asked the Secretary of State for Industry what are the latest figures for the output of British manufacturing industry; and how this compares with 1979.

In the six months to March 1982 manufacturing output stood at 90, taking 1975 as 100, compared with 89·2 for the previous six months. The figure for 1979 as a whole averaged 104·4.

In view of the gloomy figures that the Secretary of State has just given and the depressing economic forecasts, three of which were in the Financial Times this morning, does the Secretary of State hold out any hope for a recovery in British manufacturing output over the next two years?

Yes, Sir. The consensus of all the major surveys in the country is of a modest increase in output for the rest of 1982, and a further increase in 1983. I stress that, apart from the Liverpool forecast, which stands out on its own, the forecasts do not suggest that it will be substantial. That will be won only when we have recovered much of the competitiveness that we have lost in the past few years.

Does my right hon. Friend agree that the output of British industry could be far higher if there were greater demand for its products in the home market? Does not import penetration still present a grave challenge to our manufacturers, who are becoming, but ought to be, more competitive?

My hon. Friend is absolutely right. People complain about a lack of demand in the home market for consumer goods, but let them look in the shops and see from where the goods are coming that most people are buying. There is no lack of demand for goods. The lack of demand is for the products of many British factories—by no means all—because they are not yet as competitive as they could be.

What does the Minister think about the OECD outlook for July? It points out that output has fallen more in Britain than in any other OECD country during the recession and that there is no prospect of closing the gap between our dismal and their more hopeful economic performance.

The OECD is taking an unduly pessimistic view of the prospects for the economy. We shall have an opportunity to explore this matter in greater depth on Wednesday, because the Opposition have chosen industry as a Supply day subject. Over the past 12 to 18 months there has been a remarkable advance in industrial productivity. We have achieved a substantial improvement in the rate of increase of unit labour costs, and we have regained a significant part of the competitiveness that we lost in the previous five years, but we have a great deal further to go before we regain all our competitiveness and compete on equal terms with our neighbours.

rose—

Order. Answers are very long today. We shall have to do better if we are to have more questions.

Does my right hon. Friend agree that manufacturing industry is delicately poised for a recovery that we still hope is to come? That being so, will he urge the Chancellor of the Exchequer, if he is planning to raise extra money to meet the cost of the Falklands campaign, to bear in mind the delicate state of our industry and the fact that it cannot bear any further taxation if it is to survive?

I am sure that my right hon. and learned Friend the Chancellor of the Exchequer will take careful note of what my hon. Friend has said.

asked the Secretary of State for Industry what is the value of the grants allocated to England from the European regional development fund in 1982.

So far this year a total of £50·2 million has been allocated from the quota section of the European regional development fund. I expect further substantial allocations in respect of projects in the English assisted areas in the second half of this year.

Does my hon. Friend agree that these grants are playing an increasingly important part in building up the strength of our economy? What steps is he taking to publicise the nature and extent of the assistance to this country from the European regional development fund?

I agree with my hon. Friend that this is an important element in the way in which Britain benefits from the EEC. Our share of the quota section is at present fixed at nearly 24 per cent., which makes us the second greatest beneficiary. Almost £200 million will he coming to the United Kingdom as a whole this year.

We publicise the grants that come in. It is clear from deputations that I receive that local authorities are well aware of the advantages of the fund, although they, too, could do more to tell the general public about the assistance that comes from the regional development fund.

Does the Minister agree that there is no point in publicising the fund in the West Midlands if the Government refuse to recognise the structural defects in industry in that part of Britain?

Money from the European regional development fund goes to assisted areas throughout Europe. Therefore, it is directed to assisted areas in this country. As the hon. Gentleman knows, we recently discussed the changes in assisted areas following a statement in the House. This matter can be discussed further during the debate on Wednesday.

asked the Secretary of State for Industry what has been the reason for the infrequency of the meetings of the Council of Ministers responsible for the European Space Agency; and when it is proposed that they should next meet.

There has not been a meeting of the Ministerial Council for some time. However, with the agency's existing package of major programmes running so smoothly, no formal proposals have been put forward for a ministerial meeting.

In view of the continuing success of the American space shuttle, will the Minister do all that he can at any future meeting to ensure that member States work together within the European Space Agency instead of going it alone with national projects as seems to be the case at present?

Broadly, I agree with my hon. Friend's comment. We have done very well out of our membership of the European Space Agency in the past seven or eight years. It has enabled us to create a space industry, and we are now making 10 satellites. We continue to support the programmes of the ESA, particularly the large satellite that we shall be building in 1986 in co-operation with Italy and Canada.

I warmly welcome my hon. Friend's endorsement of the importance of the ESA in European space activities. Will he give a commitment on behalf of the Government to support the ESA remote sensing satellite programme, which has great commercial application as well as scientific value?

Yes, I certainly give that commitment. We are supporting the ESA programme in earth remote sensing. We are also investigating the possibility of a national programme of our own as this is an area in which the United Kingdom has particular skills.

asked the Secretary of State for Industry whether he is satisfied with the progress being made by British Leyland.

Yes. As Sir Michael Edwardes said at BL's annual general meeting, the company is on course to achieve the main financial targets set for 1982 in its current corporate plan.

Does my hon. Friend agree that, although the reduction of £100 million in the losses of BL's car division last year is to be welcomed, BL's progress towards break-even is threatened by the heavy over-supply of cars on the market, which is estimated as being 30 per cent. in excess of demand? Is it not time to take account of the remarks of the newly elected president of the SMMT and to consider afresh the possibility of relaxing hire purchase restrictions on motor vehicles to bring them into line with those on other goods, to take note of the tariff disparities with Spain and to do something about parallel imports?

My hon. Friend has raised several major problems. We shall certainly take into account the comments of the new president of the SMMT.

With regard to overcapacity in the industry, import penetration is approaching 60 per cent. and car production is at its lowest level for 24 years, so it is not obvious that there is any vast overcapacity in the United Kingdom.

I agree that Spanish imports represent a serious problem. It arises out of the current position of Spain vis-a-vis the Community, and it is being considered in the context of negotiations for Spain's accession to the Community.

In view of the figures that the Minister has given and the effect upon the United Kingdom motor industry, is it not time that the Government made a statement about the Nissan investment? Is he aware that there is speculation in the press about a plan B, but that the House has been given no information about this? Is it not time that the Government made a statement about the negotiations?

No, I do not believe that it is. Moreover, I cannot imagine that the right hon. Gentleman thinks that that is a remotely helpful question. We are in negotiation with the Nissan Motor Company, representatives of which will be coming to this country very shortly. It would be both premature and foolish for the Government, in the process of negotiation, to make a statement to the House at this point.

If the Nissan project does not go ahead, does my hon. Friend regard BL's progress as sufficient to halt the penetration of our home car market by foreign imports?

The rise in imports this year has been disappointing. At the same time, there have been notable advances by BL. In the first quarter of this year BL sales rose by 6 per cent. and BL exports across the board rose by 23 per cent. There have also been some remarkable advances in productivity. We believe that the results achieved by BL are consistent with the targets set for it.

Following the courteous hearing given to me by the Minister and his senior civil servant, Sir Peter Carey, relating to the dispersal of machinery from Bathgate, will he ask a senior official from the Department to visit Bathgate to see at first hand the industrial calamity that results from the widespread sale of public assets of this kind when machinery goes not only to Marshall of Gainsborough but to other firms at knockdown prices?

I have already written to the hon. Gentleman about the talk that we had. We are well aware of the deep problems caused by redundancies and closures in his constituency. On the last point, the hon. Gentleman will know that the Public Accounts Committee has been considering this aspect, and a report is expected shortly.

asked the Secretary of State for Industry what effect the United States Government's imposition of duties on the imports of subsidised steel has had on the British steel industry.

asked the Secretary of State for Industry what effect the United States curbs on imports of steel from the United Kingdom will have on the plans of the steel industry.

The effects of the unjustified discrimination against the British Steel Corporation's steel exports to the United States of America are potentially very serious but are not readily quantifiable. We are making intensive representations direct to the United States Administration and are fully supporting European Community initiatives to find an acceptable solution.

Bearing in mind the very cheap energy costs—well below world market prices—that have been enjoyed by United States industries for many years, does my right hon. Friend agree that the United States Government's action smacks at least of double standards? Does he further agree, however, that there is a lesson to be learnt from these difficulties about the pitfalls of subsidising any industry that has to operate in an international market?

My hon. Friend makes a valid point about American energy prices, at least in so far as "old gas" is concerned. With regard to subsidisation, a vast amount of the money that has gone into British Steel has been used to increase investment, to rationalise the industry and to allow the closure of outdated plants and the modernisation of capacity—a process that Mr. Baldrige, the United States Secretary for Commerce, actually praised in his evidence to a Senate Committee.

Is it reasonable for us to expect the Americans to allow substantial increases in imports of highly subsidised steel when the Common Market imposes rigid controls on imports and insists that they must remain at the traditional levels, which are the levels of 1976? Would it not help the Government's case greatly if we gave an assurance to the world that the British Steel Corporation will not dump steel abroad at prices well below those that our home manufacturers have to pay?

I dispute the charge that British Steel has been dumping steel in the United States of America. The duties that have been provisionally fixed are countervailing duties based on a calculation of subsidies which neither the British Steel Corporation nor Her Majesty's Government accept. That is precisely what the discussions are about. We are trying to reach a sensible solution. We understand the problems of the American steel industry, but they are due overwhelmingly to the fall in demand for steel in America and only marginally to imports of steel from Europe.

Has the Secretary of State noticed how zealous the Americans are in protecting their industries? Why do we not sometimes take a leaf out of their book, or would such a proposal be vetoed by Viscount Davignon? Will the Secretary of State also take account of the high productivity figures that are now being recorded by the British Steel Corporation when there is still speculation about major redundancy schemes ahead?

The hon. Gentleman will no doubt wish to make his first point direct to Mr. Baldrige, which, I am sure, will be well taken.

I have had no proposals from the British Steel Corporation for any further major rationalisation of its production. I am full pf praise and have said many times that the improvements in productivity at the British Steel Corporation's works have been quite outstanding and trust be maintained. I am not sure that I can help the hon. Gentleman any further with regard to the future.

Does the Secretary of State agree that this illustrates the danger of introducing import controls into any sector of the economy at such substantially high levels? Will he draw to the attention of the American Government the widespread support in the House for the action that he is taking in seeking to oppose the levies that they have introduced? Will he make it clear to them that in the steel areas of Britain enormous sacrifices have been made which have led to the introduction of much higher levels of productivity throughout the British Steel Corporation?

As I have already said, those developments have been praised by the American Administration and are well known, but I welcome what the hon. Gentleman said about support for our opposition to these undeserved charges.

Could not my right hon. Friend express more understanding for the American industry and Government? Surely it is unrealistic to believe that we can go on massively subsidising the public sector steel industry in this country and in other parts of the Common Market without it having a serious adverse affect on our competitors abroad and on the unsubsidised private sector in Britain?

My hon. Friend is entitled to his view, but I must remind him that I am the Secretary of State for British industry.

Is the Secretary of State aware that we much welcome his strong and firm statement about British steel exports to the United States of America, but that he will be judged by the outcome of his actions in that regard rather than by what he said today? Does he agree that the capital reconstruction of the corporation carried through by the Government and the major sacrifices that have been made in closures, rundowns and jobs losses will be rendered useless and worthless if the Americans are successful in the attitude that they are adopting?

I am grateful to the hon. Gentleman for his support from the Opposition Front Bench. I have no doubt that due note will be taken of it.

The hon. Gentleman exaggerated the potential effect. It is impossible to estimate what the impact will be in the longer term, but a 40 per cent. rate is certainly a dismaying rate of countervailing duty. We are determined to try to reach a solution that is fair both to the European industry and to the American industry. Only on that basis can we hope to move forward.

asked the Secretary of State for Industry what assistance his Department is giving to projects being developed by British Aerospace.

A number of applications from the company for assistance are being considered. Details must remain commercially confidential. A total of £1·9 million was paid by the Department of Industry in 1981–82 in direct assistance to projects being developed by British Aerospace. In addition, in 1981–82 the Government contributed £63 million to the budget of the European Space Agency, from which British Aerospace received approximately £30 million in contract payments.

Does my hon. Friend recognise the early and urgent requirement for favourable decisions to be taken on the A320 Airbus and also for the Department to contribute to the launch of the P110 project? Does he agree that he is being asked not to cast pearls in front of swine but to give money to companies that have shown themselves to be successful world leaders in the industry in which they perform? Does he further agree that, if he gives them money, he will be doing the same as is done in Japan, the United States, France and West Germany?

I assure my hon. Friend that our approach to the A320 is exactly the same as that of West Germany. We are having talks with British Aerospace about launch aid for the A320, and we shall reach a decision as soon as possible. Information is still awaited from the company.

The P110 is, in the first instance, a matter for the Ministry of Defence, but we are well aware of its strategic importance.

Is the Minister aware that we welcome the full support from the Conservative Benches for two magnificent nationalised industries? Will he give a categoric assurance that Department of Industry support for the Rolls-Royce element within the P110 project will be forthcoming—if there is Department of Industry support for it; I believe that there may be on research and development—and that the vital development and prototype stage will not be held up?

As the hon. Gentleman knows, British Aerospace is now a very successful private sector company and is doing extremely well. With regard to a Rolls-Royce input into the P110, we would look at any application for launch aid on its merits.

Is my hon. Friend certain that the substantial help given to British Aerospace does not give it an unfair advantage over its British competitors?

I do not believe that there are any competitors in the area of the A320 and the P110. As my right hon. Friend has said, we are trying to give support to British industry in an area where Governments throughout the world are giving massive support.

Whether privately or publicly owned, is it not a fact that, without the Airbus and the P110, a British airframe company will not survive and will in fact be superseded by foreign competitors in Europe and the United States? Does the Minister therefore agree that urgent action by the Government on this issue is now needed?

Both the Airbus and the P110 are important for the survival of British Aerospace and the maintenance of an airframe building capacity in Britain. Having said that, it is essential that the projects should be commercially viable and profitable. Otherwise, there is no point in the Government giving support.

asked the Secretary of State for Industry what steps he is taking to encourage the introduction of automation systems in United Kingdom industry; and what progress has already been made.

Under the Department's robotics programme, grants of over £2·6 million have been approved. In June I announced a new £35 million Industry Act scheme to assist the introduction of flexible manufacturing systems. This will supplement £25 million available under the Science and Technology Act 1965 for a continuing programme of related research and development. That is a total of about £60 million. The maximum grant has been raised to one-third to stimulate companies to action this year.

Does the Minister accept that, despite his Department's efforts, progress is lamentably slow? Will he remind his colleagues that major technological investments will take place only when the purchasing power of the public sector and of the economy generally is greatly increased.

I do not necessarily agree with the latter point. One can stimulate investment in the manufacturing sector by other means, as the schemes are showing. The robotics scheme and the small engineering firms investment scheme have been a great success. I am sure that the flexible manufacturing scheme—some £60 million—will be equally successful. In fact, we have already had applications for assistance under that scheme.

Does the Minister agree that the success of his policies has been so great that the flexibility of manufacturing in the North East has been tremendous? Indeed, companies have almost gone out of existence, so flexible has the manufacturing system become. How much of the money to which he referred has been spent in the North East? Is the Minister aware that the new industries and the magnificent revolution in entrepreneurship promised by the Government have resulted in a loss of jobs, not a gain, in the North of England? Is he further aware that we are in a worse competitive position now than—

Order. That is long enough.

I shall write to the hon. Gentleman about support for the North East and give him the figures. The general thesis of his supplementary question was that we should not automate because it led to a loss of jobs. I have refuted that argument from this Dispatch Box on many occasions. The choice for British industry is to automate or to liquidate.

asked the Secretary of State for Industry what representations he has received relating to his statement on assisted areas on 28 June.

I have received some replies to the letters that were sent to some hon. Members and to the relevant local authorities.

In view of the bitter disappointment in many parts of the country that has been caused by the right hon. Gentleman's announcement, will he say how high the unemployment level in an area must be before there is a grant of special development area status? What possible justification can there be, for example, for refusing special development area status to the Denny employment area in my constituency, where unemployment is running at more than 30 per cent., which is one of the worst in Britain and which is getting even worse because of the insane policies of this Tory Government?

It has been the policy of successive Governments to fix the areas to be covered by regional aid by reference to travel-to-work areas and not to divide them. The hon. Gentleman's constituency covers three travel-to-work areas. Stirling was made an intermediate area in 1980, and it remains an intermediate area. Falkirk was made a development area, and it remains a development area. Glasgow was made a special development area, and it remains a special development area. I do not think that the hon. Gentleman's constituency has been treated unfairly.

Does my right hon. Friend agree that if he acceded to every request from hon. Members for assisted area status, virtually the whole country would be an assisted area by their definition and, therefore, there would be no differential advantage to those areas that needed it?

That was getting on for the position that we found when we came into office. More than 40 per cent. of the working population were covered by assisted area status. At the same time, the differentials in the rates of support for the different categories of area had narrowed to the point where many firms did not regard them as a significant incentive. This Government have concentrated aid on the areas of greatest need, widened the differentials in the rates of grant to the areas and, at the same time, removed the industrial development certificate system as it applied to the rest of the country. That is a sensible regional policy.

Can the right hon. Gentleman say what the 1 per cent. increase means in additional expenditure for 1982–83?

The right hon. Gentleman will know that the programme is not cash limited but demand related. Estimates of the cost will appear in due course when the necessary publications are produced for the House of Commons.

asked the Secretary of State for Industry how many new jobs have been created in the South Yorkshire area over each of the past three years; and what proposals he has to create more jobs in the immediate future.

Figures are not recorded for the number of new jobs created. The most important contribution the Government can make to job creation is fostering an economic climate in which industry can thrive. To this end we will continue to work to reduce inflation, to bring interest rates down and to promote competition.

Does the Minister not realise that no matter what an area is designated, unless more jobs are produced than the number being lost, it is of no value? Is the hon. Gentleman not aware that the economy of South Yorkshire is slowly dying and that industrialists are becoming more and more frustrated because they cannot create jobs and instead are forced to declare redundancies? Is he not aware, further, that the employment rate in the Mexborough and district area in my constituency is running at 20 per cent. plus? When will the Government take steps to reduce the number of unemployed and create more jobs for our people?

I agree with the hon. Gentleman that merely designating an assisted area will not resolve an unemployment problem. It is not possible to resolve it in that way. In Yorkshire and Humberside, no less than 40 per cent. of the area still has assisted area status. Mexborough was updated to a development area in 1979. Thirty-nine projects in South Yorkshire have received regional aid, creating 4,900 jobs. Regional aid will not resolve the problem by itself.

Is the hon. Gentleman aware that the largest segment of population in South Yorkshire is in Sheffield? How many additional jobs will be created by the proposed merger of Johnson Firth Brown and BSC River Don, and why are the unions concerned not being consulted about the merger, which they fear will cause job losses and not job increases?

I cannot comment on the last part of the hon. Gentleman's question, because that is a matter between the companies concerned. Although, regrettably, unemployment in Sheffield is high, it is below the average for intermediate areas as a whole.

On a point of order, Mr. Speaker. Owing to the unsatisfactory nature of the Minister's replies, I beg to give notice that I shall seek an early opportunity to raise the matter on the Adjournment of the House.

asked the Secretary of State for Industry what assurances have been given to his Department by Hanson Trust and Berec Ltd. in respect of the future of the United Kingdom battery industry; and what action he has taken as a result.

Hanson Trust Ltd. and British Ever Ready Ltd. have given assurances that they will remain committed to the United Kingdom battery industry, to maintaining and improving British Ever Ready Ltd.'s position in the British market, and to developing and expanding in the United Kingdom. In the light of these assurances, and because it meets the conditions stipulated in the Industry Act and the published criteria for the office and service industries scheme, the company's application for assistance towards the cost of transferring its head office and research and development activities from London to the North-East has been approved.

Given the Hanson Trust's record as a rather nasty asset-stripping company, is it not the case that those assurances are not worth the paper on which they are written, especially given the closure of the advance projects division of Ever Ready at Abingdon by the Hanson Trust? What action does the Department intend to take to monitor the commitment of the Hanson Trust and British Ever Ready to the future and continuing prosperity of the British battery industry?

The assurances have been given in a very straightforward manner, and we have investigated them thoroughly. The hon. Gentleman made reference to departmental monitoring. Under the office and service industries scheme, the first instalment of grant is not paid for one year after the first job has been created, and there are substantial checks thereafter, so that grant may be withheld where there is any significant change in the project being assisted or where the number of jobs expected to be created is reduced.

Is my hon. Friend aware that one of the consequences of the Hanson takeover of Berec is that the Berec headquarters is to be moved from my constituency to the North-East? Although in the eyes of a few of my constituents that is to be condemned, it ought to be a matter for commendation by all hon. Members representing constituencies in the North-East. Will my hon. Friend use the good offices of his Department to point out to far-sighted firms that they could do no better than come to excellent working conditions in my constituency, with low rates?

That was a very skilful supplementary question. There is always a difficult balance in these matters. It was clear in this case that the project would not only benefit the regional economy, in the North-East but would result in benefits to the national economy, because the company made it clear that staying in London and its environs would reduce efficiency, thereby keeping overheads unnecessarily high and leading in the long term possibly to a greater number of redundancies throughout the company. Each of these cases has to be looked at carefully on its merits.

Is the Minister aware that it is to my constituency that the headquarters is being moved and that there is reputed to be a subsidy of the order of £2 million to Hanson Trust and Berec? Although I accept what the hon. Gentleman said about the assurances that could be given, what assurance can he give that there will be a long-term future for the project at Tanfield Lea?

It depends how one defines "long-term". It is impossible to give assurances about any industry in a highly competitive business over a very long term. We have clear assurances from the company about its intentions, and I have said already how the grant is payable in step with the steps that the company takes. I know from my visits to Consett that the hon. Gentleman will be delighted that these jobs are coming to an area which needs service jobs very badly.

When taxpayers' money is involved, surely the Minister is bound to give us a fairly long-term assurance. Can he say when the Berec factory on the Staners trading estate in Newburn in my constituency will start taking on labour again, as it should be doing?

The latter point that the hon. Gentleman mentioned is a matter for the company. The hon. Gentleman also referred to taxpayers' money being involved. I have already said what the position is on long-term assurances. It is because taxpayers' money is involved that we look carefully at such applications. This one was scrutinised by the North-East Industrial Development Board. Because taxpayers' money is involved we are reviewing the position where there are substantial job losses in the area from where the offices or research and development facilities will come.

asked the Secretary of State for Industry if he will make a statement on the United Kingdom pulp, paper and board industry.

I appreciate the difficulties faced by the industry in 1980 and 1981, in the circumstances of world-wide recession. During that time companies have been taking steps to improve their efficiency. These, together with the Government's success in reducing inflation, will help the industry to compete more effectively in the future, especially as important grant-aided investment projects come to fruition this year and next. Companies in the industry remain eligible for a wide range of industrial support measures.

I thank my hon. Friend for that reply, but is he aware that, notwithstanding the Government's help for large energy users, particularly of electricity, the industry, particularly smaller and medium-sized companies that are energy intensive, still has problems? Will my hon. Friend join the federation in the representations that it will make in the near future to his right hon. and hon. Friends in the Department of Energy to try to get further help?

My hon. Friend knows that energy costs in the industry were discussed in the Adjournment debate on 14 June. My hon. Friend the Under-Secretary of State for Energy explained then how cost disparities have reduced and outlined the action taken to help industry. My hon. Friend will also know that I attended a meeting at the Department of Energy in December to discuss those issues. I should be happy to consider doing so again.

When do the Government hope to announce the result of their examination of the possibilities of replacing the Wiggins Teape operation at Fort William?

I would require notice of that question. If the hon. Gentleman would like to table a question, I shall see that it is answered.

Does my hon. Friend understand the frustration of the British paper industry, particularly in the South-East, at having to compete with Continental production that is heavily subsidised by the Government, through capital allowances? Is my hon. Friend aware of how much that frustration is intensified when the industry has to compete with other regions where capacity is increased when in the South-East the industry has to close that capacity? Does my hon. Friend agree that the time is now ripe to reconsider the range of grants available to the paper industry, particularly when it has moved into new technology and higher value added products?

My hon. Friend referred to capital allowances. He will know that they are available to the United Kingdom industry. With regard to grants, there are a wide range of measures, to which I have referred. My hon. Friend mentioned unfair competition in the United Kingdom. That is an important aspect of regional policy, which also must be taken into account. My hon. Friend also referred to unfair competition in Europe. He will know that cases concerning the Community's Treaty partners are matters for the Commission, but we are ready to raise cases with the Commission when suitable grounds exist, as we have done on several occasions in the recent past.

asked the Secretary of State for Industry what new industries have been established on Merseyside in the past three years.

All sectors of industry have been represented on Merseyside for many years. To that extent no new industries have been established. However, since May 1979 my Department has recorded the opening of over 100 new manufacturing plants, which I think the hon. Gentleman may have in mind, in the Merseyside special development area. The total number of openings is undoubtedly higher. There is also evidence of significant broadening in some sectors.

Is the Minister aware that there is great anxiety on Merseyside about the pending decision on the siting of the new Morecambe Bay gasfield service base? When is that decision, which has been postponed since March, likely to be taken? Is the Minister aware that it would be a tremedous boost to the economy of Liverpool if the expected 1,000 jobs were to be situated there as a result of the base being opened?

I have no details on the hon. Gentleman's point, although I am aware of the concern on Merseyside. However, the hon. Gentleman will know that there are many encouraging signs of new investment by existing companies coming to Merseyside. A substantial battery of Government aid is available. Since the Government came to power about £270 million from my Department has gone to Merseyside in regional development grants and selective financial assistance.

Is my hon. Friend aware that many people wish to see one of those bases in their areas? Does he agree that the British Gas Corporation must make a decision in the light of commercial criteria and in the overall national interest?

That is a matter for the British Gas Corporation and my hon. Friends in other Departments. I shall make sure that my hon. Friend's comments are drawn to their attention.

Will the Minister mention the other side of the coin and state how many old industries on Merseyside have closed down over the past three years and how many jobs have been lost? What positive plans do the Government have to reduce the 20 per cent. unemployment rate on Merseyside?

Of course a number of old industries have gone and jobs have been lost. Merseyside faces the acute problem of restructuring its local economy. It is encouraging that many new plants and the extra investment are in high technology industries, which will be vital if the economy of Merseyside is to be properly revived.

asked the Secretary of State for Industry how many new motor cars were sold in the United Kingdom in the first half of 1982; what percentage was of United Kingdom manufacture; and how these figures compare with similar figures for 1981 and 1980, respectively.

The proportion of cars sold in the United Kingdom in the first half of 1982 which were of United Kingdom manufacture was 42·3 per cent. compared with 46·1 per cent. and 42·4 per cent. in the corresponding periods of 1981 and 1980 respectively. I shall publish the full information in the Official Report.

Can my hon. Friend tell the House how his Department defines a car of United Kingdom manufacture? What percentage of the components must be of British manufacture? Is my hon. Friend aware that a change in the statistical base can entirely alter the results?

My hon. Friend asks a timely question in the light of the debate on the Nissan project. We have put a percentage on the joint venture deal with Honda. I ask my hon. Friend to use that as a rough rule of thumb, although we expect a higher proportion in our domestic manufactures. My hon. Friend's question is timely also because British consumers are about to purchase Y registration cars. I hope that they will consider seriously the implications of what they are doing, particularly as we have a strong and viable domestic manufacturing base today.

Does the Minister agree that the declining share of British made motor cars reflects a declining share of British Leyland cars on the home market, which this year is 2 per cent. down on last year? With reference to the Nissan project, about which the Minister of State was frank with the House, and which, in its original form, was as dead as a dodo, before we get a watered-down version of that, will the Government enter seriously into discussions with British Leyland about the opening of a plant in the Midlands for the expansion of British-based manufacture?

The hon. Gentleman and I share neighbouring constituencies. He will understand that I have some sympathy with his final observation. However, it would be most unwise to make a controversial statement immediately on the Nissan project. As we know, the details of the negotiations with the Department of Industry were agreed to a fairly satisfactory extent. The strategy is a matter for the Nissan company. We shall meet representatives of the company in the Department of Industry towards the end of the month.

Has my hon. Friend asked my right hon. and learned Friend the Chancellor of the Exchequer to consider eliminating the 10 per cent. special car tax to stimulate sales?

A number of ideas are being mooted at the moment which are designed to boost demand for United Kingdom manufactured cars. That is the key question. Any stimulus that comes, which is entirely a matter for the Chancellor of the Exchequer, must take account of the effect that it might have on imports as well as on domestic manufacturers.

Will not the British Leyland car market contract if British Leyland is allowed to sell 400 of its 1,600 showrooms? Will the Minister intervene to ensure that the 400 showrooms, if sold, are not taken over by Continental manufacturers who can thereby further reduce British Leyland's car markets?

I suspect that there is a small dose of speculation in the hon. Gentleman's question. Even if there were not, it would still be a matter for Sir Michael Edwardes and his board to decide, although I share the hon. Gentleman's concern that foreign manufacturers may take over such outlets if that hypothetical situation were to arise.

What are the Government doing about British manufacturers who are taking a rake-off of upwards of £1,000 on the same car manufactured on the Continent?

Car price differentials are a matter of great controversy. I suspect that they reflect more the policies of individual car manufacturers than they do the differential fiscal policies of nation States in Europe. The matter is the subject of considerable inquiry by my noble Friend the Secretary of State for Trade, and I shall pass on the right hon. Gentleman's remarks to him.

Does my hon. Friend agree that the British Leyland dealers are being pressed on their margins, particularly because of the difficulty of getting rid of used vehicles? Will he therefore consider the need for representations to relax hire purchase restrictions to bring them into line with those pertaining to other goods? Does my hon. Friend agree that reducing a typical payment from £90 to £65 a month would have the effect of widening the market?

I have seen the submission from George Turnbull and the SMMT on this matter. My hon. Friend is absolutely right. To increase demand in that way would release the log jam, particularly on used car sales and, in turn, new car sales. However, this is a matter for my right hon. and learned Friend the Chancellor of the Exchequer. I am sure that he is in no doubt about the strength of the arguments deployed on the lines put forward by my hon. Friend.

asked the Attorney-General when he last discussed the prosecution system with the Director of Public Prosecutions.

I have regular meetings with the Director of Public Prosecutions when matters relating to the Director's office are discussed.

In view of the Select Committee report on police complaints procedure, will the Attorney-General bear in mind that a Scottish procurator fiscal system, although probably better than the system in England and Wales, falls far short of a fully independent system for dealing with complaints against the police? Does the Attorney-General agree that such complaints would be far better dealt with by a special ombudsman with supporting staff?

I have discussed the aspect involving the Director of Public Prosecutions with my right hon. Friend the Home Secretary, but ultimately it is his decision, not mine.

As these matters are the responsibility of the Attorney-General, does he agree that there is an increasing number of people in England who believe that the public prosecutor system ought to be established in England, not necessarily precisely on the lines recommended by the Royal Commission, but at least with the ingredient that there is an independent authority for bringing prosecutions separate from the police?

I should like to see every police force with its own criminal prosecuting system which, if it disagreed with the chief constable, could go to the Director of Public Prosecutions for a decision. I do not believe that a national prosecuting system is necessarily the right way of going about it.

Can my right hon. and learned Friend say how soon it will be before all prosecution statements are served upon defendants in cases that come before the magistrates' courts?

That matter is still under consideration. I am not able to give my hon. and learned Friend any further information at the moment.

In his discussions with the Director of Public Prosecutions, is the right hon. and learned Gentleman satisfied about the way in which possible prosecutions of people who issue racist statements that militate against integration of the ethnic minorities are being carried out?

I think that the hon. Gentleman if referring to section 5(A), which is the amended section of the Public Order Act 1936. In fact, we have prosecuted in more cases over the past 12 months and have obtained a much higher rate of conviction than previously. We hope that that process will continue.

asked the Attorney General what proportion of the parliamentary questions to which he, or the Solicitor-General, have replied in the last six months have related to matters for which the Lord Chancellor is responsible.

During the period 1 February to 7 July 1982, 165 questions have been, or will shortly be, answered. Of these, 99 are related to matters for which the Lord Chancellor is responsible.

Does the Attorney-General agree that it is extremely unsatisfactory, not to say bizarre and offensive to the House, that he, uniquely, has to answer to this House for a Department in which he has no responsibility or share in policy formulation? Does he further agree that there should be a Minister in the House from the Lord Chancellor's Department? Alternatively, should not the Attorney-General himself be linked in some way with that Department so that he has responsibility for his answers?

It would be impossible for me to be linked with that Department. The House has placed upon me a number of decisions of a quasi-judicial nature which I must take without being influenced by anyone else. This is the first time that I have heard the suggestion that the Lord Chancellor's Department should have a Minister of its own, but I shall consider it.

Whatever the future of the Lord Chancellor's Department and the Law Officers' Department, does the Attorney-General agree that there can be no justification for exempting those two Departments, alone among Government Departments, from the scrutiny of a Select Committee of the House? Would it not be perfectly possible to exclude such matters as the appointment of judges, but still subject legal services, law reform, the legal aid system, the Offical Solicitor and the Public Record Office to a perfectly proper Select Committee scrutiny?

This is a hardy annual. Speaking for my Department, about 90 per cent. of the decisions I have to take could not be the subject of an investigation by the Select Committee. It might be slightly different so far as my noble Friend the Lord Chancellor is concerned, but the matter is constantly raised and talked about.

asked the Attorney-General if he is satisfied with the present workings of the jury system.

I am concerned about some evidence recently available of the suborning of jurors and that people who are disqualified under present legislation by reason of their previous convictions from serving on juries have, in fact, been sitting as jurors.

Is the Attorney-General aware of how welcome was his change of mind not to make major changes in the jury system by means of an amendment on Report to the Administration of Justice Bill? If he intends to bring about such major changes, will he present them to the House in such a way that they can be debated properly, preferably being preceded by a White Paper?

The change is in the qualification of jurors rather than the jury system as such. I do not altogether accept what the hon. Gentleman said, because the intended amendment would have been moved on Report and the House would, therefore, have had a chance to debate it. However, as I indicated a moment ago, we decided riot to proceed with it. It is a matter that I want to have in law as soon as the House agrees, because I am worried about the number of people who serve on juries but who should not do so.

Why cannot my right hon. and learned Friend go back to the good old days of the law in England when, in order to become a juror, one had to be a man of substance and maturity?

The reason is that the House not only moved away from the property qualifications, but, by an amendment which I believe was moved by one of my hon. and learned Friends, reduced the age from 21 to 18. However, all these matters must be kept under review.

Will the Attorney-General confirm that, whether composed of men of substance or not, juries continue to reach fair and sensible verdicts, by and large, and that the problem of the corrupt juror is relatively small, a, though disturbing? Will the Attorney-General therefore ensure that any remedy he produces will be limited and do nothing to diminish the respect that the public have for the fairness of the jury system?

The problem is not the jurors themselves, but the extent of the attempts made to suborn them. This is an increasing worry and, I regret to say, an increasing worry which we have not fully appreciated in the past. When a juror is approached it has to be reported to the court. Although jurors in practically every case we know of have behaved completely honourably, for reasons that the hon. and learned Gentleman, as a barrister, will appreciate, it is safer to swear in another jury, with all the delay and further expense that is involved.

Is there not a case for looking very carefully at the possibility of reverting to the special jury for long-term frauds and other complicated matters of that sort? Would not that be infinitely preferable to the alternative suggestion of having expert assessors?

My hon. and learned Friend is correct. The long-term frauds cause great anxiety. I was told last week of a case which is expected to last more than a year. Miss Smith could be a spinster at the time of the swearing-in of the jury and could have to leave the jury, having married and had a baby, before the end of the trial. That is one of the problems we have in keeping a jury together for long periods.

I beg to move, That the clause be read a Second time.

With this it will be convenient to discuss new clause 2—

The new clauses, and particularly new clause 1, are important. The background to them was explained in a press notice which was issued at the time of a reply by my right hon. and leaned Friend the Chancellor of the Exchequer to my hon. Friend the Member for Kensington (Sir B. Rhys Willaims) on 25 June. A copy of the press notice was placed in the Library. The background was further discussed in the latest issue of the Bank of England Quarterly Bulletin. I shall not attempt to go into all the complexities, but if hon. Members have queries I shall do my best to answer them when replying to the debate.

The essential purpose of monetary policy is to reconcile the twin objectives of abating inflation and securing the greatest possible moderation of interest rates consistent with the abatement of inflation. That task has been rendered more complex by the way in which very high levels of inflation and accompanying high nominal interest rates, experienced throughout the 1970s, led to the virtual atrophying of the corporate debenture market and a consequent growth in the dependence of the corporate sector on bank finance. This, in turn, inevitably compounded the problems of ensuring that the growth of the monetary aggregates did not generate additional infllationary pressures.

The new clauses are designed essentially to remove two rather artificial obstacles to the management of the monetary policy. I shall refer first to new clause 2. The National Loans Act 1968 was drawn up at a time when variable rate borrowing was hardly in its infancy. As a result, no provision was included in the Act to enable the National Loans Fund to engage in such lending to the local authorities or to anyone else. Today, as the House will be aware, variable rate funding is commonplace. But since the facility has not been available from the National Loans Fund local authorities have been obliged to turn to the banking system. As a result, the local authorities are now borrowing more than £10,000 million from the banks. Most of this is in the form of variable rate finance. The local authorities have themselves been anxious to have access to such a facility from the Public Works Loan Board.

Because of the ability of the Treasury to borrow on generally finer terms than local authorities, the provision of such a variable rate facility should enable the NLF to on-lend to the local authorities on very competitive terms for variable rate loans, while at the same time observing its statutory obligation to ensure that such on-lending does not involve any element of subsidy. It is calculated that this should produce a saving to the local authorities and hence to the public sector borrowing requirement of perhaps £20 million a year. Furthermore, by helping to move local authority borrowing away from the banking system, it should facilitate our task in controlling the growth of monetary aggregates.

As the House was informed last October, we were able to arrange a small amount of variable rate finance from the NLF for the nationalised industries within the restraints of the 1968 Act, but this had to be arranged to conform with the Act according to a formula by which the rate of interest has to be re-determined by the Treasury every three months. Such an arrangement is not appropriate to the much larger volume of business that we hope to attract from the local authorities.

New clause 2 will take the place of section 5 of the 1968 Act. It requires the formula for interest on variable rate loans to be tested against the cost of Treasury borrowing during the initial period of the loans to ensure that the cost of lending will be above the cost of borrowing by the NLF. In practice, the formula for variable rate loans will probably be a margin above the London inter-bank offer rate. Experience shows that on this basis the Government will not be on-lending at interest rates below market rates as they are forbidden to do under the terms of the National Loans Act.

It is important that Government lending can be offered on terms competitive with those offered by the banking sector. In the highly sophisticated conditions of modern financial markets, this means not only competitive rates but competitive types of instrument. New clause 2 will permit this and increase considerably the attractiveness of borrowing from the Government. In particular, the Public Works Loan Board will be able to respond to requests from local authorities and make variable rate loans to them on a substantial scale. This should result in an appreciable saving in interest costs for borrowers and the public sector as a whole. It should also mean a useful reduction in bank lending to public bodies that has built up considerably in recent years. The effect will be to raise the Government borrowing requirement but not the public sector borrowing requirement. For a given level of funding it will reduce the level of any balance in the National Loans Fund and of any money market shortages.

That leads logically to new clause 1.

Before the Economic Secretary goes on to new clause 1, could he say how much he expects monetary aggregates to be reduced as a result of new clause 2?

Of course I cannot say that. I cannot predict, as the right hon. Gentleman knows, the scale at which local authorities will take advantage of this opportunity. Even if I could, I could not predict the precise implications of that for the growth of monetary aggregates. The answer to that must be, as the right hon. Gentleman will know, a lemon.

The hon. Gentleman said that he expected that local authorities would save about £20 million as a result of the borrowing that they will in future make from the National Loans Fund which at the moment they are borrowing from the banks. Therefore, the Government must have made some estimate of the proportion of the £10,000 million that is currently borrowed by the local authorities from the banks and which will now be shifted over to the National Loans Fund; otherwise the Government would not have worked out the £20 million.

The £20 million is a rough calculation based on assumptions. We do not know precisely how much of the £10,000 million that the local authorities are currently borrowing—

What about the £20 million?

As I said, the £20 million is not much more than a guesstimate. We do not pretend that it is more than that. It is an idea of the order of magnitudes that might prevail if a substantial proportion of the borrowing that local authorities currently make on variable rate terms from the banks were now to be shifted to the National Loans Fund. I cannot give the hon. Gentleman further orders of magnitude than that.

Surely the Minister is further puzzling the House on an already puzzling subject. A few minutes ago he said, as I thought, that there would be a saving of £20 million on the interest expenditure of local authorities. To make that estimate, he must have estimated what the figure would be by which local authorities took advantage of this new facility. Now he is telling us that it was guesswork. Is he not confusing us still further? Was it guesswork, or was it a rational estimate?

I said that it was calculated that this might produce a saving to the local authorities, and hence to the PSBR, of perhaps £20 million a year. I should not go on oath as to that figure, because we are not in a position to dictate to the local authorities whether they switch, for variable rate finance, from the banking sector to the PWLB. That would be their decision. All that I can tell the House is that they have said that they wish to have access to this facility, and we hope that they will use it on a substantial scale. It would be wrong for me to say anything more precise.

The hon. Gentleman said that the main purpose of new clause 2 is to reduce the increase in monetary aggregates, and that this would save a useful £20 million. As the hon. Gentleman made it clear that the monetary aggregates were the prime reason for the new clause, that must have been the figure that he chose at the beginning, and the £20 million was derived from that. Any calculation would proceed in that way. The hon. Gentleman is not coming clean with the House in the way that he should.

I am not trying to keep anything from the House. However, the scale on which this facility will be used cannot be predicted, and is not in our hands. We believe—this I readily concede to the right hon. Gentleman—that the extent to which local authorities switch their variable rate borrowing from the banking sector to the NLF will reduce the rate of growth of bank lending and thereby assist us in the business of controlling the growth of the monetary aggregates and particularly the broad aggregates. That is one of the purposes that we have in mind.

Whichever way and however much local authorities change their borrowing, and however much the monetary aggregates are affected, I hope that the hon. Gentleman will explain to the House—in trying to convince us to accept the clause—what effect this will have in the real world.

I do not think that I can give the House any greater detail than I have already on the precise sums that might transfer from one form of borrowing to another. As I have already said, this is not in the Government's hands. We are not in a position to dictate to the local authorities precisely how they borrow on variable rate terms. Therefore, the volumes are not in our hands. I readily concede to the right hon. Gentleman that one of our primary purposes in making this change is to reduce the scale of dependence of local authorities on bank finance, because we believe that this will contribute to the resolution of the problems that previous Governments have faced with the rate of growth in bank lending. That is an element in our thinking that ties in, as I was about to explain, with what we are proposing to do in new clause 1.

New clause 1 is designed to eliminate an artifical restraint on our ability to vary our funding in response to changing market conditions, and in some circumstances our ability to intervene in the foreign exchange market.

Read that again.

I did not hear that comment, which is probably just as well.

For many years now the Bank of England's operations in the gilt-edged market have been designed, in the words of the Committee presided over by the right hon. Member for Huyton (Sir H. Wilson),

"to implement monetary policy by funding the Government's borrowing in non-monetary form, so controlling the money supply and influencing interest rates."

Sometimes—depending on such factors as the buoyancy of bank lending—we need to make debt sales to the non-bank public greater than the PSBR,and sometimes we need to make them less. When we need to make large debt sales to offset the build-up of liquidity in the banking system, the National Loans Fund is liable to accumulate balances in a way that section 12 of the National Loans Act does not permit.

At present section 12 of the National Loans Act allows the Treasury to borrow to meet the outgoings of the NLF—which means basically the central Government borrowing requirement, rather than the PSBR, plus whatever sterling the exchange equalisation account needs—plus enough to meet any necessary working balances. It has over recent years been possible for sales of long-term debt to exceed the outgoings of the NLF as the excess could be used to repay the so-called floating debt, that is, Treasury bills held by the banks and ways and means advances lent by the Bank of England.

However, we are now close to the point where there is little room for this floating debt to be further reduced, so that if issues of long-term debt exceed the outgoings of the NLF the NLF would accumulate balances rather than repay debt. It would thus be in the position of a man who pays off his overdraft and moves from the red into the black. However, the Act at present does not allow this to happen, other than on a minor and temporary scale.

When the constraint imposed by section 12 of the Act, which has no coherent relationship with monetary policy, is reached, the Government of the day would be unable to vary debt sales to influence monetary conditions, with adverse consequences for the conduct of monetary policy. For example, it could leave the Government unable to contain the growth of liquidity in the economy which a rapid growth of bank lending would otherwise produce. It could also, in certain circumstances, make it impossible for the EEA to undertake intervention to smooth a fall in the exchange rate. It is quite inappropriate that a section in the National Loans Act should impose such an incidental limitation on our freedom of action in this connection.

My hon. Friend says that at some point we shall reach the stage at which one runs up against the limit at present imposed by the legislation. Will he say, first, whether we have yet reached that point, or is it impending? Secondly, is not his analogy with an overdraft going black or red somewhat inappropriate, since what the Government are doing in funding in the first place is borrowing, thereby going into the red. My hon. Friend is saying that we are not in a position to pay off different debts. Either way, the Government are still in the red. We have not abolished the national debt.

I concede that we are not at the point at which we can abolish the national debt. I wish that we were. That is something that we are not likely to see in our lifetime. It is true that we are talking about Government borrowing, but the consequence of borrowing under the National Loans Act, under certain circumstances, is a build-up of positive balances, and that is what section 12 of the Act forbids.

In answer to my right hon. Friend's question about whether we have overshot the margin, as I understand it, the answer is "No", although there is a risk that we could do so. That is not a risk that we should fairly take, in conformity with section 12 of the Act. It is equally inappropriate for our actions, whether in the funding of the public sector borrowing requirement or potentially in exchange market intervention, to be inhibited by that limit. That is why we are asking the House to agree to this new clause.

I wish to take up the hon. Gentleman's point within his main argument about the exchange equalisation account. The National Loans Fund has existed since 1968. The exchange equalisation fund has come under changing fortunes and circumstances during those 14 years. Can the Minister point to a single occasion on which successive Governments have felt inhibited from operating into and through the exchange equalisation account by the existence of section 12 of the National Loans Act?

I have just explained to my right hon. Friend the Member for Worthing (Mr. Higgins) that, to date, we have not been inhibited by that rule, but we easily could be inhibited in the future. There could easily be circumstances in which we could not at the same time continue our funding operations and intervene through the exchange equalisation account to smooth a fall in the exchange rate. We should have to choose between the two. Essentially, that seems unwise, for reasons which have nothing to do with monetary policy or exchange rate management.

It is essential, therefore, to amend the National Loans Act to allow borrowing to take place to promote sound monetary conditions, even though such borrowing could cause balances to be accumulated in the National Loans Fund. Such balances, which will earn interest, would accumulate in the banking department of the Bank of England, where they would be available to relieve money market shortages. I cannot tell the House the scale on which balances to be permitted under new clause 1 will—if the House approves—be accumulated, for that will depend on a variety of factors including the level of bank lending and the extent and direction of foreign exchange intervention.

Will the Minister explain in simple terms why the Government should want to borrow more than they are spending, and why, to enable the private sector to lend to the Government, they should pay back debt to the private sector?