Furniture Development Council (Dissolution) Order 1981 (Hansard, 27 July 1981)

Viscount Long
My Lords, I beg to move that the draft Furniture Development Council (Dissolution) Order 1981 which was laid before this House on 23rd June 1981, be approved.
My Lords, the Furniture Development Council came into being on 1st January 1949. It is the most long-lived of the development councils set up under the Industrial Organisation and Development Act 1947. The order setting up the council allocated to it a wide range of functions. Over the years, however, in part because of newer organisations that came into existence, the functions actually carried out by the council have dwindled, and since 1968 its sole function in practice has been to collect a statutory levy on furniture manufacturers, the proceeds of which are passed to one of these newer organisations, the Furniture Industry Research Association, known as FIRA.
Last year the Government decided to seek the views by ballot of the companies in those few industries for which statutory levies still existed, to establish whether or not there was a clear balance of opinion in them in favour of the continuation of a compulsory collection. This was done because, at that time, all but five out of 40 different industry research associations, so far as they were supported on a collective basis by their industries, received such support on a voluntary basis. So those industries having statutory levies were balloted.
The present proposal to discontinue the statutory levy in the furniture industry and to wind up and dissolve the Furniture Development Council results from the expression of opinion within the furniture industry. The present draft order provides for the winding up and dissolution of the Furniture Development Council and the abolition of the statutory levy at the end of 1982. For the year 1982 itself the order provides for the level of exemption from liability to pay the levy to be increased from a chargeable turnover of £3,000 per annum to £200,000 per annum. This provision will give early relief from payment of the levy to the smaller firms in the industry. In addition, the order also contains provisions to facilitate the winding up and dissolution of the Furniture Development Council. I shall come to those provisions later.
Out of the industries that were balloted, the furniture industry was the only one where there exists a development council which collects the levy rather than the levy being collected by the Government themselves. The existence of the Furniture Development Council means that my right honourable friend the Secretary of State is required by the 1947 Act to consult every five years with the council and with organisations representing both sides of the furniture industry on the question whether the council should remain in being and, if so, whether the development council order should be amended in any respect. These consultations were not due until this year. But the views of the council and 625 those other organisations needing to be consulted were sought both last year and this and have been taken into account as well as the results of the ballot of levy paying companies.
The council was in favour of the statutory levy and so of its own continuation. There were divided views among the other organisations consulted. But of the levy payers who voted in the ballot a clear majority—63 per cent.—were against the continuation of the statutory levy. It is because we believe that the views expressed by this clear majority should be respected that the Government have brought forward the present order which we are considering today. The abolition of the statutory levy would end the remaining raison d'être for the Furniture Development Council. This is why the order also provides for the winding up and dissolution of the council.
Perhaps I might emphasise at this point, to avoid any confusion in the minds of noble Lords, that it is because the industry favoured the abolition of the statutory levy that we are proposing the dissolution of the Furniture Development Council. This does not come about because of the Pliatzky Report, the report on non-departmental public bodies. That report referred to the Furniture Development Council as a body to be wound up as expeditiously as possible. But it was made clear that this depended on the outcome of the review of statutory levies then being undertaken. It is the outcome of the levy review, not the Pliatzky Report, which has promoted the present order.
The furniture industry has voted against the continuation of the statutory levy. We think it right to pay heed to its wishes. However, strong representations have been made to the Department of Industry that it would be wrong to discontinue the statutory levy without giving FIRA time to adjust. To do so would be damaging to the future of FIRA, which in recent years has depended on the statutory levy for 40 per cent. of its income. Having considered those representations, we believe that it is right that there should be a period for adjustment to the system of non-compulsory funding of FIRA that will follow from the replacement of the statutory levy. The views of the council and FIRA have been sought on the time needed for this adjustment and, having heard what they have had to say, the Government agree with them that the levy ought not to be completely abolished nor the council dissolved until 31st December 1982.
The draft order provides for this, so giving FIRA time to adjust. I should add that many in the industry have made clear that they value the work done by FIRA, and we hope and expect to see FIRA continuing to draw financial support from the industry, though the support, would be given on a non-compulsory basis as is the case in nearly all other industries. The furniture industry has voted against the continuation of the statutory levy, not against FIRA. FIRA has much to offer the industry, as I am sure the industry appreciates I should also like to pay tribute to the Furniture Development Council. Over the years the council has carried out its tasks with great efficiency and the vote is no criticism of them.
I referred earlier to the order containing a provision 626 to give early relief to the smaller firms in the industry. It does this by providing with effect from 1st January 1982 that those companies whose designated turnover does not exceed £200,000 will be exempted from the levy from that date. FIRA has arrangements in hand to enable those smaller firms within the industry who will obtain early exemption from the levy to retain access to FIRA's services by voluntary subscription if they so choose, although it is not intended that they shall retain free membership of FIRA once not paying the statutory levy.
I also referred earlier to the other provisions of the order. As when other development councils have been wound up and dissolved, the draft order provides for the orderly winding up and dissolving of the council. It provides for the residual property, rights and liabilities to vest in the Secretary of State after the council's dissolution. It provides for the council's accounts. It also provides for the imposition and recovery from the industry of charges to meet the council's liabilities and winding up expenses should the council's assets be insufficient for this purpose. It does so because the 1947 Act requires this. The council has already made clear its intention to conduct its affairs in a way that will avoid any need for such a supplementary levy on the industry. Lastly, the order also provides for the application of surplus moneys, after the liabilities of the council and its winding up expenses have been met. My right honourable friend the Parliamentary Under-Secretary of State made it clear in another place that such surplus moneys would be passed on to FIRA.
We expect the council to complete as much as possible of the winding up of its own affairs. After the dissolution date, when the remaining rights and obligations will vest in the Secretary of State, the Secretary of State will arrange to complete all outstanding business. It is certainly not our intention that the work carried out by FIRA should cease. Quite the contrary. This is why the Government have been concerned that the transitional arrangements shall allow FIRA to get off to a good start without the statutory levy.
I have already made clear that the vote was a vote against the statutory levy not a vote against FIRA. Noble Lords will wish to know that, in addition to the support which FIRA. has obtained from the industry through the statutory levy, the Government already provide substantial support for FIRA. In recent years this Government support, given by way of cost-shared contracts for specific programmes of work, has accounted for 17 to 20 per cent. of FIRA's income. This support is not linked to the existence of the statutory levy. Your Lordships will be glad to know that, under present research and development policies, the Government would expect to continue to support work at FIRA in the same way as in the past, if suitable proposals for support are put by FIRA to the Department of Industry's research and development requirements boards. The director of FIRA is aware of this.
Those who pay the furniture levy have been consulted and most no longer want a levy to continue on a compulsory basis. After 1982, with the abolition of the levy, FIRA will be put in the same position as the great majority of other research associations which carry on their affairs without a compulsory levy on 627 their industries. Like them, I anticipate that, like them, FIRA will continue to do useful work for the industry with which it is associated, and will win the freely given support from the industry, I beg to move.

Lord Wallace of Coslany
My Lords, first, I should like to thank the noble Viscount, Lord Long, for his clear and detailed explanation of the purpose of this order. He did so at a very impressive gallop, but did brush a few fences in his progress, for which I forgive him. However, I cannot agree with him that the work of the development council has decreased or is not now necessary.
The Furniture Development Council costs the taxpayer nothing. In other words, it has done the Government's job for them. It has collected the levy, part of which—as the noble Viscount has said—is passed over to the Furniture Industry Research Association, which may stand to lose 40 per cent. of its funding as a result of the Government's ill-advised decision to bring in this order.
As a result, the association will have to rely on voluntary funding. The research association has carried out, and still is carrying out, valuable work for the industry since the 1950s. The development council itself has proved its worth to the industry and has advised and helped many manufacturers with technical advice on woodworking, upholstery, hard-wear, materials, plastics, production, management and costing. It is now moving into micro-processor and robotic applications in the industry. It has banks of information on machines and materials which are second to none in the world. A considerable amount of technical data is on file and available. I want to know—and I put this question to the noble Viscount—what will happen to all this valuable material on the dissolution of the council?
I agree that there has been consultation with the industry and that a majority against the levy—and the noble Lord stressed that it was against the levy and not the council—was obtained, although it was by no means a unanimous decision. One can understand the desire of some sections of the industry to get rid of the levy for financial reasons alone. It is a small-scale industry with many small employers scattered around the country, especially in the South East, and a fair proportion in London. It has been hit hard by the Government's monetary policy. High interest rates, the high value of the pound and increasing foreign imports have dealt a serious blow. Some 130 furniture firms went out of business in 1980. Employment fell by 11,000 last year, and approximately 18,000 workers are now on short time.
One can understand the modification of the statutory levy, but not its abolition. To wind up the development council, with all its valuable work, is not wise. In fact, in my view it is an act of stupidity on the part of the Government which can only have a harmful effect on the industry. The Furniture Industry Research Association will, I understand, continue—and, I have been assured of this by the noble Viscount. That was an assurance, which I would have sought. It will have to depend on voluntary funding. Will this be sufficient? 628 Am I correct in assuming that there is no chance whatever of a Government contribution? The noble Viscount gave a hint on this, but he was not very specific. I ask that question, because there are a number of matters needing urgent research involving public safety and protection on which the Government have responsibility for action. I need only quote to the House the example of the use of plastic foam in furniture, where there is, indeed, great public anxiety.
Finally, in another place this order was fully and somewhat heatedly debated at an extremely late hour on 8th July. In fact, it continued into the early hours of the 9th, but as we know from Hansard the sitting of the 8th July continued well into the morning of the next day. Incidentally, this was debated—and I make a point here—before the Joint Committee on Statutory Instruments had concluded its review of the order. This is just another bit of evidence of the legislative muddle which the Government are in. However, the order was approved in another place without a Division, and under those circumstances, and bearing in mind the custom of this House, we shall, very reluctantly, not oppose it.

Viscount Long
My Lords, I am most grateful to the noble Lord, Lord Wallace of Coslany, for his contribution to this important order. I am only too happy to say to him that for once it was not the Government twisting the council's arm; it was that the council itself wanted to wind up, and let FIRA control the system.

Lord Wallace of Coslany
My Lords, I do not think that the noble Viscount is correct. If he will refer to the debates in Hansard of another place for 8th July, he will find that the chairman of the council bitterly complained about it and another Member said that it was an act—I forget the exact expression, but it was extremely strong. I do not think that it was the council. Surely it is the Government who have reached this decision based on the levy finding.

Viscount Long
My Lords, I have already discussed the way in which the ballot went and it is what the industry wanted. The industry is going through a very difficult time, with high rates of interest and so on. In the furniture industry if there is a change of design you might miss out on orders or for the next three years you might get more orders from abroad. I was in the timber trade, so I know how the situation fluctuates from there being good exports to there being too many imports from Russia, Sweden or Finland. At the moment, the industry is experiencing difficulty.
There will now be a voluntary funding and it will be up to FIRA, with all its experience, to bring in the levies voluntarily through the industry itself. This is what it intends to do, and, with the best will in the world, I am sure that it will do so. I am certain that the industry will back FIRA. If I may enlighten the noble Lord, in my view there is no reason to believe that the useful and necessary work at FIRA will be abandoned because the statutory levy is to be abolished. I do not believe that that will happen. If the work is useful and necessary, there will be every incentive for companies to pay for it in order to reap the benefits of FIRA's work. These arrangements will come into 629 existence at the end of 1982 and with all its experience I am sure it will carry on successfully.
The noble Lord was worried where the information will go and what will happen to it. It is there at FIRA and the industry will benefit from it. I do not worry about that. Much work that FIRA already does is not funded from the proceeds of the levy but on other bases, such as contracts with manufacturers, consultancies, and so on. The testing of material is one example. In the furniture trade, with new technology, new paints, new machinery, celluloses, and so on, that is an important part of what they are going to get. FIRA'S equipment for testing materials was grant aided by the department's Research and Development Requirements Boards. This type of assistance will still be available for any appropriate new work. I have tried to answer as much as I can of the noble Lord's questions. I have every confidence that FIRA will be able to deal with the situation without a compulsory levy required by the Government.