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Trade And Industry

Volume 113: debated on Wednesday 25 March 1987

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Westland Plc


asked the Secretary of State for Trade and Industry when he intends to respond to the Trade and Industry Committee's report on Westland plc.


asked the Secretary of State for Trade and Industry when he expects to reply to the report of the Trade and Industry Committee on Westland plc.

The Secretary of State for Trade and Industry and President of the Board of Trade
(Mr. Paul Channon)

Yesterday I wrote to the Chairman of the Committee with the Government's response to the report.

Will the Secretary of State tell the House whether that response contained an acceptance that an illegal concert party was in operation? Does he recommend that the Select Committee's view on transparency in share dealings should be taken so that such illegal activity is not possible in the future?

It is for the Select Committee rather than for me to reveal the exact reply that I gave, but I can tell the hon. Gentleman—I do not think that the Committee will mind if I do—that it made two recommendations, one of which related to the disclosure of material interests. I said that those were being examined under the review of the operation of the takeover panel that I announced to the House on 28 January.

Is the Secretary of State aware that Government policy has led to the loss of 1,800 jobs at Westland? Does he think that Government aid will be required?

I have no reason to assume that the company will require Government aid. The company had an extremely good year last year, and I hope that it has a prosperous future ahead of it.

I was very pleased yesterday to receive my right hon. Friend's reply, which has been placed before the Committee. We shall be considering his response, and I hope that the Government will not hesitate to make the kind of progress that the Committee has called for, especially in relation to business ethics, with which the Committee is particularly concerned.

I hope that the review will be completed by the end of April. I shall inform the House of the Government's conclusions at a very early date.

Does my right hon. Friend agree that if we are to be able to obtain information about the ultimate beneficial owners of shares hiding behind nominees and other banks, we shall need legislation to bring that about?

That may well be so. I would not rule that out. However, I should like to wait for the review before making recommendations to the House.

In view of the undertaking that the Secretary of State has already given about limiting the ownership of Rolls-Royce shares to 15 per cent., is it not essential that legislation on the lines just referred to should be introduced before he proceeds with the privatisation of Rolls-Royce?

Order. There is another question about Rolls-Royce. This question is about Westland.

With respect, Mr. Speaker, the recommendation concerns not only Westland, but companies in general. I submit that my question is in order.

I think that the hon. Gentleman should reserve his fire until we reach the question on Rolls-Royce.

Does my right hon. Friend agree that the prospects of the helicopter division of Westland are linked closely with European collaboration? Will he confirm rumours in Europe that the British Government are not to proceed with collaboration on the NH 90?

With respect, I feel that that is a matter for my right hon. Friend the Secretary of State for Defence. I know that my right hon. Friend intends to make a statement to the House about helicopters soon.

Does the Secretary of State recall assuring the Select Committee a year ago this month that he was watching the stock exchange inquiry "like a hawk"? Now that the stock exchange inquiry and the Select Committee have both concluded that the absence of a concert party strains their credulity, would it not he appropriate for him to try swooping "like a hawk"? Is it not now abundantly clear to those who want to see that the Sikorsky deal was secured by Rupert Murdoch and Lord Hanson being prepared to pay over the odds for enough shares to secure the result that the Prime Minister wanted? Is not the real reason why there was no DTI inquiry into those share dealings that they both had more influence at Downing street than the Secretary of State for Trade and Industry?

Budget Proposals


asked the Secretary of State for Trade and Industry what effect he estimates the Budget proposals will have on the level of United Kingdom trade and commercial activity during 1987.

I expect the Budget proposals to contribute to a seventh successive year of growth in the economy.

Does my hon. Friend agree that the latest CBI survey bears out the Chancellor's statement that the prospects for output and exports are now better than they have been for many years? Should not the Bank of England follow the lead of my right hon. Friend the Chancellor of the Exchequer and reduce interest rates further, which would be of particular help to manufacturing industry in the north?

My hon. Friend is right about the survey, which was carried out before the Budget. The responses on order books and the expectation of future output were higher than at any point in the history of the survey. I have little doubt that next month's figures, which will be based on a survey after the Budget, will show an even higher level of confidence. Nor is that confidence confined to the United Kingdom. My meetings abroad, with such hardheaded judges as the Swiss and the Germans, show that they also believe that permanent and beneficial changes have taken place in the United Kingdom economy.

What does the Minister say about the value of the pound against foreign currencies? Is he satisfied with its current rise? Does he have any view on how far it should rise before it becomes counter-productive?

Hello! I thought it was only a few months ago that the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) was predicting a sterling crisis because the value of the pound might fall. Perhaps he and the hon. Gentleman should have a quiet word about the appropriate angle of approach on this subject.

Does my hon. Friend agree that he might he being unfair to the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), who predicted a stirling crisis, because the excellent policies that we are now following means that the pound is bound to be strong? Does he also agree that in this excellent Budget the Chancellor of the Exchequer did not want interest rates and the pound to go too high? Would not our best hope be for the Bank of England to follow the Chancellor's excellent lead?

We have many expectations and hopes, and whether that is the best my hon. Friend may be able to judge better than me. What is certain is that matters relating to the exchange rate and the value of our currency are entirely for my right hon. Friend the Chancellor of the Exchequer.

I hope that it will not have escaped the Minister's attention that the Chancellor predicted that at the end of 1987 our deficit on the balance of trade in manufactured goods will be £8 billion. What does the hon. Gentleman say about that? Does he agree with the Chancellor, who said, from a sedentary position, that that was neither here nor there? Does the Department of Trade and Industry share that thoroughly irresponsible view of the handling of Britain's economy?

Certainly, if there is one element in our trading affairs that is less satisfactory than others, it is that relating to manufactured exports and the balance of trade for manufactured goods. We do not deny that. However, that the Opposition should make such a meal of it, singling out the one element in our trading picture where they can find a deficit, is entirely unjustified. Our trade position has to be looked at in its entirety. Our manufacturing output continues to increase. It will increase by 4 per cent. Next year. As my right hon. Friend the Chancellor said in the Budget debate on Monday, the prospects for an improvement in that sector are increasing.

National Quality Campaign


asked the Secretary of State for Trade and Industry if he will make a statement on his Department's national quality campaign.

The Parliamentary Under-Secretary of State for Trade and Industry
(Mr. John Butcher)

The campaign was launched in 1983 to raise British industry's awareness of the importance of quality for economic success, to help firms to raise the level of their quality performance and to enable firms to demonstrate their achievements. To date, over 50,000 firms have been contacted through the campaign, and there is no doubt that Britain's quality performance has improved as a result. Nevertheless, much remains to be done, and the commitment of all sections of industry and commerce to quality remains vital.

Does my hon. Friend agree that all the advantages that we have with regard to increased competitiveness, lower interest rates, and lower inflation, and the advantages in price and the other things that go with it, could be set at naught if we do not achieve the highest quality possible in our goods and services, so that we can beat off the foreign imports on our own terms and show, as we used to in the past, that "Great Britain" means "great" in manufacture and services?

I am sure that my hon. Friend will celebrate with me the recent figures, which show that the rate of growth of manufactured exports is slightly higher than the rate of growth of imports. I am sure we all hope that that trend will continue for the foreseeable future. My right hon. Friend is also right in linking non-price factors, such as improved quality and design, as part of the cause of that healthy trend. The national quality campaign has been the key in changing attitudes in British industry.

May I congratulate my hon. Friend on an excellent quality campaign? May I reassure him that "Best made in Britain" is a good policy? Our companies are competitive. Provided we deliver our goods on time, even in Leicester, we have much to celebrate. The campaign should be supported by the Opposition, because it ensures that British goods are the best made and the best for our country's future.

My objective is to double the number of companies that take part in the national quality campaign, by implementing quality programmes within companies. This year we shall also take a more targeted approach, concentrating on and helping major companies and their suppliers, concentrating on individual sectors and also involving regional campaigns in the approach.

Rolls-Royce Plc


asked the Secretary of State for Trade and Industry what arrangements he has made to discuss with the trades unions of Rolls-Royce plc the consequences of privatisation.

None. Relations with the Rolls-Royce trades unions are a matter for the company.

Why will the Minister not meet the Rolls-Royce trade unions if, as other Ministers have stated, they believe that most workers in the company are in favour of privatisation? Why will he not meet them to explain that the Government are writing off £645 million of company debt effectively to give away Rolls-Royce, and that the management is planning to close the East Kilbride works, threatening 2,500 jobs, and generally to run down the business's dependence on aero engines, threatening thousands of jobs? Why will he not meet the unions to explain those real consequences of privatisation?

At the press conference last week the chairman of Rolls-Royce specifically denied the East Kilbride allegations as having no foundation in fact. The answer that I gave to the hon. Gentleman still stands—relations between the trade unions and Rolls-Royce are a matter for the company. The Rolls-Royce employees are well aware that their order book is now standing at higher levels than ever before. The prospects are better than they have ever been.

Does my hon. Friend agree that it would be more useful if the trade unionists from Rolls-Royce met their brothers from Jaguar and had a word with them about the privatisation experience?

Does the Minister accept that there is a national interest here which must be protected and which led to Rolls-Royce being brought into public ownership in the first place? Will he therefore reconsider his plans and retain at least 50 per cent. of the shares in public ownership, thereby enabling the employees to have a share of their own company and enabling private capital to be brought in as well?

No, there is no case for that. I notice that the hon. Gentleman is sitting on the 50 per cent. fence in this case. Rolls-Royce needs to be free of public sector control to be able to make its way successfully in the private sector, and we have every confidence that it will do well.

My right hon. Friend is well aware of the excellent relationships that generally exist between the trade unions and management of Rolls-Royce. Referring to the order book that he mentioned, will he assure me that, as privatisation approaches, there will be a clear declaration by the Government, heard by the employees, managers and shareholders — the public — that the contracts into which Rolls-Royce has entered, such as those for the V2500 and the Superfan engine, will be indemnified by the Government against any consequential problems?

The V2500, as my hon. Friend well knows, is the subject of launch-aid already; and that should effectively dispose of his question on that matter.

The Superfan is the subject of a later question on the Order Paper.

As the employees of any company determine its success or failure in the final analysis, has the Minister no concern for the fact that Rolls-Royce has made no attempt to explain the possible implications of privatisation?

That is not the in Formation that I have. The management of Rolls-Royce has assured me that it has carried out an extensive programme in all its plants of explaining exactly what the implications of the policy are, by means of fortnightly employee meetings and printed material. I shall be happy to obtain some of that material and send it to the hon. Gentleman if he wishes.

Will my right hon. Friend draw a distinction between the official position of the unions on this matter and the steady stream of employees from Rolls-Royce who have come to my surgery and to the surgeries of hon. Members representing neighbouring constituencies wanting to know when they will get the opportunity to buy shares in their own company?

I am sure that my hon. Friend is giving only the latest example of what has happened in other privatisations. The work force will seize the opportunity to participate in an undertaking, which is, after all, something in which it is involved.

Before proceeding with the privatisation of Rolls-Royce, is it not essential for the Government to introduce legislation requiring the disclosure of voting rights in shares? Such legislation should be on the lines suggested in an earlier report, which I shall not mention. If the Government do not, how can they guarantee the undertaking that they have already given — that not more than 15 per cent. of the shares in Rolls-Royce will be allowed to pass into foreign ownership—if foreign companies acquire shares through British nominees?

We shall he taking steps in the privatisation to ensure that there is a 15 per cent. limit on any single shareholding, be it foreign or domestic.

Does my right hon. Friend agree that the history of privatisations has been one of great benefit to the companies that have been privatised, to their work forces, to the economy and to the taxpayer, who gains twice: once when the shares are sold and secondly when the increased profits of privatised companies are taxed?

Is it not true that privatised companies do not have the monopoly of job losses? After all, under previous Labour Governments, nationalised industries, such as steel and coal, took more than their fair share of job losses.

My hon. Friend is right. The list of successful privatisations in which productivity, performance and employee participation have increased to a remarkable extent bears eloquent testimony to the success of the policy.

Will the Minister confirm that although Rolls-Royce has denied that it is actively considering the closure of its East Kilbride plant, it has been revealed that the document referring to that has been superseded by another, which refers to rationalisation at several places in the United Kingdom? Will he confirm that there is a widespread fear that such rationalisation will inevitably lead to redundancies?

If the Minister is to commend the suggestion by the hon. Member for Solihull (Mr. Taylor), that the trade unionists of Rolls-Royce should talk to their brothers at Jaguar about privatisation, should not the same trade unionists also speak to their brothers at Coventry Climax about their experience of privatisation?

The hon. Gentleman will be aware of the press reports which I also saw last week referring to East Kilbride. As I said in my original answer, the chairman of the company went to great lengths to deny these allegations and to say that the document was no more than a management exercise by someone at a rather junior level in the company.

Nationalised Industries


asked the Secretary of State for Trade and Industry how much his Department will be spending on support for nationalised industries in 1986–87, as compared with 1978–79.

The total external financing requirement for the Department's nationalised industries is expected to be £177 million in 1986–87, compared with £845 million in 1978–79. This is a reduction of nearly 90 per cent. in real terms.

Does my right hon. Friend agree that these excellent figures are the result of determined Government policies and effective management of these industries over the years? Does he also agree that these reductions have enabled resources to be released which are much better and more effectively used in other parts of the economy?

I entirely agree with my hon. Friend that the management of the nationalised industries and also the privatisation programme have been of immense benefit to the British people.

If these industries are such a liability, as has just been mentioned by the hon. Member for Mid-Worcestershire (Mr. Forth), why is it that we saw such indecent scandals going on in the stock exchange when people were eagerly wanting to buy up the shares in these very industries?

The question that I have been asked is what the financing requirements are of the nationalised industries that I have in my Department. As to the question of privatisation, the whole House knows that the Government have transformed the prospects of the majority of the nationalised industries in this country. They have been placed in a situation in which they can be privatised, to the immense benefit of all concerned.

Does my right hon. Friend agree that the huge sums of money that have been expended on supporting the nationalised industries over the years have held back the British economy for too long, and that the sooner the rest are brought back to profitability and the private sector the better it will be?

I am sure that we should have an increasing programme of privatisation. I agree with my hon. Friend that the sums that had to be spent in the past were a great drain on the economy, and nothing illustrates that better than the example of British Steel.

Will support include non-financial matters, such as not forcing Austin Rover to give commercial information, which the right hon. Gentleman's predecessor and his Department did, although this was resisted by senior management and was extremely damaging to Austin Rover, particularly to sales of the Metro? Will the right hon. Gentleman explain why this was done, and will he assure the House that it will not be done again in the future?

I do not accept what the hon. Gentleman says, nor does this question refer to Austin Rover.

In congratulating my right hon. Friend on these excellent figures, may I invite him to suggest to the House that the fact that other countries are following precisely the policy followed by this Government is in itself a major tribute to their success?

I think that that is right. All over the world people are following the privatisation policy. It is only the out-of-date dinosaurs on the Opposition Benches who will not do so.

Does the Minister not realise that the benefits that he talks about are somewhat illusory? Does he not recognise, for example, that it is very hard to convince the consumer, in relation to British Telecom, that he or she has benefited from the privatisation? Does he not realise that £2,000 million private monopoly profit is not difficult to achieve, exercising monopoly power, but does he recognise that that means that the Government have imposed £2 million of Tory doctrine tax on consumers linked to the British Telecom system?

I do not agree with that at all. The privatisation of British Telecom has led to an upsurge in new industries and in new suppliers and to a very considerable increase in activity in the economy. The duopoly policy is also extremely successful. When one looks at the other nationalised industries, one sees that the Post Office has made very considerable strides, and I notice that the right hon. Gentleman did not mention British Steel.

Export Credit Insurance


asked the Secretary of State for Trade and Industry what information he has on the extent to which the private sector is providing cover for export credit insurance; and if he will make it his policy to encourage this development.

There are no published figures. Our impression from a variety of sources is that private sector credit insurers cover a very small, though growing, proportion of United Kingdom exports. I welcome any cost-effective developments which benefit our export trade.

Is it not a sign of the Department's inefficiency that in 1985–86 it employed 1,769 people to write just over £15 billion worth of business, whereas over the same period the private sector dealt with a greater volume of work and employed fewer than 400 people in connection therewith? When will the Department be instructed to allow United Kingdom exporters to have the choice of placing all their business in the private market? Is not the present monopoly on some work indefensible?

There are absolutely no constraints whatever on United Kingdom exporters placing their insurance wherever they wish.

I am pleased to hear the Minister's response. Will he confirm that the Government intend to maintain the present system, recognising its importance to many United Kingdom manufacturers, such as GEC, which simply could not compete in world markets without the existing Government-sponsored insurance scheme?

The Export Credits Guarantee Department has an obligation to break even, and that exercises a discipline on its judgments. However, there are, of course, certain sectors of the insurance market and certain policies which the private sector—to which my hon. Friend the Member for Derby, North (Mr. Knight) referred — simply will not touch. In those sectors, if British exporters are to have a reasonable level of assurance, the ECGD is the only recourse available to them.

Is my hon. Friend aware that he is not quite correct to say that there are absolutely no restrictions? The ECGD operates restrictions in that it deals with the basket of an exporter's insurance needs, whereas in the private sector the exporter can choose to insure with different companies for different markets. The ECGD will not permit that.

I think that the difference between my hon. Friend and me is only one of semantics. The ECGD has to exercise the comprehensive principle, but if an exporter does not like the basket approach, to which my hon. Friend referred, he has the clear option to withdraw his custom and place what insurance he can where he can.

Has the Minister seen the illuminating document, "Export Goods Not Jobs" published today by the Society of Civil and Public Servants on behalf of its members in his Department? Will he confirm that, under this Government, the Export Credits Guarantee Department has been obliged to double its premiums and that, as a result, it has lost one third of its share of the market? Will he confirm that, in the same period, the number of export support staff in his Department has fallen by two fifths, and that the number of overseas commercial officers in the Foreign Office has fallen by one seventh? Is it any wonder that exports are rising at one third the rate of imports, when the Government have been so busy pulling the rug from under the feet of British exporters?

I doubt very much whether the comparative import and export rates — to which I have already referred and which we would all like to be in better balance — have anything to do with difficulties in getting insurance cover. They certainly have very little to do with it. I am afraid that I have not seen the document to which the hon. Gentleman referred—he said that it was only published this morning — and comment on it will therefore have to wait until I can communicate with him personally.

Does my hon. Friend share my concern that the ECGD lost nearly £55 million last year on covering commercial risk, whereas the private sector manages to provide cover on commercial risk at a profit? Does that not suggest that we need to examine closely the manning levels and cost structures of ECGD, to stem the haemorrhage of taxpayers' money?

The losses to which my hon. Friend refers may relate to some extent to the internal arrangements of the ECGD, and when I went to Cardiff a few weeks ago I was very impressed by the changes that were taking place in that regard. Nevertheless, as I said earlier, we have to make available a service to British exporters to cover the sectors which, for one reason or another, the private sector flinches from entering. There are restraints, there are some sectors in which even the ECGD will not provide cover, although they are marginal. It is perfectly justifiable that some public money should be at risk in this area.

Regional Development Grants


asked the Secretary of State for Trade and Industry what has been spent on regional development grants in England so far in 1986–87; what he expects to spend in 1987–88; and if he will provide figures for the north-west.

Provisional figures for payments of regional development grants in 1986–87 to the end of February are £226·8 million in England and £91·3 million in the north-west region. The 1987–88 provision for regional development granta for England, as incorporated' in the Supply Estimates, is £105 million. Future provision for expenditure on regional development grants is not allocated at the regional level. The actual distribution will depend on the pattern of demand.

I acknowledge those figures — one is always grateful for small mercies under this Government—but is the Minister aware that the north-west region still has the second highest number of unemployed in Britain outside the south-east and London, and that far more money is necessary to get greater financial investment moving in that area and to create safer and more secure jobs? Is he further aware that the 1981–84, census taken by the Department of Employment reveals that 158,000 jobs were lost during that period in the northwest region? Is that not the result of the Government's complete neglect of a once great industrial region and the fact that they continue with their senseless and futile economic policies?

The hon. Gentleman will, on reflection, realise that the massive contribution of inflation to the health of the north-western economy is something for which he and other supporters of the Labour Government should take at least some responsibility. The north-west region will be a beneficiary of the improved economic climate and the £230 million of selective assistance that is being distributed, of which the north-west has £67 million, to create 17,000 jobs in recent years, is at least a start in the right direction.

Does my hon. Friend agree that large parts of the south-east are over-priced, over-congested, overrated and thoroughly disagreeable, and that that will become far worse in the next 20 years or so? Should not northern Members of Parliament be emphasising the positive advantages of their area, which is ideally built for future business expansion, with its marvellous infrastructure, marvellously cheap places to build businesses and homes, good schools, roads, and commercial infrastructure? If business men came to our region, particularly to the metropolitan borough of Bury, regardless of regional aid grants, they would find a wonderful place for their businesses for the future.

Notwithstanding the reply that the Minister has just given, does he not recognise that in the north-west there are large areas of dereliction, factories which have closed and many people out of work, and that the Government's hands-off approach has only been compounded by the giveaway Budget, which did nothing to provide additional resources for less prosperous regions? Will not the absence of a regional policy to provide new work, new hope and new prosperity, simply suck away yet more of our people and resources to the south-east?

I am astonished at the rashness of the hon. Gentleman, coming as he does from an area of Merseyside where more public money has been spent over more years than in any other part of the United Kingdom. Has he forgotten the creation of the urban development corporation, the enormous effort made to reclaim large parts of Liverpool's city centre and the substantial number of jobs created in many urban developments within the Liverpool area to try to deal with the problem of neglect?

Will my hon. Friend accept from me, representing a north-west constituency as I do, that the Budget was warmly welcomed by industry from every sector? Will he also accept that, far from the whingeing that we have heard from the Opposition, if we had responsible councils seeking to reduce rather than increase rates to and planning departments that were prepared to be flexible in accordance with the Government's requirement, the opportunities for industry, which in my area are immense, could be repeated throughout the north-west region?

My hon. Friend is right and I am sure that he, like others who live in that part of the north-west, will welcome the creation of the urban development corporation in Trafford Park, which I am sure will have a major influence on the centre of Manchester.

Can the Minister confirm from his figures that the cuts in regional development grant in England will be £121 million in the coming year, and that, on top of cuts in Scotland of £70 million and in Wales of £40 million, that makes a total cut in regional development grant of £230 million, the biggest single percentage cut in any one year since regional policy was established, and at a time of growing and deepening regional divisions? Given the catastrophic fall in manufacturing investment value, manufacturing employment and in manufacturing output since 1979, what possible sense does £230 million worth of cuts make? How many jobs will be lost as a result?

The hon. Gentleman should know perfectly well that the national expenditure on regional assistance is now £419 million, which represents a £36 million, or 9 per cent., increase on the previous year. The hon. Gentleman should also know perfectly well that there has been a change in the pattern of assisted areas, which has now includes 70 per cent., or thereabouts, of all those in the working population. That is the benefit of redrawing the map to ensure that all assistance reaches the parts that need it most. As the hon. Gentleman wants to discuss manufacturing investment I trust that he will take heart from the fact that, although manufacturing investment in the north has indeed declined substantially, and in the north-west it declined between 1979 and 1984 by 31 per cent., there has now been a substantial growth in manufacturing investment in the north-west. In the northern region as a whole there has been a growth of 26 per cent. in one year, and in the north-west that growth has been 10 per cent. in one year.

Company Law


asked the Secretary of State for Trade and Industry what plans he has to seek to reform company law on nominee shareholdings.

The possibility of changing company law on nominee shareholdings and other matters is already under consideration as part of the review of the operations of the takeover panel which I announced in the House on 28 January.

Why has the Secretary of State embarked on a programme of determined inertia and felicitous procrastination as regards the breaking up of offshore syndicates run by eminent and distinguished merchant bankers, accountants and solicitors who deal in nominee shareholdings? Can the Secretary of State tell us what progress has been made in the discussions between his Department and the Channel Islands and the Isle of Man, which act as havens for fraudsters in this sphere?

We have had discussions with a number of regulatory authorities, and these are proceeding extremely satisfactorily. As for determined inertia, that is hardly a fair accusation when I have already told the House that I hope to make an announcement about the review of the operations of the takeover panel next month.

Would it not be a simple matter immediately to implement the recommendations of the stock exchange, which are that nominee shareholdings should be unable to exercise voting rights or to nominate proxies?

Yes, that is certainly one of the matters presently under consideration.

Is it not possible that Marketing and Acquisition Consultants, a firm in Jersey, is a receptacle for large amounts of money belonging to Guinness, which is being fed into the island illegally? Why do the Government not find out who owns that company? Why do they not make extraordinary efforts, as against using the mechanisms that are currently available to them? The Government can find out who is behind that company if they wish to know. It is in the public interest to find out. Why do the Government not make a greater effort?

The hon. Gentleman knows perfectly well that a number of investigations are taking place. I really do not believe that it is proper for me to go further than that in the House at this time.

Research And Development


asked the Secretary of State for Trade and Industry what has been the change in real terms in Government support for civil research and development since May 1979.

My Department's support for civil research and development in this financial year is forecast to be £372 million. This is some 60 per cent. higher in real terms than in 1979–80.

Does the Minister accept that the expenditure on civil research and development in this country lags far behind that of our major competitors in other parts of the world? Will the Minister tell the House why the Government have not done more to increase that expenditure and to encourage companies to increase their research and development expenditure? Does the Minister not hang his head in shame at the way in which he and his colleagues have, in the past 24 hours, torpedoed the European Commission's proposals for increasing expenditure on research and development?

If I can take the last point first, having just returned from the particular research council, we have not torpedoed anything. What we are insisting upon is that, before we agree an expenditure of more than £5 billion, the Commission should have a sensible series of programmes with which it can convince us about what it is trying to achieve. We must also know whether the proper methods of evaluation have been put in place and whether it is possible to turn off some of those programmes if they are not achieving their targets.

As regards the hon. Gentleman's other points, he will be interested to know, from a press release from my Department on 26 February 1987, that civil expenditure on research and development in 1985 was £4·8 billion at current prices. That represents an increase of 16 per cent. on the £4·2 billion figure in 1983—two years before.

Despite the increase in 1979, does my right hon. Friend agree that scientists become somewhat blinkered about the value of projects? Is it not necessary that projects are correctly evaluated for their commercial potential? Is my right hon. Friend satisfied that the evaluation process that is carried out by the Government is sufficient, bearing in mind the vast sums of taxpayers' money involved?

Quite frankly, I do not think that one can ever be satisfied. The evaluation and monitoring procedures have improved a great deal in recent years. My hon. Friend is right. I do not see why, in the public sector, one should accept lower standards than one would in private business or, indeed, in one's personal life. If public money is involved, lower standards of monitoring and evaluation seem to obtain.

Will the Minister accept that the money that is made available for civil research and development is not fairly distributed throughout the regions of the country, because there is a tendency to go where the head offices of industries are located—in the south-east? Will he take some positive steps to ensure that regions such as the north-west get a fairer distribution of this important work?

It is not actually the head offices that do research, as the hon. Gentleman knows. It is where the laboratories are situated. I visited several excellent research establishments in the hon. Gentleman's part of the country, which shows that some good research is going on in the north-west as well.

Although I welcome the increase of 60 per cent. in real terms that my right hon. Friend announced, does he agree that a great deal more could be done by private industry, particularly when its profitability is sharply increasing?

I agree with my hon. Friend. The House will he interested to know that, although British industry expenditure on research and development has gone up 20 per cent. in the past 20 years, during the same period industry expenditure in Germany and France has doubled, and in Japan it has trebled.

What does the Minister intend to do about the figures that he has just given? Is he not worried that we have an escalating brain drain of our top scientists? What does he intend to do about that? Does he realise that that is an absolutely essential area for Government activity? What proposals does he have to offer?

The right hon. Gentleman may have forgotten the Link programme that was announced in November, which is a £420 million programme designed specifically to attack the exploitation problem that we have in this country of the extra time that it takes to develop an innovation or an idea into a marketable product. It is a large programme, working with the academic sector, Government and industry, and is designed to bring everyone together and to pull new products through.

Purchasing Initiatives


asked the Secretary of State for Trade and Industry if he will make a further statement on the implementation of his Department's public purchasing initiatives.

The public sector spends about £40 billion each year on assets, goods and services. My Department is enhancing its programme to promote, with public bodies and their suppliers, the advantages of positive purchasing with the aim of achieving value for money in this spending and, at the same time, improved competitiveness in firms.

Does my hon. Friend agree that a more efficient expenditure of that enormous sum of money could have a dramatic impact upon our economy? Will he do all that he can to achieve, say, at least a 5 per cent. improvement in the efficiency of the spending of that cash this year? Will he do the same in future years, if he can?

There are two objectives of my Department's public purchasing initiative. The first is to support the central unit on purchasing on value for money. Secondly, through the application of the principle of positive purchasing, we seek to ensure that, when the money is spent, a number of British companies become more competitive as a result of enlightened purchasing procedures and, therefore, supply more products into these contracts.

Does the Minister accept the fact that given the size of the public sector and its purchases there is a real opportunity to use it to encourage regional industry, such as in the northern region and the north-west of Scotland, and so on? There should be a specific and clear criterion. The Minister did not mention that, but said that he would take this regional distribution of purchasing into account to support the industries.

I am grateful to the hon. Gentleman for his observation. He is anticipating a certain part of our thinking on the public purchasing initiative. We have now agreed guidelines for the PPI principles, and we shall be pleased to present them either on a sectoral basis or on a regional basis. However, I accept the hon. Gentleman's point.


asked the Secretary of State for Trade and Industry if he will make a statement about the current balance of trade with Japan.

From the provisional figures for the 12 months ended December 1986, United Kingdom trade with Japan showed a balance of trade deficit of £3·7 billion.

I thank my hon. Friend for his reply, although it brings me no comfort. What evidence is there that the various undertakings that are contained in the Japanese action programme to facilitate the access of British imports to Japanese markets have been honoured by the Japanese?

Does the Minister accept that in the constituencies of various hon. Members there are electrical appliance industry and other interests which are very concerned that the Japanese people and their Government, while making encouraging noises about their desire to import, nevertheless impose such stringent and sometimes ludicrous conditions regarding the safety of various appliances that they seldom, if ever, get into Japan? If we in this country were to impose such stringent conditions as theirs, there would hardly be a Japanese product that could enter the United Kingdom.

The right hon. Gentleman is entirely right. He cites one example of, I am sorry to say, a large number of British goods that would otherwise be competitive but that are excluded by Government or quasi-governmental devices.

Will my hon. Friend take this opportunity to condemn the Japanese Ministry of Posts and Telecommunications action in blocking Cable and Wireless investment and United States investment, as allowed by Japanese law? Will he also take this opportunity to say what he hopes Her Majesty's Government can do, in the face of this acid test, to persuade Japan to allow British investment in that country?

This is certainly an exemplary situation, which completely encapsulates the Japanese attitude and the difficulty of breaking into a most important sector. The British Government have been active. My right hon. Friend the Secretary of State—[Interruption.] I do not understand why the Opposition are reacting in this way. This is practically the most serious single topic with which we are dealing. [HON. MEMBERS: "What is the hon. Gentleman going to do about it?"] I am telling hon. Members what we have done. My right hon. Friend the Secretary of State wrote to Mr. Karasawa on 13 February. He received no reply. My right hon. Friend the Prime Minister wrote to Mr. Nakasone on 4 March and has had no reply. I know that a number of senior members of the American Administration have also written about it. [Interruption.]

I assume that the Opposition's attitude is good-natured, but I detect in it a strong undertone of indignation, which I know is shared on this side of the House. In the course of time this level of indignation, which is widely held in this country, in the Community and in the United States, will finally find expression —[Interruption.] Hon. Members know very well that in GATT, in the Treaty of Rome and in all our treaty obligations there are very powerful restraints on retaliatory action, but the House is demonstrating this afternoon a level of indignation that ultimately will make such action inevitable.

Is the Minister aware that if I were standing in his shoes at the Dispatch Box answering questions in that way I would be thoroughly ashamed of myself? I thought that the Government were asking people to buy British. How can they when they look in the warehouses, the retail outlets and the shops and all the goods are made in Japan? Why does the Minister not take the short walk to No. 10 and tell the Prime Minister that he has failed in his duty and resign?

I notice that neither the hon. Gentleman nor his hon. Friends actually come out and recommend import controls—or do they?

May I say how refreshing I find the candour of my hon. Friend the Minister? May I also say that expressions from the Opposition Benches about this unsatisfactory situation are not just widely, but are wholly, shared by Conservative Members? The Japanese Government must be given to understand that their behaviour in this regard militates against a healthy and natural expansion of the world economy. They are not serving their own interests in the long run and we hope that the day will come quickly when Her Majesty's Government, in company with our partners in the Community, will be able to get some effective action against these pirates.

I am grateful to my hon. Friend for his support. For some reason, Opposition Members refuse to acknowledge that there is a comprehensive system of international trade treaties which regulate world trade. These treaties have been built up over a long period to restrain and deter trade wars. Where one country deliberately flouts, ignores or circumvents that system, it has only itself to blame for the consequences. To put those consequences in order—[Interruption.]

I do not object to what Opposition Members are doing; I welcome it. This indignation, which has not been shown in the House before, is timely and is a great help. But hon. Members and the House must realise that to take action involves a consensus of agreement with our trading partners. It involves getting the United States and the Community on side, and it may ultimately involve action outside GATT.

Miti and Japan are planning world domination through trade. Their respect for international conventions, as the Minister will know, as a historian, is hardly honourable. There are the examples of non-tariff trade barriers, the dumping of credit and the capturing of international markets. We have Nomura moving into the City of London and the financial institutions from Japan are moving to take over the City. If my hon. Friend wants a weapon, he has it there. Tell the Japanese to take their financial operations out of the City, remove their trading markets and let them go home.

My hon. Friend is quite right. Indeed, the principle of reciprocation is embodied in the Financial Services Act. This is the one sector where we have the possibility of immediate retaliation where appropriate. My hon. Friend the Under-Secretary is going to Japan in a few weeks' time and he will make that perfectly clear.

Does the Minister understand that, having invited the House to be indignant, he has now heard its indignation expressed clearly and forcefully? Does he appreciate that, for a Government who have been in office for eight years, it is not good enough for them to come to the Dispatch Box and wring their hands about the difficulties in dealing with the Japanese? Let me tell him what he might consider doing—do to the Japanese what they do to us.

I wish that I could. As the right hon. Gentleman well knows, we do not have at our disposal the same kind of administrative machine as the Japanese, and that at present we are constrained by a whole range of international treaties, to deviate from which would require the consent and approval of our partners.



asked the Secretary of State for Trade and Industry when he expects to announce his decision on launch-aid for Superfan.

Rolls-Royce has not yet submitted a full application for launch-aid. Any application will be considered in the usual way.

Does my hon. Friend agree that perhaps the best way in which he could advance any future application for launch aid for Superfan would be an early and favourable decision on British participation in the A340 Airbus, particularly in the time scale within which he indicated to me earlier this year it would be taken, that is by the end of March?

I do not expect Rolls-Royce to put in its launch-aid application quite as soon as my hon. Friend has said. Perhaps it will do so in the next two to three months. My hon. Friend and the House will be pleased to know that Rolls-Royce today announced that it has signed a business agreement with Boeing to install the 211 engine—the 524D4D in the 767 family of Boeing aeroplanes. That is very good news.

Could the Minister be a little more precise about the business of the launch-aid for the Superfan, because it is very much bound up with the success of the A340? It would help the House and those of us who are interested in the A340 Rolls-Royce engine to know exactly when all this will be resolved.

As I said in my original answer, we have not yet received a launch-aid application from Rolls-Royce for the Superfan. The situation about the Superfan in relation to the A340 is that the arrival of the Superfan engine will certainly improve the selling and marketing prospects of the A340. It is not essential but it makes the aeroplane still better. I understand that the International Aeroengines consortium, of which Rolls-Royce is a member, will take a decision fairly soon about whether to proceed with the Superfan. All these decisions have to be taken in sequence.