To ask the Chancellor of the Duchy of Lancaster what was the balance of trade in information technology in 1979 and 1988.

For the information technology and electronic manufacturing sector the United Kingdom had an adverse balance of trade in 1979 of £444 million. In 1987, the latest full year for which figures are available, the adverse balance for this sector was £2,226 million.

Is that not a further example of the complete failure of the Government's industrial policy? Is it not time that the Chancellor of the Duchy and the Secretary of State got down to implementing a serious industrial policy for Britain? For example, will the right hon. Gentleman discuss with his right hon. and noble Friend the COCOM arrangements affecting trade with the Eastern bloc countries? If those arrangements were relaxed, would it not offer massive opportunities to British firms, mainly small firms, to export to Eastern bloc countries? Will the right hon. Gentleman do something about that?

In the light of the hon. Gentleman's opening remarks, I should point out that the deficit in information technology doubled between 1978 and 1979, deteriorated dramatically in the early 1980s, and since then has remained broadly stable. I invite the House to draw its own conclusions from that. On the rest of the hon. Gentleman's question, I draw attention to the many opportunities that British firms have taken and, perhaps most important of all, the obvious significance of the recent decision by one of the world's leading electronics manufacturers, Fujitsu, to come and do business in Britain.

In the light of the interesting report of the Select Committee on Trade and Industry on the subject, and in view of the fact that the rather regrettable deficit represents a large proportion of the total trade deficit, does my right hon. Friend consider the Government's response to the Select Committee report to be adequate?

My hon. Friend will be aware that my right hon. and noble Friend the Secretary of State is meeting the Select Committee next week to discuss that very matter. The Government have given their considered views in response to the Select Committee report. There are some differences of opinion, but well over half the Select Committee recommendations have been accepted or are already the subject of action.

Is the Minister aware that last year the trade deficit in electronics was £3·9 billion—an increase of 15 per cent. on the previous year and accounting for almost one third of the total massive balance of payments deficit? In the past year alone, the deficit in electronics, telecommunications and audio equipment has risen by a staggering 40 per cent. In the light of those disgraceful figures, is it mot time that the right hon. Gentleman and his Department addressed themselves to the magnitude of the problem instead of contemptuously dismissing the recommendations of the Select Committee which at least attempted to point the Government in the right direction to rectify a quite disgraceful performance?

First, I hope that the hon. Gentleman will acknowledge that, despite the size of the absolute figure, the deficit is a relatively small proportion of a very large market and represents less than 15 per cent. of the United Kingdom market. Secondly, as I hope that I have made clear, there is no question whatever of the Government having dismissed the Select Committee recommendations contemptuously. Thirdly, the most important single thing that the Government can do is what they have done with conspicuous success—to make this country a more attractive place for people to invest in and develop their businesses.

To ask the Chancellor of the Duchy of Lancaster what has been the growth in manufacturing productivity since 1979 (a) in Britain and (b) in other major industrial countries.

Between 1979 and the year to the third quarter of 1988, the latest period for which full international comparisons are available, manufacturing productivity, as measured by output per person employed, grew by 42 per cent. in the United Kingdom. The comparable figure for Italy is 38 per cent., for the United States 37 per cent., for Japan 31 per cent., for Canada 28 per cent., for France 26 per cent. and for the Federal Republic of Germany 17 per cent.

I thank my hon. Friend for that reply. Does he agree that those are truly outstanding figures of achievement by British manufacturing industry? Does he also agree that many overseas companies investing in this country are finding that the levels of productivity achieved by their United Kingdom subsidiaries are at least equal and often greater than in their own countries? Is it not a fact that the chamber of commerce in Germany has identified that as a major factor in investing in Britain?

Yes. My hon. Friend is correct to pay tribute to British manufacturing industry for its enormous achievements over the past several years. He is also right to recognise that it is the environment and framework provided by the Government that has enabled that to happen, and we should welcome it. We look for further improvements, but I believe that inward investment in Britain, such as the recently announced investment by Toyota, Fujitsu and Bosch are examples of how the productivity record in Britain is now so good that it is attracting people here in enormous numbers.

Will the Minister confirm that the British textile industry is one of the industries that has notched up considerable increases in productivity? Will he also confirm that the men and women who have co-operated in achieving that increased productivity have not had a fair share of the increased wealth that they have produced? Is he aware that their low basic rates of pay have created an over-dependence on excessive overtime working and that it is time that the men and women in the textile industry who have contributed towards increased productivity received a fair and proper share of the increased wealth they have created?

Any judgment as to what constitutes a fair and proper share should be established between the trade unions, if there are any, and the employers in a particular industry. Employers will see that it is right that the terms and conditions they offer their work force have to be acceptable and sufficient so as to attract enough labour to the company to enable it to continue. We all recognise the great strides that have been made by our textiles industries and hope that they will continue, even against a background of difficult trading conditions.

Does my hon. Friend agree that the vast improvement in productivity under this Government, whereby the average British employee produces 50 per cent. more than his counterpart in Japan, cannot have failed to impress and attract the Japanese and encourage them to choose the United Kingdom for Toyota —and what better location is there than the midlands?

My hon. Friend is correct to pinpoint that aspect because it is important that we continue to set an atmosphere of success and productivity. In that way we shall continue to attract the type of investment that we have announced this week, which will provide employment for our people and continuing success in our economy. We welcome those developments and are confident that they will continue.

To ask the Chancellor of the Duchy of Lancaster what proposals he has for improving his Department's procedures in investigating those suspected of company frauds; and if he will make a statement.

In April last year the serious fraud office was established for the investigation and prosecution of serious and complex fraud. An increase in resources last year allocated to investigations by the Department of Trade and Industry has already resulted in such inquiries now being concluded in a much shorter time scale. In addition, following a review last year, the Companies Bill at present being considered in another place contains provisions which significantly improve procedures and extend powers for the investigation of companies.

Even so, does my hon. Friend agree that there is still a regrettably long delay before people are prosecuted for company fraud, which is damaging for all concerned, including those being tried? Does he also agree, as a one-time practising barrister, that one of the principal reasons why it takes so long is that the Director of Public Prosecutions and the Department find it difficult to obtain a conviction when there are jury trials? Does he agree that the House fluffed the opportunity to change to a judge and two laymen, as the Roskill committee recommended, and that that should be implemented as a matter of urgency in the next Session of Parliament?

On the time scale, my hon. Friend will be delighted to know that in the past few years the average time for a Companies Act investigation has fallen from three years and five months to 18 months despite a general increase in the complexity of the investigations. I am sure that the House will welcome that marked improvement.

My hon. Friend is right that for a few trials of exceptional complexity the Roskill Committee recommended trial by judge and assessors rather than by jury. That was the only significant recommendation that the Government did not accept and, as my hon. Friend said, it was highly contentious. We accepted a number of other principally procedural recommendations, which should make it easier for juries to deal with exceptionally difficult cases.

Will the Minister look into the allegation of procedural confusion between the serious fraud office, his Department, fraud departments in the police force, the Crown prosecution service and the Attorney-General? With the best will on earth, people are getting the procedures wrong because they are too complicated.

A degree of complexity is inevitable. I know of no country with as sophisticated a corporate structure as ours where it is possible for administrative matters of this kind to be dealt with in a neat and tidy way. Different functions have to be carried out, and prosecuting authorities must remain independent. I do not foresee much scope for streamlining administrative structures, but I foresee scope—we have worked extremely hard to achieve this—for ensuring that the processes are much swifter. We are having considerable success along those lines.

Does my hon. Friend agree that part of the answer may lie not in increasing the powers of the serious fraud office or of his Department, but in companies and their boards considering more adequately activities which may not necessarily amount to fraud but are certainly not intended uses of shareholders' money? Whether it concerns loans or activities wholly unassociated with the activities of a company—[HON. MEMBERS: "The Tory party."]—and whoever the non-executive staff or directors of a company may be, I suggest that the House should reconsider the proposals of the late Sir Brandon Rhys Williams on audit committees, which would allow such activity because it would be separately reported.

I hear what my hon. Friend says. As my hon. Friend no doubt did, I had a number of fascinating discussions with our late friend Sir Brandon on the subject. I do not accept the argument that the simple existence of an audit committee solves all the problems. Directors currently have a duty to account to shareholders for the way in which shareholders' funds are used. Proper means are available for shareholders to hold directors to account for the way in which funds are used.

Why has not the inspector's report into the House of Fraser takeover been published, when no criminal proceedings are pending? If the Secretary of State is still awaiting the serious fraud office report, how is he able categorically to state that there have been wrongdoings?

It was perfectly clear from the outset, and it was stated in open court in the Court of Appeal. The hon. Gentleman should know enough about the world to understand that a case is not referred to the serious fraud office unless there is some sign of wrongdoing.

To ask the Chancellor of the Duchy of Lancaster if he now plans to bring forward legislation affecting consumer rights.

We intend to improve the protection given to consumers in a number of ways, including the introduction of regulations under the Consumer Protection Act 1987 on price indications at bureaux de change and changes to other legislation affecting consumers' interests.

I thank the Minister for that reply, but is not the consumer getting an increasingly worse deal under this Government—who are supposed to believe in consumer choice—as a result of electricity and water price rises and private greed being put before public water and food quality? Is it not time that the consumer received a fairer deal?

The consumer gets an excellent deal in the United Kingdom, partly as a result of the general productivity of manufacturing industry, to which reference was made earlier, partly as a result of competitiveness and choice in the market-place and partly —the hon. Gentleman was right to draw attention to this —as a result of excellent arrangements that have been put in place for the protection of consumers' interests in the process of privatising our major supply industries. All of that is ample evidence that consumers are extremely well served in the Britain of 1989.

Is my hon. Friend aware that at this very moment the main clearing banks are holding a press conference at which they intend to make an announcement about the £50 limit on cheque guarantee cards? I am sure that he will join me in hoping that the banks will announce that the limit is to be increased and that each bank will be able to set its own limit. Does my hon. Friend agree that it is disgraceful that the banks have been allowed to carry on this cosy little cartel which has operated against the interests of the consumer? Will he join me in supporting any moves to see that the Office of Fair Trading investigates that kind of closed shop?

Such matters must primarily be matters for the banks themselves. It is for them to make a judgment on how best to deal with their consumers and customers in the market-place. Each of the banks must make its own judgment about how to respond to consumer pressure from time to time. I hope that they are prepared to take a realistic view of the matter and to examine a limit which has stood for a long time, but it must be a matter for the banks themselves and I have no intention of seeking to interfere.

Why is the Minister not proposing more fundamental improvements to the Consumer Protection Act 1987 so that, for example, agricultural produce is included and the unjustified exemptions in relation to product safety and liability are ended? Will the Minister also consider the introduction of environmental labelling such as exists in other countries so that the increasing number of consumers who are concerned about the environment can be sure that the products that they buy help the cause of environmental protection?

On her second visit to the Dispatch Box, the hon. Lady is being slightly mischievous in seeking to lead me into concerning myself with matters of food policy which she and the House know fall principally and rightly to my right hon. Friend the Minister of Agriculture, Fisheries and Food, who is more than capable of dealing with all matters of food protection and food hygiene which come before the House.

Can my hon. Friend tell the House whether he has undergone something of a conversion on the basic question of consumer rights in the short distance from his former place in the House to the Dispatch Box?

I am confident that when my hon. Friend studies whatever proposals I may bring before the House from time to time he will find himself fully able to support them.

To ask the Chancellor of the Duchy of Lancaster if, in the light of the problems of Atlanta Sports Industries Ltd. of Hellaby, near Rotherham, he will take urgent action to bring in amending regulations under patent law.

My Department is aware of this case, on which I have corresponded with the hon. Gentleman. As I understand the position, the problems of Atlanta Sports Industries Ltd. arose under copyright law, not patent law. The House will be aware that the Copyright, Designs and Patents Act 1988 has sought to remedy some of the weaknesses of the old law, but it cannot be retrospective. It is our intention that the detailed regulations will be in place by the summer.

Does the Minister recognise that deficiencies in the law have caused serious and possibly increasing difficulties to that business and probably to others? After all our letters, does the Minister not recognise that a successful and enterprising business is being held back by the deficiencies of his Department, not least because the problem arose as a result of the company accepting the invitation of his Department to attend a particular trade fair?

I cannot accept that because a company has been helped by, in this case, the British Overseas Trade Board in attending a fair, the Government have any responsibility for transactions which may result from that. I believe that that is unreasonable. As the hon. Gentleman knows, most of the defects in the old law have been remedied by the new law, but we cannot and should not make it retrospective. Much though I regret the circumstances in which the company finds itself, it is not a matter for Government and that must remain our position.

To ask the Chancellor of the Duchy of Lancaster what is the value of grants allocated to England from the European regional development fund since its inception.

The value of grants allocated to England from the European regional development fund since its inception in 1975 is £1,602 million, out of a total United Kingdom allocation of £3,307 million. Since 1975 the United Kingdom has received a larger allocation from the European regional development fund than any other member state apart from Italy.

It is a large figure. Does my right hon. Friend agree that the grants are making an important contribution to strengthening the British economy, and is he satisfied that the British people are fully aware of the scale of the grants?

No, I suspect that people are not fully aware of the scale of the grants and I should be glad to join my hon. Friend in trying to improve their knowledge of that matter. It is encouraging that local authorities and others concerned with the areas that are eligible are increasingly aware of the grants and are being increasingly effective in preparing good plans and playing a key part in making sure that we get our due share of the money.

Is the Minister satisfied that west Cumberland is getting its fair share of those European moneys? Is he aware that in west Cumberland we have 43,000 sq. ft. of empty new factory in the middle of an enterprise zone in an area of high unemployment? Will he help us to find someone to occupy that factory? How about a bit of the Japanese money which seems to be circulating as we seem to have very little Japanese investment in west Cumberland? Can we have some?

First, I welcome the warmth of the hon. Gentleman's implied welcome for some of the investment that has been going elsewhere. I am afraid that I am not in a position to direct Japanese companies, but I shall certainly draw their attention to the existence of one enthusiastic Member of Parliament.

Is my right hon. Friend aware that my constituency is the engine room of the British economy and that the infrastructure has consequently suffered greatly, especially due to the parsimony and greed of the Department of Transport? Will my right hon. Friend have a word with those responsible for the European regional development fund to see whether they can give us any assistance to build some better roads?

I must say that the prospect of the European Commission proposing the distribution of funds designed to help those who are having more difficult times for what my hon. Friend describes as the engine room of the British economy seems remote. I hope that my hon. Friend will allow me not to comment on his remarks about my right hon. Friend the Secretary of State for Transport, save to say, within the terms of collective responsibility, that I cannot quite agree with my hon. Friend.

I am delighted that such opportunities exist in England, but will the Minister draw to the attention of the European regional development fund and to incoming industrialists the fact that my constituency of Cynon Valley, which contains the deprived town of Mountain Ash and 45,000 sq. ft. of factory space—2,000 sq. ft more than that in west Cumberland—would be delighted to have any industrialists come to our area, where one in four men are unemployed?

The hon. Lady will have noticed that I gave not just a figure for England but a much larger figure for the United Kingdom which, of course, includes the area in which the hon. Lady is interested. I will draw the attention of my right hon. Friend the Secretary of State for Wales to the hon. Lady's remarks, but his response may be that, in general, Wales has not been doing too badly recently.

Is my right hon. Friend aware that parts of Hereford and Worcestershire have recently been removed by the European Commission from the scope of objective 2 of the European regional development fund? In those circumstances, will he confirm that the parts which remain United Kingdom assisted areas will not suffer in any way in terms of applications for regional selective assistance from the Government?

I am aware of the point that my hon. Friend makes and I can confirm that the Commission's proposals for the distribution of objective 2 money have no effect on the existing entitlement to assisted area status in this country and the help that goes with it. There is no direct coincidence between the two kinds of area.

What proportion of the regional funds to which the Minister has just referred has been applied under the additionality rule, on which I understand that the regional funds have been allocated? Will he assure the House that the new European regional development fund and the Community's new structural fund arrangements will be additional to the national spend on regional assistance?

The agreed aim of everybody involved is that the European regional development fund shall add to the amount of investment taking place in development areas. The hon. Gentleman will know as well as I do that there can be a great deal of argument—I will not pretend that there is not—about precisely what that means. I do not think that I can give a more specific answer, because the whole question of the allocation under what has recently been announced in defining the objective 2 areas depends on the submission of plans, not all of which have yet been submitted.

To ask the Chancellor of the Duchy of Lancaster if he will make a further statement on his policy to increase links between industry and schools.

One hundred and forty-six DTI advisers on enterprise and education are now working, and the education service has asked them to find around 100,000 pupil work experience places in their first year.

My Department is also now offering a teacher placement service, which is being managed on our behalf by Understanding British Industry. I am pleased to announce that we have appointed a director for the service —Mr. Peter Davies. More than 80 local bodies have already expressed interest in offering the service, and the first organisers are in place. Teachers will be able to choose between a number of high-quality briefing packs. This year provides the opportunity to test both these packs and the matching service, to ensure that it all runs smoothly. The teacher placement service has been developed from the successful pilot schemes run for my Department by UBI last year. I will place in the Library a copy of the UBI's report.

While acknowledging that industry is responding positively to the need for closer contact with schools, may I ask my hon. Friend whether he accepts that more needs to be done by all interested parties? Is he aware that in areas of high job creation, such as Basingstoke, followed closely by Crawley, the shortage of skills is becoming yet more acute, and that every measure must be taken to ensure that our school leavers have the attitude and the aptitude to contribute positively to the industrial and economic life of the country?

My hon. Friend has summed up the problem extremely ably. We all recognise the increasing difficulty of skill shortages in many parts of the country. We have gone a long way towards recognising that this problem arises, as much as anything, from the schools. That is why the education and enterprise initiative seeks —and I believe that it has made a very good start—to address the problem of the lack of what might be called enterprise culture and understanding in many of our schools, which gives rise to a lack of proper career and educational counselling of youngsters. We hope that we shall see a lot of young people getting work experience and, more important, that we shall see teachers getting experience in the business world so that they may better advise and guide their public towards careers in the wealth-creating sector.

I wonder whether part of one of these briefing packs that are to be issued to schools will contain information about fraud in the boardroom. Will it include, for instance, the city page of The Daily Telegraph of 15 April 1989, where it is reported that Blue Arrow loaned £25 million to de Savary and his gang; that, under section 432 of the Companies Act, the shareholders should have been fully informed of that matter, but were not; and that one of the directors of Blue Arrow is none other than the right hon. Member for Chingford (Mr. Tebbit)? Since that right hon. Member is supposed to represent those shareholders, he ought to be asking the Secretary of State to order an investigation, but as has is not here, I am doing it for him.

I welcome the hon. Gentleman's interest in the wealth-creating sector. I shall send him one of these packs, in the hope that it will increase his understanding of the process of wealth creation.

Is not this a serious matter? Would it not be helpful to school leavers if leading industrialists could be more articulate about the scope for getting things done in industry, compared with some other professions, which I shall not mention? Why are these industrial tycoons such shy violets? Why can they not tell us how they make money and how that benefits the country also?

My hon. Friend has made an important point. We hope that people in industry and business will be much more forthcoming and co-operative in trying to carry their message into schools and colleges so that young people may better understand how wealth is created and that it is only by the creation of wealth that we as a society can provide all the other services that we want to provide for our people.

Is the Minister aware that there is a clear understanding in industry that healthy links with schools depend on a parity of esteem and resources on the two sides, and that there is major concern that schools are simply not getting the teachers, particularly of science and mathematics, whom they need? Is he aware that, this year, applications were down by 25 per cent. for physics and by 16 per cent. for mathematics? Will the DTI lend its voice in support of industrialists who demand greater resources and esteem for teachers?

I am confident that my right hon. Friend the Secretary of State for Education and Science is aware of existing problems, and is tackling them with great vigour. The esteem in which the teaching profession is held is a matter for it. I hope that the conduct and dedication of teachers in future will help to increase the esteem in which they are held.

Does my hon. Friend agree that one of our biggest problems is schoolchildren's perception of engineering, inventing and manufacturing, and that we must sell the status of those occupations? Without them Britain will never rebuild its industrial and commercial strength. I am not one of those, and I am sure that the Minister is not, who say that Britain cannot manufacture products competitively. We must demonstrate to young people that engineering, inventing and manufacturing are the future for Britain.

I am grateful to my hon. Friend for making that point. I recently discussed those matters with the Engineering Council. It is acutely aware of the matter, and is mounting a positive and active campaign to carry the message to where it will be heard and understood. Our record in manufacturing productivity increases, to which reference has been made today, amply demonstrates that we still have the ability and the will to make improvements and to continue to make manufacturing and industry generally an attractive proposition for our young people.

To ask the Chancellor of the Duchy of Lancaster if he will make a statement on Her Majesty's Government's policy on the future continuation of the multi-fibre arrangement within the current negotiations on the general agreement on tariffs and trade.

We are committed by the GATT declaration at Punte del Este to formulate "modalities" for the eventual return of trade in textiles and clothing to strengthened GATT rules and disciplines.

The United Kingdom attaches the highest importance to the strengthening of GATT rules—in particular, a more effective safeguards clause to allow defensive action to be taken against sudden and damaging surges in imports, and better disciplines on unfair trade and on counterfeiting.

We look for a reduction in barriers to trade and better access to developing country markets, especially the newly industrialised economies. The committee acknowledged the contribution which all participants could make to the process of liberalisation, while preserving our existing rights under the present MFA.

Having regard to recent developments in the GATT multilateral trade talks in Geneva and the importance of those developments to the knitwear industry in my constituency and in other areas, will the Minister guarantee that he will agree no further changes to the trading system for textiles and clothing unless he secures some of the aims that he mentioned, such as the effective prevention of dumping and subsidies, the GATT safeguard clause, and the dismantling of excessive trade barriers, which effectively block our exports in trade and clothing items?

I accept that all the factors that the hon. Gentleman mentioned must be taken into account in considering the degree to which the provisions of the multi-fibre arrangement are relaxed or dispensed with. Safeguards clauses are important. As many hon. Members with textile constituencies know, the existing mechanism is unsatisfactory. It is cumbersome and slow. I will ask my officials to look at possibilities for improvements and making better use of the provisions under article 19.

My hon. Friend will know that many hon. Members are legitimately concerned about the undeveloped world, but that same lobby also seeks completely unrestricted entry into this country of textiles from the undeveloped world. Such a policy could destroy tens of thousands of jobs in the Nottingham and east midlands area. I hope that we will not go down a road that will destroy those British jobs.

My hon. Friend is right. Paradoxically many of those jobs are held by former citizens of, or immigrants from the very countries for which the lobby that he identifies seeks unrestricted access.

Will the Minister make a clear statement that the Government are committed to the renewal of the MFA? The Confederation of British Wool Textiles Ltd., the employers' organisation based in Bradford, is concerned that there has not been a clear and unambiguous statement, particularly as the industry is faced with a Community quota by 1992, instead of a quota for each member state, to make sure that there is a burden-sharing arrangement for the whole of the EEC. Emloyers are also fearful of increased water charges. The effect of those developments will be a loss of jobs. Will the Minister make a clear commitment to maintain the textile industry?

There is no commitment to maintain the MFA. The commitment is to formulate modalities for the eventual return of trade in textiles and clothing to strengthened GATT rules. That has been unchanged for the last 15 years since the MFA was promulgated. As I have said on the Floor of the House in debate on the subject, that return is dependent on a satisfactory solution of a very large number of other related problems.

Does my hon. Friend agree that the commitment of the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) to Liberalism appears to be somewhat lukewarm in the attitude that he has evinced in his supplementary question? Does my hon. Friend also agree that arrangements such as the multi-fibre arrangement are an arbitrary restriction on consumer choice and on the export potential of Third world countries, and therefore contribute to their impoverishment? Why do we support free trade in every other area of the economy but not in this?

It is not for me to comment on the esoteric varieties of policy that the Liberal party adopts at any given moment. Consumers do not have a high purchasing power when they are out of work. There are large numbers of consumers who constantly seek advice about buying British goods. There is no special adjunct of faith that dictates and obliges that consumers should always buy the cheapest thing. They consider other factors in making a consumer choice.

The Minister for Trade's personal commitment to the MFA is recognised in the House, and the arrangement is an important way of regulating trade between the far east and ourselves. Is he not also concerned about the growing trade gap in textiles with the EC, which is now £1.75 billion? What does he think has caused that gap? If he is concerned about it, what action will he take to try to narrow the gap?

That is a completely different subject from the multi-fibre arrangement. Trade with the EC is not governed by it. Competition, measured in terms of delivery, quality, price and so on, is the yardstick. There are elements where Government subsidy is present. Those are subject to Commission scrutiny. If any hon. Member advises me of cases where EC subsidies affect the balance of competition, we will immediately consider them closely.

To ask the Chancellor of the Duchy of Lancaster how many new businesses have been established in Leicestershire each year since 1983; and if he will make a statement.

The numbers of new businesses registered for VAT in Leicestershire for each of the five years from 1983 to 1987 were respectively, 3,003, 2,885, 3,033, 2,961 and 3,347. During that period the total numbers of businesses registered has increased every year, growing by 13 per cent. overall.

Is my hon. Friend aware that in Hinckley, the principal town in my constituency, demand for industrial land far outstrips supply, that the council has just had to release another 120 acres, and that 158 acres are currently under consideration by private developers? Does he agree that that demonstrates the effectiveness of Government policies and the prudent policies adopted by the Conservative-controlled Hinckley and Bosworth borough council?

My hon. Friend has it exactly right. Because my constituency borders that of my hon. Friend, I know from my local knowledge that there has been a considerable growth of economic activity in our area. New companies are doing well, employment has increased substantially and the prosperity of the area has grown markedly.

Does my hon. Friend agree that an important element in industrial growth and in the growth of new industries is the infrastructure? Within my area of north-west Leicestershire, an excellent road system is being built, including the new M42-A42 road. However, an important element of that road system is correct and proper road signs so that people who want to go to the new industries in towns such as Coalville and Ashby know how to get there. Will my hon. Friend speak to the Secretary of State for Transport to ensure that there are properly marked road signs?

I know that a great many people are seeking to find a way to my hon. Friend's constituency. I shall certainly speak to my right hon. Friend about whether steps can be taken to enable them to find their way to it more easily.

To ask the Chancellor of the Duchy of Lancaster what progress is being made in discussions between his Department and the industry in connection with the development of the next generation of cordless telephones.

We have issued some 2,000 copies of the consultation document "Personal Communications in the 1990s" and held initial briefing meetings with a number of companies. We are asking for responses to the document by 28 April.

I thank my hon. Friend for that response. Will he ensure that the discussions are sufficiently brisk and that the aims are sufficiently straightforward to enable us to have successful competitive manufacturing in that sector, without undue Government or other bureaucratic delays that could adversely affect our competitive position?

I can give my hon. Friend that undertaking, but I believe that he will agree that we have already demonstrated as a country remarkable success in that area due to the liberal regime allowed by the Government. We will continue with that policy in the hope that we will continue to be world leaders in what will be an important industry in the future.

To ask the Chancellor of the Duchy of Lancaster what information he has on the percentage increase in expenditure on mergers and acquisitions since 1979.

Expenditure on acquisitions and mergers by industrial and commercial companies within the United Kingdom in 1988 is estimated to be about £22 billion. In current prices, that is about 13 times greater than the 1979 total of about £1·75 billion.

Does the Minister agree that, if Scottish industry did not have to spend so much effort in fighting off mergers and takeovers, it could create new work, which might help a constituency such as mine where the official unemployment rate is 22 per cent.?

The idea that merger and acquisition activity reduces employment is manifestly absurd. Over the period when merger and acquisition activity has been at its height, unemployment has come down and employment has risen to record levels. The premise on which the hon. Lady bases her question is utterly absurd.

Does my hon. Friend agree that the Government should be congratulated on not allowing the bid for Scottish and Newcastle Breweries? Scottish Members should congratulate my hon. Friend rather than indulge in negative comments.

My hon. Friend is right to draw attention to the careful scrutiny of that bid by the Monopolies and Mergers Commission. As a result of the commission making an adverse public interest finding, the bid was not allowed to proceed. I did not hear all that many cheers from the Opposition when that happened.

Does the Minister think that it is wise for former holders of his ministerial post subsequently to take up paid appointments as advisers on mergers and acquisitions? Is that not a misuse of the information and knowledge gained in that post?

No, Sir.

Precisely because merger activity has increased so much would it not make sense, particularly because of the conflict of interest that exists between investment management and corporate finance, to bring the role of merchant bank advisers under the aegis of the Financial Services Act 1986, as some of us recommended in the debate on the financial services White Paper four years ago?

My hon. Friend was lucky enough to be privy to discussions on that Bill at which I was unable to be present. I suspect that his proposal to extend the scope of the Financial Services Act into an area which, at the moment, it does not cover would not be at all welcome. There are proper mechanisms for making sure that conflicts of interest do not arise and that proper interests are preserved. It would not be right to extend the system in the way that my hon. Friend suggests.

To ask the Chancellor of the Duchy of Lancaster if he will make a statement on the current state of the hosiery and knitwear industry in Leicester.

The hosiery and knitwear industries continue to make a major contribution to Leicester's economic and industrial development. They continue to adapt to technological and other changes, to the further benefit of local and national economies.

While noting the Minister's tribute to the hosiery, knitwear and textile industries may I ask him whether he recognises that there is still grave concern in those industries about the continuing recession and that there is also concern in my constituency about the redundancies in Coras? How many jobs have been lost in Leicester in the hosiery and knitwear industries in the last few years and what is the Minister proposing to do, if anything, to help those industries to survive in the light of the increased water charges that are now on the way?

The hon. and learned Gentleman sometimes reproaches hon. Members for not addressing him as learned, although I do not think that he aspires to the sobriquet of gallant. As a man of the law, the hon. and learned Gentleman will know that there are many international restrictions. Trade in textiles is governed by treaty, by arrangement and by restraint arrangements.

And the Minister does not like them.

I would tighten them up if I could. The hon. and learned Gentleman well knows that any interference with the flow of trade outside those limits would lay one open both to judicial review and to legal action by importers.

To ask the Chancellor of the Duchy of Lancaster if he will make a statement on progress on recent initiatives on export promotion.

Since the launch of My Department's export initiative about 3,000 inquiries have been received in response to our advertisements in the press alone. I believe that the initiative has been well received by British industry and is succeeding in encouraging more businesses to export successfully.

Is it true that the initiative is costing about £100 million per annum? If so, what is likely to be the long-term effect on our balance of payments? Will it repay this investment?

The total amount expended in export promotion by the Government is £100 million per annum, or rather more. The initiative has a number of different headings, chiefly related to the giving of advice and information to would-be exporters. Export initiatives single market campaigns, such as Focus Germany and the Opportunity Japan campaigns have been extremely successful. During the year in which the campaign was in place, our exports to Germany increased by 17 per cent. compared with an international average increase of 3 per cent.

Is the Minister satisfied with the operation of the exchange equalisation account?

The exchange equalisation account is a matter for my right hon. and hon. Friends in the Treasury. In so far as it affects the exchange rate, plainly, one has to accept that it is a transient and temporary phenomenon. Many traders would probably prefer it not to exist or to operate at all.

To ask the Chancellor of the Duchy of Lancaster when he expects Britain to have a trade surplus in information technology.

It is not possible to make a prediction of the kind that the hon. Member seeks. What is important is that the Government's economic policies have led to record levels of productivity, output and investment and have helped to attract companies like Fujitsu, which will provide a major boost to our balance of trade in information technology through both exports an import substitution.

I thank the Minister for his answer but would it not have been better, in all candour, for him to have said "unlikely"? Since, in reply to a similar question, the Minister made it clear that the Government policy was to make Britain attractive to foreign investment, and since we are told that there is a lot of footloose capital and industry in this country which apparently prefers to invest abroad rather than in Britain, how does that square with the Minister's policy that he has enunciated to the House?

I see no inconsistency whatever. Not only are a lot of people from overseas investing here, as has become clear in recent weeks, but there has been a substantial increase in the rate of investment by Britons in manufacturing industries and in other sectors. Our aim is to make the whole country a good place to invest in for foreigners and those already here, and we have succeeded in that.

To ask the Chancellor of the Duchy of Lancaster what information he has concerning losses to investors in financial institutions which have gone into liquidation over the last 12 months.

My Department only keeps records of those financial institutions in respect of which it has itself applied for compulsory winding-up orders. In the past 12 months such action has been taken against eight financial institutions. In these cases the losses to investors are estimated at £4 million. This figure does not include cases where winding-up orders were sought by the Securities and Investments Board.

Is the Minister aware that Greenan Investment Management in Ayr went into liquidation with a loss to investors of £1 million? Following this up, I find that some of those investors will not be fully compensated by the investors' compensation management scheme. Will the Minister look into the matter to see whether there are ways in which compensation can be improved?

I understand from Sir Anthony Barrowclough, the Parliamentary Commissioner, that his report on Barlow Clowes, which was expected this month, will take several months more because of the complicated nature of the investigations into the affair, which he is supervising personally. In the light of that, does the Minister think that it is fair to ask investors to wait many more months before they have any chance of receiving compensation, or will he now consider some kind of scheme to help those who have lost very substantially indeed, some of whom are retired people, including retired miners in my constituency, who are now in great difficulties as a result of the collapse?

I am very much aware of the distress and hardship caused to people whose money was not repaid to them following the liquidation of Barlow Clowes. I cannot comment on how long the Parliamentary Commissioner's investigation will take; it is a matter entirely in his control and it is for him to draw it to a conclusion when he can. All I can say is that my Department has co-operated fully with his investigation at every stage.

As regards providing compensation at this stage, I must tell the hon. Gentleman that I see no reason now for changing the view that we reached in the autumn, when we concluded, on the basis of Sir Godfray Le Quesne's detailed and exhaustive report, that the Department's handling of the case had been careful and considered and that, on those grounds, there was no basis for making ex gratia payments.

To ask the Chancellor of the Duchy of Lancaster what recent information he has on new orders for merchant ships.

Based on information from Lloyd's register, new orders as well as completions in 1988 were at the lowest level for many years. The most recent figures suggest that a period of recovery may be beginning, but there is little evidence that it will be lasting and it is expected that the world shipbuilding market will remain dominated by considerable excess capacity for several years.

The Minister must also be aware of figures from Lloyd's maritime information service which I have sent him. They demonstrate conclusively from the most reliable source in the world that for the kind of ships built by British shipyards and, in particular, North East Shipbuilders in Sunderland, the last quarter of 1988 was the best for new orders for many years and that what we were told by the Government throughout last year and the year before, which was that there was no evidence of an upturn, has proved categorically wrong. We also now know that in 1988 prices for new build ships rose by 30 per cent. in one year. Has not the penny finally dropped that the Department of Trade and Industry has got this wrong and that this is a crazy time to close major British shipyards?

I have two comments. First, the hen. Gentleman puts more weight on the statistics to which he referred than they will bear. Secondly, whatever the state of demand for shipbuilding, it is necessary—as it was, unhappily, in the case of North East Shipbuilders Ltd. —to consider the prospects against the background of those seeking to run the yards so that they will be able to build such ships in a competitive and commercial way.

I must announce to the House that I have selected the amendment in the name of the Prime Minister.

I beg to move,

That this House notes the long-term failure of the British economy to meet the challenges of a competitive and technological world; expresses its profound concern at the increasing United Kingdom trade deficit in the information technology and electronics industries; notes the United Kingdom's gap in computer and other technological skills; and calls upon the Government to boost investment in high tech infrastructure and civil research and development and to work with industry and the education service to create the skills base that is vital to the modern, efficient and innovative economy that the United Kingdom desperately needs, if the next decade is to overcome the missed opportunities of the 1980s.

I think that I am right in saying that this is the first major debate for some time on a trade and industry subject. It comes in an afternoon in which the Chancellor of the Duchy of Lancaster, the right hon. Member for Braintree (Mr. Newton), has answered questions on trade and industry matters, and a private Member's Bill on hacking has been introduced. Therefore, it is an important day for trade and industry and I am delighted to be able to introduce a debate of this nature.

I am glad that the Chancellor of the Duchy will be replying to the debate. He and I do not agree about many of the main planks of the Government's policy. However, he is widely respected as someone who considers and is briefed on his subject closely.

I do not want it to be believed that I and my party think that everything the Government have done has been wrong. That is not the case. In the past 10 years the Government have had some considerable achievements. The greatest achievement the Government will have to their name is the democratisation of the trade union movement. That will be their enduring memorial—[Interruption.] I hear the Labour Members sitting in front of me disagreeing. We will wait and see the evidence of history.

One of the Government's most significant achievements is the pursuit of enterprise and self-employment. My argument with the Government on those matters is that they have not gone far enough or fast enough in the direction of the policy they have outlined.

We must ask whether the propaganda we are fed by the Government—that all that adds up to an economic miracle— stands up under examination. The old moss-covered tombstones of British industrial decline still stand after 10 years of Thatcherism. We still have the highest inflation of any major advanced industrial nation; we still have the highest interest rates of any of our major OECD competitors; we still have wage rises racing well ahead of inflation; we still have net investment—investment as a percentage of GDP—which is at best static and, according to some figures, falling; we still have overall industrial production only just blipping above the 1979 level; we still have a continual loss of our share of world markets as our goods fail to meet the right standards in terms of price and, perhaps more important, quality and we still have a trading deficit of unheard of historic proportions which is now seriously undermining the strength of the British economy.

In many ways, all those symptoms are depressingly similar. Far from having an economic miracle in the 1980s we have, standing clear and evident to everybody, the old signposts of British malaise. We have an industrial system which has failed to produce effectively for world markets and has failed to win new shares of those markets. We have not made progress in what I believe to be the fundamental change that the British economy and British industrial base must achieve in the last years of the century if they are to face up to the new challenges. That fundamental change must be away from being a low-quality industrial assembler to being a high-quality industrial producer.

Perhaps a more fundamental change is needed in our industrial base away from a high-resource use, low-value-added industrial base to a low-resource use and high-value-added base. Information technologies are the key to that fundamental change. In The Times on 16 September 1986, the Alvey committee said that the

"basic economic situation dictates that we must become a net exporter of high technology and high value added goods."

That statement was right, but the committee was wrong in the prediction that followed. It said that, if things continued as it calculated when it wrote the report, by 1990 Britain would become a nation in deficit in high technology information-based trade by £1 billion a year. We have yet to reach the end of the 1980s, yet that predicted deficit is already twice as high: it is running at £2·19 billion and growing. In 1984, the figure was £1·8 billion, but it has increased to £2·19 billion. In 1979, we had a surplus in information technology trade that amounted to about 0·5 per cent. of GDP; we are currently running a deficit of just over 0·5 per cent. of GDP.

Many believe, and I am one, that the underlying weakness in our industrial base lies in information technologies. It is essential that Britain corrects that. It will involve not only inventing new technologies but manufacturing and, above all, applying them. Our failure to do so underlies our weakness.

Behind the bold figures of the industrial deficit that. I have given, there are even more worrying facts. Let us consider innovation. Britain is second only to the United States in Nobel prize winners, and per capita our inventions and achievements are greater than any nation. Between the 1950s and the 1970s, Britain had a truly superb record in innovative technologies. But that record is a past record. Our innovative capacity has dropped sharply. In 1963, over 26 per cent. of European applicants for new United States patents were British. By 1985, the figure had fallen by 16 per cent. We are the only major advanced OECD country whose percentage of applications for United States patents has dropped. We now apply for 2 per cent. of United States patents and are below even France as an innovative nation.

Perhaps that is not surprising, as the number of people working in research and development—scientists and engineers—has fallen over the past 10 years. Using a figure for every 10,000 of population, of all the OECD nations we have the fewest scientists and engineers working in the research sector. In 1983, 32 per cent. of engineers were working in research and development, yet now we have only 30 per cent.

Britain has opted out of many of the new technologies, such as the space programme. The Secretary of State for Energy had to go to Moscow to hitch a ride on a Soviet spacecraft sponsored by British industry for us to have any input into the space programme.

Does my right hon. Friend agree that one of the underlying problems of our poor research base is the dreadful salaries paid to brilliant research scientists? Does he accept that at the Electricity Council research centre at Capenhurst in Cheshire the best salary a brilliant 30-year-old researcher can expect is well under £30,000, which is poor compared with salaries available abroad?

I agree with my hon. and learned Friend's comment. But that is not the only underlying reason. I shall come on to that subject in a minute. Another reason is the lack of adequate research money to provide researchers with the facilities that they need. As I shall point out later, there has been a major flood of some of our highest and best researchers to, for example, the United States and other nations where they are paid much better.

And to the City.

If they had been going into industry, I might be a little more optimistic, but they seem to be leaving this country altogether.

These facts show up in our own domestic market. Britain has the fastest growing new technology market, after Japan, in the world, yet our share of our own market and our capacity to even fulfil our own market demands has now dropped massively from 50 per cent. to less than one third in the past seven or eight years. A National Economic Development Council report in June 1988 identified the reason for that clearly—lack of investment.

Investment in research and development is a contentious subject in Britain, as we already spend a higher proportion of our investment in research and development on defence-related research and development than any other nation in a way that frequently holds up the research and development we need in our industrial sector. Even in terms of non-defence research and development, whereas, between 1971 and 1985, all our major industrial competitors increased their research in non-defence research and development, we reduced our research in the non-defence sector. In Japan, it has increased from 1·8 per cent. to 2·8 per cent. of gross domestic product. In West Germany, it has increased from 2 per cent. to 2·5 per cent. It has increased in France and the United States and only the United Kingdom's share of non-defence-related research and development has dropped, from 1·8 per cent. to 1·5 per cent.

I see the Chancellor of the Duchy of Lancaster wondering about those figures. I direct him to the "Save British Science" report which gives the figures. I have them here if he wants to look at them. I ask hon. Gentlemen who may read the Hansard report later to plot those figures on a graph and then to plot on a graph the level of industrial production in each of those nations. They will find that the two curves correlate almost exactly. Nations that have invested more in non-defence-related research and development have seen overall industrial production rise, whereas ours has similarly declined.

Does the right hon. Gentleman agree that there is a correlation between the success of both the Japanese and West German economies and the small percentage of gross national product that they spend on defence, as opposed to the large amount that we spend on defence? Most of our research and development is defence-related. Why, then, does the right hon. Gentleman support such a high level of defence expenditure?

The hon. Gentleman must have missed the point I made earlier. I conceded that Britain is spending 50 per cent. of its research and development on defence and I said that that was one factor holding back the proper development of civilian research and development. Other factors, such as secrecy, are involved, too. In the United States, defence-related projects in which new ideas are developed will move across into the civilian sector, but our own secrecy frequently prevents that from happening here. I could give the hon. Gentleman examples of how that happens.

Government-funded civil research has dropped similarly. Between 1981 and 1989, it dropped from 0.73 per cent. to about 0.5 per cent. In terms of money, that means that £800 million less is going into Government-funded civil research. Even allowing for the extra £100 million that was put aside in last year's Autumn Statement, it means a £700 million drop. It means that as a percentage of gross domestic product, Government-funded civil research will be lower in 1990 than it was in 1981.

But we are not talking merely about a lack of investment in physical goods, research or technologies. We are talking as well about the other component, which is lack of investment in people. In Britain today, the largest and most significant factor holding back production is the skill gap that afflicts our industries.

My hon. and learned Friend the Member for Montgomery (Mr. Carlile) referred to the brain drain. Indeed, at the top level, we are seeing a major brain drain. I visited silicon valley a little while ago; it is a fact of life that the greatest expatriate population of silicon valley, not even excluding Hispanics, comprises expatriates of Britain who emigrated to pursue new technology.

In November 1988, the New York Times made an extraordinary statement about the influx of our intellectual capital into the United States, stating that it composed

"The largest single influx into this country"—

that is, the United States—

"from a single source since the Jewish professors were forced to leave Germany and Austria in the 1930s."

The right hon. Gentleman has failed to identify when those expatriates went to silicon valley. Is it not the case that the head of Bell-Labs, the head of Hewlett-Packard's research department and the head of Rolm are all expatriates of this country, but that they emigrated in the 60s and 70s? Is it not also the case that there is now substantial evidence of reverse migration among many of the people who emigrated 20 years ago?

I can tell the hon. Gentleman precisely what he wants to know, because, as I recall, I visited silicon valley in 1985 when the present Government had been in power for six years. Every person to whom I spoke—they were all either high in the research structures of firms or running firms themselves—had emigrated from Britain since this Government came to power. If there is evidence of a reverse trend, I shall be interested to know it, but I will bet the hon. Gentleman any money that he cares to lay that over the 10-year period since 1979, Britain has lost massively more researchers and scientists abroad than have come to this country.

I turn now to the skill gap as it affects industry. I refer to the National Computing Centre—[Interruption.] Conservative Members may find this strange and amusing, but I do not and nor, I believe, do the people of Britain. In 1988 the National Computing Centre estimated that we now have 6,000 fewer programmers and analysts than industry needs.

On 27 February this year, The Independent published an article stating that British industry is now short of about 30,000 experienced information technology staff. It predicted that unless there is a change of Government policy, by 1993 Britain will be short of about 100,000 experienced industrial information technology staff.

We know that a report published earlier this year by the Confederation of British Industry identified that the skill gap in Britain posed a major barrier for many of our firms. Even in Merseyside, which has high unemployment, 30 per cent. of firms are being held back because they cannot find people with the appropriate skills.

Meanwhile, the number of those applying for information technology-related degrees in our universities is dropping fast. Those figures underlie our industrial weakness and will ensure our continuing decline in information technologies.

However, the picture given by the bald statistics is not the whole picture, because it misses out the central fact which, more than anything else, is a contributory cause of the deplorable position that Britain is now in. I refer to the Government's attitude towards information technology and new industries. I do not pretend for a moment that the Government found themselves in an easy position because they did not.

No one can doubt that Britain was facing a major problem when the Government came to power in 1979, but the Government's inability and unwillingness to tackle that problem effectively now holds them to be indicted. Time and again they have shown that they do not care about British invention and technical skill. Indeed, time and again they have shown that they do not even recognise it; and time and again they have refused to support British invention, so that time and again something is invented in this country, but others then produce it, and we end up adding to our balance of payments deficit by buying it back from them.

I want to give the House three simple examples of how this has happened in the past.

Hovercraft.

Hovercraft is not one of them. Nowadays I do not count it as in the front range of new technology.

Let me take, first of all, the transputer, invented in INMOS, which was established by Labour's National Enterprise Board. The transputer—sometimes known as a computer on a chip—is still 10 years ahead of the field. Indeed, transputers are currently being used by NASA for its communications and radar systems. Much more important, they are being used by the Japanese as the basis of their new laser printer technology. They offer a unique parallel computing opportunity and unique abilities to interconnect with other systems. They are also one third cheaper than any comparable silicon chip mechanism.

For ideological reasons, as we all know, the Government sold INMOS, complete with the transputer, to Thorn EMI in 1984. Almost immediately, Thorn EMI decided to go out of computing altogether, and into music publication, which provided quicker access to short-term profits. INMOS was then put up for sale. Thorn EMI refused to invest any further in the factory in south Wales—at least, it refused to invest significant amounts in it and showed absolutely no interest in making sure that the transputer was developed adequately. The Government—by this time, too late—stepped in and tried to persuade universities and others to use the transputer, but it was far too little, far too late.

Last week S.G.S. Thompson moved in and bought INMOS. Let it be on the record that S.G.S. Thompson is a wholly owned Franco-Italian firm and is less profitable, in overall terms, than Thorn EMI. But it could see a good thing, which our own Government and, I must say, our own industry—the industrial electronics giants—could not see. S.G.S. Thompson has promised to invest in the transputer—something that neither the British Government nor British industry was prepared to do. It has promised to recruit 100 new engineers, and, according to its new managing director, will put limitless investment in what he described as a jewel in the new technology area.

Is it not ironic that, in the very week in which, for instance, Fujitsu has said that it will launch a £400 million factory at Newton Aycliffe to assemble its computers and laser printers, the very week in which we have rejoiced at Toyota moving in to establish assembly plants in the north-east, we have sold one of our own world-beating inventions, and been relegated to the position of an offshore assembly?

I agree with the hon. Gentleman's point that the Government have sold a valuable public asset, which could and should have been developed in public ownership. I resent that very deeply. But then the hon. Member talks about a Franco-Italian company taking that asset over. But the United Kingdom is a member of the Common Market. Surely freedom of movement of capital, freedom for predators to go and buy anywhere, is a fundamental requirement of the Common Market, of which the hon. Gentleman and his party have made absolutely no criticism.

Absolutely, and I would be the last person to believe that a firm like that should not be available to purchasers in Common Market countries. As the hon. Gentleman will discover in a minute, I believe that the European context is essential if we are to be able to develop a decent high technology industry. My argument is not that a Franco-Italian company should move in and buy up; it is that it is extraordinary that, whereas people from France and Italy can see the advantages of a British invention, our own Government and British industry are too blind to see them. I can find few more depressing examples of the short-term and myopic view of this Government.

There is, however, perhaps one—gallium arsenide, in many ways a sister to the transputer. It is a new high-speed chip.

The right hon. Gentleman referred to gallium arsenide as a high-speed chip. It is not a high-speed chip. It is a product on which one can produce a high-speed chip. The right hon. Gentleman also described the transputer as unique. It is not unique. There are a series of competitors. I wish that the right hon. Gentleman would stop displaying his ignorance of high-technology subjects.

Mr. Ashdown: I am delighted to hear from the hon. Gentleman. He is wrong about the transputer. There is no equivalent to the transputer. One or two chips are now being developed which are transputer emulators, but they are not in the same league as transputers. However, the hon. Gentleman is right to say that, technically, gallium arsenide is not a chip. Without wishing to go into long and detailed explanations, let us accept the short term of a chip in the sense that it can at least fulfil many functions of high-speed computers which the silicon chip can perform.

What is unique about gallium arsenide is that it has several special properties. It is light-emitting, its architecture can be varied after it is made, and it is about five times faster than the conventional silicon chip equivalent. What is also important is that it was invented in Britain. Many people believe that it will replace silicon in high-speed computers and certain other applications.

In 1985, the advanced materials and devices committee predicted a world market for gallium arsenide of £9 billion. On 11 March 1985, I initiated an Adjournment debate, backing up that committee and asking the Government to support a programme to develop gallium arsenide invented and developed in Britain. I asked them to set up a structure similar to the Alvey committee to press forward the development of this British invention. That Adjournment debate was answered by the then Under-Secretary of State for Trade and Industry the hon. Member for Coventry, North-East, who is now Under-Secretary of State for Education and Science. Hon. Members can look at columns 125 and 126 of the Hansard of that date. The Minister's answer was disparaging, to put it mildly. He described gallium arsenide as

"not an easy material to process."—[Official Report, 11 March 1989, Vol. 75, c. 125.]

He described it as an "immature technology" when contrasted with the advanced silicon chip technology, and said that the development should be left to industry. He went on to state that the Ministry of Defence was investing some money in it, and he gave the impression that is would have only a Ministry of Defence application.

For the record, gallium arsenide is not now being made in Britain in any commercial quantities. Far from having only a Ministry of Defence application, gallium arsenide chips are at the heart of every compact disc player imported into Britain today.

However, Britain leads the world in some aspects of gallium arsenide technology. Last week I was at St. Andrew's university, where I spoke to Professor Sibbett. He has developed a specific, individual application for gallium arsenide which enables it to produce the fastest laser pulse in the world—so fast that the duration of the pulse in relation to the duration of a second has the same relationship as the duration of a second to the history of the universe. That is important. It will mean that we can develop extremely high-speed computers in future.

I looked at what the professor was doing, and as I left his laboratory one of his researchers said to me, "We have established a world record, and that world record has stood for four years. This will be the basis of new high-speed computers. I have absolutely no doubt that the technology will be bought out, used by others, and that we will import it in high-speed computers in years to come."

I now refer to gallium arsenide's sister technology. Gallium arsenide produces a light impulse. It is a fibre optic which will transmit light, not only in computers but around the country. Again, we have a technology that was invented in Britain—at the British Telecom laboratories in Marplesham. It carries a signal that is thousands of times faster than the conventional twisted copper pairs. The United States study said that in 1991 delivery and installation of fibre-optic cables would be cheaper than installing the twisted copper pairs that we currently have. We will see the development of speeds of transmission down fibre-optic cables increased by perhaps 20 times before the end of the century. The fibre-optic cable offers the possibility of a broad-band, interacting computer communications network for the whole of Britain, possibly reaching into every house.

Conservative and Labour Members seem to think that this is not an important matter. It will be very important. [Interruption.] I am glad to get some support from the Conservative Benches. Just as our Victorian forebears thought it right to construct an infrastructure of roads, railways and canals to carry the commodities to support their industrial revolution, so we will need a modern infrastructure to carry the commodity for our industry. That commodity will be information. A fibre-optic network will be as essential for our future industry, based on high technology, as were the railways, canals and roads in the past.

A great many people have considered whether we might invest in such an infrastructure. The Peacock committee said that we should; so did the Prime Minister's own advisory committee on science and technology. British Telecom appealed to the Government to help it do so. It said:

"All we want is some kind of horizon from the Government, so we are not planning against total uncertainty."

The French, the Japanese and the United States are doing it. The Germans are doing it like mad. Even the Labour party is now proposing that we should do it. I am told that the Labour party will suggest that this should be the centrepiece of its new industrial strategy. I am delighted that the Labour party is at last joining me in the two-year campaign to invest in the new industrial infrastructure that our nation will need.

The Government of course, have said that we should not do it. [Interruption.] Conservative Members will have time to make their statements shortly. Mr. Alastair Macdonald, reporting to the Department of Trade and Industry earlier this year, said that the Government should play no part in this and that we should leave it to the market. I am not suggesting for a moment that the Government should find the £15 billion or £20 billion to make all that investment, but they have a major role to play in stimulating private investment, in creating the interface standards that will allow it to work, in deciding how it will be laid down in Britain and in pump-priming the development.

Any belief that we can simply leave it to a free market and see it develop is nonsense. Under the Government, Britain will not get a modern, extensive, nationwide fibre-optic network. Therefore, it will lose the opportunity to use a British invention which would revolutionise society and provide new opportunities for self-employment and enterprise, for education in the home, for self-health care, for home shopping and for entertainment. The Government are turning their back on all those opportunities.

Is it not ironic that at the same time as the Government are turning their back on helping such systems to come into being, we launched, in January, a satellite television network capable of reaching into every home? What a tragedy that in Britain the telecommunications revolution will be used to give new opportunities to the powerful to shape our minds and to provide soap operas instead of new possibilities for our citizens to shape their destinies for themselves.

Behind all that we must accept that Britain's trade in new technologies has been seriously hampered not only by the United States Export Administration Act, but by the dead hand of the Co-ordinating Committee for Multilateral Export Controls. COCOM is a secret committee, it is not treaty-based and it seeks now to police the export of high technologies between the countries of the West and the Soviet Union. It has completely failed in that task. In many ways the Americans have sought to take unilateral action outside COCOM, which has nearly always resulted in giving American industries and firms —especially large firms—trading advantages over their British or European rivals. Frankly, COCOM's day has passed. The new developments in East-West relations mean that COCOM must and should be reformed. We should insist that COCOM is brought out into the open, that it is properly established on a treaty base and that it is worked on the basis that all the nations who are party to it will act multilaterally within COCOM instead of using their industrial muscle outside it.

So, here is the situation that Britain faces today. We are the only European nation whose inventiveness is falling behind. We are the only European nation in which the number of scientists and engineers in research and development is dropping. We are piling up a bigger and bigger deficit in the information technology trades. We are losing our share of even our domestic market. We are the only advanced nation to be investing less than we were 10 years ago in non-defence research and development. We are losing many of our best brains abroad. We are suffering from a massive and growing skill gap in information technology that probably covers 30,000 jobs today and will cover 100,000 jobs by about 1993. Fewer people are studying for computer degrees than previously and we have far fewer people in our universities than our competitors. We have a Government who know nothing and could not care less about information technology and about the creation of the new industrial base that Britain will need to badly for its prosperity in the future.

Of course, those conclusions are not new. They are all identified in the recent report of the Select committee on Trade and Industry. The Government have responded to them all in their response published in March of this year. I have yet to read a bleaker and more complacent document than that response.

What Britain needs urgently is a strategy for the new technologies, which will invest in research and development, which will invest in a remissible training tax to encourage firms to carry out their own training, which will invest properly in higher and further education, which will invest in a new technology infrastructure, especially in a fibre-optic cable network for Britain, and which will invest in the world-beating products that the country still invents in sufficient numbers.

The Government, of course, know nothing about the meaning of investment. They will leave it to the market. They will stand by and see this nation, whose prosperity and future now lies in building a high-wage, high-skill, high-investment, high-technology economy and industry, become instead a low-wage, low-skill, low-investment, low-technology offshore assembly plant for others.

Of all the indictments that can be laid against the Government, their failure to invest in the future is the greatest and the one for which we will pay the greatest price. That is why I hope that all right hon. and hon. Members, who see for Britain a better future and who believe that the Government have a role to play in building that future, will vote for the motion.

I beg to move, to leave out from 'House' to the end of the Question and to add instead thereof:

'notes the success of the Government's policies in creating a climate in which industry has achieved record levels of output, productivity and investment; welcomes the continuing increase in investment by United Kingdom companies in civil research and development; endorses the Government's policy of supporting collaborative research and development both in the United Kingdom and in Europe; approves the measures being taken by the Government to make education and training more responsive to the needs of industry and commerce; and welcomes the success of the United Kingdom in attracting advanced technology inward investment as a further indication of the strength of the United Kingdom economy.'.

Perhaps I might begin by observing—using a word that the right hon. Member for Yeovil (Mr. Ashdown) used once or twice in his speech—that there is something ironic in the fact that he should move his motion in such terms in a week that has seen the announcement of three massive inward investment projects by companies which are world names in information technology, in vehicles and in vehicle components—Fujitsu, Toyota and Bosch. The total of their investments is about 12 billion. The Opposition are well aware that there are many other investments quite apart from those projects. I mention those major examples of recent inward investment projects because, to put it mildly, they hardly suggest that some of the world's most successful industrial countries and companies share the essentially gloomy view that the right hon. Gentleman has thought fit to put before the House.

Will the Minister give way?

I shall happily give way, because if the debate had been initiated by the official Opposition we would have heard an even more mindlessly gloomy set of propositions.

There is an alternative Opposition Front Bench operating today and we and the Democrats are in complete conjunction in our views on this matter. Why is it that the only thing that the Minister can do is to claim great credit for the fact that foreign investors, especially from Japan, are coming to this country? Where is British investment? The Japanese are coming here in order to get a foothold in Europe for 1992 because they know that Britain is the most deregulated country in the whole of Europe. That means that it will be easy for them. They are using us as a doormat, and it is about time that the Minister started to say that.

Think about the bridge on the River Kwai.

I shall think at least as much about the remarks attributed to the hon. Member for Dagenham (Mr. Gould), who spoke in, I think, the north-east yesterday. He effectively suggested that the north-east was becoming colonised by the Japanese because they are investing there. I wonder whether the hon. Gentleman goes back to his constituents in the Ford plant at Dagenham and suggests that that is an American colony. Some of the major contributors to the British economy over many years have been foreign investors, overseas firms, whose contribution we immensely value. They have contributed a great deal to the British economy, and I do not know why it should be suggested that we should now turn our backs on them.

Britain and its employment and production would be the losers if we were to adopt the attitude suggested by the hon. Member for Newham, North-West (Mr. Banks). He can come back at me if he wants to, but he should bear in mind that much of this investment would come to Europe anyway. The key point is that within Europe it is coming to Britain. If the hon. Gentleman would prefer it to go to France, Italy, Belgium or Germany, let him say so. If not, let him welcome it here.

It is coming to Britain because we are a pushover. They know that our conditions of employment and employment rights are so deregulated that they can take advantage. The Government just lay down a doormat for investors from the rest of the world. The Minister spoke about Ford. There is a threat hanging over the future of Dagenham and the investment there. I went to buy a Ford car from Dagenham Motors because I thought that, as I live in the area, that was the appropriate thing to do. I asked whether the Fiesta that I bought was made at the Dagenham plant, which is right behind the showroom. I was told that it was assembled in Spain. What state are we coming to when we buy Ford cars in this country and then find that they are assembled in Spain and exported to Britain? That is palpable nonsense. Where is the investment in British industry, technology and skills? That is what we want to hear about.

The hon. Gentleman and I can agree on at least one matter, which is that 10 years ago there was not the remotest likelihood that any of these firms would have come to Britain. He describes the change from his own particular, rather curious, perspective. I described the change as one in which firms see this country as a good place in which to do business and as a good base for operations which, in one industry after another, are becoming increasingly international, for reasons which have nothing to do with the factors that the hon. Member for Newham, North-West has mentioned.

The right hon. Gentleman is absolutely wrong to say that there was no inward investment 10 years ago. There was a lot of inward investment in all parts of the country, but the difference between this Government and the previous Labour Government is that the latter had a regional policy and tried to get investment in areas of high unemployment and to get industry where it was vital. Unfortunately, at that time a whole series of firms which operated in this country but whose decisions were made in Detroit and elsewhere were closing down.

Why?

The Minister needs to know a little about economics, but I am not making a speech. I could explain to him in very simple terms the nature of the rotten system that he upholds, which has booms and slumps. If he does not understand that, he does not understand the ABC of economics.

I was the Minister of State for Industry for a period when we were getting that inward investment. It was precisely when inward investment began to taper off that we saw the end of the regional policy.

I am conscious of the previous unhappy experience of the hon. Member for Liverpool, Walton (Mr. Heller). He should perhaps bear in mind two things. First, two of those same companies to which he has referred and to which I have not referred—I suppose that he had in mind, in particular, Ford and General Motors —have both in recent months, quite apart from the three large investments in the past week that I have already mentioned, made significant decisions to invest further in this country, Ford with its engine plant in Wales, and General Motors with some futher investment not very far from the hon. Gentleman's constituency.

I ask the hon. Gentleman to recognise something else. Although it is for Bosch, for example, to say, rather than for me to tell the House, precisely what factors influenced its decision to come here, bearing in mind that it is a German company, I gather from my contacts with the company that two considerations that attracted it were the low rate of corporation tax and the good state of British industrial relations. That is why I say that 10 years ago there would not have been the remotest possibility, however much regional assistance had been offered to them, of those companies coming here.

A third point that I mention while I am seeking to deal with the hon. Member for Walton is the significance of Toyota's having decided to come here on a massive scale with no regional assistance at all, because it has not gone to such an area. That is a feature of some significance.

I would like to join my right hon. Friend in welcoming the inward investment that has taken place, but it is not only inward investment that we are seeing. In my own constituency in the past four or five years we have had both announcements of further investments and actual investment by, for example, Glaxo with £500,000 to be spent in Stevenage in the next four years and 2,000 people involved in research and development. Another 500 people are involved in research and development in Marconi Instruments with a new factory development. Further development is going on in International Computers Ltd., part of the Standard Telephones and Cables group, in Stevenage. All this new investment is being made so that this country can be more prosperous.

I am grateful to my hon. Friend the Member for Stevenage (Mr. Wood). He makes very well the point that, although there is a particular drama about so many large inward investment projects being announced in the past week, it is against the background of a widespread increase in investment of all kinds across virtually the whole of the British economy, both by companies overseas and by those business men here who have greater confidence in the country's economy than they have had at any time for a generation.

That line of argument about inward investment would stand up much better if the Government had not been in office for 10 years. When they took office we had a marginal surplus on our manufactured trade; we are now down to a deficit on manufactured trade of about £20 billion and a balance of payments deficit of about £15 billion. According to the Chancellor, despite all the claims about inward investment, it is likely to get worse in the next financial year. If this inward investment is so good, beautiful and wonderful, when will the balance of payments return to a surplus?

Where is the miracle?

If, for example, Fujitsu makes chips here rather than elsewhere, there will be an export and import substitution effect. The same is manifestly true of Bosch, Toyota and all the other projects that I mentioned. At the same time, they will contribute in various ways, both direct and indirect, to the further strengthening of the competitiveness of the British economy, and are part and parcel of the range of policies with which we seek to meet the needs to which reference has been made.

When will we move back into a surplus?

No doubt other hon. Members wish to take part in the debate, and I wish to make some progress.

One matter on which both Social and Liberal Democrats and Labour Members sitting below the Gangway happily agree with my right hon. and hon. Friends is the importance of investment for this country's future prosperity.

It is striking that, although during the 1960s and 1970s the United Kingdom was near the bottom of the league by almost any standard of the substantial measurement of investment, since 1980 total fixed investment has grown faster in the United Kingdom than in any other country in the European Community. Manufacturing investment alone—I know how keen Opposition Members are on manufacturers—is estimated to have increased by no less than 9·5 per cent. between 1987 and 1988. All the indicators point to continued buoyant investment this year.

I am not trying to be obstructive, but, if that is the case, why is manufacturing investment now only back to its 1979 level?

I shall point to a fact that emerged in the course of my statement on Toyota, which I made to the House yesterday, when I was challenged about the degree of import penetration of the British motor car industry. I made the point then, and I make no apology for repeating it, that for most of the period since the Government took office there has not been a particularly satisfactory level of import penetration. It has been between 50 per cent. and 60 per cent.—but that was about the level which it had reached in 1979. Between 1974 and 1979, the level of import penetration doubled. It will take a long time to overcome the effects of such decline, its consequences for investment during that period, and the decisions that were then made.

Equally, investment in industrial research and development is increasing in an encouraging way, with an increase of about 26·5 per cent. in real terms—more than a quarter—between 1983 and 1987. It should be firmly registered throughout the House that it is against that background of a strong sustained increase in investment by industry that the right hon. Member for Yeovil has brought the motion before the House this afternoon.

Will the right hon. Gentleman confirm that investment as a proportion of GDP—which is the proper way to measure net investment—is no higher than it was in 1979? The right hon. Gentleman accused me of being gloomy. Is he not gloomy about the fact that today our deficit in information technology is running at £2·9 billion a year and growing? Does he not find that a gloomy picture? Or does he think that it is wonderful?

I shall be coming to some of the right hon. Gentleman's remarks about information technology, for I have no desire to dismiss them. I ask him to acknowledge, however, that after more than 20 years in which the economy suffered not only from its failure to invest as much as we would like but from growth in consumption outpacing, consistently and almost relentlessly, that of investment, there has been a dramatic turnaround in the past five or six years. The growth of investment has often exceeded that of consumption by as much as 100 per cent. That remarkable trend has addressed a long-term weakness of the British economy, and has helped to build up its strength for the future.

The right hon. Gentleman talked a good deal about the information technology and electronics sector. Although he considers that sector particularly important, and it helped him to make his case—or attempt to do so—I ask him not to ignore other aspects of high technology, especially aerospace and chemicals, which present a different picture.

No one should imagine that the labels "information technology" and "electronics" mean that those are the only high-tech industries with which the country needs to be concerned. In aerospace, for example, the United Kingdom's capital investment in 1986 was £220 million, up from £133 million in 1983. In chemicals, capital investment in 1987 was running at an annual rate of £1·4 billion, up from some £900 million four years earlier. Investment in aerospace research and development between 1983 and 1987 has consistently remained at a high level, while in the chemical sector R and D investment increased from £735 million in 1983 to £1·3 billion in 1987—a massive increase of 47 per cent. in real terms. In both those high-tech sectors, moreover, the country is running a trade surplus of over £2 billion.

rose—

I will give way once more, but then I must get on.

Does the Minister accept that the British aerospace industry has been so consistently under-funded that we have not been able, in conjunction with Airbus Industrie, to provide a range of planes to satisfy British Airways—which is now almost entirely dependent on Boeing, with its highly variable quality of production? Does he also accept that the only small to medium-sized plane, the British Aerospace 146, depends not on Rolls-Royce engines but on Avco Lycoming engines imported from the United States? Is that not a sign of our lack of investment in technologies that will need developing if we are to match Boeing and Avco Lycoming?

It is also significant that a considerable number of American aircraft in operation around the world use Rolls-Royce engines. Given the size of this country and of what might be called its domestic market, its achievements in industry are considerable and make a major contribution to our balance of payments.

For understandable reasons, the right hon. Gentleman chose to focus particularly on a different high-tech industry, IT and electronics. In his intervention a few moments ago he implied—indeed, he virtually made his view explicit—that it was self-evident that the United Kingdom should expect to have the manufacturing capability to meet all its high technology needs. He points to the trade deficit in the IT and electronics sector, arguing that it demonstrates a need to channel further investment into it. I noted that he did not refer directly to the point that nearly all the major countries of the European Community and the United States also have IT deficits, and therefore have not gone down the self-sufficiency path that the right hon. Gentleman implied.

Our country has a long history of involvement in research and, as many right hon. and hon. Members said, it has been the home of many great discoveries. It certainly has outstanding strengths in particular areas of scientific research and industrial technology, including many under the umbrella of information technology and electronics. When it comes to instrumentation control systems, for example, and to electronic capital goods such as radar, we had a 1987 trade surplus of more than £700 million. No country is, or is likely to be, a world leader in each and every area of high technology. It is an increasingly global market in which each successive generation of technology demands ever-increasing sums to be spent on research and development investment.

The United Kingdom—no more than the United States, Germany or Japan—will not be able to become a major force in every area of high technology. Therefore, in common with other developed countries, we have rightly, in my view—tended to specialise in those sectors in which British firms have a world lead or the prospect of maintaining a strong position in an increasingly competitive global market.

Interestingly, it emerged from the speech of the right hon. Gentleman that information technology is used to increase the efficiency and effectiveness of industry and commerce, and that that is true whether the IT equipment concerned is manufactured in the United Kingdom or is imported. In his remarks the right hon. Gentleman adverted—almost as an aside—to the undoubted growth in the IT and electronics trade deficit, and to the fact that that deficit was associated with probably the fastest growing market in the world. That is itself an extremely encouraging trend. It is at least as important—it will be possible to argue that it is even more important—to ensure that IT is effectively applied in our manufacturing and service industries as it is that we ourselves should be a massive manufacturer of microchips or whatever. In revealing that the United Kingdom is one of the world's fastest growing markets for IT and electronics products, the right hon. Gentleman indicated one of our country's growing strengths and not weaknesses, as he sought to imply.

The right hon. Gentleman is correct to say that the proper utilisation of information technology is vital. One thinks, for example, of the way that it has been used to make the textile industry up-market and more competitive. However, the fact remains that Britain is woefully under-equipped to make use of the capital goods that it is buying in to support that deficit. The Institute of Administration and Management's report of 10 July 1988 commented that unsophisticated users of information technology are six times more likely to suffer poor financial results. It went on to comment that that is exactly what we have in Britain today—due to inadequate training levels, an insufficient number of graduates, and in particular a deficit of 6,000 programmers and analysts. The underlying problem is that the Government refuse to invest in education so that we are unable to utilise the maximum capacity of even that IT that we are buying in.

The right hon. Gentleman, understandably, rapidly shifts his ground from concentrating solely on our production capacity in relation to IT and electronics. Now that I have made the point that applications of that technology are increasing, which is encouraging, the right hon. Gentleman turns to what he calls the skills gap. I shall refer to that issue later. However, I hope that I have carried the right hon. Gentleman with me in recognising that at least as important as the sheer scale of the production of any particular types of IT or electronics products in this country is the extent to which we make use of those products, from wherever they may come, in developing industry's competitiveness and efficiency.

Capital investment in IT increased by 44 per cent. in real terms between 1982 and 1986, and it is also a leading sector of investment in terms of research and development, with investment in 1987 of nearly £2 billion compared with slightly less than £1·5 billion in 1983. Clearly it would not be sensible to demand of United Kingdom firms that they invest in areas where they cannot compete effectively internationally. It would not be right, as the right hon. Gentleman claimed it would, for the Government to seek to determine where and how United Kingdom firms should or should not invest. That approach of picking winners was tried in the past. More often than not it ended up as the quickest way of picking losers and of sending a good deal of money down the drain. There is no substitute for firms having a knowledge and understanding of the market place determining their own production and investment strategies.

There will inevitably be areas of IT and of other industries where foreign firms have a competitive advantage and where United Kingdom companies will choose to buy from abroad rather than manufacture in this country. That is an inevitable consequence of increased specialisation in the IT and electronics sector and of the need for every country to concentrate on comparative strengths. That is one reason why we welcome the overseas investment to which I referred earlier, which has been an outstanding aspect of this country's success story in recent months and years.

I emphasise the contribution made to this country by firms with which we are already familiar. IBM, for example—and it would be just as possible to talk about Hampshire being colonised by IBM as about the north-east being colonised by Fujitsu—with more than 18,000 employees, is the largest employer, producer and exporter in the United Kingdom's IT industry. In 1988 it exported goods and services worth more than £2 billion, running a positive balance of trade and making it one of the country's largest exporters.

It is encouraging that other world leaders such as Digital Equipment, Hewlett-Packard, Rank Xerox and Datalogic all chose the United Kingdom for their European headquarters. Their decisions are not just coincidental but are positive statements by business leaders of confidence in this country and in its role as a key player in information technology. As was said by my hon. Friend the Member for Stevenage, it is far from the case that our indigenous IT firms are not investing. My hon. Friend referred to ICL, which has spent about £20 million on its United Kingdom manufacturing ability in the past two years, while Research Machines, one of our smaller but growing computer manufacturers, made more than £5 million of capital investment over the same period.

The Government have also created a climate that ensures that firms are much better placed to invest in research and development. Manufacturing profitability in 1987 was the best since 1969, and industry increased its own funding of research and development by about 30 per cent. in real terms over the four years between 1983 and 1987. Apart from that growth in industry's own expenditure on research and development, the Department of Trade and Industry spent more than £500 million on science and technology in 1988–89, and it will spend a slightly larger sum in 1989–90.

I am not sure from the right hon. Gentleman's remarks whether he welcomes this, but the Government have shifted their balance of policies and moved away from what is known as near-market support for research and development to direct support to longer-term ventures more distant from the market. We are putting much greater emphasis on longer-term collaborative programmes of research between companies, and encouraging co-operation between companies and higher education institutions. Many new schemes to promote pre-competitive collaborative research have been launched in the past year. For example, some 11 programmes have been announced and several more will soon be launched on Link, with which the right hon. Gentleman will be familiar. Proposals for such projects are being generated at a healthy rate.

I was particularly pleased that the right hon. Gentleman clearly recognised the importance of international collaboration, especially with the aproach of the single European market. We are supporting the Eureka framework which goes beyond the European Community and is a pan-European programme to encourage industrially led projects with the European Community and other European partners; and, of course, we are supporting many European Community research and development programmes which are complementary to our own.

Everyone in the Department is actively encouraging United Kingdm organisations to take part in community research industrial research and development programmes. Within the framework of those programmes, United Kingdom organisations are taking part in between 50 arid 80 per cent. of the projects, depending on the individual programmes, and have received between 18 and 20 per cent. of the total funding. That is not often sufficiently appreciated when people look at some of the figures to which the right hon. Gentleman referred.

I wanted to make one or two further points about investment, but in view of the time, partly because I have given way several times, I shall move on to the other shortage on which the right hon. Gentleman focused particular attention—the need for training in various skills at various levels. Certainly the time when training could be regarded as a one-off spell between general education and work and when additional training was considered neccessary only when new machinery was installed is long gone. It is encouraging that so many employers in Britain consider training to be a continuous process that is essential if they are to keep up with their competitors at home and abroad. I assure the right hon. Gentleman and the House that that shift towards ensuring that training is more widely accepted as an essential part of a firm's investment and development is being reinforced.

Clearly, not least because of the large increase in the use and application of information technology and electronics, there has been a need to increase the supply of skilled manpower. The surge in demand for IT skills that has accompanied the surge in the market for the processes and products has undoubtedly led to a shortage of qualified manpower. We have sought to respond to that in a variety of positive and constructive ways, although it is manifestly not a problem that can be overcome in weeks or months.

By 1990 the engineering and technology programme will have provided 5,000 extra places at undergraduate and postgraduate level, 80 per cent. of which are in IT-related subjects. That programme and the earlier information technology in higher education initiative have significantly increased the places available for postgraduate information technology training. This year, the funding to help polytechnics and colleges to develop their capacity for applied research has been increased by more than 50 per cent. The high technology national training initiative of the Training Agency provides high-level vocational training courses, the majority of which are in computing sciences and engineering, with an IT component. Currently, some 3,000 students benefit from that programme. Computing and IT is a compulsory element in all youth training scheme programmes.

Those are just some of a wide-ranging set of programmes directed at the very problem to which the right hon. Gentleman drew attention. Trainees on employment training will also be able to undertake training on information technology as part of their individual action plans. We are continuing to monitor closely the evolving pattern of demand and supply for information technology professionals through regular surveys carried out by the Institute of Manpower Studies on behalf of a number of Government Departments and agencies.

Finally, I should mention something which the right hon. Gentleman did not include in his speech—the range of measures that are under way to improve links between business and education, not least the wide-ranging plans by my right hon. Friend the Secretary of State for Employment for the development of training and enterprise councils.

In addition to the need for improvement in the amount and nature of training available in certain places at certain times which is currently being addressed, too many of those programmes were not sufficiently shaped by direct and clear knowledge of the needs and requirements of businesses and business men. The move towards training and enterprise councils to ensure that training is more closely related to the needs that underlie this debate will, in the medium and long term, prove one of the most important and productive changes which the Government has sought to implement.

For reasons that are clear to the House and, I hope, accepted, I have taken a little more time than I had intended. I accept that much remains to be done to overcome the full effects of a longer and unhappy period of decline in many parts of British industry, especially during the 1960s and 1970s. Against the background of recent investment decisions by British firms and those abroad, the change in the past 10 years should be considered genuinely encouraging by hon. Members on both sides of the House. More than at any time in a generation, Britain is investing in the future. We are investing in capital, in skills and in a way which will continue to improve the output, the competitiveness and the trading position of the British economy. While I accept that there is still more to be done, I hope that the right hon. Gentleman will accept, as he did at the outset of his speech, that an immense amount has already been achieved.

I congratulate the right hon. Member for Yeovil (Mr. Ashdown) on his choice of subject for our debate. I also congratulate him and his party on the wording of the motion, as far as it goes. I was also pleased that he is so eager to endorse the Labour party's next economic programme in advance of its publication. I look forward to his further endorsement when the programme is published.

In the 1989–90 Red Book, which I understand is more than just another document, the Government claimed:

"As a result of sound financial policies coupled with supply side reforms, progress has been made during the 1980s".

I shall return to supply side changes but first I shall address the question of economic progress. In any test of economic progress, it would be reasonable to look at the indices of manufactured output, manufacturing investment, trade, employment, growth and even inflation.

Can what has happened in our economy in the past 10 years be called progress when manufacturing output returned to 1978 levels only in 1987 and manufacturing investment has still not yet returned to 1979 levels? In 1979, we had a surplus of £3 billion on our trade in manufactures, but we now have a deficit of £20 billion. That is reflected in the figures of key industries in our economy. For example, most households spend a large proportion of their income in the car industry, but there is now a £6 billion gap in trade. In textiles and clothing there is a £3 billion gap in trade and in electronics there is a growing gap, as we have already heard, of nearly £4 billion. That is also reflected in our share of world trade, which has fallen by 11 per cent. over the same period.

Can it be called progress when we have lost 2 million jobs in manufacturing industry over 10 years? Notwithstanding the improvements in employment in the past couple of years, which we all welcome, unemployment is still 35 per cent. higher than in 1979, even if we take into account the Government's new method of calculation. Can it be called progress when the north-south divide is greater than it has been at any time in the past 20 years? Can it be called progress when inflation on all indices has all but returned to the 1978–79 level? I remind the Chancellor of the Duchy of Lancaster of the comments of his right hon. Friend the Chancellor of the Exchequer before the 1987 general election when he said that inflation was the judge and jury of the Government's economic policy. I wonder whether the Chancellor is still saying that. I wonder whether the Minister is saying that when inflation is increasing rapidly. It is now double the average in the EEC and is moving relentlessly upwards.

That depressing picture is the real monument of 10 years of Thatcherism. It has bequeathed to this generation and the generation of the 1990s a lower capacity to make things that we need to export and an inability to compete in the modern high-tech industries. We are now a ravenous pool of consumerism for the products of other countries. What will happen when the bubble bursts? Will not deflation be forced on us again? Will not living standards begin to fall and, with a time lag, unemployment again start to rise? All that will have been called progress during a time when we have had the benefit of £78 billion in North sea oil revenues.

Some people may argue that inward investment is a sign of good times. I am not saying that it is not welcome in some circumstances. However, an over-reliance on inward investment is surely an indictment of our industries' inability to invest in our future. I am not opposed to inward investment. As a Member for the north-east of England I realise the importance of Japanese investment to the north-east economy. However, we must recognise why the Japanese are here. They are not here because of any supply side miracle in the British economy. The senior management in Japanese companies will say why they are here. They want to be inside protectionism that they think might occur in Europe after 1992 and if they locate in a country in which English is spoken, they do not need to retrain their middle management in other languages. That is the real reason why Britain is attracting Japanese investment. I think that the Minister knows that that is so.

The hon. Gentleman is making disparaging remarks about inward investment. Did he listen to his hon. Friend the Member for Houghton and Washington (Mr. Boyes) when he intervened strongly during the Chancellor of the Duchy of Lancaster's statement yesterday to point out the enormous benefit that Japanese investment has conferred on his constituency?

I am grateful to the hon. Gentleman for raising that point. We are not opposed to all inward investment. We want a balance of investment in this country and a greater investment by our indigenous companies. One reason why companies will not invest in the north is that companies currently located in the south cannot persuade their managements to go north. To companies from Japan, Korea or elsewhere the 300 miles between Newcastle and London and the 400 miles between Glasgow and London are immaterial.

We cannot rely exclusively on Japanese investment for major projects in the regions. If we do accept investment, it must not be on just any terms. We must remind ourselves that Japanese investment in the United Kingdom is for the benefit of Japan, not Britain. We risk becoming an adjunct of the Japanese economy, with all that that entails. We need our own economy, our own product development and our own components industry. We must develop using our own inventiveness, our own new industries and our own research and development. We need our own educational and training investment and we need our own industrial infrastructure. Without that, we will become nothing more than a low-wage, low-skill, branch-plant economy.

Some people have said that we are becoming a screwdriver economy and hon. Members know the danger involved in that. In prosperous times it might be all very well but in difficult times there is nothing for the screwdriver to screw. That means a reduction in output and an increase in unemployment.

I do not understand how the hon. Gentleman can make those comments about Japanese companies such as Fujitsu, Toyota and Nissan but not about IBM, Ford, NEC or any of the other major foreign investments that have been here for some time. Nobody in Dagenham talks about a screwdriver economy. Nobody talks about such an economy in Hampshire or various other places in which IBM is working. Nobody who has seen Nissan at work in the north-east talks about a screwdriver economy. Why should it be assumed that that applies to all new investment?

I know that the right hon. Gentleman makes regular journeys to the north-east, but I hope that in future he will take a little more cognisance of what he is told. He will know that the people in the north-east remember the nature of the investment that came from the American economy in the 1940s and 1950s. Companies such as Caterpillar are no longer there. Caterpillar was a screwdriver company and when things became difficult internationally it pulled out. Many companies, including Massey Ferguson and Chrysler, have pulled out in that way. That is the real danger. We need a balance of investment. I am not saying that we should exclude all foreign investment.

I am listening to the hon. Gentleman's argument with care. He said that we need a balance of investment. I am not suggesting that he believes that we should exclude foreign investment but is he suggesting that, for the Labour party, with the announcement this week, the balance has gone too far in the wrong direction?

I am not saying that the balance has gone off the end. However, if in the future the only investment in parts of Scotland, the north-east and north-west is foreign investment, the economy will become so dependent on inward investment that when we are hit by an international recession those areas will be as badly hit as they have been in the past. Some areas, such as Wearside near my constituency, are extraordinarily dependent on inward investment. They will be the first to be hit if there is a world recession, and everyone connected with the investment knows that.

Is my hon. Friend aware that a report commissioned by the Department of the Environment from the distinguished accountants, Peat Marwick McLintock, on the housing action trust in Sunderland said that there was no evidence of the Nissan plant having any effect on employment on the estates of Downhill, Hylton Castle, Red House and Town End Farm? The Nissan plant, which already employs 2,000 people and is adjacent to those estates across the A19, has had no effect on those estates, which have high unemployment. Is not part of the problem that because investment is not indigenous, it is highly selective where it employs?

I am grateful to my hon. Friend for his comments. He knows that the problem arises in such areas as a result of skill shortages and the lack of proper training programmes over the past 10 or 15 years.

If the Nissan plant is only a screwdriver plant, why do people need skills to work in it?

I have been grateful for other interventions, but that remark is offensive. It is offensive to say that people who work on an assembly line have no skill. The hon. Gentleman should spend 39 hours on the Nissan production line and then make that remark.

Why is our economy in the shape that it is? I shall refer to comments made by people who know more about the subject than the hon. Member for Wokingham (Mr. Redwood). Dr. Andrew Sentence, who is head of the CBI's trends and policies group, stated last July in the CBI news:

"High interest rates are a burden on business and are unwelcome at any time. However, they also affect companies, particularly manufacturers, through their impact on the value of the currency."

I met the chairman of a company called AWD, which is in the vehicle industry. The Minister is familiar with it and I hope that he will agree that it is a go-ahead company which has considerable prospects. It rescued Bedford Vans, but its chairman is saying that the company will not make the impact that he wants on the market until the exchange rate is industry-based. I recently met a director of Courtaulds in charge of its spinning division in Lancashire shortly before he announced the closure of spinning plants. He made it clear that the problem was not internal productivity but the exchange rate. He said that as long as it was geared to the City and not to the needs of industry, the company could not compete in the world market.

Economists once thought that if demand policies are appropriate the economy will be successfully steered, but history has reminded us that that is not the case. I agree with a speech that the Minister made earlier this year, in which he acknowledged that demand and supply side initiatives are essential. However, it is clear that the Government's policies on the demand side have been pro-City, pro-rich, pro-export of capital and anti-industry, anti balanced economic development and anti the interests of ordinary people.

I observe no supply side miracle. Our failure to improve the supply side is at the core of the problems facing us as we build up to 1992. The basic error made by the Government over the past 10 years is that they believed that if they bashed the unions, trimmed the power of workers and gave employers more punch, supply side problems would be solved. That is what happened to British Leyland, but could any hon. Member say that as a result it is a strong, independent company going from success to success? Surely the truth is different, as everyone in the industry knows. It failed to take necessary design, capital re-equipping and marketing measures. I am as pleased as any hon. Member that it is hanging on manfully, perhaps in hock to Honda, but everyone in the industry knows that the basic problem was not limited to labour. That lesson is typical of much that has happened to much of manufacturing industry.

We should now know that the supply side cannot be changed without investing in the future, yet we still spend less on research and development than the Germans, Japanese or Americans. As the right hon. Member for Yeovil said, if the military aspect is extracted from research and development expenditure, the problem is more severe. Is it any surprise that we are ever more dependent on Japanese-designed cars, electronics and engineering products? The Government cannot dodge their responsibilities, as the Financial Times said when attributing blame for the problem in an editorial on 14 March.

There will be no supply side miracle while training is so woefully inadequate. Our number of trainees has dropped from 23,000 in 1979 to 8,300 in 1988. Two thirds of British workers have no workplace qualifications, compared with one in five in Germany. Cuts of over £230 million were made in the 1989–90 training budget in real terms. Even in the service industries, about which the Department of Trade and Industry is for ever crowing, 14,500 young French people obtained qualifications in retailing compared to only 1,650 in Britain. Is it any wonder that the Engineering Employers Federation has forecast a deficit in mechanical engineering products in 1989, for the first time this century?

Is not the fundamental policy error of the Government that, unlike our counterparts in the Federal Republic of Germany, they are completely and ideologically hostile to collective and community action? We cannot make improvements in research and development, training, education and infrastructure unless we make a public expenditure commitment. Public expenditure should be accountable. The test should be the value of the service or product that it provides. However, I acknowledge that that has not always been the case. Crucially, public expenditure should be used to stimulate and complement private sector investment and initiative.

The Government know the perils ahead. They know that a further hike in interest rates will not only hit mortgages and further hamper industrial investment but will further exacerbate the trade gap. They know that the pound is likely to collapse when confidence departs and the hot money leaves our shores. They must know that 1992 is a further threat to our economy. If they are honest, they will admit that we still have severe supply side inadequacies.

Regrettably—I believe that the country holds this view —it is too late to change the Government's view. Some Conservative Members share the view of Labour Members that intervention is necessary and that we must invest to protect our future. Perhaps we will hear more about that from Wales in the coming week. I urge Conservative Members to join us in supporting the motion.

The title of the debate is fully in keeping with the slogan approach of the Social and Liberal Democratic party. It is long on good intentions and rather short on practicalities. I was privileged to represent Workington in the late 1970s and remember the workings of the Lib-Lab pact. I remember that almost any investment for the future was cut and cut again, so perhaps the House will understand my scepticism about the words of the right hon. Member for Yeovil (Mr. Ashdown) about investing in the future. I have a thought going through my mind that if he ever got near the levers of control the results might fall a little short of his words.

I am grateful that the House has the opportunity to discuss this most important matter, but I am disappointed in the number of hon. Members who are present to listen. Although I include hon. Members of my own party in that comment, we are more in evidence than hon. Members of other parties. We have some good spenders in this House, but we are a little short of earners. As a nation, we must earn money before we start spending it. This is a debate in which we decide how to earn money so that we can spend it on the social programmes the nation requires.

I want to talk about future investment in reducing our balance of payments deficit. In the short term, the Government's policy—which I support—is to have high interest rates which will bring down inflation and reduce demand. I am concerned that high interest rates will, in turn, reduce investment as well as demand. Even if that does not happen, I am equally worried about whether our manufacturing industry will be of a size and capacity to take advantage of the demand when interest rate falls. Will it be in a position to supply the goods that our people require when interest rates come down? I worry that that will not be the case. If I am right, we shall lurch backwards and forwards in a way reminiscent of the stop-go policies of the 1950s and 1960s, only this time we shall use the balance of payments as the crisis indicator.

I assume that it is desirable to bridge the balance of payments gap and to bring our balance of payments into equality; thus we should define the objectives to be achieved. It is a sad fact—every hon. Member who has spoken so far has made the point—that for some reason our manufacturing industries are poor in investing in three areas—training, equipment and research—when compared with industries in other countries. We can deal with the problem of the balance of payments deficit as a large cake, by taking slices out of it and dealing with each slice at a time. I am glad that manufacturing investment is now up to its 1979 level, but it is still low compared with the other G7 countries and we have to bear in mind the significant point that our investment is still some 50 per cent. lower than Japan's as a percentage of gross national product. However, I do not decry the increase in investment that has taken place, as so many Opposition Members have. It is a significant improvement and long may it continue. But we should have some idea to what percentage of GNP should be reached in manufacturing investment if we are to work towards reducing the balance of payments deficit.

We must also have some idea what percentage of inward investment is desirable each year and work towards it. I have to smile when I see the disagreements between the two wings of the Labour party over internal investment. I welcome Toyota's investment in the north. It is a tribute to the changing attitudes and atmosphere that the Government have created that the Japanese are looking to this country for investment. I also admire the work done by my right hon. Friend the Secretary of State for Wales in creating the infrastructure in Wales to attract companies to the Principality. I am not saying that the Government should pick winners, because the Government could not pick a winner if we paid them, but the Government can provide the infrastructure to make this country attractive to foreign companies for investment. I am told that during the last two years, the improvement in the balance of payments which will be created by those companies that have gone into south Wales in that period would mean a change of £10 billion to £15 billion to the balance of payments, if it were to be extrapolated over the whole country. That contribution should not be lightly brushed aside.

I know that some people are rather worried about internal investment and inflows of funds. I must point out to them that the most chauvinist nation of the lot in the European Community—France—has now, for the first time, revised its policy on internal investment and is going out of its way to attract more companies to invest in France, whereas before it was trying to keep them out.

Much has been said about training and the fact that for some reason our manufacturing industries have been poor in that respect. The recent initiatives of my right hon. Friend the Secretary of State for Employment in putting £3 billion into training and bringing in manufacturing industry, which will contribute about £15 billion, will go a long way to bridge the skill gap. It is a funny quirk of human nature that although we have probably the most generous student grant system in the industrialised world, we have the lowest percentage of people going on into further education. That reflects a failure of the motivation of some of our schoolteachers. Britain desperately needs a trained work force to maintain its position in the industrialised world.

Again, we have a low percentage of GNP spent on research. Other hon. Members have already made the comment about the percentage given by the Government to defence. I would like the Government to look at defence as a separate item and see whether it is necessary for them to increase the percentage that goes into the civil side. Although our defence industries make a contribution to the balance of payments, one cannot eat tanks or grow rockets. That part of the economy should not be supported to the detriment of the civil side. The civil side should be evaluated on its own and should not be squeezed out in favour of the military.

I was generalising when I spoke about investment because certain sectors of society and industry have done exceedingly well. For example, the huge investment put into aero engines has produced results. Other hon. Members have mentioned our pharmaceutical and chemical companies. There is no doubt that money invested comes out in the fulness of time in profit, jobs and products. I am afraid to say, however, that as a general rule, the lack of skills and the lack of investment in research in our manufacturing industry has led our manufacturers to retreat into niche marketing. Niche marketing is profitable in the short term, but I remind industry, as I remind the House, that niches are a little like castles in 13th century Europe, in that they are soon overrun. We must consider the wider context.

I am reminded of the story, which I am told is true, of the ambassador to Washington at the time of the introduction of television. He was asked to do a Christmas broadcast which would be recorded in advance. The television crew arrived, the ambassador gave the broadcast and when he thought that it was all over the interviewer said, "What would you like for Christmas?" The ambassador replied, "Crystallised fruit." Come Christmas day, the ambassador watched the broadcast. All was going well until, at the end, the camera flashed to the French ambassador. When he was asked what he would like for Christmas, he said, "I would like to see an end to nuclear arms." The interviewer turned to the Australian ambassador who said, "I would like an end to the Korean war." He turned to the Indian ambassador who said, "I would like an end to world hunger." Hon. Members can guess the rest of the story. There is nothing wrong with crystallised fruit in a domestic context, but it does not have much impact on the wider world.

We must look to the targets presented within the European Community, the Pacific rim, the USSR, America and the rest of the industrialised world. We must see what we must do to expand our productive capacity and to build on our present success to achieve equality in our balance of payments. We must then target our objectives and, with Government support for the infrastructure—and the Government should not try to pick winners—we should go for it.

I am pleased that we have this opportunity to debate such an important subject today and that my party initiated it. One of our concerns in the past 10 years has been the weakening of Britain's competitive position. We must be able to pay our way in the world, and our failure to keep up with modern technology is beginning to come home to roost with a vengeance.

I am a member of the Select Committee on Trade and Industry. Last year our major report considered Britain's position on information technology. We discovered that there was a remarkable paucity of information about the state of that industry. It was difficult to find out exactly what was going on. Therefore, much of our report was dedicated to asking the Government to play a role in ensuring that more information is available so that Britain can ensure greater participation in the development of that technology and, much more importantly, in its application and use.

Many of us have personal experience of modern equipment. If it did the things that the salesmen said that it would, we would be pleased with the service, but more often than not, it fails to live up to the expectations raised about it. That is basically because we are lagging behind in using that technology effectively and in developing its application.

That presents an interesting contrast with the attitude of our major competitors. When looking for information on this, the Committee visited the United States and Japan. It is fair to say that what we saw in Japan scared us because the Japanese are channelling long-term investment into this area on a scale that leaves us gasping and the Americans terrified. If the Americans are terrified, there is no room for complacency in Europe or in the United Kingdom. Indeed, the Americans are so concerned that they have tried to copy some aspects of the Japanese approach in bringing companies together in research and development consortia to try to advance the technology and its application.

Our report also referred to the Government's role in advancing technology through their own procurement policy. However, that view was categorically rejected by the Government, who do not see it as a function of government. That is interesting, because it was explained that a significant component of the success in this area of Japan and the United States was brought about by their Governments' conscious use of their procurement powers to bring on technology. Although the British Government are facing severe competition from highly powerful and successful Japanese and American markets, the one thing that the Government have decided that they must not do is to follow their example. I cannot imagine a more stupid response to a serious situation.

The Select Committee looked at silicon valley, where there has been a wonderful upsurge of innovation and ideas in new product and new systems developments, but when one got to the bottom of it, much of the money came from the United States' defence budget. Although applications ultimately spin off into the commercial market, without being underpinned by defence spending, many of the ideas, products and companies, would simply not exist.

My right hon. Friend the Member for Yeovil (Mr. Ashdown) has already referred to the lack of research and development funding in areas apart from defence, although we do not have a defence budget that is in any way comparable to that of the United States. We must address that issue and ensure that there is some push from underneath as well as some pull from the market. One area on which my party and the Government agree is that the market must be the determinant, but the market alone will not ensure that British companies succeed in developing the new technology.

We must look for opportunities in new markets. There is no doubt that a single European market is an opportunity for greater co-operation and for developing a bigger market. From that market there is the potential to develop markets in the Third world and in the Eastern bloc. We should not lose sight of that because if the economic reforms in the Eastern block are successful, as all hon. Members hope that they will be, those countries will need the technology which we have but which they are a long way from being able to produce for themselves.

I make a specific plea—I hope that the Minister will address this point—for the British Government to press for a review of COCOM. The Select Committee on Trade and Industry called for that last week and our call was reinforced by the Select Committee on Foreign Affairs. The relevant extract of that Committee's report states:

"The Trade and Industry Committee criticised the unwieldy nature of the system"—

that is COCOM—

"commenting on the likely extent of trade opportunities lost. We share its view, and are sympathetic to its recommendations including 'an immediate and radical reduction in the scope of the Cocom list'."

I stress that COCOM needs to be able to expand as fast as technology changes. Too often we are in the ludicrous position of British companies being prevented from exporting technology which is already becoming obsolescent but which, because COCOM has not caught up with it, is still on the restricted list. In consequence, we lose market opportunities and eastern bloc countries lose the opportunity to develop their economic performance.

So that there is no misunderstanding, I make it clear that we fully understand the need for COCOM. We are not suggesting that it could or should be swept away because, of course, we must maintain our guard on defence and security. However, as we—the Select Committee on Trade and Industry—said and as the Select Committee on Foreign Affairs has said, COCOM does not apply simply to defence. It is becoming a significant and substantial restraint on trade. I hope that the Government will agree that that is something that the West, collectively, could usefully address.

Although I welcome the Labour party's support for our motion, the hon. Member for Newcastle Upon Tyne, North (Mr. Henderson), who spoke from the Labour Front Bench, tried to suggest that the Labour party was somehow ahead on this matter and that it would address itself shortly to a great and presumably revamped "white heat of technology" initiative. Unfortunately, the tenor of the hon. Gentleman's speech suggested that what was being put forward was some kind of "fortress Britain", which would be narrow and introspective. He failed to grasp the fundamental point that, if we are to be competitive in the market place, we must be in the market place and not protected from it. We agree that the market must be allowed to operate and that our companies must be able to respond to it. "Fortress Britain" may be a superficial populism, but ultimately it would destroy our industrial base by hiding it from the real world.

We believe that the Government have a role to play in ensuring that we have a level playing field and reciprocal arrangements with our non-European competitors, such as the United States and especially Japan, and in ensuring that the single market within the European Community operates evenly and fairly for all of us.

Like my hon. Friend, I welcome the Labour party's support for our motion, but does he agree that there is a fundamental contradiction in the Labour party supporting a motion that is substantially addressed to information technology issues which, by definition, technically cannot know any national boundaries because information technology is all about the international free flow of information, while at the same time alluding to pulling up the drawbridge around the British economy —which, as my right hon. Friend rightly says, would spell short-term disaster for our country?

Yes, it would, but it also seems incompatible with membership of a single-market European Community. The Labour party does not seem fully to have come to terms with that yet.

We must ask how we can update, compete and keep up to date with new technology and how we can ensure that the new technology that we have will be fully and properly utilised. The Select Committee on Trade and Industry concluded that we are a long way from taking full advantage of the capabilities of the technology and using it as effectively as we might.

We saw one or two examples of both success and failure. The most often quoted example of success is American Airlines, which introduced its own computerised hooking system, involving all the American airlines, and found subsequently that that system actually made far more money than running the airline did—so much so, that the president of the company, when asked whether he would sell the airline or the system, said, "I will keep the system; the airline can go."

On the other side of that experience is the Bank of America, which managed to lose $2 billion as a result of failing to introduce a modern and effective information system. When we met officials of the bank, it had got rid of software experts and was trying to see whether it could correct the situation by employing hardware experts. I suspect that the latest reports are not all that promising. This area is very important to the United Kingdom. I think it is generally accepted that our financial services industry is strong, advanced and innovative and, therefore, has substantial potential. It is not perfect—there is no room for complacency—but it is one of our strengths. Indeed, it has been a traditional source of satisfaction to British Governments of all colours that, whatever the state of our balance of trade, our balance of payments in terms of invisibles was always in surplus. But there are some worrying signs that that surplus is reducing.

With the advent of 1993—almost a second, albeit international, big bang—there is some concern that British financial institutions may see the single market as something against which they have to protect themselves, instead of an opportunity that they have to exploit. I hope that the Government accept that they have a responsibility to try to ensure that when we get agreement on the single market it will be agreement that gives British financial expertise full access to that market. The Government must ensure that access is not restricted by barriers erected by other countries that want to protect themselves from our success. They must ensure that we can continue to develop the application of technology in the financial services area, to our own and the European Community's advantage.

Let me put this debate in perspective by saying that the subject is central to the current state of the British economy. The Government are perpetuating the myth that, in the 10 years since they came to power, we have had an economic miracle. There have been changes, and some of them have been beneficial. I am not arguing that they have all been bad, but I say very forcefully that it remains the case that in the Government's first two years a third of our manufacturing capacity was swept away. The Government's defence is that the firms that were lost were weak and were, by definition, unable to withstand the blizzard, and that the result is a leaner, fitter economy.

The trouble is that it is a smaller economy in terms of its ability to enable us to pay our way in the world. We are not paying our way in the world, and the current balance of payments deficit is a direct result of that policy. The position is getting worse, and is likely to get worse still, unless we can create the goods that the world wants to buy, with sufficient added value to enable us to maintain our standard of living. The signs are not good, and the Government's position is extremely vulnerable—and rightly so.

I am sure that the hon. Gentleman would concede that when this massive fallout in British industry took place, one of the principal factors involved was that British industry was very weak financially. After a long period of high taxation, it simply did not have the cash resources to tide it over. I should be interested to know what the hon. Gentleman can tell us about his party's views on corporate taxes. Does he feel that those taxes are at the right level now? Does he not concede that this Government have already brought them down to a level that puts them among the lowest in the world? Does he think that there would be more investment in research and development, in training and in capital items if this trend towards lower corporate taxes were continued?

I shall be very happy to enter that debate if the hon. Gentleman can persuade the Government to give us time for it on another occasion. Let me ask him specifically why the Government have not been prepared to introduce tax relief for money invested in long-term research. That is a positive proposal that they could have taken up, but, so far, in 10 years, they have not done so. Radical changes of that kind could usefully be introduced. They might be positive and helpful. That is a direct answer to an irrelevant intervention.

There seems to be a myth that we are moving into a post-industrial era, that we have created a post-industrial society. Looking at our post-industrial society right now, one can define it as meaning short-term profit and long-term bankruptcy. This country cannot sustain 55 million people unless we make goods and provide services that can be sold in the world. At present, we cannot do that. That is the dilemma that we are in.

The consequences of this policy fall very unevenly within the United Kingdom. I do not intend to make a regional policy speech; I am simply pointing out that Scotland, Wales and the regions of England, which had predominantly manufacturing economies, have suffered disproportionately as a direct result of this change. It is not good enough for the Government to proclaim massive investment in shopping centres as some kind of substitute. Indeed, I think that the building of massive shopping malls on what once were the sites of great industries is actually a symbol of the monumental misjudgment of this Government. Those shopping malls are selling goods manufactured outside the United Kingdom, goods that we do not have the resources to buy. We must find ways of ensuring that at least some of those sites go back into manufacturing. We must ensure that our manufacturing capacity, our manufacturing base, is enlarged. But the Government have no answer to that problem. Indeed, the decline continues.

This is one of the things that they might have made a virtue of. Over this period we have faced progressive and successive privatisation. The Government learn slowly. Initially, and fundamentally, privatisation was simply a means of getting their hands on finance quickly in order to buy votes with the taxpayers' money. One cannot dispute that in that policy they have been successful, but they have suffered because, in the process, they—the free-market Government—have actually privatised monopolies. They have privatised inefficient monopolies, centralised monopolies, inflexible monopolies, and the ones that were privatised earliest have failed to take full advantage of the potential for technological advance and market development because they have been protected from the market by the strength of their monopoly.

British Telecommunications may have been profitable, but it has been profitable because technology has been moving fast enough to reap the profits from the customers. But its speed of innovation has been much lower than the speed of innovation in telecommunications systems in other parts of the world. That is greatly to Britain's disadvantage.

We argued at that time that it was a great pity that the Government did not establish, for example, Scottish Telecommunications, which could have been autonomous, and might have developed its own technology relevant to the Scottish economy and the more sparsely distributed population of Scotland. It might have developed something with export potential. It might have been possible to develop new products and new services. Incidentally, the same goes for Scottish gas or Scottish steel. Of course, in the case of electricity that is already the situation of Scotland, but it could be done in England as well.

Is not the hon. Gentleman completely misleading the House? When the industry was under nationalised control it was a crying shame that investment was not being put into it. The country simply could not afford it. Privatisation resulted in the investment of £2 billion, enabling British Telecom to make huge advances. In the past, the system was being held back by nationalisation.

It was being held back by the Government's public sector borrowing requirement, which, in any case, we never supported. I have always regarded that as the most spurious argument of all. Right now, the Government have a huge surplus, and there are nationalised industries that could make use of it. Indeed, so could the education system. But the Government will not release that surplus, even though the investment would be non-inflationary, would create jobs, and would underpin the wealth of the country in the future.

My hon. Friend's last point is at the centre of the argument about the Government's irresponsibility in the matter. We can have a theological argument about whether privatisation or nationalisation is good, and a practical argument about whether it is good for British Telecom. But there can be no doubt that no firm in Britain would not distinguish between capital and revenue. What an act of irresponsibility it was to get the money from the privatisation of BT and others and then to spend it paying off this year's bills, instead of reinvesting it in the future.

It was worse in the early years. Tax cuts were used to buy goods which were made outside the country, and that aggravated the problem. That is the crux of the matter, particularly now that the Government have some resources. We must plough those resources into investment—the Government's responsibility is investment research and development and training—and the private sector must be given a climate in which it will invest in product development, innovation and new technology. Unless we can do that and add substantial value within the United Kingdom, we will face disaster.

In 10 years, people will realise that, far from an economic miracle, we had a reckless Government who used simplistic assumptions that took a once great manufacturing nation to the brink of bankruptcy and were financed only because they had the windfall bonus of North sea oil, which is now evaporating. We are heading for an awful lot of trouble. Unless this kind of motion is not only passed but acted upon, unlike our European competitors, post-1993 Britain will feel a nasty, cold draught.

The motion is split into two parts. The first half is critical of the Government, and the second half puts forward a series of suggestions. It is unfortunate that the speech of the right hon. Member for Yeovil (Mr. Ashdown) was not also split into two parts. He spoke for 38 minutes, and he criticised the Government for 38 minutes. He made not one positive suggestion, with the exception that we should do away with COCOM. He had to withdraw that comment, and the hon. Member for Gordon (Mr. Bruce) clarified it in terms of reforming COCOM.

The right hon. Member for Yeovil used the word "past". He also mentioned in passing the levels of investment. It was one of the thinnest, if not the shallowest, speeches I have ever heard from an hon. Member in opening a debate. He was wrong on gallium arsenide, transputers, and fibre-optic cables in terms of their use by Mercury and BT in docklands, and so on. He could not even get right the constituency of the Minister who replied to his Adjournment debate some years ago. When I challenged him on the brain drain, he had to revert to passing bets, which is a rather childish way of providing information to the House. It was a travesty of a speech, which took 38 minutes of what should have been an important debate.

Much more interesting was the contribution by the hon. Member for Gordon. He made a series of positive suggestions. I agree with several of his suggestions about the long-term requirement to turn round the economy, and the need for investment in various sectors. However, I disagree with one or two points. Obviously, one is his assessment of the long-term future of the economy. Given that the motion refers to education, I was interested also to examine the capital investment which took place in education from 1973–79. During much of that period, the Government were supported by the hon. Gentleman's party. Between 1973–74 and 1978–79, the level of capital investment in education, particularly in schools, fell by 63 per cent. We are now paying, in terms of the shortages of systems analysts, computer programmers, engineers and the like, for long-term under-investment, particularly by a reduction of 63 per cent. in investment in schools over less than five years.

I wholeheartedly concur with a comment in the Social and Liberal Democrats News of 7 April this year. It states:

"his utterances on this topic only give weight to growing disenchantment with his leadership."

In terms of the requirements that we face for the future —not for the past, as the right hon. Member for Yeovil said—it is significant that there was no suggestion of a long-term SLD policy. I should have thought that we could have heard of one during the right hon. Gentleman's speech. I presume that we will hear about one when we debate another motion.

Several of my colleagues have referred to inward investment and the internal investment that is now being undertaken by companies within this country. I am pleased to note that the level of investment as a share of GDP is now higher than it has been for the past quarter of a century. I agree with those hon. Members who said that investment is still not high enough, particularly in respect of a commitment to civil and research development. On that point I agree with the hon. Member for Newcastle upon Tyne. North (Mr. Henderson). He referred to inward investment by Toyota, Fujitsu, and Boch. In terms of the competitive nature and the achievements of major companies in this country nowadays, it is significant that, on the same day that Toyota announced its investment in Derby, GPA announced that it would purchase Rolls-Royce engines for every 757 that it included in its order. It is significant also that, in this day and age, an order of £1·5 billion—that is, in round terms—for the British aerospace industry can be hidden on back pages because of other levels of investment.

We should not deny the successes. Equally, we continue to face challenges. For example, the concentration on information technology and telecommunications, upon which much of the debate has focused, is highlighted by the decline in our share of telecommunications exports. About 25 to 30 years ago, we exported about 25 per cent. of all telecommunications equipment to other industrialised and non-industrialised countries. That figure has fallen year in and year out for about a quarter of a century. Our share of telecommunications exports is now down to about 5 per cent.

GPT, in the form of system X, is showing substantial progress in its capacity to compete. The problem is that, while it is trying to develop that product, the world's major competitors among telecommunications manufacturers such as AT and T, Northern Telecom, Ericsson's, Siemens and the like are moving on to the next phase of switchgear, and the investment required by GPT to develop that next phase is not available. Therefore, it is actively looking—whether willingly or not—to tie up with Siemens or some other company. We must recognise that problem in long-term industrial developments in this country. It requires not only investment but a changed attitude by management to training.

For far too long, British management has been unwilling to commit any money to training anybody over 21. The supposition is that once they are over 21, they are trained; they will learn on the shop floor, office, drawing room or whatever, and that is it. British management must commit far more money to investment in training. It must be willing to take individuals off the shop floor year in, year out, and upgrade their expertise. The vast majority of foremen in German and French industry are graduates. They are required not only to turn over the line and ensure that it continues to produce, but to solve problems on manufacturing lines on a day-to-day basis.

British management should adopt a similar attitude. If it does not, it will fail to survive, despite some of the successes that I have identified. For example, it must improve its links with universities. We have some of the best universities in the world. One of the few points on which I agree with the right hon. Member for Yeovil is that although they produce excellent ideas, those ideas are not taken up by British industry but go to other countries to be developed.

I agree with the point that the hon. Gentleman has just made. Why does he think that happens?