Industrial Policy

HL Deb 15 July 1992 vol 539 cc227-62

3.33 p.m.

Lord Williams of Elvel rose to call attention to the case for an effective industrial policy in the light of sharpening competition within the European Community and throughout the world; and to move for Papers.

The noble Lord said: My Lords, perhaps I may say how much I look forward to hearing the maiden speeches of my noble friend Lord Howell and the noble Lord, Lord Chilver. I am sure that we shall benefit greatly from their wisdom and that our debate will be very much the richer for their contributions.

We have recently had a series of debates about the European Community and the general state of the United Kingdom economy. Indeed, we had two such debates only yesterday. The theme that I wish to introduce to your Lordships this afternoon is certainly related to those issues but in a somewhat different dimension. It is this: are we satisfied that British industry is in a position to confront the challenges that face it? If we are not so satisfied, what, if anything, should we be doing about it?

Let me first outline to your Lordships the nature of the competition that we shall face over the next few years. There is of course the completion of the European single market. That is not merely a matter of liberalisation of trade between the different members of the Community. In the way that it is developing—this should be openly recognised—it has become no less than the restructuring of the European manufacturing base in which only the best will survive. By the "best" I mean those who have plant and machinery up to the most modern standards—up-to-date information technology, modern management methods; and a clear strategy to develop good products targeted to clearly identified customers.

To be among the best is not necessarily to be big. Small and medium size firms can be among the best. They can compete; but they must have the characteristics that I have described to survive in the single European market. That is the challenge we face in the single market.

Then there is the challenge from the wider world to which my Motion draws attention. Even if—and this is something that we would deplore on this side of the House—there is in the end no agreement on the GATT Uruguay Round, there is no doubt that competition from countries that see their economic future in the development of an industrial base will during the 1990s be especially severe. The OECD recently published what I would describe as a look into the future through a crystal ball. It forecast that Europe and the United States would gradually lose economic power to the countries of the Pacific rim—not just Japan, but Korea, Malaysia, Singapore, Indonesia and last but by no manner of means least to China herself.

In the face of those two competitive challenges—from our Community partners and from the rest of the world—we have to ask ourselves, and I ask your Lordships, where we in the United Kingdom now stand. The answer is not, I am bound to say, encouraging. It is not just a question of general economic malaise, profound as I believe that to be. The worry is more specific. Most seriously, business investment is badly down, and manufacturing investment is faring even worse, but even that might not matter so much if the quality of investment can improve to make up for the deficiency in quantity. But again here I can only offer your Lordships a certain amount of discomfort.

About four years ago a number of companies recognised the competitive nature of the world of the 1990s for what it would be and made their plans accordingly. In the relatively easy credit conditions of those days they invested in plant modernisation, streamlined their marketing and embarked upon extensive programmes of research for new products. All, your Lordships might say, very sensible and very enlightened. There were other companies, on the other hand, which did not take such a view and decided not to invest in new plant or new information technology and which soldiered on with old-fashioned plant and a low-productivity labour force.

Let us consider the present circumstances of today. Let us consider Company A—one of the enlightened ones. It has already rationalised its labour force to the minimum but in this time of static or even falling demand for its products it is having to carry the now penal cost of the capital it has raised to invest in modern plant. Result: serious financial trouble. Let us consider, on the other hand, Company B—one of the less enlightened. It has money in the bank. It can manage without difficulty a fall in the demand for its products by the simple expedient of sacking part of its workforce. Result: survival.

Between those two companies, can anyone pretend that Company B is better equipped than Company A to face the competitive challenges that I have described? Of course not. Company B will go under, but if Company A has already gone under, where does that then leave us? That picture is a precise reflection of many sectors of our industrial economy today throughout the country.

All in all, I am bound to conclude that at best we are only able to limp into the single market and that we are substantially ill-equipped to compete with the emerging economies of the Far East. The truth of the matter is that we have relied so much on short-term financial judgments that in many sectors we no longer have any capacity in Britain at all. That is why our import bill is high and rising—even when the economy is at best flat and the consumer is reluctant to spend.

What should we be doing? It would be absurd to pretend that there is an easy, quick-fix answer to the question. But there is one thing that we should be doing, in my view immediately. The one area in which it is possible for a policy change to have tangible effect in the near term is in government support for the financing packages available for large long-term projects for exports. We have been losing out badly in world markets, not because of lack of skills or the price of the goods that we try to export, but because of uncompetitive support from ECGD. We must be prepared to match the advantages our competitors give their own exporters; and that is an immediate priority.

Beyond that, I recognise that the question that I asked can only be answered in the long term. It is easy to destroy an industry. We have seen that in the early 1980s and we are seeing it even now. But it takes a long and sometimes painful time to build a new industry which is fully competitive, with world-beating products and the right penetration in world markets. That is what we now need. To do it requires a determined and effective industrial policy from the Government. That is my main message this afternoon.

The construct of such a policy is well known to your Lordships. It would entail an enhanced role for the Department of Trade and Industry. The Treasury can no longer be allowed to dominate our industrial affairs. Not only that, the re-creation of our industrial base has to he set as the prime objective of government. Transport policy must be framed to that purpose. No policy for industry will ever be successful unless industry's products can be efficiently distributed to industry's major markets. Regional policy, too, must be geared to that ultimate imperative for the simple reason, again, that no industrial policy will ever be effective unless its results are properly distributed between the regions of England, and Scotland and Wales.

Sources of finance must not only be readily available but must be available to support companies on a long-term basis so that they do not succumb to the wavering fashions of the financial markets. Not only should the quantity of investment be raised, but the quality of investment is all-important. That means a commitment to a much higher level of civil research and development and also to a highly trained management and workforce, team work in the workplace and an education system that will provide the basic formation and motivation for young people to join in what should be an exciting future. Furthermore, and finally, this whole effort must be orchestrated in a forum which embraces the various interests involved: the government, the CBI, trade unions and consumer representatives.

Your Lordships might at this stage complain that I am doing nothing but recycling the policy that my party put before the electorate last April at the general election. I have to accept that criticism, but I do not believe that because we lost the election it is a wrong policy. I cannot disavow in July what I put forward in April. But—and here I come to the most important point—all the policy recommendations that I have put forward find an almost precise echo in a book entitled Where There's A Will, published in 1987 under the authorship of one Mr. Michael Heseltine. As the world undoubtedly knows, he is now the Cabinet Minister in charge of the Department of Trade and Industry. There are many quotations I could give your Lordships from the book in support of what I have said, but I do not wish to try your Lordships' patience overmuch. Just one will suffice. On page 101 he writes: The most serious industrial managers are now increasingly and articulately dismissive of a 'hands-off relationship between government and industry. They want, and should be offered, a new partnership between those whose working lives are spent in British industry and commerce and the political and administrative machine. They want more certainty and stability in decision-taking and they want a longer-term view—not an apologetic 'help me when I'm down' affair, but a proud and visible commitment to a jointly conceived set of measures for the creation of wealth". I could not possibly have put it better myself. Admirable sentiments—and not only admirable but right. What has happened since the author of those sentiments has become, as he now chooses to call himself, President of the Board of Trade? The entire vision has been abandoned. NEDC, the symbol of the partnership between government and industry, has been abolished in a pre-emptive strike by the Treasury.

There will be no extra support for exports—the Treasury will not allow it; no English development agency to follow those in Scotland and Wales; no new competition policy and, above all, no new industrial strategy to sweep Westminster and Whitehall into the 21st century. All we have seen is a commitment to "one stop" shops and some rearranging of the furniture in Victoria Street.

The shame of it is that Mr. Heseltine's analysis and his prescriptions were broadly right. As I said in the debate on the Address, we would support the new president if he put into effect those prescriptions that he had written in his books. The fact that when in office he has been roundly defeated by the Treasury says more about the Treasury and the Treasury-dominated Government than about the DTI.

However, the matter is more serious than a simple battle for turf between two government departments. The DTI's defeat is a symbol of our industrial and economic decline. As we move into the competitive world of the future, that decline will become more and more apparent and the Government—this Government—will have no one to blame but themselves. I beg to move for Papers.

3.48 p.m.

Lord Joseph

My Lords, I share with the noble Lord, Lord Williams, the welcome and the attention with which the House will listen to my noble friend Lord Chilver and the noble Lord, Lord Howell. I also share with him a deep concern about the competitiveness of this country's business activities. However, I hope to persuade your Lordships that the spokesman for the party opposite will have to accept some attitudes far more difficult or at least unfamiliar to his party than he indicated in his speech this afternoon. I say in no perverse spirit that I hope very much that the party opposite will add to the recommendations that it has just made through its spokesman some of the matters that have been more controversial in party political terms than he ventured on this afternoon.

The noble Lord touched, quite understandably, on the level of investment. I was glad he recognised that it is quality as well as quantity that counts. He touched, understandably, on finance. He failed to recognise that our problems stem from misjudgments in the middle of the 1980s which, in a previous debate a week ago, I acknowledged were the responsibility of the Government. However, I added that the party opposite aided and abetted the Government in advocating that interest rates should be lower than they then were when with hindsight we can see they should have been much higher. Those misjudgments led to the recession and the high interest rates which the country now endures.

The noble Lord also spoke of research and development. He failed to repeat his party's acceptance of a training programme as an indispensable component of success. I regard training and improved education as important. However, I recommend to your Lordships a Hobart paper published only this week entitled Training Too Much? which was produced by the Institute of Economic Affairs. From what I have read that paper is thoroughly worth reading.

As for expanded education, I yield to no one in thinking that we have treated scandalously the non-academic children and adolescents of this country. However, I tremble a little for future entrepreneurship if we expand higher education with its present propensity to be slightly hostile to business as a whole and slightly hostile to enterprise.

I should like to take this opportunity to deal with yearnings which may exist in this House and in another place, and on both sides of both Houses, to adopt the more apparently successful interventionist policy of Japan. My right honourable friend Mr. Heseltine needs no one to defend him. He is perfectly able to defend himself. For those noble Lords who yearn, albeit furtively, for a little touch of MITI in this country, I recommend they read a book, which I have just read, by Chalmers Johnson published by the Stanford University Press entitled MITI—The Japanese Miracle.

MITI and the present skill of the Japanese government, in co-operation with Japanese business, have not emerged immediately but rather after decades of painful and harrowing trial and error. It is a delicate operation of co-operation between interventionist government and business. It succeeds stages when the Japanese Government sought to solve their economic imperatives by way of cartelizing Japanese business. That failed and led to another stage in which the Japanese Government adopted wholesale policies of intervention. That stage failed relatively speaking and it has been succeeded by the present co-operation between Japanese business and the Japanese Government, including MITI.

Noble Lords must accept that we are witnessing in Japan a successful example of a developmental state. It is not a welfare state, as some noble Lords welcome in this country. It is not a state dedicated to equality or to justice, let alone social justice. It is not a regulating state. It is a bureaucratic state. I believe there would have to occur in this country a veritable metamorphosis for us to follow the Japanese example. What are we to do in this country? For various reasons, some of them very understandable, too much of our talent flows into professional and social services, advertising and non-business activities. That factor is partly due to the impression given that manufacturing and business only too recently were pervaded by Luddism. That situation is partly due also to the conditions of pay and responsibility which management offers in business. That is for management to alter.

Today we must speak of something which the party opposite may find itself less willing to advocate than the noble Lord who has just spoken. In this country there has to be—I speak of things that are hard to achieve—a much greater recognition of the dependence of jobs and prosperity and of social benefits on competitive business. Even now I do not believe that dependence is widely understood.

When I was Secretary of State for Education and Science I visited the sixth forms of many schools. I used to ask the teachers to leave and I then spoke alone to the pupils. I asked them what lay ahead for them. They almost always answered that there were only two modes of life ahead for them, either employment or unemployment. I used to point out gently that there were two other modes of life for a business career; there was self-employment and one day perhaps employer-ment. That concept seemed unfamiliar to them. I do not believe those in the senior common room understood that there were four such modes.

We depend desperately upon scientists and engineers but they still flinch from vulgar ideas of profit. I was the Minister responsible for trying to persuade a brilliant, world famous laboratory in one of our great universities to move into the market place with some of its products. A special sealed chamber had to be designed in which the scientists could work and not suffer any contamination from profits. We designed something called Celltech which I am glad to say is now taking off. It would not do any harm to the objectives that I and the whole House want if profit, made in competition and subject to the rule of law, were more widely accepted, including by our scientists and engineers. We desperately need more entrepreneurs in this country.

How will Her Majesty's loyal Opposition respond to a particular criterion? I yearn for that criterion although I have no reason to believe that it will happen. Let us suppose that one day the Government suggest a reduction in the burden of capital gains tax. The immediate instant reaction of the Labour Party will be to state that as a result of that lessening of the burden of capital gains tax the wealthy will become wealthier. Some competitors of ours have a quite different capital gains tax structure that penalises short-term gains but exempts long-term gains. That is probably the kind of policy we need in this country. But until the Labour Party accepts that, there will be nothing like full employment and there will be insufficient entrepreneurship; and until we get rid of this incubus of capital gains as it is now, I do not accept the protestations of the noble Lord as meeting the needs of the country.

I agree with him that there is no quick fix coming. The structure of business matters, the corporate nature of Europe and the protectionist nature of Europe are matters we must consider. We are being, through Europe, wicked to the third world and to Eastern Europe in keeping out their products. Were there more time in this debate I would speak for longer on that matter. I accept the same objective as the noble Lord, but I do not believe he has bitten into the real needs of this country.

3.58 p.m

Lord Ezra

My Lords, the noble Lord, Lord Williams of Elvel, in introducing this debate drew attention to the fact that this is not the first time in recent days we have discussed the economy. I participated in a debate introduced by the noble Lord, Lord Dean of Beswick, last week on the subject, and yesterday during the debate on the Finance Bill the economy was widely touched on. Nonetheless the difficult economic situation in which we find ourselves thoroughly justifies the frequency with which we discuss this subject.

There are many aspects to the problem of our industrial situation. I wish to discuss particularly our balance of payments. Britain's visible exports amount to no less than 19 per cent. of GDP. In addition there are substantial invisible exports consisting of financial and consultancy services, tourism, shipping and earnings from overseas investments. Thus, exports of goods and services are big business for this country and the CBI estimates that the UK exports 40 per cent. more per capita than Japan. That is a remarkable achievement.

However, the trouble is that exports cannot be considered in isolation. For the past five years more goods have been imported than have been exported. That is particularly true of visible trade. The last year in which a positive trade balance was achieved in the UK was 1985. That was the year in which the Select Committee on Overseas Trade, so ably led by the noble Lord, Lord Aldington, and with which the noble Lord, Lord Stoddart, and I were involved, reported to the House. It foresaw that unless current policies were changed a progressive deterioration in Britain's trade balance would set in.

The committee estimated that that might amount to a deficit of some £10 billion by 1989. At the time that was considered to be wildly pessimistic. In the event it proved to be far too optimistic as the deficit in that year exceeded £20 billion. Subsequently deficits have fallen to £15 billion in 1990 and £5 billion in 1991. However, in 1992, based on figures published so far this year by the Government statistical service, the deficit could rise again to perhaps as much as £10 billion. In the case of visible trade, excluding oil and erratic items, the deficit in 1991 was £13.5 billion and for the first five months of this year unfortunately it is running at a rate noticeably above that.

That situation arises during a continuing period of recession, but it has been evident during the post-war period that as the economy picks up so the balance of payments deteriorates further. Therefore, if the economy begins to pick up either towards the end of this year, as the Government hope, or during the course of next year, as some of us feel is the earliest likely date, on past form we could expect that fortunate occurrence of a recovery to be accompanied by a widening of the balance of payments gap, which is already wide enough.

There can be only one explanation for that situation. That is the inadequacy of our industrial capacity. While there has been noticeable improvement in productivity in a number of sectors of British industry, that has not made up for the underlying lack of capacity. One therefore returns to the question of investment, which has already been mentioned in today's debate by the noble Lord, Lord Williams, and the noble Lord, Lord Joseph. Unfortunately investment in manufacturing industry in particular has been declining at a substantial rate. According to CBI statistics it fell by 15 per cent. in 1991 compared with 1990 and further falls are forecast this year. It is therefore vital to create the conditions under which industry will start to invest again.

That is an issue which has been widely ventilated. If, for reasons which the Government have repeatedly drawn to our attention, it is not possible for this country unilaterally to reduce interest rates, then we must look at other measures, particularly fiscal measures. Fiscal measures which have been mentioned repeatedly in debates on this subject have been an increase in investment allowances and putting more money into essential infrastructure to create the right conditions for industry, particularly transport, training and education and research.

It could well be argued that to spend public money in those directions would add to the already high public sector borrowing requirement. That is perfectly true, but if we do not stimulate the economy in some way the PSBR will go up anyway in financing increasing unemployment. Surely it would be better to spend more on the PSBR to finance productive investment which could stem unemployment than simply have to go on financing an ever-increased level of unemployment.

I should like to draw particular attention to the stimulus of exports. The noble Lord, Lord Williams, mentioned the need for financial packages for export projects to be on the same basis and same scale as those of our major competitors. I should like to refer specifically to export services. I have found that the amount spent on export promotion services in Britain is less than is the case with many of our major competitors. In 1990– 91 some £31 million was spent on those services. That was £6 million less than the previous year, and indeed the amount spent on those services in recent years has declined progressively in real terms.

The British Overseas Trade Board's latest annual report indicates that that fall in expenditure is attributable in part to a decline in the take-up of certain export services. That is a serious matter because the quality of the services offered by the BOTB is, in my opinion, generally high. Therefore it means either that insufficient effort has been made to promote the available services or that the charges made for them are too high. Some of the services offered, such as those relating to overseas trade fairs and outward missions, have limiting conditions attached to them. At a time when it is vital to stimulate exports it seems questionable whether restrictions of that sort should be imposed. I therefore feel that a wide-ranging review of export services is called for.

To conclude, we have been going through a prolonged period of declining employment and investment in industry. It is essential that those trends be reversed. When the economy ran too fast in 1989 the Government began applying the brakes. Now that the economy is running well below the speed limit it is time for a touch of the accelerator.

4.6 p.m.

Lord Howell

My Lords, first of all I should like to express my personal appreciation of the very warm and kindly reception I have had from all sides of this House. It is 37 years since I made my maiden speech in the other place. I shall therefore hope to enjoy more than my fair share of the traditional tolerance of this place in this speech and in future months as I can assure your Lordships that I shall attempt to rid myself of the old Adam as soon as possible.

I am well aware that maiden speeches should not cross the conventions of the House and should be reasonably brief. I assure your Lordships that in my time I have refereed far too many highly contentious and emotional football matches not to wish to enforce the rules, however distinguished the players. I hope that at the end of this speech the goal posts will still be in the same position as they were when I stood up.

Interestingly enough my first maiden speech was also on this subject of industrial growth and harmony, which is a matter of the highest priority for this country. During the whole of my public life I have been sustained by the great city of Birmingham, which of course is suffering badly at the moment but which has been at the heart of the industrial life of this country. I am therefore grateful to my noble friend Lord Williams for calling attention to these matters today. As far as possible I shall avoid controversy by allowing the facts to speak for themselves, which is more usual in this place than in the place from whence I came.

The facts could not be more devastating than at present. Your Lordships are familiar with them, and some of them have just been recited by the noble Lord, Lord Ezra, and by my noble friend. Therefore, I shall not go into them in detail except to say that we know that GDP has fallen for six consecutive quarters and is 3.6 per cent. down over 1990– 91; fixed investments are down; the current account deficit must be the cause of the greatest concern to us all; 30,722 businesses collapsed in the first six months of this year; and unemployment is officially put at 2.7 million but most of us believe that it is much higher. In the West Midlands alone in 1991 manufacturing employment fell by 9.1 per cent. and output declined by 8.5 per cent. Business failures in the West Midlands are up 40 per cent. in the first six months of this year to 2,020. These are catastrophic figures.

I think the question to be asked in this debate, which the noble Lord addressed is, what is the purpose of all this. How are we to rescue ourselves from it? How can so much of our industrial heartland ever again compete and export when it is being laid so low by the recession? I talk to a great many businessmen in the CBI, chambers of commerce and the Engineering Employers' Federation, and I talk to trade unions and others. All of them regard the argument over the correct level of interest rates as purely academic as far as their businesses are concerned. My great fear is that we are not only destroying the industrial base of the country; we are destroying its social fabric.

I was brought up to believe in the Protestant work ethic. I know that for millions of youngsters, including myself and, I suspect, many of your Lordships, the discipline of the workplace was one of the most important things in their lives. If millions of people do not know and never will know the discipline of the workplace, what social effects do we expect that to have in the world outside? That is very much part and parcel of the need for an industrial policy. For example, what on earth can we say about the recent finding of the career service that in 1991 only one in 10 school-leavers had a job to go to—a 50 per cent. reduction in the position three years earlier. If we look at the dramatic drop in business opportunities for graduates and people coming out of technical colleges the situation is equally startling.

I believe that industrial policy in this country has been sacrificed on the altar of fiscal rectitude and we desperately need to have a new industrial strategy. I base my comments on the advice I have received from my business colleagues in the West Midlands. We need to have a policy which will create a new partnership between manufacturing industry, the banks—which have a lot to answer for—and the Government. We need long-term investment, with tax incentives for technology and research and development. We also need regional development agencies and improved capital allowances. Can we not end the ludicrous policy of stopping local authorities spending their capital receipts on building houses in order to help the building industry get going again?

The West Midlands also needs an air link from Birmingham to the United States on which we have been pressing the Government for a long time. We need help with the MetroLine to link the Black Country with Birmingham's International Convention Centre, the National Exhibition Centre and the National Indoor Arena. It is a story that beggars belief. It is a £100 million project. A two-year appraisal (the most thorough ever undertaken) was made by the Department of Transport. It gave it the green light. The Government announced a £21.5 million grant for the tender process alone. That encouraged the private sector to put forward schemes and spend hundreds of thousands of pounds on its own feasibility studies. Incidentally, although the £1.5 million help had been announced at the Conservative Party Conference last October, immediately after the election when business houses had tendered and spent hundreds of thousands of pounds, the Government announced that they were not going on with it and there was no money for this extremely vital regional railway link. One result of that is that Birmingham and the West Midlands have lost a £10 million grant from European funds which they desperately need.

Another matter of vital importance given the geographical location of that part of the country is the Channel Tunnel. It is another incredible story. A £9 billion investment was jointly announced by the two Prime Ministers. The French have gone ahead and built a magnificent high-speed link. Where are we seven years after the announcement? We still do not know the route. First, we were told there was no need for a rail link. In 1988 British Rail was producing four alternative high-speed routes. We then had the Trafalgar House involvement, which collapsed. Five months later the south London route which had been chosen was dumped. We then had the east London route. I am not surprised that the recent brilliant "Face the Facts" radio programme commented: Kent probably has the worst railway system in the country onto which we are seeking to impose the most sophisticated new system yet devised". To coin a phrase, this is no way to run a railroad. Our European partners must find the whole story incredible. We need to have urgent decisions taken about the west coast route for high-speed trains and the siting of an international freight terminal in the West Midlands, which is so vital to our export trade.

I express the view that we need both an industrial strategy and a long-term European strategy. On the latter point I ask the question: how are we to educate our children unless in the primary schools we start to get them to speak a second language'? We ought to help our businessmen. It was announced this week that 55 per cent. of those asked did not believe that 1993 affected them at all.

I conclude by asking the Government to establish strategy committees—I looked up the terms of reference and find we do not have them—to consider economic, industrial, commercial and long-term European policy. I trust that this debate will aid the Government in coming to those conclusions.

4.17 p.m.

Lord Benson

My Lords, on behalf of the whole House I congratulate the noble Lord, Lord Howell, for his contribution. He comes with a very wide experience in many fields and his speeches will help our deliberations. It may not be generally known to the House, but apart from an abiding interest in cricket his special interests comprise manufacturing industry, health, environment, arts, local government, immigration and international and national sport. We may have the pleasure of hearing from him on a great many different topics.

I start with two assertions which I do not think will be disputed. First, our manufacturing base has been shrinking for years. It is now at such a low ebb that it cannot sustain our economy satisfactorily. Secondly, although there have been improvements in recent years the average standard of productivity in manufacturing is below that of our competitors. Between 1970 and 1987 our world share of engineering goods fell by 37 per cent. I add to those two modest assertions a reminder of the decision which your Lordships took only last year to support the report of the Select Committee on Science and Technology which contained the following statement: In the past manufacturing industry has suffered from a perceived neglect by government and from government's indifference to the decline of our manufacturing base. This must now change". In the face of those facts it is incomprehensible that any government would not wish to formulate a clear, firm industrial policy which would cause the country to change direction in the manufacturing field. I go further and say that there is no difficulty in defining the material and substance of what should be included in an industrial policy. I made some tentative suggestions for the consideration of the House in the debate on 13th May this year, reported at cols.382 and 383 of Hansard. I will not weary the House by repeating them. So far as I could detect from the debate that followed, there was no dispute on those issues.

As an illustration of the decline in our manufacturing base, let me take two simple examples. Before, during and after the last war we had a strong, virile machine tool industry that was strong in exports. What is left is virile but a shadow of its former self. In 1970 production stood at 1,400 million; in 1990 it was 750 million; in 1991 the figure dropped a further 20 per cent.

I take another example. Before, during and after the last war we had a good motor cycle industry. It collapsed in 1970 for reasons which need not be detailed. There has recently been a proposal to resuscitate the industry. However, in the intervening 20 years personnel have been lost along with exports and the skills which enabled us to compete with the Japanese who imported motor cycles in large quantities. In fact we handed the motor cycle industry over to the Japanese holus-bolus. Those are merely two examples of many that can be found in industry through the most trivial investigation.

It may be suggested that the decline is due to lower quality engineering personnel than our competitors, shortage of capital, or a workforce that could not adapt to modern technologies. I believe those suggestions to be nonsense. What we have lacked are leadership, thrust, determination and enterprise—all things which would keep us at the top of the league tables and not rootling along at the bottom.

Looking back on the history of industry in this country, we notice that in the past 50 years when any government have proposed measures affecting industry, the immediate reaction of the opposition parties has been to say in strident terms not only that they disagree but that they will repeal all the relevant legislation and reverse the policies. The effect on industry has been disastrous. The indecision, doubt and lack of knowledge as to what will happen have prevented investment.

Perhaps I may give a simple example to drive home the point. At the end of the last war, steel comprised, directly or indirectly, no less than 50 per cent. of our total exports. Then the Government decided to nationalise the industry. The succeeding government decided to denationalise the industry. A later government decided to renationalise, and a succeeding government decided again to denationalise. There were four complete turnarounds. We ought to be ashamed to see our great industries become political playthings.

The lessons to be learnt are that an industrial policy must be long term; it serves no purpose over the short life of one Parliament. It must also be sufficiently free of dogma and doctrine to be generally acceptable. Lastly, whatever opposition is in existence must exercise much greater restraint than has hitherto been the case.

It is the view, I believe, of many people in this country that we should not have an industrial policy because it might lead to interference in management by government, to direction of labour in some form or another, and to restrictions, impediments and whatever may stop the development of industry. I believe that such views are wholly misguided. I regard the situation merely as it is on the football field. The 11 players represent industry, striving with every sinew to defeat the opposition. But sitting on stools on the sidelines are the manager and the trainer. If the manager and the trainer went on to the football field, they would make themselves look ridiculous. If the players sought to manage themselves, the team would be relegated at the end of the season. Both have to work to a common policy to improve without interfering with each other in the way that is suspected by so many.

An industrial policy would help to enlarge our manufacturing base, which is crucial to this country. It would increase our exports, reduce interest rates, strengthen the pound and bring our adverse balance of payments more into line. Those plums are ready to be picked. They should not be left to rot on the ground. If the Government want to take us out of the recession in which we are now wallowing, they can do no greater service than to stimulate everyone by a firm, strong industrial policy on the lines which have been explained today.

4.26 p.m.

Lord Chilver

My Lords, perhaps I may first thank noble Lords for their very kind welcome this afternoon and for giving me the opportunity to contribute to this very important debate. Over recent years I have become increasingly involved in international business. That has inevitably focused my mind on competition in international trade. In international business one stands or falls by the success of one's competitive activities and that has led me to hold strong views on international trade and competition. However, I am conscious this afternoon that the custom of your Lordships' House requires me to be uncontroversial. Although recent interpretations of that word have shown flexibility, I certainly intend to contribute to illumining the basis of this important debate rather than indulge in further controversy.

Unquestionably competition is increasing around the world at a great pace. It is worth putting that in context. The world's largest exporters are Germany, now in the lead, and the United States. Those are the two greatest exporters. Each of them exports 11 per cent. of all world exports. Japan accounts for 8 per cent. of world exports and the United Kingdom accounts for 5 per cent. That is a very substantial performance. Exports today are at record levels. The European Community, in terms of exports as a whole to the world beyond, accounts now for 15 per cent. of world exports. That is perhaps the most significant feature of the interchange of trade across the world that we need to consider in this country in relation to our national policies of industrial development.

Productivity around the world presents an interesting picture. It may come as a surprise to many people in this country that the average rate of productivity in Japan is lower than it is in Britain. But that masks the fact that the productivity of Japanese industry in areas which contribute to their external export performance is very high indeed. There is a lesson to be learnt; namely, that productivity must be pushed to extreme limits in areas where international competition takes place.

The greater part of international trade is conducted by international companies, which play a key role. They compete in different competitive climates around the world. They work in markets which vary considerably. Those companies are independent bodies. They may be incorporated and based in one country but their activities bring economic worth throughout the world. At the other end of the spectrum, small companies have severe problems with the increasing competition in international trade. They have limited access to knowledge of industrial development and markets and can meet severe problems of funding.

International exchange is one of the most powerful forces in world development. In general we must keep in mind the features which enable those forces of development to continue to operate on the world scene. We must consider areas through which we can encourage the exchange of trade. There are many barriers to what is called free exchange of trade. I use that contradiction deliberately because our concepts of free trade in Britain are very different from those that are experienced in other corners of the earth. It is important that in their study of the problem our Government address the effect of disparities—the impairments to international trade—which so many western companies meet on the world scene. The playing field is complex, with different rules and goal posts in different positions.

International trade is best conducted when fiscal, financial and social environments are stable. That factor will dominate the way in which international trade develops in the future. We have already referred to the importance of investment in the longer term. It is important and requires action not only by Government but by companies themselves. In the diverse funding situations which occur in the world, it is difficult to find areas in which suitable long-term funding can he established to develop long-term projects. In the evolution of the European Community it is not impossible that companies, as we know them today, may become more broadly based in the European Community, and funded in somewhat different ways which will enable the deployment of resources for the longer term.

In Britain we have to exploit the knowledge of industrial development available to us throughout the world. Our science and technology in Britain is very strong. We have to ensure that we not only deploy the knowledge of our working industry but also the knowledge generated elsewhere. We ourselves generate a small fraction of the world's new science. It is important that we develop means of accessing world knowledge which we can exploit in our own industrial development.

Finally, many of the discussions on the balance of trade problem focus either on imports or exports and do not fully consider the importance of the appropriate balance of trade which we as a country wish to aim for. We see powerful exports as one feature of an extremely strong economic policy. However, if encouragement of those exports has not led to competition with imports then the balance is wrong. That can cause serious problems. We in this country should now address more generally the type of balance that we wish for in the longer term. We should not necessarily pursue exports for their own sake. Indeed, one could criticise the policy of the pursuit of exports over the past 25 years or more. One could argue that that pursuit of exports created overseas markets, but because of the industrial plant and capital investment required to produce those exports we were unable to meet the needs of our own domestic markets.

In conclusion, we shall face increasing competition in the years ahead. It is important that we discuss the issue more widely and seek wider understanding of the problems that it generates.

4.35 p.m.

Lord Dean of Beswick

My Lords, it gives me great pleasure to follow two maiden speeches of high quality. I join the noble Lord, Lord Benson, in congratulating my long-standing and noble friend Lord Howell on an interesting debate on the area that he represented so well over a number of years. He has first-hand knowledge of the area and the problems that beset it. I also congratulate the noble Lord, Lord Chilver, on his maiden speech. That too was of high quality. He has a wide spread of interests in the industrial and commercial world which befit him well to make contributions to debates in this House. We shall benefit from those contributions. I note that in his earlier years he was a railway engineer. The noble Lord and I have a tenuous link. In my younger days I too was a railway engineer. However, I manufactured locomotives. We congratulate the noble Lords on their high quality speeches and look forward to hearing more from them in future.

I shall not speak at length about what should be done by the Government to achieve the aims printed on the Order Paper. When I spoke last week in the debate on the loss of jobs in manufacturing, I referred to export credit guarantees. I believe that in this country they are insufficient. My noble friend on the Front Bench Lord Williams referred to them in detail. I did not receive a reply. However, I believe that people in this country are not batting on a level playing field through the assistance that they receive on expensive and long-term contracts.

I refer to some points made by the noble Lord, Lord Joseph. Although we sat on different sides in another place, nevertheless I have always had the greatest respect for him when he made political speeches and statements as a man of the highest integrity. However, he has placed some of the blame on the Labour Opposition as though they had some responsibility for what the Government did in the 1980s, which has placed the country in its present difficult situation. I was in the gallery in another place on the day that the the Budget was announced by Mr. Nigel Lawson, now the noble Lord, Lord Lawson. It was such a marvellous Budget that the Conservative Party rose as one waving their Order Papers. The cheers did not last long because the Budget was an appalling blunder. I do not believe that it is right to say that the Labour Party played any part in that whatever. It is the duty of the Opposition to oppose; and that is what they did. But an appalling mistake was made and nine or 10 of the members of the Cabinet which created that situation have recently been ennobled in your Lordships' House. Those people are responsible for what took place.

The noble Lord, Lord Joseph, spoke also at some length about Japan. Some 12 years ago I went to Japan on an all-party parliamentary visit. We questioned the Japanese industrialists and business people, but there was no hint that they were hindered, or not helped, by their government in the same way that our people are. For example, one of their shipyards was in danger of closing down. There was a surfeit of the mammoth tankers which they were building and they were mothballing them. They were on the last project building a huge oil-drilling rig weighing about a quarter of a million tonnes. I asked what would happen to the shipyard when the project was finished; whether it would be closed down and the workers made redundant as they would be in Great Britain. I was told that that would not happen because the social consequences would be too hard to bear. I was told that there would be an accommodation, although I was not told what that accommodation would be.

At that time, under the last Labour Government, a package was put together by the noble Lord, Lord Varley, who was at that time at the Department of Industry, to tender for a large power station in the Middle East. I believe that our bid was about £130 million and we were beaten by the Japanese by £30 million to £40 million. Anybody who knows heavy engineering will know that a disproportionate part of the cost is accounted for by materials because there are such huge quantities involved. For example, one must buy steel on the world market; there is no cheap market. Those of us who were involved in that tender believed that in some way the Japanese Government had helped to fund that successful bid by the Japanese engineering industry. Therefore, we should be rather careful when saying that we should follow the Japanese.

The term Luddism was used. I worked in engineering from the age of 15 to the age of 40. I was a highly skilled engineer. I do not remember being bombarded with high salaries. Every penny that I received I had to fight for from the boss, and I earned my money. The sad fact in this country is that some of the most skilled men in engineering—toolmakers and so on—are among the worst paid. Last week I received a report from the AEEU which shows the progressive decline in our manufacturing base. Another report will be published, which is embargoed until tomorrow, which shows that that situation is continuing.

I now wish to speak about the North West. From June 1979 to June 1992 there has been an increase of 320,000 in the number of unemployed people. In the manufacturing sector, which is the most important, there has been a total reduction in jobs of 363,000. The Government cannot hide behind those figures by saying that that is because there has been a reclassification of jobs. Those jobs are hard-nosed manufacturing jobs in the workshops. Vickers shipyard will lose 1,000 jobs, BICC will lose 220 jobs, and GEC Turbines will lose 500 jobs. I could go on. That situation is not improving.

Finally, I wish to refer to a report recently published headed: 15 years of initiatives have failed to halt inner city decline". It is a report by the independent Policy Studies Institute. It lists 50 of the worst areas,13 of which are in the North West. Conditions are worsening in most of the facets mentioned in the report which include education, unemployment, housing and poverty. The article states: One of the biggest statistical leaps was in Manchester, where homelessness rose from 0.9 for each 1,000 households in the second half of 1983 to 13.8 per 1,000 in the second half of 1991". That is an astronomical increase by any standards.

Your Lordships may think that my remarks are somewhat wide of the Motion on the Order Paper. However, I believe that those matters are all inter-related. Where I was born and bred and spent my life was, along with Birmingham, the biggest industrial centre in Europe and it is now a desert. That is not because of high wages or because it has been strike ridden. The people who are still there ask only that they should be given the chance to get to work again. I believe that the Government should do more than sit back and wait for the tide to turn, which it may never do.

4.45 p.m.

Lord Wade of Chorlton

My Lords, first, I congratulate our two maiden speakers. I have never before met the noble Lord, Lord Howell, but I am delighted to see him in this House. Also, I was delighted to hear the first maiden speech of my noble friend Lord Chilver. I trust that that quality will be maintained and that we shall hear from him many times in the future.

I agree with the noble Lord, Lord Williams, when he identifies competition as an enormously serious aspect for manufacturing in this country and for the country as a whole because what is detrimental to our manufacturing industries, or industry at any level, is against the interests of everybody in this country.

I agree with the noble Lord that we need to consider seriously what government's role may be in dealing with the extra competition which will come not just from Europe but from the rest of the world. We are moving into an era in which industry should gear itself up to operate at a much more competitive level. The noble Lord, Lord Williams, did not refer to the GATT negotiations which are extremely important and to which we must adjust.

What is the role of government in these matters? I disagree wholeheartedly with those noble Lords who suggest that government industrial policy should decide where investment is made, what kind of industry is developed and how various sectors of our industry are stimulated. Any suggestion that that is what we mean by government involvement would be detrimental, as it has been every time that it has been tried. The only way in which we can be competitive with the rest of the world is by allowing industry itself to adjust to changing economic circumstances and to do all it needs to do to adjust. Surely that is the role of government: that they do not put in the way of industry anything which prevents it from taking up the most competitive position.

It is in that sphere that the Government can take a much more positive approach. By and large governments are much better at stopping things than they are at making things happen. Their structure makes it easy for them to prevent things happening because they can always find supporters for that. It is much more difficult for governments to be positive. The most positive policy of a government in those circumstances is to decide that the growth of industry is the greatest priority of the country. They should not do anything to prevent the growth of industrial development.

I shall now tell your Lordships of three areas of government policy where the Government are unwilling to say "Yes" and thereby stopping investment. There is a major development in Manchester. The project will employ some 25,000 people. An inquiry has been taking place for three years. All that is needed is the Secretary of State to say,"Do it." In the past he has been enormously capable of saying,"Don't do it." We are all aware of such instances. On this occasion he should give the go ahead. We have been waiting for three years.

There is another development in Somerset. An international company has selected a site for a major leisure development. It has now waited well over two years for the result of an inquiry. It wishes to invest £80 million. The company has been offered a site in Germany which can be made available immediately but it would rather invest in the UK. All it takes is for the Secretary of State to say yes. If that was done, the £80 million would be invested immediately, a large number of jobs would be created and everybody in the country would benefit.

Government policy should be first to make economic growth their priority so that whenever they are confronted with an issue, they have to decide whether it is right for the economy. If it is, they should agree to it. There needs to be much greater understanding in government. I agree with the Prime Minister's stance on maintaining our present exchange rate levels and our present levels of interest. However, while accepting that that is the right approach, one must accept also that if those rates cannot move up and down, other matters must reflect the pressures that are created.

The pressures will be in terms of employment and of businesses going through greater cycles than in the past when the money aspect could fluctuate. The Government must appreciate that their attitude to financing themselves has to alter. We must take a greater grip on government expenditure and on decisions about those we employ and what we pay people. I applaud the Prime Minister's stance on the wage constraints affecting civil servants. I should have liked to have seen similar disciplines employed in the other place.

If we are to push the country into becoming more competitive everybody must respond by being hard working, by taking every opportunity to produce growth, and by cutting expenditure to the minimum. And the Government—by far the biggest employer—must pursue the same disciplines that they are forcing every other business to employ.

I agree with noble Lords—I do not need figures; we can all quote figures—in regard to the numbers of people we meet who are experiencing severe difficulties. It is a tragedy to see not only companies that started in the boom times of the mid-1980s, but also those which have been profitable and successful for 30 or 40 years, having to wind up and unable to use their skills.

As the noble Lord, Lord Benson, said, I feel that it is leadership which must make clear the priorities in everything we do. How many times in the past two or three months have we heard pleas for the Government to send money abroad to support this or that cause, or to protect this or that? We must accept that all the sacrifices are not possible until we create the wealth needed to do it. We can only do that through business and industry and by exporting our products. That is one of the most important aspects of the role that government can play.

The noble Lord, Lord Dean, referred to the North West. Extra growth will come from new technology and the ability to transfer technology from one company to another; the stimulation of further technology growth between this country and other countries in Europe and more particularly, the ability to offer and market our services to the growth areas such as the Pacific rim nations and the Far East.

Within the North West we have the North West Regional Technology Centre which was set up under the auspices of government in 1986. It is now running independently and playing an enormously important role. Only two weeks ago I attended a seminar called "Technologies for Tomorrow". It attempted to bring together those entrepreneurs looking to invest in technology and those people with the necessary skills. It was enormously impressive. There was a whole range of new technology waiting to burst upon the market place. Lack of funds and a lack of confidence that having got the right product we would be able to market it was the barrier. However, once people met, the enthusiasm of the entrepreneur on the one hand and the person developing the new technology on the other produced extremely interesting developments. I hope that the Government will see the importance of those kinds of organisations. Although they give support, there are many other areas where they can do So.

This is an important debate. We live on the wealth that we create. If we do not continue to create it and make it our top priority to do so, as many noble Lords have rightly said, so that we achieve a situation in which everyone is working for the common aim, we shall all suffer. Our future will be jeopardised and what was mentioned by the noble Lord will come to pass.

4.55 p.m.

Lord McNair

My Lords, I must first declare an interest in the debate. I am directly concerned with a manufacturing enterprise, albeit a small one. It is a trade which has remained unchanged for generations—that of producing handmade wooden tent pegs. I am the craftsman, the foreman, the production controller, the salesman and the accounts department. One might say that gives me a "worm's eye" view of the economy and of industrial activity. Indeed, it was while I was splitting timber and shaping it into tent pegs that I listened to a programme on Radio 4 about the growing industrial performance, the growing integration and co-operation and the growing economic self-confidence of nations in the South East Asian part of the planet.

People in such countries work extremely hard and are immensely innovative. Those economies are all in different stages of industrial development. Discussion abounds about whether the Japanese system of close co-operation between government, banks and manufacturers or the South Korean system of dynastic family enterprises should be the model for the future. I suspect that the answer is probably both, each in its own cultural context. I feel strongly that it is the cultural context that is more important than anything else in determining the strength and vitality of a nation's economy.

I fear that the cultural context in which manufacturing industry flourishes or founders in the UK is rather unhealthy. There is still great prejudice against trade and engineering in those social groups which sociologists place at the beginning of the alphabet. It is a petty and elitist attitude which only serves to reinforce the prejudices of those by whom education is regarded as a difficult pathway to unlikely success. The "them and us" attitudes of all social groups do not appear to me to be diminishing. All those unproductive attitudes are a luxury we can ill afford. We are indulging our prejudices at the expense of our industrial growth. In that respect, we are playing the fiddle while Rome burns all around.

An argument could be made for moving towards what one might call the "Asian ant-heap" type of economy where social security provisions are minimal or non-existent and wages are low, resulting in rapid growth in currently successful or government encouraged sectors. I suspect that that is what many in the present Government would like, even if they dare not say so.

In my view that is not the answer. We need basic and technical education which both provide the mental and practical tools to do the job and also empower the individual in such a manner that he or she has the emotional maturity and self-reliance to create a secure and worthwhile future. Educational programmes which achieve that are readily available. They provide the self-confidence and self-respect which are a necessary prerequisite for young people to want, to absorb and to benefit from a sound and intellectually stimulating educational experience. I am thinking particularly of two programmes offered by the highly regarded educational research and development NGO called TACADE. Skills for Adolescents and Skills for the Primary School Child are increasingly seen as making a vital contribution to effective education. Such an education results in greater self-reliance and diminution of the dependence on state benefits.

I was particularly struck by an observation made earlier by the noble Lord, Lord Joseph. There are, of course, four possible ways in which one can participate in the economic life of the country. As far as I am aware, we do not have any educational programme that explains to young people how business works in a practical way. An introduction to economics such as I endured on an economics 0-level course, which concentrated on abstract supply and demand graphs, is enough to turn anyone off the whole subject. I wonder whether such an input could be added to the national curriculum.

Additionally, we need to move much faster and more determinedly to catch up not only with the German tradition of excellence in technical education but also with the new developments in that direction in France. We somehow almost expect the Germans to be better at that than we are. Perhaps the fact that France is working hard to create a society of technically competent citizens may spur us to more vigorous action in that direction.

The situation may in fact be more serious than that and require drastic and far-reaching, not to mention far-sighted, policy initiatives. I mentioned earlier that the South East Asian economies reflect various stages of economic development. By that I mean that neighbouring nations consist of highly developed economies close by those which are less developed, which provide a pool of cheap labour. We seem apathetically accustomed to the penetration of our economy by those of Japan and South Korea.

An example of what international trade can be about was provided by the way in which the Japanese television industry came to dominate the Sri Lankan television market. The Japanese Government offered to build them a television station. Meanwhile, all the representatives from the consumer electrical companies went round to every little shop and store they could find. The result, naturally, is that it is very difficult to buy a television in Sri Lanka which is not made in Japan or which is not made by a Japanese company.

That is the kind of partnership between government and industry which would make such a difference to our companies' efforts to export. Even our own entrepreneurs have products like that manufactured in the Far East. I believe I am right in saying that that is how Amstrad operates its computer business.

We saw yesterday that manufacturing output has again fallen. Our balance of payments deficit is increasing at an alarming rate. Could it be that the single market has come too late for us and that we are experiencing the early stages of the structural meltdown of a post-imperial and post-industrial economy? I sincerely hope not. I urge the Government both to confront that possibility and to adopt such policies as would ensure that that does not happen.

Lastly, I endorse the remarks made by my noble friend Lord Ezra about the need to look at the total picture of spending and saving in the economy. There is little point in achieving zero inflation if it brings with it zero spending and a negative growth in manufacturing output while the trade deficit increases. It is sales, and the prospect of sales, which induce entrepreneurs to invest more and produce more. There are no absolutes in economics. When we had raging inflation the cry went up "Why don't people save more?" Now we appear to have become a nation of squirrels.

Surely it makes sense to look at the overall tidal flow of savings and investment. I understand that National Savings is doing very well. I urge the Government to use that resource to stimulate growth by developing our grossly inadequate infrastructure both in a physical and personal sense.

5.3 p.m.

Lord Monkswell

My Lords, I thank my noble friend Lord Williams of Elvel for introducing this very important debate. I had thought of speaking about the immediate problems facing manufacturing industry in the United Kingdom as we know them today. But the contributions of my noble friends Lord Howell and Lord Dean of Beswick have effectively forestalled that. I have no need to explain to your Lordships the problems faced by manufacturing industry and the opportunities which those problems present to the economy of this country.

It is interesting to note that virtually throughout the debate the emphasis has been on the importance of manufacturing industry. I thought that it might be interesting to take an historical perspective. It is interesting to recall that in the early 1980s the Conservative government said in effect that manufacturing industry and the problems that it faced did not matter because the service industries would take its place and provide the wealth of the country.

I have prepared a list of service industries, but it is not exhaustive. When one speaks in terms of religion, law, medicine and education—prostitution is something of a grey area or a part of the black economy, if I may put it like that—and of soldiering, finance and engineering in the knowledge-based sense rather than in the manufacturing-based sense, they are all elements of service industries. But the Government's encouragement of their development in the 1980s was pretty limited. I say that in the sense that religion, for example, is not really one of the strong points of this country nowadays. We have a rather anachronistic legal system which does not translate well to other countries throughout the world. As regards medicine, we do not train enough doctors in this country to satisfy the needs of our own National Health Service. When considering education, one has only to think about what has happened to it over the past five or six years under the Conservative Government to realise that they were never very much in favour of promoting education. They have done everything they can to denigrate, castigate and do what damage they can to it.

It is interesting that this country spends so much on the armed forces and equipment for them. Soldiering is something which is capable of being exported. One needs only to think in terms of the Gulf War to realise that we have effectively exported that expertise. The Government have not done much to support engineering. Salford University has a very effective centre of learning in the engineering sphere. Far from being supported by the Government, it has had a massive cut in income caused by the Government and the centre has been told to go out and find the money for itself.

Finance is another matter. The finance industry, through taxes foregone and the laxity of controls, has effectively been given every support and encouragement to grow and prosper under this Government. But to what benefit? At the same time as it has been encouraged through low taxation and lax regimes to grow and prosper, it has not been for the benefit of this country, but for those people with money. That situation has existed right through the term of the Conservative government. Effectively, support for manufacturing industry has been whittled away and where it has existed it has been hampered by high exchange and interest rates and a lack of investment incentives. Manufacturing industry has been attacked in just about every way that it could be attacked by this Government.

In my opening remarks I said that I would introduce an historical perspective. I was thinking in terms of my school history lessons and the Scots education I received. The history that one learns in Scottish schools tends to be Scottish history. I remember being taught that when the economies of Scotland and England were brought together in the 16th century, quite a large number of what one can describe as men at arms had to go overseas and become mercenaries. It is an interesting historical analogy. I hope we are not, but I fear we are, in the same kind of situation now in the sense that as our economy is merged with the economies of Europe, we know that we have a large number of men at arms. What is going to become of them? Are they going to be retrained to take part in productive manufacturing endeavour, which has to be the most important activity that this overcrowded isle indulges in, or are they going to be used effectively as mercenaries overseas, killing other people and getting killed themselves? I hope that we shall not see that.

There are two actions the Government can take. One is to reduce the money that they gather in taxation and currently spend on the defence establishment generically—on the armed forces and on defence manufacturing. The other is to take back some of the taxes foregone on money earned by the financial industries. They should invest the money that accrues through that increased taxation and through reducing the expenditure on the armaments business and the armed forces. If that money was invested and channelled into support for this country's manufacturing industries, we could—I hope—start to build a better, more decent and more socially just country and, in doing so, contribute to a better and more socially just world.

5.11 p.m.

Lord Sefton of Garston

My Lords, the last time that I debated this subject in this Chamber was on a Motion moved by the noble Lord, Lord Wade of Chorlton, drawing attention to the situation in the North West. I gave an example of what has happened in a two-mile area of Merseyside. Fifty years ago a tremendous amount of industry was located within that tight area but today nothing remains. That is the place from which I take my title. Because I drew such a tremendous picture of the decline of an area I was accused on several occasions in that debate of being pessimistic. Well, I have not detected much optimism in today's debate. I did not even detect any optimism in regard to the nation's industry and commerce from the noble Lord, Lord Joseph, who, as we all know, is a protagonist of the free enterprise system.

When the noble Lord, Lord Wade, says that he thinks that the Government's industrial policy should not have anything at all to do with the siting of industry, I should like him to consider the situation on Merseyside as a whole. We have lost many major industries. The two industries that are left on Merseyside are all that remains of a massive industrial complex. One belongs to Vauxhall Motors and the other to Ford. Both those firms came to Merseyside because of government policy which was supported by both parties. In fact, they came to Merseyside because of the consensus and the realisation that, because of Liverpool's geographical position, there was no other reason for its existence and a reason had to be found. We persuaded Vauxhall and Ford to come to Liverpool—incidentally, we also persuaded Leyland Motors, but I shall talk about that later—and those firms now provide the only basis for industrial employment today on Merseyside. I ask the noble Lord, Lord Wade, to consider that point.

The noble Lord, Lord Benson, referred to what happened during a 50-year period and to all the faults of the steel industry. However, the problems of the steel industry and of this country do not go back only 50 years: they go back much further than that. I ask the House to consider some of the mistakes that were made by successive governments after the last war. To some extent, did they not depend upon memories of what had happened before the war?

There is no doubt at all that during the inter-war years when free enterprise had its unrivalled reign it could do anything it liked. It ruined the railways. It ruined the coal industry to such an extent that in 1940 when this country was fighting for its very existence the private coal owners closed some pits. It ruined the steel industry because it could not meet the demands of the nation. The story went on and on. In the end it created such massive unemployment that men like Winston Churchill and others were saying that never again must this country use the weapon of unemployment to solve its economic problems. That was said to be the consensus—and we all agreed.

Things were not too bad after the First World War ended. Churchill also said that recriminations about the past should be used in order to enforce effective action in the present. All I ask is that we remember that and act by it.

The present Government's message to the nation is that private enterprise is a wonderful thing and that if it is given its head and allowed to pull itself up by the bootstraps, it will do so to such an extent that the nation will be better off. I assume that the word "nation" means the community, although, having heard the views of a person who has only recently been ennobled and become a Member of this House, I sometimes doubt that. However, presuming that "nation" means "community", the Government say that private enterprise, in the pursuit of profit, would make us all better off. But, if it has shown nothing else, today's debate has shown that an awful lot of people today do not believe that that has happened. They believe that we are facing a crisis of monumental importance over our world trade.

Over the past 12 years private enterprise has received the clear message from the Government: "Go ahead. Exploit". They have said to people,"You go ahead and be an entrepreneur and while you are making your profits, bring work to the people". But the real position at the moment is that we have 3.5 million people unemployed. Is that what the Government were referring to?

Having made recriminations about the past and looked at what happened during the inter-war years, perhaps I may now give the House some other examples. If one goes even further back, one could say that the years before the Boer War were just as bad for the working classes of this land. It is an amazing thing that the events of the Boer War, then of the First and Second World Wars, were the only times when the working classes of this country could look forward to some employment. That is a commentary on the operations of the nation. That is the history of this nation.

Let me bring our history right up to date. It is time that the Government started to look at what happened in the past and tried to learn some lessons from it. They should not make guesses or the dogmatic assumption that because they believe in a certain political philosophy it will bring solutions. It will not. Read the book—it is all there. The Government should consider what happened during those periods. We are now reaching a stage where the cold war is ending and when the resulting unemployment will get worse and worse. We really need to do something. If we leave it to private enterprise, private enterprise will operate as it always has—in the pursuit of immediate profit.

I should like to give your Lordships three examples which I raised with the noble Baroness, Lady Denton, not very long ago. The 125 aircraft, which is being manufactured at Broughton just outside Chester, is a big employer of labour. If it goes down that will have a serious effect on that area. The company which owns the 125 aircraft production has said that it does not have the money to invest in a new model. It is making money, but it needs £500 million to launch a new model if it is to be successful. It does not have that money so it is looking for buyers for the manufacturing capability of the 125 aircraft.

Rolls-Royce and Vickers are also in trouble. They do not think that they have the money to invest long-term in, for example, the new model that Rolls-Royce needs if it is to compete in the world market. Those companies are in trouble and are today looking for customers. It is probable that any customers will be either Japanese or German.

There are other examples, but I have reached the end of my time. I wish to conclude on another point. I raised those examples in the House and I asked the Government what they intended to do to ensure that those companies did not go into foreign hands. The noble Baroness, Lady Denton, replied on that occasion. I respect the noble Baroness very much indeed and I do not blame her personally as she was given a brief. She had to read it. In reply to my question she stated: My Lords, the Government take the view that in general it is the company itself which is best placed to decide on changes in ownership or control".—[Official Report,19/5/92; col.549.] If that does not mean that the ownership of some of our major industries—three major industries which are producing very well, with no complaints about profitability—will he left in the hands of private shareholders, I have never heard anything.

I have another quotation from the noble Baroness. I said in a supplementary question: My Lords, can I take it that the answer from the noble Baroness is that the Government intend to do nothing at all to prevent these firms going into foreign ownership? The resounding battle-cry from the Government Benches was: The resource which allows our industry to continue and for new models to be developed will be focused on with fierce concentration".—[Official Report,19/5/92; col.550.] I say this to the Government. They can focus on it as fiercely as they will but words will not change the nature of private enterprise. If it sees a quick profit in selling to overseas buyers with the result that Rolls-Royce cars end up being manufactured in Germany, it will do it, and no amount of fierce concentration by the Government will make it do anything else.

5.22 p.m.

Lord Lucas of Chilworth

My Lords, the noble Lord, Lord Sefton of Garston, will allow me not to follow him down that particular road. On this last full working day of the summer term the noble Lord, Lord Williams, is to be congratulated on putting before us the subject of this debate. It will focus our minds during the Recess and no doubt we can come back to it later. I am grateful to him for that. The noble Lord will appreciate that in a timed debate it is not always possible to debate right across the Chamber. However, if noble Lords will forgive me, I should like to pick up one or two points that have already been made.

The noble Lord, Lord Benson, in using examples of the collapse of British industry, cited the motorcycle industry. He will recall very well that the motorcycle industry collapsed largely as a result of predatory pricing by the Japanese. I am happy to say that the motor industry did not allow that to happen. The arrangements voluntarily entered into between the Society of Motor Manufacturers and Traders and JAMA, the Japanese equivalent, allowed Japanese imports. Therefore, when that voluntary agreement was entered into it was not necessary for the Japanese to adopt a predatory pricing policy, so we have had a reasonable and fair pricing competition on those products.

That agreement expires at the end of this year and there is another informal arrangement between the European equivalent of the SM MT and JAMA. I very much hope that the Government do not interfere in any way in that kind of arrangement, which was the point made by my noble friend Lord Wade of Chorlton. If they do, the kind of arrangements that have been made between labour—the unions—and the two principal motor manufacturing companies in this country—Ford and Vauxhall—are likely to be affected, with the result that neither Ford nor General Motors will be able to go ahead with their plans, which include huge investments.

The noble Lord, Lord Ezra, with whom I agree so frequently, mentioned trade. It is on that issue that I wish to speak today. I am glad that the President of the Board of Trade has resuscitated that position. I am not completely sure why he has done it. One could make a number of guesses. However, it brings into sharp focus the importance of trade. At the end of the day trade is what it is about. If nothing is manufactured there cannot be any traders. Successful traders will demand a product. If the President of the Board of Trade has that in his mind, I am happy. What I would suggest, however, is that the Board of Trade is revamped. It has been working at arm's length from government but under government. It cannot go on in that way.

The noble Lord, Lord Ezra, mentioned the decline in support for export trade and reminded us that, according to the last report, it fell to £31 million. The noble Lord is right in that a number of the services which are offered are far too highly priced and discourage the smaller trader. But I think there is something more fundamental here. From my experience in the department—admittedly some years ago—it never felt entirely happy that those in the Foreign and Commonwealth Office were the right kind of people to encourage, foster and seek out business in foreign parts. That is not to deny that there are some splendid commercial counsellors in our overseas posts—indeed, ambassadors and high commissioners—who work hard. But the very nature of their discipline prohibits them from being traders.

In the vernacular—your Lordships will forgive me if I use this terminology—they cannot cut a deal. They are not trained to. But a trader can and he knows how to do it. He knows the streets that he has to walk down to cut that deal. I should like to see some of the money the Foreign and Commonwealth Office spends on trade through those overseas posts spread to some of our chambers of trade and commerce in those countries. I believe that they can ferret out this business. They would have far better intelligence and would be able to go to a supplier instead of using the arm's length device that a government servant has to use.

If in January 1993 mainland Europe becomes part of the single market I presume therefore that it will no longer be accepted as an export market. A lot of money is wasted by government in supporting trade in what will be a home market. The best of the people can manage very well indeed. It is where the culture of trade is foreign—for example, in the Pacific basin or in the Arab states—that one needs the support of professionals. I should like to see a shift of emphasis there.

A number of noble Lords have mentioned transport. If transport is the end of a production line I urge the President of the Board of Trade to use his influence in the Department of Transport to stop it shilly-shallying over road and rail developments and to pursue the completion of that production line. For example, in North Kent, Kent County Council has shilly-shallied for about five years over the approach road to the docks. The dock carries 200,000 traffic movements a year, essentially of exports. Manston Airport is stultified by a lack of facilities to get there. We could use those; but, no, the process is delayed by a lethargic county council that has its eyes on the great glamour of the Channel Tunnel. We have to use other assets to get our exports into the market place where the traders can do the business.

5.30 p.m.

Lord Jay

My Lords, I agree wholeheartedly with my noble friend Lord Williams—and, indeed, with both maiden speakers whom I warmly congratulate—that unless the British Government give at least the same active support to British industry and British exporters as other firms receive from their governments, British firms will inevitably be put at a disadvantage. A level playing field sounds fine. But it is not much use if some of the players are more level than others. At present, while our own Government have mutilated the ECGD, and, incidentally, abolished the NEDC, the French Government have given huge state aid to Renault and are now paying thinly disguised state aid to Air France.

In order to prevent the House getting a slightly distorted picture arising from all the propaganda about 1993 and the single market, I think it is worth looking briefly at the other side. Despite the arduous labours of the noble Lord, Lord Cockfield, over the 1993 programme, such efforts, contrary to his intentions, have had the effect of scaring quite a number of the great multinational companies into a rush for cover and the forming of mergers, joint enterprises and various other types of arrangement among themselves.

I shall give your Lordships a few examples. In the car industry, Renault and Volvo have arranged a swap of shares and executives together with the formation of joint subsidiaries which I do not think are intended to ensure competition between them. Of course, Volvo also has an alliance with a Japanese car producer in the Netherlands. However, we can also look elsewhere. In the food industry, Nestle, already the world's largest food combine, is seeking to take over Perrier which is the leading French mineral water group; indeed, it is France's largest food company.

In the various branches of the electricity industry, a whole series of link-ups and joint ventures—"joint ventures" now being fashionable and sounding more respectable than mergers—have been formed involving our own GEC. In fact, after acquiring Plessey and Ferranti, GEC now has joint ventures with Siemens of Germany, General Electric of the United States and the Compagnie Générale d'Electricité de France. In addition, it has arrangements with Thomson CSF of France for joint development in defence electronics.

I am not criticising GEC for defending itself; I am merely pointing out that the single market that we are supposed to be entering will, to some extent, be a managed market; that is, managed by the multinationals rushing for cover against the threat of extreme competition. Indeed, in the electricity industry it looks as if the single market may almost become a single producer in some parts of the system.

In the meantime, Fiat has established a close tie-up by means of a swap of minority stakes with, again, the Compagnie Générale d'Electricité de France—a combination which the Financial Times described as an alliance between Europe's third largest car producer and Europe's largest supplier of telecommunications and railway equipment. In the absence of the noble Baroness, Lady Thatcher, perhaps I may mention our old friend the helicopter industry which at one time inspired such political passions. Aerospatiale of France and Deutsche Aerospatial of Germany have merged their helicopter interests in a new company called Eurocopter. Presumably, there will be no more competition there. I could continue and mention British Steel and even BP which have been forming alliances of that kind. Indeed, the airlines are also hankering after mergers; for example, Air France with Sabena of Belgium and British Airways with USAIR. Of course, what I have briefly mentioned only shows the tip of the iceberg.

No doubt the gallant Sir Leon Brittan, who really has an industrial policy, will be battling to stem the tide. I doubt that he will succeed. The House will remember that, in the case of Renault, the previous French Prime Minister went behind the back of the luckless Sir Leon and straight to M. Delors and, as a result, Sir Leon was outvoted in the Commission. Frankly, control of all such matters is not very easy.

Of course, legislation can legally prevent mergers. But you cannot so easily veto or, indeed, interfere with joint ventures which are, as I said, the current fashion. You can ban written restrictive agreements; but you cannot force firms to compete if they do not wish to—if two firms in a duopoly simply refrain from competing, I do not think that governments or legislation can interfere. Nor can you blame individual firms for defending themselves in that way in the present deflationary state of the world, particularly when, incidentally, we have all passed company legislation compelling them primarily to act in the interests of their shareholders. It is the natural inevitable rift of' a privatised market economy, as indeed Adam Smith once pointed out in a very famous quotation.

The public should not be deluded into thinking some great transformation into perfect competition will suddenly be revealed on January Ist 1993. Indeed, on balance, and owing to the headlong rush for cover by so many of the multinational firms—both big and small—the 1993 campaign may, in the end, actually turn out to have diminished rather than increased competition in Europe and elsewhere.

Therefore, I believe that the public will not really notice any great difference. With present policies, things will go on much as they did before; that is, a steady decline in UK competitiveness which is much more due to excessively high interest rates and the hopelessly uneconomic exchange rate. That will have more effect on the British economy in the next few years than all the propaganda that we have had about the single market.

5.38 p.m.

Baroness Denton of Wakefield

My Lords, once again I have to thank the noble Lord, Lord Williams, for allowing us to listen to a most interesting debate. We are grateful for the opportunity. I should like to say what a particular pleasure it has been for me to be in the Chamber to hear the maiden speeches of my noble friend Lord Chilver and the noble Lord, Lord Howell. The noble Lord and I share an affection for the West Midlands, so I was particularly pleased with his speech. I also had the pleasure of serving on three interim advisory committees chaired by my noble friend. I was delighted to be here today. I should like to express my thanks to both my noble friend and the noble Lord for being custom-abiding speakers.

The Motion before the House which calls attention to the case for industrial policy is couched in terms with which I suspect very few of us would disagree. However, what we do disagree about are the precise elements of an effective industrial policy. I must say that it is the first time that I have heard from the Benches opposite the admission that their industrial policy came from my right honourable friend's book. I was surprised to hear the noble Lord criticise the president for recognising that the world is changing constantly and he has moved on.

It is certainly the Government's intention to help British industry to win in international markets, and with such intense competition in those markets, particularly at a time of worldwide recession, it is all the more important that government and industry work together in partnership to help industry gain that necessary competitive edge. We are doing this by establishing the economic conditions in which industry can flourish, and we are building up a clear and useful dialogue between government and industry. Our view is that that is the best way to help British industry compete.

What UK firms need most of all, as my noble friend Lord Wade pointed out, is the defeat of inflation. That is the cornerstone of our economic policy. Entrenched inflation destroys industry's competitiveness and leads to lost output, lost jobs and lost savings. Lower inflation enables businesses to plan and invest with confidence.

We have made substantial progress. The latest figures show inflation to be down to below 4 per cent. from a peak of nearly 11 per cent. in 1990. That means that it has been below the EC average since August last year and has been below the German headline rate since February. No one should doubt our resolve on inflation. Our record speaks for itself. Under this Government inflation averaged 7.6 per cent. compared with 15.5 per cent. under the previous Labour Government. But there is still some way to go before we can consistently match the 2 per cent. inflation level of Japan, and there is no room for complacency about pay rises. In the first quarter of this year manufacturing earnings were 9 per cent. higher than a year earlier. We must exercise further pay restraint if we are to increase our competitive edge. In particular, I very much hope that those at the top of industry will send the right signals to the rest of the workforce by restraining their own pay rises. Last night's vote in another place does not help the noble Lord's case.

Our success in bringing down inflation and our resolve to reduce it still further have enabled us to reduce interest rates from 15 per cent. (when we joined the ERM) to 10 per cent. now, thereby cutting industry's costs by £7 billion a year. Membership of the ERM has not only reinforced our commitment to bring down inflation but has also provided the exchange rate stability which businesses want. I believe the noble Lord said that that was a Treasury decision. Departments do not work in isolation. We will deal with the economic scene in partnership.

I know that many businesses would like to see interest rates fall further still. But they should understand that the best way to guarantee that is to maintain downward pressure on inflation.

Prudent management of the economy will also mean firm control over public spending. That includes restraining the growth of the European Community budget.

A key area for action will be our continued promotion of enterprise. Our record is strong. Our taxation policies have reduced corporation tax to the lowest rate of both the EC and the G7. Our top rate of personal income tax is now among the lowest in the world. Trade union reforms have improved our industrial relations to a state which was almost inconceivable 15 years ago. Last year the days lost through strikes were at the lowest level since records began. Our privatisation programme is now being emulated the world over. Transferring state businesses into private ownership increases business efficiency, whether through competition or in other ways. It allows employees to take a direct stake in their companies, and it gives everyone a chance to own a real share in the nation's assets.

Our competition policy has ensured that market forces encourage British businesses to satisfy their customers and raise their quality. Our deregulation initiative has succeeded in cutting red tape for business so that it can focus its energy, although there is still some way to go. My colleagues are studying that. The way to improve the productive capacity of our economy is not to try to increase the role of government but to curtail it; not to add to bureaucracy but to reduce it wherever possible.

We have paid especial attention to small firms. It is my privilege to be Minister with responsibility for small firms. The loan guarantee scheme for small firms has provided nearly 31,000 loans since its inception. Small businesses are a vital part of our economy: firms with fewer than 20 employees provide more than a third of all private sector jobs. There are over 400,000 more small firms in Britain today than there were 11 years ago. Manufacturing output is now over a fifth higher than in 1981. The Government agree with the noble Lord, Lord Howell, that education is vital for industrial competitiveness. That is why we have done so much to raise standards through the national curriculum and other reforms.

Another key part, as many noble Lords have pointed out, which government can play in industrial competitiveness is in international trade. We shall continue to strive for truly open markets worldwide, just as our policies at home are designed to produce vigorous and healthy competition in the domestic market. In Europe our aim must be to sharpen competition, to pull down the barriers to trade and to remove unnecessary regulation. We must impress upon our partners that greater competition is the best way forward. It will both enhance the process of wealth creation and strengthen European industry's ability to compete in world markets.

On the wider international scene, I agree wholeheartedly with the noble Lord, Lord Williams, that we have to do all that we can to ensure a successful completion of the Uruguay Round of the GATT negotiations. I hope he agrees that that is a policy that my right honourable friend the Prime Minister is visibly pursuing.

We shall continue, via our export promotion policies, to assist UK companies to succeed in overseas markets. Export volumes are at record levels and the UK's volume share of world trade in manufactures, which fell under Labour, stabilised during the 1980s and has risen over the past three years. Exported goods account for more than 18 per cent. of our GDP. The noble Lord, Lord Ezra, questioned that fact, but we must look at both ends of the problem. I see nothing but pleasure in that figure. And those figures disguise some even more impressive achievements in particular sectors. Between 1981 and 1991 chemicals exports grew by over 70 per cent. and pharmaceuticals exports by almost 80 per cent. We should remember those industries more often. We are now a net exporter of televisions and we expect to be a net exporter of cars by the mid-1990s. We shall continue to help industry to build on that clear capability to win in world markets to show that the British workforce can match any other.

We shall also aim to continue to attract investment from abroad. By 1990 the UK accounted for over 40 per cent. of Japanese inward investment in the EC. In 1991 we attracted 10 times more inward investment than Germany, four times more than Italy and twice as much as France. That shows the success of our efforts to maintain an economic climate which will be attractive to investors.

I have spoken at some length on the importance of establishing the right economic conditions for industry. The other key element is to develop a clear and effective dialogue with industry. That must rest upon a solid relationship with every sector of industry and a real understanding of their needs and anxieties. Our restructuring is not just furniture moving. The restructuring at the DTI is aimed at increasing that understanding. Decisions must be based upon clear communications between government and industry. Having opened up that communication, the DTI has it at the top of its agenda to help British companies to compete and win in world markets.

Let me expand upon the reorganisation of my department which was announced some 10 days ago. There are three main elements: our industrial competitiveness will receive particular attention from a new division set up for the purpose; we shall look closely at how the UK compares with its international competitors; and we shall make it our priority to ensure that government policies do not stand in the way of our industry's performance. The Government must and will shape their policies and spending plans with full knowledge and recognition of the needs of industry.

The second element of the reorganisation is the adoption of a sectoral approach to industry. Existing areas of sectoral expertise within the department will be brought to the fore and any key sectors which are not at present fully represented will be covered by new divisions. We shall look to be at the beginning of business cycles, not at the end, and we shall look to be working in partnership.

The sectoral divisions, both new and existing, will have an explicit role to sponsor their industries, not in an uncritical way but as a basis for an informed dialogue and a constructive partnership. We are also looking at the possibility of setting up local first-stop shops as a first point of contact for businesses to stop time being wasted on re-inventing the wheel. I hope my noble friend Lord Joseph will be pleased to know that we shall include in those areas signposting to services available, to academic opportunity which will help industry, to design opportunity and to financial opportunity. It is important that we fund small companies.

In his list of what matters in industry, the noble Lord, Lord Williams, omitted people. People are absolutely vital. They are the essence of our future and our "Invest in People" programme concentrates on that. We are not aiming to be the lowest cost producer. We are aiming to be globally competitive. I am pleased to reassure my noble friend Lord Joseph that customised training will play an enormous part in our forward plans. That of course will allow small firms to work with some of the children about whose future he was concerned.

Both my noble friend Lord Joseph and the noble Lord, Lord McNair, raised the question of the status of industry, and particularly in regard to young people vis-à-vis the professions. I would say that industry does not yet honour its graduates or let its young people through nearly as much as it will need to. I hope that my noble friend will be pleased with the continuing strength of the teaching companies scheme which the DTI operates and which enhances technology transfer, gives graduates business training and improves industry and academic links.

We have heard much comment on the export credits guarantee scheme. Project exports remain healthy and the business is well on a par with previous years. I personally was pleased to hear a report from one of the successful Hong Kong submissions that our support was as competitive as that of any other country and—even better news—they did not need it in order to do the contract. ECGD announced in April 1992 premium rate reductions in over 50 markets.

The noble Lord, Lord Ezra, mentioned export services. He pointed out that there were limitations to the help we offer to companies on trade missions. That is so; after three trade missions help is withdrawn. We believe that if after three trade missions to one country contacts have not been made or agents appointed, we may do better helping in some other country. In fact, it is five missions to Japan and I admit that even that will take a little time. However, it gives people the chance to start moving. We wish to put as many people into the export markets as we can.

I hope that it is not out of order to disagree with a maiden speaker, but my view of the West Midlands is more optimistic than that of the noble Lord, Lord Howell. There is a changing shape to industry and economic activity there. The convention centre is second to none in this country. The financial services centre being built in Birmingham can hold its own throughout the world. We cannot expect industry always to be the same shape. I hope that the noble Lord will allow me to introduce him to a midwife at some point. He talked about the deaths of companies. We should also look at the births. It is estimated that in 1991,460,000 new companies were formed. But I must agree with the noble Lord that it is important that banks show more understanding of the agenda of business and in particular of small businesses.

The noble Lord, Lord Benson, said that there had been losses in manufacturing industry. I would point out that even in the machine tool industry some companies in this country are incredibly successful. They benefit from the same economic policies as others. Again. I mention the UK chemical industry as a prime wealth-creating sector on which almost every other manufacturing industry is dependent. Its trade balance was positive all the way through the 1980s and was almost £3 billion in 1991. Between 1981 and 1990 its R&D grew in real terms by almost 90 per cent. Perhaps we could take that as a firm indication of one of the reasons for its success.

My noble friend Lord Chilver pointed out that no one is immune from global competition—certainly not small firms. We aim to be well aware of the internal competitiveness they need to match. The noble Lord, Lord Dean, seemed to indicate that to be ennobled one always had to be right. I hope that he did not really mean it, otherwise my stay here would be short. I point out that unemployment in inner-city areas outside London declined between 1983 and 1991 and we can look forward to the announcement of new city challenges tomorrow.

My noble friend Lord Wade shared concern that dictatorship from the centre is not the way to encourage enterprise. I hope that he will be reassured to learn that the Department of the Environment's latest policy guidance on planning says that development is to be allowed unless it would cause demonstrable harm. The intention to allow people to grow is there.

I can tell the noble Lord, Lord McNair, that the Engineering Council has an absolutely splendid neighbourhood engineering scheme under which it sends young people from industry to share the opportunities with younger people. It works very well.

I am sorry that the noble Lord, Lord Monkswell, did not recognise that the defence industry is at the forefront of manufacturing and that the skills and technology it learns allow our engineering skills to be developed. It contributes greatly.

I am sure that the noble Lord, Lord Sefton, who was kind enough to suggest that I understood industry, would not expect me simply to read an official answer to him. I do not agree that one can criticise a company for recognising an out-of-date model and strategically planning to find the funds to build the next one, or for looking at how models can be continued in global markets where one has to have numbers to cover research and development.

The North West has many growing companies. Several of the best pharmaceutical companies are represented there. It has the glass industry and it even has one of the best television producing companies in the world. We have to look at where the future lies, and those companies all employ people.

I have tried to answer as many points as I can in the limited time. The Government are well aware of the need to maintain and improve upon our industry's competitiveness at home and abroad. Of course we believe in manufacturing industry and of course we believe in training. We believe in innovation and in the British workforce. We also believe in winning. To allow our companies to do that we are establishing the best possible economic climate.

Lord Williams of Elvel

My Lords, I am most grateful to all noble Lords who have taken part in this debate which has been interesting and useful. I should like to spend another 10 minutes or so answering some of the points that have been made but it is not the convention in this House to do so and nor do I have the time. I wish I had the opportunity to move for Papers, but that again is not the convention of the House. I beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.