HL Deb 01 February 1984 vol 447 cc672-9

4.4 p.m.

The Chancellor of the Duchy of Lancaster (Lord Cockfield)

My Lords, I will, with permission, repeat a Statement made in another place by my right honourable friend the Secretary of State for Trade and Industry. The Statement is as follows:

"With permission, Mr. Speaker, I should like to make a further statement on the Nissan project. I am pleased to inform the House that the Government and Nissan have reached an understanding on the basis for a Nissan car plant in the United Kingdom. The president of Nissan, Mr. Takashi Ishihara, and I have signed heads of agreement today. These are being published and copies will be available in the Library of the House later today.

"Subject to a satisfactory outcome of negotiations with United Kingdom trade unions and local authorities, Nissan will proceed with the construction of a car plant on a green field site of substantial acreage (probably around 800 acres) within a development or special development area.

"The first phase will be a pilot plant, to begin production in 1986, providing an assembly capacity of 24,000 cars a year based on imported kits. These will be treated as though they were built-up imports in the context of the discussions between the Society of Motor Manufactureres and Traders and the Japan Automobile Manufacturers Association, both of whom have given their agreement to this arrangement. During this phase Nissan intend to gain experience of general operating conditions in the United Kingdom, to develop effective relationships with local component manufacturers, and establish the prospects for further development.

"In the light of this Nissan will decide, not later than 1987, whether to proceed to Phase 2, which will provide capacity for 100,000 units on a full manufacturing basis. If Nissan decide to proceed to Phase 2, production would start by 1990 at 60 per cent. local content on an ex-works price basis. Full production would be reached in 1991, with 80 per cent. local content being achieved and maintained from the middle of 1991.

"In addition to regional development grants the Government will also be ready to provide selective assistance of up to £35 million if Nissan proceed to Phase 2; this is equivalent to 10 per cent. of the total capital costs of both phases. In Phase 1, the plant will employ directly between 400 and 500 people, and in Phase 2 around 2,700 people; but particularly in Phase 2, the potential total direct and indirect employment will be considerably greater.

"This project represents an important opportunity to create fresh investment and jobs in the motor industry. It will introduce a major, efficient new domestic customer for the United Kingdom components sector; and it represents a constructive step forward in the dialogue between Europe and Japan on trade and investment. For these reasons I am sure that the House will join me in welcoming the Nissan project to the United Kingdom."

My Lords, that concludes the Statement.

Lord Bruce of Donington

My Lords, we are grateful to the noble Lord, Lord Cockfield, for repeating the Statement made in another place. Before passing definitive judgment on the Statement, naturally we should like an opportunity of examining the heads of agreement as soon as we have been able to retrieve them from the Library.

We on this side of the House give a welcome to this project in so far as it has been described to us. We note that there is to be a pilot plant. We note that it will be based on imported kits; in other words, there will be no immediate manufacturing capacity here as distinct from pure assembly. The initial gain of between 400 and 500 jobs—which we should like to be reassured by the Minister is a net figure—must be set against the job losses in this particular industry which have occurred since 1979. Some 170,000 jobs have been lost in the vehicle manufacturing industry since this Government took office, and a further 150,000 in the components side of the industry. So the gain in employment, on the assumption that it is a net gain, is a very small one. Nevertheless, if there is a gain we must certainly welcome it.

We would of course note that there will be substantial advantages to Nissan as a result of this project, and we certainly would not wish to begrudge them in any way; and particularly, of course, it will, if consummated, give them a right of entry into the European market—something which I imagine will bring a sense of gladness to the shareholders and directors of Nissan. There will also be other advantages to Nissan, in terms of the regional development grants to which the Statement refers, and also in connection with selective assistance. I should like to ask the noble Lord how the amount of selective assistance has been determined before it is known whether the company is going to move into an ordinary development area or a special development area. I believe that the practice—the noble Lord will correct me—is to determine selective assistance after the nature and amount of the regional development grant has been determined.

Another point arising on that about which the House would like to be informed is: are these terms to Nissan in conformity with the current rates and formulae for the determination of these grants? Are they, for example, in excess of the grants that would have been given to British firms or other firms coming into the country after the proposed revision of the regional development grants; that is to say, if the press reports of reductions of the order of £150 million are going to be achieved? In other words, would the noble Lord assure us that undue advantage is not being taken of the current rates by arriving at agreement at this time rather than after, as and when, the new rates and new regional aids come into operation?

In general, we welcome the proposal. We would like to have further information about it. In the meantime, we would express pleasure that this very important company, which is known to have efficient management and very good and constructive management attitudes towards those who work for it, has decided to come to the United Kingdom, thereby expressing full confidence in the ability of the workforce of the United Kingdom, often derided in other quarters, to perform the work that is required.

4.14 p.m.

Lord Diamond

My Lords, I too should like to give a welcome—so far as these Benches are concerned a very warm welcome—to the Statement which has been made by the noble Lord the Chancellor of the Duchy. I can see nothing but benefit accruing to this country, both in the general concept and in the way it is proposed to deal with it in two stages; in terms of competition and efficiency, in terms of opening minds as to labour relations. I should like to ask the noble Lord if he would be good enough to explain a little more fully the basis of the figure of assistance which has been agreed, both in relation to this company and in relation to other companies, be it of British, European or other origin, which might otherwise have taken place, so that noble Lords will have a better idea of how the figure would stand in relation to other investors.

I do not know whether the noble Lord can tell us anything (because it is not necessarily his responsibility) about discussions which have taken place between the prospective employer and their present employees, the unions, in Japan. It might be of interest to know how they have overcome any difficulties there, if the noble Lord has any information on that topic. The only other more detailed question that I think would be helpful to your Lordships' House would be if the noble Lord the Chancellor of the Duchy could go a little further in asessing the net gain in employment in Phase 2 when it is fully developd. It is inevitable that there will be some loss of employment to some present employers; I should have thought it inevitable that that will take place as a result of competition. There will, on the other hand, be much direct increase in employment. I do not know whether the Government have worked out what the net benefit in employment is likely to be.

Lord Cockfield

My Lords, I am most grateful to the noble Lord, Lord Bruce of Donington, and to the noble Lord, Lord Diamond, for the very warm welcome they have given Nissan and their entry into the United Kingdom. I would be very anxious to join my welcome to the welcome they themselves have expressed.

As the point was raised by both noble Lords, may I start with the question of the effect on employment. In Phase I there will be only a relatively small effect outside the immediate Nissan project itself. But, of course, we all hope very much that it moves on then to Phase 2, where there is direct employment of 2,700. The best estimate the Department of Trade and Industry have been able to make of the total employment effect in Phase 2—that is, taking the effect on the component suppliers, any possible repercussive effects elsewhere, the influence on exports, the influence on imports, and taking a range of central assumptions—is a figure of 6,000 net. That is inevitably of course an estimate; but it indicates that the project brings with it an employment gain over and above the direct employment.

It is perfectly true, of course, as the noble Lord, Lord Bruce of Donington, said, that there is a substantial advantage to Nissan, in the sense that when they move to Phase 2, where there is a high local content of production, it gives them entry to the EEC market. But of course that is of great benefit to the United Kingdom as well. There are major benefits to the United Kingdom from this project: one is import substitution—that is, we hope that most of the output will replace cars which would have been imported into the United Kingdom. Nissan are equally determined to make the most of the export opportunities that this project opens up for them. The fact that it is an advantage to them is something that we and they very much welcome.

With regard to the question about how the selective assistance was determined, the figure was taken as 10 per cent. Of the total investment, taking Phase 1 and Phase 2 together, the total investment being approximately £350 million. Of course, it was a negotiated figure, because it is the essence of selective assistance that it is discretionary in amount. That, of course, is in addition to the standard regional assistance which is available to any other firm and which is at 15 per cent. in the case of a development area and 22 per cent. of eligible capital in the case of a special development area. As regards the new regime, the position is that transitional arrangements have been made and any company falling within those transitional arrangements, as Nissan do, will in fact be entitled to the 15 per cent. or 22 per cent. as appropriate; so there is no special discrimination in favour of Nissan there.

The noble Lord, Lord Diamond, asked how the company in Japan succeeded in getting the agreement of the unions. There were long and complex discussions, as I believe the noble Lord knows, and it was a very considerable achievement that they ended up as happily as they did. It is a very good augury for the future in the United Kingdom that Nissan are now opening up discussions with the unions. We believe we have met the major concerns very legitimately expressed by the unions about the local content, and we have in fact negotiated a high figure for the local content.

I think that answers the specific points raised. I entirely agree with the noble Lord, Lord Bruce of Donington, that one needs to read the heads of agreement, as I am sure he will, which are expressed in remarkably clear terms. In conclusion, I should like to say how much I appreciate the welcome that both noble Lords have given to the project.

Lord Bruce-Gardyne

My Lords, while joining in the thanks to my noble friend for the Statement, may I ask him whether he can confirm that if Nissan was to choose to go to a special development area the total cost to the taxpayer of the project, if it went through to Phase 2, would be in excess of £100 million? Can he also say what would happen if, having decided to proceed to Phase 2 of the project, Nissan found itself unable, perhaps for good and sufficient reasons, to achieve the 80 per cent. local content which has been suggested? Can my noble friend tell the House whether assurances have been obtained from the French Government that these British Nissan cars will be deemed to rank for free circulation? My noble friend will have seen the comment of the chairman of Renault on this matter in the past few days.

Lord Cockfield

My Lords, my noble friend raises three points. First, may I assure him that his arithmetic is approximately correct. As regards regional grant assistance, this is precisely the same figure to which any other company in similar circumstances would be entitled. On the 80 per cent. local content, we are satisfied that Nissan will succeed in achieving that sort of level. We will be monitoring progress, but I think it will be quite unrealistic now to start thinking in terms of Nissan failing to achieve that figure. We are confident it will be able to do so. The company is confident that it will be able to do so. It poses a challenge to our component manufacturers, but it is a challenge I am certain they will rise to.

The actual terms of the agreement with Nissan are commercially confidential, but I can assure my noble friend that care is taken to protect the interests of Her Majesty's Government. On the question of entering into Europe, we regard a car with this degree of local content as being a British made car, and on that point we are quite certain of our position.

Lord Ross of Marnock

My Lords, are we to understand from what the noble Lord said about the difference between a special development area and a development area that no firm decision has been made as to where this site is to be? I certainly welcome the Statement, and would welcome it even more if the site is to be in Scotland. There is one other matter on which I am rather curious. Can we take it now that if we put down Questions about the expansion of any firms into any place we will be given Answers on the financial aspects of the project? I was always under the impression that the Department of Trade did not disclose the financial aspects of any dealings it had with companies.

Lord Cockfield

My Lords, the noble Lord, Lord Ross of Marnock, is quite right in saying that no firm decision on the site has yet been taken. It is a matter for the company to decide. I understand it is looking at a number of locations but has not yet decided whether the final location will be in a development area or a special development area, but under the heads of agreement it will be in one or the other.

My own understanding is that the degree of information I have given is in line with that which has been given in corresponding cases previously. On the question raised by my noble friend Lord Bruce-Gardyne, this is, if I may say so, a simple matter of arithmetic on the basis of certain figures which emerged in the Statement itself.

Viscount Trenchard

My Lords, can my noble friend give the House a little more information on the timing of Phase 2? May I say that I, too, welcome this decision, having been at the Department of Industry and played a part in the negotiations for many months in 1979. I am entirely satisfied that the net employment benefits to this country can be very great indeed.

I should like my noble friend to make a little clearer whether the heads of agreement throw any light on the date at which the decision to go ahead with Phase 2 might be taken. If I understand my noble friend correctly, we are talking about Phase 2 commencing in the 1990s. Does that mean production or the completion of the factory? Can my noble friend be a little more explicit on that point? If the project goes ahead, is production likely to start in 1990, or not? Has my noble friend any information on whether the Nissan union in Japan has cleared and agreed the general principles behind Phase 2 as well as Phase 1?

Lord Cockfield

My Lords, on the first point raised by my noble friend the timetable is in fact set out very clearly and specifically in the Statement itself. It also appears in the heads of agreement. Nissan is to decide not later than 1987 whether to proceed with Phase 2. If it decides to proceed with Phase 2, production will start by 1990. Full production would be reached in 1991, with 80 per cent. local content being achieved and maintained from the middle of 1991. I suggest that that is a very clear and specific timetable. Looking ahead over a period of as much as seven years, as we are, it is as clear and specific a timetable as one could expect.

On the question of the unions in Japan, I gather that they accepted the proposition on the basis that I have announced to the House.

Lord John-Mackie

My Lords, is there not enough industrial land already developed and not used in this country without taking 800 acres of green land out of agriculture, which is getting scarcer every year?

Lord Cockfield

My Lords, I wonder whether there might not be some slight misunderstanding on this. The phrase that is used in the Statement is "greenfield site". I believe this is a technical phrase used by people who construct factories, and so forth. I understand that one can have a greenfield site which is not, in fact, a green field. The term refers to being able to start on a clear site, so that there is an easy, straightforward development project.

Lord Dean of Beswick

My Lords, I, too, welcome the announcement conveyed in the Statement repeated by the Chancellor of the Duchy, but, speaking as a former engineer, my welcome is somewhat guarded at this stage. There seems to be a sense of euphoria that the project has already succeeded, but I should like to press the Chancellor on the question put by the noble Lord from the SDP Benches regarding the second phase and the gaining of 6,000 jobs. Bearing in mind the history of the Japanese industrialists in the post-war period in regard to their capacity to flood domestic markets in other countries all over the world, very often with tragic economic, industrial and social consequences for the countries involved, can the Chancellor tell us that the jobs will not be at the expense of our own domestic motor car industry? Can he also tell us whether the Japanese can be held fast to the agreements that they make if they decide to open the tap further and damage our own domestic car-producing industry?

Lord Cockfield

My Lords, so far as the major point raised by the noble Lord, Lord Dean, is concerned, the figure of 6,000 that I quoted was a net figure which took into account all the repercussive effects—both the favourable ones (because it opens up a big, new market for our component manufacturers) as well as any that are potentially unfavourable on manufacturers in the United Kindom. But we believe that most of the production will be at the expense of imports, and therefore it is a clear net gain to the United Kingdom economy. With regard to the other point that the noble Lord raised, speaking as a previous Secretary of State for Trade, I would say that my own experience was that while the Japanese were very tough bargainers, they always adhered scrupulously to any bargain that they struck.

Lord Morris

My Lords, in answering one of the questions raised by my noble friend Lord Trenchard, my noble friend Lord Cockfield used the phrase "not later than 1987". By that does he mean not later than the start of 1987, or not later than the end of 1987?

Lord Cockfield

My Lords, my noble friend is trying to press me on the precise details of the timetable. I wonder whether I may look into his point, because on this I can do no more than tell him what is in the heads of agreement.

Lord Bruce of Donington

My Lords, may I press the noble Lord on one further matter of detail, and at the same time thank him very much indeed for the information that he has given? Will he define a little more closely what the Government intend should be meant by the phrase "60 per cent. local content"? It is indicated in the Statement as being on an ex-works price basis, but I venture to suggest that that basis may include the promotional costs, advertising, and a whole series of other matters that have no local content at all. Will the noble Lord mind defining a little more closely the term "local content" as he understands it?

Lord Cockfield

My Lords, the phrase is one which is customarily used in this field, and it carries its customary value. It includes, I am told, parts, materials, labour, and overheads.