§ Question again proposed.11.17 am
§ Mr. Robert B. Jones
All my illusions are shattered. I thought that my right hon. Friend the Leader of the House had come hot-foot to the Chamber, as he is an accountant, to reply to the points that my hon. Friend the Member for Bolton, North-East (Mr. Thurnham) was making about the surfeit of accountants in the engineering profession as opposed to genuine, professional engineers.
§ Mr. Batiste
Did my hon. Friend observe that while many Labour Members appeared to be able to come into the Chamber for the business statement, as soon as we return to the debate on the engineering industry they all disappear?
§ Mr. Jones
In many debates in this Parliament Labour Members have not been present, and that shows their lack of interest in yet another subject rather than a distinctive lack of interest in engineering.
Before the statement I was relating my interest in the civil engineering sector. My father was a civil engineer and I am pleased to say that my sister was an engineer, which is comparatively rare. I worked for the Federation of Civil Engineering Contractors for many years and took a close interest in the industry and, on its behalf, in the workings of the House. For those two to come together in this debate is particularly welcome.
The civil engineering industry is especially important for our balance of payments. It may interest the House to know that the consultant side of civil engineering has 13 per cent. of the world market and the contracting side 6.5 per cent., which makes the United Kingdom important out of all proportion to the size of its economy and workforce. We are particularly strong in the middle east, Asia and Africa, but it is worth pointing out that we are not strong on the European mainland. Curiously enough, the countries that have strength there are the Scandinavians and the north Americans. Why can countries that are outside the EEC, and therefore have no inside track into the market, come out ahead of the United Kingdom's profession and contracting industry? We should be in an advantageous position because of our location. There is a great source of indirect exports through plant and materials, for example.
The civil engineering industry should be in the vanguard of efficiency and innovation. The term "engineering" is derived from the same root as "ingenious", and it is on that basis that the industry has established its reputation over the years. Unfortunately, it tends sometimes to fall behind the times. For example, I find it extraordinary that the Association of Consulting Engineers should not allow its members to advertise. This gives an advantage to firms which engage in design and build and disadvantages many of our top professional firms.
The implications of liability put the industry at an especial disadvantage. British civil engineers are over-cautious, or fail correctly to establish a balance between risk and cost. The strengthening of the Severn bridge is an example. Comments were made about in in New Civil Engineering. The article stated:It is now capable of carrying a nose to tail jam of overloaded 40 ton lorries in all lanes, at the same time as a 787 ship is colliding with one of the piers and a Boeing 747 with a tower—all of this during a gale of such strength as has never yet been recorded.When the industry's cautious approach is taken to foreign contracts it loses out, especially to the north Americans and the Germans, who have a better appreciation of balance. We must examine why we take a cautious approach. I believe that it stems from our law of liability, which I accept has been reformed recently in terms of the law of latent damage. Until that reform, the law was almost entirely unclear. It may be that the descendents of Christopher Wren would have been liable for any defects in St. Paul's cathedral. That is clearly an absurd supposition. I know that the Government examined the problem carefully before supporting reform of the law.
In the United Kingdom we have effectively 15-year liability. This places a particular burden on consultants who are retiring, especially if they are single principals. In overseas countries there is invariable decennial law. The cost of the additional five years in the United Kingdom contributes to the industry's lack of competitiveness in some areas.
In practice, consultants without cover do not get sued. There is no point in suing someone if the action will not lead to substantial damages being paid. This acts as a deterrent to the industry as a whole, and especially to legitimate, large-scale professional firms and contractors. There are the most absurd anomalies, and I shall use the Channel tunnel as an example. With decennial law in France and 15-year liability in the United Kingdom, there will be a rivet in the middle of the tunnel that is the subject of 10-year liability that will be bolted into something that is the subject of 15-year liability, for example. Is that sensible? With the single market just round the corner, is that sustainable?
Research and development was referred to ably by my hon. Friend the Member for Harwich (Sir J. Ridsdale). Research and development is critical in civil engineering. It is from R and D that new techniques arise, and new techniques enable us to steal a march on our competitors. We spend only about 0.56 per cent. of turnover on R and D, and it is directed mainly to products and materials, not techniques. Less than half of the expenditure on R and D goes into design. Within industry as a whole, 2.3 per cent. of turnover is directed to R and D. This means that the civil engineering industry is spending only one fifth of the overall expenditure on R and D. In agriculture, 3.3 per cent. of turnover is being invested in R and D. We must find some way of improving our domestic performance on this front. In the building industry, it is significant that almost all the new products coming on to the market and making things possible that were not possible before—shuttering, for example—come from Scandinavia and West Germany. The insulation materials produced by our continental rivals are very much better than those which are produced in the United Kingdom. We are losing out.
The Single European Act will dominate our debates on many subjects over the next few years and I make no apology for referring to it now. We must be prepared if we are to take advantage of the opportunities that come our way. The form of contract used in Continental countries is different from that which is used in the United Kingdom. That is not surprising as we derive much of our tradition from common law whereas many Continental 788 countries derive their traditions from Romano-Dutch law and Napoleonic law, for example. As contract law follows the flag—this applies to other European countries and when we are trading in the middle east or Asia—this has a bearing on our exports. I hope that the Government will be putting all the force that they can behind the British case for our form of contract being used for civil engineering works under the new single market system.
It worries me greatly, for example, that in the Cotswolds, where there is a beautiful form of stone building, and natural slate, that if a planning authority wishes to deem these as acceptable materials to be used in new developments, it runs the risk of being ruled against as a result of the Single European Act. That is because local materials advantage the United Kingdom and disadvantage our competitors. It will give rise to considerable worry in the United Kingdom if that sort of problem can occur. We must ensure that that is not allowed to happen when the final details are sorted out.
We do not get as much of the European market as we would like, and that is a result of some of the factors that I have outlined. I believe that we are best when we participate in joint venture projects. That applies to markets other than the European market. The Koreans are proving to be extremely successful in the management of manpower, which is a lesson that our trade unions might profitably learn, and learn quickly. We are exceptionally good at managing projects, which reflects competence of our consulting engineers, to put together a package and to operate in far-flung parts of the world. Of course, in the European market, it makes sense to get together with local civil engineering companies and make sure that we have the advantage of their local know-how, knowledge of terrain, the law, planning, and so on. We should expand joint ventures.
When one touts for new work abroad, people ask "What have you done at home?" Of course, for many years, the civil engineering industry suffered from a lack of work load in the United Kingdom. I am happy to say that the latest work load survey of the Federation of Civil Engineering Contractors for the January-March quarter is the best on record. That is a tribute not only to the competitivenes of our civil engineering industry but to the priority that the Government have placed on investment in infrastructure over recent years, now that we have come out of the recession.
The trouble is that profits have not followed suit. It is perfectly true that the industry is getting more work, but profit margins are low. It may interest my hon. Friend the Minister to know that there has been only a 2.5 per cent. price increase between January 1983 and January 1988. We are trying to keep inflation down — I strongly support that — but when we compare that figure with the price increases that have been possible for other industries we shall appreciate the impact on profitability of prices being held down to that degree.
To strengthen the domestic market, we must look at many more innovative approaches to financing. The growth in private sector financing of public capital projects is to be welcomed. I congratulate my right hon. Friend the Secretary of State for Social Services, who, when he was Secretary of State for Transport, secured the Dartford-Thurrock crossing deal, which is certainly one of the most beneficial deals that the country has ever had. There have been many advantages, not only in tapping private sector resources, but in making sure that such 789 projects are carried out ahead of time. The RYRIE rules, which were laid down by the Treasury and recently updated, ensure that there will be relatively little growth in that respect, because of the failure to take account of the advantage in bringing forward a project and working out the balance between public and private financing. I hope that my hon. Friend will pass on to the Treasury my comments on that point. It seems to be slow, considering that it welcomed this as an initiative, to come up with its part of the goods, laying down a proper framework. A request of the civil engineering EDC of 24 November 1986 led to the updating of the RYRIE rules, which was reported to the National Economic Development Council on 16 February 1988. That is a deplorably long time in which to come up with something that all Ministers whom I have ever heard speak on the subject have referred to as an excellent way of harnessing private sector talents.
Civil engineering is important to the country, because of the balance of payments, employment and its general contribution. It is an exciting industry. It is the modern equivalent of the great 14th and 15th century explorers, who set out to discover new worlds. Engineers, too, drive back frontiers and do things that, hitherto, we thought impossible. Civil engineers turn deserts into fertile ground and bring prosperity to countries that have been deficient in infrastructure and, therefore, have had low standards of living. It is well worth debating civil engineering.
§ Mr. Neil Thorne (Ilford, South)
I am pleased to follow the remarks made by my hon. Friend the Member for Hertfordshire, West (Mr. Jones) about the civil engineering industry and its great contribution to the world of engineering. He made many important points. The Latent Damage Act 1986, which came into force not so long ago, contains some extremely interesting provisions. My hon. Friend's point about St. Paul's cathedral and the Wren family was particularly interesting. Nevertheless, as a result of the Latent Damage Act, there are considerable misgivings about what might happen in future, for the simple reason that the period is not limited to 15 years, but runs for 15 years after a material defect is discovered. That could be a much longer period.
It is extremely difficult for engineers to find the necessary insurance to cover their liability well into their retirement. It is even possible that large claims could be made many years later against widows and families who inherit the assets of a deceased engineer. That is worrying. It must inhibit the functioning of a civil engineer. We shall have to watch how the legislation progresses and consider what effect it will have when it reaches the courts. The courts' interpretation will be important.
My hon. Friend said that people in developed countries, and also in previously under-developed countries, are now trying to promote their engineers. The type of work that traditionally came to this country is now much harder to find. Until recent years the level of invisible earnings produced by engineers working overseas amounted to no less than £500 million a year. Last year, for the first time, that figure declined to £420 million. The reason for that decline is the fact that competition is much greater.
My hon. Friend mentioned the Association of Consulting Engineers resisting advertising. We have a genuine dilemma. It is possible to compete in respect of 790 fees and types of services, but it is difficult to compete in respect of both. Few people understand precisely what they are getting for their money, and therefore it is difficult for them to be able to compare like with like. The Government rightly want to ensure that competition is free and fair throughout society, whether in industry, the trade union movement, or the professions, but it is a difficult problem because, quite clearly, the professions want to maintain a high standard.
§ Mr. Robert B. Jones
My hon. Friend is obviously referring to the views of the Association of Consulting Engineers. I ask him to contrast that view with that of the Institution of Civil Engineers, which is quite happy for its members to advertise. We have in mind, not the unsolicited direct mail shots, but the general form of advertising. The wedge has already been driven in. The Association of Consulting Engineers is in danger of being the last bastion of fuddy-duddiness, when we are trying hard to be even more competitive.
§ Mr. Thorne
I am sorry that my hon. Friend called the Association of Consulting Engineers fuddy-duddies. Its performance has been extremely high. Its standard of engineering throughout the world has been second to none. We have an extremely good reputation in the world. The association is reluctant to give way unless it is certain that the standard can be maintained. I am sure that we will reach a satisfactory solution, but it should not be rushed.
The areas in which we have competed are particularly interesting. We have contributed to many major civil engineering contracts throughout the world. By doing so, we have created employment and exports. Clearly, when consulting engineers are being employed from this country, they have extremely good contacts and they know what products are produced here. Therefore, they would not exclude those products from the market.
Much capital was made out of the fact that the second Bosporus bridge was constructed by a Japanese company. We seem to have forgotten that that Japanese company was helped by considerable quantities of goods from this country, particularly steel for steel wire. We have to thank the British consulting engineers for encouraging the Japanese to buy from this country. Too often we tend to forget or ignore that point.
The same principle applies to other sectors of engineering, such as when taxes are applied to goods that come into this country for use in making another product here. We must be careful about that and ensure that we do not freeze ourselves out of world markets by adding taxes to a product from overseas as this may prevent us from making a substantial profit on more complex products. We must watch carefully the contribution that British industry makes in the world so that we can see what extra facilities in civil engineering and what extra profit we can engender in British industry by adapting what can be produced elsewhere.
My hon. Friend the Member for Norwich, North (Mr. Thompson) is to be commended for the way in which he introduced this important subject. I welcome the remarks that he made and agree that we should pay our engineers the rate for the job. All too often we tend to overpay other professions—I hesitate to name any, but there are a few about that know exactly where the finance can be found. Engineers tend to specialise in providing a good service, but do not get the recompense that they deserve. Unless 791 we ensure that that is put right, we run the risk of losing many able people. The engineering profession is one through which this country has achieved enormous success, and I hope that it will go on to even greater things.
§ Mr. Roger King (Birmingham, Northfield)
I am grateful to my hon. Friend the Member for Norwich, North (Mr. Thompson) for promoting this debate. It is extremely relevant because of the tremendous change that is taking place in our engineering industry, represented by the recent announcement that British Aerospace proposes to merge with, or take over, the Rover Group. Those two companies, with a combined output of £7 billion, employing a large number of people and with a substantial export market represent, almost uniquely, all that is good and all that is bad and troublesome about British industry.
I can speak with a slight personal knowledge because I am an ex-engineering apprentice. I never reached the august heights of being a qualified professional engineer. I was an apprentice with the old British Motor Corporation. In fact, I was a Nuffield apprentice. The company was known as Nuffield before becoming the British Motor Corporation, British Motor Holdings, British Leyland Motor Corporation, BL Cars and now the Rover Group. Therefore, it has had many names and one tends to remind people of one's age when referring to the fact that one was a Nuffield apprentice. However, I shall not go into details of my age.
The negotiations that have started between British Aerospace and the Rover Group ought to have widespread debate because they represent an enormous change and a challenge for the car industry and the engineering industry in Britain. Now that we have had time to digest the implications of the proposed British Aerospace takeover of the Rover Group, we should step back and ask a few questions.
I was one who welcomed the proposals. I do not look at the takeover with hostility because it has many merits. British Aerospace is a talented and gifted company and it has proceeded along a path of prosperity in an accelerated way since becoming part of the private sector. We need to seek some assurances and examine what alternatives there might be, if any, for the remaining large sector of our motor industry, which is still British owned.
Although British Aerospace has said that it intends to honour the Rover Group's five-year corporate plan, as timescales go that is not very long. Markets change and the attitudes, aims and objectives of management have to adapt accordingly. We have to ask ourselves, in terms of that five-year plan, of which there can be only about four years left, what sort of manufacturing sector we shall have within our motor industry at the end of that time.
Some pundits—there have been many in the technical press, tabloid papers and more serious papers — have said that British Aerospace would seek to develop the Rover Group as a British-type BMW market-orientated business. In other words, low volume but high profit. The sort of low volume envisaged must be around 200,000 cars per year, which would clearly put into question the viability of Rover's twin car plants which are situated at Longbridge in my constituency and Cowley.
Although we have had verbal assurances that British Aerospace will not be able to dispose of the Austin Rover 792 business for at least five years, as far as I know that will not cover plant rationalisation or market volume. Indeed, it could not seek to cover those aspects of the deal because it would be unreasonable to do so in a normal commercial transaction. However, this deal is much more than that. Volume of manufacture has implications beyond the car manufacturing units themselves. Halving Austin Rover's production level would have a disastrous knock-on effect within the engineering components industry, which is predominantly situated within the west midlands but which can be found the length and breadth of the country. It would have an equal effect upon distribution and sales outlets. There are 1,200 Rover dealers employing, on average, 100 employees each and that is not a force to be ignored. Neither sector can earn a living without strong volume presence.
It is vital that any new owner should categorically commit itself to at least present output levels. Without that, all the painstaking hard work by tens of thousands in rising to the challenge to create a future for the car side of the company will be put in jeopardy. We saw on Thursday just how much has been achieved by the Rover Group. It made a small profit but has a long way to go before it could ever be a viable entity in its own right; some of us would say that perhaps it never could. However, it is a substantial performer with a £3 billion turnover, over one third of which is in the vital export market.
I wish the talks well although I reserve my view on the synergy between British Aerospace and the Rover Group. There is no doubt that engineering excellence is present in both companies in many and varied disciplines. In fact, what is being achieved at Rover, much of which has yet to see the light of day, is by anyone's standards outstanding and is gradually ripening for commercial exploitation. That accumulation of technical wealth, which should become commercial wealth, makes me wonder whether the value of the business is far greater than the quoted "give away" being promulgated. I recognise British Aerospace's interest in satisfying its shareholders that it is concerned with picking up businesses that will mean something to it and which are not just a rag-bag of worn-out assets.
We do not know what the value of the business is to anyone else because British aerospace has exclusive rights to negotiate until 1 May. Obviously it will seek the best terms possible without bothering whether they represent the best deal for the taxpayer. Who can blame it? However, for those who are interested in jobs, which is a pre-eminent consideration, a one-horse race for ownership is not the best way forward.
I am pleased that in his statement my right hon. and learned Friend the Chancellor of the Duchy of Lancaster said that the Government would have to consider alternative offers. The difficulty faced by an alternative party is whether such an overture would be truly welcomed or whether it would cause embarrassment. Therefore, the Government must spell out more clearly their attitude to any bidder, so that on 1 May the terms negotiated between parties that are involved at present—which perhaps may involve debt write-offs and capital grants — can be known, so that alternative offers can be tabled.
A British solution would be preferable, but is that entirely realistic in the strict sense of the future prosperity of the car business? The car industry is so international, with global markets, that a wholly owned United Kingdom solution, while satisfying many, will not do 793 much to unlock the potential for Rover Group profits. British Aerospace will not bring one extra outlet for those products if the deal comes to fruition.
In many respects we have been here before, because two years ago we had the tussle over Land Rover—General Motors and the secret Austin Rover-Ford talks. Both failed because neither company was prepared to say what future they could offer. It is not the American way of doing things to tell people what aims and objectives they have. They prefer to keep their cards close to their chest because they are aware of the competitive nature of the industry. Faint heart never won a fair lady, and unless one spells out what one wants to do with a business, the future becomes more important for those who will be affected by any takeover.
Those earlier talks were all pie in the sky. At that time, the Rover Group was in poor shape. In the intervening two years, it has moved forward substantially, both financially and in products and technology. It is now a different animal and is attractive, not as a rag-bag of dubious assets but as a viable business with good potential, given the right commitment.
Any potential suitor must spell out clearly what the potential market might be, how it would handle the Rover marque in the market, what sort of volume production it would envisage, whether it would remain committed to a replacement Metro or something similar, which is so vital for component jobs, and what it would do for Land Rover.
Earlier, I mentioned that Ford and General Motors had been involved in talks. What would happen if they were to renew their interest? I do not know whether they will, but Ford has been looking for an up-market image for some while, as its unsuccessful talks with Alfa Romeo, which subsequently collapsed when Fiat marched in, showed. With its worldwide dealership total running at 7,000 and its market dominance in many countries, the statistics could be mind-boggling.
It is well known that Ford has in preparation a replacement for the Ford Fiesta. Although it will appear to be a completely new car, the engine is of old-established design. However, suppose it wished to specify the new Rover Group K series engine, which is all alloy and much sought after. The Rover Group plans to make 300,000 units per year on the most advanced technologically based equipment yet available in the motor industry. That is a testimony to its engineering expertise and to that of the component industry. I am proud to say that the Rover Group will be manufacturing those engines in my constituency. If Ford became involved, up to 1 million units would be required every year. Think what that would mean for Longbridge and the subcontractors supplying pistons, bearings and ancillary equipment. These are all questions that must interest us.
The same is true with regard to the new R8 model that the Rover Group is developing in conjunction with Honda. It will be sold as an alternative to the Escort through existing Rover dealers and new ones that any new company might bring. Positioned in the market where Audi is at present, the sales potential could be substantial. The future for jobs, which must be our prime concern, would look very exciting indeed.
I have mentioned Ford but, equally, General Motors could make a success of the business. Many manufacturers have secondary marques — Volkswagen has Audi, Peugeot has Citroen and Fiat has Alfa Romeo. All those secondary marques have experienced growing success, 794 after years of going nowhere, as the parent company has invested in models, plant and opened up new markets. I make no personal choice; my sole aim is to say that there should be a choice.
The Britishness of such an arrangement must be in question, although Ford and General Motors become upset if they are viewed as alien businesses, given their immense investment in the United Kingdom. If that is the price to pay for the opportunity that beckons — any suitor must spell out those opportunities to try to win our hearts and minds—perhaps we should give it more than passing consideration.
I do not know who will form a queue for the Rover Group — probably no one. The future status of the company must be decided one way or the other. I welcome the British Aerospace bid because it ends the hiatus over ownership sooner rather than later.
The Rover Group's financial results show a vast improvement over the past years, which is a testament to its management and employees. Much more progress must be made to ensure its future as a semi-volume car producer. Can it find its resources internally? Perhaps not, although it has a chance. Some of its new models, which have yet to see the light of day, are very advanced in design, technology, performance and finish. The new R8 may well be a volume seller in the old sense of the word, in line with the Mini and Austin 1100 of 20 years ago.
Can British Aerospace provide the constant financial commitment to keep the business moving forward on a broad model front? At best, we do not know and at best we should.
The Rover Group is a substantial part of our engineering heritage. Almost every modern car owes something to the brilliance of its engineers, particularly Sir Alec Issigonis, who showed the world how to build a small car. The tragedy is that we threw it all away for reasons that are now history. However, there is such expertise and ingenuity in the Rover Group today. Porsche engineers are reported to have gasped in amazement when presented with a V6 prototype engine that was sent to them for a second opinion. In terms of weight and performance, it was a revelation. The two-litre M16 engine, which is built at Longbridge, has won a Design Council award, and the K series engine which is a replacement for the engine used in the Mini and the Metro at present, is exciting the motoring fraternity even before it is in production.
The influential motoring magazine, "What Car?" has voted the Rover 820SE as the best executive car and the Montego 2.0 Mayfair estate was voted best estate car. The Metro came top in a recent "Car" price-quality audit. These are all examples of how much is being achieved by the company at present.
The partnership with Honda has been beneficial to both parties. However, we can never be sure whether it is long term, and it has done little to resolve Rover's problems of market size and economy of scale. The Rover Group has the products, but it does not have the market size or distribution outlets, and until it has it cannot achieve the economies of scale of some of its larger competitors.
There is no doubt that the British Aerospace deal is exciting, but can it give what the Rover Group truly needs, or does its future lie elsewhere? We must address ourselves to those questions. In the light of the information available to us we cannot give a definitive answer.
It may be that an all-British solution is best, but should we not look at any other offer and judge each on its merits? 795 We must get it right because there can be no further chances for the Rover Group. The west midlands economy demands that we get it right; the engineering economy of the west midlands and of the country demand that we get it right.
Is it right to negotiate the future of a very large section of our engineering heritage behind semi-closed doors? Should we not know the facts, proposals and hopes for the future of the company if it is to become part of a bigger group?
I hope that British Aerospace will endeavour to win the hearts and minds of all the employees and show all the opportunities that a relationship with it would offer. The future of the Rover Group is exciting, but it needs a commitment, resources and good management. Given the resources of a bigger and stronger partner, it could bring prosperity to the country, continue to be part of the cutting edge of technology in this country and give us a key to our future prosperity over the next few years.
§ Mr. Spencer Batiste (Elmet)
First, I should like to join my colleagues who have congratulated my hon. Friend the Member for Norwich, North (Mr. Thompson) on his good fortune in winning the ballot for this debate, on his good sense in choosing a subject that is so important, and on the clarity and excellence of the speech with which he introduced the debate.
I should like to comment on one particular aspect that he raised, although I wish to be associated with the breadth of his comments. The motion falls into two parts. The first congratulates the engineering industry on its past progress. I endorse that fully. Successful manufacturing industry is crucial to the success of this country. It is crucial as a wealth creator and makes a vital contribution to our balance of payments. It is also crucial for employment, especially to many skilled people.
However, it is important that we separate debates about employment from debates about the success of manufacturing industry. They are two quite separate debates, and the dangers in confusing them are that we measure the success of an industry by the number of people that it employs rather than by its productivity and performance.
The success of the engineering industry in Britain today is largely attributable to the fact that it has addressed so many of the problems that we have inherited from the past. I make no apology for saying that it has been able to do so because it has been operating in the 1980s, in the framework of the revitalised enterprise culture which is the objective of Government policy because the Government's role in creating that framework is crucial to the success of manufacturing industry.
In all those congratulations, however, one message must come over clearly from the debate: that we cannot possibly afford to rest on our laurels. The pace of change that we all face is accelerating all the time. That came home most clearly to me many years ago in a debate in my law office when we were discussing whether to replace the computers that we had brought in only two or three years earlier but which had already become long outdated. In that debate an elderly consultant of the firm, who had distinguished service in the first world war and who, as a young man, rode to work on his horse and left it in the 796 stables behind the office, asked whether we would like to know about our firm's first debate on high technology. We asked him to tell us. He said that it was about the telephone and whether we should have one. After an agonised debate the firm's partners decided that they would have to move with the times and that they would buy a telephone, but, because nobody would use it very much, they put it in the stable with the horse.
During his working lifetime, that consultant had moved from the horse to the microchip. I wonder how far we will have to move in our lifetimes, from the technologies and methods of industry and the organisation of our society that we take for granted today to the things that our children and grandchildren will take for granted in the future.
We are at the threshold of even greater and faster change than at any time in our history, and it will dwarf everything that has gone before. We face changes in our products, methods, and skills and in the demands that we make on our industry, but, above all, in the markets in which we must compete, and our attitudes to those markets. Our continued success in the 1990s and beyond will depend upon how successfully our industry adapts to those changes and, in the medium term, how we face the challenges and opportunities that will be opened up by the completion of the European market in 1992, on which I shall concentrate today.
Jacques Delors, the President of the Commission, said:Europe has had to run the 100 m hurdles, while others run the 100 m sprint.In America and Japan, our competitors have the benefit of being organised on the basis of a large home market, without internal obstacles. They have been able to come to Europe and, in many cases, to run rings around our indigenous companies because they have the benefits of scale at home.
§ Mr. William Cash (Stafford)
Does my hon. Friend agree that one of the most important things at the moment is to invest strongly in new products and to attract training and training potential of the highest calibre? Does he also agree that one feature of those other countries that he mentioned is that there is a continuous dialogue between Government and industrial leaders, and that that is something that we should encourage as much as possible?
§ Mr. Batiste
I am grateful to hear that my thinking on this subject and the remainder of my speech match closely the analysis that my hon. Friend has made. I fear that when the hurdles start to come down in 1992, French and German industry, which has been planning for a fast start, will be ready to run the sprint, whereas we shall still be jumping long after the obstacles have gone.
In 1992 Europe will be our home market. It will not be the preserve of the export sales manager. Every British company should now, as a matter of urgency, be reappraising every aspect of its business plans. Because the Government are so important to the framework in which industry operates, they should be there out front. The Department of Trade and Industry—the Department for enterprise—should be there, signposting to our business men the high ground that they have to capture between now and 1992 and smoothing the path to achieving those objectives.
It is disturbing that the French and German Governments seem to be moving so much faster in mobilising industrial awareness and action in their 797 countries. I have heard it said, in relation to France, that that is because French industry is not as well oriented to world markets and to adapting its methods when major changes come to be made in meeting new markets. I am cynical about that because I think that it is much more to do with the fact that the French are realistic when it comes to assessing the needs of their national industries and identifying the problems of 1992. They are determined to ensure that their companies will not lose out.
We must start with the very structure of our companies. Where should their offices be located? Where should we place our manufacturing, sales, distribution, transport and servicing facilities? What communications systems will be needed? Those of us who, like myself, represent northern industrial constituencies — mine is Leeds, which has a wide range of different industries involved in engineering — will wish to be satisfied that the Government are doing everything possible to balance out the inevitable disadvantage that our companies face by being remote from the centre of balance of the market.
The Channel tunnel can, indeed, give us easier direct access to the Continent, but in our regions we must have the inland facilities, linked to the rail and motorway networks, to ensure the smooth passage of our products. I do not want to see the barriers removed from Dover but reimposed in London.
We must also consider our attitude to competition and mergers policy. We have just heard an exceptional speech from my hon. Friend the Member for Birmingham, Northfield (Mr. King) demonstrating his depth of knowledge and awareness of the motor car industry, which is so important in his constitutency. Many other companies around the country face great challenges as we come to the period of the completion of the European market. We should ensure that, wherever possible, the artificial boundaries that exist in our society are removed and that balancing factors, in terms of infrastructure and organisation, are created.
In the motor car industry, as in many other engineering industries—especially the high technology industries—once and for all we shall have to face the fact that other companies, especially those operating in Japan and the United States, are organised on a scale that dwarfs our companies in Britain. If we are to play in those markets, we must be aware that mergers between large companies in Europe are an essential signpost of the way forward to success.
§ Mr. Roger King
I thank my hon. Friend for his kind comments. I agree entirely with what he has said about the necessity for being large enough to take on world competition. He knows, as we all know, that at present in this country if one has over 40 per cent. of a certain market, one is in danger of becoming a monopoly. Has that put a constraint on British companies being big enough to face European competition in 1992? When we go into Europe, in the true sense, in 1992, Europe will be our home market, and 40 per cent. of the United Kingdom market might mean only 10 per cent. of the European market. Therefore, should we perhaps not review our position and attitude to monopolies?
§ Mr. Batiste
My hon. Friend makes his point and mine most eloquently. We must rereview the position of our engineering companies and the framework of competition policy within which they operate. Artificial limits, such as 798 market share being the sole motor of competition policy, cannot be sustained in sensible regional policy of sensible European policy. If for no other reason than the huge resource demands of successful research and development, mergers will continue to take place in Europe. The issue is whether British companies take part and therefore share in the success. There may be some sentimental value attached to soaring like an eagle into last place, but I prefer to hear the Japanese awarding us gold medals in the business olympics.
We are often told that a company is only as good as the people who work in it. How many British companies are seriously considering the personnel implications of 1992? The number of 18-year-olds in Britain is projected to decline by up to one third by then, and much of the country faces skill shortages which are becoming quite serious. We face an explosion in demand for skilled people. Too many people leave school without the training that they need for the jobs that are available. How many of our engineers are learning the languages of what will be our home market in the 1990s? We have heard much about the need to create more engineers, but surely we must broaden the educational experience of everybody, because we face radically different challenges.
Too many people leave school without the training that they need. I have just completed what I believe is one of the longest running Committee stages of a Bill — the Education Reform Bill. When it becomes law, it will give industry a major opportunity to participate in schools, colleges, polytechnics and universities. Like the youth training scheme, which has provided an opportunity for more basic training, it is not window dressing, but its success depends on industry's willingness to become involved as it never has before. The Government are creating the framework, but industry must take up the challenge.
Engineering needs to enthuse young people. They cannot be press-ganged into joining. I regard high tech and space industries and their spin-offs as the motor for enthusing young people. That is what is happening in the rest of Europe. Pay and productivity are inextricably linked. There must be vision and motivation, but there must also be working practices which are attractive to young people. That is how to get them in.
For a great deal of my working life as a lawyer, I have been involved in the technology transfer from universities to industry. There has been a substantial change. The transfer was more or less non-existent 10 years ago, but we are now making a showing. It is not good enough if British academics with brilliant research behind them prepare themselves for a Nobel prize ceremony but ignore the practical implications of their work and disclaim any responsibility for the conversion of their ideas to the market place. It is no use industry saying, "We are not prepared to look at work that scientists are doing in universities because we do not think that it is yet sufficiently close to the market place to give us a product." The gap in Britain is all too obvious, but the Japanese and Americans seem to be able to fill it far more effectively.
Britain's expenditure on research and development as a proportion of gross domestic product compares with that of the United States, Japan, Germany and France, but industry's portion is far too low. The latest figures which are available to us are for 1985, so the pattern may have changed significantly. If it has not, there is a serious problem. Ten years ago, industrialists may have said that 799 their company's profits were simply not big enough to enable them to invest heavily in research and development and that they were into survival, but survival depends every bit as much on research and development as on short-term considerations. Any engineering company, small or large, which does not realise the fundamental importance of planning its products for the future has only a short-term future.
§ Mr. Cash
Does my hon. Friend recall that, only recently, the Japanese announced that they had conducted a survey of which countries had come up with the most new ideas? It shows that about 80 per cent. of new ideas since the second world war have come from Britain. Perhaps we can build on the idea of our being awarded a gold medal for generating new businesses by matching research and development to the number of ideas that we have generated.
§ Mr. Batiste
I can confirm what my hon. Friend says on the basis of personal experience of the university for which I have acted for many years. I have seen many ideas which everybody knows will one day be winners but which need a great deal of money and time to develop. Time and again, the way in which we fund research and development and its integration with companies means that we run out of money too early, so our competitors fish successfully in our intellectual pool.
What worries me is that much of the work on standards for new products is taking place in Europe. Standardisation, which is fundamental to completion of the internal market, is under way. I am told that some 80 committees are at work on standardisation in Europe, and that 45 of them are chaired by German business men. I do not object to the Germans fighting their corner. What I am worried about, if that is true, is where our business men are. It will be no good British engineering coming to the Government in 1993 and saying, "We do not like the standards that Europe has adopted. They do not help us very much." The time to say that is now. They should be getting out there now and doing something about it.
The message to the Government and engineering from the debate must be to think now and act quickly, because we cannot afford to miss the boat. We have overcome the legacy of the past, and we must now face the challenge of the future.
§ Mr. Lewis Stevens (Nuneaton)
I, too, congratulate my hon. Friend the Member for Norwich, North (Mr. Thompson) on selecting this subject for debate. It surprised me to learn that there has been no such debate since 1980.
I agree with much of what my right hon. and hon. Friends have said about engineering having to perform in the future. My hon. Friend the Member for Elmet (Mr. Batiste) spoke about 1992 and said how important it is for engineering to be ready to participate fully in what will then be our home market. It is important to remember, however, that engineering is not one single industry, but a multitude of industries involving many skills. It is spread throughout the country. It is dangerous to generalise about whether it is good, bad or indifferent.
We have come through a difficult period and new industries have been introduced. Today's is not the same 800 industry as that of 10 or 15 years ago. Many industries have gone and some have declined, but they are being replaced by different needs and different skill requirements. The difficulty is meeting those requirements, but we must if we are to survive. The various reviews that have been carried out recently suggest that we are now encountering skill shortages, in both craft and technician abilities, and in professional engineering.
The development of professional engineering, particularly the mechanical, production and electrical areas, has improved over recent years. The courses being offered at universities are more realistic. My hon. Friend the Member for Elmet criticised the fact that many engineers do not learn languages as well. My hon. Friend might be aware that a polytechnic runs engineering courses which include language tuition, and one year of the course is spent working abroad. My hon. Friend the Minister and I know that polytechnic well.
§ Dr. Michael Clark
In my hon. Friend's list of engineers he mentioned production, mechanical, electrical and civil engineers. Will he add chemical engineers? If he does so, he will be the first to mention them in the debate.
§ Mr. Stevens
I owe my hon. Friend an apology for not mentioning the chemical engineers. Many more skills than I mentioned are required in the engineering industry.
Improvements are being made in the number of engineers and in the number of those being trained in universities and polytechnics, but that development still has a long way to go to meet the needs of the future. In many respects, engineering is not so attractive to people. Some of the factories are not streamlined and high-tech. Industry Year tried to get rid of the attitude that factories are always grimy, dirty and gloomy places. But, indeed, some of industry still is like that and will continue to be. It will not necessarily be inefficient, but it is not always the most pleasant of environments. Many people from the industrial areas know full well that their parents and their families did not want their children to follow them into certain industries—such as into the pits or the steel industry. It was much more acceptable to go into another profession, such as the law or accountancy, than to go into the engineering industries. It may have been a misguided idea, but it was real. Some people still have that attitude, which is understandable.
One must also consider a simple thing called pay, which has been mentioned in the debate. Engineering is not the highest paid profession, even if one splits it into different areas. Perhaps the civil engineers are the highest paid. I notice that a recent Confederation of British Industry—Manpower Services Commission survey referred to increases over 12 months compared with the average pay increase. The production engineers did not even achieve the average level. Not so many years ago it was reported that more people were studying the Welsh language than production engineering at university.
One of the keys to improvements in engineering must be our manufacturing systems. This is where Japan in particular scored over other nations because of its ability to develop its manufacturing systems. For many years it developed, not its design and product capabilities, but its production systems and manufacturing techniques.
If our young people are to be encouraged to go into engineering, a career structure must be realistically painted for them. In many professions, if one qualifies there is an 801 expectation that, provided one keeps up to date with, for example, changes in the law and so on, a career structure will develop along a straight line. In many cases, that is not so in engineering. The speed of change in industries does not necessarily give continuity or the prospect of continuity in a company. Changes do not necessarily constitute a continuation in a very specific area of that engineering ability, be it electronic or mechanical engineering. One is much more likely to be forced to change in the engineering profession than in almost any other. Not everybody welcomes that.
In the engineering profession, moving upwards has often meant having to move out of the environment in which one is a specialist. There may be a move into management. The survey showed that about 24 per cent. of people at director level are graduates or professionals in engineering or the applied sciences, which is not good. That has been commented on. However, it is not easy to move into the higher paid jobs without moving out. We lose many engineers, not so much into management as out of the engineering industries, where they can obtain higher wages in other types of commercial activity.
The present developments in training are in the right direction, but how much time do we have? We have until 1992, which may seem to be quite a long time now that we are producing more engineers, but, what happens in an engineering business if one does not have the skills at the level that one wants? The company does not cease to function. It is not like having a solicitor or a barrister who is not available to go into court because that qualification is needed. What happens is that a slightly lower ability and qualification are used and the industrial project continues at a lower level of performance. The eventual result is that the company or the industry performs at a lower level and gradually loses its competitiveness and ability to be in that market. We need to have those skills available. Our education system must help to encourage far more people to become engineers at all levels.
Our status as engineers will always be a little in question because there is a gradual development in status from the craft or lower skill level right through to the full professional qualification. People work together and help each other, and are in the same team. There is no rigid structure in the profession, and there is never likely to be, which means that only the professionals do one thing, and only people with another qualification do another. There is a mixture. This creates problems of how we are to develop our education system. More people need to be educated at the higher levels. An initiative has been taken by some universities, which have produced a brochure saying that if one has no mathematics or science A-levels, one can still be an engineer. That is an important move. People must have the mathematical abilities, but the initiative lies in trying to open a much wider gateway for people who want to enter the engineering profession.
We must ensure that sufficient people are encouraged into the engineering profession to give us the levels that we need. Many of our industries have suffered tremendously from reductions because of overseas competition. The machine tool industry, in which I worked at one time, has been reduced to a tiny industry compared to what it was 15 years ago, but it is still required for supplies.
If we are to develop our engineering and manufacturing bases we need machine tools, and if we cannot provide them ourselves they must come from abroad. Therefore, we are under tremendous pressure. Unless we can resurrect 802 some of our manufacturing areas, we shall lose a great challenge and an opportunity in trade. As a consequence, as our economy expands we shall have to buy in from abroad. Our industry will not be able to move fast enough to take advantage of such an expansion. The situation can be improved by collaboration between British companies and some overseas companies.
Engineering is a complex business, whether it is in the manufacture of machine tools or of cars. The risks factor in setting up and developing an engineering industry is much higher than in other industries. The need for skills, research and development, training and education is critical. It is probably too late to do anything in this Budget, and I do not know what my right hon. Friend the Chancellor will do, however, at some stage we will have little choice but to give extra impetus to the development of the engineering industry by looking at how taxation affects it and what tax incentives can be given. I know that there are incentives and initiatives for high technology and so on, but subsidising industry is not a wise way forward. I have no doubt that my hon. Friend the Minister, with his support for the manufacturing industries, recognises their difficulty, particularly among the small engineering and manufacturing firms. Our tax regime does not help those industries, and perhaps he can pass that message on to our right hon. Friend the Chancellor. These industries need special encouragement and support from the Government, not through subsidy, but through tax incentives.
The engineering industry is critical to everything that we do — for example, medicine and other service industries — and particularly to manufacturing and production. It gives us wealth in terms both of cash and standard of living. If it does not develop we shall have a much poorer standard than our competitors. It has improved significantly in the past few years, and if we want to build on that improvement there must be real efforts between the Government, industry and the engineering companies and professions. The situation must he examined and discussed with a view to bringing about an improvement in engineering opportunity.
§ Mr. Gary Waller (Keighley)
When I spoke in the debate on the Finniston report in June 1980 I said that the report described the implementation of its proposals as "an engine for change". I also said:We may think that that implementation will be enough and that as a result all the problems will be solved. Nothing could be further from the truth … The engine will need continually to be fuelled and to receive regular maintenance if it is to operate efficiently and to the benefit of engineering and of Britain as a whole." —[Official Report, 13 June 1980; Vol. 986, c. 1066.]Considerable progress has been made in the past eight years, particularly with the creation of the Engineering Council, which was the principal recommendation of the Finniston report. At best, these changes have enabled us to hold our own, but our international competitors have moved ahead swiftly. It is true that productivity in the British engineering industry has increased by over 60 per cent. in this decade, and that is a remarkable performance. However, we still lag behind several other highly developed countries that are our competitors.
Perhaps today, even more than in 1980, the challenges that we face and the problems that we must overcome are essentially ones of human resources. Because unskilled and 803 semi-skilled jobs have been taken over by machines, the need for technologically qualified people has increased greatly, and it will increase even more.
When we compare the proportion of our directors and senior managers who have engineering qualifications with the relevant figures, for instance, in West Germany, our deficiency is particularly apparent. Eight years ago, I referred to the benefits of broadly based education courses which provided training and practical experience not only in engineering but in management techiques. Unfortunatly, the industrial technology and management course at Bradford university to which I referred then is no longer in existence. On the other hand, there is greater recognition of the need for the right kind of education and training. That has to be a continuing feature in a changing industry and a changing world.
The Finniston report took into account the proposition that the status of engineering and engineers was too low and needed to be raised. Despite the good work of the Engineering Council and numerous other bodies, that remains the position today. Too many people think that engineering is all about metal-bashing and dirty overalls. Few appreciate the intellectual challenges involved. One of the problems that we identified in 1980 was the generally poor image of the private sector, in which a high proportion of engineering jobs is located. Vastly improved profitability and the Government's nurturing of the enterprise culture have done much to correct that state of affairs. However, engineering still suffers in comparison with other parts of the private sector.
If we are to change that attitude, as we must, we cannot start too young. The inclusion of science and technology in the national curriculum which is an intrinsic part of the Education Reform Bill, is a big step in the right direction. However, only if the courses are taught with imagination and are stimulating — and only if companies can demonstrate to school leavers the career opportunities and attractive conditions in engineering — will the most talented and highly motivated young people become potential recruits to the industry, in which skills shortages are becoming daily more apparent.
I am sure that my hon. Friend the Member for Elmet (Mr. Batiste) is right to say that the industry will have to enthuse young people and draw them towards it.
My hon. Friend the Member for Bolton, North-East (Mr. Thurnham) made an important point: half those potential recruits — the girls — will not even consider engineering unless they come to realise that engineering is just as much open to them as it is to boys. That is something to which the Engineering Council has rightly devoted considerable attention with its initiative devoted to career breaks for chartered and technician engineers who are women. There is evidence that gender expectations are imprinted at a very early age. On my many visits to schools in my constituency I always look hopefully for signs that girls are not led to believe that certain jobs traditionally associated with boys are closed to them.
Integration may not always be the right answer.
§ Mr. Barry Field (Isle of Wight)
My hon. Friend may be interested to know that I recently went round Fawley oil refinery with the Industry and Parliament Trust. I was surprised to find, in the hard environment of an oil 804 refinery, that all the control room engineers were women. That shows that more and more women are becoming engineers.
§ Mr. Waller
That is encouraging news, as is the fact that the proportion of women trainees is increasing. However, it is increasing from a low base. We are now up to nearly 10 per cent. whereas the figure was perhaps half that when we debated the matter eight years ago. We have a long way to go, although I am encouraged by what my hon. Friend says.
I pointed out that integration at junior school level may not always be the right answer. The other day I visited Ingrow first school in Keighley. I was interested to see a group of girls playing together with construction and engineering-type toys. The teacher pointed out that if boys and girls play together, the boys invariably elbow the girls away from those toys, so the girls are allotted a separate time when they have full use of them. That seems a practical response to the circumstances that have probably prejudiced many girls against engineering and technology in their most formative years.
I spoke a moment ago, as in 1980, about the status of engineers. A factor that has put Britain at a disadvantage in the past is the unfortunate way in which status has been judged. It is not to do with white collars or blue collars or whether one has a key to the executive washroom. The successful companies that I visit are nearly always those which show a more positive recognition of the fact that everyone—management and shop floor workers alike—has an interest in achieving success for the company.
Here I believe that great progress has been made in recent years. As the need for an ever larger proportion of the work force to possess engineering qualifications continues to increase in the future, good employers will and must give priority to programmes which involve continuing training throughout working life. They must also develop their links with educational establishments in their area, especially as demographic factors in most areas mean that the available pool of potential recruits will become smaller.
Like my hon. Friend the Member for Nuneaton (Mr. Stevens), I wish to say something about the importance of the machine tool industry. I have a constituency interest as Keighley has traditionally been linked with that sector. Landis Lund in my constituency has won contracts to provide machine tools to many motor manufacturers and in the most recent year it won the Queen's Award for technological achievement. It is one of the leaders in the industry. Another famous company, Dean Smith and Grace, has retained jobs by keeping in the forefront as new advances have taken place and by changing its range so as to compete effectively. Unfortunately, many other machine tool companies have gone down with the loss of many jobs, but those which have shown their willingness to embrace change have survived.
The European market now takes nearly 40 per cent. of our exports. The significance of that market is shown by the fact that the largest growth in all our export markets in 1987 was in Spain, which increased from £800,000 in 1986 to £17.9 million in just one year, becoming our fourth largest market abroad. That is because previous tariff barriers were removed and that market was opened up to us. That is clearly a pertinent example. Reference has already been made to the completion of the European market in 1992. If British skills and enterprise are to pay 805 dividends, we must take full advantage of the opportunities that that offers. Great strides have already been made in the area of common qualifications, with the Engineering Council leading the way, but British companies still lag behind many of their European counterparts in their perception of the challenge posed by the completion of the European market.
In 1987, the machine tool sector improved its position by expanding total export production, but our estimated share of world machine tool exports is ridiculously small at 2.9 per cent. in 1986 compared with West Germany's 22.9 per cent. I do not believe that the future need be so bleak. I believe that the downward spiral can be reversed. A major threat, however, not just in export competition but in import penetration, comes from the far east. Taiwan, for instance, nearly doubled its share of the British market in 1987. British industry is anxious to compete on equal terms, but many firms such as Dean Smith and Grace point out that they cannot compete with the credit terms offered by companies in Japan, Taiwan and Korea. Too often, we have lost orders not through failures of quality, price or delivery time, but because our competitors could offer much better credit terms backed by their Governments. The Department of Trade and Industry—the Department for enterprise—must devote attention to that area to understand the concerns of the industry and the threat to thousands of jobs.
Anyone who doubts that we need a strong engineering industry should consider the example of Switzerland, which has an enviable reputation in the services sector but also does very well in engineering, as shown by the fact that it has more than 9 per cent. of the world export market in machine tools — a far greater share than Britain, which is a much larger country than Switzerland.
A thriving service sector can exist only with a thriving manufacturing base to service. To some considerable extent, in this country that means, and will continue to mean, engineering. The future of engineering is exciting, and whether we make the most of the opportunities depends, above all, on whether the industry gets the human factors right.
§ Dr. Michael Clark (Rochford)
I am grateful for the opportunity to speak this today, because I wish to bring to the attention of the House and my hon. Friend the Minister the chemical engineering industry and all that it contributes to the standard of living and the wealth of the nation. I remind my hon. Friend that for many years I worked in the chemical engineering industry at ICI, managing plants constructed by engineers, and working with them in commissioning such plants. I should declare an interest, as I am a parliamentary adviser to the British Chemical Engineering Contractors Association. I am proud and pleased to be so, because I am aware of its valuable work in helping in the manufacture of the bulk chemicals that help us in so many aspects of our lives.
By their very nature, chemical engineering companies are large and are heavily dependent upon professional engineers. As my hon. Friend the Member for Norwich, North (Mr. Thompson) said, the training of professional engineers is as vital to the chemical engineering industry as it is to all the other engineering industries. I congratulate my hon. Friend, not only on coming first in 806 the ballot, but on choosing for debate a subject as important as engineering. As he said, it has not been debated in the House for eight years.
The chemical engineering contractors are important resources of trained engineers. As a viable industry, it offers engineers employment that will give experience in feasibility studies, design consultancy, project management, procurement, commissioning and the maintenance of heavy and complex plant. During the last year for which figures are available, the major contractors had a combined turnover of about £500 million, but installed capacity of machinery was about £3 billion. Therefore, there is an escalator from the work obtained by the large contractors to other contractors and suppliers, which then benefit.
About 30 per cent. of the contracts obtained are exported, and with export orders there is always the opportunity for work to be placed in this country. It is therefore important that Britain provides a good, substantial basis of chemical engineers to pass jobs to smaller companies which could not have obtained such work without the marketing help of the larger companies.
The growth in chemical engineering has been largely in the nuclear industry. I am sure that the House will be pleased to know that chemical engineering contractors are helping with the reprocessing of nuclear waste and effluent treatment to ensure that all discharges, whether gaseous, liquid or solid, are reduced to as harmless a state as possible. Indeed, the effluence now going into the Irish sea from the Cumbrian coast has so little pollution that, in many ways, it is cleaner and more purified than discharges from conventional industries.
The growth of work in the nuclear industry was necessary to offset the decline in work in the oil industry. It is perhaps surprising that we have heard little about the engineering that is taking place in the oil industry, particularly in the North sea. While I understand that production engineering, as mentioned by my hon. Friend the Member for Nuneaton (Mr. Stevens), is vital, and mechanical engineering, as mentioned by hon. Members including my hon. Friend the Member for Birmingham, Northfield (Mr. King), is also important, heavy structural and chemical engineering have enabled us to exploit our North sea oil. Some concentration should be given to that.
The major chemical engineering contractors employ 10,000 people, a large proportion of whom are highly trained professional engineers whose disciplines are multiple. There are structural, mechanical, civil, instrument, stress and chemical engineers. Ever since I took a great interest in science at school I have believed that science enhances the standard of life of people throughout the world. Science has enabled us to have better housing, and improved food and more of it — although, unfortunately, still not enough in some parts— and it has revolutionised our clothing by the use of man-made fibres, which are better and cheaper than many natural ones.
As a chemist I have been proud to be part of a profession and industry that have contributed towards pharmacy and improved our standard of health, getting rid of disease and pestilence — some of it being erradicated altogether. That has been achieved through new scientific materials and developments in science and chemistry. Although it is first done in test tubes or glass flasks in laboratories, ultimately, when we want to use these materials in thousands of tonnes, we must construct 807 chemical plants to manufacture the materials in the quantities needed. This is where chemical engineering contractors some into their own, devising the massive plants that can reproduce on the 10,000-tonne scale that which a scientist will produce in a small test tube in a laboratory.
Chemical engineering contractors have contributed to the development of nuclear fuels. All nuclear plants are built by contracting engineers and they exist to provide not only cheap electricity, but the electricity that is essential for the future when the fossil hydrocarbon fuels run out. If nuclear energy is controversial, let us bear in mind that large contractors are also involved in providing the machinery and equipment for alternative energy sources, such as windmills, wave machines and barrages across rivers.
Contractors have a part to play, not only in offshore oil and gas production, but onshore, where exploration is taking place, as it has done in my county of Nottinghamshire for many years since well before the war, and now in the south of England on Wytch Farm and elsewhere. Coal processing and conversion into other materials is another part of the work carried out by chemical engineering contractors. At present, environmentalists are worried about the amount of sulphur in flue gas. It is the chemical engineering industry that will find the right equipment to take the sulphur out of power station flue gases to prevent so much acid rain, not only in the United Kingdom, but in Scandinavia and Germany.
If it were not for the large artificial fibre plants developed largely in the north of England to produce terylene, nylon and other polyesters in large quantities, the man-made fibre industry could not take advantage of scientific experimentation and development. I worked for some time in the plastics industry. When I worked in County Durham and Yorkshire, the large plants at Wilton and Billingham were developed and built with great skill by people from that part of the country. A host of experience was brought together to produce the plants to enable plastics to be brought forward that could revolutionise manufacturing, whether for the motor industry or the aircraft industry, for domestic appliances in the home or for use in myriad ways throughout the country.
In 1945, when the war was over, polythene had been used only to help develop the radar system. ICI considered that there would not be a market for more than 500 tonnes a year. It was considered to be a scientific polymer with particular application due to its dialectric constant. As I have said, it was used in the development of radar to help us win the war. There is now a polythene market of well over 25 million tonnes. That demonstrates how the market has developed.
We know that not everything is plain sailing in the engineering industry. There have been some setbacks. The price of oil has fallen and the high cost of the pound, which has made the value of oil so low in terms of sterling, has meant that exploration in the North sea has been greatly curtailed. The orders placed with large chemical engineering contractors have been cut. Britain is not the country with the cheapest interest rates, and I well understand why that is so. Britain has a booming economy, and we must be careful with interest rates so that we do not fuel inflation. However, if interest rates are high, 808 major contractors are not helped when they wish to obtain orders overseas. Similarly, high interest rates are not helpful in terms of export credit to overseas companies. In recent years, few large-scale chemical plants have been built. If there are fewer plants, there are more competitors for them. Countries such as Japan and Germany are giving credit on better terms than can be given from this country.
Despite all that, engineers in general, and chemical engineers especially, are not whingers. They get on with the job. They see the problem and they solve it. They treat difficulties as opportunities. Is that not what engineering is all about? Problems are seen as opportunities, and engineers use their skills to overcome them.
It is important that we retain a basic British chemical engineering industry. It is important that we retain expertise here so that we do not have to import all the time. It is essential to ensure that we have services that we can export for foreign currency to keep our balance of payments right. We want British chemical engineering companies that can develop and become repositories for advanced technology. We do not wish to import a piece of advanced technology for four or five years and then let it go back to the United States, Germany or Switzerland. We want to develop advanced technology and retain it. We must ensure that our advanced technology capabilities grow by experienced engineers being able to pass on their knowledge to young trained professional engineers who are entering the industry. We wish to provide direct employment for professional engineers who are leaving our universities. By having a British chemical engineering industry we can ensure more effectively that the subcontracts that are placed go to British companies, not overseas companies.
It is important that the profits of large engineering companies should remain in Britain and not be remitted abroad to parent companies. If there is remittance abroad, we can be sure that investment will take place abroad. If profits remain in this country, they will be invested here and our engineering industry will develop a larger base.
The desire of most British companies to export, and the Government's desire to assist them to do so, come together happily. I know that chemical engineering contractors greatly appreciate the assistance that has been given by the Foreign and Commonwealth Office towards obtaining contracts abroad. Indeed, chemical engineering companies in this country have shown their appreciation by helping the Foreign and Commonwealth Office to run training courses for commercial officers, and, five or six times a year over the past few years, have helped to ensure that commercial officers in overseas posts are aware of the availability of British expertise and the need to use it abroad.
Therefore, it was somewhat disappointing when, in his report last year, the Comptroller and Auditor General, commenting on the work of commercial overseas posts, criticised companies for concentrating too much on large firms instead of attempting to bring about additional exports through promoting small and medium-sized companies. Small and medium-sized companies are close to my hon. Friend's heart. In large, heavy engineering, such as the chemical engineering industry, it is difficult for small firms to get orders that are appropriate to their size. It is difficult to get orders worth £10,000 to £30,000. If a large engineering company gets a major contract, the spin-off for smaller companies is significant and important.
809 I shall illustrate that by giving three quick examples. They represent total contracts of £480 million. These contracts provided 1,200 man-years of work to chemical engineering contractors, but those 1,200 man-years of work became 20,000 man-years of work for smaller suppliers. Therefore, there was a multiplier factor of 16.
My first example is a chemical plant. It was built abroad and supported by the Export Credits Guarantee Department, and well supported at that. The contract was worth £175 million. Of that £175 million, £136 million went to equipment suppliers, fabricators and subcontractors. That contract was worth 800 man-years of work for the contractor, but 10,000 man-years of work for sub-contractors and suppliers. Six hundred suppliers were involved, each one of which passed on work to smaller sub-contractors. It is believed that, overall, about 2,000 or 3,000 small companies benefited.
The geographic spread of the work is also interesting. Although the contractors may have had head offices in London, the work that they were able to farm out was 14 per cent. in Scotland, 30 per cent. in the north of England, and 21 per cent. in the midlands, leaving only 35 per cent. for Northern Ireland, Wales and the rest of England. Many companies benefited from that major contract, and most of them were in Scotland and the north of England.
The second example is a town gas plant — also abroad — the contract for building which was won against Japanese competition and Japanese financing. In this case the contract was worth £22 million. Of that £22 million, £15 million was spent in the United Kingdom, again proving the point that if a British company wins a contract, work comes back to the United Kingdom. In this case 60 per cent. of the work that came back to the United Kingdom was in Scotland and the north of England, representing 517 orders for 300 companies; the average order value being about £10,000. Those £10,000 orders could not have been obtained easily, if at all, by smaller companies.
My third example is a major industrial complex, also abroad, and also well supported by ECGD, for which the contractor was grateful. The contract value was £250 million, of which 62 per cent. was spent in the United Kingdom, again distributed among 500 United Kingdom companies and bringing to them 9,000 man-years of work.
I am sure that my hon. Friend the Minister, with his interest in small businesses, will appreciate what large businesses do to help small ones and, conversely, what small businesses do to help large ones. The industrial structure of any country, particularly this one, is complex and interrelated. We need small and medium-sized engineering and manufacturing companies and they, in turn, need the large chemical engineering contractors, and they need them to be British if they are to receive a fair share of the work that is being obtained by them.
Those large contractors need a steady and reliable flow of top rate professional engineers. That can be achieved only if the Government continue to ensure that they support universities, which are training the professional engineers. Without that seed-corn coming from universities, the rest of the chain breaks down.
It is important that we have debates like this more often than once every eight years. Industry is ever changing. If we wait eight years before trying to adjust the controls on industry, we will find that the pendulum has swung too far. 810 I am grateful for having had the opportunity to speak and I again congratulate my hon. Friend the Member for Norwich, North on tabling the motion.
§ 1.6 pm
§ Mr. Barry Field (Isle of Wight)
I should like to associate myself with the remarks that have been made by several speakers who have congratulated my hon. Friend the Member for Norwich, North (Mr. Thompson) on choosing this subject for a debate. I should like to thank my hon. Friend the Minister who has stayed throughout the debate and listened to all our speeches. I say that because I am probably tail-end Charlie. It is unusual to find Ministers staying in the Chamber throughout the proceedings on a Friday.
I hope that my hon. Friend the Minister will forgive me if I scurry away before I hear all that he has to say. Courtesy of British Rail Engineering Ltd., the trains are no longer running to Portsmouth Harbour station and I have to catch a coach in order to catch my ferry.
My hon. Friend the Member for Elmet (Mr. Batiste) rightly drew attention to the incredible span of progress that we have seen in engineering and technology, particularly that which our forebears have seen from the age of the horse to the microchip. I thought that he was going to tell us something we did not know when he said that the telephone had been placed in the stable. I thought that perhaps we were going to hear about a horse that could answer it.
It might seem a little extraordinary, given my long background in a service industry, that I should choose to speak in an engineering debate. However, I am particularly proud of being a member of the Worshipful Company of Turners, a city livery company. It was the first of the city livery companies to sponsor technology in colleges and to place lathes around the country. It runs an award scheme every year with the Institution of Mechanical Engineers and provides a first prize of £1,000 for the young students who come forward with the most excellent technical drawings and mechanical innovations.
I sometimes sit at the award ceremonies, seeing the master and his wardens in their fur-trimmed robes in ancient surroundings. I sit with the nervous young students who come from universities and technical colleges from around the country. They come to London with their mums and dads to receive their awards, which are usually accompanied by a gold, silver or bronze medal. I contrast that with the view that the nation has of engineering. It is seen as being represented by a grubby blue overall covered in oil stains. I wish to address my remarks to the status of engineering in this country. All too often the perception is of a dirty and noisy industry and grubby hands.
The best example of the way in which we denigrate engineering is that of the nation's housewife. My wife continually tells met that she calls out an engineer to repair the washing machine. I continually tell her that she calls out a trained mechanic. Quite how that washing machine knows to break down just as I arrive at the House I have never worked out.
In Germany, an engineer would be called "Herr Doktor." In Japan and America, the engineer equates well with the rest of the professions. In Britain, we think of engineers as being people who repair washing machines and televisions.
The motion on the Order Paper says: 811to develop engineering performance up to and above the standards of leading industries overseas.One of the ways in which we can do that is by highlighting the report of the Engineering Council entitled "Management and Business Skills for Engineers". The council argues that Britain's rivals overseas appear to make much better use of qualified leadership in the running of their industries. The proportion of company directors who have graduate or other professional qualifications in the United Kingdom is 24 per cent., compared with 62 per cent. in West Germany, 65 per cent. in France, and 85 per cent. in Japan and America. We must ask whether we are making the best use of the potential of those who train as engineers.
We need more incentives for our young people people to train as engineers. My hon. Friend the Member for Norwich, North in his excellent speech, spoke of the decline in the number of young people between the age of 16 and 19 coming forward for training.
He may be interested to know that in a recent Manpower Services Commission report on the travel-to-work areas in the south-east region, the Isle of Wight showed the greatest projected demographic reduction—of 15 per cent. — in 16–19 year olds throughout the region. That shows that we must gear ourselves to train those who are in other skills, or who are unskilled, to become mature people working in engineering. Otherwise we shall be faced with a tremendous skills shortage in this country.
For the life of me I have never been able to work out why we pay the same student grants to those who wish to become sociologists or artists as we pay to those who wish to become engineers. I could pose the question why we pay grants at all. Perhaps there should be loans, but that is a separate issue and I do not want to enter those unchartered waters.
The nation is crying out for engineers of every type. Chemical engineers in particular are in short supply at the moment. I cannot understand why we do not pay a substantial premium to students who wish to pursue engineering disciplines.
§ Mr. Batiste
Does my hon. Friend welcome the growing incidence of major companies who sponsor engineers at university with a view to familiarising them during their course with the activities of their company and taking them on board once their course is completed?
§ Mr. Field
My hon. Friend raises an interesting point. Often when I go round factories in my constituency and ask managing directors what they think of the training of colleges and universities, they say that they must begin all over again before they can employ the people at the workplace. The scheme to which my hon. Friend has alluded is very helpful in that regard. There must be much more practical knowledge of the uses to which we are putting our graduates' educational qualifications than there has been in the past. I believe that the Department of Education and Science is now addressing that and that such ideas are becoming much more fashionable in education. I am sure that my hon. Friend will agree that the universities are becoming much more attuned to industry's needs. Although we have a long way to go, the position is definitely improving.
812 If one examines the figures relating to engineering in this country, one can begin to see its tremendous value for our economy, both at home and abroad. It is estimated that engineering employs over 2 million people. As has already been said, almost 10 per cent of our gross domestic product is accounted for by the engineering industry, which provides 30 per cent. of our exports. It is estimated that in 1987 there was £95 billion of engineering sales, of which £34 billion were exports. From those figures we can begin to see the tremendous effort that goes into engineering and the way in which it influences our economy.
I give my hon. Friends a few illustrations of the way in which engineering affects our lives. My constituency, the Isle of Wight, has a small population of just 133,000. We have the second highest retired population of any county in the United Kingdom. From that, one can see that the working population on the island is probably quite small. However, if my hon. Friends are lucky enough to find themselves serving on one of the Select Committees that are going to some of the more exotic parts of the world—as has been commented on from time to time—and if they happen to find themselves travelling on a Boeing aircraft, the chances are that the wing assembly was assembled by Westland Aerospace in East Cowes. When they come into land — I hope that it will be a happy landing—and especially if landing in China, the chances are that the weather radar that pilots the aircraft into the airport was manufactured in West Cowes by Plessey. If the motor car that takes them from the airport to their hotel happens to be a turbo model, it is a 50–50 chance that the turbine in that turbo was manufactured on the Isle of Wight at Ryde by Truecast Engineering. If, perchance, they travel to their hotel from the airport by train, there is a sporting chance that the air conditioning in that train—it is almost a 100 per cent. chance in this country—was manufactured by Temperature, part of the Norcross Group, at Sandown. If while travelling on the aeroplane they are busy playing with their IBM personal computer, the membrane keyboard of that would almost certainly have been manufactured by Nameplates for Industry in Newport on the Isle of Wight.
I hope that that gives my hon. Friends and, indeed, some of the young people listening from the Strangers Gallery, a flavour of what engineering is all about. Indeed, it may encourage those young people to look forward to a career in this industry which, time and time again—
§ Mr. Patrick Thompson
Does my hon. Friend agree with the point made earlier in the debate that it is not just manufacturing industries which benefit from more and better engineering skills, because the service industries depend on engineering products which have been designed by our engineers, and that we can get more jobs for our young people in the service industries by having a more successful engineering industry?
§ Mr. Field
My hon. Friend has raised a pertinent point. I began my speech by telling the House that I am a member of the Worshipful Company of Turners. An eminent speaker once addressed our livery company and excelled himself by saying what a pity it was that our craft had died and was no longer in being. As a result of that, the liverymen's sponsorship scheme began. We are also associated with the Royal Electrical and Mechanical Engineers and have an annual award scheme for it.
813 People seem to think that engineering does not affect their lives. Somebody once told me that when we eat a loaf of bread, we should remember that an engineer has produced it because he probably made the spindle on the oven that baked it, or the bearings or the shaft that drives the stones that milled the wheat. Engineering is the fabric of our society. It has brought tremendous advantages. I hear people saying how sad it is that the craft of turning has fallen into disuse, but I wonder how they think the wheels on their car go round.
§ Dr. Michael Clark
While the craft of turning may have fallen into disuse, it has done so only as a result of advanced engineering which has enabled numerically controlled machines to come in. While one engineering skill may decay, another takes its place. Engineers feed on engineers, and that enables some technologies to leap forward while others become redundant.
§ Mr. Field
I hope that my hon. Friend accepts that there is just as much craft in turning on a multi-headed machine which has a computer programme as there was in the previous generation when a chap applied the tool to the lathe.
Opposition Members often talk about the decline in industry. In my constituency, Thorn EMI makes parts for the Kenwood mixer. The spindle which goes through the middle of the mixer used to take one and a half minutes to machine on three different machines. It now has a multipurpose machine which produces the spindle in 30 seconds. That is where the jobs have gone.
The British Hovercraft Corporation, which succeeded Saunders Roe, at East Cowes, and which is now known as Westland Aerospace, once employed more than 5,000 people. There have been a substantial number of redundancies. It makes many products and some of the company's subsidiaries are at the forefront of electronic engineering technology. One of the more interesting components that it produces on a multi-headed machine is the air intake for the E101 European helicopter, which is made in titanium. It is a difficult component and comprises several turnings. Each component is worth £10,000. They are not very big. If the engineers set the machine up slightly wrongly, an incredible value is written off in scrap.
1 hope that my hon. Friend the Minister will consider why we do not load incentives in favour of students who wish to study engineering. Engineering is a difficult qualification to obtain. It is a discipline in itself. I have long puzzled over why a nation which is short of engineers is not prepared to give incentives to students in the form of grants. Indeed, we might give no incentive at all to students who wish to pursue disciplines which are in surplus. It always seems extraordinary to me that year after year we turn out more sociologists than we need, who then spend their lifetime trying to gain employment in the House, whereas the nation is crying out for engineers.
§ Mr. Austin Mitchell (Great Grimsby)
I congratulate the hon. Member for Norwich, North (Mr. Thompson) in his absence on winning the ballot and introducing the motion. I hope that he will come back in time to hear my congratulations to him on the sensitive wording of the motion, which is wet speak for, "Things have been bad but they have been getting better lately. Please do something 814 about it before we get clobbered in the engineering industry." The rest of the debate has reinforced that message to the Government. It has set the tone for an interesting debate.
I am becoming a connoisseur in my role as "Leader of the Opposition (Fridays)". On some Fridays I am the sole Opposition Member as well as Leader of the Opposition. Fridays can become a Back-Benchers' play school. Some odd creatures come out from under some odd stones and talk some extraordinary economic rubbish. Thanks to the sensitive wording of the motion, today's debate has not been like that.
Opposition Members have not been apparent in large numbers, largely because of the odd and silly terms of debate on previous Fridays, particularly last Friday. That has put them off attending Friday debates. But today has been different. While the Labour cat has been away, the mice have played on the Conversative Back Benches to great effect.
We have heard an interesting analysis of the problems of the engineering industry. There have been some strong indictments of the Government's record on the industry. The right hon. Member for Brentford and Isleworth (Sir B. Hayhoe), again in wet speak, gave a strong critique of the Government's record. The hon. Member for Harwich (Sir J. Ridsdale) put in a passionate plea, which Opposition Members would second, to get interest rates down and allow industry to compete on more equal terms. The hon. Member for Birmingham, Northfield (Mr. King) gave a damning critique of Government policy towards the Rover Group and the car industry in general. Emphasis has been laid on the inadequacy of training and of research and development.
In all, there has been a chorus of complaint, again in wet speak. I do not expect Conservative Members to start saying to their Minister, "You are making a mess of it," but they have said that in carefully modulated code. The essence of what they are saying is "Things are not well in the industry. Do something about it." That is the message that has come over.
§ Mr. Roger King
The hon. Gentleman said that I had offered a damning indictment of the Government's failure to back the car industry. If he reads my speech, as I hope he will, he will notice that I said that the company has invested large sums of money in new products, is represented in the market place by cars that are considered to be outstandingly successful, and has enjoyed its best ever financial year. Surely that is not a damning indictment.
§ Mr. Mitchell
I enjoyed the hon. Gentleman's speech. I endure most speeches by Conservative Members. I do not want to remove the effect of that enjoyment by correcting what the hon. Gentleman said. He said that there were problems with Rover's continuance as a volume car producer and that it might not make it. That is a responsibility of the Government. Will they back the company as a volume car producer? The hon. Gentleman said that he did not want negotiations to be solus cum cola with British Aerospace — other bidders should be allowed. I draw the inference from that that the Government should continue to back Rover. In fact, they are washing their hands of Rover. The hon. Member made a good speech about how the position of Rover does not tie in with the Government's policy, so it is asking the Government to do something.
815 That is not uncommon in the engineering industry. I have here an editorial from The Engineer of 10 March, the latest edition, on the trade figures in the manufacturing trade. It says:The really worrying part about the figures is that high technology and growth sectors where we are doing well are numbered in single figures. The sectors where we do best are all too often 'traditional' product, which is a euphemism for industries whose heyday has passed … Every sectoral deficit indicates goods which British companies and consumers are apparently keen to buy, but which British manufacturers make in insufficient numbers, or to the wrong spec, or the wrong quality, or the wrong price.The problem with all these complaints about the engineering industry, its training and competitiveness is a Department of Trade and Industry that knows nothing about trade and is not characterised by any industry or any knowledge of any industry except advertising. We have Lord Young of Graffham, Saatchi and Thompson, who knows little about the needs of industry, although he might know about the needs of property development, and a Department of Trade and Industry which has embarked on a hands-off policy towards industry, and which is concentrating its resources on spending. This year it has a budget of £13.3 million for advertisements to convince industry that it is doing more, when it is doing less. This Department does not have an industrial policy, and in today's world that is a policy for the death and decline of industry. Industry is involved in an international struggle. It is up against competitors who are backed and supported to the hilt by their Governments and who, in some cases, are financed by their Governments. They are certainly helped in that international struggle to a far greater extent than is our industry by a Department of Trade and Industry that wants to wash its hands of the whole business.
§ Mr. Barry Field
I am sure that, like me, the hon. Gentleman will remember the Labour Government's attempt at directing the industrial base with a selective employment tax which was supposed to move employment away from the service sector and into industry. The result was that thousands of people went on the dole. That was a failure of policy.
§ Mr. Mitchell
If the hon. Gentleman wants to plough through his scrapbook for 1965, I shall leave him to get on with it. We are talking about the 1980s and the struggle that our industry has to survive. Industry, especially engineering industry, is sent into that international struggle with nothing better than the Prime Minister's sermons and Lord Young's advertisements ringing in its ears.
§ Dr. Michael Clark
Let us not go back with scrapbooks, but stay with the 1980s, and in particular the next few days. Would the hon. Gentleman welcome a reduction in taxation in a way that would help companies to be more competitive? For example, would he welcome a reduction in corporation tax if that should come about next Tuesday?
§ Mr. Mitchell
That is all clever political stuff, but the main burden on industry is electricity charges, which have been increased to fatten up the electricity industry for privatisation. Another one is high interest rates, which are higher here than in any of our competitors, and another 816 is an exchange rate that is rapidly becoming grossly overvalued. All these are shackles on industry's ability to compete. The hon. Gentleman asks me to anticipate what will happen in the Budget. I am not an expert in abnormal psychology. I cannot do that, but I can say that these are real and present burdens imposed as a result of Government policy.
§ Mr. Mitchell
I shall give way in a moment, but I wish first to pursue this theme. There is lack of consultation, characterised particularly in the engineering industry. The Engineering Employers Federation has made consistent attempts to enter a dialogue with the Department of Trade and Industry. It particularly wants to do so before the creation of an internal market, which will sharpen competitive pressures on the industry. It requires close co-operation between the Government and industry, because a uniform internal market will harm the peripheries. It focuses growth and development on the expanding centre, and unless there is co-operation between industry and Government Departments, that tendency to weaken the peripheries will be heightened.
§ Mr. Patrick Thompson
Surely the hon. Gentleman will concede that it is wrong to return to the gloom that was purveyed during that debate in 1980, when all the evidence suggests that engineering manufacturing production and productivity are up. It is irresponsible of him to give a gloomy picture, it goes against all the facts.
§ Mr. Mitchell
As I said, the hon. Gentleman's motion is very sensitively worded. It is true that the production and productivity figures are up — largely on those for 1981 rather than on those for the 1970s. They are certainly not as high as those of our competitors. That is the problem. I shall deal with that distinction in a moment.
I am talking about the failure of the Department to co-operate with the industry, particularly with the Engineering Employers Federation, which seeks to enter into a dialogue with it. At the CBI conference at the end of 1986 James McFarlane presented a paper calling for an industrial strategy for engineering. The Government have consistently refused to get involved. Indeed, at the Engineering Employers Federation dinner in February, Lord Young attacked the need for an industrial policy.
The Engineering Employers Federation has given up the idea of trying to work with the Government and has gone in for an industrial forum—an industry-only think tank. It thought, "We will do it ourselves because Lord Young will not play ball." An editorial in The Engineer of 25 February said:It's all falling on deaf ears because the government, and Lord Young especially, appear to have the fixed idea that talking to industry and giving industry advice and intelligence has to mean controlling industry down to the fine detail. It doesn't have to be that way, and it isn't that way in Japan, in West Germany, and other countries where governments have apparently fruitful partnerships with industry.The Government dogmatically refuse to co-operate with the industry. That is the subject of the motion. Their attitude is also characterised by their unwillingness to help the industry in the crucial matters in which it needs help—not only in training, but in research and development. Our spending on R and D is low. According to a written answer on 16 February, research and development financed by industry in the United Kingdom was 1 per cent. of GDP compared with the Federal Republic of 817 Germany, 1.6 per cent.; Japan, 1.8 per cent.; and total spending on research and development as a percentage of GDP in the United Kingdom was 2.3 per cent. compared with the Federal Republic, 2.7 per cent. and Japan, 2.6 per cent.
Even those figures may not be wholly indicative because, as the aerospace manufacturers point out, many Ministry of Defence contracts are not real research. The Government's efforts have been fairly minimal in an area of activity crucial to the economic health and the competitive edge of British industry.
§ Sir Julian Ridsdale
The reason why Japan can spend so much on research and development is that its manufacturing industry makes huge profits. Thanks to the Government's policies, we too are now making very good profits in our industry and we shall be able to make improvements where they are needed.
§ Mr. Mitchell
The hon. Gentleman's fire was well concentrated on the Government when he attacked their high interest rate policy. I do not want to attract it to me. I would point out that the Government allocated £25 million to spend on gallium arsenide research. That was just over a year ago and the money has still not been spent, although the advertising budget has been pushed up to £13 million. The Department is providing only £5 million for a super-conducting centre at Cambridge, whereas Japan spends £150 million on its international super-conducting centre.
It is not only profits that we lack; it is Government support for research and development. It is vital that the Government should help industry. The engineering industry particularly needs help to recover from the mess that the Government have created. The hon. Member for Norwich, North mentioned the debate that took place in 1980, at the height of the period of damage to the real economy, and particularly to manufacturing and engineering sectors. The hon. Member for Harwich nearly referred to the Prime Minister as an engineer.
§ Mr. Mitchell
Yes, he corrected himself. I have heard the Prime Minister referred to as a barrister, a mother, a dishwasher and a preparer of meat paté. She is clearly a woman of many parts and a great dramatic actress, but she is no engineer, except in the sense that Hoover, who "drained, ditched and damned" the United States in three years, was said to be a great civil engineer.
The Prime Minister's economic achievement was similar. We had high interest rates, an overvalued pound, deflation of demand in this country and a drastic deterioration in the terms of trade. The loss in manufacturing industry, which hit engineering primarily, amounted to one fifth of capacity, 28 per cent. of employment and 1.8 million jobs. There was nothing inevitable about it. No other country experienced a decline on such a scale. It was caused by overvaluation of the pound, which made imports cheap and exports dear, pricing us out of the market and slashing profits.
The hon. Member for Harwich is right. Profits in British industry have been consistently lower than those of our competitors. In 1979–81 they were cut to the bone—indeed, they went into negative figures. Because profits have been low, investment has been low. In the period when profits vanished altogether, everything that makes 818 for competitiveness — research, design, development, skills, and especially training—was jettisoned simply to survive. The Engineering Industry Training Board has pointed out that from 1978 to 1984 employment in the industry fell by 30 per cent., but training fell by 50 per cent. The present figures are appalling. As the board's economic monitor for 1987 shows, in 1978–79 total craft and technician registrations with the board were 24,500. In the last year shown on the table, 1986–87, the figure was just 9,870. We are gobbling the seen corn, we are not training the next generation, and that failure has characterised the whole engineering industry.
§ Dr. Michael Clark
Does the hon. Gentleman appreciate that what stops research and development and training more than anything else is inflation? The Labour Government allowed inflation to rise to 27 per cent. and were thus largely responsible for the decline.
§ Mr. Mitchell
I wish that the hon. Gentleman would not insist on making on such silly, petty political points. Research and training increased under the Labour Government, as the figures show. Investment also rose. Investment falls when firms do not make profits, and they were not making profits because of the way in which the economy was being run. What happened between 1979 and 1982 was a disaster for British industry, and there is no way of concealing that fact, so let us not quibble about it in a party political fashion. It is clear that the whole problem dates from that holocaust.
The success story that we have been told today is merely a bounce back, and it is inadequate to recover the ground lost in that earlier disastrous performance. The engineering industry is simply heaving a sigh of relief because it has come through and recovered from all that the Government did to do the industry down. That is not success—it is merely survival. That is not the story in Japan, West Germany, South Korea and other economies with which we have to compete.
Those countries realise that comparative advantage, which is the mainspring of success in international trade, does not spring from the climate of Lancashire encouraging the cotton industry because it is rainy and damp, or from the native intelligence of the people, but is something that can be created and built up. Those countries started with a competitive exchange rate, which encouraged investment in manufacturing because exports paid.
Let us consider the car industry—the very kernal of engineering. The Volkswagen "Beetle" has been one of the most successful cars in the world. It was a far worse car than the Morris Minor. It was a success story, not because of advanced technology—it was designed in the 1930s and was an outdated, inadequate and clumsy car that was somewhat dangerous because the engine was in the back—but because it was cheap because of the exchange rate. As the profits for Volkswagen were high, it could plough those profits back into investment and achieve economies of scale, spreading the cost of research, design and development over a massive output that was never attained with a Morris Minor.
That simple contrast shows how comparative advantage can be created. If a firm is successful, the network of training, suppliers, contacts and business connections and the whole sustaining supporting web that keeps industry moving builds up and is strengthened. That is how 819 comparative advantage is created. By the same token, if it can be created in competitive economies, it can also be thrown away. We have thrown it away through the harm that has been done to manufacturing industry.
As industry contracts, shackled by interest and exchange rates, it cannot compete internationally, so suppliers go into liquidation, training is cut, the whole sustaining network frays and weakens and industry goes into a spiral decline. That is what has happened in Britain. Faced with problems with the economy—let us regard it as a car—industry is not moving fast enough. What do we do? The Japanese try to boost industry, and the Government and industry co-operate, but we knock the hell out of the engine, the drive motor of the economy. Manufacturing and industry suffer the first effects of over-valution and high interest rates, and are therefore shackled on the international market. The result has been a disaster.
There has been some measure of recovery since 1982. It is interesting to note how many Government statistics now start their run in 1981, as though 1979 to 1981 had never happened. Gross fixed capital formation in manufacturing in 1987 was 35 per cent. up on 1981—but it was also 10 per cent. down on 1979. It is lower now than it was in every year under the Labour Government, other than 1976. In British manufacturing industry—which includes the major trunk of engineering—from 1981 to 1986 there was a net disinvestment of £1.17 billion, compared with a net investment under Labour of £1.15 billion. We are eating the seed corn.
§ Mr. Roger King
Has the hon. Gentleman read the 1987 financial results for the Rover Group? Its exports are at an all-time high for the past nine years. It is exporting more than at any time since 1979. One in three of its cars goes overseas and, for the first time, it has exceeded £1 billion of sales in the overseas market. That does not fit the hon. Gentleman's catalogue of misery and difficulty supposedly faced by exporters because of currency problems and so on.
§ Mr. Mitchell
I gave the hon. Gentleman an opportunity to redeem his reputation following his devastating critique of Government policy towards Rover. I wish that he would not try to redeem it so vociferously. Rover's share of the domestic market has dropped substantially, where the main threat is from imported cars. That has come about partly because of the exchange rate. I shall deal with exports in a moment.
The net disinvestment is appalling, and it dates from that holocaust of 1979 to 1981. I want to give some of the facts and the figures, because it is important that we realise the disastrous consequences of what has been done. Engineering employment has dropped by one third since 1978, with more than 1 million jobs lost. The size of the vehicles and parts industry is half what it was in 1978. The decline is universal and there is no subsector of engineering where employment is anywhere near what it was 10 years ago.
According to British Business of 4 March 1988—so the figures are official—engineering output as a whole was only 12 per cent. higher than in 1980. None of our competitors had such an inadequate increase in output. Mechanical engineering, which accounts for half the total output, was 89 per cent. of the total in 1980. A comparison of the figures for 1979 with those for September to 820 November 1987 annualised shows that output in mechanical engineering was down 16 per cent., in motor vehicles down 25 per cent., in metal goods down 10 per cent., in basic electricals down 14 per cent., in electrical goods for industry down 15 per cent., in machine tools down 26 per cent., in mining and construction machinery down 20 per cent., and in foundry and forges, which are always basic indicators of the state of the engineering industry, down 48 per cent. and 42 per cent. respectively. That is a pathetic and disastrous record.
While that has been going on, imports have increased their share of the domestic market by far more than exports have increased in eight of the nine engineering subsectors dealt with in the figures. The balance has changed for the worse in seven of the nine subsectors. In 1978 only one of the nine subsectors in engineering was in deficit; by 1986 it was five. A positive engineering trade balance of £3.2 billion in 1978 has been turned into a negative balance of £3.4 billion because the Government run the economy, not for industry, but for money. In other words, the engineering balance has turned round by £6.6 billion over that period, and it is getting worse. For group 7 of the SITC figures, comparing 1979 with September to November 1987, the surplus in 1979 was £1.7 billion, whereas annualised for the three months it was £6.8 billion. That is the turn round in engineering trade.
Import penetration in our domestic market in vehicles is up 45 per cent., in electrical engineering up 55 per cent., in mechanical engineering up 30 per cent., and in instruments up 8 per cent. It is a tragedy, and all else springs from that. In the modern competitive world, as the hon. Member for Harwich, well knows from the experience of Japan, success compounds, but so does failure. Once the wind-down is started, it goes on unless it is checked.
Even now skill shortages are building up — the Engineering Industry Training board gave evidence to the Employment Select Committee in February 1987 about the figures for skill shortages—yet we are doing less in terms of training. We are not doing enough to remedy the shortages even at our reduced level of activity, let alone at that of the 1970s.
The average company spends only one sixth of what our competitors spend on training. Fewer people are trained by our industry. Japan produces 80,000 engineering graduates a year, whereas we produce 9,000. In Germany, 750,000 young people are apprenticed trained each year; our figure is 10 per cent. of that. How can industry succeed if that is our record on training? Between 1980 and May 1987, 6,500 apprentices were made redundant in the engineering industry. First-year apprenticeship training has declined. Figures produced by the National Institute of Economic and Social Research in January reveal that the number of youngsters gaining craft qualifications in France rose by 60 per cent. between 1975 and 1985.
In mechanical and electrical engineering, France trains between two and a half and three times more qualified craftsmen and technicians per head of the work force than Britain, and they are trained to standards that are often higher than equivalent qualifications in Britain. There is nothing inevitable about the decline. It is the result of the Government's incompetence and their failure to manage the economy so that industry can flourish, compete and expand in the world market.
821 The success that we want to see the engineering industry achieve does not spring fully armed from the head of Lord Young. Nothing apart from advertisements springs from Lord Young's head. Competitiveness and success spring from a healthy industrial base. The new developments that we all want — the new technologies and the new industries—will grow only from the present industrial base. If we kill or harm that base, nothing will develop. The only logic of what was done by the Government during 1979–81 is that which is to be found in the belief that phoenix will rise from the ashes. In other words, the more ashes the Government created, the better the industrial health of the country and the greater the number of phoenixes. That is the only explanation that I can give of the Government's policies.
Everything that is done by the Government in their non-interventionist policy moves us towards a low-wage low-skill, low-investment and low-profit economy that will be unable to compete in the world market. All the studies of our training, investment and competitiveness reveal what is going wrong when comparisons are made with other countries. A fascinating study of Britain's productivity, machinery and skills—it was based on a sample of British and German manufacturing firms—in February 1985 reveals that our investment and training record is entirely inadequate. There are stockbrokers' reports on engineering training in France and West Germany. We know that in West Germany productivity in the engineering industry is high. Productivity in France was 79 per cent. of that of West Germany, and in the United Kingdom it was only 56 per cent.
I do not want to be too churlish. I merely wish to set the record straight. I accept that there are success stories. There are successful niche industries. Training boards are doing a better job, and the same is true of the Engineering Council. The Design Council is right to begin a two-year programme to improve industrial design. However, these successes cannot be grafted on to a decaying industrial base. First, we must make the industrial base healthy so that it can respond and bring changes to the United Kingdom. The well-being of industry is vital.
Under this Government we have seen the continuing decline of the industrial spirit. The economy has been run for finance, high interest rates and an over-valued pound. These are policies that benefit those who have, but they all harm industry, the great, vital beating heart that is the powerhouse of the economy. It is only industry that can provide growth, jobs and the exports that enable us to survive in the world market. Industry provides only 23 per cent. of employment, but even now it provides over 50 per cent. of exports. The only sector of the economy that will enable Britain to survive in the 1990s has been harmed by the Government. The Government have driven us down to a low level, and now things are turning sour again. The nominal exchanges in February showed an increase of 12 per cent. when set against that for February 1987. The terms of trade in engineering are worse now than in 1981, when we were at the height of the holocaust.
How can industry survive and compete with these shackles? The Government must co-operate with industry, encourage it and work with it in the way that other Governments have done so successfully, thus forearming it for world competition. Unless the Government run the economy in a way that establishes a competitive exchange rate and low interest rates, rather than high interest rates that reinforce an over-valued exchange rate, we shall find 822 ourselves facing the same difficulties that confronted us during 1979–81. The best future for the engineering industry lies in allowing it to compete in the world market without a ball and chain round each leg, one being high interest rates, and the other an over-valued exchange rate. We must let the industry generate profits, rather than lock it, as the Government are doing, into a remorseless spiral of decline.
The Government have run the economy, not for the interests of people who make things to sell on a world market or for the interests of jobs, but for the interests of finance, capital and the City. Such interests do not provide jobs or well-being for the great majority of our people. When it comes to power, Labour will run the economy for jobs, manufacturing and expansion, with a competitive exchange rate and a sensible interest rate policy that will allow industry to compete.
§ 2 pm
§ The Parliamentary Under-Secretary of State for Industry and Consumer Affairs (Mr. John Butcher)
The hon. Member for Great Grimsby (Mr. Mitchell) made many points, for which I thank him. It appears that, as the Friday speakers, the hon. Gentleman and I have come to a mutual pact, which is never to repeat the speeches that we made on the previous Friday. That makes things far more entertaining for us and makes life much more of a challenge. My major thanks go to my hon. Friend the member for Norwich, North (Mr. Thompson), who provided an opportunity for many hon. Members to contribute to the debate.
It is significant that this is the second occasion within eight days on which we have discussed the business of wealth creation. Some hon. Members consider that we devote an awful lot of time to sometimes heated arguments about wealth distribution when, perhaps, we should give equal prominence to wealth creation issues. We may discuss such issues when we talk about the Budget or macroeconomic policy, but what economists call microeconomic measures, such as those that we have discussed today, are important. I hope that there will be further opportunities to discuss matters such as the engineering industry generally and all the enabling skills that combine to help us to generate the wealth on which the quality of life for the whole community depends.
Apparently, it is the custom in this debate to say which part of engineering has touched us or for which part we speak. I confess that I was not trained as an engineer, but, after 12 years in the computer industry, I can claim that a little knowledge of electronics, and systems engineering has passed my way through the process of osmosis and the need to earn my living.
Before I take up the major themes that were raised by my hon. Friend, I congratulate his constituency on the presence of such an excellent company as Beaver Machine Tools, operating in a tough market in which technologies are rapidly changing. Beaver's moves into CNC techniques and quality equipment are to be commended.
We often hear tales of woe about great difficulties being experienced by whole sectors. It is sometimes alleged that a whole sector is in difficulty. But, within each sector, there is always a company that proves that it can do business, with good management, excellent training and a good work force, no matter how great the pressure or difficulties may be. There is always a company that shows that it can 823 be done. We must try to define the ingredients for success and determine how Governments can help to spread best practice.
My hon. Friend said that he would like to see more engineers at top board level. The engineering profession will have cheered him for making that statement. The profession will know that many first degree engineering graduates acquire other qualifications and skills. An awful lot of covert engineers head many of our major companies. Some of them no longer practice under the title of engineer, but, to a great extent, they understand engineering disciplines.
§ Dr. Michael Clark
My hon. Friend said that some heads of companies are probably engineers but no longer trade under that name. Does he agree that he has put his finger on one of the problems facing the engineering industry? When people who are engineers later become accountants or lawyers, they are more proud to be called an accountant or a lawyer than an engineer.
§ Mr. Butcher
I should like to see an Italian habit gaining ground in this country—just one. If one speaks to the chief executive of an Italian company who has had an engineering training, his business card will probably show the letters "Ing" after his name which stand for ingegnere. An Italian would be proud of that. It would distinguish him by way of the qualifications he brought to his job. As we have heard from three or four speeches today, that distinction does not seem to be coveted by any of our similarly qualified people. It is a great shame because British engineers can hold their heads up when it comes to a comparison with the expertise of virtually any other country's engineers. The difficulty is that our good people are the very best in the world but there is a gap in the middle ground that the German, Japanese and French seem to fill, but which we do not. We seem to have a large no-man's land between our top flight, elite engineers and those at technician level. People have remarked for decades about the way in which the Germans have a solidity and depth to their engineering capability that we have yet to achieve.
My right hon. Friend the Member for Brentford and Isleworth (Sir B. Hayhoe) is a qualified mechanical engineer. I notice that his curriculum vitae shows that he was a toolroom apprentice on his way to achieving those qualifications. He talked about the need for us to do whatever we can to see that mutual recognition of professional qualifications across Europe is achieved, not through a general directive, but through a separate directive for engineers. My right hon. Friend, who I am sure will read the record of today's debate, can be assured that I shall look into that in considerable detail. I have taken a careful note of what he said and I shall respond to him with an account of our latest negotiating position. We shall take great care and I can assure him that we shall stay in touch with the professional bodies as he advised.
The central themes raised by my hon. Friend the Member for Norwich, North and several of my hon. Friends were training, shortage, the feedstock coming from schools and what happens in our further and higher education sectors. No one in the House would deny that now, perhaps more than at any other time in our economic 824 and industrial history, we need the very brightest and best of our youngsters to go into manufacturing and engineering.
Industrial and commercial warfare is taking place in the international market. To a major extent it is free and fair, although there are a few warts and defects. To a large extent we are locked into that open competition. We cannot afford to fight that battle without the assets of our brightest and best going into the front-line business of earning orders for the United Kingdom and making and selling things in the international market.
How do we go about that? We need to change the culture in the schools. We need to build on the craft, design and technology programmes that are now starting to bear fruit. We need to build on the technical and vocational education initiative. At the risk of bringing a little political controversy into the debate, I have to say that we need a core curriculum. We cannot have our youngsters opting out of mathematics and physics at the age of 14. In most cases they study those subjects until 16 but, if our young people, boys and girls, do not have the basic foundation upon which they can graft changing demands for skills throughout their working life, we shall handicap those who wish to train them in maturity, such as employers.
§ Mr. Stevens
Does my hon. Friend agree that, to attempt to broaden the scope for and numbers of people entering the profession beyond 16, there should be a broader-based education system than there is at present in our schools and sixth forms?
§ Mr. Butcher
There is a sort of Friday culture that encourages candour and a fairly relaxed response to questions such as that. That is the moment at which a little alarm bell should ring at the back of one's head and subconsciously send a signal, "Steady on." I am not entirely sure that I agree with the implication of what my hon. Friend is saying. I want a core curriculum until the age of 16. My right hon. Friend the Secretary of State for Education and Science must make decisions about what happens after that age. Speaking as a representative of industrial and commercial interests, I believe that we should not erode the quality control of the A-level system. Yes, let us strengthen education up to the age of 16, but we must not erode the quality of A-levels. I hope that, by my reporting faithfully what industry is saying to me, my right hon. Friend the Secretary of State for Education and Science will bear that very much in mind. That is all I have to say on that subject on a Friday, having spoken in an earlier debate at 4 am. I do not wish to trust myself with any looser statement than that.
City technology colleges are something that our competitors, the Germans—my goodness, we have been going on about them this morning—would recognise instantly. They never changed. While we were messing around with our secondary education system in the postwar period they kept their Hauptschule, Realschule and Gymnasium. They kept their technical schools, but we only toyed with the idea. We fiddled about with them for a brief period after the war, but we did not stay with them and we should have done so. Now that we are having to re-invent them, those who have brought them forward can point to the German experience and say, "There is one of the reasons why they have a depth to their engineering and industrial capabilities." We should not be ashamed to borrow ideas when they have proven to be successful in the international world.
§ Mr. Patrick Thompson
Does my hon. Friend agree that those who are enthusiastic about city technology colleges should pursue industrialists more vigorously and say, "This is an idea that is of benefit to you; let us have a great deal of support for it"?
§ Mr. Butcher
My hon. Friend, who used to be a school teacher, is right. This is not a one-way crusade on which the Government have embarked. We have brought forward a set of proposals that invite participation from demanders of skill as to how we produce those skills at statutory education ages. I hope that, having extended the invitation to those who told us that this was the way that we must go, they will accept it, participate and, if necessary, provide hard cash if they wish to back their ideals, particularly in the inner cities.
We can extend an invitation to engineers—whether they be on the shop floor or in the boardroom, or whether they be trade unionists or members of the Institute of Directors — to serve on the governing bodies in the schools that are being reformed to carry out this option by my right hon. Friend the Secretary of State for Education and Science. The cross-pollenation that we all consider worthwhile is beginning to happen, but we need far more of it.
I think that the hon. Member for Great Grimsby will agree, if I interpreted his remarks correctly, that it was right for us to give the bulk of increases in places in the higher education system to the polytechnic sector. That is where the more vocational attitudes are to be found and it is where we can channel our resources. Some 60,000 extra full-time students have now been placed in the polytechnic sector, compared with the year that I know the hon. Gentleman would choose—1979.
As to skill shortages, for one year I chaired a committee called the skill shortages committee. Inevitably, the DTI produced a report. That report gave the numbers and quantities, by type of discipline in engineering, for which we should be providing. From memory, I believe that we said that we wanted 4,500 additional graduate engineers in disciplines such as physics, maths, information technology, and electronics engineering.
However, on the way we discovered that the United Kingdom did not necessarily require only pure information technologists. As we progressed through the year we found that a new kind of engineer was demanded. We were fairly sure that we could predict that demand for such an engineer would increase dramatically during the 1980s. I refer to the engineer called the manufacturing systems engineer — a multi-disciplinary engineer who is well-versed in the science of production and in what goes on on the shop floor.
As my hon. Friend the Member for Harwich (Sir J. Ridsdale), who spoke eloquently about the Japanese experience will confirm, the Japanese have been investing in such people for a long time. They would give their eye teeth for some of the schools in our engineering professions. We must produce our manufacturing systems engineers with particularly British tricks to bring to the trade. If we do, we can reap the same benefits, which are massive savings in production costs and in work progress. Those savings could be invested in state of the art equipment, which could be used to improve quality, which can be used to go for non-price factors in the market share. That is the benign cycle at which my hon. Friend was grasping in his speech earlier.
826 I turn now to the youth training scheme. I sometimes wonder how many engineering employers know that they can use YTS to discount the first-year costs of their apprenticeship schemes by 100 per cent. How many know that they can use it to discount the costs of their second-year apprenticeships by as much as 80 per cent.; and how many know that new proposals have been produced quite recently about the accreditation of the formal training elements in those apprenticeship schemes? If there are any engineering companies out there that do not know that, I hope that this debate, with its central theme of educational awareness, will at least have done its part in getting that message across.
I do not think that anyone in the House would disagree with the now often asserted statement that we must tackle the skill shortage problem. The tragedy is that while most of the weaponry that is required to tackle that problem is there, few of our companies are enlightened enough to use it.
There is a further under-utilised national resource, this time at the higher education level. How many of our engineering companies have heard of the teaching company scheme, by which postgraduates can go into companies and become involved in clearly identified projects in those companies? Young postgraduates, charged with state of the art development, and paid for in major part by the taxpayer, can work to projects that are agreed between academia and the user company. I do not know of any company that has used the scheme that has anything bad to say about it. It does not appear to have an enemy. We are to double the size of the scheme. The Government can help and we can use taxpayers' money to good effect.
My hon. Friend the Member for Harwich should write a book. He has two particular lines of experience that he brought to our debate today. The first is his commitment to engineering, which came through strongly. The second is his knowledge of the Japanese experience. Those lines of experience are highly relevant to every issue that we have discussed this morning.
I could exchange views with him at great length on automation and robotics. Western Europe missed a trick when the Japanese and Americans started setting de facto standards on, for example, controllers. That is a huge industry. However, a company that is located just three miles from here, across the river, is bringing forward controllers that knock spots off the Japanese. I wish that company well. Perhaps my hon. Friend's group could visit the company as it is so near.
Unless management training is correct, unless the management systems are right, and unless a company understands what manufacturing systems engineering means, there is no point whatsoever in throwing automation at the problem. That will only compound the weaknesses in the company. Automation is not an answer in itself.
I shall respond in letter form to what my hon. Friend the Member for Harwich said about the Cranfield engineering research programme. When he said that we have to be competitive in world terms, he encapsulated what the debate is about. There is no such thing as a home market any more. Any company will find that, unless it can compete on the world market, it will not have a home market. We have to test our products all the time in such a hypercompetitive environment because, if we do not, surprise, surprise, our competitors will test their products 827 in our home market. That is the way of today's world and it is why 1992 is so important. I noted carefully what my hon. Friend said about the chairmanship of the European standards-making institutions.
My hon. Friend the Member for Bolton, North-East (Mr. Thurnham) reminded us that we cannot afford to turn our back on 50 per cent. of the nation's intellect, which is what we do if women and girls are deterred from going into the allegedly male-dominated professions. We all know how much we need engineering skills. We all know how acute the problem is. Women have the same aptitudes as men if they are given a chance to develop them. It is another of those tragedies that, at 14, many girls opt out of the O-level and general certificate of secondary education subjects which give them at least the option of going into engineering. We have a job of work to do in that respect.
There is another element of the enterprise initiative which was not debated very much when the White Paper was published. Many commentators missed a significant issue. I refer to the programme to get 10 per cent. of our teachers into industry and commerce each year to gain work experience. Moreover, all of our young people, presumably at about 15 or 16, will have experience of the commercial and industrial world, and teachers in training colleges will have the same opportunity. Such steps help to solve the problem caused by our underusing 50 per cent. of the nation's intellect.
My hon. Friend the Member for Hertfordshire, West (Mr. Jones) asked me to consider liability. I shall. He brought a new dimension to the Channel tunnel question. He asked about research and development spending. There was an increase in private sector research and development spending of 12 per cent. in real terms between 1983 and 1985. We do not have the statistics for 1986, much as I think that I would enjoy displaying them today. There has been an increase in the proportion of research and development funded by industry from 70 to 77 per cent., which is in line with our competitors. The Government's spending is a higher proportion of gross domestic product than in the United States or Japan.
My hon. Friend talked about civil engineers. Civil engineering output was to the value of £22.7 billion in 1986. Civil engineering new orders in 1987 amounted to £17.5 billion. Those are almost record levels and, perhaps more than any other statistic, a measure of confidence in the future. The mechanical engineers are turning over £20.36 billion and the electrical engineers £17.76 billion, which shows that we should not underestimate the civil engineering sector in terms of employment and wealth creation. I accept what my hon. Friend said about the need to use our big companies to better effect. The information that he gave about the multiplier effect was powerful.
My hon. Friend the Member for Ilford, South (Mr. Thorne) reinforced the point about liability. He also mentioned consulting engineers and the extent to which they exert influence on the placing of contracts for raw materials, sub-assemblies and structural componentry.
My hon. Friend the Member for Birmingham, Northfield (Mr. King) made a Northfield speech, which was powerful and closely argued. He will understand exactly why all that I shall say in response is this—the best guarantee of the long-term future of jobs at Longbridge and in the Rover Group is to keep making 828 profits, no matter who owns the plant or what the shareholding structure is. We have made it clear that there will be no other bidders during the exclusive negotiating period agreed with British Aerospace. If agreement is reached, it will not be appropriate to negotiate with others. So, there will be no negotiations with others provided that the two current parties agree terms by the end of April.
§ Mr. Batiste
My hon. Friend referred to profits being the most important signpost of the way forward. Did he notice that in the speech of the hon. Member for Great Grimsby (Mr. Mitchell) from the Opposition Front Bench, that word was curiously absent?
§ Mr. Butcher
I have to disagree with my hon. Friend because the hon. Member for Great Grimsby mentioned profits. He said that investment goes down when the firms are not making profits. If he assumes that investment goes up when firms are making profits, the Friday culture must have got to him. This is a seminal moment because he has said for the first time that I have heard it stated so clearly by a Front-Bench Opposition spokesman what Conservative Members have been working on ever since Edmund Burke first commented on the French revolution. I congratulate the hon. Gentleman. I hope that that has not damaged his career too much. He said that he was Leader of the Opposition (Fridays). His contribution was far better than that which oftens comes from the real thing. I wish him every success and look forward to seeing him next Friday.
§ Mr. Patrick Thompson
I am grateful for the opportunity to say a few words at the end of a most encouraging debate. It has been much more encouraging than the debate in 1980, which has been mentioned on several occasions today. I hope that the House will be able to accept the motion on the Order Paper.
I thank my hon. Friend the Under-Secretary of State for a positive and interesting reply. I was attracted by his remarks on the youth training scheme. It is true that not all industrialists—it happens in Norwich as well—are fully aware of all the opportunities that are open to them. I am glad that the debate has been used in that way, to bring the attention of everyone involved in engineering to what is available now, as well as to point the way to the future.
I thank the hon. Member for Great Grimsby (Mr. Mitchell) for attending and speaking in the debate. I might come back to his remarks if there is time.
I thank all my hon. Friends who have taken part in the debate. Many other hon. Members show an interest in doing so. I am therefore especially pleased that I had the opportunity to introduce it. I thank my right hon. Friend the Member for Brentford and Isleworth (Sir B. Hayhoe) and my hon. Friend the Member for Harwich (Sir J. Ridsdale) for their support in the debate. Indeed, I am grateful for the support of all the members of the all-party group for engineering development. Time does not permit me to thank all my hon. Friends individually. There were a large number of interesting contributions, which will make good reading in Hansard and will be worthy of future study.
A study of the report on education and training for new technologies by the House of Lords Select Committee on Science and Technology in 1984 makes interesting reading 829 because it reiterates so many of the points that were raised in the debate. What a pity it is that Opposition Members were unable to take part in this debate. They were around, because they came in for the statement. It is a pity that the hon. Member for Great Grimsby was here all on his own. I am grateful for his contribution. I thank everyone for taking part in an excellent debate.
§ Question put and agreed to.
That this House urges that consideration be given to the steps now required to build on recent success in United Kingdom engineering industries and to develop engineering performance up to and above the standards of leading industries overseas.