My hon. Friend is right. The change has been welcomed by industry generally and by the motor industry in particular. The abolition of the car tax was warmly welcomed by the Retail Motor Industry Federation, the Society of Motor Manufacturers and Traders, the CBI, the Association of British Chambers of Commerce and many industrial leaders. That warm welcome was in marked contrast to the grudging reaction of the Opposition. The hon. Member for Dunfermline, East (Mr. Brown) suggested that the money should have been put towards prizes in the national lottery. That is not the sort of reaction that one would expect from industry, or, indeed, from the Opposition.
I recognise that the industry has been going through a tough time, with lay-offs and short-time working. Following this and other measures, especially the reductions in interest rates, we believe that there is every prospect of a much brighter economic outlook which will benefit the car industry. I think that we all recognise that that industry is of great importance to the United Kingdom's economy. Production of motor vehicles and parts accounts for about 5·5 per cent. of United Kingdom manufacturing output. Producers employ 250,000 people, and distribution and servicing employ a similar number. That means that about 500,000 people are employed in the industry.
Output grew rapidly during the second half of the 1980s but fell with the onset of the recession. The most recent figures show that car production was up by 3·7 per cent. in the first 10 months of this year compared with the same period in 1991. Much of the increase in domestic production can be attributed to Japanese car manufacturers, who were one of the key sources of inward investment in Britain in the 1980s. I remind the House of the central importance of attracting and retaining that inward investment, not just for the car industry but for manufacturing generally. For example, Nissan Motor Manufacturing (UK) Ltd has an investment exceeding £800 million. Planned car production next year is more than twice that of last year and the company has just won a Queen's award for exports.
Toyota has spent £840 million on its United Kingdom operations, and that includes a £140 million engine plant in Shotton in north Wales to produce up to 200,000 engines. Honda is investing £300 million in its car manufacturing plant at Swindon. It currently employs 786 people, and that could rise to 2,000 at full capacity. This is not just a Japanese success story, because British car manufacturers have their successes. For example, in the past two months Land-Rover has increased production of its new model.
None of us must lose sight of the importance of the European dimension. There is much loose talk about the effects of imports on the car industry, but more and more of the components used in the assembly of cars are produced throughout the European Community. One obvious, although high-market, example of car production is Mercedes-Benz. Its current procurement of components from the United Kingdom is valued at £25 million, and it will rise to £75 million. The procurement of the Daimler-Benz group generally is worth about £240 million in addition to that.
That means that procurement by a German manufacturer of United Kingdom components, some of which are then imported to Britain, amounts to almost one third of a billion pounds. Similarly, many British companies have subsidiaries and operations in other parts of the European Community producing components that are used by United Kingdom car manufacturers. As I say, we must remember the European dimension. The legislation will be of material benefit in increasing the car industry's turnover. It has been widely welcomed in the industry, and I hope that it will be welcomed by the House.