HL Deb 12 July 1985 vol 466 cc477-90

2.30 p.m.

Lord Molloy rose to ask Her Majesty's Government what measures they are taking to plan the reconstruction of the United Kingdom's industrial base by encouraging the provision of the most up to date equipment, the training and retraining of employees to provide a labour force with the necessary skills, and the development of new technology.

The noble Lord said: My Lords, I beg leave to ask the Unstarred Question standing in my name on the Order Paper.

This Unstarred Question has been on the Order Paper for quite some time. Ever since it has appeared on the Order Paper I find—and I am sure this is simply by chance—that Her Majesty's Government and indeed Her Majesty's Opposition have become interested in the Question. They have established all kinds of inquiries to find out precisely what is the situation. I do not know whether I can claim that that is because of my putting this Unstarred Question down on the Order Paper. If it is merely a happy coincidence, then it is a worthwhile one and I find it most gratifying and encouraging.

What we are talking about is the future of our nation. Our recent past has not been particularly encouraging, particularly in so far as we are the land which led the Industrial Revolution of yesteryear and when one realises that in nearly four-fifths of the world wherever there is a railway track laid that is because the English thought of the idea first. I could give a long, long list of what the English have invented and produced—right down, even, to the rubber band. Regrettably, they have often left others to exploit it. However, I happen to believe that the innate genius is still there.

I want to ask straight away the noble Lord, Lord Lucas, who is to reply to the debate in his capacity as Minister, this question. What burdens on industry have the Government removed to try to revitalise particularly the manufacturing industry? We hear a good deal about those burdens. I am sure they exist. However, I should like to know a little more precisely what they are.

Our industrial base is the foundation of our future. It urgently requires enlarged provision of up-to-date equipment. We must maintain the capacity and perspicacity to constantly update. In the disciplines of modern industrial equipment, technical and technological advance in the, to many of us, bewildering world of computerisation is inevitable and now urgent. The changes in a decade almost deny comprehension. No doubt some of us in this Chamber who may have had some experience in some of the great craft industries and who have been apprentices, or even scientists, find it difficult to understand this massive advance in the past few decades, which I believe is only just getting underway. America has shown the way. It is only just getting underway and there is more to come. I am desperately anxious that this nation shall not fall behind. We have to design and improve equipment at all levels of industry. It is true that we are doing so but I believe without the full drive that the urgency of the situation commands.

In relation to employees, I believe that more schemes of training and retraining must be undertaken. There must be permanent links forged between the shop floor and universities; between technical colleges and training centres. They must no longer be looked at as little empires on their own, little islands of contribution. They must have bridges or links between them to take full advantage of why they were created.

We must make a reality of our high tech vision. The Government funded the MEP, the Microelectronics Education Programme. I praise and laud them for it. It has indicated our route. However, when one realises that, after having done this, we have only trained via it 25 per cent. of our teaching force, this seems to me a very serious form of myopia. The variations that exist among our schools are too great. Some schools use computers a great deal and others not much. These variations between standards of teaching science, technology and computerisation are too great to ignore. They are a danger, and we must do something about it. The monopoly of maths and science seems to be breaking down. That is a particularly good thing. I happen to be among those who believe that vital imagination is much more than having a detailed knowledge of maths and science. The ideal situation is to link them both together.

Domination of the economy by new technology is now inevitable. So, too, is the encouragement of the expansion of technology and a science-based industry. Great Britain has not yet acquired a science-based industry. We have talked about it a great deal. There has been much about it recently in the newspapers and other forms of the media. But it is always talked of as happening in the future. One never hears that within three, four or five months we shall have taken a giant step towards establishing a science-based industry. That is vital. It is exactly what the United States of America has done. We have to emulate that performance.

I believe that the encouragement of expansion of technology is also vital in all forms of teaching. The start must be made in our primary schools. I have raised this matter previously in the House. I have seen how young children in the state of Minnesota are able to use, even as a toy, a computer that baffled me. I am not particularly dull, but that is what happened. My granddaughter can teach me how to use it. We have not yet advanced to this stage. I agree that there are dangers, and I shall come to these later. I wish, however, that we were facing these dangers and that they were not absent because we are not giving the priorities to computerisation that we should be giving.

I believe that experience with computers must begin at an early age. Jack and Jill must control the robot to fetch the pail of water. They should not be humping it themselves. There is no future in that. The future engineer, musician, fitter and poet will have to learn to work with a keyboard and terminal. It is the job, I believe, of the Government in collaboration with the CBI and the TUC to see that we avoid waste of talent among boys and girls. Our watchword must be that current shortages of microskills will not be tolerated. That is vital to the quintessential submission that I make.

Adaptation must be speeded up. Open tech units must be increased. I also believe that the quality of instruction must be improved. It has to be realised that youngsters entering our technical colleges or universities this week will be the instructors in 18 months' time. We have to see that they are geared to the most up-to-date methods not only in what they are teaching but in what they pass on to other technicians. A new breed of scientists must be assisted to emerge.

The great companies of the CBI and the vast coverage of the TUC must be brought together to provide a permanent joint new technology scientific computerisation board. This should not be a one-off operation and they should not have to wait for the Government, of any complexion. They are essential to this idea of mine becoming a great success. I believe that if the TUC and the CBI and those involved in similar aspects of our industrial and commercial life wish to contribute they should be allowed to do so, in establishing this new technological scientific computerisation board. Its purpose in the first instance will be to serve its members. Inevitably, however, it will also serve our nation. Young people leaving school today will retire in the second third of the next century. This by itself demands massive improvements in teaching and training. It must be our top priority investment.

One word of warning. Educational specialisation can also be a great danger. We must never allow the arts and the humanities to drop below the science and technical world. They are of equal importance. Basic skills must be taught in a manner which avoids the essentials being outdated. I shall say that again because it has been part and parcel of the United States' approach to the whole problem. Basic skills in the United States are taught in a manner so as to avoid the essentials of that teaching being outdated. They catch up all the time. We can learn a great deal from that, and we ought to emulate it.

I should like to give the House an example of what the United States has gained from this. When we look at the American record on jobs we see that there are numerous comparisons which show that United States' employment creation outclasses that of Europe. While Western Europe has lost an aggregate of 2 million jobs in the last decade, the United States has added 20 million (and five million of these since the recession in 1980–81) in a formidable display of economic power. Altogether in 1984 the United States' economy generated 3.5 million private sector jobs. It is interesting to note that this big advance was to a great degree assisted, aided, and supported by the publicly-owned sector of the United States of America. The high rate of United States' job creation is not a new phenomenon. They have done it before, and, just as important, so have we.

With regard to the development of new technology, the application of microelectronics involving computers, telecommunications, the automation of equipment and genetic engineering is spreading in Japan and in the United States. We to a degree are making an effort, and so are other parts of Europe. It follows that information technology will herald the new industrial age.

Just as we created a new industrial age a few centuries ago with our Industrial Revolution, now this new industrial age has been created by the United States of America. But they could not have created the second industrial revolution if we in Britain had not created the first. The sensible thing is that we ought to get together. We ought to invite here United States' businessmen and scientists and not just foreign secretaries and presidents, and all those important people. We ought to get these equally important people to come to this country and talk with our scientists and technologists, and to help in the seeking out and teaching of that technology which will herald the new industrial age.

One of the main worries of Europe is that information technology in the broadest sense—that is, everything from computers to telecommunications—is a strategic industry, but in this particular field (and it is difficult to have to say this) Europe has practically nothing. That is why a moment ago I urged seeking the collaboration and full co-operation of our colleagues in the United States of America.

I am firmly convinced that all parties, professions, and craft skills in this country would support the quintessentials of my submission. I also believe that we still possess one of the greatest assets of all time—the determination, courage and willpower of our British people.

In my maiden speech in this House—I am drawing to a conclusion—I thought it right and proper in regard to the subject matter to quote our great poet Milton. I shall quote him again briefly this afternoon. Milton said that we are, a nation not slow and dull, but of a quick, ingenious and piercing spirit; acute to invent; subtle and sinewy in discourse; not beneath the reach of any point—the highest that human capacity can soar to

I conclude with this: the way ahead for our country will present a formidable challenge, but it is not new to this nation. We have faced challenges before and overcome them. I should like to see us garner the best of Britain today, to train our nation for an even finer and better Britain for tomorrow, not merely for the sake of Great Britain and its people but also for what we shall then be able to give to the less fortunate parts of the world.

2.45 p.m.

Viscount Hanworth

My Lords, I did not put my name down to speak, but I feel that this is an extremely important debate. I am sorry that it was set down on a Friday as an Unstarred Question because it raises so many matters of real importance to the nation. I do not propose to speak for more than a few minutes, certainly not more than five. I should like to make one or two points.

First, there is undoubtedly a shortage of certain types of artisan and technical grades that our industry urgently needs. We should do everything we can to make good that deficiency. Secondly, there is a shortage of technicians and university graduates who are trained in engineering and the other skills that are required in industry and who are willing to go into industry. It was pointed out some years ago that in Germany perhaps 80 per cent. of first-class people, not necessarily from university, but able people, went into industry, whereas only 30 per cent. went into our own industry. That is a desperate shortage and is the shortage from which we now suffer. There are insufficient really able men in our industry.

The strange thing is that the Robbins Report long ago tried to help us to catch up with the number of graduates in Russia and elsewhere, always with the idea, apparently, of producing more people who would be useful to society as a whole. But what a tragedy it has been! From an industrial point of view we wanted more people trained in science, engineering and management. But what did we get, my Lords? We had a lot more rubbishy, third-rate art courses, and at that time it was even believed that it did not matter what was taught at university and however badly it was taught; because it was taught in a university, it was self-justifying. This is a disaster.

An even greater disaster was the technical colleges which had been producing a useful outtake of students, but they tried to ape the older universities and we lost out by producing a large number of new universities which were unable to produce the skills needed by industry; nor were they able to produce what was needed by society. The latter is a very important point.

I say, and I say again, that the best training of a mind that I ever received in my life—and I was up at Cambridge—was the Army Staff College. It taught me to think, and many of the disciplines in university do not do so. Furthermore, we found that for many going to university, if they had reasonable capability, was an escape from going into industry.

All that is changing; but it is difficult to change. It is not possible to change suddenly from a lot of arts courses, which may not be very useful, to something more practical. It takes time. That is happening. But of course what we never seem to realise at all is that the strength of this country has always been in its engineers; and latterly we have been bad at the development and production stages. Our research work and our scientists were, and still are, excellent. What we simply fail to do is to produce the product. That is where we are failing.

It is very unfortunate that the status of our engineers, who are responsible for just this, has declined. Many attempts are being made to increase their status and to get more really able people into that profession. But we have a very long way to go. That is one of the things that we must do for the future: hut it will take time. That, my Lords, is my five minutes.

2.51 p.m.

Lord Dean of Beswick

My Lords, in congratulating my noble friend and colleague Lord Molloy on choosing this very important subject for a debate, I join with the noble Viscount, Lord Hanworth, who has just spoken in saying that it is a pity that the debate could not be held at a more prime time in the House. As my noble friend Lord Molloy said in his opening remarks, we are of course discussing the future of ourselves as a nation and what plateau of social structure and life our children and their children will have to endure or live on.

I remember that some weeks ago a similar debate took place in this Chamber. I think it was the noble Lord, Lord Kearton, on that occasion who used terms such as, "We have had jam yesterday and jam today but unless we get this right there will be no jam tomorrow". I know that he will forgive me for repeating those terms. I think that they encapsulate what we are talking about. The last Labour Government, with all their faults, identified the problem that was then assuming large proportions. They had already taken decisions in conjunction with the TUC that if re-elected they would give absolute priority to sustaining and developing our manufacturing base because, without that, we have very little future or no future at all.

People ask, "What immediate measures can be taken?" I am not speaking in isolation, because it is on record quite recently, when I say that pillars of business (certainly not pillars of socialism) such as the CBI are asking for a reduction in interest rates in order to allow the money to be invested in industry, in some of what I think they term our sunrise industries, about which the noble Viscount, Lord Hanworth has spoken. I do not know whether any noble Lords present were able this morning to take on board an interview with somebody from one of the universities which is engaged in developing robotics. It was quite fortuitous that I was able to listen to what he said, because that also underpinned something that the noble Viscount, Lord Hanworth, said. The person interviewed said that people assumed that this country comes a very poor third in robotics and technical developments, compared with America and Japan. He went on to say that that is not the case and that in certain areas we are doing as well and in some cases better.

However, when the initial process has taken place and things should be made available in a marketable sense to attract investment or to make money, we fall down. The money is not available; or, if it is available, it is not finding its way to doing that very job. And, of course, the people who are taking advantage of it are the Americans and the Japanese, almost exclusively, and not the rest of Europe. Therefore, in my opinion we are exporting some wonderful expertise from this country, trained over here almost at market rates.

If I may digress for a moment, I should like to say a word about one part of the admirable speech made by my noble friend and colleague Lord Molloy. He talked, I think, about the humanities and the arts, referring to our future educational needs and the system in the universities. As an ex-shop floor engineer, I take the view with some reluctance that in the language of priorities I do not want to see, any more than my noble friend does, the arts and the humanities suffer. But if we do not get this right there will be an ever-diminishing amount of resources to sustain education in those things. It may well be that the arts and humanities may have to decelerate for a while in order to get the industrial base and the future of the economy right so that funds can be provided for those purposes.

One thing has benefited us. I know that the pound has dramatically fluctuated over a number of years, but I do not think there is any question that the devaluation of the pound, mainly against the dollar (because it has pretty well held its own against most other currencies and has done rather better than some of them), and the opportunities so created, while they benefited us to some extent could have benefited us a little more. I am glad that this debate has taken place in an objective atmosphere, because there is no point in just getting up and repeating criticisms of the Government. But I do have to say that—and it is not being said only by me and my party—that I wish more opportunity had been taken to plough the huge funds gathered since 1979, when the last Labour Government went out of office, into the very things that the noble Lord, Lord Molloy, and the noble Viscount, Lord Hanworth, have talked about: that is, the huge sums of money that have been gathered in from our oil revenues.

I know it is not easy to transfer money into jobs, and sometimes one can invest a lot of money and create only a very few jobs; but I believe that a substantial part of the money that has been spent on increased social service benefits and unemployment payments because of unemployment would have been better spent at an earlier stage on retraining and on reinvesting in some of these industries. For instance, Inmos should quite clearly have been developed and underpinned by increased Government funding at the right time. I do not take the view that the Government are doing any service to us in just indulging in privatisation for the sake of privatisation. I do not believe in nationalisation for the sake of nationalisation. Where an industry is doing well, its workers are happy and it is developing, it should be left alone. I think the Government are going a little too far in that situation.

I should like in the next few minutes (because I do not intend to detain the House for very long on this) to take the opportunity of looking at what happened to our industrial base in the ten years from 1971 to 1981. In industry, the figure for men in full-time employment is minus 1,576,000; in services the figure is increased by 200,000. The balance is obviously shifting the wrong way, certainly dramatically, even though one has to accept that the service sector in a developing society will have a bigger role to play. In regard to part-time men in industry there is no change, but in the service industry there has been 124,000 extra jobs created for men on a part-time basis.

With regard to women in full-time employment, 534,000 jobs have been lost in the manufacturing industries in the same 10 years. In the service industries in the same period there was an increase of 322,000 jobs in the women's sector. In regard to part-time jobs for women, in industry the figure is minus 76,000, and in the service industries it is plus just over a million.

Once again these are dramatic figures that compound what has been happening; there has been a tremendous erosion of jobs in our manufacturing base. Some of those people, such as skilled engineers and those from wool working and textile industries, have borne the biggest brunt of those losses. There may have been some training, but it should have taken place before. However, I have to have regard obviously to the fact that the Government have a very substantial retraining programme.

Since 1981 up to the time of the current figures the manufacturing industries alone have lost 652,000 jobs, while jobs in the service industries have gone up by 377,000. That is another indication that the growth which is taking place in the service industries in terms of wealth creation and the GNP is vastly outstripping the number of jobs that are being lost in the manufacturing sector.

As an ex-Member of another place who represented a northern constituency and as an indigenous northerner myself, I am disturbed by one thing. Perhaps I may read this brief paragraph before I conclude: Engineering and textiles manufacture have been notoriously badly hit. Between 1981 and April of this year the number of people in manufacture has dropped by three-quarters of a million. In Northern Ireland and the North and West the percentage of industrial jobs lost since 1978 runs at 30 per cent. The equivalent figure for London and the south-east is just on 15 per cent". The source of this is the Employment Gazette. It also states: Great Britain is fast becoming a new Italy with an economic divide North/South that will soon be irreversible". In closing I should like to put a point to the Minister. I mentioned this a few weeks ago when we debated the statement on Stansted, or the airports policy. The people in the north, irrespective of what Government Ministers say or what their representatives say, are firmly of the opinion that they have a Government who care more for the south than they do for the north. All the figures on employment and investment, whichever way one looks at the situation, certainly reinforce this view. I do not expect the Minister to take that on board and to reply immediately because I appreciate that this is a very complex subject, with a mass of figures to prove the argument. But I hope that the Minister will take note of what is being said with increasing frequency—and not just by members of my party, his own party or the Alliance. It is coming across to the broad spectrum of the people in the north that they come second on every issue.

I should like to say once again that my friend and colleague Lord Molloy has done us a great service in enabling us to debate this very important subject. If we do not get this situation right, we shall not have a future. I hope that eventually we do get it right. My Lords, we must move in the right direction.

3.5 p.m.

Lord Lucas of Chilworth

My Lords, like a number of noble Lords, particularly those coming from an engineering background. I rather regret that we are spending a beautiful sunny afternoon in July in discussing such an important subject, because the importance of industry is in no doubt at all. Despite the hour and the number of contributors to our short debate this afternoon, its importance is in no way undermined. A number of speakers have mentioned the importance of industry as part of our economic stability and also its importance in other areas.

I remind your Lordships of the most interesting debate that we had only a few weeks ago which was initiated by the noble Earl, Lord Shannon, on the subject of Industry Year 1986. I should like to say again, as I said on that occasion, that we welcome the initiative of the Royal Society of Arts, supported by the CBI, the British Institute of Management and the TUC, among others, in making 1986 Industry Year. Again, I remind your Lordships that the object of that is to encourage a better understanding of industry, its essential role and its service to the community. The Goverment, and indeed your Lordships, gave this initiative unanimous support when we debated it in May.

We are committed to a healthy, vigorous and competitive manufacturing sector, but at the same time we have to recognise the integral role of the services in our economy. Government do not design a difference in importance between the manufacturing sector and the service. This is how the relationship between the two has effectively evolved in the changing domestic and world situation.

I would remind the noble Lord, Lord Dean of Beswick, that the employment figures in the service sector increased by 504,000 between March 1983 and December 1984. There are nearly 13½ million peple usefully and properly employed in that sector. Therefore it is important that we deploy all our resources in the service sector and in the manufacturing sector to the best effect. We have to recognise that the decline in the share of manufacturing in total output is a trend which has been evident for many years. Manufacturing output accounted for 40 per cent. of GDP in 1955 and for 25 per cent. in 1984. In employment terms, yes, I recognise what noble Lords have said, because the share of manufacturing has declined from 40 per cent. to 26 per cent. in those years.

However, this is not a development peculiar to the United Kingdom; it is common to many industrialised countries. What causes more concern is that there has been a very long-term decline in our manufacturing productivity relative to that of our competitors. One indication of that is the decline in our share of main manufacturing countries' exports from 20 per cent. in 1955 to 15 per cent. in 1963, to 9 per cent. in 1979 and to 8 per cent. today.

Underlying this decline were shortcomings in both price competitiveness and what have been collectively know as non-price factors—quality, design, reliability and delivery. And to the other symptoms of poor performance was added an absolute decline in manufacturing output of 4 per cent. Since then I think we would all agree that we have seen a remarkable improvement in major aspects of industrial performance, particularly in productivity and profitability.

In the years prior to 1979—I do not pick these to match the 10-years span of 1971 to 1981 of the noble Lord, Lord Dean—we thought the specific solution being offered to these ills was too often to prop up sick and ailing enterprises with an injection of taxpayers' money. Such injections become addictive—a convenient way, as drug addicts find, of avoiding the difficulties of a fiercely competitive world.

Regulation and intervention were seen as substitutes for enterprise and initiative. Not the minimum regulation necessary to ensure smooth working of the market, but regulation and intervention to insulate and protect producers from the signals which the market conveys. Such measures can succeed—and perhaps did—in the short term in protecting an enterprise and its workers from the consequence of change in demand and a failure to adapt. The difficulty is that, when the adjustment comes, it is even more painful than one envisages.

The failure of past measures has been all too apparent. The general solution added more to inflation than to performance and competitiveness. The specific solution contributed to a belief that reality could somehow be indefinitely avoided. If all else failed, the Government could be relied upon to find taxpayers' money in support. The willingness to take a risk had little place.

We do not believe in answers of this kind. We do not believe that industrial performance can be improved by restricting dividends, denigrating profits and preventing overseas investment. We do not believe that protection is the answer. Protection of industry too often means protecting industrial inefficiency. Nor do we believe that subsidy is an answer to managerial or market weakness. Subsidy itself breeds inefficiency, and its inevitable partner—taxation—stifles incentive and blunts the competitiveness of the successful enterprise.

Our overall solution to the problems caused by this long history of substandard performance has been to create a climate in which industry can compete and flourish, and to direct Government assistance towards helping industry to acquire the ability to compete, rather than insulating it from the effects of its failure to do so. A prime requirement in restoring competitiveness is the control of costs. It is therefore to help the recovery of manufacturing industry, as well as in the interests of the nation generally, that the Government are determined to continue the fight against inflation.

But industry itself has a responsibility. If inflation is to be held, if it is to be reduced further, wage settlements have to be lower. A second requirement is to reduce the burden of taxation on those who work and invest in industry. We are now well into the staged reductions of corporate tax announced in the 1984 Budget. Beginning next year the rate will reduce to 35 per cent. from a figure of 52 per cent. at that time. Rates of personal taxation are particularly relevant to those who work in and who finance small firms. We have, moreover, introduced specific measures to encourage the flow of capital to small firms, notably through the Business Expansion Scheme. I would also say, not in particular answer to the noble Lord, Lord Dean of Beswick, that we have brought a new spirit of enterprise to some of our largest industries through the return of firms in the public sector to the private sector, and those results are reported in the newspapers as the weeks go by.

The noble Lord, Lord Molloy, made some very interesting and wide-ranging comments on industry. He will forgive me if I say that interesting though I found his speech, I could not agree with much of it. I am sure that the noble Lord will understand because sometimes we approach these matters from a different viewpoint.

The noble Lord asked me particularly about burdens on industry. Specifically in this Administration we have abandoned price controls, factory building controls, dividend controls, hire purchase controls and foreign exchange controls. That is a fairly long list. I remind the House that those controls were in place in the late 1970s and not the late 1940s. As well as removing those burdens, we abolished the national insurance surcharge, which in its heyday amounted to a burden of some £3 billion on industry's costs. We are not going to stop there.

The Burdens on Business document published last March reported on the work of an inter-departmental study of regulatory burdens. My noble friend Lord Young of Graffham is leading further work within the Government to consider the options. His report is anticipated quite shortly.

The noble Lord, Lord Molloy, also spoke of—if I may encapsulate his remarks—the American example. My right honourable friend the Prime Minister has referred to the success of the American enterprise in the reduction of regulations and in ensuring freedom and encouragement for small businesses to establish themselves. However, I must give one word of warning to the noble Lord, Lord Molloy. Much as he may extol much of American industry, it is of some little disappointment to Her Majesty's Government that the Americans appear to be seeking the introduction of protectionist policies to sustain growth. I can only say that were they so to do, that would cause a great deal of damage not only to themselves but also to their trading partners across the world. Protectionism does not add to worldwide trade, upon which our economy, the American economy and the world's economy depends.

I turn now to some of the more specific measures that we are taking to encourage the development of our industrial base. I remind the House that a comprehensive range of support is available to industry. Much of that is administered by my own department, the Department of Trade and Industry. We have found a repackaging of assistance measures necessary, largely in response to complaints from industry that the schemes and services offered were so numerous that business people found it difficult to establish what help was worth having and where they could obtain it. I shall briefly but not exhaustively run over four main heads.

The first is business and technical advisory services, embracing a wide range of general advice, grants for consultancy work to improve works and processes, and grants towards feasibility studies of employing new technology. Another is support for innovation. Selective financial support is available for research and development, leading to new products and processes and for longer term applied research projects. Thirdly, there is support for investment. The general objective here is to improve competitiveness, to encourage the growth of employment and investment. The final category of DTI assistance that I want to underline this afternoon is the help and support given in the area of exports, but I shall not expand on that aspect.

The noble Lord, Lord Molloy, also said in his speech that he placed as a top priority further expenditure on training, particularly in engineering. He went on to say—as so many people do—that equally he wanted enough money spent on the arts and humanities. Each of us has our top priority. It is our job in Government to balance the priorities, and I think that we have perhaps got that balance about right.

The Question on the Order Paper this afternoon quite rightly refers not only to industry's equipment but to its labour force and to the need for training and retraining. The Government believe that it is essential to our economic survival that we have sufficient people with the skills to meet the demands of new technologies and to cope with continuing change. The Government's objectives in the training sphere were set out in the White Paper A New Training Initiative. I accept, as was suggested by the noble Lord, Lord Molloy, and the noble Viscount, Lord Hanworth, that training starts with the young. Their initial training should instil both the necessary skills and the flexibility to adapt to change. Let us not forget, when we are thinking of the young and introducing them to modern technology, that through the micros in school scheme we have an average of 10 micro computers in each secondary school, with many more in primary schools. We are ahead of all our major competitors in that area. I, too, have seen youngsters using these. I was giving prizes at a school recently and a class of four-and-a-half-year-olds were demonstrating to me what they can do with writing simple programmes and directing pieces of machinery across the classroom floor. That is very impressive. We lead in that respect.

I have always believed that traditional apprenticeships are costly and often hidebound by institutional obstacles, such as time-serving. We are emphasising the need to modernise that. The training and retraining of adults is equally vital—certainly something not recognised until a few years ago.

In using the expression "labour" I do not mean only operatives but professional staff such as engineers, of which we do have a shortage and where Britian has lagged behind countries such as France and Japan. We must retrain people into those engineering skills, which are in such high demand. Similarly, I believe the educational institutions have not always recognised training needs. Perhaps industry has not been able to explain to the educational institutions what it is they really want. Those two elements, which have been underlined this afternoon, have pointed to a widening gap between those in industry and those involved in the provision of education. Therefore, the Government have been concerned to improve the links between industry and those who provide for the training and retraining of its workforce. Through measures such as the teaching company scheme and through our increased funds to further and higher education, we have devoted our energies to this.

However, a key element to this strategy is its recognition that the prime responsibility for training must rest with employers because, at the end of the day, they are the direct beneficiaries. In balancing these demands on public expenditure the Government can only afford to fund a fraction of the needs. We have, of course, MSC's role as a catalyst and pump-primer in convincing employers of the importance of investing in training. It is an interesting fact that, of all those people applying for jobs who have recently undertaken retraining programmes, 58 per cent. sought and obtained employment, whereas two years ago only 51 per cent. were successful.

I can offer only the briefest outline of the support for industry which the Government provide. In the vital areas of research and development, innovation and technology transfer, we have doubled our expenditure on support in real terms and our policies here have produced an industry which is altogether fitter, as indeed is our manufacturing industry, more competitive, more efficient and more in tune with the needs of the market. We intend, and we will ensure, that there is a climate in which industry itself can continue to build on those strengths. It is a policy which is clearly working.

I say that on the strength of these few facts. Gross Domestic Product is at its highest-ever level. We are entering our fifth year of uninterrupted economic growth. In the first quarter of this year manufacturing output was 10 per cent. above the trough of early 1981, and in 1985 as a whole it is forecast to increase by 2½ per cent. Productivity growth in the United Kingdom's manufacturing industries has been among the highest in the major industrialised countries in recent years. In the three months to April this year it was over 29 per cent. up on the final quarter of 1980.

Profitability is improving. For non-North Sea industrial and commercial companies, the net real rate of return was around 7 per cent. in 1984, the highest since 1978. Business investment increased by 13 per cent. in 1984. Our current account was in surplus for the fifth year running in 1984. Exports of manufactured goods grew 10 per cent. by volume in that year. The number of people in employment has risen by over 600,000 since the spring of 1983. The CBI have reported a significant increase in business confidence since January. Their monthly trends in surveys of manufacturing are reporting the best results on total orders since the survey was introduced in 1977.

It is from evidence such as this that our policy draws its strength. Your Lordships will understand that I make no apologies. I am confident that the Government's present policies meet the three points that the noble Lord, Lord Molloy, put so interestingly in his Question this afternoon.

Viscount Hanworth

My Lords, before the noble Lord sits down, there is one point which worries me, though I did not interrupt him. He seemed to say (and I may have got it entirely wrong), that he equated the manufacturing and the service industries as equally important. I am not sure how he defines a service industry, but surely it is only the manufacturing industry which contributes to the health of the nation and the balance of payments. Surely on that ground it is wrong to equate them or consider them as equal.

Lord Lucas of Chilworth

My Lords, I did not seek to equate anything at all. What I sought to underline was the importance of the service industries, and there is no doubt that modern technology, the making of things, in fact may be assisted with such programmes as CADCAM. CADCAM needs servicing: telecommunications need servicing, need selling, need financing. These are the service industries. To an extent they go hand in hand. There is certainly no equating nor equalising. But when we talk of industry, as the Question does, I seek not to draw a blind across the importance of the service industries and their contribution to our economic strength.

House adjourned at half past three o'clock.