Wool Textile Industry (Scientific Research Levy) (Amendment) Order 1982 (Hansard, 30 March 1982)

§ Lord Cullen of Ashbourne

My Lords, I beg to move that the draft Wool Textile Industry (Scientific Research Levy) (Amendment) Order 1982, which was laid before this House on 2nd March, be approved, 1325 and, with your Lordships' permission, I will speak also to the draft Wool Textile Industry (Export Promotion Levy) (Amendment) Order 1982 which was laid before this House on 2nd March.

The two orders are closely connected and they can most conveniently be dealt with together. I should explain that it is necessary for there to be two separate orders, although they are closely connected, since the purpose of the two levies is different. One levy is for scientific research into the technical problems of the industry, carried out by WIRA (formerly the Wool Industry Research Association) and the other for the promotion of exports of woollen goods effected by the National Wool Textile Export Corporation, known as NWTEC.

The effect of these orders, which are under the authority of the Industrial Organisation and Development Act 1947, is to provide for the amendment, first, of Statutory Instrument 1970/349 (the Wool Textile Industry (Scientific Research Levy) Order 1970), as amended by Statutory Instrument 1971/881 (the Wool Textile Industry (Scientific Research Levy) Amendment Order 1971); and, second, of Statutory Instrument 1970/348 (the Wool Textile Industry (Export Promotion Levy) Order 1970), as amended by Statutory Instrument 1971/880 (the Wool Textile Industry (Export Promotion Levy) (Amendment) Order 1971). The changes proposed in the orders are twofold. Perhaps the most significant one is that the scientific research levy shall cease to be payable in the wool textile industry after the levy period ending on 31st March 1983. The other is that the orders provide that the level of exemption from liability to pay the two levies (that is, for scientific research and export promotion) will be increased with effect from the current levy period ending on 31st March 1982.

It may be helpful if I explain at this point a little of the background to these statutory levies which were established in 1950. The scientific research levy was introduced to provide funds for scientific research carried out by WIRA. These funds replaced grant hitherto paid by central Government in one form or another since 1918. The export promotion levy was introduced to provide funds for the work of the National Wool Textile Export Corporation which had been financed since 1941 by the Board of Trade. The objective of the levies was to spread the cost of research and export promotion aimed at benefiting the industry as a whole on as equitable a basis as possible to all firms within the industry. The proceeds of these levies are paid over, without deduction, to the two organisations concerned.

As part of a general review of statutory levies in industry, the Department of Industry conducted a poll last year of companies which pay these wool textile industry statutory levies. The result of this poll showed that a significant majority of companies (58 per cent.) had voted for the termination of the scientific research levy and a small majority (51 per cent.) for the continuation of the export promotion levy. It is obviously right that the views expressed by a substantial majority of the industry should be respected. But having accepted the views of industry on the scientific research levy, we recognise the difficulties that would be created in discontinuing it overnight. 1326 We have taken the view therefore that a period of adjustment is desirable so that the industry and WIRA might consider possible alternative arrangements. In effect, the provisions of the draft order mean that the levy would be phased over a period of some two years after the poll was conducted.

It is certainly not the intention of either the industry or the Government that research carried out by WIRA on behalf of the industry as a whole should cease to exist but rather that, as a result of the draft order and a new system of funding to which it would inevitably give rise, WIRA should become more commercially orientated and responsive to the needs of the industry which it serves. I know that WIRA is confident about its own future in the post-levy period. Many firms have intimated that they would be prepared to contribute by voluntary subscription. It is my belief that a move from a statutory levy to voluntary support, combined with greater reliance on charges for specific services, represents the most effective way of securing this change in direction.

Let me now turn to the second aspect. As I have said, both orders contain provisions to assist at once the smaller firms in the industry by raising, with effect from 1st April 1982, the exemption level below which firms do not have to pay levy. Both levies are collected at the same time on one assessment form. The Department of Industry then divides the proceeds in the appropriate proportions between the two recipient bodies. The exemption limit for both levies is therefore the same. The levies are collected in arrears, the collection commencing on the 1st April 1982 relating to the levy period 1st October 1981 to 31st March 1982.

The present position is that companies are exempted from making payments where the assessed amount would be just under £5, or less, in any six-monthly levy period. The new orders would increase this exemption limit to just under £100 per levy period. At present, some 70 companies out of nearly 700 assessed for levy are exempted from payment. The proposed increase in the limits will exempt approximately 200 further companies. This is a very substantial increase and in suggesting it we have of course had to have regard to Section 9 of the 1947 Act which requires that the authority making the order shall satisfy themselves, that the incidence of the charges as between different classes of undertakings in the industry will be in accordance with a fair principle". We are so satisfied for three reasons. First, these new exemptions will not increase the levy payable by those who remain liable. They will pay the same as before. Second, the new exemptions will not cause a significant loss of revenue to WIRA and the export corporation. The loss will be less than 4 per cent. of these bodies' levy income. Third, many of these smaller companies have in practice received little benefit from the activities which the levies finance.

At present the scientific research levy yields about £411,000 per year and represents about 27 per cent. of WIRA's total income. The remainder of their income is derived from contributions from the Department of Industry towards expenditure on approved Textile Research Council contracts, subscriptions, rent, royalties and the like. The export promotion levy 1327 yields about £365,000 per year, and represents over 85 per cent. of the export corporation's total income. It is estimated that under the proposals which we are now considering, WIRA's income will be reduced by some £11,700 and the export corporation's by about £10,400 in a full year, or less than 4 per cent. of the amount they receive from levies, though the precise amount is difficult to calculate with certainty because the levies are based by reference to levels of emoluments and weights of fibre supplied which will obviously vary from one year to another.

As is required by the 1947 Act, the department has consulted organisations representative of persons carrying on business and those employed in the industry. The industry's representative organisation, the Confederation of British Wool Textiles, support the changes proposed. The two unions consulted, namely the National Union of Dyers, Bleachers and Textile Workers and the General and Municipal Workers' Union, would prefer that both levies should continue. We have taken serious account of that view, from the organisations representing persons employed in the industry, but we have decided on balance that the scientific research levy should be phased out. The matter has been discussed also with WIRA and the National Wool Textile Export Corporation, which have accepted the proposed amendments to the orders which I am putting before the House, which are essentially based on the wishes of the industry. I therefore ask the House also to accept the wishes of the industry and to approve these orders. I beg to move.

§ Lord Bishopston

My Lords, I am sure that we are all grateful to the noble Lord, Lord Cullen of Ash-bourne, for having explained these draft orders in the way he has. On a day when your Lordships' House has already undertaken the consideration of a great deal of business, and when much still remains to be done, there may be a temptation to let these orders go through "on the nod", but I rather feel that if the time was available this topic could be the subject of a major debate because it concerns the present and future position affecting the wool textile industry, which, as many noble Lords will know, has been greatly hit by circumstances to which in a moment I shall briefly make reference.

Although these orders are small and may appear to be insignificant, they are really of great importance to the wool textile industry generally and to certain parts of the United Kingdom in particular, in areas which have been badly hit by the recession and by Government policies. The substance of the Minister's introduction is to warn both us and the wool industry that the levy on the industry for scientific research and the promotion of exports is to be phased out. Another aspect to which the noble Lord has made reference is that each of the orders substantially raises the level (and I am now quoting from the Fifteenth Report from the Joint Committee on Statutory Instruments), below which firms in the wool textile industry are exempt from paying the research levy and the export promotion levy payable 1328 under 1970 Orders in that industry. The levels are, however, raised very dramatically: from £2,500 to £50,000…". The noble Lord the Minister has made reference to that. I do not want to pursue the report's points about procedure, but it says: In this case the effect of the massive increases in the exemption limits proposed by the Order would be that some third of the firms in the industry would be exempt from the levy, as compared with the 10 per cent. of firms that are at present exempt. To raise the exemption limits to such an extent constitutes in the Committee's view an unusual use of the powers conferred by section 9.". I do not wish to pursue that particular point of the Committee's report, but I want to draw attention to the very high increase in the exemption levels because they are very important.

In one case, as the Minister says, one levy is for scientific research into the technical problems of the industry by WIRA and the other is for the promotion of exports of woollen goods by the National Wool Textile Export Corporation. These levies have helped two aspects which are absolutely vital to the future of the wool textile industry, at a time when the industry has been very badly hit by economic problems and by the economic policies of Her Majesty's Government—especially by high interest rates and foreign competition. Indeed, over the past two years hundreds of wool mills have closed and thousands of jobs in the wool textile industry have been lost in parts of Yorkshire. The unions have been very concerned about these job losses and about future prospects, if this kind of policy continues to prevail. Surely there has never been a time when the industry needed more effective R and D in order to remain competitive in the face of strong challenges from abroad. Adequate investment is vital, but it must be based upon the findings of scientific research, on up-to-date techniques, and have scientific backing.

The other area of great importance is that of export promotion, which is so vital at the present time. The Government will realise that we have to be competitive with economically produced materials and textiles and also by export promotion. There have been reductions in overseas missions in recent years together with a reduction in trade fairs and market research. Although there has been a demand of the industry with both of these levies, without such a levy without co-ordinated research, and without strong export promotion (co-ordinated and not piecemeal, which will be the result of this policy) the wool textile industry will not be ready to face the challenges of the post recession period.

We find ourselves confronted by bad policies yet again. I am sure the industry must realise that, despite the problems, what is needed is centrally co-ordinated research. If this is going to be left to be done piecemeal by firms who are already exempted considerably by this order or, after the levies have been phased out, for firms to pursue their own research, if any at all, without the pressures and incentives of central co-ordination, this will make the industry far less competitive. Therefore, the future of our wool textile industry and the thousands of jobs concerned with it must depend upon more co-ordinated effort backed by Government resources instead of being left to market forces to the detriment of our industry and, surely, to the pleasure of our competitors abroad.

1329 This is a bad policy. It is too late for the Government to review their policy now, but, whatever takes its place, we should bear in mind the need for coordinated and effective research to help in our competitiveness in the future.