Economic Recovery: Co-operation with Industry

HL Deb 09 April 1986 vol 473 cc202-67

3.9 p.m.

Lord Bruce of Donington rose to call attention to the case for constructive co-operation between government and manufacturing industry to achieve economic recovery in the United Kingdom and the question of the relevance of the privatisation programme to this end, and to move for Papers.

The noble Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper. The debate this afternoon is essentially a continuation of the debate which took place in your Lordships' House on the Report of the Select Committee on Overseas Trade. It will be recalled by most of your Lordships who were present on that occasion that the great majority of speakers on either side spoke in varying degrees of support for the conclusions at which the Select Committee had arrived. I think there was general agreement on the importance of the British manufacturing industry and the necessity for it to expand greatly in order not merely to achieve a modest measure of national economic recovery but also to act as an insurance against that inevitable time—not so far away—when the oil supplies available to us from the North Sea begin to decline.

Your Lordships will also recall that the Government's attitude towards the report was, to put it mildly, somewhat ambivalent. The first and instinctive reaction of the Chancellor of the Exchequer to the report, which he ventured to inflict upon a dinner at the Mansion House, was to refer to it as: a mixture of special pleading dressed up as analysis and assertion masquerading as evidence. I thought that that was a little unkind to the members of the Select Committee, including in particular its distinguished chairman, the noble Lord, Lord Aldington. However, happily, more moderate counsels prevailed, and the Leader of the House in another place was quick to make amends on 28th October 1985 when he described the report of your Lordships' Select Committee as an important report produced by a distinguished group in another place. We in your Lordships' House should be grateful for small mercies.

Nevertheless, there has been a tendency in government circles—and I shall not weary the House with specific quotations because I think your Lordships know the observations very well—in particular by the Chancellor of the Exchequer, to suggest that there has been an over-emphasis of the importance of manufacturing industry. Indeed, when one of the members of your Lordships' Select Committee proceeded to emphasise the importance of manufacturing industries he almost went so far as accusing one noble Lord of being discourteous about and disparaging of workers in service industries.

There can be no doubt that manufacturing industry lies at the base of practically every other sector of the economy. The construction industry uses the end products of 100 or more different industries. They are used by the supply industries: gas, electricity and water. They are even used in the communications industry. They are used in distribution and in a whole variety of ways—and not the least by people.

From the general observations which have been made and the laudatory remarks and attitude of the Government to the communications industry, one would almost think that the country can subsist on a diet of computer print-outs, tapes, visual displays, documents of all kinds, credit notes, banknotes, share certificates, and all the rest, which are of course all the paraphernalia emanating from the City of London. My Lords, it is not so.

We in this country require the production of manufactured goods in order that a tolerably civilised level of existence, at whatever level of income, can be maintained. Indeed as evidence of that, as your Lordships well know, over the past three years we have imported into this country on average some £6 billion per annum more than we have exported, which shows that if the manufactured goods have not been available in the United Kingdom, they have been readily bought from abroad and are vitally necessary.

One of the drives and purposes of the Select Committee was to address itself to the redress of this balance of trade and payments in the products of manufacturing industry—indeed, that was its whole purpose and its whole drive. That commends itself as a matter of common sense.

How did it happen that for the first time in our history we had this colossal deficit in manufactured goods in terms of overseas trade? As from 1979 onwards it was due in part to a direct decline in manufacturing output in this country. One knows quite well that it is not always good to go back into history, but one has to learn some lessons.

One of the conclusions at which the Select Committee arrived—and certainly one conclusion which I put before your Lordships—is that that was directly due to the actions taken by the Government in 1979 in effecting a colossal rise in interest rates, in forcing the exchange rate up to a point where at one time in terms of the dollar it was 2.45; and, as the Select Committee's report pointed out, compared with other countries this meant an extra 50 per cent. increase in the relative unit labour costs of goods produced in the United Kingdom. In other words, while they were busy extolling the virtues of competition under the free markets and also continuing their propaganda about undue wage increases, at the same time they themselves put up unit labour costs in terms of exports to overseas countries. By a like token, they also subsidised imports into this country to a point where domestic manufacturing firms could not meet the competition from overseas, which was thus being subsidised.

There is an important lesson to be learnt there. The first point is that the importance of interest rates generally—and above all the importance of the exchange rate in its direct effect upon manufacturing industry—should be burned into the Government's mind. I am well aware that there are other factors concerning manufacturing industry in this country in terms of marketing, design, research and development, and all the rest that are contributing factors, and undoubtedly these have to be taken into account.

Viscount Trenchard

My Lords, before the noble Lord leaves the point about the exchange rate, will he attribute no part of the influence of the very strong period of the pound to the scare as regards the world shortage of oil and our coming on-stream in full degree as an oil producer?

Lord Bruce of Donington

My Lords, yes, that was undoubtedly a contributing factor; I certainly will give the noble Lord that. However, the dominant reason for the decline was, precisely as I have said, allied with the direct deflationary policy pursued by the Government in terms of their restrictions on expenditure, in terms of their restrictions on the public sector borrowing requirement, and in terms of the general deflationary policy pursued by them.

It is my case this afternoon, particularly in the light of the experiences in other countries—especially in France, Germany and Japan—that if the Government are to serve the interests of the nation as a whole as distinct from the interests of a particular class within the nation, they cannot stand aside from their duty to promote generally in the country policies that mean the greatest good for the greatest number. Therefore, they have to take into account the interests of the nation as a whole. The Government should abandon their "hands off industry" policy; they should abandon any concept that in the end free market forces by themselves are likely to produce the result that they desire. There is in any case a complete inconsistency in the broad general drift of the Government's policy, as they put it to the country, of free market forces.

Over a significant section of the economy, notably agriculture, there is no free market at all; there is massive subsidisation, either direct or through the EC, and competition does not apply. There again their policy is not to rescue lame ducks. But the inconsistency is that, while they are disinclined in any way to secure the future of the tin industry in Cornwall, the Bank of England, without hesitation or without even consultation with the Chancellor of the Exchequer, has no hesitation in putting £100 million into the rescue of Johnson Matthey. This is not consistent.

The Government on the one hand, for example, put forward trading schemes. The noble Lord, Lord Young of Graffham, speaking sincerely in the interests of training for the future of industry, puts forward a variety of training schemes. This is immediately contradicted by the denial of higher educational facilities to people at universities and in the polytechnics. There are contradictions the whole time.

As The Times put it the other day, one wonders whether the Government know where they are going. If the noble Lord will recall, The Times said yesterday that the Government seem to be thinking on their feet. Surely the mass of the people in the country know as a matter of common sense that there are considerable needs in this country which exist contemporaneously with large-scale unemployment. They know as a matter of common sense that the problem that has to be solved is to put the two together: to give people the tools to enable them to proceed with the job. Yet this appears to be completely outside the scope of the thinking of Her Majesty's Government.

Surely the time has come when they have to take a hard look at the whole position. They should consider whether they can any longer bumble on from day to day with switches of policy which, if they were not so amusing, would be tragic. Has not the time come for this Government, or any government, to address themselves to determining a policy for the future of manufacturing industry?

On the 16th June 1983, Mrs. Thatcher, on her return to become Prime Minister for the second time, in an act that I can only describe charitably as one of arrogance, abolished the Think Tank. Government Ministers, whether they be experienced in office or not, whatever their professional experience may be, must find it difficult to cover the whole economic spectrum of the country and to trace as an individual all the interrelationships that exist among the various sectors of the economy and the effect that an action in one is going to have upon the other. This is no disrespect to politicans who are concerned with broad issues of policy, but to deny themselves the services of a trained body which is there precisely to advise them on the logical consequences of what they propose to do and what the alternatives are, and to substitute for that an organisation that is doing little else but churning out party policy, must be an act of folly.

What is required is that the Government should reconstitute a Think Tank. They should be able to possess themselves of the nature of the whole spectrum of the country with which they are dealing. They should have a far more organised and close relationship with the National Economic Development Office, and should develop even more closely in consultation their contact with industry, with the various other sectors of industry and with the trade unions with a view to drawing up an outline plan for the recovery of British manufacturing industry.

Planning, I know, sends a shudder down the spines of members of the Government. They do not believe in it. They do not believe in planning at all. They do not remember the degree of planning that had to take place under wartime conditions which was necessary not merely for our survival but for our victory, when millions of people were serving in the forces; and what planning had to be done in order to ensure their resettlement in industry on demobilisation after the war. Proper planning in collaboration with all sections of industry was necessary to achieve that, and it was done. This is the kind of operation that in this time of emergency is needed. Believe me, this is a time of emergency, and not only within the international debt scene but in view of the imminence of the decline of the oil resources of our country. It is time for urgent action to be taken.

I know perfectly well that had the noble Lord, Lord Young of Graffham, been here—and I much regret his absence, although I welcome the presence of his noble friend who is to reply—he would have provided us with figures going back to 1981 (they are always selected going back to 1981) showing us just what progress had been made since that time. One has to remind him occasionally of the 1979 figures in order that he does not fly right up in the air and get carried away by the exuberance of his emotions on the subject.

What we have to do is to plan, and the planning has to be done now. It will take at least 18 months to plan. But the objective is not merely the recovery of a certain section of industry. I have figures here to which I referred as long as seven years ago, when I had the good fortune to be in debate with the noble Viscount, Lord Trenchard. I pointed out to him that over 50 per cent. of the leading companies in Europe, as disclosed in the sixth report on competition by the EC Commission, were British companies. He ventured to suggest at that time that many of them must have been multinational.

It is true that last year, of the 500 leading and most powerful companies in Europe in terms of capital employed and profitability, no less than 219 were United Kingdom companies. In the case of the top 200, 99 of those places were occupied by United Kingdom companies. Therefore I can give to the noble Lord without further ado his case: the British companies have been prospering, but at the same time unemployment has been rising and the rich have been getting richer and the poor getting poorer.

We on these Benches want to lay down clearly that when we talk of economic recovery we talk not in purely sectional terms, because there are only 2.7 million adult shareholders in the country directly affected by the profitability of their companies out of a total adult population of 42 million. We talk in terms of policies designed to secure full employment. Full employment of our resources aside from fictional unemployment at a figure of something below 3 per cent. is the aim to which this country should now be dedicated.

We should not accept as inevitable that, with the rise in the fortunes of the large companies and some small ones, accompanied by a rise in unemployment, this should somehow be called recovery. It is nothing of the kind. Recovery will in our terms occur only when our people are in gainful employment and when, by investment, if necessary, by the Government where private enterprise or private finance fails to invest, the factors of production can be put together in terms of plant and equipment, on the one hand, and of the employment of human labour, on the other. That is what we mean by recovery. It is only by the active co-operation of the Government with all parties in industry that that can be accomplished.

As part of the contribution to the recovery of manufacturing industry, there also has to be a different climate of opinion, not only within the country as a whole but within manufacturing firms themselves. Other countries to a large extent have accomplished their success by securing a co-operative attitude between the operatives, on the one hand, and the management and capital, on the other. The examples are MITI in Japan and the Commissariat Génèrale du Plan in France; similar institutions exist in Germany and elsewhere, where the workers have a statutory right to be consulted on matters of policy so that there is a far more co-operative attitude on the floor.

On these Benches we seek a unity of purpose. We are determined that this shall be achieved. We know as a matter of experience that our success in war rested upon that unity, and we call upon the Government to change course before it is too late to enlist the efforts of the whole nation behind the purpose of full employment and recovery which the nation can accept and endorse with enthusiasm. My Lords, I beg to move for Papers.

3.33 p.m.

Lord Brabazon of Tara

My Lords, the noble Lord, Lord Bruce of Donington, has mentioned three key words in his Motion: "recovery", "co-operation" and "privatisation". I propose to deal with all three.

Listening to the noble Lord's speech one might suppose that constructive co-operation between government and maunfacturing industry has not existed up to now; and that a sustained recovery from the deepest world recession since the Second World War had not been in progress in this country for the last five years. If noble Lords seek to maintain these positions, they will find them untenable. Even our opponents cannot dispute the momentum of the privatisation programme; and given the performance of those undertakings which have been privatised, I suspect they may find that it is only in principle that they can object.

It should not be necessary for me to dwell for long on the economic recovery. But if others continue to ignore it, or wish it away, we must go on emphasising it. Our national economic performance in the five years since the world recession has been impressive by any standards. Our national output—real gross domestic product—has grown over that period at an annual rate of around 3 per cent., with inflation below 6 per cent. Manufacturing output has shared in that growth. Growth in manufacturing productivity in the UK has been among the highest in major industrialised countries, with productivity up over 33 per cent. on its late 1980 level.

Profitability in manufacturing industry in 1984, measured by the net real rate of return, was at its highest since 1973, and the volume of exports in 1985 reached record levels. Indeed, recent CBI surveys of manufacturing industry indicate the increase in output will continue and longer term forecasts are for continuing growth for at least the next two years.

We in Government have been saying for some time that the economy is now more robust and resilient. This has now been dramatically confirmed on two occasions. The first was the success with which our industry weathered a prolonged miners' strike; and now we have experienced the much wider upheaval of the rapid fall in oil prices—wider because its effects are not concentrated within our shores, but extend in greater or lesser degree to all with whom we trade. This sudden change, and the calm and businesslike reaction to it both in industrialists and financial markets, puts in perspective the rather melodramatic forebodings expressed in your Lordships' House and elsewhere about the fate of the economy when the oil runs out. Of course, a fall in the price of oil is not the same as a decline in production. The former has a number of positive aspects: it stimulates economic growth and reduces inflationary pressures throughout the oil consuming economies; it improves the market environment for our exports to the greater majority of countries; and it contributes to adjustments in the exchange rate which many in industry have for a long time claimed to be necessary if they were to survive and prosper.

Nevertheless, the effect of the fall in the price of oil is to reduce our earnings from oil exports by a half or more, almost at a stroke. The way the economy is adjusting to this gives reason for confidence that it will also be capable of adjusting to the loss of the remaining oil income over many years. Recent events in the oil market have also given yet another demonstration of the difficulty, for governments or anyone else, of forecasting the timing and extent of economic change, and confirmed, if confirmation were needed, that the right policy for government is one which encourages industry to maintain the flexibility to respond effectively to change.

The Government can help to create the conditions in which industry can flourish, but only industry itself can take advantage of the resulting opportunities. The Government are aware of the emphasis placed by our industry on the need for lower exchange rates and lower interest rates. Neither is entirely in the gift of the Government. But exchange rates at least have moved in the direction industry hoped, and the latest movement in interest rates, too, has been downward, with base rates now having fallen 1½ per cent. since the Budget.

The biggest obstacle now to an improvement in our competitiveness and a further substantial fall in interest rates is excessive increases in pay. The CBI has estimated that 1 per cent. on pay costs industry £1 billion a year, while 1 per cent. on interest rates, even if maintained for a whole year, costs industry only £250 million. Pay negotiation is a matter for industry itself. The level agreed should be no more than a company can afford and is sufficient to recruit, retain and motivate employees. The whole of productivity gains should not be spent on higher pay increases but spread throughout the economy so that ultimately they result in increased employment.

The Government believe that the rigidity of the pay system has contributed significantly to the distressingly high level of unemployment, and that if a significant proportion of pay in industry were linked to the level of profits, the level of employment could benefit in the longer term. In his Budget speech my right honourable friend the Chancellor announced the Government's intention to hold preliminary discussions with employers and others about the feasibility of temporary tax relief for participants in profit sharing schemes of this sort. Depending on how these talks go, the Government have it in mind to issue a consultation document.

The noble Lord's Motion calls attention also to the case for constructive co-operation. This Government have a strategy for industry. It consists, as I have said, in doing all that we can to provide the right climate, and leaving industry to get on with its job with the minimum of interference. But an absence of intervention does not mean the absence of co-operation. Co-operation continues at a whole range of levels, and our recognition that the private sector must play its proper role in the economy makes for more effective co-operation. Co-operation for the private sector becomes a practical question of working together with government as equals, each in its proper sphere, rather than of risking enclosure by the extending tentacles of bureaucracy or offering hospitality to some Trojan horse of public enterprise. People find it much easier to co-operate when they are not under threat. I would suggest that for that reason industry can co-operate with greater peace of mind with a government who work with the grain of the market, rather than seeking to control it, whether through expanding public ownership or constant encroachment on the freedom of industry's managers to manage.

Let me turn now to the reality of co-operation. At one extreme we have the countless day-to-day working-level contacts between people in industry and those in government departments whose job it is not only to regulate but to provide advice, help and information. All too often co-operation between government and industry is seen as consisting of meetings between Ministers and the leaders of industry or the regular coming together of government, management, and unions through the National Economic Development Council. Such meetings are valuable for the opportunity they provide to discuss major difficulties and, in the case of the NEDC, to consider and exchange views on longer term strategy. But, inevitably, they make the most news when there are strong disagreements. The steady constructive co-operation which the noble Lord, Lord Bruce, rightly values is unfortunately not news.

Government and industry are constantly exchanging information. I say "exchanging" advisedly, because the traffic is not one way. The Government themselves rely on industry to provide a whole range of statistical information which is essential to monitoring the performance of the economy and to the formation of policy. Much of that information is also used by industry itself, and there is a balance to be struck between the needs of industry and government for information, and the costs to industry and government of providing, collecting and analysing it.

This Government's idea of co-operation with industry does not consist of intervention to support enterprises for which the market either no longer sees a need or sees only a sharply reduced need. But there are, nonetheless, many areas in which the Government are able to act in partnership with industry.

A most topical example is Industry Year, which is being administered by the Royal Society of Arts, Manufacturers and Commerce but with the financial and moral support of the Government. What better means of encouraging future co-operation between industry and government than ensuring that the role of industry is more widely appreciated, particularly among the young people from whom our future industrialists and our future civil servants and local government officials will be drawn?

Links between industry and education are a major theme of Industry Year, and I should like to point out the extent to which we are working with industry to ensure that the skilled manpower which industry needs is available. For example, the Government have contributed £43 million to the Engineering and Technology Programme to fund 5,000 extra places in higher education in subjects needed by industry; industry has given half as much again, £24 million; and there has been other help such as course design which has not been costed. Since coming to power, the Government have almost doubled in real terms their expenditure on training.

Then there is the wide range of support schemes that the Government provide, many of them designed to help industry develop the technology, expertise and equipment to compete effectively in the future. We believe that the way forward here is to help firms to develop the strength to sustain themselves in the future rather than to offer subventions to sustain production patterns of the past in the markets of the future.

All these measures show that, while we are determined to avoid usurping industry's role as manager of its own affairs, we keep in very close touch with industry's needs, and, where there is a proper role for the Government in strengthening industry's ability to compete, we make help available not through subsidising its prices or financing its deficits but by specific help to build self-sustaining competitive strength for the future. But the funds for such help must come from somewhere, and we do not believe in discriminating against success, whether personal or corporate, through heavy taxation. For that reason the cost-effectiveness of such schemes is, and will continue to be, carefully monitored.

The Motion questions whether privatisation is relevant to economic recovery, although I do not think the noble Lord, Lord Bruce of Donington, even mentioned the privatisation programme. I firmly believe that it is, and it is very important. To sustain and build upon industry's improved performance requires a flexible, responsive economy where there is less state interference, where market forces are allowed to work and where there are incentives to, and rewards for, success. Privatisation helps directly to create such an economy, and it is succeeding.

This House has debated privatisation before and, indeed, will do so again tomorrow. I will therefore endeavour not to weary your Lordships with more of the same. Indeed, I doubt that however many times we debated this subject I could find much common ground with the noble Lord, Lord Bruce of Donington. But there does seem to be a misunderstanding of the reasons for privatisation. The reasons are not mainly financial, although of course we welcome the contributions which privatisation brings to the Exchequer. Nor do we act out of prejudice against the public sector. We are privatising because we believe it benefits the national economy, not just in the short term but in the long term as well, and it is this long term health of the economy that is vital for our future prosperity. These benefits come from the improvement in efficiency, competitiveness and service brought about by the stimulus of market forces. Equally important, though less tangible, are the changes of attitudes and perceptions that privatisation has brought about.

The performance of the companies so far privatised illustrates some of these benefits. They have proved their ability to compete in tough, highly competitive markets at home and overseas and are pursuing vigorously new opportunities for growth. For instance, to take Jaguar—and the House will not need reminding of the highly competitive nature of the motor industry world-wide—its profits increased by 33 per cent. in 1985, output is at a record level and it has taken on more employees. British Aerospace's profits increased by 25 per cent. in 1985, and its outstanding orders were worth over £300 million more at the end of 1985 than 1984, and this does not include orders resulting from the Memorandum of Understanding signed in 1985 between the Government of Saudi Arabia and the UK—the largest British Aerospace have ever had. Since privatisation, Cable and Wireless has trebled its turnover and quadrupled its profits; Amersham International has also increased its profits fourfold, and the National Freight Corporation, which is over 80 per cent. employee-owned, has increased its profits sevenfold over those in the last year before it was privatised.

These companies are all competing, either at home or abroad, with established rivals. In short, a competitive market place already existed. This is not the case, of course, for monopolies, which formed and still form a large part of the state sector, yet we firmly believe that privatisation here also can bring benefits to the national economy. The nature of some of these monopolies makes it impracticable to break them up, although we certainly do not overlook opportunities for competition. But, provided that there is effective regulation to protect consumers against possible abuse of this monopoly power, it is entirely proper that these industries also should have the opportunity to enter new markets and expand free of the shackles of the public sector, and the opportunity to use private sector finance to assist this expansion and be exposed to the stimulus and discipline of shareholder pressure. As with other privatisations, we believe that these influences will bring about improvements in efficiency, performance and services to the benefit of the whole economy.

Our privatisation programme has of course played a major part in stimulating wider share ownership. I think that many noble Lords in all parts of your Lordships' House believe that wider share ownership—by the public at large and by employees—is desirable. Why? We often hear that part of the reason for this country's relatively poor performance in recent years is a lack of understanding of business and the process of wealth creation and a similar lack of positive attitudes towards industry.

Share ownership has an important part to play. To have a direct personal stake in British business and industry provides a significant incentive to take an interest in the performance of the particular company or companies concerned. For employees to take a stake in the company they work for helps them strengthen the link between their performance and the company's success. It also helps to break down the old demarcation between capital and labour, which is not conducive to a joint effort towards improved performance. In both areas the privatisation programme has made significant strides. Privatisation, together with the Government's measures to promote employee share schemes, has substantially increased the number of people directly owning shares. The BT sale was a major contributor. Over two million people received shares and the large majority—around 1.6 million—still hold them. Over 80 per cent of employees in privatised companies have bought shares in their companies, giving them a real stake in their companies' success.

The topics which the noble Lord, Lord Bruce, has raised in debate today are not unfamiliar to your Lordships' House, but they are nonetheless of great importance to our economic future. I hope that I have demonstrated that economic recovery has taken place and is continuing, that co-operation of a practical and constructive kind between Government and industry as a whole is flourishing, but in a way which leaves industry free to pursue its own goals, and that privatisation has already made, and will continue to make, a substantial and direct contribution to this country's performance.

3.51 p.m.

Viscount Chandos

My Lords, in the short time that I have spent in your Lordships' House I have always enjoyed hearing the noble Lord, Lord Bruce of Donington, and from time to time speaking in the same debate as him, sometimes in agreement and sometimes not. It is therefore particularly pleasing to be able to speak on the Motion proposed by him today for which your Lordships' House should be grateful. I should like to pay tribute to the skilful wording of the Motion by the noble Lord which pinpoints with great accuracy one of the central issues of current political debate.

Students and commentators of post-war political history often identify the decision by the Labour Party 25 years ago not to modify its commitment under Clause 2 of its constitution to bring about the common ownership of the means of production with the subsequent long, slow diminution of the party's broad, popular support. The change in approach by the SPD in Germany in contrast, at the same time, has now left it still the dominant left-of-centre party, even under a fully proportional electoral system, and the German economy consistently the locomotive of European growth and one of the world's economic success stories.

At the same time the German economic miracle, and for that matter that of Japan, is often cited conversely by the proponents of the free market economy as irrefutable evidence to justify the pursuit of policies which minimise the role and intervention of government in the economic and industrial activities of the country. International comparisons of this sort should, however, be made only with great caution. Drawing conclusions about the correct role of the British Government in the management of the country's economic and industrial affairs from a simple analysis of the approach of the governments in other countries with wholly different social, industrial and financial backgrounds can lead to significant missed opportunities and damage to economic growth and industrial success.

In both Germany and Japan the interrelationship between companies, and for that matter between companies and financial institutions, is fundamentally different from that which exists in the United Kingdom (or in the United States) and it is quite wrong to think that a German or Japanese system can be replicated with the same degree of apparent government intervention or non-intervention, while ignoring this inherently different industrial and financial structure. The German and the Japanese financial markets are still predominantly geared to the service of local and national business and do not have the same positions as international centres as London, New York or Zurich. That is not to say that London's role as an international financial centre should be discouraged, for, indeed, if properly applied, the capabilities developed through having such a position can benefit the rest of the country's business community as well as being a source of employment and overseas earnings. The London financial community must not lose sight of its vital role in financing and assisting the country's industry in its desire and pursuit to maintain, let alone increase, its share of the world's financial services market. But all the while the Government must appreciate that the private sectors in Japan and Germany for historical, cultural and other reasons perform their functions in a different way and feel different responsibilities from that of the United Kingdom or the United States.

The United States has in itself completely different attitudes towards business from that which applies in the United Kingdom and there are equally strong reasons for not thinking that the strength of the US economy, with all its natural advantages of size and established markets in addition to the cultural and historical factors, can be easily or quickly replicated in the United Kingdom through the imitation of the apparently non-interventionist role of the United States Government—even if the appearance did in fact represent the reality.

What is clear from the last 25 years, and if I may say so from the speech of the noble Lord, Lord Bruce, is that a conventional application of corporatist government intervention through nationalisation and the rigid maintenance of centralised government ownership is not the way to achieve an internationally successful high growth economy. Equally, I do not believe that all of your Lordships, let alone the rest of the country, are convinced by the Government's record of the last seven years, or if I may say so by the speech of the noble Lord, Lord Brabazon of Tara, that a determined assault on public ownership for its own sake and an almost unwavering adherence to the free market solution is enough to allow our economic growth even to match those of our major industrial competitors, let alone make up the lost ground of the last decades. The patchy growth in business confidence, the instances of individual success are clearly to be welcomed, as is the beginning of a change in the attitude towards business enterprise and entrepreneurial success; but there is a logical gap in saying that these changes cannot take place and cannot be accelerated without a blanket withdrawal of the Government from direct participation in the manufacturing economy.

The Government have an inescapable role in the commercial and financial markets of the country as a buyer of goods, an employer of people, a supplier of services and as a borrower of funds. It is quite illogical to draw a line arbitrarily between the Government's role in these instances and their potential role as a provider of funds, as an owner of business or as an investor in projects. If the Government have to make constant commercial decisions concerning the purchase of goods or services, for instance, it cannot be argued that there are no instances in which their judgment can be good enough to justify investment being made, or maintained, on as good a basis as can be achieved by the private sector. There is plenty of evidence, of course, that the Government's record at making decisions in terms of purchasing goods or services is pretty poor and there are areas in which clearly the private sector can helpfully play a greater role in making those choices instead. But realistically the Government will never be able to remove all need for commercial decision making from themselves, so that there must be determined attempts to improve it in those areas where it cannot be subcontracted. In accepting that, therefore, there is no reason to close the door absolutely on the Government also playing other roles in the markets.

The use of government purchasing in the United States is, of course, a critical, disguised form of what might be termed government intervention by the purest of free market economists, but the strength of the American economy is based on that as well as on its inherent size of market. Japan and Germany also maintain strongly directed government purchasing programmes. Both on a national and on a European basis commonsense alone dictates that we use our public sector purchasing power more effectively, remembering that decision making of the highest quality and incisiveness is required to make this effective. The disaster of Nimrod should not blind us to the essential stimulation and support that government purchasing gives to the industry of every major industrial competitor that we have.

The Government have set out to establish an environment conducive to enterprise, entrepreneurial activity and the promotion of producers in contrast to non-producers; although that last distinction is not easy to make, since in the most profitable of firms there are always people in back-office roles without whom the producers would be unable to generate the business and the profits. In the same way there are people in roles which are not directly productive, say, in the public sector, without which the private sector would be totally at sea. But in general we should not dispute the objectives that have been set, nor ignore the progress that has been made.

What else does industry need from the Government apart from this change of attitude? Stability is the cry of every industrialist, and the Government themselves, in aiming to leave business free from unnecessary constraint or intervention, acknowledge precisely that. Yet, as the noble Lord, Lord Bruce, said, the pursuit of intermediate financial targets for much of the last seven years has been significantly and seriously damaging for industry through excessively fluctuating exchange rates and unacceptably high real interest rates for prolonged periods. The reduction in inflation, of course, is an addition to stability which is important but not so uniquely important that the other instability can be automatically justified, particularly in the light of growing evidence that many of the targets pursued in the past were irrelevant to the achievement of even that one priority objective.

Stability, too, is necessary in other areas affecting industry's operations, such as taxation, industrial relations, planning, regional grants and subsidies. Damaging barriers and constraints have been removed, and so long as we do not forget the valid interests of other sectors of the community, such as the environment, we should see this as another area of increasing co-operation between government and industry.

In terms of industrial relations, however, there is now a widespread and worrying concern that another form of instability—the swinging of the pendulum too far—has occurred regarding the maintenance of a fair balance between the interests of the employer and the employee. I would join with the chairman of ICI, Sir John Harvey-Jones in feeling that, whatever the historical failures of the Fleet Street unions, the approach taken by News International and the unevenness of the law's current position in the long run are storing up problems for industry as a whole which are just as severe as those created by the supine approach of Fleet Street managements in previous times.

In trying to create the entrepreneurial atmosphere, as the Government are, it is essential that the expectations raised in this way can be satisfied as well as possible. For this reason the adoption of a clear tax-based encouragement for widespread profit-sharing is important, as is its potentially vital role in allowing significant economic growth without an uncontrollable explosion of wage inflation. Those of us on these Benches may feel that a prophet is not without honour (or a profit not without sharing) except in his own land; but we can only console ourselves that the adoption of Alliance (and, before that, Liberal) policy of such long standing is the sincerest form of flattery.

In case your Lordships should think that an inexplicable case of mellowness has overcome me, there is sadly an area of government intervention within industry where no kind words can conceivably be found. Sir John Harvey-Jones, in his Dimbleby Lecture—a forum which I am sure all your Lordships agree has a distinguished record for forecasting important and far-reaching political and social change—laid painfully bare the crisis in higher and further education, in the sciences and engineering in particular, and the devastating consequences that this is having and, far worse still, will have on British manufacturing industry. There is no area of co-operation between government and manufacturing industry which is more important, nor, tragically, more badly neglected. The latest reported cuts in further education, in the polytechnics particularly, represent an intolerable future handicap on future British industry. These cuts and those others in the past seven years must be replaced, not necessarily in exactly the same areas of education but rather in those which are most suited to, and important for, the future industrial and social life of the country.

The noble Lord, Lord Bruce, introduced (in the title of his debate, anyway) the question of the relevance of the Government's privatisation programme to the achievement of economic recovery; but beyond what I have said earlier I do not intend to spend much time on this question. I have argued that there is no logical foundation for the Government's hasty and undignified withdrawal from the ownership of any industrial manufacturing group, whether it be complete or partial ownership. I suspect that I shall not be the only speaker this afternoon to remind the Government once more of the damage done to British Leyland by the opening, closing, reopening and—who knows?—reclosing of negotiations to sell the various key subsidiaries of the group.

The commercial justification of finding a partner for at least Leyland Trucks was not paralleled by any similar justification for the sale of Austin Rover to the Ford Motor Company, as the board of BL (or certain key members of it) have subsequently confirmed. The decision to enter negotiations over the sale of Austin Rover was based fundamentally on the Government's view that public ownership is inherently and unquestionably bad. In the event, their shallow motives were exposed while, more damagingly, a possibly commercially correct approach to Leyland Trucks, if not to Land Rover, has been jeopardised.

I shall not, however, spend much time on privatisation, precisely because it is irrelevant. It is, moreover, an increasingly threadbare policy (in the eyes of the country) on which to base industrial regeneration. Some instances of privatisation have arguably been successful: the National Freight Corporation certainly; British Aerospace and Cable and Wireless perhaps. Conversely, I have suggested to your Lordships before that the merger of the constituent parts of British Aerospace under public ownership clearly, though maybe accidentally, created a stronger aerospace industry than would otherwise have existed. The privatisation of British Telecom, however, and the prospective sale of British Gas and of the major water authorities cannot easily be justified in competition terms; nor, for that matter, in terms of freedom for financing or motivation of employees. As has been argued elsewhere, neither a public offer nor a placing with financial institutions is necessary to allow a company's employees to participate in the profits of their own company, either through profit sharing or through share ownership.

The process of privatisation has become an obsession for this Government and a damaging one, which has distracted attention from vital areas of cooperation such as education, training and export assistance. I therefore call on the Government to cease the privatisation programme and instead increase their commitment to the areas of co-operation with industry that I have mentioned.

4.8 p.m.

Lord Aldington

My Lords, I, too, should like to begin by expressing my thanks to the noble Lord, Lord Bruce, for introducing this Motion today. We are enabled to spend what I might call a contemplative afternoon on a few of the many important factors affecting the future of British manufacturing industry which are now being widely debated in the country as a whole, following the publication of your Lordships' Select Committee report last October.

That report came in for a little criticism, as the noble Lord reminded us; but it was a notable event that the Chancellor of the Exchequer included in his Budget speech a quotation from the report. However, notable as that was, it seems to me rather a pity that he chose to quote only part of a sentence in the report and to omit the first part of it, which began with the word "Unless".

The noble Lord, Lord Bruce, made a less combative speech than usual, and on that I congratulate him because I think that it is helpful to avoid splitting the House on party political lines on this subject when so much of what we are talking about is national.

However, he said two things upon which I think that I must come to the defence of the Government. When referring to the origin of the deficit on the balance of trade in manufacturing goods he put the sole cause down to the exchange rate and other policies in 979, 1980 and 1981. That is not what your Lordships' committee did. The committee pointed to the long-term cause—the steady deterioration in competitiveness over the whole of this century. It said that the trend so established was accelerated by what happened during the years 1979 and 1980. With regard to monetary and anti-inflation policies, the committee deliberately stated that that policy, was thought good for other reasons although it had a damaging effect upon manufacturing industry.

The second point upon which I think, with great respect to the noble Lord, he went a little beyond the facts was when he referred to what he called the propaganda about wages. The Select Committee dealt with the wages point (the pay increases point) in paragraph 137 of the report. The committee dealt with it at a little length; it dealt with it seriously and with full agreement. The committee was in no doubt at all that one of the reasons, and possibly the principal reason, for our lack of price competitiveness was our tendency to increase wages more than productivity, and therefore more than the competitiveness of a product allowed. That point was made clear.

I should like to pay tribute to the thoughtful speech of my noble friend Lord Brabazon. I have not had the privilege of hearing him speak on this subject before. I agree with much of what he said, but I dare to suggest to your Lordships that he was a little rosy-eyed about the present position both of our economy and of manufacturing industry. Of course there have been improvements, and I shall come to those.

Here he is following the Chancellor of the Exchequer and I think both are a little rosy-eyed—over-optimistic—to suggest that by April 1986 we can firmly say that the economy has adjusted very quickly to the results of the fall in oil prices. How can we conceivably say that when there is no statistic available at all? The trade and navigation accounts show an enormous oil surplus for the first month of the year, and some adjustment in the second. They show no signs of any increase in exports of manufactured goods and no sign of a reduction in imports. I hope that my noble friend is right, but I have to say to him that neither he nor the Chancellor, in my opinion, have any justification for saying that within 25 weeks we have adjusted to the fall in the oil prices and that therefore we need not worry about our ability to adjust over 25 years. I hope that is right, but there is absolutely no evidence known to me to justify that statement.

I always enjoy listening to the thoughtful speeches of the noble Viscount, Lord Chandos. I always agree with large parts of what he says and I always disagree with small parts. I join with him in his tribute to Sir John Harvey-Jones whose performance on the "box" in the Dimbleby lecture was remarkable and a great contribution to the debate on this subject in the country.

Now I return to the Motion. We are asked to look at the case for constructive co-operation between government and manufacturing industry to achieve economic recovery. There has of course been economic recovery, as my noble friend has reminded the House. I agree that we need to achieve further and faster recovery. The Motion also asks us to consider the relevance of the privatisation programme. As my noble friend said, the noble Lord did not waste time on that point.

I think that both the privatisation programme and co-operation between government and manufacturing industry, including financial institutions—and I agree with other noble Lords that they are of great importance—are of great importance to the advancement, efficiency and output of manufacturing industry.

I am in favour of that, but I have to say that neither will achieve results unless there is a national industrial strategy. I am not talking here about a national plan or dirigisme. I am talking about a national industrial strategy. That is the question upon which I wish to concentrate for the rest of my speech.

The debate on that subject started really after my right honourable friend Mr Michael Heseltine began stating his strongly held views. I find myself in agreement with him in calling for an industrial strategy, backed by machinery within government, to co-ordinate and maintain it. Sir Charles Villiers made a similar proposal, as my noble friend and other members of the committee will remember.

All governments have an industrial policy. The Chancellor stated to us his general philosophy that it is industry's job to make itself competitive; it is the Government's job to provide an overall climate. I guess that the Secretary of State for Trade and Industry would go a bit further than wanting merely the overall climate because, as we have been reminded this afternoon, there are, and have long been, many activities in his department and others which specifically encourage exports, innovation, research and development and other things. I have no quarrel at all with what my noble friend said to us about that this afternoon.

I am glad that my noble friend mentioned what is being done by the Government to support Industry Year. That is well set out by my right honourable friend Mr. Paul Channon in an article in the House Magazine. I do not know whether your Lordships read it, but it has some interesting articles. He set out all the things that the Government are doing to back the Industry Year Campaign. All have the declared aim of securing a better understanding of the importance of manufacturing industry. I welcome that very much; but where is the strategy and what do we mean by an industrial strategy?

If one follows the strict words of the Chancellor's philosophy, the Government's only strategy would seem to be to leave things to market forces, but market forces are apt to force rather a short-term outlook, and from my study of history and my own experience they have never proven themselves, unaided, to be the quick source of recovery and expansion of a manufacturing base. In fact, the Government are not content to abdicate all responsibility to market forces. How could they when other governments interfere very much in the market place and have become part of the market forces? In their reply to the Select Committee the Government said that they: accept the importance of continuity and consistency in industrial policy. In his evidence to the Select Committee, Sir Hector Laing wrote to us. I shall quote him because Sir Hector is certainly not, in the parlance of the day, what the Government call a "wet". He said: the present Government has in effect made a virtue of not having a vision of the future of British industry, and a positive policy of distancing the State from the industrial sector. I think the Government should acknowledge that the nation does have an industrial problem in which it has a serious policy interest. A clear indication that the Government is ready to give a strong lead by, for example, launching an industrial priorities exercise, could prove very effective". More recently, Sir Trevor Holdsworth, the chairman of GKN, has written an article in the journal Catalyst published by Macmillan, which I commend to your Lordships. The first words of that article are these: There is at present a reluctance by Government to embrace the concept of an industrial strategy. Other developed countries have done so, and their better economic performance is evidence of its effectiveness. How much more do we need one in Britain". A little later on he adds: it is only in Britain that there is a pretence that Government has no such policy—and that even mentioning the word signifies 'corporatism' and 'wetness'. I have to plead guilty to the terrible charge of "wetness" in this respect, but I think I am joined by quite a lot of your Lordships.

What did we say? At paragraph 145 of our report the committee said: The Committee are convinced both from their study of competitor economies and from the evidence that they have assembled from the many witnesses that Government in Britain should take the initiative in formulating a national industrial policy which makes for faster growth in manufacturing. That is what we said all together.

The CBI made an interesting comment. In their reply to my request for comments after we published the report they said in comment No. 16: The report has been criticised in some quarters as being too interventionist in its approach. This criticism mainly relates to the call for an overall national strategy. But the development of a comprehensive overview of the national economic interest is not synonymous with intervention or 'dirigisme'. Its purpose should be to guide and consolidate government action and to provide a credible basis for private sector planning without attempting to direct it". I respectfully agree.

Here I should like to say that I agreed very much with the noble Viscount who preceded me in his warning that we should not take lock, stock and barrel a particular form of strategy, planning and so on from Japan, Germany, France or anywhere else, without studying the difference of structure; of course we should not.

What should be the content of that strategy? That seems to me a matter for a discussion that I should like to see in this House and everywhere. But we shall not secure agreement on it until we are really agreed about the part which manufacture and the creation of wealth plays in our economy today and for the future, as it plays in the economies of all the developed nations of the world.

Nor shall we achieve the right objectives unless Ministers, all politicians and officials have a full understanding of the circumstances of manufacturing in the modern world—not just at home—the potentialities, the importance of what is and the practicalities of what can be. We have, too, to be agreed among ourselves on the capabilities of our own countrymen when properly directed and educated, and to have confidence that we can in the appropriate areas do as well as any other country, whether the United States, Germany, France, Japan or anywhere else.

I did not detect that confidence in some of the discussion on British Leyland. A former Secretary of State for Trade and Industry in a statement recently implied that patriotism is a dangerous guide in decisions about the future of the one large truck manufacturer which is British owned. I think that a display of lack of confidence in the power of British ownership and direction would be a more dangerous guide and I hope that that point will be borne in mind.

Then we have to be agreed about the role of our European connection in the development of our manufacturing base. But in thinking about that it should never be forgotten that the purpose of that European partnership is to lead to greater global competitiveness, just as that must be a principal aim in British industrial strategy.

I could talk at much length on how the strategy should be formulated, how the strategy should be supervised and maintained. I have some agreement with Mr. Michael Heseltine, again, on the point he made—that it is time for a powerful arm to be created inside Government on industrial policy to counter the otherwise dominant Treasury. I said I thought that my noble friend was a little too rosy-hued in some of the things he said. I do not think that all is well. All is better than it was; of that I have no doubt. Most certainly is it better in inflation, in the climate of enterprise, in the start of a change in educational attitudes—and there is one—in the removal of burdensome regulations and yes, too, in the appreciation of the market place's demands. But all is not as good as it is with our overseas competitors.

It is a fine thing that our productivity has improved in the last few years, but in relation to our overseas competitors we are not as productive as we were in 1973, because they have been improving their productivity and go on doing so from a higher base. Percentage figures, which the Chancellor gave the other day, without remembering that they come from different bases, might mislead your Lordships. It is by global competitive standards that we must judge ourselves. And it is those standards which persuade me that there is a real urgency about improving the position of our manufacturing industry. I have not altered my mind at all about the seriousness of the matter, nor about the urgency of securing the changes which the Select Committee advocated.

4.27 p.m.

Lord Houghton of Sowerby

My Lords, the level of debate so far has been of a very high order indeed. My own attraction to this debate was mainly through the terms of the Motion on the Order Paper which I think is very significant indeed, coming from the sources that it does. It is of both political and practical importance because on the comparatively rare occasions when we are dealing with these matters we have now a new philosophy from these Benches about co-operation with private enterprise.

The Motion speaks not only of co-operation but also of constructive co-operation, and there is no question that co-operation is, in any case, a very satisfying human experience. Whether it is in terms of persons, causes or institutions, it is a natural desire of people to co-operate. What may divide movements from co-operation sometimes defeats the whole purpose of national endeavour. The French have a word for another form of co-operation. They call it cohabitation, and President Mitterrand is practising that art at the present moment. We have no need to embrace that concept here at the moment. We may have to look at it again after the general election. At all events, at the moment we can look at our relations with industry in a co-operative spirit.

As has been said, this is Industry Year, and some things are happening at the present time which rather spoil the scenery that we had hoped to have for the year. But this debate will go on for a long time. This is only another chapter in a long and continuous debate on the national destiny. It will cover for a long time a huge slice of political, economic and social discussion and activity in this country. In his recent Dimbleby lecture Sir John Harvey-Jones laid great stress on the need to change public attitudes towards industry and to lift the whole ethos of industrial work and management in our esteem and scale of values. That is important. It is hard work though, in view of the industrial history that we have to overcome.

The relations between trade unions and management in this country are of an order very different from those in European countries and in Japan, because they derive from an Industrial Revolution embarked upon before other nations in conditions which have left a sad legacy of distrust and antagonism that it is difficult wholly to repair. We have also the division of political philosophy between private endeavour and public ownership and state capitalism and private enterprise: all words for different shades of activity in political and philosophical terms.

I am cautious about the use of the word "strategy" in this context. Much failure has attached to that word in the past. Whether it is "economic", "industrial", "manufacturing industry" or "monetary", we have had them all. They have led to great disappointment. Surely the assumption behind a strategy is that it requires a high command.

I recall that one of the great Labour leaders said that the aim of a Socialist Government was to occupy the commanding heights of the economy. That was the basis to a large extent of Labour's nationalisation policy years ago. But when government occupied the commanding heights of the economy they soon found that they were not in command. A large labour force was produced for whose terms of pay and conditions no satisfactory formula was ever devised, with the result that in the public sector there was more widespread discontent, I think, than in the whole of private industry over a number of years.

Nearly every strike was in the public sector; nearly all troubles arose in the public sector, many of them in vital services. So that failed. The commanding heights of the economy had people from the unions and elsewhere scrambling up to get hold of them. There was a considerable reduction of power in the hands of the government of the day. So I feel that we have to approach this question of strategy with great caution.

There is nearly always a desire to have a comprehensive settlement, design or viewpoint of the nation's destiny. There is always an anxiety to know where we are going in conditions where probably the world does not know where it is going. Will we ever know where we are going? One has to be philosophical about the human condition in life, not only now but always. Did any human beings know where they were going? It is extremely difficult to base future policy on a firm viewpoint as to where you are going.

This may sound a little depressing but I think it is realistic and has to be faced. When we lift the debate to the elevation we have this afternoon, when we have a look at the scenery and form an opinion of what in general should be the basis of our action for the future, we probably have to come down to more realistic affairs and try to contribute something to the major design. That will often take the form of attention to a great deal of detail, all of which has a part in the result of our activity.

With the identification of the function of manufacturing industry as being of such importance to the economy and so desperately needed as far as we can see in our economic affairs as natural resources decline, I wonder sometimes whether we should not identify more closely those matters which relate to the health and prosperity of manufacturing industry. The first condition of this co-operation, however, is that whichever government are in power—Labour or otherwise—they must accept the role of private enterprise in our mixed economy and give full importance to the activity, the prosperity and the wealth creation which we seek to get from it. That is the first condition of co-operation and that is what I believe to be the underlying philosophy of this resolution. We are discarding a good deal of the historic debris of philosophical Socialist thought to replace it by a more practical approach to a modern society in which there is room for and a tolerable acceptance of different forms of economic and industrial activity.

With that as a starting point, I wonder whether we ought not to have a check list for all the things that are of importance to manufacturing industry and try to bring them together to see what in the sum total they look like and what departmental and other ministerial responsibilities have to be called into action to deal with them. Otherwise, a great deal that relates to manufacturing industry is dispersed over the wider canvas of, say, taxation, education, training, working conditions, wages and hours of work. To have a check list for manufacturing industry would probably be of considerable value.

There is a wide range of important matters here. Education has been referred to and there is also training. Why is it that those who go to the jobcentres for employment straight from school see a large notice board of vacancies that all require experience? Some of them specify a minimum period of experience or minimum qualifications which are to be obtained probably only through experience. They naturally ask "How do we get the experience?". This is where training comes in. The Manpower Services Commission has an important responsibility to do its best to anticipate the likely expansion in particular fields of employment which relate to manufacturing industry.

Just recently in the local papers in my former constituency I read about vacancies for machinists. An upturn in textile manufacturing saw the industry short of machinists. Nobody had any machinists. What is more, not many people wanted to be trained as machinists. All sorts of difficulties arise on the gap between the level of social security and the reward for full-time work when first beginning in a job. That has a relationship to taxation and the thresholds of taxation. Those are important, too.

Working conditions need examining. There are also the ambitions in industry. It would be a mistake for any government to reintroduce levels of taxation on higher incomes as a form of retribution for concessions granted by a previous government. I do not think that is a basis for levying taxation. One has to avoid importing some kind of moral justification for higher levels of taxation related to the fact that reliefs were given six, seven or eight years earlier. There is a new generation of management and technology which does not remember the concessions of 1979 and which would regard additions to the tax burden as additions to the tax burden, full stop, with no moral or philosophical justification. It is a mistake to link social improvement with fiscal bias against a highly skilled and quite innocent body of workers and a new generation of technology and management.

Reference has been made to wider share ownership. I have been a member of the wider share ownership movement for a long time. I am very much in favour of it. When I was a Member of Parliament for Sowerby I made it my job to have a modest shareholding in every public company in the constituency. I felt that it was a good thing to know what was going on. It did not do me any harm politically. On the contrary, people said "Here is a man who is taking an interest".

I refer also to what I believe is another encumbrance on manufacturing industry; that is, our present labyrinthine code of company taxation. It is now a monstrosity. It is complex, obscure, incomprehensible and has created a mammoth industry of professional interpreters of the law with tax schemers and strategists. There is a strategy in taxation and one can buy books about it. Tax inspectors complain that they cannot bear the work load any more. The courts are congested.

Then there is the gloomy spectre of the black economy which is as big as anybody's guess. All this comes from a system of taxation which has been built up, brick by brick and boulder by boulder, to make it absolutely impenetrable to ordinary mortals. What a load of mischief it all is! Since we have not had a Royal Commission for 35 years it would not be a bad idea to have one on company taxation alone.

There are so many things to which I need not refer and which are found in the excellent booklet recently produced by The Industrial Society as its contribution to Industry Year. A great deal of attention needs to be given to the smaller aspects of life in industry which make for contentment of the work force, which help to improve efficiency and which often given encouragement to people to do unpleasant work, to bear strain, to go out into the world in the national interest to sell and to bring back ideas for fresh enterprise and activity. If we can get that, then we have co-operation. If all the political parties make constructive co-operation with manufacturing industry a firm and stable element in their policies now and in the future we shall get somewhere. It is in that spirit that I accept this Motion.

4.45 p.m.

Lord Rhodes

My Lords, I had no choice about becoming a capitalist when I came out of hospital after World War I because I was out of work. Instead of walking around for too long looking for work I started a business of my own, and for 50 years I was a fairly successful manufacturer.

At a time when we see so much in the way of reports on "spivvery" in the City and when it is possible to transfer huge sums of money across frontiers, I thought it might be opportune, instead of making a generalised speech, to follow the course of events of a company in the North-West which is only one of many enduring the present conditions. This company was founded in 1837. It was incorporated as a private company in 1908. It has been managed throughout its life by successive generations of the family.

Private industry has been a target for people saying "clogs to clogs" and all that, but this company has been superbly managed for nearly 150 years. It is not a big company. It has continually employed approximately 100 people. Even throughout the 1930s and the last war the workforce has been strong. Historically, the business consisted of contracting in joinery work; of making the whole range of joinery work in the joiners' shop and fixing it on site. During the last 30 years it has become predominantly concerned with manufacturing joinery for direct sale to the building trade. It so happens that the predominance of this particular firm is joinery. In the North-West there are dozens of companies which have the same characteristics, and when I refer to joinery I am referring also to other enterprises in other basic industries.

The policies of the company have always been to maintain a steady and competent workforce, the training of apprentices and the re-investment of profits. At present there are 104 employees in that firm. Anyone who knows anything about manufacturing today will recognise that in carrying, shall I say, the burden of a one-in-five ratio of apprentices this company is well managed and has the welfare of its operatives and the country at heart. The factory has modern machinery and equipment. The company has no financial borrowings in any shape or form.

Since the Tory Government came into office, this company has experienced its workload coming under increasing pressure from competition as a result of the general shortage of work in the trade. That is very natural, and we can understand it. Margins have been reduced to the absolute minimum, and the ability to invest has virtually disappeared. Some of this company's competitors have ceased trading; others are in a similar position.

The situation now is one of virtually no work in the industrial and commercial sectors and a much reduced demand in the private housing market, having taken into account seasonal fluctuations; and, most importantly, there is almost no new housing work for local authorities. The company has not been involved in any substantial local authority housing work, apart from routine repair work, for at least five years. The result of this situation is that 27 per cent. of the workforce have been laid off and are registered at the Jobcentre as temporarily unemployed. Should the workload not improve, the company will be forced to declare some employees redundant, which involves the payment of wages during notice for up to 12 weeks and the payment of statutory redundancy pay of up to £4,000 per person depending upon age and service. These facts might sound of small importance and not be the nitty-gritty in the general consideration of this problem, but it is a very serious matter if you happen to be one of those expecting redundancy.

The majority of the employees of this company have substantial service with the company, and it is estimated that the average termination costs will be £1,000 in wages during notice or in lieu of notice and £2,000 statutory redundancy pay per person. At present there is a rebate of 35 per cent. of the statutory redundancy pay from Government funds, but this is shortly to be reduced to zero in order to reduce Government spending. For a reduction of 20 people in the workforce this company's liability could be as high as £60,000, and these enormous costs could follow a year when, for the first time in 150 years, a small loss was made, at a time when current trading, with men laid off, is showing no profit. There are many companies in the North-West who face similar conditions to those I have been describing, and this fact should be grasped by the Government.

In these circumstances the savings and the strengths of a company can vanish overnight. It is a risk which is faced when there is a loyal workforce which may have been there for 20 or more years. After every visit that I have made either to China or to Japan I have come back—especially from Japan—with the fixed idea that one of the fundamental reasons for the success of the Japanese economy is that they possess a loyal workforce. Yet in this country we are destroying it.

There are two main points which arise from the present situation. First, at present there is no new local authority housing being built, nor has there been for about five years, but that is the fundamental basis for this type of trade. It not only means work for the building industry but means work for the textile industry, for those who make carpets and curtains, and for a whole gamut of manufacturers. These houses are needed. It is estimated that there is a need of 300,000 houses for a minimum of five years. This will set the economy going. It must be recognised that there is a desperate need for new housing, and when the pent-up demand is eventually released the decimated building industry will not be able to cope and prices and wage claims will rise uncontrollably.

My second point, which is perhaps of more importance, is that with the vast amount of legislation regarding the employment of people, and in particular the Redundancy Payments Act, it is considered that the direct employment of people is now not a good commercial risk, and this is directly contributing to the appalling figures for unemployment. The building industry has always been liable to be used by successive governments as an economic regulator and has had to tolerate the resulting wide fluctuations in workload. Compounded with this are the risks imposed by employment legislation, which I have just mentioned. The resulting trend is now strongly away from the direct employment of labour. Many building contracts are let to contractors who manage only and who subcontract all the work. Some employers are offering their labour force only short-term contracts of employment for two years before they sack them.

These manoeuvres are designed to avoid the worst of the unacceptable risks imposed by the employment legislation. The result is a large increase in the employment of temporary and casual labour and labour-only gangs, with the consequent problems of the imposition of the health and safety regulations and the proper collection of tax. These factors must be considered very seriously by the Government. We are not developing skills: we are producing "cowboys". The evidence is there for all to see.

A recent report in the Chamber of Commerce Bulletin reads: Many companies intend to make their workforce more flexible by increased use of temporary, subcontracted and part-time labour. If we allow this type of company to go down, we are destroying what was in the past, and still is, one of the finest characteristics of British industry.

At the company of which I have been speaking there are 20 people who are under sentence. These people represent perhaps only a very small number, but for that firm and for the general picture in the North-West Government intervention is needed. There needs to be a rethinking in terms of housing of the people. Houses are very badly needed in order to set off a whole series of activities for the benefit of manufacturing industry in this country.

4.59 p.m.

Lord Marsh

My Lords, a number of people have said that this House has debated these subjects, and indeed they have been debated in the country as a whole, on many occasions. I think that is a good thing, and the House is indebted to the noble Lord, Lord Bruce of Donington, for giving us the opportunity to raise this topic yet again, because I think that there is a deep and fundamental difference of opinion which in serious debate cuts right the way through the political parties, as the noble Lords, Lord Houghton of Sowerby and Lord Aldington, have said. It is a strong and very serious argument about the future of this country and its method of administration.

I believe that it is not without interest that at this very moment the Assemblée in Paris is starting the first stages of a massive privatisation operation, much greater than anything in this country: so the question of privatisation versus public ownership is not just a matter of some unique eccentricity of the present British Government.

One feature of the debate so far that worries me—we all feel quite strongly about these matters—is the element of romantic nostalgia for the economic policies of the past that keeps appearing in many speeches. The noble Lord, Lord Bruce, introduced it early in his speech when he suggested as a key point—he was right to do so, because it has been taken up as a key point—the need for the Government to draw up a long-term plan. So many of us in this House have walked down that path and round that circle so many times. We have faced disappointment, disillusionment and despair on every single occasion. But, at a time when we all accept that we face serious and urgent problems, we say, "Let's go and do it again". As the words were spoken, I thought that I could hear a sepulchral chuckle from the late Lord George-Brown. No Minister ever commanded the authority, the influence and the resources of government power as George Brown did through the Department of Economic Affairs when he tried to achieve a viable national plan. It did not work. It did not work because for many years—

Lord Soames

It never will work, my Lords!

Lord Marsh

My Lords, I accept that; I do not believe that it ever will work. I believe that you have a choice between a Gosplan-type society, where the state controls all elements of society, or you have a free market society, with government stepping in to control the excesses. You cannot have a free society and a totally planned economy at the same time. It is the mistake that has been made over and over again. Yet, 20 years after, we still raise this as an alternative. What worries me—because I, obviously, take a different view—is that it commands support right across the spectrum. The noble Lord, Lord Aldington, and his committee were attracted to some extent—

Lord Aldington

My Lords, may I interrupt? I see, as I think the committee does, an enormous difference between a national plan and a broad strategy and industrial policy. This Government have an industrial policy. They have mentioned it. An industrial strategy is one thing, a plan another. I am not in favour of the plan for the reasons that the noble Lord has eloquently and precisely expressed.

Lord Marsh

My Lords, I accept that. I apologise for misrepresenting the noble Lord, as obviously I did. We should bear in mind that the fact that governments say that they have a strategy does not lead one necessarily to accept that there is truth in the statement. The fact is that whenever governments embark upon a search for strategies, they always find themselves moving gently, ever so gently, from strategy, planning, policies and suggestions to direct intervention. No Minister, offered the opportunity, can resist it.

What also strikes me is the way in which we talk as if the reduction in manufacturing industry and its scope in the economy is peculiarly British. It is not. It is a feature throughout the western industrialised world. Whether in coal mining, in steel, in shipbuilding or in textiles—in fact, over a whole range of areas—the western industrialised nations find that these industries are moving elsewhere. I hear people occasionally (it has not happened this afternoon) expressing contempt, almost, for the financial services and the service industries that take their place. These are men and women who nurse a nightmare and wake up fearing that the standard of living of the British worker might sink to that of the Swiss. That is something which he could probably bear.

It is too complex a subject to deal with in a short debate, but I believe that we only delude ourselves if we believe that there are some measures that the Government can take that can reverse the decline in the importance of a manufacturing base in the British economy. It is inevitable and part of an international trend. If there is one thing that we have learned in the post-war years it is that governments do not have the power to change the British economy to anywhere near the extent that they believe they have. It does not matter which party is in power, and it has nothing to do with the desire to do so. No one can sensibly argue against constructive co-operation between government and British industry. The trouble is that it is one of these weasel-worded phrases that means different things to different people.

Over the years I have sought advice in a commercial capacity frequently from officials at the Department of Trade and Industry and from the commercial sections of the Foreign and Commonwealth Office. I have never had reason to be other than grateful for the help and advice given. Civil servants, on the whole, quite like being asked to give advice. It is always willingly given. That is the role of government. There are bodies like the British Overseas Trade Board, the Invest in Britain Bureau and a whole range of government organisations concerned with advice, with co-ordination of research and development, and with a whole range of similar activities. That is wholly admirable. It sets parameters of behaviour, whether in terms of the environment or in health and safety legislation. That is the job of government.

What is not the job of government is the administration of British industry, or sections of British industry. When they try to do so the results are always appalling. Many of the problems that we face in British industry today are the result of interventions by politicians over the years. That is not a criticism levelled at the Opposition Benches. The most interventionist Government that I witnessed was that led by Edward Heath. That Government could not resist intervening in anything that moved. And frequently, thereafter, it stopped! This has been a major obstacle to the future development of British industry.

We have had the recent fiasco of Westland. It is important, not because of the size of the issue or the size of the company but because it demonstrates once again how easy it is for a highly intelligent man—I have considerable respect and affection for him—to believe that government Ministers know better than the people who are actually running the outfit; but, even worse, forgetting who is morally and legally responsible for running the company. It was outrageous, I believe, that a British Minister should be using the powers of his office, and some that he collected from outside his office, to seek to pressurise the board of a public company to take a decision with which it was in fundamental disagreement. That would be morally wrong for the board of a public company. It would also be legally wrong. If the Minister concerned had been successful and the decision had proved to be a wrong one—Government decisions have been known to be proved to be wrong from time to time—who would have been responsible? Every time the government intervene, they destroy accountability. When you destroy accountability, then you destroy the very basis of efficient management. Westland was a very good example of what can happen once one falls into the trap of believing that politicians can or should control commercial companies.

The debate has also touched upon privatisation. It is right that this should be so because it is a connected subject. Those of us who supported public ownership and nationalisation enthusiastically did so on three main assumptions. First, we believed in those days—at least I have the excuse of saying that in those days I was much younger than I am now—that it would enable us to plan use of the nation's resources far more effectively. For over 30 years we have had total state control of all the key energy industries, and we are as far away from an integrated energy policy today as we were in the beginning, despite many White Papers, many debates and (may the Lord preserve us) a multitude of working parties. We have controlled for 40 years all the elements of the transport industry. We are today no nearer an integrated transport policy than we were in the beginning. I therefore think that that point falls.

Secondly, we thought that nationalisation would bring industrial peace and that it would bring efficient management because it would bring with it motivation—long before the phrase was used. It has not done so. In the event, industrial relations and working practices in the public sector have been as bad as the worst in the private sector because it was possible to keep those industries going despite overmanning and restrictive practices which would have bankrupted companies in the private sector. That is not a criticism of the management but the result of the system. It did not work.

Thirdly, we believed that with the dreaded profit motive gone the customer would be king. I spent five years trying to tell railway commuters on the Southern Region of British Rail that that had happened. I received some rude replies. The fact is—and I put it as a fact—that there is no evidence that customers in the public sector are demonstrably more satisfied than they are in the private sector. Indeed, I remember on one occasion that Lord Wilson, when he was Prime Minister, rounded on his colleagues (and some I think who are present today were there on that occasion) and demanded to know of them whether they wanted to go to the next general election with a commitment to make Marks and Spencer as efficient as the Co-op. This was greeted with some lack of attractiveness.

After over 30 years of the same policies, for the first time we are trying a different approach. I find that very encouraging, because I am convinced that there is no point in going on for another 30 years with policies which have not worked.

I turn to privatisation. The board of the National Freight Corporation was a group of imaginative men who decided to try something new. They invited their workers to join with them to buy the company themselves. Three good friends of mine—Peter Thompson, the late Bobby Lawrence and Frank Law—were very much involved in that exercise. I was pretty sceptical about it. But in the event—and it cannot be underlined too much—13,000 ordinary working men and women bought (which was for them a new venture and was quite a lot of money) shares in their own company and took 80 per cent. of the stock.

The British Telecom position has also been referred to. There is the most recent case of privatisation, Vickers Shipbuilding and Engineering in Barrow-in-Furness. I shall declare an interest because I was involved with the merchant bank which organised that employee buy-out. Barrow-in-Furness is different from the Paris Bourse or Wall Street or Threadneedle Street. It is not an area of the country which is heavily populated with stockbrokers and merchant bankers. The labour force does not, on the whole, own shares. In the early stages we were very concerned as to what the response would be. However, again 14,000 people, 80 per cent. of the work force, applied for shares in their own company with such enthusiasm that it was nearly over-subscribed twice. It is easy to lapse into an arrogant elitism which believes that the mass of the population cannot take the right decisions for themselves. In this case I have no doubt they were right on every count.

My Lords, both parties have tried variations on the same theme many, many times. I do not think that there is any dispute between us as to the nature of the problems. We have tried variations on the same industrial policy for nearly 40 years, and none of them has worked. For the first time in postwar Britain we are taking a fundamentally different approach. In my view the evidence is overwhelmingly against returning once again to policies which have been consistent in their abysmal failure.

Lord Molloy

My Lords, before the noble Lord sits down, would he not agree that the Government of 1945 to 1950 may not have been a perfect Government but they certainly sought to create a good economic base for the nation? The tragedy was the 13 years that followed, when all that was wasted.

Lord Marsh

My Lords, I think the tragedy and the point to be borne in mind is that there has been no lack of goodwill or sincerity in any of the parties when they have been dealing with these issues. If there had been, it would be easier to understand why the policies failed.

5.16 p.m.

Lord Hatch of Lusby

My Lords, the noble Lord the Minister reads very well but I would remind him that this is a debate. In following my noble friend Lord Bruce of Donington he answered not a single issue raised by our opening speaker.

I sympathise with the noble Lord the Minister. This debate should have had either the noble Lord, Lord Young, or the noble Lord, Lord Lucas, answering the fundamental issues which are contained in the Motion. I also think that the noble Lord, Lord Brabazon, has a right to feel aggrieved. The party of businessmen does not seem to be sufficiently interested in the future of British business and British manufacturing industry to take part in this debate apart from two noble Lords from the Tory Back Benches, both of whom were on the Select Committee and who can hardly be said to be wholehearted supporters of the line put forward by the Government.

It is perhaps also significant that the allies of the Conservative Party, the SDP and the Liberals, also have no speakers from the Back Benches. I would appeal to the noble Lord, Lord Brabazon, when he makes his second speech on winding up to deal with the issues raised by this debate, to take part in the argument. That is the whole purpose of Motions in your Lordships' House.

Lord Brabazon of Tara

My Lords, will the noble Lord give way? I have every intention of trying to deal with as many points as I possibly can when I come to wind up. If the noble Lord recalls, I think that he will realise it is normal form for the Government to set out their case at the beginning of the debate and when the Minister comes to wind up, to attempt to answer as many points as possible. That is what I shall try to do.

Lord Hatch of Lusby

My Lords, I would never suggest for a moment that the noble Lord in previous debates has tried to escape from that responsibility. I am asking him to do something somewhat different: to take part in the argument, and not just to reply on the points that are raised. I should have thought that the Government's case would have contained an answer to the argument put forward by my noble friend Lord Bruce of Donington and contained in the Select Committee report of which I had the honour to be a signatory. This did not come out. What we heard from the noble Lord the Minister was a series of Civil Service points, all with selective facts. For instance, although the noble Lord, Lord Bruce of Donington, in opening the debate, pointed out that inevitably the Government take 1981 as their base year, if they will be honest they should start in 1979 and compare the situation today with the position when they came into office.

Again, the noble Lord the Minister has talked about the recovery—but recovery from when? It is recovery from the depths of the depression of 1981; a depression which I suggest (and I shall suggest this in further detail later on) was not just an accident of history but was at least partially caused by a specific policy put forward and implemented by the Government themselves.

The noble Lord talks about recovery, but omits to mention the fact that competitiveness in the manufacturing industry in this country is in decline in comparison with that of our competitors. He talks about productivity. It may well be that the reason we do not find Conservative Back-Benchers speaking in this debate this afternoon is that they would have to defend a higher rate of inflation in this country than in that of any of our competitors. They would have to defend a declining competitiveness in this country compared to that of our competitors. They would have to defend a higher unemployment percentage in this country. Therefore, they have very wisely stayed away.

I am somewhat sceptical about my noble friend's Motion, which is: To call attention to the case for constructive co-operation between Government and manufacturing industry". That fills me with a certain amount of unease. Recently we have seen an example of constructive co-operation by this Government. Does not it depend on which government are putting into effect their co-operation? Despite their claims to non-interventionism, we have seen this Government's attitude to industry twice in the last three months.

Westland has already been mentioned. However, I should also like to refer to the attitude towards British Leyland, and I would remind the Minister that when he starts talking about the successes of privatisation he should remember that British Leyland was nationalised because it had failed in private hands and needed national control in order to pull it together. At the very moment when the Government are trying to sell a national asset into the private sector it is on an upward trend.

What was the result of this prejudice, this discriminatory, secret, hole-in-corner intervention of the Government? The answer to that question was given just yesterday by the managing director of the Austin Rover Group. According to him, the intervention of the Government in that hole-in-corner way caused the loss of 40,000 vehicles worth £200 million. Those are not my words, but the words of the managing director of Austin Rover describing the effect of this lamentable and prejudiced government attempt to sell British Leyland—to whom? To the Americans—rather than use the assets of that company and the rising trend of its business as a national asset, as has been done in other countries, and keep it both British and in the possession of the electors of this country.

However, I want to concentrate on that section of the Select Committee's report which was my particular interest, and this is where again I ask the Minister to answer the argument—rather than the details—which has never been answered from that Front Bench over the six or so years that I have been putting this case. The noble Lord spoke about a recovery. Last year world trade increased by 3 per cent. In 1984 it increased by 9 per cent. It had therefore been reduced by a third last year. According to the secretariat of GATT, the main reason for this was the failure of industrialised countries and developing countries to maintain their previous level of trade. Last year it actually fell; there was an absolute fall in value.

I submit to your Lordships that, whether you take the interventionist case or whether you accept the Government's word that their job is only to create a climate in which trade can flourish, the Government have certain responsibilities in this field, particularly in the field of exports, and that they recognise that they have responsibilities by setting up their own organisations.

When we on the Select Committee examined the then Secretary of State for Trade and Industry, Mr. Tebbit, and the Chancellor of the Exchequer, Mr. Nigel Lawson, we put this case to them because we had the evidence. I would ask all Members of this House to read not just the report but the evidence that was given.

This afternoon the name of John Harvey-Jones has been mentioned. The evidence of John Harvey-Jones alongside, on the same morning, the evidence of the noble Lord, Lord Weinstock, was quite categorical. Noble Lords will see that I specifically asked two of the leading industrial figures of this country this question: As this Government have reduced overseas aid by 6 per cent. per annum since they came to office, what effect has that had on British trade, British industry and British employment? Each of them said—and this was repeated by other industrial leaders throughout the evidence—that it has had a disastrous effect.

When I put that question to the Chancellor of the Exchequer and to the Secretary of State for Trade and Industry and quoted these figures to them, what was their answer? It was simply: "We believe in reducing public expenditure as a percentage of gross national product". Of course, they have not done it. In fact public expenditure is higher as a percentage of gross national product today than it was when they came to office, as I elicited from the Government by a Question just last week.

However, they have instituted cuts in their own organs, their own channels and institutions, in order to provide this atmosphere in which export trade can flourish. Aid is one area. Aid helps to develop trade with third world countries. As aid has been reduced, so its effect has been to reduce our export trade with third world countries. I have given examples here many times and I shall not repeat them today, but there are specific examples, about which noble Lords in industry know, where trade has been specifically reduced because of the reduction of aid and at the same time employment has also been reduced.

I want an answer to this question: Why do the Government continue to think that, in the words of the Prime Minister: aid is a hand-out or a charity", rather than an investment in the development of our own industrial process?

Secondly, the Government have specifically set up the British Overseas Trade Board to improve the climate for exports. That is its job. However, last year the budget of the British Overseas Trade Board was frozen, which in real terms meant that it was reduced. Again I asked the Chancellor and the Secretary of State for Trade and Industry why they were reducing the budget of their own organisation, which was set up to help and encourage trading in manufactures of this country. The parrot-like answer was "We believe in reducing public expenditure". But is that not reducing public investment?

On the occasion on which I was able to examine the Chancellor and the Secretary of State for Trade and Industry, I warned them that if they reduce the budget of this organisation, its operations will also be reduced. Today I can quote the figures for what has happened over the past year. The exhibits sponsored by the British Overseas Trade Board at trade fairs have fallen from 332 to 292. The missions abroad by British exporters supported by the British Overseas Trade Board have fallen from 151 to 139. The missions to Britain by foreign companies and organisations looking for imports have fallen from 69 to 52. Is this not proof positive that if you reduce the resources of government organisations designed to help with the export trade, then you are going to reduce their effectiveness?

I ask the Minister again to reply to this argument: do this Government believe that in the British Overseas Trade Board, or in overseas aid, this is a public investment in wealth production in the export trade, or do they believe that it is a hand-out, a charity? Do they accept what the industrialists have all accepted, that aid and the services of the British Overseas Trade Board, and similar institutions like the commercial attaches at foreign and Commonwealth diplomatic posts throughout the world, are not just hand-outs but are an investment in the development and resuscitation of British overseas exports of manufactures?

The case I am making is that, by taking their attitude, the Government, from the start, made the depression worse for this country than for other countries. They have delayed recovery and are still delaying recovery, and because of their blindness and dogma they are preventing even their own institutions from taking up the opportunity that, as the oil price declines, we now see, can come and is coming in many other countries.

But I would point out that the present situation, in which the oil price has declined so severely, has been described by the secretariat of GATT as a particular headache for Britain. Why? Because Britain is one of the major exporters to the oil producing countries, and as their revenue falls it is certain that, unless we take international action, our export opportunities will fall.

I would remind the Minister yet again that it is in the developing world that the market is increasing fastest. That is the world which traditionally has been closed as a market. It is now beginning to open up. Other countries are seeing those opportunities. We apparently are still blinded by the dogma of this Government, who still think of aid and assistance and international action as charity.

I would ask the Government to recognise that a future for this country is only possible if we recognise that now we are part of a world economy—not of a European economy, not of an Atlantic economy, and certainly not of a national economy, but part of a world economy. Our only opportunity for reviving the industry of this country is by collaboration between the Government and both sides of industry in recognising the opportunities in a world economy.

5.35 p.m.

Lord Ardwick

My Lords, it is almost 30 years since I served on a committee of inquiry set up by the British Association and the Nuffield Foundation into the connections between science and industry. The question we were asking was why, in a country which could produce so much scientific discovery of the highest class, were we so laggard in technological innovation?

The obvious answers were given. But the years have rolled by and we are still asking the same questions: why has Britain, with all its energy and its genius, lagged industrially behind not only the United States but also Japan, Germany and France? The Government, I am afraid, obscure these problems by their ceaseless vaunting of their achievements; sustained economic growth, yes, and a gratifying reduction of inflation. But side by side with that we have massive unemployment and an army of young people who can be rescued from idleness only by gigantic improvisation. This improvisation, the creation of a national training scheme, I do not decry, thought I deplore the fact that it is necessary.

Alongside this we have a conspicuous decline in the health service, the homeless condemned to costly, yet sordid, bed and breakfast accommodation, and our teachers aggrieved, surly, and suspicious. But perhaps that most disturbing factor of all is the closing down of manufacturing firms, the process known as deindustrialisation, and the facile belief that we can somehow exist almost wholly, or very largely, as a service economy. The service side, of course, has an important role to play, and I am not decrying it.

Now, my Lords, if you live in the right districts of London and contemplate with pleasure the ever-increasing value of your house, if you look at the richly stocked shops and the retail sales results, or learn of the holidays abroad booked months in advance, you could be deceived into believing that all is for the best in the best of all possible worlds; that is, if you close your eyes to the violence in the streets, or if you still your fears that your firm might be the next to be taken over.

But the English frontier does not end at Watford. I was glad that my noble friend Lord Rhodes brought in that splendid voice from Greater Manchester. Go North. Go to the West Midlands, until recently so full of pride and prosperity, but now shockingly depressed. Go to Manchester, the city where I was born. Or go to its once great rival, Liverpool. Up there nobody believes that given a year or two more of this Government, more privatisation of monopolies, another five pence knocked off the standard rate, and all will be miraculously righted and we shall be a thriving, dynamic, competitive economy creating wealth and jobs, if not for all, for almost all. Nobody believes that in the North.

I look at Manchester as it once was—a proud city. Some people say that one of the major causes of our decline in Britain is the prestige we give to the professions and to those concerned with finance, and the humble role we ascribe to engineers and other creators of wealth. My Lords, they may think like this in Belgravia, Chelsea, and Hampstead. But this was never true in the industrial North.

There we took the greatest pride in our major firms, such as Metro-Vicks, in Hans-Reynolds, in Clayton Aniline—where Lord Wilson's father worked as a chemist—in Beyer and Peacocks, in Mather and Platt, and in the Altrincham Linotype. If you worked for one of these great firms, even in the most humble capacity, you were, and you felt, one of the elect. And if you could get your son into one of their apprenticeship schools, he would share your status. And the industrialists, with the great merchants of Manchester, and the philosophers and scientists at Manchester University, at Owen's College, would all meet together, and they all lived together, in an organic society.

Where is Manchester now? Some of the great firms remain. But the ship canal, from which Manchester goods from Manchester docks used to sail across the oceans of the world, is a ghost of what it used to be. The Royal Exchange, once the centre of the world's textile trade, is a theatre. The cathedral, where Temple preached, has been arranging its final service of the day to end before darkness falls and danger looms on the streets. The Guardian, leaving a small team behind, has left for Gray's Inn Road. The Halle, the Grammar School, the Evening News and the football clubs remain. As for the district of Ardwick, where I spent my youth, it was so devastated when I was there a few years ago that I have never had the heart to return.

As for Liverpool, that always had more glamour, but the plight of Liverpool is much better known than that of Manchester. Liverpool, with all its energy for sport and song, suffered greatly before the war, and the man who did most to rescue it was Lord Woolton. It was his experience in dealing with Liverpool's unemployment that led him to commit the Conservative Party to make high employment the priority of its post-war policy. The party stayed honourably by that policy for many years. I do not know what Lord Woolton would think of the party's policy today, since we have reached the conviction politics state.

It is sometimes said that the failure to find a successful post-war strategy for industrry has been due to the wide differences between the two class-ridden parties that have alternated in enjoying power since the war. That is true, or was true, as far as the rhetoric went. There were some shenanigans about the steel industry. But there was also an underlying consensus, something very useful, called Butskellism. That, too, was brought to an end by conviction politics.

Where have these politics brought us? How do we get back to our industrial greatness? How do we move from the age of the take-over to the age of creation of real wealth? How do we give the just financial and social rewards to the wealth creators? How do we restore pride in our products and in our social institutions?

One thing is certain—we shall not achieve the miracle overnight. Yet an era of opportunity seems to be opening up as cheaper fuel spreads its benefits throughout industry and throughout the world. We may have come to the end of the bleak period which began in the early 1970s. There are the possibilities for a brave government who are not sunk by ideological prejudice to enter into a bolder economic policy.

But beneath this there remains the need for long-term reform. Six years ago Professor Sir Charles Carter, who led the inquiry I mentioned at the beginning of my speech, was concerned with a much more illustrious debate which enabled him to produce a book Industrial Policy and Innovation. The noble Lord, Lord Kearton, was one of the participants. There was, of course, the usual division between those who thought, like the noble Lord, Lord Marsh, that the market could do it all, or almost all of it, and those who thought it would not because the signals the market receives about future prospects, such as the value of sterling or the future of the rate of interest, are often very poor. They argued that reaction to these signals will be inadequate to deal with the problems of the British economy, with its tendency to deindustrialisation related to technical backwardness.

That was six years ago, and I think they have been amply justified by events. They argued that it was essential to have a plan for innovation which would encourage changes in the industrial structure. It would be necessary to select industries or technical developments which could make effective use of special access to finance or even to subsidy. Government action might be required in research and development. Indeed, the noble Lord mentioned that in his opening speech. I should like to hear about these fruitful interventions that the Government are making, because we hear much about the free market but we do not hear much of the positive things they are doing. If in winding up the noble Lord could tell us a little more about that, I should be very pleased.

Some of these participants saw the need for profound social change and pointed to the inadequacy of management and of our sour industrial relations, aggravated by politicians with short-term ends. They were already aware six years ago of what the rest of us are beginning to talk about and have talked about in this debate: whether we can learn something from the Japanese, remembering that the U-turn in Japan which has produced the miracle is of fairly recent date.

Finally, they found that there was a need for background policies, for improvement in managerial, engineering and technical education. All this sounds so familiar as to be banal. But for most problems in life there is no miraculous solution. The best we can do is to think hard, then apply common sense and go on applying it. We must resist the temptation to believe that there is a simple ideological solution, whether it is the totally free market suggested by the noble Lord, Lord Marsh, or whether it is total planning. Nobody advocates that any longer; I do not think anyone has advocated total planning for many years. That will not work. When we find the solution it will surely be a judicious mixture of the two, fortified by good luck, if it is to succeed.

5.46 p.m.

Lord Dean of Beswick

My Lords, in following other speakers, I also pay tribute to the noble Lord, Lord Bruce of Donington, for initiating this debate and the manner in which he moved the Motion. During his speech, when he somewhat castigated the Secretary of State for questioning the motives of a Member of the Opposition in this House who referred some time ago to the service industries, I think he was referring to me. The point I was making at the time was that unless we live by our manufacturing industry we do not live at all. I was not trying to devalue what was being done in the service industries because what is being done is valuable work. But it is economically impossible to fund an increasing service industry with a shrinking manufacturing base. There is no possible way that that can succeed.

I do not begrudge the Minister his shopping list of successes. The Government may, through some of their own activities in conjunction with industry and its policies, have speeded the train up a little, but is it going fast enough when we are still losing manufacturing jobs in industry at a larger rate than we are creating them? I draw your Lordships' minds back to a few weeks ago when the Minister of State was at the Dispatch Box and was asked to read the categorisation of the new jobs that had been created and that were being paraded as the success of government policies. The figure he quoted was 620,000-plus. But when he gave the breakdown of the figures fewer than 20,000 of those jobs were in manufacturing industry. We now have to contend with appalling figures of unemployment. I accept the Government's intention. But Members from all sides of the House see these figures as totally unacceptable and want to see them decreased. But if that is the rate of progress at which it is to be attacked this problem will be with us for a long time to come.

The Secretary of State, and on occasions the Prime Minister, and other Ministers, keep talking about the American success and the American capacity to implement policies that have created millions of jobs. It has been suggested that we ought to follow them and operate in the same manner. Last week during the recess I had the good fortune to be listening by chance to a radio programme from Boston, Massachusetts. It was an interview by Mr. Brian Redhead of the BBC with people from all sections of the community involved in the economic recovery of Boston. What came across clearly was that the project was an outstanding success; but there were weaknesses. We have been seeing some of those weaknesses in this country and we have to guard against them. Those industries that have taken off and have started to gear upwards have been very successful indeed. Their working conditions and their wage rates were quite good. It appeared that there was more risk capital available for people to become involved in that type of activity. But a woman was questioned who worked in what we call the public sector. Her hourly wage rate was between 3 and 4 dollars an hour in America. She said that it was not a wage on which one could exist in isolation, and it was far too low.

I issue this warning. If the Government think that by some of their measures they are going to depress wages in some of the service sectors to create more jobs, that is only going to lower the standard of living for a lot of people who do not have such a high standard of living at present. I thought that the programme was extremely useful, but it certainly set some alarm bells ringing in my mind as to what was really taking place.

My own industrial background is engineering. I spent my life in engineering before I came to your Lordships' House. There is no point in not looking backwards occasionally to realise the enormousness of the disaster that has hit us. Redundancies and closures in engineering firms have not all been in twilight industries, the heavy industries. I was glad that the noble Lord, Lord Ardwick, referred to some of the firms in Manchester. I happened to serve my time with one of those firms, a firm which has now gone out of existence. That area of the country played a major part in supplying the logistics for the armed forces in two world wars. I remind some of your Lordships that the most successful heavy plane of the Royal Air Force in the last war the Lancaster bomber, was born, built and bred in Manchester. Churchill tanks and naval guns were made in Manchester. Logistics of every kind were made in the Manchester area. However, all the factories, with the exception of Metro-Vickers, have now closed down. When I went to work at Metro-Vickers in 1960 after my own firm closed down, 25,000 people were employed there. There are fewer than 8,000 now; and in some respects they are at risk.

I have to tell your Lordships that the cause of this is not based on high wages. I never enjoyed high wages in general engineering. There have never been high wages. Wage rates in the manufacturing industries in the country generally are substantially below those of our chief competitors. It is about time that we put the position of wage rates in its proper context.

Perhaps I may quote briefly some figures. Nearly 1.8 million jobs have disappeared in the manufacturing sector in this country since 1979. In general engineering over half the jobs were lost in nine years. I will list some of the industries involved to illustrate that they are not all outdated industries that had to go to the wall. Mechanical engineering lost 118,000 jobs; electrical and electronic engineering lost 87,000 jobs; instrument engineering lost 35,000 jobs, shipbuilding and repairs lost 470,000 jobs; and metal goods generally lost 382,000 jobs. That is the dimension of the disaster from which we are now suffering.

There has been a drastic decline in almost all branches of engineering under this Government. Although the rate of decline has slowed, there is no sign of any sustainable upturn. This involves an industry that traditionally was and probably still is the biggest employer of people in the manufacturing sector. At one time the figure was over 3 million. It is somewhat less now because of the job losses; but there is no room for optimism there.

If the economic recovery does take off, we are concerned as to what we do about recruiting the people needed to man these industries because the people are not there any more. I quote now some figures from the Engineering Industry Training Board. It says that low apprentice recruitment foreshadows skill shortages; trainee redundancies have almost halted and engineering and technology graduate numbers are falling. So much for the recovery; but who will man those industries if economic recovery takes off?

The training board continues: Shortages of skilled engineering workers are likely to worsen in the future as the industry has failed to recruit more young people for apprenticeship training. Despite the continued recovery in engineering output, the apprentice recruitment numbers have not improved. The latest recruitment figures are less than the numbers needed to maintain the skill base of the industry. Apprentice recruitment for the 1985/86 training year is provisionally estimated to number 9020, of whom 7040 are craft and technician apprentices recruited by the industry into basic training". I have to tell your Lordships that in 1979 the intake of apprentices into the general engineering industry was nearer 30,000—it was 28,000-odd—and it is now down to 9,000, including the Engineering Industry Training Board's own scheme sponsored by the Government. That is the situation that we face.

Next, if one considers manufacturing industries, since 1979 there has been a net loss of 1.79 million jobs. I submit that, despite the success story that the Minister was trying to convey to us, there is no way in which the present situation can be tolerated and no way in which this serious trend shows any sign of reversing.

I was pleased that my old friend and colleague Lord Rhodes referred to the question of building houses and the fact that this would act as a catalyst to create jobs, and not only in the building industry. As your Lordships from all sections of the House will know, non-political committees, commissions and the Duke of Edinburgh's committee, which was commissioned to deliberate on the subject, have said that a massive programme that was economically sound could be put into operation in order to reduce much of the unemployment. They were of course speaking in the main about the building industry. However, as my noble friend Lord Rhodes graphically illustrated, a high housebuilding programme and the refurbishing of the inner cities would act as a catalyst to create a large number of other jobs.

I was glad that the noble Lord, Lord Ardwick—by a quirk of fate our birth places are less than one mile from each other—referred, as I said in opening, to the deterioration that had taken place in east Manchester, which was a very prosperous part of the country in working class terms up to about 20 years ago. The Secretary of State, unfortunately, cannot be here this evening. I make no adverse comment about that because I appreciate that it is because of his wide responsibilities. But I wish that the Secretary of State would accept the urgency of what is taking place and not base his formula for economic revival on service jobs and jobs in training schemes only.

Some weeks ago—I do not know whether by a slip of the tongue—he said that he would like to be shown some of these economic deserts or deserts of unemployment. I think that my noble friend and colleague Lord Ardwick has certainly indicated one today. Only two or three weeks ago one was indicated quite clearly by the noble Lord, Lord Stallard, situated just a couple of miles up the river. There is no noble Lord sitting in the House who comes from any region of the country, whether in the North-West, the North-East, large areas of Scotland or the whole of south Wales—indeed, in this context I have to mention Northern Ireland—who could not do other, if he so wished, than show the Secretary of State the appalling industrial devastation that has been suffered.

I close on this point. Even until after the war, the factory at which I worked was so "well equipped" that some of the machines were still started by pulling a rope and moving the belts over. I think that there is a lot in the argument that the engineering companies, the historical ones, that had a base in those areas were never equipped to compete with their competitors because of the cost involved.

I have not travelled at great length abroad. But I have been to Japan and other parts of the world. I have questioned the way in which they finance their industry and I am not too sure that the name of the game is the same in each country and that some of our people who are in the manufacturing export industry are not operating at a disadvantage compared with some of their competitors. That is an area to which this Government ought to give serious attention to see whether, when our exporters are bidding for contracts abroad (and certainly for some of the large, jumbo-sized ones) they ought to make sure that those exporters can do that on the same financial basis as their competitors overseas—bearing in mind of course that I am talking about the finance needed for interim payments for huge contracts that may take from three to five years to complete. It has been an excellent debate and I am absolutely delighted to have had the chance to make a contribution.

6.1 p.m.

Lord Briginshaw

My Lords, I think I am known among your Lordships as being an advocate of brevity in speeches, but I ought to find time at the outset to congratulate my noble friend Lord Bruce on his speech as an appropriate and robust presentation and a reminder of the real and total context of today's debate and of one of the most important Select Committee reports to have emerged from this House.

It is my view that the first essential of co-operation between government and manufacturing industry is, fundamentally, the input from government. I cannot let the word "co-operation" pass without saying to your Lordships that I do not believe that one of the ingredients of co-operation now and in the future is based upon barbed wire. A recognition of the simplicity of the apparent difficulties and how to deal with them is the essence of this Motion. I suggest that Britain cannot afford not to innovate, but we in the U.K. are inhibited and tied to prohibitive regulations and policies internationally and otherwise which sap the dynamic of our manufacturing industries' efforts. In this regard, I am not satisfied with the Government spokesman's rose-coloured view.

The answer from the Government lies in their essential input. That is the central issue. I visited Japan for a time. The Japanese have positive answers to some of the simple questions—and I regard many of the questions as simple—for solution. Central to the issue of the allocation of funds is the financial allocations to our industrial international endeavours. Examination of the international costings, which my noble friend has just mentioned, costings which we have and which the Japanese do not have—and the Japanese do not accept those obligations—need to be examined. The need for a government input in this regard is an important factor in relation to our competitive position with our overseas rivals.

The president of the Confederation of British Industry, in welcoming today the small reduction in interest rates, added that our borrowing costs are still higher than those of our competitors. Are we getting value for money in totality for our arms expenditures? This is one of the factors that I have in mind with regard to our situation vis-à-vis the Japanese competition. They are not burdening themselves with international obligations in the same way as we are and they are at an advantage. There needs to be an input from the Government in this regard. Are we accepting international policies which we in the U.K. cannot afford? Would we be better served by having more modest requirements in our international affairs and consequently reducing the cost to our manufacturing industry? This could be a valuable input into the required equation, for it is the idea of a national plan, as I indicated. As far as a national plan is concerned, I cannot see any advantage from incorporating in it the idea of "barbed wire" and the feeling that is generated by such a utilisation.

6.7 p.m.

Lord Polwarth

My Lords, I think that we are all extremely grateful to the noble Lord, Lord Bruce, for having introduced this subject, even if I do not follow him into the second part of his Motion, partly because he did not tell us much about it. But I shall let that be. I considered the first part of the Motion to be unexceptionable. Co-operation is something that we all want. I think we are striving to get it, but it can always be made better. The merit of this debate is that it has continued that which was started by a somewhat controversial report of the Select Committee on Overseas Trade under my noble friend Lord Aldington, of which I had the privilege to be a humble member.

It is a debate on a most unusual state of affairs. I can think of no other Select Committee report which is still being referred to, discussed and kicked around six months after its publication. I hope that the debate will be continued, and I can assure your Lordships that the former members of the Select Committee, dead though that committee may be, will do their best to ensure that that debate continues.

I enjoyed immensely the speeches of the noble Lords, Lord Houghton and Lord Marsh, which were stimulating, realistic and came from real experience. I agree about the futility of national plans or anything which resembles them. I think there is fairly general agreement on that. Although our committee spoke of the need for a national industrial policy, as my noble friend Lord Aldington said in an interjection, that was a very different concept from a national plan. I think of it not so much as a national policy but more as a national attitude to industry. That was the key section of our report—a national attitude at all levels and throughout all sections of the community.

I agree that we cannot necessarily say that we have to follow the example in this respect of our main competitor countries. The noble Viscount, Lord Chandos, pointed out that our cultures are very different and that it would be difficult to adopt exactly the policies in this direction of, say, the Germans, the French and most particularly the Japanese. But we learnt something from our visit on the committee to those countries. I do not think we can dismiss the idea of trying to further manufacturing industry in its own right when we see what has been done in those countries and that they continue to back their industries to the hilt.

There is something we can learn from them without adopting their models. They are in no doubt as to the importance of manufacturing industry, and that must have contributed to their success. To those who speak as though the decline of manufacturing industry was inevitably indefinite I would ask: where do they think the demand will come from in future for a large number of our service industries, important though they are?

Of course there is a great deal of co-operation, as has been said, between the Government and industry in a great many ways. I do not think we need go over it all. There are many daily contracts between businessmen and Whitehall. There are organisations like the British Overseas Trade Board and others which have been referred to. Perhaps I might quote one particularly successful example of co-operation in Scotland; that is, between the Scottish Office, through the Economics Department of Scotland, with the Scottish Development Agency, all under a determined Minister. Their success in strengthening the industrial scene in Scotland is a good example of effective co-operation between arms of government and industry. I do not think there is any lack of will to co-operate on this front. I am sure the will is there, both in government and in industry, but I still feel there is something of an "understanding gap", if I may call it that.

I hesitate to come back to something of a hobby-horse of which I spoke in the last debate, but I think this is very important. There is still a gap of understanding between, on the one hand, politicians and administrators, and, on the other, businessmen. I think that can be traced back to the rigidities of our educational system, under which specialisation occurs early and we each pursue our defined path towards a particular career. Once we are launched on that, through school and university, there is little opportunity for exchange of experience with the other side. We stream and specialise too much, I feel, and we have something to learn here from the French, the scene with which I am most familiar.

I know that when I go over there and look up my friends, whether socially or in business, or those I have come to know on the Franco-British Council, I am never quite sure what I shall find them doing each time I go back. Last time one of them may have been a senior civil servant and next time he may be chairman of a large industrial company. It can also happen in the opposite direction. That stems from their practice by which all the highflyers go through the same system of the "grandes écoles". They get to know each other; they have a common background, and later they have this facility to move between one side and another. I wonder whether we could not devise some institution or system of a similar kind to enable the same to be achieved here: otherwise, with the best will in the world, I do not think our industrialists and administrators can work and co-operate to such good effect as they do in France, Germany and Japan, for instance.

Many of the criticisms, if such they were—I call them rather "suggestions"—in the committee's report were much more of degree than of policy. Now that the Government have had time to reflect maturely, I think they are beginning to admit that there was quite a lot of sense in many of our suggestions. For instance, as regards the resources devoted to our overseas trade posts and to the British Overseas Trade Board, both organisations do a fantastic job in promoting our exports. Both have had their resources cut back almost to the bone.

Although I realise the need for economy of expenditure, there must be some differentiation between different forms of expenditure. I should have thought that, taking these organisations together, they are immensely worthwhile and give a good return. If your Lordships see the report of the British Overseas Trade Board, just published, it estimates that its efforts have stimulated exports of some £2 billion and that gives a return for money of something like 50 to one. I would urge that in this admirable field of cooperation more resources, rather than less, should be available.

I am not a pessimist. I believe industry has made itself much more efficient in the last few years, and I was delighted to see from the same report that last year British exports went up by a higher percentage than did our imports. But unless we go on becoming more productive—and this is the key to it—we shall slip back again in relation to our competitors. If nothing else, I believe that our labours of that year and our report have stimulated a discussion which has been immensely worth while. I hope that that will continue, and I urge the Government to take its suggestions seriously, even if some of them may have been inserted in a somewhat provocative mood.

6.17 p. m.

Lord Molloy

My Lords, the House is quite right in congratulating my noble friend Lord Bruce of Donington not only on causing this debate to take place, but also on the informative and stimulating manner in which he introduced his case. I am bound to say that when I listened to the noble Lord, Lord Brabazon, making his very brave reply I thought it was the first instance in my whole life of hearing a Front-Bencher whistling in broad daylight, because it was a devastating case that he had to answer.

There are one or two things that we have to get exactly right and we have really to understand. It is no good the noble Lords, Lord Aldington and Lord Brabazon, talking about people who want a few shillings a week increase because the cost of living has been going up. It leapt up in Sir Geoffrey Howe's first Budget, as we all know. They are told to behave themselves, to hold down their demands, while the Top Salaries Review Board has given in increases more than a steelworker or miner can earn in a year. These are the things we have to get right if we wish to get a proper spirit in our country.

I think we should also take full cognisance of what the Motion put forward by my noble friend says: To call attention to the case for constructive co-operation between Government and manufacturing industry to achieve economic recovery in the United Kingdom"— Then it goes on: and the question of the relevance of the privatisation programme". All it really seeks is to call attention to the case. This Government clearly need to drop some of their arrogance and listen to the points of view of other people who have been in government, in business, in commerce and industry. As I have said, the list of assets which was read out by the noble Lord, Lord Brabazon, will not be criticised by anybody; nobody will criticise it at all—it is very welcome. What it indicates perhaps is this. If we had only had the Aneurin Bevan form of public ownership instead of what we know as the Herbert Morrison form of public ownership, we would have had a much more efficient industry in this country; do not believe for one moment that ICI and other big companies have just about two directors and no one else. No way!

We should have had Ministers responsible for certain parts of the coal industry, certain aspects of steel making and the other great industries that were taken into public ownership in this great island of ours. The principle was right, but some of the forms of administration were wrong.

I must be fair to some of the people who ran the publicly owned industries before they were privatised, and I shall quote from an article in the Financial Times of 20th July 1985 which stated: Some senior people say moving to the private sector can dramatically improve a company's image. Keith Stuart, the chairman of Associated British Ports, says that when his company was in the public sector, everyone assumed it must be a money-losing monopoly. Yet ABP, which had not been a monopoly, had been self-financing for 10 years before it was privatised. 'No matter how good our PR effort, we could never get over this shibboleth of being in the public sector.' Mr. Stuart says, 'When we were privatised, one advantage we had not anticipated was the sea change in public opinion. Overnight, we were seen to be a good thing'. It had been a good thing for 10 years, and it would not be a bad idea if, in the interests of British industry—not of political argument—some Ministers and Government spokesmen also made that point on behalf of those who ran efficient sectors of publicly owned industries.

I believe that we must reorganise our industrial base. We must of course maintain capacity and perspicacity. The motto must be to up-date our technical skills, technology, computerisation and science. I should like to give credit to the Government for funding the microelectronics education programme. That was a very wise thing to have done.

The CBI, the TUC, commerce, manufacturing industry, energy production and the service industries must be brought together. We must not let them act in isolation nor let them be seen individually. We must have national co-operation. We must combine to achieve economic recovery or even to get back to where we were. What a wonderful thing it would be if we could only get back to the industrial production and situation that was left by the Callaghan government and which was taken over by Mrs. Thatcher! We have not even reached that position yet. How about that?

Let us have no rubbish. It is appreciated in industry, commerce, the universities, the trade unions and the CBI and it is about time that we talked about it: Great Britain's first objective is to get back to the status that Mrs. Thatcher inherited from Mr. Callaghan's government.

As I have advocated many times, we should look at the 1984 recovery in the United States where the private sector generated 3.5 million jobs. But as has been pointed out by American technologists and economists, those great endeavours could not have taken place without the massive support of the public sector in the United States.

The 1979–81 drastic decline in manufacturing industry is something about which we must take full cognisance. I am not one who believes in allowing the bawling of the past to drown the whispers of the future. We must look back to see what mistakes we made. Any prudent mother does that. Any prudent company director does that. Any prudent bank official does that. Why do the Government not do it? That is what the noble Lord, Lord Bruce of Donington, is advocating. We must have the courage to acknowledge our errors and recognise that we have our priorities wrong.

I happen to believe that the Government have been totally obsessed with privatisation which they have put before the nation's great interests. It is not so much a case of selling the family silver and assets; the Government are selling the family tools. They are selling what the nation requires to organise itself and which has served us so well, despite all the nonsense we have heard from the noble Lord, Lord Marsh. I shall have a little to say about that later.

What happened from 1945 to 1951 has been pointed out. It was a far greater miracle than anything achieved by any German at any time. We were superior to the French, the Germans and the Italians. The noble Lord, Lord Marsh, might have a yen for them—and he is entitled to it—but I shall not be stopped from saying a word for Great Britain. One remembers that we had full employment and we started to gird our loins. We could then help France, Germany and Italy. We did a great deal as well as slowly realising some of our great achievements, such as the social services, the National Health Service and the housing projects. All those things were done at the same time by the government.

There have been two Tory scourges. The first has been the scourge that followed 1951 for 13 years and the second has been the Tory scourge of the past six years, from which we are suffering so terribly now.

Only the other week I read an article in the Sunday Times about United States economists who had taken the same view. Reagan had the sense to read Franklin Delano Roosevelt who, with the aid of Keynes and Galbraith, started a form of public endeavour. The great private enterprises that followed, which meant so much to America and meant so much to us in 1938 and 1939, were born out of public endeavour. The USA, with President Roosevelt, spent and prospered. That was the motto of Keynes and Galbraith. They spent in the public sector and prospered. Conservatives pooh-pooh that idea. They have no right to. They should consider it. It has worked before. It worked for us. We were able to pull ourselves up in the late 1930s.

The noble Lord, Lord Aldington, called, rightly I believe, for prudent government intervention. I believe that the Government should provide the basic good, economic earth for private and public endeavour. The Government should listen to things that have been said in previous debates. They should listen to Members in this House who support them and those of us who never will. Our ideas should be examined. If that does not happen, we are not a Parliament. That is what Parliament is all about.

In his speech on the overseas trade Select Committee's report the noble Lord, Lord Boardman, gave a better example than I can. On 3rd December 1985 he said: Also disappointing was the immediate reaction from some members of the Government. My noble friend Lord Aldington has referred to them. It was a little uncomplimentary to the distinguished witnesses who gave evidence and possibly even to your Lordships' House, to write off the report in the way that it was written off within an hour or two of it being published".—[Official Report, 3/12/85; col, 1241.] I think that that is something for which the Government will always be remembered. That tremendous report captured the imagination of so many people. It was a terrific report, but it was met by the most appalling arrogance.

If we are to create a climate of co-operation throughout our industry, we must involve all the people. It would be silly to concentrate only on publicly or privately owned industries. We must also seek justice in the distribution of rewards. That is becoming very important, because in public and private industry the fundamental element that we must have is a contented workforce, whether it is made up of specialists, scientists or top flight craftsmen. Industry will never get over what is now happening in education. This is something we have to avoid. I applaud immensely the help which young people are getting to start industries of their own and to become the entrepreneurs of the future; it is an extraordinarily good thing. But the initial assistance has not been enough for the inventive young entrepreneur, and I hope there will be more cognisance of that submission as well.

While the great publicly owned industries are the property of our people, and the boards and Parliament constitute the nation's management, let us also provide the greatest possible freedom and stimulus to vitality and progress in all sectors. The British people look to their Government to defend them. I do not believe for one moment that they take the view of the noble Lord, Lord Marsh, that all governments are a nuisance, that the House of Lords is a nuisance, that the House of Commons is a nuisance and that having Cabinets is a load of rubbish. I do not believe for one moment that any sane person accepts that submission by the noble Lord, Lord Marsh.

What I am sure they would not want, if there were a complete free-for-all, is to end up in the bogland of the imagination of the noble Lord, Lord Marsh, which would be a terrifying prospect. The people of this country want their Government to provide education, they want their Government to oversee and help local government and they want to see their health service looked after. They believe in law and order and believe that their police forces should be assisted and not left. Does anyone suggest that we should have privatised police forces, a privatised navy, or a privatised Royal Air Force? That is the barmy sort of argument that we have heard from some quarters today.

The submissions of my noble friend Lord Bruce of Donington have been supported in all parts of the House. Indeed, the noble Lord, Lord Aldington, could find only two issues on which he could support the Government. That, in itself, should cause the Government serious worry, coming from a very eminent person. That, together with the submissions of my noble friend Lord Bruce and of other speakers on all sides of the House, should cause the Government to look at where we are heading. They must realise that our British people are the last people who will want to get rid of their government, as was hinted by the noble Lord, Lord Marsh, and to get rid of their local government. They believe that the government are there to guard their livelihood, to defend their freedom and to enhance democracy.

I conclude by saying, after all the economic arguments that have been submitted, that one thing is absolutely vital, We have to ensure at all times that, so far as is humanly possible, we have a contented and even adventurous workforce of scientists, teachers and everyone else. They must be proud of what they are doing. They must really believe that all their endeavours in the schools, in the universities, in the pits and in science and technology will create for us all a better Britain in which to live.

6.33 p.m.

Lord Donoughue

My Lords, this has been a valuable debate, which enables us to stand apart from the extremes of party ideology and to look at some of the most important questions. We are genuinely grateful to the noble Lord, Lord Bruce of Donington, for so fully setting out the issues at the opening of the debate. I thought that the noble Lord, Lord Brabazon, presented a reasonable, welcome and unhectoring attempt at a shaky case. The noble Viscount, Lord Chandos, in particular, introduced a city and an international dimension which was extremely valuable; and, of course, we are grateful to the noble Lord, Lord Aldington, for the independence of his expertise. I should like to concentrate briefly on the privatisation side of this debate, because the manufacturing question has been well explored, and to look at two points—the competitive aspect and the haste of the privatisation programme.

The plausible case for privatisation, which was well made by the noble Lord, Lord Brabazon, is the introduction of competition and the benefits of a market economy. We understand the attractions of that, having had some experience of the alternative, but what is our experience of the privatisation programme? We have already had British Telecom where, despite the excellent efforts of Oftel—and what Professor Carsberg is trying to do there is commendable—the domestic competition that is provided is limited.

As regards gas—if one may look ahead to future debates here quite soon—that, I believe, is being sold unashamedly as a monopoly. One looks back to a brilliant editorial recently in the Financial Times that made the case against it. The noble Lord, Lord Brabazon, fell back upon regulation as the protection, but I doubt whether that is enough, nor do I think that it is meant to be enough. The monopoly of British Gas that is being offered for private investment is being offered with the benefits of the protected revenues of monopoly, because that provides a higher rating on flotation and therefore raises more money. If we are to have monopolies, surely they are better to be public monopolies with all the benefits of public accountability. If we are to be offered privatisation, please let us have the benefits of competition.

I wonder whether the Government's privatisation programme is in danger in some cases of betraying its own principles. On the programme of privatisation, I am concerned with what appears to be the precipitate haste. The British Leyland fiasco—because it can only be so described—is a sad example of that, where the billions of public money which have been invested to improve the situation were to be handed on to, sadly, foreigners and others too soon. One wonders why the Government were not willing to wait for the fruits of that investment to come along. It smells of dogma, of ideology. Why not wait until it is ready, as Jaguar, which has benefited from privatisation, was ready? Surely there is a role for public ownership in a mixed economy.

I thought that the noble Viscount, Lord Chandos, cogently and convincingly argued that there cannot be an arbitrary line that the Government draw where they say that they have no responsibiity beyond that. One role is nursing casualties back to economic health. We have had privatisation, and we are threatened with more, and it seems not to meet the desirable principles of more competition and improving the economy which are based partly upon ideology. I feel that ideological privatisation is as bad as ideological nationalisation.

Also, one wonders about the other motives behind privatisation and the objective of financing the next election. The more rapidly these privatisations come forward, with suggestion of haste, the more we see a process of recycling the proceeds of public asset sales into the private pockets of the electorate before the autumn of 1987. I suggest to your Lordships, though I admit that most private individuals who are lucky enough to invest will welcome the proceeds, that that haste may be contrary to the interests of the industries concerned. Although we all understand the radical alteration in the balance of the industrial economy that the Government are attempting, with the purpose, as stated, to make it more internationally competitive, which, in principle, has its attractions, we need to ask: what is the current practice?

What is troublesome is where we see private monopolies being created. We see industries being dumped on to the market before they are ready and manufacturing treated as a poor relation, with little prospect of improving employment there, which ought to be the first priority of any government of this country. We see the most massive restructuring of our industrial economy in 40 years, undertaken partly for reasons of electoral economics. What worries me is that, once again, manufacturing industry is being sacrificed to politics and to dogma. I cannot believe that that is in the long-term interests of our economy.

6.40 p.m.

Lord Ezra

My Lords, as a member of the Select Committee on Overseas Trade, which was so ably led by the noble Lord, Lord Aldington, I am delighted to be taking part in this debate and am particularly grateful to the noble Lord, Lord Bruce of Donington, as other noble Lords have been, for introducing it. I hope very much that this will not be the last time that we shall be talking on this vital subject.

The question we have to decide first of all is the nature of the problem. Here I should like to take up a point made by the noble Lord, Lord Marsh, to whom I always listen with rapt attention. The noble Lord has a compelling way of making his points. He said that the fact that manufacturing industry was showing a relative decline in Britain was reflecting what was going on in other countries and that other major industrialised countries were showing the same symptoms.

The noble Lord was in good company in making that point because it was made by the Chancellor of the Exchequer when he spoke to our Select Committee. This is what is written in our report: It was argued before the committee by the Chancellor of the Exchequer that all advanced industrial countries have seen manufacturing decline in relative importance as a share of their GDP but it is significant"— this was added by ourselves— that only the United Kingdom has seen any sustained absolute fall". That is demonstrated in the chart on the following page.

The fact is that when we compare ourselves with other countries we are in a relatively worse position and there is a problem that we have to try to put right. Indeed, if there were not such a problem, why has Industry Year been launched with such enthusiasm on all sides, its objective being to change the attitude to industry, a point which was made in his eloquent speech by my noble friend Lord Chandos and repeated by many others? I believe that Sir John Harvey-Jones in his recent lecture, which many obviously witnessed because it was repeatedly referred to, was right in his key statement to the effect that in the United Kingdom manufacturing is fast becoming an endangered species. That is the problem that we have to face. I do not think that anybody who draws attention to that problem is necessarily being either pessimistic or optimistic. It is a statement of fact and it indicates that there is a problem which has to be dealt with.

How are we going from here on? I should like to refer here to what the noble Lord, Lord Brabazon, said in his usual moderate manner about the impact already created by the fall in oil prices, a point taken up, quite rightly in my opinion, by the noble Lord, Lord Aldington. The noble Lord, Lord Brabazon, in company indeed with the Chancellor of the Exchequer, who referred to this on the occasion of the Budget Speech, implied that the findings of the Select Committee report had already been nullified because of the vigorous response in this country to the fall in oil prices. But, as the noble Lord, Lord Aldington, reasonably pointed out, we do not yet know what the effect of all this will be. All we know, on the one hand, is that a substantial amount of revenue has already been lost and will continue to be lost through the lower oil price for as long as it lasts; what we do not yet know is whether that will be made good. We hope it will be.

But in any event this is not the issue to which the Select Committee was addressing itself. It was not talking about the possibility of an oil price reduction; it was talking about in due course the oil reserves of the United Kingdom being reduced, possibly at a time when there was a strong demand for oil, and we should therefore cease to have that major resource at our disposal which had been so valuable over recent years. That was the issue to which we addressed ourselves. We said that that was a possibility and therefore we ought to address ourselves as to how we put it right. Our conclusion was that the only way we could properly put that right would be to reinvigorate manufacturing industry.

We have had many views on this subject during the course of this debate and there is no point in going over a lot of the ground again. What I should like to suggest is that there are certain specific ways in which the case for "constructive co-operation", which is the wording of the Motion, can be applied. I should like to identify some of them. I have five points. I dare not call them a policy, because that apparently is not a word we can use any longer. I dare not even call them a strategy, because of the noble Lord, Lord Houghton, being against that. But the noble Lord talked about having a check list, so I gather we can use that word and I shall produce a check list.

The points to which I feel we should be attending at the present time on as co-operative a basis as possible are the following. The first is the level of interest and exchange rates. I know that we have all repeatedly referred to this. Fortunately, interest rates are beginning to come down and the exchange rate in relation to our European competitors has also come down. But interest rates are still very much higher than in competing countries. We cannot be satisfied until we are at the same sort of level. But there is another aspect of interest rates to which I should like to draw attention.

I have been addressing a number of meetings at which small firms were represented. I know that the Government have a strong policy for supporting such firms, for encouraging start-ups and helping them to keep going. But one thing they all complained about was the high cost of money, and they are at the higher cost end of borrowing. They have to pay the highest terms that are available. Furthermore, if they seek to take advantage of the Government's loan guarantee scheme, they have to pay 5 per cent. on top of what is the highest going rate on which the bank will allow them the money. This to my mind is a serious impediment for smaller enterprises, particularly those seeking to start up.

In the course of our work on the Select Committee we visited a number of countries and a group of us visited France and Germany. In both those countries, as your Lordships are probably aware, there are organisations which provide funds for small enterprises, at interest rates lower than the average. In other words while in the United Kingdom the smaller enterprise pays higher than average rates, in Germany and France there are provisions for them paying lower than average; in the case of Germany, through the Creditanstalt fur Wiederaufbau, and in the case of France, through the Credit d' Equipement des Petites et Moyennes Entreprises. These organisations have lasted for many years and have been a great success story; we suggested that this situation be looked at in Britain. That is one aspect of the problem of interest rates which I believe we ought to be examining with care.

When we come to the exchange rate, it was noticeable in our deliberations that virtually all the industrial witnesses who appeared before us said two things. First, they wanted the exchange rate to be relatively competitive but, above all, they wanted stability. It was the instability of the rate which worried them most as businessmen, whether they were exporting or had to import goods. The instability was what they were worried about.

I must say that I am rapidly coming to the conclusion that the Government have no intention of moving fully into the European monetary system. Those of us who support that as a means of achieving stability have been asking questions for years and have always been met with the same answer. The question 1 should like to put is no longer "when are we going to go in?", because I know the answer that the noble Lord will give me. I know it as well as he does. What I should like to ask him is, on the assumption that this is not on, because we have been through every conceivable circumstance, what is the Government's alternative strategy for achieving the stability of the currency that we so badly need? Or are we to continue to have a currency that jumps about like a yo-yo? When the catering hands on the Norwegian rigs decide to go on strike sterling increases. When Mr. Volcker has 'flu sterling diminishes, and so on. It is a ridiculous situation that a major currency should be subject to these extraordinary quirks of circumstance in overseas countries. I believe that we should now be talking seriously about an alternative way in which we can obtain a greater degree of stability in our currency.

Secondly, I come to the infrastructure. I know that every time the infrastructure is mentioned Ministers on the Government Benches heave a great sigh and say "Here they are again. They want to spend an awful lot of money that we do not have and we shall run into balance of payments difficulties, and so on". I do not believe that that is correct. In my opinion, an increased amount of infrastructure investment can stimulate the economy in a way that little else can.

I recently visited the Docklands which is quite near here. It is a most impressive experiment. A great deal is going on there. There is much new investment. The way in which it has been launched is by the Government setting up the Docklands Development Corporation and giving it the task of investing in the infrastructure. According to the 1985 report of the corporation, £141 million has so far been spent on the infrastructure—that is, roads, water supplies and electricity connections—but that has generated £800 million of private investment.

If that has happened in the Docklands why do we not replicate it elsewhere in the country? Why do we not go to town on this? We know perfectly well that our infrastructure needs improvement, that the quality of housing is deficient and that the roads are inadequate, according to the recent CBI report. There has also been another report on the water supply system in certain parts of the country. Here is a way of stimulating the economy and getting a good return for public investment.

Thirdly, there is the application of new technology in industry. We are lagging behind others in this respect. We have to come to terms with technology, and the right way to do that is to make sure that we move from the research stage to the development and application stage. I recently visited one of the major manufacturers of information technology equipment. I asked in terms of the application of computer-integrated manufacturing (which is the ultimate form of controlling these things through information technology) what was the percentage of firms in this country that had adopted it. The company said it was estimated to be in the order of 5 per cent. There are degrees in the use of information technology in many other enterprises but that was the figure given to me. The figure for America was thought to be about 15 per cent. and for Japan about 25 per cent. We have a long way to go yet. The Government have done a fair amount but a much more determined and cooperative thrust is needed to get that moving.

Related to that, and my fourth point, is research and development. At our Select Committee we were advised that not only was our civil research—leaving aside defence research—on a lesser scale than in many other countries but its effectiveness was also less that others. This came from the evidence we had from NEDO which had gone into this subject. When we went to Germany we found that the government there contributes a substantial amount to industrial research. Up to 40 per cent. of the amount spent on research in enterprises in Germany is provided by the government. Therefore, the whole area of research and development needs to be looked at.

Finally, on the question of training a great deal is, of course, being done but many of us still feel that we do not yet have the mixture right. Certainly we do not have it right compared with Germany or with the system they are now adopting in France. In other words, others in this area as well are moving ahead more effectively than are we. This need not be taken in a negative sense. It is a challenge.

I should like to conclude by saying that we are now at a point in our economic development where we can identify our problems. We know that we have the resources and the skills to resolve them. We can see what some other countries have done to deal with their problems. What is now necessary is a major, cooperative effort to get the whole thing moving.

6.56 p.m.

Lord Williams of Elvel

My Lords, the Motion before your Lordships, which has been so ably moved by my noble friend Lord Bruce of Donington, has come at a very opportune moment. As many noble Lords have remarked during the debate, it is part of a continuing discussion which we have been having in your Lordships' House—indeed, which is being maintained in other places—about the future when we come to the end of North Sea oil. What we are witnessing in one form or another is the beginning of the end of the North Sea oil bonanza.

Nobody believes that the oil price will recover significantly before North Sea oil production starts to decline. The debate now turns on how we cope with the transition to a future in which our mistakes will not be masked by North Sea oil revenues. This was the theme, in many respects, of the report produced by the very distinguished Select Committee of your Lordships' House chaired by the noble Lord, Lord Aldington, and has been the theme of much of today's debate.

There will no doubt be future inquests about what happened to the oil money. There will be recriminations, and no doubt a great deal of heat and noise will be generated. But we should leave those behind us for the moment and concentrate on what we can do in the future. Equally, it is no good pretending that it simply is not going to happen. It is no good continuing to build a strategy for economic recovery on the basis of an uncertain oil price or on the base of a tax-cutting programme financed by the proceeds of privatisation. The oil price, to which the noble Lord, Lord Ezra, referred, appears now to be determined by a small group of Norwegian pastrycooks. That is not a very sensible way of looking at our economic policy and deciding what revenues will be in the future.

The privatisation programme in its present form depends entirely upon a receptive stock market. If the market falls, who is going to buy British Gas? Who will buy the water authorities? I sometimes wonder who is going to buy the water authorities even in a booming market. I have a nasty feeling that the result of the Fulham by-election, however satisfactory it may be to some of us on this side of the House, may not be appreciated so much in the City of London. What price British Gas if the Financial Times Index falls 200 points? What price the water authorities as utility stocks if the gilt-edged market turns very weak?

But that same financial strategy, as I understand it from the noble Lord, Lord Brabazon, is indeed the Government's programme for economic recovery; nothing else—again as I understand it—is needed. Market forces will take care of the rest. All the Government have to do is to create the appropriate financial conditions and it will all follow automatically as night follows day.

I hope that we have said enough on repeated occasions for your Lordships to be quite aware that on this side of the House we have no belief at all in this financial strategy. In our view it is now no more than an exercise designed to give maximum room for manoeuvre in the pre-election period, as was brought out by my noble friend Lord Donoughue. By no stretch of the imagination can it be called a programme for the long term, or even a medium-term economic recovery.

It is to the achievement of that recovery that we have to address ourselves today. For instance, is it to be achieved by the privatisation programme? The noble Lord, Lord Marsh, and, I think, the noble Lord, Lord Brabazon, in parts of his speech, seemed to think that the process of privatisation by itself will create an economic recovery: "Everything else has failed, so let's try this".

I wish I had their confidence. I have investigated—as far as I can, because it is a very difficult exercise—the performance of companies pre-privatisation and post-privatisation, and all I can say is that I have no solid evidence that privatisation by itself brings any increased efficiency at all. After all, the profit turnaround of a number of companies which were subsequently privatised came before privatisation—witness Jaguar, Britoil, British Telecom, which doubled profits between 1980–81 and 1982–83, and, dare I mention it, British Airways. My noble friend Lord Molloy referred to Associated British Ports. Alas, Associated British Ports lost more than £6 million in the year after privatisation, having made a profit before, so there is not a great advertisement there.

If the noble Lords, Lord Brabazon and Lord Marsh, mean privatisation in the sense of employee ownership, then I think we can come much closer together. For us, privatisation in the form of just selling companies on the stock market does not have a great deal of appeal; but employee ownership—and I think that this has been commented upon elsewhere, and I pay my due deference to the noble Viscount, Lord Chandos—is a theme which has been consistently put forward by the Liberal Party and a theme which I think is coming more and more into the picture as a serious and constructive way to move forward.

But the privatisation programme has some pretty nasty side effects as well. There is the loss of revenue to the Exchequer when publicly-owned assets are sold off. When you tot them up looking at 1986–87, it comes to somewhere around £3 billion a year lost even before the sell-off of British Gas. Then there is the market effect. Has privatisation increased the total level of savings or has it simply drawn funds from other forms of saving? The answer is perfectly clear. The savings ratio has fallen over the last three or four years during the privatisation programme, and the clear implication is that this programme has in fact drawn funds from other forms of saving. In other words, quite simply it has helped to keep interest rates up.

If the economic recovery as some mystical result of privatisation is a chimera, then economic recovery based on continuing oil revenues must be something of a sour joke. This brings us back to the first central theme of this whole debate, which I am not sure that the Government have fully accepted and which I think was well illustrated by the noble Lord, Lord Ezra, and that is the importance of manufacturing industry in any economic recovery that is worthy of the name. My noble friends Lord Rhodes, Lord Ardwick and Lord Dean of Beswick, if I may say so, spoke very eloquently from their own regional and direct experience about what had happened to manufacturing industry. An economic recovery means, at least in the language of this side of the House, not the Financial Times Index hitting 1400 or the basic rate of income tax coming down to 25 per cent., but a return to what can reasonably be described as conditions of full employment. No other definition is acceptable.

After the report produced by the Select Committee which was chaired by the noble Lord, Lord Aldington, I doubt whether any serious commentator would take the view that services, dividends from foreign investments and so on will in any sense at all do the trick by themselves, valuable as they may be. My noble friend Lord Ardwick made that point. Nor indeed will the revival of manufacturing industry by itself solve the unemployment problem, but it is a necessary condition of that solution, because in spite of all that has been said to the contrary the demand for manufactured goods in Britain, as in other advanced countries, increases at just about the same rate as total domestic demand for all goods and services. There has been no shift to services in the total spend. Domestic spending on manufactures is estimated to have fluctuated at around 37 per cent. of total domestic spending for the last 25 years. What has happened, of course, is that we have started purchasing many more goods from abroad, and, as the noble Lord, Lord Ezra, pointed out, only in Britain of all the main industrial countries has the volume of manufacturing output risen less than total output over the last 25 years. Of course, the result has been the dreadful deficit in manufactured goods which now confronts us and which indeed was the object of the study of the Select Committee.

In the early 1960s the proportion of imports in domestic spending on manufactures was about 10 per cent. By 1985 it had reached about 50 per cent. On the other hand, exports of manufactures have generally risen at about half the rate of imports and our share of world trade has therefore fallen almost continuously, reaching an all-time low in 1985. This point was taken up, and one or two pertinent questions were asked about it, by my noble friend Lord Hatch of Lusby.

So the question is no longer whether manufacturing industry will have to bear the brunt of the recovery process, but how best to ensure that it can and does. Here is the real point of the Motion put down by my noble friend Lord Bruce of Donington.

There are two possible solutions. There is the market forces solution, which I think was advocated by the Government and the noble Lord, Lord Marsh, in which all markets, including the labour market, are free to the point where they are wholly untrammelled, and they operate as in the first chapter of any elementary economic textbook of classic economics; or there is the recognition that such a dream, or a nightmare if one likes to call it that, cannot really operate in the real world, and we have to live with an imperfect world peopled by human beings and not by robots.

As I understand it, the Government take the former view. To judge from their rhetoric, market forces are supreme. We on this side of the House take what we believe to be a more realistic view. The problem about the Government's view—and, if I may say so, the view of the noble Lord, Lord Marsh—is exactly illustrated by the current figures for manufacturing costs. In spite of a somewhat ambiguous reply from the noble Lord, Lord Lucas of Chilworth, the other day at Question Time, the Monthly Digest of Statistics reports that, although the cost of materials and fuel for manufacturing was down by 9.5 per cent. from February 1985 to February 1986, manufacturing output prices were up by 5 per cent. What we did not get out of him was that average earnings in manufacturing were up by 8.2 per cent. in that year—and that was with nearly 4 million unemployed. If ever market forces did not work, there is an example. It is abundantly clear that the market forces in this particular area, as in others, are not producing the desired result. What we are calling for in this Motion is not a free-for-all or jungle law. We are putting the case for constructive co-operation between government and manufacturing industry.

Lord Soames

My Lords, is the noble Lord suggesting that it should be the job of government to introduce some form of incomes policy to ensure that in manufacturing industry wages do not rise faster than either productivity or the inflation rate?

Lord Williams of Elvel

My Lords, I speak at the moment, of course, for myself, but I believe that I will speak for my party in the future. Yes, I think that we have to have some form of incomes policy that applies not only to wages but also to salaries, to dividends and to all forms of income. We have to be clear that this is what we are talking about.

The Government have an unparalleled opportunity to take advantage of the conditions generated by the reverse oil shock. If the last 15 years have seen tremendous turbulence in economic conditions in the world and in the United Kingdom as a result of two successive and sudden rises in oil prices in the early and late 1970s, the late 1980s should see the reverse. By all rights, we should be moving into calmer waters, and the world should be able to resume the kind of economic growth path that it followed during the period from 1945 to 1973. I was sorry to see the noble Lord, Lord Marsh, fall into what I regard as a current fashionable trap of denigrating the period between 1945 and 1973. I was particularly sorry in view of the fact that he was a distinguished member of Government within that time.

Between 1945 and 1973 this country enjoyed a period of economic prosperity such as it had not enjoyed since the reign of Queen Elizabeth I. We should never forget that. In those years the trend of growth rate in our gross domestic product was 2.8 per cent. per annum. The trend growth rate in manufacturing output was 3.1 per cent. per annum; in manufacturing investment, 3.5 per cent,; and in manufacturing productivity, 2.9 per cent. It is since 1973 that we have fallen behind these trends in all areas—in total output growth, in manufacturing investment and output and in productivity, and even the relatively fast growth in manufacturing productivity over the last few years has only brought it back up to the 1950–73 trend line.

Now we have an opportunity to climb back again. It has been said by many noble Lords in this debate, although it cannot be said too often, that the climb back must be based on a revived manufacturing industry. No other solution is remotely realistic. For this to happen there must be partnership between all those concerned—Government, trade unions, management, consumers, educators, researchers and financial institutions. In short, there must be a systematic and co-ordinated national effort—a change of attitude, if you like—such as that called for by the noble Lord, Lord Aldington, who chaired the Select Committee. Whether you call this a national industrial strategy or a change in attitude, or whether you say that we should address ourselves to a check list, as proposed by my noble friend Lord Houghton—a check list ably filled out, I thought, by the noble Lord, Lord Ezra—does not really matter. That is a question of semantics. There will have to be some form of institutional framework around which this check list and strategy can operate. However, I would not characterise that, as I believe the noble Lord, Lord Marsh, did, as being comparable to Gosplan. There is no doubt in my mind—

Lord Marsh

My Lords, I am grateful to the noble Lord. I made the position clear. I was not suggesting that it was comparable to Gosplan. I was saying that either you have a Gosplan economy or a free economy. You cannot have the middle road that the noble Lord suggests.

Lord Williams of Elvel

My Lords, I am grateful to the noble Lord for his intervention. We have to recognise that there is a complete difference of opinion between the noble Lord and myself and, indeed, my party. It is clear, as the noble Lord himself put it, that there are strong opinions held on this. I do not believe that what he says is true in France, in Japan or even in Germany. I do not believe that what he says is true in the United States. We have to be in the area of a mixed economy. I have no doubt that there is a majority among your Lordships for this type of solution. I have no doubt that there would be a majority in another place to unite behind the Government if they adopted this sort of solution,

But the Government, as I believe the noble Lord, Lord Aldington, pointed out, have to change tack. They must stop believing that there will be an automatic return to prosperity. They must suspend the irrelevant and divisive privatisation programme. They must revive the procedures of discussion and consultation that they have abandoned. I do not mean simply working contacts and information: there must be consultation. Above all, the Government must accept that they have a leading role to play in industrial regeneration.

If they do these things, not just as an election gimmick but as a genuine change of heart, they will have our support and, I believe, the support of your Lordships' House. But if they fail through indolence, perverseness or, worse still, through rigid, doctrinal commitment, the future is bleak indeed. I have no doubt that if they follow that path they will not be in their place for long.

7.16 p.m.

Lord Brabazon of Tara

My Lords, with the leave of the House, I shall now attempt to answer some of the points made during the most interesting debate of the noble Lord, Lord Bruce. I echo the thanks of all those who have said how grateful we are to the noble Lord for raising this subject. The noble Lord referred to the report of the Select Committee on Overseas Trade of this House on the deficit in trade in manufactures. My noble friend Lord Young of Graffham said in this House, when we debated the report, that the Government welcomed many of its recommendations. But the Government believe it is important to ensure that the whole economy's competitiveness is able to adapt and not just that of manufacturing industry. The Government accept the need for an efficient manufacturing industry. But a policy of selective support and substituting the judgment of government for that of the market is not the answer.

The noble Lord, Lord Bruce, emphasised the importance of interest and exchange rates. I agree. But the increase in oil production and prices in 1979–80 was inevitably reflected in the exchange rate. My noble friend Lord Aldington reminded us of this, and, of course, of a lack of competitiveness from which we had suffered for many years previously.

The noble Lord, Lord Bruce, referred to the National Economic Development Council. The Government value the National Economic Development Council as a forum for an exchange of views with industry not only at the global level in the full council but also, and particularly perhaps, in the little Neddies. However, experience simply does not support the view that grand plans initiated by government or a Think Tank can achieve the improvement in performance that we all seek. The noble Lord, Lord Marsh, dealt most effectively with that point. Other noble Lords repeated it.

The noble Lord, Lord Bruce, contrasted our free market policies for industry with the common agricultural policy. I would be the first to agree that the common agricultural policy is not perhaps ideal. That is why we in the Government spend so much of our time trying to improve upon it. I would, however, point out to the noble Lord, Lord Bruce, that agricultural policies over the years since the end of the war have resulted in our near self-sufficiency in food products. That is hardly a comparison that one can make with the motor industry.

I should like to correct one point made by the noble Lord, Lord Bruce, concerning the tin industry in Cornwall. We have consistently made clear that the Government will consider assistance towards the cost of viable projects aimed at enabling Cornish mines to adapt to changed market conditions. I should like to put that point on the record.

The noble Lord also said that there were 2.7 million direct shareholders in the country. He suggested, I think, that they were doing too well out of things at the moment. I remind him that there are 27.7 million direct shareholders but there are also an enormous number of others who have an interest in pension schemes or insurance policies or indirectly have an interest in the welfare of the market.

The noble Viscount, Lord Chandos, rightly emphasised the danger of comparisons with other countries with different historical, cultural and political backgrounds and that we could not replicate the conditions of Germany, Japan or the USA if we tried. However, in our role as a purchaser, upon which the noble Viscount also dwelt, we must reconcile our duty to obtain value for public money with responsibility for the health of major manufacturing companies.

The noble Viscount emphasised the importance of higher and further education to the future of industrial performance. I referred in my opening speech to the funding of additional places in higher education as a subject which is most relevant to industry. That is a matter about which we are doing something. The number of students on engineering and vocational courses is growing significantly. Industry is making a great effort on updating and retraining. He also referred to the cuts in polytechnic places reported in The Times the day before yesterday. Perhaps I might recommend that he reads the letter in The Times yesterday—which he may have done—from my right honourable friend the Secretary of State for Education which puts this whole matter in perspective. It gives a clear understanding of our policy there.

The noble Lord, Lord Molloy, and other noble Lords, suggested that we were obsessed with privatisation; the noble Viscount urged us to stop it forthwith. We are not obsessed with privatisation. We have tried it and we have found that it works very well, as I outlined in my opening speech. Therefore we shall continue with it.

My noble friend Lord Aldington—to whom so many noble Lords paid tribute on his chairmanship of the Select Committee, and I join them—said that my right honourable friend the Chancellor and I viewed the fall in oil prices in a somewhat rosy manner. Let me repeat one sentence from what I said in my opening speech: The way the economy is adjusting to this that is, the fall in oil prices— gives reason for confidence that it will also be capable of adjusting to the loss of the remaining oil income over many years". I should not have thought that that was going too far. We should indeed recognise the favourable aspects of the price fall and draw encouragement from the calm initial response of industry and the financial markets.

My noble friend referred to the need for an industrial strategy to be put forward by the Government. The words "industrial strategy" tend to imply the full panoply of intervention and control which I do not think he wanted: he made that clear. However, our not having a grand strategy does not mean that we cannot have policies towards industry. We do have. Our aim is a thriving, competitive business sector. This means that all wealth-creating activities and all our aims are directed to that end. Fundamentally, a stable economic framework is what we are seeking. We are also working to help industry by encouragement of enterprise, restoration of incentives, removal of the burdens of business and, where appropriate, direct support for exports, research and development, innovation and other such matters.

The noble Lord Lord Houghton of Sowerby, referred to the call of Sir John Harvey-Jones in his Dimbleby lecture—which unfortunately I did not hear but have since read the transcript—for a change to a more positive attitude in this country to industry and wealth creation. The Government wholeheartedly agree. This is the main objective of Industry Year and of our efforts to increase the supply of technically qualified manpower.

I also sympathise with the noble Lord in his doubts about the strategy in the sense of a detailed blueprint for the future, particularly at this time of rapid technological change. I have a great deal of sympathy too for his strictures on the complexity of the corporate tax system. A major objective of the 1980 reform of company taxation was to introduce greater simplicity and neutrality so that decisions can be made on commercial rather than on tax grounds.

The noble Lord, Lord Rhodes—who is not in his place, I hope that he is all right—brought the debate firmly down to earth by describing vividly the impact of the difficult recent trading conditions in the North West on a specific small company. The noble Lord referred to the level of housing starts. In the three months to January private sector housing starts were 16 per cent. up on a year earlier, and that last year was the second highest level in 12 years.

The noble Lord, Lord Molloy, urged me to listen to those with experience in politics, commerce and industry. I therefore listened to the speech of the noble Lord, Lord Marsh, with great interest. He reminded the House vividly, and from personal experience, of the dangers of an exaggerated faith in the Government's ability to plan the direction of industrial evolution. He emphasised the great attraction to ordinary men and women of the ownership of shares in the companies for which they worked. The noble Lord mentioned in particular Vickers Shipbuilding, the most recent of all the flotations, and that over 80 per cent. of the workforce had subscribed for the shares.

The noble Lord, Lord Hatch, was disappointed that it was I who was to answer this debate and not my noble friend Lord Young of Graffham. I remind the noble Lord that my noble friend is Secretary of State for Employment; I am sure that he needs no reminding. This debate is to do with manufacturing industry and it would have fallen to my noble friend Lord Lucas of Chilworth to reply. He is abroad at the moment trying to get business for this country, and we wish him success. I am therefore afraid that the noble Lord has to put up with me.

The noble Lord accused me of not responding in my opening speech to anything that the noble Lord, Lord Bruce, had said in his speech. I pointed out that I would be trying to do so now. I can only assume that he was not listening to the speech which preceded his—that of the noble Lord, Lord Marsh—because he certainly made no reference to that speech.

The noble Lord accused not only me but other members of the Government of trying to fiddle the dates on which we base our statistics. He said that we should go back to 1979 or 1981 instead of always quoting from what is called the depth of the recession. Let me say that that was the sharpest world recession since the Second World War. It was accentuated in this country by the effect in the past years of overmanning and declining competitiveness, not to mention the inflation rate that we inherited from our predecessors which was running at an average over the five years 1974 to 1979 of 15½ per cent., which was six points higher than most of our competitors. The succeeding years have seen a genuine and soundly-based recovery in manufacturing industry in the United Kingdom.

The noble Lord then spent time talking about British Leyland. He said that was nationalised because it had failed in the private sector. I would not dispute that that was the case and that there can be poor management in both the private and public sectors. But I believe that good management has a better chance to show its skills, and hence contribute to wealth creation, in the private sector. This is why we believe, as does the British Leyland board, that to return British Leyland's operating companies to the private sector would be to the long-term benefit of the entire vehicle manufacturing business in this country.

The noble Lord referred to our overseas aid programme. I would be the first to agree that we have cut parts of that programme, but on the positive side we recognise the importance of overseas aid to our exporters. Since its introduction in 1977 almost 100 projects have been assisted under the aid and trade provisions, involving £1.7 billion worth of exports from UK companies. The noble Lord, Lord Dean of Beswick, also mentioned this subject.

Lord Hatch of Lusby

My Lords, will the noble Lord give way? The noble Lord has given figures of projects under the aid and trade provisions. Is he aware that the parallel support given by Japan to its exporters is 40 times as large as that given by Britain and that the parallel support of the French Government for its exporters is 20 times as large? Will he put his figures for government support for exports into their proper context?

Lord Brabazon of Tara

My Lords, I can understand Japan's figures being better than ours because Japan is a rather richer country. I shall certainly look into the figures which the noble Lord has mentioned.

The noble Lord went on to talk about the British Overseas Trade Board's expenditure. The Government remain committed to a balanced programme of export support. Last year we had nearly 7,000 participants at trade fairs. However, export promotion cannot be exempt from the general need in industry's interest to conserve public expenditure. I also note the views of my noble friend Lord Polwarth on this matter.

The noble Lord, Lord Ardwick, asked me to be more specific about what the Government were doing to help industry. I outlined a number of measures in my opening speech. I could mention to the noble Lord the restoration of incentives through simplification and reduction of taxes; we are working to reduce the burdens on business through the deregulation initiative of my noble friend Lord Young of Graffham; we are supporting industry through our help to exporters; and we are giving great support in particular to encourage innovation and help improve competitiveness. For instance, we are working to improve awareness in the application of the new technologies. Here I can mention two joint schemes with our European partners—ESPRIT and EUREKA. We are encouraging high-tech collaborative research and projects.

Since 1979 expenditure in support of industrial R & D, innovation and technology transfer has quadrupled. Policies are kept under review and from time to time reshaped so that funds are used efficiently and the taxpayer gets value for money. Since the support for innovation programme was launched in 1982, bringing together and rationalising help previously available through different routes, £790 million has been offered in support of more than 6,500 projects. Applications for this type of assistance increased from 400 in 1979 to 3,000 in 1983–84. I hope that that gives the noble Lord some further ideas about what we are doing on the positive side.

The noble Lord, Lord Dean, referred to the decline in manufacturing employment. I am afraid I have to tell the noble Lord that that is true in all Western industrialised countries, even where manufacturing output is increasing, as it is here. I accept that there are skill shortages in particular areas. In the information technology sector the IT Skill Shortages Committee, chaired by my honourable friend the Parliamentary Under-Secretary of State for Trade and Industry, Mr. Butcher, reporting in July last year, called for a new partnership between industry and education in order to tackle the skills shortage problem.

The noble Lord also referred to the problems of unemployment, particularly in the inner cities. The new package of employment measures announced in the Budget, including the expansion of the community programme and the additional measures to help the young and long-term unemployed will, I am sure, go some way towards helping with this problem.

The noble Lord, Lord Briginshaw, reminded us that our interest rates are still higher than those of our competitors. That is perfectly true, but at the moment our main aim in interest rates is the containment of inflation, and I think that any increase in inflation would be just as damaging to industry as higher interest rates. However, as the noble Lord will be aware, interest rates have come down by 1.5 points since the Budget and we must hope that they will continue on that track.

My noble friend Lord Polwarth referred to the dependence of the service industry on manufacturing industry. That is indeed true, but to some extent the same is true in the reverse: manufacturers depend on service industries. In some cases computer hardware and software is a definite example of that. I have already referred to export promotions.

I can assure the noble Lord, Lord Molloy, that I found no difficulty in defending the Government's case, as I think he thought I had. The noble Lord made two points. First, on privatisation, the noble Lord quoted the example of a change of attitude towards Associated British Ports after privatisation. As I have said, we are not saying that everything in the public sector is bad and all in the private sector is good. There is plenty of good work in the public sector, but the point is that commercial freedom does change attitudes and improve performance. The noble Lord, Lord Williams of Elvel, later quoted the case of Associated British Ports and mentioned how the profits declared last year had fallen. I would remind the noble Lord of the miners' strike, because a certain amount of the business of Associated British Ports was fairly closely involved with that.

The noble Lord, Lord Molloy, also said that we must update, and I could not agree with him more. That is why the Government have substantially increased the sums that they spend on encouraging the application of new technology, not just in new industries but also in the traditional and long-established ones as well. The noble Lord also urged me to return the country to the state in which Mr. Callaghan left it in 1979. If the noble Lord will forgive me for saying so, I think that I should like to resist that temptation.

The noble Lord, Lord Donoughue, made two main points on privatisation. I suspect that one will be better debated tomorrow afternoon—namely, the subject of monopolies—when we shall debate the Gas Bill. However, we believe that considerable benefits are to be wrought from privatising these monopolies, provided that the controls are satisfactory. Furthermore, provided consumers are adequately protected against monopoly abuse, why should they not benefit from the improvements and efficiency brought about by privatisation? The noble Lord also questioned the speed of privatisation. I do not think that the programme as a whole could be described as being carried out in indecent haste. After all, it has been going on since 1979. Equally, as we believe that privatisation brings benefits, we want these realised so that the economy as a whole benefits.

As regards British Leyland, we have long said that it should be returned to the private sector and our concern is for the long-term future of the business. Although performance has improved, much remains to be done in an increasingly hostile environment. We believe that this can best be done in private ownership.

The noble Lord, Lord Ezra, pointed out that among major industrial countries, only in the UK has there been an absolute decline in manufacturing. I submit that this reflects poor competitiveness over many previous years. Improvements in productivity, working practices and attitudes over recent periods give hope that we shall be able to match our competitors.

The noble Lord referred to the loan guarantee scheme. In the Budget my right honourable friend the Chancellor announced a three-year extension of the scheme and a reduction in the premium from 5 per cent. to 2.5 per cent. I am glad that the noble Lord, Lord Ezra, did not ask me to repeat the normal line on the exchange rate mechanism, which I have already done once today at Question Time. As I said then, my right honourable friend the Chancellor said why we would not be against joining the exchange rate mechanism, but that the conditions had still not, in our opinion, shifted sufficiently to justify United Kingdom membership just at this moment.

The Government do not have an exchange rate target, but it is part of the evidence of monetary conditions. Their objective is to maintain downward pressure on inflation. Exchange rate stability is indeed important, and it is not always clear what is the best way of achieving it, but I must say to the noble Lord that I would have thought that during the last few weeks, with the fall in the price of oil, the relative stability of the exchange rate over that period says a lot for the opinion of the financial markets on this Government's management of the economy, and which incidentally has allowed a 1½ per cent. fall in interest rates when many people would have expected the complete opposite.

The noble Lord, Lord Ezra, asked as well for more investment in the infrastructure, and quoted the example of docklands. The Government fully agree on the importance of the infrastructure. I sometimes feel that people do not believe that the Government spend anything on it at all, but we certainly do. This year total public sector capital spending is expected to be £21½ billion, which in anybody's book is a very substantial sum.

The Government are not anti-infrastructure. What is important is that it is cost effective use of resources, and it is these projects to which the Government try to give support. I would point to the increase in spending on certain things such as roads, up 25 per cent. in real terms since 1979. In regard to water and sewerage a further increase in investment of 18 per cent. is planned by 1988–89; and I could go on through rail, gas, and electricity. Capital spending in the health service is 21 per cent. up in real terms since 1979; and, as I say, I could go on.

Lord Ezra

My Lords, will the noble Lord allow me to intervene? One part of my question was concerned with whether the Government intend to replicate the successful dockland experiment elsewhere?

Lord Brabazon of Tara

My Lords, I believe that such an experiment is going on, I think, in Liverpool, but without checking my facts I could not confirm that. The noble Lord has a good point. It has indeed generated a terrific amount of interest and investment.

In conclusion, the noble Lord, Lord Williams of Elvel, painted I thought a rather surprising picture to begin with on one aspect of privatisation. He asked, what price gas if Labour wins the Fulham by-election tomorrow and the market falls 200 points? He also went on to ask what price water on the same basis if gilts turned very weak? Gilts, I might point out, are showing the lowest yields since 1972 at the moment. I do not think that implies that a great deal of faith would be shown by the market at the prospect of a Labour Government, if the noble Lord suspects that these things would follow from a by-election victory in Fulham.

However, we had one piece of common ground on privatisation, and that was employee share ownership. We would agree that this is vital. I think that I made that point fairly clearly in my opening speech. Indeed, we are achieving that aim. It is all very well for those who propose these policies, but we are actually achieving them.

The noble Lord pointed to the increase in import penetration in this country from the 1960s until now. Well, this is something we must try to reverse. It is all very well talking about exports the whole time, but import substitution is just as important a solution as increasing our exports. The vehicle manufacturing industry is one particular case in point. I bet that if I went outside into your Lordships' car park, I would find there 50 per cent. foreign-built cars. I think we should bear this in mind, each and every one of us, in our personal purchasing policy, so as to try to pick British where it is available.

The noble Lord pointed out that yesterday at Question Time my noble friend Lord Lucas might have been misunderstood in the figure he gave for the latest available output costs. I can confirm that they were up by 5.1 per cent., which is down—

A noble Lord

A rate of increase.

Lord Brabazon of Tara

A rate of increase—that is exactly what I am trying to say. They were up 5.1 per cent. year on year, which is, however, a smaller rise than they had last year. The noble Lord pointed out the difference between manufacturers' costs, which were actually down 9½ per cent. over the period, and the increase in earnings. I think those figures all tell the same story.

When challenged by my noble friend Lord Soames the noble Lord pointed us straight back to an incomes policy and a policy on dividends. That, taken with what the noble Lord, Lord Bruce, said in his opening speech on the case for a grand plan for the economy, puts us straight back, in my opinion, to the unsuccessful era of the late 1970s.

As I said at the beginning, the House must be grateful to the noble Lord, Lord Bruce, for the opportunity that today's Motion has given us to return to issues which will be crucial to our economic future. We have heard thoughtful and well-argued contributions from noble Lords of many viewpoints, but all sharing a common concern for a substantial improvement in our economic and industrial performance, which for far too long has fallen short of our capability.

The Government are convinced that the solution lies mainly in industry's own hands and that further selective intervention by the Government, with its inevitable costs elsewhere in the economy, will not help. We shall continue to concentrate on the proper role for government, releasing the energies of the private sector to seize the opportunities for change and growth which the coming years will offer.

7.47 p.m.

Lord Bruce of Donington

My Lords, I shall not detain the House very long, save to express my thanks to those noble Lords who have seen fit to take part in this debate. I am well accustomed, of course, to the various political arts deployed in another place and here, and I am very conscious that one has to take it as a matter of course that ideas that you have never uttered are put in your mouth in the course of the perfectly free play of debate that ensues.

I am most grateful also to the noble Lord who speaks for the Government on this occasion. May I assure him that he really has no need of the support of the noble Lord, Lord Marsh, to whom I thought he paid a very fulsome tribute. He will learn as time passes that the fealty of Lord Marsh, based upon his past history, is a matter which he has to take into account, and that when he does pass observations on matters that took place before 1959, when the noble Lord entered another place, he is not necessarily always the best authority. Nevertheless, I myself welcomed listening to the noble Lord, who I hope to be able to join in debate on another occasion.

I must offer my apologies to the House for not having dealt with the second part of the Motion, dealing with privatisation. I freely offer my apologies, and offer as the real reason for my abstinence on this occasion, which I hope the House appreciated, that it was due to the fact that the Motion for the Second Reading of the Gas Bill was put down rather later than the Motion on which I had the honour of addressing the House tonight. Therefore, being, with my noble friend Lord Stoddart of Swindon, heavily engaged in the debate tomorrow on the Gas Bill, may I assure the Government that they will have it in full measure tomorrow on privatisation. My Lords, I beg leave to withdraw my Motion.

Motion for Papers, by leave, withdrawn.