§ 5.33 p.m.
My Lords, I beg to move that the draft Hosiery and Knitwear Industry (Scientific Research Levy) (Amendment) Order 1979, which was laid before this House on 20th November, be approved. This order, if approved by Parliament, will be made under the authority of Section 9 of the Industrial Organisation and Development Act 1947. This short order makes provision for the amendment of Statutory Instrument 1969/882—the Hosiery and Knitwear Industry (Scientific Research Levy) Order 1969—so that the scientific research levies shall cease to be payable in the hosiery and knitwear industry after the levy period ending on 30th June 1982. It also provides that, from 1st January 1980, the level of exemption from liability to pay the levy will be increased from a chargeable turnover of £5,000 to £250,000 per levy period.
Your Lordships will remember that it was necessary to withdraw this draft order laid before the House on 23rd October so that the levy exemption limit could be amended to £250,000 per levy period—that is, £500,000 per annum. This was as a 1596 result of a misunderstanding between the Hosiery and Allied Trades Research Association and the Department when calculating the likely effect of the exemption level on HATRA's income. The Department's calculations were based on raising the limit from £5,000 to £500,000 turnover per levy period—that is, six months—whereas HATRA, and others, assumed £500,000 per annum. When it transpired that there had been a genuine misunderstanding my right honourable friend accepted that HATRA should not be obliged to live with a sudden loss of levy income of at least twice the level which the association, after careful consideration, had considered it could accommodate. My right honourable friend was reinforced in this view when further contact with the two trade associations primarily concerned revealed that the industry too had assumed that the agreement had been to exclude firms with a chargeable turnover of up to £500,000 per year, and not per levy period.
The new exemption limit of £250,000 per levy period—Article 2(b) of the draft order—properly reflects the understanding reached between HATRA and the industry and the Department and involves a loss of income tolerable to HATRA.
I think it would be helpful to the House if I explained, at this point, some of the background to the statutory levy. In the late 1960s the Hosiery and Allied Trades Research Association, known as HATRA, which was formed to carry out research on behalf of the United Kingdom hosiery and knitwear industry, requested the imposition of a levy, under the 1947 Act, so as to spread the cost of research, which benefited the industry as a whole through a gradual improvement in knitting techniques, on as equitable a basis as possible to all firms within the industry; and in so doing to augment its income to the extent necessary to carry out research on a scale suited to the needs of a highly competitive expanding industry, with considerable export potential. After consultations, the then Minister agreed the request and the order, which we are now seeking to amend, came into operation on 1st July 1969 to provide funds for HATRA which had been carrying out collective research for the industry since 1949. The proceeds of the levy are paid over gross to the research association.
The present proposal to discontinue the statutory levy stems from various criticisms 1597 made within the industry. In particular, some firms, many of them small, producing relatively low volume of high value knitwear—for example, cashmere and other fine animal hair knitwear—considered that they were bearing a disproportionate part of the cost of funding HATRA. It has also been argued that the present method of funding HATRA does not sufficiently encourage it to utilise its resources in the ways which the majority of the industry would like to see. Indeed, it has often been said that the research carried out by the research association is not directly applicable to many companies, particularly the many smaller firms who by their nature cannot benefit from, for example, developments in large-scale production techniques.
Having said that, I hasten to pay tribute to the much valued work which HATRA has, over the years, carried out to the benefit of the whole industry. Indeed, I should make it clear at this point that, having conducted full consultations with the industry, as required by the 1947 Act, it is the view of the industry as a whole that a research organisation with the standing and capability of HATRA will continue to be needed. However, a clear majority of the firms within the industry indicated in response to the department's inquiry that they considered that the present statutory system of funding HATRA was unsatisfactory and should be discontinued.
I am convinced that it would be quite wrong simply to discontinue the levy overnight. A period of adjustment to whatever new system of funding the industry and HATRA decide to introduce is obviously needed, and that is why my right honourable friend the Secretary of State for Industry has proposed to phase out the levy over a period of some two and a half years. The proposal does, however, contain a provision to assist at once the smaller firms in the industry by raising, with effect from 1st January 1980, the exemption level below which firms do not have to pay levy, from £5,000 to £250,000 chargeable turnover per levy period. In addition, I understand that it is the intention that smaller firms, thus exempted from levy payments, will still have access to the services and research results of HATRA, and that the association will undertake specific projects for those firms who are prepared to pay for them.
1598 At present the levy yields about £250,000 per year which represents about 50 per cent. of HATRA's total income. The remainder of its income comes from contributions to approved Textile Research Council Contracts from the Department of Industry, subscriptions, rent, royalties and the like. It is estimated that under the proposal which we are now considering HATRA's income from the levy will be reduced by approximately £20,000 in a full year. I should say that it is difficult to quantify precisely the effects that raising the exemption level would have on income since, as I mentioned earlier, the levy—0.033 per cent.—is calculated on turnover which, noble Lords will appreciate will, vary.
The industry will have between now and the end of June 1982, to decide what system of contribution should replace the statutory levy. Discussions with the industry have suggested that in future a much higher proportion of HATRA's income than hitherto would be related to the provision of specific services for the individual firms or groups of firms. It is not the intention that research for the industry carried out by HATRA should cease to exist, but rather that HATRA should become more commercially orientated and responsive to the needs of the industry which it serves. I believe that the alteration proposed from a statutory levy to voluntary support, combined with charges for specific services, will be the most effective way of bringing about this change in direction. I beg to move.
§ Moved, That the draft order laid before the House on 20th November be approved.—(Viscount Long.)
§ 5.41 p.m.
Lord WALLACE of COSLANY
My Lords, first I should like to thank the noble Viscount, Lord Long, for the very detailed and lengthy explanation that he has given. May I also express gratification that the dropped stitches have been picked up and that at last we are able to deal with this order, only just in the nick of time, because I understand that the Recess starts on Thursday. Generally speaking, from the information that I have already gleaned from the noble Viscount, we have no objection to this order. I should like to ask him how the order originated. Did the initiative come 1599 from the industry? Furthermore, what organisations were consulted and, indeed, was the decision unanimous by both management and unions? Apart from that, it is obvious that there is no real objection to the order. Therefore, I wish it godspeed.
§ The Earl of SHANNON
My Lords, I, too, should like to thank the noble Viscount for explaining in such detail this order which is now in the correct amended form, as was agreed with the Hosiery and Allied Trades Research Association and the industry concerned. At this point I must declare my usual interest in matters of industrial research. I fully appreciate that the attitude of Her Majesty's Government is that they do not wish to continue indefinitely with compulsory payments by industry. Nobody likes paying statutory levies, even if they are for one's own benefit. However, I must ask Her Majesty's Government to bear in mind the vital necessity—and it really is a vital necessity—for British industry to keep very fully abreast of the modern technology available. It will be our only means of maintaining our industrial economy in the face of competition from developing nations, especially in the low labour-cost areas. The textile industry has produced some classic examples of where we have not kept abreast of the latest technology and of where, as a result, we have lost out.
The noble Viscount gave some figures of the percentage that was being spent on research. How pitifully low! Let us hope that when this statutory levy finally comes to an end, the industry will realise that it cannot possibly continue to meet world competition if that is the only sum of money which it and many other industries in this country are prepared to spend on the only means of keeping themselves abreast of modern technology and in the race at all. I hope that this observation will not be lost on Her Majesty's Government; that they will do everything they can to encourage industry, both large and small, to adopt new technology; and that they will also do everything they can to ensure the continued viability of all organisations which have a long record of transferring new technology to industry, with the all too obvious beneficial results to the nation and to our economy.
§ Lord WIGG
My Lords, before the Minister replies perhaps he would be good enough to answer one question. As I understand it, the Government object in principle to levies being imposed by statute, and the Government's attitude in relation to the order which is now before the House is conditioned by the fact that they object in principle but will allow two-and-a-half years to elapse. I am not interested in the two-and-a-half years, but I am interested in the Government's attitude to the principle of levies raised by statute.
My Lords, I am grateful to the noble Lord, Lord Wallace of Coslany, the noble Earl, Lord Shannon, and the noble Lord, Lord Wigg, for taking part in the debate on this very important order. Yes, we did manage to gather up the stitches. I have already said that we had to withdraw the order because it was not quite right. The noble Lord, Lord Wallace, asked me one or two questions, in particular where the views and ideas originated. The industry as a whole was informed about the changes. The order stems from a request made to the department by the Scottish Knitwear Council in mid-1977 for the revocation of the 1969 order owing to the high cost of their knitwear. They felt that they needed that revocation, As I understand it, in Scotland there are many more smaller firms than there are in England.
In October 1978 a referendum was held in which 61 per cent. of the firms on the department's levy list voted in favour of the abolition of a statutory levy—I think that this is the point raised by the noble Lord, Lord Wigg; 24 per cent. voted against, and 15 per cent. either held no view or did not reply. Therefore, it was not the Government which pushed this ahead; it was a referendum which produced the results.
My Lords, the Government are now very happy to allow the industry to adopt this voluntary method of raising the levy. That is what 1601 the industry wanted and the Government are in full agreement with them. I know that two-and-a-half years is a long time, but I think that the industry probably want to do it in a shorter period.
§ Lord WIGG
My Lords, I do not want to involve the Minister in an interrogation, but I wish that he would answer the point. The point is this. The industry wants to do something. Obviously the Government, who are sensible people, will want to go along with the industry. I want to know what is the Government's attitude towards levies raised by statute. Are the Government impartial or do they hold the view—which, after all, is in accordance with their general philosophy—of being opposed to levies imposed by statute and thus will sooner or later lift them?
My Lords, in his remarks the noble Earl, Lord Shannon, referred to the vital matter of money for research. Not only do I agree with him, but it is important that the whole of industry—not only knitwear and hosiery—receive money for research. It is vitally important at this stage because of the vast competition which this country faces with the rest of the world. I think that I have answered most of the questions.
§ On Question, Motion agreed to.