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Purchasing Practices: Memorandum Nedc (80) 44

Volume 414: debated on Tuesday 4 November 1980

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6.50 p.m.

rose to ask Her Majesty's Government what steps they are taking to ensure that the recommendations contained in the Memorandum NEDC (80) 44, issued by the Secretary of State for Industry on 26th June 1980, are promptly and effectively implemented.

The noble Earl said: My Lords, Memorandum NEDC (80) 44, issued by the Secretary of State for Industry on 26th June of this year to the Institute of Purchasing and Supply, is a declaration of principle of great national importance. Briefly, the memorandum stated that central Government would be examining their purchasing arrangements to ensure that full use was being made of Government purchasing power to help United Kingdom suppliers become more competitive. The Secretary of State asked the nationalised industries and local authorities, as well as private sector buyers, to look similarly at their purchasing practices with the same objective in view and he outlined some ways in which that aim could be fulfilled. On page 2 of the memorandum Section 4 stated that the Department of Industry would give them every support by means of a conference of the Institute of Purchasing and Supply, that the Secretary of State welcomed the suggestion and hoped he would be able to address the conference himself. I gather that that has not as yet happened, but hopefully it will occur in the not too distant future.

Few would disagree that it must be more economical for the United Kingdom to buy a domestic rather than an imported product, particularly if the quality and delivery are on a par, so let us consider three related factors: first, the past consequences of the lack of a policy; secondly, the policies of our international competitors; and thirdly, the problems of implementation. The logic in the memorandum is both obvious and impeccable and the principle set out is of great economic importance. In fact, a recent Conservative Party political broadcast said, "Think British before you buy", so Her Majesty's Government must surely set an example.

The principle is so obviously in the national interest as a force for economic development and prosperity that it is incredible that we should even need to discuss it. Do we hear of other countries discussing it? I very much look forward to hearing from noble Lords opposite that they support the principle so that it may become consistent national economic policy outside the area of party politics. My concern is that the memorandum's policy should be put into practice forthwith, for it is essential that we capitalise to the full on our abilities in the innovative and expanding market sectors such as aerospace, electronics and computers. If we take a brief look at some of the sectors that have contributed to our national wealth in the past, we find the railways, shipbuilding, steel and the motor industry, but alas today they have virtually ceased to contribute. In fact, I believe they actually consume our resources at the rate of millions of pounds a day.

If we review our past performance and attitudes in these high technology areas, what do we discover? First, we have enormous abilities in the research and development area, followed by an enormous failure to transform the products into profitable sales by effective marketing and mass production. For some reason, our inability to co-ordinate the requirements of the user with the products of our manufacturers, together with lack of enterprising investment, has obviously played the major part in this failure. What overseas buyers will buy British products when the British public sector will not demonstrate its faith in them and sometimes perhaps even openly disparage them?

Examples are numerous. First, aerospace. I have discussed British Airways' —or is it just "British" these days?—purchasing policy at length on many occasions in your Lordships' House. The consequences of the policy for the economy have been, first, a severe drain on the balance of payments in acquiring American-built aircraft and the airline's operations are likely to add to the drain on our resources, although I agree that British Airways are doing their best to remedy this. Secondly, we have a decline in our civil aviation design and production capability which has made a reduction in our wealth-producing capability, a vital area of economic development, at least according to Viscount Davignon, the EEC Industry Commissioner, and President Giscard d'Estaing. Even Spain and Brazil have development programmes for their national aerospace industries. Thus, the aircraft industry is a prime example where Britain has not earned the profit it should have done.

Other examples abound in the public sector; police and local authorities are buying imported motor-cycles and vehicles at the same time as the public purse is paying out to Meriden and British Leyland. The Civil Aviation Authority bought imported radar systems, and not from Marconi or Plessey. I could go on ad infinitum and ad nauseam. The list

of British technological firsts in which British genius and leadership measured in money and time have often been dissipated and lost is equally depressing: the jet engine—before we say we made a success of it do not let us forget that it bankrupted Rolls-Royce—jet airliners, the commercial computer, hovercraft, the brain scanner and one in which I have a vested interest and hope that will not happen to, the airship.

Today's situation is little better and our aerospace industry on the civil side is still, alas, not a good example. The Harrier jet, on the military side, is a world-beater, but it would have been even more successful in an enhanced supersonic form, but we cancelled that development in the 'sixties. It could not now be revived, but there is a strong danger that the supersonic jump jet will be handed over to McDonald Douglas and once again we may have to buy it back. On the electronics front it seems that our advanced products, like System X and Viewdata, are not being introduced and marketed fast enough for us to gain a profitable world market share. Surely these are areas where the Government's policy should be implemented urgently. As a starter, why have Her Majesty's Government not yet decided to agree to give the Inland Revenue's requirement for a computer to ICL? Perhaps the Minister will enlarge on that when he replies.

Let us briefly consider our competitors; it is interesting, and I hope constructive, to consider their policies. France has continuously developed her high technology industries over the last 20 years. Aerospace in particular has become a successful part of the French economic infrastructure. The French have always adopted a consistent policy of development, of which Concorde was an important component. France is at the head of the electronic revolution with a programme to introduce "Telematiques" throughout the country. The French have an intense sense of nationalism which strongly influences all purchasing decisions in the public sector. If we in the United Kingdom had built some British warships on spec it is possible that the French would not just have concluded a multimillion pound deal for three frigates with Saudi Arabia. But France had them ready, so she could deliver them at very short notice, instead of taking years as we might have done.

In the Far East, Japan is another competitor who exhibits an even stronger sense of national purpose. The Japanese have deliberately set out to achieve worldwide markets in field after field. Their success with ship-building, domestic electronics, motorcycles and vehicles is obvious. Next on the list apparently are the aerospace and computer industries. Needless to say, the foundation of the Japanese success is a highly secure domestic market.

My last example is the United States. Its indigenous industries benefit greatly from development contracts and from procurement policies which favour them over foreign competitors—the "Buy American" Act. They also have a vast domestic market, enabling them to secure great economies because of long production runs, coupled with a social and patriotic attitude which encourages innovation and stability. In fact when I was last in Dallas I saw cars with stickers on the back window, stating:

"Texan cars, built in Texas, by Texans for Texans".

Bell helicopters in the States reckon to sell 2,500 helicopters in the same category as the new Westland WG 30, which British Airways wants to operate from Milton Keynes into London Airport. I asked a Question about that yesterday. For once, British Airways is asking to buy a British machine, with a British engine, built in Britain. So for God's sake! let British Airways operate this service, since we may sell abroad 300 or 400 of these helicopters; and they sell for £1 million each.

We were once described by Napoleon as a nation of shopkeepers—and, my Lords, shopkeepers are salesmen. We appear in so many instances to have let this ability slip in so much that although we have a genius for writing reports, we often seem to fail to follow up our recommendations; or if we do, we are very often too late. In fact Sir John Clark of Plessey summed up the situation the other day by saying:

"Britain is going on playing cricket while the rest of the world is playing karate".

Let us take a brief look at the problems that are associated with any procurement policy. The first is the definition of "United Kingdom industry". There are many of the so-called multinationals which operate in this country and which claim to be good corporate citizens in that they export, pay taxes, provide employment, and so on. But, my Lords, surely the test must be one of ownership, control, direction and ultimate benefit. IBM (UK), for example, had I believe a turnover of £882 million last year. It recently disclosed that the net contribution to equipment exports was only £8 million. Therefore after repatriation of dividends of approximately £51 million to its United States parent, the United Kingdom company presumably made a negative contribution to the balance of payments of some £43 million.

So I maintain that the policy must be to support genuine British companies first, European ones secondly, with the rest of the world, including the multinationals, last. My noble friend might not entirely agree with these sentiments, but I hope that even if he does not do so tonight, perhaps Her Majesty's Government will if necessary reconsider these thoughts.

Our second problem, and perhaps the most important, is that of incentive. British industry must be stimulated rather than lulled into a state of false security. My suggestion would be to favour those organisations which have a commitment in active participation and competition in overseas markets, and thus earn profits for Britain.

A third problem is that of a product of innovation which does not entirely appear to meet any existing user specifications or requirements. For instance, the example that I have in mind is the hovercraft, which has clear military applications, as could be seen in the film on television a few weeks ago of the Warsaw Pact manoeuvres. Its adoption by the Ministry of Defence has been very slow and remains half-hearted, and I suggest that there must be many other cases. If the Civil Service were using Viewdata systems in quantity, probably the Rank television factory would not be facing closure; but we have not grasped the opportunity.

To conclude, I would say that despite such problems, there are areas in the private sector which apply, and thrive on, a pro-British procurement policy. Marks and Spencer, Freddie Laker, even—he may not buy British, but at least he bought the Airbus—and Unipart are shining examples.

My Lords, we live in a harsh, competitive world; we must realise the fact and act accordingly. The noble Lord, Lord Nelson of Stafford, chairman of GEC, said the other day:

"Competitor countries turn their public purchasing and Government research and development funding to the advantage of their industries and their exports. United Kingdom companies cannot be expected to win their battles at home and abroad against powerful and heavily-backed foreign rivals if they are obliged to compete with one, sometimes two, hands tied behind their backs".

I welcome the Secretary of State's policy statement as a large step towards achieving a coherent national policy for increasing our prosperity by encouraging United Kingdom industry. But I should like to emphasise the need for some form of central machinery for discussing future requirements in the public sector at a very early stage, whereby development contracts can be ensured, thus leading British industry to a competitive position. To put it simply and logically, there should be: first, early statement of requirement; secondly, development contracting; and, thirdly, competitive production. Thus three vital objectives will be achieved: first, reduction of unemployment; secondly, reduction of expenditure on social services; and, thirdly, we will all work for the national benefit—and perhaps by so doing we shall be able to use our cricket bats as effective counters against karate chops.

7.7 p.m.

My Lords, I am sure that the House will be grateful to the noble Earl, Lord Kimberley, for having asked this Question. It seems to me to be just the kind of subject on which it is appropriate to call for what might be termed a progress report, and in the same way I have no doubt that the noble Viscount, Lord Trenchard, will welcome this opportunity to give us all the information he can as to what has actually happened in the four months since the memorandum was published.

As the noble Earl told us, the memorandum's avowed purpose was to explain how the Government felt that the public sector could use its purchasing power to help British industry generally to become more competitive. That is an objective which has my wholehearted support; and I am sure that the Secretary of State was right to say that purchasers and their suppliers can best serve their mutual interests by discussing their forward plans together. That is the policy which ensures that 90 per cent. of the goods that Marks and Spencer sell are supplied by British manufacturing firms—one of the many things that I so much admire about that particular company. In my view the public sector should certainly aim to act in the same way wherever this can be done without damage to our long-term economic and commercial interests.

As the memorandum made plain, such a policy has important implications for product design and performance specification, and I shall be interested to hear from the Minister what progress has been made in the case of the engineering industry in implementing the recommendations on those points, which were contained in the reports by Sir Frederick Warner in 1977 for the National Economic Development Office, and by Sir Kenneth Corfield.

As regards research and development, in their report of February 1980 the Advisory Council for Applied Research and Development concluded that the various parts of the public sector carried out too much of this themselves in support of their purchasing decisions; they took insufficient account of the needs of their own suppliers; and they aimed to meet only their own particular requirements. Again, I should be glad to learn of the Government's response to the recommendations in that report as to how those deficiencies might be remedied. Perhaps I should say that I did not give the Minister notice that I was going to ask those specific questions because the points appear in the memorandum, but I shall understand, of course, if he is not in a position to respond in any detail now, in which case perhaps he would be kind enough to drop me a note later.

In my view, one of the most telling points in that same ACARD report was that one department is frequently responsible within the Government for a particular nationalised industry while another, usually the Department of Industry itself, is responsible for its suppliers. As the authors of this report put it in what seemed to me a masterly understatement:
"In such cases we are not convinced that there is adequate liaison between departments over the development of the industry as a whole";
and they recommend that departments should review their arrangements for considering the impact of the activities of individual nationalised industries on the private sector, with particular reference to purchasing policies. I should therefore like to ask the Minister to tell us when he comes to reply what has happened about that specific recommendation, because it seems to me to be a very important one.

Now in what we say this evening I am sure that none of us will wish to make the task of the noble Viscount more difficult, but we see reports that some cash might be made available to bodies such as the Post Office, the BBC, the Ministry of Defence, and so on; or that such bodies might be compensated directly, so that development contracts can be placed with British suppliers. Liberals find this a particularly delicate area, because, as good Europeans and with our free trade sympathies, we wish EEC agreements to be honoured and GATT rules observed. But within those constraints I am certainly all for the public sector buying British, and so improving the ability of our own suppliers, as this memorandum puts it, to provide the right goods at the deg price at the right time.

Thus, in the particular case of the contract for computerising (a horrible word!) this country's tax system, I personally hope it will somehow prove possible to award it to ICL rather than to one of that company's international competitors. It may be that the Minister will not feel able to say much on that particular matter at this moment, but to the extent that he can it will be welcome. By the same token, although it is not perhaps directly relevant to this Question, I cannot forbear to add that where it is a matter of a nationalised industry supplying, rather than purchasing from, the private sector, as in the case, for example, of the gas feedstock soon to come ashore from the North Sea, I hope equally that it will prove to be our own chemical companies, rather than those of our international competitors, which will benefit.

I think that is all, really, my Lords, that I wish to say. Indeed, I would not have said even as much as I have were it not for my belief that this is a matter of vital concern for British industry in general. It seemed important, therefore, that someone from these Benches should encourage the Government, in the words and spirit of this Question, to take prompt steps to see that, so far as possible, the recommendations contained in the memorandum are implemented.

7.16 p.m.

My Lords, we are grateful, I am sure, to the noble Earl, Lord Kimberley, for introducing this short debate; and I listened with great interest to the speech of the noble Lord, Lord Rochester. The purpose of this paper is to explain how we believe the public sector can deploy its purchasing power to strengthen and promote the competitiveness of United Kingdom industry. This is, as the noble Earl has said, a very important paper, and a very interesting report; and I am sure that if there is an adequate follow-up the exercise will certainly have been worthwhile. In paragraph 2 it says:

"Over recent years public purchasers have to an increasing extent found that overseas manufacturers have been better able to meet their requirements in quality, price or delivery, and particularly for high-technology products".
My Lords, I think that defence and national security are also involved in this problem. In the last war, after the fall of France, we had no 40mm guns for our fighter aircraft, and there was a serious problem with regard to the supply of bauxite and many other things. I wonder whether we have learned our lesson about this from the problems we had to face then. Are we any more self-sufficient now?—particularly as, some months ago, we read that Rolls-Royce, who are very involved in industrial war-potential and Government security contracts, were reported to have been to Italy for quotations for certain parts of their products.

The noble Lord mentioned electronics. I wonder how far the situation with regard to electronics is involved with our defence requirements and our national war- potential. The noble Lord said, in effect, that we are in fact two nations: the old, large traditional industries of the North are languishing; and the new consumer industries of the South are taking in each other's washing and are doing very well, largely upon imported goods from France and Italy. I wonder when the Government are going to have to get down to dealing with this adverse balance of the Economic Community, which runs into hundreds of millions of pounds.

I am told that the electronics industry in this country, the country of invention, is in a serious position. I am also told that everything seems to be made easy and predictable for importers of electronic goods, whether from Hong Kong or America or wherever, as if we are hell bent to organise for overseas competitors to give them our markets on a plate. We have read in the press recently of electronic factories in this country closing down—television, word processing and electronics equipment in the preliminary advanced work on microsilicon chips. How long can any Government look at that situation and be complacent about it? When, from playing around with microchips, the great inevitable switch comes to using them on a wider sphere—and we are worried about two million unemployed now—how many more unemployed will there be after the big changeover? If we allow these foreign competitors in electronics to come into this country and take our markets, how shall we employ the people who are displaced?

I think in dealing with this problem of imports we must recognise that electronics in motor-cars and so on has now created a powerful vested interest in this country. The number of people employed in the distribution of their products, whether of motor vehicles, of television sets, of electronics of every description, or in repair, in servicing, in garages, in sales, and in pressurised advertising in the media, has resulted in this becoming a considerable industry in this country. When we look at the number of people using Japanese cars, I am reminded of when we used to export cars to the United States and when more people made profits and got employment in the distribution of our cars in America than those who were manufacturing them in this country. Now we have a reverse process.

I wonder whether when we are trying to get home purchasers of British cars and so on, we are up against this old problem of buyers wondering whether they can get spares or deliveries under four or five months because of industrial troubles—when at the drop of a hat the media can give prime viewing time to the militants urging a walk-out at the factory gates. This is the kind of propaganda which is preventing the rightful sales of British cars. I need not mention British Leyland, for it applies on a much wider scale.

I think this is an interesting paper, but I believe it avoids many of the real problems, particularly the problem of dealing with the imports of the foreign electronics industries which are causing the shut-down of many of the newer factories. If we are to avoid astronomical unemployment when the silicon chip process really gets under way, the Government must give this situation serious consideration. I find that this is a memorandum of good intentions; but drastic action will be needed before we are through with this problem—and it is a problem which is not going away.

7.23 p.m.

My Lords, the House has before it a memorandum, reference NEDC (80) 44, issued on 26th June of this year, by the Secretary of State for Industry, Sir Keith Joseph. I am bound to say that the House is most grateful to the noble Earl, Lord Kimberley, for having put down this Unstarred Question so that we can ventilate the contents of the memorandum. I would assure the noble Earl that only the utmost sense of public duty could have impelled him to draw attention to a memorandum that is so acutely embarrassing to the Government that he supports. It is as though Sir Keith Joseph, sitting among the desert of industry that he and his Government and their policies havecreated, had suddenly become aware of the fact that purchases by the public sector, mainly by the nationalised industries and local authorities, amount in total to many billions of pounds per annum and that in some sectors public bodies are the predominant or sole purchasers. Exactly so. Yet, over the past years, members of the Government and their supporters in the country have done very little other than persistently to denigrate the nationalised industries themselves, the purpose for their existence and the way in which they are operated.

Now, in a blinding flash, they suddenly find out that, after all, it is the nationalised industries and the local authorities who are responsible for a good deal of the trade of private industry throughout the country, whatever that trade may be; whether it be turbines, cables, boilers, pipes, machine tools, pumps, generators, motor vehicles, plant and equipment of all kinds, hospital and medical equipment, protective clothing, chemicals, plastics, furniture or the products of the construction industry.

One of the most vital factors in the everyday life of private industry is the demand that comes from the public sector. We on this side of the House, to my certain knowledge, for the past half century have continually drawn the country's attention to the fact that if any Government were so minded as to use the nationalised industries in the national interest, there lay within their hands a valuable instrument for stimulating industry when sometimes it was getting a little stagnant or, occasionally perhaps, for cutting back when it was getting overheated. In other words, the control of the nationalised industries was in itself a very valuable factor in enabling Government at any time to be able to take its due share of the steering of the whole economy.

We have listened this afternoon to the sentiments expressed not only by the noble Earl himself but by the noble Lords, Lord Rochester and Lord Granville of Eye, and I am bound to say that I cannot help agreeing with most of what they say. Of course, it is right that our own nationalised industries—and I am not going to forget the local authorities—should, as far as they possibly can, buy from British industry. In fact, if they do so, undoubtedly it provides for continuation of orders, it provides (as the memorandum sets out) for longer runs and therefore lower unit costs. In short, it is a most valuable instrument.

But in this respect the Government are of course in the political sense completely schizophrenic. They say in the con- clusions in paragraph 8 of the memorandum:
"the Government are determined to ensure that a real change in practice takes place".
Of course; and we are concerned with the practice of this and we cannot consider this practice in isolation because of course public enterprise is deliberately subjected by the Government to constrictions. These are voiced week by week by the Government themselves.

In answer even to the slightest Question that comes from their own Back-Bench in this House and in another place the Government express their determination that public enterprises—and they refer to them by name as opportunity serves—must operate on a commercial basis and must operate competitively. They say that they are no different from any other commercial organisation and should be treated as such. If, for example, they bought in the British market at prices which were far less competitive than those abroad, they would minimise the return on their capital and they would then expose themselves to the criticism of not operating profitably. In point of fact, the commercial policy of buying as cheaply as possible on the assumption that quality, delivery and everything else are a detail, is one that is hammered home to every nationalised industry by the Government.

So, my Lords, what has happened? It means that at the present time, owing to the policies of the Government in which they so obstinately persist, much of British industry cannot possibly compete in price with what is produced overseas. The Government's interest policies have undoubtedly caused the high exchange rate—and if the noble Viscount wants any further information I can refer him to practically every reputable financial commentator and most of the financial press today, and he will find that that is so. Owing to the high rate of the pound, artificially inflated by the Government and their high interest policies, German, French and American manufacturers of equipment required by nationalised industry have a subsidy of something like 30 per cent. or 40 per cent. as compared with the British manufacturer. Indeed, even worse than that, owing again to the policies of the Government in forcing up energy prices of electricity and gas, and of intervening actively in the nationalised industries, we find that competitors over- seas are able to offer prices below those offered by British firms.

The Government can take a choice. Of course the nationalised industries would be prepared, with Government approval, to buy British. But, no; they are enjoined to operate on a strictly competitive basis, whereas the policies of the Government ensure that British firms cannot operate on a competitive basis. We have said many times on this side of the House that cuts in Government expenditure operate in exactly the same way so far as local authorities are concerned. When the Government cut public expenditure—and Mr. Heseltine has become increasingly stringent so far as local authorities are concerned—what are they doing? They are cutting down the propensity to purchase by local authorities from a whole realm, a whole mass, of British industry, and on the opportunity for the construction industry to supply them with things that they need. I have no doubt that there are many British manufacturers who would be quite willing and indeed are anxious to sell kidney machines to the hospital service. One of the wickedest and most despicable cuts in Government expenditure has been the cuts that ensure that people will die because some hospital authorities—or at least one hospital authority—have been forbidden to acquire any further kidney machines.

We are getting now to the stark realities of the association of public bodies with private industry. We on this side of the House of course agree that there should be this close association. We had been urging this a long time before the present Government even became aware of it and indeed aware of its uses. The paper says that they wish that there should be established a closer relationship and discussion of forward plans together. It goes on to say:
"To achieve success it will be necessary for them to enter into a sustained dialogue over future requirements, often up to five or more years ahead".
How can the nationalised industries possibly plan ahead? As we are talking now, and as we have been living in this country over the past year, it is quite clear that the arbitrary imposition of cash limits and the artificial restriction of investments by nationalised industries make it quite impossible for them to plan ahead at all intelligently in these matters. The Government have interfered time after time. Not only have the Government forced up prices charged by nationalised industries but they have exhorted them time and time again to buy in on the cheapest possible market.

I am sorry to have to raise these matters, which are the practical context within which a policy of this kind has to operate. For some reason that is obscure even to the most skilled city economist and is most certainly obscure to the hulk of British industry including the CBI, the Government—that is to say, the minute section of it comprising the right honourable lady the Prime Minister, the right honourable gentleman the Chancellor of the Exchequer and Sir Keith Joseph himself—keep the demands of industry for finance, the demands of the nationalised industries for finance, within the public sector borrowing requirement. They are now under pressure to bring the public sector borrowing requirement down owing to the fact that the increase in unemployment over the past year has added millions and millions to their public sector borrowing requirement.

These are things the Government have got to face before they issue memoranda of this kind, the contents of which are wholly admirable. What the Government have to do is to create the practical conditions within which the principles laid down in these memoranda can operate: that is all they have to do. But if I know Sir Keith Joseph's political schizophrenia aright, this is what he will not do. He will consider this as in a little compartment—and I have no doubt that the noble Lord would prefer to debate it on this basis—unaware that the global effect of his policies are precisely such as will completely frustrate their being brought into effective operation.

I therefore reiterate that the only conditions under which this policy, with which I am in complete concurrence, can be brought into operation is, first, by an immediate reduction in interest rates of at least 4 per cent. so that the pound may begin to come to a more normal level where British industry will be able to compete with continental imports which other firms, for entirely competitive reasons, are compelled to buy in order to preserve their own viability.

The second step is that the nationalised industries' borrowing requirements must be taken out of the public sector borrowing requirement at any rate, even though the extent of that borrowing requirement has already been proved to have no relevance to the level of inflation in the United Kingdom. The third thing the Government can do, if they want their policies to succeed, is to stop this incessant denigration of the nationalised industries and the snide sneers that come from them the whole of the time. Finally, in the words of the right honourable gentleman the Member for Hexham, Mr. Geoffrey Rippon, yesterday, they should stop this "motorway madness" which the Government's existing economic and fiscal policies so accurately reflect.

7.43 p.m.

My Lords, if my noble friend who introduced this Hexham question will forgive me for one moment, I should like very briefly to make the odd point while declining to go into a debate on the industrial situation which the noble Lord will no doubt find future occasions to do—more than one, I should think—and will be able to repeat his many statements covering the industrial situation, the economic situation, energy prices and all the rest.

I must, I am afraid, say just a few things for the sake of the record before we get into the subject of the Question. We are, of course, discussing public purchasing as a whole: the central departments, the local authorities and the nationalised industries as well. Secondly, neither my right honourable friend nor I nor any member of the Government has ever denigrated or made snide remarks about those working in and running the nationalised industries. What we have done is to suggest, as three-quarters of the public have already realised although noble Lords opposite have not, that nationalisation of major industries to a greater extent than our successful competitors has perhaps been a mistake. Nevertheless, we shall deal with the situation as it is, as realistically as possible. But on every occasion my right honourable friend has paid tribute to the people who are working in the nationalised industries and the whole of our policies are designed to make their very difficult tasks that much easier, if we can find a way of doing it consistent of course with stopping the haemorrhage of public funds which the steel figures and other nationalised industry figures represent.

So far as industrial policies are concerned, I sometimes get a little worried that noble Lords opposite may be having a little trouble with their memories and indeed with the leaders of their party in another place, because when their incomes and prices policy finally broke down they made it quite clear that the only realistic alternative was to have a realistic control of the money supply. Let me also just point out that that is what we are doing, and it is not cutting the money supply but trying to prevent it from growing at a pace which makes inflation certain and makes it impossible to deal with the root causes of inflation, so long neglected.

The noble Lord, Lord Bruce, appeared to have in mind the use of the nationalised industries in relation to the subject that we are debating as a sort of buying instrument where the Government, Ministers and civil servants could intervene and ensure that British goods were bought. I am afraid that we do not have that degree of overweening self-confidence that enables us to judge the purchasing policies of huge nationalised industries. But what we want to do is to make sure that the chairmen of those industries—and I shall come back to this in a moment—review thoroughly their purchasing policies so that in their judgment they can buy British and pull through British technology whenever that is possible.

One of the most competitive businesses has already been mentioned in this debate. There was a suggestion, by the noble Lord, Lord Bruce, I think, that the nationalised industries would be less competitive if they bought British. Marks and Spencer are one of the most competitive firms in the world and they have a very high record of buying British. I hope that when I come back to the serious question posed by my noble friend we can examine how that is; because what the noble Lord was suggesting, by inference, was that we should encourage the nationalised industries to take yet more taxpayers' money to buy British more expensively.

Finally, I must point out to the noble Lord opposite that the need for a new policy is based on the fact that in the days of his Government there was a movement away from buying British, which, I have to accept, continued into the early days of our Government. We have analysed some of the reasons why on some of the subjects which my noble friend has raised. We have tried to use past history of public authorities, central departments and nationalised industries purchasing abroad, to try to analyse why. It is because of this drift away from buying British by the public sector that it is so necessary to have a new policy, which my right honourable friend has brought in.

I myself, in the Department of Industry, soon found that I was the Minister responsible in that department. In other departments other Ministers were also responsible and it was with them that I liaised in relation to the placing by the CAA of the radar contracts abroad. That was a clear example of a failure to get a co-operative and meaningful dialogue over the years before we came to office. We hope that our new policies and systems will ensure that that sort of thing does not occur again. It was a marvel of misunderstanding.

The companies felt—and I cannot judge the detail—that the specifications laid down were very special to Britain and the CAA, and would make it hard to maintain their very valuable export business, which had been selling £100 million a year without any great assistance. Yet, somehow, they were unable to get together with the purchaser to talk this through, and to find a common base which not only would meet the requirements of the Civil Aviation Authority, but would also strengthen British industry for the future.

I am not allotting blame, as I am quite incapable of doing so. I would merely say about that industry that I believe that they will continue to obtain a large share of the world's business in the capital radar field, and I wish them very well in doing so. All we can try to do is to see that the policy that we have adopted ensures much earlier contact and con- tinued dialogue over specifications, and over how to put together the interests of manufacturer and of purchaser.

The Department of Industry, led by my right honourable friend, has been made the lead department in this new policy. So the co-ordination between departments, which I think the noble Lord, Lord Rochester, raised, is centred on the Department of Industry, and at civil servant and at ministerial level the progressing of this matter, with all the departments which have responsibility for any part of the public sector, is being urgently carried through.

All departments have been asked to review their purchasing policy. All nationalised industry chairmen have been asked about this. Discussions have been taking place on their reviews. Discussions have taken place with Sir Derek Ezra as chairman of the Nationalised Industries Committee. Sir Derek has set such a fine example of this method of liaising closely with suppliers, in his capacity as chairman of the National Coal Board, and has, indeed, strengthened industries manufacturing mining equipment, leading to good export performance.

He and others have extended these thoughts to the purchasing policy of private industry, and we wish them well. This matter has been raised with the local authority associations and will be raised with important single local authorities. Training schemes are planned and, indeed, seminars have started. The Department of Industry will be the catalyst, not thrusting itself forward, not telling people how to do it, but trying to ensure that this long-term dialogue and the pull-through of British technology takes place, and that British industry plans to become competitive in the areas where it is strong.

Let me say to the noble Lord, Lord Rochester, that the Warner Report on Standards has been accepted and the Government intend to see that its objectives are achieved. It is a field in which it is difficult to make very fast progress, as I think the noble Lord will accept. The Institute of Purchasing had its conference in September. My right honourable friend was unable to address them, but my honourable friend the Parliamentary Secre- tary at the Department of Industry spoke to them fully on this subject.

So that all these things—the ACARD Report included—are moving forward. We agree, in the main, with many of the ACARD recommendations. In particular, we are studying and considering whether there is scope for movement in relation to trying to encourage the shift of more research to the private sector and to the suppliers, rather than too big a weight of it occasionally being in the public purchasers' departments.

The noble Lord, Lord Rochester, mentioned the gas pipelines and the value of some of the components of that gas to the British chemical industry. I can assure him that those points are well understood and well studied, and that within the basic market framework the Government will try to ensure that the maximum national interest is met.

We are often accused of not giving enough help to our manufacturing industries in this area, and my noble friend, who introduced this Question, mentioned the importance of development contracts in other countries. We have our international obligations and we shall adhere to them. In this area, they are principally the EEC supplies and works directives, which require contracts from Government departments to be advertised if they exceed £130,000 in value. We shall ensure that others carry those out, as well as ourselves—if I may say that to my noble friend in relation to the cricket hat and the karate chop.

In January, the GATT provision comes into operation, which we shall comply with, and which will be a very big help in relation to major changes in the "buy American" Act. We give much help to various industries, as indeed do our competitors in other countries; particularly, perhaps, in electronics, where not only have we continued to back Inmos, but we have also continued to carry out the MISP and the MAP schemes, and have encouraged development in the various selective schemes which we still use. Quite a part of this has helped British manufacturing industry to have products available and suitable for our public purchasing area.

It would be wrong to think that we could supply 100 per cent. of our needs, either in the public purchasing area or in the country as a whole, when, as noble Lords know, we export 30 per cent. of our GDP and are a trading nation. In the huge industrial world of today, we shall not be the first supplier of every possible thing to our own organisations. But we want to give every chance to those industries which are capable of success to develop their successes, to use their innovatory skills and to get a pay-off, where it is appropriate, through public purchasing in the first instance.

I agree with my noble friend that there is no doubt that our innovative ability is still there. His list of the number of things that we have invented in Britain but have not developed could be extended. The failure has gone past what is called in industry the development stage, so I agree entirely with his point. Public purchasing is not the only reason. That the profitability levels of British industry had been depleted by 1975 to one-quarter of the level of our competitors is a large part of the reason, too. These things will not all he put right immediately.

I am not quite sure that I can go all the way with my noble friend in relation to obviously modern industries and obviously old industries. The old industries, even the nationalised old industries where enormous sums of taxpayers' money are involved, are still producing a considerable quantity of added value in Britain and there is a considerable number of companies which are dependent upon them. Nor do I feel that industries in the private sector, like textiles, should necessarily be labelled old industries and considered not to be in the same class for ensuring that the new initiative regarding public purchasing should help them. Aeroplanes, to the older men in this House, are new, but much of the textile industry that remains today is based on highly scientific, new materials which have been changed four or five times, whose substances are based upon the petrochemical industries. If one goes to their plants and mills, one finds engineering works of precision which an aircraft manufacturer would be proud to see.

It is for this reason that I find it difficult also just to say that electronics is an important matter. Of course it is important and it is all-pervasive in many different parts of our industries, but in the industrial world of today we may not be going to be top in every aspect. However, a great deal of encouragement is being given because of its all-pervasive nature.

I am not going to deal with the noble Earl's examples from the aircraft industry which he knows so much better than do I in terms of the history of our development of, or failure to develop, a number of important new aircraft, or hovercrafts, or helicopters, or the supersonic Harrier jump jet, but I would ask him to look to the future, which is indeed the purpose of his Question. Perhaps we should have a larger aerospace industry, but we still have an aerospace industry which is certainly as big as the French aerospace industry. Although we may not make complete aircraft to the extent that we once did in all areas, we make a very good proportion of the engines and of the highly complicated components which go into both our own aircraft and foreign aircraft. However, I will draw my right honourable friend's attention, and also the attention of my noble friend the Minister at the Ministry of Defence, to all of his points.

In relation to System "X" and Viewdata, this is a prime example of very good co-operation already between the public sector and the private sector. Three major companies, and the Post Office, have not only developed System "X" but have sold it. It is becoming famous across the world and they have a joint selling organisation to promote it. This is an area where, with congratulations to the noble Lord's colleagues when in office, there is already, due mainly to the Post Office and to private enterprise, a considerable success story which needs to be reinforced, and I believe that we shall give it reinforcement. Noble Lords will have seen the recent announcement that my right honourable friend Mr. Butler is to concentrate upon information technology. This will bring together the Post Office and the private side at ministerial level and ensure that this happens in other areas.

So far as Viewdata is concerned, this, too, we shall promote. We do not believe that the comparisons which are often made with what other nations, and particularly the French, are doing are always 100 per cent. fair. One is told, for instance, that the French already have the kind of Prestel system with which noble Lords will be familiar working in relation to telephone directories, that they are substituting these new systems for all their telephone directories and that thus their public purchasing is much better than ours. I expect noble Lords know that the truth of the matter is that the French are planning a test in a town of 250,000 people to see whether this form of press-button telephone directory is popular, and that they are then to consider whether it could be totally substituted, and at what price. We are well aware of that experiment and we are looking at it in considerable detail. It is of course an extra cost, unless one can make it a total substitution; and there lies a problem which we are studying with great care.

We shall press on as fast as we can in Government departments with the use of things like Prestel. It was only this year, again, that hard copies have been able to be taken off the Prestel system machines. Until that was possible, substituting existing systems of information in Government departments was not possible because one needs records for meetings, for coming to the House and for all the other things. One would simply have had a duplication of systems and an increase in public expenditure. I give these two little examples, one on the French side and one on our side, merely to illustrate that Ministers have directed their minds to this matter and are determined to make the new policy work and to get over the problems which exist.

I am, as usual, taking too long on this very important subject. I have already mentioned—I will not go into details but I can supply them to my noble friend—that we support entirely his sentiments in relation to the Buy American Act which is against free and fair international trade. A big hole in it is being made by the new agreed GATT system on 1st January. We are aware that some of the states in the United States do not always agree with what the Federal Government have done. Occasionally we might have the same problem on a small scale in the United Kingdom. But we shall watch it and we shall press the United States to ensure that the GATT treaty is carried out.

I lose my noble friend just slightly on the definition of what United Kingdom industry is. He mentioned many factors, but I do not think that ownership should be regarded as the overwhelming factor. Of course, we should all like to see indigenous British-owned firms getting as much of the cake as they possibly can, but we believe in encouraging our big, strong, multinational firms to invest in other countries also. By the same token we have always been open for investment in the United Kingdom.

It is not true, either, that all British-owned firms do a very big proportion of their operations in the United Kingdom, or that all foreign-owned firms do only a small proportion of their operations in the United Kingdom. There are foreign firms that have in the United Kingdom nearly all their research and development—at least for a branch—and their full manufacturing operations and are making a major contribution to the British economy. So I am inclined to "think British" in terms of operations rather more than in terms of ownership.

In defence of that great American-owned computer company, IBM, I think I must mention that while my noble friend's figures are technically accurate, they do not go the whole way. Enormous capital investments have been put into this country year by year. In the last recorded year I think they have amounted to over £60 million. Then, of course, a big tax bill has also been paid and an enormous number of jobs have been provided in their model works with model employee relations around the country.

I think I must leave the situation there and say that I would rather not be held by my noble friend to a particular machinery at this stage, though we are reviewing the machinery for each sort of main area of public purchasing and trying to make sure that it is well oiled. But one type of system I think will not fit. I can assure the noble Lord, Lord Granville of Eye, that we are not complacent in this area. That is why there is a need for a new policy, because it has not been working well enough under the previous Government and it does not yet work well enough under us.

I worry as to how quickly one can make progress in this enormous and complicated area. It would be politically delightful to be able to say that we were going to ensure that in a very short space of time there were more British manufactured goods bought by public authorities. I do not think the situation is like that, but we are absolutely determined to get a system where the possession of these big public purchasing orders in the hands of Government departments, nationalised industries, local authorities, are used to make British industry more competitive and will drag through new British technology.

My Lords, before my noble friend sits down, may I ask him just one question: has he any possible news with regard to the Inland Revenue?

My Lords, I deliberately did not waste time by saying that I did not have any news and by telling your Lordships what has already been made very clear through the Chancellor of the Exchequer's statement on 8th August. As I really cannot take the matter any further forward than that, I did not waste your Lordships' time.