood, has had a good run and has raised matters which I think we ought to pursue on other occasions. There are certain points on which I should like to comment, because the speech in effect raised the whole issue of the philosophy (if that is the right word) of Government and industry and of relations between them; and the noble Lord put forward a number of suggestions, some of which were directed at industry—the engineering industry more specifically than the machine tool industry. Another suggestion amounted to an invitation to the Government to do what they can. If I may say so, the noble Lord was not entirely convincing that the sort of methods he wants (although I should like to explore them further) would work. I hope that noble Lords, although my political views are known, will acquit me of making a purely Party political point when I say that the days of old-fashioned capitalist competition, leaving it to free enterprise and the market, et cetera, are clearly past. I think probably that a majority of noble Lords on both sides realise that we need to work out new methods of achieving the improvements that are necessary to enable private entrepreneurs, so far as the market allows, to use their enterpreneurial skills without inhibiting them or without driving them into the desperate position in which so much of industry at times suffers.
The noble Lord referred very interestingly to the inevitable consequences (and we have not solved this problem) of the investment demand cycle. In this matter I am bound to say that the Government's past policy has not been very satisfactory; but I am also bound to say that they are learning rather quickly. I apologise for referring again to the "lame duck" philosophy, but really this is an irrelevant approach. Clearly, where there are "lame ducks", the sooner they go out of business, the better. But, of course, one never knows. Some of the high flyers become "lame ducks" only when they are hit by events, which are sometimes outside their control.
I should like to deal briefly with some of the points raised by the noble Lord. I was very interested in the remarks of the noble Lord, Lord Kings Norton, about research and development. No one is better qualified—because the noble 392 Lord ran D.S.I.R. for many years—to speak on this subject. It was unfortunate, but inevitable, that when we debated Rothschild (and I do not proposed to start debating it again, intensely interesting subject though it was) we focused on the particular proposals, but I say again that they had a very stimulating effect. But we have not discussed at length the relationship between research and development, and, as the noble Lord pointed out, the extra cost of development is of an order of anything from four to ten times the cost of the research. I do not think we have found an answer on this, but it is quite clear that purely market processes do not achieve the answer, and we have seen that this is so. It is a fact, and a somewhat worrying one—I make this point to the noble Lord, Lord Kings Norton—that as the noble Lord seeks for better selection in regard to that research which is neither pure nor basic or directed at development, he must remember that there has been a tendency on the part of industry to say that they intend to work more on direct development, as I understand it, and that research will be—I do not know whether the term is "objective orientated" or something else. This has also caused anxiety for the opposite reasons, so that some of the more fundamental and basic research which has been done, valuably, in industry may not be done in future. None the less, I think most of us would accept the general proposition that in this area some kind of switch of resources is necessary; but as to how that is done I have great difficulty in finding an answer.
In the whole of the R. and D. field, and in the whole of the seeking of greater efficiency in Government, I believe that the problems today are largely beyond the capacities of Parliament and Government. I really believe that we need to do some very fundamental thinking as to how Government and the public interest can exercise its rightful influence without in fact moving entirely to a diregist or totalitarian type of society. But it is of course a fact that some of our manufacturers complain that they are at a disadvantage in comparison to foreign competitors because the British Government tend to be less involved in this matter. As to competing in certain 393 markets, such as East European markets, I should have been very interested to hear something more from the noble Lord, Lord Birdwood, on machine tools industries in other countries and the extent to which there is a more co-ordinated Government/private enterprise approach than we are yet able to achieve here.
The noble Lord referred to manpower planning. Here I believe the Government have an important role. During the time of the previous Government (and I had some concern in this) we greatly supported the setting up of the Institute of Manpower Planning. This is an exceedingly difficult area where fundamental thinking is yet to be done. I have not seen the recent reports from the Institute—I suppose they publish them—but I saw some of the earlier ones and they were promising. But whether anyone is paying attention to it in industry, or elsewhere, I do not know. One of the problems of industry to-day is that management have so much to look at. To start with, they have to learn the meaning of the wretched Industrial Relations Act and how to apply it; and all the other guidance available to management. We really are in grave difficulties here. How one can evolve the re-training and enlightenment of management while still allowing them to do their jobs, and in a competitive situation to act in a proper entrepreneurial way, is something we have yet to learn.
It is a fact that there are large numbers of companies in this country which would greatly benefit if they used financial modelling techniques of the kind which have been evolved and which consultants can sell them for a comparatively small price, revealing to them the cost of what they are doing and, indeed, sometimes, what are the prospects of profits. I suspect that there are still too many companies which do not yet know, until the blow hits them in the final results of the year's trading accounts, whether they are making a profit or are likely to make a profit. The kind of systems to which the noble Lord referred are important, but here again how do we take the time to train people? I would ask the Government to comment particularly on the noble Lord's suggestion, which shook me 394 a little, that in relation to the investment demand cycle we ought to do a sort of simulation of what ought still be to be spent on R. and D. marketing and training. This strikes at the very root of the private enterprise system. It may well be that Governments, by certain adjustments in the already complicated taxation procedures, will give a lift on this; but I am nervous about subsidisation in areas of this kind. I have seen wasted efforts in all these areas.
However, at least one of the virtues of the cycle, which I do not defend because I do not like the way the capitalist system works, is that it sometimes shakes out activities which are not good enough. It compels people to look at their training; it compels them to look at their R. and D. and their marketing. I must say that I think he is a bold man who suggests that there should be some form of Government subsidy of this kind which would clearly have to be applied throughout the whole of industry. None the less, it raises certain issues, and one of the consequences of this cycle is that firms, because they have to go on trading, and because they have perhaps failed to forecast properly (they do not use the right financial modelling or what-have-you) immediately make panic cuts in the areas which are most important for the long-term growth both of the firm and of the industry.
In this connection there is one type of Government intervention which was promising, a post valuable partnership between Government and industry, and that was a body such as the I.R.C. I know very few leading industrialists who do not regret greatly the decision of the Government to abolish what was a promising institution. It may well be that this reformed Government, with their new Minister of Industry, and with their new Committee, are in fact going to adopt these techniques. We do not complain when they go in for investment grants and have to find another name for them. And if they want to set up the I.R.C. again and call it by another name, we shall rejoice over these doctrinaire sinners who repent in these matters. But I am bound to say to the Government, in the light of what the noble Lord has said (and there are many other interesting matters that one would have liked to talk about), that Government must achieve 395 a better exchange and a better relationship with industry.
Curiously enough, I have heard criticisms that Ministers have been less willing to talk to industrialists. This is very much a matter of personal experience and we must experiment with new techniques. I wish that the noble Lord, Lord Erroll of Hale, a distinguished ex-President of the Board of Trade, would take part in this debate because I am sure he would disagree with everything I am saying—though perhaps now he would not—but I am bound to say that at some stage I think Parliament must concern itself in this aspect. We cannot do it just by debates across the Floor of the House, valuable though that is, unless we are to abandon responsibility or refuse to take up responsibility in areas where Governments are continually pressed to intervene.
I do not think it would be right to put all the responsibility on the Government, because in the end the Government would inevitably become more elitist and more authoritarian, and I am sure that none of us would wish to see that. To get back to my old subject of a reformed House of Lords, with more Members giving more time, if we had that we might then be able to make the sort of contributions, critically, in Committees, collecting the information and at least reading the amount of evidence that exists, and insist that the Government should intervene where they can. I am glad that the noble Lord, Lord Birdwood, has introduced this debate, and I hope that he will not be discouraged by the small number of speakers who are to take part. I hope he will agree that the noble Lords, Lord Drumalbyn and Lord Kings Norton, and I at least make up in quality for the lack of quantity.
§ 3.42 p.m.
§ LORD DRUMALBYN
My Lords, I should like to start by congratulating my noble friend on having raised what is, by any standards, an extremely important subject, and on having done so, if I may say so, competently and in such a constructive way. If he was on occasion perhaps a little too pessimistic and doleful I will try to right the balance, to some extent at any rate. I am glad that the noble Lords, Lord Kings Norton and Lord Shackleton, have intervened. I 396 remember on one occasion some years ago when I raised a debate—I think it was on import savings—and the noble Lord, Lord Shackleton, was good enough to reply, but we were the only speakers, and I think that is one of the reasons why the noble Lord, Lord Shackleton, in the kindness of his heart, has intervened in this particular debate.
It has been an extremely interesting debate. I am bound to confess that I approach the subject with the utmost diffidence, because there are so many of your Lordships who have immense experience in the field of research and development and of marketing and, above all, the very wide field of engineering. For after all, the engineering industry comprises the mechanical, the instrument and the electrical engineering industries and it is an extremely important part of our economy. I need only mention that in 1970 the industry accounted for about one-fifth of all industrial net output and about one-quarter of the net output of manufacturing industry. Manufacturing industry itself contributes over one-third of the gross domestic product, so we are speaking to-day of a very large sum; something like 8 per cent. of the G.D.P. stems from the engineering industry. Its contribution to exports is of course very high, being just under 30 per cent., and that is excluding aircraft engines. The proportion of this net output which is exported directly is 26 per cent., which is immediately behind that of motor vehicles.
I should like to say one thing to the noble Lord, Lord Birdwood. He referred to the interesting Report of Professor Williamson, but of course all these Reports are bound to have limitations in terms of time, and the NEDO estimates that were taken for the value balance in engineering products were made originally in 1966 on 1965 figures, and a projection from that does not really fully apply to-day. The fact is that over the period 1967 to 1971 exports almost doubled in money terms from £1,455 million in 1967 to £2,705 million in 1971, and the crude trade balance in our favour rose from £700 million to £1,350 million. In the machine tool field also exports more than doubled in value over that period from £46 million to £97 million, with an overall trade surplus of £48 million in 1971.
397 It is of course true that these results owed a good deal to the rapid increase in prices between 1967 and 1969, following upon devaluation, but the volume of exports and imports has risen markedly, due mainly to the continuing process of liberalisation of international trade up to 1971 among the main manufacturing countries of the world. Since then—in 1970 and 1971—the rate of growth in the volume of world trade in manufactures was falling, and this contributed to the fall in export orders of the engineering industry, which was accentuated by the uncertainty associated with the international monetary crisis. In addition, our export prices have been increasing rapidly.
It is natural, of course, and it must be stated quite clearly, that these figures mask a situation which is far from comfortable. I am not quite certain whether the figures quoted by my noble friend were totally right, but certainly the trend was quite correctly pinpointed. Obviously, when the machine tool industry is short of orders there will be a rapid falling off in employment in the industry, and it may well be that some of the best people whom one can ill afford to lose, will be lost, and may not come back. This, as the noble Lord has said, is a continuing problem in a cyclical industry of this kind. One of the most valuable parts of this debate to-day is the fact that he has drawn attention to it. It is something that has to be continually studied. I sometimes think that we tend to forget about it when we move into the upswing again and it is only when we come back to the low phase of the cycle that we begin to think of what it is necessary to do. I have no criticism at all of his suggestion that it would be a good thing if during a trough period firms were to say what they would be doing were it not for the trough. The only difficulty is in timing that type of report and collating the reports at that stage. The suggestion he has made is well worth looking at and we will certainly take it into account and study it carefully.
World trade is expected to rise faster this year than in the past two years. Our engineering industry should benefit from this, provided that we can prevent our costs from rising more rapidly than those of our overseas competitors. In this, of 398 course, unit labour costs are of major importance. It is perhaps worth mentioning that if the present claims of the C.S.E.U. were met in full, labour costs would rise by 40 per cent., and labour costs amount to nearly a fifth of total costs of production. At home the industry occupies the central place in British industry as a whole. Not only does it employ over one-quarter of all those employed in manufacturing industry, but much of the output of the engineering industry is in the form of the tools of production and control used by manufacturing industry. Clearly the efficiency of these tools has a very important "gearing" effect on the rest of industry—in the efficiency with which we win our raw materials, and produce, package and distribute our finished products.
In view of the rather sad side of the picture which the noble Lord, quite rightly, drew to the attention of the House, it is important to recognise that the industry is growing. Its average rate of growth has been higher than that for manufacturing industry as a whole. Over the period 1963 to 1971 there was a higher rate of growth in electrical and instrument engineering than in mechanical engineering, but in the latter also the average annual rate of growth was higher than that for manufacturing industry as a whole.
The output and general activity of the engineering industry in 1971 was adversely affected by the low phase of the investment cycle in this country and the slow growth in the economies of our main overseas markets, particularly in the United States of America and Europe. The recent experience of falling orders and lack of growth in the engineering industry is largely a reflection of the trend in investment in plant and machinery by manufacturing industry, which fell by 8 per cent. in 1971, after rising by 10 per cent. in each of the two preceding years. The decline was entirely on the mechanical engineering side. Investment by the engineering industry itself fell by 19 per cent. between 1970 and 1971, and in the motor vehicle industries the fall in investment was 30 per cent. This is bound to have had an effect, of course, on the machine tool industry.
The downturn in investment has been felt particularly severely in that industry. 399 Between 1967 and 1970 total deliveries at current prices increased by 27.7 per cent. and within that total exports rose by 92 per cent. This, of course, merely accentuates what the noble Lord has said about the cyclical nature of the industry. Last year total deliveries fell by about 59 per cent. but exports increased by a further 11 per cent. to a record level. This represents a remarkable marketing achievement, since output per man and capital investment are both lower here than they are in Germany.
New orders, however, fell last year by nearly one third—the noble Lord said 37 per cent., rather higher—and this reversal was not confined to the United Kingdom. Indeed, in the machine tool industry in the United States of America orders started falling off in 1969. More recently the recession spread to Europe and Japan. The decline in orders has resulted in a substantial number of redundancies and closures since September, 1970, and industrial troubles such as those at the Churchill Machine Tool Company in Altrincham and Coventry. I am sorry that my noble friend Lord Erroll has just left the Chamber.
It was against this broad background that the Government in their analysis of the problems facing the economy concluded that while over the next 12 months a recovery in private investment, both in manufacturing industry and in the service sectors, could be expected, it would not be of the magnitude required either to meet the challenge of Europe or to provide an adequate basis for a return to full employment. For these reasons the Chancellor in his Budget Statement announced a series of measures aimed at a growth of output at an annual rate of 5 per cent. between the second half of last year and the first half of next. The massive boost to consumer spending coupled with the new system of capital allowances, applicable countrywide, are designed to create a climate favourable to industry against which it can expand with confidence and move on to a period of sustained growth and profitability. The formation of the Industrial Development Executive, to which the noble Lord, Lord Shackleton, referred, is a further move to create machinery within Government which will broadly assist industry to modernise, adapt and rationalise so as to meet the new and rapidly 400 changing world industrial and commercial environment.
One of the most important tasks of the Executive will be to examine the problems of the machine tool industry. In the assisted areas the regional arm of the Industrial Development Executive will have a positive role. It will have the resources for encouraging industrial expansion and modernisation, and a special task to stimulate growth in particular areas. It will co-operate closely with local authorities and other bodies and agencies concerned with regional industrial development. The White Paper spells out the role of the regional industrial directors, and I think this should to a large extent go a long way to meet the gap which the noble Lord, Lord Shackle-ton, indicated might exist. To refer to the White Paper, those roles are: to seek out potential candidates for grants and evaluate applications for selective assistance in the region; to provide an expert view on the obstacles to industrial growth in the region, and on the steps necessary for promoting industrial expansion and modernisation; to ensure that industrial factors are given full weight in the overall planning in the region; to promote the regions industrial interests. One of the very great advantages here is that it is hoped to avoid the problems of over-centralisation which we may have been faced with in the past; and the kind of closer contact that the noble Lord was speaking about between industry and those who are responsible for decisions will, we hope, be achieved through these new measures. We shall, of course, have an opportunity of debating them when they come before the House.
Following the Washington agreement on new exchange parities last December, world trade in manufactures is expected to rise faster this year than in the past two years. With recovery in demand in our main overseas markets—especially the United States and Western Germany—overseas orders for engineering products are expected to rise again this year, and the volume of export deliveries should also expand. This, coupled with the expansion in the home market which is bound to follow the Government's recent reflationary measures, is sure to bring relief and growth to the engineering industry. So that the scene is now set for a period of sustained economic growth 401 against which industry can lay its investment plans with confidence.
It is from this firm base which Her Majesty's Government have created that the engineering industry's recovery will spring. To take full advantage of this the industry will need to have special regard to the importance of good industrial relations, the need for adequate research and development, and the proper training and use of both its skilled and unskilled manpower. It is only by giving these their due full weight that the engineering industry will be equipped to take the fullest advantage that entry into the E.E.C. will present with its new market of 300 million people. The relaxations announced in the Budget Statement in the exchange control rules for direct investment in relation to the E.E.C. will enable United Kingdom firms to look again at the possibilities of forging further links with our E.E.C. partners.
My noble friend Lord Birdwood, in his Motion and in his speech, referred particularly to the machine tool industry. The broad measures which I have just outlined should help the industry with its main short-term problem—the fall in orders due to the low level of investment in manufacturing industry both here and abroad. Orders for machine tools fell by nearly one-third last year, and as a result there have been redundancies and some closures. As I said in my opening remarks, the most serious risk is that skilled manpower will be lost for good to the industry, and that in consequence its production capacity will be permanently affected. But I presume that this must have been said each time when we reached the trough of the cycle.
It was for this reason that the Government decided that an extra £10 million should be made available immediately for spending on machine tools in the public sector—that is to say, spending by the Royal Ordnance Factories and Naval Dockyards, British Railways workshops, and the universities, polytechnics, further education establishments, Government training establishments and industrial research establishments. This is intended to help in bridging the gap while the more general stimulus to investment which the Budget is providing has had time to make its effects fully felt. I say "fully", my Lords, for the first effects 402 should be to enable spare production capacity to be taken up, and while that is happening manufacturing industry should be considering its investment plans and moving on to place orders for new plant and machinery. The sooner it does so, the better. There is evidence of a growing feeling of confidence in industry. The Association of British Chambers of Commerce, I see from the Daily Telegraph, thinks that it is at its highest for ten years. Once orders start coming in and order books lengthen, the waiting periods for delivery will lengthen, too. I am very glad that the Machine Tool Trades' Association have been running a series of advertisements in the national Press urging industry to re-equip now to ensure that it is competitive when we enter the E.E.C. They deserve great credit for their collective initiative.
The machine tool industry expanded rapidly in the 'sixties. Its total deliveries rose from just under £95 million in 1960 to nearly £200 million in 1970, falling back about 5 per cent. last year. Some of the criticism levelled at it is perhaps not wholly justified. What it was doing simultaneously (my noble friend, as I have already said, pointed out that in terms of value per ton our exports are lower than our imports) was to reinforce success in its traditional lines and at the same time seek to increase its sophistication. After all, if we are able to export standard mechanical engineering products of comparatively low value per ton, and can do so competitively, so much the better. Admittedly, we may find increasing difficulty in doing so, and the industry should be gearing itself towards more sophisticated products, for specialisation is certainly the order of the day in international trade. But the industry is doing this, as we shall see, I have no doubt, at the International Machine Tool Exhibition sponsored by the Machine Tool Trades' Association which is to take place at Olympia in June, and which I gather the noble Lord, Lord Kings Norton, has already seen in Hanover.
The Government are helping and encouraging the industry. But, as the Report of the Committee chaired by Sir Richard Way on the industry said almost at its outset:If further progress is to be made to the extent which seems to us vitally necessary, it will be mainly by means of efforts made by the industry, not by action of the Government 403 —important though this can be in certain spheres.Government help is given, for example, through pre-production orders. The problem of the machine tool industry is not so much a question of new ideas and new machines as of the manufacturing industry's willingness to take up these new machines. There is an inevitable tendency of firms to allow "the other fellow" to try out a new machine first, or to go for a well-tried and well-known machine. That is why, of course, the Government have been giving, and will continue to give, help through these preproduction orders, which enable the Government to place an order in the early stages for a prototype machine and to have a contract with another firm to try it out and report back on the results. That is one way in which the Government are helping.
Another way is by support for research and development and for establishing advisory services (which I think have not been mentioned to-day), such as the Numerical Control Advisory Service, run for the Department of Trade and Industry by the Production Engineering Association at Melton Mowbray, and the Group Technology Centre run by the Atomic Energy Authority at Aldermaston. It is perhaps on this Group Technology Centre that the noble Lord's comments, and the comments of the noble Lord, Lord Shackleton, were very illuminating. This is the area of cellular manufacturing to which my noble friend referred so cogently. Once these services are established, they should be self-supporting through the fees that they will earn for the services which they perform.
As for research and development, the Department of Trade and Industry support machine tool projects where the benefits to be derived are important and so widely spread that no individual firm will undertake the work. The National Research and Development Corporation support the cost of developing new inventions, generally on a fifty-fifty basis. The National Engineering Laboratory at East Kilbride carries out a large programme of research in selected fields—and "selected" is the word; the question, of course, is who selects—of engineering, including machine tools. Then there are four research associations active in the machine tool field, which together receive 404 about £600,000 a year from the Department of Trade and Industry. I thought it right to remind the House of this background because I think it would be a mistake to suppose for one minute that the Government were not helping in this field.
The machine tool industry has been clinically examined over the past decade in a series of reports associated with the names of Mitchell, Layton, Way and Feilden. There is general agreement that improvements are needed in the qualifications and expertise at all levels of manpower, from semi-skilled to highly skilled professional and managerial grades. It is considered that the distribution of qualified scientists and engineers within the engineering industry could, in comparison with other advanced countries, be much improved. This is an aspect that I am a little surprised has not been stressed as much as I had expected in the debate so far. In particular, there are too few qualified scientists and engineers in production and marketing. My noble friend mentioned that point. For example, in Europe more than twice as many Q.S.E.s (as they are called) are employed in marketing as are employed in research and development, whereas the comparable proportion in the machine tool industry in this country is only one-sixth. No doubt there are many reasons for this, starting with the attitudes engendered in our schools towards industry and the vital task of marketing. We must also acknowledge that there is still a large gulf between the student's experience at university and the environment in which he will be employed in industry.
Valuable work has been done by the E.I.T.B.—the Engineering Industry Training Board—in this field. Steps have also been taken to improve the experience of graduate engineers in the engineering industry through the provision of postgraduate courses in manufacturing technology which aim to give instruction in all aspects of the product—marketing, design, manufacture, organisation and management. The University of Manchester Institute of Science and Technology runs a two-year course on machine tool design. Its distinguished head, the noble Lord, Lord Bowden, is anxious to find practical ways of encouraging and enabling graduate engineers to attend 405 post-experience courses in engineering so as to bring their knowledge up to date, and I understand that he has been having discussions with the Government and is to submit to the Department of Employment proposals for training courses. In this connection, I should say that the Government hope that advantage will be taken of the sums to which I have referred as having been made available to higher educational and training establishments to provide numerically controlled machines.
The Way Committee recommended that educational requirements for engineering graduates should be reviewed by the Department of Education and Science, the professional institutions and industry. It is of course for the universities themselves and the Council for National Academic Awards to devise courses and to determine the qualifications for awards of degrees; it is for industry to say what its training requirements are. If industry and the professional institutions consider that changes in the content of courses are required, it is for them to approach the universities and polytechnics. This is not to say that the Government have no role to play here. The Government have previously supported postgraduate training in the machine tool industry by a financial contribution to the formation of a Bosworth course in machine tool technology. These courses are designed to take the raw material of the science or engineering graduate and equip him to hold posts of responsibility in industry.
It is sad, but true, that over the past five years the machine tool course has attracted only half the number of students that it was designed to take. As Dr. J. S. Lewis of Lancaster Polytechnic has aptly put it:The central problem…is not how to accelerate the production of more high level specialists, but how to convert the first degree graduate into someone whose talents his first employer can make use of without mutual disenchantment".And it is not only how to convert him, but how to get him in the first place. The Government hope that the Unit for Qualified Manpower, which the Department of Employment has recently set up, together with an inter-Departmental steering committee will serve a very use- 406 ful purpose in collating and analysing information about qualified manpower and so enable consequent policy problems to be identified and resolved.
I hope that I have covered most of the points which have been urged upon the Government. I have taken particular note of the suggestions of my noble friend Lord Birdwood; and of course we always listen to the noble Lord, Lord Kings Norton, with the utmost attention. I have taken note of what my noble friend said about the use of forecasting techniques, and this is something that is being very carefully considered. It is easy to say that we should stop constantly changing economic variables; if only the economic situation would stop constantly changing we might be able to do so. I entirely appreciate what was said about the need to adapt the machines which are required to the conditions and needs of the time, and I hope very much that we in the Government will be able to avoid changing them more than is strictly necessary. I should like once again to thank noble Lords who have taken part in this debate, and to congratulate my noble friend very warmly on what was by any standard an excellent performance.
§ 4.14 p.m.
§ LORD BIRDWOOD
My Lords, in winding-up, I shall go through the normal motions of simply covering in brief some of the points which have been made. When I saw the list of speakers printed for to-day, I felt curiously uncomfortable. It was as if I had chosen to ask the House to debate some extremely esoteric subject. Possibly the fate of a small flower in a reservoir would have had a much more vivid, immediate response. However, the response which has occurred has more than made up for that. The noble Lord, Lord Kings Norton, dwelt upon R. and D. and drew a distinction between pure and applied research—pure useful research and applied useful research. He referred to Rothschild and stressed the selection of objectives. I would just point out to him that if that is the important criterion—and I see no reason why it should not be—one gets into a chicken and egg regression. The people who have to select the objectives are generally the people at the top of the heap in the science establishment at that moment. But advice is given to them 407 in structuring the objectives of the research which they are going to sponsor. Your Lordships will take the paradox.
I was extremely grateful to the noble Lord, Lord Shackleton, because he said, in much clearer words than I used, precisely what it was that I was trying to get at: the subtleties of the interaction between Government and industry. That interaction is at its most vivid in engineering, and that is one of the factors which prompted me to put this Motion before the House to-day. He mentioned foreign patterns and practices. I have little to offer on that subject, except that I think it is true to say that the French—who of course gave us the word he used, "dirigiste"—pattern of help to companies is very much more dirigiste than we would stand for. If one gets help in France, then one gets pretty clearly directed help. One gets a consultant in at the same time and he says precisely what is going to happen to that cash.
§ LORD SHACKLETON
My Lords, I wonder whether I may interrupt the noble Lord. Does he think that one of the factors here is the extent to which civil servants have an opportunity to serve rather more in industry? The House will know that no one is a greater supporter of the British Civil Service than I, but this is, to my mind, a notable factor, and I wonder whether the noble Lord is aware that it is one of the reasons why this closer co-operation is achieved.
§ LORD BIRDWOOD
Yes, my Lords; I am aware. But I do not have enough experience of, or even very strongly moulded opinions on, the problems of political philosophy which are raised. I think that what happens now in this country at this stage of development is, roughly speaking, right. We have the niche which seems to suit us. All I was trying to say was that, pledged as certain Administrations are to non-discriminatory action—I shall not be drawn into using the term "special cases"—there are certain fundamental activities within our economy which need a measure of thought and which I do not think they can exactly rely on. The suggestion I made was to get any Administration off the hook of direct funding, of simply pouring money in, by structured funding to flatten out a very cyclic situation.
408 I shall describe what I heard recently, but I shall have to go some way to concealing where I heard it. A machine tool manufacturer was distressed because one of his best customers had recently—this was about two months ago—bought an Eastern European machine at a price which that British manufacturer would have had to pay for his raw materials. This question of Eastern European machine tool manufacturers, having met their COMICON obligations, being able to establish virtually any market slot they like for their products is something which bears looking at quite closely. My noble friend Lord Drumalbyn referred to Theo Williamson's paper. I think we have both been waving this ochre-coloured document in front of us. He said that these figures were necessarily out of date. That is so, but this paper has two graphs in two different places. One is the E.D.C. forecast 1970–72, and Williamson then draws our attention to the fact that this is precisely echoed by a study made in 1965; and there is a frightening consistency between those two sets of projections. They are exactly the same—and they came from very different sources at different periods of time. Of course, devaluation or any other change will effect an alteration to the shapes of those projections, but I think the projections are very consistent indeed, and I hope that our discussion this afternoon will establish ways of changing them much more fundamentally. It is true to say that each year that goes by there are new record levels of exports. Of course there are. It is the rate at which the change occurs that is the important variable in this case: not merely the slope, but the rate of change of slope compared with that of our competitor countries.
The noble Lord also referred briefly to my figures. Every figure I quoted I took from a NEDO publication, from a D.C.I. publication, from The Times or from the Financial Times. So, apart from actually standing at the docks and counting the imports, I could do no better. I was very happy that the noble Lord enlarged on the role of the Industrial Development Executive. But again my point stands: how is this going to affect the people who have to do the work? What is actually going to change from 409 the point of view of somebody sitting in his office in the West Midlands? What is going to be different from what he was doing before? The regional emphasis is something on which I cannot particularly comment. I agree wholeheartedly with the excellent work which is being done at Manchester, and I am glad that was mentioned. My Lords, I hope that this short, short debate, the first of this afternoon's two, has aired some opinions, has given my noble friend Lord Drumalbyn an opportunity to spell out in some detail the structure of help that already exists, and has indicated areas in which help might be forthcoming. I beg leave to withdraw my Motion.
§ Motion for Papers, by leave, withdrawn.