Enterprise Initiative

Part of Prayers – in the House of Commons at 1:33 pm on 4th March 1988.

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Photo of Austin Mitchell Austin Mitchell , Great Grimsby 1:33 pm, 4th March 1988

The hon. Gentleman is still working for that promotion. Of course we welcome that shift. However, it is shift within a reduced and misapplied budget. There is no strategy for the regeneration and encouragement of British industry.

Returning to Randolph Churchill and Lord Gladstone, what does Lord Young say to a nation which now has a higher level of import penetration than any other advanced industrial country? What does he say to a nation in which the imports of foreign manufacturers as a proportion of British output was 9 per cent. in 1966 and is now 48 per cent. — double the proportion in west Germany and in France? What does he say? He advertises. What does he say to an economy which has just had its worst ever monthly trading deficit? He advertises. What does he say to a manufacturing industry that has gone from a £5 billion surplus in 1978 to a £7 billion deficit? He advertises. What does he say to his ministerial colleagues who are now seriously embarrassed at the failure of the DTI to stop that trade gap widening remorselessly this year? He advertises.

The White Paper and its associated documents that have been pouring out from the DTI are an advertising compendium with no substance. They are irrelevant to the real problems.

The problem is that industry was so badly battered by what the Government did between 1979 and 1983 that the industries that survived the economic holocaust caused by high interest rates, an overvalued pound and a depressed and deflated domestic economy because of cuts in Government spending, had to throw overboard research, design, development and training — indeed, everything that makes for non-price competitiveness. They had to do that simply to survive.

Investment is still down. As a nation, we spend three times less on each individual training system than is spent in Sweden. We produce three times fewer trained engineers than France. Research, design and development have all gone.

Now, in this motion, we are asked to praise the DTI's belated efforts in that direction. Praise is due to them, but it is about time they saw some light. They cannot simply graft on those measures and expect them to take. They cannot expect business to become competitive by grafting on research and design through consultancy arrangements. Research and design spring from competitiveness, they do not produce it. They are a reflection of competitiveness and the dynamic of British industry which begins with price competitiveness and generates profit.

Profits have always been too low in Britain. If we had higher profits we would have invested more, there would have been improved productivity, output and quality. We would have been able to spread research, design, development and model changes in the automobile industry over a larger output, thus pressing less heavily on each unit cost. If we had been able to do that, we would now be more competitive. We cannot graft on competitiveness at this late stage after the prelude of 1979 to 1983.

Competitiveness is a syndrome; it cannot be created by consultancy arrangements. It is a driving desire for change, growth and expansion, a desire to compete and to win in the world market which does not exist because industry has been cowed and battered by what has been done to British industry in the name of monetarism. The danger is that we are now locked into a lower level of output and production. It is difficult to expand beyond it without sucking in imports and worsening the balance of payments.

It is true that there was an improvement between 1986–87. The pound and oil prices came down. Therefore, our exports became slightly more competitive. Productivity went up and unit labour costs went down. The Government were beginning to learn some economic sense—if we run the economy for competitiveness, we can increase productivity and bring down unit labour costs by the expansion that that generates. But we must run the economy to be competitive. The Government were prepared to do that only because an election was in the offing in 1987. It is certainly not the start of an economic miracle.

We shall face serious difficulties in manufactured trade—difficulties to which the enterprise initiative is largely irrelevant. With the dollar coming down, we face the fact that two thirds of the increase in manufactured exports that has occurred since 1979—it is a small increase—has gone to the American market. That two thirds is now threatened by the fall in the dollar. Also, American exports have become more competitive. They are already considerably more competitive in volume terms. Trade that is diverted from the American market competes more bitterly and intensely with our other traditional markets. We are still in the syndrome that the NEDC diagnosed in the 1970s, when Britain turned out products of a lower unit value than France or West Germany but imported high-value goods. That is still true.

Imports are taking an increasing share of the British market. That sounds incredible, after all the praise of the regeneration of British manufacturing that has come from Conservative Members. If British manufacturing has been so powerfully regenerated by the new spirit that the hon. Member for Colne Valley (Mr. Riddick) wanted to make compulsory in schools—he scolded the unemployed for not feeling the new spirit of enterprise—why is it that, between 1979 and September 1987, the percentage of the domestic chemicals market taken by imports increased from 30 per cent. to 40 per cent.? That was in less than 10 years.

The proportion of imports in mechanical engineering increased from 29 to 38 per cent., in electronics from 31 to 48 per cent., in motor vehicles from 38 to 48 per cent., in textiles from 33 to 46 per cent., in clothing from 29 to 38 per cent., in washing machines from 28 to 35 per cent. in 1987, and in televisions from 22 to 37 per cent. If we are so good, why has that happened? It is because industry has been so badly treated by the Government that it has not been able to compete. We cannot make it compete by grafting on the new elements that have suddenly been thought of by Lord Young.

All the basic weaknesses of the British economy still exist. They have to be dealt with—not the peripheral matters with which the enterprise initiative deals. I shall quote various reports that have been produced over the past few months about the state of British manufacturing. I hope that the Minister will give us his assessment of their accuracy. Investment is almost the life-blood of competitiveness — the one thing on which we have to fight back against the world — yet investment in manufacturing is 9 per cent. lower than it was in 1979. Indeed, in large sectors there has been a net disinvestment. We have been living on the seedcorn. The annual industrial survey of the Financial Times in January 1988 stated: In many areas … it is difficult to escape the conclusion that the rising sales of British goods derive less from investment in new products than from competitive prices, stemming from relatively low wages, and a currency level which, until recently at least, has been competitively priced. On productivity, a summary of recent academic research by Warwick university states that Britain is still part of a vicious and self-perpetuating spiral of low wages, low morale and low productivity. A CBI memorandum to the NEDC last October states: Britain remains a relatively low-pay, productivity, low profit economy". How will we improve all the things that we are supposed to improve in design if we have a low-pay, low-profit economy, if we do not involve workers, and do not generate investment? The Cranfield-British Institute of Management study, entitled "Managing Manufacturing Operations in the UK, 1975–1985" stated: The regrettable but overwhelming conclusion must be that very little has happened in manufacturing operations in the UK over the last ten years. This is particularly true in the key areas of 'competitive' edge — delivery reliability, lead times and use of new technology. That is the background.

We welcome the provision of help and these consultancy arrangements in design and marketing. There should be a bonanza for the consultancies. They will produce a lot of advice, some of which will be practicable for British industry. It is just not enough. If the Department of Trade and Industry is prepared to recognise that the state has a role to play in offering these consultancy arrangements, and encouraging manufacturing in this direction, why does it not extend it in other sectors? In our competitor countries, Governments and Government Departments offer help to their manufacturing industry. They offer support, investment, finance and a closer working relationship with Government Departments than British industry has ever enjoyed. Why is assistance offered for sectors such as design but not for all the other problem areas faced by industry, and, in particular, why not for research and development?

Research and development must be the key to new processes and new competitiveness. The DTI has spent £30,000 on a report from Coopers and Lybrand on innovation centres, which I think are necessary for Britain. Coopers and Lybrand found, no doubt because that is what the Department wanted it to find, that innovation centres were not necessary. But Japan has 190 of them, all state funded.

The Lords Select Committee on Science and Technology produced one of the most damning reports on British investment in research and development that I have ever seen. It paints a depressing picture which is contrary to that created by the advertising monstrosity that the DTI is putting out. Lord Young told that Committee that recent Organisation for Economic Co-operation and Development figures for industry-funded research and development in the United Kingdom and competitor countries gave cause for "considerable concern". He was half right. It should have been "overwhelming concern". He also said that he saw it as central to the Government's philosophy that the motivation for spending more on R and D must come from industry itself. The problem is that it has not done so. It does not seem likely to do so and the Government are doing far less than they should. If we cut out defence-oriented research and development, the proportions of Government-funded research and development in EEC countries is: Germany 34 per cent., France 26 per cent., and United Kingdom 16 per cent. In other words, we are spending about half per head of what Germany is spending, about 60 per cent. of what France is spending and just a little over what is spent by those industrial powers, Italy and Belgium.

The conclusions drawn by the Committee, which looked in detail and heard evidence from all interested parties on the state of research and development, were: the overwhelming weight of opinion from almost every sector of the research community and from the private sector is that R&D in many fields is underfunded, and in some cases seriously underfunded … These two views should not be taken together to mean that the underfunding is wholly the responsibility of the Government. This is not true. A large share of the responsibility rests with industry, who have failed to invest enough in R&D and to appreciate its importance. Other sections of society, particularly the City and institutional shareholders, have to accept some responsibility. The Committee are concerned at the comparative failure of British industry to undertake and to finance R&D, and its disposition to rely on publicly funded work. That is a crashing indictment of British industry and the Department of Trade and Industry, which has not been encouraging it to spend more on British research and development.

In the light of that failure and of the realities—not the public relations realities projected by the Department through its advertising budget and by Conservative Members reading Central Office briefs — the initiative that the hon. Member for Carshalton and Wallington asks us to commend is silly, smarmy and irrelevant to the real problems facing manufacturing. It is not a case, as the hon. Member for Yeovil (Mr. Ashdown) said, of fiddling while Rome burns, because the motion commends the increase in the output of firelighter manufacturers and offers them design consultancies on the shape of the briquettes that they manufacture. That is worse than fiddling while Rome burns.

The real problem is the industrial decline that must be reversed. We have wasted the oil opportunity that should have been used to expand the British economy to a new industrial strength. That opportunity was largely thrown away. Let me declare my overseas visits. In November 1987 I visited the United States and not Saudi Arabia. While I was in the United States, Senator Moynihan said that President Reagan's economic policy consisted of borrowing $3 trillion from the Japanese and throwing a party. The Government have taken the wealth from the North sea and thrown a party and, being mean, they have invited only their friends and not the mass of the British people in the way that Reagan invited the mass of the American people.

The Government have destroyed jobs and will be the only Government to go out with fewer jobs than they came in with. Over the same period America has created 10 million jobs by expanding the economy. What will happen in the 1990s when the oil contribution finishes? We will move into deficit in oil trade in 1991. The Government have used the opportunity of oil to destroy much of our manufacturing industry and we have moved into a horrendous and growing deficit on manufactured trade. I ask the Government to tell us what will happen when the oil goes in the 1990s. How will we survive and provide the jobs, preserve our standard of living, and generate growth unless we rebuild manufacturing industry? That cannot be done by the tinkering that is contained in the White Paper.

It is not a question, as the White Paper says, of a hands-off approach to industry. We have to run the economy for manufacturing, and that is what a Labour Government will do. We shall run the economy for growth, for expansion, for manufacturing and for jobs. We will not run it for finance or for the interests of money and those who have it or for high interest rates. We shall put money to work for the people and for industry. That is what any responsible Government ought to do. The tinkering in the White Paper is not reality.

British industry is now in a war, an international struggle for survival, and it is not surviving very well. Survival does not depend on small firms, 94 per cent. of which do not export. Survival depends on the big battalions and on the Government's co-operation with them to rebuild the country's economic fortunes. We send British industry into that international struggle burdened with heavier costs than its competitors. It has heavier rail transport costs and heavier electricity charges, just wilfully increased to fatten up the electricity industry for privatisation. British industry also has heavier interest rate charges than its competitors, and all those burdens are influenced by Government.

We are asking industry to fight that international war with that ball and chain round its leg. It has gone into battle not with protection and help from the Government, because it has been stabbed in the back. Any firm that invests substantially in research and development and in new products and modernisation, and diverts money from immediate profits to investment is promptly the object of a takeover bid because its share price is depressed by the very techniques of investment that are necessary to survive the international struggle. We send it into battle and we stab it in the back, and Pilkingtons is an example of that. The company then has to spend millions in fighting off the threat of the takeover bid. Lastly, we send it into battle not with Government help and co-operation, but with a Government running the economy for finance. The Government are now killing the goose, the fall in the pound from 1986, that has laid the Government's golden and electoral eggs. The real value of the pound sterling has appreciated by 13 per cent. since the last quarter of 1986. The Government complain about the increase in wages, but there has been a 13 per cent. increase in the real price of the pound. That is a bigger burden on industry than any increase in wages, and it is a direct consequence of the Government's policy of tying sterling to a deutschmark whose value must increase.

The terms of trade for manufacturers are worse than they were in 1981, and disastrous consequences will follow, just as they did in 1981. As the hosannas about success from the grovelling chorus of sycophants from whom we heard today ring loudest, matters are turning sour. We have returned to the stop phase in the stop-go cycle, and all that the Government have to offer to counter it is fatter consultancies. They are an irrelevancy.

The prospects are bleak and becoming bleaker. The balance of payments is widening, and the Government's only answer will be deflation. Exports will suffer and imports will become more competitive. None of that reality emerges from this half-baked, inadequate White Paper which fudges every issue and gives solutions to none of the problems. Essentially, it is the bland leading the blind stumblingly downhill.