§ Mr. Lewis Stevens (Nuneaton)
I beg to move,That this House considers that the United Kingdom export trade is a vital factor in the development of the British economy; notes that Britain exports a wider range of commodities than any other country and welcomes the contribution made by the continued growth of the volume of exports over the last ten years; supports the Government's efforts to remove barriers to international trade to free the movement of goods and money; and believes that the promotion of British overseas trade should be a high priority for business and government and that the opportunities arising for increasing exports require a high level of competitiveness from business and trading conditions such that they are not disadvantaged compared to other countries.I have chosen a broad motion because our export business is a wide subject, involving not only industrial manufacturing but financial services and overseas and inward investment.
By tradition, this country is a trading nation. Since the industrial revolution, we have traded products that were manufactured in this country. Before it, we traded on a merchant basis throughout the world. For a long time, we have not been self-sufficient. Despite moves over the years to make ourselves self-sufficient in various products, we have noted the need to involve ourselves in international trade to make up for our product deficiencies.
It is interesting that, in the past few years, the growth in exports has managed to compensate, to some extent, for the large increase in imports. Mr. Peter Morgan, the director-general of the Institute of Directors, made an interesting comment in an article in "European Freedom Review". He said:We are all soldiers in a global economic war. There is a convention which defines the conduct of the war—it is called GATT—but there is no arms limitation treaty. A nation is allowed to put into the economic battlefield any number of its citizens that it chooses—there are no restrictions. Nor are there any restrictions on the training or technology which can be given to our economic warriors.Some competitors are disturbingly professional about these issues. The West Germans in business behave uncomfortably like the East Germans in sport—they pick their players while they are still at school and then coach them meticulously until they are old enough to compete. They concentrate on developing technical skills. Not surprisingly the West Germans win as many enterprise gold medals as the East Germans win Olympic golds. And there is the suggestion that for the 1992 games, East and West Germany will enter a single team.That comment is a particular tribute to Germany, and it shows clearly that we are involved in a trade war.
Last week in the Daily Mail there was a report of a survey that had been carried out by some Swiss groups. The report had the unfortunate heading: "Unions 'mean Britain trails in trade war"'. I may return later to the topic of industrial relations. The report placed us 12th out of 23 nations in competitive trade. That is not an especially good position for us. However, the survey made some interesting points. It said, for example, that Britain exports the widest range of commodities to the second largest number of countries. It also said that Britain scores well for having free markets that allow the free movement of cash, that we invest more of our wealth overseas than any other country and that we receive the most foreign investment. After Belgium, we erect the fewest barriers to 1237 imports and we are the third best for easing restrictions on foreign firms wanting to set up in Britain. The survey also commented on some of our less good achievements.
§ Mr. Derek Conway (Shrewsbury and Atcham)
My hon. Friend may be about to tell us some of the bad news. Can he inform the House whether that survey covers the effect on British competitiveness of corporation tax? Does he conclude that Britain's ability to compete with the very powerful nations that he has mentioned this morning would be considerably harmed if the British people were ever foolish enough to return a Labour Government committed to increasing the burden of business taxation on British exporters?
§ Mr. Stevens
I am grateful to my hon. Friend for that intervention. The survey does not mention corporation tax specifically, but the business community accepts that much of our success must depend on investment in our businesses. One of the key factors to the success and growth of businesses, particularly the small and medium businesses, must be the corporation tax or the tax levied on those companies. Should any Government move to increase the taxes on those businesses, it would be a serious threat to the exports and development of those companies. It would also be a serious threat to the standard of living of the British people. The survey does not mention that.
§ Mr. A. J. Beith (Berwick-upon-Tweed)
While the hon. Gentleman is thinking about that, he should talk to some of the business men in Bath and elsewhere who have contributed a great deal to our tourist earnings, but who find that the new business rate is working extremely to their detriment.
§ Mr. Stevens
The business rate is a far smaller element in the costs of most businesses, especially those involved in exports, than corporation tax. In some areas, the business rate has created extra charges for some businesses, but in many other areas, including my own, the new uniform business rate has reduced the burden on many businesses. It has especially reduced the rates for manufacturing businesses which are the key to much of our export trade. I will concentrate more on manufacturing industry than the motion may suggest, mainly because I know that industry best and I worked in it for many years.
The United Kingdom volume in manufacturing is now 55 per cent. higher than it was in 1981. That is a substantial increase in the volume of exports in manufactures. If oil and erratics are excluded, in the three months to April, exports were 11 per cent. higher than in the same period last year. That again is a substantial amount. One does not jump to that degree without considerable effort and success for the businesses involved.
Our impact on world trade, in manufacturing and most other industrial sectors, has declined over many years. Since 1983, the United Kingdom world share of trade in manufactures has been constant following those years of decline. That is possibly one of the most significant events since the Government took office in 1979. What had become almost accepted as an inevitable decline was halted and we started to come back—or at least to hold constant—in a world where trade is growing all the time. That in itself was an achievement and it was reflected in the way in which our gross domestic product grew at an 1238 average of 3.2 per cent. between 1981 and 1989 when the figure for West Germany was 3.2 per cent. and for France, 2.1 per cent. That had an automatic reflection on the standard of living of the British people.
In 1948, Rostas published a paper on the fact that our productivity, which is a key to our competitiveness and our exports, was far less than that in the United States. Towards the end of the 1950s, it was suggested that France and Italy—and Germany a little later—would soon be well ahead of the United Kingdom as well. What happened during that time? Little happened, because we continued the decline. Our productivity fractionally improved, but not at the rate of our competitors' productivity.
By the end of the 1970s, we found ourselves in a weak position. That has substantially improved in the past 10 years, but it does not alter the fact that we still need continually to improve. Our volume of exports and our ability to compete in the world market are more important now than they have ever been. We know what 1992 means in terms of our general EEC commitments. However, the recent changes in eastern Europe and in other parts of the world will set a new target, a new area of investment and a new area of competition.
The economy of the United Kingdom needs to grow in the 1990s. Whereas, in the 1980s, there was a rise in oil production, which obviously benefited exports and imports, the concentration must now move towards the industrial sectors. In general terms, it is difficult to define precisely how competitiveness has become better or worse. In general terms, our productivity has increased, which has maintained us on a level base compared to many of our main competitors.
The difficulty is that, while our overseas trade from exports has increased, it has been over-balanced by the large amount of imports. That means that we must increase our exports and that import substitution is involved. That means in turn that new capacity must be established either by United Kingdom companies and/or by inward investment from companies overseas.
Increasingly in recent years, companies from countries such as Japan have invested in the United Kingdom, which is relatively attractive to overseas companies. The United Kingdom's ability to attract such activity will depend heavily on our cost-competitiveness and also on the ability of our firms to provide them with materials and components. If we cannot provide components, we shall become less attractive.
German and Japanese industries have adopted very different strategies. Our attraction lies essentially in the fact that we are becoming more competitive and that our industries have low cost structures. That has meant that we can compete better in simpler products than the Germans and the Japanese, who have responded to the strengthening of their currencies by concentrating on products and services in which technology and other experience can support a high price, so that producers remain competitive despite high domestic costs. That is a desirable practice, should it prove practicable.
One criticism of the United Kingdom is that our work force lack skills, and that restricts our ability to increase our export growth. But we have been successful in many high-technology sectors. The aerospace sector, in particular, has done well. I have in my constituency one of the Rolls-Royce companies. Both before and since its return to the private sector, Rolls-Royce has been able to compete throughout the world with its advanced high 1239 technology products, and strong competition from the United States has not stopped the company's continued development in exports and trade. Rolls-Royce has also diversified its activities, taking over Northern Engineering Industries, for example, which produces Synchrolift platforms for use in dry docks—a high-technology product involving large-scale engineering. That is an example of the way in which we can compete successfully in some areas of high technology, although not all.
No country will have a monopoly on high technology. As international trade increases, even Japan, with its tremendously large high technology range, will gradually be forced to limit the scope of its products because other countries will become more highly specialised. In those aspects of high technology in which we are successful, we can certainly compete.
Exports are most important to our economy. In 1989, for example, our exports were worth £92 billion, which, given the size of our economy, makes them a major factor by any standards. Unless the trend of improvement continues, our living standards will be reduced.
This Government, throughout their lifetime, like previous Conservative Governments, have strongly supported the removal of trade barriers, considering that to be one of the most important factors in encouraging international trade. It is not easy simply to open the door to trade from anybody, anywhere, at any time. At times, one has to consider the interests of our industries and—possibly even more important—ensure that we are playing on a level playing field and all playing to the same rules. But this country has led the struggle to remove barriers, and no doubt we shall continue to pursue the matter well into the future.
GATT is a key to that, although, as with most international agreements, difficulties may arise in enforcing the rules that are laid down. In particular, we may have difficulty in persuading all the countries that should be involved in GATT to accept not only the technicalities but the spirit of the agreement and not to try to invent other barriers.
Despite our free trade approach, there is still concern among those in the textile and knitwear industries in the midlands and elsewhere about the future of the multi-fibre arrangement, which has been in force for many years and has been extremely helpful to companies in those areas. The future of the arrangement is now the subject of talks and it is likely that, in due course, the industry will move away from the MFA into the normal GATT arrangements.
What happens in the transitional period will be most important for many companies, and that is what worries the industry. It is to be hoped that a satisfactory arrangement for a transitional period lasting a few years—there have been many arguments about how many years it will be—will be found during the Uruguay round. That will be an important confidence-booster to the industry. Until the industry is satisfied that it is not threatened with the sudden disappearance of the protection afforded by the MFA, its attitudes to investment and the way in which it views itself will be affected. I realise, however, that not all the competition suffered by the British textile industry comes from the countries that are partly the reason for the MFA being there in the first place.
The United Kingdom's competitiveness largely depends on improvements in productivity. For the past 10 years, productivity improvements in the manufacturing 1240 industries have been running at about 4.3 per cent. a year. That is a substantial improvement, given that, between 1974 and 1979, productivity increased by only 1.2 per cent. a year. Productivity is the key that will make the difference between whether we succeed and improve our position or whether we fall behind our competitors.
Our competitiveness also depends upon our ability to invest in the development of industries and to draw in the technologies that we need. Over the years, many of our companies have tended to reduce their size and increase their productivity, which to some extent has weakened our base on which to expand and create extra goods for export. It is true that many of our industries have a far more productive and competitive base and a better technology base; it is simply smaller than the base that we had years ago. We must increase that base, to make ourselves even more competitive.
Our small base forces us into specialisation which can be successful. For example, the British machine tool industry almost disappeared some years ago. However, earlier this year I visited the national exhibition centre, as did the hon. Member for Wallsend (Mr. Garrett), where the change that has gradually taken place in that industry over the past few years was apparent. Once again, we have a machine tool industry. Within its limited range, that industry has been successful thanks to high technology and to being forward-looking and assessing the needs of the industry worldwide instead of simply concentrating on the home and immediate European markets.
As we move towards 1992, the EEC barriers to trade will be removed. However, although some aspects of 1992 are good, there are other aspects about which we should have reservations. Within the Commission there is a desire not to have barriers, to allow free trade. At the same time, there is a danger that with the centralisation of the Community, bureaucracy might create new barriers.
The definition of product standards offers opportunities. The harmonisation of standards of products such as engineering goods will have a considerable effect on the goods and also on safety, environmental needs and consumer protection. At the moment, we often have national testing of products that have already been tested in other countries. That can provide a barrier to trade, because it is easy to insist on a standard different from that in another country. The Commission is keen to have a mutual recognition of standards within the Community. It would be a great advantage if countries within the Community and outside it could accept the same testing standards.
The political changes in Russia and eastern Europe offer challenges to trade. The Department of Trade and Industry has encouraged people and actually taken groups of businessmen to those countries in an attempt to promote interest in eastern Europe. Of course, it is not that easy. We cannot simply say, "Look, there's a country, get in there." However, there are opportunities to open up new markets on a much wider and more interesting basis, but that will take time. The Government have a role to play as companies move into new areas. The British Overseas Trade Board, the Foreign Office, the DTI, which is a prime mover, the Department of Energy, the Ministry of Agriculture, Fisheries and Food and the Welsh Office all have parts to play.
§ Mr. David Evennett (Erith and Crayford)
My hon. Friend has raised an interesting point. With the opening 1241 up of new markets, there is an opportunity for a partnership between the Government and industry. The Government should encourage and give advice; they should not take a definite lead.
§ Mr. Stevens
That is a very important aspect.
With regard to eastern Europe, there are staff in embassies and at consulates who can assist our business interests overseas. However, as we seek to expand our effort overseas, we must remember that it is not simply a matter of manipulating effort from one area to another. Additional resources will also be required perhaps in terms of people. Today local knowledge rather than diplomatic effort is more important when businesses go abroad. Shifting staff from one area to another—for example, from South America to eastern Europe—might not necessarily be in the interests of trade. We still need governmental organisations in the countries in which our businessmen see markets.
§ Mr. Ian Gow (Eastbourne)
My hon. Friend was paying tribute to the Foreign Office. I have often wondered whether it is possible to conceive of a world without the Foreign Office and that thought just occurred to me again. If we have what Mr. Delors wants—not what I want—which is economic and monetary union, will there then be a need for a British embassy in the Grand Duchy of Luxembourg, in the Kingdom of Spain, in the temporary republic of Greece or in the Kingdom of Belgium?
§ Mr. Stevens
That is a most interesting concept. I am not sure whether that idea would be welcomed. If we follow my hon. Friend's argument a little further, would our trade with France and Belgium actually constitute exports? That might raise many difficulties, and it might affect the figures that I have quoted today.
§ Mr. Gow
One must never be led astray even by one's hon. Friends, but my hon. Friend puts me in mind of a greater man even than he— General de Gaulle. The general had the marvellous concept of a Europe from the Atlantic to the Urals. Mark how far ahead of his time the general was. We now see in prospect that widening of the European family and the opportunities for trade to which my hon. Friend was rightly referring.
§ Mr. Stevens
I cannot follow that important aspect.
We are trying to encourage more small and medium sized companies to export to Europe and elsewhere. However, there is a problem with the information and facilities on offer to them. Our embassies and consulates now charge small companies for information and I believe that that is reasonable. The information with which companies are to be provided must be useful and tailored, and it must also be a worthwhile investment.
The trouble with many companies going overseas is that we do not necessarily co-ordinate very well as a country. That is a commercial aspect. When companies get together to make trade bids in a competing country, it is not uncommon for syndicates to get together in no particularly natural grouping. From time to time we find our companies going abroad in competition with each other and bidding for bits of contracts rather than for whole contracts. There is a need for commercial interests to combine ideas and to bid for some of the large projects that are available.
1242 There is great enthusiasm for eastern Europe for all sorts of reasons. We are enthusiastic because it is near, and, because of its low economic position, its potential is even more attractive. However, we have been doing a lot in Africa, the Caribbean and south American countries that also need our help in economic development. Our activities in eastern Europe will be in addition to our already developing trade with other countries.
It is well known that companies within the EC and elsewhere get help in one form or another to boost exports. That boost is very welcome—everybody welcomes Government assistance. It is important that our businesses get the same encouragement and help; otherwise, we will not stand a chance of competing fairly. Matters are improving through Government and other pressure. There is no question that things are getting easier in Japan because barriers are being removed. After some changes in tax on whisky exports to Japan, our Japanese exports have boomed by 72 per cent. That is an important market for whisky, and for many other products.
It is important that the Government respond to frequent complaints about people finding ways around the rules. The same applies to some of our EC partners, GATT countries and so on. We want to make people play by the rules and ensure that, if somebody is not prepared to meet a deadline, we do not put our people at a disadvantage.
There is much more that I should like to say, but I have little voice left.
The importance of our exports cannot be overstated. We have a history of trade. In agriculture, industry and finance we have achieved a great deal in a few years by developing and extending our trade to the benefit of the people of this country. It will be to the detriment of our country if we do not push harder the importance of exports developed by our businesses abroad. We have done well over the past 10 years. The future lies in our ability to export and compete.
§ Mr. Ted Garrett (Wallsend)
I am sure that hon. Members sympathise with the disability of the hon. Member for Nuneaton (Mr. Stevens). It is an occupational disease of our profession. A rest this weekend will do the hon. Gentleman's voice much good.
The hon. Member for Eastbourne (Mr. Gow) referred to General de Gaulle, whose concept of Europe does not coincide with mine. General de Gaulle's concept of Europe was from the Atlantic to the Urals—a Napoleonic concept, with France in the lead, not the EC, as we seem to think that it should be today.
It is amazing that, when this debate started, the Opposition side of the House was populated by four hon. Members from the north-east and one who was originally from the north-east, who had the temerity to intervene and then to disappear. I should like to think that that is not his normal custom. He should follow the rules of the House. If an hon. Member intervenes in a debate, he or she is expected to see the debate through. I have always followed that custom, and I hope that other hon. Members will continue to do so.
Two of our major problems are a lack of knowledge about exports and a lack of communication. People involved in export and marketing have an incestuous way of life. They talk to each other in jargon, and the rest of the nation does not seem to be involved. That is a matter of 1243 regret. Among the many criticisms of our educational system, one that stands out is that many polytechnics do not teach the skills that one requires to be an expert on exports and the skills that many manufacturing and exporting companies require. I inquired into the matter and I found that, in the United Kingdom, there are only about three places at which a graduate or non-graduate who wishes to pursue a career in that profession would have great difficulty in finding a place. We should be very proud of that.
I have an engineering background. In my young days, we never saw the marketing people or those who helped to sell the goods that we manufactured. When I was about 18, the management of the company introduced we apprentices to the export manager. It was like listening to someone from another planet. We kept straight lines of demarcation.
Members of the Institute of Export, a most worthy body, cannot get a hearing. They cannot even communicate with the British public. How can we persuade our sons and daughters to follow that worthy profession? It is a skilled profession that requires courage, expertise and damned hard work. If one succeeds, the results are good.
At this stage I should declare that I advise the British machine tool industry, which is a large exporting sector of our manufacturing base, and British American Tobacco plc, which has enormous export and finance facilities and, of course, indirect exports because of its other activities. As chairman of the all-party group for the chemical industry, I am proud to say that a small but influential group of Members of Parliament are conscious of the vast role that industry plays in our exporting capabilities.
There are some anxieties among exporters. The machine tool industry, for example, is worried about the cut in support for inward missions. Inward missions mean that 15 or 20 prospective purchasers from America or any other country that has an industrial base or that wants to buy British machine tools are brought here for 10 days. The industry pays half the cost and the other half is paid with the support of the British Overseas Trade Board, for which we are all grateful.
However, some people still seem sceptical about whether inward missions are a success. The other night, I participated in a public debate on the motion: "That this Government have eroded the nation's export base." I listened to a young lady who was the epitome of a female yuppie, who said, "Inward missions are a complete waste of time." She was immediately challenged by an equally positive example of a male yuppie, who said straight away——
§ Mr. Garrett
No, it was not the Minister—he is now past that age.
That young man said that that was nonsense. He had been to Mexico, where he had used his export knowledge to sell British goods to Mexican and Latin American companies. He said that it was nonsense furthermore, because some Mexican machine tool importers had then come to the United Kingdom, interested in purchasing machine tools. The inward mission had also succeeded in selling the products of a British company that produces 1244 safety equipment for the mining industry. It took over a market that had been held for 20 years by a French company.
That is a side effect of an inward mission. If there were no inward missions, the British machine tool industry would not be able to sell 40 per cent. of its production in the United States. The Americans prefer British machine tools to Japanese machine tools. They are developing a healthy dislike for the Japanese machine tool industry, and we must capitalise on it.
We have mixed fortunes with outward missions, which is when we go to other countries. Those mixed fortunes are due partly to the lack of back-up that is in our embassies for the commercial people we employ. There has always been a grouse at commercial and diplomatic level—and with some substance—that the British are not well-manned or fully geared up compared with our competitors.
I should like to hark back to 1966—I hope that hon. Members will not mind me reminiscing again—when the Labour Government formed the first Select Committees. I was asked to serve on the first Select Committee on Agriculture. We began by inquiring into how British agriculture would interest itself in what was happening in Europe. We thought that we would go to Brussels and Paris. That was an exciting venture in those days, when hon. Members did not travel abroad as much as they do now—at least, not officially. We discovered that we had no agricultural attaché in either Brussels or Paris.
When we reported that fact on our return, the Minister—the late George Brown—did not appear to like our interference in foreign affairs, with the result that Mr. Crossman, who became Leader of the House, abolished not only the Select Committee on Agriculture, but also the committees covering technology and education. Those three Select Committees were aborted and it was some time before a Government—the present Government—thought that it was a good idea to return to a Select Committee system, which is what we have today. I hope that you, Mr. Deputy Speaker, will forgive that slight digression into history.
I well recall visiting Taiwan, with which, then as now, we did not have diplomatic relations. I was much struck by the fact that, although Germany did not have diplomatic relations either, it had 80 people in Taiwan to promote its commercial affairs. In addition, the Americans, who did not have diplomatic relations, had nearly 300 people there. The Minister should note that the British had only one man, on part-time secondment, who was not even supposed to be there officially, and two secretaries to look after the interests of British exporters and manufacturers. When we reported that back to the Minister, he said, "Yes, we honour our diplomatic agreements. When we do not have a diplomatic agreement, we do not have one." Britain struggled along like that. Although things have improved, it is useful to remember that example.
Those who, like me, visit international trade exhibitions are appalled to realise that our exporters have to struggle damn hard to find a place in the market place of the huge international exhibitions. Only last year, in one of our biggest markets, the local people who represented British commercial interests in Chicago and Detroit found that their employment was to be terminated. Although they were Americans, those people did a damned good job for Britain and British interests.
1245 When the Kemp report, commissioned by the Secretary of State for Trade and Industry, appeared last December, it contained a few positive things, but also some anxieties and worries. British exporters are worried about the financial services that are provided by the Export Credits Guarantee Department. It is not good enough for the House quietly to accept the report without making some form of strong and legitimate protest.
In the past, our major exporting industries have believed that some of the Department's policies were good for their companies. I have to say that: I cannot stand here and be completely negative. Furthermore, the policies have been good for the sub-contractors that supply the main companies. We from the north-east know that that has also been good for the employment prospects of our region. Finally—this is stating the obvious—the policies have been good for our balance of payments.
While the balance of payments is at its present level—I shall not enter a debate on that this morning, because we shall probably hear enough about it next week—it is worth stating some of the things that are causing concern. The Kemp report refers to the insurance services group of the ECGD. The House knows that that provides comprehensive cover for those exporting goods, but not services. Some manufacturers think that the monopoly at present enjoyed by the insurance services group is not in the best interests of the exporters. They feel that the interest charged is too high, and in many ways they are grateful that alternative private agreements can be reached to meet the cost of providing the financial security that the exporters are expected to have.
Exporters also feel, and I agree with them, that, if they are to be successful in exporting and industry, they should be supported at a level equal to that given to our foreign competitors. This support should apply also to the provision of facilities at the cost at which such facilities are available. In other words, it is no good the Government saying that the facilities are available if the exporter is being charged too much for them. We must see whether we can find an easier financial solution to their legitimate complaints.
Some of the premium rates charged by the ECGD are already higher than those provided by other export credit agencies. The new system of calculating premiums will put British industry at a disadvantage. I also understand that the global sum available for cover has to be carefully calculated for each country, that there will be a strict limit on the sums available and that the amount for each country will be calculated. In other words, there is a lack of flexibility, which means that British exporters, who have been successful in China, the USSR, Hong Kong, South Africa, India and Indonesia, will be restricted: in some years, more will be required to offset what is provided to another country or area of export. I hope that we will increase our exports, but if, when we do so, there is not enough cover for the new business, exporters will be somewhat disturbed.
I welcome this debate, about which I could say a lot more. I am disappointed by the attendance today, but it is symptomatic of this nation that we have not got across to the public, the Government or even the Labour party the importance of this subject. When one mentions exports here, people yawn, but if one mentions them in Germany 1246 or France, one can see the vigour and alertness with which they respond. The young people in Germany going through their education system are involved with, for example, the vast chemical companies operating there. They gear their educational system to fit into the needs of their companies, both professional and labour. We have to mix our problems on export with a new system of re-education, because, whatever people may say, we are still a strong and substantial manufacturing country. I want that to continue.
§ Mr. David Evennett (Erith and Crayford)
I am glad to have the opportunity to participate in this important debate. I am always delighted to follow the hon. Member for Wallsend (Mr. Garrett). I know of his sincere interest and experience in industry and exporting. I agree with a number of his comments, although not with his analysis. I shall later highlight where I disagree with him.
I congratulate my hon. Friend the Member for Nuneaton (Mr. Stevens) on raising this important issue in the House today. His excellent speech highlighted the real achievements of our industry, particularly our exporting industry, and we have a good story to tell, as he said. My hon. Friend knows, not least from the many occasions when we have served together on various committees dealing with these subjects, that I share his interest in industry, training and employment.
I shall concentrate on three areas. The first is the general importance of exports. Secondly, I shall highlight some of the exporting industries in my constituency and the success stories that are to be told there. Thirdly, I shall raise the issue that I believe to be paramount, although it has not yet been addressed—the need for changes in our attitude towards wealth creation and exporting in our educational establishments. The relevance and importance of industry and commerce are too often ignored by the House, and we do not have enough debates on these vital subjects. As the hon. Member for Wallsend said, it is disappointing that more of our colleagues are not here today.
We have endless debates about matters affecting the public sector, yet we give so little time and attention to the private sector, which creates the wealth that we need to finance public sector services. Without the wealth, we cannot provide from the public purse the funds for the services such as education, transport, and the national health service, that we all want and need. It is important that we consider matters affecting industry and commerce, so that we are aware of the difficulties that people in these sectors face and so that we can ensure that the Government, who, unlike so many previous Administrations, are in tune with businesses, will take every step to help business and business men to be successful.
Britain has a long history as a trading nation, and our industry and commerce have formed vital parts of our economy. Our record of trade, and in particular export trade, goes back many centuries, as we have already heard this morning. We have a long history of seeking out and then meeting the demands of new markets around the world. Over the years, there have been many changes as a result both of competition from other developed nations, notably the United States, West Germany and Japan, and of rapid technological advances in the past decade or two. 1247 In his informative speech, my hon. Friend the Member for Nuneaton gave us some figures that told an interesting story.
At one time, the products of our heavy industries—shipbuilding, heavy engineering, foundry works and so on—were sold throughout the world, but low-technology goods are now produced domestically even in less developed countries. Therefore, the market for such goods from this country is limited. Where we can and do compete successfully is at the high-tech end of the spectrum, in both manufacturing and service industries.
§ Ms. Joyce Quin (Gateshead, East)
There is not a neat distinction between high tech and low tech. For example, in shipbuilding, modern vessels have high-technology equipment. Therefore, the old and new industries can often work together.
§ Mr. Evennett
I accept that one cannot have hard and distinct divisions in industry or in any other aspect of life, but there are different skills and opportunities. If we took industry as a whole, we would lose and not maximise our export opportunities in our areas of expertise.
§ Mr. Garrett
The hon. Gentleman pursues the right arguments, but he must also remember that, as my hon. Friend the Member for Gateshead, East (Ms. Quin) said, we are blending high and low technology. That applies to the coal mining industry and what is left of the steel industry. We export the technology for those industries. British companies make the high-technology equipment used in them. There is a follow-through. It is true that we still have some low technology left, and that element will always remain. It is not advisable to decry it too much.
§ Mr. Evennett
I am grateful for the hon. Gentleman's comments, and I agree with him. One must have balance in everything. Balance is the important aspect that I wish to put across this morning.
Of course manufacturing industry in Britain is important for employment and for exports, but we must not concentrate too much attention on it and overlook the importance of the service industries, for example, which have an equal part to play. With modern machinery, simple manufacturing processes can often be carried out in many countries. Therefore, there is intense competition in that sector. By contrast, the service industries in Britain have a high volume of export business and sell quality services which are available in few other countries. We have a good record of providing high-quality professional services in all forms of engineering design, technology, architecture, and, as my hon. Friend the Member for Nuneaton said, financial services.
It is essential to overcome the old idea that manufacturing is more important than other industries, or that it is the only important element. Manufacturing is perhaps of equal importance, but both manufacturing and services must be discussed in any debate on exporting. Regrettably, in certain areas there has been a decline in our manufacturing industry. Everyone in the House must take responsibility for the all too frequent record of decline and disappointment in certain manufacturing industries. We know the reason for that decline. Over the years, many restrictive working practices and economic policies have resulted in so many firms going to the wall and so much export trade being lost. Everyone in the House regrets that, even though we understand that there must be 1248 developments and changes within the economy, which regrettably, results in lack of competition in some sectors and jobs and manufacturing industries going overseas.
There has been a tremendous expansion in the service industries. The export market for service industries is not new but it is often decried and it is not debated with enthusiasm in the House. The invisible exports from the City of London, which are so vital to our economy and our nation—such as shipbroking and marine insurance—have played an important part in our economy recently and ever since London developed as a financial centre centuries ago.
The City continues to play an important role in international trade, and constantly develops new products and services to meet world demand, ensuring that the City of London remains a major international centre for insurance, finance, commodities and banking. We must not forget the finance provided by the City for our industries across the country. It enables them to export and create wealth for the whole nation.
My second area of interest is dear to my heart. It is the industry in my constituency of Erith and Crayford. It is historically an industrial area where the heavier end of manufacturing has had a base and exports have been of great importance. Traditionally my constituency was dominated by the engineering industry. The area had strong links with the manufacture of armaments, and a large part of Crayford was developed by the Vickers company to provide housing for its work force. We are grateful for the development that took place last century and in the early part of this century. However, today the large, labour-intensive operations have been replaced by smaller manufacturing and service operations. In general these new companies are leaner and more efficient. They are highly competitive and entrepreneurial and make the best use of a skilled work force to produce goods and services which are sold both at home and abroad.
Many of the companies in my constituency have already developed significant export markets and are working to expand those markets and to identify and develop others. The companies involved in that export business represent a wide range in terms of size and product from large companies, such as BICC in Belvedere, which supplies supertension cables for major power supply projects throughout the world, and Dussek Campbell in Crayford, which recently won a Queen's award for export achievement for the sale of its waxes and oils, to small companies such as Gillies Smoked Salmon located in Crayford, which has developed a new export market selling smoked salmon to overseas airlines.
As one who regularly visits such firms in my constituency, I am delighted with their approach, enthusiasm and success in production and export. I could mention many other local companies, but the important point to recognise is that, regardless of size, product or market, all those successful companies have a common philosophy. They have a good work force, effective management and above all an entrepreneurial approach which enables them to promote themselves and their products and to take full advantage of the opportunities that result.
Businesses in Crayford which have developed an export potential are well placed to take full advantage of the area's geographical location. It is near the channel ports and the EEC. Both my hon. Friend the Member for Nuneaton and the hon. Member for Wallsend mentioned the EEC but in my area we take a new and greater interest 1249 in opportunities beyond the EEC. That is an important point that we must put across to everyone in Britain. As we look to 1992 and the EEC, we must not neglect the American, far-eastern and other markets in the third world, which are vital to industry and exports in Britain.
I regret the fact that we too often look towards Europe because of 1992 and the success of the Department of Trade and Industry in pursuing the 1992 initiatives and the development of trade within Europe and the opportunities therein. However, we must never overlook the fact that Europe is one market in the world and that there are so many others. In my constituency, the export industries are looking beyond Europe. Their management teams and directors travel the world promoting their firms and the services that they provide.
As we have already heard this morning, the development of the European Community as a single market will present a host of new opportunities for business in Britain and for exports. The key will be a shift in attitude so that Europe is not seen as an export market. As my hon. Friend the Member for Eastbourne said in his excellent intervention, Europe may be part of a much bigger domestic market. We look with interest to the 1990s and the developments that they will bring.
It is important to note that 1992 has been widely publicised, albeit somewhat later than in other European countries, and although the concept was misunderstood in the early days, the campaign has had great success. Everyone in the industrial and manufacturing sector is looking towards 1992.
In Britain we need to realise that business is changing. Business remains what entrepreneurs in this country have always felt it was: exciting, challenging and rewarding as an occupation. Business presents great opportunities, apart from generating the wealth of a country. Business is demanding and stimulating, and requires dynamic, talented, intelligent and trained people.
The present Government are the first in my lifetime who believe in business and have helped and encouraged it in a way that would not have been dreamt of 10 or 20 years ago. They have encouraged and supported entrepreneurs with general policy and with specific initiatives, such as the small firms service, enterprise allowances for those starting out in business, the enterprise initiative—which enables companies to obtain a vast range of expert advice on development—and, of course, the insurance provided for businesses by export credit guarantees. All those initiatives and enthusiasm from the Government have had a major impact on business in this country.
As has been said, manufacturing output and investment have increased and profitability—which is something that we do not talk about enough in the House—is at its highest for 20 years. Sometimes hon. Members have criticised those but they are real achievements, which lay the foundations for a more successful business sector in the future.
The third area of concern is that, despite the positive approach which the Government have adopted and have encouraged others to adopt, and despite the support for the enterprise culture, which has been somewhat slow to develop but is now gathering pace, there is still a shortfall. Enthusiasm and belief in profit and business have been slow to develop and are still in their infancy in some of our 1250 schools, colleges and universities. I regret to say that, as a member of the Select Committee on Education, Science and Arts who has visited many such institutions, I have found that business is still dismissed in the similar off-hand way in which Victorian aristocrats looked down their noses at those quaintly described as being 'in trade'. Too often, in many faculties within those excellent institutes of learning, there is reluctance to encourage people to go into business or to become entrepreneurs and to make and create wealth.
To ensure that Britain succeeds in the world marketplace, we must change such outmoded attitudes and the philosophy that gives school pupils the idea that working in industry is what one does when one cannot go on to university or higher education, because one's A-levels are not good enough to get a place. We must change the idea that studying engineering—both the previous speakers have been heavily involved with engineering—is not quite as good as studying a pure science, that business administration is not a proper degree subject, and that graduates who go into company management schemes are merely wasting their talents and their time.
§ Mr. Stevens
I wish to emphasise the point that my hon. Friend made about how unpopular engineering is, even among engineers. A recent survey by Imperial Ventures Ltd. showed that of 14,000 engineering graduates, only 5,000 intended to go into engineering.
§ Mr. Evennett
I am grateful to my hon. Friend for that information, which highlights the point that I have been trying to put across. In the countries that we have to compete with in the world marketplace, the enterprise message has got through, loud and clear, as a consequence of the right attitude and the generally high standard of business education at degree level and beyond. In those countries—America, West Germany, wherever—talented people are encouraged to go into business, with spectacular results, as we have seen, for the export and industrial development of those countries. We need a similar approach to business, industry and exports as entrepreneurs have in those countries.
All hon. Members take trips abroad and we know that many business men abroad regard exporting as a fun opportunity and a challenge as well as rewarding and worthwhile for the nation and for the individual. That is what we have to say to our young people in schools and colleges in this country. We must tell them that that is a way to have a challenging, exciting and invigorating career, and it is just as worthwhile for the well-being of the country as working in institutions of higher education and learning.
Of course it remains true that exports are created not by attitudes alone, but by products of the right quality, at the right price, which other people wish to buy, supported by an effective after-sales service. However, a change in attitudes could ensure that people of talent are available to design, manufacture, promote, sell and service products here and abroad, that would advance Britain's exports to the rest of the world. We have to do that if we want to progress.
In recent years there has been some change in attitude, but more needs to be done as we go into the 1990s. We 1251 remain a major exporting nation, and we should be proud of it and ensure that we approach exporting with new vigour.
The Government strongly believe in wealth creation, enterprise and the entrepreneurial spirit, and they have given us tremendous opportunities. As a nation, we must take them. I believe that, under the present Government, we will take them, and that the results will benefit everyone in this country, because more wealth will be created, as will more exports, which are so vital.
§ Mr. A. J. Beith (Berwick-upon-Tweed)
The hon. Member for Erith and Crayford (Mr. Evennett) was a bit unfair to universities and schools, which have made progress in the vital area that he was discussing, and which are stimulating people to work in export industries.
Almost all Opposition Members who have spoken or been present this morning represent constituencies in the north-east of England, and we can point to Newcastle university and polytechnic, as well as other higher education institutions, which are involved in export-related activities, and are conscious of responsibilities towards business. Those institutions have grown up with business.
In some areas financial pressures have made it difficult for institutions to provide the service that they want to provide. For example, language teaching is of the greatest importance to exports. An export-inhibiting tendency in this country is that people do not know other peoples' languages sufficiently well. Languages such as Russian and Spanish—which is one of the most useful for export markets—are not as widely taught as they should be. That is partly a result of financial problems, and partly because of an historically wrong structure for language teaching in Britain.
When the hon. Member for Erith and Crayford talked about the City, and the contribution that it has to make, he reminded me of the discussions that we have had this week on related matters. It is important that the City retains its pre-eminence as a centre of financial services, and that is why I should like Britain to lead developments in European currency and central banking—which will take place anyway. I should like a European central bank to be in London. If not—if it is in Frankfurt or somewhere else—the City will have to pay the price in the role that it plays.
I apologise to the Minister and to other hon. Members who may speak later because I have a constituency engagement which will force me to leave early. That is one of the problems with a constituency 300 miles away from the House. One advantage of such a constituency is that it has many exporting industries. For example, Pringle's Knitwear, Hardy's of Alnwick, which is known throughout the world for fishing tackle, and Jus-Rol Frozen Foods are all great exporting industries, along with agriculture, which has had to fight in recent weeks to keep its export markets open. When the hon. Member for Erith and Crayford referred to salmon, I hope that he was not challenging Berwick's role as England's salmon capital, exporting wild salmon—both as smoked salmon and in other products—throughout the world.
In the area that I represent there are great export commitments. Trade figures have been depressing in recent months; the one encouraging factor has been export 1252 growth—usually that has been the one comforting note. However, more recent figures have shown that growth to be slowing. There is bound to be a fear that it was mainly a beneficiary of depreciation a year ago, and that it may not be sustained. The appalling trade figures—far beyond the Government's deficit forecast—would be more bearable if the price that we are paying in the form of export restraint were controlling inflation. Our export performance must improve far more dramatically if we are to cope with the tendency towards import growth—a serious problem that can be addressed only if our manufacturers win more of the home market and a larger share of the overseas markets. It is asking a good deal of our industries to expect them to keep up with the British consumer's taste for imports.
§ Mrs. Ann Clwyd (Cynon Valley)
On a point of order, Mr. Deputy Speaker. I am sure that I speak for the entire House and for the people of Britain in expressing our deep concern and sympathy for the victims of last night's devastating earthquake, which has left thousands killed or injured. The British people are always ready to respond with generosity in such circumstances, and I am sure that the Government will also be ready to respond with immediate humanitarian aid for the earthquake victims. We know already that appeals have been made for medical supplies, food, tents, blankets, clothing and heavy-duty equipment. We should like Ministers to tell us this morning precisely what emergency action they intend to take in response to the tragedy
§ Mr. Deputy Speaker (Mr. Paul Dean)
I am sure that the whole House echoes the concern that the hon. Lady has expressed. Although there have been no requests for a statement, I am sure that what she has said has been heard on the Government Front Bench.
§ Mr. Beith
I should like to associate myself and my hon. Friends with the concern expressed by the hon. Member for Cynon Valley (Mrs. Clwyd) about this appalling tragedy. I hope that the Minister will be able—without getting into trouble with you, Mr. Deputy Speaker—to give us any useful information that he may have about Goverment assistance to Iran.
The support for exports in this country is diffuse: it is spread over many Government Departments, not all of which seem to know what the others are doing. The Department of Trade and Industry, the Foreign and Commonwealth Office, the Ministry of Agriculture, Fisheries and Food, the Department of Energy and agencies such as the British Overseas Trade Board sometimes seem to be going in different directions. The Foreign Office recently decided to take more than 20 members of its commercial staff out of Latin American-based work and transferred them to eastern European work. At the same time, the British Overseas Trade Board argued that eastern Europe was not an immediate priority to which resources should be diverted, and that we should continue to work primarily in some of the other markets. A difficult question to answer is how much should be given to eastern Europe now, given the slow pace at which the infrastructure that is necessary for effective trading relations is being created. It appears that different Government agencies are pursuing different policies, which are sometimes in conflict. I wonder how the Government will address that problem.
1253 Small businesses play an important rôle in exports but it is usually harder for a small business man to penetrate foreign markets and maintain the necessary contacts without adding overheads that it is beyond the resources of his business to maintain. There is, perhaps, a greater rôle for Government in the promotion and assisting of small business exports. However, the charges that are now imposed for export advice are a potential disincentive; a business man may not know how much he will receive from a market, or whether he can recoup his costs, of which the charges are an additional element. Such charges may be insignificant to larger firms, but smaller firms—for whom that type of assistance matters most—may be deterred from entering an uncertain market, or taking a new product into an overseas market.
The Government are contemplating major changes in their export promotion support activities, especially those designed to off load that activity into the private sector. The Secretary of State for Trade and Industry would like nothing better than to give almost all the activities of his Department to the private sector.
§ Mr. Beith
Is the Minister denying that? If he is, that is useful information that can be discussed further, later in the debate.
It is not clear that the private sector feels able to take on some of the Government's export credit activities, especially those involving large lumps of insurance concentrated on markets with uncertain creditworthiness. In such instances, it is difficult to obtain any commercial return on the credit. Other countries are continuing to sustain various efforts designed to assist exporters in those markets. Some countries have done more than Britain to support and sustain changes of commerce. With their local business contacts and the direct participation of local business people, they are in a unique position to help exporters: one business man can talk to another in a language that both understand. I want to encourage greater Government support for changes of commerce.
There is a danger of "unilateral disarmament" in the Government's export promotion activities. In their desire to adopt a free-market approach and to remove themselves from activities at which they may not be particularly skilled, or which may seem to be too interventionist, they may be moving faster than Governments in other countries. It is vital for our Government to recognise that their job is not to rid themselves of responsibilities that they think they should not have, but to ensure that they are on all fours with Governments in competing countries, and that we are not providing less assistance. If the level is inappropriate, we should seek an international agreement to ensure that Governments are not as involved as some are. We must attempt to operate by international agreement, and to secure transparency in the export promotion and credit activities of other Governments.
If this country is strict about indicating the loss-making areas of Government export credit activity, we must ensure that the same transparency is available in other countries, rather than send our exporters into a market where they will compete with exporters who have hidden 1254 subsidies from their Governments. The Government should divert a considerable amount of diplomatic and negotiating effort into that.
Eastern Europe has recognised all the inefficiencies that result from protection and from state management of economies. What better time to convince Governments across the world that the inefficiencies that they all build into international trading relationships by protection and hidden subsidies are harmful in the long run to consumers, both in their own and in other countries? Let us go with the wind of change in eastern Europe, and recognise that it has implications not just for eastern Europe or third-world countries, but for advanced developed countries such as Japan.
Now it the time to realise that a great many subsidies and interventions in those markets are anti-competitive. They are unfair to exporters in other countries and they are against the interests of consumers in every country. Just as the past year has been a year of dramatic change towards freedom in eastern Europe, let us now aim for a year, or even a decade, of dramatic change towards genuine free trade.
§ 11.9 am
§ Mr. Ian Gow (Eastbourne)
I start by congratulating my hon. Friend the Member for Nuneaton (Mr. Stevens) on winning the ballot, on his excellent speech and on the courage which he displayed in persevering with that speech. My hon. Friend had a virus in January. By common consent we are now in June and I join my hon. Friends and the entire House in hoping that that virus will depart quickly, we hope before the end of the month. I also enjoyed—as I always do—the speech of the hon. Member for Wallsend (Mr. Garrett). So we started today as we shall try to continue, although we shall certainly not be able to better those two speeches.
Richard II ascended the throne of England 613 years ago today. I am delighted that my hon. Friend the Under-Secretary of State for Corporate Affairs is in his place, not least because he is one of the most articulate exponents of the Government's free enterprise policies. That ascension to the throne of England is an appropriate date to remember because it reminds the House of an extraordinary contrast. We are often told that it is a good thing that many people from overseas come to the United Kingdom. That might be regarded as importing people, yet we are told that importing is not so virtuous and that exporting is the only virtuous thing. We are importing people, which is supposed to be good in the sense that they are supposed to bring money here. But my hon. Friend's motion refers only to the export trade.
§ Mr. Soames
I am grateful to my hon. Friend. When my hon. Friend talks about importing and exporting people, is he aware that the Government have recently undertaken some important legislation which could lead to importing quite a number of people from Hong Kong? Does he agree that those people are likely to make an important and valuable contribution to the United Kingdom economy and that they are greatly to be welcomed?
§ Mr. Gow
My hon. Friend is an expert on the British Nationality (Hong Kong) Bill and has made several journeys to what is at the moment the Crown colony of Hong Kong. I hope that the 50,000 heads of families to whom my hon. Friend refers, and upon whom we shall confer the right of abode in Britain, will remain in Hong Kong. I do not want to sound in any way unwelcoming; I hope that they will stay in Hong Kong because I want Hong Kong to benefit from the contributions that those people can make to the Crown colony.
I do not know who drafted my hon. Friend's motion, but it bears some of the hallmarks of the civil service. I was not suggesting that civil servants drafted it, only that it bears some of the hallmarks of the civil service. It states:That this House considers that the United Kingdom export trade is a vital factor in the development of the British economy;Who could quarrel with that? I am about to be really kind to the hon. Member for Berwick-upon-Tweed (Mr. Beith), who is no longer the Chief Whip of the Liberal Democrats but is now the shadow chancellor; I hope that I have got his designation right. Even the once-mighty Liberal party could not dissent from the proposition that the export trade is a vital factor in the development of the British economy.
The motion continues with the words,notes that Britain exports a wider range of commodities than any other country".What on earth does that mean? I am happy to give way to my hon. Friend the Member for Nuneaton if I missed that part of his illuminating speech which told us what he meant bya wider range of commodities".Now I come to the most important part of my hon. Friend's motion to which I draw the attention of the shadow Chancellor of the Liberal Democrats and my hon. Friend the Under-Secretary of State, who I hope will not be in that position for very much longer. He will not misunderstand what I am saying because seated upon the Treasury Bench is a Lords Commissioner of the Treasury. I hope that the Lords Commissioner will tell my right hon. Friend the Patronage Secretary that my hon. Friends and I are looking for the early promotion of my hon. Friend the Under-Secretary of State. He is far too good to be an Under-Secretary of State; he should be a Minister of State. I am sure that that view will be shared by the hon. Member for Berwick-upon-Tweed after he has listened to my hon. Friend's speech. I hope that my hon. Friend will contribute to the debate because it is very important and I shall be asking some questions which my hon. Friend may not find too easy to answer.
My right hon. Friend the Patronage Secretary is now in his place so I shall have to repeat the tribute I paid to my hon. Friend the Minister. My right hon. Friend was about to make the journey to his Sussex constituency, but on hearing that tribute to one of Her Majesty's Ministers, my right hon. Friend the Patronage Secretary postponed his journey and came into the Chamber. Madam Deputy Speaker has just come into the Chamber, so she cannot accuse me of repeating what she did not hear. I was saying that my hon. Friend the Under-Secretary of State should be a Minister of State. I hope that my right hon. Friend the Patronage Secretary will cease talking and will listen carefully.
The most important part of my hon. Friend's motion is the words, 1256supports the Government's efforts to remove barriers to international trade to free the movement of goods and money;It is surprising that the hon. Member for Berwick-upon-Tweed did not seize upon those words as being the most important ones in the motion. The Liberal party used to support free trade. I do not know whether the Liberal party still supports free trade. Sometimes the Liberal party wants to restrict trade and to impose controls, but. I do not agree with that. I believe in the freedom of people, goods and capital in what is now the European Community, but I go further than that. I should like the free movement not of people but of goods and services worldwide. Some of my hon. Friends will agree that we cannot suggest that those who live in Africa or Asia should be able to come here, but I am in favour of their goods coming here freely. I look forward to the day when there will be free trade not just in the European Community but with other nations, too.
§ Mr. Grylls
Listening to that, I almost decided not to intervene. Does my hon. Friend agree that one advantage of the strength of the European Community, as it moves towards a free market by 1992, is that it can use its influence as one of the most important trading blocks in the world to bring about free trade in different parts of the world which would add greatly to wealth creation? It should use that influence to the good.
§ Mr. Gow
I agree entirely with my hon. Friend. As in other matters, my hon. Friend and I have identical views. I agree with him, and I agree with myself.
My hon. Friend the Member for Nuneaton, despite his illness, referred to the European Community. I am surrounded by hon. Members who have strong views on the European Community. I was rebuked by the hon. Member for Wallsend—at least I think it was a rebuke, but it was a courteous and friendly one——
§ Mr. Gow
It was either a rebuke or a correction. I frequently plead guilty to charges that are levelled against me, which often are only too well founded.
I am a student of de Gaulle, whose story is fascinating. It is appropriate we should be talking about him, because was not last Monday, 18 June, the anniversary of the first occasion on which he saved France?
§ Mr. Gow
Before General de Gaulle returned to power in May 1958, and before the treaty of Rome was signed on 25 March 1957, he had been the leader of the Rassemblment du Peuple Francais. He was the only leading political figure in France who was opposed to the signing of the treaty of Rome. Although the treaty was signed in 1957, it did not become operative until 1 January 1958. I remind the House of those dates because in May 1958—a year after the treaty had been signed and four and a half months after it had become operative—de Gaulle became 1257 the last Prime Minister of the fourth republic. By the time that he had formed his administration, which included Ministers from all parties, France was already a member of the Community. But because de Gaulle believed in the solemnity of treaties entered into by France, when he became president of the fifth republic the following January he set about fashioning the institutions of the Community so that they should be in the best interests of France. I do not rebuke the general for doing that, and in a moment I shall mention my right hon. Friend the Prime Minister, who has sought, without as much success as de Gaulle, to fashion the institutions of the European Community, notably its trading arrangements.
§ Mr. William Cash (Stafford)
Does my hon. Friend recall that when Adenauer and de Gaulle met for the first time, de Gaulle subsequently recorded in his memoirs:We discussed Europe at length. Adenauer agreed with me that there could be no question of submerging the identity of our two nations into a stateless institution"?
§ Mr. Gow
I do not recall those words, but I remember the meeting of those two relatively old men, who were the heads of the Governments of France and Germany. When de Gaulle became president in May 1958 he was 68 and Adenauer was almost the same age. They both lived through the first and second world wars and it was left to those two statesmen to ensure that an essential element for peace in Europe was friendship between France and Germany. It was infinitely more difficult to be the architect of that policy in the years following the war, when bitterness was so great and all the signs of the destruction were evident—not just the blood spilt but the buildings that had been destroyed.
I am glad that my hon. Friend the Member for Stafford (Mr. Cash) reminded me of the role of Adenauer and de Gaulle and how they set about creating friendship. I remember vividly that de Gaulle kept only two stars on his kepi, when lesser men had promoted themselves to field marshal. He visited Germany, at Adenauer's invitation, to inspect the flower of the reviving German army, which I found moving. I must not be led astray into de Gaulle and Adenauer, not least the amazing contribution that de Gaulle made.
My hon. Friend the Member for Stafford read some words to the House about the relationship between Adenauer and de Gaulle, which reminded me of another famous phrase of de Gaulle's. We have reminded ourselves of the phrase "Europe from the Atlantic to the Urals." That phrase earned me a rebuke from the hon. Member for Wallsend. De Gaulle coined a phrase which reflects the views of my hon. Friend the Member for Aldridge-Brownhills (Mr. Shepherd), who believes in the concept of a Europe des patries. I give way to my hon. Friend.
§ Mr. Richard Shepherd (Aldridge-Brownhills)
Having been pulled to my feet, I entirely endorse the sentiments and observations of my hon. Friend.
§ Mr. Gow
A Europe des patries is endorsed by my hon. Friend the Member for Aldridge-Brownhills. That is a terrible name; I have never liked the boundary commissioners. They should never have given my hon. Friend's constituency that name. Castle Point is another example. My right hon. Friend the Father of the House is 1258 a delightful man, but I have never understood why his constituency is called that. We might have a debate on the boundary commissioners.
§ Mr. Andrew Mitchell (Gedling)
My hon. Friend mentions the changes that the Boundary Commission makes from time to time to the names of our constituencies which he regrets. Whenever I have had the pleasure of listending to one of my hon. Friend's speeches, he has referred to my constituency as "Gelding". I am grateful for this opportunity to remind him, before he mentions my constituency and perhaps makes an inadvertent mistake, that it is Gedling.
§ Mr. Gow
I am grateful to my hon. Friend. His father represented a constituency called Basingstoke. The boundary commissioners abolished that constituency and renamed it Hampshire, North-West, but I still think of my hon. Friend's father as the Member for Basingstoke.
My hon. Friend the Member for Crawley (Mr. Soames) is in his place, as he usually is. Later today, he will make the journey to Crawley. I remember when that constituency was called Horsham and Crawley. The folk who live in Crawley are no longer represented by my hon. Friend the Member for Horsham (Sir P. Hordern) but are represented by my hon. Friend the Member for Crawley.
§ Mr. Soames
Does my hon. Friend agree that it is a continuing disgrace and a source of the deepest anxiety and unhappiness to many hon. Members that my hon. Friend the Member for Horsham (Sir P. Hordern) does not sit upon the Treasury Bench?
§ Mr. Deputy Speaker
Order. I hope that we will not get too far away from the subject of United Kingdom export trade.
§ Mr. Gow
It continues to astonish me that my hon. Friend the Member for Horsham is not in the Cabinet, promoting exports—I think that that brings the discussion within order, Mr. Deputy Speaker. My hon. Friend should be in the Cabinet. I mean no disrespect to my right hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley)—who would wish to be discourteous to him?—but my hon. Friend the Member for Horsham would be as excellent a Secretary of State as my right hon. Friend. Incidentally, we cannot rebuke the boundary commissioners for calling my right hon. Friend's constituency Cirencester and Tewkesbury. It is a delightful name and conjures up a vision of the finest English architecture in a beautiful part of the world.
I wish to return to exports and to the Common Market. By one of those happy accidents, I have before me an extract from the Official Report of 29 June 1989. It records the famous occasion when my right hon. Friend the Prime Minister had returned from the kingdom of Spain and the so-called Madrid summit—and came to the Dispatch Box from which my hon. Friend the Under-Secretary of State for Corporate Affairs will speak soon. Unlike many other Heads of Government, my right hon. Friend the Prime Minister, wholly in character, came back directly from Madrid to the House to give an account of what had taken place and to submit herself to examination and cross-examination by my hon. Friends and even by the spokesman—now absent—of the once-mighty Liberal party, the hon. Member for Berwick-upon-Tweed.
We may pause here to note that the Treasurer of Her Majesty's Household—my hon. Friend the Member for 1259 Watford (Mr. Garel-Jones)—whose weekend appears to have begun already, judging by his attire, has torn himself away from his constituency to listen to a debate on exports. He knows more about exports than almost any other man, because he contributed to cementing friendship within the Community by marrying a girl from the kingdom of Spain. That marriage took place when Spain was not in the Community. One might say that there is a direct link between my hon. Friend's marriage and the accession of Spain to the Community, because Spain acceded a long time after we joined on 1 January 1972. At that time, my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) was First Lord of the Treasury. Unaccountably, my right hon. Friend is not in his place. No doubt he is conducting an orchestra in a distant land—I suppose that he is contributing to exports. I think that some of my hon. Friends would like to export my right hon. Friend, but who would purchase him? That is an interesting point. Perhaps my hon. Friend the Under-Secretary of State will tell us the answer.
§ Mr. Gow
Anyway, that was a fair point to make.
I said that my right hon. Friend the Member for Old Bexley and Sidcup might be contributing to an export drive, but before then I was talking about the journey made by my right hon. Friend the Prime Minister from Madrid to London in June last year. Did she make that journey alone?
§ Mr. Gow
My right hon. Friend did not. When she returned from the Madrid summit, no one believed that she was alone on the aeroplane. She was accompanied by my right hon. Friend the Member for Blaby (Mr. Lawson), who at that time was Chancellor of the Exchequer, and by my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe), who at that time was Secretary of State for Foreign and Commonwealth Affairs, so there was a kind of trinity on the aeroplane. I shall not lay myself open to a charge of blasphemy by trying to describe their different roles, but there was a trinity—although I must say that that point was not original; Aneurin Bevan once said it.
§ Mr. Soames
Would my hon. Friend care to speculate on what events following the Madrid summit—at which a good deal of discussion on exports took place—led to two members of that trinity no longer holding the same posts that they held then?
§ Mr. Gow
Each hon. Member knows that no Minister can continue in the same office for ever. Indeed, one might say that I am living proof of the truth of that proposition. Therefore, we should not be too surprised if those who held office in June last year do not hold the same office today.
My hon. Friends may say that there is one dramatic exception to the rule that no one can hold the same office for ever, because my right hon. Friend the Prime Minister has held the same office since 4 May 1979. That was the 1260 day—my hon. Friend the Member for Watford remembers it with great clarity—on which the Queen summoned to Buckingham palace the first woman in the story of these islands ever to hold the office of First Lord of the Treasury.
My hon. Friend the Member for Crawley put a question to me and I shall try to answer it, but first I should like to return to the Official Report of 29 June 1989. My hon. Friend the Member for Aldridge-Brownhills put a question to my right hon. Friend the Prime Minister. Her words are relevant to the motion of my hon. Friend the Member for Nuneaton. All of my hon. Friends who are here now were here on that occasion. [Interruption.] My hon. Friend the Member for Crawley is leaving the Chamber to get some further works of reference. I hope that he will catch your eye a little later, Mr. Deputy Speaker.
My right hon. Friend the Prime Minister made her famous statement on 29 June 1989. By an extraordinary accident, Richard II came to the throne in 1377. I thought that the column number of my right hon. Friends speech in the Official Report and that date were the same, but I now find that they are not.
My right hon. Friend said:the Council"—that is, the Council of Ministers—agreed that the measures necessary to achieve the first stage of progressive realisation of economic and monetary union will be implemented from 1 July 1990.Let us pause there. Mark how timely this debate is. Is not today 23 June? No, it is 22 June, but we are not very far away from that date.
I see that my hon. Friend the Treasurer of Her Majesty's Household has apparently joined the Liberal party. He is wearing yellow today, which is very odd. However, we do not want to be misled into that subject.
The Prime Minister said:The first stage of progressive realisation of economic and monetary union will be implemented from 1 July 1990".That is the first day of next month, which is eight days away. That is why my hon. Friend the Member for Nuneaton tabled the motion for debate today. He realised the significance of the words of the Prime Minister and thought that it would be timely to hold a debate a few days before 1 July.
The Prime Minister said:These"—that is, the measures—include completion of the single market, abolition of all foreign exchange controls".I entirely agree with that.
I remember the reaction of the Labour party when my right hon. and learned Friend, who is now the Lord President of the Council, abolished exchange controls in the autumn of 1979. The Labour party was strongly opposed to that and said that if exchange controls were abolished, all sterling would go out of the United Kingdom. My hon. Friend the Minister knows a great deal about that. Was he not in the think tank at the time?
§ Mr. Gow
My hon. Friend should have been.
My right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) fashioned the policy of abolishing exchange controls in conjunction with the Prime Minister. They were supported by my hon. Friend the Minister although he was not an hon. Member at the time.
1261 I have never believed in exchange controls. I believe in the free movement of people, goods and capital. Exchange controls were imposed in 1939 when war broke out. It was left to a Conservative Government to dismantle exchange controls, and although the Labour party predicted that there would be a great flight of capital, a direct consequence of their abolition is that the United Kingdom now has one of the largest holdings of overseas assets. The fact that Britain now has massive assets overseas has contributed greatly to our exports and to our trade. That is why my hon. Friend the Member for Nuneaton tabled the motion.
The statement of my right hon. Friend the Prime Minister after the Madrid summit was of far-reaching consequence. She said:As my right hon. Friend the Chancellor of the Exchequer"—my right hon. Friend the Member for Blaby (Mr. Lawson)—has made clear, stages 2 and 3 of the Delors report would involve a massive transfer of sovereignty which I do not believe would be acceptable to the House.How much I agree.
§ Mr. Grylls
My hon. Friend has put his finger on a very important point. I entirely agree with him.
§ Mr. Gow
It would not be music to them all. If my right hon. Friend the Member for Old Bexley and Sidcup were here, I do not think that he would be applauding quite as much as my hon. Friends who are here—[Interruption.] I thought that my hon. Friend the Treasurer wanted to intervene, but obviously I was wrong.
My right hon. Friend the Prime Minister continued:The Government support the objective of closer monetary co-operation, but will work for solutions which leave crucial economic decisions in our own hands."—[Official Report, 29 June 1989; Vol. 155, c. 1109.]
§ Mr. Andrew Mitchell
Does my hon. Friend agree that the remarkable speech the other night by my right hon. Friend the Chancellor of the Exchequer follows that statement by the Prime Minister? It is a remarkably constructive and helpful contribution to the development of the EC and of Europe more widely.
§ Mr. Gow
I agree. I make it plain to my hon. Friend the Member for Nuneaton that there is a consistency of policy all the way through from the Madrid summit to the speech of my right hon. Friend the Chancellor earlier this month.
We may note the absence of any representative from the Liberal party. The Labour party is, of course, well represented.
§ Mr. Andrew Mitchell
I must point out to my hon. Friend that the popularity of the Liberal party has sunk so low in the opinion polls that the party is considering employing the services of Jacques Cousteau to see whether anything can be done to resuscitate it. Is my hon. Friend aware that the reason why no Liberal Member is here is that Liberal Members are engaged in a futile but brave attempt to save their seats at the next election?
§ Mr. Gow
My hon. Friend has given an explanation for the absence of any representative of the once-mighty Liberal party, but the representatives of the Labour party and my hon. Friends believe that if one is a Member of Parliament, a responsibility that should have priority is attendance in this place. Labour Members and my hon. Friends are demonstrating this morning that they believe that this place has an important role.
I began my speech on exports and imports. Tourists are one form of import, which one might think is a bad thing. However, we may have been blinded into thinking that it is wicked to be an importer and that it is virtuous to be an exporter. The Department of Trade and Industry and the Central Statistical Office are involved in those matters. I hope that my hon. Friend the Minister will tell us which Minister is responsible for the Central Statistical Office. A Central Statistical Office document published last month is supposed to be all about exports; that is why I have it in my hand. The document appeared on 23 May and another one has probably been issued this morning. I hope that my hon. Friend the Minister has the figures with him, because he knows the figures long before we do. If he has not, we shall have to wait until we can go to the tape. But at least I have last month's statistics.
In trying to measure our exports and imports, we have been rather blinded by statistics. Let me ask my hon. Friend the Minister this: what would happen to the human story if we ceased to keep any of these statistics? Would the world come to an end? I find in this document, compiled at enormous expense, every category, real or imagined—some unreal and unimagined—of exports and imports. For what purpose are the figures compiled? Why does it help us to know thatestimates of invisibles are based on a variety of sources, mostly inquiries of those engaging in the various transactions"?It is absolute gobbledegook.
My hon. Friend the Minister may think that I am reading from Lewis Carroll, but I am not. I am reading from a publication produced by Her Majesty's Government and paid for by the Minister's poor constituents.
§ Mr. Soames
Is my hon. Friend aware that my right hon. Friend the Chancellor, for whom he and I both have a high regard, shares his concern about the quality of our statistics and the cost of counting them? One of the many imaginative programmes that the Chancellor has put in hand—even before his excellent speech on the future of the hard ecu—is the complete reform of the gathering, consideration and publication of all Government statistics. Does not my hon. Friend agree that that is a far-sighted and important step, which should have been taken many years ago?
§ Mr. Gow
Of course I share my hon. Friend's admiration for the Chancellor of the Exchequer. But apparently the Chancellor is not going quite as far as I want him to go. He proposes the reform of the statistics; I propose the abolition of the statistics. Would the world come to an end if we failed to gather these statistics? Moreover, the statistics are always wrong.
§ Mr. Shepherd
I would not presume to tell my hon. Friend any such thing. He is on to an important point. But the abolition of statistics can create the most speculative of markets. The mood of markets can be translated into imagined flows across the exchanges, and that can have consequential effects on our standard of living, the retail price index and so on.
The criticism of the accuracy or otherwise, of the statistics which now run through our economic life is severe. The inaccuracies that have been recorded and the correction of items in subequent months have been reflected in sterling's external value and that, in turn, has had repercussions for our inflation rate. That is why I would support my hon. Friend if he maintained that, rather than abolishing statistics, we should have accurate ones.
§ Mr. Gow
I think that we should commit to the permanent records of this place the entry and instant departure of the Liberal Democrats' spokesman of financial affairs, who used to be the Chief Whip. Imagine being Chief Whip of the Liberal party; what a task that would be.
What I would say to my hon. Friend the Member for Crawley and my hon. Friend the Member for Aldridge and Brownhills, if there is an "and"——
§ Mr. Gow
Oh, I see: it is like Beaumont-Dark.
What I was saying when I was interrupted by the transient presence of the Liberal Democrats was that, unless one had read the Central Statistical Office document, one would not believe what was in it. I shall give you, Mr. Deputy Speaker, a copy; you may like to frame it for your study. These are the words fashioned, by somebody in the office of my hon. Friend the Minister, on the subject of invisibles.These are usually sample inquiries, and are variously held on quarterly, annual or periodic bases. For some components, data for recent periods are therefore incomplete and subject to significant estimation errors.Out of their own mouths, the statistics are condemned.
1264 My hon. Friend the Member for Nuneaton made an excellent speech. The House and, I hope, the nation, are grateful to him for having initiated the debate, and it is with mounting impatience that Mr. Deputy Speaker and I await the Minister's reply.
§ Ms. Joyce Quin (Gateshead, East)
I welcome this debate on exports, although at times during the unusual speech of the hon. Member for Eastbourne (Mr. Gow), I was not entirely certain that that was the subject that we were discussing. I congratulate the hon. Member for Nuneaton (Mr. Stevens) on his good fortune in being able to initiate the debate, because it concerns an important matter which, despite the low attendance, is dear to the hearts of many hon. Members on both sides of the House.
The motion is somewhat curious. Reading it, one would certainly never guess that we have one of the largest balance of payments deficits in our history; that does not emerge from the motion at all.
The motion welcomesthe contribution made by the continued growth of the volume of exports over the last ten years".It does not mention the fact that, sadly, the annual growth rate of our volume of exports—3.5 per cent. in the 1979–89 period—was the lowest of any EEC country and also lower than that of Japan or the United States. That is a great pity and to be deplored.
I agree with the hon. Member for Nuneaton that it is important for British business and British exports to be guaranteed the same level of support as is given in other countries. We would all at least say that we agree with that and that there should be a level playing field in terms of support for exports.
Many hon. Members have stressed that trading is vital to our economic health, but unfortunately, over the past 10 years, our record has been little short of disastrous. Between 1979 and 1986, our share of world trade fell by 15 per cent.—a larger fall than that experienced by any other industrial country. In 1988, our current account trade deficit reached £14.5 billion. That was larger than the total of all the United Kingdom's deficits over the previous 40 years. Then, 1988 was followed by the record deficit year of 1989, when the figure reached more than £19 billion. Presumably the total combined deficit of 1988 and 1989 was larger than all the previous United Kingdom's deficits in recorded history. We should bear that in mind when considering exports.
In 1978, we had a £5 billion surplus on the balance of payments. Before this debate, I looked through some old Hansards for that time and noted that plenty of Conservative Members were worried that the surplus was so small.
In manufacturing, our trade performance has deteriorated dramatically, with 1983 marking the first year since the industrial revolution in which manufacturing imports by Britain exceeded our manufacturing exports. In 1989, our manufacturing deficit with West Germany was £9.6 billion, and with Japan it was approaching £5 billion. However, it seems that the Government are not prepared to look those figures squarely in the face and recognise that action is vital.
The hon. Member for Nuneaton (Mr. Stevens) gave some interesting figures about the growth in exports, but he took 1981 as his base year, and, as we all know, that was 1265 a very poor year for our economic performance. Therefore, that was a low base on which to give further figures.
There is considerable cause for concern when the figures are broken down into sectors. My hon. Friend the Member for Wallsend, (Mr. Garrett) mentioned the machine tool sector about which he is concerned. In that sector, 47 per cent. of our market was taken by imports, but in Japan the corresponding figure is only 7 per cent.
The hon. Member for Erith and Crayford (Mr. Evennett) referred to old and new industries, the situation in both is very worrying. In some of our old industries, which I believe still have an important role to play, we are losing badly in terms of exports in comparison with other countries. One of the great sadnesses for me, coming from the north-east—I know that it is also a great sadness to my hon. Friends the Members for Jarrow (Mr. Dixon) and for Wallsend—is the demise of our shipbuilding industry and the fact that our yards are facing the bulldozers at a time when shipbuilding worldwide is experiencing a great boom.
To reinforce a point that I made to the hon. Member for Erith and Crayford, I believe that in shipbuilding the old and new industries can work very well together. It is foolish simply to dismiss older industries in which there are skilled workers and a great deal of expertise as industries in which we do not want to be involved, when it is clear that there will be a market for those products in future and those products also have important links with the high-technology sector.
The trade deficit in textiles, another of our older industries, was 1.5 billion in 1989. We are also concerned about the steel industry at the moment. It is sad that our steel industry is still considerably smaller than the steel industries in other European countries, particularly those of West Germany and Italy. Perhaps the Minister will comment on the prospects for high-technology investment in our steel industry.
In our recent debate on the future of the Ravenscraig steel plant, my hon. Friend the Member for Motherwell, South (Dr. Bray) said that Ravenscraig could be well placed to receive high technology investment along the lines of such investment in the United States and Italy. I hope that the Minister will refer to that. Solutions should be sought in the steel sector which can safeguard the help of all the existing steel plants and ensure that those plants can survive and prosper in future.
The hon. Member for Eastbourne said that perhaps we should not consider imports as basically evil and exports as basically good. I rather agree with him, but we want to see them to be in better balance. The imbalance and the size of our trade deficit are worrying us. Of course we need to import, just as we need to export, but we need a better balance between the two.
The trade figures are to be published today and I understand that there will be a drop in the current deficit from about £1.6 billion to £1.3 billion. While I strongly welcome any drop in our trade deficit, we are still dealing with a substantial deficit. In previous years, such a figure would have been greeted with absolute dismay instead of relief. The hon. Member for Eastbourne also tried to pour scorn on statistics generally as convenient way of overlooking the scale of the problem. However, the weight 1266 of all the statistics taken cumulatively concerns me, not the fact that individual statistics may be less accurate than we would wish.
I want now to consider the export services that the Government provide. I was glad that my hon. Friend the Member for Wallsend laid such stress on the importance of the future of the Export Credits Guarantee Department. He referred quite rightly to the real anxieties felt by industrialists at the Government's proposals for changing ECGD.
Although it is true that many people in industry have welcomed the Government's proposals to privatise the short-term insurance sector, there is now concern among industrialists that, if it is privatised in that way, it may fall prey to a takeover bid from its main competitor in this country. Perhaps the Minister will refer to that. Exporters are worried that a private monopoly might be created by such a takeover. That would not be in the interests of the services provided to exporters.
Obviously, if the Government go ahead with their proposals to privatise that part of ECGD, there will be discussions and presumably legislation which will be debated by both sides of the House. That might be the most appropriate time to consider the misgivings that have been raised over the common services provided both to the short-term side of ECGD and to the long-term project side. That will be the time to raise worries about whether those common services might be weakened as a result of the policy of privatisation which the Government seem to be pursuing. As we have such a huge trade deficit, now is not a good time to be reorganising, hiving off and weakening ECGD in that way. I can understand the concern of industry about that.
My hon. Friend the Member for Wallsend also referred to the project side of ECGD. Once again, industry has been vocal in expressing its fears to hon. Members on both sides of the House about that. My hon. Friends have told me that many firms in their constituencies have expressed concern about the future of the long-term project division and about the increases in premiums, some of which have already taken place and others of which seem likely because of the Government's commitment to the portfolio management system for ECGD.
None the less, we are grateful that the Government have decided to maintain a commitment to the project division of ECGD, because there were unpleasant rumours that certain Government Departments favoured the so-called zero option—taking support from the long-term project division. Industrialists greeted that suggestion with widespread alarm. That commitment to ECGD is very important.
In reply to a written question of mine this week, the Government said that they are now going to consult further before deciding whether finally to introduce the portfolio management system. I am glad to hear that. The reservations expressed to us by industrialists made us worry about prospects for exports if the system had been introduced in the way in which the Government originally envisaged. ECGD and the project side is not just some marginal benefit that is given to companies. It can mean the difference between winning and losing an order. Often fairly minor costs determine whether an order is won.
§ Mr. Ted Garrett
The Minister will agree that a question of morality is involved. Industrialists like to think that the Government are interested in what they are doing 1267 and that the Department in particular is very keen to help them. There has been a tendency to drift from that view. The Minister may challenge that remark, but manufacturers think that the Government are drifting from being interested in their interests.
§ Ms. Quin
My hon. Friend makes a valid point, and I reinforce it. Many people in industry feel that the avowedly non-interventionist, hands-off approach that the Department of Trade and Industry wants to espouse is not in the best interests of industry, particularly when it seems that many of our competitors are adopting a different approach.
The hon. Member for Nuneaton said that he felt strongly that the playing field should be level and that we should not be disadvantaged by the extra support that other countries might be giving. That reinforces my hon. Friend's point. Opposition Members are committed to ECGD and the short- and long-term aspects of its business. ECGD is not feather-bedding industry. It does not absolve companies in this country from going out and winning orders, complying with the technical requirements that may be laid down by overseas customers, and delivering in terms of quality and punctuality. Exporters must still comply with all those things, but they need the export credit assistance that seems to be available to our main competitors.
Ministers have occasionally expressed the view that large companies in particular are sufficiently equipped to look after themselves, but I remind the Minister that large companies subcontract a great deal of their work to smaller companies, and the economic health of large and small companies is therefore linked. Measures that may be taken because large companies can stand on their own may have an unpleasant spin-off effect on smaller industries, and I hope that the Minister will bear that point in mind.
We do not want business to be deterred from winning export orders, particularly, as was mentioned by the hon. Member for Nuneaton, in the newly opened markets of eastern Europe and the Soviet Union. One of the worries that have been expressed to me is that the premiums for ECGD-supported business to the Soviet Union have increased considerably of late. Although, I understand that, in the changing situation in the Soviet Union, the commercial risk looks rather different from what it was in the past, the Soviet Union, whatever one thought of its regime, was a reliable customer and never defaulted. This is not the time to make it more difficult for companies to do business with the Soviet Union, particularly when, politically, we want to make the point that we support the reforms taking place in that country. We do not want to create more economic and political difficulties in that country. Although I can understand some of the commercial judgments behind the increase in premiums, the political aspect must be borne in mind.
Several hon. Members have mentioned the help that other countries give exporters. It is difficult to find accurate information on the level of export support that other countries give, but I was supplied with some figures from EEC sources in a publication entitled "First Survey of State Aids". It certainly seems as though France, in particular, and Italy spend a good deal more on state aid to trade and exports—2 billion ecu for France and 1 billion ecu for Italy, but only 749 million ecu for the United Kingdom.
§ Mr. Cash
If the hon. Lady is seeking to suggest that state aids are good in the context of the single market, will she bear in mind the fact that the consequence of giving unfair subsidies in the form of state aids in any sector within the single market is bound to distort the market and, in turn, lead to a situation in which we do not have a level playing field? We will end up giving unfair advantages to one part of the community as against another. That is the way to destroy, not to improve, the benefits of the single market.
§ Ms. Quin
I do not know whether the hon. Gentleman is suggesting that we should stop state aids and let everybody else give state aids. If that were the outcome, our position would become even worse. There must be EEC and wider international agreement on a range of state aids and subsidies. Agreements already exist. Sometimes we understandably worry that those agreements are not always being properly respected, and we must pay attention to that matter also. It is not helpful to talk about state aid as a distortion when we are trying to tackle our economic and export performance at present.
§ Ms. Quin
We have all agreed on the need for a level playing field. The hon. Gentleman and I might disagree on what kind of EEC and international system of subsidies we might like. Many of us, including myself, regard regional assistance as an important element and think that it should allow for all countries in which there are clearly demonstrated regional difficulties. In the general sense of wanting a level playing field, I agree with the hon. Gentleman.
We should examine the amount of direct aid to exports that other countries are giving and see whether we can learn something from the services that they provide. It is a matter not of criticising high levels of aid but of looking at the ways in which other companies are successful in promoting exports in certain sectors and across the board.
The Government have made some strange decisions lately regarding exports and our presence in trying to promote British commercial interests in events and exhibitions abroad. The Minister will know that we have had correspondence about the British Government's failure to accept the invitation to be partner nation at the Hanover trade fair in 1992. That trade fair has been described as Europe's biggest industrial marketplace. It is an honour to be chosen as partner nation. It would give us advantages in the number of exhibits and attention to us and our products.
It is most regrettable that the Government have decided not to take up the opportunity. I understand that the French were very keen to take the opportunity when we declined it. The decision seems to have been made for cost-cutting reasons rather than anything else. Perhaps the Minister will address that point.
There have also been reports, especially in The Guardian, about our strange attitude towards the Seville Expo in 1992. I stress that 1992 is an important year and our presence at those events should be as strong as 1269 possible. Perhaps the Minister will tell us in what ways Britain is hoping to maximise the benefits of the Seville event.
The hon. Member for Nuneaton referred to the Government's decision to introduce a range of export charges for firms that want various types of export advice. Although it is clear from the Minister's replies to my written questions that the introduction of the charges has had a mixed result, it seems as if they have acted as a deterrent in one or two sectors. Although it could be argued that, if people pay for something, they are committed to it and believe that they will get something worthwhile from it, I believe that export charges could deter casual inquirers, such as people who feel that the export business might be able to offer them something, but who are not sure. They are the very people we want to attract to exporting. We are all agreed on the need to improve industry's awareness of the export business, and I believe that charges could act as a deterrent in that respect.
I do not know the costs and benefits of the charges in terms of adminstration and collection. Perhaps the Minister could give us some details of that. However, there is little evidence that the charges have had a good effect, and some evidence that their effect has been negative.
There has also been a steep cut in support for export marketing research. I am not sure why the Government took that decision, but it certainly does not seem helpful at present.
In response to an intervention by my hon. Friend the Member for Wallsend, I referred to what has come to be known as the "non-interventionist, hands-off" approach of the Department of Trade and Industry. The Financial Times recently reported that the Secretary of State for Trade and Industry was considering whether the private sector should take over the Department's work of providing export support. It appeared as though the Department might get out of the job of export promotion altogether. I hope that the Minister will give us a clear assurance today that there is no possibility of that.
Hon. Members have referred to some of the campaigns run by the Department, such as the enterprise and export initiatives and the "Europe—Open for Business" initiative. Although such campaigns are important in promoting awareness—I am certainly not decrying them—they must be followed up. The Department should monitor the take-up to ascertain what can be done to improve it in those areas where it has been low.
I should be grateful if the Minister could concentrate on the role of the European accreditation centres, which are responsible for testing goods and certifying that they are in accordance with the EEC standards that were agreed under the 1992 programme. I have been told that there is a dramatic shortage of such facilities in this country and that some firms have to wait up to two years before receiving their certificates.
However, the Department of Trade and Industry recently said in reply to a written question that it did not have information about the average length of time that firms in different parts of the country had to wait for testing facilities. Perhaps the Minister can assure me that the Government now have that information and that, if 1270 firms in certain areas are having to wait an inordinate time for their products to be tested, the problem will be rectified quickly.
A recent article in the Newcastle Journal, which is concerned about the shortage of European accreditation centres, pointed out that the testing facility is important for more than just exports. A company that operates in Gateshead and sells to another firm in another part of the north-east must meet those standards and be tested in accordance with them. Therefore, the testing facilities are important not only for our exports to other European countries but for our internal domestic trade. I hope that the Minister will take that point on board.
Perhaps the Minister could also direct the Government's attention to the role of the excellent Euro-information centres that were set up recently, which provide information, especially to small businesses, about events in the European Community, and directives and proposed directives that might affect them. There is an excellent Euro-information centre in Newcastle. I have also visited one in Birmingham and I know that both those centres, which were pilot centres under the EEC scheme, are worried that the temporary funding from the European Community is being phased out. They now have to rely on business sponsorship, which is proving difficult to get.
It is important that the Government make a commitment to the future of those centres and to their valuable work, at least until 1992 but also thereafter, if at all possible. It would be helpful if the centres could know that for the next few years their finances will be on a sound footing, instead of having to worry every day about where the next penny is coming from. That will mean that they can provide a service and get on with the job of supplying the firms in their regions with the information that they have found—and I am sure, will continue to find—so useful.
I recognise that that is not directly the responsibility of the Department of Trade and Industry, as it involves small firms and comes within the purview of the Department of Employment. None the less, as it is so important to small firms and to exports, I hope that the Minister will bear in mind what I have said.
We need to learn from what many other countries, especially Japan and Korea, have done in targeting markets and co-ordinating various export promotion instruments to ensure that we can do better in various sectors and various markets in the future than has been the case in the recent past.
The hon. Member for Nuneaton referred to eastern Europe, which is obviously an important area for us in the future. I recognise that the countries of eastern Europe cannot buy expensive imports from west European countries with hard currency. However, given the importance of regenerating the economies of those countries and of tackling their severe environmental pollution, it is important that we consider a trade and aid package that would involve British firms in supplying much of the equipment needed, either to tackle environmental pollution or to help regenerate those economies. Again, perhaps the Minister will comment on that.
It is depressing to note that, last year, not only did we have a bad trade balance with most of the countries of western Europe but we had a negative one with East Germany, the Soviet Union, Czechoslovakia and 1271 Romania. The gloom was relieved only by the small surplus that we had with Hungary and Bulgaria. The figures for trade between western and eastern Europe show the domination of West Germany and the poor United Kingdom position. While we admire German success, it would not be healthy for the future balanced economic development of Europe if the figures for exports and imports remained as they are.
As the House of Commons Select Committee on Trade and Industry noted, we have opportunities in eastern Europe, particularly as we have a language advantage, because in many of the eastern European countries, English is the most widely spoken foreign language. We should capitalise on that important asset.
The Labour party is keen to see an active and decentralised Department of Trade and Industry working with industry and firms in the regions, and providing them with regional export service. Such regional departments would co-ordinate with the other bodies concerned with export promotion, such as the chambers of commerce, which are increasingly active in this sector.
I strongly support what my hon. Friend the Member for Wallsend said about the need for a professional approach to the business of exporting. He quoted the interesting example of Taiwan, where it was clear that we were falling behind other countries in trade promotions. The need for a more professional service is as important as it ever was. We should encourage the recruitment into the Department of Trade and Industry or the Foreign Office export service of people who already have experience in exporting but who have not gone through the Civil Service career structure. Towards the end of the last Labour Government, proposals along these lines were introduced, but I believe that they have never been acted on.
The Library has provided with me with some interesting information, which clearly shows that we run a substantial trade surplus in military equipment and identified defence equipment. As we know, there are concerns about the prospects of that export sector. That is why the Labour party believes that the arms diversification agency that we have suggested, which would encourage and assist firms to find new markets and move away from their traditional products, is vital.
I was perturbed to hear a Minister in the Department of Trade and Industry say recently during question time, in answer to my hon. Friend the Member for Denton and Reddish (Mr. Bennett), that firms were fully capable of changing their production and finding new markets. The Government must take a considerable and active interest in this sector to ensure that we do not lose. We do not want the surplus in the military trade to be lost and diversification in that sector to lead to an even more outrageous deficit on our balance of payments.
§ Mr. Grylls
What role does the hon. Lady see for the Government in this process of switch or diversification from military to civil work? How can they help firms to diversify? The real incentive to diversify is the firm's, because if it does not do so and its armament orders drop, it will go out of business.
§ Ms. Quin
A firm that sees its markets declining will have a real incentive to diversify, as it will have to move into other markets to survive. However, Government bodies, particularly the export service, have a certain amount of expertise, even if it is not as great as many 1272 would like, and they can do a great deal to advise firms. In the past four or five years, France has worked hard to improve, and has improved, its balance of payments position, which was weak. It has done so by a co-operative effort between the Government and industry. That is a good example of how we should he working more actively, and we should follow it.
Export assistance from Government is not the only important factor. The general economic climate is also of enormous importance in determining whether firms will be able to export successfully or even survive. The Government have been responsible for many failures and the deterioration in the economic climate in recent years. The regions of the United Kingdom continue to lag behind the rate of manufacturing investment in 1979. The figures from 1979 to 1987 show that there was a decline in manufacturing investment in the northern region of 43 per cent. That is an enormous reduction.
Investment, training and research and development are vitally important for the future health of our economy and future opportunities for our firms to export. The Confederation of British Industry has rightly criticised the Government's failure to invest in transport infrastructure. It pointed out that the lack of adequate transport infrastructure is responsible for creating considerable economic difficulties for firms. Most Governments would see investment in transport as a clear Government responsibility.
The hon. Member for Berwick-upon-Tweed (Mr. Beith) mentioned the difficulties that firms experience in certain areas as a result of the introduction of the uniform business rate. The publication Forum of Private Business said recently that it had warned the Minister of the dangers of the uniform business rate, and claims that its 1990 survey proves it right. The survey showed that 45,000 businesses failed, 135,000 jobs were lost and various sectors incurred steep rises in costs following the introduction of the rate. Despite its name, it is clear that the effect of the uniform business rate has not been uniform. Businesses in some areas have found their circumstances better than those in others. It is clear that the burden of the rate has fallen heavily on particular businesses in particular parts of the country.
I have raised many issues to which I hope the Minister will respond. We all agree that exports are an important matter. Initially I was surprised that the hon. Member for Nuneaton chose the subject, given the Government's record, but I accept that he is worried about the future of British industry. As he has a constituency in an area such as the west midlands, I am not surprised. The exports record of the past 11 years has been very bad indeed, and the best alternative for Britain is to turn to Labour.
§ The Parliamentary Under-Secretary of State for Corporate Affairs (Mr. John Redwood)
I am grateful to you, Madam Deputy Speaker, for calling me at this stage in the debate.
Before I begin, I wish to reply to the point of order of the hon. Member for Cynon Valley (Mrs. Clwyd) about the earthquake in Iran. The House will be delighted to know that Britain is sending relief supplies to the victims of the earthquake in Iran. We hope that they will be there by the weekend. The emergency aid will he flown on specially chartered planes and will include medicines, 1273 blankets, tents and other relief supplies. That follows the departure early today of a team of British experts from the International Rescue Corps, which sent 17 of its volunteers to help with the search-and-rescue operation. I pay tribute to the speed of its response and wish the volunteers well. Of course, the Government wish to be associated with the expression of sympathy of the Labour party and the House. We are deeply disturbed to read of the tragic loss of life and the difficulties that the families of the victims must be experiencing.
§ Mr. Redwood
I am grateful to the hon. Lady.
My hon. Friend the Member for Nuneaton (Mr. Stevens) has performed a great service to the House by raising an important batch of issues related to our manufacturing and export performance and the progress made by our industry in recent years. My hon. Friend comes from an engineering and industrial background. That makes his comments carry even more weight. It is good to see hon. Members present on both sides who have a similar background and who can bring their experience of industry to bear on these important issues that shape the nation's future.
My hon. Friend the Member for Nuneaton is also an extremely good constituency Member of Parliament, and we often hear from him in that connection. I know that in his constituency the textile industry is of considerable importance. I heard what he had to say about the multi-fibre arrangement negotiations. The Government are proceeding with our partners in Europe, because negotiations on the MFA are conducted on behalf of this country and the other 11 member states by the Commission, and it is a common western European policy. The Government have worked with our partners to make it clear that transitional arrangements and protection against surges in imports need to be built into the system.
The House should also note that 83 per cent. of textile imports last year came from developed countries and not from MFA countries. Therefore, the proportion of our imports in the textile sector that is affected by the MFA is quite modest. However, in my hon. Friend's constituency clothing is more important and it is true that the proportion of clothing imports from MFA countries is higher, and is therefore a matter of considerable concern in that sector. That is why we are trying to negotiate satisfactory transitional arrangements. Those issues have been set out for the House on several occasions, by myself and by my right hon. Friend the Secretary of State, in debates reflecting hon. Members' concern on the subject.
I want to reassure the House that, through the European Community, we are actively pursuing dumping cases if we think that they need to be investigated or that action needs to be taken. Hon. Members may like to know that the EC already has anti-dumping remedies in force against polyester fibre from the United States, Mexico, Romania, Taiwan, Turkey and Yugoslavia; polyester yarn from the United States, Korea, Mexico, Taiwan and Turkey; and acrylic fibres from Mexico. Complaints about 1274 alleged dumping of cotton yarn from Brazil, Egypt, India, Thailand and Turkey are currently under investigation as well as of spun polyester yarn from Korea, Taiwan, Indonesia, India, and China, and of terry towelling from Turkey.
The Government will forward any representations or allegations about dumping to the European authorities. We are keen to see genuine cases of dumping pursued with great care, and with all due speed, so that remedies can be imposed and domestic industry is given the reassurances that it needs.
The hon. Member for Gateshead, East (Ms. Quin) and my hon. Friend the Member for Nuneaton also asked what the Government are doing to assist and promote British trade and investment in eastern Europe. My hon. Friend may know that I and my colleagues have been active in recent months taking parties of business men to the countries of eastern and central Europe. We have been keen to take them there to introduce them to Ministers, senior officials and those who will be running state enterprises and privatised industries there, and so that the business men may identify the opportunities. Also, we have been keen to allow our business men to work with us to explain to the Governments of those newly democratic countries what steps they should take to facilitate trade with the West, and to create a more attractive climate for investment by western companies and countries. We have been pleased with the responses of British industry, and of the countries that we visited, which were courteous hosts and keen to learn from us about the legal and financial framework that is needed to make them attractive to western investors. We shall continue to pursue that vigorously.
Our policy is buttressed by the know-how funds that have been established in several of those countries. It can make money available for those wishing to undertake feasibility studies or other work in eastern European countries governed by the funds.
With other member state colleagues we have contributed to a large know-how fund at EC level, which is also open to approaches from British businesses. In addition to our work as tour guides to British industry, the Department and Foreign Office posts in those countries are making information available so that British business men will know more about the changes under way in the law codes and the investment climate, and about whom they should meet and what opportunities are available.
I take issue with the hon. Member for Gateshead, East on one point. She said that none of the eastern European countries would have a significant amount of hard currency with which to purchase western exports. Let us consider the special case of East Germany. Shortly, it will have a large pool of deutschmarks as a result of the conversion of the ostmark to the deutschmark. On a recent trip to Berlin, I observed a considerable inclination on the part of East German companies—especially those in the retail sector—to use some of that spending power to buy western goods. They expect a surge in demand for western-style products immediately after monetary union.
East German consumers are likely to say that they want western-branded goods and western-style packaging and marketing, and, initially, many of those goods will come from the West. I encourage any British business man who thinks that he may have goods to sell that would be an important element in the restocking and re-merchandising of East German stores to make an approach as soon as 1275 possible, as that task is already well advanced in the run-up to monetary union. Major promotions and sales are under way in shops in East Berlin in our attempt to remove the traditional COMECON goods and make way for new stocks—many of which, as I have said, will come from the west.
The hon. Member for Wallsend (Mr. Garrett) made a good speech: I was delighted to hear him speak up for British industry and manufacturing—as he always does—and acknowledge that British industry has done a good job in recent years. I take it as a compliment that he thinks that I am too old to be a yuppie. On a busier day, most of the yuppies in the House can now be seen on the Opposition Benches, as they busily carry out the instructions of Mr. Mandelson to put on collars and ties and ape the yuppie style of dressing.
The hon. Member for Wallsend remined the House that it was a Conservative Government who introduced the Select Committee system, and a Labour Government who damaged parliamentary scrutiny. I am proud that this Government have nothing to hide, and are happy to see their policies and actions probed—rightly—by Select Committees, with regularity and often with some incisiveness.
Many other hon. Members—including the Labour party's Front-Bench spokesman, the hon. Member for Gateshead, East—have drawn attention to the Export Credits Guarantee Department. I shall ensure that the views expressed in this debate are passed on to my right hon. Friend the Secretary of State, and also to my noble Friend the Minister for Trade, who will be examining the way in which the new system can be implemented. My noble Friend will also be carrying out consultations in the way that the hon. Member for Gateshead, East described. Of course, we wish British industry to have access to a good service, in this as in all other areas where the Department of Trade and Industry supports and helps industry and commerce, as business men go about their task of exporting and representing Britain abroad.
There have always been controls on the amount of credit risk in any given country; that will not be a new feature of the portfolio management system, which is a mechanical device—an aid to analysis—to settle realistic premiums in relation to the risk of the country concerned. That may mean that some go down and others up. The Ministers making those decisions will examine the balance of the package and the results of the risk assessment when deciding how to implement the ideas for change.
The hon. Member for Wallsend asked about missions. I agree that missions are an important part of commercial life. They can be valuable to the business men who take part, and sometimes lead to good follow-up business and orders as a result of the contacts made. There has been no intention to circumscribe or cut them down. For example, last year the number of inward missions increased to 84 from the previous year's 69. The number of outward missions—145—was similar to the 152 of the previous year; money had been offered for 160, but only 145 were organised because of various problems with some of the countries originally targeted.
§ Mr. Grylls
I am sorry slightly to run over what my hon. Friend said earlier, by returning to the credits available to industry in exports. My hon. Friend rightly said that there have always been restrictions per country. Will he assure the House that, when he considers future policy, he will 1276 bear it in mind that Britain has always been very successful in many major exporting projects and competes in a very tough world, and will he make sure that our large firms that compete for orders, together with the small firms that they bring in their wake and that are also extremely important, are not disadvantaged compared with firms in other countries such as Japan and West Germany, which compete in the same markets? Although we certainly do not want unnecessary subsidies, if there is to be any scaling down of subsidies, will my hon. Friend ensure that it occurs only in parallel with what is done in other countries so that we are not disadvantaged? I am sure that he will be the first to accept that it is extremely important that we maintain our share of the export market.
§ Mr. Redwood
I shall make sure that my hon. Friend's comments are drawn to the attention of the Ministers who will be thinking through the next stage of policy for the ECGD. I am grateful to him for his contribution to the debate.
My hon. Friend the Member for Erith and Crayford (Mr. Evennett) told us a fascinating story about the structural changes in industry and commerce under way in his constituency in recent years. Many other hon. Members could tell similar stories of the changes that have taken place in their parts of the country. There has been a fantastic process of regeneration, renewal and change, most obviously in towns such as Corby, where the steel industry closed in 1980 with devastating consequences for employment and for the state of that town. Ten years later, Corby is a flourishing, enterprising town with a whole host of new jobs. More than 11,000 new jobs have been created since the collapse of the steel business there. Many of those jobs have better pay and conditions than the ones that they replaced. Of course, we all recognise that the transition was unpleasant and painful, but we should pay tribute to the towns that have managed to recover so well.
§ Mr. Ted Garrett
Does the Minister agree that it would have been more painful had Corby not had a reservoir of skilled people from the closure of the steelworks and the ancillary industries that supported the steel industry?
§ Mr. Redwood
I agree that the skills of the local work force were an important part of Corby's renewal, as was the creation of the enterprise zone, the work of all levels of Government to promote Corby and, most importantly, the work of a large number of inward investors in the private sector who backed Corby, gave it a chance and turned it into one of the most enterprising towns in the country in a short time.
The hon. Member for Berwick-upon-Tweed (Mr. Beith), who unfortunately has had to leave the Chamber, alleged that my right hon. Friend the Secretary of State was trying to get rid of his entire Department into the private sector, but that is simply not true. My right hon. Friend the Secretary of State and his ministerial team believe that there are important roles for the Department to fulfil and we are making sure that those roles are properly fulfilled and have the right resources to back them up. We do not intend to wind up the entire Department in the way that the hon. Gentleman alleged.
I agree with the hon. Member for Berwick-upon-Tweed that there needs to be transparency in other countries on subsidy and aid patterns. That is one of the intentions behind the Commission's monitoring of state aids throughout the European Community. The Government 1277 are giving strong backing to the European Commission, particularly to the Competition Commissioner, to make sure that the right data are collected about state aids across the Community and that follow-up action is taken by the Commission to deal with those flagrant abuses of the state aid regime that can distort competition and therefore distort the markets unfairly in the creation of the single market, which we are backing strongly.
I also agree with the hon. Gentleman about the importance of the GATT round, which has to be concluded by the end of the year. The GATT round is attempting to take on entirely new sectors and to include in its remit agriculture and services as well as making further progress in the traditional area of industrial goods. It is vital to the trading prosperity of the entire world that the GATT round makes good progress in the closing months of this year, and the Government are fully committed to doing what they can with their European partners to achieve a good resolution in that GATT round, as we believe that that would make an important contribution to further world growth in the 1990s.
My hon. Friend the Member for Eastbourne (Mr. Gow) paid a tribute to me. I promise the House that it was unsolicited and that no bribe or anything improper passed between us. When he enticed me into making a frivolous intervention, I was referring to the categorisation of orchestra exports; I do not wish to be associated with comments that he made about right hon. and hon. Friends, all of whom I much value.
My hon. Friend the Member for Eastbourne asked me a serious and important question about what would happen if the Government no longer collected statistics. It would be difficult, if not impossible, to conduct economic policy if we had no idea what was happening to the economy. My hon. Friend, the Chancellor of the Exchequer and I share concerns about the accuracy and reliability of some of the statistics, which is why the Government have set out a plan for improving the reliability of data, especially on invisible trade, to which my hon. Friend the Member for Eastbourne drew attention when quoting from the Central Statistical Office's press release on the previous month's balance of payments. He asked what the reporting line is for the CSO, which is through the Treasury and not the Department of Trade and Industry.
Several points were made by the hon. Member for Gateshead, East. She cited certain industries that are in trouble and drew attention to machine tools, shipbuilding and textiles, but there are many success stories within those industries. I hope to show later how an industrial revival is taking place and that it is spreading ever more widely across industrial sectors and across the country as the most difficult regions participate and become the leaders in the next phase of growth, as some are showing signs of doing.
The hon. Lady's question about our single market campaign and backing information for Europe spans more than one Department, but I promise her that the single market campaign run by the Department of Trade and Industry will continue until the completion of the single market in 1992. It goes through phases, and we are beyond the phase in which the main purpose was to explain to businesses that 1992 will happen. That was a successful 1278 campaign, and almost every business is aware of it. The campaign is now working, through the regional offices, seminars and other mechanisms, to advise and to work with companies on the coming of the single market.
§ Mr. Cash
Does my hon. Friend agree that the information aspect of the campaign is immensely important? I pay tribute to him for the work that he has done on it since he took up his responsibilities. Does he agree that it is essential to convey the message not only that, through marketing and distribution techniques, companies can export their goods to other countries, including eastern Europe, but that they must produce goods of the highest quality with the highest productivity? It does not matter what companies are trying to sell if their products are not good enough, because they will not be sold.
§ Mr. Redwood
My hon. Friend is right. Quality and value for money are essential ingredients to penetrate the wider marketplace. That lies behind the enterprise initiative that the Department of Trade and Industry is fathering, to help smaller and medium-sized companies in particular, which have not always had the resources, to build quality into their systems, and to attack new markets abroad—where there may be language problems, or familiarity problems about how those countries do business in fairly distinct national markets in western Europe—and to help them with production processes and other matters that may be important to achieve the right quality.
Manufacturing can benefit from BS 5750 and all the other standards, which provide a discipline to companies that wish to build quality into their systems. Often, companies that approach that somewhat hesitantly and say, "Oh dear, this will be an added cost and difficulty", discover that it not only lifts the quality and lowers the reject rate of goods but cuts costs by imposing better disciplines on stocks and by cutting the reject rates so that fewer raw materials and inputs are wasted. As my hon. Friend says, that is an important part of building success in the single market.
The hon. Member for Gateshead, East was right to say that campaigns must be monitored. We are all well aware of that and, in one way or another, we monitor what happens as a result of the campaigns. The hon. Lady said that Labour would like to see active and decentralised Department of Trade and Industry offices. There are already regional offices and they have an important role to play in the enterprise initiative and in the current phase of the single market campaign.
The business rate point is an own goal, for two reasons. It offers to business men and women the guarantee that, once the transition is over, the business rate will not go up by more than inflation. It protects them from Labour councils that were doing untold damage to industry and commerce in Labour-controlled areas by producing high increases in the rates in a way that was impossible to predict from year to year, making business planning difficult. It rebounds against the Labour party, because the revaluations and recalculations that form part of the introduction of the unified business rate produce substantial benefits for businesses in the north, especially industrial businesses, which Labour Members represent. 1279 For years, the Labour party has said that we should tackle that problem. This positive measure will help industry in those towns and cities.
Recently, an important financial commentator in the City, one of the big investment houses, said that the 1990s would see Britain becoming the Hong Kong of Europe. The commentator explained clearly that that meant that Britain would become a centre of manufacturing excellence, based on the productivity and skills of our work force. That conclusion has been reached not just by analysts. It has been shown by the inward investment from Nissan, Toyota and Honda. Those companies have said it in ways that speak louder than words. They have brought major manufacturing plants to this country to expand and revitalise the British motor industry. Not just car makers are involved—Bosch, Fujitsu and Motorola are among many major overseas investors that are coming to this country because they recognise that Britain in the 1990s will be an exciting manufacturing centre. It is part of the western European market but has many natural advantages because of its industrial work force and the climate created by the new labour relations legislation of the 1980s and the Government's successful economic policies.
Overall, industrial investment has surged by more than 50 per cent., in volume terms since 1982. That is a sign that overseas investors and investors that are already here are backing Britain and British industry in the most tangible way possible, by spending their money here and by expanding and modernising their factories.
My hon. Friend the Member for Erith and Crayford pointed out that it was not just a case of manufacturing success and that Britain, too, is an important service provider. I agree with him on that point and I agree that it is invidious to make distinctions between the contribution of manufacturing and the contribution that service providers make to the wealth and creativity of this country. Both are equally important. To achieve a successful modern economy, we must understand the mutual dependence of the service sector and industry and the way in which both need to develop in particular directions.
The British service sector, especially financial services, made an important contribution to British economic growth and success in the 1980s. The international stock exchange, for example, accounts for 65 per cent. of all the international trade in equities that takes place outside the country of origin of the quoted company. That is two thirds in London alone—more than in New York and Tokyo combined. It is a towering achievement. London is the world's foremost foreign exchange centre. It is not second to Tokyo or third behind Tokyo and New York. It is the biggest and is an important marketplace. London contains within the confines of the City and the over-spill of the City further east and west a vast concentration of insurance companies, investment houses and other service providers and support businesses. In 1989 there was a huge surplus of £8.9 billion for the balance of payments on the financial services that we exported over and above the services that we imported. In addition, thanks to the massive overseas investment in recent years, £4.6 billion of net income came from abroad across the services account.
Not so long ago, Labour Members cheered up and took delight in possible misery because they thought that the invisible account had dipped into deficit. We started getting a series of questions as to why the account was in 1280 deficit and how terrible that was. The figures have been reworked and we discover that the invisible account has never been in deficit. I hope that the Opposition will share my pleasure that there was no deficit. The enormous contribution made by our service sector should not go without remark.
§ Mr. Redwood
I am, of course, concerned to see that Britain trades well. I agree that it is important that invisibles should trade well. That has been happening and will continue to happen. In the first quarter of this year, there was a surplus of over £700 million on the invisible account despite the fact that we are still making heavy payments to the European Community. Those Government transfers are deducted from the money made by our private sector service providers.
§ Mr. Alan Williams (Swansea, West)
Does the Minister realise that those figures explain why we are so alarmed? A surplus of £700 million is derisory. In the past invisibles held the balance and we always had an adequate surplus to outweigh the deficit on visibles. This is not happening any more. The £700 million goes nowhere towards meeting the £16 billion deficit on manufacturing alone.
§ Mr. Redwood
The right hon. Gentleman has foreseen my next subject. If we are to address the balance of payments deficit, we must first ask how big the deficit is. I am grateful to my hon. Friend the Member for Eastbourne for pointing out that the figures are often inaccurate and often revised.
Last year, there was a £15 billion black hole in the figures. I do not know whether the right hon. Member for Swansea, West (Mr. Williams) wants to contest that point. The statisticians themselves admit that they cannot pin down £15 billion, which is almost the whole deficit. Why might that have been?
There are two serious explanations, which we should examine. One possibility is that we were exporting more services and that the invisible account was far stronger than the figures revealed. An element of that black hole is accounted for by just that point. Why do I believe that? Work has gone on in the United States, which has had a similar problem with a large apparent deficit and a large black hole in the figures. The Americans have carried out additional sampling and issued questionnaires in their service sector and have discovered that the old samples and the old questionnaires were not capturing the growth, the dynamism and the changes within the service sector itself. There was a great understatement of service exports in the United States, which is now being detected through new questionnaires.
An element of that could be seen in the British figures and I welcome the decisive move by my right hon. Friend the Chancellor of the Exchequer to improve the quality of the statistics. We shall discover that some service exports are underrecorded.
§ Mr. Cash
My hon. Friend will know that 60 per cent. of our trade deficit is with the European Community. Difficulties may be presented in invisibles when services that we could provide are prevented from entering 1281 Germany, for example. That creates the sort of imbalance that enables the trade of Germany to have a surplus with the whole of the rest of the European Community of 70 per cent. Will my hon. Friend comment on that?
§ Mr. Redwood
I am grateful to my hon. Friend the Member for Stafford (Mr. Cash), who is quite right that on the stated figures the deficit with Germany is large and that it is an important component of the total. One of the complaints that we have had in recent meetings of the Internal Market Council, which I attend on behalf of the Government, is that, having opened up our market in manufactured goods and welcomed many German imports of good quality machinery and consumer goods we expect reciprocity in the marketplace for services. We think that our investment and insurance companies have something to offer the German public, which they might like to buy if the market were less constrained by regulation.
My hon. Friend will be pleased to know that, at the IMC this Wednesday, we made some progress because the other member states agreed with us—not with the Germans—that we had to make progress in liberalising the insurance market. We agreed a motor services directive, which does not go nearly as far as we should have liked, but which will be an important signal to the Commission and to the Community as a whole that most member states want progress in insurance, and we expect a much more dramatic move from the Commission when it brings forward its two passport directives for insurance, which will mean that British insurance companies meeting our regulatory requirements will be able to trade in Germany or France with little additional regulatory hassle.
That is what we intend to deliver for Britain, and we are now building support in the Community. My hon. Friend is quite right to say that the market must be fair and we must be able to export goods and services that we are good at providing as well as importing goods and services that our partners are good at providing.
The second possible explanation of the £15,000 million black hole in the figures is that there has been a major underrecording of inward capital flows. I immediately agree that that is a likely explanation for a substantial part of the black hole. What that means is that we have been a much more impressive magnet for inward investment than even the Government have been led to believe by the figures that we have had before us so far. That would be all at one with the picture of a country growing far faster in recent years than its trend rate of growth in the 1960s and the 1970s and with the analysis of many outside commentators and business men, who say that Britain is now a foremost manufacturing and investment centre in Europe and an attractive place to which to bring business.
The growth of manufacturing and the success of the economy have produced some problems, with rapid growth in demand in the past couple of years sucking in a large number of imports. Our problem has not been a shortage of exports or an inability on the part of our exporters to do well. Several of my hon. Friends have already pointed out the great export success that we were recording in the 1980s. It was because domestic demand had grown so quickly and because imports were being sucked in rapidly that the Chancellor of the Exchequer introduced measures to curb domestic demand, and those 1282 measures will begin to have an impact on the import of consumer goods. Figures published today show that the import of cars, for example, is now declining, which is exactly what one would expect after years of rapid growth based on a major expansion of real incomes.
The successes of the 1980s are quite astonishing: national income up by more than a quarter; exports of manufactures up by more than half in volume terms; real take-home pay up by about a third; manufacturing productivity up by more than half; and car output up by a third. Those are remarkable achievements. Those are the successes that we could never achieve in the 1970s with the interventionist policies that then ruled the roost, and the successes that we were told could never be achieved in the 1980s with our policies. Yet they are there for all to see. Our performance has been one of the most impressive in the western world in all those respects. At the same time, in 1979, Britain had a mere £12,000 million-worth of net overseas assets, whereas today it has £110,000 million-worth of net overseas assets. That represents a ninefold expansion of our national savings abroad, routed through the financial markets in which we are so successful.
How has all that come about? My hon. Friend the Member for Nuneaton drew attention to the way in which the aerospace industry, Rolls-Royce in particular in his constituency and ICI in some of its high-tech areas, have been successful in developing new ideas and exploiting market opportunities. I agree with my hon. Friend.
§ Mr. Redwood
As the hon. Member for Wallsend says, the pharmaceutical industry has also been successful. I also pay tribute to it because it is a prime example of a British industrial success story. Several major companies based in the United Kingdom export to the world and have a research and development record second to none.
I have three examples, in addition to the examples refered to by my hon. Friend the Member for Erith and Crayford and my hon. Friend the Member for Nuneaton of wht can happen in particular industries. My first example is the printing industry.
The British printing industry did not have a particularly good reputation when the Conservative Government took office. Parts of it were definitely dogged by labour relations problems and other difficulties with investment and developing for the future. However, there was a tremendous transformation across the board in the printing industry in the latter part of the 1980s. An important part of that was permitted by the legislation that we passed to allow more sensible relations between managers and men and to allow individual trade union members rights to decide and influence the shape of their union's policy and to choose the people who led them. With the efforts of management, that has resulted in a massive expansion in technology and productivity.
In the latter years of the 1980s, the printing industry was cutting its unit labour costs and by so doing was becoming more competitive and doing well in world markets. That industry has continued to have a balance of trade surplus which is a useful contribution to this country's economy at a time when, in several industrial areas, because of the massive expansion in demand, imports have grown even more rapidly than exports.
My second example relates directly to the Government's care and concern for manufacturing as 1283 revealed in our pursuit of privatisation policies. The transformation in the British steel industry in all respects is staggering. In 1978–79, it took 14.3 man hours to make a tonne of steel. Today it takes 4.7. The productivity increase has been over 200 per cent., and that increase is now protecting jobs in the steel industry where, in the 1970s, there were massive job losses because there was no productivity improvement and the industry constantly lost market share. Those improvements have led directly to a surge in profitability which enables investment in new plants and technology to be undertaken.
In 1979–80 total losses including write-offs of capital amounted to almost £1,800 million. In 1988–89 British Steel's profits were £733 million. It is important to understand the central role of profits in providing the cash and the incentives for investment. That has made British Steel once again a force to be reckoned with in world steel markets. Building on that success should sustain that industry in future.
§ Ms. Quin
The Minister's words will sound hollow to the 800 or so workers at Ravenscraig who are worried about their jobs and to the 1,000 workers at the Brymbo mill in north Wales. Will the Minister respond to my point about the prospects for new technological investment in Ravenscraig, which should be a centre for the new technology that is being tried in the United States and Italy?
§ Mr. Redwood
The essential point is that jobs would not be safe in the steel industry if the industry was not productive, competitive and making money. Of course, the profits give British Steel several options as to where it invests and how to build for the future. However, it will have a future only if it has that money. I cannot give the hon. Lady any guidance on the individual investment plans of British Steel. That is a matter for the board of British Steel. I am sure that the hon. Lady can elucidate that information from the board in the normal way.
The third industry is the motor industry, where it is a different story again. The first story was of a competitive industry in the private sector that responded to new legislation. The second story was of a nationalised industry that was transformed by privatisation. The motor industry had been reasonably successful in the private sector, but it had a poor performing public sector component in the 1970s. It is now being expanded and developed at a rapid pace because there has been a big influx of new technology, new ideas, new money and new factories led by Japanese investors.
What did the Opposition say about that? A few years ago, the Leader of the Opposition roundly condemned what he called the colonisation of British industry. He was trying to make it as unattractive as possible for people to come here, and he was scornful of industry. Some of his right hon. and hon. Friends cast aspersions when investors came here, saying that they would be only screwdriver factories and were not worth having. At least they were better than the hon. Member for Coventry, South-East (Mr. Nellist), who called for the nationalisation of Vauxhall, Ford and Peugeot. What an incentive that is to a new inward investor trying to bring private investment into this country.
§ Mr. Alan Williams
Hon. Members have heard a degree of preposterousness that I cannot allow to go by. The Department must have briefed the Minister. Is he aware 1284 that inward investment did not start in 1979? In that Department I provided the grants to bring Ford to Bridgend, and conducted the negotiations to bring Hitachi and Toshiba to this country. We had an active policy on inward investment. We also had a bipartisan attitude towards it. I can remember when the first Minister of State in the Department of Trade and Industry, Adam Butler, talked to a group of Japanese would-be investors. He undid the bipartisan approach by saying how much worse it would be if ever there were a Labour Government. There were Japanese looking for long-term investment having to accept the fact that there are different Governments. We have always played on a bipartisan basis. I am astonished that the hon. Gentleman is taking that line. I assume that he has a brief.
§ Mr. Redwood
I have done my homework and I have seen the quotes that substantiate what I have been saying. I am delighted that the right hon. Gentleman agrees about the value of inward investment. I am sure that some Opposition Members would wish to associate themselves with that process. I pay tribute to those who have done so.
There has also been an unwelcome strand of criticism from some Opposition Members, and aspersions, such as the "screwdriver" aspersion, have been cast. That is unhelpful. The Japanese are bringing in design and technology, and they are seeking to employ highly talented British people to manage and design within their plants and factories. I hope that everyone will accept that that is the way to go forward, in exactly the same way as many Labour and Conservative Members welcomed inward investment from America several decades ago, which was an important part of the growth of the motor industry in those days.
The question of the magic ingredients for export and industrial success is often raised. Sometimes people urge us to follow the Japanese more closely. There are many things about the way in which the Japanese go about business that we can emulate or learn from. They have been particularly active in introducing just-in-time systems. They have the idea that design should proceed by incremental advances and steps, improving products bit by bit in their approach to quality and to labour relations in many of their factories. We can learn from all that.
The Opposition also said that we should learn from the amount of money that the Ministry of International Trade and Industry uses to subsidise and encourage Japanese industry. I do not know whether the Opposition have done their homework. If we were to follow exactly what Japan does by way of subsidy and grant to industry proportionate to our GNP, we would have to reduce our current level of subsidy and grant. That may not be what people have in mind.
Others say that the Japanese are still too protective by tariff. If we are to reach the point at which EC tariffs are in line with Japanese tariffs, on average the EC tariffs will have to come down, not the Japanese. However, we hope that the whole world will make great progress on tariffs, multilaterally through GATT. It is to that that we intend to turn our mind, and to dedicate our efforts in the closing months of this year.
The message from successful exporting industries, whether in this country or among our leading competitors overseas, is that the first prerequisite of export success is a lively domestic market. The Japanese vehicle and electronics industry, the German chemical industry, the 1285 United States computer industry and our British pharmaceutical industry have all established world leadership in many products and export successfully. They all have a similar formula. They are based on several competitive major companies in the country concerned and they are often—this is especially true of Japan—based on a substructure of dozens, hundreds or even thousands of highly competitive small and medium-sized enterprises that work as suppliers, advisers and service providers to those industries.
Those are the conditions that we have been re-creating in this country and which account for the staggering growth in productivity, exports, and general economic performance in the 1980s.
As we look to the 1990s, our trade performance and our general manufacturing performance will be more and more determined by the disciplines of the European Community. I agree with my hon. Friends who say that British industry and commerce have always looked far more widely than western Europe, and must continue to do so. Of course, there are huge opportunities in the English-speaking world, where the markets are even more approachable because of the common language, and there are also many market opportunities in the developing world, where we have strong links and are often highly respected.
However, the policy framework is based on EC policies of more competition, no recourse to devaluation as a policy instrument, a prohibition on most types of state aid and subsidy, and growing strength in policing the state aids regime. In that climate, it will be even more important than in the 1980s for industry and commerce to turn their minds to constant improvements in quality, value added, and in manufacturing productivity. Only with such a concentration can we hope to survive and prosper in these competitive markets of western Europe and beyond, in the post-GATT world of the early 1990s.
It is a disappointing spectacle to look across the Chamber, asking oneself what advice the Opposition are giving us on policy. Their policies are all either rehashed policies from the 1970s or retread policies from the 1960s. They say that we need a new DTI, with greater stature, but what they are recommending looks very like the Department of Economic Affairs that they tried in the 1960s and which failed so miserably.
Do you remember that, Madam Deputy Speaker? They were left holding a national plan that was a pure figment of their imagination. There were endless rows with the Treasury, which would never surrender the power of the purse—and nor should it, because it is the Treasury that must provide the economic and financial discipline to run the economy and our economic policy. However, that is what the Labour party is recommending again for the DTI, and, if it were adopted, it would fail again.
The Opposition also advocate a national investment bank. It is a rerun of the old National Enterprise Board, which lost money and destroyed jobs. That is exactly what a revamped national investment bank would do, but on a far grander scale.
The Opposition also propose a national minimum wage and a training levy. That means a massive increase in industry's costs, which would make it far more difficult for us to be competitive in the competitive world of the 1990s.
1286 Labour's income tax policy would soak anybody on more than £20,000 a year. That policy is targeted to hit the middle managers, the designers and the marketers—those who go out and sell our exports, the very people who are essential to building the strength of this country's industry and its success in world trading.
There is also the Opposition's idea about more and more subsidy. I must advise the Labour party that that would be illegal under the treaty of Rome. The whole point of the Commission's attack on state aids is to ensure that such a policy is not pursued in any member state.
Finally, there is the incredible budget—the £20 billion to £50 billion of spending pledges that are to be financed by no tax increases on the bulk of the population. That one simply will not wash. There is no way that we could follow a policy like that, because it suspends the laws of arithmetic.
The way forward is through GATT, and through co-operation within Europe to get a fair and level playing field for all our businesses. It is through building on the great successes of British industry in the 1980s, increasing productivity, stressing quality, going forward with new products and being proud again to be British in the markets of the world. That is why there has been such a restoration of fortunes in the 1980s and that is why the 1990s will be even better.
§ Mr. Michael Grylls (Surrey, North-West)
This debate, initiated so well by my hon. Friend the Member for Nuneaton (Mr. Stevens), is one of the most important for the House, particularly because of the debate about the development of the 1992 market and economic and monetary developments in Europe. Against such a background, it could not be more important for us to have a debate about the general trade position.
There has been a certain amount of discussion about the balance of payments. The hon. Member for Gateshead, East (Ms. Quin) spoke about the deficit in our balance of trade. However, as the EEC market develops, we may shortly be looking at it rather differently. We shall be concerned more with the figures on trade between the EEC, perhaps an expanded one, and the rest of the world, than with those on made between us and the EEC, which will be irrelevant. We shall come to see trade within the EEC rather as the United States sees trade between California and Florida. That will be a great change. My hon. Friend the Member for Eastbourne (Mr. Gow), who has had to leave, made several points about statistics, and they are well known to be inaccurate. A lot of time and taxpayers' money is spent on getting these figures, but I doubt whether they are accurate.
It is easy for Members of Parliament to slip into the habit of criticising imports and saying that they are bad and only exports are good. One cannot export if one does not import. Trade has to be balanced. Perhaps it is just a matter of justified pride that we like to see our goods and firms doing well in the overseas markets, and British products on the shelves of shops overseas. Many of us like to buy British goods in our high streets, and that is proper. In the free trade world that both sides of the House want to develop from the current international negotiations, some of those factors will be less important.
I shall spend a few minutes on one aspect of export trade. Not many years ago, the House would have been 1287 unlikely to debate export-import business and trade. It was assumed that most firms were able to undertake their own exports. If they were successful, they were successful, and if they were not, they were not. They went round the world doing their business and getting their orders and needed no help—certainly not from the House of Commons. They might have needed some help from the export department, the ECGD and other such organisations, and from foreign missions, but by and large, it was not necessary for Parliament to take an active part.
That is probably still true today of most large companies, which are able to find their export markets and to till the ground in important markets without any great help or encouragement from the Government. It is perhaps those firms which are not so successful—the rather more flabby firms—which sit back and say, "The Government should help us and encourage us more." I am not sure that it is really necessary for the Government to help them.
I intervened in my hon. Friend the Minister's speech to mention help for some construction firms. All our construction firms must compete on the international market. I shall leave aside the large firms which, by and large, can look after themselves. I wish to concentrate on small and medium-sized businesses.
About 70 per cent. of all businesses in Britain do no export trade whatever. Therefore, there is a vast pool of businesses, many—probably most—of them small and medium-sized which have not yet put their toe in the water of exporting. In that area the Government have a role to play. They must encourage, help and lead such businesses forward until they take the plunge into exporting throughout the world. Of course, Government expenditure on encouraging exports must be cost-effective. We cannot spend large sums of taxpayers's money unnecessarily. Of the 1,400 new businesses created—it is nice to see the hon. Member for Ashfield (Mr. Haynes) on the Labour Front Bench agree with me and say what good news that is. He always welcomes good news for Britain. The good news is that there is a net gain each week of 1,400 new firms, taking into account firms which go out of business for one reason or another.
§ Mr. Frank Haynes (Ashfield)
I make it clear to the hon. Gentleman that I am not agreeing with what he says. I am chastising the Minister for his speech not so long ago.
§ Mr. Grylls
I hope that the hon. Gentleman will think again about any chastisement. I should be the first to leap to the defence of my hon. Friend the Minister. He gave an intelligent and broad-ranging speech. The hon. Gentleman has not been in the Chamber for the entire morning so perhaps he has not yet picked up the flavour of the debate. He should think again about chastising my hon. Friend and I hope that he will not chastise me.
As I said, 1,400 new firms are created each week. There is a vast pool of businesses which should be able to export. In all seriousness I say to my hon. Friend the Minister that we should encourage our export departments, overseas posts and commercial offices to pay greater attention to those businesses. They should encourage the pool of non-exporters to put their toe in the water and take advantage of the huge opportunities.
One of the greatest myths or popular misconceptions put about is that a firm can export only if it is a global business. It is a silly, facile phrase written in articles and so 1288 on, but no one understands what it means. There may be a need for global businesses in some areas but it is mainly the smaller firms which will get up and go.
I participated in a trade delegation to Tokyo about 18 months ago. It included delegates from about 16 small to medium-sized firms. None of them have ever been to Japan before, and many had done virtually no exporting. The firms employed on average 50 or 60 people. When we arrived in Tokyo I asked if I could help in any way. The business men looked at me as though I was crazy because as soon as they arrived they simply got stuck in. To them Tokyo was like any other market. They had done their research. Appointments had been made for them extremely efficiently by the commercial department of the British embassy in Tokyo. Although Tokyo was a strange city different from anywhere else that they had been, they got cracking. By the end of the visit many of them said that they believed that they would do business.
Some months later I invited those business men to the House for a drink to find out how they had done. Without exception they were doing business as a result of the trade delegation. That impresses me because they were not moaning and groaning about trade barriers and problems in Japan—which is a difficult and demanding export market because the country is very rich. They started exporting.
Firms in the delegation that I mentioned had their fares subsidised and, to that extent, were given a leg-up. Therefore, we can help, not necessarily by subsidies, but by encouraging people and giving them information. In this age of information technology surely we should be able to persuade even quite small firms to have a VDU so that information on potential contracts could be flashed round the country simultaneously. It would take ages to do that by letter and that would be nonsense today. I hope that we can get information to the hundreds of thousands of British firms which could be exporting if they were given more encouragement.
Also it would be useful to encourage small firms to set up subsidiaries overseas. Sometimes it is assumed that only large firms can afford overseas subsidiaries, and that has generally been the case in the past. However, I can offer an example in France where an organisation was set up a few years ago called APIME—an association of small and medium-sized businesses—to help establish overseas subsidiaries, among other things. When Renault was setting up a plant in Morocco, its management asked APIME to help it get suppliers of nuts and bolts in France to set up subsidiaries in Morocco. The company thought that Moroccan businesses should supply it, so that all the parts did not have to come from France, but Morocco had no indigenous suppliers of motor car parts. A number of smaller firms which supplied Renault in France set up subsidiaries to supply its plant in Morocco, and those companies started to do very well. That is a lesson from which we can learn. We must encourage small and medium-sized firms to set up subsidiaries overseas. Assistance need not necessarily come from the Government. Large British firms which are successful overseas could help, as did Renault.
If a small or medium-sized firm has half a dozen subsidiaries round the world, it will become a stronger firm generally, and will be more able to compete effectively in the international market.
The Minister has given a good account of what the Government have done to encourage firms to sell overseas. 1289 In future, can we concentrate that much more on small and medium-sized firms, which have an increasing part to play in the expansion of Britain's export trade?
§ Mr. Alan Williams (Swansea, West)
In the past the hon. Member for Surrey, North-West (Mr. Grylls) and I have agreed on a few issues, but we have disagreed on many more. However, I agree when he says that in general we welcome investment overseas, but we must bear it in mind that that is not necessarily always beneficial. Investment overseas is beneficial only if profits are repatriated. Investment overseas requires a capital outflow and a loss of exports, which will be produced in the local market abroad rather than being exported from Britain. Unless profits are repatriated there will be a net capital outflow, and a diminution of the balance of payments figures.
During his brief and welcome appearance at the Dispatch Box, my hon. Friend the Member for Ashfield (Mr. Haynes) mentioned the Minister's comments. However, he missed the real gem—the Minister's reference to the new business rate. He had, he said, discovered that businesses throughout the country welcomed it, because it had put an end to the drip of blood that they had endured under the old rating system. The Government have come to the rescue: they have slashed all the arteries. The Minister seems to believe that killing off businesses quickly is an act of kindness.
Earlier, the Minister referred to the need for meaningful and accurate statistics. My hon. Friend the Member for Ashfield would have enjoyed that, too. How, the Minister inquired of one of his colleagues, can policy be meaningful if those who developed that policy do not know the basis on which they are working? That, of course, is quite true; but, if it is true when applied to an analysis of trade and industry, it must also be true when applied to an analysis of unemployment and poverty. While working to improve the accuracy of statistics in the commercial sector, the Government have indulged in practices that have rendered those other, social statistics virtually meaningless.
The time of the debate is propitious, as yet another set of trade figures has been published today. The Minister seemed to find them encouraging. Certainly they are not as bad as the last lot, but the deficit is still running at more than £15 billion a year: that should not please any Minister.
The key to the balance of payments problem lies in manufacturing. According to the Minister's predecessor —now Minister of State, Foreign and Commonwealth Office—the trouble was that the Opposition were dewy-eyed about manufacturing, and did not understand the potential of invisibles. Given the factors to which the Minister attributed the poor trade in visibles, he will surely understand why we regard manufacturing as crucial to the country's long-term survival.
Whatever the Minister may say, the evidence of one simple set of figures cannot be ignored. When the Government came to office, the manufacturing trade surplus was £3 billion; now the deficit is £16 billion. That enormous transformation accounts for most of our present difficulties. But the problem is not just the reversal from surplus to deficit; it is the fact that it has happened 1290 in the high-technology sector. We have a £1.5 billion deficit in office and data processing equipment, telecommunications and sound equipment and electrical machinery, and a £7 billion deficit in road vehicles.
Not only did the Government destroy 20 per cent. of our manufacturing when they came to office; they completely failed to recognise the need to exploit the high-technology and high-value-added sectors.
§ Mr. Redwood
Is the right hon. Gentleman denying that, in volume terms, manufacturing exports increased by more than half over the 1980s? Does not he understand that, in a fast-growing economy with a large amount of demand, good export performance can co-exist with deficits in some sectors? The fact that people are buying even more than we are producing in this country is a sign of the strength of the economy.
§ Mr. Williams
With respect, when we are exporting anvils and importing Porsches, we are not getting a very good deal. That is why a manufacturing surplus of £3 billion has become a deficit of £16 billion. Does the Minister not understand the figures? They are quite simple and straightforward, and I have specified the sectors in which the deficits are occuring.
§ Mr. Stevens
Does not the right hon. Gentleman accept that the electronic and computer sectors, which involve fairly advanced technology, were already in deficit in 1979, although competition has been broadly maintained since then and the deficit has roughly kept pace with the expansion in the industry?
§ Mr. Williams
Inevitably, some tend to be in deficit and others tend to be in surplus, but if one looks across the spectrum, high-technology industries tend to be in deficit, and I shall explain the reasons for that. The hon. Gentleman referred to the screwdriver industry and that is relevant to my argument. We are into assembly and low-technology industries, but we are not into high-technology industries.
Just a fortnight ago I asked the Chancellor of the Exchequer what manufacturing investment would have been in Britain over the past decade had we sustained the average rate of growth that occurred in 1974–79—a period that he and his party condemn as a time of failure. The Chancellor's answer, which can be checked in Hansard, was that we would have invested £30 billion more in British industry had we maintained the growth rate of the 1970s. Those figures are almost meaningless, but if we put it another way, that is the equivalent of 50 Sunderland Nissans. That success was cast aside because, as soon as the Government took office, far from recognising the importance of manufacturing, they cut manufacturing investment by 30 per cent. and spent the next 10 years getting back to where they started.
I put it to the Chancellor that perhaps it is unfair to expect the Government to maintain the high standards of manufacturing investment that were reached under a Labour Government; what would have occurred had they managed to match the growth rate of the French in the 1980s? The Chancellor told me that over a period of eight years we would have had £16 billion more in manufacturing investment had we matched the performance of the French. I asked him what would have happened had we matched the performance of the Germans and he replied that again there would have been 1291 £16 billion more in manufacturing investment had we matched the rate of increase in manufacturing investment attained by the Germans. So when we compare the Government's performance with that of the Germans, the French or the previous Labour Government, it is clear that the black hole to which the Minister should be referring is the black hole into which our manufacturing investment has disappeared. It is no coincidence that we have a £1 billion deficit with France and a £10 billion deficit with Germany, in manufactures. It reflects the decade of neglect of manufacturing investment.
If we take not the £30 billion difference between the Government's growth rate in manufacturing and that of the previous Labour Government, but the £16 billion figure, we should consider what that could have meant in terms of investment, had we been pumping that money into putting new equipment and the latest technology into our manufacturing industry.
§ Mr. Tony Favell (Stockport)
Is not it true that the great problem in the early 1980s was the resistance of the trade unions to change? Any proposed change was met with arguments about demarcation. Only when the power of the trade unions was broken were people prepared to invest in Britain.
§ Mr. Williams
That is not true either. As I said earlier, people were investing in Britain on a massive scale. In 1979, the year we left office, we had the highest level of manufacturing investment ever achieved in the United Kingdom. It increased by 14 per cent. in the previous year and a similar figure in the year before that. There were many inward investment projects, to which I referred in an intervention. I was fortunate enough to be involved in some of them. Hoffman-la Roche made an investment of about £140 million at the time. With respect to the hon. Gentleman, I shall not give him a longer reply. I aim to sit down and enable him to speak so I shall move on to my next point.
The complete turn-round on the manufacturing account reflects the Government's failure to invest in industry to enable it to compete internationally. Superimposed on that, because of the deficit, we are locked in a financial trap, which works against the interests of industry and makes us keep the hot money here to finance it. Therefore, interest rates and sterling must be high, which makes it more difficult for exporters but easier for importers. That helps to explain the figures for the past two months.
The reality, whether the Government recognise it or not, is that we are back on the edge of a new stop-go and the pre-oil position, Sadly, the only hope that the Minister offered was the possibility that in his long-range telescope he may have found a black hole in the statistics.
§ Mr. William Cash (Stafford)
The debate has turned largely on exports. Much criticism has been made of export statistics, but for us to understand what is happening in Europe—the global village that we now inhabit—we must have comparative performance statistics.
We must tackle Britain's relationship with the rest of Europe, because 60 per cent. of our trade deficit in 1989 was with the European Community. We must carefully consider that important figure. Almost one third of our 1292 trade deficit was with West Germany and one fifth was with Japan. The lesson from that is that we cannot allow the European Community to develop simply on the basis of a system dominated by one country's powerful economy. That is not in the interests of the United Kingdom, it certainly is not in the interests of France, which explains much about French policy on the European Community since 1957 and, in particular, it is not in the interests of the European Community as a whole or West Germany. Given the movements in eastern and central Europe, the problem will grow when West Germany merges with the German Democratic Republic.
Last week, I attended a conference in Hungary at which many people were considering the opportunities for investment in eastern Europe. It emerged—I found this extremely disheartening—that the eastern European countries export only 4 per cent. of their gross national product instead of the 60 per cent. necessary to provide an effective framework for trading relationships.
German trade has a tremendous influence on eastern European countries. Austria makes 30 per cent. of the foreign investment in Hungary, and the bulk of the balance is German investment. The political implications go far beyond statistics and to the heart of the future Europe. If the eastern European countries become economic dependencies of the German and French centre of gravity, and if the management, shareholders and profits of those German companies are attracted back to that centre of gravity by the use of cheap labour and subsidies in eastern Europe, there will be a difficult political problem.
What will happen if there is a hard-core federal system —my right hon. Friend the Prime Minister and the Cabinet have made it abundantly clear that we will not allow this to happen—within which the single market operates and which is dominated by one or two countries or a cluster of alliances round the economic power base of Germany and/or France? The political power of other countries in eastern and central Europe will be subordinated to the increasing centre of gravity in Germany. The resulting dependency will create division, jealousy and differences of a kind that the European Community is designed to avoid. For that reason, we must ensure that we keep to the central theme of a wider Europe, rather than a hard-core federal system. The economic and political consequences of that are far too dangerous.
The Uruguay GATT round has been going on for some time, but in fits and starts. Now that the European Community cannot be seen as a system that will enable free trade to operate exclusively within its boundaries—there is a global problem as well—it is becoming increasingly necessary to ensure that GATT works. I hope that we can encourage my hon. Friend the Under-Secretary of State to ensure that every effort is made to free up trade throughout the world and, in particular, to use the GATT mechanisms to achieve that objective.
In the G7 countries, two general criteria have been developed to improve the world economic environment. World savings are the first. Goods of the necessary quality cannot be created without investing in machinery and technology. World savings must be generated and money must be made available for research and development to underpin efforts to improve export performance. We must have monetary and tax policies designed to achieve that.
1293 It is interesting that, for all the criticism from the Opposition about the economy, they forget that we have a substantial trade deficit, partly because—as I said in an intervention—we cannot easily get into other markets. Their regulations, policies, company law structures and organisation of industrial and banking systems are designed to prevent us from operating on the level playing field that is necessary for the single market to work effectively. It is absurd for people to talk about the necessity of having a single market if we do not have a genuine competitive framework within which to operate. That in turn must dovetail with GATT at the international level, so savings are needed for investment underpinning. Monetary and tax policies are needed to free the economy and to allow individual enterprises to operate effectively. It is also necessary to ensure that we do not have improper restrictive regulations in other countries. That is what the single market is all about.
The developing countries are also important. I was glad that the Minister referred to the developing countries in this context. I have recently returned from Uganda. The resources of a continent such as Africa are phenomenal. We must make the most use of mutual and reciprocal trade not only in the Community, but in the wider Europe to which I referred, so that we do not create the political difficulties that will occur if we fail to create the wider Europe that is needed, including EFTA. We must also operate globally. In this context we must have regard to other countries, for example in Africa and in South America, which is seldom mentioned.
We are living in a single world. It is true that we need to localise democracy and to ensure that it works effectively on the ground. However, we must operate with the kind of vision on trade that Adam Smith and the East India Company considered as a matter of course in the 18th, 17th and 16th centuries when Raleigh, Drake and other well-known figures lived.
The world is our oyster, but we must produce the goods to enable us to sell in it, and we must have the commitment to working together with our European partners to make it a success.
§ 2.7 pm
§ Mr. Kenneth Hind (Lancashire, West)
I thank my hon. Friend the Member for Nuneaton (Mr. Stevens) for the opportunity to raise this important matter which is fundamental to the future of the British economy. Britain depends on the export of manufactured goods. We have always had either to export or to die. That must be our watchword for the future.
At the risk of being parochial, I will address my remarks to the regional perspective of export trade from the north-west of England. Recently Peat, Marwick, McLintock carried out a survey of 100 chief executives of major companies in the north-west of England. It established a reassuring picture, but one that raises several matters about which there should be concern. The survey showed that the economic prospects for the region were still seen as very good, despite high interest rates and the balance of trade. The feeling that the economic prospects are good is based on a mixture of real success—because we have been highly successful—and somewhat less tangible optimism.
1294 The north-west of England has embraced the opportunity that has been offered by increased inward investment. Many new industries have grown up and they, too, have exported. Over the past three years, we have seen a massive reduction in our unemployment problems. Very few people now talk about the north-south divide because the truth is that many parts of the north-west compare admirably with Godalming and other parts of Surrey and with other more prosperous parts of the south-east.
Interestingly, the survey suggests that 90 per cent. of business decision-makers in the region perceive good prospects for their companies. But they say—and this is a cause of anxiety—that key opportunities are seen for increasing sales probably in the United Kingdom market. I take this opportunity to say to businesses in the north-west that they must be much more outgoing in their approach to Europewide and worldwide trade than is suggested in the survey.
One worrying revelation is that 40 per cent.—an increase on last year—see the single European market having little or no effect on their businesses. Our competitors in Europe will not just stay at home and service their home markets. They will be looking to penetrate our markets and compete against British industry in the sectors that it dominates at present. British industries must worry not just about securing their market share against their British competitors; they must be concerned about those overseas who will come in and try to take their markets. Industry must realise that it is essential to consider exports.
The 100 chief executives identified two matters, both of which have been mentioned in the debate, as essential if exports are to improve. The first is the need to enhance customer service and attain total quality standards. The executives regard that as a key issue and it is something that we must develop and encourage industry to achieve. I believe that the failure of British exporters in the past has been attributable to lack of quality control and of adequate after-care services. That has resulted in our losing export trade.
The second factor, which is also vital, embraces the question of languages referred to by the hon. Member for Berwick-upon-Tweed (Mr. Beith), who is no longer with us. The training of key staff—whether in production or in the knowledge of the countries where a company wishes to sell a product or have an export drive—is most important and can be achieved if companies tackle their training needs on an in-house basis. British industry is beginning to take that point on board. I was interested to note the other day figures which show that British industry is now spending £18 billion annually on training its staff. That figure excludes the £3 billion that the Government are spending, through the various training programmes, to train the unemployed and make them available for work. If we in the north-west are to be fit to help our export drive, we must bear those matters in mind.
Let me do a bit of special pleading about the things that are vital if the north-west is to develop further. I welcome British Rail's announcement yesterday—we must have improved rail links—that it will spend £350 million on upgrading the north-west lines to London. That means that we shall have faster freight rail links, which we will inevitably need when the tunnel is opened. I shall not bore the House by saying too much about that but, in the long term, the logic of building a fast link from London to the tunnel, to be connected to the various high-speed links 1295 from London to the provinces, is inescapable. I hope that the private sector and British Rail will get together to build that essential infrastructure link.
For the north-west, the King's Cross terminal is part of that and will help our export trade. We need fast freight links from the north-west to the channel tunnel, which will be one of our major export outlets to the Community. People in Merseyside and Greater Manchester want to be able to put their freight for their customers in Europe on to trains in marshalling yards in the north-west and have that freight taken on to Amsterdam, Berlin, Paris and Milan—the markets that are necessary to our businesses.
If such a link does not exist for freight, the north-west will be peripheral. I accept that industry and commerce in the north-west must acknowledge the advantages offered by 1992 and the single market. As a consequence of the survey to which I have referred, I hope that much of north-west industry will say to itself, "Perhaps we are being a little too relaxed about 1992. We need to look positively at exports and take advantage of the opportunities in future."
I want briefly to consider several matters that have concerned me and companies in the north-west. I declare an interest because I have economic ties with one of the companies to which I will refer. The Soviet Union offers a major opportunity to expand overseas trade. Over the past few years the old communist regimes in the eastern bloc have been broken up. The advent of enterprise economies in those countries has opened a fantastic opportunity for British industry, and British companies have an opportunity to export there.
Although the Soviet Union is not one of the world's great economic powers, when we consider its mineral resources, population and geographical size, within the next 30 years it must become one of the world's major industrial powers. Britain has an opportunity to take advantage of that market.
I urge the Government to think carefully about upgrading the Export Credits Guarantee Department facilities for the Soviet Union. A company in Manchester—Doctus plc—has negotiated a £2.6 billion deal with the Soviet Union. Timber will be imported into Europe and sold worldwide and in return the Soviet Union, through a joint venture fund, will buy technological equipment, computers and necessary manufacturing hardward from the west. Those goods can predominantly be British provided that we set up the appropriate arrangements.
The present provision of £240 million of ECGD funds is admirable, but it will not be enough in the long term. The Department of Trade and Industry has an opportunity to help British companies, perhaps through the kind of arrangement that was made—dare I say it?—with Iraq through the ECGD. Under that arrangement a consortium of British banks set up a sum of money which was guaranteed for three months by ECGD. If the national economic bank of the Soviet Union were to be involved in the long term in a similar arrangement, British trade would go to the Soviet Union which might not otherwise have gone there.
I hope that we will see a greater awareness of the need for Britain to export. That is vital, and I commend once more my hon. Friend the Member for Nuneaton for giving us the opportunity to discuss this subject.
§ Mr. Tony Favell (Stockport)
I congratulate my hon. Friend the Member for Nuneaton (Mr. Stevens) on choosing this subject. It was a stroke of genius.
As my hon. Friend the Minister said, during the 1980s there was a remarkable transformation in this country. During the 1980s, at long last, this country realised that the world did not owe it a living and that, to make progress, it simply had to roll up its sleeves and get on with the job. That was due to the inspiration of my right hon. Friend the Prime Minister. When firms were closing down and people were losing their jobs, she said, "No amount of protection sill save you or us from the decision that has to be made. We must sell the right goods at the right price, at the right quality, and at the right time. It is as simple as that." That message is now accepted throughout this country. People did not want to hear it at the time. One of my right hon. Friend's greatest achievements was to get that message over to the people.
Our growth in GDP is the highest of any European country, apart from Spain, which is more or less on a par with us. During the 1980s, total investment in this country was higher than in any other European country. The profitability of our manufacturing and industrial companies has gone up four times. During the latter part of the 1970s, when the Labour Government were in power, profit was a dirty word. Profiteering was a bad thing. People were condemned for making profits. But profits bring investment into the country, encouraging our people to invest here rather than abroad, and produce good things for the people who work in our companies.
Rewards have been spread. The take-home pay of the average man with two children went up by one third during the 1980s—a remarkable achievement. The main complaint in my constituency and in the north of England is that the roads are chock-a-block—they are full of cars. My constituency is on a flight path to Manchester airport. Many of the aeroplanes bring people home from Majorca, Greece, the Canary Islands or further afield, and a very good thing, too.
§ Mr. Favell
There is a trade gap. As my right hon. Friend the Chancellor of the Exchequer has said on many occasions, the reason for the trade gap is simply that demand has outstripped supply. That is admitted by the Government. We are spending more as a nation than we ever dreamed would be available to us. People are a lot better off. The working man has one third more to spend than he did 10 years ago. Unfortunately, our supply side has not grown as fast as the availability of money to buy goods. It is as simple as that.
We must look at the trend—it is good news. During the three months to April exports were 11 per cent. higher than they were in the same three months last year—that is, in volume terms—whereas imports were only 3 per cent. higher. During 1989 exports increased by 11.5 per cent. —the highest annual growth for 16 years. When the Opposition were saying that the country was on its knees, we were exporting more and at a faster rate than at any time for 16 years. That is very good news.
1297 Of course, it is taking time to turn the country round. When the Government came to power in 1979, we were a joke. We were the sick man of Europe. Whenever one went abroad, people said, "What has happened to your once great country? What are you going to do about it?" The country did something about it—it elected a Conservative Government. We have had a Conservative Government throughout the 1980s and there has been the most extraordinary transformation. Nowhere is that more evident than in my constituency of Stockport in the north-west. Simon Engineering has a small head office in my constituency, but it employs 16,000 people worldwide, carrying British technological expertise and engineering into every country, including China, Russia, Africa and America.
British Aerospace is another large employer in Stockport. For the very first time a civil airliner—the brand new advanced turbo prop aircraft—is being produced there and is selling all over the world. The Opposition say that we are not technologically advanced, but what about our aerospace industry? We are selling aeroplanes all over the world. British Aerospace is acknowledged as one of the finest aircraft manufacturers anywhere.
About 90 per cent. of the bowler hats throughout the world are made by Christy in Stockport. It is said that we in Stockport can tell when the Japanese Government are about to change because we get an order for top hats.
None of that has come about because of grants or subsidies—there are no grants in Stockport. It has happened simply because people have rolled up their sleeves and worked together as a team. The chamber of commerce has worked with the schools, the college and the work force. We have encouraged new businesses through the Stockport Business Venture. We are a northern industrial town—like Liverpool, we are on the Mersey and we often hear about the problems of Liverpool—but we have 4 per cent. unemployment. The problem now is to find more skilled people for Stockport. It is a wonderful town—and it is wonderful because it listened to the Prime Minister's message in 1979 when she said, "The world does not owe you a living. Roll up your sleeves, get on with the 1298 job and prosperity will come to you." Prosperity has come to us and, if that message is understood, it will spread throughout the country.
§ Mr. Stevens
With the leave of the House, Madam Deputy Speaker, I should like to reply to the debate. First, I thank my hon. Friend the Minister for giving his time today to answer my debate. In addition to thanking all my right hon. and hon. Friends who have been present, I thank Opposition Members for their attendance, especially the hon. Member for Gateshead, East (Ms. Quin) who has been present throughout the debate and who made some interesting points.
The hon. Lady referred to Russia and to our export performance there. One article in a newspaper only this week was headed:Slow payers spoil fun of Kiev fair".That is a problem in Russia at the moment, which we hope is temporary. However, there was also the good news that John Brown, the engineering division of Trafalgar House, has decided to take on a large project in Russia. There was also news about ICI and Rank Xerox, which showed that although there may be reservations, some major British companies are keen to move into Russia.
Inward investment has made a great difference in the past few years. Last year 304 companies came to this country and I am pleased that 86 of them came to the west midlands. They join companies such as Peugeot, which is located just beyond my constituency, and which has made a considerable difference to the engineering industry in the Coventry area. The success of Jaguar has almost renewed it as a car manufacturing area.
Hon. Members have spoken of our trade balances. For example, we have a bad trade balance with Japan, with a deficit of £1.4 billion last year. However, encouragingly, that was 9 per cent., less than the previous year. Even in that, there is improvement. Every hon. Member who has spoken has stressed the importance of exports for our economy and our people. Success in exports depends on our ability right across the board to train people and develop our economy.
§ It being half-past Two o'clock, the debate stood adjourned.