Motor Industry

Part of the debate – in the House of Commons at 6:40 pm on 12th December 1983.

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

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terms were agreed, Spanish industry, behind tariffs, has grown much stronger and many people feel that those terms are out of date.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.