Industrial Production

HL Deb 11 May 1983 vol 442 cc506-31

5.52 p.m.

Debate resumed.

Lord Molloy

My Lords, may I first apologise to the House, and to the noble Lord, Lord Ezra, and my noble friend Lord Gallacher, as, for the last seconds of the speech of the noble Lord, Lord Ezra, and the first few seconds of the speech of my noble friend Lord Gallacher, I was seized with a discomfiture which compelled me to leave the Chamber.

There is one thing about this Chamber, which is that, whatever the debate may be, one can only be impressed by some of the contributions and one can learn so much from them. I remember that in one of the post-Falklands debates I was not only deeply interested in the contribution by the noble Lord, Lord Thomas of Swynnerton, but so much compelled to read the report of his speech in the quiet hours and to inform myself of much that I did not know. There are a number of things which I hoped would happen in this debate today, but, alas, up to now, apart from my noble friend's contribution, there has not been a great deal and there has not been much information from those with vast experience who might have taught us something. The reason for that, I suppose, is the impending general election when all that we are parading—and I shall be as guilty as anyone—is our loyalty to our parties.

What I find amazing about some of the speeches from the Benches opposite are all the reasons why this country is in one of the most disastrous situations that it has been in since the end of the First World War. From the Benches opposite, these reasons have been listed—the world situation, the change in world economics, bad management, irresponsible trade unions and everything, except the fact that the real cause is the Conservative Government, which has the major responsibility.

I am bound to say—if I were a really unfeeling person I would not say it—that, despite the Gallup polls, this is one of the biggest laughs going on in the country. It is a joke in the clubs, it is a joke in the pubs, it is a joke among rugby players and it is a joke among soccer players. Blame everybody except yourself, as Mrs. Thatcher's Government do. We have had an example par excellence of that today.

This would not be so had if it were not so serious, because the Government are not even prepared to learn. The nation must understand quite clearly that the same bilious medicine that has caused so much disaster will be continued should the supreme disaster take place and the party opposite be returned to power. That will indeed be a black day for this country, and the country ought to note it, because we shall have the same policies which have caused this terrible problem.

Those of us who are just about young enough to remember the 'thirties can recall what happened then and can make a comparison. The comparison is this. The myopic attitude of Conservative Governments has always been to cross the river to fill the pail—and the journey there and the journey back can be risky and disastrous—when it can be filled on the side that we are on.

I listened to the remarkable speech by the noble Lord. Lord Thorneycroft. I remember listening to him when I was a very young councillor on Fulham Borough Council, and I used to think that one of the great assets of the Tory Party was that they seemed to have so many men of ability who could also put over a case. Perhaps the greatest ability of the Tory politicians of those days was the manner in which they put over a case, which enticed innocent people to think that they actually believed some of the things they were saying.

We had an example of it afterwards in the one famous Prime Minister with whom I think the noble Lord Lord Thorneycroft, had an occasional brush—Mr. Harold Macmillan. He "conned" the country. We all remember the phrase, and we are getting it today. The Tory Party has the audacity today to say what he said then and which won him his election—"You've never had it so good". But the noble Viscount, Lord Trenchard, told us a moment ago that that was the time when we started to behave in an appalling manner under Tory and Labour Governments. Yet there was the Prime Minister of the day telling us that we had never had it so good.

Viscount Trenchard

My Lords, what I said to the House was that our standard of living was not only maintained but improved, in spite of losing half our share of a doubled market.

Lord Molloy

My Lords, that is precisely what has been happening in the last three or four years, and I must acknowledge the courage of the noble Viscount to have said it. But we cannot swing it all the way back and say that the men who returned to this country in 1945, under the leadership of a Labour Government, who started to build the welfare state which became the envy of the world, who started to create the principle of full employment, who introduced a new deal on education and who introduced the National Health Service, within a few years of the most disastrous war in the history of mankind, did not do so well. I do not think that that is either a decent or an honest argument.

However, as the noble Lord, Lord Thorneycroft, said, perhaps one of the reasons for our demise in the past few years is that we have not matched our rivals. There is a great deal of truth in that. When one looks at the hard statistics and facts, this country has not done so very well in the past three or four years, and therefore the noble Lord, Lord Thorneycroft, was correct to say that we have not matched our rivals. One must then ask: why? The shortest possible answer is that it is because of the present Government's dreadful policies over the past few years.

The noble Lord, Lord Thorneycroft, also adumbrated the possibility, in defence of his party, for which I do not blame him, that when we have a Labour Government they may interfere with GATT. As the noble Lord honestly explained, the idea of the General Agreement on Tariffs and Trade was not very popular with the Government of which he was a member. However, as happens in all parties, the noble Lord was able to convince sufficient of his fellow Conservatives about the intelligent and sensible ideals which lie behind the General Agreement on Tariffs and Trade. It was a massive move forward for the Tory Party to acknowledge that they must discard, totally and absolutely, unfettered competition in return for sensible world co-operation. The noble Lord, Lord Thorneycroft, mentioned that imperial preference was at the time the high ideal of high Toryism. I am grateful that the noble Lord won the day. It seems that always we have to drag the Tory Party kicking and screaming into the next decade.

The noble Lord also quoted Winston Churchill, who said in the 1930s that if we went on as we were, half the nation would leave this country. Under the Tory Government of the 1930s, tens of thousands of our fellow countrymen found no hope in the policies of the then Tory Government. Those policies were very mild compared with what our fellow countrymen have to put up with today—4 million on the dole as a result of the past four years of the current Tory Administration.

The noble Lord, Lord Thorneycroft, pointed out the horror of the possibility of this country leaving the Common Market. Only a fortnight ago the Prime Minister was praised for having improved the rotten deal we are getting from Europe. She has said that she will fight as hard as possible for an even better deal if we stay in Europe. We cannot praise the Prime Minister for having fought for a better deal in the Common Market and then say a couple of minutes later that the best thing that ever happened to us was to join the Common Market. That is another quite remarkable statement.

I am sorry that the noble Lord, Lord Ezra, is no longer in the Chamber, for I wish to turn next to the excellent speech which he made. It was marred only by one remarkable statement. The noble Lord praised the Government for aiding the small businessman. The fact is that ever since records have been kept there has never been such a high level of bankruptcies among small businessmen as we have witnessed during the past two years. The Government need to give small businessmen a hand. I have mentioned many times in this House that the small businessman is vital to this country—also that when we refer to people who are on the dole we have to remember that during the past four years thousands of small businesses have gone down the Tory drain, causing anguish and anger. If they have any sense, the Tory Party will never take that risk again.

I was interested to hear the noble Lord, Lord Ezra, mention the current campaign, which the Government have just thought of, imploring everyone to buy British. I agree with both the noble Lord, Lord Ezra, and the Government that to buy British is a very good aim. However, I wish that the Prime Minister believed in it so far as the shipbuilding industry is concerned. We all know where the last big order went. It did not go to a British shipyard. There was no "Buy British" for the Prime Minister. Off that order went to Malta. These are the unchallengeable facts which the British people have got to appreciate.

It is right and proper to speak about the need for publicly owned industries to buy British. At the same time we have to appreciate that there are many hundreds of private firms which service the publicly owned industries; whether defence, the National Coal Board, the Central Electricity Generating Board, the British Gas Corporation, and also local government. They provide roads, lamps, traffic signals—all for the wickedly publicly owned sector. We ought to acknowledge not only that the publicly owned sector makes a massive contribution to the nation but that it provides a great deal of work for private entrepreneurs. Noble Lords who appreciate both sides of this massive co-operation and who do not listen too much to the glib nastiness of some of the Tory popular press know that very often the massive public corporations are the lifeblood of a myriad of small private enterprises. Therefore, it is important for British, publicly-owned industries at all times to endeavour to ensure that the private sector also purchases from Great Britain.

I listened with great interest to the speech of the noble Lord, Lord Harris of High Cross. I have already mentioned the few facts which he omitted about the economy of this country when our ex-servicemen came back here in 1945. By 1955 they had helped to create, under Governments of both parties, the largest housing programme that this country had ever seen. We all remember Mr. Harold Macmillan's 300,000 houses. He did not build them, but he had the idea. We have to recognise the contribution made by the bricklayers, the carpenters, the quantity surveyors. But the challenge was the record of the previous 40 years. It was dismal. Then it was raised to its highest level by Aneurin Bevan. That presented a challenge to the Conservative Party.

I am all for competition which is related to getting the best National Health Service, the best social security, the best education, the best housing programme. This is thoroughly satisfactory, and in a modern industrial society these are the beatitudes which we must not lose sight of in our industrial endeavour. To keep blaming one another is not good enough. The speech of the noble Lord, Lord Harris of High Cross, reminded me of the tens of thousands of people we see on the tanner banks at every soccer game. We find brilliant centre forwards by the tens of thousands, brilliant goalkeepers, brilliant strikers and brilliant halfbacks, all on the tanner bank. And some of them are on the Cross-Benches of this House.

There are many more points which I should like to make, but if I did so I do not suppose I would convert any noble Lord. Nevertheless, if we want something which will get us out of a mess we should look for some principle and policy that has succeeded. When there was a certain situation in the Western world in the 1930s, I happen to believe that it was the policies of Keynes and Galbraith with which Franklin D. Roosevelt created the New Deal that pulled America out of the soup and then pulled us out of the soup. It not only created a better industrial base, but permitted us to be in a better position to take out the unwholesomeness of European fascism. There is a need for intelligent co-operation on all sides of industry. I do not believe it helps for the TUC and the CBI to be at each other's throats all the time when there is a need for sensible collaboration.

I believe that we can restore a caring society, and a caring society is something that we must all accept as a fundamental belief. It is not industrial success by itself that matters, but what we do with that succes that will uplift our nation. This nation can show the way to a very disturbed world. When one looks at all the various theories of economics and "isms" which are abundant, one has to make a choice. In my lifetime, I have seen it proved beyond all peradventure—and I hope that the British people will see this as well in the weeks ahead—that the best system of all for giving a fair deal and a fair break is that which is embraced in the principles of democratic socialism.

Lord Rochester

My Lords, before the noble Lord, Lord Molloy, sits down, will he accept that when my noble friend Lord Ezra advocated, as he did, a policy of controlled expenditure on our infrastructure, and said that wherever possible purchasing should be achieved through British suppliers, he also made it very plain that this should in no sense be done at the expense of British competitiveness?

Lord Molloy

My Lords, I am sure that is correct. I only grieve, having listened to the speech of the noble Lord, Lord Ezra, that he did not stay to listen to mine.

6.12 p.m.

Lord Thomas of Swynnerton

My Lords, those who have heard this interesting debate will remember it, first, because of the lucid and moving defence made by my noble friend Lord Thorneycroft of the principles of free trade. They will also remember it for the invigorating and very encouraging estimate of the future of our country given by my noble friend Lord Trenchard, and I suspect also for the characteristically brilliant picture given by the noble Lord, Lord Harris of High Cross, of what I believe he would refer to as the "locust years". I was also impressed by the speech of the noble Baroness, Lady Nicol, and her interesting speculations on the possibilities of co-operatives playing a part in our national recovery in the future. Like other noble Lords, I should also like to congratulate the noble Lord, Lord Gallacher, on his powerful and balanced maiden speech.

Those of us who heard the speech of the noble Lord, Lord Cledwyn of Penrhos, when he introduced this debate will also remember his speech for the fact that he recognised—late, I thought, and a little grudgingly—that one of this Government's achievements was the control or conquest of inflation. I believe that the noble Lord, on thinking back, will acknowledge that his recognition was a little grudging, recalling the fact that many years ago, during the course of the "locust years", one of the leaders of his party made a firm statement about how important it was that the pound in one's pocket one week had the same value as the pound in one's pocket shortly after. I hope also that the noble Lord, Lord Molloy, will find that the remarks that I have to make about a country bordering on the North Atlantic are as enlightened as those he heard me make about a country bordering on the South Atlantic.

The world is undergoing a recession, largely but not entirely inspired by two major increases in oil prices. It is also going through a major transformation in technology. The chief mark of this transformation is surely a change towards high technology and electronics. These changes—the consequences of which will be enormous in the next 20 years—have been compared by some with the changes caused in the world by the Industrial Revolution. It is doubtful whether the changes will be anything like as significant as that, but one can say that the consequences will come faster, and that the 20 years between 1980 and the year 2000 will see far more changes than those seen between 1780 and the year 1800.

Nevertheless, recollection of what happened in the late 18th century is quite valuable for our purposes, for this reason: the changes at that time due to mechanisation were vigorously resisted by those whom history has come to refer to as the Luddites—yet the fact is, as historians testify, that the numbers employed increased steadily despite the machinery that was introduced and despite the very large increase in the population in all the countries which were experiencing the effect of mechanisation for the first time. That may be a helpful reminder to those who wonder about the consequences of automation or advanced mechanisation at the present time.

With all these changes—and the Industrial Revolution was no exception to this—some nations are left behind because of the consequences of the transformation. China was a very good example in the 18th century. To some of us it certainly appeared a possibility in the 1970s that Britain might have been just such a country. All the signs of decay were present. It seems to me that 1979 gave this country a chance of renewal and of adjustment to the changes that were necessary. I myself hope that that chance will be confirmed in 1983.

We heard from my noble friend Lord Trenchard some indications of increased international competitiveness and of increasingly encouraging signs from the economy. Some of the points he mentioned were certainly very impressive. Another figure that might interest your Lordships is the clear sign that in the past year or two—particularly in 1982—there has been in this country a substantial increase in productivity per man hour, second to none among OECD countries. In some months there was an increase in productivity higher than that of Japan. The question must be; can that increase in productivity be consolidated? And can the consequent benefits reinvigorate the entire economy and bring back into the active economy the 3 million unemployed? This is the main question we should be considering when preparing our minds for the general election.

I must just remind your Lordships that the picture of unemployment that has been given was interestingly corrected by my noble friend Lord Orr-Ewing when he pointed out that alongside the increase in jobs lost there has nevertheless been, over the past 12 months, a substantial increase in the number of new businesses. The figure he gave was 10,000 new businesses a month.

To return to the main theme of my speech, can we encourage or invigorate the economy so that the beneficial developments which are occurring in the advanced companies can affect the entire nation? There are two ways in which this can be done: first, by a tactical approach, and, secondly, by a strategic approach. The tactical approach is not one, I would suggest, which is the same as that put forward by the noble Lord, Lord Ezra. We have to think carefully about this—I quote from the noble Lord, Lord Gallacher—"sympathetic economic environment" in which small companies, indeed large companies if the small companies become such, can really thrive. That is what Sir Keith Joseph has referred to on many occasions as a climate of enterprise.

What is a climate of enterprise? There are many things which you would expect to find, and among them, it seems to me, are these. I do not put these in any particular order of priority. First of all, the chance of profit, the promise of prosperity if things do go well, and indeed, the chance of establishing yourself as a person of independent means. Surely that is a great contribution to society and to the climate of enterprise to which the noble Lord, Lord Gallacher, referred.

Secondly, companies should not be expected in the future to spend the kind of time they have had to spend, not so much in the recent past but in the 1970s and 1960s, in dealing with unproductive problems of labour. There are endless instances in the 1970s of companies whose executives spent something like 50 per cent., or even more, of their time dealing with labour disputes which had nothing to do with production. Another point to try to insist upon is that the shop floor must cease to be a place for class war, or class conflict. Of course, conflict, and competition, must play a part in all kinds of enterprise; I perfectly agree with that. But let the competition and the conflict be directed towards industrial or possibly international competitors.

Thirdly—and here the Government can play a part—everything should be done to make job mobility and, indeed, housing mobility, easier, and some of the measures introduced by the Government in the last four years have certainly helped in both directions. I think that a climate of enterprise must have—I say this in particular reference to the noble Lord, Lord Cledwyn—if not a zero rate of inflation, which perhaps in current circumstances is a dream, but at the very least a reasonable predictability in relation to their money. This is something which affects the fabric of society, it seems to me, just as much as employment. Simplification of tax is also extremely desirable. A day perhaps will come when companies will think once again, if they are taking on an extra director, whether he should be an accountant or somebody interested in the promotion of the product concerned, which certainly used to be the case in the past. Finally, of course, the climate of enterprise depends on that membership of an open trading international community, both through GATT and the European Community, to which the noble Lord, Lord Thorneycroft, referred with such eloquence.

This certainly is not the managed economy to which the noble Lord, Lord Jacques, referred as having been so successful in the years after the war. I would not say that everything done in the years immediately after the war should be rejected; of course, that would be absurd. But I think it is important to say, in relation to the speech made by the noble Lord, Lord Jacques, that in addition to the things of which he approves, those things to which the noble Lord, Lord Harris, referred are also important to recall; an era of the beginning of the British disease, of numerous restrictive practices, of decline of investment, of our declining share, as the noble Viscount, Lord Trenchard, put it, of the doubled world market, as it was; an era of increased imports; and, I should add a contribution of my own in this respect, an era in which there was a steady decline, it seemed to me, in the belief in the dignity of work itself. That is the tactical approach which I suggest is desirable to try to create this beneficial climate which the noble Lord, Lord Gallacher, demanded.

But there is a long-term approach, in which no doubt the Government and other sources of influence and communication can play a part. Not long ago I sat next to a Cambridge don in that university who told me that he had analysed the career records of his 500 pupils over the last 25 years. It must be said that he taught history. He discovered that out of those 500 pupils he could only find for certain that two had gone into business. This seems to me to be an indication of some of the prejudices which still continue in the nation against the idea of commercial activity. It anyone thinks this is a new development. I should refer him to a speech made some 70 years ago by the second Earl of Selborne, in which he said: When I was at Oxford the best brains at Oxford when they had a chance went into the Indian Civil Service. It was only the second best as a rule who went"— not to industry— to the Home Civil Service". He added: The best men are all prepared to take the least risks". I think, perhaps, it was to this defect in the appreciation of enterprise, to which my noble friend Lord Thorneycroft referred, not in his speech this evening but in a speech he made I think two years ago, when he pointed out that most people who have played a part in public life in the last 50 years had something to answer for. I think the main point is our attitude to enterprise and to business as such.

A very important point, which must occur to an historian working on this kind of theme, is that we have also become used over the last generation to a persistent neglect of the virtues of those who carried out the Industrial Revolution in the first place. It is very surprising that until the recent establishment of the admirable museum at Ironbridge, there was no museum in this country dedicated to those great men who started off the Industrial Revolution in the 18th century. I cannot help feeling, as an historian, that the recollection of the vigour of the past, communicated through schools, through the media, perhaps, dare I say, through the Churches, may be the best pointer to revival in the future.

6.29 p.m.

Lord McIntosh of Haringey

My Lords, I should like to open by giving a very brief summary of the economic achievements of an administration going to the country after four years in power; an administration in which real wages remained constant, in which employment—not unemployment—increased by 15 per cent., in which real gross national product increased by 20 per cent., in which labour productivity increased by 4 per cent.—all, I think your Lordships would agree, good measures of successful economic management of an economy over a period of four years.

Now I should like to give another example of an administration going to the country after four years in office; unemployment increased by 2 million, a record only worsened, as my noble friend Lord Cledwyn said, by Spain; production of wealth declined by 4 per cent. and with manufacturing production declining by 11 per cent. when the average for an industrialised country as a whole was only 3 per cent. Manufacturing investment—and this comes back to the points made by the noble Lord, Lord Ezra—declined by 36 per cent. For the first time in the history of the country concerned, manufacturing imports exceeded manufacturing exports and manufacturing exports declined in absolute terms by 3 per cent. over the period.

It will be no secret which is the second country to which I am referring, with a disastrous economic record. It is, of course, this country and the disastrous economic record of the present Government. The other country to which I referred, which I think your Lordships will agree has had a successful economic record, was not a monetarist Government. It was the administration of President Jimmy Carter, after the oil crisis to which the noble Lord, Lord Thomas of Swynnerton, referred. Everyone seems to think that that was a disaster which fell on all industrialised economies equally, and that that somehow excused the policies of the present Government, when the fact of the matter is that if any country had any chance whatever of gaining from the increase in the real price of oil it was the country which is a net exporter of oil compared with many of its industrial competitors who have done so much better over this period.

There can be no doubt at this stage of the debate about the economic facts of the past four years and, in particular, the facts of industrial production. If there were any doubts about it, those doubts are silenced by the attempts that the Government have made to cover up the economic position of this country. Last month, the National Economic Development Council published a rather gloomy report, in which it said there would be no increase in employment; not this year, not next year, but by the end of the decade. It pointed out that there was more difficulty in the United Kingdom than in other countries in establishing credibility for investment projects, particularly in manufacturing industry. It talked about the job losses in this country; not just in manufacturing industry as a whole. Several noble Lords referred to what I suppose is the inevitable decline in jobs in some of the old staple industries—the extracting industries, and so on—but there has been a job loss in the electronics industry in this country. This must be the only country in the Western world capable of achieving a job loss in the electronics industry. If we have an economy in which we are spending, or losing, £17 billion a year on benefits and lost taxes—£100 a week for every person unemployed—how in those circumstances can it be claimed that there is an economic defence to be made for the policies of the present Government?

That report was published by the National Economic Development Council in April of this year. It followed an earlier report made to the National Economic Development Council which was greeted by the members of the council at a meeting, the minutes of which have been leaked but which have never properly been made public. This report was very much worse, but was suppressed by the Chancellor of the Exchequer and by the CBI members of the National Economic Development Council. I challenge the Government, and the Minister in his reply, to deny that there was a report which was very much gloomier than the one I quoted and which has been suppressed.

If there was any doubt concerning the prognostications of improved economic conditions which several noble Lords have made, that doubt has been destroyed this week. There is no conceivable rational argument for the Government to go to the country now if they really believe that there is to be a significant economic improvement between now and the time when their natural term of office expires a year from now.

It is not enough, as several noble Lords have said, to attack the present Government. We have to think of what to do about the position. I profoundly agree with the noble Lord, Lord Ezra, that the real issue is that of industrial investment. Indeed, I referred to it earlier and I believe that his analysis of the situation is sound, but I believe it deserves a little further exploration. The issue is not that there are not enough funds available for investment in total. There are considerable funds available. Indeed, some City observers have described funds as "washing around the economy".

The problem is both negative and positive. The negative side is that there are much quicker profits to be gained from non-productive, non-manufacturing activities in this country such as finance and property and, of course, from the export of investment capital. I am not one of those who say that there should be no export of investment capital. We are a trading nation, as the noble Lord, Lord Thorneycroft, said, and long may we remain so. Incidentally, I thought that was a brilliant attack on protectionism which is not the policy of the Labour Party. We are a trading nation and, being so, that implies some freedom in the movement of capital. That is not to say that for all time all investment overseas is the wrong policy to pursue. But there are times when it has gone to excess and I believe that the last four years, since the scrapping of exchange controls, is one of those periods when it has been positively damaging to the manufacturing industry in this country.

The positive reason is, as several noble Lords have said, that there is not the climate in which people have any confidence to start off in private manufacturing industry. They are given no encouragement by any management whatsoever of Government expenditure. Here we come to one of those areas where dogma has taken the place of realism in Government policy. The noble Lord, Lord Ezra, referred to the need for investment in the infrastructure; what he called the fabric of our industrial society. He is right. To talk about the construction industry and the renewal of the fabric of our utilities is the right approach. I do not believe that anyone looking at it objectively could disagree with that argument. The problem is that the Conservative Party does not look at it objectively. The Conservative Party says that these elements of expenditure are necessarily public expenditure, that they affect the public sector borrowing requirement and, therefore, they are not acceptable and anathema to the believers in the pure market economy. Therefore, they reject by far the most readily available means of reviving industrial manufacturing production without any inflationary effects. There is no proven relationship between the size of the public sector borrowing requirement and inflation. If the noble Lord the Minister has evidence to the contrary, I shall be delighted to hear it.

So we have the position where an obvious starting point for industrial regeneration is rejected for dogmatic reasons by the Conservative Party. That is by far the most important single element in the policies we shall be pursuing. I am certainly not going to claim to expound Labour Party policy about industrial production. My noble friends, particularly my noble friend Lord Cledwyn of Penrhos, are far more qualified to do that than I am. But I would add to what I have said, and to what other noble Lords have said, one particular point which I believe to be of considerable importance and which I think should be considered by all parties and not on a party political basis. Reference has been made to the problems of unimaginative management. The noble Lord, Lord Harris of High Cross, made that reference, although I think he was unfortunate in choosing the example of Bill Allen in seeking to attack the trade unions. Bill Allen showed that by imaginative co-operation with the trade unions one can make successful progress.

There is one matter which is capable of legislative correction which could make industrial management in this country enormously more effective. I refer to the transferability of pensions. I believe that the risks for managers when changing jobs in mid-career are great because, to be frank, of the fraud which is practised upon them by the pensions system of receiving frozen pensions which cannot be transferred. Those risks actually deter innovation and enterprise in managers who have something to contribute from breaking out of a unitary career and doing something new for the benefit of themselves and of society.

I believe that it should be a priority of any Government elected on 9th June to remedy that serious drawback and problem from which managers in the private sector suffer. I am talking about the private sector of course; in the public sector there is either a lifetime career or transferability. I hope on that suitably non-controversial note I can conclude by saying that I support the Motion moved by my noble friend Lord Cledwyn of Penrhos.

6.40 p.m.

Lord Granville of Eye

My Lords, I should like briefly to add to the tributes paid to the Leader of the Opposition. The noble Lord, Lord Cledwyn of Penrhos, made a very able speech in introducing the Motion and drawing attention to the record of industrial production and growth. Most of the speeches have referred to that. It has certainly had the attention which the Motion requested. I also much enjoyed listening to the speech of the noble Lord, Lord Thorneycroft, who I thought made a very eloquent appeal, which I have no doubt will be listened to outside as well as in your Lordships' House.

But so far in the various speeches that have been made referring to the Government and the Opposition no noble Lord has mentioned what might happen if by any chance we get a hung Parliament. While listening to the debate and the various policies put forward, it seemed to me that it has all happened before. In 1931, we had a hung Parliament. The Prime Minister was Mr. Ramsay MacDonald and the Chancellor of the Exchequer was Mr. Philip Snowden. The Liberals had 59 seats and Labour had the largest party. The Liberal Party, under Mr. Lloyd George's aegis, spent a great deal of time, money and research on a policy which they called "We can conquer unemployment". It was very much concerned with some of the capital works which I think I recognise in the present policy of the Labour Party. What happened to it? Both Mr. Philip Snowden and the Prime Minister, Mr. Ramsay MacDonald, turned it down. I think it was the late Sir Dingle Foot who said it was turned down basically by Whitehall and the Treasury officials, who said that until the economy was put onto a sound footing—after Margaret Bondfield's 3 million unemployed—it would be wrong to go for large-scale capital investment and capital works.

The parallel with 1931, with 3 million unemployed and the world economic crisis, was referred to by Lord Thorneycroft. We had a great conference on it at the Imperial Museum, of 66 nations, including America and most of the other producing countries. When all the policies had been produced, the research had been done and all the exchanges with President Roosevelt had taken place, it all came down to one word, "confidence", which really began the revival of 1931ߝ32. The only public works that I can remember that we had in those days was the rearmament programme of Mr. Baldwin, which was worth about £1,500 million. But it seems to me that unless we, as an international trading nation, can get that confidence across to the people abroad who will buy our goods, the investors—as has been said in so many speeches this afternoon—and the IMF, we shall not get very far.

Reference has been made to subsidising capital works. At the moment we are subsidising the railways, the mines, British Leyland, steel, shipbuilding, and so on. At the end of the road, when you start spending money, is the IMF. I think it was Mr. Healey who had to get off the plane at Heathrow and come back because the IMF had said, "Stop". If you are an international trading nation in our position, at the end of this is the IMF. You either belong to it or you do not, though of course we could become an artisan island in the North Sea, with the lowest standard of living in Europe, build a wall around ourselves and say we are not concerned with international trade.

At this late hour, I should like briefly to refer to two points. One is the adverse balance of manufactured goods with the EEC. I wonder whether the Minister can give us any idea of the current figure? My recollection is that the adverse balance in manufactured goods with continental countries in the EEC is still a very large item. I think we really must do something about that. Of course we gave them an 11-month start before we went in. They had established their organisations, built up their distributive arrangements and got right into our markets. If you go into the shops of most large towns, you can still see Italian, German and French goods of all kinds.

Today it is entirely a question of whether we are competitive. A man who is running a group of stores or a shop within the Economic Community will buy the goods that are the best value. If we are not producing the goods, we are wasting our breath. We are wasting our breath with all the diatribes we can conceive unless we are competitive in selling our goods. In the so-called wages explosion of 1975ߝ76, I remember attending a costing meeting in a large factory. They were asking for a 16 per cent. increase in labour costs because of inflation. The 16 per cent. plus had to go on the cost. The result was that they lost orders and within a few months there were 90 redundancies.

Reference was made by the noble Lord, Lord Thomas of Swynnerton, and by the noble Baroness, Lady Nicol, to some kind of new arrangement in industry if we are to get into a competitive position so that we can restore full employment, such as workers mounting co-operatives, and so on. But we must be frank about this. The industrial climate is very important. We have industrial confrontation and two armies—unions and management—fighting with zeal an interminable battle resulting in all these strikes.

One other matter has been referred to—the discouragement of middle management. I am not concerned with top management on the top salaries. It is middle management which is vital to the great industries of this country. They will not try any more if they are discouraged by taxation—if there is talk about making the pips squeak.

The other issue is the home market. Can any of your Lordships tell me why it is if you go into certain streets all you can see are foreign, and especially Japanese, cars? In this respect I understand that there is a proportion of 70 or 80 per cent. of cars are in the car fleets of commercial companies. These companies employ British workpeople, and they have to sell their goods. Do they buy British cars?

We are faced with another problem, which has been referred to several times; that of the microchip revolution. No party—not the Government, not the Opposition—has faced up to the problem of the vacuum which will result when the microchip, or electronic innovation, really becomes established in the great industries of this country.

Reference has been made to two nations, the North and the South. There will be two nations. There will be those who work in the factories, in the electronic microchip plants, producing goods for home consumption and for export. And the others? Who will employ them? Will they have to take in one another's washing, or engage in home trades? Or are we going to recognise the fact that we may be more than half way towards the age of leisure? We must realise that it is no good describing the situation as "overmanning". There are large numbers of people who go through the motions; they clock in, they clock out. It is not work; it is not like a machine shop; it is an occupation. We have had an interesting debate. It was certainly worthwhile the Opposition introducing it, but of course the answer will be found at the hustings.

6.52 p.m.

Lord Scanlon

My Lords, I suggest that this debate might prove to be something of an exercise in futility, in that if there is a change of Government, any remarks which I may make in replying this evening to our excellent discussion will prove to have been unnecessary, while if there is not a change of Government, my remarks will in the future be ignored with the same kind of zeal with which they have been ignored in the past. To that extent the debate can, I repeat, be seen as an exercise in futility. My noble friend Lord Gallacher, whom I must compliment on an excellent maiden speech, served a dual purpose in that, besides addressing the House, he, no doubt much to the delight of your Lordships, eliminated at least two pages of the notes which I had prepared for this reply.

In opening the debate, my noble friend Lord Cledwyn of Penrhos suggested that there was common ground between us, on the basis that, if we are to survive as an industrial nation, we all not only desire, but must have, an economic, viable manufacturing base. I believe that that has been the central theme throughout the debate. We had an excellent contribution from the noble Lord, Lord Thorneycroft, in which he gave his version of the manufacturing base, but I hope that I shall be forgiven for saying that I thought that it had little to do with the issue. I hope that perhaps there will be a future occasion on which we can debate the question of the Common Market. All I would say at this stage is that in or out of the Common Market, nobody is going to pull the chestnuts out of the fire for Britain. We will succeed by pulling ourselves up by our own bootlaces, or we will not succeed at all, either in or out of the Common Market.

What I believe is irrefutable is the fact that in the four years from January 1979 to January 1983 total national output—that is, the gross domestic product—fell by nearly 7 per cent. That is devastating in its own right. But if one looks at certain sections of our manufacturing base, one sees that the situation is truly horrific. There has been a 35 per cent. fall in ferrous metal production, a 31 per cent. fall in textiles, and a 29 per cent. fall in metal goods. Even in the so-called success sectors, which have increased output, the position has to be seen in perspective. A 2 per cent. increase in three years in the electrical and electronic sector is in fact a dismal record, given the opportunities we have had, given the extension of credit for consumer durables, et cetera. It is a dismal record, hearing in mind that it is meant to be one of the industries for the future.

Much has been said about productivity by most of your Lordships who have spoken in the debate. The point has been made—and I think we all agree—that British industry is now leaner. Is it fitter? That is the real question which has been asked. Again, the noble Lord, Lord Thorneycroft, had no difficulty or compunction in finding an affirmative answer to the question. But let us look at it in a little more depth. It is true that in manufacturing industry productivity is today slightly higher than it was in 1979. But there has been no productivity miracle. Yes, there was a steep rise in productivity in 1981, but it had been preceded by a very steep fall in 1980. Averaging out those figures, one sees that there has been no major increase in the long run in the growth rate of productivity.

I say to your Lordships in all seriousness that when one looks at the major factors contributing to productivity and tries to foresee the future, one finds that the outlook appears very grim indeed. I have no hesitation at all in referring to one of the major factors—that of investment. In manufacturing industry we are 33 per cent. below the investment level of 1979. That is bad enough. But then we have the noble Viscount, Lord Trenchard, saying why this is so. I want to put to the noble Viscount an alternative reason which I think is truer historically, and which goes back even farther than the reasons which he advanced. With a secure home market, bolstered by the possession of an Empire which provided not only the source of very cheap raw materials, but also a market for much of our manufactured goods, we did little, if anything, by way if investment for the future. That lack of investment in the past has now resulted in low returns; and low returns now in the maufacturing industry is the reason why we are not getting the investment today—

Viscount Trenchard

My Lords, I hope that the noble Lord will allow me to say that I entirely accept that the imperial preference situation, which favoured us for a long while, was certainly one of the major problems which the noble Lord, Lord Cledwyn, would rightly have said faced all post-war Governments. Undoubtedly, we had been living on that situation. But it does not alter the fact that we lost half of our markets in two decades, and that did not then show. It has shown only in recent times when world growth stopped.

Lord Scanlon

My Lords, I fully agree. But what has not been explained is why we lost those markets. I know that it is easy to blame restrictive practices on the trade unions, and so on. The real truth, I suggest, is that the lack of investment in the past still continues which means that our technological advance is way behind that of our industrial competitors.

Lord George-Brown

My Lords, I am reluctant to interrupt my colleague, but he is glossing over an important point. I think that he should face it honestly for the sake of himself as well as the House. When, in 1965 and 1966, we attached ourselves to investment in the future, he led a union, if I may say so with great respect, that was insistent upon retaining restrictive practices. As near as damn it, that was what lost us our markets. We can all change our minds. We can all grow up. We can all be different. I think, however, with great respect, that the noble Lord should perhaps simply say, "I did play a pretty lousy part at that time".

Lord Scanlon

My Lords, the noble Lord, Lord George-Brown, pre-empts me. I have never tried to argue that the trade union movement is somehow all clean on this issue and that it has not had restrictive practices. My argument relates to the major cause of the ineptness—I do not hesitate to use the word—of manufacturing industry in Britain.

If we must go back to other factors, I invite the House to consider the contributions that I have mentioned in your Lordships' House before. British industry in the 1970s had a deal that no other industry or Government has had in peacetime. I refer to the three periods of wage restraint when the people of these islands accepted wage reductions well below the level of inflation which contributed to bringing down inflation from 26 per cent. to single figures, but did not result in investment in British industry. This means that £10 billion in direct money and in portfolios goes towards investment in factories and shares abroad when it should be invested here. I repeat that I do not think that one can rely upon patriotism or voluntarism on the issue of investment. We had the National Enterprise Board to find the money if private capital was not available.

I should like to continue to deal with the other factors that give cause for alarm. There has been mention of the training of professional engineers, technicians and craftsmen who will come on stream in four years' time. I have a horrible feeling that we shall be short of these people in the future as we have been short of them in the past, due to short-sightedness in the training programme. In 1979, the total number of apprentice technicians and craftsmen was 100,000. Today, the figure is 40,000. In engineering, there were 27,000 apprentice craftsmen and technicians in 1979. Today, the figure is just below 9,000.

When it comes to research and development, the position is even more black. The recession itself is causing firms to cut back on this vital investment in the future. This affects not only basic research but also applied research and development. There is some hope. I must pay tribute, yes, to this Government. This non-interventionist Government have at last seen the light and have agreed upon the Alvey plan, under which they will invest £200 million in the future of communication technology and computers. That is very welcome, and all I can say is that it is long overdue.

Your Lordships will have the opportunity of debating your own Select Committee report on research and development sometime in July. I shall say no more about investment in research and development until that time. What is important is that productivity is not an end in itself. Nor is productivity the only aspect. It is production and productivity, not one or the other. Seen in that light, the real answer is that productivity has gone up because employment has fallen faster than output has fallen. I can perhaps use a cricketing metaphor. We may have improved the batting average of UK Limited but only by not sending in the last six batsmen. Cricket matches are won by the number of runs scored, not by the batting averages of those lucky enough to participate in the batting.

The key question must be; What will happen if and when—I have to say "if and when" and not that it will take place—the economy picks up? It is not difficult to keep down inflation with 3 or 4 million unemployed. If this is to be the pattern of the Government for the future, we know where we stand. But there has been no dramatic improvement in industrial relations. It is true that militancy has diminished. It would be surprising if that was not so with nearly 4 million unemployed. Is it, however, not the case—I have mentioned this before in your Lordships' House—that many managements are saying, "It is our turn now"? This new type of management will breed a backlash, when the upturn comes, of trade unions saying, "It is our turn now". This will go on and on, unless we grasp the nettle of what we are going to do in relationship with the trade unions.

Lord George-Brown

Vote for the SDP.

Lord Scanlon

That, if I may say so, would be the worst of all the alternatives, even worse than the present Government. The real question is: Are we going to develop an attitude of mind whereby Government, industry and trade unions work together instead of tearing each other apart? Unless we do something, there will be an inevitable backlash. My plea, especially if there is a return of the Conservative Government, is that some of the anticipated legislation should be dropped. Industrial relations are not encouraged by some of the more vitriolic remarks of Secretaries of State and Ministers who should know better than to poison the atmosphere as they are doing.

It would be equally wrong to talk as if there has been no world recession and that we have not suffered the aftermath and our fair share of it. I shall not bore your Lordships with comparisons of how the recession has hit us harder than the rest of the industrialised countries and whose fault that is. That has already been covered by the contributions of noble Lords, especially on this side of the House. But reports of the present recovery are, I suggest, much like Mark Twain's premature obituary notice; that is to say, much exaggerated.

The Government have been wrong before. We have been told about troughing out, turning the corner and recovery on the way. What real basis exists for believing that this is any more true now than it was? I know that the noble Lord the Minister has been asked to deal with producivity figures. This brings me to the CBI survey. It would be more correct to describe the CBI survey and its reaction as being rather less pessimistic than being more optimistic. Buried in the CBI report are some important caveats. Thirty-one per cent. of those asked think that the volume of new orders will go up in the next four months while 50 per cent. think that it will stay the same and 8 per cent. actually believe that it will fall.

Again, as my noble friend Lord McIntosh indicated, perhaps a much better barometer of the state of the economy in the future would be this report of the NEDO. As I understand it, it is based on the collective reports of 40 active working parties dealing with the various sectors of the manufacturing base; they are tripartite and if they cannot give an accurate picture of the state of the economy, I do not know who can. That may well be the reason why it has not been published, and I hope that today's meeting of the NEDO has at least agreed to publish it as soon as possible.

I have tried to say what the present position is and what the prospects are for the future. I now come to my final point; is there an alternative? Contrary to the much publicised statements, there is another way. It will be to give precedence to building our manufacturing base, to expanding our public commitments and expenditure and by so doing make a serious contribution—and a heavy contribution—to reducing this intolerable load on any economy of 3 million people anxious and willing to work and prevented from doing so by the very system under which we operate. That will cost money. Of that there can be no doubt. We must face this.

It has been said before that it can be financed by the amount of money that we are spending on unemployment and by the tax revenues that are lost thereby. In part it can be financed by borrowing—and which company does not borrow? What is wrong with borrowing if it is to invest in a sound, basic, viable manufacturing base? Nothing at all. There is everything to commend it.

Therefore, finally, I believe that there should be some control over this amount of British money, both real and in the form of shares in portfolios, that goes abroad, to the extent of £10 million in 1982. Those are ready-made finances which I believe could finance the type of programme that is envisaged and which the electorate will have the chance of determining in the coming election. But above all—and I make my plea on this—whichever party is returned to government, if that manufacturing base is to be built up on the grounds that many of your Lordships have tried to describe in this debate, it can only be done on the basis of consensus, not confrontation; on the idea that we shall work together—industry, Government and trade unions—in order to get that manufacturing base going and under way and producing the exports by which we shall increase our standard of living, and provide the hospitals, roads and so on which any caring society wants. That is the usefulness of this debate. I hope that that is the purpose of the coming general election.

Lord George-Brown

My Lords, they should have done it when they had the power.

7.13 p.m.

The Parliamentary Under-Secretary of State, Department of Health and Social Security (Lord Trefgarne)

My Lords, this has indeed been a fascinating debate marked by a number of informed and interesting speeches, not least of course the maiden speech from the noble Lord, Lord Gallacher, which was a contribution which greatly enhanced the debate that we have had today, and has I hope been a foretaste of many more speeches from the noble Lord in the not too distant future. The House is indeed indebted to the noble Lord, Lord Cledwyn, for introducing this subject and for giving us a chance to express our views upon it.

The fall in industrial production that has occurred over the last few years is very regrettable. The unhappy consequences of this are evident to us all. What is perhaps less clear is that most other industrialised countries have been suffering from the same problems, as the world passes through the worst recession for 50 years. The universal nature of the recession is illustrated by the growth figures for the major OECD economies. These had averaged 5 per cent. a year in the late 1960s and early 1970s—that is, in the years before the first oil price explosion. Growth has now fallen to nil. Nearly all the industrialised countries have suffered from serious falls in industrial production, and high unemployment. In the United States, for example, industrial production fell by over 8 per cent. last year. In Canada the fall was around 11 per cent., while in Germany industrial production fell by nearly 3 per cent. in 1982. British industry has been affected by these developments more than in most countries because of the persistent problems accumulated over a decade or more—inefficiency, low productivity, poor competitiveness, and too many stoppages and strikes. We were slow to adjust to growing competition from the newly industrialised countries, which, on the one hand, had access to cheaper labour and raw materials, hut, on the other, did not suffer from our unhappy legacy of industrial strife. As a result, the United Kingdom's share of world trade declined from 17.9 per cent. in 1959 to 9.1 per cent. in 1979. These were the figures referred to by my noble friend Lord Trenchard and I am happy to confirm them.

This gradual decline in the United Kingdom's relative position in the world economy came to a head when our underlying weaknesses were coupled with the need for economic adjustment furthering a further surge in oil prices and rampant inflation or, to use the simile of my noble friend, when world growth declined to an extent that it no longer covered the inefficiences to which I have referred. This came at a time when the business cycle was in any case due to turn down, with industrial production reaching a cyclical peak in the first half of 1979.

The Government's basic strategy has been to create the right climate in which British industry can once again be internationally competitive, and in which a sustained recovery can be built. The cornerstone of this strategy has been the reduction of inflation. During the five years of labour rule preceding the last election inflation had averaged 15.4 per cent. Not only was this creating major social problems, but it also made it impossible for British industry to compete effectively in home and export markets.

Success in the fight against inflation was therefore essential to any lasting recovery. To this end the Government adopted the Medium-Term Financial Strategy. A central part of the strategy is to create, over a period of years, a stable financial framework in order to achieve enduring changes in attitudes and expectations. The MTFS has made an important contribution to reducing inflation to its lowest level for almost 15 years. Lower inflation means that for given monetary growth there is more room for recovery in real activity.

Within this basic strategy, the Government have done a great deal to cut industry's costs. Our success in reducing the public sector borrowing requirement as a percentage of GDP over a period of years has contributed in no small measure to the reduction in interest rates. Bank base rates are now 6 per cent. below their peak in October 1981. We have also cut the National Insurance surcharge—Labour's tax on jobs—by 2 per cent., with a further ½ per cent. reduction coming into effect from August. These reductions in NIS will put hack into private sector companies £2,000 million in a full year, while the lower interest rates to which I have referred have saved a similar sum. Moreover, measures taken by the Government to help industry adjust to higher world energy prices have led to savings in industry's energy costs of around £500 million over the last three years.

Though the main aim of fiscal policy has been to reduce Government borrowing, and the overall tax burden is higher than would have been wished, there has been room in both of the last Budgets for substantial tax reductions. Indeed, but for the position adopted by the Opposition, there would have been more in this present one. In these and previous Budgets the Government have sought within the continuing framework of the medium term financial strategy to restore incentives, thus providing scope for enterprise and initiative. The Chancellor of the Exchequer announced in the last Budget that the "small companies" rate of corporation tax is to be cut be 2 percentage points to 38 per cent., and the marginal rate limits substantially increased.

The Budget contained over 15 measures to help small firms start up and grow. These include a major extension of the Business Start-up Scheme which will be renamed the Business Expansion Scheme. This should greatly ease the provision of equity capital to qualifying unquoted trading companies. The Loan Guarantee Scheme is also to be extended. Since-1979 a total of over 100 measures have been introduced to help small firms start up and grow. Such measures are an important element of our strategy since many small firms will prove to be the nuclei of the great industrial concerns of tomorrow.

Lord Molloy

My Lords, would the noble Lord also read the figures of these hundreds of thousands of firms who are now going to be helped and resuscitated who were strangled a few years before under the same Government?

Lord Trefgarne

My Lords, for some time now the figures have indicated that the growth and the rate of growth, and the rate of birth to use a better expression, of small companies has significantly exceeded the number of closures. In our efforts to create the right climate for industrial growth, the Government have sought to remove obstacles to industrial development and the efficient use of resources. We have been pursuing policies to improve the "supply" performance of the economy by providing greater incentives for work and enterprise, and by improving the operation of markets. The Government have removed a whole host of damaging controls, which had been holding industry back. We have now abolished hire purchase controls, as well as pay, price, dividend and exchange controls. On the subject of exchange controls, one or two noble Lords suggested that we ought to control the outflow of capital from this country. But, of course, to do that would strangle at the same time the important inflow of capital which we are seeing at the present time.

Industrial development certificates and office development permits have been ended. The Government have alleviated the burden of the public sector on industry. Wherever possible we are returning state enterprises to the private sector. This represents by far the most effective means of extending market forces and improving efficiency. So far 10 major public corporations have been successfully privatised, including British Aerospace, Cable and Wireless, Britoil and the National Freight Corporation, which was returned to its employees. Nationalised industries which have enjoyed a monopoly position in the past are being subjected to the bracing wind of competition. For example, in February last year the Mercury consortium were given a licence to run an independent telecommunications network in competition with British Telecom.

The Government's supply side measures include the setting up of 24 enterprise zones. Indeed, my noble friend Lord Bellwin announced yesterday that three local authorities in Kent had been invited to submit plans for a further enterprise zone. A consultant's report on the progress of the original 11 zones shows that in general they appear to be succeeding in their primary purpose of bringing new life and investment to some very run-down areas. Freeports are to be introduced in a limited number of locations. The Government are also acting to reduce labour market rigidities, which have been an important constraint on the United Kingdom's performance. This matter was much in the mind of my noble friend Lord Thomas. These latter measures will help to ensure that, as recovery develops, growth will be sustained and permanent.

My Lords, the Government recognises that we have also a more specific role to play in helping industry to adjust to new technologies, changes in demand patterns, increasing commercial risks and so on. We therefore provide selective help to industry. In 1983ߝ84 the Department of Industry will be spending around £1.6 billion. The balance of this expenditure is being moved away from nationalised industries and public sector companies towards schemes to promote innovation in the new technologies. The proportion of the Department of Industry budget spent on nationalised industries and publicly-owned companies will fall from around 70 per cent. in 1980ߝ81 to 40 per cent. in 1983ߝ84, while that spent on innovation will rise from around 6 per cent. to 19 per cent.

Innovation and the introduction of new technology are essential if British industry is to improve its competitiveness. With this in mind, my right honourable friend the Secretary of State for Industry announced on 17th March that the maximum level of grant under the Department's support for innovation programme would be maintained at 33½ per cent. (rather than at 25 per cent.) for a further year to May 1984. In cash terms, our support for industrial research and development under the Science and Technology Act 1965 has risen from £57 million in the last year of the Labour Government to £230 million in 1983ߝ84. In real terms this is an increase of 135 per cent.

The range of schemes available to help industry adopt the technologies vital to its competitiveness is wide. I shall mention a few major examples. The Microprocessor Applications Project will allocate £85 million to a programme to increase awareness of the advantages and applications of microelectronics. £10 million has been allocated to help firms develop, install and manufacture robots. The Flexible Manufacturing Systems scheme will provide £35 million to accelerate the introduction by industry of computerised methods of production control. £40 million has been allocated to assist the development by United Kingdom industry of a wide range of optoelectronics technologies. In the field of software products a further £15 million has been allocated to assist the development of innovative software products by British industry—a field of fundamental importance with the increasing adoption of computerised systems.

My Lords, it is important to recognise that the Government are not just supporting new industries. Many of these schemes are designed to help existing industries become more efficient and productive. In addition to the existing programmes, my right honourable friend also announced on 15th March that a further £185 million was being added to the support for innovation programme over three years. This will be allocated particularly to a number of new schemes. For example the Small Engineering Firms Investment Scheme, which operated until the middle of last year, has proved so successful that we have reintroduced it. A new Innovation-Linked Investment Scheme will help firms improve their expertise in bringing into production, and marketing, new products.

A second major new initiative, referred to by the noble Lord, Lord Scanlon, which I recently announced to your Lordships, concerned advanced information technology. Following the publication of the Alvey Report, around £200 million is to be allocated for the support of a major collaborative research programme by companies, Government research establishments and academic institutions.

My Lords, at this point I owe your Lordships an apology. When I repeated that Statement to your Lordships, I said inadvertently that the TUC, when asked to express their views on the Alvey report, had not done so. I find that I am quite mistaken on that. They had indeed responded to the Alvey report quite positively, and I apologise both to the noble Lord, Lord Bruce of Donington, and to the TUC for that inadvertent error. I have, of course, written to both.

Of course, the Secretary of State for Industry's longstanding powers under the Industry Act 1972—now continued under Sections 7 and 8 of the Industrial Development Act 1982—are still used to support industrial projects in regions of particularly high unemployment and/or projects making a major contribution to the national economic interest. Payments of grant by the department under Section 7 during the last financial year totalled around £100 million on regional selective assistance: since 1st May 1979 payments of automatic regional development grant have amounted to around £2,000 million. And since July 1979 £30 million of assistance has been offered for 59 industrial projects in the national interest. It is therefore quite wrong to suggest that this Government have disregarded the needs of industry in cases where it has been in the public interest for the Government to help.

In the context of regional policy, I would particularly emphasise the problems which the West Midlands have been facing during the recession. More than one noble Lord referred to that particular area. The Government are conscious of the difficulties of this region, and, with this in mind have established a "Team for Innovation": my honourable friend the Parliamentary Under-Secretary of State, Mr. Butcher, will take charge of the work of the team which will encourage firms to make the fullest use of all the national schemes of support for industry. The reintroduction of the Small Engineering Firms Investment Scheme, SEFIS 2 as it is called, to which £100 million has been allocated, and to which I referred a moment ago, should be of major benefit to the West Midlands, where there are so many small engineering firms.

I shall now deal with one or two of the points that have been put to me this evening. First, in his opening remarks the noble Lord, Lord Cledwyn of Penrhos, asked about the surplus of trade on manufactures in 1982. Indeed, he suggested that there was a deficit on that account. That is not the case. I agree that these figures are very complex and it is a question of whether shipping charges are included on imports, and nice points like that. But the noble Lord is mistaken in thinking that there is a deficit on the account of manufactured trade during 1982. If I may, I shall write to the noble Lord to give him some detail.

I referred already in response to the intervention by the noble Lord, Lord Molloy, to the position of small firms. While it is true that insolvencies have run at a distressingly high rate recently, nonetheless the number of births of small firms is also running at a record high level and the number of new firms now being brought into existence substantially exceeds the number of firms closing down.

The noble Lord, Lord Ezra, mentioned public purchasing. I think that was in the mind of the noble Lord, Lord Molloy, as well. I agree that this can and should be applied in an enlightened way to encourage competitiveness. The Government acknowledge this and have pressed the importance of this approach on the nationalised industries and public bodies. I have no doubt that the noble Lord was the recipient of some of this pressure when he was the distinguished chairman of the Coal Board.

We think that this is an enlightened policy, but at the same time we want to be careful not to embark on an indiscriminate "buy British" policy, although the Government are in a number of ways supporting the introduction of new products through public purchasing. For example there are over 20 pilot office automation schemes in the public sector which are being assisted in this way. I should sound a small note of warning about this approach and that is that under the GATT agreements and the terms of our membership of the EEC we are obliged to ensure that we do not impose any barriers upon overseas firms tendering for the work of our public bodies.

Lord Ezra

My Lords, if I may, I should like to comment on that point. I am conscious of the need to ensure that we keep to our international obligations. The whole purpose of the purchasing policy that I was proposing was that we would be purchasing from home sources because they were competitive with overseas sources.

Lord Trefgarne

My Lords, I wholly accept that point and entirely agree.

A number of noble Lords, indeed most noble Lords who have spoken, and the noble Baroness, Lady Nicol, who spoke with particular eloquence, referred to the problems of alleviating the worst effects of unemployment. Some 621,000 people are covered by special employment and training measures, although the effect on the unemployment register is rather less than that. The Government spent £1½, billion in 1982ߝ83, 40 per cent. more than in 1981ߝ82, on special employment and training measures and £2 billion has been allocated for 1983ߝ84. The new community programme designed to provide up to 130,000 places for the long-term unemployed began in October last year and the new job-splitting subsidy scheme began in January to encourage extension of part-time work and to provide additional opportunities for productive jobs for unemployed people.

In the autumn the youth training scheme will begin at a cost of some £950 million a year. The new scheme will provide a foundation year of occupational and industrially relevant training for all 16-year-old school-leavers and 17-year-old unemployed school-leavers and will also apply to some employed young people. It was announced in the Budget that from 1st October the job release scheme will include a new scheme for part-time job release for up to 40,000 more people, and from 1st August enterprise allowances will be available throughout the country within an overall cash limit of £25 million in 1983ߝ84.

Baroness Gaitskell

My Lords, may I ask a very short question? In his interesting speech the noble Lord has made no reference to our oil and the difference that can make to the whole situation.

Lord Trefgarne

My Lords, I should be misleading your Lordships if I were to suggest that the oil were anything other than of the greatest benefit to our present economy. However, the oil industry does not form part of the manufacturing industry which is the essence of our debate this evening.

Baroness Seear

My Lords, I may have misheard and I am sure the noble Lord the Minister would not want to mislead the House, but did he not imply that the scheme was for unemployed 16-year-olds in the main? I thought it was to apply to all 16-year-olds who were to benefit from the youth training scheme? Surely the point of the scheme is that it is not to be confined to the unemployed.

Lord Trefgarne

That is exactly so, my Lords. I said that it would apply to the people that the noble Baroness is hoping and expecting it will apply to.

There are now clear signs that industry is responding to the new climate we are creating. Productivity—that is, output per head—in manufacturing has risen about 16 per cent. since the end of 1980. It is now about 9 per cent. above the average for 1979. Pay settlements are now being reached at much lower levels. As a result, manufacturers' unit wage and salary costs rose by only about 3½ per cent. in the three months to February compared with a year earlier. This compares favourably with our major competitors overseas. The cost competitiveness of manufacturing industry has improved by around 20 per cent. since early 1981.

Last year British exporters of manufactured goods succeeded in at least checking the decline in their share of world export markets. There are also growing signs that the improved performance is beginning to feed through into increased output. Industrial production rose by 1½per cent. in the three months to February, compared with the previous three months, and manufacturing output rose by 1 per cent. Gross domestic product has recovered by 2 per cent. since its trough in the spring of 1981.

Indeed, there are now a large number of indicators pointing to a more general economic recovery. Total housing starts in the three months to February were up 33 per cent. compared with the previous three months. For the first time ever new car sales have topped half a million in the three months to March. Registrations during the first four months of this year were 16.6 per cent. up on the corresponding period for 1982. Consumer expenditure and retail sales are also running strongly. The Central Statistical Office's index of leading cyclical indicators points to a continued upswing in the business cycle.

For three months in succession the CBI Industrial Trends Survey indicates that the number of manufacturers who see signs of improvement outnumber these who do not. The April Quarterly Trends Survey showed encouraging improvements in orderbooks and output expectations, a slowdown in destocking and job shedding, and improved investment intentions. The response to the overall business optimism question has been bettered on only three occasions in the last 25 years.

Although there is still a long way to go, recovery has begun—of that there is no doubt. In the past there have been signs of recovery which have not been sustained because the world economy turned down. Now, however, there are clear signs of growth particularly in those countries which have been successful in the fight against inflation. In the United States, for example, industrial production has risen for four months in a row. That Administration has revised from 3 per cent. to 4½ per cent. its estimate of growth this year. In West Germany, industrial production in the two months to February rose by 1.5 per cent. on the previous two months. The continued restraint in wage bargaining means that British industry is in a position to take full and permanent advantage of this international upturn. The prospect now is for a growth in GDP of about 2 per cent. in 1983, with continuing improvement in profitability.

The Government have done a great deal to create the conditions in which industry can achieve sustained recovery and prosperity. The process of adjustment has been painful but there was no alternative to it, given our poor industrial performance, which had been getting worse over a long period of time. The reduction of inflation and improved competitiveness represent the only route to the sustained economic and industrial recovery which we all wish to see. Increased Government expenditure on the scale which some have called for in order to boost demand is the route to higher inflation, and hence to lower real output and fewer jobs. It would certainly not bring the sustained industrial recovery to which this Government are committed.

Lord Cledwyn of Penrhos

My Lords, it is my pleasant task at this time, bearing in mind that there is another debate to follow, to thank all those who have taken part in what I think has been an interesting and, indeed, important debate. I should like to thank particularly my noble friend Lord Gallacher for what all noble Lords will agree was a most thoughtful contribution which has whetted our appetites for further contributions from him. I should like also to thank my noble friend Lord Scanlon for his powerful winding-up speech and the noble Lord, Lord Trefgarne, for telling us what the Government feel about industrial production. I think that, on the whole, that was the triumph of hope over experience, but I am extremely grateful to everyone. I beg leave to withdraw my Motion for papers.

Motion for Papers, by leave, withdrawn.