I beg to move,
That this House recognises the importance of design, quality, marketing and manufacturing systems among the key issues which influence the competitiveness of British industry, and welcomes the policies of the Department of Trade and Industry, the Department for Enterprise, to promote greater attention to these factors in businesses both through the Enterprise Initiative and other measures.
It is my purpose to give hon. Members an opportunity to debate the enterprise initiative of this Government, especially those aspects of it that are intended to encourage better design, quality, marketing and manufacturing systems. The imperative for doing that is to be found in the need for our firms to compete in increasingly competitive national and international markets. Happily, the best firms in this country know that and have made great strides in recent years, which have been demonstrated by what has been achieved so far in improved performance, productivity and competitiveness.
However, there is still some way to go, by international standards, before all our firms, large and small, join these welcome improvements. For example, I am sure that the House is pleased to hear that manufacturing productivity in the fourth quarter of 1987 was more than 6 per cent. up on a year before, and up by more than 40 per cent. since 1979. Manufacturing profitability has risen every year since 1981, and in 1986 was at its highest level since 1973. Manufacturing output per head has grown faster in the United Kingdom since 1980 than in all other major countries, and even unit labour costs, which for so long were one of our principal problems in maintaining our international competitiveness, are now thought to be rising at a lower rate than those of our competitors.
All this is satisfactory evidence of movement in the right direction. In the future, we shall be able to maintain and improve our competitive edge only if we continue to improve our competitiveness in both price and non-price factors. A recent Design Council publication reported two pieces of interesting evidence in support of that assertion. The first was that an analysis of the different factors affecting the export of West German goods to the United States revealed that 47 per cent. were design-related, as compared with 28 per cent. that were price-related. So the design factor was by far the most important.
Another study of the reasons why British manufacturers bought foreign machine tools rather than British ones attributed 51 per cent. of the cause to design-related factors and only 5 per cent. to price-related ones. I therefore want to turn my attention to the crucial area of design.
The Design Council states in one of its excellent documents, entitled "Profit by Design":
Good design is not an optional extra — it is a vital ingredient in the success of any firm. To grow or even to survive British industry must offer products which can compete in quality, performance, cost and appearance in increasingly competitive world markets.
Our foreign competitors have known and practised that gospel for some time. For example, the Danish electronics firm Bang and Olufsen manufactures and sells beautiful hi-fi equipment in this country and other parts of the world. The German motor manufacturers Porsche, BMW and Audi in their various ways have made their products into quality, even cult, items through their excellent design. We have all heard the famous advertising slogan "Vorsprung durch Technik". That slogan brings a wry smile to people's lips, but it also makes a statement about the product and the way it is perceived. Such statements can be convincing in the eyes of the public only if they arc based on good design and sound performance.
We should also consider the Japanese camera and optical equipment firm Canon which happens to have its United Kingdom headquarters in my constituency. Canon has led the world with its SLR and compact cameras and now leads the world with its small tabletop photocopiers and other business equipment. Those are a few examples of firms whose success in the international market has been based on good design, among other vital factors.
Fortunately, the need for better design in British products has been recognised at the highest level in this country. Long before the latest enterprise initiative which my right hon. and noble Friend the Secretary of State for Trade and Industry was so right to launch earlier this year, my right hon. Friend the Prime Minister, doubtless as a result of the tireless efforts of my hon. Friend the Parliamentary Under-Secretary of State for Industry and Consumer Affairs, gave the lead by chairing a seminar on design at 10 Downing street in January 1982. Many hon. Members will be aware that it was followed by another seminar in January 1987 to monitor the progress and give further impetus.
The Design Council, first as the Council of Industrial Design from 1944 to 1972, and latterly in its present role, has played a valuable part in keeping the flag flying for the improvement of British design in all its forms. I submit that we need to do still more in every way to spread the best design practices throughout our industrial sector and especially among small firms which, if we define them as companies with 500 or fewer employees, constitute roughly 95 per cent. of firms in this country.
Is the hon. Gentleman suggesting that the definition of a small firm should be one with 500 or fewer employees? Is he aware that many people regard even the Bolton definition of 200 employees as being vastly in excess of what it ought to be?
I am aware of that. I thought that my comments might take the hon. Gentleman by surprise. However, a cut-off point of 500 employees is used in relation to enterprise counselling and other services available from the Department of Trade and Industry. That is why I used that figure. However, I accept the hon. Gentleman's point that a layman's definition of a small firm may be considerably smaller than one employing:500 employees.
Much that is happening in this area is being stimulated by the Government. I welcome the assistance available from the DTI for consultancy arrangements on the design and development of new products and the redesigning of existing products to meet market, financial or production needs. It is important that firms should constantly assess and renew the quality of design, even when they believe that they have a market lead. These things do not remain static. I particularly welcome the fact that, since its inception in 1982, the support for design scheme has attracted nearly 7,000 applications for assistance, and 3,000 projects have been completed. I suggest that we need to generalise the best practice to ensure that it is taken on board throughout British industry among both large and small firms.
Perhaps one simple example will do more than anything else to illustrate my case. It is all too easy for arguments to become a little too abstract. As I recently bought a new jug kettle, I speak from experience in this matter. Indeed, I am well aware that my example illustrates the benefits of good design and I can vouch for the aesthetic appeal and effectiveness of the design. My example concerns a jug kettle, which, Mr. Speaker, you may have in your home or in your Apartment in the Palace of Westminster. The kettle is manufactured by GEC Redring. Approximately 65 per cent. of British households own a plastic jug kettle yet 15 years ago they did not exist. That shows the importance of innovation and design. According to a Design Council document "Profit by Design",
Redring supplied elements to kettle manufacturers and did not manufacture complete kettles. But the company decided to buy a conventionally shaped kettle made out of plastics and developed it to a satisfactory level of reliability. Being non-automatic, the profits were small and it was stopped after a year in which much valuable experience of plastic kettles had been gained. However, a London industrial designer"—
and here comes the element of design—
David Harris, was working independently on a design for a plastic jug kettle and had approached all the potential manufacturers to try to interest them in producing the new kettle design.
Redring Managing Director, Mike Johnson and Max Byrd, Development Manager, saw the advantages—a jug kettle can be filled with less than half an inch of water which can save up to £40 a year in electricity bills; it handles and pours better; plastic is much lighter and does not burn the user; perhaps most importantly, in the long run, the plastic jug kettle costs less to produce.
So Redring bought the rights to the design. Said Byrd, 'it was frightening and exciting at the same time—we had to start from scratch because there was no other kettle like it.' Development took about a year no—complete prototypes were able to be made so tooling took place straight off the drawing board.
The Redring kettle was launched in 1980. Within two years the company had 15 per cent. of the kettle market.
I quote that example at some length to show what can be done through a combination of imagination and determination with a simple product. Often the simple products most need the benefits of good modern design.
However, if we are to succeed in changing attitudes towards design throughout British industry, we will need to ensure that more managers understand that good design must be an integral part of the whole manufacturing process and that well-designed products sell better and can also be cheaper to produce.
That underlines the need to educate existing managers about the importance and value of good design and to ensure that design forms an important part of school and business management education. We must ensure that design is included in the national curriculum being developed by the Department of Education and Science and that it is more widely accepted as a subject for A-level examinations.
The educational aspect of the problem poses a triple challenge. First, more design studies should be incorporated into business management courses, beyond the six schemes now funded by the DTI at five polytechnics and one college of further education. Secondly, we must increase business awareness among design students at degree level. Finally, we must plug the most serious gap in our educational provision in this area—the shortage of multidisciplinary product designers and design managers of the kind now being produced in only woefully small numbers in this country by Imperial College and the Royal College of Art in their pioneering course on industrial design engineering.
Happily, I believe that I am pushing at an open door. I take great comfort from the comments made by my right hon. Friend the Secretary of State for Education and Science when he opened a recent exhibition at the Design Centre in London. He made clear the direction in which the Government intend to raise the awareness of design in education still further. He drew attention to a £1.5 million initiative for pilot courses in engineering design in polytechnics and colleges and referred to the preparation of a consultative document on design in schools and mentioned action to improve the supply of craft design and technology teachers in schools. He said that recruitment to CDT teacher training courses—for which a new Government bursary is available—increased, I am glad to say, by 65 per cent. last year and 382 students enrolled on courses in the autumn of 1986, compared with only 231 in 1985. Clearly, we are making good progress in that direction, but we need to move further and faster, because it is vital to our competitive success.
It is a most welcome development that British industry is now putting much greater emphasis on quality. That is an increasingly important factor in maintaining and improving our international competitiveness and it should be an integral part of all manufacturing. As a chapter of the White Paper on the enterprise initiative points out, it is vital to encourage and improve quality and ensure that this is done through British standards and, increasingly, through international standards institutions as well. The fundamental insistence on quality must become part of the ethos of all firms. It must be built into their design and components and into the attitudes of their work force, from top to bottom. For many German and Japanese firms it is a corporate philosophy—almost a way of life. It would be good to see British firms following that lead.
I welcome the fact that the Government are playing their part with the national quality campaign, which has been going since 1983. I entirely agree with the Secretary of State's remarks in a recent document entitled "The Case for Quality":
The inescapable message from all this is that if you want your customers to come back, you need to ensure that your products don't.
Once again, we can learn from the Japanese and the Germans, who often achieve companywide commitment to quality and manage to involve all their employees in their quality campaigns.
An excellent example of what can be achieved by the application of quality cost management is provided by Mullard, part of the Philips group, which has factories in Blackburn and, incidentally, in my constituency. Mullard has concentrated effectively on the application of quality cost management and applied it in producing tungsten filaments, picture tube cathodes and video discs. For the expenditure of small sums—the timely investment of not more than tens of thousands of pounds in each case—Mullard has managed to achieve terrific results, which prove absolutely that attention to quality and the upgrading of quality in existing products is the right answer for modern firms in a competitive environment. It pays off handsomely in terms of reduced costs, extra business and improved job satisfaction for employees, which also should not be underestimated. If one involves all employees in the upgrading of quality, they will become more fully committed to the standard of the product that they produce.
In better marketing, too, there are great opportunities for British industry to increase its competitiveness and market share both at home and in the export markets. Indeed, improved marketing is the next logical stage in the improvement of company performance, now that the necessary manning reductions, efficiency improvements and better industrial relations have been achieved in many cases. I therefore warmly welcome the marketing initiative, which is managed for the Department of Trade and Industry by the Institute of Marketing and which provides expert consultants to help firms to develop a more effective marketing strategy especially in export markets.
I understand that so far the financial support for the marketing initiative has trebled over the space of a few years to £6.25 million a year and that 1,400 companies have already taken advantage of the scheme. That is good news and my hon. Friend the Minister and his Department are to be commended for their contribution to our commercial success.
Schemes such as the marketing initiative can help companies with better presentation of their products, bring home to them the advantages of greater product differentiation and emphasise to management and all who work in British companies that, ultimately, the customer must be king. The success stories of companies that have adopted that approach—without any need for external stimulus — include some examples well known to the House, such as Amstrad computers and Clark's shoes, and we must encourage more of the same. One of the most important common denominators in all marketing success is firms' ability to look ahead and make full use of well-informed market projections such as those produced by the Henley Centre for Forecasting.
In the modern world in which the customer is king, it is vital for companies to have a clearer idea of new processes as well as new products and to spot the fact that consumer markets are increasingly defined in terms of community of interest rather than community in the geographical or class sense. Examples include the hi-fi community, the water sports community and the personal computer community. How many firms fully realise the potential for financial services and financial counselling now that as many as 75 per cent. of the population have a bank account? It is estimated by the Henley Centre that over the next 10 years real personal disposable incomes may increase by a further 20 per cent. The opportunities for the management of those new income flows will be considerable.
In such a rapidly changing commercial environment the firms that look ahead will stay ahead, while those that fail to do so will decline and may even go under. Let me give a few examples to illustrate that. McCarthy and Stone saw the opportunities to provide for the aging population much more effectively and has benefited accordingly. Securicor saw opportunities to provide better security in times, alas, of increasing crime. Black and Decker saw the enormous opportunities provided by the DIY revolution and Beechams saw the possibility of turning Lucozade and Ribena—with the help of Daley Thompson—into drinks for the rapidly expanding health market.
Those examples show the importance of identifying and taking market opportunities and also how much can be done even without Government help, let alone with the backing of the schemes about which I am sure the Minister will tell the House later.
Finally, we need new manufacturing systems such as computer-aided design, robotics and other new methods of production management, which can all help to produce significant improvements in the competitive performance of British industry. As computers become relatively cheaper and better understood, it should be possible to encourage their wider application, especially in smaller companies. That will not only enhance the efficiency of production processes, but will encourage management to think through the challenges of businesses in a more systematic way. It should also have a beneficial effect on the suppliers and components manufacturers for large firms that have already computerised and automated their processes. The White Paper makes it clear that the adoption of such techniques is not simply a matter of buying in the technology; it is at least as much about changing management systems to integrate production, marketing and design and to improve quality.
In a sense, I have come full circle. Since the central message of the White Paper and all the Government's excellent efforts to foster enterprise and competitiveness in British industry is that we have now entered an era in which quality and the skills of management, acting in fruitful co-operation with fellow employees, will, more than anything else, determine the economic success of firms in this country. I commend my hon. Friend the Minister and his Department for all that they are doing, but I am sure that my hon. Friend will agree that, in the end, it is up to British industry to do more of what must be done.
The hon. Gentleman will know that we all have constituency duties outside the House and have to drag ourselves away from time to time, much as we might prefer to be here.
I congratulate the hon. Member for Carshalton and Wallington (Mr. Forman) on having secured the debate and chosen an extremely important subject. In the early part of his speech, he gave the official Government view and painted a rosy picture of the British economy. He talked about increasing competitiveness and unit labour costs. He failed — I understand why — to ascribe those, developments in large measure to their real cause, which is the enormous exercise in the removal of manpower and growing unemployment in Britain. Nevertheless, I admit that efficiency in unit output has improved, but not enough to make Britain more competitive compared with our key European competitors, who have improved even faster. That is shown too clearly in the falling level of our share of world trade and, more than that, in our enormous and burgeoning trade deficits. I shall certainly touch on those matters, although the hon. Gentleman did not, because they are the underlying problems of the British economy. Many external commentators agree with me that those problems will come home to roost in short order.
To start on an optimistic note, the Government have done one or two things that needed to be done. I am not prepared to say that they have done nothing useful for Britain. That would be ludicrous. Their greatest achievement has been the democratisation of the trade union movement, ensuring that the government of Britain is returned to the democratically elected Parliament. That should not be reversed. Their second greatest achievement has been to set Britain on the road towards a much more enterprise-oriented economy, which will depend more on small business men, the self-employed, initiative and enterprise. Indeed, they have not been radical enough in pursuit of that aim.
One of the Government's great faults was apparent in the hon. Gentleman's speech when he defined small businesses as those with 500 employees or fewer. That is ludicrous. The Government have too readily understood the problems of large businesses and have been too ignorant of the genuine problems of extremely small businesses of one, two or three people, where assistance has always been provided to help with the initial set-up — that is commendable in itself — but where real assistance is required at the point of expansion when a business decides to double the number of its employees. That is the point when the prosperity that the business can generate and the jobs that it can provide receive a quantum leap, and at that point there is nothing except the business expansion scheme, welcome though it is. Far too much emphasis is put elsewhere.
The move towards an enterprise economy is to be welcomed, although it has not gone far enough, and for that reason this document, so far as it addresses that problem, is welcome. The rhetoric and hype are unexceptionable, but one must ask whether it is all that Britain needs now. One comes ineluctably to the conclusion that it is much more about public relations and hype than about tackling the underlying problems of the United Kingdom economy. Except for the stimulation of enterprise, the improvement in design, and new technologies, the underlying problems are not addressed.
What are those problems? We look at the rosy picture of the British economy of the hon. Gentleman and of the Government and we begin to see a picture of a wholly different hue. Since 1979 one fifth of our industrial base has been wiped away. It will not come back; it has been destroyed from the face of the map. Obviously, the world economy has passed through a period of restructuring, and no one would doubt that. I do not lay all the blame on the Government. But a Government with any kind of industrial strategy for the future have a medium-term financial strategy, so why not an industrial strategy? I am suggesting not an indicative plan, such as the Labour party would have put forward in the 1970s and may even put forward now, but one that will point the way to the future and help us to overcome that period of restructuring as other western European industrial democracies have. In the free market system with its hands-off, know-nothing and do-not-care-less approach we have lost one fifth of the industrial base on which our industry will always depend. However great the growth in the service sector, the service industries depend in large measure on an industrial base and feed off it, as United States' experience shows clearly. Whatever shift in growth there may be, the decline of our industrial base is deeply damaging.
To put his case in perspective, will the hon. Gentleman concede that the problems of industrial adjustment and restructuring, which involve the decline of some parts of the traditional manufacturing sector and the arrival of other new manufacturing processes, has been going on in all western industrial countries?
Indeed so, but, as the hon. Member for Great Grimsby (Mr. Mitchell) says, not at this pace. The regrowth of a new industrial base has not been assisted, and I am thinking of the new technologies. The hon. Gentleman and I will agree that we must move to a low resource use and high value added economic base. That means using new technologies. But we have seen the deficit in new technology trade grow to astronomical proportions in the past eight years. It is now running at about £3 billion a year. There is no evidence that those key strategic new technologies which we shall need to make the shift that the hon. Gentleman suggests are growing. The deficit shows that only too clearly. One of the brave statements in the document is:
The starting point of our strategy—one which I have called our enterprise strategy in the White Paper—is the need for business to succeed against world competition.
We are doing appallingly badly. Our trade deficit must cause serious anxiety, even to the Government whose predilection is these matters is to close their eyes and pretend that problems are not there. In 1980, we had a £1,361 billion surplus in trade; last year we were heading towards a £9.5 billion deficit. That is a shift of £11 billion in the past six years. Even in the new technologies, where we must do well to succeed, that deficit is as bad, if not worse.
Of course, I am not saying that. Indeed, Britain has invested huge sums overseas. The hon. Gentleman knows as well as I that that has much more to do with the happenstance and luck of North sea oil and its effect on the British economy than any other underlying strength of our industrial and economic base outside the oil sector.
We should be seeing some action from the Government which will stimulate the long-term investment, which Britain lacks so badly, of patient money, such as occurs in Japan. Of course, it does not produce a return inside the year that the City operates, nor does it unhinge stocks and shares because it causes a temporary downturn in accounts produced at the end of the year. We need to think about the strategic new technologies and about producing some stability in our exchange rate by joining the EMS.
The second major problem not addressed in the document is the terrible imbalance between the prosperous and pampered south-east, which is undoubtedly doing extremely well, and the other areas, which have largely been left out in the cold. The Government have unstitched and unpicked any concept of a regional policy. These factors come out clearly. Yesterday from the Library I got the figures for investment in venture capital to see what the regional disparities were. They are startling. I discovered that on the latest figures available 63.7 per cent. of all venture capital is now invested in the south-east. There is not a region, save only the north, which even gets into double figures. Actually, the north is just over double figures. About 11 per cent. of all venture capital is invested in the north. Obviously, that is welcome. However, in Wales the figure is 2.6 per cent.; in the south-west it is 4.9 per cent.; and only 5 per cent. of all venture capital has been invested in the midlands—an area that has been more devastated than any other by the economic and industrial restructuring to which the hon. Member for Carshalton and Wallington referred.
There is nothing in the document to begin to redress that. One cannot see signs of any effort by the Government to begin to have a programme to encourage industry and to give economic strength to other areas of Britain. The south-east of our nation is doing very well, but the rest of our nation is not. That imbalance cannot be continued without serious damage to our economy and perhaps to our social cohesion as well.
I turn next to what the Government say is their underlying strategy—their rhetoric about competition. I agree with that rhetoric and believe strongly that competition in the market place is absolutely vital. I believe that market forces should run the economy rather than the Government control it in minute detail. Indeed, the general view could be, "The market where possible, the state where necessary." However, do we see that rhetoric of competition in the Government's actions? One can find it in the words in the document, but what actually happens? Let us take, for example, a public sector corporation such as British Telecom. Did the Government privatise that in a way that would encourage competition? Of course not. They converted a public monopoly into a private monopoly to assist their friends. When we consider what the Government have been doing about British Airways and British Caledonian, do we see that they have opted for a competitive approach? Of course not. We see a conglomeration of large elements in the market place, and that is anti-competitive. One finds the same with the privatisation of British Gas and in the Government's approach to the British Petroleum-Britoil affair.
Time and again, when the Government are given the opportunity to encourage competition, they opt for the larger semi-monopolistic forces in the market place, instead of generating real competition. Even in the case of the larger corporations—
I shall give way to the hon. Gentleman later.
Even in the case of the larger corporations, where one can see that in the interests of the consumers, the setting up of watchdog bodies might be able to control the huge insensitive corporations, such as the privatised BT, the watchdog bodies are created in a manner which makes them almost totally toothless. However I agree with the hon. Member for Carshalton and Wallington that the consumer is a vital element and I should like the market place to be run by the individual choice of the consumer rather than by the power of the monopoly producer, of the mass producer and supplier.
The hon. Gentleman asks a question, so I shall give him a straight answer. No, I do not wholeheartedly welcome it. Just because I expound a principle, that does not mean that I therefore ascribe to the total detail of what the Government do in any particular case. The hon. Gentleman might have asked me the same question about BT, and my answer to him would have been no, because the privatisation was not competitive. However, if one intended to privatise the electricity industry, there could be a case for keeping the grid in national hands and then having privatisation of suppliers feeding into the grid. If we are to achieve competition, I believe that that is the way we shall do so. Creating a situation where one body has 70 per cent. of the market, and the rest 30 per cent., is not competitive. Indeed, that is creating sharks and minnows in the market place, which is exactly the opposite to what I believe should happen, and to what it seemed to me that the hon. Member for Carshalton and Wallington might have been proposing.
I move on to a subject on which I have already touched briefly—
The House should not allow the hon. Gentleman to get away with his comments about toothless watchdogs, because we recently had a prime example of Oftel drawing the attention of British Telecom to its chat lines and abuses of them. If being bitten by a toothless dog results in one taking pretty prompt action, I think that such watchdogs are effective.
The hon. Gentleman has chosen the one area in which they have been effective. I shall be more generous to Oftel because it has tried hard to do a good job within the constraints. Over the issues of Talkabout programmes and telephone boxes, on which it has recently done a good job, that watchdog has been effective. However, there are many other areas. I suggest that we would not have got into this powerless situation with regard to the inefficiencies and inadequacies of BT if Oftel had had the power to operate much earlier. The fact that it has now been able to operate does not mean that the organisation is perfect. Indeed, in different circumstances that situation may not have occurred. Anybody, including those inside Oftel, would agree that some of its powers are inadequate to the task of controlling what is a huge private monopoly.
I move on to another besetting problem on which I have touched previously. I refer to the short-termism which runs the British economy and which certainly runs the investment sector. One sees, hears and reads about that time and again in the City of London—a place where young men earn £120,000 or £130,000 per year when they are not yet 30, on the basis of a turnaround and profits shown in the portfolio of their stocks, measured over a week. In that situation, Britain is manifestly not making what I have already described as those patient money investments to bring on the new technologies in a manner that would return investment to the nation in the years to come. Instead there is a candyfloss, hamburger-style economy in which, if one cannot make a profit inside a year, one had better not continue the operation. In such a situation, the stocks and shares of any given company will fall according to what the published accounts say because people are making snapshot decisions instead of looking underneath to discover whether the company is making long-term investments. Indeed, all too frequently, a company that makes a long-term investment in technology becomes prey to a raider because the price of its stocks falls and it gets snapped up. There is a degree of technology buy-out in the same way as there was asset and property acquisition in the 1960s and 1970s.
It is not surprising that the City of London behaves in that fashion because it is set that model by the Government who also behave in that fashion. The short-termism that runs through the Government at present is deeply unpleasant, unwelcome and unhealthy for our future economy.
The Minister is shaking his head, so I shall give him an example. When the Government privatised British Telecom or British Gas — I do not doubt for a second that there was a case for privatisation, and although I believe that British Gas should not have been privatised, I saw no reason why Rolls-Royce should not have been privatised and put in the market place if it was done in a reasonable fashion — if they had been taking a long-term view, they would have used that money to invest in the British economy, and not to pay off that year's bills or to balance the books. No sensible business man would dispose of assets in that fashion. The Government use money in a short-term way, and that affects others who make investment decisions.
None of those problems are addressed in the document although they should be, because they are the besetting, underlying difficulties and problems of the British economy. Instead we have what I can only describe as a degree of public relations hype. One need only consider the advertising budget for the initiative, which is now bigger than the budget for the small firms unit, as I think the Minister knows, in Lord Young's previous Department, the Department of Employment. The advertising budget is huge, and in some ways it is a waste. If the document seeks to give a profile to enterprise, that is useful, but why not tackle the real problems of the British economy? Sam Brittan in the Financial Times said that he thought it was a
sender up of Thatcherism by a hostile satirist.
Perhaps one can understand those comments because the way in which this matter has been handled is ludicrous to the point of being farcical. Chapter 7, for instance, states:
In all our work we will take account of the differing circumstances of the regions and of the Inner Cities to enable those who live there to help themselves.
The document tells us that we are about to become aware of the problems of Britain's regions. However, if one picks up the popular version of the document, one finds that there is not much evidence that the DTI knows about the regions outside London. Having looked at it the other day, I noticed that, on the map, Cardiff has been put where Swansea is, Poole where Weymouth is, Reading where Oxford is and Coventry where Worcester is. There is not much evidence that the Department knows its way around anywhere outside the City of London.
Is that the kind of efficiency that we would expect the Department of Trade and Industry to set as an example for others? I am told that the calendar that it has produced had one week that contained three Tuesdays. The Department does not seem to know its way round Britain, or even what time it is. That is not a good example to set for industry. If that is what the Department of Trade and Industry means by showing concern for efficiency and a knowledge of the regions of Britain, I am not impressed. I do not suppose that other people will be impressed either, except those who are impressed by the candy floss of the PR man.
I accept the need for the move towards an enterprise economy. There is a need to go faster, to be more radical and to encourage small businesses and enterprise, but the document is a triumph of public relations over hard policy. There is nothing in it that will tackle the balance of payments problems which are inexorably approaching Britain. There is nothing in it to tackle the growing trade chasm which is opening up. There is nothing in it to end the tragic divisions between the pampered, prosperous and, in many ways, profligate south-east and the dog-eared dereliction that one finds all too frequently elsewhere in the old industrial bases of the nation.
There is nothing in the document to remedy the devastated industrial base of Britian. There is nothing for that consuming short-termism which is mortgaging the future for a quick buck today, stimulated by a Government who have set the pace by flogging off public assets, not for investment, but to squander on this year's bills. There is nothing to solve the deep-seated, underlying problems which have caused Britain to fall behind her industrial competitors, both in their effectiveness and in their share of world trade. If the Government turned their attention to those problems, we should sit up and listen, but this is, frankly, fiddling while Britain's industrial base is in severe danger of decaying in a way which will damage our future economy and perhaps the social cohesion of our nation.
The Liberal spokesman, the hon. Member for Yeovil (Mr. Ashdown), made an interesting speech and I agree with many of his arguments. Everyone who listened to his speech will regard it as a balanced contribution to the debate.
There is a surprised expression on the face of my hon. Friend the Member for Watford (Mr. Garel-Jones), the Vice-Chamberlain of Her Majesty's Household. It is sometimes possible to refer to a speech by a member of another party and to say that there are some points worthy of attention or agreement, without it being regarded as heretical. The notion that one must never agree with anyone in another party strikes me as very strange, but perhaps I am being unfair to my hon. Friend, because he cannot speak in the House. Nevertheless, he can speak outside the House where he no doubt makes robust speeches on the policies that we are debating today.
I add my congratulations to my hon. Friend the Member for Carshalton and Wallington (Mr. Forman) on his personal enterprise initiative in selecting this subject for debate. He will not misunderstand me when I say that the acceptability and blandness of his motion means that everybody can agree with it, but that is good sense in itself and a traditional Conservative approach to policy matters. It contains some good points which need wholehearted support.
I apologise for having missed my hon. Friend's initial remarks, but he is right in saying that, whatever ideas come from other parties, the Government and the Conservative party have a strong monopoly of ideas in this area. I also add my support and commendation for what the Government have achieved, very remarkably, since 1979 in respect of some aspects of the long-term transformation of the economy.
However, there are considerable problems that still need tackling. The fact that they have not yet been tackled reflects, to some extent, the excessive divisiveness of our political system which has become more pronounced in recent years and has prevented us from reaching the consensus solutions which are required urgently by Parliament and by any Government to overcome those problems.
The old curate's egg description of the Government's achievements would be right. When I say that, I do not wish to alarm my hon. Friend the Member for Watford by seeming to be churlish, as I am most enthusiastic about some key elements of the Government's achievements. Although it is an intangible and ethereal factor and, to some extent, an emotional and psychological point, one of the most important factors has been the change of attitudes. A great friend of mine, who is a peer in the other place, has a reputation for getting up at 11 o'clock in the morning in the traditional style of peers. I was rather amused when he said that one of the most marvellous things that the Government have done is to bring in a new work ethic. I shall not name him, as it was an accidental remark, although, if he reads Hansard, he will know that I am referring to him. He was correct about all the other citizens of this country, but not about himself, as he still gets up at 11 o'clock.
There has been a great change in attitude and a reinculcation of the work ethic. I am a City person and admit that the City is often justly criticised. However, people in the City come into work early, not just the ordinary employees in any organisation, but the people who run that organisation. We also see that in industry. The attitude to work, for those who are fortunate to have it, has improved enormously from top to bottom. For example, directors and employees in factories are now on first name terms, but, in some traditional establishments, that used to be regarded as wicked only a few years ago. Such points may he considered trivial, but they are important factors in that change.
When the hon. Member for Yeovil referred to the Government's achievements in respect of trade unions, he was supporting an aspect of Government policy. Those are definite, unshakeable achievements which are admitted by all trade unionists, not simply Right-wing trade unionists. They will represent a tangible, monumental achievement for this country if their effects are lasting.
I pay tribute to the Government Departments, particularly the Department of Trade and Industry. I do not believe that the recent changes are superficial and merely PR hype. They are real and deep expressions of the change of attitude and behaviour within those Departments. I pay tribute to the Departments because I hear so many business men speak of the way in which Department officials assist them and put forward ideas.
I reject the old-fashioned notion — it might be supported by Professor Patrick Minford, for example, although I must not misquote him as he has never said this to me—that a civil servant cannot be as heroic as a private business man. Civil servants are just as good as private business men. The fact that they work in the public sector does not matter. There are many entrepreneurial officials in the Department of Trade and Industry, and I warmly congratulate the Secretary of State on creating a Department that works positively for industry, rather than a bureaucracy that holds industry back. Perhaps that encapsulates the best of all the subtle changes of the past few years.
Unfortunately, the picture is not entirely rosy. The balance of payment figures represent a severe problem. I am very much concerned about our problem of low output. I chide the Government with reluctance and with my customary sadness for allowing their propaganda to skate over the awkward truth, I used to enjoy reading The Economist, which I regarded as essential reading, but I now regard it as an increasingly silly magazine, partly because it has started to pursue a particular line. That is a great mistake. The Financial Times is an excellent newspaper because it does not pursue a particular line.
Recently, The Economist contained an article whose theme was the comparison between the West German and British motor car industries. It referred to the doldrums in the German motor industry and the triumph of the British motor industry. I am delighted that the British motor industry is now experiencing an upswing and is going through a better phase. It has done much to improve itself, although it has some problems at present. The article stated that the total German output of private motor cars was 4.4 million, about two thirds of which were for export. But it conveniently left out the British output figure, which was about 1.7 million following the recent increase—it used to be about 1.4 million. Those figures may not be entirely accurate, but 1 hope that they are a near approximation.
To leave out that was absurd. Although Germany is, as we know, a high-cost, high-quality, high-reliability economy, it is manifestly the most successful, the premier capitalist economy of Europe. The hon. Member for Yeovil mentioned all the depredations that we have suffered, paricularly since 1980 and 1981. We were the only country that became recessionary in physical manufacturing output — the only one of the OECD-classified list of economies of our size of 50 million or 60 million—to suffer a backwardation in real manufactured output. The German economy is much bigger than ours. It is absurd to say that it is not as successful, and for the Government to concentrate on productivity increase figures that come from units of output per employee. That is misleading, unless the total output figures are also included.
I wonder whether the hon. Gentleman has noticed, as I have, that the Government go a stage further in massaging the figures by always producing those that measure the position from the lowest point of the depression in 1981, rather than those from when they came to power in 1979, which would look entirely different. I understand that the total manufacturing output in Britain today is only a blip above its 1979 level.
I think that it is more than a blip above. In the past six months, it has started to rise significantly. As the hon. Gentleman says, however, it is up for the first time.
I think that the Government would pursue a better line if they stopped avoiding the total output figures. Some people support the idea of the cathartic policy for the British economy; they feel that a rude shock was necessary. I do not agree. I believe that an advanced economy needs a blend of industrial manufacturing activities, as well as services and so forth. It is a great mistake for aspects of manufacturing industry to be wilfully neglected or allowed to be eliminated, just because of a decision to concentrate on such matters as computers and financial services. Be that as it may, development ought to come out of the many millions of decisions made in the open market. Obviously, some manufacturers went out of business against their will, and might have survived had they received the necessary support, which would have been forthcoming in other countries.
I do not wish to go on for too long, and I acknowledge the presence of my hon. Friends who are trying to contribute—
Both my hon. Friend and the hon. Member for Yeovil (Mr. Ashdown) have said things which, if the debate had taken place about three years ago, would have received my strong support and assent. In my previous guise, before I came to the House, I helped to publish papers that were very critical of the decline in British manufacturing industry, and the contribution that it made to our national strength and balance of payments.
I would like to draw my hon. Friend out a little. He has touched only slightly on the dramatic improvement in our manufacturing output in the past three years, and I feel that he should pay tribute to that. The hon. Member for Yeovil, I fear, also ignored that point.
Unfortunately, I do not have the index on me, but I think that it is only a couple of index points above the 1979 level, which was, I believe, 109.
I was making a comparative point. Other countries have had their recessions—a bit later, indeed—and, as their output was higher in any case, the effects were severe. But the effects were proportionately much more severe in this country, whose economy was already limited in its output. Perhaps my censure was not as severe as my hon. Friend imagines.
Germany, then, is the premier capitalist economy, with no fixation with ideological nostrums so abstruse as to be almost invisible to the naked eye. There is an idea here that everything in the private sector is wonderful and everything in the public sector is wrong. In Germany, some regard the public sector as something that should be limited and kept small; nevertheless, there is an attitude of co-operation between the two sectors that we seem to have lost in recent years. I feel that an excess of ideology— rather than common sense, wisdom and a pragmatic observation of the scene—is guiding our business and economic practice.
Another problem is the complacency that still affects British management, despite the success that we have achieved. I pay tribute to the Government's attempts to overcome that, and, indeed, to my hon. Friend the Parliamentary Under-Secretary for the enormously important work that he personally has done.
I must declare an interest in retailing: I am involved as a non-executive director in a large retailing group. I do not exaggerate when I say—as I did in a debate last year―that we have frequently been on our knees pleading with British manufacturers to supply the products that we so urgently need for our customers. Sadly, however, we have ended up again and again having to obtain them from overseas suppliers. We are now encouraging the latter to invest here more and more, thank goodness.
The attitude of certain large corporations in this country — I shall mention no names — has often been very complacent. They have refused to supply the products that we need. I do not refer to the odd one-off example; it has happened far too frequently. We now have no large British-owned television set manufacturers. I suppose that Ferguson is an exception: it is owned by Thomson Brand, and perhaps a change of ownership does not matter. Incidentally, Thomson Brand is a nationalised company.
Indeed it is. But, whatever the ownership, television sets, electronic products and so on have a history of decline. Government action is not the sole cause of that, although it may have been partly responsible. Manufacturing complacency, giving up and not bothering mean losing the market and any productive capacity.
After that cathartic period has been achieved, we need a much more open and pragmatic attitude. We need to get away from the ideology, and take common sense as a basis for our actions. We should accept the mixture of public and private sector, the need for them to work harmoniously together.
I do not wish to anticipate Monday's debate, which would be out of order. However, electricity privatisation is a case in point. I am not at all enthusiastic about the Government's plans; I state that quite openly. Parts of them are good, but has the proposal really been triggered by a genuine problem that needs tackling, or did the ideological motor start it off somewhere in the recesses of the Centre for Policy Studies—which itself should be privatised? [HON. MEMBERS: "It is."] I mean that it should be nationalised.
That would be a bit unfair. The Centre for Policy Studies has done some excellent work.
Did it all start with someone sitting in a cupboard, having food pushed through twice a day and being asked, "Are you ready with that memo on privatising the Army yet, George? You are late." Or did it begin in the Department of Energy, as a genuine modernising policy? I am simple-minded, and I cannot understand the idea of increasing electricity charges now so that they can be lowered later. I would not, therefore, have tackled the CEGB in the way that is proposed in the White Paper. The problems of the electricity industry are hugely complex, and to comment so briefly on them will inevitably appear superficial. Surely, however, the main problem is at the distribution end, which the Government are leaving more or less intact; indeed, they are increasing its scope of activity.
Of the three segments of the industry, distribution surely provides the main problem of geographical monopoly. There is enormous complacency in its operations, including — I say this with heartfelt enthusiasm, as a retailer—the use of showrooms, which is monumentally inefficient in many respects. No wonder all the area boards are, according to the Government, so enthusiastic about electricity privatisation. Their geographical monopoly will remain intact and they will be able to secure generational activity at the margin and increase their work. As I understand it, those boards will collectively own the middle segment of the proposed privatised industry—the transmission company.
I believe that the problems of the electricity industry lie with distribution rather than generation. To tamper with an enormously successful, carefully built up, huge entity, the CEGB, so lightly — the White Paper is a short document for such a complex matter—is a pity.
If I were involved in deciding Government policy—obviously they would be acting much more wisely as a result — I should agree that they have done a lot of extremely successful privatisation. We are all aware that the main reason for privatisation has been to make the people shareholders and, as a member of the London stock exchange, how can I say that that is a bad idea? However, all Governments must discontinue certain policies after they have been a success—they cannot go on and on. I believe that, after the last privatisation, that should have been it. I hope that that attitude may be shown vis-à-vis the water companies. The problems of that industry will not be solved by the fairly simple approach that has been adopted by the Government to such a complex matter.
Enterprise is vital and I wholeheartedly commend the Government for having been the enterprise Government and the DTI for being, par excellence, the enterprise Department. However, such work must be tempered with social restraint and a sense of responsibility. Every sound business man would surely agree that there is no contradiction between the maximisation of profits and an acute social conscience and responsibility. They should plough back resources into the community not only through taxation, but as a result of autonomous action by companies and individuals — company directors and shareholders.
My contribution to the debate is somewhat paradoxical because I am talking against my own interests in the Bill that is second in the list for consideration later, the Planning Permission (Demolition of Houses) Bill. That Bill is an excellent representation of the ideas that I have sought to put forward. As a Conservative I naturally support property development and the beneficial positive aspects of such development. However, in the outer London suburbs we are witnessing rampant, excessive property development. Therefore, I am glad that many of my colleagues are present to support my Bill when it comes up for Second Reading.
Property developers must also recognise the need for restraint and recognise their social obligations not to overdo development. I would be out of order if I described my Bill in detail, but it provides that property developers must apply for permission to demolish dwellings at the same time as they apply for planning permission to build a new block of houses or flats. The merits of such an approach would be obvious. The size of the file that I have with me demonstrates the number of letters of support that I have received. There is also tremendous support for the measure within the House.
My approach to my Bill is somewhat paradoxical because I have spoken in this debate and there are two other private Members' motions after this one. However, I have acted thus because it is rumoured that the Department of the Environment will, once again, object to my Bill. Recently I had a meeting with the Minister for Housing and Planning and he was as helpful as he could be. However, I would describe the Department's attitude as sympathetic, but unclear how to proceed. I believe that the Department of the Environment always prefers to change planning laws as a result of Government instruments rather than through Private Bills.
May I apologise to the House because, owing to a long-standing constituency engagement, I may be unable to stay to hear the concluding speeches in the debate?
I believe that it is appropriate, given that today is the parliamentary eve of Monday's debate and certain journalists outside may be busy scribbling away, to say that there are some on the Conservative Benches who see opportunities and benefits to the nation as the result of the privatisation of electricity. My hon. Friend the Member for Harrow, East (Mr. Dykes) was correct to consider that privatisation in this debate. From other privatisations that have taken place, it is clear that quality control, design of the product and the financial control, management and discipline in those businesses have improved as a result. My hon. Friend has discussed whether the pursuit of privatisation is a good policy. It is clear that it has been successful and that current business practices contrast totally with the attitudes that prevailed in the 1960s and 1970s. During that time Britain's international position was falling rapidly.
I believe that the White Paper on enterprise is extremely important because it is a further step away from the attitudes of the 1960s and 1970s. Today things are completely different. An important contrast is that the White Paper is not about putting vast sums of money on the table, and it is not about vast grants to British industry. It is about encouraging support and improving skills within industry and business.
Reference has been made to manufacturing output and the fact that it is only just above the level reached in 1979. However, those people who say that forget that the service sector has expanded enormously. We now have a larger manufacturing industry than in 1979 plus a much larger service sector.
When one compares the current position to the 1970s, it is important to recognise that putting money on the table was not the answer. In the 1970s money was grabbed by unsuccessful businesses and, as a result, those businesses were made more unsuccessful. They became less competitive as a result of receiving too much money to produce out-of-date and badly designed products.
The Government recognised that failure. Certainly, the famous "British disease" known throughout the world is now recognised as having been cured. Foreign competitors stand up when a British business man walks into the room because they recognise him as a true competitor. We had to change our attitudes and improve our skills in marketing, design and finance. If we had not done that, we would have lost out in competition to Japanese, German and American business men.
One of the best business lessons that I ever received occurred when I was flying back to this country across the Atlantic—I hasten to add on a British Airways plane—with a Japanese business man sitting next to me. Every time the conversation turned towards business, that business man discussed market share and how to increase it, the competitive position and how to compete more effectively and efficiently. I often contrast that conversation with the lessons that I had to learn when I visited various sectors of British industry in the 1970s. At that time I saw much old-fashioned industry and old-fashioned attitudes. In the 1960s and 1970s there was little understanding among middle management about international competition and increasing the market share.
The evidence of changed attitudes is demonstrated by a new sector that has developed, the British venture capital industry. The hon. Member for Yeovil (Mr. Ashdown) mentioned that industry and I share his concern that it is not as regional as we would like. It has been too concentrated on the south and the south-east. However, the business venture in which I was involved attempted to set up some operations in the north and the north-west. In a small and modest way, we managed to achieve one or two successes, but they were not as plentiful as we would have liked because we were trying to overcome in a matter of months attitudes that had been built up over many years. The regions lacked skills, training, investment and business knowledge, and there had been a loss of capital markets to London. Even the local professionals, the solicitors and the accountants were uncertain as to what venture capital was all about.
I am pleased to say that the British venture capital industry is admired by the United States for being competitive with their own industry. It is also admired by the Germans, the French and the Italians, all of whom want to copy our industry and develop their own venture capital industries. Certainly we have the opportunity for many new companies to start as a result of venture capital initiatives in Britain. I pay tribute to the work of the British Venture Capital Association.
One important aspect of the debate which I touched upon at the beginning of my speech is the British approach to business. In the 1960s and 1970s our attitude was totally wrong and we lost markets. In the Commonwealth countries and throughout Africa the British car industry has been in retreat and many foreign competitors' cars are now sold in those countries. We lost products, and we lost a television industry that is down to only about one company manufacturing in Britain apart from some Japanese companies now assembling over here.
Mr. Eric S. Heifer:
Is the hon. Gentleman aware that we lost all those industries at the time when they were all privatised? The managements refused to get off their bottoms and get around the world and fight for markets, and allowed the television industry, the motor cycle industry—indeed industry after industry —to go to the wall. The Government tried to stop them going to the wall. The private enterprise people could have done what they wanted to do, but they did not and they failed the country.
The hon. Gentleman did not listen to the point that I made earlier. My key point was that all those industries that failed during the late 1960s and the 1970s received vast amounts of Government money. The Government subsidised businesses that had failure within them. However much money one puts on the table, one cannot turn a business round when the work force does not want success. [Interruption.] Management—and I criticise British management—in the 1960s and 1970s did not understand the requirements of success. That was a very significant point. [Interruption.]
Not only did Britain lose products and opportunities; it lost new products. It lost the opportunity to develop the video equipment industry, and many new areas of business. There were problems with both the management and the work force. In some British companies there were five or six canteens. I used to go round some of those companies and compare them with the American subsidiaries operating in Britain which had only one canteen and in which the management were on the shop floor. The management were interested in what was going on. There was a complete contrast in attitudes between British companies and American subsidiaries operating over here. Fortunately, however, much of that is changing.
We now do not have management and work force problems to the same degree, except when they are raised by Opposition Members. We have staff and personnel problems because management is beginning to recognise, and has recognised for some time, that management and work force in Britain have the same objective — to produce more goods.
It is important that in this interesting debate we recognise that throughout Britain there is a lack of training. The Government have done quite a lot to encourage training in business. However, we still have problems which are highlighted by Mr. Robb Wilmot, former chief executive of ICL, who pointed out that one Korean company has more management graduates in it than there are in the whole of the United Kingdom. That means that we do not have the management skills or the background of management training that we need. I know that the Government will do much to develop that.
I should like to pay tribute to my hon. Friend the Under-Secretary of State for Industry and Consumer Affairs who has advocated the cause of British industry, and improvements in design and quality control. I am pleased that my right hon. Friend the Prime Minister has joined us. It is only appropriate that I should say that one of my friends recently attended a conference where my hon. Friend the Minister was speaking. He said to me, "Who is this man Butcher? The Government should wheel him out more often as he is a really good speaker." In clothing design and other industries, Britain excels. At one time I acted as financial adviser to one business lady in the design sector. She constantly said to me that she had never been trained at design school to understand business, but she built up a business that employs some 50 people. We can imagine how large that business could have been if she had been trained in business skills.
I conclude by drawing attention to the fact that the Government are encouraging the improvement of design manufacturing skills. Productivity has increased rapidly. The Government, through the enterprise initiative White Paper, will help further to develop the quality and marketing skills of British industry. We have come a long way since the problems of the 1970s. We have proved that it is not vast sums of money being put on the table in investment grants that improve British industry. We have proved that it is improved by the right economy, by reducing taxation, by encouraging our business men to succeed and by being more competitive against foreign competitors.
All those skills that we are encouraging and all the improvements that we are trying to achieve in British industry are no good unless British industry earns profits. Opposition Members fail to understand the importance of profits. Profits are important because today's profits, this year's profits, provide the cash for next year's investment, and investment in plant and machinery is extremely important for the country. Without more investment in plant and machinery, we cannot succeed and we cannot compete against overseas companies.
I hope that the Government will continue doing what they have done to date so that there will be more improvement and investment in the people who are important in British industry and in new plant and equipment. I know that we will continue to achieve new production records as a result of the Government's initiatives.
This morning, I have been under a misapprehension. We have heard about the electricity authority and about national and multinational companies. I should like to bring the debate back to the enterprise initiative.
I welcome the regional grant system being taken over by the Government's initiative. I hope that the initiative will be developed by the regions. Design is important. British Aerospace, which is in my constituency, is well-equipped in respect of design. That is why I hope that the proposed negotiations between the Rover Group and British Aerospace are successful. Design is important in business.
I should like to bring the debate back to the small business man. The country's future depends on him. The small business man needs the help that the initiative will provide.