Motor Industry

Schedule 6 – in the House of Commons at 12:23 am on 25th July 1984.

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Photo of Mr Hilary Miller Mr Hilary Miller , Bromsgrove 12:23 am, 25th July 1984

It is a pleasure to welcome my hon. Friend the Under-Secretary of State for Trade and Industry to this debate on the motor industry, which plays a great part in the economy and makes a more positive contribution to it with a great deal less heat, violence and intimidation, than the coal industry. It is a special pleasure to welcome my hon. Friend to the debate, in view of his constituency of Coventry, South-West, in the heart of the motor industry in the west midlands, and his particular responsibility for the region in which my constituency lies.

I am grateful also for the support of many of my hon. Friends who have proved themselves champions of the motor industry in their constituencies, and no doubt they will be making telling contributions to the debate. It is a shame that we have only one rather forlorn representative on the Opposition Front Bench with a motor industry constituency, but we welcome the hon. Member for Dagenham (Mr. Gould) to the debate.

This industry is of prime importance to the economy and makes a positive contribution, with 500,000 employees directly employed in the assembly and components industries — I exclude those in the downstream service activities. It contributes about £12 billion to the gross domestic product and about £4 billion to the country's export performance. This year, it has recorded a significant turnround in stemming at long last the tide of imports. There has been a reduction of imports over the past two years of about 2 per cent. despite significant growth in the market for new cars in 1983 and so far in the current year.

The industry is also in the forefront of the application of new technology, whether robots for manufacturing or computer-aided design. It is the application of new techology, in which the Minister takes such a close interest, that has enabled our domestic industry to survive by bringing down the break-even point and reducing the lead time for the introduction of new models. Those are significant developments.

I should like to pay a tribute to the management and men who have achieved that significant transformation. They have accepted sacrifice. In the 10 years that I have had the honour to be a Member of the House, their wages have dropped from among the highest to the lowest in the manufacturing sector. They have delivered in terms of performance, improved productivity, quality and design. We have a responsibility to see that the commitment and confidence that they have shown the industry is matched by us in the House and the Government.

However, there has been a heavy price to pay. In the previous debate, when I listened to the figures and conditions for mineworkers, with no compulsory redundancies, and heard that those who wanted to go could receive £1,000 per year of service, I thought that the car workers have had sorry treatment. They have had to make way for the improvements that I have described. It is no wonder that there is a sense of bitterness, in some parts of the country that we represent, at the terms available to the striking miners.

A price has also had to be paid in terms of investment and by the taxpayer, in the case of British Leyland. Thankfully, 1984 bids fair to be another record year for sales, but the fact remains that profitability is low, there is a poor return on capital and the danger of over-capacity overhangs the whole market, threatening to destroy the price structure.

The real reason for the concern about the Nissan project was that it might increase the over-capacity that exists not only in Europe but throughout the world. I should like to put on record my gratitude to the Government for achieving in the negotiations with Nissan the acceptance that production, for the initial stage of manufacture would be offset against the company's import quotas, thus eliminating for that first stage any addition to the overcapacity to which I referred. I clearly understand the feelings of Nissan on the conditions that it requires to meet on local content, when one compares the local content achieved—if that is the right word—by General Motors' Vauxhall division in this country, which is lower than that proposed in the Nissan arrangements.

I have referred to the threat of over-capacity, the low profitability and poor return on capital and the difficulty therefore of finding the heavy investment required to improve our performance further. It is significant that the Metro plant at Longbridge has now fully equalled any performance of a European assembler, and at one time was responsible for about 80 per cent. of the robots in British industry. Therefore, no one can claim that this is a sunset industry which should be wiped out to make way for the new industries of the future. In the west midlands we are considering the application of new technologies to our traditional industries to provide for the future for our constituents.

Among the particular threats that I wish to mention this evening—no doubt my hon. Friends will wish to raise others—I shall emphasise three: the discussions going on in the EC on block exemption for selective distribution, the discussions in the EC about emission standards, and the problem once more of Spanish imports, which was recently and effectively raised by my hon. Friend the Member for Oxford, East (Mr. Norris).

It is apposite that we should have the opportunity to debate the EC second draft proposals for block exemption, because the advisory group of experts to the Commission is meeting this week. It advises the Commission, which is responsible for competition policy and is not under any obligation to refer the matter further to the Council before reaching an effective decision. It is therefore most important—I urge this on my hon. Friend the Minister —that adequate instructions are given to our representatives on that advisory group. We shall not get a second bite at the cherry in the Council of Ministers. There is no recourse to that forum and we must make our position plain in the current negotiations.

There is a suspicion that the bureaucracy in Brussels is not well motivated towards this country or to our British manufacturers—witness the recent action against Austin Rover on type approval permits, to which I may refer briefly later. It strikes me as odd that the Commission should have the powers it proposes to assume under the draft block exemption to require positive action by manufacturers rather than to require them or their dealers to desist from action.

The second draft represents some minor improvements on the original draft, especially regarding the exclusion of commercial vehicles, but it weakens the position of manufacturers and dealers further by the imprecision of the language and the extension of the scope of action available to the Commission. The points I wish to stress in this second draft concern the price differential and what is called the full-line availability of models.

It is perhaps relevant here to point out the benefits that manufacturers believe that they can obtain and confer on the consumer, through the selective distribution scheme. The appointed dealer, in fact, provides the pre-delivery inspection. He is responsible for warranty repairs, undertakes to keep a supply of parts, has trained staff and usually has to provide premises of an appropriate standard that are easily accessible. There is not just a benefit to the manufacturer; it is believed that there is also a benefit to the consumer.

The price differential proposal contained in the draft block exemption strikes directly at the manufacturer's prospect of profitability, because if the Commission finds that over a period of six months there is a price differential between different markets in the EEC of more than 12 per cent. it has the power to investigate and to withdraw the block exemption.

There has been a great deal of talk by the Consumers Association, which has been reported widely in the press, to the effect that the Commission is acting as the consumers' friend in this matter by seeking to impose what are, in effect, price controls on a product. It is easy to demonstrate that it is equivalent to a price control because if a price control has been applied by a Government in a member state of the EC for at least 12 months, that is supposed to be the ruling price throughout all the other member states of the EC. That, coupled with full-line availability, means that a manufacturer or dealer cannot withdraw effectively from the price-controlled market. They may have to continue selling at a loss in the price-controlled market, and that price then becomes the ruling price throughout the rest of the EC.

The price differential has not been defined. We do not know whether it is pre-tax list price, as in the first draft, or what price will be adopted for the application of this rule. Another difference from the first draft of the block exemption is that the price differential control is now applied to parts. That is serious for dealers.

The second item that I wish to talk about is full-line availability. The second draft also extends the requirement that any model that the consumer chooses must he made available. That requirement extends not just to the manufacturer but to the dealer. He may not have the premises or the skilled mechanics to handle a particular model of the variant chosen by a consumer in all the member states. We must remember that we expect Spain and Portugal to accede to the Community before long, and Greece is currently a member. That illustrates the wide range of economies and types of vehicle and taste that may prevail.

I believe that those are real threats to the manufacturers' profitability and represent an unwarranted interference in the operation of the market and a pretence that there is a free market in the Community applied to one product when there is is no uniformity of tax regime, excise duty, inflation rate, wage rate or type approval. There is a whole range of differences that can easily explain the substantial differences in the retail prices of cars which the Commission by administering this fiat, is seeking not only to overrule but to pretend does not exist. This is a favour-currying measure that cannot be justified on the facts.

Photo of Mr Bryan Gould Mr Bryan Gould , Dagenham

I was glad to hear the hon. Gentleman urging his ministerial colleagues to make sure that clear instructions were given to the United Kingdom representatives on the advisory group. He may like to know, as might his colleagues, that my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) has written today to the Secretary of State to urge him in that direction. We feel, as the hon. Gentleman does, that the draft block exemption in its present from poses a real threat of damage to the British industry.

Photo of Mr Hilary Miller Mr Hilary Miller , Bromsgrove

I am encouraged by the support that the Opposition have officially expressed. I do not think that this is a partisan matter, and, were it to be party political, I should feel debarred from taking part in the debate.

I shall now refer to type approval and the recent action taken against Austin Rover by the Commission. This is an attempt by the Commission to fine the company for charging for the issue of a type approval certificate. We should bear in mind the fact that a genuine personal importer does not have to face the requirement of type approval certificate. It is only the parallel trader who is subject to the requirement. The manufacturer has a real cost to meet in obtaining type approval for his vehicle —for example, the number of vehicles that have to be crash-tested to destruction is a heavy expense. The irony of this situation is that Austin Rover charges less for its type approval permit than do other manufacturers. It is unclear why it should be selected for this action by the Commission.

The press has somehow confused the issue of the type approval certificate with the block exemption and the differences in car prices. It has made a serious mistake in some of the figures that it has been presenting, because, with the discounts available in this market and the movement in the exchange rate, the differences that it reports to exist cannot be shown to be justified. Therefore, the position is constantly changing. There is no question of a deliberate attempt to put down the consumer, although it must be recognised that British manufacturing costs are still not, over the full model range, in line with those of our European competitors. If this attempt at uniformity were carried to an absurd extent, it would result in a loss of jobs and employment, and one could envisage, for example, that Ford might have no option but to close Halewood. The matter needs to be handled responsibly.

There is then the problem of emission controls. There has been widespread concern, fostered particularly by environmental groups, about the damage caused by acid rain. I hope that the Minister will accept that not more than 30 per cent. of acid rain can be attributed to nitrous oxide, of which 25 per cent. can be attributed to vehicle emissions, which is 7·5 per cent. of the total.

The Federal German Government have struck out on their own, in response to pressure from the Green party, and are seeking to introduce from January 1986 a requirement that cars be fitted with catalysts providing the same emission control as is currently required in the United States—the so-called 49-state formula—which would require the introduction of unleaded petrol at the same time.

There is already agreement in the EC to move to the introduction of lead-free petrol, but we do not yet have agreement throughout the EC on the specification of that fuel or any assurance regarding its availability on a European basis, and my hon. Friend the Member for Tatton (Mr. Hamilton) may wish to speak about that.

There is a great deal of disadvantage in the installation of catalysts, which are expensive to install—estimates range from £450 upwards per vehicle — there is a penalty in fuel consumption of about 10 per cent. and, more seriously from the point of view of the environmentalists, there is the factor of deterioration of the catalyst and the need to maintain and replace it at least twice during a vehicle's life. There is, therefore, a real cost and penalty involved, although the catalyst, if properly functioning and maintained, coupled with electronic fuel management systems, can achieve a reduction of 97 per cent. in nitrous oxide.

There is already being developed the high compression lean-burn engine—of which examples at intermediate stages are the Jaguar HE engine and even the Ford Escort engine in its advanced form—which, employing modern technology, adds little to the cost, as it is part of a natural development. It will achieve 10 per cent. fuel economy, will not require any maintenance or replacement additional to the normal and will achieve a reduction of about 80 per cent. in poisonous oxides. Indeed, although the percentage reductions in emission differs over the lifetime of the vehicle, it is felt that the cumulative total will be equivalent by both methods, so there is a compelling argument for us to look to the new technology of the future rather than back to the catalyst technology of the 1960s.

The question of imports has been given a good airing by my hon. Friend the Member for Oxford, East. Under the arrangements which are now under consideration, it is suggested that, on entry next year, Spain should sign an agreement, to take effect from 1986, but that nothing should be done in the meantime either to extend the reduced tariff quotas for imports of British vehicles into Spain or to limit the constantly increasing import of Spanish vehicles into this country. My hon. Friends have been active with an early-day motion calling for a limit to be imposed—a sort of import cap—on Spanish imports into Britain until the transitional arrangements following Spanish entry into the Community come into effect. When those transitional arrangements begin, my hon. Friends and I would expect a greater than normal reduction in the extremely high car tariffs of more than 20 per cent., and would also want an assurance that the luxury and compensatory taxes, which now gross up the import duty from 36 per cent. to about 67 or 68 per cent., and even gross up the reduced tariff quotas to an effective rate of duty of 45 per cent., will be replaced by a uniform rate of VAT applying equally to domestic production as to imports.

The background to that is simple, as my hon. Friend the Member for Oxford, East recently explained. Spanish production of motor vehicles now exceeds that in this country, and there can be no justification for the continuation of these disparities, which were described as "grotesque" by my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin), when he was Secretary of State for Trade and Industry, as long ago as October 1982. The Prime Minister gave an assurance that something would be done to alleviate the problem.

My hon. Friends may wish to mention many other aspects of the industry, including parts agreements, body panels and taxation; but we should remember the crucial role of the industry in the national economy and in the regional economy of the west midlands, and its contribution to standards of living and to personal freedom. We look to the Government to ensure that the climate and conditions are created in which the men of the industry can prove their personal worth and their service to the country.

Photo of Mr Roger King Mr Roger King , Birmingham, Northfield 12:52 am, 25th July 1984

It was at about this time last year that I had the pleasure of opening a Consolidated Fund debate on this subject. The shopping list that we set out then of requirements to resuscitate the British motor industry are similar to the list that we have today. Nothing much has changed in the intervening period. In 1983 the British motor industry enjoyed record sales of just under 1·8 million units, and most people believed that that figure would not be reached in 1984. There are signs that it might be reached, but the latest estimates are that it will settle at about 1·7 million, which nevertheless represents a buoyant industry and a successful marketplace for new car sales.

Last year we asked for some assistance on the 10 per cent. special car tax, for which we listened avidly on Budget day, but regrettably my right hon. Friend the Chancellor of the Exchequer was unable to grant it. However, he presented to the House a further imposition of tax on the use of personal company cars. We warned against that, because there is a definite sign that gradually, as company personal taxation is increased on cars, the tendency is for the user to buy a car and to be recompensed by the company. In most cases he buys a foreign car, whereas companies tend to buy British cars.

In the previous debate we discussed the Spanish problem, the effect of Nissan coming to this country and the likelihood of pollution control. The Spanish problem is still with us, we have yet to see what effect Nissan will have on our market, though we have had an assurance that there should not be too much of a problem when it moves into phase 2 of its development and that many of its components will be supplied by our industry, and we have had assurances from the Ministers on pollution control. We are told that the Government prefer the lean-burn engine solution, rather than catalyst burners. We look to the Government to ensure that there will be no European legislation forcing us to adopt the catalyst solution.

We now face other problems, including the block exemption rules and the disruptive effect of the dating of car number plates. I cannot understand the difficulty over block exemption. I know that the Commission would like all prices in the EC to be within a price band of about 12 per cent. That is a useful target—as long as I can buy a bottle of wine here at the price at which it is sold in Italy and France. The system must cover all goods. The Commission sells butter at 7p a pound and a bottle of plonk at about 7p and it ought to give us the right to buy at those prices before it starts picking out one industry for price control.

The problem arises because there has been a price freeze in the Belgian market for some time. None of the car companies seems to make much money out of that market, but they all insist on a presence there. Therefore, we must be there with our European competitors. Cars are sold at a lower price, though it is important to look at the final price, after adding all the taxes and taking into account all the discounts. As recently as last week, it seemed that some BMW models could be bought for less here than in Germany.

The Commission has no right to decree that a manufacturer be fined £208,000 for not allowing the public to buy a product at a price which the Commission would like to see. The company has a valid defence. The case is going to appeal and I do not want to prejudge the outcome, but I hope that the company will be found not guilty.

Early-day motion No. 897 has been signed by 116 hon. Members from all parts of the House. That underlines our anxiety about Spanish imports. The problem is highlighted by the recent announcement that yet another Spanish company, Seat, is to sell cars here from the International Motor Show in October. By all accounts, it is a good product and competitive on quality, design and price.

I do not suggest that we should ban the imports of Spanish cars. If Spain can export 120,000 cars to this country and sell them, that is all right by me—as long as we have the opportunity to sell in a fair market in Spain. If we do not have that opportunity, we should look to ways of bringing the Spaniards to account. If we could organise a boycott of Spanish holidays, I should be right behind it.

The trend to have the latest prefix on a registration plate is distorting the industry. There used to be a fairly modest hiccup, but it is becoming a monstrous cough. Over 20 per cent. of a year's car sales are effected between 1 August and the following two or three weeks. There are about 370,000 cars waiting to go on to the roads at this moment, and they will sport the new number plate.

Problems are caused for our sole indigenous manufacturer, Austin Rover, because, production has to be geared up for 1 August at a time when the annual summer holidays take place. Many of us do not have much say in when we take our holidays, because of restrictions on schooling and other commitments. The difficulty of being able to supply a wide range of cars in all manner of trim and colour combinations to satisfy an increasingly fickle market is proving considerable.

There is not the same problem for continental manufacturers, and not for many of the other indigenous manufacturers in Britain—Ford and Vauxhall being two examples. They merely switch production from the UK to their continental plants to top up their stock in Britain. The top 10 in the league of sales in Britain reveals that many of those cars are not British in the true sense of the word, as they have been assembled on the mainland of Europe. A large proportion of the model range, such as the Escorts and the Sierras, comes in from Ford's factories on the continent.

I understand that there was an inquiry when we finished the suffix system with the letter Y and introduced the prefix system 12 months ago to decide whether there should be a better arrangement. No one could offer a system to replace the present method of defining number plates. The police like cars to be dated by means of number plates, because for some reason people remember the date of a car by the suffix and this helps the police to deal with crime. I am not against the retention of the system, but there is a strong case for changing to 1 October for the introduction of the new letter. Many manufacturers change their models in September to coincide with the continental motor shows. The introduction of the new letter on 1 October would avoid much of last year's production of cars on the continent being dumped on to the UK market at peak selling times. Austin Rover would be able to have a clear run-up to that sales period. I urge that the date for the new letter be considered carefully.

The privatisation of British Leyland is going ahead piecemeal. Jaguar will shortly be privatised and presumably Unipart, the spare part division, will follow in the not-too-distant future. The future of Austin Rover presents the real challenge. I pay tribute to the management and work force of the company, who have been able to create a viable company with a strong future. It has been rather like the phoenix rising from the ashes. It is not yet making the sort of money that would encourage the Government to sell the organisation, and I am not suggesting that a date for privatisation could be given within the next year, two years or three years.

The workforce there needs all the encouragement that it can get to continue to produce the products which the company and the country need. There are, of course, occasional hiccups. There are industrial disputes. There was an unfortunate incident at Longbridge when the company was shut down for two weeks over a matter of principle, which was subsequently resolved. There are tragic production losses. However, the company is now producing cars and breaking a record for output that has stood for 12 years.

Wages are important. Job security is important—and, as a result of the new market acceptability of the products, it will be there. But what will also be important in the immediate future is the feeling that the work force wants to play a greater part in the company and in its destiny.

Our Government have encouraged property ownership. We have embarked upon a policy of selling council houses in order to stimulate property ownership. In previous privatisations we have tried to ensure that the work force has the right to own part of its company.

We could privatise part of Austin Rover almost straight away—the part that we would give to the work force. In three years' time, with a full programme of privatisation, the work force will probably be given a say. In the case of British Telecom and Jaguar, for instance, the employees have the right to buy into the company. But might it not be possible to introduce such a measure now, so that the workers can invest their savings and be given some shares in the company which will acquire a market value when the whole company is floated? That would give the work force a sense of belonging to the company.

Photo of Mr Bryan Gould Mr Bryan Gould , Dagenham

How would the hon. Gentleman propose to prevent employees from selling their shares in the company almost immediately, as has happened in almost every such privatisation in the past couple of years?

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

One would put a value on the company as it is now, allocate 10 or 15 per cent. of the shares to the work force, and give people a number of shares commensurate with the length of time for which they had worked for the company. The shares would be pieces of paper until the company had been floated. If people wanted to sell the shares, that would be fine; but the whole point would be that they would be working for the company and the future. That is the ingredient which would ensure the continuing profitability of Austin Rover and the growth of the British motor industry.

Photo of Mr Steven Norris Mr Steven Norris , Oxford East 1:07 am, 25th July 1984

We are grateful to my hon. Friend the Member for Bromsgrove (Mr. Miller) for introducing this debate. It is often said that Britain's most important industry receives sadly scant attention in this House, considering its impact on the economy as a whole and especially the economy of the west midlands.

I shall concentrate on Austin Rover, in which I have a particular interest. The future profitability and operative capacity of Austin Rover is clearly vital to a large section of the west midlands and to the component industry which feeds on the basic construction and manufacture of motor cars.

Over the past year, Austin Rover has continued a staggering performance — a performance which is ultimately based on a product-led recovery. There is the Montego, which follows on from the Maestro. There is the new 200 series Rover and future XX Rover which will replace the aging SDI model. The investment in product engineering is exemplified by the facilities at Cowley which many hon. Members will have had an opportunity to see the computer-aided design facility, CAD-CAM, which is a remarkable achievement.

That means that Austin Rover is offering the most up-to-date facility for the design of motor vehicles in Europe. It is also building a database that will benefit all models. That will help the company to rationalise vehicle design. It is also investing in robotics and improved production efficiency. That produces many unpleasant consequences, which are only too evident at Cowley. On one side of the production line are 16 or 18 people, each operating a hand welder, doing a job which, on the other side, is done by one automated unit, two of which are controlled by one supervisor. In terms of the loss of jobs it is tragic to see that, but we live in a world in which, if we are not prepared to use such equipment, the company will not survive. Even the reduced number of jobs would also be lost.

Five years ago about 15,000 people in Cowley produced about 4,500 cars a week. Now, 10,000 people produce the same number of cars and it might not be long before 5,000 people do the same. I hope that that target will be exceeded, but the principle is plain. The result is precisely what the Government's industrial policy tries to alleviate—people whom we must employ in other new industries are put on the labour market. For BL, however, it has meant that the company is able to fight the motor vehicle battle in the 21st century. Austin Rover is now as efficient as any manufacturer in Europe in terms of man hours per vehicle, and it matches the output target of the Japanese.

The component cost in Austin Rover cars is still too high, however. A warning must go out to British component manufacturers which, for many years, have relied on Austin Rover always wanting to use British components. Unless component manufacturers realise that playing second best on product investment, quality and delivery is not good enough, Austin Rover will be forced to think about the sourcing of its components. That will mean job losses in the British component industry.

I know one thing about Harold Musgrove and his team at Austin Rover — they want to buy British. The company still buys about 90 per cent. of components in Britain. However, it wants to succeed, even more than to buy British. If the cost of success to Austin Rover is being forced, by the simple laws of competition, to buy components abroad, it will have to do so. Although I would not welcome that, I should have to accept it as an inevitable fact of life.

In addition to investment in production design and improved product efficiency, a strong and well-marketed product enables a work force to be paid a rate that we all hope can be improved. My hon. Friend the Member for Bromsgrove mentioned the slide in the real level of pay in the motor industry.

We have seen new jobs being created at Cowley and we hope that that shows that the decline in the total number of persons employed may have been arrested. If, instead of making 4,500 cars a week, the company makes 5,000 or 6,000 cars a week, that is the way to keep people employed and the company healthy.

This evening we should be addressing ourselves to what the Government can do for Austin Rover. We cannot simply hand the company a cheque book. We had years of that philosophy and it produced little or no success. It is arguable that it drove the company to the brink of oblivion. The company has been brought back from that brink by the hard-nosed reality of having to accept that that company either made and sold or did not survive.

We can continue to ensure, first, that Austin Rover has a healthy car market into which to sell in Britain. Every manufacturer needs a domestic base on which to build. That means that the Government should not use the motor industry as their major fiscal regulator at Budget time. We have seen that happen year after year. It may have satisfied Chancellors of whatever political complexion to use the motor vehicle industry as a fiscal regulator, but, my goodness, it wreaked havoc in the industry itself.

The Government should think about the inequity of the special car tax to which my hon. Friend the Member for Birmingham, Northfield (Mr. King) referred. They should think about the fact that it singles out Britain's premier industry for a particular selective tax of an extra 10 per cent. in addition to VAT. Incidentally, insult is added to injury by making it practically the only product on which VAT is not allowable to the company purchasing the product which is registered for VAT.

The Government should think about the taxation of company vehicle benefits. Engine size banding is crucial. The Government could do a great deal of good for the British motor industry at no cost to the Treasury. I point, for example, to the break in the table at 1800 cc—the only 1800 cc engine that is used in a British vehicle is actually made outside Britain. It is nonsense when we are deciding on engine capacity breaks to determine fiscal policy and to determine the buying policy of the company buyer that a mark should be chosen at which only overseas competitors gain and which puts all British engine manufacturers at a significant disadvantage.

The Government should think about supporting the line of my hon. Friend the Member for Bromsgrove on block exemption and price control. That surely is a nonsense which both sides of the House can agree to oppose. I hope that we shall see vigorous opposition to the strange logic of the proposals in the ensuing months.

Most of all, the Government should think about the fact that the motor industry is, as I have said, Britain's premier exporting industry. We should not under-estimate the importance of manufacturing industry when the Chancellor is planning his company investment incentives. We should take account of the effect on cash flow this year alone of the Chancellor's decision to reduce capital allowances, to abolish stock relief and to effect the one-off clawback in terms of corporation tax.

Whatever other benefits those measures may have achieved, and without wishing to detract from the overall drift of the Budget statement, I must say that it would be unwise, to say the least, for any Government to ignore the growth and the potential still in manufacturing industry in Britain when considering future Budgets.

Let us not rush privatisation. When Austin Rover is in a position to be returned to the private sector, let it be returned. But let no one forget that it was the private sector that drove it to the state in which it was necessary for the Government of the day to rescue it. Let us never delude ourselves that there is any special quality of private ownership which of itself will somehow rescue the company. The company will prosper in private hands and that is where it should be. I see no role for the state as a manufacturer of motor vehicles. Let us ensure, however, that privatisation takes place only when the company is in a position to fund its expansion and development and to ensure that it has a healthy future.

Others have spoken at length about Spain. I had the opportunity to do so in a recent Adjournment debate. so I simply pay tribute to the welcome that my right hon. Friend the Minister for Trade gave to our representations in that debate. He made a most constructive response to the points that I raised. I believe that he recognised the strength of feeling on both sides and that he genuinely shared it. Many of us regarded import capping very much as a last resort which we hoped could be avoided if real progress could be made in convincing the Spanish Government of the necessity at least to show some willingness to negotiate on decreasing the reduced duty quota before accession rather than afterwards.

Finally, I should not let this opportunity pass without paying special tribute to Harold Musgrove, Andrew Barr, Mark Snowden and the team at Austin Rover whom I have been privileged to come to know in the past year. I have seen them at work, and their commitment to Austin Rover is second to none. They are interested only in success—success for the company and success for their work force. Their own work rate is punishing. If ever a management team in this country deserved to succeed, it is that team. I only hope that in the ensuing year we shall take every opportunity to support that team and to ensure that in the debate on the motor industry this time next year we shall see further desirable progress towards a healthy and strong British motor industry.

Photo of Mr Neil Hamilton Mr Neil Hamilton , Tatton 1:23 am, 25th July 1984

I am pleased to have the opportunity to raise in this rather specialist arena a problem of considerable importance to my constituency. My hon. Friend the Member for Bromsgrove (Mr. Miller), to whom we are most grateful for initiating the debate, in his usual perceptive manner anticipated the subject that I hoped to raise — the Government's policy towards vehicle exhaust emissions.

There are a number of large employers in my constituency whose production brings considerable correspondence and vociferous protest to Members of Parliament. The nuclear power industry is a major employer. There is also the pharmaceutical and drug industry with animal research experiments. In addition, my constituency is one of the two or three with manufacturers of the lead additives that go into the petrol. If I seem to have drawn the short straw in that area, I make no apology for seeking to raise some of the problems that that industry will face.

My hon. Friend the Member for Birmingham, Northfield (Mr. King) may be interested to know that there are also makers of catalytic converters in my constituency, so we shall no doubt be addressing ourselves to that problem in the future. Associated Octel employs about 250 men in my constituency, and about 2,500 in the nearby constituency of my hon. Friend the Member for Ellesmere Port and Neston (Mr. Woodcock). As a result of the Government's policy change on lead in petrol about a year ago, alas, the factory that produces the lead alkyl compounds in the Tatton constituency will close, and virtually all the men employed there will be made redundant. Octel is a major export earner for this country. Seventy per cent. of the lead alkyl compounds produced outside north America are produced by that company in the north-west, and 82 per cent. of its production, to a value of about £100 million per year, is exported. Thus, this is a very high added value industry.

As a result of the proposed phasing out of lead in petrol, we shall be adding considerably to the costs not only of the private motorist but of industry also. One tonne of lead additive saves about 125,000 tonnes of petrol. In answer to a question of mine on 2 April this year, my right hon. Friend the Secretary of State for Energy confirmed that the cost of the Government's policy could involve an additional consumption of 800,000 tonnes of crude oil a year, and investment by the United Kingdom refining industry of some £500 million, assuming no further changes in technology or driving habits.

I take issue with the Government on the basis of this change in policy which has adversely affected my constituents. I should like to spend two or three minutes explaining the reasons why I believe this policy to be miscalculated and ill-advised, and to mention some of the repercussions that might flow from the policies that the Government are pursuing in the European Community, to which my hon. Friend the Member for Bromsgrove referred.

I am not persuaded that any link has been causally established between emissions of lead in exhaust gases and the health risk that various lobby groups have claimed for it, and have, alas, persuaded the Government to make the policy change to which I have referred. Since the Royal Commission on environmental pollution produced its ninth report, a great deal of evidence has been produced that seems to cast doubt upon the validity of its conclusions.

Indeed, as the Government propose to reduce the lead content of petrol from 0·4 grammes per litre to 0·15 grammes per litre by the end of next year, it might be instructive to look at an example from Germany, which made exactly that change in policy earlier in the last decade. A study was made in Frankfurt in the mid-1970s that I think proved authoritatively that there is little connection between the emission of lead in exhaust gases and health risks. Frankfurt was chosen as the basis for the study because it is a highly industrial city with a dense traffic problem and few industrial sources that contribute to air-borne lead. Thus, it is a good example of an attempt to monitor the effect of exhaust gases.

As a result of the policy change of the German Government, there was a 60 to 80 per cent. reduction in vehicle lead emissions, which is dramatic. The resultant average change in blood lead levels showed only a marginal decrease of about 10 per cent. In 40 per cent. of the men and 50 per cent. of the women, the blood lead concentration remained unchanged or actually increased.

From consideration of that study and, indeed, other studies that were made in Germany in Duisburg and Dusseldorf, it seems that a 65 per cent. reduction in petrol has not resulted in a dramatic change in the blood lead levels of German children.

I have a more recent example from a Government publication of the Department of the Environment—the "Digest of Environmental Protection and Water Statistics." In issue No. 6, 1983, there is an article on blood lead concentrations. Thirty-five blood lead surveys were carried out in the United Kingdom in 1981 as part of a European Community screening programme for lead. In all but three of the 35 cases it was shown that there was no causal connection between the blood lead level and lead emitted in exhaust gases. In the three cases where there was a high lead content in the blood there were good reasons for believing that they had nothing to do with exhaust gases.

The three cases were in Ayr, where the high lead content in the blood was due to high concentrations of lead in the drinking water; the Islington Archway road where three men had been exposed to specific adventitious sources — stripping old lead paint or working in the scrap metal trade—and Gravesham where just one child was above the EC reference level and 90 per cent. of the children had blood levels of less than two-thirds of the EC reference level.

The article stated: Blood lead concentrations of adults living near major roads were not very different from the general population in the same area". I believe that the examples pull the carpet from underneath the reasons for the Government's policy.

The Medical Research Council has recently compiled a report, which has not yet been published, into the neurotoxicological effects of lead emissions from motor vehicles and is believed to have found that there is no conclusive evidence to connect them with high levels of lead in the blood. Perhaps that report will be published so that we may be informed. I hope that my hon. Friend the Minister will be able to discover whether it is intended that the report will be published soon and will write to me with the answer.

The Government have been pressing for further action in the European Community. The Commission has proposed that the introduction of lead-free petrol should be mandatory for all new cars by 1991. The Commission has had extensive discussions with the United Kingdom and other European car and oil industries. The United Kingdom Government are trying to persuade their European partners to introduce lead-free petrol for new cars from 1989. That would create tremendous problems for the British motor and oil refining industries. The Government are not taking into account the time required for industries to adjust.

The Government should cease to press for an advance on the date that the Commission has adopted. I hope to persuade the Government through my, perhaps, solitary campaign. I hope that in their zeal to press on with what I believe to be a misguided policy, the Government will not seek to move in advance of our European partners and so put the British motor industry at a disadvantage.

The 250 workers in Northwich who will be made unemployed as a result of the change in policy will receive their statutory redundancy entitlements, and Octel will give them more in addition. We heard earlier about the benefits for which miners qualify when they are made redundant. My constituents will certainly be envious. Octet has an excellent industrial relations and export-earning record. Its workers have been treated shabbily.

I hope that my hon. Friend will not add to the problems of the motor industry by pressing Government policy too vigorously in the European Community. I hope that my hon. Friend will urge upon Environment Ministers, who are primarily responsible for this policy area, the industrial problems that will be caused if that policy is pursued.

Photo of Mr John Butcher Mr John Butcher , Coventry South West 1:35 am, 25th July 1984

I add to those of my hon. Friends my thanks to my hon. Friend the Member for Bromsgrove (Mr. Miller) for initiating this debate. I echo an observation by my hon. Friend the Member for Birmingham, Northfield (Mr. King) that this debate merits greater attention, or at least prime time on another occasion during the year. As my hon. Friend the Member for Bromsgrove has rightly pointed out, the motor industry is still a keystone in the industrial make-up of the United Kingdom, accounting for about 7 per cent. of our industrial output. My hon. Friend rightly said also that the motor industry is now a high-tech industry. It is a sunshine industry in every sense. It applies intellect to achieve higher added value. The industry uses the new technologies to make an existing product in a revolutionary manner and to add new facilities to its product ranges.

I add my tribute to that paid by my hon. Friend the Member for Bromsgrove to the management and men in the British motor industry. I shall deal with some of the points that my hon. Friends have raised and then address the general themes raised during the debate, not least the questions on emissions, the block exemption regime and Spain.

My hon. Friend the Member for Bromsgrove asked a specific question on the position of Austin Rover in the aftermath of the controversy on its type approval certificates. The company has announced its intention of appealing against the fine imposed in respect of the fees that the company charged for type approval certificates. I hope that, in these circumstances, the House appreciates that it would be inappropriate for me to comment on the details of that case.

My hon. Friend the Member for Northfield joined in the discussion on Spain and on block exemptions. He, too, asked a specific question and he made an especially interesting observation about registration letters and the anniversary of the new registration plates. My Department and the Department of Transport are aware of the problems that British manufacturers face with the current change in letter each August. We need to note the impact of this year's change to ascertain whether the "A" change was exceptional or whether we now have a permanent annual "monstrous cough", to use my hon. Friend's words. Once the evidence is in, we shall assess the pros and cons of the case which my hon. Friend eloquently put forward.

My hon. Friend the Member for Oxford, East (Mr. Norris) homed in on the theme of the new technology applied in the motor industry. I, too, have been impressed with the CAD-CAM facility at Austin Rover. I have been most impressed by the new manufacturing techniques that have been incorporated in the Cowley plant and the equally excellent facilities at the Longbridge plant in particular.

British component manufacturers do not have a good press. If we had a longer debate, it would be interesting to see how much common ground there was between my hon. Friend the Member for Oxford, East and myself on the record of British component manufacturers. Some of our component manufacturers have an excellent record, but all are striving to improve their record. The House may be interested to know that the Government have a purchasing policy, called the public purchasing initiative. That policy does not receive much prominence, but it is important in that it guides the Government in the £40 billion expenditure on goods and services which we deploy. We hope that a purchasing policy from BL will encourage the purchase of British products, because they are the best and because the relationships that BL has built up with its component suppliers encourage them by all means possible to produce the best and competitive products. Therefore, we hope that the John Egan and Jaguar story will be writ large, and that the excellent relationship that he has built up with his component suppliers will be mirrored elsewhere in British Leyland and the other major manufacturers in the United Kingdom.

My hon. Friend the Member for Oxford, East asked what the Government could do for Austin Rover. I do not know whether he was paraphrasing Kennedy, but he will expect my response to be: what can Austin Rover do for the economy in the aftermath of a £1·34 billion input from the taxpayer? We must recognise that Austin Rover and British Leyland as a group have made immense strides. As a west midlands Member, I am in no doubt that the work force in British Leyland and Austin Rover has been used to far greater effect than in the sad years of the 1960s and 1970s. My hon. Friend also mentioned engine size banding. I assure him that we shall digest his comments in detail and respond to him in a letter. We shall see whether we have any common ground.

My hon. Friend the Member for Tatton (Mr. Hamilton) gave an interesting and learned discourse on the medical and environmental aspects of lead pollution. I am sure that he is aware of the German dimension, and I cannot resist the temptation to say, "Ich habe wirklich keine Ahnung." Let Hansard make of it that what it may. I shall seek to obtain for my hon. Friend the information report and timetable that he requested.

I should like to refer to Spain. The Government are acutely aware of the problems for United Kingdom manufacturers that result from the anomalous tariff regime between Spain and the Community. The imbalance of trade in cars is the most obvious and worrying symptom of this problem, but other industries — for example, domestic electrical appliances—are affected too. If it had been in the Government's power to do so, we would have remedied that a long time ago. The problem is, unfortunately, not that simple.

Trade between Spain and the Community is determined by an agreement signed in 1970—before we joined the Community and at a time when Spain was much less industrialised than she is today. Under that agreement Spain is entitled to charge the high duties that she imposes on manufactured goods from the Community. As my hon. Friends will know, an attempt was made in 1979 to renegotiate the agreement. The United Kingdom obviously supported that, but other member states were not prepared to make the agricultural concessions that Spain demanded as the price of an improved regime for industrial goods.

Since then, the Government have made clear to Spain our concern that that anomalous position should continue in the changed circumstances of the 1980s. Spain is now a major and highly competitive car producer. She produced more cars in 1983 than the United Kingdom and exported over half her production. Cars are produced with relatively low-cost labour in modern, well-equipped plants built by the large multinationals. It is absurd that such an industry should be protected by a duty of 36·7 per cent. on cars imported into Spain.

We of course welcomed, albeit limited relief, the reduced duty quotas introduced by Spain last year. Austin Rover has made good use of that, increasing its sales in Spain by 70 per cent. in 1983. On the strength of that we made it clear to Spain that we thought that there were strong grounds for Spain's opening the door further by improving the quotas when they were renewed on 1 July this year. We were disappointed to see that, in the event, no improvements were made, although I note that Austin Rover has received a useful increase in its allocation—even though it is less than it might have hoped. The Government have therefore done all they can to improve the immediate access to the Spanish market, but we have not given up the fight.

Photo of Mr Hilary Miller Mr Hilary Miller , Bromsgrove

Does the Minister recognise that article 11 of the trade agreement of 1970 to which he referred provides for the Community to authorise a member state to take the necessary protective measures in the event of difficulties which adversely affect the economic situation in a region, quite apart from serious disturbances occurring in a sector of the economy of one or more member states? Will he care to reflect on that and propose with the Spanish authorities a discussion of the difficulties arising, particularly in the west midlands?

Photo of Mr John Butcher Mr John Butcher , Coventry South West

My hon. Friend has, as ever, made a most perceptive point. I have a rough idea of the region he has in mind. We shall examine that proposal, but I shall come to our latest negotiating position shortly. I have no exception to that dimension being added to the guidance we may give our negotiators in due course.

Some suggest that, since we cannot immediately gain access to the Spanish market, we should close the British market to Spanish cars, or at least find some way to stop the numbers growing. We are not, however, free to act in that way. As a member of the Community, we are bound by the 1970 agreement. There is little hope of persuading the Community to denounce that agreement and to impose higher duties on cars imported from Spain. In any case, without the agreement we would be still worse off, as Spain would then be able to charge even higher duties on all our exports to Spain.

Unilateral action also has difficulties. There would be nothing to stop Spanish cars from crossing into the United Kingdom via Germany or France. Added to that, we would be breaking Community law, and the European Court would rule the action invalid. Any ban on imports would then have to be lifted and any extra duty levied would have to be repaid.

We have also looked at the possibility of anti-dumping or safeguard action under the agreement. This, too, would be for the Communiy to decide, but on examination we would not be able to mount a case which could fit the international rules for this.

I return to the question asked by three of my hon. Friends: what, therefore, is the hope of relief? Are we stuck with the 1970 agreement for evermore? Fortunately, there is the prospect of a solution, indeed of one that will solve the problem once and for all. When Spain joins the Community, as we intend she shall, her trade with other member states must, after a transitional period, be free of all duties. That may seem to some to be a distant prospect, but it is not so. Spain is scheduled to join on 1 January 1986. The Community is pressing for transitional arrangements which will reduce all Spain's duties as quickly as possible. At the ministerial meeting yesterday, the Community told Spain, at the United Kingdom's insistence, that there must in addition be accelerated dismantling of her highest duties. Cars are by far the most important of industrial goods affected by high duties. The negotiations with Spain will continue, and this subject is only one of several still to be settled.

Other member states have different preoccupations. We must be realistic as to what we can expect to achieve. There is, however, no question for the United Kingdom of neglecting the interests of our industry and we shall continue to fight for early and effective access to the Spanish markets for British manufacturers who are hampered by the present anomalous trade regime.

With the observation I made in response to the intervention of my hon. Friend the Member for Bromsgrove, I hope that my hon. Friends will accept that our latest negotiating position is as tough as my hon. Friend the Miniser of State, Department of Trade and Industry said it would be when he replied to an Adjournment debate earlier this week. The Spaniards were left last night under no illusion about the seriousness with which the United Kingdom holds to its position. The Foreign Affairs Council will reconvene on 3 September to reconsider the matter.

I have noted my hon. Friend's comments about motor vehicle emissions. We shall take them into account, as we always do, when our negotiating position is being considered. I share with my hon. Friends an antipathy towards being stuck with a policy for tackling emissions which may not be a state of the art or a method which bodes well for the future.

My hon. Friends will be aware that my hon. Friend the Minister of State has said that he is attracted by the high compression or lean-burn approach alluded to by my hon. Friend the Member for Bromsgrove. There are disadvantages of which we are aware, with the deterioration of catalysts.

The position over block exemptions may be slightly more fluid than my hon. Friends suspect. We are attempting a second draft. There is far more flexibility in the second attempt than there was in the first. The Commission is now saying that it will not stick root and branch to the 12 per cent. price, and will be a little more understanding in the way that it views its application across the various member nations because of the various differences in our economies which do not necessarily imply an unfair pricing practice.

BL's privatisation was mentioned and, as ever, we shall judge the merits of privatisation in the light of the general development of the BL group. Any commitment on that issue would be unwise and not in the interests of BL or any of its component or associated companies.

I thank my hon. Friends once again for their contributions. The record has again been blessed with a number of astute and reasoned comments, which the Department of Trade and Industry will examine at length.