HL Deb 16 June 1992 vol 538 cc126-37

3.40 p.m.

The Minister of State, Department of Transport (The Earl of Caithness)

My Lords, with the leave of the House, I shall now repeat a Statement being made in another place by my right honourable friend the Chancellor of the Exchequer. The Statement is as follows:

"With permission, Madam Speaker, I should like to make a Statement. The National Economic Development Council and the National Economic Development Office were established in 1962. In the 1960s and 1970s they provided a helpful forum in which the overall economy and the performance of individual sectors could be discussed and debated. Much useful work was done and successive governments valued the role that NEDC played.

"But the era of corporatism is long passed. In the past decade, governments, not just in Britain but across the world, have pursued more market-oriented policies, the promotion of competition and the smooth functioning of market mechanisms. There have been radical changes to the structure of business and industry. The number of small firms and the self-employed has grown rapidly. Large parts of the former public sector have been privatised, and international markets are increasingly integrated.

"The British workforce has become more skilled and more specialised, with more flexible working practices and more varied career patterns. Trade union membership has declined, and in the private sector decentralised wage bargaining has become the norm rather than the exception.

"Against this background, it is clear that the NEDC no longer reflects the needs and realities of the British economy in the 1990s. Since its inception, the council has been dominated by producer interests. But its membership and structure cannot hope to represent fully the interests and views of the whole range of industry or the workforce. And, paradoxically, the continued existence of the NEDC in these changed circumstances may actually have inhibited, rather than encouraged, the development of direct contact on specific issues between the Government and trade unions and other employee associations.

"Accordingly, and after careful consideration, the Government have decided that the National Economic Development Council should now be abolished.

"The sector groups and working parties of the council will also be wound up. Over the years, they have made a valuable contribution, and some of the issues addressed by the council and these sub-groups will of course remain on the agenda. Those most closely concerned in the present range of NEDO's consultative activities may decide that they wish to continue to liaise with each other, but it will be for them to decide what is done, and how.

"The National Economic Development Office has served the council and the sector groups and working parties well. But with the end of the council, and the change in the way the Government intend to approach more detailed issues, the office itself will no longer have a role. Accordingly, its work will be wound down in an orderly fashion over the next six months. The office will close on 31st December 1992.

"It is the intention of my right honourable friend the President of the Board of Trade to offer employment to a small number of NEDO staff in his department. There may also be opportunities in other government departments. Those who do not secure employment in the Civil Service will be eligible for redundancy compensation by analogy with the usual Civil Service rules. There will be full consultation with staff and their representatives on the handling of redundancies and the applicable terms of existing redundancy procedure agreements will be fully honoured.

"I should like to make it clear that today's announcement is no reflection on the work done by the staff of the office or the sector groups and working parties. And I should like to add a particular note of thanks to Dr. Walter Eltis for his work as director general.

"The Government continue to attach particular importance to improving the effectiveness of our dialogue with industry. Indeed, in recent years we have consulted more frequently and with a wider range of interests than in the past on complex technical subjects. This is true both in the formulation of domestic policy and in the development of the UK's response to the increasing range of draft EC directives as the single market approaches. This partnership has served Britain well and it will continue. The Government will be alert to the interests of industry in developing policies across the range of its activities.

"My right honourable friend the President of the Board of Trade has already announced his intention to reshape some of his department on a more sectoral basis. He will be announcing details before the Summer Recess.

"The Government remain fully committed to maintaining a close dialogue with industry and with all other relevant interests. But I believe that this decision to bring the National Economic Development Council to an end is the right one. A close relationship between government and industry remains as essential as ever if we are to develop our policies to create in Britain a strong, dynamic and competitive economy. But the age of corporatism must be put firmly behind us."

My Lords, that concludes the Statement.

3.45 p.m.

Lord Peston

My Lords, I thank the noble Earl for repeating the Statement made in another place by his right honourable friend the Chancellor of the Exchequer. I respond to the Statement with some sadness and considerable concern. Noble Lords, particularly those on the Government side of the House, will be aware that the NEDC was introduced by their former colleague the first Earl of Stockton, who, as Prime Minister Harold Macmillan, represented, I suppose, the kind of concerned Toryism that seems to have died out in more recent times.

In responding to today's Statement I am also rather surprised because all my preparation was in anticipation of a Statement saying that the Government intended to strengthen the NEDC. Indeed I half thought that it would be moved from the Treasury to the new President of the Board of Trade. I am very much taken aback by the Statement, which apart from anything else seems to represent a defeat for the new President of the Board of Trade who is on record as saying over many years precisely the opposite of what is in the Statement, not least during the course of the general election that has just been fought. I was also under the impression that the right honourable gentleman the Prime Minister was moving us away from what I might call the ethos of a Statement of this kind into something again representing or corresponding to what I understood the modern Tory Party believed in. Clearly, I was mistaken.

The Statement refers to the era of corporatism passing and seems to imply that there is a contradiction between the view that the market mechanism should be made to work as efficiently as it can and the view that there is a role for government in meeting all sides of industry. I should like to hear from the Government how they have come to the conclusion that there is some kind of contradiction. This has nothing to do with politics. Although we may disagree on where to draw the line between the private sector and the public sector, most of us believe that the market mechanism cannot function on its own, that it requires an appropriate infrastructure and requires an appropriate atmosphere set by the Government. Therefore I should like some more and better particulars from the Government on that matter.

The Government are right in saying that governments across the world have pursued more market oriented policies. However, does the noble Earl agree that they have not abandoned the kind of tripartite set-ups that NEDC represents? They have done precisely the opposite in Germany, Japan and France. There is no conflict between the two approaches. If one needs any more conclusive evidence that the market does not work on its own and needs help, one simply has to look at the housing market, Canary Wharf or any of those matters. The market will not recover on its own. It requires government and it is helpful when all sides of industry meet in order to encourage that.

I accept what is said in the Statement about the council being dominated by producer interests. But I ask myself, "Whose fault is that?" Who appoints to the NEDC? It has always had—I accept that it was the case when we were in power—one symbolic representative of the Consumers' Association or the Consumer Council, but that did not necessarily have to be the case. If the NEDC is as useful a body as I think it is, one could have strengthened that side of it.

The Statement says that, the continued existence of the NEDC … may actually have inhibited, rather than encouraged, the development of direct contact on specific issues between the Government and trade unions and other employee associations". Can the noble Earl give any examples of this inhibition of direct contact, given that it was only a matter of the Government picking up the telephone and saying, "Come and see us, and we'll spend a few shillings on beer and sandwiches", and there could have been such direct contact? What is it that inhibited the Government that they now say that they must abolish this body?

On the specific working parties, I thought that almost everyone who had any experience both of being on the working parties and of using them thought that they had made an extremely valuable contribution. The noble Earl has said nothing about how that kind of detailed work, producing, for example, particularly important reports on training, will be replaced. Perhaps the noble Earl can tell us more. We are told that the Government intend to approach such detailed issues in a new way. Again, I should like to ask the noble Earl whether he can tell us anything more about what they have in mind.

The noble Earl voiced a particular vote of thanks to Dr. Walter Eltis, the director general. He is an old friend of mine. I should certainly like to associate myself with that vote of thanks. Of course, Dr. Eltis is an outstanding economist who is actually devoted to the kind of economics that appeal to the Government side of your Lordships' House rather than to this side. That does not make him any the poorer an economist. But I hope that the Government will have the sense to ensure that he is retained in the government machine once he gets the sack at the end of the year—although, if he goes back to academic life, that will at least be enormously beneficial to that world.

The Statement says that the Government have consulted more frequently in recent years and with a wider range of interests. Again, I have to tell the noble Earl that that is complete news to me. I should like to be given some examples of that increased consultation. Everyone in industry thinks that the Government have consulted less and less.

More generally, I have to say that it seems to me that the Statement is sending out the wrong signal to industry. Here we are in the midst of a very long recession and we have what most of us as economists predicted was impossible; namely, a major balance of payments deficit at the bottom of a deep recession. I certainly thought that that was impossible, but then this Government specialise in showing how bad I am at economics. However, as I said, we have this considerable deficit which the latest figures show to be larger than we thought. Therefore, is this the time to send out such a signal to industry? The greatest concern of businessmen to whom I have spoken about the Department of Trade and Industry over the past few years was that the then Secretary of State constantly replied to what they had to say by essentially telling them that they were on their own and that government had nothing to offer them, except good wishes.

Following the election, and especially with the new Secretary of State and the Prime Minister now being established, I had thought that the department would be sending out a quite different message to industry. I am afraid that the message is not one that British industry on all sides will find particularly satisfactory.

Baroness Seear

My Lords, we on these Benches also thank the noble Earl for repeating the Statement. We agree that the age of corporatism is over, and rightly so. As the noble Lord, Lord Peston, was prepared to admit, it has been dominated by producer interests in both parties—that is, in the Government party and in the Labour Party. Although we recognise that there has been a sea change in some sections of the Conservative Party, both have been representative of producer interests. The determination that that should not continue is something that we very much welcome.

Having said that, there are a number of issues about which we should like to have more information. The Statement says that, some of the issues addressed by the council and these sub-groups will of course remain on the agenda". On whose agenda? I believe that the noble Lord, Lord Peston, inquired whether it would be the Treasury's agenda or that of the DTI. After all, we have a DTI and it presumably has policies to do with industry. If not, what is it there for? We ask that, in the development of its policies to do with industry, it listens to industry. The department may not have, or need, a Neddy, but it needs to be in constant contact with, and to receive advice and information from, industry to deal with the rather vaguely referred to items on the agenda in the Statement. Surely it is crystal clear that the department should be listening to both sides of industry. That is not corporatism; it is sensible consultation with the people who know about industry, who have a special interest in it and a special knowledge about it and without whom no sensible industrial policies can possibly be developed.

If the department does not do that, who will invent the industrial policies? Will it be the Civil Service? That will not get us very far. Alternatively, will it be the politicians? I also doubt that that would get us very far. We are dependent upon something to take the place of the Neddies, given a government who claim to be a listening government. We should very much like to know what those mechanisms will be —without corporatism, yes.

Industry needs help from the Department of Trade and Industry about what is going to happen in the future. It needs information and research of the kind that only the DTI can undertake. The right research must be carried out. But will the department find out from industry and from the trade unions what are the urgent problems into which we need to have research? How will that information be drawn from industry? How will the work of the DTI be done and how will it be referred back to industry while it is taking place?

The Statement is extremely vague about future policies. It is a change from the old policies; some of that, as I said, we welcome. However, it tells us all too little about the really creative and responding Department of Trade and Industry that is needed in the future.

The Earl of Caithness

My Lords, I listened with great care to the remarks of the noble Lord, Lord Peston, and the noble Baroness, Lady Seear. I was especially interested in what the noble Baroness said in conclusion. She said that she welcomed some of the changes in the Statement. However, I do not think that the noble Lord, Lord Peston, welcomed anything in the Statement. I am afraid that, while many of us have moved on, the noble Lord has not moved on quite as fast as the rest of us. Perhaps he would like to try to catch up.

I believe that what the noble Lord was saying generally was that NEDO and the NEDC have formed a very successful organisation that has worked extremely well. Nothing that we have done since will work in any way comparable to it. As the Statement I repeated says, much of the structure of British industry has changed enormously. Working patterns have changed, with management and the workforce now much closer together. And there are training and enterprise councils. There is also much contact that was never envisaged—it did not even happen—when the Chancellor of the Exchequer set up NEDO in 1962. Therefore, the world has changed.

When we looked at the matter, the question was whether NEDO was the right organisation for the future. We believed that it was not. We believe that there is much more comprehensive contact within industry, the workforce and management, than there was previously. That has taken the place of much of the work of NEDO. As your Lordships will know, my right honourable friend the then Chancellor of the Exchequer, Nigel Lawson, made various alterations to the way that NEDO worked in 1987.

The noble Baroness, Lady Seear, wanted to know more about what the Department of Trade and Industry is doing. I should point out to the noble Baroness that I made reference to a Statement that my right honourable friend the President of the Board of Trade will be making, it is to be hoped, before the Summer Recess. I do not in any way wish to pre-empt what my right honourable friend will say. However, I shall draw to his attention the noble Baroness's remarks.

When the noble Baroness says that the DTI must listen to industry, I should stress that there are many more fora in which government can listen to all sides of industry than was the case when NEDO was established; for example, there are the trade associations and the innovation units. Indeed, there is a huge range of contacts which I am sure already account for more than NEDO has been doing.

3.59 p.m.

Lord Boyd-Carpenter

My Lords, as one who was a Treasury Minister in 1962, I listened to the Statement with, I must admit, some surprise. First, can my noble friend indicate whether the decision resulted from, or was affected by, any representations made to Her Majesty's Government? For example, what has been the attitude of the CBI which I understood was always very interested in the work of NEDO and NEDC? Alternatively, has industry generally made any such representations? Secondly, he referred to items on the agenda which will still continue. Would the Minister perhaps identify these and indicate by whom they will be handled?

The Earl of Caithness

My Lords, with regard to my noble friend's introductory remarks, perhaps I can understand some of his sadness, he having been a Treasury Minister when this was introduced. It is always sad when one is a Minister to see something that one has looked after change, alter and even be disbanded, as in this case.

With regard to my noble friend's first question, the decision was for my right honourable friend the Chancellor of the Exchequer, and both the TUC and the CBI have been informed. With regard to the second point that my noble friend raised, it will be up to industry to decide what are the subjects to be discussed, and not only that, but which will be the best fora in which they can be discussed and pursued.

Lord Stoddart of Swindon

My Lords, unlike my noble friend on the Front Bench, as soon as I saw that we were to have a Statement about Neddy I knew perfectly well that the Government were going to abolish it. I merely read the open book; I did not gaze into the crystal ball. Everything they have done about Neddy over the past 13 years indicated that they were about to abolish it. First of all, perhaps the noble Earl would answer the question posed by his noble friend. Did he have any representation from industry, particularly the CBI and other representative organisations, that this body should be abolished? I believe the House is entitled to a straight answer to what was a straight question.

Secondly, the Statement says that the council has been dominated by producer interest and that is the main reason given for abolishing Neddy. If that were so, would it not have been more sensible to widen Neddy to take account of consumer interests? Would that not have been the sensible way forward rather than to abolish a body which gives the Government the opportunity to discuss, together with both sides of industry, economic difficulties and policies of the day?

Is the noble Earl aware that this will have a devastating effect on the trade unions, which have been criticised, insulted and vilified over the past 13 years? Is it not a signal to them that the only way forward for them now—for them and their members, if they are to have a voice—is to become more militant? They have lost the body on which they could get together with employers and government to discuss things in a reasonable manner. They are now pushed even further away—further at arm's length so that they will have no voice at all. Bearing that in mind, will the noble Earl—I know that he is not responsible for it—convey to the Government the view certainly of people on this side of the House that we simply cannot understand why the Government wish to abolish an organisation which they could have developed not to the advantage of this side of the House but to their own advantage and the advantage of the whole of the country?

The Earl of Caithness

My Lords, the noble Lord said that it was solely due to the producer interests on the NEDC that the Government have decided to abolish it. That of course is not correct. It has been dominated by producer interests. But the question is whether it is the right forum in which to get the best out of negotiations and discussions that have quite naturally to take place. We believe that it no longer is. Rather than expanding it, we believe that British industry can now be served very much better by discussing it, as has been the trend, on a much more local and specific basis. The reason for that is quite clearly that the nature of industry has changed quite substantially since 1962. Industries are now far more international. If one looks at our big industries, one finds that they have bases all round the world; they are working on a global policy rather than on a national policy. Because of international competition and the international nature of industry the days have gone when one could put things into nice little boxes.

The noble Lord talked about the unions. I had quite a lot of experience before coming into politics and I can say that the whole climate is a great deal better than it was before. There is much more discussion and healthier discussion between unions and management. Rather than the stand-off approach which I remember as a teenager in those terrible dark days the whole approach between management and the workforce is considerably better and very much more constructive than it was.

Lord Boardman

My Lords, I hope that my noble friend will be relieved to know that I at any rate welcome the decision. Perhaps he can confirm that Neddy was created originally with the three power blocs—government and the then two very definite sides of industry which happily have since become blurred. That inhibited greatly the flexibility that it needed. Perhaps the Minister will be able to say that with the abolition of Neddy the Government hope to achieve a greater degree of flexibility to assist industry in its way forward, particularly in Europe.

The Earl of Caithness

My Lords, I am very grateful to my noble friend. He has considerably more experience than I have. He confirmed the change in working practices and that the two very definite sides of industry have become a great deal more blurred —to use my noble friend's words. Of course we believe, and it is our intention, that the proposals that my right honourable friends will be bringing forward should afford a great deal more flexibility in our discussions with industry.

Lord Cockfield

My Lords, like my noble friend Lord Boyd-Carpenter, I have a personal interest in this in that I was one of the founder members of the National Economic Development Council. Indeed, I became a member of it the second time round when I was Secretary of State for Trade in 1982. May I say, with all due respect to my noble friend Lord Caithness, that this had nothing whatever to do with corporatism. I know that it is fashionable to invent history to comply with one's own view as to present policy, but it is not really a very desirable way of approaching these matters. On this occasion I do not propose to go into the reasons and what lay behind the establishment of Neddy in 1962, although I was in fact directly involved in it with Mr. Harold Macmillan, as he then was. The real function of Neddy was twofold. It was first of all to produce forecasts of the national economy, properly broken down for the years ahead, thereby replacing what had been the old economic survey which had been produced under the inspiration of the late Lord Keynes during the 1945–50 period. Secondly, it was intended to act as what I might essentially describe as a think-tank for industry. I realise that so far as the first function is concerned the Government themselves now produce forecasts for the economy for the periods ahead. Whether they are any better or indeed as good as those that we used to produce in the 1960s may well be a matter for debate. But that is a different issue.

So far as the second point is concerned—and this is the issue I want to ask my noble friend about—I know there are innumerable think-tanks now existing, but the enormous merit of Neddy was that it brought together a wide range of people, not only on what are commonly described as both sides of industry and the Government, but there were also independent members of Neddy. Therefore it was a wide spectrum of views. The trouble with most think-tanks is that they are very much oriented in particular directions, either politically or on the basis of particular economic theories. So often they are promoting a point of view rather than trying to do what Neddy tried to do, which was to find solutions to accepted problems. I think that the disappearance of Neddy will leave a real gap here. Do the Government propose to do anything to fill that gap, or will the vacuum be left to be filled by other people with a less balanced view of many of the issues involved?

The Earl of Caithness

My Lords, with the changing nature of industry within this country and throughout the world, the detail and complexity of the problems about which my noble friend was talking have changed significantly since 1962. There will, of course —my noble friend was right about this—be issues that will need to be discussed. As I said in the Statement that I repeated, I am sure that it is best for industry to work out the best way to look at the particular problem with those who might be involved in trying to address it. That is one of the ways in which my noble friend's anxiety will be met. Another relevant point —and it was mentioned in the Statement—is the Statement that my right honourable friend the President of the Board of Trade hopes to make before the Summer Recess.

Lord Irvine of Lairg

My Lords, perhaps I may be the third Member of your Lordships' House, in addition to the noble Lord, Lord Boyd-Carpenter, and my noble friend Lord Stoddart of Swindon, to ask whether the CBI, or any other body representative of employers, recommended the abolition of the NEDC to the Government. Having been given two opportunities to answer that question, will the Minister take this third opportunity and answer the question yes or no?

The Earl of Caithness

My Lords, I apologise for my oversight in not replying to the point raised by the noble Lord, Lord Stoddart of Swindon, which has now been repeated by the noble Lord, Lord Irvine of Lairg. We have not received representations.

Lord Marlesford

My Lords, I warmly welcome the abolition of an old friend of many Members of the House. Does my noble friend agree that 30 years is long enough for most institutions to exist? It is good that they are scrapped. There are far too many institutions—

Noble Lords

Oh!

Lord Marlesford

My Lords, I said "most" deliberately. There may well be other institutions which could, with advantage, go into honourable retirement. I suspect that it is only the NEDC's abolition that will be noticed. It has not been noticed for a long time by most people.

Does my noble friend agree that many of the changes of the past 30 years, and especially the past 10 years, have produced institutions which will fulfil several of the NEDC's functions in a more modern way? I am thinking in particular of the Citizen's Charter, the regulatory mechanism for the now privatised monopolies, the TECs which have already been referred to, and the more proactive role that my right honourable friend the President of the Board of Trade will undoubtedly fulfil.

Does my noble friend agree that there is a gap which the resources released by the abolition of the NEDC might be used to fill? I refer to the need for much better scrutiny by industry and government of proposals which emerge from the European Commission. They need to be questioned under the principle of proportionality. That is, their benefits should be measured against the costs which will fall upon those who are asked to implement them. Will he consider discussing with his right honourable friends the setting up of some new institution—30 years may be enough for it to do its work—to enable industry and government to consider European proposals which may have a heavy impact on industry, often without corresponding benefit?

The Earl of Caithness

My Lords, as regards the first part of what my noble friend said, he put the matter in a more succinct form than I have been able to do in response to questions. With regard to the second point that he made, I shall of course draw his remarks to the attention of my right honourable friend. My noble friend raised a valid point when he said that there was a need to look at draft EC directives as the single market approaches. Considerable work has been done on that aspect of the matter. The cost of complying with those directives might deserve special attention in the future.

Baroness O'Cathain

My Lords, like many Members of your Lordships' House it was with considerable sadness that I heard the Statement, because, like some Members of your Lordships House, I cut my economic teeth on the NEDO, and so I feel that this is a sad moment. What is coming through is the suggestion that the NEDO has not changed. That is not true. It has evolved over the past 30 years. It has not remained static. In the early days of working with the NEDO there was confrontation, but that was defused by the work done by the little NEDOs. People went on from little NEDOs to working parties. The working parties did some valuable work which included looking at EC directives to see how they would affect industry. Recently, some of the working parties have managed to include representatives from Continental Europe. The NEDOs have not been stuck in concrete since 1962. One of the most valuable things that the NEDC has done is to build up trust and understanding among industry, the Government, the unions and/or the professions. It is important that it is not on a one-to-one basis. It is important that the discussions should take place in a room with three people. One can always have discussions with someone on a one-to-one basis and then go and have discussions with someone else on a one-to-one basis. The value of the NEDC was that all sides of the argument were brought together, and forward we went. I fear that that advantage will be lost if the NEDO is abandoned. There must be a reason for the abolition: it may be the duplication of resources. There are obviously some areas of the DTI which are doing the work that the NEDC was doing. Will the Government look closely at the possibility of continuing to have tripartite or four-party discussions: the Government, the unions, industry, and/or the professions on a regular formal basis under the auspices of the DTI? That might fill the gap which is bound to arise as a result of the demise of the NEDO.

The Earl of Caithness

My Lords, I listened with care to what the noble Baroness said. She covered the point well. There has been increasing duplication. I hope that in due course the loss that she feels will be suffered by not having the NEDO will not be as great as she fears.

Lord Bruce of Donington

My Lords, like my noble friend Lord Stoddart of Swindon, I was not the slightest bit surprised by this afternoon's announcement that the NEDC was to be abolished. I am looking at the clock and I am looking at the Minister. In the light of his noble friend's proposed 30-year limit, upon which I do not propose to trespass, I hope that he will not use the passage of time to prevent the House from hearing my views on this subject. I do so agree, and not for the first time, with the noble Lord, Lord Cockfield: originally the whole purpose of the NEDC was to formalise, albeit sometimes on an informal basis, relations between the Government and what are euphemistically termed "both sides of industry", with the objective of trying to arrive at some degree of consensus as to how our national economy should be developed and how the various sectors within it should, within a broad, general outline, be continued and enlarged. Those were its purposes. I am not in the slightest bit surprised that the Government find it embarrassing to be confronted month by month—

Viscount St. Davids

My Lords, 20 minutes have elapsed and I think that we should continue the Business of the House.

Lord Bruce of Donington

My Lords, I entirely agree. The Government's attitude has been pathetic, and it is as well that they terminate the process.