§ [Relevant documents: First Report from the Trade and Industry Committee of Session 1988–89 on Information Technology (House of Commons Paper No. 25), the Government's White Paper on Information Technology (Cm. 646) and the Minutes of Evidence taken before the Committee on 26th April 1989 ( House of Commons Paper No. 338-i).]
Motion made, and Question proposed,
That a further sum, not exceeding £322,022,000 be granted to Her Majesty out of the Consolidated Fund to defray the charges which will come in course of payment during the year ending on 31st March 1990, for expenditure by the Department of Trade and Industry at its research establishments (including the National Measurement Accreditation Service) and on the running costs of certain of its headquarters divisions, in its radiocommunications division and the Patent Office, support for industry (including industrial research and development, education, training, design, quality, marketing, management best practice and standards, business development and aircraft and aeroengine research and development), space technology programmes, protection of innovation, international trade (including export promotion, trade co-operation and international exhibitions), enterprise and job creation (the inner cities initiative and city action teams), miscellaneous support services, grants in aid, international subscriptions, provision of land and buildings, loans, grants, and other payments.— [Mr. Forth.]
§ Mr. Kenneth Warren (Hastings and Rye)
I declare an interest in the subject for debate, having been associated with the information technology industry since before entering Parliament.
Our reason for selecting this subject stems from a decision in December 1987 to inquire into information technology. It was in particular the hon. Member for Warrington, North (Mr. Hoyle), who apologises for not being able to be with us, who conceived the idea of the debate, based on the growing worry about this country's trade deficit in information technology goods. It was big then, it is bigger now and it is growing remorselessly larger.
The subsequent hearings that we held throughout last year culminated in a report published in December; three months later we received a White Paper from the Government.
The White Paper was eagerly awaited. Unfortunately, when it arrived it was somewhat misleading. I am sure that my hon. Friends who served on the Committee will enlarge on the problems that we encountered.
We were aware that the DTI had misunderstood the report's axes of argument, and its acceptance rate for our 52 recommendations was only 28, which is not as high as we are usually awarded when we place a report before Parliament to which the DTI then responds. Perhaps the Department would have preferred us to consider petrol prices at the pumps—we considered that as a subject for 520 debate—or shipbuilding: the Government seem to give aid to private shipyards which is not available to the nationalised yards. Or we might have called for a popular debate on beer and the tied houses, but we stuck to information technology because I had called for a debate on it in Government time, but unfortunately the Leader of the House could not see his way to giving us one.
It is interesting to read in The Independent today that its technology correspondent, Mary Fagan, draws attention to a document which came from inside the DTI which states:Internal briefing papers told DTI officials to resist a Commons debateon information technology.
We have this debate in our time now and we look forward to exploiting the two hours and 48 minutes that are left——
§ Mr. Michael Marshall (Arundel)
I fully understand my hon. Friend's point about the importance of the debate. On behalf of the parliamentary information technology committee I may say that we greatly value the thorough work that went into this report, and I assure my hon. Friend that we shall continue to help him in any way we can to further the debate in the coming weeks.
§ Mr. Warren
I am most grateful for that support from the chairman of the parliamentary information technology committee which does so much useful work on behalf of the House and the industry.
We have had tussles with the DTI before on tin and on Westland, when we held inquiries, but in general it may surprise the House to know that we reached broad agreement on the proposals that we made on British Steel, on the Rover Group and on trade with China, eastern Europe and so on. Unfortunately, the information technology problem remains, and our unanimous proposals have been misinterpreted.
These proposals were arrived at after a year—long presentation of the most skilful evidence from across the industry, collected by the Committee in Europe, Japan and the United States.
I could not resist bringing to the attention of the House a quotation by my hon. Friend the Parliamentary Under-Secretary of State for Industry and Consumer Affairs, who waited until the Select Committee was safely over the border in Scotland to look at financial services for 1992 before saying:This old-fashioned idea of the gargantuan dinosaur of Government, directing the sector by procurement policies, is … typical of Select Committee members but not modern Government policy."—[Official Report, 19 April 1989; Vol. 151, c. 385.]It is a pity that my hon. Friend said that, because I am sure that he has since had a chance to read the report—clearly he had not read it at the time. No doubt he will be pleased to know that the Select Committee is eagerly looking forward to the chance of welcoming him with its usual courtesy, as soon as it can.
We also welcome my hon. Friend's self-announced appointment to his post. Our right hon. and noble Friend in another place said that there would be no Minister of information technology but at a recent press conference, our hon. Friend the Minister told us:I am your friendly Minister of IT".521 We did not ask for a Minister of information technology, and the noble Lord did not expect one to be appointed. We hope that this self-appointment will survive any future shuffle.
I have always regarded my hon. Friend in good heart as a man who can be relied upon to pour oil on troubled waters. I note that he is not wearing his usual admirable watch chain, perhaps knowing that it has a dry tinder box attached to it. Nevertheless, I could not let the moment pass without-telling my hon. Friend that the Committee was not happy with his view, which I am sure he will want to amend if he catches your eye, Madam Deputy Speaker.
The report contains two main themes. No one knows better that my right hon. Friend the Paymaster General, whom I welcome to the debate, that Government as a business operation need information technology on a scale that they do not yet appreciate. Secondly, the United Kingdom trade deficit is the cause of growing national concern and it cannot be wished away by selective statistics.
The business of Government is labour-intensive—it is probably the most labour-intensive business in the country. Two of the tables in the report show the number of civil servants with computer workstations, and how many will have them in 1993. Table 12 shows that the major Departments of State have about 0.3 workstations per civil servant. By 1993, that will have risen to an average of 0.5.
The best current practice is between 0.5 and, in the most advanced offices in private enterprise, 1 per person. The Government need to bring in a lot more technology because they face a major problem that they have not yet dealt with. Between now and 1993 the total number of people in the 18 to 24 age group, which is 6 million now, will drop to 4.8 million—a fall of 20 per cent. in potential recruits. Although I trust that the Conservative Government will continue to prosper through those years, I fear that they will not find themselves the most attractive employers for young people who will be the subject of intense competition in efforts to drag them away into highly paid jobs in other industries which can afford to pay more than the Government.
The only solution, with which the Government must come to grips, given the labour-intensive nature—
§ Miss Emma Nicholson (Torridge and Devon, West)
Why is my hon. Friend concentrating so hard on the under-24-year-olds? Information technology is eminently suited to the recruitment of middle-aged people, particularly women who work from home or part time. Government are part-time employers of notable success, and they offer job sharing and good working practices. It would be easy to train those over 24 in modern IT, which is so user-friendly, so why does my hon. Friend concentrate so heavily on the younger age group?
I am concerned that the percentages to which my hon. Friend has referred may be slightly misleading. I refer especially to computerisation within Government and workstations. My hon. Friend will recall the central head office technology system which is being introduced to the Ministry of Defence, which is commonly known as CHOPS. With its introduction there will be 75,000 terminals. There will be a terminal on each senior manager's desk. My hon. Friend will——
§ Madam Deputy Speaker (Miss Betty Boothroyd)
Order. The hon. Lady is making a long intervention. I am sure that she will catch the eye of the Chair in due course.
§ Mr. Warren
I am grateful to my hon. Friend for her intervention, and especially for the information about the Ministry of Defence. When the Committee asked it how many computer workstations it had, its first response was to tell us that it did not know. Secondly, the Minister told us that it could not give us the information because it was secret. I was inclined to think——
§ Mr. Warren
If my hon. Friend will forgive me, I shall proceed with my speech. I am sure that she will be able to catch the eye of the Chair later in the debate. As I have said, I am delighted to have the information about the Ministry of Defence to which she drew our attention. I still feel, however, that it did not know how many computer workstations it had.
I accept my hon. Friend's argument about the age group that I have selected, but I want to illustrate a problem that must be regarded as inevitable. There will not be enough people entering the labour market in the next five years to take up the job opportunities that will be available. I accept, of course, that there are job opportunities that involve the use of information technology throughout the age ranges. I wish that I could stand with my hon. Friend and believe that IT is all user-friendly. My experience is that it is usually antagonistic when I am using it. That is probably the result of bad luck over the years.
I draw the attention of the House—I hesitate to do this after my hon. Friend's intervention—to yet one more table in the report. It will be the last table with which I shall burden the House. It sets out the number of personal computers that are available in the home. It shows that Britain has much greater experience of the use of personal computers, whether they be for home use, for a hobby, for business or for scientific work, than America, Spain, France, West Germany, Italy and Sweden, for example.
That takes me again to the 18 to 24-year-olds and the problem that the Government will have in recruiting young people to fill the job opportunities that they will have. The people in that age group will expect information technology to be commonplace. They will be used to playing around with keyboards and screens and they will expect to be well equipped with information technology when they take up employment. I believe that the Government will have an even more difficult recruiting task than perhaps they have appreciated and identified so far.
It is true that we do not work at home, and I do not suggest that any Member of this place, let alone my right hon. Friend the Prime Minister, would wish to do so. I ask the Government, however, to examine more closely and severely the communications systems that are available in the market place and to bear in mind those that will be coming forward. The Macdonald committee, the members of which were not in business or in industry, advised the Government on communications. It even stated in its report that it did not choose to discuss the matter with those who are in industry or in communications.
That is disappointing. It is communication systems in which the greatest use of information technology must be found and developed over the next 10 to 20 years. I have 523 a personal desire to see a wide band communication system developed that can take voice and data so that the country can be as competitive as it needs to be in developments that go beyond 1992 for use in the financial services sector, for example.
§ Mr. Warren
I hope that my hon. Friend will forgive me if I choose to continue with my speech. I am sure that she will catch the eye of the Chair in due course.
§ Miss Nicholson
I remind my hon. Friend of Britain's enormous success in using the Packet switching system to such effect through the introduction of Mercury, which has brought competition to British Telecom. We now have one of the largest customer databases and international data transmissions in the world. We have been enormously successful with British Telecom and Mercury in the use of the Packet switching system, and this has brought exactly the result that my hon. Friend is seeking.
§ Mr. Warren
With respect, it has not. It does not allow for the sort of communication systems that will be required in the next decade in Britain and throughout the rest of Europe and the western world. The fact is that it is not a wide band system. I shall be more than delighted to give my hon. Friend a private lecture on the subject on another occasion. I hope that she will accept for the moment that the problem is that we do not have communication systems that are adequate to meet the expectations of those who want to compete—whether they be in Scotland or Ireland—with the rest of the European community.
In today's edition of The Times there is a fine article that draws attention once again—this has been repeated over and over again in the national and technical press—to the number of skilled employees that will be required. The National Computing Centre Ltd. believes that the present shortage of 19,000 staff will rise to over 35,000 within a year. We are talking about those who are well skilled and well trained in the art of information technology. It must be recognised that it is an art and not only a science, especially when the proverbial bugs are running around inside the equipment.
We have a trade deficit problem and it is not confined to information technology goods. It is an enormous problem that stretches across manufacturing industry. The deficit is running at £17,000 million a year. I worked out late last night—I hope that I got the zeros right—that it amounted to about £50 million a day, or £33,000 every minute around the clock. To offset that, we shall have to export and sell six more Metros a minute.
The two major components of the trade deficit are, surprisingly enough, German motor cars, which account for about £5 billion-worth of imports a year, and information technology, the imports of which amount to about £2.5 billion a year. In third place is the importation of material that is required by the paper industry. We have a major problem and the Committee sought to adress it. It is one that cannot be wished away by selective statistics. It is an enormous problem and it does not matter what other countries are doing. It can be mastered, however, by the talents and resources that are to be found within the 524 United Kingdom. That could be done if I could only persuade the Government to be drawn into collaborating, co-operating and seeking to close the gap.
I ask the Government to examine their track record. When the Committee tried to identify the Government's work in this area, it was disappointed to find that reports such as that produced by the Bide committee in 1986 received no response. One of the recommendations was that work should be undertaken on a fail-safe system for British Rail. If that recommendation had been adopted in 1986, some of the recent rail crashes—I do not like to speculate—might have been avoided. That applies as well to some that might yet come. To reject the work of so many over such a long time is not conducive to persuading more people to come forward to collaborate with the Government on inquiries which they may wish to initiate.
The reaction to the Committee's report has perhaps been better than the reviews which the Government were prepared to give us. I shall refer to some of them. The Cranfield Technology Institute stated:We support each of the 52 recommendations.There was a response from IBM, which read:I … congratulate you on the accuracy with which you have pinpointed the most critical issues.The Electronic Engineering Association commented on anable, interesting and well-written document on the current state of the IT industry in the United Kingdom.The professor of computing at the university of Kent reported:I was pleased to read that the Committee was trying to shake up the system.We are still trying to do that.
The Hoskyns Group said:Excellent … the task now is to ensure that the report is not buried alongside Bide and Coopers.The British Computer Society said that the reportgives Government a real opportunity to simultaneously improve the effectiveness of its own operation and the performance of United Kingdom industry.The comment that I really like, Madam Deputy Speaker—and I am sure that it will appeal to you—comes from the female managing director of a computer company which my right hon. Friend the Prime Minister visited. She said:I don't know if she will go back and give the DTI a handbagging about the report … but I feel she should.When my hon. Friend the Minister replies, we shall find out whether he is suffering from the slings and arrows of outrageous handbags.
The Government's track record is not a happy one. The National Computing Centre was asked by my right hon. and noble Friend the Secretary of State if the report would give him some idea of skills requirements for several years hence. The industry had invested £100,000 of its own money in the report, which was started in January 1986, but no reply has been received. The DTI may well run into some difficulty with those who are anxious for a partnership to develop with Government if nothing happens after all their efforts. We had high hopes that the report and the White Paper would guide us towards a partnership that needs both the help and the interest of Government and that looks upon Government as a major customer.
The Committee's work was not to pick winners or losers. Nevertheless, the PA Consulting Group—which is used extensively by the Government—said in a report entitled "Winners or Losers": 525No one seems to know what to do as far as IT is concerned".An article in "The Management Edge" by David Harvey stated:Corporate systems in two thirds of UK companies will not withstand the competitive strains imposed by the single European market. The warning comes as the countdown to 1992 reduces the room for any serious preparation to be carried out.Because of the downturn in engineering orders this year, the Government—who are a major market-maker—must tell us what they propose to do. They say that they will not intervene, but I could list several Government interventions by the DTI, beginning on 8 February. For a Department that does not want to intervene, it is a remarkable somersault. Its most amazing intervention—of which I happen to approve—occurred on 19 June when it launched the open systems technology transfer programme at a cost of £12 million. In doing so, it must have picked a winner. It could have picked another one, but it did not. Of course, I cannot refer to the winner because that would be unfair to the loser. To my regret, during the past few years in information technology there has been a remarkable propensity, especially by the Ministry of Defence, to pick losers—to the tune of £1 billion in a recent project.
The Government cannot claim that they are not in the business of picking winners when not only do they pick a winner but they spend £1.8 billion of taxpayers' money each year to sustain their IT requirements. The black knight of intervention has stealthily come among us. That is evident in the recommendations of the report that have not been accepted. Time and again we can enumerate and cross-check interventions against the report's recommendations, although those recommendations have not been accepted in the White Paper. I feel that there has been, perhaps, a slightly sinister change of policy.
A report in the Financial Times on 26 June by Mr. Alan Cane stated:Concern that British computing services companies are not yet geared to competing successfully against foreign companies for large contracts has prompted a Government `initiative' that comes close to contravening the spirit, if not the letter, of international directives on open competition.Companies are being invited to receive quiet, informal advice from the DTI. One of the bidders is quoted as saying that the DTIis saying that they will put extra votes your way for an all-British consortium.Neither my hon. Friend nor I is an interventionist, but that is something of a volte-face by a Government who, apparently, do not believe in intervention but who, in fact, are surreptitiously encouraging it. Companies are being encouraged to discuss their bids with the DTI and the CCTA, which in turn will give information to help them win contracts. That is a change of policy. I am not saying that that is wrong, but the Government's policy on intervention should be publicly stated.
I know that many other hon. Members wish to speak in the debate, Madam Deputy Speaker [Interruption.] I have known you for a long time, Mr. Deputy Speaker, and I really did not expect to see you clad in such a manner. You will no doubt understand my problems in Committee when hon. Members laugh at me—although it is normal to laugh at the Chairman.
526 The task of developing IT understanding is colossal, but it is something from which the Government cannot escape. I welcome collaboration provided that it is creative and promotes Government understanding that they cannot avoid being a player in the market place. It may sound like Powellite philosophy, but the Government say that they will not intervene in the buying decisions for £1.8 billion equipment, yet they are buying between 10 per cent. and 20 per cent. of total output for their own civil and military uses.
The Government and the DTI do not have to set themselves up as judges on the merits of the people and the products in the IT marketplace. However, they must understand that their process of choice is antiquated and expensive. Indeed, major suppliers say that it costs them three times as much and takes them three times as long to bid to Government as it does to comparable outside enterprises. Because the Government are the largest single buyer, spending billions of pounds each year, their choice affects the operation of the market place.
I have a rather worrying personal concern that in a country built on talent and surrounded by opportunity the Government do not recognise their unique duty of leadership by constantly seeking to open new areas of prosperity for our nation. That is the inherent challenge of the Committee's IT report and the reason that we have selected it for debate tonight. We want the Government to accept their duty and to act. I hope that my hon. Friend the Minister will respond with understanding.
§ Mr. Stan Crowther (Rotherham)
I am happy to follow the Committee's distinguished chairman, the hon. Member for Hastings and Rye (Mr. Warren). He has not left a great deal for other Committee members to say. I appreciate the splendid way in which he advanced the Committee's views.
Because of the short time available for this debate, I shall be brief—although I intend to concentrate on a matter of crucial importance to British industry. I felt that the hon. Gentleman was displaying his customary generosity when he suggested that the Government had misunderstood the Committee's report. The alternative is that they understood it perfectly well, but reacted in an extraordinarily stupid way. It may be that they have misunderstood it. Perhaps I should be as kind as the hon. Gentleman.
The Select Committee spent a vast amount of time on the inquiry. There were 15 sittings in the House and we took many thousands of words of written evidence as well. We travelled around the world talking to people in Japan and all the way across the United States. We then produced a report containing 52 recommendations which was warmly welcomed by the industry. The hon. Member for Hastings and Rye has quoted a few of the comments that we have received from the industry, but they are merely a few out of a vast number of comments that we have received, all extremely complimentary to the report. Unfortunately, the report was dismissed peremptorily by the Secretary of State. It is sad that he should have reacted in such a way.
I emphasise that the report was unanimous. Every member of the Committee agreed with every recommendation in it. I do not intend to deal with its technical 527 aspects—other hon. Members are much more qualified than I am to do that—but I want to make one or two comments on the political aspects of this matter.
This is not a matter of party division. Again, I emphasise that the report was unanimous. The argument between the Select Committee and the Secretary of State on this matter goes to the heart of the ideological divide in British politics today. It is entirely a question whether a British Government have a duty to make decisions and to implement policies which are positively in the interests of British industries and British companies.
This is the only Government in the industrial world who make a virtue of neutrality in that matter. They are certainly the first Government in British history who have taken the view that it does not matter whether British industries sink or swim and that it is nothing to do with them. I know of no previous Government of any party who have taken that view, but that seems to be the well-established policy of successive Secretaries of State for Trade and Industry, of whom we have had a large number in the past 10 years—about eight.
Those Ministers have all claimed a great attachment to what they call market forces. I am not against market forces, but we need to remember that market forces do not come down from heaven. They are not created by some extra-terrestrial body. They are very much created and conditioned by Government policies—for example on energy costs, interest rates, exchange rates and, in the particular context of the matter that we are discussing, public procurement.
Let me refer briefly to the Government's response to our report on that matter of public procurement. They said:The Government do not consider that public procurement should be used as a policy instrument to pull through technology.We never suggested that it should be an instrument to pull through technology. All that we were suggesting was that in their public procurement policy it would not be a bad thing for a British Government to pay some attention to British industry. That may have been a misunderstanding, but if it was it was a serious one.
Government policies on matters such as education, training and research in the area that we are debating are of enormous importance in conditioning what turn out in the end to be market forces. For example, no one can seriously dispute that the success of the United States IT industry in the civilian field owes a great deal to the enormous amount of taxpayers' money which the Department of Defence spends on research—a perfectly proper use of the taxpayers' money. I am not necessarily suggesting that the Ministry of Defence should adopt the same policy here; I merely mention that as an example of the way in which Government expenditure can be used to benefit the economy, obviously including the private sector.
Those are ways in which market forces are determined by the use of Government policy and resources, and I would like to see that happening here. However, the Government's response to the report, effectively saying that that is not their job and has nothing to do with them, is unfortunate.
The Ministry of International Trade and Industry in Japan clearly, openly and obviously devotes its policies entirely to the promotion of the Japanese national interest. Nobody makes any secret of that. If the Japanese have 528 tended to open the Japanese market to foreign imports more than they have in the past, it is only because they perceive that to be in the Japanese national interest.
In the highly competitive world in which we live, I see nothing wrong in any Government adopting that policy. But the British Government's attitude, as we perceived it during the inquiry, as during many other inquiries, is that, although they want British industry to make the best possible use of information technology, it does not matter much to them where the equipment comes from; whether it is made in Britain or imported. They do not care much about the future of Britain's indigenous IT manufacturing industry. The hon. Member for Hastings and Rye pointed out the appallingly high trade deficit in that area. We and the Government should be worried about that.
The Government have said that they are not prepared to make use of their enormous purchasing power to assist in and encourage the development of the British IT manufacturing industry. They are wrong to say that. I hope that they will think again about what we have said in our report. Again, I emphasise that this is not a matter of an ideological difference between parties. The report, like all our reports, was unanimous.
I do not want to be told about our international obligations under EC rules, the general agreement on tariffs and trade and all that kind of thing. I see that the Minister nods, so I fear that I may be told about it. lest I shall be told about it, let me say at once that I have heard it all before. I also know that other Governments, who are similarly bound by identical rules, manage to find a way of protecting the interests of their own industries and of making sure that their own industries develop in the competitive world in which we live.
I never quite understand why we should be the only ones who say that there is nothing we can do because of the international rules. When we talked to people in Japan, the United States and throughout western Europe—yes, even in the EC—we found a very different attitude. The Minister knows perfectly well that there is not another Government in western Europe who will sit supinely back and see its own industries destroyed by competition from outside if there is something that can be done about it. There is something that the Government can do, but I am afraid that they are refusing to do it.
Where there is a will there is a way and it is up to the Government to find the way. It is time that we had pro-British policies from the British Government.
§ Sir Ian Lloyd (Havant)
I am glad to hear that the hon. Member for Rotherham (Mr. Crowther) has joined the comparatively select band of those who have been to Japan, the United States and elsewhere in Europe to look specifically at the information technology industry. Rather like those astronauts who go into space and never see the world in quite the same way again, hon. Members who have shared that experience never quite see the problems in exactly the same light again.
This is an old stamping ground of mine, but I feel something of an interloper in what is a vital and important argument between my hon. Friend the Member for Hastings and Rye (Mr. Warren) and my noble Friend Lord Young representing the Government. The hon. Member for Rotherham has touched on the crucial and sensitive aspects of this vital debate.
529 I am indebted, as I am sure are the House and the country, to my hon. Friend the Member for Hastings and Rye for having produced a remarkably comprehensive and interesting report which deserves, and I hope will continue to receive, the closest possible scrutiny. I have read not only the report but the Government's White Paper in response to it. Before commenting on both, I think it fair to say that the interchange between Select Committees and the Government provides a crucial fulcrum on which the balance between Government policy and the views of its critics can be weighed. It is very much in the public interest that that should be done seriously and openly, as it is this evening on the Floor of the House.
I congratulate the Government on responding positively and constructively to certain parts of the report. On reading the White Paper, I particularly welcomed the recognition in paragraph 5.14 of the significance of the international trading market. Recalling the remarks that had been made about Japan, I never forget for one moment that whatever may be Japan's success on one side of the coin, it depends on the other side of the coin, which is the virtually completely free access that Japanese products have to the OECD world trading market. Neither the Japanese nor anyone else should be allowed to forget that. Therefore, I welcome also the Government's emphasis on the general agreement on tariffs and trade and on access to international markets. Whatever happens, it is important that our policies result in such access.
Before giving my critical reactions, I shall set the scene. Since I last spoke on the subject—which was quite a while ago—the cost of semiconductors per function has fallen by 75 per cent. It has fallen by half since the report was printed. The size of the information technology deficit has increased enormously and the scale of the IT industry in the United Kingdom, in Europe and worldwide has expanded at a prodigious rate. The world economy now benefits to the tune of the massive figure of 400 billion dollars. About 15 years ago, I said that by the end of the century, IT would be the world's largest industry. Now I believe that that target will be exceeded and that if IT is not already the world's largest industry, it will be within the next few years.
I very much regret that Britain has sold to France one of its most outstanding examples of information technology, the transputer. United States' investment in microelectronics in 1986—the latest year for which we have figures—reached the colossal equivalent of £60 billion. The figure for France was £8 billion. In 1987, Japan's output of information technology products was 97 billion dollars. By comparison, the total for the EEC was more or less a comparable figure, while that for the United Kingdom was only $22 billion, or one fifth of that for the Community.
Japan's research and development expenditure now stands at 6.9 billion dollars and is second only to that of the United States, which spends nearly 20 billion dollars. Japan's expenditure is now double that of the United Kingdom, at 3.1 billion dollars. It is a matter of the greatest regret that not one United Kingdom firm features in the list of top 10 companies in respect of computers, telecommunications or semiconductors. Japan completley dominates the export market for consumer electronics, with a 63 per cent. share, compared with 5 per cent. for the 530 United States—which is an interesting figure, because it represents a very rapid change from a position of dominance—and 4 per cent. for the United Kingdom, with 27 per cent. for the whole of the European Community.
A specific and significant statistic is that relating to installed robots, upon which so much of industry's performance depends. The figures are most alarming. The total number of installed robots in Japan is 82,500; in the United States, it is 25,000; in Germany, 12,000; in France, 5,000; and in the United Kingdom, 3,600. If one reflects on those statistics, one draws at all points the conclusion that the diffusion, of microelectronic technologies is now the main driving force of all the OECD economies. The greater the diffusion, the greater the growth rate, the greater the prosperity and the greater the market dominance. The correlation is very clear and very specific.
I turn to research and development, and hope that I shall interest the House with two technical examples. The first transistor was developed in 1955 or 1956. I recall holding a copy of one in my hand in the House. It had four gates. Today's commercial integrated circuits have 1 million gates. Laboratories are producing circuits with 4 million to 6 million gates, and the cutting edge of science is what are known as gigaflop systems having 1 billion gates. That stage has not yet been reached, but in the field of molecular electronics the cutting edge of science is getting very close.
At the Carnegie Mellon centre in the United States, work is continuing on 400 megabit optical random access memories, which means having 400 million devices on one small memory chip. Even more exciting is the use of that device in super-computers using what is known as bacteriorhodopsin. That extraordinary material is found in the photosynthetic apparatus of bacteria on the shores of San Francisco, and it can be used as a bistable optical switch—that is, as a semiconductor, because it can signal either on or off—with the phenomenal switching speed of 1 million millionths of a second. When used with laser technology, it offers the prospect of computers that can operate thousands of times faster than the comparatively small number of supercomputers that currently exist throughout the world. A combination of semiconductors of that kind with polymer surfaces presents the possibility of developing artificial vision for computers before the end of the century—and we should reflect on what that could mean for humanity.
I refer to two other important developments. Fujitsu has produced the first Japanese to English translation system—and what a shame that that was done in Japan—using a 32-bit personal computer. The price will be around £2,200, and the expected revenue is around £45 million in three years. The questions I ask are, why not us, and why not here? Even more depressing is that the first Josephson junction processor has also been produced by Fujitsu. It is based on the prototype developed by a brilliant young Englishman, Dr. Josephson of Trinity college, Cambridge. Again I ask the questions, why not us, why not here? When considering British information technology policy, we cannot escape asking such questions, whatever may be our arguments about the right method of dealing with the problems involved. Only this morning I heard that a young scientist in Hong Kong is close to developing a computer that will recognise spoken Mandarin, and the possible market for that is 1 billion Chinese.
§ Mr. Timothy Wood (Stevenage)
My hon. Friend mentioned a number of fascinating developments and quite properly asked the questions, why not us, why not here? Is he suggesting that companies or the Government should have played a part?
§ Sir Ian Lloyd
I shall not escape that question. It is important and I shall try to answer it directly.
It has been pointed out that the United States car industry has installed three super-computers. In the same article, we were told that Nissan has installed two which are so much more powerful than the three available to the whole of the United States car industry that they will be able to design, develop and crash a motor car without even building a prototype. Does the British motor car industry have access to that technology? If not, why not? Where does the responsibility lie?
These machines cost an enormous amount, between £7 million and £15 million. There are a few hundred in the world and only three in the United Kingdom, but they are of the utmost importance. I am glad to say that Europe is not asleep. The European sub-micron silicon initiative involves a £2.7 billion programme and the intention is to increase the present density of integrated circuits by 10, to increase their size by 2.5 times and to extend the elements of memory from 40 million to 200 million—still well below the figure that I gave earlier—and the elements of logic from 2 million to 10 million.
The world market for super-computers has been estimated to be £100 billion by the year 2000. Those who support the JESSI programme—the European sub-micron programme say that, with luck and if we do it properly and get it right, Europe's share may be £17 billion. Paragraph 5.5 of the White Paper "Information Technology" states:The Government have no plans to require the creation of a national broadband network based on fibreoptic cable.I contrast that with what is happening in Japan and the United States. In Japan, it has been stated that the intention is to create a fully integrated digital communication structure using broadband fibre-optic microware.
I hope that the House will forgive me if I quote fairly extensively from Senator Gore's speech on the so-called Gore Bill in the United States. He said:High-performance computing is the most powerful tool available to those who, in an increasing number of fields, are operating at the frontiers of imagination and intellect. The nation which most completely assimilates high-performance computing into its economy will very likely emerge as the dominant intellectual, economic, and technological force in the next century.I fully concur with that judgment. Senator Gore went on:If the United States is going to be a supercomputer superpower in the 1990s, we had better start building a high-capacity, national research and education network today.He argued:A national network with associated supercomputers … will cluster research centres and businesses around network interchanges, using the Nation's vast data banks as the building blocks for increasing industrial productivity, creating new products, and improving access to education.How, he asks, is this to be done? Now we come to the centre of the debate. Senator Gore said:Can we rely on the market system to provide this kind of infrastructure? We certainly couldn't where the Interstate Highway System was concerned … I believe that the Federal Government must again be a catalyst … Clearly, the 532 technological spinoffs and productivity gains would be enormous, from a network that would cost the Government less than one Stealth bomber.Senator Gore went on to develop in some detail what he hoped the Bill would do for the United States. He spoke ofputting in place a three gigabit per second"—not 3 million, which is our standard—national research and education computer network by 1996 … including a National Digital Library … projects like neural networks; … basic research and education; … stimulating the development of hardware; … enhancing the development and distribution of software".Senator Gore said:This bill would also authorise $1.75 billion over 5 years, fiscal years 1990 through 1994, to carry out the purposes of the act. The investment is tiny and the payback enormous".He said:the only long-term deficit solution is to get away from short-term thinking, look to the future, and invest in the people, technologies, and equipment that will ensure our standard of living and increase productivity.That is what is happening or is about to happen in the United States and Japan. [Interruption.] My hon. Friend the Minister does not think that that is happening. Doubtless he will reply in due course. If I am wrong, I stand corrected. If it is not happening after what has been put forward, I should be surprised if it does not happen fairly soon. If this or something like it does not happen fairly soon in Japan, I shall be even more surprised.
We come to the question: how is this to be done? I am coming to a sensitive matter. I have just read the exchanges with Lord Young when he appeared for the second time before the Trade and Industry Committee and answered probing questions on ministerial responsibility. I disagree with both parties, which puts me in a difficult position. I do not disagree with the objective of my hon. Friend the Member for Hastings and Rye (Mr. Warren)—it is extremely sound—nor do I agree with Lord Young's attempt to play down the significance of this ministerial post. It has been played down, largely on the ground that everyone now knows about information technology and everyone now uses it and therefore there is no need for central responsibility. It is like saying of the Treasury, "Everyone knows about money and we really do not need a Chancellor of the Exchequer." I acknowledge that the analogy is imperfect.
I can claim some responsibility for this debate because I put up a paper in 1978 that developed the concept of a Minister for Information Technology. I was delighted when my right hon. Friend the Prime Minister came to power in 1979 and appointed the present Secretary of State for Education and Science to that post. While he was Minister for Information Technology, we made much progress. He was one of the few hon. Members, and certainly one of the few right hon. Members, with a clear appreciation of what this was all about. While he was in that position, he drove things forward and we were conscious that the nation had as the Minister for Information Technology someone with a grasp, determination and understanding of information technology. Alas, ambition and other things beckoned and the sad clothes of the Minister for Information Technology were dropped, like Cinderella's, into the wastepaper basket, and my right hon. Friend moved on to other and better things. As a result, the nation may have missed out, even if it has gained in other ways.
§ Mr. Crowther
Does the hon. Gentleman agree that during the reign of that Minister for Information Technology we developed a considerable trade deficit in that business?
§ Sir Ian Lloyd
That may be so, but the reasons for the development of the trade deficit, in both the United Kingdom and western Europe as a whole, and in the United States, are deep-seated. This is the obverse of the remarkable sense of vision, determination and organisation—almost unique in the history of the industrial world —that was displayed in Japan. I came across it for the first time in 1970, when a Japanese Minister of State with specific responsibility for information technology told a visiting delegation from Europe that information technology in Japan bore the same relationship to industrial power as coal did to industrial power in the 19th century. I have never forgotten that, just as I have never forgotten the vigour, force and conviction of that man's statement.
What are the solutions? There are many, but I favour one particular solution. I am sorry to have to say that I disagree with my noble Friend the Secretary of State for Trade and Industry and I probably disagree with many others. We need this focus. If the whole record is in any sense a judgment of whether this decision is right or wrong, I believe that that record is wholeheartedly on my side and no one else's. I stick to that judgment because I have made it on the Floor of the House for almost 25 years. Events are what count and events have proved me increasingly right.
As a country, we cannot afford to fail in this area. We must think much harder and we must be more effective. We must see a national and European leadership emerging in this sphere. Our science, our inventiveness and our technology are all equal to the challenge and I have every confidence in them. However, our institutions are not, and I have less confidence in them.
Senator Gore talked about talent and determination. We have almost a superfluity of talent and the very best talent in this country is second to none. We have rather less determination. Let us put talent and determination together. When we have done so, let us use them.
§ Mr. Malcolm Bruce (Gordon)
I will not attempt to follow the hon. Member for Havant (Sir I. Lloyd) with the great deal of technical knowledge he has revealed. However, I hope that he will agree that one does not have to have that degree of technical knowledge to be able to approach this subject and to recognise its importance. The information technology industry, regrettably, has its own technology, terminology, statistics and jargon, as many industries do. As a result, many people tend to shut it out, and to think that it is not for them and not terribly important.
However, the advent of the development of information technology can be compared with the invention of the printing press, the railways, and the internal combustion engine all rolled into one. It is—or represents when used and developed properly—a major leap forward in the way that we organise our business, the means of production and our daily lives. It has already had a substantial impact, but I suspect that its eventual impact will be far greater.
There are some simple, practical aspects of information technology to which we can all relate, given our everyday experiences of the past 24 hours. The habit has built up 534 over generations that people congregate in great cities. I do not believe that that development will be fundamentally reversed, but technology can enable a more sensible balance of time and place to be organised. Many of us use new technology every day when communicating with our constituency offices. I and many other hon. Members have word processors and fax machines at home to enable us to communicate between our homes and secretaries. Those are simple examples of information technology, but they have made an enormous difference to the speed with which information can be transferred. With the development of super-computers, not only speed, but volume and sophistication, come into play as well. They are all important and have substantial implications not only for the economy, but for society as a whole.
However, there are still many casualties within the system and part of the reason for that is that information technology has come upon us so quickly. It still remains true, for example, that companies buy hardware before they have considered fully what they want to do with it, and before they have considered their software requirements and intercommunicability, not only within their own company, but with their customers and the companies from which they purchase. Much has been learnt, but the learning curve is expensive.
It is interesting that a survey last year said that the most important priority among British management was upgrading existing systems. I realise that that is partly a reflection of the speed of technology, but regrettably, it is also a reflection of the mistakes made in earlier purchasing decisions. Members of the Select Committee on Trade and Industry will remember in particular the Bank of America, which we visited, where there were substantial errors and the Committee judged that the bank was continuing to make errors in buying information technology systems.
It is interesting that a survey carried out by Amdahl when our report was in its early stages pointed out that attitudes in British management towards information technology lagged behind those in other European countries and especially in West Germany. One of the problems was that we did not spend much time in training our executives in the use of information technology. The survey said:In Great Britain, the least amount of time is spent learning: for example it is believed that only 9 per cent. of British managers 'often' attend internal presentations or seminars on Information Technology, whereas it is 19 per cent. in France, 29 per cent. in Italy and 36 per cent. in West Germany".That is symptomatic of the problem. The survey also showed that the British position was mixed:Expectations are high and there are some excellent success examples … There are some notable exceptions but there is clearly a great deal to do in improving attitudes and understanding if full benefit is to be gained in the years ahead.There are problems in attitude in British management, which the Government are entitled to say are not wholly their responsibility.
However, I find it odd and the Committee collectively found it offensive that the White Paper was not a counter-statement, but a rather cavalier rebuttal of a serious piece of work which involved a great deal of evidence taken from a wide variety of sources and which made common-sense recommendations. The Government impugned many of the recommendations in a way that did not represent what the Committee had said. What offended me was that the Government criticised us for 535 points that we did not actually make and rejected recommendations that we did not actually make. That is not a businesslike way in which to go about the matter and was quite unnecessary.
As the hon. Member for Havant has pointed out, there were areas in which the Government were able to say that they were acting positively and as our Chairman, the hon. Member for Hastings and Rye (Mr. Warren), pointed out in his excellent opening speech, not intervening is, in a sense, an act of intervention. It is a policy decision. The Government are taking a macho ideological position which does not make sense in the day-to-day world in which we all live. Their attitude seems rather unnecessary.
As the Minister will recall, we had a debate on this subject on 19 April. 1 am pleased to say that the subject was chosen by my own party and the debate was opened by my right hon. Friend the Member for Yeovil (Mr. Ashdown), who has direct personal interest in these matters and is an enthusiast for information technology. In particular, he referred to the desirability of having a national broadband fibre-optic cable network. The Government have rejected that and have said that they do not believe that that is especially desirable. They said:The Government have no plans to require the creation of a national broadband network based on fibreoptic cable.Again, the Committee did not suggest that the Government should require the creation of such a network. The Committee said that it thought that that would be desirable, and that it was interested to know whether the Government agreed and whether they felt that they would have an input into that network. I must ask the Minister whether the Government believe, just as neutral observers and operators in the game, that a broadband network is desirable. If they do not, the Minister should tell us why. If they do, what contribution are they prepared to make towards securing it? Nobody is suggesting that the Government should require that network or that they should make it happen, but they should say whether they think that it is desirable.
§ The Parliamentary Under-Secretary of State for Industry and Consumer Affairs (Mr. Eric Forth)
What would the hon. Gentleman do?
§ Mr. Bruce
The Committee is asking the Government to say whether they agree, and if so, what they propose to do. Hon. Members of all parties agreed that a broadband network would be desirable. If the Government do not agree with that, the House should know. Equally, we should know what the Government consider to be the way forward—[Interruption.] The Minister will have the chance to reply, so these are perfectly reasonable questions.
The Government accept responsibility for the road network. We have debates about it and different views are expressed, but the Government accept the responsibility for ensuring that there is a road network and that it is maintained, updated and from time to time extended. The Government also accept responsibility for the national grid, for gas and electricity. Why do the Government not accept the responsibility for a national information technology grid, which should be in exactly the same category because it is the modern equivalent of those other networks?
If the Government's argument is that they do not have a role to play, either as a participant in the market or as a gentle guider of the market, they cannot point to history as 536 showing that the market has always got it entirely right. Most people would acknowledge that although the building of the railways was a wonderful achievement, the private companies involved built a lot of lines in silly places, with gauges that did not match. Many of those lines did not pay and ultimately had to be closed, yet the Government could have had a logical and useful role in standardising the gauge. It seems extraordinary that the Government cannot state the desirability of them making similar contributions in this area.
As has already been said, the Government are substantial operators in the market place, as purchasers and users of information technology. I believe that the correct figure for Government expenditure is £1.8 billion per annum, which is about 20 per cent. of the total market. That is no mean and insignificant sum.
When the Committee visited silicon valley we saw considerable evidence that that was substantially a private venture and an offshoot of the injection of Government defence spending. The Committee is not suggesting that that is what we should be doing. We are simply making the observation that the needs and the huge budget of the American defence industry caused the spin-off of that massive innovative private enterprise explosion in silicon valley. That example proves that the interaction between Government expenditure and private sector growth and development is inescapable and unavoidable. Therefore, for the Government to say that they are not prepared even to consider the implications of what they are doing in terms of its impact on the private sector is both absurd and irresponsible.
It is not fair for the Minister to say that the Committee is implying that there should be detailed scrutiny. There was certainly never any suggestion that Government expenditure should be used to pull through technology. We simply argued that the Government should give some consideration to the impact of their expenditure on the development of the British information technology industry. We said that where the two could coincide, the Government's interest as a user and the industry's interest as a supplier should coincide, to both parties' mutual benefit. Any sensible Government would surely grasp that idea as being practical common sense and something that could be used to everybody's advantage.
I value this debate. Our Chairman gave a full and excellent exposition of the Committee's work. I defer to him as somebody who knows a great deal about the subject and as somebody with a great deal more expertise than myself.
This subject affects everybody. It is crucial to the development of our economy and our society. The Government should not artificially magnify differences, many of which do not exist. They should not belittle the work of the Committee because although the Committee members have broad backs, the sad thing is that ultimately the Government are not belittling the work of the Committee, they are belittling our industry, which worked so hard with the Committee to give a great deal of useful evidence, which I believe has been brought together in a way which is welcome to the industry.
I repeat that the industry would like the Government to respond and to ensure that in 10 or 15 years from now our British information technology industry will be in much better shape than it is now and that the British economy and British society will be much benefited by that fact.
§ Dr. Keith Hampson (Leeds, North-West)
This is an important debate. It was a privilege for hon. Members —sadly few in number—to hear the distinguished speech made by my hon. Friend the Member for Havant (Sir I. Lloyd), who knows more about the subject than probably any other hon. Member and who has campaigned on these issues for so long. I endorse the gist of his entire speech.
My hon. Friend used the word "depressing" several times. I came to this subject as a total stranger when we began our Committee inquiry. Ministers sit in Whitehall, they are sometimes fairly new in their jobs and are not particularly conscious of the issues, so I stress that, as we as a Committee travelled around and saw the Japanese and American efforts and learned about what our partners in Europe, such as the French, were doing, it was indeed depressing to come back and discover what we are doing.
Hon. Members have used metaphors tonight and have said that information technology is today's equivalent of the railways or the coal industry. I was going to use the example of steam. In so doing, we are searching to indicate the enormous significance of developments in information technology. However, what was not true of the earlier industrial revolutions was the sheer pace of change and the rate of development and progress that there is in this area of information technology. Indeed, that is at the heart of the problem because the continuous and huge cost has conditioned the way in which our rivals throughout the world are handling this issue. Therefore, it is not good enough for Ministers to give the impression that they want to wash their hands of it.
Moreover, it is not good enough for Ministers to say that the Committee proposed solutions which, frankly, we did not. We were simply trying to draw attention to the scale of the problem and to the significance of what was happening elsewhere in the world. We were not saying that there should be an attempt in the words of the White Paper to "impose a 'best' solution." Where on earth did the Government get that from?
In the same paragraph, however, the Government said something that we would endorse. I hope that the Minister will bear in mind my words on this in the light of his words in our previous debate on this subject on 19 April. The White Paper states:Government action can be justified to seek to correct failings in the market mechanism".That is exactly what we proposed throughout our report and the Government have not denied that fact. Therefore, there was no point in the Minister saying when he replied to that earlier debate:The Select Committee was looking for what the Department sees as a more interventionist approach than the Department of Trade and Industry is prepared to support … I regret … not modern Government policy."—[Official Report, 19 April 1989; Vol. 151, c. 385–6.]We are entitled to ask, which Government's policy? Not that of the Japanese Government. At the heart of capitalism, they pursue a different policy, as do the American Government. In this, as in so many areas, we are marching out of step.
§ Miss Emma Nicholson
Has my hon. Friend considered the contracting out by the American Government? When I was at the NASA base the other day, I found that the most interesting thing was that it was run by IBM. Did my hon. Friend understand the effects of what he was looking at in the United States of America?
§ Dr. Hampson
I shall deal with that in detail in a moment. I was trying to make the point that Ministers are making unfounded accusations about the Committee and that the Government are out of step with what we discovered other Governments were trying to do.
The Minister's sentiments were not even consistent with the Government's own approach. Within three weeks of the publication of the Select Committee's report, the Department of Trade and Industry issued a press notice which said:Government invests £22 million for extra IT research.I hasten to point out that Ministers had not told us that that was happening. Moreover, the Secretary of State appeared before the Committee for a second time three weeks before a major reorganisation of the handling of information technology in his Department was undertaken, yet we were given no indication that that was about to happen.
The press release to which I have referred is one of several issued by the DTI boasting about what the Department is doing—of an information and engineering advanced technology programme for example, and of £22 million to help electronics to expand the science base of this country. Another press notice is entitled "Semiconductors", and says:The Government announced today … £16 million for a national programme of research into high temperature conductivity.Where is the difference between what the DTI is doing on a large number of fronts and what the Committee proposed? We proposed that such activities should be openly accepted. We should not be hiding our initiatives and efforts, or the fact that we are doing what other Governments are doing, albeit in an ad hoc way. We argued that there should be co-ordination. The IT effort spans an enormous range of activities. It involves the schools and how we get young people to cope and to become involved naturally with information technology. It involves training teachers. We have an appalling record on that; information technology coverage in teacher training programmes is wholly inadequate. It involves the awareness of business men and a whole range of other areas' activities—the Training Agency and its training programme for young people and so on.
We have already acknowledged that a Minister in the Department should be the co-ordinating Minister for inner-city policy. Information technology is enormously significant. Is there not a case for saying that we should have a Minister to try to co-ordinate the Government's efforts? That is what the Committee suggested, but the Government said that it was not part of their thinking on these matters.
When it comes to trying to get orders for British industry, every effort—rightly—is made by the Department and the Prime Minister to win contracts—for example, for bridges in Turkey—and I give them credit for that, but are we really saying that help for the British construction industry is more important than assistance for information technology—both for the benefit of that industry itself and because of its application? We cannot say that. Information technology will not only be our largest, most important industry; it will be the industry on which our future prospects depend most heavily. This is what will determine the competitive cutting edge of a 539 modern industrial country—the acceptance, use and successful development of information technology. The Government acknowledge that in practice, but not openly.
In Japan, the significance of information technology is all too apparent. When we visited Japan we were given a document issued by the Japan Key Technology Center. It contained the huge headline:Reaching Out Toward the 21st Century"—and that is exactly what we are talking about. The document describes the use of Government funds to help co-operative research. Despite the enormous power of the Japanese information technology companies and the huge scale of their own research, they still draw on Government funds. If more than two companies are prepared to capitalise a research and development company, they can get 70 per cent. of the capital from the Japanese Government.
They can also get loans. This is an interesting idea, to which I draw the Minister's attention. Loans are available for Japanese companies that enter high-tech research. Such loans cover 70 per cent. of the cost of research projects, and the interest and repayment of the loan depend on the success of the project. That is because the risk factor in information technology is enormously high. If the project is successful, the company pays the money back. If the project does not succeed, the payments are less, or the company does not pay at all.
It is not good enough to say, as so many commentators in this country do, "Well, the Japanese have a different culture." Of course they do, but the idea of trying to bring together the power of the private sector with Government help to co-operate in this immensely costly area is not restricted to Japan. In odd ways, we try it here, and that may provide a little help on the edges, but the Select Committee was concerned about the scale of the investment gap.
One finds similar arrangements in operation in the United States—the very heart of capitalism. Why did Congress pass the Joint Development and Research Act in 1984? Because the joint involvement of huge American corporations had been breaking anti-trust laws. Having seen what the Japanese are doing, it was most important for the Americans to encourage similar developments. Congress has enacted proposals giving tax credit relief to companies that are prepared to invest in research projects in universities. In America, we see fundamental research assisted by the Government drawing in private sector investment.
What in any of this does the British Conservative Government disapprove of? Will not the Minister say for once that most of these activities are perfectly within the philosophy and approach of the present Government?
§ Dr. Hampson
I find that extraordinary. I think that it should go on the public record that the Minister has just quite clearly said, "No." That is out of character with what other Ministers are saying and with some of the Department's own programmes.
We cannot ignore the scale of the Japanese and American efforts. Rather than giving a great deal of detail about what the Americans do, let me draw the attention of the House to a book by a man called Kenneth Flamm, called "Targeting the Computer". The book is the result of a research project examining how public procurement policy and investment programmes in Europe and the 540 United States have enhanced the development of computer and information technology. The Europeans have not done things very successfully, as the book shows, but that does not mean that we should not make the effort to do them at all.
The book shows how, in the 1960s, the defence programmes, developed largely for the American air force caused a great breakthrough in high-powered computer work. The role of the Defence Advanced Research Projects Agency in the 1970s is central to the book's thesis. Help was given to bright people who had bright ideas in universities in the United States—not specifically for military purposes but because it was thought that the development of technologies such as the Sun workstation would ultimately benefit the military. The Americans were prepared, as a Defence Department effort, to put huge sums of money in, even though there was no immediate or direct benefit. The Americans were funding projects that it would take 15 to 20 years to follow through, and we are seeing the results in the space programme and the like.
Of course the British Government do not have resources on that scale, but it is a matter of philosophy and of our approach. We can do something, just as the French have. The "smart" card is now becoming a practical project. It is cheap enough in terms of unit cost for companies to use in the market. That happened largely because the French Government realised that French companies had something valuable but that the project would be difficult to launch because of the cost. They therefore said that a French man's medical records would henceforth be held on a smart card. That created an enormous market for the private sector to develop. The French Government were not picking winners or telling the private sector to do this or do that. It was an example of a Government entering partnership with private companies, helping to create new markets and helping companies to succeed as far as they could in those markets. That is something with which the British Government, of all Governments, should be concerned.
Even if the Government do not accept the degree of intervention that the Minister might say my remarks imply, they have a role in increasing awareness. The Government constantly talk about awareness in the enterprise initiative. The Committee heard a lot of evidence to the effect that there simply was not enough awareness. We may be having a lot of awareness programmes about Europe. The Government have been spreading knowledge very successfully about the single market. One of the most important factors in helping the country to succeed in the single market will be the adoption of information technology.
We do not have enough targeted programmes under the enterprise initiative for information technology.
We do not have enough resources in the teaching company programmes specifically geared to information technology. Let us look at some figures: 41 per cent. of IT managers said that their senior management in this country were not successfully involved with knowledge in IT; the comparative figure for West Germany was 5 per cent.
The Government have a major effort to make to heighten awareness, even if they do not want to pull through the technologies, help create the markets, develop the partnerships and do something further to develop research. They must do something further on research, even though they do a lot already. They already make 541 research grants. I have suggested a different type of loan programme, or, like the American Congress, a tax credit system for companies interested not only in specific developmental work for company use but in pure research.
One immediate issue would be of enormous benefit, Increasingly, the Government have encouraged the private sector to help universities and other institutions of higher education. We have a programme of about £1 million to try to lever another £10 million in gifts or donations to higher education. But there is also VAT on charitable donations from companies. A company such as Hewlett-Packard that has been giving equipment to Leeds university is charged 15 per cent. on the value of the high-tech equipment that it is donating. That is absurd. That is the right and left hands of Government not knowing what each other is doing.
We must somehow co-ordinate the Government's effort. The Treasury must believe that short-term cash figures are nothing compared with long-term investment in this country's future. The pay-off in 20-year-olds being able to use the best equipment from Hewlett-Packard, IBM and so on will be more important than spending £40 million on their grannies getting assistance for medical insurance. If we took the £40 million which we are going to put in to assistance for medical insurance and put it into the programmes that we already have to help companies give more equipment to higher education, it would pay for far more in the longer term.
We are asking whether Britain can win and do its best in Europe and whether we can do the best of which we are capable in the world. The report is trying to tell the Government that Britain must be a winner and that, above everything else, we become a winner through the successful use of information technology. Frankly, the Government must have a more positive response, spend more, be more interventionist and be more prepared to co-ordinate their efforts.
§ Mr. Roger Stott (Wigan)
I congratulate the hon. Member for Hastings and Rye (Mr. Warren) and the other members of his Select Committee on Trade and Industry on producing their report on information technology. I agree with most of the contents of the report. Without doubt, the Select Committee's conclusions are a devastating critique of the Government's policy on an industry which, in the words of the hon. Member for Leeds, North-West (Dr. Hampson) is the touchstone of the new industrial revolution. I agree with the Committee's 52 recommendations, but I should have liked to see them go a good deal further.
My one regret is that this debate on an important subject is taking place so late. I should have liked to have a full day's debate, so that the Select Committee's recommendations could be fully explored. I have a great deal of respect for the work of Select Committees. I hope that the Minister has had time to reflect on and repent his rather stupid remarks of 19 April, when he referred to the Select Committee as anold-fashioned idea of the gargantuan dinosaur".—[Official Report, 19 April 1989; Vol. 151, c. 385.]I hope that the Minister has read the minutes of the evidence of 26 April, when some of his hon. Friends were 542 particularly offended by his personal reference to them. I hope that he will have the magnanimity to repent and to desist from using such stupid language.
§ Mr. Forth
I ask the hon. Gentleman to re-read that passage. In any case, the last words of my hon. Friend the Member for Leeds, North-West (Dr. Hampson) were that the Government must be more interventionist. I heard him say that, and it will be on the record. Why should I withdraw my remarks, which the hon. Gentleman misquoted, when at least one of my hon. Friends has justified part of what I was saying?
§ Dr. Hampson
Will the hon. Gentleman allow me to correct that? I said that there is no doubt that my hon. Friend the Minister would call my view interventionist. I am talking about nurturing those industries, not intervening and telling them what to do.
§ Mr. Stott
I hope that we can penetrate the Minister's mind, although I have serious doubts about doing that.
There are three major facets to a debate on information technology. The first is the state of the IT industry, the second is the use of IT by the rest of industry, and the third is the Government's use of IT. I shall concentrate on those three issues.
The Chairman of the Select Committee has already mentioned that we have a huge trade deficit in manufactures, particularly in information technology. I make no excuse for drawing that matter to the attention of the House. Britain's 1988 trade deficit for information technology was £3.9 billion. That was up by 15 per cent. on the year before, and was almost one third of the total deficit in manufactures. In the past four years alone, the deficit in electronic goods, which includes computers, telecommunications and audio equipment, has risen by a staggering 40 per cent.
According to the Financial Times a detailed breakdown of the figures shows that theUnited Kingdom does not enjoy any particular areas of strength.The biggest imbalance was in components, professional equipment and semiconductors, at £1.5 billion. For telecommunications, television and audio it was almost as bad, at £1.4 billion. That is double what it was in the past four years. The only declining part of the deficit from £1.1 billion in 1984 to £1 billion last year was in computer and office machinery, but that was almost entirely due to the assembly operations of United States companies in Britain, such as the one in Scotland—Wang—which is now leaving Britain.
Employment in the United Kingdom electronic and electrical engineering sector has fallen from 752,000 in 1979 to 529,000 in 1989. At the same time there has been, and still is, an increasingly alarming skills shortage. No doubt the Minister will lament that deficit, and claim that all other OECD countries, apart from Japan, suffer trade deficits. That is a fig-leaf that has been claimed by himself and also by his boss, the Secretary of State, in his rather difficult encounter with the Select Committee on 26 April.
In two ways, it is an extraordinary defence. First, apart from the rather special case of telephone equipment, in which we are still seeing the legacy of public procurement policies, both in their role of producing strong companies in Britain and the investment programme of British 543 Telecom and others, Britain's trade deficit in the other relevant sectors is the largest by far of any comparable countries.
Secondly, and even more extraordinary, Japan's strength is claimed as a defence by a Government who maintain that the type of industrial strategy that is followed by Japan is an abomination against nature. In the words of the sour White Paper that was produced by the Government in response to the report:'Strategy' implies attempts to 'pick winners', to ignore market signals or to impose 'best solutions'."It cannot work," the Government say, yet strategy is precisely what Japan has and what has continued to contribute to its present dominance in information technology.
Having read about the Secretary of State's encounter with the Select Committee. I remembered that he had a rather bruising encounter with my hon. Friend the Member for Rotherham (Mr. Crowther) about the definition of the words "strategy" and "policy". The Secretary of State said that the Government had a policy, but, apparently, his departmental officials told the Select Committee that the Government did not have a strategy for the information technology industry. I, and I suspect many others, do not believe that the Government have a policy or a strategy, no matter how those two words are defined. As the hon. Member for Leeds, North-West said, the Government cannot pick winners in the versions of the alternative policies that have been quoted by the Minister. As the Select Committee recognised, only customers that include the public sector can pick winners in the long term.
Government can, however, do much more to ensure that conditions are created in which winners can come through. People look for winners in the first place. In the words of the Electronics Components Industry Federation, when giving evidence to the Select Committee, market forces cannot be relied on. The Government's fear of committing themselves in any argument about the future is similar to the man who will not leave home for fear of being run over and who spends his time compiling long lists of all those who have been run over in the past.
Japanese industrial strategy has led to some mistakes, of course, but the Minister would feel much more comfortable tonight if he could claim Japanese IT success. Japan is not the only country to believe in the I-word, "intervention". The French-Italian state-owned company SGS Thomson could not believe its luck when it was allowed to purchase INMOS, the developer of the world-beating, leading edge transputer, just as it was moving into profit after the characteristically long lead time following the initial investment in hightech.
The Conservatives never liked INMOS because it was established by the last Labour Government and was in the public sector. I find telling the response of Pasquale Pistorio, the boss of SGS Thomson, when asked how he would feel if he were British and saw such a unique company pass into foreign hands. "I do not know," he said, "I am not British." At one level that was, I suppose, a diplomatic answer, but at another it was extremely revealing. It could happen only in Britain. This is the only country in the world that would sell something as valuable as INMOS to a foreign competitor.
There has been no lack of warning about the parlous state of the British IT sector. The NEDC warned in 1984 that Britain was approaching a precipice. In 1986, the Information Technology Advisory Panel called for a more 544 energetic and strategic approach. The Advisory Council for Applied Research and Development, the Cabinet advisory body, and the report to the Department of Trade and Industry from Coopers and Lybrand both called for action. Perhaps the most damning of all was the MacKinsey report into the British electronics industry which pointed a gloomy picture post-1992.
The Government have not failed to heed just the warnings. They have done all they can to make the situation worse. They abolished the IT little Neddy and they abolished the post of Minister for Information Technology and gave us instead the Parliamentary Under-Secretary of State for Industry and Consumer Affairs. We always understood that his role in the Conservative party was to stand next to his right hon. Friend the Member for Chingford (Mr. Tebbitt), thus making him appear civilised. The Prime Minister should never have visited upon the Minister who will reply tonight the supposed mantle of Minister for Information Technology, considering that this is one of the most important areas in British industrial activity.
One bright spot in the activities of the Government was the Alvey programme, but that is now almost entirely wound down. The proposals of the Bide committee, for the relatively modest sum of a £125 million follow-on, has been totally rejected by the Government, as the hon, Member for Hastings and Rye pointed out.
Yesterday I spoke to Lord Gregson, who was a member of the Bide committee, who told me that that committee has worked for two years to produce its report and that the Government had done nothing about its recommendations. The tragedy is that that seems to be indicative of the attitude of the Government towards the IT industry.
The Government are winding up their support for such strategic projects as fibre-optics and opto-electronics, as well as the micro-electronics industry support programme and software products scheme. They have made it clear that there is to be no significant support for the large-scale integrated microchip, the exact opposite of what is happening in the United States and Japan. Within a few weeks of the Government making that announcement, the American Government announced a $250 million support programme for collaborative research by United States companies into VLSI technology. Therein lies the real difference.
We welcome the ESPRIT, RACE, BRITE and other EC-wide research programmes and we want to see those extended and developed. Although Britain's performance is poor, we must catch up with the rest of our European competitors. Part of the problem, and therefore part of the solution, must be to tackle Europe's general backwardness compared with the United States and Japan. Part of that must be a European-led position on the setting of standards.
We welcome the new DTI push for OSI, even if it is too little, too late. We also think there could be more effort in ensuring that the public sector used OSI equipment. That is an example of the kind of interventionist public procurement policy that can work.
But although European collaboration is an important part of the way forward, it cannot be a substitute for British Government action. A strong research base in Britian is a prerequisite to participation in collaborative EC research programmes. ESPRIT 2 was massively over-subscribed and we cannot pretend that it is a substitute for our own efforts.
545 Insufficient research and development is not the only problem holding back Britain. Despite insufficient funding by industry and a lack of resources in the universities, there are still major technological breakthroughs and exciting discoveries made in Britain. Some are brought to the market, and we wish them well. Some are even brought to the market by British firms.
There are three factors underlying the failure of British IT to grow in the way that it has grown in other countries. First, British firms have been handicapped in terms of access to funds. There is now a well-researched funding gap for start-up companies, which applies particularly to ventures operating at the inevitably high risk, long-term payback, leading edge of technology. Many of the world's newest large and medium IT companies started out in Califorian garages. British garages have been much less productive. I suspect that that has more to do with the availability of funds to take the development on to the next stage than to any inherent superiority on the part of Californian garages.
Secondly, we have the general structural problems common to all aspects of British manufacturing industry. I will spare the House a lecture tonight on high interest rates, but our easy market for corporate control and the City-induced emphasis on short-term profits has been particularly damaging to the IT industry. The great struggle between GEC and Plessey provides some important lessons.
GEC is in a position to make the bid because of its extraordinary cash mountain. It has run up that cash mountain because it has failed to make new investments, and high interest rates allow it to make a significant return. As the Financial Times has commented:GEC has no great reputation as an innovator in non-defence electronics. One of the most striking facts to emerge from the MMC report is that Siemens spends three times as much on research as GEC.GEC no doubt also sees an advantage in building up that cash mountain as a defence against other creditors. GEC has always been profitable, but it has not grown in the same way as other European companies.
§ Dr. Hampson
As far as I can remember off the top of my head, that is a little unfair. Siemens is so much bigger as a company than GEC. Siemens is worth £14 billion to £15 billion, whereas GEC is worth £3 billion to £4 billion. I believe that GEC's latest account shows that it has been spending about 7 per cent. on research, which is higher than Siemens.
§ Mr. Stott
The hon. Gentleman may or may not be right, but my point was related to the bid for Plessey. Although GEC has had so much money generated, it has not spent that money on increasing its research and development—which I believe it should have done—in the same way as other European companies.
GEC has always been profitable but it has not grown like other European companies. Between 1982 and 1987, GEC declined by 27 per cent. in value. Siemens, on the other hand, grew by 70 per cent., AEG, another German company, grew by almost 500 per cent., ASEA Brown Boveri, the Swiss-Swedish firm, grew by almost 250 per cent. and Philips by 36 per cent. As GEC is one of our biggest firms, we are entitled to feel disappointed by those statistics. However, the City will be impressed by the 546 statistics that they value—profits per employee are almost twice those of any of the other big European electronics companies. The Opposition do not object to profits, but we believe that they should be invested in new products and markets and, especially, in research and development.
There is even less excuse for GEC than any of the other companies because so much of its profit—like Plessey—is made from the taxpayer. GEC and Plessey are two of the six companies which were paid more than £250 million by the Ministry of Defence last year. Both companies—I should exempt Plessey because it has attempted to break away from that syndrome—have preferred the safe yet slow growth markets of defence contracting and other public sector supply contracts to the more risky but higher growth consumer side. Our large electronic companies need a more adventurous and risk-taking attitude and greater market orientation. I hate to think how much time, money and effort have gone into this bid, for no apparent reason. Once again, resources have been drained from the productive sector to profit the financial sector, where all those who make such a good living from the takeover market have made yet another killing.
The third ingredient in Britain's IT industry is the I-word, Government intervention. I am not talking about centralised planning or DTI meddling in the day-to-day operations of individual firms, but about the kind of approach provided by MITI in Japan and the Department of Defence and NASA in the United States, where public procurement is done in a way that maximises spin-off rather than Britain's overly secretive approach.
I was interested to read the comments of the hon. Member for Leeds, North-West, when he was cross-examining the Secretary of State. He said:Who are the big buyers in the market? The big buyers, there, are the Government: MINITEL in France, NASA in the United States. From what you are saying, it may be the success of different companies, but it is the use of Government purchasing power that leads to that success.The Secretary of State then said:What has MINITEL led on to?If I recall, the hon. Gentleman then rounded on the Secretary of State and said:Thousands of small companies have been founded in France on the back of MINITEL. Have your Department checked it out? What I want to know is, have you even bothered to find out? Do civil servants in this country even bother to look to find out what is happening elsewhere.The hon. Member for Leeds, North-West said that, because, if I recall, he was pretty steamed up. He was right.
A good example of such an approach for Britain would be the introduction of broadband fibre-optics in the communications network, as the Select Committee has recognised. It is an area of technology in which Britain leads the world, both in the strength of the basic science research base and in the application of applied technology, particularly by British Telecom. Such a network would not require huge Government expenditure, bar some initial pump-priming and a commitment to use the network for purposes such as education and training.
By making a commitment to such a network, the Government will ensure that the private sector can make the investment in the new technology and in the new capacity that will be required. Other countries will want to buy the expertise and technology that we develop. As has been said time and time again tonight, this is a rare opportunity to develop a common European approach, through standards setting and by collaboratively funded research in which Britain's industry can set the pace. 547 Broadband cable is the infrastructure of tomorrow. It is the river by which information can flow and the Government should begin to respond to that proposition properly instead of trotting out the conclusions of the Macdonald report.
I recognise that time is moving on and that other hon. Members would like to participate in the debate. I do not believe, however, that the Select Committee has addressed the matter of high-definition television. The House will be aware that the standard for high-definition television will be a European one. To take advantage of that exciting new technology we must learn some lessons from the past. Television set production in this country has all but disappeared and frankly the Government have just sat back and let that happen. To prevent a further worsening of our balance of payments the Government should be working on—let us use the word that the Minister does not like—a strategy to assist and advise British companies so that we can meet the challenge adequately and play a strong role in Europe. Failure to do so by leaving it entirely to market forces will mean another wasted opportunity and another loss for Britain.
There are a number of questions that I would like to ask the Minister, but I shall confine myself to two matters. What will happen after Alvey 2? How will the long-term research be funded? Does the Government believe that the United Kingdom has a chance to participate seriously in the artificial intelligence expert systems markets of the 1990s and beyond? What is the Government's position on COCOM, given that other European countries are making major strides in selling information technology products and telecommunications equipment to the Eastern bloc? What will the United Kingdom Government do to protect our firms that are penalised by the codes of COCOM?
Over the past few years, the Government have been inundated with reports and advice from many learned quarters, the latest of which is the Select Committee's report. If they fail to respond positively to the advice given to them by the Select Committee and by industry and if they fail to respond to the plethora of advice that they have received in the past, they will stand guilty of abandoning the touchstone of the new industrial revolution.
§ 9.7 pm
§ Mr. Richard Page (Hertfordshire, South-West)
I congratulate the Select Committee and its Chairman on the report, although I do not agree with everything in it. It is rather like the curate's egg—good in parts.
I welcome the opportunity, however, to debate information technology as it is the rope on which our manufacturing industry and commercial activities hang. Coupled with that are the effects of information technology on our balance of payments, whether that means benefits to it or a downside negative. At the moment our balance of payments is negative.
It is a strange fact that, for some reason or other, this country has less investment in manufacturing industry, research and training than any of our international competitors. Why that is so could be the subject of a long, detailed debate, but I do not intend to examine every reason tonight. I know that I tend to sound like a well-worn record as I keep on producing the facts again and again, but I shall continue to do so until something is 548 done to put the situation right or I am proved wrong. Obviously, from a national point of view, I hope that I am proved wrong.
There have been some significant improvements in our manufacturing investment over the past few years. However, those investments are only now level with those of 1979. In percentage terms against their gross national product, the Japanese invest 50 per cent. more than all the other industrialised nations. We are the lowest of the G7 countries when it comes to investment. That is on the negative side, but on the positive side, we must congratulate the Government on the work that they have done on inward investment, and the way in which they have brought companies' and countries' activities into this country. They have been so successful that even the French, that most chauvinistic of nations, have seen where they have gone wrong and seek to emulate us.
I do not know whether the present levels of manufacturing and inward investment are sufficient to produce, in time, an acceptable level of trade balance without, as may shortly happen, demand being beaten down by the single club of high interest rates. My hon. Friend the Member for Hastings and Rye (Mr. Warren) clearly described the size of the problem when he said that, to overcome the present negative balance of trade, this country will have to produce and sell six more Metros every minute.
However, that is enough of the general gallop around the park of my particular prejudices. I shall return to the information technology report and the Government's response. I have some sympathy with the Government over the dilemma that they face. First, they do not want to try to pick winners. I have to smile and welcome the conversion of the hon. Member for Wigan (Mr. Stott) who said that he, too, was apprehensive about any Government's ability to pick winners. His is another of the road to Damascus conversions which are taking place among the Labour party and its policies. If the hon. Gentleman is not careful, the Labour party and the Conservative party will become indistinguishable. I have no doubt that differences will be forthcoming at the next election.
§ Mr. Crowther
I am extremely obliged. Will the hon. Gentleman tell us to which Conservative party he has just referred: the Government or Conservative Members on the Select Committee?
§ Mr. Page
When it comes to splits in parties, nobody can beat the Labour party, in which the spectrum of political prejudices is so wide that it has gone round in a complete circle. I apologise for stirring up this minor controversy and I shall return to the other horn of the dilemma. If we did not have fun in these debates it would be time we all went home. However, if the House will quieten down, I shall return to the other horn of the dilemma. There are so few of us here this evening that I hardly think these are grounds for a riot.
The Government must also ensure that there is sufficient national progress to combat and defeat international competition, which exists outside the EC. Later, I shall talk about how we must work within the EC to achieve the success which we all want.
The Government's example is not one of the best. I am a member of the Public Accounts Committee and we have in front of us a series of reports from the National Audit 549 Office referring to the effectiveness of Government Departments in introducing information technology and computers into their daily operations. It would be invidious of me to go through the reports because they make sad and serious reading. The delay in introducing computerisation into Departments is nothing short of a scandal, with one bright exception: the Inland Revenue. That Department has taken significant steps to introduce computerisation and information technology into its operations. I say that from the bottom of my heart, not because I sent my income tax form in this morning.
We face a dilemma. The Government spend more of total funds on research and development in information technology than do our industrial competitors; on the other hand, our industrial manufacturers contribute far less. The Government must be congratulated on helping to bridge the huge divide between academia and industry by setting up the Alvey programme—£350 million, which has gone into some positive projects. That is a memorable step towards reducing the huge gap and towards achieving what is regarded as standard by almost every other industrial country.
I have offered credit and congratulations, but I am disappointed to read in the report that the Alvey project will not be evaluated until the 1990s. We must build our future on the success or failure of that project, so we need information about it. Paragraph 17 of the report states that we have not taken commercial advantage of the work done on these projects. That is a crying shame and it illustrates one of the weaknesses in our industrial structure.
The baton has been taken up by ESPRIT. I am glad to see that more small and medium-sized businesses are involved in that.
I support the Committee's recommendation that more tax aids be given to the smaller companies to enable them to improve and compete. As the House knows, I am a firm supporter of smaller businesses. They have the flexibility and ingenuity to get projects under way while big companies are still bending down to put their boots on.
Against that background we must examine what the competition, particularly the Japanese, are doing. The report quotes the Japanese as saying that their information technology industry will be worth £600 billion by the year 2000—for a huge market which the Japanese are targeting for themselves.
What part can we make IT play in the overall game of national economic success and in redressing the negative balance of trade? There is a growing realisation in the United States that if it adheres to its present course in IT it will soon lose out to the Japanese. United States leadership in this field is under severe pressure. Its lead in specialised chips, super-computers and software is being whittled away. My hon. Friend the Member for Havant (Sir I. Lloyd) gave us a devastating and sorry list of the advances being made by the Japanese. Their success has made the Americans aware of the vital necessity of having a large manufacturing base. It has exploded the myth of the 1970s that America could become more prosperous as a service-based economy.
We can learn from these experiences. Only as part of Europe can we stem the tide and start to catch up. Europe is caught in the crossfire between the Japanese and the 550 Americans, as they shoot it out at the OK Corral. Only by skilful use of the sheer market size of the EEC can we ensure a revival.
Europe used to show a surplus on information technology; now it shows a deficit. I could list the areas in which we are losing out, but I shall mention only one—the ability to write software. We used to lead the world in this skill, but we are steadily losing our leadership. We shall redress the balance only with the co-operation of all people, all Governments and all industries within the EEC. The official EEC efforts to revitalise high technology on a national framework have been based so far on ESPRIT, RACE and EUREKA. These have been worthy efforts in bringing companies and academic institutions together. The Government are to be congratulated on laying that foundation, and from that flows the recommendations of the Select Committee. Recommendation No. 21, reads:the Government should plan now to avoid any hiatus in academic research in IT when both the national IT programme and Esprit 2 come to an end.Simultaneously and in step with that must be the next move, that of international co-operation within the EEC for the introduction of pan-European initiatives away from the protection of small and national champions that operate in a fragmented market. There must be a move towards a larger operation in a larger market. Time is not on our side, but I suggest that what I have said offers the best chance of success of survival for British-based industries in the IT world.
§ Dr. Jeremy Bray (Motherwell, South)
Like everyone else who has contributed to the debate, I welcome the report. I support the recommendations and I agree with all that has been said by the advocates of faster progress.
I wish to take the argument one stage further. The hon. Member for Havant (Sir I. Lloyd) made some interesting remarks when he compared information and money. He said that people know broadly how to use money nowadays but they do not say that we can do without the Chancellor of the Exchequer, although to do so would be an attractive thought. The Chancellor does not spend his time telling people that they should use money rather than gold, or beads, or barter. Instead, he is concerned with who does what with money, tax, expenditure, expenditure on what, savings, savings by whom, investment in what and investment for what. As information technology matures, it should be concerned with the use that is made of information rather than the methods by which that use is made. All computer companies nowadays are advertising for sale solutions and not techniques.
The origins of these matters go back far beyond the recollection or reminiscences of the hon. Member for Havant. Before the 1964 general election, I chaired a committee on the uses of information from a more mature information technology industry. One member of the committee was Professor Richard Stone, who was personal assistant to Keynes and a Nobel prize winner. Another member was Teddy Jackson, the director of economics and statistics at Oxford, who rendered Harold Wilson, as he then was, a great service in coming second to him in PPE at Oxford as an undergraduate. We put together the rationalisation of business statistics which led to the common register of business interests, the setting up of the business statistics office and other developments.
551 I shall mention two areas in which the Government are suffering because they are not taking the initiative. I am, of course, in favour of the broadband fibre-optic network, but for what? We must face the fact that the PA Consulting Group's technology report, the Zegfel report on the Netherlands and other papers all reach the conclusion that there is not a market for switched broadband in the foreseeable future. There was, however, a caveat in the PA Consulting Group's technology report. It stated that education and training was a potential application area but that the education sector had no money to spend nowadays and that it was not a potential customer. That may be true under this Government, but is it true in terms of the needs of the education system? I am speaking not in terms of the potential of information technology but of needs, efficient ways of raising standards in schools, the introduction of the national curriculum, and so on.
I think that the answer to the question is probably yes. Interactive video and broadband access to the best teachers in the country, so that teachers in the classroom can call them up and use their material as needed, is probably the most effective way of raising education standards, in conjunction with many other developments in education. Those methods need to be developed; the curriculum material needs to be developed. It is an expensive business.
The PA Consulting Group estimates that software development is 10 times as expensive as hardware. The software needs a long lead time in its development. It is no good producing hardware and then trying to develop the software for it, because it will be 10 years before that software is available to exploit the hardware potential. The software must be developed at a stage when the technology is still too expensive to use for its future application. The £6,000 interactive video machine may be far too expensive to use in classrooms generally, even if it is only one for the teacher, but it is essential for the development of the educational methods that will come into use in five, seven or 10 years time, through cheaper machines and on broadband. It is the most efficient way to develop and research the curriculum material, test it in the field, and train people in its use.
We need to go on from there. The work of the Open university needs to be properly organised and integrated with such projects as the medical work at Bristol university, the engineering departmental links within London university, Salford and other initiatives. A number of operations are being carried out but they are grossly under-funded. There is no leadership from the Government or from the Secretary of State for Education and Science—the once so-called Minister for Information Technology.
The personal computer revolution should be the model for the development of broadband applications. It is a new medium that people must learn how to use, just as they learned to use personal computers by watching their children playing computer games at home. The computers began to go into the schools and the parents wanted to buy them because they thought that they would provide opportunities for the future. If there is good curriculum material in the schools, everyone will also want it in his or her home. Every parent will want it for his child. There will be a willingness to spend the £400 to £800 per household needed for each new wave of consumer electronics, which introduces the new systems.
552 By their neglect of information technology, the Government are also damaging the processes of government. If anyone wants to empty the House, to drive out the Members, he should talk about information technology. If he wanted to drive out even those few Members present tonight, he need only talk about Government statistics. The report on Government economic statistics reveals an outrageous neglect, mostly by the Department of Trade and Industry, but also by the Treasury. There is a discrepancy in the national accounts between the records of income and expenditure of £14 billion—3.5 per cent. of national income. The books do not add up.
The discrepancy is bigger than the trade gap. It is the stuff on which elections are won or lost, yet the Government are in the dark. They propose only some patchwork improvements to the individual statistical series and so on. The damage was done by Rayner, who missed the point that the biggest users of business information are the businesses themselves; the Government are but bystanders and watchers abstractors of a tiny part of the information flow that runs in great tides throughout the economy. A modern information system for the economy needs to be based primarily on the uses made by business of its own information.
The system needs to be organised. There needs to be set standards of disclosure, of publication and of access similar to those that are set in the accounting profession. The profit and loss accounts, double entry bookkeeping and so on were invented by the Venetian traders in the middle ages. If the Government do not create the standards and systems, business cannot communicate with itself.
Practical steps must be taken. The Government must realise that there needs to be an open system, and that system should be brought into the electronic age. It should be based on the requirement of companies to maintain their databases on-line on personal computers or floppy disks. There must be the appropriate security checks so that the right people have the right access at different levels.
It might be a paradise for the hacker to begin with, until the hacker discovers that he can have more fun and make more money by collating the information that people want rather than by concentrating on what he believes to be hypersensitive information that is being kept from people. The data are then available on a consistent basis between the historical record and the projection into the future. It is not Government who build the models, it is the investment analysts, the shareholders, the takeover bidders, the employees, the customers, the suppliers, who, from this system can build up a comprehensive picture of how the economy works, how business works and how their prospects will develop.
The proper posture of information technology is not as a supplicant, not as a master, but as an articulate and powerful servant.
§ Miss Emma Nicholson (Torridge and Devon, West)
I welcome the opportunity to follow such a distinguished speaker as the hon. Member for Motherwell, South (Dr. Bray).
553 I cannot agree with the report. I urge the House to reject it and to adopt in its stead the excellent White Paper put forward by my noble Friend the Secretary of State.
Had it not been for the acidic and arctic exchanges between the Secretary of State and the Select Committee, I would have felt able to draw conclusions as he did, empirically, from the report as it stands. However, I cannot, because when one draws conclusions from this report, one is accused of not having read it. The Minister himself was accused of not having read the report before his statement on 19 April when he talked about dinosaur tendencies. If being a dinosaur is an ability to respond effectively to change, the Select Committee in its report has demonstrated that quality.
I must add here, with my respect for the individual members of the Committee, that the Committee's report does not reflect the high intelligence that is undoubtedly shared by all its members. I have sought long and hard for new ideas in the report, but I can find not one.
Let me draw the Committee's attention to three crucial paragraphs where the report fails and where its failure is shown most clearly. Those are the last three paragraphs, Nos. 114, 115 and 116.
I have to read the report because one has to be a fundamentalist when dealing with it. One must read the exact words; one cannot draw conclusions. Paragraph 14 says:There is no doubt that the government no longer attaches a high priority to IT as a frontier technology needing sponsorship.I submit that that statement is made as a reflection of ill-considered thinking by the Government, and yet it is exactly the stance that the Government should adopt. A frontier technology? How could IT be a frontier technology? IBM started in the United Kingdom in 1954. I started work in ICL in 1961. IT is most surely not a frontier technology needing sponsorship.
The report goes on:Whatever the effect of this on the future of the IT industry it does not fit in well with the objective of promoting the use of IT in the economy.Of course it does, because frontier technology it is not and it most certainly does not need sponsorship.
The report goes on:We recommend that IT matters should be dealt with at Minister of State level in the DTI.It then says that the Governmentshows no signs of formulating a total policy for the industry",and that the Secretary of State for Trade and Industry shouldbe made responsible for all aspects of Government policy on information technology and should produce an annual report on its implementation.Old-fashioned thinking indeed.
But that thinking, particularly the last statement, is based on a complete misapprehension. The misapprehension is identified clearly in the evidence on Wednesday 26 April which we can read at paragraph 1145. That says that the Committee felt thata Minister should be responsible for IT (as would be the case in every large organisation and enterprise in this country) at the Cabinet table.That is completely incorrect. Not all boards have an IT director. Nor do most boards have a director who has a 554 specific responsibility for IT in his portfolio. For the most part, IT is included in the finance director's responsibilities, and only to a limited extent.
Industry thrives and creativity wells best from the bottom up and not, through imposition in the IT industry, from the top down. A rigidity of thinking runs right through the report, not just as a thread but as an iron rod which reflects dinosaurial thinking and points to an early death for the report.
Let us look for a moment at the size and scale of the industry and on the Government's part and the way in which they have computerised so massively. No other speaker has touched on that. The British software industry alone is currently one of the country's great success stories, but almost everyone has overlooked that. It is growing at a rate of 25 per cent. per annum. What other industry in Britain unhampered by Government intervention is doing that? Hardware sales have been dropping annually. It is also worth remembering that computers currently hold 2 per cent. of all human knowledge.
The Government have not held back from computerisation or from holding more human knowledge on computers. I refer to the Ministry of Defence's CHOTS endeavour using 75,000 terminals, which the Select Committee did not know about, and which will be implemented in September. Within three years, the Inland Revenue will be using 40,000 desktop computers addressing 20 different databases. Twenty million Department of Social Security records are currently being computerised. They will be on line and in daily use, and that will mean any number of word processors on people's desks.
There has also been enormous investment in computerising hospital records, which, God and the suppliers willing, will be completed by 1991. That is perhaps the largest and most interventionist exercise of all, and the one which will have most impact on everyone in the country, because all of us are concerned about our own health. The Department of Trade and Industry is busy putting company knowledge and advice on computers.
No member of the Select Committee has mentioned the tremendous departmental shift to computerisation, whereby the Government are changing from the old system of handing down budgetary control through votes, which we presumably inherited from the 1600s, to the modern system of budgetary control with its concomitant partner—the management information system. In academia there is JANET—a computerised network information which serves all our universities, which also have their own excellent departments of computer science. In addition, the Government are buying in through contracting out—and if that is not a way of supporting British industry, what is?
TAURUS—computerisation of share registers throughout the country—is embedded in the Companies Bill. There is computerisation in industry, and among individuals in the form of bulletin boards. The tiny amateur network of the British Association of Computer Clubs alone has a network of 20,000 members.
The report does not address some of the real problems. It overlooks what is happening and tinkers instead with old-fashioned thinking and with things that have been and gone. It does not consider properly the question of staffing. Of course there is a tremendous shortage of programmers, and perhaps that is one reason why there is more software intervention and why more self-created software is being 555 developed with ADA, which will mean that fewer human beings will be needed. I have already mentioned the crucial importance of women and of middle-aged men in IT and of the lessening need for young people because computing is no longer the skilled and sophisticated profession that it was when I first joined the industry.
I draw the attention of the House to another part of the Select Committee's report. I shall not pull through the technology, but I shall pull through some of the report's very old-fashioned thinking, to arrive at a fraction of modern thought. Paragraph 51 contains a clear criticism of universities and the Government for not tempting the brightestto undertake higher education in the appropriate disciplines.The really interesting thing about IT is that all its disciplines are eminently suitable for all graduates entering the computer industry. BP, for example, takes graduates from all the disciplines within any university framework, ranging from zoology backwards.
The report does not address the key British weakness, which has nothing to do with training , lack of intellectual creativity, or lack of funds. It is the huge, built-in weakness of lack of marketing ability. That is the single largest factor in inhibiting computer development in Britain, and it always has been. The Select Committee's report does not attract attention to computer misuse, which accounts for one fifth of the computer investment—continuing, capital and recurring—in any computer installation. The report does not address the key issue of standards, which must be the thrust of computer usage.
The Government's role in computer and high-technology matters should be minimalist. They are a major user of a high standard. The White Paper is not "sour", as was said earlier, but sane and sensible, giving a framework for growth within which United Kingdom-based IT will flourish. The Select Committee report should be discarded and rapidly buried. I suggest to members of the Select Committee, "Hands off information technology. You are well meaning, but astigmatic interference will throttle it to death."
§ The Parliamentary Under-Secretary of State for Industry and Consumer Affairs (Mr. Eric Forth)
This has been a fascinating and informative debate, which is not something that one can say about every debate. The hon. Member for Rotherham (Mr. Crowther) gave the game away. Indeed, several cats leaped out of bags this evening. Early in the debate, the hon. Gentleman stressed that the report had been unanimous. He went on to give us, as he was entitled to do, a traditional Labour party approach that laid great stress on what I make no apology for calling good, old-fashioned interventionism.
The key to the debate and to understanding the difference of opinion between the Government and the Select Committee is in what the hon. Member for Rotherham said about the unanimity of the report. In his evidence to the Committee, the Secretary of State for Trade and Industry, Lord Young, said:I believe there is an honest difference of opinion between us".Let us not try to hide that fact. From time to time, Select Committees produce texts that attract unanimous support from all parties on those Committees, and they should not be surprised if the Government are not able to accept their 556 recommendations. That Is almost axiomatic and self-evident. I am surprised that members of the Select Committee on Trade and Industry are surprised that there should have been this difference of view between the Select Committee and the Government.
My hon. Friend the Member for Leeds, North-West (Dr. Hampson) gave the game away totally in his typically honest way and with his typically honest candour when, at the end of his excellent speech—I made a note of his words and will check them in Hansard tomorrow—he said that the Government must "be more interventionist." That is clear, open and on the record. The hon. Member for Wigan (Mr. Stott) recognises that. This is a major reason for the difference between the Select Committee and the Government.
§ Dr. Hampson
I was being ironic about my hon. Friend's use of the word "intervention". The Government cannot have a "hands off" approach. They must nurture, as do every other major Government in Europe, the United States and elsewhere. We are not proposing dinosaur thinking. My hon. Friend the Member for Torridge and Devon, West (Miss Nicholson) and my hon Friend the Minister seem to be somewhat ideological.
§ Mr. Forth
If I have time, I shall return to the point about what other countries do. We must be a little careful. Many hon. Members have been seduced into seeing what they have thought are attractive elements in other countries' policies, taking the bits that they like. Contributors to the debate have spoken favourably about Japan, the United States and even other European countries. They have suggested that all we have to do is to adopt the good bits, the nice bits or the bits that seem to work well, and all will be well. If I have the time, I shall refute that argument. I do not find it attractive or convincing.
My right hon. Friend the Secretary of State spent a long time with the Committee. I do not know whether it was a meeting of minds. At one point in his excellent speech, he said:I believe Government, and I have said so already, has a very real role to set the climate, to set standards, but that the particular technology is not the responsibility of the Government to actually choose and select.My right hon. and noble Friend the Secretary of State put his approach in his usual succinct and elegant way.
My hon. Friend the Member for Hastings and Rye (Mr. Warren), the Chairman of the Select Committee, made an excellent opening speech. He showed, as always, why a Select Committee is prepared to follow his leadership and to unanimously back his reports. From the nature and tone of his speech, I can understand why that should be so, even though there may be differences between us. It is important to put the record straight immediately on one of his points. My hon. Friend quoted an article in the Financial Times. I want to make it clear that there is no Department of Trade and Industry and Central Computer and Telecommunications Agency initiative as he suggested. I understand from the CCTA that it could, if requested, meet the firms to clarify aspects of particular 557 contracts, but in that case, all information and all contracts would be available to all bidders. Each bid for Government contracts is considered on its merits and bids by United Kingdom consortia are not given preference over others.
I wanted to make that point clear because several hon. Members have suggested that in some way, either openly or surreptitiously, we could use Government procurement policy to favour British suppliers. Members of the Select Committee on Trade and Industry above all should know that that is not allowed within the European Community. My hon. Friend the Member for Leeds, North-West sought to draw a parallel with bridges in Turkey. One cannot compare the Government's support for civil engineering contractors building bridges in Turkey with the public procurement policy of information technology within the European Community. The parallel is faulty in so many ways that it is difficult to know where to start.
§ Mr. Forth
I am grateful to my hon. Friend for raising that important point. The answer must be that if there are members of the European Community who are breaking its rules, flagrantly or otherwise, we should not break them in the same way, but should encourage the Commission to discharge its responsibilities in ensuring that all member states obey the rules equally. Let us not become rule breakers, but let us rather urge the Commission to do the task with which it is charged and responsible—to create the level playing field we all want. I hope that my hon. Friend agrees.
I want to give the House some idea of the extent of the Department's useful, productive and correct support for information technology. We give support for consultancy, for example, under the financial and information systems initiative and 2,250 such projects were approved in the first 14 months of the initiative. There are three major programmes for information technology transfer and information standards involving about £41 million of spend over three years. We support the introduction of new technology into schools. There is a £6 million programme and the Department of Education and Science also provides support under its schools initiative. There is support for information technology research and development under the Department of Trade and Industry and Science and Engineering Research Council joint framework for information technology, including the United Kingdom's contribution to the European programmes and that will total over £100 million of publicly funded support for information technology research and development this year.
In that context, and in answer to the point raised by my hon. Friend the Member for Hastings and Rye and by the hon. Member for Wigan about the Bide committee, which recommended funding of £300 million in collaborative research 558 and development, taking into account spend through the European programmes. The Bide application programme was rejected because we believe—we have a consistent view about this right across the board, not just in relation to information technology—that near-market research and product development is best carried out by industry, and not by the Government using public funds.
The hon. Member for Wigan referred to INMOS. It is true that industry in the United Kingdom had every opportunity to acquire INMOS when it became available, but the truth was—it may well be a sad truth—that no United Kingdom electronics company was prepared to take INMOS on. The fact that a company from another European Community country chose to do so may say something about its judgment, rather than about that of United Kingdom companies.
I now turn briefly to high-definition television, to which the hon. Member for Wigan also referred. The Government are providing support for that product. We are supporting the work to establish a European standard for the system. Work is being undertaken under EUREKA, and United Kingdom firms are involved in that project. The Department of Trade and Industry is providing support for the necessary service and development. That is something that has been identified and to which measured support under the research and development heading is being given.
Several hon. Members have referred to the IT trade deficit. Much concern has been expressed about that and, of course, the Government are concerned, just as they would about any trade deficit in a country which depends on trade more than any other country. However, there has been a trade deficit in this area for many years. Indeed, there was an IT trade deficit in 1978, in the last year of the Labour Government. Obviously, this is a long-standing problem.
As the hon. Member for Wigan admitted, it is a problem that the other major European countries also face. The Federal Republic of Germany, France and Italy all have trade deficits in computers and communication equipment. In 1987, the United States moved into deficit in this area. Therefore, of all the OECD countries, only Japan has a trade surplus in this area. It should not be forgotten that the United Kingdom has a trade surplus with the rest of the European Community—of over £500 million in 1987. We should not paint too gloomy a picture, because we can point to success.
In her excellent speech, my hon. Friend the Member for Torridge and Devon, West (Miss Nicholson) gave the House some good news and an upbeat picture rather than the doom and gloom that was presented by most hon. Members. We must strike a balance in these matters. We must acknowledge the problems, but also fully acknowledge the success stories. I thank my hon. Friend for doing that and regret that she was the only hon. Member to take such an approach.
I turn now to the fibre-optic network, with which so many hon. Members are obsessed, besotted or dazzled—I do not know which word to use about it. The hon. Member for Gordon (Mr. Bruce) challenged me to give the Government's view on this, and I do so with pleasure. The Government have listened carefully on many occasions to the arguments in favour of promoting a broad band national grid. We have taken into account the views and the many reports that have been made on this subject. We keep a close eye on developments abroad.
559 No one doubts the potential benefits that can be offered by modern telecommunications, or that fibre-optic applications will he important. British Telecom already has over 550,000 km of fibre optic in its network and the amount is increasing daily. However, technological choice and consumer choice are also increasing and it is for the market to signal which services or technologies will be the most successful in the future——
§ Mr. Forth
I am afraid that I cannot give way again, because I shall have to conclude my speech in about two minutes' time.
The House must understand that there is a great difference between recognising the value of technology, which we undoubtedly do, and encouraging, where necessary, British Telecom to do what it thinks is right because it is the expert. As I do, the hon. Member forWgan acknowledged that we have a world lead in that technology. Given that that is the case, there can be no grounds for the Government stepping in with taxpayers' money simply to do something which the market is already doing ably in responding to the needs and demands as they arise. We in the Department of Trade and Industry have a clear view about where we are going.
Many other points were raised in the debate and I shall study the record to see whether hon. Members require answers from me that I have been unable to give in the short time available to me. The importance that we attach to the matter is fairly obvious, not just from the Select Committee's report but from the care with which the Department of Trade and Industry put together its response to that report in the White Paper. Some unflattering things have been said about our White Paper, but I hope that hon. Members will appreciate that the White Paper at least gives full recognition to the Committee— to the importance of its report and to the detail of its work. The Department went to considerable lengths to reply in depths to the report, and it is to be regretted that we were unable to agree.
I hope that the Chairman and members of the Committee will realise that we attach great importance to this matter and will continue to do so. We shall examine carefully all the speeches made today—some of them very expert—to decide whether they should influence the direction that we take in future. I gladly——
§ Mr. Warren
I shall draw the attention of the House to the points that need answers and explanations. I regret that my hon. Friend the Member for Torridge and Devon, West (Miss Nicholson) has misinterpreted the report. She was the only hon. Member who was not in step, and I suggest that it would be a good idea to look at our recommendation 51, which suggests that IT matters should be dealt with at Minister of State level. That does 560 not imply a Minister of information technology. Such a Minister could be responsible for finance, for the bicycle shed and IT.
My concern about the Bide report was that there was no reply at all from the Department. I thought that that was rather an insult from a Department which had called upon the members of the Committee to give their best contributions to the report and to serve for two or three years.
I am sure that many hon. Members will be surprised to know that, in both the Treasury and the Department of Health, there are Ministers with specific responsibility for looking after IT, just as our report recommended. I am delighted that they are there, and that in both Departments there is clear evidence of progress being made.
Many of the Select Committee's problems in compiling the report arose from lack of adequate statistics. I hope that the Government will come up with some better ideas, because many of the statistics with which we had to deal were two to four years out of date. That may account for the fact that we were told by officials giving evidence that the Government did not have an IT policy and then Ministers came along and said that they did. Improved statistics might help us all.
It is interesting to note that the Government have admitted that they do pick winners and that they are picking losers. That is not unusual, but we had always understood that they did not pick winners.
Let me deal briefly with the broad hand communication system. I felt that the failing of the Macdonald report was that it did not involve the very people who were likely to be users. It did not even ask the questions of the Ministry of Defence, the prime candidate for becoming a user of that equipment. It did not ask the people in the City who dearly want that equipment. It did not ask people running financial services in Scotland, who know that they must have that equipment if they are to remain competitive. Not only do they want it; they are keen to invest in it. Industry is not looking for a Government subsidy all the way. I think that the Government should re-examine the matter and try to understand the opportunities that that system would create for those in business.
We have moved a long way tonight towards understanding that the Department of enterprise can become the Department of initiative. I gather that the gargantuan dinosaur of Government to which my hon. Friend the Minister referred is on the Government side and not in the Select Committee. I assure the House that the Select Committee, undaunted and as vigorous as ever, will return as necessary to the subject of IT, because it is fundamental to the future wealth of our nation.
§ Mr. Timothy Wood (Stevenage)
I have listened to the debate with interest, and I have heard what I can describe only as a wide range of views. I have reservations about some of the points that have been made on both sides of the argument. Before one comes to any conclusion about solutions, one must examine the causes of the difficulties in information technology.
Over the years, European countries have acted independently and have fought with one another in the development of information technology, but they have not succeeded. Japan has succeeded because it entered world 561 competition through consumer electronics and was thus able to build its research base and funding in a way that European countries did not. I hope that the Government will act to ensure that there is co-operation in Europe——
§ The Question necessary to dispose of the proceedings was deferred, pursuant to paragraph (4) of Standing Order No. 52 (Consideration of Estimates).
§ It being Ten o'clock, MR. SPEAKER proceeded, pursuant to paragraph (5) of Standing Order No. 52 (Consideration of Estimates), to put forthwith the deferred Question necessary to dispose of the proceedings on Estimates, 1989–90 (Class XI, Vote 3 and Class V, Vote 2).
§ Question agreed to.