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Trade And Industry

Volume 115: debated on Wednesday 29 April 1987

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asked the Secretary of State for Trade and Industry what progress he has achieved in securing wider access for British exports to the Japanese market.


asked the Secretary of State for Trade and Industry what is his latest estimate of the trade deficit with Japan; and if he will make a statement.


asked the Secretary of State for Trade and Industry what progress he has achieved in securing wider access for British exports to the Japanese market.

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

In the year ending February 1987 the United Kingdom visible trade deficit with Japan was £3·8 billion. Some progress has been made. I am glad to say that in 1986 United Kingdom visible exports to Japan increased by 18 per cent. to £1·26 billion.

Will the Secretary of State tell the House what progress has been made since he dispatched his Minister to Tokyo a few weeks ago with "a timetable in his pocket for the opening up of the Tokyo stock exchange"? First, was a timetable negotiated there, and, if so, what was it? If it was not negotiated, will the Secretary of State use the powers that he now has under the Financial Services Act?

The right hon. Gentleman has informed the House that the trade deficit with Japan was £3·8 billion, but in 1979 it was about £882 million. The position is worsening. Will the Secretary of State tell the House what action he will take to protect British industry?

The hon. Gentleman's question relates to two points. On the general trading front, the figures are inflated by the present strength of the yen. The House must understand that the figures are changing. As the yen appreciates, in cash terms the figures look larger at the beginning. In terms of volume, that will change as the value of the yen changes. It is mildly encouraging that British exports increased last year by more than those of any other Western European country.

As for my hon. and learned Friend's visit to Tokyo—and the hon. Gentleman's question relates entirely to financial services—he did indeed lay down a timetable for the opening up of the Tokyo stock exchange. There will be further financial talks at the end of the next month, and we have made it clear that we will use our reciprocity powers under the Financial Services Act if we have to. My hon. and learned Friend has already achieved a considerable moving forward of the Japanese Government's timetable for opening up the Tokyo stock exchange, and he is to be thoroughly commended for that.

Does the Secretary of State agree that there is now a real danger of a diversion of Japanese exports to the EEC following tariffs being imposed by the United States? Can he give some indication of the Government's attitude to the proposals of Commissioner De Clercq this week on behalf of the Commission, and of what measures he thinks we can take to ensure that our financial institutions have access into Japan and to deal with the anti-dumping problem? The Government have not yet made their position clear on that.

On the anti-dumping point, we are strongly in favour of effective action to stop so-called screwdriver operations, and we shall support effective steps to that end. On the question of the Financial Services Act, I do not think that I can add much to my reply to the hon. Member for Sheffield, Central (Mr. Caborn). The problem relates to the Tokyo stock exchange, and I have described that. As for trade diversion because of the American tariffs, there is a real risk of that. Commissioner De Clercq and the British Government have been working very closely together on the problem. We strongly support the Commission's proposals. If goods are diverted from the United States to the European Community, we shall take action, I hope within the next two or three weeks.

Will the Secretary of State accept that those of us who represent constituencies where electrical appliances are manufactured are bitterly disappointed at the lack of progress on trading with Japan? It has gone beyond being a normal diplomatic incident. May I suggest that the right hon. Gentleman asks the Foreign Secretary formally to call in the Japanese ambassador and express to him in the strongest possible terms that we have completely lost our patience?

Secondly, is there not a great deal to be said for taking a leaf out of the book of our French partners and treating Japanese goods in precisely the same way as the French Government have been doing for some time?

I have some sympathy with what the right hon. Gentleman said in the first part of his question. The Japanese ambassador is well aware of the Government's views, and he is also aware of the views of the House of Commons. I shall, I hope, be taking more effective steps than that. I am to see the Ministry of International Trade and Industry Minister, who is coming to London. I shall be having a meeting with him tomorrow, and on that occasion I shall convey to him what the right hon. Gentleman has said. There has been some exaggeration of the extent of what the French have done in the last few days. They have imposed duties on frozen Coquille St. Jacques and on a Japanese fish dish. Whether that will strike terror into the heart of the Japanese Government must be open to doubt.

Will my right hon. Friend make it absolutely clear that we are complaining about the unfairness of trade between Japan and this country? We want there to he full and fair trade, and we want it to be expanded. Will my right hon. Friend make it clear that that is the general view of the Government, and not that there should be an overall restriction of trade?

I agree absolutely with my hon. Friend. We want to open up the Japanese market to British goods, not to close the British market to Japanese goods. If we have to take action, either with our Community partners or, where we have to do so, on our own, that, though regrettable, may have to be done. I understand that the general aim in all parts of the House is to open up the Japanese market. I do not disguise from the House that that is extremely difficult, but some progress is being made.

Is my right hon. Friend aware that one of the few notes of caution in an otherwise very encouraging quarterly survey that was published yesterday by the CBI relates to the prospect of a world trade war? Therefore, will my right hon. Friend proceed with great caution when considering possible measures against Japan? What is proposed could be very counterproductive. What we need are specifically targeted measures.

I agree entirely with my hon. Friend. If he is referring to financial services, we have a whole range of powers. If we took action under the reciprocity powers, we would choose specifically targeted measures that we thought were very much in British interests, in order to make sure that the action that we were taking helped Britain.

As to the question of a world trade war, I could give many examples. We have a whole range of powers relating to financial services, of which the House is well aware, from the refusal of extra licences to the removal of institutions that are operating in this country. One could take any precise example between those two. If my hon. Friend cares to put down a question, I shall try to answer it. A world trade war would be a disaster for this country, which depends so much on exports. Incidentally, it would also be a disaster for the Japanese.

Will my right hon. Friend take every opportunity that he can to point out to the supporters of protectionism, whether in Japan, the United States or the EEC, that protectionist measures damage consumer interests everywhere by restricting competition, by raising prices and by reducing the volume of trade? Does he agree that in an interdependent and fragile world economy we cannot afford to concede protectionist measures to producer interests and producer lobbies who are agitating in their own interest?

In general, I agree with my hon. Friend. I emphasise what I said a few moments ago, that we want to open up the Japanese market to our goods, not to close our market to the Japanese. That is the aim that we are trying to pursue, with some success, but I do not disguise from the House that I should like it to be much more successful.

Is the Secretary of State aware that many of us are deeply cynical about why the Government started all this sabre rattling? We believe that it is probably designed more to impress the British electorate than the Japanese Government. If the Government are genuine in their desire to stop the grossly unfair trade impediments that have been placed in Japan on products from this country, why did they not act earlier to try to help the Scotch whisky industry and many other industries that have been unable to sell their products in Japan in previous years and that have had precious little support from the Government?

That is absolute nonsense, and I suspect that the hon. Gentleman knows it to be nonsense. No objective person would say that I have been sabre rattling this afternoon. That was a ridiculous remark. As to Scotch whisky, the hon. Gentleman knows perfectly well that the Community is taking action. The GATT panel is meeting this week, and we shall receive a report later in the summer. If there is no satisfaction from the Japanese Government, we shall retaliate.

When considering taking action to force open the Japanese market to British goods and services, would it not be wiser to try to hit the Japanese where it really hurts, in respect of manufactured goods, rather than take action against Japanese financial houses, which will have an adverse affect on the City? If my right hon. Friend is going to quote the GATT regulations, can he explain why it seems all right for the American Congress to take action against Japanese manufactured imports?

I am sure my hon. Friend is aware that when I was talking about financial services I was talking about trying to obtain reciprocity for our financial services in Japan, not of trying to use financial services powers for other matters. As for general trading matters, the Community as a whole must deal with them, and I think that that is well understood in the House. A great many activities are going on in the Community at present. There is the anti-dumping matter to which I referred. There is the prospect of a trade diversion because of the American actions. That matter is being actively pursued and action on it may take place shortly. There is also the action that we are taking in the Community to try to unbind the tariffs on a certain range of products as a result of Spanish and Portuguese accession to the Community.

Does the Secretary of State agree that the Japanese ambassador and the Japanese Prime Minister have been well aware of the Government's view for many years, yet the gap gets wider and wider? Will the right hon. Gentleman say something to them about the way in which Scotch whisky is taxed out of the Japanese market, and about the fact that each of the 2,000 cars that Jaguar sells to Japan is inspected individually? Is it not time to stop talking, to take action and to say to the Japanese that we will apply exactly the same measures to their goods coming here as they apply to our goods going into Japan? That will mean something, rather than having this meaningless talk that goes on time after time from the Dispatch Box.

The hon. Gentleman has chosen one or two rather poor examples. Jaguar is doing extremely well in the Japanese market. The hon. Gentleman has raised the question of cars, so he may be interested to know that Austin Rover is now the fastest growing exporter of cars to Japan and is beginning to do much better in that market. There is a long way to go. As to the question of Scotch whisky, the hon. Gentleman knows perfectly well that the Community has taken this matter to the GATT. The panel met yesterday and we will receive a report in a couple of months' time. We will either get satisfaction from the Japanese, or the Community will retaliate.

Apart from the GATT panel's deliberations on Scotch whisky, may I suggest to my right hon. Friend that it would also be encouraging to the Scotch whisky industry if, parallel with those deliberations, there was some direct representation by Her Majesty's Government to the Japanese Government about the need to end as quickly as possible their discriminatory tax regime against imports of that product?

Does the Secretary of State agree that, given the remarkable success of the Japanese industry in miniaturising every electronic product, it is not credible for the Japanese Government to claim that they cannot admit any more British members to the Tokyo stock exchange because they cannot find space for them on the floor? Therefore, was the Secretary of State not surprised to read, after his colleague met the Japanese Minister for Finance, that one of the officials present told the press that he was gratified to hear that reports to withdraw the licence of Japanese banks had been exaggerated and that he assumed that such a horrible thing would not happen? When will the Government steel themselves to give the same protection to British business and British industry as the Japanese Government give to Japanese industry and Japanese business, and to act to halt the mounting deficit in our trade with Japan, which has shot up fourfold under this Government?

I am very touched by the hon. Gentleman's deep concern for the British financial services industry and its desire to be part of the Tokyo stock exchange. I agree with him, and that is why it is so encouraging that, as a result of my hon. and learned Friend's visit, the timetable for entry into the Tokyo stock exchange has already been improved. When my hon. and learned Friend was there he set down a clear timetable and make it perfectly clear that, if it is not met, we shall retaliate. No doubt the House will keep us up to the mark.

As to the general trading front, I have already described the action that we are taking within the Community. There is a great deal of frustration, not only in this country, but in the rest of the European Community. We shall pursue this matter. It will not go as fast as all hon. Members would like, and there is no point pretending that it will, but some progress is being made.

Invisible Exports


asked the Secretary of State for Trade and Industry if he will make a statement on the level of the United Kingdom's trade in invisible exports.

The net earnings of the United Kingdom from all forms of invisible transactions amounted to £7·2 billion last year. It is likely that earnings continued at broadly the same rate, £600 million a month, in the first quarter of 1987, and further growth is expected during the rest of this year.

I thank my hon. Friend for that reply. Is it not true that a large proportion of that sum is due to overseas investment earnings? If so, do not those huge figures give the lie to the allegation that North sea oil revenues are being squandered?

My hon. Friend is entirely right. The balance of earnings on overseas investments rose by well over £1 billion last year. The great advantage of overseas investment income is that it allows the United Kingdom to participate in world expansion trends and offers a useful hedge against foreign currency fluctuations.

Will my hon. Friend continue to hold urgent discussions with my right hon. and learned Friend the Paymaster General so that any barriers to trade, particularly in the important industry of tourism, are removed? Clearly, a number of companies are holding back from investing in this country because they note that the Labour party continues to attack tourism as jobs for ice cream salesmen and Mickey Mouse jobs. Will my hon. Friend confirm that there is nothing remotely true in that, and that tourism is the fastest growth industry in Britain?

I have constant consultations with my hon. and learned Friend the Paymaster General. Alas, my hon. Friend's point is all too true. The Labour party continually regards invisible earnings as some kind of immoral earnings, to which any kind of reference is somehow demeaning.

Car Sales


asked the Secretary of State for Trade and Industry what proportion of new cars sold in the United Kingdom are imported; and how this compares with 1986.

Imports accounted for 49·4 per cent. of the United Kingdom car market in the first quarter of 1987, as against 56 per cent. for 1986 as a whole. This is a welcome change in trend and powerful evidence of the appeal of British products.

Those figures are welcome. I draw my hon. Friend's attention to the fact that Austin Rover has had its best export figures for seven years. As the buyers in Spain, Japan and the United States are demonstrating their confidence in British products, as shown by record sales to those countries, does my hon. Friend agree that the British people could ably demonstrate their concern about unemployment by ensuring that they seek wherever possible to buy British motor cars and other British products?

I entirely endorse my hon. Friend's remarks and his comments on the substantially improved export performance of the Rover Group. The Rover Group's share of the market in the first quarter of 1987 was 16·5 per cent. This shows welcome growth compared with the whole of 1986, when the share was substantially lower. There is plenty of room to demonstrate that, in terms of consumer choice, the Rover Group's products are beginning to meet demand.

For the purpose of the figures on imports, if a car is designed in Japan, built with Japanese components and has a Japanese badge on the front but is screwed together in this country, does the Minister regard it as a British car, or as a Japanese car?

As the hon. Gentleman knows very well, if the investment is made within this country and the vehicle is put together in a development or assisted area, there should be 60 per cent. of local sourcing for it to qualify as a European product.

Does my hon. Friend agree that one way to stem the tide of imports is to produce the sort of cars that the British public want? Is it not, therefore, good news that the Rover Group and Honda have agreed to proceed with the new R8 range of cars, using the best expertise from both countries to build a range of cars which we hope will establish a sound substantial market share within the European market within a short time? Is this not a good sign of job security at Longbridge in particular, which will have the task of building this good range of cars?

My hon. Friend is right and, as he knows, the developments with the Honda company continue to improve. This is the fourth occasion on which there has been a joint agreement to manufacture a motor car which has been jointly developed. From that point of view, the position of the Rover Group in relation to Honda is steadily improving, to the benefit of the workers in both companies.

Industrial Performance


asked the Secretary of State for Trade and Industry when he last met officers of the Confederation of British Industry to discuss the performance of British industry.

I last met officers of the CBI at the meeting of the National Economic Development Council on 1 April. The performance of the economy, including industry, was among the matters discussed.

Is my right hon. Friend aware of the results of the latest CBI survey, which were announced yesterday, which show that manufacturing output in Britain is expected to rise by well over 3 per cent. this year—an excellent figure — and that companies are now more optimistic about future orders than they have been at any time in the last 10 years? Will my right hon. Friend point out to the officers of the CBI that those results testify to the success of Government policies and are good news not only for British industry but for Britain?

I entirely agree with my hon. Friend. I hardly need to point out to anyone—it is perfectly obvious to everyone in the country—that the success and prospects for British industry are better now than they have been for probably a generation. The survey from which my hon. Friend quoted is the most optimistic survey that the CBI has ever produced since it started to keep such records. I believe that manufacturing output will do extremely well this year, as will manufacturing exports, and the forecast for British industry is extremely good.

Is the Secretary of State aware that the CBI has been critical of the amount of investment that has taken place in research and development, which is one of the reasons why British industry has failed in many areas?

The CBI, if it is critical about research and development, is certainly not critical about anything else. We see the survey as a great success, and we know how successful British industry is. As for research and development, certainly no one can level that criticism at my budget, which has seen a total transformation. Most of the money that used to be spent on propping up loss-making nationalised industries is now being spent on research and development.

Does my right hon. Friend agree that, in an expanding economy, successful employers need to be able to attract labour from unsuccessful employers? Does he agree also that if the SDP proposals for statutory pay controls were introduced, this would stultify the economy and restrain growth?

Yes, I am sure that that is absolutely right. It will be interesting to have the proposals explained to us in greater detail. I suspect that they will prove equally unconvincing.

If the Secretary of State pays attention to results rather than to projected surveys, will he confirm that since 1979 manufacturing output is down by 4 per cent., that investment in manufacturing industry is down by 17 per cent., and that British industrial capacity has been reduced by 20 per cent.? Is that an advertisement for the success of Government policies over two terms?

Britain's manufacturing output has grown for six successive years. The volume of manufacturing output is 14 per cent. higher than it was in the depths of the recession. The growth of manufacturing output showed a sharp spurt in the second half of last year. Outside forecasters agree with the Government in predicting strong growth in manufacturing output in Britain throughout 1987. We expect it to expand 4 per cent. faster than the rest of the economy, and faster than in any year since 1973.

Regional Strategy


asked the Secretary of State for Trade and Industry when he next intends to meet the officers of the Association of British Chambers of Commerce to discuss the impact of the Government's regional strategy.

My right hon. Friend has no current plans for a meeting with the association specifically to discuss the impact of the Government's regional strategy.

Surely the Minister, with his background, is aware that chambers of commerce in Yorkshire and Humberside are concerned about the wider implications of regional policy, including, for instance, assistance under the Industrial Development Act 1985. Is the Minister aware that the 1984 report showed that one quarter of all assistance went to the south-east? In the micro-electronics industry, for instance, only one project in Yorkshire and Humberside was supported, compared with 28 in the south-east. Surely the Minister has a responsibility to try to redress such an imbalance.

As the hon. Gentleman knows, the redrawing of the assisted area map has benefited the northern regions particularly. He will know that most assisted areas are now within that part of the country which he and I represent. He will also know that the performance of local industries and companies in Yorkshire and Humberside has shown a dramatic improvement. The regional report supplied by the Association of British Chambers of Commerce states:

"Yorkshire and Humberside: After a year of relatively poor results the figures for the final quarter of 1986 are comprehensively the best results seen for some time. The balance figures for domestic orders in manufacturing have more than trebled, and those for domestic deliveries are better still. Export performance too is significantly improved and employment levels and expectations are similarly encouraging."
That is the true position of industry in the region.

In considering the impact of regional policy, has my hon. Friend noticed that manufacturing productivity in Scotland is well above the United Kingdom average, that manufacturing exports per employee in Scotland are running at 30 per cent. above the United Kingdom level, and that the latest GDP and personal disposable income figures put Scotland in the top three of the 11 United Kingdom planning regions? Do not these excellent results shame those who constantly talk Scotland down?

I am delighted to hear such a robust defence from my hon. Friend of the performance of industry in Scotland. It is a powerful fact that improved competitiveness and productivity are countrywide. That is the surest way to improve sales, profits and employment.

Are the chambers of commerce in the north-west region more concerned than the Government about the decline of manufacturing industries, which has meant a loss of 30 per cent. of the jobs in that sector in a region that is heavily dependent on manufacturing jobs? How much longer can we continue to trade with such a massive deficit budget on manufacturing industry?

I understand the hon. Gentleman's concern about the pattern in the north-west and I concede that regions have different patterns of performance. However, the Association of British Chambers of Commerce report for the Greater Manchester area states:

"After a less worrying third quarter than in certain other regions the improvement in the fourth quarter is very pronounced, strongly positive for home and export orders".
I suggest that there is now an improving trend even in the north-west.

Is my hon. Friend aware of the quiet way in which the new post-1984 regional development grant and regional selective assistance programme is working? In the north-west and in my constituency of Lancashire, West, there have been 52 applications for such grant in the past year resulting in £3·2 million investment, which has encouraged industry to invest and has created 600 jobs in my constituency. Surely that is the way that regional development should continue, and I wish my hon. Friend every success and long may it continue.

I am grateful to my hon. Friend for making that point. He will be equally aware that, with the tailored system of regional support, the support is really reaching those particular areas and industries that need it.

Manufacturing Industry


asked the Secretary of State for Trade and Industry what is his latest estimate of the level of import penetration in the manufacturing sector.

For the year 1986, imports of manufactured products are estimated to have accounted for 34½per cent. of United Kingdom home demand.

Does the Secretary of State agree that an import penetration level for the manufacturing sector of nearly one third suggests that we are not as competitive as the Government claim in manufacturing, a view surely confirmed by the record deficit on manufacturing forecast in the Budget?

In fact, the hon. Gentleman is somewhat mistaken. Over half that total is accounted for by the import of material, either semi-finished, intermediate or capital, necessary for British manufacturing industry, for jobs and production at home. With regard to the pessimistic forecast to which the hon. Gentleman drew attention, in the final quarter of last year exports were up 6·5 per cent. and imports were up only 3·5 per cent. For the period December 1986 to February 1987, exports were up 2 per cent. and imports were actually down 3 per cent.

Is there not rather a lot of British hypocrisy in the talk about retaliation against imports when the European industrial tariff is actually higher than the Japanese industrial tariff and when so much of the European public sector is closed to Japanese or American penetration? Is it not rather odd to be demanding access for Cable and Wireless to the Japanese market, when the Japanese are not allowed into our market?

I do not know how appropriate it would be for me to be tempted to return to the subject of Japanese-United Kingdom trade on a question that does not actually relate to that topic. However, it has always been my view that the obstruction to our exports to Japan and the need to open up that market—to which my right hon. Friend the Secretary of State drew attention earlier—arises not so much from tariffs, but from the various obstructive devices that the Japanese interpose between our manufacturers and fair and proper access to their domestic market.

Do the Government recognise the tremendous continuing damage in many parts of the country, certainly in the west midlands, resulting from the high level of import penetration? Has the Minister abandoned the views that he used to advocate as a Back Bencher when he sought adequate protection for the British manufacturing industry? Has he finished with those views?

I am quite ready to let hon. Members assess what they think my views are from what I say. The level of import penetration which the hon. Member deplores, is, as I have said frequently, not within the control of the Government; it is the consequence of a variety of individual and corporate choices that are made seeking value and quality for money.

Does my hon. Friend agree that the high import figure shows that plenty of opportunities exist for British manufacturers if they care to take them? Will he support this by holding more "Better made in Britain" exhibitions?

Yes, what my hon. Friend says is perfectly right. We support "Better made in Britain" exhibitions. We are giving a research grant to the "Think British" campaign, and public purchasing is over 95 per cent. British sourced.

Does the Minister understand that the full implication of one of his previous answers is that the Government seem to have no responsibility for our balance of trade in manufactured goods? Is he aware that it was only under this Government that in 1983, for the first time, we had a balance of trade deficit in manufactured goods? Given that the deficit was nearly £6 billion last year and will be £8 billion this year, have the Government the remotest idea how this dreadful imbalance can be corrected?

Considering that the right hon. and learned Gentleman had the answer less than two minutes ago, presumably he is choosing deliberately to misrepresent what I said. The Government have no responsibility for the large and widely diffused mass of individual and corporate choices which account for the present level of import penetration. I said no more than that. If the right hon. and learned Gentleman cares to tell us what the Labour party would do to direct choice, we shall be interested to hear it.

Steel Industry


asked the Secretary of State for Trade and Industry if, when he next meets the chairman of the British Steel Corporation, he will raise the future of the five integrated plants; and if he will make a statement.

The strategy agreed in 1985, which was based on the continued operation of all five integrated works for at least three years, remains firmly in place. Decisions on a strategy thereafter must wait until a clearer picture has emerged of market developments, particulary within the EEC.

Will the Minister recognise that the Ravenscraig plan is fundamental to Scotland's long-term industrial future? Is he aware of the damage that recent speculation has done to confidence in the plant's long term future? Will he accept that the commitment to maintain steelmaking until August 1988 is no longer adequate? May we have a long-term commitment from the Government?

I understand the hon. Gentleman's concern. He will be aware that I, in company with my hon. Friend the Under-Secretary of State for Scotland, the Member for Galloway and Upper Nithsdale (Mr. Lang), who has responsibility for industry in Scotland, visited the Ravenscraig plant not long ago and had discussions with management and trade union representatives. I made it clear to them at that time that the five integrated sites policy will remain in place and cannot be altered until we have assessed the position nearer the date. The Ravenscraig plant today is working above the planned output in all areas, with some additional weekend work in the strip mill. This is a very good performance and a powerful indication that the proposals are working well at the British Steel Corporation.

As my hon. Friend knows, the British Steel Corporation is on target to make a profit approaching £200 million this year. Will he confirm that the future of the five integrated plants depends upon commercial success? If jobs in the industry, and the industry itself, are to be preserved, it is essential that the corporation remains commercially successful. Does he agree that any judgment on the future of those plants—my hon. Friend will know that the plant in my constituency is the most successful within the British Steel Corporation — must depend upon commercial success. profitability, viability, quality and reliability?

I have to endorse wholly what my hon. Friend said. The crucial factor that remains to be resolved, having agreed that the corporation is now performing with extreme success in virtually every activity, is that the market for steel products should be receptive and buoyant.

Does the Minister appreciate the need to build long-term stability and confidence in the industry and that that can best be done with assurance from the Government about the future ownership and control? Does he further appreciate that the present policies seem to be based on the premise that if steel is produced efficiently, at some future date the industry will be flogged off to the highest bidder?

The hon. Gentleman may have his own views about that, but the fact undoubtedly remains that the corporation should be in the private sector. That is where, ultimately, the Government intend to place it. The reason for that is simple — it will then be able to demonstrate beyond doubt, without any taxpayers' money being put at risk, that it can survive from profits, competition and productivity.

Does my hon. Friend agree that when the Conservative Government returned to power in 1979 British Steel was in a very sad way? It was overmanned, uncompetitive and could not win contracts against the rest of Europe, or indeed, the world. Today it is a very different story, is it not? We are now competitive. We can compete with anybody. Had it not been for the Government's help and advice, there may not have been a British Steel Corporation today.

My hon. Friend is right. It was the decisive way in which the Government tackled the problems associated with the manufacturing and marketing of steel products that enabled the corporation to restructure and to survive during the biggest steel crisis in Europe, which gave rise to the original strategy decisions in 1982 and to the decision in 1985, which is still in place.

The Minister has just confirmed his party's commitment to the privatisation of this sector of the steel industry, but will he also confirm that the previous chairman of BSC said that, regardless of productivity and profitability improvement, the privatisation of this sector could be achieved only if one of the five plants was closed?

The right hon. Gentleman will also know that over a considerable period there have been discussions with various BSC chairmen on the restructuring of the corporation. He will know that there were several discussions of that kind in 1982 and in 1985. The corporation is at the moment looking at plans for privatisation and the Government are taking advice from merchant banks. When all the advice is available, we shall take a view on how privatisation can best be achieved.

Since the top management of British Steel is notoriously anti-Ravenscraig and anti-Scottish, what guarantee will the Minister give that, in the event of privatisation, the first act of the newly privatised corporation will not be to close Ravenscraig steelworks and thus take away Scotland's indigenous steel industry?

The hon. Gentleman must take it from me that the five integrated site policy was agreed with the corporation in 1982 and 1985. There has been a consistent campaign by some Scottish representatives who seek to suggest that the corporation is not supportive of the five integrated site strategy. It is supportive of it, and it is that strategy that has brought the corporation to a highly enviable position within the EEC.

Industrial Performance


asked the Secretary of State for Trade and Industry what are the latest figures for the annual turnover of British industry.

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

The output index for manufacturing industry, excluding the energy and the service sector, was 104·6 in 1986, based on 1980 equal to 100. Since the trough of the recession in 1981, manufacturing output has grown impressively and is now over 15 per cent. higher. The turnover of manufacturing industry in 1985 was £225 billion in current prices.

Does my hon. Friend agree that those good figures, together with the CBI report that we have just received, is a tribute not only to the framework and background that the Government have provided for the industrial sector, but to management and work force within our industry, which have combined to bring Britain to the position where it can now compete right across the industrial sector with the best that the world can offer? Does that not give us enormous hope for the future in terms of the profitability of British industry and secure jobs for our work people?

My hon. Friend is absolutely right. I am sure that he will celebrate with me the fact Britain is now enjoying a top position in productivity and competitiveness—the best position that we have been in for two decades. As he is a west midlands Member, I am sure that he will also celebrate with me the fact that the manufacturing sector is now spearheading our industrial recovery and that the projected 4 per cent. growth in manufacturing will be the fastest rate of growth since 1973.

Instead of celebrating, will the Minister look at the CBI survey, in which he will find that only 15 per cent. of the companies in that survey regarded their fixed plant as adequate to the demands on them, and that 25 per cent. of companies were unable to meet demand because of a lack of fixed capacity? Is that not an inevitable consequence of the destruction that occurred in manufacturing industry during the early years of the Government's period of office, and does it not reflect on the lack of investment in fixed plant in recent years?

Alliance spokesmen should get involved in a different form of research. Industrialists tell me, day in and day out, that the worst possible outcome in business and industrial terms with regard to confidence, exchange rates and interest rates would be a hung Parliament. To that extent one can say that alliance spokesmen are arguing for uncertainty and the undermining of our economy.

Following the Budget and three cuts in interest rates since early March, are not all the jigsaw pieces now in place for the sustained growth of British industry? Should not any lingering political uncertainties have been satisfactorily dispelled by the middle of June?

If we can keep current trends going into the 1990s, talk of a British industrial renaissance would not be an exaggeration. We have a magnificent opportunity and I am sure that the electorate will not throw it away.

Insider Dealing


asked the Secretary of State for Trade and Industry what action he has taken on information so far received from the inspectors he has appointed to inquire into insider dealing at the Department of Trade and Industry.

I have received no information from the inspectors which calls for action on my part. Any question of prosecution in this case would be a matter for the Director of Public Prosecutions, who is being kept informed of the progress of the inspection.

The Government are not convincing the public that everything is now in order — quite the contrary. Surely we need the high-profile techniques of the United States regulatory authorities, which send shivers down the spines of those who are brought in for questioning, and not polite phone calls from DTI inspectors? Criminologists have shown that arrest has the greatest impact on white-collar criminals, not the softly-softly approach of the Government and the DTI.

The powers of the Securities and Exchange Commission to investigate insider dealing are less than those that are available to our investigators, and it is noteworthy that during the passage of the Financial Services Act no Opposition Member suggested a single additional power to investigate insider dealing over and above those that are contained in the Act, which are being used.

Does my hon. and learned Friend agree that not only were the Government responsible for making insider deaing a criminal offence and enhancing the powers of investigation under successive legislation, but that, considering the volume of highly commercial confidential information that passes over the desks of officials in the Department of Trade and Industry, we are remarkably fortunate in this country in enjoying a high degree of integrity among officials, which has become evident over recent years?

I very much agree with my hon. Friend's observations, which I greatly welcome.

Did the Minister note last month's statement by Tesco that it is bringing forward its hid for Hillards because insider dealing had shoved up the price of the shares of Hillards by one quarter in the preceding month? How do the Government hope to stop these scandals in the City if they cannot bring to book the insider dealers in their own Department?

The hon. Gentleman should await the outcome of the inspection to which I earlier referred before he leaps to such unwarranted conclusions. If there is any information arising out of the other matter to which he referred that warrants consideration in the Department it will receive that consideration and any appropriate actions will be taken.

Company Takeovers (Concert Parties)


asked the Secretary of State for Trade and Industry how many prosecutions have been undertaken since 1979 under part VI of the Companies Act for the organisation of a concert party.

In view of the conclusion of the Select Committee on Trade and Industry that there was almost certainly a concert party in operation at Westland, will the Minister reconsider the decision not to hold an inquiry? Is an inquiry not made even more necessary by the strange fact that while one member of the concert party — Dreyfus of Switzerland — admits that its agents were agents for Lazards, which was the financial adviser to Westland, Lazards do not admit this commercial connection?

My right hon. Friend the Secretary of State announced last year that he had decided not to appoint inspectors into this matter, and no new information has emerged to warrant changing that decision. The hon. Gentleman has completely misunderstood the nature of the information to which he has referred. All that that information amounts to is the fact that occasionally the Swiss bank concerned transacts business in London through Hill Samuel, the Midland bank or Lazard Brothers. This information was published in the Bankers Almanac and Year Book over a number of years, and it is of no relevance to the matters to which the hon. Gentleman has referred.

When does my hon. and learned Friend expect to receive the report of the inspectors who are examining the Guinness affair?

The inspectors examining Guinness plc are carrying out their investigations with considerable expedition and are making good progress. However, I cannot give a specific date as to when their report will be available.

Did the Government know about the relationship between Lazards and Dreyfus, and if so, why did the Secretary of State or his Ministers not inform the Select Committee on any of the three occasions when they gave evidence?

For the reason I gave a moment ago, if the hon. Gentleman had but listened, the information to which he has referred is of absolutely no relevance to this matter.

Overdrafts (Credit Charge Advertisements)


asked the Secretary of State for Trade and Industry whether he will consult the chairmen of the clearing banks and the Bank of England concerning the advertising of credit charges on overdrafts.

The exemption of bank overdrafts from the full documentation requirement of the Consumer Credit Act serves the interests of both banks and their customers. However, my hon. Friend the Minister for Trade told the hon. and learned Gentleman on 10 April that it might be appropriate for banks to provide more information to consumers about credit charges on overdrafts, and my officials are consulting banks and the Office of Fair Trading on this matter.

I welcome some movement in the direction of sanity. However, do the Government not recognise that the combination of the banks' right to charge whatever interest they please on what they choose to call unauthorised overdrafts, and the banks having no duty whatever to tell people what interest will be charged on such overdrafts, is a scandalous rip-off.) It is not enough simply to say that the officials are having consultations with the banks. What steps, if any, do the Government propose to take to stop this practice?

My hon. Friend the Minister for Trade explained in full in the debate on 10 April the reason why further action of the kind that the hon. and learned Gentleman thinks appropriate would not be in the interest of either the banks or their customers. We are seeing what can be done to make more information available.

While I should not like to encourage the Government to interfere in any private arrangements over overdrafts, should not my hon. and learned Friend at least encourage all the credit card companies to publish the overdraft charges and the APR available so that at least my constituents and those of any other Member can shop around? There is no question of being ripped-off, but at least customers should be allowed to shop around.

Will the Minister confirm that the burden of debt facing millions of households is not only up on an astonishingly high level but is increasing at an extraordinary pace? Are the Government to continue their lack of concern about this serious matter?

I cannot see how this arises out of a question on charges on overdrafts. However, the debts to which the hon. Gentleman referred are backed by increasing assets.

May I put it to my hon. and learned Friend that there is a legitimate subject of concern in the questions raised today? Some of the average rates of interest charged both on overdrafts and on credit card deficit balances amount to usury, if not exploitation, given that there has been a further fall in base rate today to 9·5 per cent. and we may be looking forward to a further fall. This is not a matter for the Government to get involved in private arrangements, but I do think that they could send some signals to the private sector.

The only real point of concern is whether information is given to consumers to enable them to make properly informed decisions. The Consumer Credit Act 1974 ensures that that information is available. Overdrafts that have not been previously agreed are a special case and, for the reasons that were explained in the Adjournment debate to which I referred earlier, I am asking the banks to consider what further information can be made available to their customers.

Research And Development


asked the Secretary of State for Trade and Industry if he will make a statement on the current extent of research and development funding by his Department.

In the current financial year my Department expects to spend £412 million on support for research and development, which is a threefold increase on the expenditure level of the Labour Government.

Irrespective of those figures, is the Minister aware that, since 1981, the number of people who work in research and development has fallen by more than 20 per cent.? Within the figure for research and development there has been an increase in military research and development and that suggests a serious decline in industrial research and development. If the Minister is aware of that, should he not take steps to obviate that balance by putting more money into industrial research and development? That would make sure that, when the oil production declines, we are in a position to become a competitive nation.

Yes, the hon. Gentleman is right to say that fewer people were employed in research and development in 1985 than in 1983. Between those two years it is also true to say that there was an increase in research and development in the civil sector of 16 per cent. I believe that the other part of the hon. Gentleman's question is more interesting, as it suggests that the Government, through their expenditure levels, can positively encourage industry to do the thing that only industry can decide to do—to commit the requisite levels of research and development funding to improve industry's commercial prospects.

While congratulating the Government and my right hon. Friend's Department on tripling the research and development expenditure since the time of the Labour Government, may I ask my right hon. Friend to recognise that the important point is to get the private sector to increase its contribution to research and development on a year-on-year basis? Furthermore, is there not a role for my right hon. Friend's Department to support applications for the introduction of new technologies to existing industrial and manufacturing processes?

Yes, indeed, and that is why we have an extensive, advanced manufacturing technology programme and why we introduced the LINK programme in December of last year. That is a £420 million programme which, over five years, is to be targeted at precisely the area raised by my hon. Friend. The Government and industry, in partnership on a 50–50 basis, will improve what I might call the exploitation factor—taking a research and development idea and pushing it forward into a marketable product.

Now that the Minister is the sole obstacle to agreement on the European framework programme, and in view of the projected cuts in DTI research and development expenditure over the next few years, the lack of any growth of research and development in industry since 1981, and a 10 per cent. fall in research and development in the electronics industry between 1983 and 1985, is the Minister aware that, under the Government's leadership, Britain has become the sluggard of Europe with regard to research and development?

If we are the sluggard of Europe, I do not know what Europe would have made of us in 1979, when the Labour Government went out of office. At that time there was an expenditure level precisely three times below our current expenditure level.

If I am single-handedly holding up the European research and development, I am doing so because of my belief in the correct quality of programmes. I do not see why we should be relentlessly driven down a particular path simply to appease and accommodate the types of programmes for which we believe there is no competitive future for the rest of Europe.



asked the Secretary of State for Trade and Industry if he is yet able to announce his decision on the launch-aid applications by British Aerospace plc in respect of the A330 and A340 Airbuses.


asked the Secretary of State for Trade and Industry if he will make a statement on Government support for Airbus.

Discussions with British Aerospace about its combined application for launch aid in respect of the Airbus A330 and A340 projects are continuing. We aim to reach a decision as soon as possible and an announcement to the House will be made thereafter.

I thank my right hon. Friend for that reply. Can he say how long he expects discussions to continue before an announcement is made? Can he also confirm the Government's support in principle for extensions to the Airbus range and assistance with funding?

First, I wish to recognise the considerable role that my hon. Friend has played on behalf of his constituents, who have British Aerospace and Rolls-Royce interests. The House will appreciate that the first decision that had to be taken was whether the Government believed that this project was worthy of support. That decision has been taken and we are now discussing with British Aerospace the precise level and amount of that support in a constructive and harmonious atmosphere. I am confident that we shall be able to reach agreement in the quite near future.

I am glad that the Government have finally realised the importance of such a project. Does the Minister realise that delay means a loss of orders? The longer the delay, the more orders may be lost. Has he any idea what orders have been lost up to the present?

There is no question of orders being lost at present, because the aircraft concerned in the question have not yet been formally launched. That decision has not been finally taken by the Airbus consortium. What is in issue here is the level of support that will be necessary to maintain the involvement of British Aerospace in a consortium which the Government believe is very important to the health and wellbeing of the aerospace industry, not only in the United Kingdom, but in Europe.