Japanese Companies: UK Investment Incentives (Hansard, 4 April 1989)

§ The Secretary of State for Trade and Industry (Lord Young of Graffham)
My Lords, around £120 million was paid in investment incentives to Japanese-owned companies in the United Kingdom in the 10 years 1979 to 1988 under the main schemes of regional and national assistance for industrial 1013 development. In the period, projects expected to create or safeguard over 30,000 jobs, with project costs in excess of £1.5 billion, were supported under these schemes.

§ Lord Bruce-Gardyne
My Lords, I am most grateful to my noble friend for those figures. However, I am not sure I heard them entirely correctly. Did I understand him to say that the total cost of subsidies to incoming Japanese firms was£120 billion? If I misheard the figure I apologise. But whatever the figure was, I ask my noble friend, as one whose enthusiasm for open markets and, above all, for an open single market after 1992 is at least as great as his own, and I dare to think even greater, whether those of us who believe in open markets should not nevertheless be worried about the very severe surge of protectionism which we witness on both sides of the Atlantic now. Is it not possible that to wander around flourishing enormous subsidies to incoming Japanese firms at a time of great sensitivities in Europe could become a little bit like wandering round a hay barn in high summer with a lighted pipe?

§ Lord Young of Graffham
My Lords, I am grateful to my noble friend. I am not sure I quite go along with the simile he has just given in your Lordships' House. But the difficulty is that I do not know how to stop the Japanese companies. If Japanese companies look around Europe and compare us, say, with Germany, they see that we have payroll taxes of 11 per cent. while in Germany it is over 100 per cent. They see that we have corporation tax of 35 per cent., while in Germany it is 56 per cent. Therefore, for reasons that seem to me to be quite obvious, they opt to come here. In many cases now Japanese companies come to this country and receive no assistance whatsoever. In other cases they come and receive only selective assistance which is available to other British firms. I cannot see any way in which I should keep them out, nor is there the slightest possible reason why I should even try.

§ Lord Williams of Elvel
My Lords, does the noble Lord accept that we on this side of the House support a programme of government incentives to encourage Japanese investment here, provided of course it is complementary to our own indigenous manufacturing industry, or whatever industry is involved, and not destructive of it? Furthermore, does the noble Lord accept that in South Wales particularly Japanese companies have shown a policy of good neighbourship which we very much appreciate?

§ Lord Young of Graffham
My Lords, I am very grateful to the noble Lord, Lord Williams of Elvel, for his support on this question. It is a habit I should like to encourage in him.

§ Lord Williams of Elvel
My Lords, will the noble Lord also recognise that there is nothing wrong in subsidies; and that there is no wrongdoing, let alone a clearly disclosed wrongdoing?

§ Lord Young of Graffham
My Lords, I hear what the noble Lord says.

§ Lord Jenkin of Roding
My Lords, will my noble friend agree that it is immensely encouraging that Japanese companies still regard and are increasingly regarding this country as much the most attractive location for their overseas investment in Europe? Will he recognise that while some may be tempted to invest elsewhere on the Continent in order to curry favour with other governments in the Community, they would be well advised to invest where they think their economic future is the brightest?

§ Lord Young of Graffham
My Lords, I am sure that at the end of the day overseas companies coming to the United Kingdom will invest where it best serves their purposes. That is why I believe they come here. I should like to make the point that in the Government's view there are no foreign companies in the United Kingdom: there are Japanese-owned British companies; and there are American-owned British companies; and there are German and Swiss-owned British companies. That is surely the best view because it is Britons who are employed by them, and the wealth created accrues to the United Kingdom.

§ Lord Leatherland
My Lords, does the Minister agree that the companies come here because they know that the British worker is a very hard and dutiful worker, and they want to take advantage of his labours?

§ Lord Young of Graffham
My Lords, I must report that when I was last in Tokyo I heard a great many remarks about the quality and output of the Nissan factory in the North-East of England, which at the time compared favourably with any other plant owned by Nissan anywhere in the world, including Japan.

§ Lord Eden of Winton
My Lords, can my noble friend give any indication of how the figures designed to encourage inward investment compare with the encouragement given to investment in this country?

§ Lord Young of Graffham
My Lords, they are precisely the same. We do not have special rules for overseas companies. Selective assistance in the appropriate areas of the country are available to companies whether or not they come from overseas or not. I should remind your Lordships' House that Toyota may very well decide to come to the United Kingdom without receiving one penny of assistance. Even if the company decides to go to a development area where it would receive regional assistance the new regime in Europe may be such that it will not be able to collect it.

§ Lord Taylor of Gryfe
My Lords, I fully support inward investment in this country from Japan or any other country. Nevertheless, is it true that two years ago 50 per cent. of the total regional aid budget was taken up by one Japanese investment in the North East of England? Can the Minister give me an assurance that the granting of such a large proportion of the budget has no effect on the 1015 investment incentives for indigenous companies which wish to expand?

§ Lord Young of Graffham
My Lords, I am very grateful to the noble Lord, Lord Taylor. I shall have to check that figure and I shall write to him and place a copy of my letter in the Library. I am slightly surprised by the noble Lord's question because I have been used to a world in which it seems to be Scotland which receives the bulk of the regional aid money.

§ Baroness Seear
My Lords, will the noble Lord accept that while many of us on these Benches disagree with a great deal of what the Government do, we applaud their enthusiasm for fighting protection and supporting free trade?

§ Lord Young of Graffham
My Lords, I am grateful to the noble Baroness.

§ Lord Bruce-Gardyne
My Lords, I may have led my noble friend to misunderstand my viewpoint. Is he aware that if he were to try to stop inward investment I should immediately demand his resignation? I do not say that I should get it, but I should demand it. Does my noble friend recognise that I have never, as the noble Lord, Lord Williams of Elvel, seems to suggest, denounced subsidies as evil? But I have suggested that they are silly. Does my noble friend agree that in giving in some cases substantial subsidies to incoming Japanese firms we are being downright silly and encouraging the feeling in other parts of the Community that this country may turn into a Trojan horse for the Japanese? Does he further agree that we may thereby provoke precisely the sort of protectionism in the Community and the United States which my noble friend is as keen as I am to prevent?

§ Lord Young of Graffham
My Lords, I think that there are two distinct parts to my noble friend's question. In relation to the first part concerning state aid, I read with great interest a speech made by Sir Leon Brittan recently and an announcement that it appears that the Commission is to lead an assault on the principle of aid across the Community. It would be a very bad competition in which countries in the Community would vie with each other to entice companies to invest. It would be better to have no aid at all and to let companies, out of sheer economic self interest, invest in the country which provides the best economic climate. That country, I suspect, would be the United Kingdom.
So far as concerns the noble Lord's second point, I do not believe that I should be doing my duty if I were to say to overseas investors, "Please do not come here because you might make other countries jealous". That is something we shall have to learn to live with.