Industrial and Economic Recovery: DTI's Role

HL Deb 13 June 1990 vol 520 cc302-73

3.9 p.m.

Lord Williams of Elvel rose to call attention to the role of the Department of Trade and Industry, particularly in promoting industrial recovery and a proper balance in the economy; and to move for Papers.

The noble Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper.

The subject of our debate today is the role of the Department of Trade and Industry. Your Lordships will no doubt recall that the last opportunity we had for a full debate on this subject was in February 1988, when the then Secretary of State, the noble Lord, Lord Young of Graffham, introduced the White Paper entitled DTI—department for Enterprise. Since that time nearly two and a half years ago, clearly much water has flowed under the economic bridge and we have thought it right to make available to noble Lords a further opportunity to debate the role of the DTI in the light of its performance since then. I should say in passing that it is perhaps significant that this debate takes place in opposition time rather than in government time, as was the case last time round; but more of that later.

My Motion refers not simply to the role of the DTI as such but also and particularly to the departmental role in promoting industrial recovery and a proper balance in the economy. I have phrased it in that manner because I believe that noble Lords would wish to have an opportunity not just to reflect on the role of the DTI as set out in the White Paper but also to consider the wider question of whether there might be other ways forward which would be of greater benefit in the economic difficulties that at present beset us.

I said that much had happened since February 1988. That is true. Much has changed. For instance, the British economy, about which there was a good deal of trumpeting on that occasion, has hit the rocks, not to mince words. We now again have a serious inflation problem. We have an appalling balance of payments problem. Interest rates are far too high for comfort. Unemployment is again on the rise. So the climate today is quite different from that of early 1988 and our view of the DTI's role must accordingly be set against that background. When he comes to wind up from these Benches, my noble friend Lord Peston will address that background.

What also has changed—I come nearer to home—is the number of Lords opposite who are prepared to stand up and speak in a debate such as this. On that day in February 1988 there were eight Conservative speakers on the list. The noble Lord, Lord Young of Graffham, introduced the debate. He was followed by, among others, two former Secretaries of State: the noble Lords, Lord Joseph and Lord Jenkin of Roding. Undoubtedly there were very distinguished speeches. The noble Lord, Lord Joseph, a self-confessed admirer of the noble Lord, Lord Young, congratulated him handsomely. The noble Lord, Lord Young, himself a self-confessed admirer of the noble Lord, Lord Joseph, congratulated him handsomely, and for good measure congratulated the noble Lord, Lord Jenkin of Roding, who had previously congratulated him. So, as they say, a good time was had by all.

Today, sadly we are missing all those Conservative noble Lords. From the Benches opposite—apart from the Minister, who I understand will speak twice in this debate, thus making weight, if I may say so—we have the noble Lords, Lord Boardman, Lord Lyell and Lord Harmar-Nicholls: the boys, perhaps—I mean no possible offence—who stand on the burning deck whence all but they have fled.

Lord Harmar-Nicholls

My Lords, I must interrupt the noble Lord to say that, as he has reminded the House, the last debate was in government time and so government supporters were justifying their policies. Now the debate is in opposition time. Is the noble Lord going to justify opposition policies in greater detail than we have had so far?

Lord Williams of Elvel

My Lords, I am most grateful to the noble Lord. He will have plenty of opportunity to make his point when he comes to speak as his name is on the list of speakers.

Could it possibly be that those noble Lords who were defending government policy at the time have, to coin a phrase, no longer stomach for the fight? That is an expression that I have heard before and no doubt the noble Lord, Lord Harmar-Nicholls, will address himself to that question. Or perhaps they are too busy nursing their seats in the boardrooms of newly privatised companies.

I can see the problem here. If, as a former Cabinet Minister, you are invited to join the board of a company that you have helped to privatise (such as, for instance, Cable and Wireless) and you find that a competing former Cabinet Minister is installed on the board of a competitor company that he has helped to privatise as well, you certainly have to look to your laurels. Although it is a matter of some surmise, you may decide that you would have done better to opt for a company that you had privatised, where there was no possibility of competition because you have created a private monopoly (such as British Gas).

On the other hand, you might just say, along with the rest of us, that it was high time that the Prime Minister stepped in with clear rules to stop this modern version of pork-barrel politics. Last month, the Trade and Industry Select Committee of another place pronounced its verdict on the performance of the DTI. Rarely, the committee said, can a government department's discharge of its responsibilities have been held in such low esteem among others involved. That is about as damning a verdict as you can get.

That verdict was delivered after an assessment of DTI performance against the objectives set out in the White Paper. I propose to follow that committee in adopting the same procedure. The White Paper set out the role; we must look at the performance. But, to be fair—I am always fair, I hope, in your Lordships' House—the ministerial team has changed. So we must go on to look and see how far the role of the department has changed with the change in the high command, and what are the implications of that. Lastly, there is the question of whether we are on the right course or whether some different role altogether for the department would make better sense.

Let us look a little more closely at the White Paper. As we might have expected (and indeed expected at the time) it starts with a rewriting of economic history. I shall pass over all that. I made my objections clear at the time and I do not wish to weary your Lordships by repeating them. Chapter 2 opens with the objective: We seek to create a larger market by privatisation". Quite so. There have been two major DTI privatisations since the White Paper; namely, British Steel and Rover. British Steel was privatised on the basis that the hot strip mill at Ravenscraig would continue for several years. But of course Ministers added some words about market conditions and now say that the decision to close is purely commercial. I am quite sure that my noble friends from Scotland will have something to say about that.

On the other hand, Rover was different. That was a company which Ministers were determined to put back into the private sector. But the formula had to be quite original—and original it certainly was. It ran something like this: you decide to whom you want to sell it; you then grant him exclusivity. That allows you to claim later that there were no other offers and that any concession was justified to secure a deal with the chosen acquirer. Since he now has an impregnable negotiating position, the acquirer makes a number of demands: the price must be derisory, the financial assistance lavish, and, in addition, there must be some under-the-counter sweeteners about which nobody is meant to know. The deal is done but of course cannot be kept secret. The result, as we all know now, is that Ministers will almost certainly be told by the European Commission that they have acted illegally and the acquirer will have to pay up. Furthermore, correspondence between the Secretary of State and the acquirer has come to light which has—I say this with all due deliberation—astonished and shocked all those who are used to high standards in public life.

The next objective concerns competition policy. It says. We seek to produce a more competitive market by encouraging competition and tackling restrictive practices, cartels and monopol ies". Again, quite so; but the practice has been wholly different. Believe it or not, in 1988 only 12 out of 281 qualifying mergers were referred to the Monopolies and Mergers Commission—a strike rate of 4 per cent.

And then of course it depends who you are and who your friends are. The acquisition of the House of Fraser by the Fayeds was not blocked, although the Secretary of State had in his hands a copy of the inspectors' report on the affair showing unprecedented deception of the authorities. That is most remarkable.

The brewers were castigated by the Monopolies and Mergers Commission for ruling imperiously over a complex monopoly. We were told with every show of conviction that the Secretary of State would break it up to produce, in the words of the DTI objective, a more competitive market. But, as we know, it did not turn out like that at all. After a good deal of dithering and slithering, the retreat was sounded and the brewers emerged triumphant in victory. The tie, and the monopoly, remains intact. If you have friends in high places, they are worth more than a thousand White Papers.

The next objective is on regulation and competition. We are told, We seek to increase confidence in the working of markets by achieving a fair level of protection for the consumer and the investor. That is very good. But again, the practice has been totally at variance with the objective. The interests of the consumer have been almost wholly disregarded. Witness, most recently, my Lords, the refusal of Ministers to accept the proposal of a former chairman of the National Consumer Council and one of the Government's own Back Benchers in this House to provide a mechanism for a consumer guarantee on goods purchased.

With regard to investors, it is almost embarrassing to review performance against the objective. In the Barlow Clowes case it took 18 months and the invervention of the parliamentary ombudsman before investors were compensated, as they should have been at the outset. Only last week, we hear that Dunsdale Securities, fully authorised under the Financial Services Act, finds that some £20 million of investors' money has gone missing, and that the man behind it had absconded before finally giving himself up to the police; and so it goes on. I know of no practitioner in the City of London—and I know quite a few—who believes that the operation of the Financial Services Act has in any way increased investor protection, and I defy Ministers to produce one. On top of that, we now hear that the US Congress, no less, through a congressional sub-committee, is visiting London to express its worries about the ability of the DTI to police the Lloyd's insurance market.

So we refer next to the burdens on business. The next objective says: We work within Government to create a climate that reduces red tape. British and Commonwealth collapsed last week, and no fewer than six regulatory authorities were involved, all of them of course playing pass-the-parcel. The accountants have been regulated, the banks have been regulated, the building societies have been regulated and companies have been regulated; everything that moves has been regulated. This has been the most regulatory government of all time. The burdens on business have been multiplied one hundredfold. Reduce red tape indeed! That is rubbish, is it not?

I do not want to continue with this sad story and burden your Lordships too much. It would take me too long. But I have traced through every single objective in the 1988 White Paper, and against each and every one there is a record of failure. On research and development the DTI's own innovation advisory board now says that R&D spending in most of British industry grew by almost nil in the period 1985 to 1988 and that the situation was most serious and alarming. Awareness of 1992 is negligible, by all responsible accounts. On inner cities, the National Audit Commission says that, Government support programmes are seen as a patchwork quilt of complexity and idiosyncrasy. It now looks as though responsibility for the inner cities has been handed over to the new deputy chairman of the Conservative Party. On encouraging management education there is nothing. Regional policy is a deliberate, and largely successful, effort to cut off central government aid. On export promotion, ECGD premiums have been put up. The Enterprise Initiative has resulted in a paltry 3.1 per cent. take-up rate for subsidised consultancies. In other words, it is a dead duck.

So what is the case that Ministers have to answer? It is twofold. There is what I would describe as the minor case, that by their own standards, by the objectives which they set themselves in their own White Paper, their record has been not just bad, but bad almost beyond belief. Not a single one of those objectives has been met, and some of them have not even been aimed at. It is—after all the years when we have been told how successful the whole thing was—one long, sad litany of failure. The Department for Enterprise has been a flop.

But it is not just a matter of failure. We must admit that we all fail from time to time, although not perhaps with the consistency that Ministers have achieved. It is not just a matter of ministerial bungling, although it has been bungling at times on a heroic scale. It is not even a matter of abject surrender to special interests, however disreputable that has been. Above all—and I regret having to say this, but I must—it is that there has been an unacceptable degree of ministerial deviousness and deceit. That is the case against Ministers, and that is the case that they must answer.

But, we are now told, all that is in the past. The current Secretary of State was quite clear on the matter when he gave evidence to the Select Committee of another place. "All that evidence", he said, "relates to the past. I am talking about my stewardship of the DTI." It is even said that when he walked into his new job at 1 Victoria Street he asked, "What is this place for?" That may well be so, but the Government are the Government, and Ministers have to accept responsibility for the actions of their predecessors. We have to ask ourselves what has changed; and here we are in some difficulty. There has been no new White Paper to supersede that of January 1988. There has been no new definition of role—just Whitehall tittle-tattle. Until the noble Lord, Lord Trefgarne—who I am glad to see will follow me—tells us what the new role is, if indeed there is one, we are all in the dark.

The rumours are rife. The Enterprise Initiative is for the chop. The estimates for current year expenditure on these subsidised consultancies show a drop of nearly a fifth against last year. Activities are to be hived off into—executive agencies, under the Government programme with the rather odd title of the Next Steps. ECGD is to be pushed out—not just short-term credit insurance but political risk and long-term cover as well. The National Engineering Laboratories too will go.

So, there it is, my Lords. Failing other information, this is way that the betting goes. The department is to be taken apart. The new crew arrives on the bridge. The new objective of the new crew is nothing more nor less than to dismantle the ship.

What happens next? The routine has been well-rehearsed. We know what will happen. What will the officers do, once they have stripped the ship right down to the point where it has become absolutely useless? We all know what they will do. The will lower the last remaining lifeboat, jump into it and row off to the next department. That is what the officers will do.

With all the chopping and changing that has taken place, it is no surprise and sad that morale is low and inefficiency has set in. We really must change that and put the DTI back where it properly belongs, as the centre piece of a strategy to bring our economy back from where it is at the moment, which is at the brink of disaster. That means a policy which actively promotes industry, sets out to solve our long-term inflation problem and acts directly on the balance of trade deficit. I truly wish that I had any confidence that this Government could achieve that. I have none whatsoever. It is surely time for a change. I beg to move for Papers.

3.28 p.m.

The Minister of State, Department of Trade and Industry (Lord Trefgarne)

My Lords, I rise, first, to thank my noble friend Lord Boardman for allowing me to intervene at this moment when my name did not appear in this place in the list of speakers. I believe that that was my fault and I apologise to your Lordships. With your Lordships' permission, I shall speak again briefly towards the end of the debate to deal with points that may be raised that I do not have a chance to cover now.

I much appreciated the intervention of my noble friend Lord Harmar-Nicholls a few moments ago asking about the policies of the noble Lord, Lord Williams, and his noble colleagues. The noble Lord spoke for 20 minutes or thereabouts and I remain as ignorant now as I was before as to what the noble Lord would have in mind if ever he were to have responsibilties for those matters. I heard nothing on that, although I dare say that we should assume that we shall have the policies that we had the misfortune to be subjected to between 1974 and 1979 and which we had the misfortune to inherit when we came to office at that time.

However, I do not wish to descend too far down the scale of political invective. The Motion of the noble Lord, Lord Williams, has once again provided the occasion for a debate on the prospects for British industry and the proper role of Government in enhancing those prospects.

The noble Lord has previously suggested that such debates are part of a continuing argument that will over time grow sharper. I regret that that may well be the case; unless, that is, the achievements of British industry over the past decade are acknowledged. There must also be acknowledgement of the important contribution made by this Government—not least my own department—in preparing the climate for these continuing successes.

The noble Lord was quite right to suggest that my department has an interest—second to none—in the United Kingdom's industrial recovery. More than that, he is right that the DTI has a role in that recovery—though we disagree about the nature of the role. Where the noble Lord went wrong, if I may say so, was in his reluctance to credit the recovery that we have already seen in British industry after its dismal performance in the 'seventies.

Let us look, for example, at manufacturing industry. It is stronger today than at any time in the past. It is leaner, fitter and better able to face the challenges of the coming decade. I hope that the noble Lord, Lord Peston, will listen because he is to wind up for the Opposition shortly. Output, investment, productivity, profitability and exports all tell the same story. Noble Lords may have read with interest, as I did, the thoughtful and appreciative review of these achievements in last week's Sunday Times; a newspaper not always sympathetic to the Government's case.

The productivity performance of manufacturing industry was transformed during the 1980s. In the 1960s and 1970s we were bottom of the league table for productivity growth. Since 1980 productivity in manufacturing has grown faster than in all other major industrialised countries, with output per head increasing by around 60 per cent. no less. That said, the legacy of our poor performance over most of the post-war period means that our levels of productivity are still lower than those of many of our competitors. Despite our impressive recent performance there is no room for complacency and much remains to be done.

The profitability of manufacturing has risen each year since 1981. In 1987—the latest year for which I have immediate figures—it was at its highest level since 1973 and four times the level of 1981. Healthy profits give companies the confidence to invest. That is borne out in the figures for investment which, like manufacturing output, stood at record levels in 1989. Investment rose by over 6 per cent. in that year and there was further growth in the first quarter of this year.

The volume of manufactured exports has increased by over 40 per cent. since 1980 and stands at record levels. Export growth in 1989 was the highest recorded since 1973. I recognise that even so there is concern among noble Lords that our overseas trade in manufactures shows a deficit. Let me say that the trade balance is only one indicator of manufacturing performance. Between 1987 and 1989, when the deficit in manufactures did indeed rise appreciably, manufacturing output rose by 12 per cent., investment by 19 per cent. and exports by some 18 per cent.

Those figures do not bear out any allegation of weakness in manufacturing or a general lack of competitiveness. As we have said before, the growth of the deficit was the consequence of the strength of domestic demand reflecting the boom in investment and the growth in consumer spending, both of which followed from increased confidence.

A period of slower growth in manufacturing and in the economy as a whole is now in prospect in response to the necessarily firm action that we have taken to control domestic demand and bear down on inflation.

Firm financial policies remain the only guarantee of lower inflation. That process cannot be painless, even though exports continue to be buoyant. It should, nevertheless, be seen in the context of the very real achievements of the past decade and the damage that would be caused by a resurgence of inflation. After a decade of rising profitability and productivity industry is far better able to handle the short-term difficulties before us and the longer-term opportunities to come.

I turn now to the question of promoting balance in the economy. The noble Lord, Lord Williams, has expressed concern on previous occasions about the size of the manufacturing sector which he sees as evidence of some fundamental imbalance requiring correction. It is true that the share of our total output accounted for by manufacturing declined for many years, although the share has been broadly stable since the early 1980s. But a falling share of manufactures has been common to all mature industrial economies.

There are two main reasons for that. First, as incomes rise people tend to spend a greater proportion of their incomes on the output of the service industries. Secondly, the scope for productivity improvements in manufacturing is almost always greater than the provision of services. Therefore, the price of goods tends to fall relative to the price of services. Since contributions to GDP are normally measured in value terms, that fall in the relative price of manufactures causes a fall in the manufacturing share of GDP even if the volume of manufactured output grows as fast as the volume of services output. Moreover, the boundary between manufacturing and services is often difficult to draw with any precision. For example, a manufacturing company contracting out its legal and accountancy services thereby enhances the size of the service sector.

As well as these factors which are common to all industrial economies, the UK has benefited from the discovery and exploitation of North Sea oil. The production of North Sea oil rose from nothing in the mid-1970s to some 6 per cent. of GDP in the mid-1980s. A rise in the share of the oil sector necessarily involves a decline in the share of other sectors.

Moreover, although it is important that manufacturing thrives and is profitable, we must not underestimate the contribution of other sectors—including the service industries—to our economic well being. Services now contribute more than twice as much to output and three times as much to employment as manufacturing. Furthermore, a pound of value added in services is worth just as much as a pound of value added in manufacturing.

Therefore, I do not believe that the share of manufacturing in total output is a cause for concern. What matters is the overall competitiveness of all sectors, including manufacturing. In a market economy the success of firms, industries and sectors is determined by the market and not by the Government.

The noble Lord, Lord Williams, would like to imply that, because the Government believe in the operation of market forces, the DTI has been left without an adequate role to perform. But that is not so. Just as UK firms are in business to beat the competition, and our future prosperity depends on their continuing to do so, so the DTI is in business to help them to meet this objective. For 11 years the strategy of the Government has been consistent; it is to work with the grain of the market and not against it.

That strategy is based on a simple proposition: that it is for business, not Government, to stand in the market-place. It is for firms themselves to take the economic decisions on which their success depends. They know better than anybody that success in world markets can only be won by giving their customers the best value for money in goods and services. It is no part of my department's role to try to exercise that judgment on their behalf. The noble Lord has spoken of research and development and I shall deal with that at the end of the debate.

Across the whole range of my department's policies the focus is on markets, broadly defined, rather than on specific sectors. The action that it takes is aimed at long-term improvements to the supply side rather than short-term expedients targeted on individual sectors, industries or companies. It tackles underlying causes rather than symptoms.

There are two central elements to that strategy. The first is to establish a framework of open, competitive markets both at home and abroad because it is in these conditions that business will thrive. The second is to encourage individuals to develop their enterprise and their skills in business.

The noble Lord has made the claim that the Government have not lived up to their proclaimed intentions in the competition policy field. Let me, once again make clear those intentions. While the law must protect customers and competitors from unfair or anti-competitive behaviour, it should avoid also inhibiting legitimate commercial behaviour. So in mergers policy, for example, the Government's approach is that intervention in lawful commercial transactions should be kept to a minimum, since broadly speaking the free commercial decisions of private decision-makers in competitive markets result in the most desirable outcome for the economy as a whole.

It is our view that competition in free markets leads to an efficient, productive and flexible economy. In short, our approach is based on our view that competition is good for wealth creation. Any policy simply designed to make takeovers harder to carry out would have a damaging effect on efficiency by weakening the discipline of the market over incumbent managements.

At the same time as safeguarding competition at home, the Government continue to champion open markets abroad, and to press for the abolition of unfair trade barriers, notably in the current GATT round and in the single market programme.

I believe that the noble Lord referred to the current position as regards the Rover Group. I understand that Sir Leon Brittan has presented to his fellow commissioners his findings and recommendations on the sale of Rover Group. I gather that a Commission decision is likely on 20th June. A Statement will be made once the decision has been communicated to us and we have been able to study the full text.

The noble Lord, Lord Williams, referred to the 1988 White Paper, DTI—Department for Enterprise. The Department had been set new objectives, firmly positioned within the Government's overall strategy for creating a climate for growth and prosperity, and the White Paper showed how these were to be carried out.

It launched the enterprise initiative embracing all of the DTI schemes that offer advice, guidance, and practical help to British Companies. These include business development (or consultancy) initiatives, research programmes, regional assistance, help with exporting and advice on single market issues. In all these fields my department is working hard to ensure that British companies get the support they need.

The consultancy initiatives are a good example, if the noble Lord, Lord Williams, will allow me to say so. The Government recognised that if small and medium-sized businesses were to increase their efficiency and competitiveness, we had to encourage them to use outside help to overcome strategic management weaknesses, and not just once or twice but as a regular part of their management strategy. The initiatives were therefore developed to give small and medium-sized businesses access to assisted consultancy in key areas of management skill. The areas are: marketing, design, quality management, manufacturing systems, business planning, and financial and information systems.

The noble Lord has suggested that we have failed to meet the objectives we set ourselves, but our record speaks for itself. Since its inception the consultancy initiatives have attracted over 51,000 applications. Some 36,000 projects have been commissioned, of which 16,500 have been completed. Nor is it simply a question of numbers. Over 80 per cent. of assisted firms are already implementing the recommendations arising from their consultancy projects, and a large majority judge the scheme to be good value for money. Just as important, over half the assisted firms intend to use full price consultancy in developing their business strategy in future. The reality is quite at variance with what the noble Lord, Lord Williams, would have your Lordships believe.

Lord Taylor of Gryfe

My Lords, for the purposes of further debate in which regional policy will feature, I ask the noble Lord how many of the consultancies were taken up in the South East and how many in the regions?

Lord Trefgarne

My Lords, I shall do my best to give that information to the noble Lord when I reply to the debate.

The maintenance of open competitive markets and the encouragement of enterprise will remain our goals. We will continue to pursue these goals through effective partnership between the department and the business community.

When we run schemes for business we have to ensure that what we provide is clearly marketed, easy to understand and easy to use. It is equally important that there is direct contact between people in business and the people responsible for the policies which affect them. We have reorganised the department to facilitate this, providing a more flexible and adaptable organisation.

I am equally keen that the department should work in co-operation with business in the implementation of policies. Private sector organisations, notably chambers of commerce and trade associations, already have a wealth of expertise and experience in providing business services to their members. With progress in the single European market, it is clear that our firms need the backing of strong, dynamic business organisations more than ever before. My department is already working closely with a number of these organisations, and I have no doubt that there will be further opportunities for co-operation that we will want to explore.

As well as benefiting business, this also benefits the consumer. The noble Lord has referred to my department's role in protecting consumer interests. I can assure your Lordships that the department remains committed to achieving a fair level of protection for the individual consumer and investor, and, by stamping out malepractice, to maintaining confidence in the working of markets.

The noble Lord referred particularly to the House of Commons Trade and Industry Select Committee report on company investigations. The Government have welcomed the report. It contains many detailed recommendations to which we are giving careful study before we make our considered response to the committee. Your Lordships should appreciate that the report is generally supportive of the present regulatory framework and of the changes introduced in recent years. It recognises that the number of completed inquiries continues to rise, and the time taken on major investigations has been substantially reduced.

I return to the noble Lord's Motion. The DTI has an active role to perform. It is performing it vigorously. It will go on doing so. The DTI's role is not for all that the role of a manipulator or juggler, keeping a balance between various sectors. That balance must be for the market to determine.

The past 10 years have seen an overwhelming improvement in the performance of British manufacturing industry. The credit goes to British enterprise, but the policies of this Government have made their contribution. The task goes on for business and Government alike. There will be intense competition and great challenges in the international markets of the 1990s not least because of the completion of the single European market in 1992. I remain convinced that British industry will be better able to meet those challenges if the policies of the present Government stay in place than if faced with a reversion to the tired nostrums of intervention still favoured by noble Lords opposite.

3.47 p.m.

Lord Ezra

My Lords, we are indebed to the noble Lord, Lord Williams of Elvel, for introducing this debate at the present time. Noble Lords opposite seem to be somewhat disturbed, but I was advised by the Whips' Office that I should speak next.

Lord Boardman

My Lords, I accepted that the noble Lord should speak before me.

Lord Ezra

My Lords, we are indebted to the noble Lord, Lord Williams of Elvel, for introducing this debate at the present time because it is absolutely right that on such a vital matter as the prospects for our trade and industry we should come back to it recurrently, particularly at this time when we are beset with numerous difficulties.

Both the noble Lord, Lord Williams, and the noble Lord, Lord Trefgarne, delivered some very vigorous and trenchant statements representing their points of view. I believe that they have initiated a debate in the full tradition of this House and those different points of view have been put clearly and with a degree of determination.

In my opinion there is little doubt that a number of the measures carried out in recent times by the Department of Trade and Industry were desirable. I find it desirable that it has concentrated on the concept of enterprise. I find it desirable that it has concentrated also on trying to prepare industry for the challenge of the single market and 1992. However, the real test of those endeavours has to be seen in the results achieved.

There is no doubt that in this country trade and industry provide our main sources of wealth. We are an established trading nation. In the old days we brought in raw materials, fashioned them, added value, exported them, and made a lot of money in the process. Our industrial and trading expertise went together. It is right therefore that we should examine where we stand in these related areas and consider the results that have been achieved through the endeavours of the DTI.

I will look at trade first. I was a member of the committee chaired by the noble Lord, Lord Aldington, which reported to this House in 1985. The noble Lord, Lord Boardman, was also a member and may refer to that in his remarks later. It was a matter of concern to me that the Government did not take that report more seriously. The report pointed out, at a crucial moment in the development of our overseas trade, that there were underlying trends which could lead us into a negative situation. It drew attention to the impact of the benefits that we were obtaining from oil. It pointed out that those benefits could not last for ever; that the oil revenues would diminish and that they masked underlying problems. It was in 1984 that we first began to run into a deficit on our manufacturing trade account. It could therefore be seen that if that trend continued it would have serious results.

When we spoke to the then Chancellor of the Exchequer and representatives of the various departments we were told that the problem would correct itself; that there was no need to worry. For the moment we were receiving the benefit of the oil revenues and when those diminished, for whatever reason, the situation would be self-balancing. But it did not happen that way. Last year our deficit on manufacturing trade account was no less than £16 billion. I regret to say that the trend so far this year is little better.

We must ask whether there is a need for a more purposeful strategy in relation to our trade policies than the ones represented to the Select Committee in 1984 and 1985. We are gradually getting into a situation in which, unless there is a change of policy, we could run into a permanent deficit. What is of more concern is that the invisible trade position which we were told at that time would act to correct the visible trade imbalance, towards the end of last year ran into deficit and so far this year is no more than balanced; it is showing no positive result.

At that time we pointed out—supported by the noble Earl, Lord Limerick, who is chairman of the British Invisible Exports Council—that the invisible trade and the services were dependent on manufacturing output and performance. If the one fell the other would fall. It seems to me that that is demonstrated by what is happening.

Let me turn to consider our industrial performance. As your Lordships will recall, industry in Britain suffered a serious blow during the world recession of 1980–81 along with all other countries. As a result many firms were put out of business, substantial reductions were made in employment and major sectors of industry were diminished. As one might expect, that subsequently led to an improvement in productivity, because if you cut out the worst performance in any enterprise then the remainder will perform better. The Government emphasised the improvement in productivity but they failed to demonstrate that we continued to lag behind in industrial capacity.

The comparisons with other countries made by the noble Lord, Lord Trefgarne, in pointing out that they too suffered a recession in their industrial output is correct. However, we found in our inquiry in 1985—it has since been confirmed—that the recovery in industrial capacity by our major competitors since that date has been greater than in our case. It is because we allowed manufacturing to fall behind that we have suffered to the extent that we have. With the unleashing of spending power on the one hand and the limitation in our manufacturing capacity on the other, it is not surprising that we have got into the difficulties we are now in over inflation, an adverse balance of payments and high interest rates.

I recall that during the detailed preparations we made for that report we paid visits to Germany, France and Japan to see how they did things. Germany and Japan are always taken as exceptional cases so I will look at the position in France, which is more comparable with us. When we went to see the trade ministry in France it told us that it had a clearly defined strategy for reviving industrial capacity. At that time France was in the same difficulties that we are now in: its balance of payments was weak and inflation was running at a high level.

The trade ministry said that it was determined to act in three areas in order to recover industrial capacity; to see that investment increased; to ensure that training improved and that research and development received all the money necessary to enable France to enter the new technology. It has kept to that policy.

We recognised the importance of those policies, but unfortunately have not kept to them as vigorously as other countries. We must ask ourselves whether there is a need now for a review of strategic concepts. We know what is going wrong. The trouble is that it is not brought together sufficiently in the form of a broad strategy—a point to which the noble Lord, Lord Williams, referred towards the end of his speech.

Let us consider the position of small firms. The Government have helped small firms in many ways. However, I recently spoke to a small firm organisation and they are troubled by two things: first, that there is a confusing plethora of things being done ostensibly to help them, but which it is difficult for the small firms to find out about; secondly, those measures, support, advice and assistance are frequently being changed.

First, the small business organisations would like to see a one-stop arrangement to which the small firm can go and know exactly where it stands as opposed to having to hunt around. Secondly, what affects them much more than any advice that they might receive from government or other sources are the external factors of the economy. What hits them most of course are the high interest rates. The question then arises as to whether and how soon the Government expect interest rates to come down—a question to which we have referred repeatedly in this House in recent months. Alternatively, there is the question as to whether something special can be done for small firms. In other words, we should be looking at the strategic approach to the problems rather than using the tactical approach, which it seems to me has been the way in which the Government have pursued these matters.

I do not believe those issues are a matter for party politics. They are a matter of national importance. We have to get our balance of payments right. We have to increase our industrial, particularly manfuacturing capacity. I believe that there would be an enormous amount of support for a clearly defined strategy to bring these things about and put at the head of the list of priorities the need to get the overriding features of the economy correct, such as interest rates; the need to get a stable currency; the need to stimulate industrial investment which, while it went up substantially last year and in the first quarter of this year has slumped since; and the need to make sure that we give the right priority to research and development and to training. I know that my noble friend Lady Seear will, among other things, be referring to that aspect later.

Therefore, my summary on the whole position of the role of the DTI in these matters is that I believe that it has done certain things in the right way, but that what is lacking is an overall strategy which can make clear to us what actions the Government intend to take in order to deal with those two overriding problems that we face both in trade and industry; namely, the massive trade deficit, which shows no sign for the moment of improving, and the deficiency in our industrial capacity.

4.1 p.m.

Lord Boardman

My Lords, I am glad to follow the noble Lord, Lord Ezra, because, as he reminded your Lordships, he and I sat together on the committee in 1984–5. I hope to refer to that later in my remarks. However, my conclusions differ to some extent from those of the noble Lord.

Some months ago I introduced to your Lordships a debate on economic affairs. I remember on that occasion the noble Lord, Lord Williams, referred to me as being over-political and introducing political overtones. I think your Lordships will agree that the noble Lord, Lord Williams, is not immune from that comment himself today. There is one remarkable difference. In the debate I opened I referred—indeed, in political terms—to how the Government have behaved and to government policies. I also referred—though somewhat more critically, of course—to the policies of the Labour Opposition and its plans if it became a government. Today the noble Lord, Lord Williams, has criticised the Conservative Administration but has maintained complete silence about what a Labour Administration would do in office.

I do not seek to defend the DTI. My noble friend Lord Trefgarne has done that most ably. Nor do I seek to defend any other government department. In fact, I have some criticisms to make. Many years ago I was a Minister in that department. Inevitably, the department has a great deal of bureaucracy and I criticise it for that. Inevitably, the department has a habit of making a number of mistakes, some of which have been quite serious. Somewhere in the chain when the department makes mistakes it tends to try to cover them up, but almost always that is discovered and comes under public scrutiny with disastrous results for the department.

Having said that, I believe that without doubt we have by far and away the best Civil Service in the world. We have men and women of integrity and ability. It is a pity that we do not praise them nearly enough. We should be proud of them. Of course mistakes have been made and of course there is bureaucracy but, my goodness, we depend on our Civil Service and it serves us well.

Civil servants within the department have a difficult time. They are subject to a political remit which at times can be irksome and difficult. That has come from both Labour and Conservative Administrations. In a way they are required to act like businessmen but they are subject to all sorts of restraints and controls which businessmen do not normally have to endure. They are subject to Public Accounts Committee examination of single transactions, to Parliamentary Questions, and so on. Those of us who have served our time in business must be glad that every transaction we have conducted has not necessarily had to go under such scrutiny to ensure that we have not made a mistake somewhere in our dealings.

I make no protest. I believe that it is right that public servants should be subject to scrutiny, but we should take that into account before we criticise them too severely, as the noble Lord, Lord Williams, tended to do this afternoon.

Lord Williams of Elvel

My Lords, I am most grateful to the noble Lord for giving way. Nowhere in my speech did I make any criticism of officials. My comments were directed to Ministers.

Lord Boardman

My Lords, I do not agree. The noble Lord did not specifically do so but he cannot criticise the whole department, as he did, without inflicting criticism on those who carry out policies. Of course his criticisms were in the main directed at ministerial control, but it is difficult not to say that part of that criticism must pass on to officials who have been responsible for monopolies and mergers and many of the matters to which he referred. However, I note the noble Lord's assurance that he was not criticising officials, which I welcome.

The noble Lord did criticise a number of actions of the department itself. I believe that the department should be judged on its overall performance and not on specific transactions, some of which have indeed gone wrong. Some of the criticisms made by the noble Lord, Lord Williams, do not stand up to scrutiny. He referred to Rover as a case for criticism. I shall not attempt to run through the facts of that transaction but it would be fair to put on record—I am sure it is in many places already—that the company was continually running at a loss in the public sector but is now a very profitable business in the private sector, making very good cars. That is an achievement of the DTI of which we should be proud.

It could be said that the Government could have charged a few million pounds more. With hindsight that can nearly always be said. In every transaction with which I have been concerned almost inevitably one side says, after the event, that it sold for too little or that it paid too much. That has happened in the case of Rover. However, for the future we have a successful, profitable, private sector car manufacturing company and I am delighted with that achievement.

The noble Lord, Lord Williams, did not make much reference, if any, to what he would do if given the authority to do so, but it is clear from the Labour Party document, Meet the Challenge, Make the Change—if I have the title right—that a Labour Government would give considerably more power and authority to the various departments which were criticised by the noble Lord, Lord Williams. There are proposals in that document for renationalisation of elements of British industry, for power to be given specifically to the DTI to make strategic interventions in key sectors of the economy; the establishment of a British investment bank; British Technology Enterprise is to be empowered to take shares in existing companies, and so on. That will be giving considerable powers to Whitehall whereas the policy of the present Administration has been to pass those back to the private sector. Anyone who believes that the policy of putting more into the department is the right policy should hark back to see what can be learnt from the history of recent years. Indeed, one need only look at Eastern Europe to see the economic chaos that has been caused by following extreme methods of socialism, some of which have similar features to those proposed in Meet the Challenge, Make the Change.

It is generally recognised in the light of experience that no commercial strategy can replace the free market as a means of determining production and meeting consumer demand. The Motion refers to "promoting industrial recovery". As the noble Lord, Lord Ezra, reminded the House, I was a member of the Select Committee on Overseas Trade which sat five years ago in 1984–85. We made some fairly severe criticisms of the rundown of our manufacturing base. Indeed we predicted with perhaps some accuracy the impact that that would have on the balance of trade. Today I find the position much more encouraging. Many of the things we said at that time we hoped were being done, or should be done, and which we were told were being done and which are now seen to have been in the course of being done at that time, have taken effect. As my noble friend Lord Trefgarne said, we have achieved many of those targets that we said at the Select Committee on Overseas Trade were necessary to achieve.

Productivity has increased by over 50 per cent. in the past few years. Our share of world trade is increasing. We have a higher growth rate than any other country in the EC. There has been a great increase in the number of new businesses created. In 1988 about 1,200 new businesses a week were being created. I believe that that number is now considerably more.

The noble Lord, Lord Williams of Elvel, referred specifically to British Steel. He picked a bad example. I remind the noble Lord that in 1978–79, British Steel took 14.3 man hours to manufacture a tonne of liquid steel. Today it takes 4.5 man hours to do the same task. I also remind him that in 1979 British Steel lost £1.75 billion (£1,750 million) and this year they have made over £700 million of profit. That is a change made under this Administration. We are the third largest aerospace producers in the world, after the United States of America and Russia. We have exports of about £7 billion. One might say that they are high-tech industries, as indeed they are. We are lucky to have many talents.

Turning to industries which are less high-tech, in textiles, with world-wide competition in this country we are now employing half-a-million people. There are about 1,500 firms exporting goods to the value of about £4 million. That is a great achievement. I could give many other instances.

One of the tests that one should apply about our level of efficiency and prospects is to see ourselves as others see us. We should look to see what other countries think of the prospects of this country by investing in it. Here there are remarkable stories of success. Bosch, which is a tremendously respected West German car component firm, has a £100 million factory in South Wales employing 1,200 people. The semi-conductor firm Fujitsu of Japan has a £200 million factory in County Durham providing 2,000 jobs. We know about the great success of Toyota and of its plant in Derby. Those are examples of how other countries see us. People come from vastly competitive and efficient industries themselves and look at this country. They say that, under this Administration, this is the place where they should put their money and provide a base for not only supplying the United Kingdom market but for exporting overseas.

One must give credit to the DTI for securing that additional investment in this country. That department deserves credit because the work done by it has been of enormous value in securing investment. So has the work of the local authorities who have gone to great lengths in their particular areas to attract industry. Above all, this inward investment represents a dramatic change in the attitude of the British people over the past 10 years. That change has led to the welcoming of investment from overseas, and people from overseas believe that this is the country where they should be.

I have referred to manufacturing industry. My noble friend Lord Trefgarne said that in the switch to service industries it is a very difficult to define where the difference lies between elements of manufacturing and services. Again, there is here an enormous success record. Overseas earnings from financial services in particular are half the value of the exported manufactured goods.

When the noble Lord, Lord Williams, next draws the attention of the Leader of his party to the economic performance of this country, he should ask him to rethink the phrase that he used many years ago, it is true, when talking about the City. The Leader of the Party said that they were people who were "an army of brokers, jobbers and quaintly-named parasites". Those "quaintly-named parasites" are doing a very effective job for the economy of this country.

It would be wrong to be complacent about the future and I certainly am not. There are very severe economic problems both at home and overseas which have to be faced. In squeezing inflation out of the system the time-lag is very long. Only now are we beginning to see the results of that. The side-effects of that squeeze are very painful. I am worried that many businesses without substantial cash resources may not be able to bear that pain for very much longer. I am sure that my right honourable friend the Chancellor of the Exchequer is aware of that. I certainly have every confidence in Her Majesty's Government, including the Department of Trade and Industry, keeping a proper balance in the economy in the future.

4.15 p.m.

Lord Clinton-Davis

My Lords, perhaps I may first of all congratulate my noble friend Lord Williams on the impressive way in which he made out an indictment against the Government, an indictment which has gone unanswered by the noble Lord, Lord Trefgarne. My noble friend adverted to what was perhaps a chance remark made by the present Secretary of State for Trade and Industry when he entered that department first of all. He asked: "What is this place for?" I suspect that he might have asked a similar question, judging by his record, when he entered the Department of the Environment. Clearly, it was necessary that he should be transferred to another department after his record there.

When the noble Lords, Lord Trefgarne and Lord Boardman, entered into their defence of the Government's record, they seemed to be unduly impressed by the erstwhile Chancellor of the Exchequer, who was allegedly unassailable at one time, and who had constantly spoken of an economic miracle. However, they appear to have forgotten some of the speeches made by the present Chancellor of the Exchequer and the re-writing of history which has been recently undertaken by the Conservative Party about that so-called economic miracle.

I do not want to concentrate on the generality of trade matters affecting the Department of Trade and Industry, but rather to confine my remarks to the regulatory functions of the department and to the massive and unprecedented criticisms that have been made against the Department by Mr. Kenneth Warren and the Trade and Industry Committee of the House of Commons. In a very pertinent sentence the report states: Laws and rules that are not for one reason or another in force bring the system into disrepute". That statement goes to the very heart of the purpose of regulation and the need for it to be effective. As regards the reputation of the City both at home and abroad, it is critical that we should have an effective system of regulation. Yet there appears to be a major difference of view between the committee and the Secretary of State concerning the circumstances in which regulation needs to be invoked and sanctions applied. I refer in particular to paragraph 13 of the report where it states that the DTI told the committee: The object of the Companies Act investigation is to find out in the first place what is going on". That is perfectly true. The report continues: We consider that the over-riding aim of such activity must be to protect investors (and other companies or individuals with whom the company in question may do business), promote efficient and honest markets and to maintain the integrity of the UK as a financial and business centre. On publication of the House of Fraser report, the Secretary of State said: The purpose of company law and inspections of the sort we are discussing is to protect the interests of the shareholders". In my submission that is not an entirely correct view of the purpose of inspections. He went on to conclude that it was not in the public interest to disqualify those particular directors. There is a need for a certain degree of clarity concerning the case for disqualification. That vitally affects the reputation of our country for dealing effectively with aberrant behaviour by companies.

Let us examine for a moment the cross-examination of the Secretary of State during the course of his evidence to the Select Committee as set out in the Observer of 27th May 1990. It was as follows: Q 'But do you think it is in the public interest that these people should not be disqualified from being company directors?' Ridley: 'I never said anything of the sort'. Q: 'You said that in the House'. Ridley: 'I did not say anything of the sort'. Q: 'If I may remind you, Secretary of State, you said in column 873 of the Official Report: "I have concluded that it would not be in the public interest to do so"—to apply to the courts for these people to be disqualified'. Ridley: 'Yes, that is the point'. Q: 'You decided it was not in the public interest'. Ridley: 'I did not decide it was not in the public interest to disqualify them. I said it was not in the public interest to apply to the court'. Q: 'But they cannot be disqualified until you apply, can they?'. Ridley: 'As I have said, I am not going to give reasons' ". That was hardly doing the committee justice; but more importantly, clarity is required when it comes to government policy on a matter as important as that. Such clarity was certainly not present on that occasion.

The question as to whether our system is capable of coping with the problems of commercial malpractice is highly pertinent to what we are debating today. In order to answer that question it would have been helpful to hear from the Department of Trade and Industry about the scale of commercial malpractice. Unfortunately, it was unable to help at all. It said that it had no reliable figures although—this is an interesting point—it considered fraud to be a growth industry. I believe that the department was right about that, particularly with the ramifications of international trade. We therefore need to be assured that we have a system in place which is capable of dealing quickly and effectively with commercial malpractice.

In his evidence the Secretary of State said that insider dealing cases were on the decline. There was not a scintilla of evidence to substantiate that proposition nor has there been any evidence forthcoming since he gave that evidence. But perhaps the noble Lord, Lord Trefgarne, will give the House the benefit of any evidence he now has in support of that, I would suggest, absurd proposition.

There is little doubt that our system of regulation—part statutory, part self-regulatory—has become extraordinarily complex and remarkably ineffective. That has been evidenced by the major criticisms contained in the House of Commons report in relation to a number of cases. In the House of Fraser case the Select Committee stated: The Department of Trade and Industry does not have the resources to undertake extensive original investigatory work itself". That is a very serious matter indeed.

The Barlow Clowes case, according to the Select Committee, indicates a failure to monitor in a systematic way the press coverage of commercial wrong-doing and a failure to respond to specific warnings. When I was a junior Minister at the Department of Trade, as it then was, from 1974 to 1979, I remember that I seemed to read rather more newspapers including Private Eye, than some of my officials—newspapers which revealed some prima facie evidence of aberrant behaviour which I would then draw to the attention of civil servants from time to time. The Slater Walker case was one in point and, indeed, there were others. I gave instructions that in future Private Eye should be scanned somewhat more carefully. It is important that the Select Committee's recommendation should be taken very seriously. I also believe that auditors should be statutorily permitted to disclose confidential information to the supervising authorities, as was strongly recommended in the report.

The complexity of our machinery for investigation is utterly remarkable. We have no fewer than 11 different authorities with responsibilities for investigatory or regulatory work. Often several of these may be involved at any one time. Major questions about the efficiency of such a system must be: is there sufficient communication between these authorities; is there confusion about who has responsibility in particular cases; is there confusion about the procedures deployed; is there a likelihood of commercial malpractice slipping through the net as a result of this web of different authorities? Those are serious questions and I invite the Minister to comment on them when he replies to the debate. My view is that overall it is not an effective system.

The idea of a British-style Securities and Exchange Commission has been canvassed. The Select Committee said that that may be a matter for the future but it seriously canvassed the proposition. Thirteen years ago, as a junior Minister, I circulated to my colleagues a memorandum following a visit I made to the United States of America and Canada. My strong conclusion then was that we needed something of that kind. We now need it even more urgently.

I remember going to see the Queen's Counsel who presided over the Ontario Securities Commission. He gave sage advice when he said: "When it's all about a lot of money—gaining it, or losing it—don't rely on self-regulation. It doesn't work". I believe that he was right. In the United States, significant duties are laid down on corporations and their officers which are much more specific than those in this country. The powers and the role of the investigating authorities are better and more clearly defined. Civil litigation buttresses criminal prosecutions and the deterrents against abuse are more real and more effective than they are in this country. That is in the citadel of the free market where dependence on voluntary codes of conduct and self-regulation is largely eschewed in favour of tight regulation. It is done because it is thought to be better for business—better for the reputation of business and for the financial centres in which those businesses operate.

Of course the-Department of Trade and Industry would argue that our excessively complex system is relatively new and needs time to settle down. But I believe that the recent cases illustrated in the Select Committee report demonstrate the need for urgency. In paragraph 113, the Select Committee stated about the House of Fraser case:

We were surprised that the Secretary of State…when making a statement in the House on the House of Fraser inquiry appeared to leave action against the merchant bank and the solicitors entirely to the relevant regulatory bodies (the Bank of England and the Law Society)". In paragraph 114 it stated: In our view, the DTI must remain responsible, in the public interest, for ensuring that some appropriate action is taken by the regulatory bodies". In paragraph 115 it stated: We are not satisfied that civil sanctions are used sufficiently in enforcement of company law". The committee was also deeply concerned about the grave delay that occurred.

I want to make one comment, parenthetically, about Lonrho. I may say that its position has been vindicated, but its attitude to publication in the House of Fraser case was in marked contrast to its attitude to the publication of the Lonrho report in 1977. Then Lonrho sought to use every and any means to frustrate publication, including threats against the inspectors themselves. Be that as it may, the situation is now such that its attitude in the House of Fraser case has been vindicated.

In the case referred to in the committee report the department has behaved like the three monkeys. It is the department that would not see, would not hear, and has refused to speak. It has not emerged satisfactorily from the withering criticisms made by the committee. The department is called upon to make a full reply and to do so quickly.

4.30 p.m.

Baroness Blackstone

My Lords, I wish to focus entirely on the DTI's responsibility to encourage research and development and to create a climate in which it can flourish. Before I go any further, I should like to assure the noble Lord, Lord Boardman, that any criticisms I make apply entirely to Ministers who are responsible for policy and not to their officials. I am sure that I speak for all speakers on this side of the House when I say that.

In the 1988 White Paper on the role of the DTI some emphasis is placed on the importance of promoting innovation in industry, above all through the development and use of new technologies. Chapter 8 of the report makes the usual ritual remarks about the importance of the market-place. Is there any government publication these days without such references? The report goes on to admit: Reliance on the decisions of firms may produce a level of innovation and use of technology which fails to provide the maximum benefits for the economy as a whole". In other words, we cannot leave everything to the market, although the present Secretary of State may have some difficulty in accepting his predecessor's concession on that point. This afternoon the Minister also appeared to have some difficulty with that concession.

The White Paper rightly recognises the need to increase research and development funding by the Government. It recognises that they must support and encourage the commercial application of new inventions; they must help small firms to innovate; and they must foster collaboration between industry and the academic world through collaborative research.

We can endorse all those claims. The problem is that the DTI's record in making progress in achieving any of them is a miserable one. As the noble Lord, Lord Ezra, said, there is a recognition of the issues but little action is taken to address them. Overall expenditure on R&D in the United Kingdom now compares unfavourably with that of most of our major competitors. In recent years the United Kingdom has been unique among OECD countries in that its R&D spending has risen less quickly than others, and yet it is widely recognised that spending in that area is a vital element in economic growth. In most countries the fastest growing industries are those which are the most R&D-intensive with the highest ratio of R&D spent to output.

I shall turn from total expenditure to private sector expenditure. Per capita spending on R&D is now at half the level of that of the USA, Japan, and West Germany. The failure of much of British manufacturing industry is at least in part due to its poor level of investment in R&D. Another indicator of those low levels of investment is the number of personnel employed to carry out R&D. Of the major industrial countries, including Japan, West Germany, France and Italy, only in the United Kingdom has R&D staff fallen.

Government investment in R&D has also fallen. After rising sharply after 1979—a point I concede—it has fallen back considerably since the early 1980s. As a percentage of GDP, it fell from 1.41 per cent. in 1981 to 1.03 per cent. in 1989. That can only contribute to a rapid slide towards becoming a low-technology country. That is a disastrous prospect for the nation and we must take urgent action to ensure that it does not happen.

Lord Trefgarne

My Lords, perhaps the noble Baroness will allow me to ask her a question. Do her figures include the defence element of national research and development?

Baroness Blackstone

My Lords, as I understand it, the figures relate to civil research. Research and development spending by the Government is also fundamentally flawed in the way that it is distributed. First, spending on defence is far too high in relation to civil research. The United Kingdom spends over £2 billion a year on defence R&D. Attempts to switch some of that spending to civil R&D and to improve the civil spin-off have been singularly unsuccessful.

Dramatic changes in the wider European political and security environment now make it even more imperative to switch defence R&D spending to civil R&D. Among the advanced economies, only the USA spends more on military R&D. Moreover, as a recent Select Committee report of your Lordships' House has made clear, the Government have exaggerated their overall spending on R&D by bringing in all kinds of spending by the MoD which is not really R&D spending. The misleading use of statistics by the Government is one of the most disgraceful developments of the past decade, and that is yet another example of it.

The second flaw in the distribution of government R&D spending is its heavy concentration on a small number of sectors. Aerospace, electrical engineering and chemicals receive 85 per cent. of public funds. Why? Why does the DTI put so much emphasis on those sectors when they account for only 27 per cent. of exports? Why also does the DTI concentrate so much support on a small number of companies? In fact, 90 per cent. of government support goes to approximately 100 companies. Yet, as the White Paper rightly implied, many smaller firms also need to innovate and to export innovations successfully in commercial terms.

The White Paper objectives that I mentioned earlier are not being achieved for a variety of reasons. First, civil research is being crowded out by military research which absorbs far too high a proportion of highly qualified manpower and other resources. Secondly, DTI Ministers have failed to take sufficient action to encourage more private sector spending. It is Labour Party policy to encourage more private sector spending and not merely to increase public sector spending.

New guidelines requiring companies to include information on R&D expenditure in their annual accounts are welcome. However, it would be highly desirable—perhaps the Minister will agree with me—if the department were to publish regular statistics on the performance of the major companies in that respect in order to encourage the practice.

Reluctance on the part of the DTI to reduce the threat of hostile takeovers—a reluctance confirmed by the Minister this afternoon, using rather crude arguments about competition—is another problem. The DTI's own innovation advisory board is, according to newspaper accounts, worried that high dividend payments and constant attention to share prices are a result of fears about takeovers. Dividends are increasing faster than profits. There is concern that high dividends are undermining research and development. Research is regarded as expendable in that situation. It is often the first thing to go.

Yet another example is the failure to provide enough support for development and diffusion. In the past couple of years there has been a reduction in support for what is known as near market research. That discriminates against small firms which cannot afford basic research. Moreover spending on technology transfer by the Government is minuscule. According to the CBI, companies are also frustrated by the difficulty of getting anything out of the department under the limited existing schemes.

The third reason why the DTI fails to meet its objectives in relation to innovation is failures in science policy. The collaboration that the department wants in relation to the academic world will not take place if we cannot recruit and maintain sufficient numbers of high quality scientists in our academic institutions. Many scientists working in our universities are utterly demoralised and disillusioned. They see little sign of the resources needed to support the collaboration that they are supposed to have with industry. Firms are understandably reluctant to supply the basic equipment, some of it expensive, needed in a well-found laboratory. This must come from the public sector. I know from my own experience in the university world that many scientists and engineers are being forced to make do with obsolete equipment, insufficient consumables and not enough technicians to support their work. Many are emigrating to North America, Europe and elsewhere.

It is also becoming harder to recruit research students in certain scientific fields. They are lured away into accountancy and other more lucrative careers. However, it is the squalid and tatty working environment, without adequate equipment necessary to do good work, that puts people off rather than poor pay, although that hardly helps. By the way, the pay of academics has fallen more in real terms over the past decade than that of any other group of public sector employees.

There are other failures in science policy, including a tendency still to spend too much on big science, leaving less available for some areas which are likely to be more productive. The DTI has not managed to produce an adequate strategy in collaboration with the DES on science policy. Looming ahead there are serious supply side problems relating to our pathetic failure to recruit enough science teachers for our schools, for which of course education Ministers must take the main blame. If we do not solve this problem, our failure to compete adequately with other advanced industrial countries with respect to R&D will become even more acute.

The noble Lord, Lord Trefgarne, asked what the Labour Party's policies were. Its policies entail dealing with each of the failures that I have identified to reverse the UK's relative decline in spending in this area. I should be happy to send the noble Lord a copy of the relevant paragraphs from the latest Labour Party policy review.

I should have liked to be more positive and more optimistic about the role the DTI is playing in promoting industrial recovery. With respect to the crucial area of research and development, regrettably it is falling far short of what is needed to secure that recovery.

4.42 p.m.

Lord Taylor of Gryfe

My Lords, I propose this afternoon to say something about regional policy, which is within the remit and responsibility of the DTI. Before doing so I should like an answer to one or two specific points and I am sure that the Minister will give me the necessary reply in due course.

The first point refers to the Kemp report on export credits. I am reminded by major British exporters, and particularly by people from John Brown Engineering, who have just returned from the Soviet Union with a substantial order, that they are much concerned by the Government's attempt to reduce their commitment to export credits. This may put British exporters at a serious disadvantage. They wish to ensure that the combination of premium increases and market capacity restrictions should not be so severe that UK exporters will be put at a disadvantage. I should welcome the Minister's assurance in that regard.

I also wish to raise the matter of Ravenscraig, since it is close to where I live and is of concern to Scots. The noble Lord, Lord Macaulay, will be more specific but perhaps I may give one quotation from the DTI White Paper which initiated the Department of Enterprise. Talking about open markets, to which it is committed, it said, Open markets do not mean Governments should rely simply on the operation of market forces or stand by as a passive observer of the economy". I suggest that this gives the Government authority to intervene which is not being recognised in the case of the closure of the Ravenscraig mill. My noble friend Lord Macaulay will pursue this in greater detail.

I was delighted to hear the references by the noble Baroness, Lady Blackstone, to the decline in expenditure on R&D. I am a member of a committee on science and technology which is meeting at this moment upstairs. We have received evidence from large numbers of successful British companies which suggest that the failure in the UK to innovate is because resources are not available to support research and development.

I wish to make one point concerning the City. I was involved in the City until I retired last year, in a company that was involved in the Guinness affair. I do not propose to pursue the matter at this stage, but it took the DTI three and half years to investigate the facts of the Guinness case. In the meantime the investigation caused considerable disruption in the operations of a merchant bank with members of the Serious Fraud Office and the DTI in the office simultaneously questioning everyone from directors to secretaries. Their activities affected the careers of people who were suspect during the three and half years of the investigation. I am sure that the Guinness affair will run for five years with the investigation plus the proceedings in the Crown Court.

Two leading members of the staff—the chief executive and the head of corporate finance—were invited to resign at the beginning of the investigations. Nothing was proved and they will not be charged but they were invited to resign before any investigation or charge.

I suggest therefore that, in any investigation undertaken by the DTI in future, there should be a speeding up of procedures to ensure that people who are innocent do not suffer and are not under a shadow and so that their careers are not affected by prolonged investigations. I hope that the Minister will give us an assurance on expediting DTI inquiries in future.

My main thrust this afternoon is directed towards regional policy. We have had several changes in that policy in the past five or six years. I suggest that we have been so much involved with the problems of the South East that we are inclined to overlook the total economic and social cost of neglecting the regions. The concentration of industry in the South East is inflationary and there is much evidence of that, not only in house prices but in other areas.

Perhaps I may quote one or two statistics. I must refer to Scotland although what I say is equally relevant to other neglected regions. Between 1982 and 1985 real investment fell by 5.4 per cent. in Scotland; in the United Kingdom it increased by 7.7 per cent. The North/South divide continues to exist. Last year 15,000 young people left Scotland and emigrated, most of them to the South East. This cannot be a happy situation for the universities and schools that produce clever young people who cannot find an outlet for their skills and talents in their native country.

I wish to speak a little about the social and economic costs of the North/South divide and its effect on the economy. British Rail's subsidy to the South East is £205 million per annum. Even with the inadequate services, that subsidy is 28 per cent. of the entire national subsidy to British Rail. On top of that £205 million for British Rail, London Regional Transport receives a subsidy of £295 million to maintain some kind of public service in the South East. The London weighting addition for civil servants in the South-East costs another £150 million.

The Autumn Statement has indicated that on top of those figures a further £400 million or £500 million will be put into transport subsidies in the South East. There are 2,900,000 mortgagors in the South East. That is 36 per cent. of the United Kingdom total, but they receive more than 42 per cent. of the total national tax relief. The figures indicate the tremendous inflationary effect, as well as the effect on the quality of life of concentrating industry in the South-East and failing to pursue a reasonable regional policy.

The Government have changed their regional policy over the past five years. I commend to the Government a statement made on the last occasion by Sir Leon Brittan who had been Minister at the Department of Trade and Industry a short time previously. He said: The criticism that I make of the proposals in the present legislation is not that they retain a selective element, but that they move over to a totally selective concept, and that is a very different matter"—[Official Report, Commons, 25/1/88: col. 63.] Sir Leon went on to say that he was not persuaded that the regional policy of the Government, which was selective in its application of regional grants, would be effective.

That was not only said by Sir Leon Brittan; it was said also by the Scottish Development Agency and others who administer regional policy. It is time Ministers looked again at the whole question of the social and economic costs of this heavy concentration in the South-East. Socially it is bad and nationally it is unhealthy. We require effective regional policy incentives to relieve this situation.

The Government have changed their policy twice in the past five or six years. They have departed from the automatic regional development grants which were so effective in creating employment in the past. It is time the Government carried, out an audit on the effects of their policy. Sometimes they seem to be victims of their own advertising. They should be looking seriously at the impact of their changes in regional policy in terms of investment and employment. I strongly recommend that that should be done.

4.52 p.m.

Lord Bottomley

My Lords, I congratulate my noble friend Lord Williams on raising this subject for debate today. I admired the way in which he condemned Ministers for letting down the Department of Trade and Industry. When the Labour Government came into power in 1945 exports were two-thirds lower than the pre-war level. Huge debts had to be incurred to pay our way. No wonder Winston Churchill said the country was bankrupt.

After a short period as Dominions Under-Secretary of State I was appointed Secretary for Overseas Trade. The President of the Board of Trade was my noble friend Lord Wilson of Rievaulx, one of the board's most able presidents. Weekly meetings were held of officials and Ministers. My noble friend Lord Wilson had a photographic memory. He was able to provide information and helped to settle matters without any hesitation.

The Secretary for Overseas Trade was used by the Foreign Office to undertake special missions. Among other things I was actively concerned with the Anglo-Yugoslav trade agreement and trade arrangements with Finland. In the case of Yugoslavia the trade talks continued for 18 months. The Minister, Kopcok, confided to me that the Yugoslavs were falling out with the Soviet Union. I mentioned this to Ernest Bevin who was Foreign Secretary at the time. He told me not to be foolish as no diplomat had reported this state of affairs. However, by the time we had finished the negotiations the break with the Soviet Union had occurred. Ernest Bevin said that I should sign the trade agreement. However, the Foreign Office said that protocol demanded that the Foreign Secretary should sign the agreement. Ernest Bevin said he would overcome that by giving me special powers plenipotentiary so that I could sign the agreement. As noble Lords can imagine, I have kept that document.

The noble Lord, Lord Campbell of Croy, was at the Foreign Office at that time. He was one of my expert advisers. He was a good adviser. In connection with some Finnish talks Ernest Bevin told me that the Communists had overrun Czechoslovakia. He told me that if I could find out anything about that matter from the Finns I should do so. I spoke to President Passokivi who just smiled and told me that Lenin had once said that the Finns were indigestible.

Under the auspices of the United Nations, a world trade conference was held in Havana in November 1947. The intention was to form an organ of the United Nations. Some of the Eastern European countries said they would attend. However, when the Russians did not attend, unfortunately none of the Eastern European countries attended. I led the British delegation. The senior delegate for the Commonwealth was Walter Nash, the New Zealand Prime Minister. We formed a good friendship which we kept until the time of his death.

The Secretary for Overseas Trade was responsible for the export and credit guarantees department. The Government would be failing in their duty if they did not give that department the support that it deserves to help out the export trade. My noble friend Lord Wilson played a prominent part in creating the General Agreement on Tariffs and Trade. As is known, the intention of the agreement was to dispense with discrimination, to bring about the circumstances in which trade could flow easily and without hindrance, and to influence the administration of import and export duties and charges. GATT offers a framework within which negotiations are held for the reduction of tariffs and other barriers to trade and a structure for putting the results of such negotiations into a legal arrangement.

The British Institute of Management was set up in 1947. I have the privilege of being the president of the Westminster branch at this time. When I was Secretary for Overseas Trade, it was necessary to do some really hard work. Most Eastern European countries and some Latin American countries were represented and led by Ministers. They insisted that a minister must negotiate with them. That meant burning the midnight oil. I recall on one occasion negotiating with Cuba. We were short of dollars and could not afford to buy their cigars. The Minister said to me: there are two things in this world which are in a class of their own—French champagne and Havana cigars. I told him that he showed appalling ignorance: had he never heard of Scotch whisky? We did business on the basis of trading whisky for cigars.

The Board of Trade was one of the busiest departments of government. It had the task of overseeing all matters relating to trade and industry. The Board of Trade played a prominent part in bringing about recovery after the war, saving the country from many of the ravages caused by that war. At that time it did more constructive work than under any other government. I have endeavoured to show that by what I have had to say.

In contrast, the present Conservative Government have failed miserably. The Government's handling of the economy has been disastrous. Britain has the worst inflation rate, the highest interest rates, the lowest growth and the largest trade deficit among European countries. The Department of Trade and Industry has shown a total unwillingness and inability to enforce proper regulation of the City of London. The trade and Industry Select Committee report on company investigations is a searing indictment of the Department of Trade and Industry and the Ministers who run it. They have failed to curb insider trading and City frauds. It must be clear to any sane, thinking person that it is time there was a change of government.

5.2 p.m.

Lord Lyell

My Lords, I shall not attempt to comment on the interesting speech of the noble Lord, Lord Bottomley. I shall begin my remarks by expressing my gratitude to the noble Lord, Lord Williams, for giving us the opportunity to discuss this subject this afternoon and to hear a number of fascinating speeches. In the course of his opening remarks the noble Lord, Lord Williams, made one or two flattering comments about the number of speakers from these Benches. I remind him that size is no guarantee of strength. He need only look at the Good Book that is not far from him and find the story—Goliath, nil; David, one—I am sorry; I did not intend to refer to my noble friend on the Front Bench. The noble Lord, Lord Williams, will see that the four speakers from these Benches represent considerable experience in commerce and, particularly in the case of my noble friend Lord Boardman, of all the matters covered by the noble Lord, Lord Williams.

I admired and enjoyed the speech of the noble Lord, Lord Williams. Were I one of the Olympic skating judges we see every four years in the winter I might award him 5.8 for technical merit. I might even give him a full 6 for artistic impression, but for content I would give a lower mark because I do not necessarily agree with him. It was a very refreshing and remarkable speech.

The main thrust of my speech this afternoon will be to draw attention to the many ways in which the Department of Trade and Industry is able to fulfil the roles mentioned by the noble Lord, Lord Williams, in terms of industrial recovery and proper balance in the economy, although I do not know what he meant by that. No doubt his noble friend Lord Peston will be able to enlighten us further.

One of the Department of Trade and Industry's current programmes is the LINK initiative which links the work of that department with that of the Department of Education and Science. The programme unifies the work of scientists—which was very well explained by the noble Baroness, Lady Blackstone—and the techniques of the market place. Noble Lords have only to cast their minds back 19 years to the Rolls-Royce affair. That company, which was a world leader in aerospace and aero-engine technology, suffered serious difficulties because of a grave lack of attention to one particular aspect of accountancy and finance. We see from that and other cases the need for the LINK initiative to co-ordinate the work of science and industry, finance, marketing, production and what is now called human resources but which I have always called personnel. The experts in those disciplines should understand the disciplines in which each of the other specialists has been brought up.

The second aspect of the work of the Department of Trade and Industry which has impressed me is the Enterprise Initiative. I believe that the noble Lord, Lord Williams, mentioned a figure of 3 per cent. uptake. Noble Lords will know that the scheme is targeted at smaller companies. One of the more interesting aspects of the Enterprise Initiative is that it is intended to encourage industry to employ outside consultants as part of management strategy. However, it is essential to use the ideas of consultants without necessarily taking everything that they say as gospel. I should not regard the maxim "consultants are best" as being in any way the truth.

I read on Sunday the article referred to by my noble friend on the Front Bench. I gleaned from that lengthy and learned article that Germany and Japan are not ruled by masters of business administration (MBAs), to whom I raise my hat in respect. Those two countries are ruled by engineers and others with special skills. The same goes for Scotland—and I look across the Chamber at the noble Lord, Lord Taylor of Gryfe—which is ruled by engineers, and also by accountants and doctors. MBAs perhaps have some standing in that country. We need to use consultants and their relevant disciplines and experience with care, because the blind use of consultancy can lead to some of the interesting cases about which we read daily in our newspapers.

As my noble friend Lord Trefgarne mentioned earlier, the Enterprise Initiative is aimed at design, marketing, finance and manufacturing systems. In that respect the Department of Trade and Industry is fulfilling the terms of the Motion moved by the noble Lord, Lord Williams.

Another aspect which I do not believe has been raised this afternoon as part of the main programme of the Department of Trade and Industry is the exellent slogan: "Europe: open for business in 1992".

That represents one of the greatest challenges in the lifetime of many of your Lordships. The programme was launched in April 1988. It has produced a high awareness of the single market, which is catching up on us. Action has to be taken.

There is one aspect of the question of Europe being open for business which has crossed my mind. How many of your Lordships would be able to make the remarks which any of us have made—or, perhaps, mercifully, have not made—this afternoon in other European languages—French, German, Italian, Spanish or other languages of the Community? I see that the noble Lord, Lord Williams, is raising one finger. I hope that he is raisin; only one finger, or perhaps two in a decent form which would be suitable for this House. I believe that raising one finger has connotations across, the Atlantic. I understand that the noble Lord speak; one or two European languages.

One of the complaints that we hear from the other members states of the Community is that few businessmen and businesswomen, not to mention Members of this House or of another place, have any idea of the necessary communication skills. That is the current jargon, although I prefer to call them languages. They are a necessary part of the programme.

I am reminded that my tutor at Oxford—my noble friend Lord Blake, who is not in his place at present—had to remind me all of 29 years ago that my priority was to write clear and concise English. The noble Lord, Lord Donoughue, who is to follow me, made an indirect contribution to my education, thanks to a valuable tome on France—he will no doubt be voluble in French, although perhaps not in this House—which enabled me to obtain some kind of a degree.

Another of the main thrusts that is particularly germane to the remarks made by the noble Lord, Lord Taylor of Gryfe, is regional selective assistance. That is particularly relevant to Scotland. I shall not follow the noble Lord down the path of Ravenscraig this afternoon as time is limited and I have one or two more points that I wish to make. I go along with at least two or three of the points made by the noble Lord about the concentration of industry and commerce in the South-East. However, regional selective assistance has a useful role to fulfil in gaining new employment and, above all, in safeguarding existing employment. It encourages existing employment to be furthered and promoted in, for example, the field of technology, be it science or other skills.

The noble Lord, Lord Taylor, referred to regional policy and to Scotland. He will know that between his dwelling place and mine is a great Scottish industrial city called Dundee. What has saddened me very much over the past three to four years has been the loss of the projected Ford factory in Dundee. That seems to me and to many of us in Dundee and Angus to be almost lunatic for two reasons. First, the reason why the investment was lost was no reflection on industrial relations in the United Kingdom. It was completely crazy and out of kilter. The whole scene of industrial relations has moved on. We shall hear more about that aspect next week. Secondly, the Ford Motor Company is a first-class employer which has been extremely successful in the United Kingdom and is a particularly successful employer and major investor.

The noble Lord, Lord Taylor, raised another point, to which my noble friend Lord Boardman alluded, regarding investment by the Government in other forms of infrastructure. Before I came into the Chamber today, I was thinking of the journeys often made by noble Lords who live far from London. I place the noble Lord, Lord Taylor, in that category. I was thinking of investment in railways. It appears that investment in British Rail over the next three years will be about £1.2 billion. However, £400 million of that investment is currently in respect of the east coast main line electrification. The noble Lord, Lord Taylor, may be aware of this, but I do not know whether other noble Lords are aware that the fastest journey between the station used by the noble Lord—the little station of Leuchars—and mine of Dundee further up, and London—a distance of about 714 kilometres according to the valuable Cook's Companion in the Library—is five and a half hours.

Noble Lords opposite and other critics of the Government's investment in the infrastructure often refer to the Federal Republic of Germany. Let us look at the core route in the Deutsche Bundesbahn; namely, that between Cologne and Basle. That is a distance of 520 kilometres which is roughly the same as the distance between London and Carlisle. The journey takes four hours and 40 minutes which is exactly the same time as the service, in which there is thought to be under-investment, between London and Glasgow. The investment and infrastructure provided by the Department of Trade and Industry therefore seems to form an acceptable base. I wish to compliment my noble friend and his department on all that they do.

Finally, I wish to support my noble friend in what I shall call his second coming in the department. He may remember that, when he first worked in the old Department of Trade, we shared the Bench dealing with sundry measures such as the Companies Act, when my noble friend's voice gave way as mine is about to do. We covered everything from Anton Piller orders to aviation and auditing. That was just the Department of Trade. When we consider how the Department of Trade and Industry seeks to unify the efforts of the entire industrial base and infrastructure of the nation and to meet the terms of the Motion introduced by the noble Lord, Lord Williams, many of us on this side of the House at least will wish to present our compliments to our noble friend and his department and to everyone who works in it.

5.16 p.m.

Lord Donoughue

My Lords, we are today considering the role of a department which is undoubtedly seen by many as the black sheep in the Whitehall flock. It is not uncommon for departments to be unpopular with her Majesty's Opposition since they advise and execute government policies. It is not uncommon for the Treasury especially to be unpopular with the Opposition and the Government alike, since it is the Treasury's role to say no to the most brilliant, and therefore usually the most expensive, ideas of all sides. But the unpopularity there is usually accompanied by respect.

It is the sad fate of the DTI at present to enjoy neither popularity nor respect on any side of either House, nor with the media and the public outside. It is not hard to understand how that sad situation has arisen, given the long history of policy misjudgments to which my noble friend Lord Williams referred in his powerful and convincing opening speech. The effect on officials in the department must be demoralising. For institutions, as with individuals, failure is bad. It erodes self-confidence and each failure tends to make the handling of the next crisis less sure.

It would be comforting if we could bury those past failures and look to the future with renewed confidence. I am not sure whether that is possible under the present direction, or even that parts of the Government want that. Part of the problem is that we have a department of industry, in which the Government, or certainly the Prime Minister and the present Secretary of State, appear not to believe. The musical chairs of six Secretaries of State in seven years—or is it seven in six years?—demonstrates the contempt with which the department is viewed. I ask noble Lords opposite: which major corporation could survive changes of chairman of that rapidity without being demoralised?

Mr. Ridley leaves no one in any doubt about the contempt with which he views the basic activities of his own department. The only historical analogy, or semi-analogy, that occurred to me was that of Mr. Tony Benn, Secretary of State of what was then just the Department of Industry. He was disdainful of his civil servants, as he has written, and believed that the department was ideologically unacceptable, being allegedly opposed to the then Government's basic interventionist ambitions.

Today Mr. Ridley is equally disdainful of his civil servants—indeed, of all civil servants. Ironically, he also believes that the Department is ideologically unacceptable, being allegedly a symbol of government intervention, which he despises. It is hard to see how the poor civil servants in Victoria Street can ever hope to win. It is no wonder if they are demoralised.

At least in 1975 the then Prime Minister, now the noble Lord, Lord Wilson of Rievaulx, had the courage and sense to sort out matters by moving Mr. Benn to a department where his talents could be used more positively. Mr. Ridley remains a danger to navigation. It appears that this series of administrative disasters gives pleasure to his own personal supporters because the department which they despise is brought into disrepute and because their cavalier Secretary of State so clearly does not care. We must care because the policy areas for which the DTI is responsible matter very much.

Despite the fanciful dreams of those who imagine that one day we shall have a world of total deregulation without any government intervention, the reality is that the DTI, however trimmed its wings, should continue in business for many years to come. We want it to be successful in that business. A wide range of DTI activities are being discussed today and several noble Lords from all sides have contributions to make based on great experience. For myself, I shall confine my remarks to two areas: financial regulation and industrial policy.

Turning to the regulatory field, the DTI is primarily responsible for policing company law. That has been a continuing source of dissatisfaction, threatening to bring into disrepute the laws under it—a point that was made most impressively by my noble friend Lord Clinton-Davis. In defence of the department it must be said that there exist genuine and possibly unavoidable tensions between the desire among many for speedy prosecution of the law and the basic need to establish convincing evidence and be fair to individuals. Having said that, there is widespread belief that in general the DTI has been simply too slow—too slow to appoint inspectors, too slow to publish conclusions and too reluctant to act upon its conclusions.

In relation to the publication of reports, in my view the DTI should publish its broad conclusions on an issue and clear the names of innocent parties involved as soon as possible, even if that means delaying publication of the final appendix recommending any criminal proceedings. The House of Fraser affair is relevant to that. It has been ploughed over often enough and I shall not spend too much further time on it. But it is incontestable that it has been very damaging to the reputation and morale of the department and it did not reflect well upon the conduct of more than one Secretary of State. Perhaps they were in an almost impossible situation but certainly they might have handled it better.

Equally certainly, the dishonest attitudes of certain company directors there exposed that either company law was inadequate or that the DTI was dilatory in exercising its responsibilities, or both. Directors must be compelled to tell inspectors the truth. Equally, inspectors must allow accused persons a right of reply.

I turn to another regulatory area—the need to protect investment clients. This is an area that concerns me professionally and I should declare an interest as the chief executive of a small investment management company—not quite a parasite, I would say to the noble Lord, Lord Boardman. We spent many hours in Parliament on the Financial Services Bill, which I recall did not always excite the full interest and imagination of noble Lords. It was a tedious penance which was justified—or thought to be so—because it would apparently impose honesty on the City and guarantee protection to investors. I am not sure that subsequent experience justifies the long nights of suffering in this House. Indeed, repeated recent experiences demonstrate that the supervision of various London markets either directly by the DTI or through self-regulation bodies monitored by the DTI is hopelessly inadequate. I was very struck by a story in this morning's newspaper which asked what was the difference between the DTI, the Securities and Investments Board, the self-regulatory organisations and an umbrella. The answer was that an umbrella usually protects somebody.

The long series of public scandals is well known. This House has discussed Barlow Clowes. The County Nat West/Blue Arrow affair is still awaiting full trial and I believe that the delay is an injustice to those who are accused. In recent days we have seen the collapse of Dunsdale Securities with the apparent disappearance of £20 million of investors' funds. The full facts of that latter scandal have yet to be established but we note that the key director was apparently licensed to trade by the DTI shortly after being involved in the London and Counties scandal, which ended in a collapse amid charges of fraud. Once again it seems that individual clients will be left with little hope of recovering all their money.

The problem in the regulatory areas is that we have imposed a huge superstructure of regulatory bureaucracy which costs honest firms (the vast majority) and their clients a fortune to sustain. The initial cost to the finance industry of implementing the Financial Services Act is estimated at over £1 billion and it costs over £150 million a year to operate.

I do not know whether any noble Lords have been subjected to one, but the self-regulatory bodies' books of rules are incomprehensible. That of FIMBRA, the body responsible for Dunsdale, is over 200 pages long. One of its rules was printed in the press this morning. Those who missed it should listen carefully when I read it out. It says: A member may provide services to a client notwithstanding there s no client agreement in effect with that client provided that a e client is not an existing client of the member". Noble and learned Lords who are present may know what that means. I hope that none of them was responsible for drafting it. There are hundreds of pages of that kind of gobbledegook.

We have a mass of bureaucracy and it does not seem to protect clients' money. It burdens the honest but does not adequately deter or catch the wicked. This area of regulation is still unsatisfactory. It needs simplication and reform. I note that the self-regulatory bodies operating under the Securities and Investments Board have promised to simplify their rule books and are committed to do so. That is very desirable but they are already behind in their timetable of commitment to do it.

I have not mentioned the numerous scandals in the insurance market because it is not a market in which I have worked. It is clear that self-regulation at Lloyds has not been a success, as perhaps some noble Lords present know to their cost. At times one has been tempted to ask: who guards the guards at Lloyds? I wonder also whether the Minister read the independent report published only last week on the failure of the H.S. Weaver Underwriting Agencies, part of London United Investments, which collapsed in March—one of the biggest insurance failures in British history. That report concludes that the DTI is fatally short of expert staff to supervise the insurance industry and that its supervision of that market "is lax and complacent". That is the kind of expression that we have heard used elsewhere.

The final aspect of regulatory policy that I wish to mention concerns insider trading. Sadly, the DTI has a long track record of failure in dealing with insider trading since it became an offence in 1980. It has shown technical defects in drafting and implementing the law. It has been dilatory in pursuing investigations, sometimes taking six months to appoint inspectors.

The recent condemnation by the All-Party Commons Select Committee on Trade, to which reference has been made, was devastating. It is widely accepted in the City, where the view is that the chances of offenders being caught are remote. What is required is greater speed with regard to inquiry, decision and publication to clear the names of innocent parties.

Organisationally, the DTI has given indications that it wishes to hive off those regulatory responsibilities. That could produce improvements. A new statutory body along the lines of the SEC in America would streamline the present tangled lines of responsibility spread over the DTI, the Crown Prosecution Service, the regulatory bodies and the Stock Exchange. However, I say to my noble friends who are involved in policy making that we must beware of creating a legal bureaucratic monster. That would be as bad as the present position.

Above all, we need signs of motivation and commitment from the top. Ultimately success depends not just on the regulatory structure, but on the attitude that the department brings to its implementation of the regulations. In recent times that attitude has seemed to be infected by inertia and conspicuous cynicism. Instead of an action tray on the Secretary of State's desk, there appears to be just an ashtray.

I have taken some time on the regulatory side. I shall refrain from continuing on the area of basic industrial policy. However, I conclude by affirming that the Department of Trade and Industry has a very positive role to play in producing an industrial climate in which healthy firms and sectors can thrive. We must move towards a partnership between Government and industry, and to secure greater prosperity for all.

5.35 p.m.

Lord Jay

My Lords, apart from anything else the admirable and most timely report of the Select Committee of the other House on company investigations, which many speakers have mentioned today, justifies this debate. In fact it cries out for a debate, and for many other things including action from the Government.

When one has a boom on top of deregulation all round, and a laissez-faire Government, one usually has financial scandals. In recent years having attempted to imbue everyone with a spirit of get-rich-quick, dignified by the name of enterprise so beloved of the previous Secretary of State, the noble Lord, Lord Young, this Government cannot escape some responsibility for all the rather murky escapades in the City.

The Government are always telling us—the Minister told us today—that it is their business to provide the right climate for industry. We can now see what the climate is. They have nothing to be proud of. The trouble is that market forces in this climate do not always work very benevolently. I do not believe that one should blame the DTI officials. Indeed the report gives special praise to one of them. But there have not been enough of them. They cannot easily have had the experience necessary in the matter of company fraud. The report leaves no doubt of that.

In order to remedy all this there is no alternative to recruiting a major corps, part-time and full-time, as the report suggests, including lawyers, accountants, City traders with recent experience, and the monitoring and investigating authorities, to carry out that job.

The report suggests a number of details on how that is to be done which I wholly support. I need not enumerate them. However, I believe that the Government will be very much to blame unless they carry out a number of the proposals. I refer to particular judgments in the report. I wholly agree with its finding on the Al Fayed takeover of House of Fraser. It was very strange that the noble Lord, Lord Young—at that time the Secretary of State—did not refer that takeover to the Monopolies and Mergers Commission. It is also strange that the present Secretary of State decided not to ask the courts whether the Al Fayed brothers should be disqualified as directors after all the disclosures which had been made. It is also a little strange that the noble Lord, Lord Young, is not with us today to explain exactly what he was doing on that occasion, and why.

However, the present Government's belief apparently is that the DTI should do less and less. That view extends to many tasks other than preventing frauds and monopolies. Mr. Ridley, the present Secretary of State, seems to believe that there should not be a DTI. If he holds that view one wonders why he took on the job of Secretary of State. His only wish, like that of the Prime Minister, seems to be to cut down public spending at all costs.

The Minister today asked noble Lords on this side of the Chamber what we should do. He almost seemed to be asking us to suggest to him what he might do. I shall certainly make a few suggestions.

There are several crucial functions which in the modern world the DTI ought to be expanding and not contracting. In most of our main competitor countries the governments, far from leaving their industries—public or private—to their fate, put the whole of their financial, diplomatic, administrative and political sources behind them. The noble Lord, Lord Ezra, spoke rightly about France today. France would have had no nuclear industry, and very small aircraft, electricity, car, steel or shipbuilding industries, if they had not been deliberately planned and supported over a long period by the state. Japan would probably have had no car, steel, shipbuilding or electronic industries without such support.

The most crucial DTI function is export promotion. If we do nothing to limit imports—and we have given that up now—we might at least promote exports. There is a great deal that a modern government can do, and our competitor governments are doing, to promote exports. The export drive was greatly strengthened during the 1960s in many ways, in particular by industrial exhibitions, fairs, special rates of interest for exporters, and other help in export markets.

But what is happening at the present time? I am at least pleased to hear that a British trade exhibition is now being held in Kiev. The Prime Minister apparently visited it. One might hope that exhibitions had escaped her cost-cutting kitchen knife but I should like to be assured that that is so. It is also reported in the press that Britain has rejected the valuable offer of being a partnership nation at the Hanover Fair in 1992, and that the French promptly stepped in to take our place. Is that true? If so, how was it allowed to happen?

There is the Universal Exposition at Seville in 1992. The DTI seems to have spent so much time cost-cutting that it has damaged our chance of an effective presence there. Is that also true?

There is a further report that spending on export market research is now to be cut. Since the Export Credit Guarantee Department has been mentioned today, will the Government also give a clear assurance that full support will be maintained for the ECGD. It was first established by a Conservative government in the 1920s and has probably proved our most successful single instrument for export promotion over many years. It has been imitated by almost every other country since and to my mind any cost cutting of that department would be the grossest folly.

In France, Japan, Italy and other countries the winning of major export contracts in civil engineering, power station equipment, aircraft and defence goods and so forth is no longer left to the competing firm. In those countries a team is formed, including representatives from the public service and the firm's managers, technical assistants and commercial staff overseas. In effect, it is instructed to win the contract. In my opinion, a major duty of the DTI should be to do something similar or at least to do something effective. It should foresee and track down such major contracts in good time and ensure that all the necessary services are on offer to the British firms competing. It should do so as a service to industry. A typical recent example is that of the noble Lord, Lord King, of British Airways. He complained that in a recent industrial contest every airline except his had government support.

In my view, the second main DTI function should be regional policy, already mentioned by my noble friend Lord Taylor. The case for a strong, vigorous regional policy is hard economics. To leave all our labour, capital and public services to stand idle at one end of the country, while in the South East allowing excessive pressure on resources resulting in high prices, housing shortages, scarcity of skilled labour and transport congestion if not deadlock, is sheer economic waste. In those cases, it is unfortunate that in general market forces work the wrong way. Each enterprise moves to where the biggest market appears to be present and so makes the situation worse for everyone else. It is rather like a traffic block.

As a result, rising prices and rents in the congested area force the Government to start a general economic squeeze, as they are now doing, while major resources remain unused elsewhere. Indeed, that is the cause of many of our present problems. Yet with a better geographical balance growth can be allowed to go further without the clamping of the anti-inflationary brake. Such a better balance would also avoid the ever-growing demand for new housing in the South East which is difficult to meet.

There are two ways of escaping that impasse which were used effectively during the first 20 years after the war in order to achieve a better geographical balance of industry. The first is to encourage new development in areas of unused resources. Practical experience has shown that the best way of doing that, in addition to regional grants, is for practical government agencies to develop industrial estates and business premises and the necessary services in the under-developed areas.

At Question Time on 21st May the Minister gave me an equivocal Answer about English Industrial Estates which has always been one of the main instruments. He said that the Government valued its work but he did not promise that it would be given the full support necessary to continue. Nor, for instance, did he say that advance factory building programmes by English industrial estates and its Scottish and Welsh equivalents will be maintained at an adequate rate. Can we have such an assurance now?

Secondly, for the sake of everyone there must be some restraint on large new projects in the congested areas. What is the Government's present policy and what, if anything, are they doing? Do the Government still have the legal power to refuse industrial development certificates in the last resort and, if so, are they using that power? If we simply abandon those positive regional policies we make most of our other economic difficulties—rising prices and rents, and traffic congestion—even more intractable.

Those are some of the positive measures which I believe a modern DTI should be undertaking in the 1990s. But it would also help a little if we have a Secretary of State who believes in what he is supposed to be doing.

5.45 p.m.

Lord Macaulay of Bragar

My Lords, this is an important debate relating to the present condition of British industry and to its future structure and supervision. I thank my noble friend Lord Williams for bringing the issue to the attention of the House. I echo his concern about the lack of interest shown on the Government Benches in this important matter. I am afraid that the efforts of the noble Lord, Lord Lyell—who is now signalling to me from a far distance—are not sufficient justification for that particular lack of interest.

It would appear that, to the layman—and I speak as a layman—and as indicated by the Minister during the course of the debate, government policy is one of a market-place free-for-all and the minimal investigation, interfering or monitoring of industrial activities whatever the effects on industry and its employees. The personal and social consequences to the individual employees, their families and communities are given no priority as far as one can ascertain. This is a Government who have no social conscience when looking at industry. I do not advocate for one moment that we must return to a hand-out industrial society but at least the Government could be courteous enough to look at the problems which arise. It is almost as though the workers do not exist as the market-place goes about like a great financial juggernaut.

I take part in the debate as a Scottish layman. I have no industrial expertise, apart from jobs as a student, or knowledge of the intricacies of the industrial process. However, I also take part in the debate as a Clydesider of Highland extraction who, during the years, has witnessed in Scotland the almost inevitable decline of the heavy industries which failed miserably to move and modernise with the times. New high-tech industries have taken the place of traditional industries and the Scottish workforce has now attained a universal acknowledgement of its skills and adaptability to the new industrial and technological challenges.

In so far as there has been an industrial revolution in relation not only to the processes in industry but to the attitudes of management and the workforce, that is of course welcome in Scotland as it is anywhere else. What is not justified is the view now being circulated in relation to a topic about which I shall speak shortly. It is the view that heavy industry, because it is such, is doomed and must go to the wall at some stage.

My interest in the debate, apart from its generality, is to focus the issue of the treatment by British Steel of the hot strip mill at Ravenscraig in Motherwell and the off-hand and dismissive approach to the issue by its chairman, Sir Robert Scholey, and by British Steel in general to that vital Scottish issue. I raise it in the context of the debate because at a later stage I wish to comment on the role of the DTI.

Yesterday's newspapers proclaimed the finality of the closure of Ravenscraig, with the chairman confirming that 770 jobs were to disappear. The knock-on effects to families and communities have been completely ignored. Varying estimates in their thousands are being given of the number of people who will be affected by the closure. A figure of 10,000 has been quoted but perhaps that is a little high. Even the Government will accept that at least 3,000 jobs will be affected and that there will be a substantial loss of income to Scotland.

The story of the issue, which has been dealt with on a rational, commercial basis, is that British Steel has treated the workforce at Ravenscraig, the people affected by the imminent closure and those attempting to discover the reasons for the closure (including of all people the Secretary of State for Scotland) with complete contempt and managerial arrogance. According to the Glasgow Herald published yesterday, Sir Robert Scholey said: The Government should keep its nose out of the concerns of private industry". He also said that he would reply to the reasonable request of the Secretary of State, when I am ready and that will be in a reasonable time". Has there ever been such a contemptible approach to a government Minister in recent industrial history? It is quite abominable that the Government should sit back and allow Sir Robert Scholey to behave in that way towards the people of Ravenscraig and Scotland as a whole. If he can behave in that way on an isolated incident, there is no reason that he cannot extend that attitude in the future.

The attitude of arrogance of which I have spoken came on the very day on which British Steel announced pre-tax profits of £733 million, an increase of 24 per cent. on the previous year. Does Sir Robert Scholey seriously ask the threatened workforce to lie back and wait for its industrial execution and accept that the Craig—as it is known locally—will be no more?

My noble friend Lord Taylor of Gryfe quoted from Hansard and I shall not repeat that. However, it comes to this. Privatisation does not mean total exclusion of public involvement and governmental interest in what is going on in industry. Surely as part of the accounting process which produced the profit figure, there must be precise information as to the productivity and profitability of the Ravenscraig mill and the contribution which that workforce has made to the impressive figure of £733 million, although there are reservations about that figure expressed in the financial columns.

If Ravenscraig is a non-viable, non-profit-making element in British Steel's commercial undertaking, let that be stated firmly and clearly to the people of Scotland and, in particular, of Motherwell so that the workers can know that that is why their livelihoods will be taken away. Let British Steel come forward now and tell the public, including the politicians of another place who are looked upon with disdain and little respect by the chairman of British Steel, and the trade unions the commercial basis for the closure.

British Steel, by its very name, is part of British life and there is a duty to inform the public why that action is being taken. If that is not done voluntarily, then the Department of Trade and Industry should enter into the process and demand to be told so that it can advise the Government. The Scottish economy will not go to the wall because of the closure of Ravenscraig. That is accepted. However, that does not justify the stonewalling attitude being so arrogantly adopted towards the workers and the people of Scotland. That is a posture of industrial imperialism almost amounting to colonialism adopted by the British Steel board.

That is in stark contrast to the responsible attitude and approach being adopted by the trade unions involved headed by Mr. Tommy Brennan. The workers are being treated like peasants, and those days have gone. It is perhaps high time that someone had a word in Sir Robert's ear to tell him that.

The unions accepted that a commercial decision may be justified but neither the trade unions nor anybody else can judge that fact while being denied the vital information on which to make a considered judgment. No less a person than the Prime Minister, in a letter to a Member of another place dated 22nd May 1990, wrote of her admiration of the: loyalty and dedication of the workforce at Ravenscraig", Thereafter she stated: If British Steel conclude that the hot strip mill is not viable, that is a decision for them to make". That is perfectly true but one has to ask: on what basis did the Prime Minister accept that decision? Has she been told by the Department of Trade and Industry through its inquiries with British Steel that that is a reasonable judgment to make? How can a responsible government walk away from that issue with all its industrial implications without at least finding out, through the DTI or any other source, whether that commercial decision was justified on the facts? The tone of the Prime Minister's letter echoes the arrogance of Sir Robert Scholey.

A position has now been reached in which the Government, through the monitoring process of the Department of Trade and Industry, while accepting that a commercial judgment is the prerogative of British Steel, should make it clear that the public are entitled to know and must know on what basis the judgment has been made.

Many questions must be answered. That plant was threatened with closure in 1987 but there was a change of mind. The workforce responded magnificently to that situation and its productivity and application to the task since that time could not have been better.

I should like to quote from the Official Report in another place and then I wish to ask a question. It states: Irrespective of political views, all of us in Scotland know that the issues involved are wider and greater than that and that the concern is, first, that closure of the hot strip mill could severely weaken, and might lead to the closure of, Ravenscraig as a whole, with the loss of about 3,200 jobs in an area of high unemployment. Secondly, if that happened—it must be seen as a possibility in the light of the announcement by British Steel—for all practical purposes it would signal the end of the steel industry in Scotland. Therefore, wider issues are involved than simply the number of jobs to be lost from the closure of the hot strip mill. An additional important factor is that over the past three years, throughout the United Kingdom, but including Ravenscraig, British Steel has been making some remarkable achievements. Privatisation, far from leading to a decline in the industry as a whole, has brought tremendous new profitability and competitiveness, for which British Steel is to be congratulated and admired. It is a remarkable achievement. It is also significant that throughout that period Ravenscraig, including the hot strip mill, contributed to that profitability and been part of the success story. That makes last week's announcement much more significant". The speaker goes on to say: I do not believe that there has been one iota of criticism from any quarter about the way that Ravenscraig's workforce responded. Although that does not guarantee the work force a future livelihood—nor can it—it imposes an obligation on British Steel, in the event of a very unpalatable announcement having to be made, to give its employees the reasons for it". [Official Report, Commons, 21/5/90; col. 32.] I ask: who said that? Was it a member of Her Majesty's official Opposition? Certainly it was not. It was the Secretary of State for Scotland, and still the conspiracy of silence on British Steel persists and the Government do nothing about it. It is quite disgraceful that the people there are left wondering about the whys and wherefores of the closure.

British Steel has been asked to answer a' number of questions about what is going on. They are as follows: what percentage of the £733 million profit is accounted for by input from Ravenscraig; why has the decision been made to close it after its success story since 1987; what is the most recent profit figure for Ravenscraig; what is the most recent figure of output per man and per hour for Ravenscraig; what is its profitability in European terms; what about new investment in Ravenscraig; what about the new Euro jean scene which is emerging and the demand for North Sea oil which is increasing; what about the new use of steel in the car manufacturing industry, and so on. The questions are innumerable and we are left in the position in which no answers have been given to those important questions. We do not know how that will fit in to the pattern of the economy in the future.

If the Department of Trade and Industry accepts, as it did at a meeting with Mr. Ridley, that it has a monitoring role, then it must get off its knees and do something about it. In Scotland we cannot sit back at the behest of Sir Robert Scholey and wait until he cares to dictate a letter to his secretary to the Secretary of State for Trade and Industry or the Secretary of State for Scotland. Why are the Government not taking some action to force this man to abandon his imperious attitude towards the people of Scotland? As I say, that may very well spread to other parts of the country. They must pressurise British Steel, through Sir Robert Scholey, to put the facts as he sees them before the people so that the future of Ravenscraig, in or out of the British Steel context, can be assessed and its future, if any, can be shaped as from now, because continual conjecture about Ravenscraig's future can only cause further damage.

It may be capable of an independent existence but that again will depend on what British Steel wants to do with the plant if and when it is closed down. The issue is being fought on a non-political, unemotional basis and is not coming from a whingeing Scot. A Member of the other place called us all whingers and said that we were over subsidised, and So on. It is not a whingeing over-subsidised Scot who is speaking to your Lordships at present. However, it is high time that the Secretary of State for Trade and Industry, who has shown very little interest in this matter, got off his knees and backed the Secretary of State for Scotland's efforts to open books and inform the workforce and the public as to why decisions are being taken.

There is another message to Sir Robert Scholey from Scotland. We pride ourselves on being polite people. We have a saying in Scotland that it does not cost anything to be polite; it does not cost anything to be courteous, nor is it difficult. Perhaps people involved in this particular struggle have been too polite towards British Steel. However, that has not been reciprocated by its representatives. Their public utterances and treatment of people with a genuine concern have been contemptible and appalling.

Representatives of the workforce met the Secretary of State for Scotland who was very impressed, first, by their attitude and, secondly, by their suggestions for the future of the Ravenscraig mill. Why is it, if the workforce representatives can meet the Secretary of State for Scotland, they cannot meet their own employer?

I take heed of the advice given at the beginning of the debate to confine my remarks to 14 minutes. I apologise for exceding that by one minute. There are other issues arising out of this topic, but I say to the Department of Trade and Industry: "Get on with the work that you are supposed to be doing and let the people of Scotland know what on earth is happening at Ravenscraig".

6 p.m.

Lord Harmar-Nicholls

My Lords, it must be very demoralising and disappointing to lose three general elections on the trot with bigger majorities each time. I understand that. However, the Opposition party must curb their disappointment. The Wednesday debates in this House can be helpful and constructive. When I saw that the debate was to be opened by the noble Lord, Lord Williams of Elvel, I thought, 'Good". He is a man who came to your Lordships' House with a very high reputation on matters of finance, the affairs of the City, and matters of that kind. Up to now, his contributions have been impressive. When I entered the Chamber today I saw that the noble Lord, Lord Peston, was to wind up the debate. He is an economist who has earned my respect. He knows that because we have discussed it, and I thought we were bound to be all right.

However, there has been no objectivity. This is a straightforward unashamed party political ploy. The language used by the noble Lord, Lord Williams, left us in no doubt in that regard. It was good old tub-thumping and brought in as many personalities as possible. There is no sex appeal in quoting figures as figures; if one can tie a few personalities around them then the tabloids are more likely to pay attention. I know the noble Lord, Lord Peston, will bring the debate back to the level his reputation deserves.

The noble Lord, Lord Williams, is the Deputy Leader of the Opposition in your Lordships' House, and his contribution is a rather more important one than normal, although they are all effective. However, he did not face the fact that the Socialist Party policies outlined in Industry 2000—which are quite distinct from the policies given last year in Meet the challenge: 1989, which was passed by their conference—almost exactly copy what this Government have tried to do. If they now want to copy the general line of the Government in facing up to both the national and international problems of the day, as their last pamphlet clearly indicates, it is not any good to suggest that the results of those policies have been a dismal failure. That was what the whole of the speech of the noble Lord, Lord Williams, sought to imply.

My noble friend, speaking with authority from the Dispatch Box, gave the facts as known to us. They showed that overall those policies have been an outstanding success.

I was impressed with the contribution from the noble Lord, Lord Ezra. He speaks as a semi-businessman. I say "semi" because many of the responsibilities he carried out were strictly concerned with business, but there was a little semi-bureaucracy tied up with them. Today he showed that the lessons he learned as a businessman meant something. I accept by and large his general description of what should flow from the Motion that we are debating.

I was disappointed with the snide references arising from the Rover deal and the Rover sweeteners that we have heard of for months. We were told that a commission will soon be reporting on the intricacies that arose from that situation. I do not know what that report will contain. However, in France the Renault company apparently also offended against the small print of the regulations. The French showed more loyalty to their French needs than seems to be the case in this country. I have not noticed any undermining of the general standing of the Renault company in France.

According to the Government the sweeteners that were alleged to have been given to Rover—it has not yet been proved or accepted—did not come into the category of a breach of regulations. We shall see what the commission say. The Rover organisation employed many people but I know that since 1970 and over the previous years it lost around £2.5 billion. It continued to lose every year. If that situation had been allowed to continue, it would have been losing money by the bucketful, and in the West Midlands—which is my part of Great Britain—we would automatically have had a lot of unemployment. It was the duty of the DTI and the Government to do their best to negotiate some way to rid us of that incubus while at the same time keeping the ship afloat, so that it could make its great contribution. This they did.

In this debate I did not expect a noble Lord as eminent as the noble Lord, Lord Williams, with his expertise, to be a party to the denigration which has flowed from it. We know the dangers. It is all very well to say that it is only politicians or parliamentarians shooting off their mouths. We saw only a few months ago that a supposed dip in the Gallup polls made a difference to the success of many concerns which had to go through a very rough period due to the lost confidence which flowed from that supposed poll. What will happen when speakers as eminent as the noble Lord, Lord Williams, holding the high position that he does in your Lordships' House, speak as he did? What effect will that have on the confidence of the world and their continued investments in this country?

It was those tactics which caused me to say that it clearly was a party ploy. I hope the noble Lord, Lord Peston, will take heed. Their eminence does not suit them for that line of approach. They could be knocked for a six if they started that party political ploying game. There is no need for it, and certainly not in this kind of debate. Even the noble Baroness, Lady Blackstone, was not immune to it. I think it was inadvertent in her case.

Those of us who have been around this Palace for a number of years remember some of the tactics. For those that perhaps have not come across it, one of the great tactics that used to be considered a vote-getter was for a Member to find out what a local authority was likely to do in the area where his votes came from: perhaps a new road had to be built or some other improvement made. He found out what was on the long-term agenda and what was likely to be done, and then asked questions and made a noise about it. Then, when the work was done—which had been on the way before he first thought about it—he would come in and claim the credit for having inspired it.

That is what the noble Baroness, Lady Blackstone, did today when speaking about education and industry and saying nothing had been done. The noble Baroness is one of the successful academics on the Benches opposite. Not only is she an able academic, but she is rather a beautiful one. With those two qualities, she is even more effective. She was being critical when the truth is that in the past five years business has more than doubled in support of universities through research contracts. Some 16,000 academics are supported by research contracts—about one-third of the total—and the universities generated 26 per cent. of their income from the research contracts as opposed to only 19 per cent. in previous years. I know that the noble Baroness is interested in that aspect. One can get the impression that it was movement from the Opposition Benches which claims credit for what has already been done, and that is the sort of tactic that I do not think is in keeping with this place.

There has been a success story over the past 10 years, and if one can establish that then all these attacks on individuals, or attacks on one department such as we heard made on the DTI, are nonsense. I have never known on the race-courses the stewards to say that the horse has won but the jockey has lost. If the horse, which is our general economy, has won—

Lord Peston

My Lords, perhaps the noble Lord will allow me to intervene. He obviously knows nothing about horse racing. That happens all the time. The horse first past the post is frequently disqualified because of incorrect behaviour by the jockey.

Lord Harmar-Nicholls

My Lords, I said that the horse had won but the jockey had lost. I hope that noble Lord has not put much money where a jockey has gone one way and the horse the other. What good is it for the horse to go past the winning post without carrying his jockey with him? If we can establish—and I believe my noble friend established—that there has been overall success, then the individual department which has contributed to that success is immune from the criticisms we have heard today.

Of course, it is part of the game to make personal criticisms. Heaven knows! the poor Prime Minister has had to suffer that for the past 10 years. If a fly landed on the wall, members of the Labour Party have stumbled over backwards to blame the mess on the Prime Minister. Only a few years ago everything that went wrong was blamed on the Minister of Health. Just before that it was the Minister for Education. Now it is Mr. Ridley.

The noble Lord, Lord Donoughue, amused me when, he made his special comment about Mr. Ridley. The noble Lord, Lord Donoughue and Mr. Ridley are as alike as two peas. They are both their own man. They each have an independent outlook. The noble Lord was criticising someone who is almost his twin brother, so perhaps he will have a look in the mirror to see what it is all about.

The growth and general improvement that has come about justifies the confidence exuded by my noble friend. I conclude on one point. Why has no speaker on the Benches opposite mentioned unemployment? Until 18 months or two years ago we could not have a Question Time without reference to the horrors of unemployment. Every speech made somehow or other dragged in the unemployment figures. The decrease in unemployment figures is the biggest test that we have on the general success of the policy of which the DTI has been a part.

I like speakers to bring some personal evidence to these debates. My personal evidence is a barometer that is worth considering. I have two businesses in the West Midlands for which I am responsible in terms, of whether we win or lose on the balance sheet. One is a paint distributing firm and the other a small hotel group. I can tell your Lordships that prior to the past eight years, during which time we have seen an improvement, my experience in our business results showed that those sort of small to medium-sized businesses were really in trouble and going under for the very lack of any enterprise or development. In our commercial hotels, in the middle of the West Midlands commercial belt, commercial travellers were not occupying our rooms. Businessmen were not coming to the area to use it as a base to bring some of the extra benefits that only now are flowing to the West Midlands. With falling unemployment they have been coming for the past three years. I hope that the Nicholls balance sheet will reflect that, and I have every reason to believe that they will.

My personal evidence and my barometer are those two businesses: paints, which reflect the success of the building industry and all that goes with it and the hotel industry where bedrooms which serve commercial visitors show that claims made by my noble friend on the general success over the past eight years, including that of the DTI, is a success that does not justify the wording of this Motion or the comments made by the noble Lord, Lord Williams.

6.16 p.m.

Baroness Ewart-Biggs

My Lords, I am happy to follow the noble Lord, Lord Harmar-Nicholls, not so much because I agree with what he said but because there is a certain scarcity value today in following speakers from the Government Benches. The noble Lord devoted a great deal of his speech to defending government policies against the points made from this side of the House, which entirely related to the Motion now before us. I am happy that my noble friend Lord Donoughue is not here: I hope that he does not read Hansard tomorrow and see that he has been likened with Mr. Ridley as two peas. My noble friend Lady Blackstone would not perhaps appreciate the rather sexist remarks made by the noble Lord about her looks.

However, that apart, I am happy to follow the noble Lord, though I shall not be following his subject. Instead, I shall be making a few remarks about the role of the DTI in relation to consumers. There is little doubt that, with the enormous increase in the range of goods and services on offer, it is critically important to establish new rights for consumers in order to meet the needs of the 1990s. I believe that at present there is insufficient evidence that the Government wish to do that. In fact, there are many signs to the contrary.

Looking back over the past 10 years, British consumers have not done very well. No one can say that industry is exactly consumer-led. The DTI refers to choice for the consumer but sometimes one feels that the choice is either of being ripped off or not being ripped off. Indeed, when proposals are made to protect consumers the Government often listen to the arguments which come from industry and are not at all happy to accept the provisions and protections put forward for consumers.

Perhaps it is not surprising that consumers have not done very well. One recalls that in the Tory manifestos of 1979 and 1983 the word "consumer" did not appear at all. In 1987 consumer affairs merited only a 10-word sentence which read: but competition must be supplemented by legal protection for consumers". That was something, but not very much was promised and even less was delivered. Indeed, one of the first actions of the 1979 Conservative Government, in the field of consumer rights, was to get rid of the Department of Prices and Consumer Protection. Consumer advice centres have been closed and over the past five years the number of officials charged with protecting consumer interests—trading standards officers and environmental health officers—has fallen by 330.

That situation compares adversely with what is happening in other countries. In Norway and New Zealand consumers have a Ministry responsible for consumer affairs to protect their interests. In most EC countries consumer rights are clear and clearly enforceable. United Kingdom consumers have lost rights and protections during the 1980s. It is not that British consumers do not stand in need of protection. That has been amply proved. Over the past 10 years the number of people seeking help from citizens advice bureaux has increased by 3.5 million to 7.6 million. The figure has more than doubled. That is a very powerful indicator that the consumer is in enormous need of protection and advice.

Every year thousands of people need advice about and protection from unsafe products. Each year thousands of people find themselves the victims of misleading advertisements and information. Others are dissatisfied about the holiday that did not turn out as the brochure promised. Other people have problems with the cars they buy. Each year many people are injured by medical drugs and they find that the pursuit of proper justice in Britain is a slow and disappointing struggle.

The situation for consumers has been very black. Indeed, were it not for the EC, the situation would have been even worse. On the few occasions when a Conservative Government have moved to strengthen consumer interests they have done so at the behest of the EC. They have done so rather reluctantly and often only after exercising every conceivable means of delaying and diluting the intended harmonisation of consumer protection legislation.

One example is the EC directive on product liability which has still not been implemented. Another specific example of how little the Government care for the interests of consumers was shown only a few months ago. The Bill is now in your Lordships' House. It is a Private Member's Bill promoted by my honourable friend in another place, Mr. Martyn Jones. He introduced the Consumer Guarantees Bill which gave consumers the all-important right to a replacement or refund in respect of faulty goods. That measure would have very much strengthened the position of people who buy shoddy goods. It is estimated that as many as 38 out of every 100 shoppers are likely to buy faulty products and nearly half of those do not find redress.

However, after a lengthy filibuster in another place the Minister for Consumer Affairs permitted only a very diluted version of the Bill to emerge. It no longer contains any guarantees at all for the consumer.

Another example is the Trade Descriptions Act which is to prevent goods being falsely labelled as environmentally friendly. That is described by the Department of Trade and Industry as the cornerstone of consumer law. Yet only a consultation period of 10 weeks has been given for a general review. It looks as though there is less of a desire to look after the interests of the consumer but more of a desire for political opportunism by the Government to get a slot for this Bill in the next Session.

On several occasions today there have been requests from the other side of the House that we should put forward some of our own ideas. I finish by putting forward some of the views that we have on this side of the House on how better to protect the consumer. It must be remembered that the Government appointed specialist ombudsman in respect of the OFT and the NCC. There are also specific and trained monitoring bodies such as OFTEL. However, none of these holds public inquiries. Investigations are invariably held behind closed doors.

At the local level trading standards officers and environmental health officers can both investigate and initiate prosecutions on behalf of consumers. But their effectiveness is constrained by cuts in local government funding and the chronic staff shortage which is currently running at 17 per cent. for trading standards officers. Clearly, the DTI must give greater priority to their recruitment and training.

The key for many consumers is information about products, services and rights of redress. The DTI part-funded CABs already provide a public service, but the prospect of litigation deters many consumers from seeking their rights. Consideration should be given to class actions performing the functions of test cases which allow all affected consumers to obtain settlement.

We would like to see many different Acts regarding consumers simplified and consolidated into one Bill. We do not want more Bills, but we want the laws simplified. We wish to strengthen the sellers' liability and simplify the procedures for redress. As I have said, we want to increase the number of trading standards officers. We wish to review the watchdog bodies because the current ones do not adequately represent consumers. We would also like to establish parliamentary committees to investigate anti-consumer practices and to guarantee the consumer access rights both to information held on them and also to company information which may affect consumers.

Those are measures that would truly safeguard many of the interests of consumers. Any government would be very wise to respect them.

6.26 p.m.

Lord Shackleton

My Lords, I put my name down on the list of speakers and asked to speak late in the debate with fair confidence that most of the issues will have been already debated and therefore I could deliver a short speech. However, I wish to say how interesting and constructive was the speech of my noble friend Lady Ewart-Biggs.

I do not think we should worry about some party conflict. We represent different policies, and there are different conflicts. The noble Lord, Lord Harmar-Nicholls, who was rather critical and who knows something about elections, as I do—we once fought an election—should not be too indignant. We had a good opening speech from my noble friend Lord Williams of Elvel, using a rapier. He was followed by bomber Trefgarne and one colleague of his.

Noble Lords are inclined to think that I cannot speak of anything except the Falkland Islands. I have had difficulty in extending the responsibility of the Department of Trade and Industry to the Falkland Islands though the noble Lord's previous department, the Ministry of Defence, is involved. I may surprise him and some of my colleagues because I am going to say something favourable about the Government. Some good things have happened, and sometimes despite the efforts of Ministers to see that matters go wrong.

I refer to the Cabinet Office R&D report The Annual Review of Government Funded Research and Development which very few people seem to study or notice. There is a large section in it devoted to the Department of Trade and Industry. There is also a section dealing with space. That department is the main holder of responsibility for space matters in this country. I chaired the Select Committee on Science and Technology. It was very critical of the Government at one stage, partly because of the antics of a previous Minister who has now been moved, as my noble friend, Lord Williams, said, and who is now harassing the doctors. Through him we acquired a very bad reputation in Europe. We held up research as regards the Horizon 2000 because we simply refused to agree to certain expenditure and that stopped everybody else from continuing their work.

In a quiet sort of way and almost by stealth, the Government appear not to wish to claim credit for what they have achieved. They have been doing rather well. We were unnecessarily rude about the officials. I do not want to embarrass the principal official by saying that he has done a good job in persuading Ministers. Everything has been partly managed by Ministers. The noble Lord, Lord Young, was gradually changing and developing interests. We pointed out that £120 million a year was inadequate for L s to play our proper part in Europe. Well somehow the amount has been increased to £150 million without anyone drawing attention to it.

The Government can be pleased that the British are now paying a useful role in Europe with the European Space Agency. The have focused on the areas that we recommended in the Select Committee report. I refer in particular to remote sensing, which is vital, telecommunications and science. The launch of the Hubble telescope will yield enormously important results. This is an important area of achievement. The officials deserve credit for quietly going along with it. Ministers have encouraged them and certainly have not stopped them.

However I wish that the Government would give more of a lead to this country. We have something to be proud of here. The French and the Germans are proud of their efforts. They go ahead and do so with government support. We are ashamed if we cannot attach a market meaning to our efforts. I should like to see the Government giving a firmer lead in such areas.

With those few compliments, I should like to turn to a less favourable aspect of my remarks. In doing so, I should like to refer to the speech of the noble Lord, Lord Ezra, who was a member of the Aldington Committee. The Government's attitude towards the Aldington Committee was deplorable and there are signs that that attitude is still held today. There was a knee-jerk reaction. In giving evidence to the committee, Nigel Lawson suggested—I do not wish to misrepresent his views—that the development of service industries was as important as the development of manufacturing industry. However, the Government's own advisory committee is now pointing out that industry is not spending enough on R&D. That is a failure on the part of the Government because they have refused, contrary to the advice of the Select Committee on Science and Technology, to give incentives to industry to spend more on R&D. It was recommended that we should follow the example of the Australian Government who give 150 per cent. tax write-offs on expenditure for R&D. That recommendation was dismissed by a Treasury inquiry, the findings of which were totally unconvincing to anyone who studied them. The Government should look again to see whether their incentives to industry in the research and development field could be more effective.

That is one aspect of a major failure. A further problem is that statistics are uncertain. I heard the noble Lord, Lord Trefgarne, refer to defence expenditure and to defence R&D. That is a dangerous area to talk about. I shall not develop it now because I hope that we will debate the subject during consideration of the Select Committee report. However, there is little doubt that the figures produced by industry are not satisfactory. The new accounting standard—SSAP13—which takes into account the Frascati criteria will improve industry's return. Nevertheless, a good many of the figures produced by some areas of industry are quite valueless. I hope that the Department of Trade and Industry is looking at the matter. We have failed to solve the problem and the latest report is very worrying. I hope that the Government will give the matter serious thought. Perhaps the Minister will indicate what he hopes will happen in this area.

Government action in overseas markets is patchy. I was chairman of the East European Trade Council. We had admirable support from the Foreign Office and from one official in the Minister's department who was extremely good. Certain firms were able to build up. This may repay us today now that the market is opening wider. I ask the Government to look more closely at these technical questions. I hope that they will take into account the convincing criticisms made from this side of the House and not just dismiss them as party politics.

6.35 p.m.

Lord Dean of Beswick

My Lords, I am grateful to my noble friend Lord Williams for selecting such an important and topical subject for debate. I understand that it is a convention of the House not to refer to another noble Lord unless one has given him notice. However, in his opening remarks my noble friend Lord Williams referred to the time in office of the noble Lord, Lord Young of Graffham. As the debate concerns the Department of Trade and Industry, for which, until quite recently, the noble Lord was responsible, I thought that he would have done us the courtesy of attending it. After all he was responsible for some of the mistakes that were made.

After he was canonised by the Prime Minister and brought into your Lordships' House as a whizz-kid to teach the politicians how to run things—it was said that he was not one himself and had never been one—I put questions to him in his capacity as Secretary of State for Employment, Those questions received either no answer or a manipulation of the figures which a layman on this side of the House, unless he had civil servants with him to deal with the problem, could not have analysed.

The same thing happened when he moved to the Department of Trade and Industry. On many occasions my noble friend Lord Williams questioned the noble Lord, Lord Young, on the whole thrust of government policy. The noble Lord was expert in the non-answer. I am sad that he is not here to answer for some of the things that took place.

The noble Lord, Lord Shackleton, and other noble Lords referred to the Select Committee chaired by the noble Lord, Lord Aldington. I was not a member of the committee although I should like to have been. I remember seeing on television part of an interview with the then Chancellor of the Exchequer, Mr. Nigel Lawson. I was astounded by the appalling arrogance with which he treated the Select Committee, especially as it was chaired by a distinguished member of his own party.

If there have been mistakes—the noble Lord, Lord Shackleton, touched on this point—it is because for 10 or 11 years we have had a government who think that their members are the only ones capable of putting forward good ideas and that every suggestion put forward by the Opposition is not worthy of consideration. The Government tried in regard to industry to rubbish the Aldington Report, and in regard to housing and the community at large they rubbished within 12 hours the report of the most reverend Primate the Archbishop of Canterbury. That was done by a government spokesman who certainly had not had time to read it. Some of the mistakes can be put down to the Government's refusal to deal with people other than members of their own party.

I listened carefully to the barnstorming speech of the noble Lord, Lord Trefgarne. I come from an area of the country which was one of the most densely populated, if not the most densely populated, in Europe. It contained a mass of factories, including engineering and chemical works, and successful coal mining operations. That area has become an absolute desert. I am talking about east Manchester. When industry there started to wind down, as a shop floor engineer I had to earn some money to keep my family so I crossed Manchester to what was called the "big house"—Metro Vickers in Trafford Park. It then employed 25,000 people. That factory now employs fewer than 7,000 people and has just announced its latest set of redundancies. If the Minister can convince me that further redundancies on that scale in that area show an upturn in the economy, someone must be standing on his head.

Let us look at what has happened to different areas of the country. Well over 2 million jobs have been lost in the manufacturing industries. There are signs of a slight upturn, although over the past few months there has been a net reduction in the number of people employed in manufacturing. The latest figures that I saw two or three months ago showed that 40,000 jobs in manufacturing—I stand to be corrected—were lost in one month. That does not indicate a solid recovery. If manufacturing industry were doing well it would not openly declare that there is a shortage of skilled labour. That is another appalling tragedy which must be laid at the Government's door.

During my six years in your Lordships' House I can remember Members from all sides drawing attention to the rapid diminution in the number of people being trained in manufacturing skills. Even today, with the so-called recovery, we are training only one-third of the number of skilled engineers, factory workers and similar workers we did previously. If we are to see a substantial economic recovery in the manufacturing sector those figures must be altered dramatically, despite the new technologies which reduce the number of men required.

I shall quote some figures which show where the devastation has taken place. As I said, I come from the North-West which in the past 10 years has lost 354,000 jobs. There have been few replacements to compensate for the loss of jobs in the manufacturing sector. The West Midlands lost 269,000 jobs and Yorkshire and Humberside 250,000 jobs. Strangely enough, areas of the South-East, which is the most densely populated region, lost most of all. It lost 500,000 jobs. Although that is the largest figure, in percentage terms it is considerably lower than the loss in the North-West and North-East. I shall not mention Northern Ireland and Scotland because I understand that those areas have been adequately dealt with. That is the dimension of what has taken place.

There is no sign at the moment of great former industrial areas, such as Manchester, which have become deserts, being made fertile by the Government's present policies. With high interest rates continuing for an indefinite period it makes it less likely that we shall see a change in the near future.

One further factor that has mitigated heavily against the North in comparison with the South is that the tax situation has been loaded against the recovery of the North. With the permission of the House I shall quote from a document which states: What is more, the gap between central government expenditure going to the North and South East has widened since 1980. This has been the result of both a switch in the balance of spending and policy changes within programmes. Major factors have been the rapid increase in defence spending and shifts in the regional pattern of expenditure on Health, Trade and Industry. Housing and other expenditure by the Department of the Environment. Quite clearly, Government expenditure policies are fuelling rather than eroding regional disparities, but what is more, Government tax cuts have also pumped more money into the South East than into the North"— where it is needed more— Research commissioned by the [North of England] Consortium revealed that the three Northern regions have lost nearly all the benefits resulting from the tax cuts since 1980 since they have had to pay more in National Insurance Contributions and indirect taxes. In contrast, people in the South East are on average more than 100 per head better off as a result of the changes in the three taxes. The difference arises because, on average, people in the South East are better off than in the North, and because both income tax cuts and the upper limit on National Insurance Contributions work to the advantage of people on high incomes". Even people who have the possibility of being re-employed and using their talents are losing out in that way.

There was a debate on transport in your Lordships' House a few weeks ago. I spoke about the inadequacies of British Rail's proposals for the North-West, the part of the country from which I come, when the Channel Tunnel becomes operative. My view was supported by a Government Back-Bench Peer and Peers on the Cross-Benches. The arteries which are supposed to pump life back into the North of England—Manchester, Leeds, Sheffield and Newcastle—will be insufficient if British Rail is left to manage on its own. To revitalise those areas, to bring them nearer in travelling time to the Continent and to make them more attractive, the infrastructure should be funded by the Government. I know that there is a dispute at the moment, and a difference of opinion over an annoucement made recently by Mr. Parkinson about some railway development in the South-East. No doubt he will be further taken to task on that matter.

Unless the Government are prepared to ensure that the railways are adequately funded, I cannot see that they will be able to do the job. British Rail's plans cater for about one-third only of what is required. That means that the South-East will continue to suck in business because of its proximity to Europe and short communication lines to the further disadvantage of the North, the Midlands and Scotland.

Reference has often been made in your Lordships' House to the overcrowding of flight paths and airports in the South-East. I find it strange that some regional airports are under used. It seems mad that the slack is not being taken up and used to advantage.

The debate has been worthwhile, but unless the Government are prepared to provide more funding on a broad basis for the regions that need it and allow the people in those areas to decide the projects and manufacturing industries on which the funds will be spent, we shall get nowhere. I produced figures a few weeks ago showing that of more than £400 million that the Government provided for inner city regeneration, £360 million was spent in Docklands. That is not much good to people in Manchester, Liverpool, Leeds, Birmingham and Newcastle. There is some recovery but the Minister has drastically overstated the success. I hope that he will tell us a different tale in a few weeks' time.

6.50 p.m.

Lord Hatch of Lusby

My Lords, in his opening speech my noble friend Lord Williams of Elvel referred to the two dubious activities of the Department of Trade and Industry concerning the House of Fraser and the Rover deals. We have never had any coherent answer from the Government as to the currency deals that took place at the time of the House of Fraser deal, nor the visit to Downing Street. That remains a sleazy mystery.

On Rover, as I have done previously, I refuse to use a euphemism. The Rover deal was based on bribery and deceit. I repeat what I said earlier in this House, that the deal—as evidenced by the documents placed in the Library, the letters from the noble Lord, Lord Young himself—shows that the standard of public morality in this country has fallen from the time when it was accepted that if anybody was discovered to have been deceiving Parliament, he resigned. He did not become the chairman of Cable and Wireless.

Lord Harmar-Nicholls

My Lords, if the noble Lord will permit me to intervene, I wonder whether the rules of the House justify Members of this House being impugned in the way in which the noble Lord has done. To question their judgment is one thing; to question their honour in the explicit terms used by the noble Lord is, I should have thought, outside the rules.

Lord Hatch of Lusby

My Lords, I am deliberately using the word "deceit". That word "deceit" will be confirmed by reference to the letters from the noble Lord, Lord Young, to British Aerospace which are in the Library. I have mentioned this before in the presence of the noble Lord, Lord Young.

Noble Lords

Order!

Lord Denham

My Lords, the rule in this House is that one does not mention any Member of the House in adverse terms unless one has given notice to that Member that one will do so, so that he can be present and reply. I hope that the noble Lord has given that notice to my noble friend. If he has not, he is certainly breaking the traditions and customs of the House.

Lord Hatch of Lusby

My Lords, I have not given notice before this debate because I have not had the opportunity. The noble Lord, Lord Young, has not been available, so far as I know and I have made inquiries in the House. However, please let me finish.

Noble Lords

Order!

Lord Denham

My Lords, I am afraid that that will not do. The customs of the House are that if a noble Lord wishes to mention adversely another Member of this House, he should have given notice to that noble Lord so that he could be there to defend himself. If the noble Lord has not done that, he must not break the customs of the House because it is not acceptable.

Lord Hatch of Lusby

My Lords, perhaps the noble Lord would allow me to finish the sentence. I was pointing out that what I say now about the letters from the former Secretary of State for the Department of Trade and Industry I said in this House in his presence, while he sat on the Benches opposite when we were debating the Rover deal. I simply repeat the general point that this is an illustration of the reduction in the standard of public morality. There is an open attempt to deceive Parliament and the Commission. It is shown there in the Library. In previous years it has been the custom for anyone attempting to deceive Parliament to resign. That is our responsibility; it is the responsibility of this House and of Parliament as a whole. I do not intend to make a speech about responsibilities; we have to deal with the matter.

What is the effect abroad? Surely instances of this kind—whether it be the House of Fraser, the Clowes case or the Rover case—reflect those lower standards of public morality and are bound to affect our reputation abroad. They will affect our reputation not just for morality but also for efficiency.

I wish to concentrate the major part of what I have to say tonight on a different issue, and one which I have raised here before. I sympathise totally with the noble Lord, Lord Trefgarne, over his indisposition when we were debating manufacturing industry on 21st February. He was unable to answer the points raised during the debate. I hope that he will take this opportunity, which is the first he has had since then, to answer the points that have been made during that debate, particularly the specific points to which I shall refer.

I start by quoting as the text of the message I wish to press to the Government, from a report of the Royal Institute of International Affairs, which is hardly a Left-wing journal. The report states: There are in addition three economic arguments to suggest that major resource transfers to the developing world can be in the broad economic interests of the developed. The first is the common general argument that a healthy developing world is an increasingly important component of a healthy world economy, which is in the interests of all countries. The second is the specific corollary of this: some forms of resource transfer represent assured export markets, helping to ensure full employment in the West". My next quotation to support that central case is drawn from the Aldington Report. I am glad that three members of the Aldington committee are present to support the unanimous report of a committee on which I was privileged to serve. The report stated: Although aid is important, per capita income level of a developing country is a far more significant determinant of the level of trade. Britain probably has more to gain by trying to expand the purchasing power of developing countries than by direct procurement under aid schemes. The Committee have heard in evidence that markets in the developing world are expanding much faster than those in the EEC. Smaller though the base for growth may be, the Committee think that every consideration should be given to expanding trade with these developing countries by seeking to expand their purchasing power. As Sir Geoffrey Howe said recently, 'Renewed economic growth in African countries is vital to British industry'". That is a strong case for expanding our export markets and at the same time for reviving our manufacturing industry and providing increased employment in this country. However, the case is an even stronger one if one looks at the figures. The trade deficit of this country has been mentioned many times this afternoon. That trade deficit is with the developed world—our competitors. We have a surplus in our trade with the third world. However, we must beware of that because part of that surplus is certainly due to the low commodity prices which have been paid over the past 10 years. Incidentally, that has greatly helped Western countries to keep down inflation.

Some figures were provided in May of this year. The figures refer to a period from 1970 to 1988 and they show what has been happening in British trade with the developed and the developing world. During that period exports to the developed world rose from 73 per cent. of our export trade to 80 per cent., whereas imports rose from 73 per cent. of our total import trade to 86 per cent. On the other hand, during that same period our exports to the developing world fell from 23 per cent. to 17 per cent. of our total export figure and imports fell from 24 per cent. to 12 per cent. of our total import figure. I suggest that that reveals a short-term policy. Such a policy is not considering the long-term interests of the economic development of this country. One could compare that policy, with certain reservations, with the policies of Japan. The Japanese are looking at the long-term. They are looking to the development of markets throughout South East Asia. They are prepared to have a deficit with those countries in the hope that they will build up markets in those countries which can be relied upon to be Japanese markets in the future.

On 21st February I made some specific suggestions regarding the importance of developing and exporting environmental technology from this country. I mentioned wind power, wave power, solar power, refrigeration and other technologies. I referred to technology which was developed in this country and which could be an invaluable asset to third world countries. It could also provide new manufacturing industry and new jobs in this country. Above all, it would give Britain a long-term future in expanding world markets. It would give us an opportunity to marry our export drive and our manufacturing drive in these new technologies with some hope of maintaining social, economic and political stability as the developing world increases its standard of living. We hope that the developing world increases its standard of living.

I made a set of specific suggestions on 21st February. I hope that the Minister who is to reply will take a few minutes to respond to those suggestions. In this situation where trade with the third world is declining and where the proportion of our trade with our competitors is increasing and thereby increasing and greatly multiplying our trade deficit, what are the Government doing? One discovers that the Government are reducing the staff of our embassies. That is hardly a measure that will encourage exports. The Government are in particular reducing the staff of the commercial sections of our embassies. There is a problem here which I hope the Minister will address as he shares responsibility for that sector of our public servants with the Foreign Office. The export promotion staff have no proper career structure. At the end of the previous Labour Government certain proposals were made. However, we did not have time to carry them out. I wonder what the Government have done in the intervening 11 years to implement those proposals and to ensure that this vital section of our embassies abroad is given a structure which will encourage staff to continue their careers in it.

Further, what are the Government doing about the Export Credit Guarantee Department? Apparently the Government are hiving it off and weakening it. I again refer back to the Aldington Report. That department is a vital element in the promotion of exports and I believe it could be of considerable benefit to the policy of increasing exports to third world countries. However, the Government have increased the premiums for long-term project business. That is a handicap to the' export market. From April 1989 the Government imposed export charges.

Finally, the Government have been cutting export marketing research. That is surely something which is of vital interest to the whole of our manufacturing industry, our economy and particularly to the export sector of our economic effort. I ask the Minister to reply to those points and to refer in his reply to the points that he was unable to answer on 21st February.

7.7 p.m.

Baroness Seear

My Lords, in listening to the opening speech of the noble Lord, Lord Williams, I recognised a classic example of Satan refuting sin. I recalled the experiences of the time when the Labour Government were in power. I recalled the overmanning in industry.

Noble Lords

You supported it!

Baroness Seear

My Lords, my party supported the Labour Government for a very short period of time. During the time we supported it we did our best to modify some of the nonsenses that were produced. However, I only have 14 minutes in which to speak and I should be grateful if noble Lords would not interrupt me.

I recalled the poor record on training, the subservience to the trade union movement and the poor share of world trade. Those were just some of the weaknesses that the Labour Government compounded by their passion for picking winners. I gather that they intend to continue with that policy.

Lord Williams of Elvel

My Lords, will the noble Baroness kindly give us a record of the actions of the last Liberal Government?

Baroness Seear

My Lords, that is an extremely cheap remark. If that is the best that the noble Lord can say in defence of the actions of the previous Labour Government, it is a pretty poor do. The noble Lord knows perfectly well what the answer to his question is. However, I shall not take up my 14 minutes replying to frivolous questions which are posed simply because the noble Lord has nothing better to say in defence of his own party.

I referred to Satan refuting sin. However, no one should imagine that this is a paeon of praise for the present Government. However, the present Government have done some things which badly needed doing, and we should recognise that. We shall be up against increasingly heavy competition in the future. I do not believe that even now most Members of this House recognise how tough that competition will be. People should realise that the world outside is not interested in the fact that we wish to protect certain elements of society. We have to earn our living in the world outside, where conditions are tough. The Government's emphasis on the importance of competition is overdue and welcome. The extent to which the Conservative Party is no longer a protectionist party is overdue and welcome. The Conservative Party has not altogether carried out the doctrines that it proclaims but I suppose that no party ever does. The Government believe in competition. It is sad, then, that they have created private monopolies without any real attempt to introduce competition into them. Indeed, in industries such as water it is impossible to introduce competition.

Some of the actions of the Government have produced an improvement in industry. It is foolish to pretend that that is not so. However, to much too great an extent this Government have been short term in what they have tried to do and short term in their attitude towards success. Sometimes I believe that they behave not like economists or even like accountants but much more like book-keepers—provided the books balance at the end of the week everything is fine. That is not the way to develop a sustained policy for wealth creation. In the world economy today it is a sustained policy for wealth creation that is needed. That means for more effective investment, far better targeted than it is at present.

I know that the Government will say that it is all a question of money, that they cannot afford to do what I am about to say it is vital should be done. Perhaps I may point out that mortgage tax relief—and I do not for one moment suggest that we should abolish it overnight—loses the Government £7billion a year. There is no need to give mortgate income tax relief at 40 per cent. to the best off. That is subsidisation of the wealthy by the less wealthy. There was no need to increase the level of mortgage income tax relief to £30,000. A subsidy of £7 billion is an enormous amount to give in one direction. The result has been to boost house prices, with the trail of problems that have followed in their wake, although they are now coming down somewhat for quite different reasons. Therefore the Government should not say that there is not the money for the essential capital investment which is needed if there is to be sustained growth of wealth.

Other noble Lords have referred to the miserable allowance for research and development. One cannot have a wealthy and competitive industry without good research and development. That means money. It means money at all manner of levels—money for research establishments and for the training and development of the people who are capable of doing the research.

We also need investment in infrastructure. I very much agreed with the noble Lord, Lord Dean, when he referred to the failure to provide adequate rail facilities in this country. We have been told today that the Government are refusing to put any money into the rail links to the Channel Tunnel. What is the point of developing the Channel Tunnel—and, yes, it is being built with private money, but that is all part of the resources of UK Ltd.—unless we back it up with the best possible rail communications? Surely what we need is rail links which will go from the tunnel to the Midlands, branching off to the North-West and the North-East. That would mean that Liverpool and Newcastle and those areas of the country which have been so badly hit by the inevitable changes of the restructuring of industry that we have faced over the past few years have a reasonable chance of revival. What a difference it would make if one could put one's goods on the train at Liverpool or Newcastle and take them off again at Dusseldorf without any interruption in between.

That is the most effective way of producing a recovery in those areas of the country without bolstering industries which cannot continue anyway. That is not the answer. The answer is to give them the chance to take full advantage of the new opportunities that are available provided we have the essential rail links. Yet only today the Prime Minister has told us that no public money can be put into those rail links. What doctrinaire folly. Because it was said that the links had to be provided out of private money no public money can be used to make good what is needed to make this very important opportunity a reality.

There is also the question of that investment in people without which there is no hope that we shall be able to compete with the Japanese, with the developed countries in the Pacific, with the peoples of Eastern Europe and with the Americans—right

across the world. That is the competition that we are up against, in high-tech industries which require highly trained people. What are the Government doing about it? They have made some reforms in education but they are stinting on the money needed to make it a reality and to produce the full effect of the changes that are being made.

What are they doing about keeping more 16 to 18 year-olds in school and in training establishments—in real training so that we can turn out a trained, educated labour force? That is the only type of labour force which has any hope of competing with the world as it will be in the 1990s let alone in the 21st century. Here again it was reported in the papers only this morning that the Government are cutting back on the TVI scheme. In some areas the scheme showed great possibilities of providing the kind of education that would appeal to bright youngsters who are not academic but who have the capacity to do a great deal of high level work, given the right educational opportunities.

As we have asked on so many occasions, what are the Government doing to increase the tertiary sector? There have been restrictions on university and polytechnic development and the loan scheme. We have been over the ground many times. However, in terms of developing industry, unless these things are done we shall be way behind. We shall not possibly be able to do all those other things that we say that we want to do because we shall not have the wealth to do it. It is long-term development—the capacity to produce wealth—which is the test of whether the Government, and therefore the Department of Trade and Industry, are doing the job that the country needs them to do.

There is a further area which the Government have neglected but which is absolutely vital to long-term, sustained wealth creation. The Government know that one of their major worries is the question of increased wage inflation. They have been able to control strikes and wage inflation because there were high levels of unemployment. We have warned them from these Benches again and again that that is not a good enough resource once the country begins to recover economically. Unfortunately, it is already clear that those warnings were well based.

The Government's attitude towards the social charter shows how little they understand what is involved in producing sustained wealth creation, especially in industries in which rapid change is necessary—and that will apply to most of our industry. We hear a great deal about the importance of good management these days. I am second to none in agreeing that that is needed. However, good management is about getting things done by people. One can only get things done through people if they feel that there is something in it for them. The Government have gone a little way through employee share holding which enables people in enterprises to feel that the success of the enterprise is also their success. However, they need to go a great deal further.

The social charter is the essential other side of the economic restructuring which has to take place and will take place inside the single market. However, unless people who will be affected by those changes feel that there is something in it for them and that they have an opportunity to share in the shaping of those changes and have some influence on them, they will resist them. No amount of tough management is any substitute for the co-operation without which it is not possible to succeed.

The Government have made some changes to trade union law which we in this party support. I believe that now they have gone too far. They have to recognise that they have to find ways to come to terms with that. I do not for one moment suggest that we should go back to corporatism. I agree that corporatism was a blight on this country. However, that does not mean that one cannot manage without obtaining the real co-operation of the people without whose co-operation no wealth creation will take place.

The Government are throwing away opportunities by not being prepared to take the long view and being far too content with short-term gains without long-term planning for continuing success.

7.20 p.m.

Lord Peston

My Lords, in responding to the debate, I am mindful of the admonition of the noble Lord, Lord Harmar-Nicholls. As he knows, I am never political, but I must tell him that I do not regard attacking this Conservative Government as political; it is more a matter of public service.

On our main theme, my noble friends have covered all the important matters. My role is to place them in the broader economic context. Let me start by saying a few words about manufacturing productivity. I have acknowledged before that manufacturing productivity has risen faster in the 1980s than in the 1970s; but some of that is a statistical artefact—the so-called batting average effect. If the weaker firms or plants are driven out of existence, the figures will then seem to show that average productivity has risen, although in fact no firm or plant will have become more efficient. However, there has been some genuine increase in productivity. That is largely a catching-up effect. We have moved closer to world averages: but, for the most part, we have not caught up and the latest figures appear to show that the rise in manufacturing productivity is coming to an end, and indeed has probably ended.

The noble Lord, Lord Trefgarne, has said that manufacturing is important, but that it is only part of the picture. We must look at services as well. He is entirely right; but, if he is right, what matters is overall productivity. Here again the position is less good. At best, we have got back to our long-term productivity trend from which, for obvious reasons connected with the oil price rise explosion, we deviated in the 1970s. In that sense therefore, on productivity the Government have achieved nothing at all.

But matters are worse than that because it appears—and it appears from listening today—that, in addition to lack of achievement, we have complacency. The "know nothing" view of research and development and training is particularly frightening. Coupled with recent setbacks to investment, the outlook for industry is not good.

On the balance of payments, one of the great achievements of the last Labour Government—surprisingly enough, I have no difficulty in defending the last Labour Government—was to bring the balance of payments under control. As a ratio to gross domestic product, it was on an improving trend from 1974 up to 1981. Since then, the trend has been altogether the other way, reaching its nadir in 1989 with the highest adverse ratio in history. That is despite the boon of an oil surplus in the 1980s compared with the oil deficit of the 1970s.

Another way of seeing the nature of the Government's failure is to cumulate the deficits and surpluses from 1979 to 1989. Again, despite North Sea oil, the cumulative deficit in that decade is of the order of £17 billion. That is recognised by all, not least by the Government's statisticians, as the best measure of the decline in our net overseas asset position.

There is worse to come, because, even on the most optimistic forecasts, unless there is a change of Government and a change in policies over the next three years, there will be a further £40 billion to £50 billion accumulated deficit to add to that. In other words, the decline in our net asset position will exceed our reserves. Since the net flow of long-term capital is also outward, the short-term financing problem is immense. The position must become critical in due course.

Let me turn to the subject of inflation. Here too I acknowledge that prices have risen less rapidly in the 1080s than in the 1970s. The Government take credit for that, but it is worth placing in perspective. First, inflation has fallen in all countries in the 1980s compared with the 1970s. Secondly, although the UK's relative inflation position improved in the first part of the 1980s, it has deteriorated since then. As we all know, we have at present pretty well the highest inflation rate in the advanced industrialised world. Thirdly, with two massive oil price rises in the earlier period, coupled with the fact then that we were net importers of oil, the problem for the last Labour Government was immensely more difficult than the problem that confronts this Government. Finally—this is in response to one noble Lord—the Government have allowed unemployment to rise. It rose to unprecedentedly high levels as part of their anti-inflation policy. They point to the fall in unemployment in recent years, but what compensation is that to all those whose lives were ruined in the earlier part of that period?

I have learnt two things on economic policy from this Government. First, if in doubt, choose policies the costs of which fall most strongly on the vulnerable and disadvantaged. Secondly, if all else fails, change the statistics.

In the modern era, it has been recognised that a commitment to full employment is itself likely to make the economy inflation-prone. Most post-war governments have pursued an incomes policy, either by persuasion or on a statutory basis. Even this Government have pursued a strong but covert incomes policy in the public sector, as some of us know directly to our cost. More recently, they have entered the exhortatory phase of Ministers commenting endlessly that the private sector must be responsible and show wage and salary restraint. I agree that what may be called a formal incomes policy is widely thought to be unpopular; and even a Keynesian dinosaur such as myself is obliged to accept that.

Nonetheless, something more is required than cash limits for workers in the public sector coupled with ministerial moaning at the private sector. In that connection, the recent suggestion for what is called co-ordinating pay bargaining by Mr. Peter Robinson of the Campaign for Work is worthy of serious consideration. He recommends a method of introducing the general issues of inflationary pressures into the system of decentralised collective bargaining. However, much as I support that view, I recognise that such an approach can work only by agreement; but it is an alternative that is well worth considering. It is certainly far superior to a policy of widespread unemployment.

Lastly on this theme of inflation, I turn to fixed exchange rates. If the money supply, nominal incomes or high interest rates do not tie down the system to an anti-inflationary stance, then fixed exchange rates will do the job. That was the thinking that lay behind Bretton Woods. It is what lies behind the exchange rate mechanism of the European monetary system. Again, although I do not regard the exchange rate mechanism as a panacea—certainly, joining is not without its risks—it can have a useful part to play in an overall strategy. It does not solve the inflation problem, but it gives us a basis on which the solution can be formulated.

In my judgment—I emphasise the word "my"—we have suffered by our failure to join up to now. I am also concerned that speculation on the date of our joining, apparently sometimes fuelled by the Treasury itself, has driven the pound up excessively and may put us back again on a rate of exchange roller-coaster. The Chancellor must end that uncertainty and stop talking about when the time is right, and what are now called the Madrid criteria. We do not have world enough and time.

I now turn to the central issue; namely, what is the point of the DTI? As has already been noted, in posing that question I am in agreement with the Secretary of State for Trade and Industry; but only in posing the question, for our answers differ. It appears that he can see no point in the DTI—the department of which he is the political head—and apparently wants to close it down. I stand second to none in my admiration for the Civil Service when I say to the noble Lord, Lord Boardman, that it consists of people who are immensely hardworking, loyal and very much underpaid. I must say that because I have a strong feeling that my noble friend, Lord Williams, and perhaps even myself, will find that they are working for us in the near future, and we shall need their help. They are admirable people, of course. However, I can see no point in the department as it is. One wants to see this department transformed back to playing its major role in economic policy, especially its major role in micro-economic policy.

What is its role? I offer a partial answer, echoing in all cases the words of my noble friends. First of all, I point out that its role is to improve the working of the market mechanism, and equally—this is the point at which one remembers its heritage as the Department of Trade—to scrutinise critically all forms and demands for protection. Left to itself the market works, but the trouble is that it works less than perfectly. The market guided and enhanced by government in the form of an active DTI works very much better. Entrepreneurs have to plan. At the industry level the DTI's role is to facilitate the planning environment.

I should add in addition that in terms of markets the DTI continues and must continue to have a vital role in protecting the consumer, as my noble friend Lady Ewart-Biggs said. It is one of the areas in which it has failed us most; and when I say "us" I speak as a consumer.

Secondly, the DTI's role must be to contribute to and provide a focus for the process of innovation. Macro-economic aspects of investment for innovation may be the concern of the Treasury and the Bank of England. However, as my noble friend Lady Blackstone and the noble Lord, Lord Shackleton, pointed out, when it comes to the detail, concern with the structures which assist that innovation must be the business of the DTI. In particular, if the short-termism of the City of London is ever to be overcome, the responsibility again must lie with the DTI.

Emphasising the regional aspects of economic policy, as the noble Lord, Lord Taylor of Gryfe, and other noble Lords have pointed out, is again a central role for the DTI. Perhaps I may also echo the words of noble Lords who have referred to the Channel Tunnel—I nearly said "Channel trouble" as a slip of the tongue. If the economic consequences of the Channel Tunnel are to be positive, we must provide a proper infrastructure for it. If we do not do so, the economic consequences will lead to precisely that imbalance mentioned by my noble friend Lord Williams in his opening remarks.

Next the DTI must co-operate with the Department of Employment to produce that training revolution on which the future of the country depends. On this theme I must again stress the parlous state of management education in this country. Something must be done as a matter of urgency. Our concern in particular must not be with a managerial élite but with management at all levels.

The DTI has to have a role in creating a framework in which manufacturing industry can be restructured. I am aware of the traditional problem, which is almost a contradiction, of the encouragement of competition on the one hand and the encouragement of integration on the other. All those who have been involved with Westminister and Whitehall have seen, as it were, the competition aspect as perhaps the trade side and the integration aspect as the industry side.

I have to tell noble Lords—again it is a subject about which many of us have thought for many years—that I blow hot and cold as to whether I believe that we would have been better off with a department of trade and a department of industry. Sometimes I believe that separation is best; sometimes I think that bringing them together, as has recently happened, is best. At the moment I am on the side of keeping them together. By next week I may be back to the merits of separating them. That simply emphasises what an interesting and important topic this is.

My general view on this matter is that a strong DTI coupled with a strong Office of Fair Trading and strong regulators can solve the problem. Obviously the market must allow small firms to grow, and large firms also must be allowed to become larger still. But in all cases what we want are efficiency gains and not greater monopoly power.

In conclusion and returning to the main theme on the general state of the economy, what we observe we have seen before. One reason why we know that this Government are on their way out, and why they know that they are on their way out, is that, true to form, they are again creating a terrible mess for these Benches to clear up. All that is before they take further risks with expansionary policy, to try to win an election that is already lost. As my noble friend Lord Bottomley said, it is time for this Government to move over and let us get down to the business of putting things right.

7.35 p.m.

Lord Trefgarne

My Lords, I am conscious that at this point in the debate I may only speak for a second time with your Lordships' permission. I hope that I have it.

Debates of this kind in your Lordships' House are invariably worthwhile, characterised as they are by valuable contributions from individual noble Lords with direct experience in many areas. The relationship between government and business can only be one of partnership. For their part, the Government must concentrate their efforts on creating the best possible climate in which those in business can pursue their activities—reforming the tax system, removing disincentives to competition, evolving long-term policies on education and training and investment in science and technology.

Those are all matters which your Lordships have urged upon the Government. I am pleased to be able to say that we are continuing with all of them. The role of business is to seize the opportunities provided by these favourable conditions and to face up to the international competition. As I have said, Britain's companies have proved capable of achieving that, provided that the Government allow them to get on with the job.

I shall reply to as many as possible of the points that have been raised. The noble Lord, Lord Williams, the noble Baroness, Lady Blackstone, and, I think, some other noble Lords referred to research and development. Our role is to set the climate for innovation. It is for industry to assess its markets and balance the risks and rewards of financing R&D. Where the Government provide support, it is targeted on areas where research is necessary before there can be any commercial applications of a product, and on technology transfer.

There was reference to an apparent reduction in my department's expenditure on science and technology in the past year or so. One of the major reasons relates to launch aid. This results in part from a delay in existing projects and in part from the success of previous projects leading to higher levy receipts than expected. Neither of those factors is within the Government's control. In addition, industry has been slower than we expected to come forward with collaborative research proposals but these have built up gradually and we are prepared to be flexible.

For example, we dealt positively with industry's excellent response to the SMART scheme by making 140 awards in 1988 and 150 awards last year compared with an original expectation of 100. I do not wholly disagree with the noble Baroness, Lady Blackstone. In many cases firms ought to be doing more R&D.

The noble Baroness referred to defence research and development, as did at least one other noble Lord. I had some responsibility for that in my previous appointment. A great deal of civil spin-off arises from defence R&D. There is no doubt about that. Nonetheless we have taken steps in recent years to ensure that we do not absorb more research capacity in defence R&D activity than is absolutely necessary, the result being, we hope, that a number of expert scientists and technologists can move over into other areas. It is for firms to take advantage of these opportunities. To some extent it is disappointing that firms have not taken up more of the opportunities that have become available. The Ministry of Defence is also conducting special programmes to ensure that some of the useful things that emerge from the defence research establishments are more readily made available for civilian purposes.

As the noble Baroness said, the defence R&D budget is a substantial sum. Of course it is mostly D rather than R and it is D carried out by commercial firms in pursuit of the projects which are assigned to them rather than development carried out just in defence research establishments.

The noble Lords, Lord Williams and Lord Donoughue, dwelt at some length on the regulation of insurance companies and other financial institutions. Perhaps I may deal first with the insurance industry. The industry in the United Kingdom is very carefully supervised both with regard to insolvency and the fitness and propriety of its controllers and managers. The system of supervision of Lloyd's has been very thoroughly overhauled, as noble Lords will be aware. I am confident that it is fully adequate to meet the requirements of the modern international market. It is perhaps worth pointing out that Lloyd's has never failed to pay on a valid claim.

On the question of company investigation and regulation more generally, the Department of Trade and Industry report—to which reference has been made—is generally supportive of the general regulatory framework and of the changes introduced in recent years. It recognises that the number of completed inquiries continues to rise and that the time taken on major investigations has been substantially reduced. The detailed recommendations are being given the necessary careful study before the Government give their considered response to the committee.

The department gives serious consideration to all complaints but can only investigate if statutory conditions are met. It would be wrong to use these extensive powers to go on what are called fishing expeditions. Each year the department's investigation division receives some 600 requests to look into the affairs of individual companies. In practice about a quarter, or 150 a year, merit investigation, normally under Section 447 of the Companies Act, referred to by the Select Committee as basic fact finding through the calling for papers from companies. Each such investigation typically takes three months to complete.

On follow-up to DTI reports, in 1989–90 such action was taken in relation to 69 companies following DTI investigations. There were successful convictions or disqualifications in 38 cases, winding up orders in relation to 19 companies, and a number of formal warning letters. Only in a very few major cases is there call for the use of the powers under Section 432 of the Companies Act 1985 to appoint outside inspectors—an aspect on which the Select Committee dwelt at some length.

I shall not repeat what has been said on earlier occasions about the House of Fraser business. My right honourable friend the Secretary of State for Trade and Industry wrote to an honourable Member in another place, Mr. Tam Dalyell. I dare say that the noble Lord has seen that letter. My right honourable friend made a number of points in it.

On insider dealing, the Select Committee makes major and controversial recommendations on insider dealing which it acknowledges to be a difficult area. We are already reviewing the law in that area and will closely consider the committee's recommendations.

The Select Committee criticised the length of time taken by the department in deciding whether to appoint inspectors under Section 177 of the Financial Services Act; and the time taken by inspectors once appointed. On the former, it took longer to decide to make an appointment when the powers were new and untried. Our target now is to make decisions within an average of six weeks. That is currently being met.

Inspections have on average taken 11 months. We expect them to be completed more quickly as experienced inspectors are re-appointed, guidance notes are issued, and more progress meetings are held. Convictions have been secured in 11 out of 20 insider dealing cases in which prosecutions were brought. Twelve defendants were convicted.

The noble Lords, Lord Taylor of Gryfe, Lord Macaulay of Bragar, and others, referred to the problems of the steel industry with particular reference to Ravenscraig. I am sure that noble Lords will not have forgotten British Steel's huge losses when in public ownership in the 1970s. Between 1975 and 1985 subsidies to this industry, expressed in today's money, were nearly £14.5 billion. Since 1985 there has been no subsidy and British Steel is now profitable. We must not go back to the bad old days where commercial decisions were overturned through political interference. The Government regret any job losses caused by the recently announced closures affecting the steel industry. However, those are commercial decisions to be made by the companies concerned, including British Steel.

The noble Lord, Lord Jay, made a number of points. I fear that I cannot deal with all of them. He asked about Expo 92 in Seville. I am the junior Minister responsible for our participation in that event. We are determined to have the best pavilion to which we have allocated no less than £25 million of government money. Indeed, it was a condition of our participation laid down from on high that we should do so only if we were the best. I am determined that we shall be. We have engaged firms of designers to assist us. I hope very much that the noble Lord will have a chance to visit Seville in 1992 to see what has been achieved.

The noble Lord also touched on export promotion generally. I agree that that it is a most important matter. It is one that falls directly to me within the department. I can assure the noble Lord that I am extremely energetic, if nothing else, in discharging my duties in that area. I seem to spend more time overseas pursuing those duties than I do in your Lordships' House which is very much to be regretted.

I have already spoken about regional policy. The subject was raised by the noble Lord, Lord Taylor of Gryfe, and others. I do not wish to repeat myself. I listened with care to the noble Lord, Lord Taylor. Perhaps I may add one point about the so-called North-South divide. I do not find that concept helpful. All regions contain prosperous areas. Unemployment has fallen everywhere with the largest falls in the assisted areas. The noble Lord asked about the regional breakdown of consultancy take-up. I am told that 78.8 per cent. of the projects completed were outside the South East.

The noble Lord, Lord Ezra, referred to what he called a slump in investment last year. There was a 1 per cent. fall in the fourth quarter but that should not be considered in isolation. The first quarter of 1990 showed a record level of investment, 9 per cent. higher than one year previously. Moreover, a recent Central Statistical Office survey of investment intentions suggests that manufacturing will exceed last year's record level with further growth expected next year.

The noble Lord, Lord Ezra, also suggested that we need a more purposeful strategy with regard to overseas trade. I do not wish to add to what I said to the noble Lord, Lord Jay. However, I agree that we need a firm and clear policy in that area. I believe that we have it. Witness, my Lords, the fact that our exports are doing so well at the moment. If one considers the figures closely our exports are now increasing at a sharper rate than our imports. I hope that we shall soon see the figures coming together in a way that will appeal to all noble Lords.

The noble Lord, Lord Williams, referred to the 1992 single market programme and what we need to do to ensure that we shape our business into the best possible posture to meet that challenge. It is a challenge and an opportunity. We have already completed our so-called "awareness" campaign. According to our researches, some 95 per cent. of British businesses are now aware of the approach of the single European market in 1992 although, frankly, a rather smaller percentage is putting itself into the right position to do anything about it.

I am very much involved in trying to overcome that problem. I hope to enlist the aid of the trade associations and chambers of commerce. I have spent a great deal of time recently on that programme. We are conducting the poster campaign to which the noble Lord referred a few weeks ago, including the splendid one at Llandrindod Wells to which I had such personal attachment.

The noble Lord, Lord Jay, who is not now in his place, referred to English Estates. We are adding to the measures available to English Estates to encourage private sector investment in assisted areas where the private sector cannot be drawn in. English Estates will still be able to undertake direct factory development.

The noble Baroness, Lady Ewart-Biggs, spoke with conviction about the interests of the consumer. I share the view of the noble Baroness that it is a most important matter even if I do not agree with all the proposals that her party has put forward. The noble Baroness was right when she suggested that the Government's policies of increasing choice and safeguarding competition are for the benefit of the consumer. That is at the very heart of our approach. But she was also right when she spoke of the need in some cases for formal consumer protection. This may not be the time to comment on the other detailed points that she raised. I shall study carefully what she said. If I have anything to add I shall write to her.

The noble Baroness, Lady Seear, spoke of education and training which is also an important matter. The Government are performing their responsibilities in full. We have made fundamental reforms to the education system in order to raise standards in schools and the performance of school leavers. We have also improved the funding mechanisms for colleges and universities. The Government spend more than £2 billion per year on training young people and the long-term unemployed with increasing emphasis on vocational qualifications. However, the primary responsibility for training those in employment must lie with employers. They know their own needs best.

For that reason we have introduced the new training and enterprise councils, the first dozen of which became operational in April. They will provide for the first time influential employer-led bodies in every local area. They will be responsible for the skill requirements of the local economy and for developing training to meet those needs. At the other end of the spectrum we are giving close attention to the needs of managers. Our "Managing into the Nineties" programme aims to spread best practice with the emphasis on helping companies to help themselves. It brings the attention of managers to the various modern techniques and technologies that can be used to improve the performance of their companies. The key message of the programme is the need to integrate all functions of business within a proper business plan or strategy. It is for managers themselves to recognise the opportunities and take action In partnership with other organisations the DTI provides signposts to help them to locate the information and assistance they need.

Thanks to the discipline encouraged by more open markets and free competition, industry is now fitter than it has been for many years to face the challenges of the 1990s. I believe that the Government have pursued with vigour the enabling role which noble Lords have rightly urged upon us and with which we shall continue.

7.51 p.m.

Loral Williams of Elvel

My Lords, I am grateful to the Minister for his full reply and for speaking twice in the debate. I am sad that the mover of a Motion does not have an opportunity to make a serious winding-up speech—it is purely formal—because there are many points that I should have wished to answer.

I am grateful to all noble Lords who have taken part in the debate; it has been a useful occasion. I beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.