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Trade And Industry

Volume 131: debated on Wednesday 13 April 1988

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Manufacturing Industry

1.

To ask the Chancellor of the Duchy of Lancaster what has been the increase in manufacturing profits and in manufacturing investment in the latest three years for which figures are available.

The Parliamentary Under-Secretary of State for Corporate Affairs
(Mr. Francis Maude)

Figures for profits are available only up to 1986. Gross profits of manufacturing companies, including income from self-employment, at current prices increased by £2·2 billion in 1984, £2·3 billion in 1985 and £3 billion in 1986. Gross investment in the manufacturing sector, including leased assets, increased by £1·6 billion and £1·9 billion in 1984 and 1985. respectively, was unchanged in 1986 and is estimated to have increased by a further £0·8 billion in 1987.

Against the background of those figures, is the Minister not alarmed when, with such a growth in company profits, our manufacturing investment is still 11 per cent. lower than in 1979? Is the Minister not perturbed by the pathetic level of research and development in this country, which is lower than that in France, Germany and Italy and less than a third of the rate of increase in Japan since 1981? Does he accept that that low level of R and D is a major contributory factor to our poor level of investment in manufacturing industry? Will the Minister set up an inquiry to examine those issues and consider the impact on investment?

I will certainly not set up an inquiry. The hon. Gentleman seems to think that profitability and investment are somehow inconsistent with each other. Of course, profitability in manufacturing in this country is not yet back to the levels that it reached in the early 1970s. If one wants people to invest in industry, one has to show a return on it. If people can make more money by investing in the building society than in manufacturing industry, they will do that. Profitability is now increasing and has been increasing for some years. However, it still has some way to go before it hits the levels of the early 1970s. [Interruption] I am asked what went wrong. The answer is the Labour Government in the late 1970s.

Is it not a fact that manufacturing industry in the United Kingdom is now setting the pace in the Western world, unlike the time when overmanning in nationalised industries, paid for by the taxpayer, put those industries on a treadmill of failure? We have released those industries, and that is why the jobs that we are creating are real jobs, not overmanning manufactured jobs.

My hon. Friend puts his points robustly and well. The trend that I have disclosed is one of rising and increasing success for British manufacturing industry. It shows that not only profitability but investment, are increasing. It is encouraging that our investment intentions survey shows a further increase in investment this year of 16 per cent. with a further real terms increase in 1989. That is thoroughly good news.

In support of my hon. Friend the Member for Newcastle upon Tyne, North (Mr. Henderson), may I ask the Minister to consider the fact that in 1986 import levels in textiles, steel, chemicals and motor cars exceeded £6 billion? Against that information, is the Minister not being complacent, and will he listen carefully to what my hon. Friend has said, because the Government have surrendered much of British manufacturing industry?

I hear what the hon. Gentleman has said. Of course, I listen carefully to what anybody says on this important subject. Exports from this country have increased pretty dramatically. Many of the goods to which the hon. Gentleman referred are imported by British industry for use in British industry. About 75 per cent. of imports are for industry, not for consumers.

Inner-City Policy

2.

To ask the Chancellor of the Duchy of Lancaster if he will make a further statement on progress in implementing the Government's initiatives for inner-city regeneration.

The Chancellor of the Duchy of Lancaster and Minister of Trade and Industry
(Mr. Kenneth Clarke)

I am pleased to say that excellent progress has been made in implementing the action for cities measures announced on 7 March. My right hon. Friend the Secretary of State for the Environment is finalising the boundaries of the Lower Don Valley urban development corporation and hopes to lay an order before the House next month. He is about to appoint consultants to report on the extension of the Merseyside development corporation. My hon. Friend the Minister of State, Home Office launched the first of 20 safer cities initiatives in Wolverhampton on 7 April. My hon. Friend the Minister of State, Department of Employment is to open the first of six new inner-city small firms service offices in Sheffield on 19 April. 1 took part this morning in Newcastle in the first presentation to encourage company involvement in urban regeneration which was attended by about 200 local business leaders..

I thank my right hon. and learned Friend for that reply and welcome the progress that has been made. Nevertheless, does he agree that resources for investment in the public and private sectors inevitably are finite? Does he accept that for property developers in particular the pickings to be gained by developing in the over-developed, luscious parklands of the south are far easier than redeveloping in urban areas of the kind to which he has alluded? Will he please get together urgently with my right hon. Friend the Secretary of State for the Environment to see whether we can add to the incentives that he has announced disincentives to develop in over-developed areas?

I am glad to say that the total level of investment in the United Kingdom economy, particularly manufacturing investment, is continuing to rise. I do not accept that the level of investment is necessarily finite. However, I understand my hon. Friend's anxiety about the pattern of development, and I am sure that he will welcome many of the measures that I have just announced, because they make it ever more attractive to invest and develop in parts of the country that previously were in decline. Those areas need new factory and housing development for the kind of growth that we are describing.

Does the Minister accept that for the regions and inner cities, particularly in the north and Scotland, to be successful, they will have to be given a fair share of the corporate headquarters and jobs that go with them? What steps does he propose to take to ensure a greater balance and distribution of those jobs rather than an excessive concentration in the south-east, to which the hon. Member for Christchurch (Mr. Adley) referred and by which the right hon. Member for Henley (Mr. Heseltine) is disturbed?

I agree with the hon. Gentleman that the difficulty is that a large proportion of companies tend to have their headquarters in London and the south. The geographical size of the United Kingdom is not so great that that problem cannot be overcome. In the end, it is for companies to decide where to locate their corporate headquarters. In that regard, Scotland has certain advantages over provincial England, and there are indeed more corporate headquarters in Scotland.

Does my right hon. and learned Friend accept that I do not wish to damage the scheme by praising it? I believe that what is being done in the inner cities is the result of one of the best and most robust measures that we have taken in this Parliament. Will he ensure that aid is provided to level old factories so that new industries can rise and thrive? That would be one of the most interesting and useful things that any Government could do for the midlands.

I am grateful for my hon. Friend's support and advice. I hope that we can help those involved in the Birmingham heartland scheme to achieve what he described in that large area of derelict land in west Birmingham. Everybody with an interest in Birmingham must want to see that area developed as rapidly as possible. We hope that Sir Reginald Eyre and his colleagues will be able to make rapid progress.

What is the point of breakfasting business men at £400 a head when the reality is that in a city such as Newcastle, where the Chancellor was this morning, there will be a loss of £2·8 million in purchasing power as a consequence of the changes in the social security scheme? Is not the combined effect of the Government's changes in the Budget and the social security scheme to take money from the deprived in the inner cities and give it to the affluent, who are largely in the south-east? Does that not mean that the effect of the Government's much touted initiative is to perpetrate a cruel and wicked charade?

I do not mind having my leg pulled about breakfasts, but this morning's presentation to the leading business men of the city was very professional. The hon. Gentleman will find that they were impressed by what they heard. They intend to build on what has been achieved with the new Metro centre in Gateshead and the new Burton Design Works in Newcastle. The economy of the area is reviving and will revive in the inner cities. I am sure the hon. Gentleman will welcome the fact that our changes to the rating system, particularly the non-domestic rate, will ensure a reduction in commercial rates in Newcastle of 32 per cent. in the near future. That policy benefits the north, largely at the expense of the south, in a way that he should welcome.

Information Technology

3.

To ask the Chancellor of the Duchy of Lancaster what steps his Department is taking to help improve the quality of usage of information technology in British businesses.

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

My Department encourages British businesses to make efficient and effective use of information technology by a variety of means, including the encouragement of best practice, support for collaborative research and development and technology transfer. It is, of course, for individual firms in their particular circumstances to decide how best to make use of IT and so derive the best possible benefit from investment in the technology.

Does my hon. Friend agree that the contribution that the better use of information technology can make to the competitiveness of British industry is much under-estimated in this country? Does he also agree that, because the Government are major users of information technology to the tune of £1·5 billion a year, they can set a good example to British industry? Therefore, will he outline to the House how he is sure that his own Department is taking the correct decisions both at the point of purchase and after the event?

The best way of seeking our own departmental assurance is to take advice, where necessary, from experts and practitioners in the industry. I should like to reassure my hon. Friend that we do our very best to remain enlightened users of IT. The general impact of IT usage is a key-enabling technology which pervades all sectors of the economy. That is why my hon. Friend's question is so relevant. Certainly, to my knowledge, for the first time since the war Britain is now out-performing the Federal Republic of Germany in a crucial application area—the use of computer-aided design and computer-aided manufacturing equipment. We are now, in the first major investment programme since the war, outstripping the Germans to the tune of 8 per cent. market penetration. I believe that that is a very significant event.

Will the Minister nevertheless recognise that the failure to produce a follow-on programme for the Alvey programme and the substitution for it of the ESPRIT II programme within Europe has left a void in Government support, specifically for the application of new techniques for the British partners in international collaborations? Does he realise that that is losing the country a great deal of the benefit which, as he rightly said, we are fully capable of achieving from information technology if only we are properly organised, with the support of the Government?

We achieved final agreement for ESPRIT on Monday. The hon. Gentleman is correct when he says that there was no follow-up to the Alvey. He will know that there is a programme of about £84 million over five years, partly funded by the Science and Engineering Research Council and by ourselves, which is following up a number of Alvey initiatives. He will also know that there are a number of other programmes in electronics and information technology. We now have, subject to an additional review, the Gallium Arsenide programme, which has been complicated a little by the difficulties between the two participating companies. So we are following up Alvey in the right way in collaborative and pan-European research.

Urban And Rural Areas

5.

To ask the Chancellor of the Duchy of Lancaster what assessment he has made as to what lessons derived from inner-city initiatives can be applied in other distressed urban and rural areas.

There are three clear lessons. First, the private sector has to he involved in regeneration measures. Public money should be used to bring in private investment. Secondly, efforts to encourage business, improve the environment and motivate local people are more effective when combined. This is why we have established city action teams and task forces to pull together Government effort in inner cities. Thirdly, action has to reflect local circumstances. We have therefore developed a range of measures—from urban development corporations to compacts between schools and industry—to respond to local needs.

Will my right hon. and learned Friend bear in mind that many of the economic and social problems of the inner cities are found on a smaller scale in many rural towns and rural areas across the United Kingdom? Will he therefore draw to the attention of local authorities in those areas some of the exciting solutions that he is finding in the inner cities?

I know that my hon. Friend's constituency suffers from a high level of unemployment. There are many similarities between the problems in Pembrokeshire and those in the depressed towns in the north and in the inner cities in parts of the midlands and the south. Therefore, I accept my hon. Friend's argument that many of the lessons we have learnt about how to stimulate new investment, new business and new employment could, with advantage, be applied to places such as Pembrokeshire.

Does the right hon. and learned Gentleman agree that one of the lessons to be drawn from the Leicester experience is the Government's inability to co-operate with and consult the local authority? That is why the inner city initiative in Leicester has been such a disaster.

I think that the inner city initiative in Leicester has been a considerable success, and that it is getting better, because we appear to be achieving a slightly higher level of co-operation with the local authority. It has something to do with the so-called new realism which is said to have been affecting the Labour party since the last general election. In so far as there has been unnecessary political dispute in Leicester, plainly I must assert and remind the House that it was wholly caused by the immediate hostility of Leicester city council the moment that we announced our initiative and before the Government agents had arrived.

Does my right hon. and learned Friend accept that the inner city areas that he is working so hard and with a degree of success to try to bring round have a great deal to learn from other areas in the country that have also been through depressed times? Will he take on board what has happened in my constituency and ensure that the lessons of Corby are applied in all areas that face high unemployment?

The amount of new investment and the collapse in the level of unemployment in Corby are quite spectacular. They are almost matched by the new investment in Scunthorpe and by the new investment in jobs in Consett, both towns having been affected by changes in the steel industry in the past. I agree with my hon. Friend that the success in Corby shows what can be achieved by towns elsewhere that face a severe economic crisis. We shall apply the lessons of Corby throughout the country.

What lessons has the Minister learnt from Scottish and Newcastle's approach to inner city initiatives, which was to take jobs out of a profitable brewery in Workington—a brewery that received Government grants over the years—and put them into Newcastle? Does he not understand that that constitutes the rape of Workington? It is a criminal act in a moral sense. That company has no right at all to act as a job thief and take jobs away from a profitable brewery in try constituency. Will he now intervene, whereas previously he refused to do so?

The hon. Gentleman must take up with the management his grievances about the decisions of Scottish and Newcastle Breweries. In my experience of the inner city policy, Scottish and Newcastle Breweries has been a very responsible company. It has worked closely with the Government at its Moss Side brewery in the middle of Manchester, where it received a large urban development grant and recruited and trained a large number of unemployed people from the deprived area around the brewery. It has been equally responsible in the north-east of England. The hon. Gentleman knows perfectly well that as a Minister I have no responsibility for the dispute in Workington to which he referred.

Will my right hon. and learned Friend bear in mind that Skelmersdale has very similar problems to Pembroke? In the last 12 months the level of unemployment in the new town has been reduced by nearly 1,500 and major steps have been taken to build new factories in the town. When the task forces in the inner city areas have done their job, will he bear in mind that they could do a great deal of good in places such as Skelmersdale and Pembroke and in other rural and urban areas that are not included in the inner city initiatives?

I share my hon. Friend's pleasure at the fall in unemployment in Skelmersdale and in the north-west generally. I agree that we have to look at the problems faced by all communities such as his in the north-west. We always envisaged that the task forces would be temporary in the cities, where they were established, and that they would aim to work themselves out of a job so that they could move to other parts of the country when they had carried out the necessary pump-priming in the inner city districts.

When the Chancellor of the Duchy of Lancaster considers expanding these schemes, will he take into account the role of local authorities? Many people are worried by independent reports about the urban development corporations and the task forces showing that, because of Government dogma, the best results are not being achieved. A major report, funded by the Government and local authorities, showed clearly that in the Sheffield scheme it would have been far better to have a partnership than to impose an urban development corporation. Some now say that the UDC could impede progress. Will the Chancellor and his Department have a word with the Secretary of State for the Environment to make sure that there is no imposition and that instead a genuine partnership is developed that involves the local authorities?

We achieve excellent relationships with local authorities of all political complexions in some parts of the country. I share the underlying assumption of the hon. Gentleman's question that it is desirable for the Government, local authorities and the private sector to work together.

Although there is a difference in the conclusions arrived at for the redevelopment of the Don Valley, I do not believe there is any difference between the aims of the Government, the hon. Gentleman and the local authority. I believe that, in time, it will be realised that the Don Valley urban development corporation is of considerable benefit to Sheffield and south Yorkshire, and that it will prove of considerable advantage in redeveloping the land more quickly than the alternative proposals would have done.

Exchange Rates

6.

To ask the Chancellor of the Duchy of Lancaster what representations he has received about exchange rate stability from manufacturing industry during the past 12 months.

My Department has received representations from a number of companies and trade organisations on the subject of exchange rates.

Does my right hon. and learned Friend agree that manufacturing industry greatly prefers stable to floating exchange rates and would like Britain to join the exchange rate mechanism of the European monetary system? Is he pressing that view on his colleagues in the Government?

We all wish to see a certain stability in exchange rates, because that is to the advantage of all international trade. However, given the present state of the international exchange markets, it is not possible to achieve complete stability. I have always found the EMS and the idea of joining it attractive. As my hon. Friend knows, the Government will decide whether to join it when the time is right.

Is the Chancellor of the Duchy of Lancaster aware that not many days ago, just before the Easter recess, we had a meeting here with the representatives of the hosiery and knitwear trade and the unions working in it? The right hon. and learned Gentleman, of course, was not present at the meeting, so I am telling him about it now. During those discussions the representatives mentioned not only the unfairness of competition but the financial instability in the exchange rate. When will the Government do something about the problem? Industry is crying out for stability to help it on its way to success. Will the Minister get off his backside and do something about it?

I am sorry that my duties as a Minister sometimes prevent me from pursuing my interests as a constituency Member and attending meetings with representatives of the hosiery and knitwear trade. I am delighted that the hon. Gentleman was there looking after the interests of my county and of those who work in the industry.

Of course, we all desire reasonable stability in exchange rates. However, hon. Members must consider the state of the world exchange markets. No currency can be guaranteed stable exchange rates. Exchange rates have, in fact, been rather advantageous for the bulk of British industry over the past 18 months or two years, but some movements are inevitable, given the present state of international markets.

Does my right hon. Friend agree that, while it is obvious that industry prefers stable exchange rates, another perhaps even more important factor is the control of inflation? When the CBI next complains about the exchange rate going up in Britain, will he perhaps remind it that in Japan the yen has appreciated by 40 per cent., and that that country is still able to beat us in many of our export markets?

I agree with my hon. Friend. Germany and Japan do not seem to have suffered noticeably from having strong currencies over the past few years. My hon. Friend is also right that, when the level of interests rates is being set, a number of factors must be taken into account. One is the effect of changes on the exchange rate; another is the effect on internal demand, monetary policy and the inflation rate.

Rover Plc

7.

To ask the Chancellor of the Duchy of Lancaster when he last met the chairman of Rover plc; what subjects were discussed; and if he will make a statement.

I made a statement on 29 March on the subject of Rover Group privatisation, and I have nothing further to add.

Does the Minister accept that most people will judge the Government's sale of Rover by the extent to which British Aerospace increases volume car production and maintains—if not accelerates—the pace of design and engineering projects, including the crucial new Metro? In view of the reports in yesterday's and today's Financial Times, will the Minister make it clear that there is no question of the Government's allowing the EEC to reduce the amount of public money going into the new combined company, as that would be bound to have an adverse affect on investment and jobs?

There are European Community rules on such matters, and sensible discussions are now taking place between us and the Commission, which will reach their outcome in due course. The agreement that we have reached is subject to the Commission's approval, and to that of British Aerospace shareholders. We shall have to await the outcome of the discussions taking place now in Brussels on the first point.

Since, no doubt, the chairman of Rover demanded stable exchange rates, and since the Chancellor of the Exchequer has promised stable exchange rates to manufacturing industry, will my right hon. and learned Friend be good enough to guarantee to the rest of the community eternal youth?

I have no recollection of having promised stable exchange rates to anybody. I rather regret that it is impossible for any Chancellor of the Exchequer to achieve complete stability in exchange rates in present circumstances. We would be more interested in discussing with the Rover Group the terms upon which we negotiated the proposed sale to British Aerospace. I think that they are reasonable, that £800 million is a fair reflection of the debts that would be accumulated by Rover Group at the time of completion of the sale, and that the £150 million that BAe proposes to pay is a fair price for the Government's share.

When the Minister next meets the chairman of Rover plc, will he ask him when he intends to meet the trade unions? Does he agree that there was no consultation with the trade unions prior to the announcement of the bid by BAe—[Interruption.] Never mind the yahoos behind the Minister. The trade unions do matter to the people who work at Rover. We occasionally hear from the Tories that they matter. One of the Minister's colleagues behind him is nodding assent. Does the Minister agree that they matter just as much as shareholders? Will he ask the chairman to meet the trade unions to explain about the bid from BAe and where Rover fits into the picture?

As my hon. Friend the Member for Solihull (Mr. Taylor) was provoked into remarking a moment ago, not surprisingly consultation with the trade unions was no doubt complicated by the rather foolish strike that was taking place at Solihull at the time that the negotiations were under way. However, I am sure that if the hon. Gentleman puts his point to the chairman of the Rover Group he will be reassured about reasonable relationships with the trade unions. I suspect that large numbers of trade unionists inside the Rover Group rather welcome the proposed deal with BAe and think that it offers them a good stable future in the private sector.

When will my right hon. and learned Friend scrap the so-called gentleman's agreement by which we put up non-tariff barriers against Japanese cars? Is it not true that those non-tariff barriers benefit Japanese manufacturers by giving them a cosy high-price market in which to sell, compound the inefficiency of the British industry and cost consumers dear?

We keep such agreements under review inside the Government. I have considerable sympathy with my hon. Friend's point of view that, on closer analysis, such deals often turn out to be of considerable advantage to Japanese importers by guaranteeing higher prices for a lower volume of sales than they would otherwise be able to have.

Will the Chancellor clarify the precise allocation of the £800 million cash injection? Can he confirm reports that, depending on the definition of debts in the Rover Group's balance sheet, a surplus of between £43 million and £240 million will accrue to BAe? What guarantees can he give that that money will be invested in jobs and new vehicles, and not used to inflate BAe's share price?

The figure of £800 million was a reasonable estimate of the level of debt likely to be faced by the company at the time of completion of sale. I think that the hon. Gentleman has, understandably, been disturbed by some of the interpretations that have been put upon the Rover Group's annual accounts which were published recently. The figure of debt shown there was the figure at 31 December 1987, not at the expected date of completion of sale. The figure in the published accounts leaves out the provision that has already had to be made for restructuring costs that will be incurred following the changes made in Leyland Trucks. When one takes into account further additional losses likely to be made this year, one comes to the £800 million, which was the Government's best judgment.

Will my right hon. and learned Friend quickly resume the proper position of a Minister in the Department of Trade and Industry in relation to the Rover Group and advocate to the chairman of the Rover Group that he takes quick action to invest in Land Rover so that new models can be produced, so that spare parts can be provided to those who have bought from Rover in the past and so that service and marketing arrangements, which have been woefully inadequate, can be improved dramatically within the next nine months in order to make the industry one of the great growth industries in Britain?

I am sure that the proper role of a Minister of Trade and Industry is to leave such matters to the commercial judgment of the owners of the company, but I am sure that the chairman of the company would acknowledge the force of some of my hon. Friend's criticisms. Land Rover is obviously a very attractive part of the business. It should have a very strong future and I am sure that the present management, under new or present ownership, will take steps to ensure that its performance is everything that we would desire.

Returning to what the right hon. and learned Gentleman was saying a moment ago, is it not the case that, on any basis, the £800 million cash injection is a generous estimate of indebtedness and that it is certain to leave some surplus over and above the indebtedness of the Rover Group? In those circumstances, is not the failure to achieve any guarantees on investment, model development or jobs all the more extraordinary and lamentable? What was the right hon. and learned Gentleman's Department doing over the past few weeks? Was it conducting a genuine commercial negotiation on behalf of the taxpayer, or was it getting rid of Rover at any price?

I do not agree with the hon. Gentleman's assertion. In more detailed discussions with the European Commission, I trust that we shall be able to satisfy it that we are making reasonable provision.

I am not sure what the point of the hon. Gentleman's attacks is. His comments slightly contradict those made a moment ago by his hon. Friend the Member for Oxford, East (Mr. Smith), who feared that there might be some reduction in the amount of public money going into the company. We are interested, not just in injecting public money into the company, but in making a reasonable and proper deal. The deal is based on what we think is a good estimate of the level of bank indebtedness of this company at the time of the likely completion of the sale.

Single European Market

8.

To ask the Chancellor of the Duchy of Lancaster what representations he has received about his campaign to publicise the approach of a European single market.

We are continuing to receive a large number of representations, all of which warmly support our campaign to alert British business to the challenge of completing the single market. The major phase of our campaign starts with a national conference at Lancaster House next Monday, 18 April.

Does my hon. Friend agree that the concept of the single market will suffer if monopolistic concerns in Europe, such as airlines or steel producers, continue to operate cartels, unofficial or official, to the great detriment of users and, indeed, to employment?

One of the objects of the completion of the single market is to make sure that competition operates within the market to the benefit of consumers.

Would it not be to the advantage of British business if we had joined the exchange rate mechanism of the European monetary system by the time we join the single market? In that case, why is the Minister of Trade and Industry saying that the time is not yet right to join the EMS? Will he still be saying that in 1992, if he is still there?

It is not for people in my position to predict the future. My right hon. and learned Friend makes his point about when he thinks is the right time to join the ERM and no doubt those making the decision will hear what he says.

Have the Government made any attempt yet to estimate what are likely to be the massive savings that should be made in British Customs administration from 1992 onwards?

There should be significant administrative savings. There are also estimated to be significant economic advantages to the whole of the Community. A report by the European Commission indicates that there should be increases to the Community's GNP of about £140 billion. Obviously, that has a major advantage for us. To those who say that the advantages will go one way, I say that that is a sad reflection on the competitiveness of British business. I believe that British business is now well placed to benefit from the opportunities that the single market will offer.

Does the Minister remember all the public relations effort at the time of our original entry into the Common Market setting out the tremendous advantages to British industry? Will he check the figures and show the continually increasing deficit in manufacturing industry between Britain and other members of the European Community? Why the hell should we believe him this time when we know that the previous time—

Order. I thought that I heard a somewhat unparliamentary word—why on earth would be more appropriate.

I dimly remember in the recesses of my memory what was said about the Common Market in the early 1970s, although I was a very young man at the time. To those who say that British business would not gain from the single market, I say that they are quite simply wrong. The United Kingdom is already open for trade to a greater extent than the rest of the Community. It must, therefore, be in our interests to open up the rest of Europe for British business.

How on earth can we have a single European market without harmonising indirect taxes?

I point out to my hon. Friend that the United States of America has had a very satisfactory single market for 200 years with some 50 different rates of sales tax in different states—not only different rates of sales tax, but quite often different systems of sales tax as well.

What will be the Government's response to the European Commission's insistence that the provisions in the case of Rolls-Royce and British Aerospace which limit foreign shareholdings to 15 per cent. should now be abandoned? Does the Government's enthusiasm for the internal market mean that they are ready to give up that essential protection for strategic British interests?

We shall continue to argue the British interest as strongly as we have in the past.

Will my hon. Friend also direct his information campaign to potential investors? Does he realise the importance that overseas companies attach to being inside the market by the time that it is completed? Is he aware of the studies that suggest that by the early part of the next decade a quarter of a million manufacturing jobs in Britain will be taken up by Japanese companies, an important proportion of which will be Wales? Is he aware that that is partly a consequence of the anxiety of those companies to be inside Europe before the internal market is completed?

My hon. Friend has made a very good point. We are already an extremely attractive environment for foreign investors. That is very much to the benefit of the United Kingdom. It has created many jobs especially, if I may say so, in manufacturing industry. I am sure that the consideration to which my hon. Friend has drawn attention is material.

Electronics Industry

10.

To ask the Chancellor of the Duchy of Lancaster what was the output of the electronics industry at the latest date for which figures are available; and what was the comparable figure in 1979.

The index of production for the electronics and information technology industries was 170 in 1987 based on 1980 being equal to 100. This compares with 97 in 1979.

As imports of electrical goods have more than trebled since 1979, is there not a case for retaining the voluntary restraint agreements with regard to imports of electrical goods from the far east? Will not those imports pose a serious threat to our television tube and set manufacturers, as there is a surplus of production in Japan and a growing surplus of capacity in South Korea?

No. The increase in voluntary restraint agreements would cause immediate and long-term damage to the British economy. I want to stress to the hon. Gentleman that, if we consider the OECD group of countries as a whole, only Japan is improving its export-import ratio. Virtually all the others are falling. The export-import ratio in the United Kingdom fell by 17 per cent. It was also 17 per cent. in Germany. In France it was 21 per cent. and in the United States of America it was 40 per cent. There is a healthy increase in our electronic engineering output. If current trends continue, we can start to attack import penetration.

My hon. Friend will be aware of the growing use of electronic systems in companies such as British Aerospace in my constituency. Will he do all he can to communicate to his Government colleagues the need for the availability of trained manpower to exploit fully that important growth in our industrial world?

I chaired a skills shortage committee three years ago which was targeted on improving the level and supply of skills in those disciplines which my hon. Friend is anxious to see enhanced—electronic engineering and manufacturing systems engineering. Within the trade figures for the electronics sector, aerospace is excluded yet we export a lot of electronics within aerospace, whereas there is a huge Japanese surplus in consumer electronics. The situation in information technology as a whole is not as bad as the overall figures would appear to show.

Single European Market

11.

To ask the Chancellor of the Duchy of Lancaster what studies have been made by his Department of the impact of the realisation of the Economic Community internal market in 1992 on the regions and nations within the United Kingdom; and if he will make a statement.

The completion of the single market means greater freedom of trade, and many studies from various sources have shown that this will bring benefits to all nations and regions within the European Community. We have commissioned few formal studies, but economic analysis is carried out within the Department of Trade and Industry in the course of providing advice to Ministers.

Will the Minister accept that the benefits, or disbenefits, of the single market depend very much on the distribution of those benefits among the multinational companies, the work forces and, in particular, the regions that will benefit? Does he agree that as part of the integration of the market there is need also for a parallel integration and enhancement of social policy, of social fund spending, and of regional investment?

The hon. Gentleman will know that it has recently been agreed in the Community that the structural fund should be doubled in the next few years, so the contribution made by structural funds to the regions of the United Kingdom will be increased. I hope the hon. Gentleman accepts that that will be beneficial. I take the point that he broadly makes, that success for regions depends on the distribution of benefits, but there is no reason why successful businesses in the regions of the United Kingdom should not benefit if they are competitive.

How resolute will my hon. Friend be before and after 1992 in asserting the proposition that the rates and scope of value added tax and other indirect taxes imposed upon the British people should be matters for the Chancellor of the Exchequer and this House and not for the Commission?

It will not fall to me to be resolute or irresolute about it, but I can assure my hon. Friend that the Chancellor of the Exchequer and the Prime Minister intend to be very resolute.

One of the possible effects of the operation of the internal market may he to allow into this country combustion-modified foam and other foams which—after February next year—it will be illegal to sell here. Will the Minister refute the statement issued by Conservative Members of the European Parliament that the British Government should go back on that commitment and accept lower safety standards, such as are currently allowed in Belgium, West Germany and Italy, so that when the internal market comes into operation such dangerous types of foam can re-emerge and be sold on the British market? Is it not a disgrace that this major step forward should be undermined by Conservative Members of the European Parliament?

I can assure the hon. Gentleman that we have no intention of going back on the decision which I announced in January about foam in furniture. Those regulations will apply to any furniture supplied in this country, no matter what its origin.

Has my hon. Friend noted that the Cecchini report, to which he referred indirectly in an earlier answer, suggests that the single market will add 5 per cent. to the gross domestic product of the European Community as a whole? Will he confirm that it is up to industry in the regions and in this country generally to take full advantage of the opportunities that he is drawing to their attention in the 1992 publicity campaign, and also that it is essential that the regions press for the continuation of this Government's economic policies, which make our country more attractive in the European Community than others?

The report to which my hon. Friend refers has not yet been published, but the Commission has previewed some of its contents, which show that there are major economic benefits to flow from the completion of the single market. My hon. Friend is absolutely right when he says that the success of this Government's economic policies has not only made the United Kingdom very attractive to investment but has made British business fitter, more supple, more resilient and better equipped to take advantage of the opportunities of 1992 than under any previous regime.

Are Ministers at all queasy about approaching the single market when our research and science funding is much less satisfactory than in competitor countries? How about inviting Sir George Porter to breakfast and answering his television lecture on Sunday night? Would the Minister be ready to do that?

Sir George Porter is very welcome to come and have breakfast whenever he wishes, and we would have an interesting conversation.

In response to the first part of the question, no, we are neither anxious nor queasy.

Polystyrene

12.

To ask the Chancellor of the Duchy of Lancaster if he has any plans to further restrict the use of polystyrene, in the light of the latest research on fire risks; and if he will make a statement.

When polystyrene is used to provide a filling for an article of upholstered furniture it will be required, following proposals in the currently circulated draft regulations, to conform to the requirement for "other fillings", that is, other than polyurethane foam and latex rubber foam.

In view of the dangers perceived by fire officers and the general public in the domestic use of polystyrene foam, especially in ceiling tiles, does my hon. Friend have any plans to extend the furniture studies, which have already been so welcome, into the use of that foam, with a view to safeguarding the public against that fire risk?

As my hon. Friend will know, our attention is focused on polyurethane foam, given its toxic and occasionally tragically lethal capabilities. Our research on polystyrene is admittedly now some years old but comes from the Fire Research Station, and shows that when used as specified, polystyrene tiles are not a significant addition to the fire hazard. However, in the light of the correspondence that my hon. Friend has sent me and his comments today, I shall ask the Fire Research Station to update that earlier report to ascertain whether it can identify a significant hazard.

Is the Minister aware that many people are now very worried about the fire hazards of artificial materials? Will he run a campaign to make it clear to people whether their existing furniture and ceiling tiles are dangerous, for otherwise many people will continue to be utterly confused? They need such information to be able to take sensible and informed decisions.

I can understand the hon. Lady's concern. She will know that we shall be introducing the most rigorous fire prevention regime in the world for foam-filled furniture and furniture covers. We do not have recent information to show that polystyrene presents the sort of danger that the hon. Lady currently suspects. However, as I said earlier, to have complete peace of mind I shall ask the Fire Research Station to take another look at it.

British Steel

13.

To ask the Chancellor of the Duchy of Lancaster what representations he has received from private sector steel companies about the proposed role of British Steel in the private sector.

I have received no formal representations from private sector steel companies on this subject.

Does my hon. Friend accept that if we are seeking to establish a fair market in Europe it is important that the steel quotas should be abolished so that the efficient firms in our country can prosper?

My hon. Friend will be well aware that my right hon. and learned Friend the Chancellor of the Duchy of Lancaster is at the forefront of a campaign to do just what my hon. Friend wants.

Bearing in mind that the present level of profitability in BSC is only just a little above what Sir Robert Scholey says he needs every year for reinvestment, is it not obvious that the Government are rushing BSC into the private sector because Ministers want to get it off their hands before it is hit by the full impact of electricity price increases, which will reduce its competitiveness, and before it is thrown into a cut-throat price war in Europe following the abolition of quotas? What assurance can the Minister give the House that a privatised BSC would be able to prosper or even to survive in those circumstances, and without the kind of backing that its competitors in Europe will certainly get from their Governments?

We are entirely happy with the achievements of the chairman of British Steel, together with the work force. We are more than satisfied that the sort of effort that is being put into making the company successful now will help it to be just as successful when it returns to the private sector, where it belongs.

Is it not true that steel quotas cost jobs in the steel-consuming industries by pushing up the price of steel? Will my hon. Friend put up a firm fight against the European steel producers who are pushing for an extension of those pernicious quotas, which do our economy nothing but harm?

Is it not the case that in the Federal Republic legal action is being prepared, not only against Finsider, the Italian steel company, but against the British Steel Corporation? In view of that development, is it not reasonable to suggest that a proper response should be offered and any difficulties surmounted before any further progress is made along the course of privatisation?

I understand that the West German Iron and Steel Federation has complained to the European Commission about the Commission's approval of payments made to BSC between 1975 and 1985, which were approved by the Commission under the rules operating at that time. It is not a new complaint. Similar complaints have been made by German industry in the past and they have been rejected by the European Commission. It is, of course, for the Commission to consider the present complaint. We reject any allegations that illegal state subsidies have been paid to BSC in the past, since all those payments were approved by the Commission. BSC is now profitable and self-supporting.

We have been talking about the single market in the EEC. If BSC is returned to the private sector, will it not have to compete in unfair conditions in the sense that it has to face energy costs which are being used as a form of indirect taxation and to pad out the proposed privatisation, and rate support grant cuts which again are being used as a form of indirect taxation? That means that BSC will not he able to compete on equal terms. Or do the Government not care, once it is out of their control and responsibility?

These are matters for the British Steel Corporation. As I said earlier, we are satisfied with the judgment of the chairman, the board and the work force of British Steel about being able to cope, because they want to be returned to the private sector.

Advice And Debt Counselling Services

16.

To ask the Chancellor of the Duchy of Lancaster what discussions he has had with credit companies, banks and other financial institutions about his suggestion that they should fund independent agencies to provide free money advice and debt counselling services; what discussions he has had with organisations currently involved in the provision of advice services; and what responses he has received in each case.

I have had a number of meetings with representatives of the financial sector at which I have stressed the importance of money advice and encouraged the principle of companies and associations providing financial and other support to voluntary bodies concerned with the provision of money advice. It is for these bodies to seek support from industry for specific projects.

As I said in my reply to the hon. Member on 9 March, a number of money advice support projects have already been funded by the private sector through the National Association of Citizens Advice Bureaux, and others. I hope that this trend will continue.

Does the Minister not accept that that is a wholly inadequate answer and a complete abrogation of responsibility on his part? Does he not accept that, in view of the insultingly light answer given by the Secretary of State for Social Services, who is doing so much to increase debt problems, the Government as a whole have a responsibility to take positive action? Will he take positive action to persuade those to whom he is passing the buck that they should make a significant contribution if he continues to refuse to do so?

For one thing, we already provide substantial support to the advice services. We support them to the extent of some £9 million for central services. That was increased specifically for the purpose of providing information on the new social security system. I already do a certain amount to persuade the financial services industry to provide support in the way that the hon. Gentleman suggests. I seem to have been persuasive, because a number of projects are going ahead.

I thank my hon. Friend for his reply. While I do not agree fully with the argument of the hon. Member for Cardiff, South and Penarth (Mr. Michael), may I ask my hon. Friend to accept that the problem of debt is growing, for reasons which are multiple and complex, and that it is an important part of the responsibility of the private sector, which is generally offering the debt, to take action in the public interest? Will he reinforce with the private sector the importance of its part, in conjunction with him and others, in dealing with the problem?

It seems to me that it is not only part of the responsibility of the private sector, but is very much in its commercial interest to provide support for money advice services. The more people who are helped to resolve their debt problems, the more money will be recovered by those who lent money in the first place. Advice services to those bodies concerned with giving money advice might find it useful to approach, for example, the utilities which supply fuel on credit, which forms part of most people's debt problems.

Why should there be different laws for people and for banks in relation to debt? Why should banks be able to to go to the Inland Revenue and say. "We have run into trouble with debts abroad; can you give us £1 billion to spread among the top four banks?", while ordinary people who have got up to the neck in debt because of Government policy are told that they will have to find another loan? It is no wonder that the residual income which goes in debt payments for every family in Britain has risen to over 80 per cent., whereas it was just over 40 per cent. in 1979. We have a Prime Minister who preaches thrift and no borrowing, yet the country is up to the neck in debt.

For the vast majority of individuals, the increase in credit that has undoubtedly taken place has been wholly beneficial. It has enabled them to even out peaks and troughs in their household budgeting. I repeat that it has been wholly beneficial. But for a small minority of people, debt problems arise. It is for such purposes that money advice services exist.