Motor Industry

– in the House of Commons at 4:21 pm on 12th December 1983.

Alert me about debates like this

Photo of Mr Roger King Mr Roger King , Birmingham, Northfield 4:21 pm, 12th December 1983

I beg to move, That this House acknowledges the important contribution to the economy of the motor industry; congratulates the car industry on its improved performance; acknowledges Government support; and calls on the Government in the development of its policies to give continued encouragement to the industry. This is a welcome opportunity for the House to discuss the prospects and current position of the British motor industry, which is an important industry for this country. It is vast and employs a large number of people. Some would say that it is our biggest industry. This year has been an especially good year for the British car industry. So far sales look like touching an all-time high of about 1·79 million cars. We have seen the resuscitated organisation of BL Ltd.—which has taken in the Jaguar car company and is proving to be one of our most formidable exporters of cars, principally to the United States — and the Austin-Rover group into which so much taxpayers' money has been placed during the past four or five years. With its increased market share of just under 20 per cent., BL is beginning to deliver those much-promised goods.

The gross value of the industry to the British economy, including commercial vehicles, cars and components, amounts to about £8 billion in 1982 terms. However, in 1981 the total turnover for the entire motor trade, covering retailers, distributors, wholesalers, stockists and all those in allied industries, was nearly £28 billion. By any standards, the car industry is a very large one.

The car industry is a vital sector of our community in terms of the number employed. No exact figures will be available until the second quarter of 1984 because, surprisingly, no one has ever kept any. It is estimated that there are about 360,000 people in manufacturing with about 200,000 more involved in the allied industries on the retail and servicing side. That represents a significant decline, because the motor industry has borne much of the brunt of the recession. In 1973, car production was 1·7 million units. In 1982, it had declined to 880,000 units —a 49 per cent. decline. I am happy that that figure is beginning to climb back again. In 1973, 600,000 people were engaged in the manufacturing side of the industry. In essence, during the past 10 or so years, the industry has lost nearly a quarter of a million jobs. This year our balance of trade — which was in a positive state throughout those years—will show a record £2·3 billion deficit. Although matters are looking more encouraging at the moment, there is a great deal to be done.

What has happened to the British motor industry during the past 10 or so years? What lessons can we learn from that? In the good old 1950s, anyone could sell anything, and the motor industry was no exception. A person had to be put on a waiting list for six months before the car of his choice was available, and really there was no choice. The car came with black paint and red upholstery, and that was that.

The Government implemented stop-go policies. The booming car industry was used as a tax regulator when inflation rates started to increase. In every sector, when manufacturers were ready to install new plant and equipment, the screws were put on in the form of taxation, and management cut back on its investment. Although we may have had competitive products—the Mini was a classic example of what happened during the late 1950s; it was a world leader in its manufacturing ingenuity and virtually every car manufacturer in the world has since copied it—the quality of the product left much to be desired. This country is known for its designers, but in the 1950s and 1960s we could not put cars together with the quality that was demanded by the customer. Add to that poor productivity, soft management and demanding unions, and we had a recipe for price increases and growing inefficiency in the industry.

One of the most cataclysmically disastrous policies was then implemented by the Government — factory dispersal. That sprang from the desire to bring employment to the so-called development areas and necessitated the removal of many of the car factories from the west midlands to the north-west, Scotland and elsewhere. Satellite plants with conveyer belt lines 300 to 400 miles long were introduced. That is a handicap that was never inflicted on any overseas manufacturer.

Heavy motor taxation was imposed by successive Governments, so that today the motorist is paying about £10 billion in taxation to the Exchequer. The car industry has been used as a milch cow because, seemingly, it has not experienced any retardation in growth. Governments of all persuasions have repeatedly taxed the industry.

The problems faced by the industry when we were deciding whether Britain was entering or staying out of the Common Market led many of the multinational companies to decide for themselves that they were going into Europe. Investment in plant by the Ford Motor Company Ltd., General Motors and other manufacturers has gone to the mainland of Europe, to the detriment of indigenous British industry. The white hot technology of the late 1960s resulted in the forced arranged marriages of what was the independent British motor industry. The industry had to be big to be beautiful, and it had to be big to be competitive. However, the evidence shows that the most competitive manufacturers in the world are the small units, such as Honda, BMW and Mercedes. There was no money in the British market for new models and new plant so the multinationals invested elsewhere.

The problems of the industry culminated in the mid-1970s with the BL rescue plan, when the Government pledged large sums of money to enable the industry to pull itself around, to invest in new models, plant and equipment and to make one last desperate effort to be a successful industry once again.

Given the level of investment, we have seen how sensible it was for both Labour and Conservative Governments to maintain a strong, solid investment in what was left of the British motor industry.

In my constituency we make the Austin Metro, which had the benefit of Government investment of about £500 million in a brand new automated plant. That is a great deal of taxpayers' money but within three years, when we hope that the millionth Austin Metro will come off the assembly line, the Government will have received, assuming that many of the Metros are exported, about £262 million in sales tax from Austin Metro production. It will have saved about £260 million in unemployment benefit, bearing in mind the scale of unemployment that might have occurred if the old British Leyland company had gone bankrupt. When comparisons are made with the shipbuilding industry, the coal industry and the aviation industry, it can be seen that money invested in the motor industry will produce a return, unlike many other organisations.

According to the Investors Chronicle, about 4,000 companies in the west midlands depend upon a successful and viable British Leyland. Despite all the hoo-ha about the so-called microchip factories with the brand new jobs for tomorrow—it must be accepted that they are vital—it has been estimated that in the past 10 years, in a world of computers, water supply, petroleum, natural gas, radio, radar and electronic goods, many elements of which have been in growth sectors, they have created no more than 84,000 new jobs. The message must surely be that we pursue our policy of encouraging the British motor industry to develop its factories, model range and employment prospects.

I have already said that BL is one of Britain's great success stories. It will make a positive contribution of about £700 million to our balance of payments this year. That is vital when we bear in mind that the industry as a whole is still about £2·3 billion in deficit. It has the right cars, or soon will have when it achieves a complete model range, at the right price and of the right quality. The work force is as productive as any other in the world, thanks to the investment that has been put into plant and machinery. The result has been increased demand within the United Kingdom and in many overseas markets. Jaguar is a classic example of how a company, which failed to modernise and failed to put its products together properly, has grasped the nettle. It now produces cars for which there is a never-ending waiting list throughout the world.

Good though our achievements have been to date, we must recognise that many of our competitors on the continent are in considerable difficulties. Volkswagen, Renault and Peugeot-Talbot-PSA are all making losses. In Europe there is 30 per cent. over-capacity in car production. The European industry can produce about 13 million vehicles a year, and this year it will have produced about 10 million. It is nowhere near its ultimate capacity. All the companies within the European industry receive varying degrees of company support. That support does not happen just once in a while. For Renault, for example, it is continuing support.

Germany and France are blessed with the opportunity to sell about 2 million or more cars a year. Germany has a population that is roughly the same as ours but it has a market of about 2·2 million car units a year. German manufacturing companies will produce 3 million cars, which means that nearly 1 million vehicles will be exported from Germany. The United Kingdom's ultimate market is about 1·79 million units, which we hope will be achieved by the end of the year. However, our own factories will produce no more than 600,000 units. We shall produce more units but they will take the form of branded imports. These are the so-called tied imports, the cars that come in from Ford and General Motors overseas. In many people's eyes, they are United Kingdom products and are sold as such. Some of them contain some United Kingdom components but the majority do not.

We must increase our United Kingdom sales market beyond the 2 million mark if we are to achieve the economies of scale that are necessary for our United Kingdom car manufacturers and component suppliers. The suppliers are having to make the same components as are produced by the German, French, Italian and Japanese industries but at a higher unit cost because they do not receive the necessary orders from the United Kingdom car industry.

The recent relaxation of hire purchase terms has proved singularly beneficial to the motor industry. It pushed sales up this year by about 400,000 units. At the same time, it enabled our manufacturers to improve their market share. In the period ending May 1983, the total United Kingdom market was 17 per cent. higher than it was for the first five months of 1982. The British share of the market was more than 1 per cent. higher at 43·4 per cent. as a direct result of the relaxation of hire purchase controls.

The motor industry believes that the effect of substantial direct car taxation should be examined. If we were to eliminate the 10 per cent. special car tax, the benefits would be substantial. As late as May 1983, my right hon. Friend the Secretary of State for the Environment, who was then the Secretary of State for Industry, was quoted as saying: The car tax will be kept under review; we do not regard it as part of the permanent furniture of Government; we will gauge its impact and we will listen to any evidence that the industry places before us. The evidence is pretty substantial. By abolishing the special car tax, the Government would lose about £600 million in revenue each year. However, within three years sales could be expected to rise to 2 million and the £600 million would be returned to the Government. It has been estimated that if there were about 2 million registrations of new cars each year for the next few years, the Chancellor of the Exchequer would be better off by about £1 billion by 1990 at 1982 prices. This appears to be a first-rate bargain, and if the Government choose to reduce their yield from taxation by about £600 million a year they will be paid several times over.

The knock-on effect for component suppliers would similarly be substantial. If the United Kingdom market can be increased to 2 million units and if United Kingdom manufacturers obtain a greater share of the increased market than overseas competitors, it has been estimated that many new jobs will be created in the steel industry and in the components sector. I am not in the business of estimating how many new jobs will be created. Opinions differ, but the estimates range from about 50,000 to about 100,000. However, it is certain that new jobs would result, and that, too, is a factor that must be taken into account as it means that the Government would not have to pay out the same amount of unemployment benefit.

We need to encourage the tied importers of cars to produce more of the components in the United Kingdom. It is no good implementing investment plans by building semi-automatic engine plants and gearbox factories. I acknowledge that that sort of investment will keep some people in employment but the real opportunities for work are in the supplying sector. I have in mind the companies that produce sheet panels and all the infrastructure that is put inside a car—such as dashboard and seats.

Ford is a net importer of cars into Britain. More and more of the products that are sold in the United Kingdom market come from its overseas factories but I admit that sometimes they have Bridgend engines. Recently we have heard about the company's large investment in Dagenham in respect of the diesel engine development for passenger cars. That investment is to be applauded but we must not lose our capacity to manufacture cars in Britain and to export them.

I believe that an expanded United Kingdom market will stimulate many multinational companies to think again about sourcing their components in this country. General Motors—Vauxhall—is thinking about that.

Photo of Mr Anthony Beaumont-Dark Mr Anthony Beaumont-Dark , Birmingham, Selly Oak

There is a danger that Nissan is likely to want to build a motor plant in the United Kingdom, and that it will be—to be blunt—a Meccano outfit that will cost many thousand jobs in the Midlands. Unless we can stipulate 80 per cent. home-produced components, that development should be resisted.

Photo of Mr Roger King Mr Roger King , Birmingham, Northfield

My hon. Friend has pre-empted what I was about to say. He has stolen my thunder, but I could not agree with him more.

Abolishing the car tax will probably cost the Government £600 million but, given that we spend £1·3 billion on regional aid, secular aid for a particular industry is money well spent. If the Government told the motor industry that they would think again about the 10 per cent. special car tax, they would find the industry ready and willing to discuss jobs and investment in car assembly and in components.

The industry's problems are many and varied. There are the European bureaucrats and their exhaust emission controls, and there are distribution problems and so on. No doubt some of my colleagues will refer to those points. I wish, with some vehemence, to draw attention to two further problems.

First, there is the Nissan development in this country. It has been likened to a Trojan horse. The development needs to be considered very closely. The Guardian on Saturday made headline news of the fact that Nissan was furtively engaged in negotiations with the Government over the Austin-Rover factory at Longbridge in my constituency. According to the report, Nissan wished to purchase the factory and produce its own range of cars there.

The incomes of 13,500 of my constituents depend on the development of that factory. That sort of scaremongering does their hearts and minds no good at all. They are told that they could wake up one morning and find themselves obliged to do press-ups and physical jerks before starting to bolt the vehicles together. I am happy to be assured by Austin-Rover, the Government and Nissan that Nissan has no intention of involving itself with Austin-Rover at Longbridge.

Austin-Rover is working nicely with Honda, in the manner in which we want such things to be done. We do not want forced marriages; we want arrangements between various companies throughout the world, and a cross-fertilisation of ideas on suspensions, engines and transmissions. That is the way forward. The example of the Triumph Acclaim shows how that cross-fertilisation can work. In 18 months' time there will be the development of the BL-Honda luxury executive car to replace the Rover range. That will be the first real evidence of joint design leadership and production know-how. It may be said that British Leyland is exactly the same as Nissan—that BL is assembling the Triumph Acclaim in this country. However, the company's policy is to improve the United Kingdom content of that vehicle, and within the next three or four months something very similar will be produced at Longbridge which, one hopes, will contain many more United Kingdom components. Evolution is taking place, and evolution is always more cost-effective and more useful than a forced marriage.

Let us privatise by all means. I have no desire for the company to remain attached to the state. However, when the time comes, the work force should be given a slice of the action. They should become investors in the project. A worker who owns part of the business will be much more diligent.

How many cars does Nissan plan to build in this country—200,000, 250,000 or as little as 50,000? We have heard all those figures. What is certain is that the local content of the car—out of the total value of the car, including labour and all the metal and goods inside the car — must hover at about 80 per cent. as a percentage of ex-works value. Only that percentage will balance the employment loss caused by competition from Nissan United Kingdom, and it will do so only if one-third of the projected output is exported.

Let us not fall into a trap. We could bribe a Japanese car manufacturer to set up in a development area where jobs are needed and give that company several hundred million pounds, only to find that no more than 5,000 or 6,000 new jobs are produced, and a handful in the component industry, and that Nissan's market share in this country is taken from British Leyland, Ford and General Motors and, in addition, that those companies are not ordering so many components made in the United Kingdom. If that were to happen, there would be a decline in job opportunities in the industry and in the number of companies supplying the industry.

Nissan may be a Trojan horse which will finish off the industry just as it was beginning to flower once again. I would welcome a strong assurance that we will not accept anything less than a 90 per cent. British content and that the Nissan factory should produce at least 150,000 cars, with a guarantee that 50,000 will be exported.

Spanish imports represent a grave injustice. The question of Spain's entry into the European Community awaits the travail of time. 1986 has been suggested but it may be, after the Athens summit, that the date of Spain's entry will be 1987 or 1988. We need to renegotiate our arrangements with Spain for the import and export of cars. At the moment, British Leyland Austin-Rover is entitled to export to Spain at a reduced import tariff of 19 per cent. 970 Metros between 1 litre and 1,300 cc and 1,000 other vehicles. In the all-important market sector of vehicles under 1,000 cc—particularly satisfactory in the Spanish market—we can send only at an import duty rate of 37 per cent. However, Spain can send an estimated 50,000 or 55,000 Vauxhall Novas to us this year at 4·4 per cent. import duty. That is entirely unsatisfactory.

We imported about £777 million of goods from Spain this year, and exported £865 million of goods to Spain. To the uninitiated, that is a positive balance of trade. However, in 1982 3·7 million British tourists went to Spain, giving Spain an income of £705 million. We obtained only £80 million from Spanish tourists. We are, therefore, in deficit with Spain to the tune of £537 million. That is an untenable and indefensible situation. Longbridge is ready to produce the required number of Austin Metros for that market. That car is ideally suited to that market. We are prepared to negotiate a satisfactory figure. Austin-Rover would probably settle on 10,000 cars per year as being satisfactory. The distribution set-up would probably not handle more.

Photo of Mr David Madel Mr David Madel , South West Bedfordshire

My hon. Friend mentioned the Vauxhall Nova. I agree that there are some difficulties over Spanish imports. He should remember that that car has completed Vauxhall's range in this country and is very much a European car. It includes bits from continental Europe as well as this country. Although the Spanish Government may be difficult, we benefit from having the Nova brought in because it underwrites a number of Vauxhall jobs.

Photo of Mr Roger King Mr Roger King , Birmingham, Northfield

I am grateful to my hon. Friend. I have no wish to stop Vauxhall importing as many Novas as it wants. I am in favour of free and fair trading, but the emphasis must be on "fair". In the future the British motor industry work force might find itself on short time because of a decline in sales demand, and therefore we want the opportunity to export a fair number of vehicles to Spain. We do not ask to send 50,000. I suggest that about 10,000 would give us a fair crack of the whip. Vauxhall has risen like a phoenix out of the ashes. It has developed into a strong company again, and I have a great regard for its vehicles. The company needs to be encouraged, and if that means bringing in cars from factories overseas, that is fine.

This country needs a strong motor industry. The commercial vehicle industry is in recession at the moment, but last month there were signs of an upturn in commercial vehicle sales. Perhaps the worst there is over. As the country pulls out of recession, operators and manufacturers will start to purchase new vehicles. A strong motor industry is essential for our balance of payments. According to the best estimates, oil revenues will start to decline in 1986 and by the early 1990s North sea oil will not contribute to our balance of payments. During that time we need to have resuscitated and completed the restoration of our car industry. It can perform well, and provide us with wealth and jobs. We must treat it carefully and fairly. It is robust and ready to fight for markets, but it needs our support and encouragement. That is why I commend the sentiments of the motion to the House.

Photo of Mr Bryan Gould Mr Bryan Gould , Dagenham 4:52 pm, 12th December 1983

I should like to congratulate the hon. Member for Birmingham, Northfield (Mr. King) on initiating this debate. It was agreeable to Opposition Members to hear such a hymn of praise to public investment in the motor industry.

A little under two years ago, I visited a large Nissan car factory just north of Tokyo, where I was able to study a modern manufacturing miracle at first hand. The Japanese car industry did not exist 25 years ago, but since then it has become the world's largest car manufacturer.

As Japan's fortunes have risen, this country has been sitting on the other end of the see-saw and our industry has been in decline. The hon. Gentleman told us how badly we have done since 1972, which was the peak year for output in the passenger car industry.

Since 1972, despite this year's welcome upturn, we have lost nearly one-half of our total output, and there has been a fall in employment commensurate with that loss. We have lost a huge proportion of our market share, at times approaching 60 per cent. of the domestic market.

The components industry, for perfectly rational economic reasons, has followed the car industry's fortunes. Firms such as Lucas and GKN have closed their British capacity to move their operations to new plants on the continent. We all know of Dunlop's recent, shameful history. We know, as the hon. Gentleman said, that whereas at one time the car industry was a major earner of foreign exchange, the picture is now different. A deficit of £2·3 billion reflects the fact that the cars we export are barely one-quarter of the value of the cars we import.

Photo of Mr Anthony Beaumont-Dark Mr Anthony Beaumont-Dark , Birmingham, Selly Oak

I am sure that the hon. Gentleman wishes to be fair, and I may have misunderstood his emphasis on firms such as GKN and others which have gone to the continent and America. Does he agree that they did that not to remove capacity from this country but to ensure that they could compete? Conditions were often better in America and Europe than here.

Photo of Mr Bryan Gould Mr Bryan Gould , Dagenham

I am glad to agree with the hon. Gentleman. If he had listened a little more carefully, he would recall that I prefaced my remarks about the components industry by saying that it had moved its operations for perfectly rational economic reasons, to take advantage of the much bigger car industries developing on the continent—as the British industry declined—and to take advantage of a generally more favourable manufacturing climate.

I was dealing with our external trade performance in the passenger car industry. I regret that the impression has gained ground in this country, assiduously promoted by some people, that we suffer particularly at the hands of the Japanese.

We know that the Japanese are not doing the major damage to the British car industry. EC car industries have secured the greatest penetration of our market. At present they have over 40 per cent. of the domestic market. No doubt the Japanese could do better than their current 11 per cent., but it is the EC that is ripping the heart out of the British industry. One telling fact illustrates precisely what has happened since we joined the EC. When we joined, we could sell it eight cars for every five that we imported. At present, believe it or not, we can sell it only one car for every 10 that we import. That is a staggering turnaround in such a relatively short time.

Although the EC is damaging our domestic car industry, it is Japan that is rightly and understandably so often held up as the model of a modern car industry. People visit Japan. The Prime Minister did so fairly recently. Many of them, including the Prime Minster, return with what can only be regarded as rather simpleminded explanations of why the Japanese have been so successful. The usual explanation offered is that the Japanese work hard and are free from industrial relations problems. That may well be true, but who can marvel at the differing industrial relations records in the Japanese and British car industries when one considers the Japanese car worker's experience over the past 30 years? He has had the unbroken experience of rising wages, rapidly rising living standards, total security of employment and participation in an industry which is universally regarded as successful. The British car worker has had an almost completely contrary experience.

The British car worker has had problems hanging on to his job and he has been constantly under pressure as real wages, compared to the rest of the wages structure in this country, have been driven down, and he is almost universally reviled as workshy and strike-prone. The real reasons for the Japaneses success lie elsewhere. They do not lie in the differing industrial relations records which are a consequence rather than a cause of the differing performance of the two industries. The reasons lie in things such as a stable expanding domestic market upon which manufacturers can plan long term. They had a protected market when their nascent industry needed that protection. Another factor has been close co-operation and trust between Government and industry which has been reflected in the availability of long-term and practical finance to the Japanese industry. That should be contrasted with ridiculous monetarist policies in Britain.

The Japanese industry has been given plentiful, long— term and cheap finance. Japanese interest rates have traditionally been low. The result of such sensible economic policy is that the Japanese yen has been maintained at a highly competitive level. The Japanese do not share our ridiculous preoccupation with currency as a national virility symbol. They could not give a damn whether the yen is an international currency of any standing. When one considers Japan's immense participation in world trade, it is salutary to remember that only 3 per cent. of world trade transactions are carried out in yen.

As a result of the sensible macroeconomic policies that I have described, which are designed to create a favourable climate for manufacturing industry and to promote competitiveness and profitability, the Japanese have the money necessary to develop new green field sites, to install the latest technology, to pay high wages which lubricate industrial relations and to buy the best talent available. It is little wonder that they have been so successful.

Britain's experience has been quite the reverse. We have had no stability in the domestic market. Purchase tax constantly went up and down, and when its use as a regulator was finally abolished we had the special car tax. When the Japanese were protecting their domestic industry, we, in a state of weakness, were dismantling our protection and opening up our market to countries in and on the fringe of the EC. In Britain, industry and Government have often been at loggerheads. They certainly do not work together or trust each other. We have not had expansion as a result of cheap money or low interest rates, but rather contraction, deflation and a monetarist ratchet which has squeezed the economy and demand and forced up interest rates. That has made investment almost impossible. Furthermore, it has forced up the value of the pound to a ridiculous level.

The hon. Member for Northfield mentioned the welcome success of Jaguar. How big a factor in that success has been the 40 per cent. fall of the pound against the dollar? It just happens that Jaguar's principal market is the United States. I cannot think of any business man or salesman whose job would not be a little easier if the price of goods he was trying to sell was reduced by 40 per cent.

That catalogue of mistakes which have been pursued most by the Government, though they are not the only ones, have produced a much weaker and smaller industry than Britain must have. The picture is even worse than that revealed by the stark facts and figures. The industry would be revealed to be in a far more parlous state if it were not for political pressures on importers who would otherwise be able to take over the British market. The Japanese could close the British car industry tomorrow. They have not done so because they know that the result would be tremendous political uproar. The British car market is artificial. Everyone has some interest in maintaining its artificially high prices. If we were to have a truly competitive market, the British car industry's plight would be even worse than it now is.

I have in my constituency a major multinational car manufacturer—Ford. I pay tribute to it. I am not one of those who argue that the problems of British industry, especially the car industry, are a result of wicked policies pursued by multinationals. We are lucky that some parts of our car industry are in the hands of multinationals which have greater resources and are therefore more able to resist short-term market forces. If it were not for that resilience, Ford and many other manufacturers would have upped and gone a long time ago. The multinationals cannot be patient for ever.

Ford of Europe gave an important warning to the Civil Service and Treasury Select Committee which examined international monetary arrangements in the previous Session. I am glad to see that the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark), who was a member of that Committee, is present. He will recall that Ford gave evidence to the effect that its problems, when considering future investment in Britain and sourcing policy for the British market, were directly and severely affected by the Government's macroeconomic policies. It made it clear that the pursuit of high interest rates and an over-valued exchange rate put a serious question mark over its willingness and ability to remain as a major manufacturer in Britain.

It would be disastrous if a major manufacturer such as Ford were forced to withdraw its manufacturing from Britain. I shudder to say it, but that is emerging as a long-term possibility. If Ford is forced to make such a decision, I fear for the rest of the British car manufacturing industry. I have pleasure in agreeing with the hon. Member for Northfield that we cannot afford the balance of payments loss, the employment loss and the loss to industry as a whole associated with a car industry which is failing to pay its way and expand. Worst of all, my constituents could not afford it. For that reason, if for no other, I shall continue to urge a change of policy, as that alone will guarantee the future of the car industry. Only a change in the manufacturing climate can guarantee the future that the hon. Member for Northfield and I want.

Photo of Mr Dudley Smith Mr Dudley Smith , Warwick and Leamington 5:06 pm, 12th December 1983

Although I agreed with some of what the hon. Member for Dagenham (Mr. Gould) said, I am not sure about his diagnosis of the Japanese problem. I should have thought that British workers were under more pressure than their Japanese counterparts during the period that the hon. Gentleman mentioned because the British product was less attractive and of poorer quality. The result was the erosion of the British market by foreign competitors, especially the Japanese. Although financial considerations gave the Japanese an advantage, they vigorously achieved penetration of the British market. It will take a long time to regain the share of the market that we lost then.

I should like to congratulate my hon. Friend the Member for Birmingham, Northfield (Mr. King) on the way in which he moved this relevant motion. It gives the House an opportunity, albeit brief, to discuss the British car industry. His admirable summary of the past 30 years was right on the ball. I am sure that few people who have studied the subject will disagree with many of his conclusions. He was right to draw attention to the overcapacity which can be found on the continent. Some of our European neighbours are building up a great deal of financial trouble. Putting our house in order will probably pay off in the longer term.

I have always felt that we set too much store on the industry as an economic barometer. Ten or 15 years ago, when anything happened in the car industry there was a momentary pause and the Government's heart missed a beat. Although the car industry is still extremely important, it is perhaps no longer the most important factor in our economy.

I congratulate management and workers in the car industry on what has been achieved recently. Having almost touched rock bottom, the industry has modernised and reformed itself. Today, with a much smaller work force, it is making more reliable cars than before and becoming much more competitive with foreign products, which bit so deeply into its market. It has shown a refreshing sense of realism.

The arrogance that was shown in the 1950s and early 1960s by car manufacturers, when it was a "privilege" for the individual to part with several hundred pounds rather than the thousands of pounds nowadays to buy a product, and the scant attention paid by the retailer and the wholesaler were a disgrace. I am glad that those days are gone. There is a sense of marketing realism today which, I am pleased to say, compares favourably with that of some of the other more successful industries.

Intermittently, right back to the times of the Macmillan Government, it has been said that we need to "Buy British" and that as a country we should endeavour to buy British products. The time has come again when we need to instil into the people, as our economic recovery gets under way, the need for them to play a part. Many of our constituents and fellow citizens constantly criticise the Government, the work force and the whole of British industry without ever looking into their own hearts and deciding that they, too, can contribute by buying British products and helping to back the home market. When I go to foreign countries, I am amazed, as I am sure all hon. Members are, to see the preponderance of home-produced cars in the streets, despite the excellence of the foreign competition. That is largely because of the pride of the nationals who live in those countries and because they are nationalistic in their outlook. A little more pride and a more nationalistic attitude by us would not go amiss. If that happened, it would be a considerable contribution to the sales of the British car market.

Here we see far more foreign cars than in any comparable city on the continent. There is no excuse for that. Ten years ago we lacked in quality, service and the way in which the products were turned out. Today that does not happen. There is excellence, and it is improving all the time.

I am glad that reference was made to Jaguar Cars. I see that the hon. Member for Coventry, North-West (Mr. Robinson), the former managing director of Jaguar, is present. With respect to the hon. Gentleman, it has improved a great deal since his time. I am proud that the current managing director of Jaguar is a constituent of mine. Many of my constituents work at Jaguar in Coventry.

I do not agree with the hon. Member for Dagenham that one of the main reasons for Jaguar's success is the favourable financial balance with regard to America. The main reason why Jaguar has succeeded is that it has first-class management and a work force that at last has cooperated with the management, and which has been slimmed down and become more efficient. The product is incomparably better than anything that Jaguar produced in years gone by.

Photo of Geoffrey Robinson Geoffrey Robinson Shadow Spokesperson (Trade and Industry)

Will the hon. Gentleman, who has made such a personal and direct criticism, inform the House whether last year and this year, under what he terms a better management, Jaguar, with all the advantages of the American exchange rate and a much more buoyant home and overseas market than when I was chief executive, produced as many cars as it produced when I was chief executive and made as much profit in real terms and whether the warranty claims per vehicle have been reduced? If the hon. Gentleman can do that, he may be entitled to make criticisms that otherwise I would ask him to withdraw.

Photo of Mr Dudley Smith Mr Dudley Smith , Warwick and Leamington

I am not certain of the exact figures. However, by general consent, Jaguar has improved a great deal. I know dozens of people who, in years gone by, bought Jaguars but gave up buying them because they were always going wrong. Today they are proud to own one and believe that it is one of the best pieces of machinery on our or any other roads.

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

The answer to the question by the hon. Member for Coventry, North-West (Mr. Robinson) is that Jaguar produces slightly fewer cars than it did when he was in charge, but this year it will sell more.

Photo of Mr Dudley Smith Mr Dudley Smith , Warwick and Leamington

Exactly. I am glad that my hon. Friend the Minister came to my aid. He is more likely to have the figures than I am. He put his finger on it. It is a question not just of production but of reliability. We all know the state that the company was in just after the time when the hon. Member for Coventry, North-West was managing director. I am not accusing him, but I am saying that the British car industry was in a mess in those days. Today it is more efficient.

I do not want to spend too much time commenting on Jaguar, good as it is. It is important that every encouragement should be given to the British car market. I hope that if the British people respond in the next few years there will be a quid pro quo with regard to the component parts of cars.

The area that I represent is much concerned with the car industry, though chiefly with producing the various components for cars of all types, foreign as well as British. It is sad when we hear that some leading British manufacturers obtain many components from abroad. We must do more to encourage home products. If they are supported, they should support also the vital ancillary industries. My hon. Friend the Member for Northfield mentioned them in his speech. Again, we need to buy British. I would never suggest that people should not be competitive and should go for an overpriced product, but many of our products are equally competitive with those from abroad, and manufacturers should make a special effort to get British components. That is an integral and important part of the scene. If the British car industry succeeds, the components industry should succeed.

There will be a contracted industry in future. Inevitably, it will remain smaller than it was in the time referred to by the hon. Member for Dagenham. The industry can be successful and contribute to the national economy in the remaining years of the century. There is a new sense of realism from the point of view of both the management and the work force. Long may that continue. That is not merely because a chill wind of unemployment has been blowing throughout western Europe in the past four or five years but because it was realised that the British car industry was overstaffed and not run efficiently, and at last the industry has got round to putting its house in order. There is still some way to go, but, with luck, the industry will be able to take on the competition, whether it comes from Japan or the EC. It will co-operate with the EC. There are many multinational companies that produce on the continent as well as in this country. By doing so, they will still have an assured future.

Photo of Mr George Park Mr George Park , Coventry North East 5:17 pm, 12th December 1983

I welcome the opportunity to debate the car industry. I thank the hon. Member for Birmingham, Northfield (Mr. King) for providing that opportunity.

In the House and outside it there is still a lack of awareness of the importance of the motor industry to Britain. That is shown by the sparsity of attendance in the Chamber. More recognition should be given to the fact that no manufacturing industry contributes more to the wealth of the nation than the motor industry. Directly or indirectly it employs over 1 million people. In congratulating the industry on its improved performance, we should not lose sight of the fact that the major strain created by that improvement has been taken by the work force, or, rather, those who were formerly part of the work force, because over 300,000 have lost their jobs in the past couple of years.

The motion seeks to call attention to the British motor industry, but the continuation of an independent United Kingdom motor industry rests almost wholly with British Leyland cars and Leyland vehicles, since none of the other British manufacturers can take decisions in isolation from the interests and strategies of their parent companies overseas. That limits the scope of United Kingdom managers to manage those companies decisively and to direct their business operations in the United Kingdom. On crunch decisions, they are always subject to meetings that take place hundreds or thousands of miles away.

As a core manufacturing industry, many other sectors depend on the motor industry for their livelihood. For that reason, I agree with the hon. Member for Northfield that an agreement with Nissan to produce vehicles in Britain must contain at the outset a strict condition calling for a high local content in the vehicles. If not, it will be a Trojan horse. If our component manufacturers are not even to be given the chance to tender for the bits and pieces that go into a vehicle — it does not matter whether they are efficient—we may gain some jobs from Nissan, but we would lose at least that number, and perhaps more, in component manufacture and in our assembly companies.

As it is, the three major multinational companies that operate in Britain no longer have the capacity in Britain to design and produce vehicles. They are confined to assembly operations, the manpower for which is reduced with the continuing introduction of robotics. Just as important, we lose the design capability and the manufacturing skill.

I have the gravest doubts about the validity of the motion's aim to give continued encouragement to the industry. The Government have been reluctant to develop an overall strategy for the industry and are still trying to disentangle themselves from all responsibilities for the motor industry. The cash support for British Leyland was small in relation to the needs of the company, when competitors were investing at record levels to introduce new models, which are the lifeblood of the industry. The investment was not sufficient, and we should compare it with the money invested by other European Governments in their companies, which enabled them to continue research and development.

To talk of privatising parts of BL as they become profitable takes no account of the cyclical nature of the sales of individual models. They do not all sell at the same rate at the same time and, therefore, if the Government select parts of BL to sell, they will lose a great part of the corporate strength that holds BL together. The Government should take account of that when they talk glibly about selling parts of BL.

The hon. Member for Northfield referred to a range of cars but, obviously, if some parts of the corporation are sold off—I shall not name any parts, because it might encourage people to identify the companies—there will be not a range of cars but some individual companies. I notice that there is even some talk that, when the companies are sold, the purchaser should be given the proceeds of the sale. That really is the "bun and the ha'penny", is it not, because one cannot escape the fact that the motor industry was in a mess under private ownership and was rescued only by the input of Government money.

If the Government wished, they could give considerable help to the industry. They could increase the market to more than 2 million units by removing the special car tax. Apart from motor cycles, cars are the only consumer durable that are expected to shoulder that imposition, which was introduced as a temporary measure in 1981. Of course, we all know what "temporary" means. It means that successive Ministers have decided that they cannot do without it, probably nudged on by the Chancellor of the Exchequer. However, on the evidence of the increase in sales as a result of the relaxation of hire purchase controls, if the special car tax were removed there would be an uplift in sales. Let us see whether we have confidence in the car industry to maintain and improve its share of that extra part of the market. I am confident that it could do so, and I hope that the car tax is abolished.

The Government effectively imposed a purchase tax of 26·5 per cent. on a British-built car, yet Britain imports videos and hi-fi equipment at only 15 per cent. tax. We also have the continuing Spanish onion; successive Ministers who have been asked about it have said "We cannot do anything about that because it would be against the treaty of Rome or against the general agreement on tariffs and trade." Britain is about the only country that plays this game. During previous debates on the matter I said that Britain was still playing cricket while the other countries were playing karate. We are still doing it. All that I ask—it would not be an outright rejection of an agreement—is for the Government to say "If you want to put X per cent. tax on British vehicles that enter your country, that is your decision, but we shall have to put a similar tax on your vehicles." That cannot be discrimination. It is even-Steven and is fair to both sides. I urge the Minister who will reply to the debate—the plea comes from both sides of the House, and is not just a radical proposal from the Labour party to man the barricades—to take this point on board.

It is bad enough to have differential ratios, but something much worse is creeping in. The European Commission has introduced a draft bulk exemption regulation, which would force the European, not just the British, motor industries to harmonise prices. Yet all the member states will still have their own price controls, car taxes, and economic and fiscal policies. There will also still be exchange rate fluctuations. The regulation is a monstrosity that should not even be considered.

We must draw the Treasury's attention to the fact that 60 per cent. of car production goes in fleet sales. If the Treasury insists on continually increasing taxation on company cars, and regarding them as perks, it will no longer be viable to have a company car. It is like imposing a tax on a carpenter simply because he uses his tools to do some DIY at the weekend. A car is a tool of the trade and should be regarded as such. The Treasury should not continue to try to increase taxation.

When it comes to individual choice, as the hon. Member for Warwick and Leamington (Sir D. Smith) pointed out, that may not necessarily be exercised in favour of a British vehicle. Unfortunately, it is still not recognised, even inside the House, that for every seven cars that are imported we lose a job. I wish that people would bear that in mind when exercising their choice.

We must also recognise that vehicles need roads. The hon. Member for Northfield said that only a third of the £10 billion in tax was returned to the benefit of the road user in the form of road construction and maintenance. We in the west midlands have been trying to get a cross-country route through the black country for more than 30 years. That would take in a part of the west midlands that has been badly decimated, where once there were steelworks, and so on.

I urge the Government to have regard to all the derelict land that could be redeveloped to attract industry back into that area. If the Minister needs any convincing, he should try to journey across the black country to get to the M6. He will then see how necessary such a cross-country road is. Therefore, some of the money from car taxation could be used to give the west midlands a lift.

Various hon. Members will no doubt urge similar action on the Government. The industry has shown that it is capable of pulling itself up by its bootstraps. We now ask the Government to remove some of the restrictions that have been placed on the car industry over a number of years. As a result, the industry would blossom, provide more jobs and revenue and—particularly as its tentacles are spread throughout the country — benefit the whole economy.

Photo of Mr Hilary Miller Mr Hilary Miller , Bromsgrove 5:32 pm, 12th December 1983

I respect and admire the knowledge of the motor industry shown by the hon. Member for Coventry, North-East (Mr. Park), as well as his forthright defence of the industry in the west midlands. However, his memory of the funding of the industry has become somewhat selective. Whether the Government wished to do so or not, they have funded BL to an even greater extent than the Labour Government did, although I accept that funding for research and development is not as great as the hon. Gentleman and I would wish.

Photo of Mr George Park Mr George Park , Coventry North East

I said that the funding was not sufficient to meet the needs of the company at that time. I trust that the hon. Gentleman will agree. He knows that unless new models and face lifts are introduced, cars rapidly lose their sales appeal. It was only when BL was able to offer a range of models, in conjunction with a favourable exchange rate, that the industry began to lift off.

Photo of Mr Hilary Miller Mr Hilary Miller , Bromsgrove

The hon. Gentleman knows that BL did not have the engineering resource to bring new models on stream any faster. It was not just a question of the finance. It was impossible to exert financial control until management control had been restored.

It is a pity that a debate on our largest employer, largest manufacturer and largest exporter second only to the oil industry has not attracted a greater attendance. We are not talking about a luxury industry. It is a vital motor of the economy and an essential part of our daily lives, especially when we consider that 93 per cent. of all passenger movements and 90 per cent. of all freight movements take place by road. Therefore, this is an essential industry that supplies an essential need.

I am grateful to my hon. Friend the Member for Birmingham, Northfield (Mr. King) for the terms in which he introduced the motion. He has done a service to the House. He recognised the industry's contribution to the economy and its improved performance, which should give the Government the confidence to take the futher measures that we believe are needed.

Doubt was expressed that the removal of the hire purchase restriction would let in a greater volume of imports, but performance shows that, for the first time for 10 years, the tide of imports has been stemmed, despite the emergence of the Nova on to the market. That stronger market has given confidence to the multinationals to produce a greater proportion of their sales in this country, Vauxhall being a notable example. I am sorry that the hon. Member for Dagenham (Mr. Gould) is no longer in his place, as I wished to take him up on this point.

Nowhere is the motor industry's contribution more important than in the west midlands. I know that my hon. Friend the Member for Northfield will forgive me if I refer specifically to BL, which now employs 100,000 people, 55,000 of whom work in the west midlands. As the hon. Member for Coventry, North-East said, the bad news is that the company lost 100,000 workers in five years because of its lack of competitiveness in terms of price, quality and delivery. The good news is that it has led the way in the adaptation of new technology —the Metro line—and last year recruited 2,000 additional workers. BL spends £2 billion every year with 6,000 United Kingdom suppliers and is now one of our top five exporters. The west midlands, more than any other region, has a unique dependence on manufacturing industry, and on the motor industry in particular.

I hope that the industry's improved performance and significance are welcome to the Government in view of the large tax take that it provides. There is a need to increase confidence in the industry and to provide for an increase in the market so that we can consolidate the gains that we have made. That will enable the industry to continue to supply the taxes that the Government presently enjoy.

There are threats on the horizon, especially in relation to capacity. At present, European car production stands at about 13 million, against sales of about 10 million. We have all seen the pressure on prices, through the discounts that are widely available. Those threats on the horizon are particular to the United Kingdom.

I know of the Minister's experience of the steel industry. Like that industry, the motor industry has already taken the measures that are necessary and has made sacrifices in both production and employment. For example, BL, with its 100,000 workers, has closed 20 factories and productive capacity has been reduced from 1·2 million units to 800,000 units. We strongly believe that the reduction in capacity has been our contribution to the reorganisation, and we look to the Government to ensure that we do not have to suffer additional contraction because EC Governments have not faced the overcapacity that exists among other European competitors.

The hon. Member for Coventry, North-East and my hon. Friend the Member for Northfield mentioned taxation on company cars. The importance of the company car market is shown by the fact that about 60 per cent. of sales are made to the fleet market. A recent survey carried out by the British Institute of Management, which was mentioned in "Heron Drive", estimated that about 2·5 million cars were owned by about 190,000 businesses. Of those businesses, 68 per cent. had more than 88 per cent. of British cars in their fleets. That shows the importance of the company car market to United Kingdom manufacturers.

Earlier I mentioned Vauxhall's increasing confidence. The introduction of additional shifts at an earlier date than expected is a reflection of Vauxhall's success in the company car market. That market is important and can help to increase not only employment and manufacture but investment in Britain. There is a proposal for an additional 15 per cent. tax, on the scale, from April 1984. However, the Government have not drawn any distinction between company cars as tools and as perks. There may be a valid case for taxing the perk and the private use of a company car, but at present that aim is not achieved. Therefore, if hope that consideration will again be given to an assessment being made by the Inland Revenue of the proportion of private as opposed to business use. That would be a much fairer and more realistic approach.

Commercial travellers have made representations about the 18,000-mile limit not being realistic for salesmen in urban areas and about the way in which their expenses are treated for tax purposes. The present tax is widely regarded as unfair. It is bitterly resented by many of those who would otherwise be the Government's strongest supporters. It is already having an effect that can be quantified. Smaller engines have been put into larger cars, such as the Sierra, Carlton and Ambassador, to try to get them within the 1800 cc band. That is having a bad effect on their export potential. In Europe, the break point for the same band is 2·8 litres.

A higher band car, such as a Rolls-Royce, is uniquely discriminated against because there are no other models in its range. Most people, other than the most privileged, cannot afford a Rolls-Royce or a Jaguar, unless it is a company car. Very few retired people run around in such vehicles, because they cannot afford to service them. Larger cars are the most profitable for the companies. They are also the vehicles in which new technology represents a lower proportion of the final cost, so they are used as test beds. Such cars also represent the most solidly British part of company fleets. Therefore, I urge the Department and the Treasury to reconsider that point, bearing in mind the commitment of my hon. Friend the Minister to the privatisation of Jaguar. That company's sales will be severely affected if such discrimination continues.

The hon. Member for Coventry, North-East mentioned the threat of block exemption. Under article 85 of the treaty of Rome, selective franchise agreements are not permitted, and it is necessary to apply for an exemption. Firms have been applying for individual exemptions to protect their positions. In the motor industry, an exemption has been granted only to BMW. That was in 1974.

At the latest date, there were 3,715 agreements outstanding, upon which no ruling had yet been made. Indeed, only 29 agreements out of 169 applications per year have been granted in other industries.

A block exemption is obviously a sensible answer. The legal certainty that it should convey would be most welcome, but the Commission's proposals so far do not, regrettably, confer that certainty. The only certainty is that the agreements are likely to operate to the disadvantage of the motor industry not only in Britain but in other European manufacturing countries.

The 12 per cent. price criterion and the full model availability criterion are causing the trouble. The 12 per cent. price criterion has been ameliorated in the modifications introduced by the Commission in response to representations, in that the 12 per cent. differential will have to be the rule for more than six months before it becomes effective. Price controls imposed within 12 months will be ignored. However, the criterion still takes no account of the position in Belgium, where price controls have existed for years. The Belgian price will thus inevitably become the standard price throughout the EC.

As the Belgian market accounts for only 4 per cent. of sales, there has obviously been marginal pricing. Consequently, EC manufacturers will have to withdraw from that market. However, that will not prevent the Japanese and east European prices still being the reference prices throughout the other EC markets. The only result can be a reduction in both sales volume and profitability at a time when European manufacturers need to invest heavily in new technology in order to compete with the Japanese. Therefore, there is a real threat.

The alternative may be for the companies to take over the dealers, so that they can get out of that difficulty with the franchises. I cannot believe that the Government want a repetition of what happened with petrol companies owning the distributive outlets and all the anti-competitive measures to which that leads. However, I hope that my hon. Friend the Minister will be able to say something about that, because, from the manufacturers' point of view, the only other solution would be to take over the outlets.

I should like to make a passing reference to the Nissan problem. Views have been expressed about the local content that would be required. I am happy to say that I have ministerial written assurances that the content will start not below 60 per cent. and will rise to 80 per cent. A written assurance was given to me in a letter sent earlier this year. I should be grateful if my hon. Friend the Minister would confirm whether that is the Government's intention in the negotiations, regardless of the eventual scale of operation.

The industry is not a luxury; it is essential to the economy. It has made considerable improvements that have begun to bear fruit in the past year. We need to maintain confidence and investment in Britain's industry at a time of overcapacity in Europe and in the rest of the world. The realisation of the Government's aim to benefit by returning BL to the private sector is largely dependent on the measures that the Government take on the industry's behalf in resisting additional increases in company car taxation and the block exemption clauses of the EC.

Photo of Alan Williams Alan Williams , Swansea West 5:50 pm, 12th December 1983

I congratulate the hon. Member for Birmingham, Northfield (Mr. King) on giving us the opportunity to debate the motor industry. I apologise to the Minister as I shall have to leave the Chamber before the end of the debate because of a clash of commitments. It is not meant as a discourtesy, as the Minister is aware after many years of sparring with me.

By tradition, in Britain we welcome inward investment. Many of our greatest and best employers are overseas companies. About 1,500 American businesses operate here. In Wales we have done well in employment terms from Japanese investment. I know from my negotiations with Hitachi and Toshiba that speculation during negotiations can be widely inaccurate and damaging because it often stimulates reactions, which are reported in Japan and lead to considerable misunderstanding.

I shall confine myself to making a couple of points about Nissan. The Opposition certainly welcome Nissan so long as its operation here means more net jobs in the car industry and that it will not be at the expense of existing firms. We welcome Nissan so long as there is maximum opportunity for British component manufacturers.

When Hitachi was thinking of coming to Britain as an independent operation we had two guarantees. It was agreed that over the first few years Hitachi would phase in the use of British components to a specified maximum level. A further guarantee, supported by industry in Japan, was that any sets that it sold within the United Kingdom would count against the ceiling that the British industry had negotiated with the Japanese industry for imports. We had twin guarantees. I realise that individual cases vary, but I hope that the Department will endeavour to obtain similar guarantees from Nissan.

The motor industry is critically essential to Britain's prosperity. About 11 per cent. of our manufacturing output is contingent on the health of the motor industry. The steel, rubber, glass and machine tool industries are involved and the ramifications are enormous. That is demonstrated by British Leyland, which alone has 700 suppliers involved in putting the final vehicle together.

The motor industry has had a disastrous three years. It is now enjoying a temporary remission, but it is facing a dangerous and uncertain future, made even more imponderable because only one of the four major assemblers in Britain is British-owned. The policy decisions of the other three assemblers are taken outside the United Kingdom and interests other than ours are paramount.

It has been said correctly that one cannot separate the fortunes of the assemblers from the fortunes of the component makers. One might put that the other way round, since components make up about two-thirds of the final value of the product. One can, therefore, argue that the efficiency of the component manufacturers is doubly important to the health of the industry. It is imperative that, in our consideration of what has happened in the past few years and of what is likely to happen, we bear in mind the overwhelming need for economies of scale by the component manufacturers as well as by the assemblers.

A fuel-based industry was bound to be severely hit by the fuel price revolution of the 1970s. No mass market product was likely to escape a major world recession of that type, but I emphasise that world recession alone does not explain the crisis. I can demonstrate that by reminding the House of what has happened since the Labour Government left office.

Photo of Sir Peter Emery Sir Peter Emery , Honiton

A convenient reference point, of course.

Photo of Alan Williams Alan Williams , Swansea West

Yes, a convenient reference point with no debating significance.

Since 1968, the last full year of the Labour Government, United Kingdom production has declined massively. Production was 25 per cent. down on the 1968 level in 1980. It remained 25 per cent. down in 1981 and in 1982. In those three years, under the present Administration, the equivalent of nine months of the 1978 production was lost. That was not because of disputes or industrial arguments but substantially because of industrial wreckers in Whitehall.

In the period that we lost 75 per cent. of the 1978 output West Germany lost only 23 per cent., France only 33 per cent. and Italy only 34 per cent. Japan's increase is not comparable, so it would not be valid or fair for me to make the comparison, but its production increased by over 20 per cent. in each of the three years. That was an abnormal phenomenon.

The world recession was not the cause of over half the lost production in those three years. It did not have the same impact on our major competitors in Europe. Far more devastating for the United Kingdom industry were the policies pursued by the United States-owned car companies in the United Kingdom and by this Government. The Government's policy was to push up inflation, which caused high interest rates, and the high rate of sterling made products uncompetitive.

Even now, with inflation back to the same level as it is in Germany, our interest rates are twice as high. Much of the damage that has been, and is being, suffered is a result of Government action. The effect is seen in the crumbling performance of the British car industry. Traditionally, we have exported between 30 per cent. and 40 per cent. of our output. Yet, in 1980 exports were 35 per cent. below the 1978 level, mainly because of the high price of sterling. In 1981 exports were 38 per cent. below the 1978 level and in 1982, 52 per cent. below.

At a time when our export sales were disintegrating, imports were rising. As the hon. Member for Northfield said, imports will reach a record level this year as a result of the high value of sterling, which makes us uncompetitive, and as a result of the policy of Ford and Vauxhall to source production so massively abroad for sales within the United Kingdom. Most Vauxhall sales here today involve little more than assembly kits. Even the design teams are being taken from Britain, although Britain has been famed for years for the quality of its design.

Contrary to popular public opinion, nearly all the extra import penetration between 1975 and 1983 is not attributable to the Japanese. Japan's import penetration has been constant. Nearly all the extra import penetration from 1975 to 1983 has been the result of internal policy decisions of Ford and Vauxhall, leading to the tied imports that they have brought into this country. Even their so-called British cars have a higher import content than they did. In November, Vauxhall spoke of having reached 16 per cent. sales in the United Kingdom market, yet only 46 per cent. of the cars it sold were produced in the United Kingdom. Indeed, I received a letter from one of its factories this moring which claims that a small company of which General Motors is a shareholder is assembling Japanese Itzu vehicles, small vans, in Portugal, badging them as Bedford and selling them in the traditional Bedford markets.

It is small wonder that, while we have witnessed this enormous penetration of the British market by the European producer, we saw, by contrast, a British export penetration of the EC of less than 2 per cent. By 1982 we had a deficit on car production of £973 million and, as has been pointed out, this year we will have a deficit of more than £2 billion.

Photo of Mr David Madel Mr David Madel , South West Bedfordshire

Does the right hon. Gentleman recognise that Vauxhall's position is changing rapidly? By the end of 1984, 65 per cent. of Vauxhall cars sold in the United Kingdom will be built in the United Kingdom. Should he not remember that Vauxhall sends a considerable amount of components and parts from this country to the German operation? It is a classic European car with each side being interdependent.

Photo of Alan Williams Alan Williams , Swansea West

There may well be adjustments, but up to the present all the adjustments have tended to be in the wrong direction. What I have been trying to demonstrate and what I have been talking about is the predicament that the car industry has faced in the past few years. In so far as it has not been the responsibility of the Government, it has been the responsibility, particularly, of the two American car producers. But, in fairness to them, it roust be said that their action very often has been stimulated by what they have seen as the wrong-headed and harmful policies pursued by the Government.

The Government have blindly, destructively and doctrinally pursued their quack economic theories of monetarism, with the result that in 1981 alone 39,000 jobs were lost in the four major assembly firms. That is one third of the losses over the whole decade—eight times the losses suffered over the five years when the Labour Government were in office. Since the Government came to office, motor manufacturers have lost 110,000 jobs and the components industry has lost 150,000 jobs. At least 260,000 jobs have been lost as a result of the policies being pursued by the Government.

It is small wonder that the west midlands is littered with the empty shells of once prosperous factories. We shall no doubt hear from the Minister that we are going through a period of recovery—1983, the year of recovery. Let us explore this return to health in a little more detail. What the Government are really saying is that, after four years of office, production is now slightly ahead of the level it stood at when they came to office because 1979 was, of course, the previous record year. They would want carefully to ignore the dead bodies scattered on the battlefield over the intervening four years. How has this recovery come about? Is it, at last, the success of monetarism that we have been promised is always hovering somewhere near the horizon? Not at all; if anything, the answer is the exact opposite.

The country has been led by a Prime Minister who has preached continually about the financial prudence of the housewife and about living within one's means. Yet this temporary upturn has been created by a hire purchase boom. We shall ignore the fact that it happened to coincide with a general election year. Consumer spending on cars has risen by 15 per cent. A recovery and an electoral victory, all on good old-fashioned "tick"—the immoral extravagance that the Prime Minister spent the previous four years warning the country against. One must give it to the Tories: they never forget a good electoral trick. This is not the first time that they have done it. They knew it would work because in October 1958 they removed for the first time in the post-war period all hire purchase controls. A year later car sales were up 30 per cent. In October 1959 they had the "Never had it so good" election with the return of a Conservative Administration with, lo and behold, a majority of 100.

Photo of Alan Williams Alan Williams , Swansea West

Interestingly, six months later those hire purchase controls were reintroduced. The signs are that the Government will have to do the same in the next 12 months.

Photo of Mr Roger King Mr Roger King , Birmingham, Northfield

Is the right hon. Gentleman suggesting that all those people who buy things on hire purchase are immoral and that, because they cannot afford them for various reasons, they should not engage in a financial credit system which will enable them to purchase the products?

Photo of Alan Williams Alan Williams , Swansea West

Not at all. We have argued this point for several years. It is the Prime Minister who has been trying to draw the parallel that the nation must live like the thrifty housewife, must never spend beyond its means and never live beyond its immediate income. We have said that, in the same way as the consumer society would never have got off the ground in the post-war period had that been the prevailing ethic at the family level, the prosperity of the western world would never have been established had that ethic dominated the economic thinking of countries in the post-war period.

Part of the so-called recovery has been the 15 per cent. increase in consumer spending resulting from a temporary hire purchase boom. There are two other temporary factors. First, the "A" registration has had an abnormal impact on new car demand and, secondly, fleet owners, under pressure from interest rates and squeezed profit margins, switched from a two-year to a three-year replacement cycle. This happens to be the third year and so more fleet owners have been replacing vehicles this year. Even so, yesterday The Observer quoted the findings of a study by the Economist Intelligence Unit which forecast that there will be a 6·2 per cent. fall in the United Kingdom car market in 1984—back under the 1 million figure of production for British cars.

This country has a low level of car possession. We should be a fruitful market for the industry. Data Research International has shown that until 1968 we had the lowest car ownership figure of any major European country. Of 21 EFTA registration authorities, only five had fewer cars per 1,000 of population than Britain. The growth in our domestic market has been smaller than everyone else's. This has happened under various Governments. Over the past 20 years, car ownership in Britain has expanded two and a half fold; in France, from almost an identical starting point, it has expanded three and a half times; in Germany, from a slightly lower starting point, it has expanded four and a half times; and in Italy, from a considerably lower starting point, it has expanded eight times and the total possession figure is far higher than in Britain.

This is reflected into the issue of economies of scale for domestic productive capability. Britain now has a production level of 0·91 million vehicles this year, while the French are producing 2·7 million, the West Germans 3·8 million and the Japanese 8 million vehicles. Let us think about what that disparity means in terms of the economies of scale not only for the assemblers but for the component manufacturers. When we take into account the tied imports, the market available to the component manufacturers is substantially smaller than the usual British domestic output.

The Society of Motor Manufacturers and Traders has asked for a 2 million domestic market, which is reasonable. It claims that that can be achieved by the abolition of the special car tax, and it has explained how that could be self-financing in a number of years—although it recognises that there could be a shortfall on tax revenue in the first year or two.

I wish to put a positive proposition to the Minister, which I hope he will consider together with his right hon.Friends at the Treasury. Why does he not offer the manufacturers a deal, as he is doing with Nissan? Why does he not say to them, "We shall seriously consider the possibility of removing the special car tax burden in exchange for specific and tight undertakings on the level of sourcing of components and vehicles for the British market"? That would be a fair and good deal, which would be welcomed by both sides of the House. I hope that the Minister will consider that. I do not want an answer today, but perhaps he will write to me if he thinks that there is merit in the idea.

We are faced with the problem of a Government who lack perception and understanding of and concern for the problems of an industry facing a potentially disastrous future. Our United States-owned companies are increasingly committed to investment in Spain, Portugal and South America, and their policies are increasingly determined overseas. Our only British company, British Leyland, is only medium-sized and is now being encouraged to sell its profitable sections. Having been told that it is at a grave disadvantage because it is not as large as its competitors, it is now being told that it must make itself smaller by selling off its profitable parts. While productivity is improving, evidence produced by the industry shows that that increase is not significantly greater than the increase in productivity among our competitors—so we are deriving little benefit from that.

We face a future in which world markets will not expand as fast as new capacity, yet we already have excess capacity. Our traditional OECD market is near saturation, but as a result of unfair tariffs and quotas we are excluded from the markets that offer future growth. Those same markets are the areas in which much of the new car productive capacity is being set up.

The industry desperately needs new investment in the assembly and component sector, yet it is aware that if it succeeds in achieving growth it may in the medium term face a crisis through a lack of skilled labour to sustain that growth because of the axing of training programmes.

The industry is central to the recovery of all manufacturing industry in Britain, yet the Government have no policy for it. The picture is of an industry fundamentally in decline and of a Government who lack the will and understanding to act in time to save it.

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames 6:40 pm, 12th December 1983

I join my hon. Friends in congratulating my hon. Friend the Member for Birmingham, Northfield (Mr. King) on raising this subject today. It is the first time for a very long time that we have had a debate on the motor industry, and it is extremely welcome. I also congratulate him on the way that he addressed the House and on the content of his speech.

My hon. Friend's constituency has been represented by many people who have championed the motor industry —including the late Jocelyn Cadbury, whose death was a great loss to the House. He was a formidable champion of the industry, and my hon. Friend is a worthy successor.

This has been a serious debate, although I am not sure that I take seriously all the comments made by the right hon. Member for Swansea, West (Mr. Williams). Fortunately, he will not be present for the remainder of the debate so I do not have to follow his argument, although I had no intention of doing that anyway. The seriousness with which the Opposition view the debate has been demonstrated not only by the right hon. Gentleman's speech but by the absence of his supporters from the Back Benches. I also note that no representatives of the SDP or the Liberal party have been present during the debate.

As it is nearly the end of the year, we can look back on what has been a significant year — in several respects, an encouraging one for the motor industry. There have been new models, such as the Maestro, which has been an outstanding success. Car sales have reached a record level. There has been no shortage of demand, with an all-time high of more than 1·72 million sales during the first 11 months. Of course, the right hon. Gentleman tried to explain that away with his usual pessimism by saying that if the sun shines today, it will inevitably rain tomorrow. But we do not accept that. Despite the spectacular increase in the market this year, as my hon. Friend the Member for Bromsgrove (Mr. Miller) said, we have managed slightly to cut back the penetration of car imports. As he reminded us, additional labour has been taken on at Cowley and at Luton with a double shift. They may be small additions to the labour force, but it is encouraging. It shows what happens when companies become more competitive and increase productivity.

The car industry symbolises Britain's manufacturing industry. It used to dominate the world. Although we can hardly believe it today, during the 1950s we were not only the largest exporter in the world but, after the United States, the second largest manufacturer. The 1960s and 1970s saw many problems, such as the failure to develop new models, and poor industrial relations, but today, contrary to what the right hon. Gentleman said, the industry again symbolises British industry in its determination to overcome its past problems and reputation and to begin the fight back. That has been shown in some of the encouraging results. As my hon. Friend the Member for Warwick and Leamington (Sir D. Smith) said, there has been a dramatic improvement.

Of course, we all recognise that the industry is still not secure. Our productivity has improved faster than that of our competitors, and must continue to do so. I sometimes receive representations from industrialists who say, ''We have had a bad time. Our productivity has been improving markedly, so what will the Government now do for us?" That is a nonsensical approach. I hasten to say that that attitude is not taken by the motor industry. Industry will survive only if productivity follows a moving target. We must continue to improve.

My hon. Friend the Member for Bromsgrove and the hon. Member for Coventry, North-East (Mr. Park) raised the serious subject of the Commission's proposed regulation on block exemption. The Government support the general principle of block exemption, which is obviously right.

The motor industry has vast investments—there are the dealerships and the dealer networks which serve the interests of the consumer — and it is right that they should be protected. But two concerns in particular worry the industry. One is the possible requirement that a dealer may demand the supply of a vehicle with foreign specifications at his own local price and the second is that franchised dealers may not be bound by wholesale restraints if the recommended tax-exclusive prices in any other member country are 12 per cent. or more higher. We are well aware of the industry's concern on this matter. I have met the SMMT on several occasions and discussed it. It relates to the whole question of car prices and differentials.

It has always been our view—we have made this clear to the industry—that in the long run the car price differential cannot be maintained, but it may be exaggerated in the short term; it may be exaggerated by currency movements or by price controls in one country, and it would be wrong if price controls in one country had to be exported to another country. In so far as the differential reflects lack of productivity, no one can say that our industry has not been making stupendous efforts in the recent past to improve its productivity and efficiency. We have always made it clear that in our view the differential would have to go gradually and could not be maintained in the long run. But if we had precipitate action or artificial moves that removed that differential, that could be a disaster for the industry.

The adoption of regulations of this type, by which the Commission exempts whole categories of agreements under competition rules, is subject to a consultation procedure. One step is the publication of a draft in the Official Journal, and that is the stage we have now reached. Now, manufacturers and others have the chance to comment on it. There will be further consultations, including consultations with committees of experts from different Governments. It will take time and I can at least give the assurance that it will not suddenly be adopted in its present form. We are under no illusion as to its importance for the industry, and we shall watch it carefully.

A number of my hon. Friends spoke about Nissan. The story to which reference was made from The Guardian about the possibility of Nissan purchasing Austin-Rover is totally untrue. Contrary to what has appeared in some newspapers, no decision has yet been made by the company. It has always been the view of the Government that Nissan would be welcome here, provided that the project would have a high local content. Certainly it would not be acceptable if it were in the terms, described earlier, of a "Meccano outfit". That would be a quite unacceptable proposition.

I assure my hon. Friend the Member for Bromsgrove that the assurances that he has received from my right hon. Friend still apply. The House will understand that I cannot go into the details of the negotiations, but obviously we should welcome Nissan to this country only if we felt that it was a project that in net terms would add to the United Kingdom both in terms of output and employment. It is true, as has been pointed out, that there is excess capacity in the industry in Europe, but in this country we have a market 60 per cent. of which is supplied by imports, and if we could get more competitive production here, that could be greatly to our advantage.

Photo of Mr John Golding Mr John Golding , Newcastle-under-Lyme

The Minister referred to the net effect of such a move. Will he say what the net effect would be on the components industry? Those who make components — this particularly interests those in my constituency — are concerned to ensure that no net loss occurs in that industry and that those employed in it do not suffer.

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

The whole content of my remarks has been to assure the very people to whom the hon. Gentleman referred.

Several of my hon. Friends spoke of the car tax. I agree about the importance of the sheer size of the market. That is one of the disadvantages that we in this country have; our market is smaller than that of several other countries and we cannot create a larger market just like that. Some of my hon. Friends referred to the market in Germany and France. They are larger and richer countries, with a higher gross domestic product per head. We cannot overnight just create, much as we should like to do so, a market penetration among all consumers equal to that of competitor countries in Europe.

The case for the abolition of the tax has been put to my right hon. Friend the Chancellor of the Exchequer, who has undertaken to look carefully at the request. We must take into account the possibility that a bigger car market in the short term might lead to higher levels of imports. It has been pointed out that what we have seen in the last year has been the growth of the market to a substantial extent and that that has not led to an increase in imports. That is so, but we have, with several domestic producers, got close to the limits of capacity. I am not saying that that rules it out, but it is a factor that we must take into account, and I repeat that the Chancellor has undertaken to look seriously at it.

Reference has been made to the terms on which trade takes place with Spain in motor products. I understand the strong feelings that exist in the west midlands and elsewhere about that. The terms of our trade with Spain are established by treaty; they can be altered only through the Community. Since those special terms were agreed, Spanish industry, behind tariffs, has grown much stronger and many people feel that those terms are out of date. In the long run, the accession of Spain must be the answer, but alterations in the interim must be negotiated through the Community and in those negotiations we must take into account our overall relations with Spain, including our general trade relations with that country.

Earlier this year the Community negotiated to reduce duty quotas, and that will give some modest opportunities for BL. Those quotas are to be renewed annually and, of course, we should like to see them enlarged further if possible, and that will be our aim.

Several hon. Members referred to the multinationals and tied imports. It is important to stress, as did the hon. Member for Dagenham (Mr. Gould), that the multinationals are a vital part of our motor industry. We are anxious throughout industry to encourage foreign investment to this country, and when it comes we should regard it as being as much a part of the United Kingdom economy as domestic firms.

The multinationals operate a spread of operations to get the necessary scale, and the Ford and General Motors commercial vehicles and components operations in this country are designed to serve not just the domestic market but the export market. We hope that the United Kindom will have the opportunity to share in these arrangements. But that right must be earned; it cannot be taken for granted. Ford has made it clear that, notwithstanding some recent improvements in some of its plants in this country, they do not all come up to the best standards in other countries in Europe.

These investments also have a long time scale; they take years to come to fruition, and in some ways the United Kingdom is still suffering from the period when it offered a less attractive and less profitable location than elsewhere. We cannot turn back the clock, but the signs are that the commitment of the multinationals to the United Kingdom is being maintained. Vauxhall has announced investments of £130 million, including £70 million for Bedford. Ford has followed up its £225 million investment in the Sierra with half the amount spent on modernisation at Dagenham, and there is to be a £100 million programme at the Dagenham engine plant.

The Government look to the multinationals to maintain a broad balance in their activities, to build vehicles and to buy components in the United Kingdom to a value at least roughly equivalent to their sales in the United Kingdom. My hon. Friend the Member for Bedfordshire, South-West (Mr. Madel) pointed out in an intervention that there are signs that the position could improve further. I was pleased to note the recent statement by the car companies about planned increases in United Kingdom sourcing of cars. Vauxhall is already operating a double shift at Luton and has just announced that it is to pull forward by four months to April the introduction of a second shift at Ellesmere Port. Those changes will mean that by the end of next year Vauxhall will be producing in this country about 65 per cent. of the cars that it sells here. Ford, too, is following a production plan that will lead to two-thirds of its sales being met from domestic production.

On the assumption that those plans are fulfilled and there is a continuing strong performance by BL and other United Kindom producers, there is a prospect next year of a reduction in the level of import penetration by several percentage points. That is not, of course, a cause for complacency. As I have already said, there are certain United Kingdom plants where further improvements must be made if performance is to come up to the level in plants elsewhere in Europe.

It is appropriate to single out BL. Not only is it the largest United Kingdom vehicle manufacturer but, as far as I know, it is the largest employer in the constituency of my hon. Friend the Member for Northfield, and I should be surprised if it was not. During the past few years, the company has made remarkable progress, much of it due to Sir Michael Edwardes.

The significant point about BL is that a large part of its improvement has been achieved at a time of recession. When the fortunes of some of our other motor car companies have been deteriorating, BL's position has been improving. It is important to realise that it is not yet out of the woods. BL still has a long way to go before it can remunerate the vast amount of capital that has been poured into it. Until it does that, it will not be truly viable. The company has staged a remarkable comeback which many might have thought impossible.

BL's strikes used to hit the headlines; now its sales do. The Metro, launched in 1980, has established itself as the leading small car in this country, and that performance is not limited to Britain. One Metro in every three is exported, and the car is spearheading Austin-Rover's drive to rebuild its share of the continental market.

Photo of Sir Peter Emery Sir Peter Emery , Honiton

Before my hon. Friend leaves the financial side of BL, may I ask whether he knows that the Select Committee on Industry and Trade has been concerned about the Government's investment? Will he tell the House that BL will not be coming to the Government for any more money for further planning? If it does, what will be the Government's approach?

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

Another £110 million is due to BL if and when it is needed. That has already been announced in the House.

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

That is the end of Government support for the company. That has been made clear, and BL's board has accepted it.

BL's great achievement with new models continued after the Metro with the Maestro in March this year, and it was an instant success. In its first month, it recorded more sales than any new model previously launched, and it has sustained that performance. I am confident that its sister car, the LM11, will be equally successful when it is introduced. Both those models are manufactured with the most up-to-date technology.

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

I shall not give way, because other hon. Members wish to speak.

Export sales in western Europe increased by 26 per cent. between 1981 and 1982. BL is successfully going back into Europe for sales. As a whole, BL is well on course to break even at the trading level this year, and that will be the first time for many years that that has been achieved.

The progress of Jaguar has, if anything, been more spectacular. I do not agree with the hon. Member for Dagenham that that is due just to the exchange rate. It is not. Productivity is not improved from 1·5 cars per man in 1980 to 3·5 cars per man in the first half of this year because of the exchange rate. It also does not bring about great improvements in quality and reliability. That has been due to the hard work of the work force and management.

Jaguar sales in the United States in 1982 were 120 per cent. above those in 1981 and 300 per cent. above those in 1980, and that is a remarkable achievement. Hon. Members will be aware of the contribution that Scotch whisky makes to the United Kingdom balance of payments. Far be it from me, especially as a Scot, to say anything derogatory about that distinguished beverage, but Jaguar cars now look set to overtake Scotch whisky as the prime United Kingdom export to the United States.

Those are just a few examples of the progress that has been made. None of them could have been achieved without the dedication and hard work of management and work force, and I am happy to pay tribute to them. The company has now reached the stage where it is realistic to start planning its return to private ownership. No one should expect that to happen overnight. The company is very large and, as with many large companies, some parts are doing better than others. I am confident that 1984 will see the first steps in the return of BL to private ownership. That is our priority for BL, and I assure the House that we intend to see it through.

Photo of Mr Paul Dean Mr Paul Dean , Woodspring

Before I call the next hon. Member, it might be helpful if I remind the House that the debate must end at seven o'clock, and quite a number of hon. Members hope to speak.

Photo of Geoffrey Robinson Geoffrey Robinson Shadow Spokesperson (Trade and Industry) 6:37 pm, 12th December 1983

I congratulate the hon. Member for Birmingham, Northfield (Mr. King) on choosing this subject for debate. It is a hardy but necessary annual, because every hon. Member is aware of the continuing central importance of the motor industry to the economy. Over the last 10 or even 20 years of British industrial performance, it is staggering to see the extent to which the decline in the whole area of manufacturing industry, especially the mechanical engineering sector, has been a function of the massive decline in the British motor industry. That decline has continued under Governments of both persuasions—that has been agreed by both sides of the House—throughout the past two decades. Sadly, since 1979, because of high interest rates and the intolerable level of sterling, the decline has accelerated. We hope that with more modest and less monetarist economic policies, we shall see some improvement in the industry's performance.

From 1979 to 1982 we saw the devastation of the west midlands and the city which I represent and about which my hon. Friend the Member for Coventry, North-East (Mr. Park) spoke so forcefully. Factory closures, the spate of redundancies and the harsh reality of the lengthening dole queues throughout the west midlands have left scars not just on managers and the work force, who put in many decades of dedicated work in assembly lines and machine shops and who served their apprenticeships in the great tradition of the industry, but on generations of youngsters who are now coming out of school without any prospect of obtaining work. When I hear the Minister say that the Government's priority for BL — the only major nationally owned motor car company producing vehicles in this country — is privatisation, I think how wrong their priorities still are.

The Minister is responsible for our great motor industry and his concern should be the future of the industry as a viable and expanding one. That cannot be encapsulated in a word such as "privatisation": it can be realised only in the hard world of internationally traded consumer goods, in which we have barely started to recover. I speak of British Leyland as a whole when I say that.

The Minister said that the recovery has only just begun; how right he was. The latest figures tell us that imports still claim 66 per cent. of the home market. The Maestro is a good car, but what percentage of the market is it claiming? The Minister would not let me intervene to ask that question but perhaps he will care to tell us before the debate ends. How does the Maestro's share of the market compare with the other leading contenders in the critical sector in which it competes for the family saloon market? It is a good car and it is doing well, but it epitomises precisely what the industry as a whole has to do. It still has to go a long way.

Privatisation, far from being the top priority for British Leyland, is a damaging irrelevance. The sooner that the Minister accepts that, the better. I hope that he will do so and tell the Right wingers within the Conservative party, who wish to return to an industrial state that never really existed, that the first priority is the health, strength and expansion of the British-owned motor car industry. The sooner he does that, the sooner the Government will be taking the approach that the whole House would want.

The Minister of State addressed himself to many of the questions that have been raised by hon. Members on both sides of the House. On two matters he went some way towards giving us a measure of satisfaction. I am sure that the hon. Member for Bromsgrove (Mr. Miller) and my hon. Friend the Member for Coventry, North-East will agree that he gave a fulsome reassurance on the block exemption. However, the more fulsome the Government's reassurances and the more committed they are to doing something, the less we begin to trust them as time passes and, unfortunately, they fail to deliver the goods. That comment applies to Nissan and to imports from Spain.

The Minister may be watching closely the operation of the block exemption, but we shall be watching him closely. As he has said, it is an issue of great importance to the industry. However, we are at an early stage in the negotiations and we cannot prejudge whether the Minister is likely to do any better than he has done on other critical issues which are of topical, as opposed to historical, importance, and which were featured in the wide sweep of the industry to which we were treated by the hon. Member for Northfield.

Among the topical factors is the proposed deal with Nissan. Does the Minister agree that he and the Secretary of State have kow-towed long enough? I realise that the hon. Gentleman is only the lady in waiting to the chief geisha girl, but it is two and a half years since we heard the Government's announcement. The hon. Gentleman was one of the occupants of the Government Front Bench when the announcement was made, for he was the Under-Secretary of State. The then Minister of State, who has become the Secretary of State for Trade and Industry, announced with a great fanfare of trumpets that the deal had been clinched.

We were told that by November 1981 we would have the full details laid before us. The Minister said that it was a great deal for British industry and one that would create many jobs. He went so far as to say that various Members would be clamouring to have the Nissan development situated in their constituencies. I remember the occasion extremely well. The Minister told my right hon. Friend the Member for Salford, East (Mr. Orme), the then shadow spokesman on these matters, that he could be sure that the development would not go to his constituency. It seems that we can now be sure that it will not go to any Member's constituency.

I have had my experience of negotiating with the Japanese. I do not wish to make the Minister of State's job any more difficult, but what can he tell us about the negotiations? It is no good continuing with vagaries and platitudes. We need to know, so that we may end a prolonged and unnecessary period of uncertainty in the industry, whether the negotiations are to be concluded. If they are, will they be on the terms originally envisaged, which involves local content and exports?

The Minister will be well aware that the potential of the Datsun affair and the benefits that it could bring to British industry have been grossly exaggerated, while the negative effect that it could have on present domestic production has been grossly underestimated.

Apart from home-based component manufacture and the projected level of exports from the United Kingdom, is there within the agreement any provision for a real exchange of production and product technology? That seems to be the most important issue of all, and I noted that the Prime Minister nodded when I made the point when the deal with Datsun was announced. If the Nissan project is to be of any real benefit—the same applies to the Austin-Rover and Honda project—it must involve a meaningful exchange of manufacturing, engineering and product engineering technology.

We can project marvellously propitious sets of economic circumstances for a renascent British motor car manufacturing industry, but unless we have sufficient resources in manufacturing and product engineering we cannot have an industry. That is the base of the industry and that is the base on which the Japanese have built an industry that leads the world. They lead the Germans, the French and the Americans.

In a study undertaken by the director of manufacturing of Ford of Europe, an Englishman—he is the only Englishman to have that level of operational executive responsibility within the Ford organisation — reported that there were two eras in the history of motor cars. He said that there were BJ and AJ—before Japan and after Japan. That formed the title of his report and that is the way in which Ford sees the threat to the massive Ford motor car company with its enormous international strength. We need to know whether we are to have access to the technology of Japan. Will there be a similar and full exchange of technological information between Austin-Rover and Honda?

Photo of Mr James Pawsey Mr James Pawsey , Rugby and Kenilworth

Does the hon. Gentleman agree that there has been a voluntary agreement with the Japanese and that they are now taking only 10 per cent. of the British car market? If we are anxious to put the British motor industry on a sound footing, we should be seeking to abolish car tax. If we do that, we shall expand the home market. That would help to put the British motor industry firmly back on its feet again where it belongs.

Photo of Geoffrey Robinson Geoffrey Robinson Shadow Spokesperson (Trade and Industry)

It seems that the hon. Gentleman realised that he would not catch the eye of the Chair and felt that he had to make his mark on the debate.

We have heard another series of platitudinous reassurances on car tax from the Minister. I am grateful to the hon. Member for Rugby and Kenilworth (Mr. Pawsey) for anticipating the next topic in my speech, about which we heard nothing from the Minister. Perhaps Conservative Back Benchers feel more sore about the Minister's performance than my hon. Friends and I.

I thank the Minister for his second positive reassurance. He said that there are no plans—this needs to be clearly and unequivocally set out on the record — for any outright sale of Austin-Rover to Honda. The Minister will have seen the newspaper reports and he has experience of ministerial contacts with managers and employees in the motor industry. He knows that the reports that have appeared in the press are probably without any foundation and are the products of journalistic speculation. However, they can have an enormously damaging and disconcerting effect on managers and employees.

Lastly and briefly, I turn to the vexed question of Jaguar. I had the honour and good fortune to succeed Maurice Edelman. Both Jaguar factories are located in our constituency, and I am proud to represent them. Although in some ways I wish I did not carry this distinction with me, I am also proud to have been for two years the chief executive of that great company. I welcome the success of the new management. I recruited Mr. John Egan into British Leyland. When I was financial controller of British Leyland, he served as my deputy controller. I would not have recruited him if he had not been a very good man.

I shall be delighted if the Minister of State is proved right and the sales figure achieved in 1973–75 is exceeded this year. In 1973–75 the recession was at its height and there had just been the explosion in oil prices. Everything is relative. Our achievements in those days were made possible by good industrial relations. Workers always prefer to work rather than to be on strike, and it is amazing what one can do if one carries the work force with one.

I am pleased that progress is being made. I can pay testimony to the outstanding work being done by management and work force together at Jaguar Cars at present.

The Minister's top priority should not be the privatisation of Jaguar or of Austin-Rover. His priority should be the health, strength and welfare of the British motor industry, as mine is a concern for Jaguar Cars, which is situated in my constituency. The company is being hawked around the City of London. Many doubts are being expressed, and the Minister himself is cautious about how quickly any sale could be achieved. There should be the widest consultation with the work force, hon. Members who represent Oxford, and many others who have some sense of the considerations that will determine the future success of Jaguar. There are doubts in Oxford, in particular, about long-term research and development.

There is a direct parallel with British Airways. There has been a massive injection of public funds. If a buyer cannot be found at a sensible price, will the Minister consider leaving Jaguar as an entity separate from the rest of British Leyland, with its own negotiating procedures and industrial relations practices, its own product development, and its own franchising plans in Europe as in the rest of the world? Will he also allow it to maintain a continuing link with the large-scale, long-term research and development facilities of British Leyland? That is a much better plan for Jaguar than what the Minister has outlined. If the negotiations with Jaguar prove as difficult as those with Nissan — and as those with British Airways, given stock market conditions, may well prove —I hope that the Minister will consider an alternative for Jaguar which might be far better than the plan being pressed upon the management against the advice of the board of British Leyland as a whole.

Photo of Mr Steven Norris Mr Steven Norris , Oxford East 6:55 pm, 12th December 1983

I welcome the comments of my hon. Friend the Minister on a number of grounds. I welcome them, first, on behalf of my constituents. The employees of British Leyland Cowley works will take great heart on hearing those comments. The achievements at that works, and the sacrifices that made those achievements possible, are memorable and worthy of our congratulation. I have a personal interest in that I own a motor vehicle dealership, and I welcome the Minister's remarks on the block exemption.

I welcome the Minister's assurances to my hon. Friend the Member for Bromsgrove (Mr. Miller) about Nissan. There are many factors here that we must not overlook. A number of hon. Members on both sides of the House have referred to the present overcapacity in the market place. In Europe, overcapacity totals about 3 million units. In the United Kingdom the Austin-Rover group alone produced 480,000 units last year and plans to produce 510,000 units next year, but there is a productive capacity within Austin-Rover group of about 750,000 to 800,000 units. It is worrying that we should contemplate introducing an additional 200,000 units of capacity into a market that already possesses at least that capacity within the Austin-Rover group alone. When one adds the additional space that there must be at Dagenham, Ryton, Luton and Ellesmere Port, it is clear that we must be careful before we commit ourselves to such a project.

Secondly—I appreciate the fact that my hon. Friend the Member for Birmingham, Northfield (Mr. King) may wish to attempt a brief summing-up—there is the cost of the project. Nissan has not yet announced its intention of coming here, but if it does the cost to the taxpayer will be considerable. We must consider that cost in relation to the net increase of real jobs in the industry. The Minister referred to the possible guarantee of minimum content. I draw his attention to a report in The Times of 8 December 1983: The latest plan is thought to be for a plant of no more than half that size"— half the size of the original project— to build a compact car with a much lower initial British content. The Japanese labour unions have made no secret of the fact that they are wary of exporting too large a proportion of the actual value of motor vehicles sold in Europe. It is hoped that if that proposition is made by Nissan, it will be strongly resisted by the Minister and his colleagues in the Department. That would be the thin end of the wedge, and if we allowed it we would rue the day. Lord Bruce-Gardyne has said, of the Nissan deal, that. The new jobs are what it is all about: and it is part of the ethos of the Department of Industry — not to mention the Scottish, Welsh and Northern Ireland Offices—that new jobs in place of those already in existence are a snip. That is what we are facing. The Nissan proposal is indeed a Trojan horse which offers the glitter of fresh new green field jobs, albeit at substantial cost to the taxpayer, but will result in the quiet loss of jobs in areas of the country such as that which I represent, which have no regional aid and no development status. We would do well to remember the classical precedent and to ensure that the disaster that befell the Greeks does not befall us.

Photo of Mr Roger King Mr Roger King , Birmingham, Northfield

Both sides of the House believe that the British motor industry has a role to play in this country and we need to encourage it to the best of our ability. We have expressed our anxieties about the Nissan development, Spanish exports and many other things. At the end of the day, the quality of the product and putting it together in the right way are important. British industry has always been good at that, and long may it continue. I commend the motion to the House.

Question put and agreed to.

Resolved,That this House acknowledges the important contribution to the economy of the motor industry; congratulates the car industry on its improved performance; acknowledges Government support; and calls on the Government in the development of its policies to give continued encouragement to the industry.