Motor Industry

Part of the debate – in the House of Commons at 5:50 pm on 12th December 1983.

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

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.