§ 11.32 a.m.
§ Lord Young of Graffham rose to move, That this House takes note of the White Paper DTI—the department for Enterprise (Cmnd. 278).
§ The noble Lord said: My Lords, in moving the Motion to take note of the White Paper today, I take great pleasure in welcoming the first contributions of my noble friends Lord Oxfuird and Lord Stevens of Ludgate. My noble friend Lord Stevens has shown that his industry is one which has responded to change substantially over the last three years.
§ I am also delighted to welcome my noble friend Lord Joseph. He more than any other is responsible for my being in your Lordships' House today. Indeed, as regards the White Paper, he can claim the authorship of that part which the House finds acceptable; that part which the House does not find acceptable may be attributed to lessons imperfectly learnt from him by me.
§ I welcome the chance of debating the White Paper because it gives me an opportunity of putting it in perspective. I know that many of the issues covered in it are of considerable concern to Members of your Lordships' House. Perhaps I should start by placing on record the underlying rationale of the White Paper. It seeks to put all the activities of my department in the context of the objectives which I set last year. I believe that it is important in considering this matter to see the DTI as a coherent whole, not only because industry needs a consistent framework of government policy but also because a coherent image and strategy are fundamental to the very work of the department itself.
§ What should the role of the DTI be? Some people still appear to believe that government can solve the problems of the economy and of industry. One glance at the size of the economy—now well over £400 billion—compared to the size of my department's budget—just over £ 1 billion—shows how unrealistic that is. Nor can any sensible person still believe that it would be right to increase my department's budget and begin to intervene in the commercial decisions of business. Surely that was the failed policy of past decades. We have a role, and it must be that of a catalyst and an influence on industry and commerce.
§ The starting point for our strategy—one which I have called our enterprise strategy in the White Paper—is the need for business to succeed against world competition. That success can only be won by giving our customers and consumers the very best goods and services. The Government are not equipped to do that. What we can do is to influence the attitudes and behaviour of people in business. If people in business are given a truly competitive environment and encouraged to develop their talents and skills, we shall begin to see an economy where prosperity can provide the social goods such as health and education which we all desire.863
§ In working with business my department now has two clear goals. The first is to set the framework within which industry competes both at home and abroad, for our aim must be open competitive markets. Open competition rewards efficiency and encourages change. In the department we shall act through privatisation, deregulation, competition policy and international trade negotiations to keep markets open and competitive.
§ The second goal which we have set for ourselves is to encourage individuals to develop their enterprise and their skills in business. There is no such thing as a competitive company. But there are competitive people. It is the skills of people in our great companies that helps to dictate the shape and form of our economy. In that area my department will act as the catalyst for the development of positive attitudes towards business and towards skills in business.
§ The prize is not just greater efficiency and more economic growth, but giving each individual citizen greater involvement and power in his own economic destiny. Our enterprise strategy is about people and encouraging their talents and not about vast sectors of industry. When we talk about business we mean people in business, for that is the greatest resource of our country.
§ I turn once again to our first goal of open and competitive markets. That aim runs through a great deal of my department's activity. Indeed, it occupies the majority of our staff. But it does not involve vast spending programmes or great schemes. All too often it is easily overlooked. Such work is vital, for it concerns the basis on which businesses trade both at home and overseas.
§ The White Paper shows how the achievement of open markets in competition runs through our department's regulatory functions in telecommunications, financial services, radio communications and patents. Many activities contribute towards greater openness and information in the market through providing a framework of company law, through giving information on company registrations and through the basic job of providing statistics and information to business itself. Those are detailed functions of government which are not seen as glamorous but which are essential for open, competitive markets. The White Paper shows the way in which those activities fit into the very objectives of my department. My concern to cut red tape runs across all those functions and informs all our activities which affect business. I shall be publishing a White Paper on deregulation later on this year.
§ The need to encourage greater competition also lies behind the announcement on competition policy which is made in the White Paper. My confirmation that the main consideration in mergers policy should be competition will have come as no surprise. The changes in mergers procedures should give greater efficiency and flexibility, so reducing the burden on business and helping the market to work. At the same time, it should ensure that we still have a competitive market and that companies themselves face open competitive conditions.
§ I hope to issue a departmental working paper soon which will set out our policy conclusions in more 864 detail. We shall also shortly be publishing a Green Paper on restrictive trade practices. We believe that the deterrent effect of the present law is weak and we intend to strengthen it. Our aim will be to concentrate on the anti-competitive effects of cartels and on the substance and effects rather than the form of agreements. Indeed, since we are part of Europe we must ensure that our arrangements on restrictive trade practices fit within the general framework of European law.
§ Looking overseas, creating open competitive international markets is vital as well. My particular concern is with 1992, for the completion of the single market in Europe by the end of 1992 is inevitable. If our business is not involved in those changes and does not adapt its strategy to them, it will simply be too late. Therefore, I am launching a major campaign to ensure that each and every British businessman will not only know what 1992 is about but will be actively considering what action he or she should be taking.
§ The second goal which we have set is to encourage individuals to develop their enterprise and their skills in business. It is a goal that government cannot achieve by themselves. We can set the objectives and we can also formulate a strategy to achieve them, but the achievement itself depends on many other groups in our society.
§ We have set clear objectives to help in improving the links between education and business—giving one in 10 of all teachers every year the opportunity to get some personal experience of business and giving every young person two or more weeks of work experience before they leave school. Those objectives will be achieved only with the active involvement of a wide range of employers and the willing participation of teachers and education authorities themselves. The Government can and will publicise and encourage the development of links between education and business. But those initiatives work only if they are taken up willingly by individuals recognising the great potential that lies in them.
§ Similarly, improvements in management education and development are vital to the competitiveness of our businesses. I strongly welcome the response of industry through the Charter Group initiative. Government can help by setting the national framework for education and spreading information. Again our role can be no more than that of a catalyst to stimulate individuals in business to recognise the opportunities of change that exist and to ensure that they take advantage of them.
§ We recognise the need to develop management skills and we recognise that the need is urgent. We cannot rely on the changes in management education and development working through quickly. Thus the consultancy initiatives which were announced in the White Paper encourage people in business to use outside private sector advice to help them take the strategic decisions which alone will determine the future development of their business. That is industry and commerce using its own expertise to spread the best management practices available. The areas covered are key strategic areas for business— quality, design, marketing, manufacturing systems, business 865 planning and financial and information systems, exactly the skills in which British industry and British commerce must be proficient.
§ The success of those initiatives will depend on local businesses coming forward with sensible ideas about how they can develop. They will have to put their own money into the consultancy projects and we hope to open their eyes to the possibilities of using expert advice and so making lasting changes to their companies. Our initiatives are about widening the scope for self-help; the emphasis is on people, management and, above all, the private sector.
§ The same concern over the competitiveness of our businesses and the skills of our management has infused our approach to regional policy, with greater encouragement to businesses in the regions to use the consultancy initiatives and new incentives for very small firms. Planned regional spending over the next three years will be some £900 million in total compared with some £700 million previously planned. But that in itself, I must tell your Lordships, is not important. What is important is the effectiveness of our policies in encouraging businesses to develop in the regions. Under the old regional development grant system, grants were being paid even to companies whose commercial decision would be to go ahead out of their own resources. I do not believe that freely giving out buckets of money was the right approach to regional development, nor, I am sure, does anyone else in your Lordships' House.
§ In both the consultancy initiatives and in regional policy we have concentrated on encouraging firms to develop and grow where lack of information might prevent change. The principle that the Government should not take on responsibilities which are primarily those of industry and commerce runs through the White Paper. The closer that innovation gets to the marketplace, the more fundamental this principle is in our policies. The changes in my department's innovation policy have concentrated our financial support on collaborative research and technology transfer.
§ I know that many in your Lordships' House share my belief that collaboration between the academic science base and industry has always been a blind spot in the United Kingdom. Our LINK initiative will support collaborative programmes in strategic areas of research which require further work before the likely commercial potential can be realised. By helping industry to get together and work alongside the academic researchers we hope to see the fruits of the research transferred into commercial applications more smoothly and quickly than would otherwise be the case. I recently announced, with Kenneth Baker, five LINK programmes on subjects ranging from advanced semi-conductors to eukaryotic genetics, and there will be more to come.
§ One theme in the White Paper which I hope that your Lordships will not have missed is the need more clearly to market and promote the services which we offer to business, for our aim is to create a partnership of action with business. Therefore, we are expanding our network of contact with business at the local level by opening up more DTI offices in the regions. We shall have moved from seven offices in the regions to some 24 offices. By getting more locally to where 866 businesses are and work, particularly in the regions, I believe that we shall offer a more effective service to our customers.
§ We are marketing my entire department's services within one package, the Enterprise Initiative. If we are running schemes for business and encouraging activities by business, we have to make sure that what we have to sell to business is clearly marketed, easy to understand and easy to use. It is no good preaching marketing without practising it ourselves.
§ The response to the Enterprise Initiative has been excellent: 110,000 booklets have been distributed; 20,000 companies have sought initial information from my department's freephone service; 4,000 applications for consultancy initiatives have already been issued up and down the land. These are now being completed and returned at a rapid rate—about 70 a day. That is just a start; I hope that many other firms will take the initiative too.
§ We have a role, a major role, in encouraging open and competitive markets which set the basis on which business competes. We have a major role in working with business as it strives to succeed against world competition. We have a major role in ensuring that the economy of the United Kingdom is ready and able to compete when in May of 1993 for the first time in 8,000 years the United Kingdom becomes once again physically part of Europe. Competition within the single market in Europe, particularly I suspect after the Channel Tunnel itself opens, will not only give us the opportunity of trading in the whole of Europe but it will give the whole of Europe the opportunity of trading here. We also have a major role in creating a partnership with business. That is the major objective of our White Paper and of the Enterprise Initiative itself.
§ We have made our strategy clear in the White Paper. We have concentrated our attention on developing enterprise and encouraging management skills. We have focused on working with the grain of the market, not going against it and not trying to make people go where they do not wish to go; in fact going along facilitating the development in quality, design, marketing, management quality systems and information systems, all of which British industry and British commerce need.
§ We believe that this strategy will enable us to work with British business as we compete more and more successfully in the world economy; for if the truth were known, the most difficult thing to achieve is for people themselves to change the ways in which they manage and approach their work. That is the most difficult task but it is above all else the most essential one for the economic future of our country. I beg to move.
§ Moved, That this House takes note of the White Paper DTI—the department for Enterprise (Cmnd. 278).—(Lord Young of Graffham.)
§ 11.50 a.m.
§ Lord Williams of Elvel
My Lords, if I rose to my feet earlier a little precipitately, I apologise to the noble and learned Lord, the Lord Chancellor, for my discourtesy. I should like to thank the noble Lord, the 867 Secretary of State, and I am sure that the House is grateful to him, for having introduced this Motion and enabling us to debate the recent White Paper issued by the Department of Trade and Industry. The House is also looking forward today to three maiden speeches from distinguished noble Lords, who will certainly offer words of wisdom and experience. This promises to be a rich and useful debate.
As the Minister said, the White Paper sets out the Government's broad approach to commerce and industry and describes the main thrust of his department. Your Lordships may recall that when he presented the White Paper to the House just over a month ago I responded with the view that there were a number of elements contained in it with which we agreed and which would have our support. I said at that time, and I reiterate now, that anything which serves to raise the morale of civil servants, which has been badly battered over the past few years, must be welcomed.
Any attempt to improve the relationship between the educational system and industry must be supported. Anything that can improve the general quality of British management must be applauded also. Finally, the attempt to improve the attitudes of British industry as described by the Minister and to increase its dynamism must be encouraged, particularly in view of the unemployment situation that is still present. Nevertheless, while we are able to welcome a number of the proposals, there are areas in which we have some doubts. I shall leave to my noble friend Lord Peston, who will be winding up the debate from this side of the House, the questions of competition and regional policies. However, there is a central question which must be asked and, indeed, answered; namely, how far is the general approach relevant to the real problem that confronts the United Kingdom economy?
There is also a subsidiary question: are we persuaded that the presentation, language—if you like, the tone—of the White Paper is appropriate for the Department of Trade and Industry or is it merely something of a public relations exercise which may look good for the moment but which will not have any long-lasting effect? The tone of the document is certainly combative, if I may use that expression. I suppose that to a certain extent we have to accept the rewriting of history, which I imagine all governments do, but at times I felt that the document went too far. For example, I was somewhat taken aback by criticism of the United Kingdom's economic performance in the early 1950s, when a Conservative Government was in power. I suppose that we were meant to draw the conclusion that the rot set in in the old Board of Trade between 1951 and 1957. I am sure that the then President of the Board of Trade, the noble Lord, Lord Thorneycroft, is in an excellent position to defend himself; certainly he needs no help from me.
However, I say very seriously that I wish the Government were just a little more generous to their predecessors of both parties. I hope that those statesmen will in due course be given proper credit for their efforts in the era prior to North Sea oil, when they struggled with the problems of the post war 868 world and achieved an astonishing record of recovery for the benefit of my generation.
I shall turn first to my subsidiary question: is the approach appropriate for the Department of Trade and Industry or is it just a passing PR gimmick? As the Minister said, the department has a vast number of functions and responsibilities. It has regulatory, enforcement, supervisory and organisational functions. It is the main arm of government which implements ministerial decisions on trade and industry. It runs many activities ranging from export promotion and insolvency services to the Patents Office and supervision of the insurance industry. The list is endless.
The staff of the department, the civil servants, have been trained for those functions; they have not been trained for marketing. That may be wrong, but it is the situation and reclassifying civil servants into an enterprise unit will not necessarily change the nature of the animal, nor indeed should it do so. Regulation, which is the administration of government policy, in many instances is the antithesis of entrepreneurship. The regulator has to enforce a set of rules. He cannot at the same time be a salesman.
The Minister mentioned the financial services sector. Many noble Lords will say—and I agree with them—that that sector is one of the most entrepreneurial in our economy. What is the role of the department? It is to set the rules, to stop entrepreneurs acting against the public interest and to detect and prosecute crime. That is the job of the regulator and it cannot be performed by salesmen because it is precisely enterprise of an undesirable and anti-social nature that the department, as regulator, must be determined to stop.
So the answer to my question whether that is a suitable approach probably lies in the old adage, which is no doubt familiar to your Lordships, "Ministers come and Ministers go but the Civil Service goes on for ever". That may well be what will happen, whatever may be the current gloss that is put on it. To me, it is neither here nor there whether something is called an enterprise strategy or an industrial policy, but it is symptomatic of the White Paper and the approach taken by the Secretary of State that he seems to think that it does matter and that somehow changing the words will change the substance. I hope that I am not too sceptical on that score but I have some very serious doubts.
Nobody in his senses will dissent from a general policy of encouraging enterprise, but are the proposals in the White Paper properly focused? Are they relevant to the real problem that we face? That problem concerns the future course of our balance of payments, not just over the next year or so—although there are immediate dangers—but in the longer term as our balance of trade loses the protection that it has enjoyed during a decade of North Sea oil. That problem was raised, discussed and analysed by a Select Committee of your Lordships' House, and its conclusion was quite unambiguous: unless there were compensating action to turn round the manufacturing trade balance as oil revenues declined, the consequences would be dire. That conclusion is as valid today as it was in 1985 when the noble Lord, Lord Aldington, reported on the Select Committee document.
869 In so far as it refers to the future balance of payments problem at all, and it is mentioned in only one paragraph, the view in the White Paper appears to be that the economy has been transformed to the point where it can cope with the problem by itself; in other words, all is for the best in this the best of all possible worlds. However, I do not believe that the evidence is properly there. In terms of relative export prices and unit labour costs, which are the two indices which perhaps best illustrate our international competitiveness, we arc no better off. In fact we are slightly worse off than we were in 1978. In terms of non-price competition, to which the Secretary of State has referred, the study undertaken by Cranfield and the British Institute of Management came to the regrettable but overwhelming conclusion that very little happened in manufacturing operations in the United Kingdom over the 10 years from 1975 to 1985. It commented that that was particularly true in the key areas of competitive edge, delivery reliability, lead times and use of new technology. That conclusion was broadly endorsed in a Warwick University summary of academic research published only two or three weeks ago.
Our view is that this problem—what I would call the Aldington problem—is still very much with us and that leaving the future to the hand of chance and free market forces is plainly wrong. This is where we part company definitively with the Government. Our view is that much more direct action needs to be taken and to be given top priority. We are all in favour of small firms but it is the bigger firms that are the real players in the field of exports and import substitution; and exports and import substitution must be encouraged with all the means at our disposal as a top policy priority.
Direct action needs information, analysis and planning. I can best illustrate what I mean by citing an example of what I believe should not happen. Not long ago, a senior official was giving evidence on Britain's high technology trade performance to the Trade and Industry Select Committee of another place. My source for what follows is the Independent newspaper. After an hour or so of question and answer, the paper says, MPs had discovered the following: Britain has no strategic plan to boost its electronic industry up to the year 2000; the department has remarkably few accurate statistics about high technology trade; the department has no view about how efficiently British industry uses information technology; the department does not know why our high technology trade is so poor; the department does not have a policy of leading other departments in buying British technology; confronted with huge trade deficits, the department believes that it is important not to look at the global figure. The official in question went on to agree that, while small American companies grew into big ones, British companies have flickered like candles in the international technology scene and then faded, and he did not know why.
We believe that the true long-term focus of the department's activity should be directed towards this problem of the future balance of payments. It should have the necessary information, not only on high technology but in every sector where our foreign 870 trade performance is weak. The department must have the answers to the questions that the Trade and Industry Select Committee asked, and have a plan for dealing with the perceived deficiencies sector by sector.
The 1980s have been the decade of North Sea oil. The 1990s are going to be the decade of the oil running down. We must be prepared for that. We believe that we should start now. Not to do so would lay us open to the charge of indulging in complacent self-congratulation—and it is a charge that on the evidence of what the Secretary of State said today the Government have difficulty in avoiding.
§ 12.3 p.m.
§ Viscount Chandos
My Lords, I am sure that the House is grateful to the noble Lord, Lord Young of Graffham, for arranging for time, even on a Friday, to be devoted to the discussion of the DTI's White Paper for which he was responsible and for the usual courteous explanation of it by the Secretary of State. I look forward very much also to the contributions of the three maiden speakers with their different but distinguished contributions to the business and industrial world.
The new subtitle for the department embraces an objective that can hardly be contentious. Indeed this Government's predecessors incorporated enterprise into the name of one of their major initiatives in the industrial sphere. The debate today therefore will continue, as it has started, to focus on whether the content of the White Paper measures up to its declared intention, and whether the implementation of policies to encourage enterprise is equal to the ambitions expressed in the paper.
The DTI is the Government's face to the industrial and business world. Every other department of government has an inevitable and necessary involvement in the country's economic and business life, but the DTI alone must represent and fight for business. The White Paper highlights the objective tochampion all the people who make it happen rather than just individual sectors, individuals or companies".All noble Lords who, like me, admire the past chairman of ICI, Sir John Harvey-Jones, would applaud the DTI's concurrence with Sir John that business is all about "making it happen". But other parts of the same passage in the White Paper seem more ambivalent as to the campaigning zeal which the DTI should have in the interests of business.
I am not convinced that sponsorship of specific industries is fundamentally different from support of the corresponding market, and a reorganisation of the department from one concept to another risks merely weakening the commitment of the department to represent wholeheartedly, but not uncritically, the interests of business and industry to an extent which is comparable with the support given by the equivalent government departments elsewhere in the world to their native industries. If the support for Japanese business interests that is given by MITI is excessive by free market standards—it is certainly not uncritical—that seems to be a failing that many of us would welcome being repeated in this country.
As in previous discussions in your Lordships' House, the role of government within industry is the 871 nub of the question. The Secretary of State has surprised me more and more recently through his embracing consensus politics as well as conviction politics. At the end of last year he reminded your Lordships that the stock market was a far from perfect indicator of the economic prosperity of the country, while in the White Paper and reinforced in his opening remarks, he has emphasised his commitment to a mixed economy. I feel that few Members of your Lordships' House will disagree with statements in the White Paper such as these:Open markets are not to be confused with unfettered market forces for these can lead to closed, protected and monopolistic conditions … Regulations … will be used to encourage competition and to ensure that markets work properly and enjoy the confidence of informed investors and consumers".It also states:Open markets do not mean that governments should rely simply on the operation of market forces or stand by as a passive observer of the economy".Where consensus has perhaps not yet reached out to join these Benches with those of the Government is in agreeing how far beyond being a passive observer a government should go in its involvement with the industrial life of the country.
I have argued in the past that the Government have consistently ignored their own participation in the markets as consumer and customer, for instance, in formulating what they felt was the correct degree of intervention or involvement with the business operations of those markets. I find it extraordinary that in 41 pages of the White Paper the only reference to public purchasing is a single sentence in the section under the single European market where it says:The Government also want to see public authorities throughout the Community buying from whatever source makes best commercial sense, with effective enforcement of open public purchasing rules".How limp, my Lords. Every other successful industrial country in the world employs positive discrimination in its public purchasing policy towards its native industries, in particular within the context of Europe and the prospective single European market. British industry will be significantly handicapped if this type of support is not given to British companies and to European collaborative ventures including British companies within the rules applied by the Community.
The White Paper also glosses over the direct role which the DTI has continued and will continue to have in certain limited spheres. All noble Lords, on these Benches at least, welcomed, for instance, the eventual agreement of launch aid last year for British Aerospace's further participation in the Airbus consortium. I for one would have liked to have seen some discussion on this type of support in the White Paper for fear that there may not be the pressure of an election and marginal seats to concentrate the mind of the Government on every occasion in the future.
The privatisation programme is mentioned with unusual reticence. That is perhaps not surprising in view of the misfortune of the BP issue. But the omission of any reference to the Rover Group, in contrast with the confident discussion of the British Steel Corporation, should cause concern. Admittedly, with Mr. Graham Day as chairman it 872 can be argued that the Rover Group needs no reinforcement in fighting its corner with the Government. Nonetheless, I believe that the White Paper should have provided an opportunity to state quite clearly the considerations which the Government believe to be relevant in the privatisation of any further companies.
The earlier commitment to the promotion of competition through privatisation has been shown—at least by the case of British Telecom—to be a thin cover story for more conscientious objectives, such as the massaging of the Government's borrowing requirements. The DTI should be a single-minded supporter of the longer term prospects of companies in its current charge against any encroachments by the Treasury with its legal eye for a fast buck. Rover should be privatised only if its prospects, and those for the component industry and for independent British engineering, design and technology, are enhanced by the sale.
The White Paper eschews any muscular support for British industry and business but makes a limp, semi-interventionist gesture to the problems. Five pages of the White Paper are devoted to the subject of business, education and management, expressing pious hopes in plenty but not promising a great deal of action. In five pages the White Paper attains the unimaginable achievement of avoiding any reference to business schools. That is hardly compensated for by the single, casual reference to them under the chapter entitled "Business Development". Perhaps in winding up the noble Lord will explain that Freudian slip in the context of the DTI's embarrassment that, simultaneously with the fond expressions contained in the White Paper, the Government are implementing the most massive reductions in financial support to the country's leading business schools. Even if in the long run alternative sources of finance from business and charities can replace government funding, in the meantime the desparately needed improvement in management training in this country will be delayed for the dubious reward of an increase in our exports of that training to our overseas competitors.
Such a multitude of areas are touched on, though hardly addressed, that it is difficult to know upon which to make brief comments. At the same time, despite the attempted comprehensiveness, there are other extraordinary omissions. The impression is given that enterprise is concentrated largely in senior management and absolutely no mention is made in the White Paper of any initiatives towards increased participation, involvement and democracy for the workforce as a whole, who need better education and training for sure (as do their senior management colleagues) and motivation and inspiration as well. In his speech the noble Lord, Lord Young, referred to the need to increase the involvement and power of each individual in his or her business life, but there is little supporting discussion of that in the White Paper.
Ignoring those omissions, and even the customary red rag offered by the Government of statistics based on the 1981 starting point, I should like to comment briefly on two matters; one for its importance and the other for its topicality. First, the actual changes 873 proposed in competition policy, as opposed to the sentiments expressed, are arguably a move in the wrong direction, however welcome to the more rampantly expansionist companies. The SDP has long argued that the burden of proof should lie with the proponents of a merger; not just that competition should not be reduced but that all aspects of the public interest should be enhanced or at least not damaged.
Secondly, the White Paper reminds your Lordships that the DTI is responsible for the regulation of the financial markets and of financial services. I am sure that the Financial Services Act remains a vivid memory for any Members of your Lordships' House. Therefore I should like to take this opportunity to ask the Secretary of State for his assurance that he will resist with the greatest vigour any attempts to dilute the effectiveness and vigour of the Financial Services Act, imperfect though it may be, including in particular the unnecessary replacement of the current chairman of the SIB. The financial services industry cannot expect the ever more complex markets and dynamic practices to be subject to the same mild self-regulatory practices of a previous era.
Although speakers today can excuse omissions from their contributions by the time limit imposed, the same excuse cannot be applied to the White Paper. Its absence of real initiatives, and the noticeable omissions, damage those constructive but largely exhortatory sentiments contained within it. As the paper touches briefly on space research, albeit to freeze R&D support in that area, I am tempted to parody that wellknown television space programme, "Star Trek", by suggesting that the true message of the White Paper is, "DTI to Enterprise One. Omission completed". I regret the lost opportunity in the White Paper and urge the Government to consider the introduction of more constructive initiatives to achieve those objectives set out in the White Paper.
§ 12.17 p.m.
My Lords, it is an honour to be here and I ask your Lordships' indulgence for my maiden speech. Were it not a maiden speech I should have enjoyed challenging some of the assumptions underlying the speech of the noble Lord, Lord Williams—particularly the last part—and I should have enjoyed crossing swords with the noble Viscount, Lord Chandos. I am most grateful for the kind words of my noble friend Lord Young. I strongly agree with the strategy, both of his Department and of the Government, that he has set out.
I entered politics in order to try, however modestly, to reduce the widespread poverty of many British people. At the time, and for many years after, I was an unreflecting statist seeking short cuts to Utopia. Over time I have come to realise that perhaps the state can do better by setting the right framework and by intervening little.
Our neighbours in North-West Europe have done better than us. They have outstripped us in the buying power of average earnings and benefits. They have also outstripped us in education, particularly of 874 the average child, and in civic behaviour. The words of the noble Lord, Lord Williams, might have warned me off saying what I shall say next but I yield to no one in my admiration for the career and the services of my noble friend Lord Thorneycroft. Yet I must say that the governments of our friends in North-West Europe—even their socialist governments from time to time—seem to have done better than have our previous governments (even the Conservative Governments of which I was a member) in showing how to enable free enterprise to create prosperity for virtually all.
Despite that, I hope that historians will say that during the 1980s British progress accelerated towards embourgeoisement—that is, towards a state in society where most people own and earn enough to have choice and scope and where everyone has the attitudes and time-horizons to make use of them. I readily admit that we have far to go with over 14 million people on benefit, with several million people not much better off, with 2.7 million people unemployed, with very much crime and with low standards of education. However, I still believe that embourgeoisement is within reach.
I hope that your Lordships will not think it odd that I emphasise the bourgeois. It was Engels who wrote to Marx that in this most bourgeois nation, as he called us, our aim was to have a bourgeois aristrocracy alongside a bourgeois proletariat and a bourgeoise. Embourgeoisement is the culmination of the movement from status to contract. It presupposes the money, the values and the readiness to enter into mutually beneficial arrangements over time and with freedom to vary the mix: to or from insurance, for retirement, for health, for accident; to or from savings, food, clothes, books, foreign travel, housing, education and charities.
The choice and priorities would be for every individual and every family. The range of choice is now immense. Yet, there are several million of our fellow citizens whose progress to embourgeoisement has been stunted by the framework created for housing, health and schooling and whose dignity and choice has therefore been diminished.
It is of course free enterprise—the decentralization of ownership and decision-making, subject to the law and in business, to competiton—that makes embourgeoisement possible. Free enterprise, if it is allowed a chance, is the least bad method yet invented to create for virtually all jobs, prosperity, social and public services and freedom.
Therefore, what can we do to advance embourgeoisement? It seems to me that we need to go further yet into the hitherto no-go areas. We are trying to improve schooling. We may argue about some of the methods. For me, the magic ingredient is the introduction of choice. The state may well procure better than it can deliver. We are now more embourgeoisé than we were but less embourgeoisé than our neighbours, most of whom were more shattered by the war than we were. The reason we are less prosperous—a different point to embourgeoisement—is that our average productivity is lower than theirs. I see the noble Lord, Lord Basnett, sitting opposite me. I should like to say that low productivity used to be blamed on the trade 875 unions. I think the responsibility is fairly upon management, although it is in the interests of unions it seems to me, to co-operate in their own interests.
Our average productivity in this country has increased fairly sharply during the 1980s, but productivity has also increased in other countries too; so the gap remains wide. Some industries have high productivity. How abysmal then must be the productivity of others. This White Paper necessarily concerns itself with jobs. I am not sure that, despite widespread and sincere concern about unemployment people in general understand where jobs come from. Jobs come from customers and so do social and public services. Upon our success in attracting and holding customers at home and abroad depend jobs, earnings, social and public services. If by chance we improve average productivity again, we shall need even more jobs to absorb the unemployed. For that we need even more—I use a French word again, for lack of an English one—entrepreneurs: the mobilisers of all those skills who, to quote the White Paper, "make it happen". We have more than we had but we need more still. In fact, if we are to be prosperous we need more millionaires and more bankrupts.
My noble friend Lord Young found the economic imperatives already in place when he went to his present department: namely inflation down; taxation down; price, wage, dividend and exchange controls gone; enterprise encouraged; denationalisation in progress; the trade unions returned to their members and competition largely galvanised. Therefore, the motivating framework is in place and my noble friend is surely right to think that it is that framework of motivation that will do most to improve our performance.
It is against that background that my noble friend seeks to improve further the performance of management, by offering them consultancies. I only wish that he had added to his list one specifically devoted to raising productivity. His purpose seems to be essential, although not dramatic. However, there is drama in the White Paper. Sponsorship, that insidious invitation to run to Whitehall, is out. An attack on cartels is in, and I welcome the systematic effort to offer all teachers a short period of experience in business.
The charm of the enterprise initiative is that my noble friend does not offer patronage. He is simply seeking to bring together two streams of expertise for the good of the country. My noble friend further recognises that other government policies may impinge on enterprise. Your Lordships will excuse the vernacular if I say that he can say that again. For example, the Government really must seek, it seems to me, to avoid unintentionally encouraging unnecessary dependence and to avoid discouraging people from taking up employment. This White Paper seems to me likely to help us towards embourgeoisement and I welcome it strongly.
§ 12.27 p.m.
§ Lord Simon of Glaisdale
My Lords, it is a great honour and privilege that it falls to me, on behalf of all your Lordships, to congratulate the noble Lord on 876 his maiden speech so spendidly delivered and so deeply reflective. I have known the noble Lord for many years—we were colleagues in another place—and so it is a particular pleasure for me to hear his success today. I have only one cavil with him; that is, that he won a fellowship in jurisprudence to All Souls but then deserted the law. However, he was then a great success in industry and achieved high office in the state. He has brought that experience to your Lordships' House and your Lordships will undoubtedly want to hear him again on many occasions.
The White Paper is couched in that high mandarin style which seems to be the particular contribution of White Papers to the great pageant of English prose. So far as one can tear away the veil, it seems to me to suggest all the right things to do; though I shall concentrate on one chapter—Chapter 7 on regional policy and on the inner cities. I think that in producing that paper the noble Lord was right to devote a chapter to that very purpose, though I think that the phrase "North-South divide" is a dangerous oversimplification since there are areas of great prosperity in the North and areas of great deprivation in the South.
However, it remains true, on the whole, that the North of England is considerably less prosperous than the South. Indeed, there is a danger that the economy of the South may become overheated. I think that was the reason why in the summer we saw a raising of interest rates. That could only have reference to conditions in the prosperous South and could be quite irrelevant, indeed antagonistic, to the interests of the North wherever it was stagnating. Therefore, I think that the noble Lord was right in devoting a chapter to that topic.
Within that, I propose only to deal with one matter which is, I venture to suggest, a matter of omission; that is, the case for local pay settlements. There is undoubtedly much more to say on that chapter but I can rest assured that it will be said much better than I could say it by the noble Lord, Lord Sefton of Garston, so I confine myself to regional pay settlements.
The case for that is surely overwhelming. If, as is the case, to take one example, housing is one-third cheaper in the North of England—the North-East—than it is in London and the South-East, you can negotiate a pay settlement at a considerably lower figure in the North which will produce the same standard of living as a higher figure in the South. If that is done, labour costs are reduced and there is an incentive for employers to go where labour costs are lower, particularly in industries which are labour intensive; that is, those industries which have been in decline in recent years.
The primary responsibility for local pay settlements is obviously with the employers and trade unions. A great responsibility rests with them. It is idle for the Government to expect them to perform in that way without themselves giving a lead. The Government do not give a lead; on the contrary, their pay settlements are central throughout. Worse than that, there is actually a London weighting and that enures towards pensionable pay, whether employees continue in retirement to live in London or elsewhere. That means there is an additional pull towards 877 London for government employees. It also means that it is much more difficult for the Government to relocate government departments, which I believe to be part of the Government's policy.
In fact, I think it was the Secretary of State himself, when he was chairman of the Manpower Services Commission, who relocated that body in Sheffield. I see that the noble Lord nods. Therefore, it seems to me that the Government have an absolute duty to review the London weighting, particularly as it is now to be accentuated by an additional pay element. I gather the amount is £600 for London and £400 for elsewhere. In other words, it is precisely the opposite of what it should he. Therefore, as an admirer of the noble Lord's own performance and of the economic performance of this Government, I appeal to him to give particular attention to that problem.
§ 12.36 p.m.
§ Lord Stevens of Ludgate
My Lords, following the noble Lord, Lord Joseph, after his excellent maiden speech fills me with even more trepidation than before. I agree with the White Paper's analysis of the main causes of our economic decline; namely, an educational system that discourages youngsters from working in business, inadequate and inappropriate training, corporatism and union power working together to limit competition and inhibiting the formation and growth of new firms. This, linked with the large proportion of GNP absorbed by government expenditure leading to excessively high tax rates, has contributed significantly to our past economic decline.
I am encouraged to see the acceptance that industrial policy in the 1960s and 1970s was determined by pressures from special interest groups. It seems to me that the White Paper comes close to acknowledging that where you have a lack of enterprise, more often than not the Government have been the problem and not the answer.
The measures designed to reduce the burden of regulation—for example, the new legislation to reduce the cost of complying with the Companies Act, particularly for small firms, increased self-regulation under the Weights and Measures Act and reducing delays—are to be welcomed. I am particularly encouraged by the formation of an enterprise and deregulation unit. Later on I shall, if I may, offer a suggestion about where it might start.
The achievements that have been made in recent years by the DTI must be welcomed. As your Lordships might expect, I wholly agree with the philosophy of open markets and the encouragement of individual enterprise. It is encouraging to see a government department recognising the vital role of enterprise in economic growth. I also welcome the fact that the size of the DTI's budget has fallen by more than a quarter since 1979–80.
I now declare an interest as a publisher. Now that my company owns some national newspapers and a number of regional ones we may have difficulty in being allowed to buy further national newspapers. Therefore, since we may no longer be a bidder for newspaper companies, I should welcome an extension of the monopolies period of reference 878 rather than a shortening of it! Financial urgency in respect of newspaper mergers is, however, always a moot point since there seem to be many people who are anxious to enter the publishing industry and few who want to leave it, despite the immense competition and the huge fluctuations in revenue which are liable to occur.
I agree with the Government's determination, as expressed in the White Paper, to foster competitive markets by encouraging competition, tackling restrictive practices, cartels and monopolies, and by privatisation. Non-mandatory, pre-notification procedures and the obtaining of undertakings from parties in order to remove threats of competition are to be warmly welcomed, as indeed is the fact that undertakings will in future be legally binding.
I declare my second interest as a director of a fund management company. I hope that your Lordships will not find me too guilty of controversy. The Financial Services Act, which is supervised by the DTI, is hardly conducive to free competition. I appreciate the desire to disclose charges that are made to investors; I appreciate the desire to control some of the worst practices, but there are many industries where no control is exercised over charges and they are left to market forces for consumers to decide whether or not they want the product. Your Lordships' House proposed over 500 amendments to the Financial Services Bill, all of which were, I believe, accepted by another place. We have within our company, which manages unit trusts, pension funds, institutional portfolios both at home and abroad and private clients' money, to comply with the regulations of three regulatory bodies and to make 15 different membership applications.
Financial journalists will no longer be able to give anyone advice in a private letter or conversation unless they are authorised under the regulations. This may cost each of them several thousands of pounds. However, some of your Lordships may think that their inability to do this will save you several thousand pounds!
In October 1987 we experienced a stock market correction, which, although sharp and relatively large by the standards of recent years, still only took the stock market back to its levels of earlier in that year. A recent report has been issued stating that the Stock Exchange operated efficiently and that it was always possible to deal during those days in the middle of October. As a practitioner, I have to say that, while it might have been possible to deal in very limited quantities of stock, the prices which were offered were in many cases totally unrealistic.
There was a company of which I have some knowledge whose market capitalisation fell from £300 million to £200 million on a £50,000 sale order. A subsequent attempt to buy £50,000 worth of the same stock made the market capitalisation rise again by nearly £100 million. In my opinion, this is hardly making a market. Furthermore, for considerable periods of time, the market makers were allowed to operate what is known as a fast market, which means that they are not obliged to deal at the prices and sizes shown on the screen. However, one must acknowledge that these were unusual and unprecedented worldwide movements occurring in all world stock markets at that time.
879 We may be heading for even further regulation in the financial area since, if the United States stock markets have limits placed on the extent to which stocks may fluctuate within a trading day, then it logically follows that we too may have to have some similar rules. Markets are, after all, international and if a price limit is reached in New York there is little doubt in my mind that investors will seek to deal in that same share or a similar one either in the United Kingdom or other stock markets. Does this mean that even further regulations are inevitable and how much will this curb enterprise?
Our financial markets were supposedly deregulated so that they could compete with the best in the world. The new regulations were supposed to protect the wave of new investors brought into the stock market by this Government. Instead they may run the risk of putting them off altogether. Charges will have to rise and in many cases they already have for the small investor. With regard to the fraud and insider dealing that one is trying to prevent, this, although probably harder under the new regulations than before, will occur wherever large amounts of money are at stake.
I applaud the desire to bring schools, universities and other educational establishments a closer understanding of the needs and hopes of the enterprises for which their students will one day work. I believe that, apart from removing certain restrictions, particularly in the industrial relations area, the responsibility for revitalising this country must come not only from the Government but also from management.
Most people welcome the opportunity to exercise their enterprise and responsibility for the jobs they are doing even though in a highly automated and computerised age this may at times seem remote. The proposals in the White Paper are to be welcomed although I can see difficulties in certain areas where the opposite of enterprise may occur if we are not careful. However, I have a certain scepticism about the department's born-again conversion to enterprise. Despite the White Paper's avowed determination not to make the mistakes of the past, one still senses that Whitehall may still not be ready to remove itself from an area where it may have no beneficial role.
I feel somewhat uneasy when I read at the beginning of the White Paper that DTI policies have been reviewed,in order to assist in the process of increasing prosperity throughout the economy and to champion the cause of all the people that make that happen".How will these people be identified and by whom? Government and bureaucrats simply cannot handle the immense activity and detail of economic opportunity. It would involve a massive increase in the DTI's budget. I believe that the noble Lord, Lord Joseph, quoted:Civil servants must not play God in the marketplace".I warmly welcome the White Paper and I look forward to a continuing reduction in the Department of Trade and Industry's budget as the British nation seizes the initiatives.
§ 12.47 p.m.
§ Lord Jay
My Lords, I hope I shall be in order in warmly congratulating both maiden speakers today, having myself shared a distant academic past with the noble Lord, Lord Joseph, and some less-distant years in the newspaper industry with the noble Lord, Lord Stevens. I believe that both of us shared the joys and the sorrows of open competition in that industry. I am sure that they both have a point of view which deserves to be heard again in this House.
I am also glad to welcome at least two elements in the Secretary of State's White Paper. The first is his belief that British education has long been too biased against business and industry as a career. Secondly, I welcome the statement on page 31 of the White Paper that inner city development should pay special attention to the employment of local labour. I particularly welcome that because it flatly contradicts the statement made recently by the Minister speaking for the Department of the Environment in this House, who told us that this would be contrary to EC law.
I am afraid I cannot equally congratulate the Secretary of State on the map which accompanies his White Paper. When I was responsible for regional policies I always found it useful to have some practical knowledge of the geography of industry in the British Isles. The Secretary of State's map shows Cardiff where Swansea really is, Poole where Weymouth really is, Reading where Oxford is and—most surprising of all—Coventry where Worcester is. I believe this is an odd start on information to industry and I hope there will be some improvement there. I do not know whether this is the new geography to be included in the new core curriculum which is to guide our education in the new world to which we are now being introduced. It rather strengthens my suspicion that at least this part of the White Paper was written not by the Civil Service but by Conservative Central Office.
I believe the same to be true of the pages which have already been mentioned today in the White Paper which rewrite history with a vigour of which even Stalin would have been proud. In the Financial Times Mr. Sam Brittan described these parts of the White Paper in rather stronger language than I would use as,a send-up of Thatcherism by a hostile satirist".Then we have a kind of sacred text about the virtues of enterprise and competition, which also moved the Financial Times to describe these passages as being "peppered with rhetoric".
The word "enterprise" occurs five times on the first page of the White Paper and eight times on the last page. This seems to be not so much serious argument as ritual incantation. It is in danger of turning a good thing into no more than a sacred cow. By contrast, the words "employment" and "unemployment" are hardly mentioned anywhere in the 40 pages of this White Paper.
Of course enterprise, both public and private, and competition are often desirable and highly valuable things, but not always, in an imperfect world. Even the international drug traffickers exhibit remarkable enterprise sometimes. No doubt much enterprise was shown in the adventures of Wall Street and 881 Throgmorton Street last year which led to all the charges of insider dealings which we have read about, ending with Black Monday.
Competition is also very valuable, but that can also lead to risks being taken, for instance in the transport industry, aircraft, railways, ferries or even inflammable furniture, which we hear about from time to time. The press in this country has given us some examples of the less desirable effects of competition. I would not myself use the language of a distinguished journalist who wrote the other day,I congratulate Mr. Rupert Murdoch on the great enterprise with which he has led the Sun newspaper down from the gutters to the sewers".As I say, I would not use that language myself but I know what he means. It may be that the noble Lord, Lord Stevens, has some idea also. If you want further evidence about what competition can do, you only have to watch American television, if you can bear to do so.
Meanwhile, the main real action announced in this paper is the emasculation of the regional development grant. The Secretary of State incidentally asserted when he made a statement introducing this paper—and I think he said it again today—that the actual spending by the Government on capital ventures in development areas would not fall as a result of this. However, a few days later his predecessor Mr. Leon Brittan stated in another place that this statement rested on enterprising, or at least rather creative, accounting. According to him there is a slight drop when you work it out properly.
It is to my mind a strange policy, just when unemployment in these areas—to give one bit of correct history today—is much higher than at any time in the whole 30 years before 1979, when all agree that this country acutely needs more industrial investment, that capital grants in these areas are actually being reduced. This follows the abolition of the investment allowance by this Government a few years ago, which means a further reduction in the incentive to investment. The idea now seems to be that a firm should only be given a grant if it would not go ahead without one. But that is not quite how the issue usually arises in this case.
If a firm is asked whether it will go ahead with a development without a grant, it will in many cases answer, "I wouldn't do so here but I might do so somewhere else, for instance in the more convenient South-East". If you refuse the grant in those circumstances you will certainly add to the overloading of the South-East about which the noble and learned Lord, Lord Simon, has already spoken today. The attempt to introduce selective grants will, I believe, from all experience of administering regional policies, create uncertainty, more bureaucratic delays and a slowing down of the whole development process in just those parts of the country where it is most needed. In the most successful years of this policy the principle always was that any reputable firm, local or incoming, domestic or foreign, would qualify for help provided it developed in the relevant area and took all normal business risks of producing and marketing itself.
Yet all these cuts in incentive to industrial development are, I am afraid, being made in order to 882 give large tax reliefs in the Budget to those who least need them and who will spend them very largely on consumer goods and to a great extent imported manufactured goods. The decision to rely on interest rates rather than budget restraints, which is apparently now the Government's policy to defend the exchange rate, will deter industrial development even further.
Therefore, despite all the cheery talk about enterprise and competition, it seems that the Government's present economic policies are encouraging consumption and imports of consumer goods and discouraging investment. Yet it is precisely in investment that everyone agrees Britain to be falling behind its industrial rivals and that there has to be improvement if we are going to face those years in the 1990s when the oil revenues will be falling.
§ 12.57 p.m.
The Viscount of Oxfuird
My Lords, in rising this afternoon to take part in this important debate with an impressive list of speakers, I seek the indulgence of your Lordships' House since, for the past 25 years, I have been exporting capital equipment to many different countries throughout the world. I have frequently been involved with the Department of Trade and Industry and the commercial wing of our overseas posts. I think my noble friend the Minister and his department are to be congratulated on this White Paper as it reflects the management thinking that is required today in a world where our industry must be successful. This requires the involvement of everybody and can only be done by continuing the quality revolution dictated by customer demands.
There is no doubt that commercial representation of government, both in this country and overseas, is generally extremely successful. However, when we see in the press that Britain has been awarded an order for a steel plant or a power station with a value of hundreds of millions of pounds, we must not forget that this only represents a very small proportion of our total annual exports. High profile contracts with international political impact tend to detract from the everyday energies of Britain's thousands of exporters who daily leave our airports, headed for sometimes unwelcoming foreign destinations. This remaining balance represents the backbone of our export effort and is evidence of British industrial vitality, energy and enterprise.
Because a large percentage of this country's exports consist of smaller, lower profile contracts, there must be a case for the decentralisation of management and decision-making to where the contract is going to be executed. Such streamlining could have an immediate effect on aid and trade provision. The average waiting time for a decision for aid and trade provision can take over three months. Commercially this delay can represent a major obstacle for a potential customer and can deter him from buying British, forcing him to seek support where there is less bureaucratic complication.
I envisage a defined level of autonomy being available to the commercial post overseas in liaison with the Department of Trade and Industry in such a way as to safeguard the requirements of aid and trade provision but to drastically speed up the 883 decision-making process. Such autonomy will guarantee the close involvement of the exporter overseas at the right time. It will also encourage the secondment of personnel between the Foreign Office commercial section to the Department of Trade and Industry, and vice versa. It is worth noting that today there are over 20 people seconded from the Department of Trade and Industry in overseas posts and there is a continual traffic in the reverse direction.
The need for a defined commercial presence in overseas posts is highlighted by the experience I had recently in a Latin American country with a contract involving a state authority. During my visit of less than 10 days the commercial secretary at the embassy, who was the most energetic of men, had his commercial availability reduced by the pressure of external forces. Most of these were urgent requirements from Whitehall: others were local issues.
In turn, he became the political officer reporting on unrest within the country; then the intelligence officer seeking information and reporting on the spread of AIDS within the country's hospitals and outside. Finally, when the ambassador went on leave, he had to undertake those duties as well. His situation was not improved when another British company that was also involved in an aid and trade provision application arrived in the latter part of the same week to press its case.
On returning to my office a couple of days later I spoke to him on the the telephone, first to thank him for his help and, secondly, to seek some commercial advice. After a pause he said he was under seige in the embassy; that there were protestors throwing bricks from a nearby roof and the police were replying with CS gas from the street. In the middle of all this chaos he was able to confirm several details of commercial significance that I sought, but finally warned that he had little hope of further communication for a while, due to the rather pressing demands on his political duties.
When one comes to consider the relatively high level of commercial staffing at some of our diplomatic posts in Europe, which under the definition of the single European agreement should be reduced rather than increased, as more responsibility will inevitably fall on the individual exporters, a case must surely be made for greater commercial involvement in those areas where we are currently understaffed.
The year 1992 will be one of the greatest challenges faced by industry in this country for a very long time. It is to be hoped that this liberalisation will eventually free our European commercial resources to be redeployed elsewhere to bolster our commercial effort outside the EEC. I know the government seek the secondment of experienced managers from industry to operate within departments, but suitably qualified people are reluctant to sacrifice, as they see it, a two-year to three-year period to work in an environment which has possibly a lower pay structure, combined with the very real fear that at the end of the period their places on their company ladder will have been lost.
How useful it would be for companies to understand the inner workings of government after 884 having had the practical experience of working with the Department of Trade and Industry and the commercial section of the Foreign Office. Similarly, how useful it would be for Whitehall better to appreciate the needs of industry. I also understand that some thought is being given to the possibility of allowing younger managers to be stationed overseas on short commercial postings of about six months, as paying guests in embassies and high commissions.
I consider that very few companies would forgo an opportunity such as this to educate and train their young men to a level of expertise that their seniors could possibly never attain. Markets like Japan, Malaysia, Indonesia, India, America and many others are enormous potential outlets for our goods and services and need experienced managers. Rest assured, that our competitors abroad are using every means to penetrate these markets. It is the duty of industry and government to make sure that we are prepared and able to meet them on an equal footing.
Finally, this White Paper must be most welcome to those companies that have embraced the principles of quality management. For instead of fighting for what might have been mere crumbs from the Department of Trade and Industry Board they are now seated at the dining table, together with a menu of common objectives and a defined principle of future progress. I therefore warmly support the proposals in this White Paper.
§ 1.7 p.m.
§ Lord Winterbottom
My Lords, when I was preparing myself to speak today I was somewhat concerned by the number of maiden speakers. I was not certain then in what order they would speak and whether or not I was to follow them. Fortunately, whoever is responsible for deciding the batting order of speakers has enabled me to listen to all three maiden speakers and to congratulate all of them on the very interesting contributions they have made to this debate. In particular this has enabled me on behalf of the whole House to congratulate the noble Viscount, Lord Oxfuird, on his speech. I have a special reason for saying that. First, it is probable that we shall become neighbours in the not too distant future. Secondly, I think that what I have to say will be in harmony with the philosophy he has expressed this afternoon.
Perhaps I may also congratulate the noble Lord, Lord Young, for the particular initiative that is being taken in connection with his department. I have worked for many years with the Department of Trade and Industry and I am very pleased to see it going over from defence to attack. That is what we all want to see.
I shall now put a very simple question to the Minister on one small point which I think is of importance for the future of our export industry during the very trying days that will come when we are in a truly common market. I refer to the effective working of free ports in this country. I have a particular interest in free ports and was absolutely delighted when in February 1984 the Minister of State at the Treasury stated that six free ports would be created: three on the coast and three at airports. I believe that particular decision was of much greater 885 importance than is indicated by the attention it has received so far.
I have always been interested in free ports, particularly because I worked for three years in Hamburg, which has a very large free port indeed, employing at present about 800 people. But of course the history of the free Hanseatic city of Hamburg goes back a great deal further than that. Mr. Pepys, if your Lordships remember, always had his draught of Rhenish at the steel-yard in the City of London because that was the free port of the Hanse. After the war Britain still had its piece of the port of Hamburg. Of course we built upon it a church and served God rather than Mammon. But as recently as that there was still the residue of a free British area in the port. My interest in freeports was sharpened when I was permitted to take part in a Select Committee on the creation of the Cardiff Urban Development Corporation. I then learnt about the area that had been allocated for the freeport and the problems that were being experienced by the important firm that had an option on the running of the port.
I should be most grateful if in his closing speech the Minister could assist me to find out how the problems that face the option holders of the Cardiff freeport are to be solved. The problem is that there are three coastal freeports. There is Liverpool, which is working effectively with only four men and which is making a profit. It has one interesting peculiarity which is that a great deal of its business comes from, of all places, Felixstowe. Bonded lorries travel from Felixstowe to Liverpool into the freeport. Their loads are then divided up and sent throughout the world. I understand that Southampton is apparently working satisfactorily; but Cardiff has not started. As I live close to Cardiff and served on the committee that set up the Cardiff Urban Development Corporation, I am anxious to see what I can do to assist the individuals who are responsible for the freeport to get their project off the ground.
The problem seems to be simple. Whereas both Liverpool and Southampton's freeports are within the port area and have existing warehousing facilities and so forth, Cardiff is a greenfield site. It is an excellent site. It has excellent lighting, sewerage and roads and is close to the main operational docks of Cardiff; but there is nothing there and there is no fence around it. The cost of fencing and of carrying out the various other operations is considerable.
There is a further complication in that the freeport is competing with the Welsh Development Agency. That agency is doing an excellent job but the trouble is that it is larger and more powerful than the private firm that is trying to develop the freeport. It has many empty warehouses available at low prices. That causes the freeport initiative to be hampered by competitive forces. I have been trying to find out how we can solve that problem. However, we run into one of the great black holes of government business. As I see it, there are no fewer than four departments concerned with the future of the freeport. There is the Treasury, which set up the project and which has some interest in it. The Minister of State made a helpful statement on VAT last November, but when the Treasury is, as it is at the moment, wrestling with the Budget, it cannot pay much attention to what is just a few hundred yards of fencing and six VAT men.
886 The noble Lord's department is responsible for the urban development corporation. The Department of Employment also has a say in small businesses. A solution to those conflicts might be found if the Department of Trade and Industry were to take over from the Treasury responsibility for the freeports, because I believe that they have an important part to play in this country's future export business. That lack of central control with regard to their future is damaging, especially to the Cardiff enterprise.
I believe that change to be important for various reasons. At present 60 per cent. of our export trade goes to Europe. I have two projects in mind for the freeports which would help us to overcome certain weaknesses in the European system. Forty per cent. of our trade goes elsewhere. A properly working freeport would help immensely the efficiency of our freeport system. I hope that the Minister will consider becoming the godfather of any future freeport system in this country.
The only other point I should like to make is a short one. Some of your Lordships may have seen a film on television about a distinguished firm in the North-East of England which, having carried out the research and design of a new type of underwater pipeline surveying vessel, ran out of money when it came to development. The French took over the project and have won an advantage over us. The spokesman said, somewhat sadly, that the difference between France and England was that in France finance was the servant of industry and in Britain industry was the servant of finance. I believe that that situation ought to be reversed. I hope in due course that that will be the case.
§ 1.16 p.m.
§ Lord Sefton of Garston
My Lords, when the debate was first initiated I never dreamt that we would be discussing 100 years of our nation's history, but the White Paper goes back 100 years and tells us that the seeds of our economic decline can be traced back over that period and that after 1870 the UK's growth rate was persistently below that of the United States, France, Germany, Italy, Sweden and so forth. It deals with the fundamental question of the advent of the single European market and also with British Steel. The Government believe that British Steel is fundamental proof that releasing the inhibitions on private enterprise, which were certainly released in the 100 years the White Paper refers to, would make this nation great. British Steel is held up as an example.
Well, that 100 years was the period when free enterprise was completely free of restrictions. That had certain results. The White Paper goes on to say—I thought in an arrogant fashion—that:The change in policies in 1979 marked the major turning point".It ignored all the previous Tory Governments and what took place in this country in 1940. I make no apologies for referring to 1940, the period of the Churchill Government, because what we had (the White Paper to some extent supports it) was an inefficient, decrepit, capitalist society in which the pursuit of private profit had led us to a situation where neither the country's coal and steel industry 887 nor its transport system could meet the needs of the war effort.
There was a turning point in 1940 when Churchill was lambasted in the Daily Express for introducing Socialism into Great Britain. We took control of the economy as a nation and the consequence was that we managed to hold our own and we increased productivity. As a nation we worked as Great Britain Limited, we stood alone in the face of the world and combated the forces in Europe. So it is a little arrogant to suggest—and this indicates what is wrong with this Government—that 1979 was the turning point; that if it had not been for 1979 we would have been nowhere.
The White Paper goes on to deal with British Steel. The Minister seems highly amused by going back into history. If he is amused then he should not have introduced history in the first place. He refers to British Steel and talks about BSC having reached a stage where it will benefit from the commercial flexibility and freedom from Whitehall restrictions which privatisation will bring. All very good.
He says that in the context of 1992, the single market. British Steel is privatised; it is a free enterprise company. It takes a decision alongside its partners in Europe that perhaps it would be more sensible to centralise steel production in the Ruhr. Because it has a long history of steel production, it could do it effectively. The Minister is nodding his head. I do not know why because all I am saying is factual. If a decision is taken to centralise steel production in the Ruhr, the question is, will this Government, if they are still in office, prevent it? Will they renationalise steel in order to control it or will they allow British Steel to take that commercial decision?
That will not be proved of course until the next series of difficulties. When we export steel plants to produce steel, that automatically means there will be less demand for the steel which we produce here. So that may well be the pattern of the future. All I am saying is that it is a question which needs addressing and the Government should give us a reply. Are they going to allow the steel industry freely to take a decision within the single market and so move on from there?
British Steel, history and what-have-you were mentioned in the White Paper but nowhere do I see mention of the 320,000 people who are employed in the most inefficient place in the United Kingdom. I refer to the South-East. This is the DTI—the department for enterprise, which is supposed to look at the fundamental nature of the problems of our society. We are spending more money on London weighting than the whole of the North-West gets in regional assistance. The situation will get worse, because in the White Paper the Government are applauding the idea that there will now be selective grants.
Perhaps I may ask the Minister a second question. He maintains that the grants should not be paid to an organisation which does not need it. They should be paid on a selective basis, not a geographical basis. Would Barclays Bank have received a grant under the new procedure? If so, where would it have gone?
888 Under the new procedure it will be a selective grant and I do not think that Barclays would have qualified to go to Wavertree Science Park in Liverpool. The probability is that it would have gone nearer the market, somewhere in Manchester. That would have been the effect.
In 1945 we were really in trouble. The situation was that after the war we had to start straightening things out. We did it in several ways. First, we nationalised the steel industry or took control of it. We took control of British Rail; and in 1945 when the war was over there is no doubt at all that the private sector was not prepared to tackle the major areas of our economy. It had already thrown away the idea of tackling the coal industry. If it had not been for the nationalisation of certain activities in our society, Ford and the rest of the private sector would not have been able to develop in the way in which they did.
This White Paper is going back to the old Victorian values, the values which ultimately led to the situation which we are in today. It is no use lauding private enterprise with all the problems of Rolls-Royce, British Leyland and the motor industry in general. It is no use lauding private enterprise if it was under private enterprise that those industries failed the country as they did. The Government switched from not blaming private enterprise to putting all the responsibility on the trade unions, but they are all part of private enterprise.
I have mentioned that there are 320,000 civil servants in London who are not included in this report and I do not wonder at that, because if one examines London weighting one will discover that it is a myth, a fraud. With the growth of chain stores now, food and clothing cost no more in London. So the only matters of extra expense are housing. That could be rectified if we removed some of the housing congestion out of the South-East to elsewhere. We could do it quite simply by moving the 320,000-odd people or a vast majority of them, decentralising and sending them to the regions. In reply to a question of mine when this paper came before the House, the noble Lord, Lord Young, said that he was not averse to moving government departments out of London. He is not even averse to moving the House of Lords out of London. If he is not averse to that, he must think that there is some benefit in looking at the problem.
Perhaps I may ask another question. Will the noble Lord look at the problem? Is he going to decide whether it is worth while moving some of the Civil Service to the regions, in the same way as he advises the private sector to do so with their activities, in order to save money and move them to a place which is much more efficient? Will he or not? Perhaps he can give us an answer.
I asked a question of the Leader of the House yesterday. I asked whether he could tell me who will take the decision under the new so-called efficiency set-up about the decentralisation of the Civil Service? Will it be the new agencies or will the Government do it? Is it not important that we should have an answer to that question? It arouses much concern in the trade unions and among the people involved. Is it not important that we should have an answer to this question? Are the Government going to take those 889 decisions? If they are, will they tell us when they are going to take the decisions. If a decision is to be taken in regard to the decentralisation of the Civil Service, it must surely be taken before these proposals in the report which we considered yesterday are dealt with.
I suppose the point should have been made perhaps in the North of England, but I want to make the point that I am very concerned that people in the North of England do not realise the magnitude of the problems which they are about to face. Noble Lords have heard reference to the wishes or the thoughts of the noble Lord about the Channel Tunnel. I have mentioned the possibility of British Steel, within a single market, deciding that steel should be produced somewhere else.
I have mentioned the problems that Ford is facing in Britain now. Those seem to me to be leading inescapably to the conclusion that if Ford can get a better negotiating deal with the trade unions in the centre of that market it may well be that the expansion of Ford would not take place in the UK but that it would take place somewhere around Cologne. If we leave things to the free enterprise market of course that is a possibility. If that happens it would be tragic because the situation around Merseyside is already bad enough. If Ford goes, and possibly with it Vauxhall, the place will be decimated and will become a desert beyond destruction.
I have asked three questions. Perhaps the Minister will address those questions when he replies; or perhaps he will not. I have made that offer before without any effect. Perhaps the Minister will write to me and inform me whether the Government intend to do those things I mentioned. If they do intend to do those things, when will they do them? If they do not intend to do those things, will the Minister tell us plainly whether there will be a change in the distribution of civil servants in this country? If that is the case, what the Minister is in effect saying is that the rest of the country in a line from Bristol to the Wash will have a charge levied upon it in order to pay the London weighting for those civil servants. That is my 14 minutes up now.
§ 1.31 p.m.
§ Lord Thorneycroft
My Lords, I agree with the noble Lord at least on one point if on no other. I agree that this is a very wide-ranging White Paper. One could talk about many things, from restrictive practices to regional policy. But for my own part I should rather concentrate, as the noble Lord, Lord Joseph, did in a brilliant maiden speech, upon the principle involved here. This paper in some ways goes to the root of the relations between industry and the Government. It is part of the pattern which this Government have drawn up on how a government should conduct themselves in a free democratic society.
Governments have a number of options open to them. They can if they wish try to run the whole contraption, and some of them do. They can try to decide what is made, where it is made, who shall make it, where they shall make it and what they shall be paid. I remember as a young man I once had the opportunity of talking with Gosplan, which is a body 890 rather like General Motors. Gosplan was delighted to talk to me. It was as frank about its failures as about its successes. But in the course of time some doubts have arisen about the Russian system. Even Mr. Gorbachev today is seeking a few Thatcherite adjustments, if I may call them that, to try to achieve something a little better for the people who live in those territories.
Or one can fall a little short of that. One can go for the commanding heights of the economy, as it has been called. One can seek to control the steel, the coal, the transport and the communications. One can seek to tax, to borrow, to spend and to intervene in seeking to provide the necessities of life to all.
Certainly all of us in this House can claim —not just the Labour Party—that we have had a jolly good go at this one. There is nobody who has not had a go at it. We have called it consensus policies or the mixed economy. The Liberal Party has been in the thick of it. The Conservative Party is also tagging along to the best of its ability. I agree with the noble Lord, Lord Joseph, that we have all been involved in the same kind of policies. Yet that control did not seem to work and does not seem a very popular option today.
Or we can try for the market. In the market economy the decision as to the main lines along which one goes is not in fact taken by governments. The noble Lord, Lord Williams of Elvel, is quite right. That decision is taken by thousands of individual decisions all over the market. People vote with their little purchases here and there in Marks and Spencers or the Co-op. They decide where the main effort will be made.
I think that your Lordships' House would agree that over recent years that method has chalked up quite a lot of successes. I shall not go into them now as I do not have the time, but that method is going rather well at the moment. That is the popular theory at the present time.
I should probably carry the Labour Party with me at any rate if I said that there were some snags even about that great system. Markets are not perfect. They can be abused by the employers. We have certainly heard some horror stories in the past few years about abuse by employers of the market system. I mention Guinness in this connection. Markets can be, largely scuppered by the trade unions. The noble Lord, Lord Callaghan of Cardiff, could tell us all about that. Markets can be discriminated against by local authorities. We were debating that issue the other day. They can be closed due to protection from overseas. Part of this debate will concern that matter. So there are plenty of snags about all systems.
I have never stood up in any assembly and claimed that there was a system that worked perfectly. But this is the system which will be tried for quite a number of years ahead. We are really embarked on the market economy. We are not debating whether or not we should have a market economy but what kind of pattern of government it should operate within. In that, more is involved than the DTI. The Treasury is involved, as are industrial relations and education. Education is the most important factor. The Foreign Office is involved as regards what happens in Europe. A vast number of departments are involved. But I 891 certainly agreed with the noble Lord, Lord Ezra, when he mentioned in a debate the other day that it was important to have a really powerful Department of Trade and Industry. He said that that department should be able to advise and supervise in this field.
I do not quite know what is said about the old Board of Trade, but I always felt that that was what it tried to do. I was very happy there. I stayed in the saddle there for six years, which is longer, I dare say, than many have been able to ride the Department of Trade and Industry. I wish the Minister every success in staying there for as long as I stayed in the Board of Trade.
I would say about this White Paper that I think in a way that its basic principles could have been written by any party in this House. If we are not going to have a communist society and we have abandoned looking after the commanding heights of the economy and trying to run the blooming thing ourselves, I think that most of us would have tried something along the lines that have been suggested in the paper. Let us not quarrel too much about it.
I remember so many old friends. I can picture Anthony Crosland giving us this kind of a policy as a new approach for an important role for government in a free society. Let us not quarrel too much about the principles that are involved in this. If I may say so to the noble Lord, Lord Williams, it is a bit more than window dressing and public relations.
To those who live in the DTI, it must look more like an earthquake. The department is moving from the large to the small, from the general to the particular and towards the ability to discriminate, if I may say so to the noble Viscount, Lord Chandos, who made such an excellent speech. This sort of policy will enable him to work like MITI and like the French. Within the DTI there must be freedom to intervene with effect and not simply to spend money indiscriminately all over the shop. That does no good at all. I think it will actually help us to move in the direction which the noble Viscount, Lord Chandos, rightly wants.
Perhaps I may make two further points. The first is about men and the second is about markets. As regards men, if we depend on the growth of small industries, the management of them has to be right. Only a fifth of our managers have degrees or special training at the present time, compared with 63 per cent. in Japan and 85 per cent. in the United States. It is not on. I pay tribute to the CBI for the steps which it has been taking in launching the Charter Group, which deserves support.
We are not only short of managers; we are short of artisans and skills. Above all, we are short of a spirit of enterprise. Mr. John Rae, an ex-head of Westminster School, who has not been an unqualified supporter of the Conservative Party, recently said, in speaking of the Education Bill, that its aims ought to be set out. He continued:The aims of British education are to develop the abilities of individual children so that they become independent-minded adults; to teach all children the skills and attitudes they will need to find employment and to contribute to national prosperity; and to ensure that all children understand the language, history and cultural values by which our society has been formed".892 As regards markets, they must include Europe. I hope that we can agree on that, and also about one other thing. It is going to be no end of a battle to get into the Common Market in the way in which it should be done. Much of it is a closed shop at the present time. I remember, more than 30 years ago, as a young President of the Board of Trade, leading the negotiations for the General Agreement on Tariffs and Trade and coming back to find the Conservative Party still wedded to imperial preferences. Perhaps I may say to the Labour Party that imperial preference is rather like Clause 4. It is crazy and out of date; nobody believes in it. But attacking it is something terrible to do. I was allowed to go and fight it at Blackpool at the party conference with the noble Lord, Lord Aldington, my Minister of State, beside me. And we won.
However, it is no good Bryan Gould saying that we must go back to that. We won that battle 30 years ago. We have to move forward. We must get into a new market which is as open and as free as the United States itself. My noble friend faces no end of a struggle in order to do that. This is a brave, good and ambitious paper and I wish it well.
§ 1.45 p.m.
§ Lord Northfield
My Lords, I join in welcoming the maiden speech which we have heard and particularly the distinguished speech of the noble Lord, Lord Joseph. He was typically thoughtful, analytical, persuasive and modest. It is a delight to welcome him.
However, I wish to raise some practical questions about regional policy financial incentives. I wish to speak particularly about attracting investment from Japan. As chairman until recently of Telford New Town, which is now a booming, self-confident city in the Midlands, I have been involved with a lot of companies in seeking government grants. I have been a frequent visitor to Japan. Next month, at the same time as the noble Lord, Lord Young, I shall be having my 14th visit in the last few years to Japan.
I should like to begin with a complaint about another part of the White Paper. I warmly welcome all the proposed help for small firms. But I feel particularly sad about Paragraph 6.12. It says that the small firms service of the Department of Employment will continue to be separate from the DTI services. The two now need to be combined. The noble Lord should have had a go at that. He should have been allowed to mould them into a more complete service for small companies.
The paragraph states that the work of the two departments will be closely co-ordinated. I wonder. In Telford, where the new DTI satellite office, mentioned in Paragraph 9.7, is sensibly being located in the new town corporation's offices, the Department of Employment is taking offices a mile away. Surely the noble Lord can achieve better co-ordination than that. It is not a good start. He knows how important a one-stop shop is for helping small companies.
I turn to the issue of regional development grants versus regional selective assistance—automatic grants in development areas versus discretionary grants over a wider area. The case for phasing out automatic grants is not overwhelming. In my view the 893 argument is finely balanced. First, as the Federation of Industrial Development Authorities—the 100 or so local authorities who have taken a special interest in economic development—points out, the certainty of grant is often most important for very small enterprises. I believe that the 1983 White Paper actually pointed to the importance which industry itself attaches to predictability in that matter. Indeed, some small companies are ill-equipped to go through the hoop of satisfying all the criteria required for selective assistance.
Secondly, as regards attracting foreign companies, let us always remember that other European companies anxious to attract a firm from the United States or from Japan will be offering automatic grants. Nevertheless, on balance I support the switch from development grants to selective assistance.
After my long experience in helping to regenerate the economy of the old East Shropshire coalfield that is now Telford New Town. I must remind your Lordships that no grants were available in the early years of Telford. It has only recently been made an assisted area and it is a good example of learning in that matter. However, the absence of grants did not stop hundreds of small firms from coming and starting up locally. Many of them are now outstanding success stories after continual growth. The development coporation in the local authority gave effective support. Perhaps local authorities should learn a lesson from that. They can do a great deal in helping small companies to get over teething problems.
The second reason for supporting the switch to RSA is that levels of unemployment, which are a good index of the need for extra financial incentives, have begun to even out between development areas and assisted areas. It is sometimes no longer fair that automatic grants should be available in development areas and not in assisted and often neighbouring areas with the same levels of unemployment. That again has been a Telford problem; firms recruited to Telford have been lured over the border into Wales to areas of similar unemployment by the prospect of automatic and more generous grants. I could give specific examples.
Thirdly, I think that it is true that UK industry is safely out of the recession and growing strongly and ought not now to need the automatic grants. Attracting footloose foreign countries can succeed quite well under selective assistance, as I shall illustrate in a moment in relation to companies from Japan. While I support the switch to selective assistance I must qualify that support by insisting that the noble Lord, Lord Young, should make the criteria for selective assistance clear, open and transparent. Only then can industry know where it stands.
For example, can he confirm that the present criteria will continue? Can he confirm that assistance will be given where a project brings new technology or helps to economise on imports—and as several noble Lords have said that is an important issue again now that our balance of payments is not quite so healthy—and that it is not simply available where there are heavy start-up grants and a project is less likely to go ahead without grant? Will equal weight be 894 given to all those criteria? They are desperately important, and I hope that the noble Lord will see that the criteria for RSA are now made more public and clear. There is no mention of them in the White Paper, it is all left rather vague.
In addition, will the noble Lord make sure that there will be adequate staff to process the selective assistance applications? It will need a lot more manpower in his offices than did the automatic grant system. We do not want long delays, frustration and sheer despair leading to cancellation of projects. I hope that we can have some assurances on that.
Now I come specifically to paragraph 7.10 dealing with internationally mobile projects. Learning to understand Japan, the Japanese and Japanese industry over the past 10 years by frequent visits and friendships with Japanese in the UK has been for me a rewarding and fascinating experience. I am proud of friendships with leaders and management of great Japanese companies. I appreciate the way in which they have enabled me to begin to understand Japanese industry and the reason for the extraordinary dynamism of their economy. It is good to have seen from my own experience that once established here they are good employers, great sponsors of the arts and sport and that the few staff that they bring (usually about a dozen in a factory employing hundreds) are happy and well received locally.
I hope that your Lordships understand and appreciate the emerging power of Japanese industry, which is illustrated by one figure alone. Early in the next century, on the basis of very modest growth rates, the Japanese gross national product will equal that of the whole of the EC countries put together, despite the fact that the population of Japan will be only one third of that of the EC. That dynamism will achieve that result, without any doubt in my mind whatever.
Of course Japanese industry knows that tariffs or quotas will be inevitable if its trade surplus continues. The Japanese Government are pressing their industry to set up overseas. Our job—and it has been my particular job in Telford—is to get a good share of that investment for Britain. The figures on the whole are encouraging. One third of the manufacturing investment by Japan in Europe has come to this country—about 60 companies. Eight of them are now in Telford, four of those on over 50 acres each and set to employ at the first stage over 2,500 people and indirectly, through purchasing of components in the Midlands, about as many again. They are expanding steadily with extra jobs, and now a second wave is beginning to arrive. Component suppliers are beginning to arrive to follow the great names like Hitachi-Maxell, NEC, Ricoh and Seiko Epson already in my own town of Telford. It is important that our town has attracted them by providing a full service—good quality campus sites in a fine environment, help with factory design, help with finding component suppliers, help with negotiating Government grants and work permits, and delivery on time of everything that we promise.
Looking ahead and thinking about RSA, the UK prospects are good. It is estimated that 2 per cent. of Japanese production now takes place overseas but 895 that this will rise to 10 per cent. in the 1990s. We have the dickens of a lot still to aim for.
RSA selective assistance has been vital in this process. In Telford something like £15 million in grants has attracted over £100 million in first stage Japanese investment. The grants were important for two reasons. First of all, the whole of Europe is competing for those investments and other countries are less reticent about grants than we are. In several cases within my experience it has always been a final choice of Telford or Düsseldorf.
Let us also remember that Japan is desperately new to this world role. A lot of my time in the past 10 years has been spent in gaining Japanese personal trust and confidence and assuring them of their welcome here. A government grant is seen as a visible recognition that they and their new technology are wanted here. Let me add the converse. Recent success stories make the Government start thinking that grants will now not be so necessary. I would respond quickly by saying that taking away grants will be seen in Japan as a sign to go elsewhere and that no more are wanted here.
In the light of that experience I welcome the assurance in paragraph 7.10 of the White Paper of no diminution in the availability of such grants. I hope that the noble Lord, Lord Young, will stick firmly to that. I am glad that he is going to Tokyo in March. The annual Tokyo seminar on Telford—an important date in the calendar for hundreds of Japanese managers—will be taking place during his visit. I hope that he will drop in on it, as our Ambassador in Tokyo normally does, to see how we set about attracting investment to the UK. I hope that I shall have the pleasure of welcoming him there.
§ 1.57 p.m.
§ Lord Nelson of Stafford
My Lords, I add my congratulations to the three maiden speakers today. It has been a pleasure to hear from them all and particularly from my noble friend Lord Joseph, who has contributed so much original thinking to our affairs over the years.
I also add my welcome to the many other ideas that have been put forward during speeches this afternoon, including the Secretary of State's new initiatives for the DTI outlined in the White Paper. We can all applaud his concern to promote wealth-creation and enterprise, both in industry and commerce. There is much in the White Paper with which I agree. However, I have one or two small concerns on the measures proposed and on some of the omissions. It would be helpful to clarify those in this debate.
Over the years in industry I have been deeply involved in overseas trade and have reason to praise the work of the Department of Trade and its predecessors, the Board of Trade. In many ways they have been of immense value to those of us who have been working overseas. I should like to be assured that this assistance will continue under the new White Paper as it has in the past.
896 The White Paper says that the DTI will change its structure:to give much greater emphasis to issues which will span all industry and commerce [and that] The existing industry divisions will be replaced by market divisions".I hope that we can have today the Secretary of State's assurance that this will not weaken in any way the support given to our exporting companies overseas which has been so valuable in the past.
The White Paper also emphasises the desire to promote free and open markets. I do not criticise that aim but I hope that the department will constantly bear in mind that it is not a United Kingdom market but a world market with which we are concerned and that we shall be concerned after 1992 about operating in a free European market. So we are not only concerned about free and open markets; it is vital to ensure that they are fair markets.
There are good grounds for suspicion as to whether all national trading practices are always fair. I am all in favour of British industry looking after itself, but in many areas it is a matter for government to ensure that the conditions are fair and equitable for all. British industry needs to have confidence that it will be operating in a fair market at the same time as it is operating in a free and open market.
In the White Paper there is also reference to the promotion of small and medium-sized firms, which is admirable in itself and much to be applauded. I am chairman of a local enterprise board and give it every support. However, we must recognise that a large proportion of our overseas trade is gained through a relatively small number of firms, which are mainly large firms. I hope that in giving emphasis to the work of small firms, the department will continue to give every support to large firms in their efforts to secure overseas markets. Many of the small firms will be efficient and reliable sub-contractors and suppliers to large firms but they depend on those major contracts. If market penetration by major firms is to prosper it will require the continuing support of the DTI in the future just as in the past.
I very much welcome the reference in the White Paper to the need for everybody to be aware of the competitive position that will arise in 1992. That cannot be emphasised too much. I am delighted that the DTI is to mount a campaign to make everybody aware of the situation. That is necessary, because our overseas competitors are already very active in this field. In Europe, and in France particularly, governments and government agencies are actively promoting the restructuring and regrouping of their firms to ensure that they are in the strongest possible position to compete in the market. We must do the same.
I do not dissent from the Secretary of State's emphasis on the fact that this is up to firms and private enterprise. However, the DTI has a large role to play over this period in bringing together all the forces that are at work in this country which can influence the situation. I have in mind in particular the harnessing of our purchasing power to the promotion of our export industries, which was a point made earlier by the noble Viscount, Lord Chandos. That has not been done as well as it ought to have been in the past, but it must be done over the 897 next five years if our exporting industries are to be in a necessarily highly competitive position. That can only be done if the purchasers as well as the suppliers are involved in tackling the problem. I believe that it is a matter for the DTI and I hope that it will form part of its campaign.
My second group of concerns relates to research and development and on this subject I speak not only as an industrialist but also as a member of your Lordships' Select Committee on Science and Technology. Noble Lords will remember that in its report on civil R&D the Select Committee concluded that support by the DTI for civil R&D was inadequate and recommended that it should be increased. It also recommended that grants should be more specifically targeted and not spread too thinly.
In its report, Innovation in Transport, the Select Committee recommended that the DTI should give more support to joint projects involving both suppliers and users. The DTI's own technology requirement board in a report last July entitled Focus on Innovation recommended substantial increases in DTI support. The White Paper contains very little about that matter except to say that grants to individual firms will cease and support will shift to consultancy, technology transfer and collaborative research. Worthy as those three aims are, they are not identical. This country still needs support for specific R&D in carefully chosen fields. I ask the Secretary of State whether the recommendations that have been made by those bodies have been taken into account in arriving at the policy outlined in the White Paper.
On many occasions the Government have rightly emphasised the need for the private sector to increase its spend on research and development. That is also the view of the Select Committee. However, I cannot see anything in this White Paper which indicates how the DTI proposes to create a different climate in order to bring that about. In his opening remarks the Secretary of State said that the DTI should be a catalyst. I hope that it will continue to be such but I suggest that it needs to be an active catalyst in this field. I wonder how my noble friend the Secretary of State intends to change the atmosphere and encourage private companies to devote more of their investment to research and development.
Finally, I should like to draw to the attention of the House the fact that the White Paper devotes one small paragraph to the subject of space, about which it says that no increase in expenditure is envisaged. The Select Committee recently studied this matter and issued a report on United Kingdom space policy. That report is to be debated at the end of March and therefore this is not the time to pursue the matter further. However, I should like simply to say to my noble friend that the committee was appalled by the Government's decision, announced on 10th February, not to participate in any of the European Space Agency's optional programmes.
Space is not just a research programme; it is a whole spectrum of new endeavour, stretching into the indefinite future. Your Lordships' committee believes that it was a grievous mistake to be out of this new field. This point will be made forcefully in the forthcoming debate. Meanwhile in conclusion, I would ask the Secretary of State this question. How 898 do the Government reconcile this decision with the declared intention in the White Paper to promote more collaboration in the research field, both on a national and a European level? Surely space must be an ideal field for such collaborative research.
§ 2.8 p.m.
§ Lord Basnett
My Lords, as my noble friend Lord Williams of Elvel has said, there are issues in the White Paper that we can welcome. There are, however, silences within it that are most unwelcome. It is certainly the case that it is stronger on presentation than it is on detailed proposals.
However, it is a welcome sight to see the DTI being given more prominence and recovering some of the status that it has lost under this Government. I should like to think that the more prominent image of the DTI will be reflected in its policies—a recognition within government of the importance of trade and industry to our economic well-being. That remains to be seen, but it is against that measure that this White Paper should be judged.
The impression that many of us have of government policy is not solely the result of what Ministers have said; it arises out of the record. No one claims that what has happened to manufacturing industry since 1979 is simply the responsibility of the Government; but the facts are there. Our main competitors may have suffered from the recession after 1979 but only in the United Kingdom did it take until last year for manufacturing output to recover to its previous level. The fall in manufacturing employment over this period was faster than in any other industrial country, including Spain and Ireland as well as our more successful competitors in West Germany, the United States and Japan.
Although output has now recovered somewhat since 1983, and it would be foolish to deny that the economy is growing relatively fast, the central problem has become worse. The deficit on manufactured goods had reached £5.5 billion by 1986 compared with a surplus of the same size in 1980, and all the signs are that this gap is continuing to widen. Therefore, whatever else the current pace of growth is doing to our economy, it is not solving the underlying weakness of trade performance. The danger is that Britain is becoming locked into being a low pay, low productivity economy, unable to compete in the high technology sectors that offer the best prospects for export growth; and increasingly dependent on imports as the economy grows.
The challenge facing the Government is therefore to help Britain escape from this trap by designing policies to create real improvements in productivity over the long term. It is difficult to believe that the White Paper does that. It is difficult, not only because of what the White Paper tells us, but also because of what it does not tell us, especially if we wish to know what the policy means for industry in the regions. Certainly it appears reassuring when it tells us,The changes do not reduce the planned level of spending on regional industrial measures.".But a planning total is not of course the same as actual spending.
The public expenditure White Paper is hardly more illuminating. Here we find that figures for regional 899 and national industrial assistance are presented together. Even if one makes generous assumptions about how these figures break down, it is clear that regional industrial support is set to fall over the next three years. If the Secretary of State can reassure the House that that will not happen, we shall welcome his reply. Indeed, I believe that we should be given more information about the meaning of the White Paper; not just its generalised rhetoric but hard facts about the amount of money which will be available and where it will go. We cannot judge these proposals unless we know whether the assistance will exist to support long-term investment in real productivity growth.
This is not merely a matter of throwing money at a problem; it is also about the way in which the money is spent. Many noble Lords have been concerned about the way in which automatic grants to industry have been awarded to large-scale projects which would have gone ahead in any event. Some of us would support the greater use of selectivity, but that begs the question of what will be the criteria for selectivity. Spending on regional development grants over the last year has been over £500 million, and that is by a considerable margin the largest element in total regional assistance. Regional selective assistance was less than one-quarter of the total.
If regional development grants are to be abolished, and the total is not to be reduced, there must be a large expansion of the selective scheme. If that is what the Secretary of State intends, he will find that there is a great deal of common ground. He will have created a powerful lever to promote industry in the development areas and in the country as a whole. However, our fear is that that is not what he intends and that selective assistance will remain more or less at its present level, used as an incentive to attract foreign investment but not the expansion of indigenous firms.
Our fear is also that, unless total spending is maintained, companies will not have the back-up to help them to implement the advice that they will be receiving through the consultancy initiatives. Improving performance in areas like manufacturing systems, design and marketing, is not merely a question of knowing what needs to be done; it also requires substantial investment, often over a long term. It would be a bitter disappointment for many companies to be told that they could receive advice from private consultants, while at the same time they were being told that they could no longer have the finance for implementation.
That is particularly the case as regards investment in research and innovation. The effects of the White Paper are easier to see in the area of innovation, but unfortunately what we see is not encouraging. Here again, it must be said that we are not told what the overall level of spending will be. The belief that, left to itself, industry will, or even should, finance its own research and development expenditure is simply not borne out by the facts. The Government are already cutting their expenditure on research and development but industry is not filling the gap. The CBI points out that industry-funded R&D accounts for a lower share of national wealth than is the case 900 with any of our major competitors, and that the pace of growth is a long way behind them all.
To become competitive we must achieve an increase in spending in absolute terms and, more importantly, achieve a rate of increase that is faster than our principal competitors. As a recent DTI report acknowledged, if that is not achieved, our industry will fail to match up to the degree of innovation of foreign companies in key areas such as electronics, telecommunications and information technology. It is in those areas of high technology—the growth industries of the future—that our economy will succeed or fail. They require very substantial increases in investment, innovation, training and new manufacturing systems. They require more than rhetoric about an enterprise culture and business dynanism. They require more than the White Paper.
§ 2.20 p.m.
§ Lord Jenkin of Roding
My Lords, I do not believe that it is a criticism of my noble friend's White Paper that he has the presentation right. I believe it has been a criticism in the past of the present Government—certainly when I was a member of it—that our policies were splendid but our presentation was bloody awful, if I may coin a phrase. My noble friend clearly has the presentation right but I also applaud his philosophy and his priorities. I read this White Paper with growing enthusiasm.
I do not see it as a major change of direction. I see it as a change of emphasis. The major change of direction came under the noble Lord, Lord Joseph, when he became Secretary of State for Industry in 1979. Then there was a cultural revolution in Ashdown House. There has been a steady progression since then. However, I welcome the emphasis on open markets, on competition, on the promotion of enterprise, on the support for small and medium-sized businesses and on the more rational and effective support for regions and the inner cities, and I should like to say a word about each.
Before I do that, perhaps I may say to my noble friend the Secretary of State that when I held what was part of his present office I called the Department of Industry the listening department. He has a major role in talking to his colleagues in Whitehall and articulating to them the needs of business in those areas where they are responsible. I shall suggest one or two areas where perhaps he might do that.
On the question of open markets, my noble friend knows that I chair the United Kingdom Japan 2000 Group—the high-level non-governmental discussion group set up to try to improve relations and establish better contacts with Japan. I have been very grateful for my noble friend's encouragement and, indeed, that of the Government generally. Of course there have been trading difficulties with Japan. The trading relationship has not always been easy. There is a profound difference in the national ethos of the two countries, one of whom, ourselves, has always had the proud boast that Britishers can go into shops and buy goods from all over the world, and it has been a point of advertising by retailers that that is what they can offer. For a long time in Japan the consumer has 901 held very firmly to the ethos: why should he buy something foreign if his Japanese compatriots can provide something as good?
If anybody believes that that is still the view in Japan, I invite them to spend 90 minutes watching the contents of a Boeing 747 as it disgorges its Japanese passengers at Anchorage and watch what they do in the duty-free shops there. They will realise that they buy goods from Britain, America, France, Italy and indeed from every country and they go back to their plane laden. That is actually happening now in Japan. Their imports are rising strongly and British business has been one of the most successful at taking advantage of rising imports in Japan.
In his recent very successful visit to Japan the Foreign Secretary talked of a dynamic, plain-speaking partnership, and I support that. That is as true in trade as it is anywhere else. Sustained pressures and friendly persuasion should reinforce the very strong influences that now exist in Japan towards internationalisation. The Cable and Wireless saga is an excellent example of how the Government and the private sector between them overcame the resistance that was there. We are now seeing the same sort of thing happening in relation to Scotch whisky. However, one must avoid sudden spasms of ill-tempered anger and outburst because that is totally unproductive and absolutely undermines the efforts of our diplomatic representation in Tokyo, which is of a very high order indeed, and makes its task more difficult.
Our exports to Japan are now rising faster than anyone else's. There are huge opportunities, but there are obstacles. Language is an obstacle; distance and cost of travel is an obstacle. Why does it cost twice as much for a British businessman to fly to New York as it does for a New York businessman to fly to Tokyo? The answer is that there is competition between the American airlines but no competition on the air routes to Europe. I hope my noble friend will give me his support in seeking to secure lower air fares for travel to Tokyo.
There is science and technology collaboration, and my noble friend has been extremely supportive on how we can expand that with Japan. Much useful work has been done. In the area of competition, I warmly applaud the emphasis given in the White Paper and the resistance to all the wilder demands being made until recently. However, I direct my noble friend's attention to some very useful minor suggestions to deal with the merger problem. These are to be found in an article by Professor Mervyn King and Dr. Ailsa Roell in the current issue of the National westminster Bank Review. The Takeover Panel should have power to issue sanctions after the event and not merely before it. There should be a power to compel the disclosure of nominee shareholding. A company and its pension scheme if acting in concert should be treated as a concert party. They are minor, technical changes in the merger scene but they could restore a little more stability into what at one point looked like becoming a dangerous development.
On the question of promotion of enterprise, the schools are the most important target. I inherited from the noble Lord, Lord Joseph, an industry 902 education unit at the department. I doubled its budget and its staff because of the importance which I attached to it. To read in the White Paper of what more is being done is indeed encouraging. However, I identified one problem and I do not think the position is any better today than it was then. If industry is asked to make people available—for example, to serve on governing bodies or address school conferences—it tends to be old Joe who does not have anything much else to do; whereas it ought to be someone, probably in his late twenties or early thirties, who is rising up the ladder in marketing production or research and development and who can give from his immediate experience at a time in life when youngsters will identify with what he is saying.
I asked the CBI if it could use its influence to try to persuade companies to do that. Unfortunately, those are the very people who are hard pressed in running companies but they will have much the best impact in trying to inculcate the young at an impressionable age with the enterprise culture.
As regards support for small and medium-size enterprises, this White Paper has got it absolutely right. I very much welcome the greater emphasis on consultancies and I underline in particular the area of production engineering. So often it is in the straightforward production processes that one sometimes finds the biggest contrasts between the less up-to-date smaller companies and their competitors, both in this country and overseas.
Often, what is required in those companies is a change of style and philosophy. Recently I visited a factory where I serve on the board, which was full of JIT—just in time. One by one the production lines—and I apologise to your Lordships for the jargon—were being JIT'd. I was shown one that was in the process of JIT-ing. The language is coming in but the problem is that there are some people who find it extremely difficult to adapt. Some people at junior levels of management find it very difficult. I think consultancies may be necessary, and that process should be rather longer than the five to 15 days specified in the White Paper. It is sometimes quite a major psychological change and consultancy takes longer. The management may feel that it needs more help.
Perhaps I may say a few words concerning the changes in regional policy about which many noble Lords have spoken. My noble friend has succeeded where I have failed. I tried to persuade colleagues that it would make sense to concentrate regional aid by giving a regional dimension to enterprise policies and to pay for them by phasing out the automatic regional development grants. I was rebuffed. Perhaps the time was not right. It was certainly at a time when unemployment in the regions was still rising and it would have been very difficult perhaps for Scottish and Welsh colleagues to have defended such a policy. Unemployment is now falling strongly in these areas and conditions are much more favourable.
I sometimes wonder how much better the regions would have fared over the past five years if I had been successful and able to channel the regional aid and the amounts available in a more selective way, as my noble friend is now proposing, rather than paying 903 very large sums in automatic regional development grants. Some arguments have been used to attack the proposals in the White Paper which I find very strange indeed. I read of a debate in another place where it was remarked that it would have been impossible to persuade Nissan to come to settle here without automatic regional development grants. It was said that it would not have wanted to sit down and try to persuade the department that such an investment was a desirable investment. All I can say is that such a person could not have spent the two and a half years that I spent in negotiating with the Nissan company, both in Tokyo and here, and with successive managers. We negotiated in great detail the terms of selective assistance and issues such as local content and a number of other matters. It is a matter of some pride that Nissan is now the largest single Japanese investment in Europe and it is expanding rapidly. It is bringing literally thousands of jobs to Washington and the North East.
Let us look at the subject rationally as the noble Lords, Lord Northfield and Lord Basnett, and others, have done. It may be an evenly-balanced argument but I believe that the right decision has been made. The issue of supporting the cities in this context is right.
Perhaps I may end with one niggle which I hope my noble friend will take back and consider. I have been helping a small company called Initiative Development Ltd, which has created the concept of an enterprise development centre. There is the idea of converting a large disused mill. It goes further than many of these schemes have done. It will require both public and private input. It will provide management guidance and the kind of consultancies which the White Paper talks about. It will provide financial support for businesses in terms of help with equity capital or loan capital. This is going beyond what most other people have done. It will require a partnership between the public and private sector including my noble friend's department, the Department of the Environment and the Manpower Services Commission, or the "Training Commission" as it will be known. It will require the private sector in terms of the initiator, financial advice and management. It will also provide most of the capital.
The mechanisms exist in the regions to do this. There are CATs—city action teams—and there are taskforces where three departments can sit around at a table and a project can be stitched together. The private and the public sector can work in partnership. But those CATs and taskforces cannot authorise the money. That question goes to Whitehall. The impression of those who are trying to bring this project to fruition is that at that point it disappears into a bureaucratic black hole.
Co-ordination exists in the regions but it still does not exist in Whitehall. I had hoped that my noble friend's fellow Minister, Mr. Clarke, would have the authority to pull this scheme together at the national level. One understands, however, that his role is primarily one of presenting the inner city initiatives and selling the concepts around the country. He does that extremely well. I had thought that perhaps the Cabinet Office unit headed by the civil servant who 904 was an extremely effective head of the Liverpool and Merseyside taskforce when I was with the Department of the Environment would be able to do the same. However, if someone is wanting for an enterprise development centre, an urban development grant from the Department of the Environment, a Section 7 grant from the DTI, and training help from the MSC, I have to say that the perception is that there is nowhere where that can be brought together and a decision can be made quickly. It seems to me that with the emphasis which this White Paper places on partnership both within Whitehall and between government and the private sector, this is still lacking. I hope my noble friend may be able to give the matter some attention.
That is what I described as a niggle. I think that this is an extremely good and very encouraging White Paper and I wish my noble friend well.
§ 2.36 p.m.
§ Lord Russell of Liverpool
My Lords, I should like to start by thanking the Minister for giving us the opportunity to debate this most promising and potentially far-reaching statement of DTI policy. I must apologise to the House for not being present at the start of the debate owing to an unforeseen and regrettably unavoidable business commitment. I shall not speak for long. I crave the indulgence of the House should I unwittingly repeat what other noble Lords may have said rather better than myself.
I should like to address myself to Chapter V of the White Paper and the subject of management education. I should declare an interest in this matter as a member of the advisory council of the Association of MBAs, until recently known as the Business Graduates Association.
Management education has recently enjoyed a degree of public attention and interest that last appeared in the white heat of the technological 1960s. Reports such as that of Professor Handy, which is mentioned in paragraph 5(2) of the White Paper, have confirmed that we British, as ever, do things rather differently to our major competitors. The statistics make for dismal reading. Only 7 per cent. of our 2.5 million managers have a degree. Only 2 per cent. have any kind of management qualification. Many reasons have been put forward for these uncomfortable facts. Two reasons are I think peculiarly our own.
First, there is the belief still widely held in this country that higher education stops at the age of 21 and that time spent on further education in the workplace is a nice soft option and a form of skiving off from the real task of day-to-day business. Secondly, there is the belief of British businesses in trial and error as the best means of management education. Yes, you may learn, but at what needless and avoidable cost on the way.
I recently had the privilege of addressing 400 sixth-formers on the subject of the challenges and intellectual stimuli that industry could offer. My main advice to them was to look behind the slick facade of companies involved in graduate recruitment and to ask those companies hard and perhaps discomforting questions about what could happen during their subsequent careers.
905 The real challenge that companies face is not in the attraction of good people but in their retention. Some companies are way ahead of others. IBM spends £2 billion annually on worldwide employee education. Other companies are content to let others do the training and survive by enticing managers from their more enlightened competitors. Most companies are somewhere in the middle, feeling their way step by step, unable to adjust their relatively short-term focus to make the large-scale, long-term commitment required to make management development successful and self-regenerating.
The publication yesterday of the paper entitled Improving Management in Government: The Next Steps by the Prime Minister's Efficiency Unit is most timely. May I ask the Minister what steps he is taking to ensure that the department for enterprise is fully committed to the spreading of a management development culture internally? With the advent of a single European market in 1992, what steps is the department taking to ensure that its senior staff are fully conversant with the dynamics of international competition? Are internal management development courses either in place or being considered in order to enhance both the department's management of its own affairs and the type and quality of advice that it gives to the business community at large?
I mentioned that I had advised sixth formers to ask awkward questions of prospective employers. Could I entreat the Minister, his colleagues and his department to do the same? Regrettably, many companies still place management development low in their list of priorities.
We are a small, crowded island, possessed of limited natural resources and a long and distinguished history that sometimes seems to threaten to suffocate us. We have to live by our wits and our skills. We have no divine right to continue to enjoy a standard of living in the top quartile of the OECD index. We need people: trained, motivated people.
Could the Minister undertake to ask those awkward questions about management development of companies emphatically and regularly? I know that if I were subjected to close questioning by the noble Lord it would most definitely concentrate my mind and I anticipate that it might have the same effect in a great many boardrooms across the country.
§ 2.42 p.m.
§ Lord Lucas of Chilworth
My Lords, one of the great advantges of being the 17th speaker in, if I may say so, the general list of speakers—the general list of course being headed by the great and the good, including my noble friend the Secretary of State and the noble Lord, Lord Williams—is that one can luxuriate in the pearls of wisdom that fall from the lips of those who know better than oneself. On the other hand, it gives one the advantage of being able to pick from the basket of goodies those points that one wished one had written into one's draft speech, had failed to do but would like to underline. Therefore in effect one gets the best of both worlds.
The first of the goodies I should like to pick out of this basket is the only one, I am sad to tell the noble 906 Viscount, Lord Chandos, upon which I agreed with him. That was his plea that we should have a further and perhaps a narrowly self-centred look at our public purchasing policy. I believe that that matter was also underlined by my noble friend Lord Nelson. It really is no good, talking in terms of competition, to say that the cheapest shall prevail. In my experience there is very little that is cheap in this world: most things are expensive although some are less expensive. It is not always best in the long term to pick the less expensive, and I think that sometimes we look too shortsightedly at the effects of such a policy.
The next plum I should like to pick out the basket was first referred to by my noble friend Lord Joseph in, if he will allow me to say so, a most admirable maiden speech about industry and the teacher-link. As my noble friend Lord Jenkin of Roding reminded us, it was my noble friend Lord Joseph who set up the industry education unit in the Department of Trade and Industry. That was a unit with which, in the short time I was there, I had a lot to do in relation to Industry Year. The enterprise shown by the RSA and the department in fostering Industry Year is spelt out even further in the White Paper.
The tragedy was that industry always grumbled that education did not provide it with the right type of graduate or person, and education then asked, "How do we know what you want unless you tell us?" I thought a lot about that matter and talked to many people while I was working in the department. Sadly, I found that it was industry which could not identify what it would need, so how could academia provide it? I think that we should, in the words of my noble friend Lord Jenkin of Roding, look further into the matter, start deeper and work faster.
I should now like to dip into the basket of my noble friend Lord Oxfuird. He made what I thought was another splendid speech, and one which I understood, in which he dealt with overseas trade. When I was a travelling Minister, I felt that we missed out badly in the garnering of knowledge. We have commercial officers, both men and women, and very good most of them are. We are currently employing more what we call "locally engaged officers", who do not come within the traditional ambit of Whitehall. They are, I suppose, more free-wheeling. It might be better if we were to encourage a greater use of overseas chambers of trade and commerce. When I travelled around, one found them from Aberdeen to Accra and from Chelmsford to Chittagong. Many of those organisations have expatriates in their membership. Far greater use of their knowledge could be made.
Another tragedy was that commercial officers had to subscribe to the export intelligence service. That always seemed to me to be a numbers game. Foreign Office inspectors would require to see that a post sent back 150 notices per month, per quarter, or whatever. They were disseminated in Eastcote and sent out to the "10-bob" subscribers. I should like to get rid of that system. It would be a good idea if the export intelligence service was transferred to the private sector, where those who provide the lead share the reward of a successful sale. Only the private sector can adequately relate those two aspects.
907 The noble Lord, Lord Thorneycroft, as he usually does, amused us with his speech. But of course he always has two or three major points. He spoke about his six years at the Board of Trade and said that he hoped that our noble friend the Secretary of State would stay in that position longer. However, that is where I disagree with the noble Lord, Lord Thorneycroft. I hope that my noble friend does not stay at the Board of Trade—the British Overseas Trade Board as it is now called. That department should be totally divorced from the Department of Trade and Industry.
I think this is one of the subject areas which came within the speech which my right honourable friend the Prime Minister made yesterday on the Civil Service. Split it away from the umbrella of the department, where there are both the assistant secretary in the department and the boss man of BOTB. What a clash, what a conflict of interest! It is now headed by a businessman, it is mostly subscribed to by businessmen, it is run by businessmen freely, therefore free it entirely from government. It has a pittance of an allowance, it has to make three times its allowance from government even to survive. Set it free to do its real job, harness it with the British chambers of trade and the overseas chambers, and let it go.
Lastly, seriously addressing myself to the White Paper, which I welcome, I am glad to see the change in the regional development grant because my experience taught me that in very few instances was a potential overseas investor concerned with the amount of grant. That was a little bit of icing on the cake. The investor was mainly concerned with the stability of labour and the stability of government policy which would enable him to make his investment and look for a long, long-term return. So the automaticity or the abolition of the grant is something which I very much welcome.
I think we can do very much better with selective assistance. If that selective assistance is identified in the wider network of regional DTI offices, all to the good. I would ask my noble friend whether he will ensure that the regional directors have such a degree of responsibility as to attach their fingers to the purse-strings and loosen them when they see it as appropriate rather than having to make a back-referral. Even though we have what is. I think, spelled out in the White Paper—that there will be criteria to which industry can address itself and by which it can measure itself —at the end of the day somebody, somewhere, probably back in Whitehall, will assess that company's measurement against the criteria. Who better to do this than the director on the spot?
I broadly welcome the White Paper. There is much to be fleshed out and I hope that before too long we shall see some of the flesh put on some of the bones in the White Paper which spell action.
§ 2.53 p.m.
§ Baroness Seear
My Lords, I am very glad to be able to say, as is not altogether common from these Benches, that there is much in the White Paper to which we can wholeheartedly give our support. This has been said on all sides today, which must be no 908 small relief to the Secretary of State, who is not always received in this very enthusiastic manner. Well, "enthusiastic" is perhaps overdoing it!
First and foremost I should like to say how glad we are that we have the wholehearted support of the noble Lord for genuine competition and open markets. That is one of the many changes which has gone on inside the Conservative Party which we from these Benches very much welcome. We can also give our support to the changes in relation to regional grants. I think there can be no doubt that some of that money at any rate was not used in the most useful way. The idea of selectivity, provided it is done properly and provided, above all else, that it does not involve cutting down the amount of money which is available, is something with which we would at least like to experiment. As other noble Lords have said, it is something to which we can give at any rate a provisional welcome. We shall watch with great interest to see how this develops, but it seems to us to be a movement in the right direction.
Here too we would especially welcome the wholehearted support of the Secretary of State for the development of the single market. We would also welcome his understanding—although he has not elaborated on this today but it came through in what he was saying—of the very considerable changes that are required if we are to make a success of the single market and his understanding of the extreme importance for this country that we should make a success of it.
The noble Lord would not accuse me of indulging in flattery towards him as a rule but I think that he probably has been the spearhead of dragging his Gaullist colleagues into a state of relative enthusiasm for the single market. I shall not expect him to comment on that, but to the extent that it is true I should very much like to compliment him. There seems to me no doubt at all that we have a great opportunity to go forward but we shall sink back further if we do not take full advantage of the single market and the developments which we expect in 1992.
That said, it would surprise the noble Lord even more if I did not say that I have certain reservations and questions that I want to put to him. Like the noble Lord, Lord Williams of Elvel, I regret that the White Paper does not deal with the central questions of the balance of payments and the growing volume of imports. I know that one could make certain comments to modify that criticism but the fact remains that we are in a serious balance of payments position, that we cannot just ignore it and that with the decline of North Sea oil unless action is taken our balance of payments is likely to get more serious and not to get better. It will not right itself without action.
We on these Benches believe, as does the noble Lord, Lord Williams of Elvel, and as of course your Lordships' Committee on Overseas Trade stressed three years ago and repeatedly since, that one cannot have a prosperous future for this country without restoring not necessarily the same manufacturing industry but a manufacturing base.
But that requires the backing in research and in development money of key industries particularly in the information technology area. It requires the 909 encouragement of private investment—the message there is perhaps more for the Chancellor of the Exchequer than for the Secretary of State for Trade —and also public investment in the development of the right kind of infrastructure. Manufacturing industry cannot in fact prosper without proper infrastructure support, both physical infrastructure in roads, railways, airports and so on and also in education and training, to which I shall return in a few moments.
That whole area, as we see it, is inadequately dealt with. I know that the Secretary of State will say that this is all very old fashioned business and that we are moving away from the manufacturing base into the service sector. But I put it to the noble Lord—and I should like a better answer to this than I received when I raised the matter a few weeks ago—whether he agrees that it is now very out of date to make this sharp distinction between manufacturing industry and the service sector and that a great many of what we call service jobs exist only because of the manufacturing sector. When I asked how many of the newly created service industries are dependent on successful manufacturing industries, I was told that there was no statistical information to answer that question. There is no statistical information to give any idea of how much the advance in services rests on a continuing success in manufacturing and how many so-called service jobs are in that part of the economy which is producing manufactured goods for overseas trade. That is what matters.
Apparently we do not have that information. But we should stop making what seems to me the very false distinction between manufacturing and services and think instead about added value and the extent to which particular kinds of production contribute to our increase in the share of world trade. Those are the questions which we need to have answered. Perhaps the terms of the discussion in the past have concealed what the important question is.
When it comes to competition I hope that the Secretary of State will follow through his assertions of support for competition in the whole area of privatisation. It seems to us that sometimes the Government have spoken with two voices in their enthusiasm for competition in general but when it comes to privatisation, particularly in British Gas, British Telecom or in certain aspects of the airways, their devotion to competition has been less than 100 per cent., to put it mildly. I do not know. It is possible that the noble Lord may even have fought a battle in order to ensure that that was not so. If he did, may there be more power to his elbow and may he return to the fray.
I want to concentrate on one other point in particular. I wish to support what the noble Lord, Lord Jenkin, has said with regard to the number of departments represented at local level. Particularly when those departments are dealing with related problems, they can be very confusing to people who are actually trying to do the job. Only yesterday a very hard-pressed director of a local chamber of commerce, operating in a particularly difficult area of the country, said to me that the number of different government departments that were promoting the entirely worthy business of the relationship between 910 schools and industry was driving them absolutely mad. Different people were going to the same schools and asking for the same kind of things to be done.
Developing links between industry and education is something of which we are all in favour. But it would help if the Government could see the development of the one-stop shop about which we have all spoken. I recognise the difficulties but I think that the Minister could look rather more closely at co-ordination at local level so that it is easier for local people to find out where to go, and, when they have gone there. to get an answer so that they can get on with the job. That would be very helpful indeed.
In the few minutes remaining I should like to put some emphasis on education and training. Of course we are all in favour of education and preparing people for the world of work. I think we have to remember—perhaps we shall discuss the matter further when we discuss the Education Bill—that although that is a very important purpose of education, it can never be the sole or even the primary purpose. Education needs to turn out difficult, awkward people who ask difficult, awkward questions and who do not fit smoothly into the established ways of working.
If (as I believe he is in his heart) the Secretary of State is a person who wishes to break up established ways of doing things, bring in new ideas and let in fresh air, then we must get the people who are not trained to conform. We need well-trained, vigorous and non-conformist people such as those who in the past have contributed so much to the development of industry and who do not like things the way they are. An education system which is too devoted to thinking about how we make the economy work better is not an education system which produces that kind of person whom we so badly need.
I very much endorse what the noble Lord, Lord Russell, has said about management development. We are very much behind in this country. There is no doubt about that at all. That is a matter on which we could have a debate in its own right. However, I think it is worth saying that it is true that in too many cases universities and institutions which have taken on teaching in that area have simply tried to develop their work along the traditional lines of universities. Moreover, they have seen their success in producing learned articles rather than in focusing the talents that they have in interdisciplinary work in order to tackle the problems of management and management training. If that had been what was wanted, it would have been better to have put the money into the universities and told them to get on with it. Those should have been quite different kinds of institutions, of equal status, but different in the way in which they worked and the way in which they rewarded people. By and large they are not; there is a whole area of work to be looked at there.
As regards training, I should like to make two points. The White Paper talks about consultancies and tells us the areas in which they are to exist—marketing, design and so on. That is all very well. But nowhere is there any mention of consultancy in that whole area which deals with the effective use and development of people.
911 All that will break down unless the proper recruitment and training of people is undertaken. A great deal has to be done in-house. It has to be done inside enterprises by people who understand how to develop internal training schemes. That is not done easily. In industry as a whole the number of people who can make a proper analysis of training needs and on the basis of that analysis, develop and implement a training programme is not very large. They are very skilled people. I urge the Minister to look again to see whether he ought not to designate an area of consultancy to be provided by the people who are able to deal with the whole aspect of the development of staff inside enterprises.
Finally, we have talked a great deal, and rightly, about the money that should be devoted and the help that should be given to the black spots in our economy. Perhaps I may suggest that we are also approaching a problem in our white spots—if that is the opposite of black spots—and that there is a strong case for reinforcing success. I talk from experience of one area, Buckinghamshire, with which I am connected, in which the unemployment rate is now below 5 per cent. There are unfilled vacancies in high-tech jobs, and not only high-tech jobs, but it is not possible to bring people in from outside because the cost of a roof over one's head in Buckinghamshire is impossibly high; and there are still unemployed people. I believe that with intensive modern training methods one could convert some of the presently unemployed people—some of them women, blacks and long-term unemployed—to fill the vacancies.
We need experimental training work, backed by resources, in the areas in which that position has been reached. It is not the kind of grant or support which would be appropriate or available for the country as a whole. However, where the position that we have in Buckingham has been reached, there is surely a case for experimental work along those lines. Contrary to what I am constantly being told by both my management and trade union friends, that it takes years and years, I do not believe any such thing to be true; nor do I believe does the Secretary of State. I should love him to provide the opportunity to see whether some remarkable acts of conversion could not be achieved if the money and the resources were made availble.
§ 3.8 p.m.
§ Lord Peston
My Lords, perhaps I too may start by congratulating the noble Lords, Lord Joseph and Lord Stevens of Ludgate, and the noble Viscount, Lord Oxfuird, on their maiden speeches. I do not say that merely as part of the normal courtesies of your Lordships' House. I could not flatter them more than to say that I wish that their speeches were not maiden speeches so that I could respond in my more usual controversial and acerbic fashion. Suffice it to say that I look forward to more such opportunities in the future.
This has been a very good debate. It is a pity that it has not been attended by more of our colleagues. For those who are keen on the market mechanism perhaps we ought to have a differential Friday 912 afternoon attendance allowance that would attract more noble Lords.
We are certainly indebted to the noble Lord, Lord Young, for introducing the White Paper. It is an important document, whether one agrees with it or not. It sets the agenda, or one might say that it sets the battle lines. I do not believe that our differences on this matter are trivial, and therefore I welcome the chance this afternoon to comment on some of the points on which I disagree with the Minister and with other noble Lords.
Before doing so perhaps I may utter one word of apology. I shall not cover to any great degree the enormously important material in Chapters 4, 5 and 6 on business education. That is not out of discourtesy to the noble Lord and his department or because I feel that the matter is unimportant. However, perhaps if I may trail my own forthcoming debate in three weeks' time, I shall be introducing a debate on business education and I prefer to retain my more detailed contributions until then.
However, I should like to make in passing three points on business education as it is at the moment. I agree of course with the noble Viscount, Lord Chandos, the noble Lord, Lord Russell, and other noble Lords on how fundamentally important it is, but the first point that I wish to make is that it is in connection with exports that foreign language tuition at all levels—schools, higher education and training—is so enormously important. It has been so throughout our history and so it must remain. As regards foreign language tuition this country has failed. When I am abroad it is a source of constant embarrassment to me to discover that virtually none of my business colleagues has even the beginnings of an idea of how to converse in any language at all other than his own. What is even more embarrassing is that they not only cannot speak a foreign language, but they have no sense that they ought to be able to do so. That is an important point to which I shall return later.
Secondly, I agree that there is a problem in the relationship between education and business. However I must emphasise that the problem is two-sided. I have spent a great deal of my academic career in trying to persuade first-class students to go into manufacturing industry and even more in trying to persuade manufacturing industry to recruit first-class students, who can be particularly difficult people. When young they tend to be sensitive and require to be coaxed; they do not wish to be told that they are useless and worthless until they have had some shopfloor experience. I agree with the noble Baroness. Lady Seear, that this is a fundamental problem which must be looked at. If we are to move forward on this matter, industry itself has at least as big a role to play as has the education system.
My third point relates to a matter that was raised by the noble Viscount, Lord Chandos, and again I hope to be able to build upon it in a few weeks' time. I am most concerned that so much of our business education seems to be business education for foreign businessmen. We are actually rather good at providing it and they are very keen to buy the product. But we do not seem to have anything like the resources required to persuade our own people to buy 913 our own product. Again, that is a matter that I shall return to later.
I turn now to the opening part of the report. I must say that in so far as it is meant to be a genuine history or an account of our experience I find the first part of the-document absurd beyond belief. I think that it is a travesty of history. If officials at the Department of Trade do not know anything about the economic history of our country, then our education system is an even bigger failure than I thought it was. However, even if they do not know anything of that history, they might at least apply a little logic. In dating the decline of our fortunes from 1870, they should realise that that period was when free trade was in its heyday. If that is supposed to be the critically wrong time, the decline cannot be put down to statism, corporatism or other philosophies of that kind.
Having listened as I always do with enormous pleasure to the noble Lord, Lord Thorneycroft, en passant I suppose that perhaps I remain a statist, a corporatist and all those things which we are supposed to have learned were erroneous attitudes in the past. In particular I was most interested in his reference to the late Tony Crosland. I ought to say that I remain a Croslandite. I believe that The Future of Socialism is a truly great work of analysis of our problems and, mutatis mutandis, I still hold that view today. It is not true that we have all changed our minds. Some of us have a kind of consistency of thought, even though we try to adapt it to new circumstances.
I turn now to competition policy. On this subject the Secretary of State lost me somewhat but I may not have been paying enough attention to what he said about all the different papers that will appear. It seems that we shall have a White Paper, a Green Paper and a working paper. It seems to me that that would make a very good examination question: define a White Paper, a Green Paper and a working paper and explain why particular problems go into particular areas. As I understand it, we shall be addressed on the subject of deregulation, on competition and on restrictive trade practices in separate White Papers. I find that a bit odd. I cannot see why we do not have those topics all in one major paper that we could debate.
However, there is a key question. The area of competition policy seems to me to be highly controversial. It is controversial because it is a very difficult subject but it is not all that political. We could disagree but not have a political row. It is simply a different judgment of how we think markets work and could be made to work.
In that connection I must ask the Minister, in view of all the papers that he intends to publish, why will he not publish the Liesner Report, which was the report that investigated the current state of competition policy and related matters in his department. Knowing the people involved. I think that this report will be of the highest standard. It may well lead to controversy, but it is controversy that we, and more particularly the Secretary of State, could afford to have and would wish to encourage.
I am a little concerned that the key document that I should like to read—I hasten to tell the noble Lord that I have not seen it; it has not been leaked to me; 914 I wish it had—has not been made available to us. I am concerned as someone who works in this field.
Speaking more generally on competition policy, it is very difficult to contribute this afternoon because we are waiting for the relevant papers. One lacks some specific detail. For example, it is not certain how merger policy will work from now on. I go back to the standard point. I believe that the subject has been investigated at great length. It is not the case that mergers on the whole are beneficial to British industry. We have the even bigger paradox that mergers do not seem to be beneficial to the merged firms themselves. Despite all the arguments about businessmen knowing best, it seems to me that one ought to a considerable extent to be strengthening methods to enable companies not to choose mergers as the way out of their difficulties, but to reinforce the good forces within the companies as the correct method.
I should therefore like to see a greater attempt to resist mergers. I should like to see it made much harder to accept mergers. In particular, I should like to see the position changed in two ways. The first is the way which the noble Viscount, Lord Chandos, mentioned and which many of us have argued for some time. Indeed, many experts in the field, whose political persuasions are on the other side of the House, also believe this; namely, that the burden of proof should change. It should be a requirement that one can demonstrate advantages in a merger. I go further. In the case of some mergers I should like to see a requirement that any advantage can be shown, let alone a net principle.
The other matter that concerns me on competition policy generally, and mergers in particular, is that the regulations, or law—whichever is relevant here—should change so that all interested parties should have rights of intervention when evidence is given. I refer to the rights of consumers, and those who represent consumers, to be called in at an early stage to say what they think.
In that connection perhaps I may say this. Others have commented on the good parts of the White Paper; I shall concentrate almost entirely on the parts with which I disagree. I feel that we could have had rather more in the document on the role of the consumer, the importance of the consumer, consumer protection, and so on. I do not wish to bore the House excessively with the words of Adam Smith, but it is the consumer interest that must always lie behind all industry and all enterprise. We cannot take that factor for granted. It has to be spelt out. I should have liked to hear a little more from the Secretary of State on that issue.
The document refers to some of the achievements of open markets and competition. En passant, I am a little puzzled about where the expression "open markets" has suddenly emerged from. This is new terminology in this area. Since I teach the subject, and have been researching it for a great many years, I am delighted that a new expression has come in. It will be grist to the mill of academics who will be able to set many academic questions such as, "Distinguish open markets from free markets from perfect markets. State what contribution the noble Lord, Lord Young, has made in this field". However, I should like to know whether any specific meaning is 915 to be attached to open markets as compared with markets or competitive markets.
In paragraph 2.30, with reference to achievements, there are two matters that I should like to emphasise. The Government refer to the telecommunications market, mobile telephones, and so on. This point has nothing to do with fundamental issues, but as I read the advertisements in the Sunday newspapers I am bothered by the enormously high cost of mobile telephones. The prices of them are so enormously high that although there are experts present I cannot but believe that they are excessive relative to cost. I am not certain that we should wish to see every noble Lord walking around these precincts with a mobile telephone in his pocket. However, I consider that a good test of whether there has been a great achievement in the area will be when mobile telephones are at least as cheap as "walkmen" or "walkpersons".
I mention it as a theoretical point but I am intrigued by the achievement on copyright and so forth. We have ploughed through the Bill already and are about to plough through it again. I cannot hesitate to draw the attention of noble Lords to the most peculiar doctrinal characteristic of the copyright area. It is the fact that it grants a monopoly and it is the area where the conversion of monopoly is somehow good. I cannot resist making that point and arguing that I believe we have gone as far as we should in that area and may well be granting too much monopoly.
Time is running out and I know that all noble Lords are desperately hoping for an early tea. I should now like to deal with the opening of markets in Europe. I welcome the move in that direction and strongly hope that the Department of Trade and Industry will do all that it can to prepare businessmen and the public at large for that entry. My experience is that most people have appreciated neither the fact that it will happen nor its significance. That will be a major problem if a large shock is not suddenly to hit delicate sectors of our economy.
I should like to make a trivial remark and say that I strongly believe in free trade and free competition where they are appropriate. However, I believe that there is a kind of symmetry. With respect to Europe, I and several other noble Lords are worried by the fact that, with our traditions, we shall be involved in the opening up of Europe in a naive way. We shall be opening up markets here while they, in one way or another, covertly and subtly, will be closing their markets to us. That is a matter of great worry.
I refer particularly to financial markets—a subject that I have raised before—where overwhelmingly this country has a comparative advantage. We should undoubtedly be the main provider of financial services to the rest of Europe on free competitive grounds. Whatever it says about the opening of the markets, the real question is whether the rest of Europe will let us capture its markets, and that is an important question. I say en passant that I am always a little struck by the contradictions in the opening up of markets, particularly in industry, and of the continuation of the common agricultural policy, which is a continuing insult to any concept not merely 916 of market forces but of efficient allocation of resources in any form. I say that although I know that regretfully it is not the responsibility of the Secretary of State.
I should now like to deal briefly with regional policy. Like many other noble Lords, I am on the margin and I want regional policy to work. It is enormously important that the regional matter is taken seriously. I argue, as have others, that the regional problem is one for both the successful and the unsuccessful. It is as important for us in the South, where labour is scarce, that the North and other areas should develop as it is for them. The two areas have a certain jointness and if the economy is to run into inflationary constraints—we may return to this subject at other times—we shall see an inflation developing in the South-East which may hold back policy and cause the North to suffer. That is one of the reasons regional policy is important.
If selectivity works, that is fine; I have no argument either way. If selectivity can be demonstrated, I should be happy with it, but I should like to make three points. First, I do not see how the policy will work without a considerable commitment to public spending. In particular I fail to see how the policy can work without a commitment to infrastructure and training and all such matters. I also add—and I do not do this simply to annoy the Secretary of State, although I never hesitate to do so when I have the opportunity—that one thing about selective policy as opposed to other forms of policy is that I should have thought that it would be more bureaucratic. It includes a closer scrutiny of all the relevant matters and it seems to me that it would involve more rather than less civil service activity, and I ask whether that is fully appreciated.
However, subject to those points, I keep an open mind. If, in a couple of years when we come to look at what has been achieved, the policy has achieved more, I shall say, "Congratulations", to the Secretary of State, but if it has achieved less, then I shall say, "You ought to show a similar open-mindness and move in that direction". I say a couple of years because I do not suppose there will be a general election for another three years.
Perhaps I may conclude with two other matters in what of necessity has to be a rather rushed response. A great deal has been said about R&D. I am bound to say that I still feel that the Government in general and the Department of Trade and Industry in particular have not appreciated the importance of that problem and I do not believe that we are doing remotely enough. I have said this before in debates and will continue to do so. I do not believe that it is naive nationalism on my part that makes me upset when I read in the newspapers that we are not in advanced electronics any more because we cannot afford it; we will not be at the forefront of space research because we cannot afford it; we will not be in the forefront of micro biology and its relevant matters because we cannot afford it. To put it differently, positively what I wish to see more and more is the Government giving the kind of support to industry—of course industry has to do it and I am not saying that the Government can do it—on a much larger scale. In other words, there should not be a budget constraint on this matter.
917 Before coming to my final remarks on the balance of payments and such matters, let me say that one should not be deluded by the rhetoric of some of our foreign competitors. They often talk as if they do not believe in government intervention. An outstanding example is the United States of America, which portrays itself as an economy dominated by unassisted private enterprise in which the government keeps at arms length, whereas nothing could be further from the truth. The United States economy and in particular its business economy is fundamentally underpinned by American procurement policy, public expenditure policy and matters of that sort. I should certainly like to see the department led by the noble Lord pursuing at least as ruthless support for our industry as the Americans show for theirs.
Perhaps I may conclude by referring to the remarks made by my noble friend Lord Williams in his speech essentially to say— and I do not think that the Secretary of State will disagree—that we must take a very long view here. We are concerned about the whole future of our country but in particular we arc concerned with what our country will produce and sell when North Sea oil runs out. What will happen then? We see now the very first signs that there are problems ahead. The balance of trade figures—and I am not one of those who say that we should look only at the balance of trade; I believe that we should look at the overall balance of payments—in themselves are beginning to be alarming. I can say no less than that.
Again I give the Secretary of State the benefit of the doubt. We will return to this theme. However, it seems to me that, in whatever way policy is judged, we must leave our country in a state where it will be producing the kind of output and on the kind of scale that will give our successors in the next century a decent and rising standard of living.
§ 3.29 p.m.
§ Lord Young of Graffham
My Lords. I rise to reply to the debate this afternoon in a slightly unusual position. On the one hand I am a member of that endangered species—at least, your Lordships will send me away a member of that endangered species—a comparatively happy Secretary of State after all the kind things that some Members of your Lordships' House have said about my White Paper. At the same time, I am also a thoughtful Secretary of State since a number of very valid and important points have been raised, all of which I shall give consideration.
Of course, your Lordships would not expect me to agree with all of them. Indeed, some are questions of interpretation. Many noble Lords sitting opposite have today questioned my interpretation of history. I must have a kindred spirit in the noble Lord, Lord Williams, who produced statistics to show that the world has not changed since 1978. I remember 1978 clearly. Even if we do not refer to social conditions and industrial relations, looking at British goods and the products of British industry and their reputation in the world at that time I must tell your Lordships that not only have I noticed but other countries have noticed a change. When I go overseas I see many people who have now returned to buying British goods and services and who have noticed the 918 enormous changes that have taken place during the course of the decade.
The noble Lord also accused me of trying to market regulation. Of course not. My department has two quite disparate functions. One is to regulate: to regulate the City in order to ensure that there is a correct and fair balance between the rights of the investor and the workings of a market which has now become one of the two main international exchanges. There is, of course, regulation in many other ways. At the same time, the department does have a role in offering services to industry and helping to influence attitudes in industry. For those functions, and those functions only, the department must of course market; and it will.
The noble Viscount, Lord Chandos, raised a very good point. I would be the first to admit that merely by issuing a White Paper civil servants cannot change the habits of a lifetime and change from sponsorship to marketing divisions. We have set off on that change. I expect to keep it under close scrutiny and I expect that it will take some considerable time to change attitudes within a government department. It is not easy to do, but it is necessary. My counterparts in France have done precisely the same. They, too, are experiencing difficulty in making the change but it is important that governments have the correct relationship with industry and not one in which industry wishes to muddle through changes or one in which government hears too much from, in many cases, the lowest common denominator within a particular industry—from those who suffer the most in particular sectors—and not from those changing and benefiting most.
The noble Lord could at least distinguish between our regulatory functions and the remainder of the department. They are important, but the regulatory functions also form a very real role in helping to open the economy. Throughout our debate noble Lords have spoken about public purchasing in Europe. That must be open. One of the fundamental tenets of the completion of a single market in Europe by 1992 is that all countries will open their public purchasing freely. It will not be an easy change to accomplish.
There are those who ask me whether I really believe that the market will be open and in existence as a single market in 1992. I must say that I wonder myself. Occasionally I think that the first 200 years will be the worst, after which I hope to be able to take life a little easier. However, I believe that we will be a long way towards that objective by 1993. It will require continual vigilance. We shall have to look at it regularly and it will be an essential function of the bureaucracy in Brussels to ensure that tests are carried out and that slowly and carefully we do to markets what we do to our own market.
I welcomed the speech of the noble Lord, Lord Joseph, and I congratulate him on a distinguished maiden speech. Perhaps I may say to him that it is difficult to see how we can have a consultancy that would raise productivity. However, if we can get design and quality right, and if we can get many other elements together, that will make a considerable improvement in productivity. Productivity has been improving steadily throughout this decade and one reason why we have consistently been able to afford wage increases well above the rate of inflation is that 919 each year productivity has increased to ensure that unit labour costs are running beneath the rate of inflation, even if still slightly above that of our principal competitors.
I hope very much that as we look at an era in which inflation is running at 3.3 per cent. and wage increases are running at 8.5 per cent. we make sufficient productivity gains to ensure that we can afford these wage increases. It is imperative that if we wish to become a high-wage society we carry on year after year making productivity gains, because there is no other route to becoming a high-wage society.
The noble Lord, Lord Joseph, also raised the question of barriers to incentives which still exist in society. It is still a part of the process in which we corrupted the original concept of a safety net in order to ensure that the least fortunate members of our society did not fall too far, but providing ladders of opportunity. In the past four decades that process was one in which we took that safety net and promptly put it right on top of the ladders. It is another matter outside this particular area and I hope it is one which we can address in the future.
The noble and learned Lord, Lord Simon of Glaisdale, unwittingly, I suspect, paid me a considerable compliment. He complimented me on the high mandarin style of the White Paper. Alas, I must confess to having written part of it myself so that I am not sure what that actually says for me. However, I shall accept it as a compliment. The noble and learned Lord also drew attention to the importance of regional pay settlements and said that we should seek differentials in them. I believe that next week we shall discuss at great length in your Lordships' House differences that may perhaps exist in different parts of the country. I shall then take the opportunity of saying a little more about that.
I also welcome the contribution of the noble Lord, Lord Stevens of Ludgate. I greatly welcome his support for deregulation. It is imperative that we actually do it. I question slightly his less than effusive welcome for parts of the Financial Services Act. I ask many who worry about the operation of the regulatory structure under the Financial Services Act whether they have ever read the laws of cricket. I believe it is impossible to read the laws of cricket and to construct the game from that. I hope very much that after April and May of this year when the new system is in operation we will find that we have an effective system of regulation and that the market proceeds and works well. It is a difficult Act. Above all else, we must ensure that London is a competitive market and does not lose its present place in the world. We must also ensure that we have an adequate system of regulation. I believe we are getting it about right. I put on record before, and I happily do so again today, that should there be any cause to change any of the regulations in order to help the working of the market we will do so quickly and as far as necessary.
The noble Lord, Lord Jay, drew attention to a fact for which I apologise straight away. It was not actually the White Paper which replaced Britain's cities, although it would have been an incredible act of job creation if we had demolished and rebuilt eight 920 cities in one year! The popular version of the White Paper was a little too popular. The new edition of it puts back many of our cities where they should be. I hope they still exist.
The noble Lord protested at the abolition of the regional development grant. I share a fear with large parts of the regions in that decades of the regional policy of governments have succeeded only in producing some form of branch economy. Time after time the head offices have ended up in the South and what we had in the North were temporary factories which were there until the cold winds of change came again. I recall a few years ago going to Belfast and in one morning I visited six empty factories, each of which was over 1 million square feet. Each had been constructed by government to cater for different activities. In one case it was carpets and in another it was an early form of computer. In each case, after a few years, the business disappeared and what was left was an empty factory of 1 million square feet. I believe that that money would have been far better spent if we had encouraged existing businesses to achieve the diversity of interest which exists in the rest of the country. That is what my White Paper is determined to see happen.
I also welcome the maiden contribution of the noble Viscount, Lord Oxfuird. He restated the principle that the quality and quantity of exports is dictated solely by customer demand. It is that market which is so very important. I am concerned to hear about the delays which the noble Lord has experienced and I shall look into the matter straightaway. I hope to write to him to see what can be done.
I am arranging to have more of my staff in overseas posts and more of an interchange with the Foreign Office, because I believe that that is very important. While I accept the noble Lord's point about the volume of our staff in commercial posts within Europe, I believe that until 1992 we should be very careful before we diminish any work that we do in Europe, because it is most important to see that we have the best of information available in this country.
The noble Lord, Lord Winterbottom, when dealing with the problems of Cardiff, said that it would be a greenfield site. He drew attention to difficulties of competing with government agencies. One of the problems in this world is that as soon as the Government interfere in anything, it distorts the market, creates problems and becomes difficult to withdraw. Nevertheless the free ports are a five-year experiment. They will be reviewed in 1989 and we shall then be able to see exactly where we are going with them.
I am glad to be able to assure the noble Lord, Lord Sefton of Garston, who I suspect this afternoon was not characteristically warm towards some of my suggestions, that this very day my department is announcing that it is going to move the Patent Office to Newport. If that is not enough for him, this very day we are also announcing that we are to move our Insolvency Service to Birmingham. Those are two examples of where we are moving parts of our department away from London, where they can properly be. In my last job I had a department in which 92 per cent. of my staff was outside London, 921 and I had over 60,000 civil servants, so that is a fair degree of dispersal.
Let me say to the noble Lord that if we want help for regional policy, nothing will be of more help than the new rating system, which will transfer over £700 million each and every year from the South to the North. I believe that when it comes in it will be of very considerable help to the regions.
My noble friend Lord Thorneycroft presented a concept with which I am still grappling. A Thatcherite Gorbachev is something I will take away with me for a long time. He reminded us of the market where people vote with their purchases. That is very important indeed.
My noble friend drew attention to the danger of markets being too free. A number of noble Lords this afternoon, including the noble Lord, Lord Peston, have commented on the use of the words "open markets". Open markets are not free markets. They are not markets which are totally untroubled. They are markets which maintain a sufficient degree of control of competition in order that they may prosper. So it is a concept between that of a controlled market and that of a totally free market. It is the type of market which we shall have in this country and which will prosper. Therefore, I can answer my noble friend's first exercise paper on that ground.
I pay tribute to the noble Lord Northfield, for all the work he did over the years in Telford. I travelled to see him on a number of occasions when I was first in the Department of Trade and Industry. It is very encouraging to see the enormous changes which have taken place since then. Let me assure the noble Lords who have queried this that the criteria for regional selective assistance are published. In brief, they are that the company genuinely needs public money in order to proceed, that the project is viable, that it will create or safeguard jobs in the assisted areas and that it will produce benefits both for the regional and national economy. We are not changing the criteria but we arc looking for improved value for money. We do not have civil servants by themselves to apply and judge these tests but panels of outside private sector people. The test we want to apply is that we have value for money. The noble Lord is quite right to draw attention to the one-stop shop. It seems that the arrangements being made in Telford are rather curious and I will certainly make inquiries to see what we can do in order to make them work.
The noble Lord, if I may say so, might perhaps express his predictions with a little care. From the time of Malthus onwards we have got into trouble with predictions in which we have extrapolated on a straight-line basis. I am not sure whether the Japanese economy will be larger than that of the whole of Europe by the year 2000. I recall that it is only 16 years since Herman Kahn of the Hudson Institute forecast that by 1995 the United Kingdom and Albania would have two of the lowest standards of living in Europe. I do not think that forecast will be right: that of the noble Lord may not be right either.
Perhaps I may say to my noble friend Lord Nelson of Stafford that I accept the words of caution that he expressed. The change to market divisions is quite 922 separate from the support for export services that my department provides. I have spent much of my time over the last few years working to help export services and the export of capital goods in foreign markets, as the noble Lord may recall, and I believe that some of them are going to meet with considerable success.
While the noble Lord is right to point out the difficulties of R&D, as indeed have many speakers this afternoon, it is salutary to remember that as a proportion of GDP the United Kingdom Government still spends more than Japan or the United States. Indeed, since 1979 my department spend on R&D is 70 per cent. up in real terms, but in the private sector we spend far less than the United States, West Germany or Japan. I have a suspicion that the private sector spend on R&D is always rather better spent than that of the Government on R&D, and that these are the matters which should concern us more. As the noble Lord, Lord Basnett, was concerned about the government spend, let me assure him that the regional spend will not be falling: nor will our spend on R&D. Just to confirm the figures to him, they will rise from £432 million in 1987–88 to £500 million next year and to £527 million in 1989–90.
I should like to pay tribute today to my noble friend Lord Jenkin of Roding in respect of the time I spent with him when, alas, he had to take advice from me as his special adviser. It was a very enjoyable period. It was also a very different world and much of what I am able to do now is done on the firm foundation that he and my noble friend Lord Joseph were able to provide during the first four or five years of this Government. I am glad to note his welcome for open markets and indeed to pay tribute to the work he does on UK—Japan 2000. I look forward to leading a delegation of businessmen to Japan next month. We are going there for the purpose of helping to improve British exports to Japan, which at the present time are rising at over 25 per cent. per annum. compound. I hope they will continue to rise at an even faster rate.
I will certainly take away with me my noble friend's point about air fares. That is indeed a very good point and I will carefully consider his suggestions on competition. May I assure him that not only will I look into the matters he has referred to but I will ask my right honourable friend the Chancellor of the Duchy of Lancaster to look into the Enterprise Development Centre. I will certainly do that and I should like to assure him that the length of consultancies in practice will be longer than the five to 15-day limit referred to. I hope that firms, when they take consultancies, will recognise the value of them and will then go on to and invest further.
I agree with what the noble Lord, Lord Russell of Liverpool, said about management education. I was in the fortunate position of being able to commission the Handy Report and have paid considerable attention to what it had to say. It draws attention to what has now received wide publicity—to the undertrained way in which British management has operated until now. I shall pay considerable attention to how we train our people within the Department of Trade and Industry. I shall be asking more questions of industry to find out the best way in which that training can go ahead.
923 Generally within the field of education, it is far better that we do not rely on universities, which have a tendency to make management education rather academic, or on government; we should rely on the private sector. That is why I welcome the work of the Charter Group. I have even asked my own department to join the group as an ordinary member. I hope that the group, together with the CBI, can in a comparatively short period erect a structure of business education which will cover not just MBAs and those at university level, but which will start the foreman on the shopfloor on a ladder of progression that will ensure that throughout British industry more and more people who are concerned with decision-making will have at least a broad idea of the basic concepts.
I say to my noble friend Lord Lucas of Chilworth that today he demonstrates a holy alliance between himself and the noble Viscount, Lord Chandos, with their concern for public purchasing policies. Well over 10 per cent. of the European Community's GDP is used in public purchasing. That is something which we must see open and which I believe we shall begin to break open in the next few years. I shall take away my noble friend's thoughts on the export intelligence service.
The British Overseas Trade Board could well be a candidate under the new "next steps" system of separate agencies following the Companies Registration Office in Cardiff, another decentralisation function of my department. We shall see whether we can make it a free-standing agency and perhaps even take it further to see how far we can go towards its privatisation. I welcome his support for the changes in regional assistance that we have made.
I am grateful, in a way in which I have not been grateful for some considerable time, to the noble Baroness, Lady Seear, for her support for a large part of my paper—support for competition and for a single European market. While the noble Baroness was speaking I was trying to work out which of my colleagues were Gaullist. If some of them are, I shall endeavour to keep the report of today's proceedings away from them for fear that they might find out that I am taking them faster than they would wish. However, I assure all in your Lordships' House that throughout government there is a general cautious enthusiam for the concept of the single European market. It is cautious, because we arc aware of the hurdles and problems to come; but there is enthusiasm, nonetheless, because we are also aware of the considerable benefits which it can bring not only to the United Kingdom but to the living standards of the whole of Europe.
The noble Baroness also raised an important point. Of course there is an interdependence between the manufacturing and the service sector. There has been a breakdown in the one-time simple division between what was manufacturing and what was service. It is becoming increasingly difficult to measure one from the other. Draftsmen whose activities used to be part of a factory have now been hived off as part of service sector activity. A restaurant that provides lunches or canteen services for a factory is now classified as a 924 service activity, whereas at one time it was part of manufacturing.
I believe that the argument is wrong. It is a false distinction. We should forget about the difference between manufacturing and service. We should be looking at the difference between wealth creation and wealth consumption. In tomorrow's world, more and more wealth creation will come from the service sector, and the proportionate value of manufacturing will diminish as we spend more and more of our GDP on things other than manufactured goods. Therefore, we must ensure that, as a nation, we can be competitive in what we call the service sectors, rather than in simple manufacturing. That is something on which I think we must spend some time and I hope perhaps that even in your Lordships' House on later occasions we can explore that concept further. In am very intrigued with the idea of the noble Baroness on the use of the people as a consultancy. I shall take that away and see whether we can develop it further.
Finally, I agree with the noble Lord, Lord Peston, totally on language training. Alas, I am a not very good example of a one-time British businessman since I speak but one language. I should like to assure him that there are considerable changes. Only last week I went to Warwick University and saw a programme which was integrating graduates into manufacturing industry. Professor Bhattacharyia was running it and it was extremely impressive. What is more, it was funded entirely by the private sector with a very substantial amount of money and I saw nothing but considerable enthusiasm from the private sector for it. That promises well for the future.
However, I assure the noble Lord that his remarks, and indeed those of many noble Lords opposite, showed undue concern for the historical basis of my paper. One hundred years ago we may well have been in a period of considerable free trade. But the decline of the entrepreneurial spirit in this country had to do with a change in our cultural base and not with the decline in free trade. What we have seen in the last 10 years is the restoration of that spirit of enterprise and of the respect for wealth creation, for working for yourself, which had sadly declined for many decades in our history.
Perhaps I may also assure noble Lords that we shall be issuing a White Paper on deregulation. It will be a White Paper because it will reflect government policy. It is a Green Paper on restrictive trade practices because that is a discussion paper. We shall be issuing a working document which will be explaining further, in rather more detail, the changes which we shall be making to competition policy, outlining in more detail the way in which the Director General of Fair Trading and the Monopolies and Mergers Commission will be working within the field of competition. I hope that the noble Lord reads that document, because I must confess that I feel he does not really believe in competition. He may well be a great student of it, but in what he says he is advocating methods designed to reduce competition.
The noble Lord said that he was concerned about the vast spread of mobile telephones and that the cost seemed to be excessive. If they were not necessary and were not wanted there would not be many of them. It is the market for them which tests whether they are 925 competitive. I suspect that we shall see a vast increase in the use of mobile telephones and that the cost will come down; the operation of a regulated open market in all its glory.
§ Lord Peston
My Lords, perhaps I may interrupt the noble Lord in case he misunderstood. I was under the impression that I was making a joke; I was being a trifle frivolous. I should love your Lordships' House to be full of mobile telephones.
§ Lord Young of Graffham
My Lords, I know that the noble Lord would not expect me immediately to suggest that I take his entire contribution as a joke. I shall not do so. However, I quite agree that we shall 926 have to take the long view. With the way the economy has gone in the past eight years, with the changes which can be seen throughout the economy and increasingly in the regions, and with the differences that we find when we speak to young people in schools and universities, the longer the view we take, I suspect, the better the economy will be. We have had a good debate today. I commend the White Paper to the House.
§ On Question, Motion agreed to.
§ House adjourned at one minute before four o'clock.