§ 4.31 p.m.
§ Debate resumed.
The Earl of Gowrie
My Lords, this seems to be an Anglo-Irish day in the House of Lords, with the noble Earl, Lord Shannon, the noble Lord, Lord Shackleton, and now myself. And I see that my noble friend Lord Bessborough has his name down to speak. Sometimes I think that this particular little pocket of black feet, or pied noir, in our society has sometimes become ignored, so I am glad that we are all trying to fly the flag today.
Also I congratulate the noble Earl, Lord Shannon, and the noble Lord, Lord Shackleton, for having attracted three maiden speakers: the noble Lord, Lord Benson, whom we know, among many things, for his sterling work on the Royal Commission on the Legal Services, my noble friend Lord McAlpine of Moffat, who has kept up standards in the great construction industry in this country and, of course, my noble friend Lord Matthews. I congratulate him on keeping up quality and standards in the press, as I think nearly everybody who appears in photographs in his great newspaper still has all his clothes on.
I am rather nervous of the noble Lord, Lord Matthews. Once I referred to him by name in a debate in your Lordships' House at a time when he was being rather fiercely critical of my own department. My reward for this was that the noble Lord was ennobled the next day. And a week later, in a leading article, I was mentioned somewhat unfavourably. But I suppose that is an ordinary, occupational risk which politicians take. In any case, I think junior Ministers 310 are grateful for publicity of whatever kind, or wherever it comes from.
We are to debate a twin subject: the issues of competitiveness and the relations between competitiveness and standards of quality control for our products so that they will be sold more competitively in world markets. In our debate on unemployment last week, I stressed that our policies as a Government had two overriding aims. The first aim is to continue to bring down domestically induced inflation, by which I mean that proportion of price rises which is caused by devaluation of the currency at home. The second and hardly separable aim is to improve the competitive position of our industry: to bring it into line, so to speak, with the very successful and very competitive other bits of our economy—agriculture, retailing, financial services, journalism, for instance—as well as into line with the many sectors of industry which are themselves still successful. That is why I very much welcome this debate and the continuity it provides with that earlier theme, as both of these Motions underline the importance that we have to attach to improving our competitiveness.
I think nobody can doubt, today of all days, the Government's commitment to the control of domestically induced inflation. I do not want to go over that ground now or to repeat the commitments that were made here last week and which the Budget Statement has of course confirmed, but I do want to make it very clear to the House that it is our analysis that greater competitiveness depends on greater investment in industry and that greater investment in industry cannot take place in an unsuitable financial climate, or an unstable financial climate.
In a notable maiden speech, I think about a year and a half ago, the noble Lord, Lord Lever of Manchester, reminded us that there was no shortage of capital in this economy. We have the corporate social capital of the great insurance, building and pension funds as well as of other financial savings institutions. There is no shortage of capital in the economy. But, the noble Lord, Lord Lever, reminded us, there is a shortage of profitable ventures to attract the money. I qualify this a little, admittedly in the different context of today's debate. There is a shortage of profitable ventures within the manufacturing sectors of our economy because these are what have lost competitiveness overall. Some manufacturing industries are still highly competitive and I rejoiced to hear some of these itemised by the noble Lord, Lord Shannon, in his opening speech. I may mention others in just a moment. But we have lost manufacturing competitiveness overall.
Nor is this shortage of profitable manufacturing ventures the only trouble. There is the problem of rival attractions for investment. To put this bluntly, you do not in an era of inflation, of currency instability, put your money very readily into industry. The first call on money is the search for investments that will beat inflation. So you get the rush into consumer durables—"Let's buy them quickly before they go up"—into property or into the savings or pensions funds which invest principally in inflation beating assets like property. That too, unfortunately, is not the only rival attraction for investment. Inflation, followed by the inevitable counter-inflation policies, puts a great 311 strain on Government budgets. As you lose industrial competitiveness, people lose jobs, the Government lose revenue and, as if this were not bad enough, the Government have to pay out more in benefits. As you struggle to regain industrial competitiveness, people have to be bought out of uncompetitive, over-manned industries. In a humane and civilised society it is of course only right that people should be bought out, not thrown on the scrap heap, and that there should be training and re-training provisions for them as well as the benefits to which they have become entitled.
But that is all hugely expensive. So Governments have to borrow money, and this borrowing pre-empts the resources which might otherwise find their way into long term investment. If my right honourable friend the Chancellor had yesterday decided to increase rather than reduce his own overdraft, so to speak, as many people of all shades of opinion would have liked him to do, the difference would have had to be funded. And that funding is the rival attraction which I am talking about. That becomes the profitable avenue for investment: lending money to the Government and compelling the Government to keep interest rates high as they are compelled to offer people a decent return.
We were criticised in the debate last week for failing to distinguish between spending and borrowing for current requirements and spending and borrowing for the future—for, let us say, a big programme of investment-led, not consumer-led, reflation. Speaking as an employment Minister, I should dearly like to see an exciting programme of improvements to the infrastructure: the roads, railways or airports. I should love the surge in demand, not least in the private sector, and the jobs that would thereby be created. But that money would still have to be borrowed or taxed. We have had to increase taxes against all our wishes.
If we increase our borowing also, the pain which the consumer suffers now, which can be short term, will be felt by industry as a whole, whether it is public or private industry and because the lead times are longer for industry the pain will be felt by industry for a long time and will result in an even greater loss of competitiveness, confidence and jobs. I hope therefore that your Lordships will see that the tough decisions on public borrowing are altogether inseparable from our continued drive towards greater competitiveness and the pressures that we are having to continue to bring to bear, at least for a while longer, on this industrial society.
My Lords, you would expect me, as an employment Minister, to say something about the role of wages in the drama of our competitive decline, and these again were touched on by the noble Earl, Lord Shannon. I am thinking in particular of the decline in our labour-intensive manufactured goods that people at home and abroad will buy at prices they can afford. I believe that the main factor in our declining competitiveness has been our input costs. There is evidence that in this country our input costs are a great deal higher than elsewhere. One breakdown of the figures illustrating our loss of competitiveness suggests that 60 per cent. of the fall since 1978—and that fall is about 50 per cent. itself—and about half the fall since the beginning of 1979—and that fall is about 40 per cent. itself—were due to labour costs rising 312 faster in the United Kingdom than in the competitor countries.
I am quite prepared to say that we are all to blame: we can blame weak management or restrictive labour practices or labour monopolies, or the upward pressure of on and off incomes policies, or Governments inflating their way out of trouble for this melancholy decline. However, our analysis is that this area of dealing with wages is an area which can only be tackled effectively for any length of time at company level and based on a realistic assessment of what is happening in an economy and what is happening in a given company. The impetus behind many of the very high settlements negotiated in recent years was theoretically an attempt to keep up with inflation. In fact these merely contributed to inflation. What is more, until recently, average earnings were rising faster than inflation and without corresponding increases in productivity—or, in the context of this debate, I could say without corresponding increases in competitiveness. That of course was all damaging to our international competitiveness.
Again, the figures spell it out. Between 1975 and 1980 unit labour costs rose here by 85 per cent.; in France the figure was 43 per cent.; in the United States of America, 33 per cent.; in Germany, 11 per cent., and in Japan they actually fell by 2 per cent. My Lords, do you wonder that the Chancellor has been obliged to take back from consumers some of the real gains which they have made but which our productivity and our competitive position unfortunately do not yet allow us?
I am glad to say, after these rather gloomy figures, that the discipline provided by the recession and reinforced by the Government's tight money squeeze has resulted in a substantial moderating of wage settlements in recent months, and that is, of course, very welcome. But this praiseworthy restraint will have been wasted if there is a wage explosion when the economy recovers. Unit labour costs represent an area where we can make real strides towards closing the gap with our major competitors if we can only make the most of the opportunity when the upturn comes, but, if wages once more outstrip productivity gains by another wide margin in the next round, this country will slide even further away from international competitiveness and the consequences of that—not least for employment—will be very grave. Do you wonder, my Lords, at the scepticism which makes us believe that the reflation which our critics are calling for would once more be swallowed up in renewed wage pressures and renewed inflation? The fruit of the gains we have made is what has to fortify the investment and the renewal that we need.
The noble Earl, Lord Shannon, mentioned high technology and the rate at which we adapt to the speed at which technology is changing. I think it is commonplace that Britain is passing through a transition from one kind of industrial society to another. Many of the stresses and strains—which we are, I think, as a matter of social fact, hearing remarkably well—are in my view due less to policy differences between different political groups than to rites of a passage that we can no longer afford not to undertake. We are moving from a cheap-food, low-wage, high-manned and low-technology industrial society to a dear-food, 313 high-wage, lower-manned and higher-technology society. We are making this move under the impetus of great competitive pressures in areas where we used to be strong, like manufacturing.
We are under pressure, too, from parts of the world which used to be weaker and poorer than ourselves. Because we are a trading nation our standard of living depends on adjusting to this competition and taking it on—not running away from it—and we have to move from here to there. "Here" is an industrial landscape, an important part of the whole economy, which is besieged by three enemies: world recession, structural change and our tight money squeeze. "There" is not Utopia—to which I think only fools aspire—but an economy in much better balance with the mix of jobs, skills, opportunities and regional possibilities.
Without any question I believe that the most advanced society today—and again it has been mentioned several times in this debate—in purely industrial terms is Japan. Japanese industry has adapted to dear energy and technical change with considerable success and without social trauma. Not in the same way, perhaps, but in some way, we have to do the same, and that is why I welcome the inward investment which Japan is undertaking in this country and the industrial habits that we are learning from them. This, together with the fight against inflation, is why we, as a Government, are keeping up the disciplines and the pressure to adapt on our national allies in industry, and of course part of that adaptation—and, unfortunately, a very expensive part—is the shedding of surplus labour, which is essential to the successful future of manufacturing industry and to the levels of employment in those other bits of the economy which depend on a successful manufacturing side.
My Lords, I shall close with a reference to standards and to quality, and I shall deal in a little more detail, if I may, with the points put to me by the noble Lord, Lord Shackleton, if given leave to wind up. I, too, should like to pay tribute to the Warner Report and to Sir Fred Warner. British industry over many years has won and held an enviable reputation in world markets for the quality of its manufactured goods. Our best firms still have a reputation for quality that is second to none. I am thinking of such sectors as defence equipment and arms, information technology, offshore equipment, aerospace—and I understand that there is very good news from America in respect of Rolls-Royce today—chemical products, luxury vehicles and luxury manufactured goods generally, whether they are cloths, high fidelity equipment or manufactured foods. We are rightly proud of all these achievements and other noble Lords could contribute their own lists.
However, since the war there have been signs that part of our fall in the world market share has been associated with a decrease in overall competitiveness due not to the wage and inflationary elements that I have been speaking about but to non-price factors. Overseas firms which combine market research designs with a strong awareness of their customers' needs on quality and delivery have been capturing an increasing share of the markets, so of course I agree that more systematic attention to quality is needed in future and I welcome the stress laid by the noble Earl, Lord Shannon, on good design. Greater sophistication of users' requirements and increased discrimination by 314 purchasers is already increasing the competition for some of our at present most advanced designs and products. During the next decade further industrialisation in low-cost countries will surely heighten price competition for all developed countries. We also have to absorb the effect of North Sea oil on our currency. So even more than some of our chief competitors we have to adopt techniques for minimising production wastage and keeping our prices keen. The successful companies—and the noble Lord, Lord Shackleton, itemised some of these techniques—will be those who maintain and strengthen their performance in these respects.
My Lords, the Government's view therefore is that the key rôle in achieving quality in goods must be to rely on individual manufacturing firms. The successful manufacturer ensures that he knows what quality features in his product his customers want rather than expecting to find customers for what he produces. He has the means for ascertaining those requirements and a management system capable of ensuring that they are satisfied. While, of course, top management commitment is at the heart of this success, a co-operative approach within companies is, I think, essential. Each employee at every level has to be brought to see that product quality is in his own interests. This is another area where the Japanese have been very successful and where we must quite frankly adapt their success and imitate them. I can tell the House that in all our industrial training schemes now we are trying to build in attention to quality and quality control techniques.
I can also say that public sector purchasers are considering the practicability of quality-assessed supplies, and that Government departments, which are of course themselves huge purchasers in this economy, are examining the scope for greater co-ordinated use of product certification; and the noble Lord, Lord Shackleton, urged that upon us. We are, therefore, putting our own house in order, and we urge others in the economy to do so as well because although, under the pressures and disciplines of recession, counter-inflation policy and all the rest, we in this country are painfully beginning to make improvements and mend our ways, in spite of this we have to remember that others, our competitors, are themselves coming under similar pressures and are adapting what may be their own better habits themselves. So I welcome the chance this debate has given us all to remind ourselves that competitive pressures increase all the time, and that we have little time to lose.
§ 4.53 p.m.
§ Lord Gregson
My Lords, may I, too, thank the noble Earl for introducing the first subject of today's debate, and for doing so in such a wide-ranging speech based on his very considerable knowledge. I should also like to congratulate the noble Earl on the timing, considering the importance of the subject relative to the events in another place yesterday. May I also thank my noble friend Lord Shackleton for introducing the second subject of today's debate, which is such an important part of the overall question of Britain's competitiveness in world trade. Of course, one has to acknowledge Lord Shackleton's considerable contribution to the furthering of the generation of standards, 315 especially being the president of the British Standards Institute; and also, of course, that of the noble Baroness, the predecessor of Lord Shackleton.
I might say that considering the complex and detailed nature of the problems that were reported on by Sir Frederick Warner I think it would have been better if each subject had had a place of its own on your Lordships' agenda, although I promise that I do not intend to make two speeches this afternoon. I should also like to comment, as other speakers have done, on the fact that we have three maiden speeches this afternoon. I well remember that the day on which I was introducing the debate on the Finniston Report was also the day on which one of the noble Lords was introduced. I said then that since we now had a civil engineer in the House I looked forward very much to his maiden speech. It just so happens that, by coincidence, we have two noble Lords involved in civil engineering; and, of course, Lord Benson, who is so well known. So I look forward to the contributions which those noble Lords will make to our debate.
My Lords, there is no doubt that this country must maintain its position as a major trading nation in the world if we are to provide even a reasonable quality of life for ourselves and our children. With a population of over 50 million we cannot feed or clothe ourselves, or provide the raw materials that are essential to maintain our industry, from the resources within our country. It is, therefore, crucial that we restore our competitive position, which has been so drastically eroded in recent times. It is true that the accidental advantage of North Sea oil and gas is providing a source of wealth that is distorting the short-term economic scenario and providing a soporific effect, but this is a very dangerous situation which must not be allowed to lull us into a false sense of security since the resources of the North Sea are finite. We would be foolish indeed if we fell into this trap when we have the object lesson of the problems that have faced the Dutch available to us. There is also the curious statistic of the United Kingdom maintaining export levels despite the drastic fall in competitiveness in world markets, but here again we must beware of a false sense of security since within these figures there is a large component of export orders secured before our competitive position deteriorated, which are not being repeated and much of which is now being supplied at ridiculously low margins, or even at a loss.
In introducing the substantive subject of the debate the noble Earl referred to seven criteria, on which he then proceeded to comment. I think our forefathers did much to simplify those seven criteria, because from my university days I remember an old adage of the 19th century that said that our competitive position in industrial goods consisted of the right product at the right price at the right time—and I should like to expand on the problem we are debating this afternoon on the basis of those three criteria the old adage proposed, in reverse order.
First, the right time. Our great grandfathers were not referring to a need to meet delivery dates, although meeting delivery dates is of vital importance, as the noble Earl told us. No; what was meant by the right time was being in the market plce at the right time and knowing what the market wants, whether it be an 316 improved textile, a new fibre, a new alloy of steel or the most advanced micro-electronic equipment. It is probably better to do nothing at all and avoid wasting money and effort than to arrive in the market place too late. There is a desperate need for industry and government to improve commercial intelligence and market research, and for the Government to inspire industry to meet the needs of the market place with a greater sense of urgency. Nobody wins the jackpot for being left at the post.
Then, the right price. That must be the price that the market will pay for the right product at the right time, unless we were foolish enough to attempt to trade at a loss. Costs must be a critical feature. The two factors most affecting external trading are productivity and exchange rates. It is all too easy to criticise the low productivity in the United Kingdom as stemming from the Luddite minds of the workforce and the trade unions. The media revel in it. But careful investigation and case studies have proved that volume variance, that is the workload, and investment are by far the most dominant factors that affect productivity. It is ironic that, despite a massive reduction of employment in manufacturing industry of 1,100,000 in the lifetime of this Government, there, has resulted, according to the Financial Times, a reduction of individual productivity in the manufacturing industries of some 5 to 7 per cent. It is incredible.
It is essential, if productivity is to be improved, for there to be a dramatic increase in the volume of new orders and an even more dramatic increase in the rate of investment in advanced manufacturing processes and equipment and I can see little encouragement to industry in the Chancellor of the Exchequer's speech yesterday. I think that that is a considerable understatement. On the question of exchange rates, I hope that in the last few weeks sufficient has been said by the appeals of the CBI, engineering employers and other trade associations and by the TUC to bring home the urgent necessity of bringing down the ridiculous exchange rate which has brought industry to its knees. I do not believe that a reduction of interest rates, unless they are brought down well into single figures, will be sufficient in itself. The distortions that are applied from the petro-currency effect of the North Sea will have to be dealt with by intervention and controls, otherwise the dismal picture outlined by Forsythe and Kaye in their famous, or should I say infamous, paper delivered to the Institute of Fiscal Studies will come to pass. That is the demise of manufacturing industry in this country.
Finally, the right product. This is where I believe the real crisis exists. We are being left behind in the technological race, not only by the major nations in the western world, but we are now being threatened by the rapidly developing second and third tier countries. South Korea, Taiwan, and Singapore are all coming on to the market place with better products than we have developed. I have often spoken in your Lordships' House about the desperate need to nurture innovation for the future well-being of the United Kingdom and I hope it is now becoming apparent to the majority of people that we cannot sell an out-of-date, badly designed or unreliable product at almost any price and that is the crucial state where we are at 317 present lodged. There is an urgent and desperate need to foster innovation, industrial R and D and product development, and to organise better quality.
It is indeed ironic that when the need is greatest, industry is in the worst state in history to respond to the challenge, because innovation, industrial R and D and the organisation of quality cost money and, other than some very paltry sums from Government, that has to come from the profits generated by industry. It does not come from the profits made in the City of London. It has got to come from the profits made in the workshops and I assure your Lordships that if you talk at the present time to any industrialist his retort would be, "what profits?".
This Government, by pursuing the policies they have, have squeezed both the profitability and the liquidity of industry to such an extent that it is now completely unable to respond, and without massive Government intervention private industry cannot avoid the desperate spiral of absolute decline to which it is irrevocably committed. It is essential that the Government must pump prime innovation and product development throughout industry in both the private and public sectors, and can I make it clear that I am not merely referring to the so-called sun-rise industries, which is the latest jargon of those with an axe to grind. We must include the basic industries such as textiles and steel, which still have tremendous potential for investment and application of the new technologies. There is a thousand times more potential in a new steel making process, or a new textile manufacturing route than in a coin-in-the-slot game of "Star Wars".
Two essential elements of the right product factor of our competitive position in world trade have been dealt with in the Warner Report. Those are standards and specifications and the organisation of quality and we cannot divorce either from having the right product in the market place at the right time. The clear message that I get from the Warner Report on both these subjects is that of fragmentation and duplication and a lack of co-ordination and a lack of determination in Government to resolve the problems that exist.
Having said that, I should like to place on record my appreciation of the work of the British Standards Institution, despite the fact that it lacks sufficient support both from industry and from Government. Considering the tremendous influence that Government agencies and nationalised industries have on the purchase of plant and equipment in this country, one would have thought that it is not beyond the wit of man for the Government to co-ordinate their activities for the benefit of industry, particularly since the establishment of national and international standards and specifications are absolutely crucial to assist industry to maximise its export potential. I wonder whether the Minister, when replying to the debate, can tell us what has happened to the public sector standardisation team set up in 1970 and tell us what progress has been made in this vitally important area of Government activity, or is this one of the Quangos that disappeared from sight in the recent slaughter?
Turning now to the other question, I do not think that I need to stress to your Lordships the importance of quality in defending the United Kingdom position. 318 It is absolutely vital and yet, here again, we find fragmentation, disagreement and lack of drive to bring about a national movement that is critical in matching the competition from abroad. Despite the valient efforts of the British Standards Institute and people like Sir Frederick Warner, we have still not got a national quality assurance board and almost every Government agency and nationalised industry still has its separate quality assurance organisation and standards. I really do urge the Government to redress this situation with all urgency, and to say that industry would indeed be grateful to have this problem resolved. Our export performance would benefit and I am sure industry would be better placed to stem the ever-growing tide of imports.
One other aspect of standards and specifications, and indeed quality standards, is their over-zealous use by some countries to frustrate imports. A great deal has been said about this subject, particularly relating to France and Japan and I would say that if these tactics continue to be used as an obstacle to fair competition in world trade, then they must be dealt with formally and the problem brought to a quick resolution, even if this means retaliation by the application of sanctions, because it is a serious and insidious technique which must not be allowed to continue.
On a number of occasions I have listened to the Secretary of State for Industry lecturing on the havoc wrought on the economy of this country by the anti-business culture and the industrial devastation it has produced. This Government, of which the Secretary of State is a member, must go down in the history books as the outstanding manifestation of the anti-industry culture, and I can only hope that miracles still happen and that the Government will totally reverse their attitude in the second half of their term of office. Otherwise industry will be decimated, unemployment will continue to escalate and the very social fabric of this Kingdom will be threatened.
§ 5.9 p.m.
§ Baroness Seear
My Lords, it is ironic to be discussing the competitiveness of British industry the day after the Budget when there were so many lost opportunities to improve that competitiveness. There was no reduction in the national insurance surcharge; virtually nothing was done to change the level of the exchange rate of the pound which appears to be practically as high today as it was yesterday; and nothing has been done to increase the flow of money into the investment which industry so badly needs. Was it really impossible to extend the use of the indexed bond, which is being offered to the pension institutions, to a far wider public—what is so special about the age of 50?—in order to raise money which would have been used for the investment of industry? If the Government believe in their anti-inflation policy, they need offer a very small return on top of indexation, and the cost of the borrowing of that money would be very little in comparison with the benefits that would accrue from the investments which could then be made.
Last week we discussed the folly of economising on capital investment as well as economising on 319 revenue. We on these Benches sympathise with the need to economise on revenue spending, but we stand where we stood last week on the nonsense of failing to put more resources into industrial development. That is what competitiveness requires. So today, in this debate, all we can do is to look at those matters where we can take action, given that the investment is not likely to be there.
First and foremost in the limited area in which we still have some room to manoeuvre is better use of manpower resources. Here I know that the noble Earl, Lord Gowrie, has much sympathy with what we on these Benches would like to see done and is, I believe, in many ways attempting to do what he can to ensure that these things are done. Before dealing with the major area of better use of manpower resources, I should like to take up one point made by the noble Earl, Lord Shannon, when he referred to the very great importance of trade inside the EEC—where, after all, the bulk of our exports now go and where an increasing proportion ought in future to go—and to ask that far greater attention should be paid to the teaching of languages to people going into industry. It is absurd for us to attempt to sell throughout the EEC and, indeed, in South America, with a lack of equipment in resources for those who have to do the job of selling.
In the past British industry has rested far too much on its ability to have ideas, to design goods to manufacture, and has had a certain contempt for marketing, for it is a contempt for marketing if you do not send out salesmen and people in the marketing field who are able to speak in the language of the customers whom they are approaching, and to speak with a full knowledge of the language, with all its nuances and idiosyncrasies. Therefore, money should be devoted to crash courses and also to much more thorough training in languages. Those of us who work in any way with people from the EEC are constantly conscious of the way in which our competitors stream ahead because of their ability to talk in the language of the customers with whom they are dealing.
Secondly, if we believe in competitiveness and if we believe—and the Government declare that they do—in making better use of resources, perhaps I could anticipate a future debate and say that the Government cannot really believe that this will be achieved by cutting back on the work of the industrial training boards. They are already in the field to improve the effectiveness of manpower, and to improve it where it matters, which is inside the place of work. The evidence is quite clear that the most effective training is carried out inside the place of work, not in Government establishments outside the place of work. This is precisely the role of the industrial training boards, supplemented of course by their own training courses; basically, their role is to improve the level of training inside the place of work. I implore the Government to think again before they use the powers which they propose to take to cut back the work of the industrial training boards.
However, when it comes to better use of resources, it is of course true—and many people in industry will tell you this—that, although we need more investment, a very great deal more could be done with the investment 320 that we already have if more effective use was made of existing resources. One way—indeed, ultimately the only way—to do this is to have far better understanding and commitment within the place of work as to what is involved in running a successful business, to get the flexibility, the willingness to learn new techniques and the willingness to try new processes. If we had that we would be able, even now, to improve our competitiveness without the additional investment, which it does not look as though we shall get. Not long ago I was in a works which was in avery difficult position; they were saying that if only they could get greater flexibility in the workforce over the willingness to take on new jobs in exchange for the ones that they already had things would improve; but outmoded ideas as to what was appropriate for people to do restricted them in developing this flexibility which, in a company which was on the verge of going bankrupt, could have saved them.
If we are to do this, then it is bascially an issue of industrial relations, but it is also an issue of incentive. Here again I say to the noble Earl: why in yesterday's Budget was further encouragement not given to profit-sharing schemes, and to the whole effort that is needed to link the interests of the workforce more directly to the profitability of the undertaking? In this country we have to overcome a deep-seated belief that there is something suspicious about profit-making. Yet surely the best way to do this is for people to see that if there is a profit, not only are their jobs more secure—and perhaps some are beginning to sec this now, although the lesson has been learned in the most costly way possible—but that they will, indeed, benefit immediately by return in their own pockets.
A start was made on this in 1978 and in an earlier Budget the Government did something to improve encouragement to link people more closely to the fortunes of their undertakings. There is nothing whatever in yesterday's Budget to encourage greater co-operation inside the place of work. What has been done with the development of industrial democracy, or whatever term you like to use, for harnessing the interests and determination of the rank and file and of middle management to the fortunes of the concern? This Government, and I believe the noble Earl himself, believe in schemes of this kind. They did not believe in the compulsory scheme proposed by the Bullock Committee, and nor did we on these Benches. But that is no reason for doing nothing. I should like to ask the noble Earl when we are likely to hear more about this, because this is one of the fundamental ways in which to get the increased competitiveness that we seek and it is far more necessary to do it now, when the capital will not be forthcoming, when the Government have not given the encouragement to industry for which industry had hoped.
In addition to making better use of manpower, I believe that there is another fundamental change in attitudes in industry which would greatly help our competitiveness. I was going to say that it is a return, but perhaps it is not a return; perhaps it never existed. It is the development of the very simple idea—the truism—that the consumer is the person who matters. Today it is so often the case that producers, in both the public sector and the private sector, regard the consumer as an irritating cross which has to be borne, 321 whether the consumer is trying to get someone from the electricity board to read his meter (I know that this is a bit of a King Charles head of mine) at a time when he has repeatedly told them that he will be in and not at a time when he has repeatedly told them that he will be out, or whether it is a consumer trying to get a builder to repair broken panes or a flooded floor, with the builder not coming at the time he is asked or, when he has come, all too often the job having to be done a second time; and in my experience you cannot even get a bill out of him. What kind of approach to consumer service is that?
Let us remind everyone that there is no point in having production if there is no consumer; that the sole justification for having producers is that there are consumers. This is very old fashioned, but I believe that the revival of this idea would do more to revitalise British industry than anything else. When I talk about producers, I am talking about both management and the workforce. Indeed, I regret to say that sometimes what passes for good industrial relations is little more than collusion between the two sides of industry to do down the consumer.
There are other things which, if we were really thinking about the consumer, we would be doing. There is the attack on monopoly. For my part I am delighted that the Government are bringing competition into the nationalised industries. If they can discover any more Sir Frederick Lakers lurking around waiting to break down the monopolistic powers of the nationalised industries, then the sooner they bring them to the forefront and back them the better.
How about monopoly in the private sector? We do not seem to have heard much about reference to the Monopolies Commission. I would ask the noble Earl who is to reply: how long does it still take to get a finding from the Monopolies Commission? I think I am right in saying that the average time is about three years. We cannot wait this length of time for monopoly-busting in this country if we want to become competitive.
Then there is the question of quality—quality which, of course, ties up with price. That is, getting a better return for the money you pay in terms of good quality. Here the question of the work of the British Standards Institution, to which reference has already been made, comes in, and the report of Sir Frederick Warner. That work has gone on for a considerable length of time, but on far too small a scale and with far too little support.
As the noble Lord, Lord Shackleton, said, I had the great honour—the most unsuitable honour, I always thought—to be his predecessor as president of the British Standards Institution. In those days the qualification seemed to be that you were a Member of your Lordships' House. They have now had the wisdom to get a distinguished engineer to be their president, which on the whole does seem to be a better specification.
§ Lord Shackleton
My Lords, would the noble Baroness allow me to intervene? Tributes have been paid to us, and I feel that we really ought to pay tribute to the staff of the British Standards Institution and all the members of the committees. I am sure she is going to do that anyway, but I missed my chance.
§ Baroness Seear
My Lords, I am glad to be reminded because, to be quite frank, I was not. I am delighted to do so, and all the more delighted because I am glad to see that they are in the Gallery. The British Standards Institution not only operates to improve quality in manufacturing in this country, to reduce costs by the rationalisation of specifications based on standards; it also works in a most distinguished way in the international field. The experts of the British Standards Institution are playing their part—and a leading part it is—in standard-setting inside the EEC and throughout the international field. This means that the British level of standards, British quality measurements, are an influence upon developments far outside this country.
That being so, surely the institution needs the greatest possible support from the Government in honouring their undertakings to the representations made by the British Standards Institution. Here I refer to the development of metrication. The British Standards Institution developed standards of metrication years ago, and every understanding of the position was that metrication would become the policy of the Government. I know that the previous Government intended that metrication should be brought in, but pressure of public opinion, to which the Government bowed at that time, was such that this did not happen.
It is ridiculous that those standards were worked out years ago but that many manufacturers are still operating in both imperial and metric standards. How utterly wasteful this is, especially when something over 90 per cent. of the people to whom we sell overseas have in fact metrication as their own internal standard. Can the Government really not have the courage to dig out the whole issue of metrication again, which no doubt they hope has quietly gone away, and see that this particular waste does not continue any longer?
These are just a small number of things which the Government must do if they are to make good some of the damage caused by yesterday's inadequate Budget. At least they could give continuing support themselves to the work of the institution. It is understaffed; it has had to cut back its staff. Its staffing proportion compared to its German opposite number is quite inadequate. This is another area where Government spending would be a form of investment which would pay dividends over and over again. Why this capitalist Government do not understand the importance of investment passes my comprehension.
The Earl of Gowrie
My Lords, before the noble Baroness sits down, could I return her to my speech, to which I noticed she was kind enough to pay great attention? We are very keen on investment, but the problem in this economy is how you finance it.
§ 5.26 p.m.
§ Lord Benson
My Lords, this is the first occasion on which I have had the privilege of addressing this House. I should like to make some observations on the broad issues and then to speak on only a narrow sector of the subject. Much of our industry in this country is lean, taut and competitive, and it has been brought to that position in part by the present recession. A comparatively small increase in volume now, which must surely take place, will have a dramatic effect on unit costs.
323 But much of our industry is not in that state. It is not difficult to discern the impediments which prevent it from being competitive and profitable. Many of them have been imposed upon us from without, but many more are self-inflicted and self-imposed. High interest rates; an unstable exchange rate; low productivity; late deliveries; strikes; sloppy management; bad inspection; excessive wage demands; poor sales representation abroad; inadequate expenditure on research and development; and a totally inadequate capital investment programme.
Whenever I look at this formidable list I am reminded of my cousin Theodore. As a young medical student he had great difficulty in passing his examinations. Eventually an exasperated parent said: "Theodore, I cannot understand this. You have taken the examinations so many times you must know every question the examiners can ask you". He said, "Yes, father. I do know all the questions. It is the answers I don't know". That is the situation we are in. We know all the causes, but we seem incapable of learning and applying the answers. Time, my own incapacity, and the usage of this House prevent me from attempting so huge a canvas, but I should like to make one observation with conviction.
In this country we live by our industry, and unless all of us are prepared to work to a common purpose the outlook is glum. By all, I mean the Government of the day; the Opposition of the day; management at every level; the unions; the City, and individual citizens from the chairman of the board to the most recent apprentice; and a default by any one of them is damaging to our industrial effort, often permanently. Unless this common purpose dominates our decisions and our attitudes there is no hope whatsoever of recovering the markets we have lost at home and abroad. Nor yet of establishing new markets sufficient to sustain the population of these islands. Deep, ingrained prejudices, entrenched positions, often selfish in character, will I fear take years to eradicate. In so far as it is not already in post, we shall have to seek or to breed leadership of adequate stature.
I wish to speak on a single narrow sector of this huge subject—financial management. It has been my lot in life to examine many businesses, both large and small. Those who are not competitive, who have failed or have been unsuccessful and unprofitable, have one common fault running through them all—an inability to realise quickly enough the damaging effects of inflation and weak financial policies. The signs are unmistakable: an inadequate return on capital employed, excessive borrowing, inadequate retentions, dividends, when expressed in real terms, paid out of capital, wrong pricing policies, bad estimating, loose control of stock and debtors and an inability to plan forward, particularly cash flow, which results in an erratic investment programme.
Not all, but many of those would have been avoided if it had been realised early enough that accounts prepared on the historical cost convention, both annual and management accounts, are misleading and need to be adjusted to real terms and to reflect the effects of inflation. Particularly is this the case of fixed assets and stocks. Unhappily, there are many people in this country who have not yet been able to adjust them 324 selves to this modern form of accounting. They decry, deride and denigrate it, and that is a grievous impediment to industrial progress.
I have recently been reading the life of Lord Lister. His great discoveries of antiseptic surgery were met with opposition, ridicule and apathy. Indeed, when his opponents noticed that the incisions they made in their patients' bodies were beginning to suppurate, they expressed great satisfaction and referred to it by the disagreeable name of laudable pus. The analogy is complete. Until we in this country learn that management and annual accounts prepared under the historical cost convention are no better than laudable pus, so long will a large number of our businesses move remorselessly and deservedly to the mortuary. I can summarise in a sentence what I want to tell your Lordships: Let us not emulate my cousin Theodore, but let us learn the common purpose—I now speak in metaphore—that historical cost accounts are no better than laudable pus.
§ 5.33 p.m.
§ Lord Schon
My Lords, it is an honour and privilege to speak following the noble Lord, Lord Benson, who I congratulate on his maiden speech. I hope we shall hear him on many occasions in your Lordships House; he has much to contribute.
The subject of the Budget has been mentioned several times, as has the fact that a reduction in interest rates is a direct little saving which may also reduce the value of sterling below its highest point and thus help in some way our exporters rather than our importers. Moreover, I have noted an indication of a willingness on the part of the Government to accept some flexibility in the cost of gas and electricity. However, the main subjects we are discussing in this debate, for which we are grateful to the noble Earl, Lord Shannon, and the noble Lord, Lord Shackleton, are productivity and competitiveness, two sides of the same coin.
In speaking to this subject, it is difficult to avoid appearing critical of our performance. I therefore start by being complimentary to our agricultural industry and to part of our service sector, such as banking and insurance, which have proved themselves second to none vis-à-vis their competitors in the world. To achieve industrial competitiveness, we must have higher productivity, and we need that very much. However, for what I would call human reasons, and psychological reasons in particular, it is hard to increase productivity in this time of high unemployment.
While in a very limited sector of industry, it is claimed, the recession has increased productivity, I have learnt through 27 years of intimate contact on a day-by-day basis with management and the people directly involved in production that lack of business and visible stockpiles of products ready for sale tend to reduce productivity. This tendency is based partly on selfishness—you do not want to work yourself out of a job—but more on a desire not to work your mate out of a job. I have learnt to understand and appreciate that attitude.
The only real way to increase productivity in prevailing circumstances is to sell more. How can we do that? Here I must ask your Lordships to forgive me for repeating what I have said on previous occasions; I may be repetitive but I am certainly consistent. I 325 have been brought up to appreciate that to sell more, you must find a willing buyer, and the erudite buyer looks for quality, price and service. As for quality, I know we can achieve it. We can be innovative, we have the ability to be up-to-date and to be as good as anyone else I know, but we are poor exploiters of innovatory achievement. We are good on the technical side but not so good on the commercial side.
As for price, I am afraid the first thing which everybody must appreciate is that to ask for more money without producing more is inflationary, and it is generally accepted that inflation is the forerunner of unemployment. It is logical that if you ask for more money without producing more you are pricing yourself out of business. If that were generally understood, then the question whether we should have a formal prices and incomes policy would not be necessary. If we produce more per person, and if we produce more of the right quality from the same plant, our competitiveness is likely to improve. That is the precondition for more sales abroad and for coverage of the home market rather than importing from abroad to cover home requirements.
In coming to the third point—service—I start by saying that I accept the right of everybody to withdraw his or her labour—namely, to strike—but I hasten to add that strikes in whatever form and at whatever place do not help to increase our credibility as reliable suppliers. It is essential from our point of view, if we want to get business, that we improve our credibility just as much as it is necessary to improve our capability to be productive, because when our competitors are producing and using microprocessors and so on we must match their effort and install microprocessors as well, and we must be better at it.
I cannot help but remark that we have plenty of planners, economists and theoreticians of all kinds, but we do little to express our appreciation of the fact that the salesman above all is dealing with people who, metaphorically speaking, are on the other side of the fence. Whether we like it or not, we have to learn that the sales department is an important department—probably the senior service.
Let me now come to strategic selling. We have to use our purchasing power. Some of the raw materials that we need in this country have to be imported. So do finished products and some services. We should make every effort as others do to make these imports with the thought in mind of maximising our exports. Some of the raw materials that we need are imported in ship loads. Let us make sure that some products that we have available go back in the same ships, instead of sending the ships back in ballast. There is a certain port in the North-East of England which serves as an importing point for iron ore. Coal is mined not far from this port. Why is this coal not loaded into the iron ore ships when they go back, instead of sending them back in ballast?
About 200 companies in this country are responsible for two-thirds of our exports. Have we made inquiries of these 200 companies as to what more they need to increase their exports even further? And why do we not encourage other companies to make an effort to be in contact with these exporters, to learn from their experience?
We live in a mixed economy. I am not suggesting 326 that Government should be involved in running private industry, but could not Government give more of a helping hand, such as is the case in other countries—France, Japan, and Germany come to my mind—to show goodwill towards industries which want to sell more abroad?
Above all, we must learn as quickly as possible to appreciate that "we" and "they" do not mean the members of management and the members of unions in this country. "We" means us, and "they" are our foreign competitors. In this context, management and unions have from the beginning to be aware of what are the manufacturing targets, and above all, naturally, what the sales plans are. As the noble Baroness, Lady Seear, and other speakers have mentioned, communications within industry are of paramount importance. If management and unions are out of step, we have no credibility and no chance whatsoever to create more wealth.
Let me give an example. We have plenty of coal in this country, though not necessarily easily accessible. We could increase the sale of coal. We could increase the utilisation of coal—and the noble Lord, Lord Benson, with his experience, knows something about this; he was part of a team that looked into the matter—at home and make liquid fuel, though not necessarily immediately. We have liquid fuel in this country to last up until the end of the century. Nevertheless, we could start to think in terms of making liquid fuel, such as is done in South Africa, for example. I am assured that in the National Coal Board we have technologies at least as good as those practised in Sasol, in South Africa.
Having the coal here, we, too, could develop a liquid fuel-producing capacity on the basis of coal as raw material, to meet not only our own requirements, but also those of other countries. The manufacturing facilities needed in this context are very expensive. It would involve a major capital investment. How can one find money for such investment without the knowledge that there is understanding of the importance of co-operation between management and unions in the coal industry?
We here in this place of limited influence, rather than of power, must use our best endeavours to convince the majority of the British people of the urgent necessity for co-operation to acquire a greater share of the world market. Let us forget the party political approach. Let us, for purely selfish reasons, think in national terms to achieve our object; to increase our exports, to regain the share of the world market that we have lost, to satisfy home needs to the best of our ability from our own resources. Incidentally, all that would answer many of the questions that are so much in our minds now in our discussions following the recent Budget.
§ 5.45 p.m.
Lord McAlpine of Moffat
My Lords, I rise with a certain feeling of alarm. Having spent 12 very happy months' sitting here, I have learned a most impressive lesson; namely, that here your Lordships have someone who is very much an amateur about to address an audience of very professional and sophisticated people. Therefore, I crave the indulgence of your Lordships. While as a businessman I appreciate 327 the great importance of technology and standards of high nature, I regard them as the handmaidens of management, and to my mind if this country is to survive, the most important thing is to secure good management. Now, what is good management? It is a combination of sound leadership and communication. The communication should be between the very top management and the middle management, because the middle management is the core of the future. They are the people who should regard themselves as being impresarios of talent. When they look around they should be spotting the young men, giving them a chance.
But it is not always easy. In my experience, I have found that if a man is really good at his job, the boss will not promote him because he does not want to lose someone who can do so much good work. At the same time in looking around for talent—sometimes unsuccessfully, perhaps even committing errors of judgment—I have asked, "What do you think of young Bill Smith. Do you think he is a good man?" The manager would say, "Yes, but he has a terrible lot to learn, you know, sir". The answer to that was to wait one's time, put the man in another job, where he had a better chance, and promote him. When the manager said that the young man had a terrible lot to learn, what he really meant was, "That fellow is going to pinch my job unless I am very careful".
We must help the young people who have talent. It is not easy with young people. The problem is how to develop their self-confidence without developing their conceit? There is only one way to do that. That is by taking the risk of giving them rather more responsibility than perhaps one thinks they are capable of. I know that this could cost one money, but it is the right thing to do. If the young people do not succeed, one has to push them away. But one must be ruthless with oneself and give these young people the chance, because Britain has been made by young people. Unless we can encourage our top and middle managements to do that, we shall not succeed. I regard headhunting as a ghastly evil, born of desperation. That remark may be objectionable to some people; I am sorry.
We used to own a marvellous, great empire. We have heard about the winds of change. Industry is in the teeth of a veritable hurricane, but it is striving to succeed. When I was a boy at school the atlas was all coloured pink. Everybody thought British in all the great countries around the globe. Fashion is important in industry. It was fashionable to have everything that was British. Therefore industry just made the things and told the chaps to buy them. It was quite simple.
Today life is different. We have had—not because we wanted to—to substitute the British Empire by the Common Market, and so, my Lords, we have to start all over again and see what we can do. We are dealing with people who know the techniques of the Common Market. I spent a very happy day in Lucerne, with a man called Mr. Shingler. He has an elevator-making business, rather like Otis. He explained to me that they had virtually no home market. Therefore, they sent people all round the world to learn what type of elevator was required, for what type of building. 328 Then they made an effort to design elevators to meet what would be the demand in the various countries.
It is no good saying that we must create an immense home market to improve industry; we must go around the world and find out what people want and discover how to make it cheaper than other people can by leadership and by the promotion of the best people.
We must learn decent manners. When our exporters write abroad they write in English; they think everybody in the world should speak English! When the Japanese come to England to buy things we do not speak to them in Japanese and are very surprised if they do not speak good English. We must learn good manners. We are facing change. I believe we can export very well.
I know that your Lordships have had far more than your ration of bad news. The noble Lord, Lord Gregson, was kind enough to mention civil engineering. There is a difference between the professions and I am merely a civil engineering contractor. Recently I had reason to look at some statistics about exports in 1974 by members of the Association of Civil Engineers. In 1974 they were responsible for exports all over the world valued at £1,400 million. In 1938 they were responsible for exports valued at £36,000 million, which I believe I am correct in thinking represents a ninefold growth. They received £500 million in fees and that was an invisible export which nobody really knows very much about. Apart from that, people were sent all over the world and received a salary in local currency. This was probably tax free and they may have saved this money and brought it home with them. Is that not something to be proud of? We do have the technical skills and that is a technical profession. I have mentioned the matter of good manners. I was very fortunate in my Scottish parents, who endeavoured to drill into me that the two most important words in the English language were "Please" and "Thank You", so please give a little attention to what I have said and thank you very much for your kind attention.
The Earl of Bessborough
My Lords, I cannot tell you how happy I am to congratulate my old and noble friend Lord McAlpine on his delightful maiden speech to which we all listened with such attention. His family is so well known and his great firm is well known all over the world. I need only say how warmly we welcome him here and how much we look forward to hearing from him frequently.
I should also like to congratulate my noble friend, Lord Benson, who like me, incidentally, is a West Sussex Peer and is not one of Lord Gowrie's Anglo-Irish team which has ventured to speak rather a lot this afternoon. But he too is so well-known and has such a long entry in Who's Who that we must all know that he will be a very great asset to the Cross-Benches. He made a most impressive speech. Incidentally, I am very happy to find myself sandwiched between two maidens! My noble friend Lord Matthews is another very distinguished industrialist and I think we should congratulate him on deciding to speak today. I hope he will often do so, and I hope also that he may give more frequent mention to our debates in his very important organ. With two such distinguished industrialists, one a distinguished 329 civil engineer and the other so prominent a financier and chartered accountant, I feel sure this will result in a great improvement to our economic and industrial debates in your Lordships' House.
Like other noble Lords I should like to congratulate the noble Earl, Lord Shannon, and the noble Lord, Lord Shackleton, for putting down their Motions on this interesting day, the day after my right honourable friend Sir Geoffrey Howe presented his Budget in another place. I am especially grateful to both noble Lords because this is not the first time we have debated together similar industrial questions, which are closely related to industrial research and development, and science and technology generally. I believe it may have been due largely to the noble Earl, Lord Shannon, that my noble friend Lord Jellicoe suggested that I become chairman of the committee of inquiry into the research associations, and I am very glad to see my deputy chairman, the noble Lord, Lord Energlyn, here this afternoon and I am pleased he is going to be speaking.
Our committee produced a report on industrial research and development, the success of which must make major contributions to British industry's competitiveness in world markets. I believe we should all welcome the measures announced by my right honourable friend yesterday to help small firms; the reduction in MLR, the reduction in some industrial fuel prices, business start-up schemes and the various incentives to investors. Some people may say that these are small mercies, but I consider them to be a highly significant, even massive, package which should certainly improve our competitiveness and our export potential. However, basically our competitiveness in world markets must depend, as I believe other noble Lords accept, on our inventiveness, on our capacity to originate and innovate, and as the noble Lord, Lord Gregson, said—on our ability to produce new products that people want all over the world. Financial incentives are certainly important and useful, but if we produce certain products, such as textiles and steel, in a quantity greater than people want, financial incentives will not in themselves solve our problems.
That is why, like the noble Earl, Lord Shannon, I am so interested in research and development, whether it be in large or small firms at their own expense, or through the kind of co-operative research which the noble Earl and I know so well, or through Government research establishments, the research councils, the universities, and possibly exploited by the National Research Development Council, of which the noble Lord, Lord Schon, was so noble a head—or even by way of defence research, for I would not minimise the importance of spin-off or fall-out from defence research. We must innovate and we must show ingenuity and imagination in our applied research, not that we should forget fundamental and basic research.
We should take a page out of Japanese enterprise, which puts great store on market research before it is decided to market a product for which they believe—or are virtually certain—there will be world demand.
I am an advocate of conducting applied research on what one might call a pound for pound or £1 for £2 basis, on the principle that the Government might well see fit to contribute when an industry itself is prepared to risk some money. I am also not averse to co- 330 operating with our American or Japanese friends; with firms in the United States or in Japan, as well as with firms within the European Community. Indeed, for some 20 years, including those years when we were in opposition and when I was close to my noble Leader in this House, Lord Soames, in the European Parliament, I have pressed for a greater degree of European technological co-operation in various sectors—but particularly in aerospace, micro-electronics, steel and shipbuilding, to name a few. There are many others too. I believe that perhaps the most important of them at this time is robotics.
I was glad to learn from my honourable friend the Minister of State for Industry, Mr. Kenneth Baker, on Monday that current Government support for robotics was running at £1.3 million a year, but I was distressed to hear from certain other Members that this was believed to be considerably less than the sums devoted to this sector by Japan, France and, I think, the United States. As the noble Earl, Lord Shannon, said, it is an interesting fact that in the areas and industries in America where robots are most used the unemployment figures are, paradoxically, the lowest. I think I know the reason for that. The noble Earl did not give one. I shall not do so, either—but I think I know it. This emerged clearly from recent lectures on the subject by Sir Henry Chilver, a great authority on the subject, who is vice-chancellor of the Cranfield College of Engineering and Aeronautics.
Another area which should have a very high priority is very-large-scale integrated circuits. The Japanese are giving £75 million this year to develop very large integrated circuits, getting more components on to one chip. Not only Britain but Western Europe as a whole must make every effort to be competitive with the rest of the world. But, as we said in my report on industrial research some years ago, we must be sure that co-operative research programmes reflect current industrial needs.
I now come briefly to the remarks made by the noble Lord, Lord Shackleton, on standards. I agree with everything that he said, and I am not going to repeat it. Here again, I should declare a past interest as a former deputy chairman of the Metrication Board, of which the noble Lord, Lord Ritchie-Calder, was chairman. This was a Quango which, in my view, has now wisely been wound up but which, in its time and under our successors, the noble Baroness, Lady White, and my noble friend Lord Orr-Ewing made us conscious of the need, especially for export, to manufacture in metric as well as still sometimes to imperial standards.
Here I would say how impressed were the noble Lord, Lord Energlyn, and I by the contributions made by the research associations to industrial standardisation in all its forms, particularly in the preparation of BSI and ISO standards and the increasing involvement, very importantly, in EEC standardisation procedures. It is a remarkable fact, as the noble Lord, Lord Energlyn, looks back at that report, that many of the 32 conclusions and recommendations that we made are still relevant today. I should like to join in the tributes paid to Sir Fred Warner and his report. But, to return to my main theme, I believe we must develop creative industry based on new ideas, new designs and a real 331 understanding of markets. In the past our attempts at high technology often proved abortive simply because we did not combine marketing skills with technical ones as well as cost-effectiveness. It makes no sense to manufacture goods here which have little or no skill content and which equally well may be made more cheaply elsewhere.
I should like to comment here at the end of my remarks on two or three smaller firms in which I have no personal interest, financial or otherwise, but which have been very successful indeed and which may have lessons for others. I mention their names because I think they deserve mention. The first is a firm called Netlon of Blackburn. Doctor Mercer, the company's chairman, inherited a textile works. The company was very weak and he decided that there was no future in cotton. He eventually designed a method for making net by plastic extrusion. Your Lordships may have seen the net for packaging oranges in supermarkets, but it has many other extremely interesting and important applications in the world.
Dr. Mercer was elected a Fellow of the Royal Society for his innovation. Then he concentrated on marketing the product, and the Blackburn company gradually increased in size; but he was unable to develop the idea world-wide on his own. Instead, he followed a policy of licensing, and Netlon is now made under licence in 26 different countries and its worldwide revenue is between £130 million and £150 million. An interesting thing about Netlon is that it is now struggling to introduce a new product called Tensar, which consists of a mesh of high-tensile plastic which can be used as a reinforcing material. It can be used as a wind break, as snow fencing and for retaining embankments; and, through an improved version which has high strength biaxially, I think they are going to produce a useful invention.
The research cost more than £3 million, of which the Government contributed £780,000 through the relevant requirement board. The market for Tensar is believed to be larger than for Netlon. It could be used as a reinforcement for soil, concrete, asphalt and plastics. The noble Lord, Lord McAlpine, probably knows about this. An enormous application is for constructing asphalt roads to overcome rutting and cracking caused by heavy vehicles. Four of the seven big American petrochemical companies want to be involved; but Dr. Mercer does not want to give away any part of the equity. There is a problem. I know several Middle Eastern countries which are interested for their big desert civil engineering projects. I hope it will be possible to get this product off the ground, hopefully as a purely British development—the equivalent, perhaps, of float glass in the 1950s.
A second firm is Dolby Laboratories. This firm was started by Dr. Ray Dolby, one of the original inventors of Ampex Videotape. He came to Britain to do a doctorate at Cambridge University and thought out the idea for reducing the hissing noise from tape recorders. He patented it, and his company, in Clapham Road, managed to get its standard accepted throughout the world and almost every hi-fi set made (including all major Japanese sets) uses the Dolby system. The company employs about 200 people and has a turnover of £7 million to £8 million 15 years 332 after the original invention. It does other things, too, and its success is one which other companies could emulate. The sad thing is that Dolby decided in 1975 to leave Britain and go to the United States. His research laboratory and the North American marketing operation now work from San Francisco, although manufacturing and world-wide marketing are still here in Clapham Road. Dolby felt, among other things, that the industrial climate in Britain at that time was not conducive to enterprise.
A third firm I would mention is Micro Consultants and its offshoot, Quantel Limited of Newbury. Micro Consultants was set up in 1967 to make scientific and industrial data systems, and has reinstrumented, among other things, the Trawsfynnyd nuclear power station. In 1973 the men who started the business set up a new company, Quantel, which exploited the developments of Micro Consultants and applied them to television broadcasting. Quantel make machines which digitise television signals and which can store a complete frame or picture in a computer-type memory.
Using this technology, it is possible to build television converters which lose no quality and they have been sold all over the world. All three big American television networks use them. There is much more that I could say about this firm but my time has run out. These firms have won recognition all over the world and this I believe is hopeful.
The conclusions that I draw are: first, where low grade or high volume manufacturing is required, it pays to licence other people to do it. Secondly, clever ideas sell well and enable companies to go ahead fast, provided that there is a market. Clever things which nobody wants must fail. Thirdly, it is easier to become established in narrow fields such as I have mentioned—for example, in tape noise reduction or television—than in less readily definable markets. All three firms that I have mentioned exploited a particular technical skill and found ways of extending it through new applications to build a larger company.
How do we get bright young people in this country who know both the technical and market problems to consider launching their own company? Bodies like the NRDC—and I do not know whether the noble Lord, Lord Schon, is still in his place—may be too demanding in their insistence on equity; so perhaps may the TDC, ICFC and indeed the merchant banks. It would be better, in my view, to find a way of financing new young firms through private sources. That means making it attractive for people to gamble on them. After all, as several noble Lords here know, we do not penalise people for gambling on horses or on football teams. Yet in the past we have punished them through exorbitant taxation. We have sometimes penalised someone who backs a British idea and comes up trumps. If we could get the gambling framework right so as to encourage the entrepreneur, the whole aspect of British industry could change. I am off to Silicon Valley at the end of the month and I shall see there how different the atmosphere is; and yet we in Britain can be competitive, too.
§ 6.13 p.m.
§ Lord Matthews
My Lords, may I thank my noble friends Lord Gowrie and Lord Bessborough for their 333 kind and friendly comments. I cannot promise further coverage in my newspapers; but I suspect that my editors will be watching the House of Lords more closely if I am here.
I should like to begin with a quotation from 1933 of the Chancellor of the Exchequer of the day, Neville Chamberlain, as we began to recover from the recession in the early 1930s.Our credit has been fully restored. We are almost embarrassed by the amount of money coming to London. From having slipped to the position of third exporting country of the world we have once again regained our position as the best",I am sure we would all have been cheered had our present Chancellor of the Exchequer been able to make a similar statement yesterday. Instead, we are faced with declining manufacturing industries and the disappearance of companies with household names, and high unemployment still rising.
I recognise that it is not only in this country that this position prevails. The whole of the Western World, with few exceptions, is going through an extremely difficult period. However, unfortunately this country is suffering to a far greater extent than the majority of the others, with inflation at over 20 per cent. in 1980 compared with an average of 10 per cent. for our major competitors; and, but for the good fortune to be blessed with oil around these shores, I dread to think what state we would be in today.
The decline in our manufacturing industries has not been brought about by the recent so-called monetarist policy. It has, of course, been going on for some considerable time and a straight comparison between Western Germany and ourselves—a country of similar size and population—over the past 20 years shows that they have increased their production at a rate of 50 per cent. greater than ours—3.3 per cent. per annum against our 2.1 per cent. During the same period, German car production, for example, has doubled from 1,752,000 cars to 3,669,000 cars. Our production has fallen below what it was 20 years ago. Our output is now less than 1 million cars per annum.
Do the Germans work longer hours to have produced this miracle? The answer is "no"—in fact they work an average of 41.8 hours per week against our 43.2, including overtime. But clearly they work more efficiently than we do, so what do the Germans have that we do not? I suggest sound rational trade union practices which, with strong, responsible management, give them four prime virtues of commerce; namely, productivity, price competitiveness, delivery on time and effective after-sales service.
The Germans have a trade union structure (which your Lordships will recall we helped to form) of one union to each industry which reflects the realities of the last half of the 20th century. We have a trade union structure which reflects the multifarious crafts of the past century, compounded by the class war and political expediency. It is an insuperable handicap and it has been entirely self-imposed.
It is a fantasy for me to suggest that we could look forward to a change in our trade unions to reflect one union for one industry. However, I believe that our trade unions will eventually have to make some radical changes in their structure whereby individual unions identify themselves with a particular industry and accept the use of high technology with reasonable 334 manning levels. I have an example in my own company's works where new equipment has lain idle for over 12 months—not because there is a dispute on manning levels, but because two unions cannot meet to agree which one of them is going to be responsible for the operatives using this equipment.
In a changing world the competition has become even more competitive with a number of new nations emerging with their own highly mechanised industries, sometimes designed and installed by us, and were demarcation is an unknown word. Every opportunity to use higher technology is taken by them, and every day it becomes more difficult for us to compete. Obviously, the more competitive the markets, the more you cut your prices, my Lords, and the more difficult it becomes to maintain standards. It is sad to see that a number of British companies with household names, who had built up their reputation on the quality of their own goods manufactured in this country, have over recent years been marketing imported products.
It is a soft option to become a service nation and I believe that would only last as long as the oil flows; and, of course, unemployment would continue to increase. So, therefore, we have to change our ways. We have been tasting the cream and it has now gone sour. Our present plight has been contributed to by the varying policies of successive Governments with wage restraints, excessively high taxation and inflation which has destroyed enthusiasm and incentive.
I believe that the British working man is equal to his counterparts anywhere in the world and is better than most, given the right environment and the right incentives. I feel that it is in this field that we need to concentrate our minds and have a much more imaginative approach to encourage workers, management and investors. Perhaps the Chancellor, Sir Geoffrey Howe, in yesterday's Budget, gave just a chink of light in this direction with his further help to the small businessman. As he indicated, we are coming to the bottom of the trough of the recession. It is essential, if that is so and the situation improves, that he should extend his help to industry generously so as to create the atmosphere and the incentives to go forward and be competitive once again.
§ 6.21 p.m.
The Earl of Halsbury
My Lords, it is a great pleasure to follow the noble Lord, Lord Matthews, who has acquitted himself well in that very trying ordeal we have all been through at one time or other, the making of a maiden speech. Such a speech is supposed to be non-controversial. So far as I am concerned, this speech conformed to the model and I agreed with everything that he said. Under the classical categories of modesty, wisdom and wit, he has won his spurs, and I am sure I will be voicing the good wishes of your Lordships if I say that we shall look forward to hearing him again on many occasions in the future.
On the two Motions before us, I am going to speak only very briefly on that in the name of the noble Lord, Lord Shackleton, to comment on his reference to standardisation by metrication and decimalisation, with both of which I have had a great deal to do in the course of my life. They both involve aligning the measures we use with the language we talk, of which the arithmetic we do is part, and any other system of 335 measurement is really quite ridiculous. I was a director of a heavy engineering company in the days when we had to quote for a very large European contract in metric. That occupied so much of the time of the drawing office that we said, "Why take two bites at the cherry? We have most of the drawing office working in metric on one contract; let us metricate 100 per cent. from now on". That cost us a fraction of 1 per cent. of one year's profit, and the job was finished, over the horizon, and we could look forward to the future and never bother about it again.
On the Motion in the name of my noble friend Lord Shannon, I should like to resume the arguments I was putting forward on the Motion of the noble Lord the Leader of the Opposition last week with regard to the redeployment of labour, and deal first of all with a throw-away line by the noble Lord, Lord Thorneycroft, who simply said that unemployment had been rising inexorably under all parties and under all Prime Ministers for 20 years. The noble Lord did not expand on that; he dealt with it in a sentence. I must, however, say a little more about this because, although it is perfectly true in the form in which he said it, it did not disclose that there were in fact three régimes during that period. There was the tail-end of the post-war demand-pull period, with unemployment running at about a quarter of a million, which terminated at the end of the first Wilson Government. There was then a period of about eight years which terminated with the end of the Heath Government, during which unemploymentwas steady at a figure of about half a million. There were two excursions into the three-quarters of a million range in 1971 and 1972, but there was reversion to normal again in 1973–74. I think these were connected with the U-turn of the Heath Government during that period.
From 1975 onwards inflation took off, and we have been running now for years past at 1½ million unemployed, which has increased significantly in the course of the last 12 months. I want to relate that to what I said last week about the natural, painless, redeployment factor that exists in the economy due to the fact that a professional career time is about 40 years and a non-professional career time a little longer. That gives a retirement recruitment redeployment potential of 2½ per cent.; that is, 25 per cent., a quarter of your labour-force per decade and half your labour-force in two decades. Against that, as a target, I want to look at what we have done in the last two decades; that is, 1960–1970 and 1970–1980. In the first of those periods we reduced our manufacturing employment from 16 million to 13 million and we increased our service industry employment from 6 million to 9 million. That was an effective redeployment of 3 million on a labour-force of about 22 to 24 million over the period; and that was within the 2½ per cent. redeployment factor to which I have referred. But that was all we did during the first decade.
During the second decade the figures have been steady. We are still employing about 13 million in the manufacturing industries and about 9 million in the service industries. In my view, had we gone on with the redeployment we would not now have had over-manned manufacturing industries and we would not be short, as we so often are, of personnel in the service industries.
336 Let me take the National Health Service as an example. They are short of people and the people are short of money. I sorted the whole thing out, working for Mrs. Castle under the Wilson Government in 1974–75, and left the Health Service with a rational structure covering everything from doctors, nurses and midwives to the 10 paramedical professions and the speech therapists—and everybody was content at that point. It has subsequently gone back, as I predicted that it would, and it is still short-staffed and complains that it is under-paid.
Many people feel it is wrong to transfer people from manufacturing industry into the service industries, but I do not believe that. I think it is the right thing to do; and we have to keep up the productivity of the manufacturing industries. Supposing that it takes three men to do what four men did physically but they produce twice as much, then everybody is twice as well off notwithstanding the fact that you have three men in productive industry and one has been transferred to a service industry. That is an example of what we did during the 1960–70 decade, when we had low unemployment, and it is what we did not do during the 1970–80 decade, when we had increasing and higher unemployment.
I come next to foresight, commercial and technological. Here one must learn to recognise certain patterns which repeat themselves. I should like to refer very briefly to the textile industry. You start off by exporting cheap cotton cloth to the Chinese and the Indians. That game is too easy to last for ever; it does not last. You then have two options. One is to increase the quality of what you are making and go into the high-quality textile industry, which the Italians have done so successfully. The other is to export not textiles but textile manufacturing machinery. We had quite a significant success in that because at one time after the war our exports of textile machinery from Lancashire were in excess of our exports of textiles. But that again will not last for ever. The third stage will be to manufacture the control engineering equipment that automates the textile machinery. And during all this process of transferring the product, as it were, across the technological board, the conversion factor of what you are making is rising, rising, rising the whole time, and it is therefore becoming a more profitable source of exports in the balance of trade.
Two headings under which the Japanese have taken the lead strike me very forcibly. Perhaps I might say at this point that in the early 1960s I headed an OECD mission to Japan to write a report on the relations between industry, government and the universities in Japan; and I came back convinced that within a decade the Japanese would be the world's No. 2 economy. That prophecy was fulfilled, and now they have become not only No.2 economy but the No. 1 pacemaker.
There were two pieces of foresight that the Japanese scored heavily with. One was the giant tanker, and I want your Lordships to note that there was no high technology involved in giant tankers. There was nothing more than the commercial courage to go ahead and build them when the Suez Canal was closed. Anybody could have done it. The Japanese were the ones with foresight and the commercial nous to go ahead and do it—to build the first tanker, to fill it up with oil, to send it around the world demonstrating 337 its economics to everybody. From that point on, the Japanese tanker industry just took off and they went on building bigger and bigger tankers in the most modern, up-to-date shipyards, but beyond being modern and up-to-date there was nothing new or original about them.
The other way in which the Japanese have shown commercial and technological foresight is in backing robotics. I have been a prophet of robotics for I do not know how long, because I believe that they are the real answer to the monotony and fatigue which a workforce suffers when it is on the assembly line. The robot is the answer to the assembly line. But unless you are continually transferring people out of manufacturing industry into the service industries, you will, of course, then get unemployment on the assembly lines when you introduce your robotics. However, I do not believe that anybody ever withstood for any length of time the desire to take advantage of technological opportunities to improve his standard of living, and I think that if organised labour withstands the introduction of robotics it will be backing a losing horse, because people will adopt them and the high standard of living that that implies.
I come now to the next phase of what I believe for the future. In the beginning, there was just shank's pony, and then in 3,000 B.C. we domesticated the horse. From that time to the middle of the last century that is all we had in the way of transport facilities. Then, in the middle of the last century, the railways gave man social mobility, and the bicycle, followed by the motor car in this century, gave him personal mobility. That personal mobility is of tremendous importance to people and that is why the family car is one of the main features of family life.
I am going to peep into the future, to where man achieves intellectual mobility; the ability to move about in the realm of ideas and thoughts, of which you can see a forecast in the form of the toys which we have in the Library—Prestel, the link to STAIRS in the Queen's Room and the other machine that they have. I have forgotten its name for the moment, but I shall think of it. We now have three of these toys to play with at this stage. And, of course, at home we have our television sets, our radios and so on. But I look forward to the day, 30 or 50 years from now, when the family cathode ray tube will be as important in the family drawing-room as the family motor car now is in the family garage. Just as a house has a garage in-built, so we shall have something like that with a data processing system in every household. It will be part of the children's education. It will be your morning newspaper. I am sorry if I am destroying the industry which is so ably represented in your Lordships' House by the noble Lord, Lord Matthews. But it will be your daily newspaper. It will be your workbench, because I foresee that most of the administrative classes will work at home. Why do we pack them into enormous buildings built by the noble Lord, Lord McAlpine? Simply so that they can be near to the files in which the information that they use is stored. If they can bring this information into their own homes by keying in and pressing buttons, they can do their work in the home. Think, my Lords, of the relief that that will be to the transport industries, when there are no more commuters—
The Earl of Halsbury
My Lords, that is the real problem in all this. How are you to keep a workforce of 25 million, or thereabouts, out of mischief, happy and occupied with something or other when, literally, there is no manual work required for them to do?
May I remind your Lordships of the etymology of the word "labour", because once labour has gone I do not see what we are going to need a Labour Party for. The word means "torment". That is why we talk of a woman in childbirth as being in labour. It is the word that the Latins used for torture. If we turn to the French languages, we talk of travail. Travalla, in Latin, was the rack. That is what labour used to be in the pro-history of humanity. But a draftsman does not need to be in a drawing office. Give him a cathode ray tube and a light pen and he can work at home.
How people will use their leisure profitably, I do not know. Possibly, they will become carpenters and make tasty furniture for people who like that kind of thing, in consideration for the people who like tasty furniture doing some service or other for them. But I shall not peep too deeply into the future, save to ask: what will happen to the transport workers, what will happen to the print industry, when all this comes true? They will have to join my redeployment and the painless mechanism I have indicated—the ranks of the others.
The same will be true of the microprocessor revolution as was true of the computer revolution. I have been in the computer revolution from the days before there were any computers. I literally saw the first computer come off the first manufacturing line and I have been associated with it in the 30 years that have followed. It is easy to say that it made a revolution. It did not. It was a steady progression. Always there is a bottle-neck. The bottle-neck was never our ability to make computers. It was always our ability to decide what we were going to use them for. Even when we decided that, we found that we had to train a whole new generation of schoolmasters, university lecturers and so on to teach people how, and the same will be true of the microprocessor.
Currently, you can buy one, if you are so minded and have the money, to play chess with. Children's toys and so on are great fun, experimenting with rockets to the moon via a little keyboard or doing sums. That will not be the real, ultimate application for them. They will have a deeper application and it will not be revolutionary on a short timescale. I believe that in the future the microprocessor will give our descendants a fuller life and that they will see it as a revolution only in retrospect. Improved productivity means enhanced emancipation from that terrible thing—labour. Let us take no counsel of our fears, but press on with it. Our danger is not that it will move too fast, but that we shall move too slowly.
§ 6.38 p.m.
§ Lord Irving of Dartford
My Lords, I want to deal with matters relating to competitiveness which are of the greatest importance and urgency for industry, and I hope the House will forgive me if I concentrate on the energy problem. In July last year on the Gas 339 Corporation Bill, I raised the question of the very large differential between gas prices charged to British industrialists as against those charged to their competitors in Europe and North America. I then mentioned three industries which were suffering very severely—the paper industry, with which I am happy to be associated; the chemical industry, and the clay-using industries. I indicated then that gas to industry on the continent was 30 to 50 per cent. cheaper than in the United Kingdom, and 50 per cent. cheaper in North America. The noble Earl, Lord Gowrie, disputed those figures and said that there was not that disadvantage; or, at least, he said that if it existed it was a short-term problem. But he undertook to monitor gas and other energy prices.
Between then and the end of the year, the department and the CBI carried out a monitoring exercise. In the debate on energy in October, I catalogued nearly 20 industries which were suffering from the same kind of problem in relation to the cost of gas and other forms of energy, and to which energy represented, as it did to the paper industry, something like 10 or 15 per cent. of total cost. Later I expressed some concern that these two exercises were being undertaken separately, because I believed that they would not necessarily lead to agreement, and in this respect I was correct. The exercise proved abortive, and a further period of delay resulted. As a result of this, however, a task force was set up under the chairmanship of the director-general of Neddy which reported to the Minister on 5th March confirming entirely what industrialists had been saying for the last 12 months about the cost of gas as well as other forms of energy to high energy users.
I want to stress that British industrialists have not been asking for cheap energy or for preferential treatment but that they should be allowed to compete on equal terms with their foreign competitors. May I remind the House of what the task force said:For an important group of energy intensive users, (representing some of the remaining 50 per cent. of industrial electricity and a significant proportion of gas by volume) United Kingdom gas and electricity prices had moved significantly ahead of those being charged to some major competitors on the Continent by the end of 1980. This situation continues. Heavy fuel oil was cheaper to Continental competitors for most of 1980, though the position had improved by the end of the year but remains volatile".This is the most significant part of the report:These developments have worsened the competitive position of this group of users".In the case of gas, the differences in cost of interruptable supplies were up to 15 per cent. and in firm supplies up to 20 per cent. In the case of electricity, in France and Germany the differential was as high, in some cases, as 35 per cent. I ought to mention that in the paper industry there are 26 companies which use more than 1 million therms of gas a year. In general terms, the economic climate, compounded by the Government's policies, continues to give to United Kingdom competitors a 25 per cent, price advantage. This is caused particularly by the linked problems of the high value of the pound, high inflation and high interest rates, together with the price of energy to which I have referred.
During the last 14 months I regret to say that in 340 the paper industry they have lost 17 mills, 46 machines and 9,487 employees. In the last 12 to 18 months the volume of newsprint made in this country, which was 25 per cent. of the total requirement, has fallen to below 10 per cent. and at this rate will disappear entirely.
Therefore it is in this gloomy context that yesterday's Budget must be viewed. I think the statement made by the Director General of the British Paper and Board Federation echoed that of many industries when he said:The Budget was a bitter disappointment. All that we have been asking for is an opportunity to compete on equal terms with paper makers overseas".What was asked for by industry was that the special tax on heavy fuel oil should be abolished. All that the Chancellor of the Exchequer was able to offer were some unspecified concessions on high volume tariffs. Secondly, he was asked that the duty on Derv should be reduced by anything up to 10p. In fact, it has been increased by 20p a gallon, which is a very severe blow to this industry and to others. This additional expenditure will cost the paper industry, in the case of one group alone, £0.4 million, and it will cost the total industry something like £2 million to £3 million. Transport costs can be between 5 per cent. and 10 per cent. of total costs. That is in addition to the other problems of energy in any industry. This blow could offset any relief, if this is really forthcoming, on high volume energy tariffs.
I said "unspecified concessions" because it is difficult to know what the Chancellor really meant in his pronouncement yesterday, for the British Gas Corporation has been negotiating with some industrialists for new contracts taking into account, as requested by the Government, the difficulties facing industrialists. However, these are for new contracts, not necessarily for renewable contracts. It is also a slow and tedious process which will come too late for many companies. The Chancellor's promise that the British Gas Corporation will hold its prices until the end of 1981 will do little or nothing to deal with the problems of differentials between the United Kingdom and Europe and America.
There was a phrase in the Chancellor's speech yesterday which I will read:The overall consequences of dealing with energy prices would be to put up the cost of gas purchased by the British Gas Corporation and, with it, the United Kingdom import bill".Many of us are unclear of the precise significance of that statement, and I hope that the noble Earl will be able to clarify it.
Industry is grateful for the fall of 2 per cent. in the MLR. It will certainly lower the cost of overdrafts, but because of the poor prospects and low profitability of many industries it will do little, in my view, to encourage investment. It looks like having little or no effect on the value of the pound; as it was so confidently anticipated and leaked, the effect has already been discounted and lost.
I should like to end by repeating, even at this late stage, what the paper industry and others asked of the Chancellor. They asked first that there should be a freeze on all energy prices for energy intensive industries until those of our European and American competitors have caught up. Secondly, they asked 341 that the Chancellor should give an immediate rebate to energy intensive industries to offset higher United Kingdom energy prices so that in the short term energy costs are no higher than in European countries. Time is running out for many companies. I hope that the Government will act soon.
§ 6.47 p.m.
§ Lord Energlyn
My Lords, I am so pleased that the noble Lord, Lord McAlpine of Moffat, referred to the invisible earnings of our professionals. We do not know the exact figure but I gather that there is a minimum of £2,000 million of foreign currency coming into this country. One might naively say that as a result of this expertise being sold on a contractual basis, British industry should have a spin-off into the hardware involved in the contracts. But it does not work like that. The reason why our consultancy practices are among the foremost in the world is because we are British. It is the integrity, honesty and clarity of the advice that is given to a client which has caused this vast and important income for Britain. But it is left to the client to buy the goods. If British industry is not producing the right goods, then it cannot expect to break into the markets created by our consultancy practices.
Having said that, no mention—I have listened to every speaker—has been made of the contribution of our nationalised industries to this income. The Electricity Council has a company selling expertise. It might be chastening for the noble Lord, Lord Irving of Dartford, to know that the Gas Council has an international consultancy service which,in 1970–71 when it was formed earned £108,222 in fees. By 1974 that had risen to £3 million, plus. In 1976, it was nearly £7 million, and ever since it has kept above the £3 million mark".That is a contribution which has been made by the know-how of the Gas Council's research organisations to the productivity of this country. I shall refer to the spin-off from that a little later.
I want to take up now the point which was raised by the noble Lord, Lord Schon. He could not understand why a ship bearing iron ore to the North of England could not export coal from England. It is claimed that because we have been importing coal we have no place in the export markets of the world for coal. In the 1930s, however, we were the number one exporter of coal. I want to take up that claim.
Before I continue I should like to make it perfectly clear that what I am about to say is in no way a criticism of the National Coal Board. Even more important than that, it is in no way an indication of a view that the Government may have been wrong in investing in the coal industry. On the contrary, this investment of the Government in the coal industry will, in my humble opinion—and I hope to prove it to your Lordships in a moment—be one of the most prudent and lucrative investments that they have made. In other words, what I am going to try to do, with your Lordships' permission, is to look at this statement that we have no place in the export markets of the world.
If you look at figures, you are always running into difficulties, but recently—in fact in 1980—the Massachusetts Institute of Technology called a world conference under the title "Coal—A Bridge into the 342 Future", and any figures that I use are derived from this quite remarkable report, a copy of which is deposited in your Lordships' Library. It says that the 1977 production of coal in the United Kingdom was 108 million tonnes and that in the year 2,000 it will be about 162 million tonnes. Then, looking at the world market, there is a world production of 2,450 million tonnes in 1977, which is expected to rise to 6,780 million tonnes.
The question I pose is this: Is there no room for us in a vast market for coal? Most of that coal is consumed in the countries of its origin, but there is nevertheless an export of coal and the figures given show that there is an export into Europe of 287 million tonnes. That is the figure that I should like your Lordships to remember because, in my opinion, that is the market on our doorstep.
Before you can enter any market, as has been said by many noble Lords, you have to have the right quality. Now there is coal and coal or—to put it in another way—coal is composed of a number of different ingredients. I am not going to embark upon a petrographic lecture on coal, but it may interest your Lordships to know that all over the world when technologists are talking about coal they use what is called the Stopes classification. This classification was done by none other than Marie Stopes at the beginning of this century. She was the first woman paleobotanist and she brought a typically feminine rationale into looking at coal. It is most important to grasp this because what she said was that coal is a bed of rock. A bed of rock is composed of minerals and, likewise, coal is composed of minerals. She pointed out that it is composed principally of four minerals: vitrain, the bright glassy one; clarain, the dull one; durain, the hard one and fusain, the dirty one.
If we take fusain, that is virtually fossil charcoal. On the world market, fusain fetches anything over £200 a tonne and that is the stuff that they pour out of the washeries when they are washing coal at the present time. So there is a market. When you come to look at South Africa, as has been mentioned, they make petroleum out of coal, and the principal reason for that is that their seams, and one in particular, are almost completely composed of vitrain—the glassy one. It is quite easy to convert vitrain into a petroleum-like product but what jiggers it up is the presence of the other minerals, durain, in particular, and fusain.
We should therefore look at the mental process of an oilman. When he finds an oilfield, the next thing he thinks about is, "Where am I going to put the refinery?" To get into the world markets we have got to put refineries at our collieries. There is nothing new in this because among the first chairmen of the National Coal Board was Sir Hubert Holdsworth, who was a distinguished scientist, and his right-hand man was Dr. Idris Jones, the late lamented brother of the noble and learned Lord, Lord Elwyn-Jones. In 1951 Idris Jones and Holdsworth evaluated the whole system of coal processing and all the R and D has been done. You may ask, why has the Coal Board not used it? There was no market for it. The market has only arisen in the last four or five years and I maintain that we should move into that market.
The noble Lord, Lord McAlpine of Moffat, mentioned simplicity and, when I am called in to advise 343 anybody, I say to them, "Let me have a look at your chemistry or your physics or your engineering. Ah yes! Now, the moment you go above O-level chemistry or O-level physics or O-level engineering you are going to increase your overheads, and your profit margins will be reduced. Therefore you must look at the simplicity of the operation". It is a curious thing, but very often the simplest things do not occur to one. If we think back over 10 years, the idea of containerising cargoes was just an idea, but today it is standard practice. If you think of what happens to the local dump of coal and the local coal man, he puts it into sacks and he delivers the coal in sacks. The reason is quite simple: first, he knows how much coal he is selling and, secondly, he does not waste any on the way.
Taking that simple prospect, I am going to put the idea to you, my Lords, that we now start to containerise coal and see what effect that has on our commercial potential. The first thing to realise is that the coal of the future is not lump coal; the coal of the future is powdered coal—what we call pulverised fuel. It burns better than lump coal and it has been proved for 50 years that it is the best type of coal to use on a furnace. So, we powder coal, and, if we powder coal, we now have the modern surface active agents that can divide these particles of coal into vitrain, clarain, durain and fusain, and all these four commodities have a different commercial value. So you bleed off your vitrain and send that to the chemical industry as a feed stock. You bleed off your fusain and you sell that as a sophisticated chemical in a variety of industries. What is left is the sort of fuel that burns quite as well as the gross coal in a power station.
The next step is to put it into bags, not load it into a truck which has to be emptied into a dump and then the dump has to be dug by a digger and the coal put into a conveyer to be taken into the power station. Worse than that, when you take it to your exporting port, you have a dump of coal which has to be fed into the hold of a ship. That ship then has to carry the coal to its destination, and there were absolutely fascinating figures given in the symposium on the cost of ship off-loading, unloading and trans-shipment, because many harbours are incapable of taking large vessels. Now, if you put this coal into bags and then you go to the firm of my noble friend Lord Bess-borough and put the bags into his nets, you can load them down into the hold and pick them out of the hold when you reach your destination.
The Earl of Bessborough
My Lords, may I interrupt the noble Lord for a moment? It is not Lord Bess-borough's firm: he has no interest in them whatever, except for their great technological achievements.
§ Lord Energlyn
My Lords, I do apologise to my noble friend. As he knows, I sometimes get carried away. What I really meant to say was the company he referred to in such an effective way. These people have produced plastic nets with great bearing capacity. I think the noble Earl would agree with that. They can carry phenomenal weights of material. You can see these lowered into a ship, into a clean hold that you are going to empty when you get to the other side. So imagine a ship like that, leaving England, 344 going to New Zealand and bringing back the return cargo. The operation then becomes economic, as your Lordships will see if you study the figures the conference has produced.
Next, I should like to narrow this down to give your Lordships some examples of what we might do wtih our neighbours, our so-called European friends. The market in Europe is something like 37 million tonnes. That is well within our capacity to produce without any embarrassment to the demands of Great Britain. Just take one or two cases. Suppose we look at Finland. Finland imports 4.1 million tonnes. When you look at the balance of trade between Finland and Britain, we buy more from Finland in the way of timber and what-not than they buy from us. Why, therefore, should they not buy our coal in exchange for their timber? There is one good customer. Then, take our friends across the Channel in France. They need 14 million tonnes of coal. Why not buy it from us? Containerised, you put it in barges, you lift it out of the barge so easily; you have not got the difficult task of loading and unloading. The odd thing is that I questioned people who were at the conference and it has never occured to them to containerise coal. So I ask the Government quite seriously to look at this potential.
Then I come to the other feature of coal which is uppermost in a lot of people's minds, and that is the mobility of coal. We are talking about fluidised beds. Let it be to the credit of the National Coal Board, and particularly of people like the late Dr. Idris Jones, that they were writing papers about fluidised beds in the early 1950s and 1960s. So all the knowledge and technology is in this country. I do not think that there is anybody in the world who knows as much about coal, thanks to Marie Stopes, as we do. What we have to do is to know how to market it. In order to market it, we have got to refine it.
Then we come to another factor and it is this: in South Wales, there was a Canadian who some 15 or more years ago started to wash coal out of coal tips which the National Coal Board did not want to be bothered with. Within four or five years the firm was in the top league and was making millions of pounds profit out of washing coal out of tips. It has now become a realistic thing to look at all the coal tips of Britain. If you make a quick calculation, we are talking about 500 million tonnes of coal in coal tips and it is far easier to win that coal than even to work it by opencast mining. I suggest quite seriously that we have here a potential source of small coal, which is the most desirable coal today, although not in the past.
Then, you ask what you are going to do with the mud. You can pour it back into those derelict workings from whence it came. Certain of the tips have a peculiar property, in that they can be converted into cement. So I can visualise washing the coal out of tips and I reckon, taking the Ryan experiment in South Wales, we could have something like 4 to 5 million tonnes of coal coming out of those tips over the next 10 years—cheap coal which we could use, releasing coal for export. You pour the mud back into the ground. You cannot do that when a mine is being worked, because there are grave difficulties over ventilation, production of methane, explosions and so on. But, when a pit is empty, you can put the mud 345 underground. Again, you put it into bags and take it underground, and in bags you can stack it tight and it will remain there undisturbed for ever.
What I am really trying to say is this: in my humble opinion, I believe we have a place in the export markets of the world, if we now use our imagination, thrust out and enter those markets. In so doing, we shall revive our maritime trade, because I hope that those ships will go out full of my bags and return clean with a cargo of cheap produce.
§ 7.8 p.m.
§ Lord Mottistone
My Lords, it is always a pleasure to follow the noble Lord, Lord Energlyn, but I hope that on this occasion he will perhaps forgive me if I do not directly follow him except to welcome his closing remarks about the restoration of our supremacy in maritime trade. I would indeed dearly love to see that, quite apart from being intrigued by his general remarks about the possibilities of coal. Our other scientific contribution came from the noble Earl, Lord Halsbury. I thought his best contribution, in a splendid glimpse of the future, was to instruct us that we are opposite the torment party. I am not sure that I would not have thought it was the party of torment, even if, in a sort of a way, it has the noble Viscount, Lord Hanworth, supporting it, too.
§ Lord Mottistone
My Lords, I think we must thank the noble Earl, Lord Shannon, very much for inspiring us to this debate. He certainly has attracted a splendid list of speakers, particularly three maiden speakers. One would not wish to be discriminatory among them; one must congratulate the noble Lord, Lord Benson, the noble Lord, Lord McAlpine, and the noble Lord, Lord Matthews. I do not see any of them at the moment, but that spares me the embarrassment of trying to say which I thought was the best.
My Lords, I will unashamedly be guided in what I have to say by the recently-produced medium-term strategy (I think they call it) of the CBI, entitled The Will to Win. I noted that the noble Earl, Lord Shannon, referred as his additional point to the will to be competitive. I suspect he might have seen The Will to Win and translated it in that sense to meet the title of this debate. I would certainly very much support the two points. The CBI says we must satisfy the customer and we must be competitive, and many noble Lords have spoken about that. I would suggest to your Lordships that when we indeed do both those things we are among the world's leaders in both production and export. I think it is that which is the key to the problem.
The CBI goes on to say that we must restore competitiveness by cutting costs, by improving efficiency and industrial relations and—and here the Government can help—by improving the framework in which business operates. In this outline paper the CBI is seeking to show industry the sort of contributions which businesses can make to help themselves improve competitiveness. It also suggests what contributions the Government and government departments can make. I propose to concentrate on the latter point. Apart 346 from the fact that several noble Lords have mentioned various aspects of what industry can do, I think the problem which faces us is not so much what industry can do and what Government can do, but how the two can blend together.
I take very much the various points that my noble friend the Minister made, and particularly that the appallingly difficult present circumstances are very restrictive as regards the Government's freedom to do all that they would like to do as their share towards improving the position for the competitiveness of industry. However, I think that whatever the Government do there is great difficulty in getting the matching, as it were, between the needs and the demands of industry and the functioning of the vast bureaucratic machine which is there to aid the Government in their activities. I think there is a great lack of knowledge when people do not have industrial experience from which to make the decisions and give the advice which is necessary.
The CBI's paper makes the point that Government departments do not have the discipline of the market to encourage economy and the elimination of waste. Nor, I would suggest, do they have the experience of the discipline of the market to know really what it is that it is reasonable for industry to want and where they can best help it. Perhaps I might suggest to my noble friend the Minister that that is the area where Ministers must be the solvers of the key problem.
Therefore, I believe that the Government's problems are even greater than the problems of industry. Nevertheless, they must be ruthless in attacking waste and overmanning; they must reduce the costs that they impose on business; and they must have cost control targets equal to those of industry. Specific contributions which the Government can make to competitiveness are to avoid policies creating additional costs; to have a realistic exchange rate and that point has been touched on by other noble Lords—and to have supportive trade policies. I like the thought of that, but I wonder just what it means.
I should like to turn to costs through taxation. We all expect costs through taxation, but I would suggest to my noble friend that they must be fair if industries are to be competitive. That applies as much on the home market as it does to exports. If companies in an industry do not have a fair competitive position at home, they will have less of a firm base from which to develop production for export.
In the food processing industry, in which I must declare an interest, there are no better examples than biscuits and confectionery. Those food products have long been leaders in the European Community, both in overall production and in export. Because of arbitrary and anti-competitive taxation policies on selected foods (which include all chocolates and chocolate-covered products) from which our main competitors are spared—and I would emphasise the words, "from which our main competitors are spared"—our competitors are beginning to show signs of overtaking us, especially in the chocolate confectionery market. I would mention in passing that Germany, which is a particular threat, has an across-the-board VAT applicable equally to all types of food.
I was most interested to hear my noble friend the Minister saying in the course of his speech that one of 347 our problems has been that we were moving from a cheap food policy to a dear food policy. I would be very grateful if, when he comes to reply, he could say whether that was just a very general statement or whether it was, in fact, an advance warning of a definite trend which the Government themselves support and would like to encourage. It could be that it is in that sort of area that the type of matters about which I am complaining might indeed be solved.
Your Lordships may be scornful that I am talking about sweets—and one can look at the matter in that way—but I am also talking about a major export-earning product and about the practical disincentive to export that the Government can create by the imposition of an anti-competitive taxation policy. I am not sure that the Government realise that their discrimination within the application of VAT is an anti-competitive taxation policy, but that is what it is. The Government, therefore, have something to answer for in that the people in the departments that administer the VAT probably do not know anything about competition, anyway. Indeed, that relates back to the point I was making earlier.
Other examples of bad taxation have been mentioned by other noble Lords. For example, there is the payroll tax which is known as the national insurance surcharge. That applies to all industry and cannot be identified as anti-competitive as between sectors of industry. However, it is a serious disincentive to competitiveness of British industry internationally as, indeed, also is the anti-competitive effect of the Government's energy policy, to which the noble Lord, Lord Irving of Dartford, referred at some length.
One could go on, but enough has surely been said to show the Government that while industry can do much to help itself so, too, can the Government help, especially by being vigilant to identify all the areas in which their activities can hamper competitiveness in British industry, both directly and indirectly, at home and abroad. Of course the Government want to help, but to do so they must develop the will and the ability to adjust policy to help productive industry to be competitive world-wide.
§ 7.17 p.m.
§ Viscount Hanworth
My Lords, I must say that I do not particularly enjoy making a speech from my new position in what I would term the "choristers' stalls" and, having made my speech, I am afraid that I shall return to something a little more comfortable immediately below me.
In speaking on the first Motion in this debate I should like to try to analyse some of the reasons why British industry is in its present state, as I think that that may be a helpful background for deciding what might be done to improve matters. If there were only one or two reasons for our decline it would be relatively easy to concentrate upon them. However, there are many. I propose to mention seven, but each of those main headings—which, of course, are arbitrary—has a number of possible sub-divisions. In trying to make such an analysis, it seems to me very important to distinguish between cause and effect. Low productivity, poor quality of goods and unemployment are all obvious defects produced by 348 underlying maladies in our national industrial corpus.
If I were asked to give just one general reason for our decline I would say that it was due to our failure to make gradual changes, which were obviously needed, in time. The noble Lord, Lord Schon, summed that up rather neatly in our last debate by saying that the British only see the writing on the wall when they have their backs to it. That leads me on to my first point: human relationships—more often called industrial relations.
At the end of the last war it should have been patently apparent to all management that they would no longer have a big stick to wield over blue-collared workers, whether or not they wanted it. The only alternative was leadership, inspiring people with a sense of purpose and a corporate spirit—call it what you will. In fact, in most cases management did not employ the most elementary techniques of achieving this end. There is still much that could be done in this direction and talking about the need for communication has obscured the issue. To many communication simply means passing more copies of papers around. I think that we should all remember the Duke of Wellington's dictum about there being no bad troops, only bad officers.
Secondly, when I joined a large company in 1959, management still believed in their hearts that Britain made the best engineering goods in the world and it was the customer's misfortune if they did not buy them. This inhibited a good marketing approach in its widest sense. The effects of this are still with us today. Some detailed facets of the problem have already been mentioned; for example, delivery dates and the need for our salesmen to have foreign languages. Even more unfortunately, because it takes a long time to put right, not enough of our really able young men have been going into industry. It has been thought to be a second-rate and unpleasant career.
Thirdly, although we are an outstanding nation as far as research and new ideas are concerned, we signally fail as regards development and putting the ideas into a marketable product. The wartime development of radar is perhaps a classic case, although under wartime conditions there were excuses for that. Atomic energy is a more recent example, but there are many others. Probably the status of our all-important engineers has a great deal to do with this failure. Fourthly, small businesses are the acorns from which large oaks grow. We have fewer of them than, for example, Germany, and in the past they have not been given the encouragement that they deserve.
Fifthly, I come to investment in new plant and other capital equipment. Industry needs to be able to see a reasonably certain future before making long-term capital investment. Constant changes in Government policy and a mass of inhibiting regulations, with added financial burdens, have been a very strong deterrent. Adversary politics between the parties are very greatly to blame. However, high interest rates and inadequate financial returns are perhaps the major deterrent today.
Sixthly and seventhly are the economic and financial climate and the unions. These are probably the two most important inhibiting factors. However, I do not want to say much about either of them. The economic and financial climate has been discussed at length by the CBI and others, and noble Lords far 349 more qualified than I have already mentioned this and, of course, the demerits of the Budget. I would only make the rather sour remark that as all economists seem to disagree, the financial system seems to be our master, not our slave.
As to the unions, unreasonable pay demands, failure to take a longer-term view of their members' interests, plain selfishness engendered by the interests of far too many unions and unnecessary strikes are things which a nation cannot afford. The unions have shown themselves even more conservative to change in their own organisations than parliamentarians.
I think that it is all summed up by what the noble Lord, Lord Hankey, said in the previous debate about the visit of the Russian trade unionists. The TUC representatives asked them to say what was the main function of the Russian trade unions. They replied that it is, of course, to increase productivity. On their being asked whether they were not interested in increasing the wellbeing of their members, the reply was "Oh, yes, of course, we are, but how can we do that unless productivity rises?"
Finally, I should like to make the point that, quite apart from the social effects of unemployment and the cost of unemployment benefits, we must remember the hard indisputable economic fact that the more people who work usefully—and I repeat usefully—for the longest reasonable time, the richer the nation would be. Of course, there are many reasons why, with improved technology, unemployment at the moment is inevitable, and palliatives such as work-sharing, shorter working hours, and so on are necessary. But palliatives they are; they should be seen as such, except in so far as the nation may, in the future, like to take greater riches in terms of greater leisure.
But what about our inability to pay for so many social benefits and services, which are acknowledged as being desirable but which we cannot afford? I realise that in this analysis I have made a few direct recommendations, each of which merits a full length speech, but I hope that this analysis may highlight some of the areas where others can, in fact, think more deeply and produce more useful answers to our fundamental problems.
§ 7.28 p.m.
The Earl of Gowrie
My Lords, perhaps I may have the leave of the House to wind up briefly just on the points that have been put to me and with nothing in the way of an additional speech; except of course to congratulate our three maiden speakers who steered a difficult course very well, because this has been an interesting debate and, as in all interesting debates, one is liable to steer into the waters of controversy.
The noble Lord, Lord Benson, dealt with inflation in such a way—and I hope it does not abuse his speech to say this—that the Government draw considerable comfort from it. My noble friend Lord McAlpine said, "Give young people a chance", which is perhaps not too controversial; I would certainly agree with it. But he also indulged in a little controversy by saying that head hunters were a ghastly evil born of desperation. I have no doubt that letters from eminent headhunting firms will pour into this House tomorrow. The speech of my noble friend Lord Matthews encourages 350 me to look forward very much to his contributions when he is not making an uncontroversial speech. Indeed, we look forward to hearing all the maiden speakers again.
The noble Lord, Lord Shackleton, who I do not see in his place, has asked me questions about public purchasing and the influence of standards. Certainly the influence of standards in promoting successful implementation of the Government's new purchasing policy is very crucial, and we are having continuing discussions between the Department of Industry, all other Government Departments (as I said in my initial remarks), the nationalised industries and other public sector organisations. As I said in my opening speech, we are trying to set our own house in order, but other people should follow suit in encouraging the introduction of new products and processes, promoting better design, and matching specifications to the needs of the world markets, preferably by reference to British Standards where these are suitable.
The noble Baroness, Lady Seear, mentioned the Budget. Certainly we were able in the previous Budget to give improvements on profit sharing and some tax reliefs there, and of course we should have liked to have done more in this Budget, and that will have to wait for resources. We have made a start. I certainly agree with her on her Bullock points, to use a shorthand, although I think it is an important part of our philosophy about this area that it must be the firms that give the lead in working out the arrangements that best suit them with their own managers and employees. I think we share a suspicion of centralised direction of this kind, but I take every opportunity I can to say that just because the Government are desisting from centralised legislation, it does not mean that we think that this issue should lie down and go away. It is a crucial one, and again I made reference to it in my original speech.
Both the noble Baroness and the noble Lord, Lord Shackleton, and the noble Earl, Lord Halsbury, mentioned metrication. Again, the answer is somewhat the same as the Bullock point. There are no legislative obstacles to people using metrication. Public sector purchasers are committed to the metric system, but we think it best that the pace of the programme should rest with industry itself. Again it is a matter of argument, but I am not sure that centralised direction from Government other than by example, which we have in fact performed, would be efficacious.
A rather technical answer to the noble Lord, Lord Shackleton. I hope, when he reads it, he will understand it better than I do. BS5750 is readily available from the British Standards Institute. It costs £5, and it is up to firms to obtain this standard and pay the £5 for themselves. The noble Baroness asked me why it took so long to get through the Monopolies Commission. I applaud her pleasure in privatising, to use that unpleasant term. As she knows, we are proceeding as fast with privatising as we can, but of course monopolies can be troublesome in the private sector. We are aware of the problem of delays. We have recently strengthened the Commission. Where delays occur, this is usually a reflection of the complexities of the issues involved. The Commission's investigation is a quasi-judicial proceeding and the parties are often legally represented. That makes it rather 351 difficult simply to cut through with directives. New style reports on public sector bodies under the Competition Act of last year are now taking only months to complete. I think that is reasonably good news.
Apart from one or two strictures on the Budget, may I congratulate the noble Lord, Lord Gregson, on an admirable speech, with a very large amount of which I agreed. He was in favour of productivity and in favour of profits, although I thought that he associated profitability with the excellence or otherwise of one Government or another, whereas I should have thought that what firms had been putting out in wages had something to do with profits. Certainly we have a long way to go to explain to people—and here again the Bullock point is important—how important profitability is to investment, and therefore to future levels of employment and competitiveness.
The only point at which I really quarrelled, apart from the party political ones, with the noble Lord, Lord Gregson, was when he said in, for him, almost a contemptuous tone that people are buying coin in the slot Star Wars machines. It was the noble Baroness who reminded us that the consumer does really matter, and if people want to buy such things, one must not depise them and indeed one must congratulate the many British firms that even now are manufacturing and exporting.
§ Lord Gregson
My Lords, may I just make a correction on that point? I did not really say that people were buying them. The point I was making was that these were being held up as outstanding examples of sunrise industry. I consider them to be a very minor market compared with the more massive markets available in the more stable industries that exist in this country.
The Earl of Gowrie
My Lords, I am glad to take correction from the noble Lord, as long as we encourage entrepreneurs and manufacturers to manufacture things which people want to buy. It is clear that we are manufacturing these machines, that people at home and abroad want to buy them, and we are doing very well on them. One of the reasons why the Eastern bloc is in such a mess and the Far Eastern bloc is doing so well is that the latter are highly sensitive to not only consumer demand but shifts in consumer demand at any given point all over the world.
The noble Lord, like the noble Baroness, urged a reduction of the exchange rate. I do not think that there is an easy way of doing this. The pound has eased somewhat, I am glad to say, in recent days, but any Government in possession of energy and also in possession of a determined counter-inflation policy are going to have a high currency. When my right honourable friends abandon their counter-inflation policies, as I for one very much hope they will never do, then we would see a slide in the pound.
The noble Lord, Lord Gregson, asked me a question about BSI. It received a grant in aid of £2,150,000 in the current year, and on a pound-for-pound basis with industry, for the next financial year the grant will be rather over £3 million if matched by equal industrial subscription. I hope that that point, as well as the 352 point of our co-ordinating the development of quality assurance arrangements in various sectors of our industry, will give him some assurance.
The Public Sector Standardisation Team was indeed discontinued to avoid unnecessary costs, but public sector bodies have been asked to use British Standards wheresoever possible. I think in this country we are prone to think that the presence of a body to do something is a guarantee in itself that it will be done. That is not necessarily the case. One can get on and see that things are done without providing the necessary institutions.
My noble friend Lord Bessborough made an admirable speech, not least because he was not afraid to use lantern slides, and gave us instances of three companies, among many in this country, which are highly competitive and highly successful. One of the difficulties one sometimes has working in a Government department is that it is rather hard to get hold of physical slides, or not to feel that perhaps the Minister is making an unreasonable plug for a given firm, or that he will incur the ire of the competitor of that given firm if he mentions them. Therefore, I am glad that my noble friend stuck his neck out and told us three success stories. I also recommend to the House a sentence from my noble friend's speech, when he said that it is little or no good for this country to manufacture goods here which have little or no skill content. Surely that is the way in which our economy has to develop.
I hope that the House will read in conjunction the speeches of the noble Earl, Lord Halsbury, both last week and this week, as they are very much part of a piece, and they are among the most intelligent and analytical approaches to this problem that I have myself come into. I hope that he might perhaps take a leaf out of Lord Kaldor's book and have them issued by Hansard together so that we can all attend to them. He said that robots were the answer to our assembly lines, and made a point which I often try to make myself whenever I can. Of course now that we are frightened of unemployment levels, and quite understandably so, we take refuge in our industries, our old industries, and try to maintain them, but in fact if we were not frightened of high levels of unemployment we would be continuing to vote with our feet by leaving traditional heavy manufacturing industry as we were doing right throughout the 1960s and 1970s. I hope that as the recession and inflation stabilise and as confidence returns that people will see that the important thing is to automate these kinds of heavy industries and to use the wealth thereby created in other sectors of the economy.
The noble Lord, Lord Irving of Dartford, and I have crossed swords many times about energy policy. I think he certainly won one recently, and the Government, under the aegis of the NEDC report, are looking at the problems of big consumers. But for those eager addicts, or seismographs, of a U-turn wherever they may lie, I might point out that really this is not a shift of ground—not that that necessarily matters—on energy pricing, but it is an effort to understand and to compensate for the movement of sterling against very high energy consumers. We are as committed as ever to economic pricing.
On energy subjects, we had a fascinating disquisition from the appropriately-named noble Lord, Lord 353 Energlyn, and I will send it (I will do it personally through my private office) to my honourable friend Mr. Moore, who is the Minister responsible for coal. One learns something new in each debate in your Lordships' House. I in my innocent way had always associated Marie Stopes with sex, not with coal, and I am delighted to have had that cleared up.
My noble friend Lord Mottistone urged us to cut Government waste. We have the continuous example of the Rayner exercises going on now, in the Civil Service and we are taking his advice there. My noble friend asked what I meant by moving to a dear food policy, and whether it was some sinister weapon in the Government's armoury which might be unleashed. That was not the point I was making. My point was that in the 'fifties and early 'sixties, with Commonwealth preference and cheap commodity prices in the world, we in this country had cheaper food than our European competitors had in theirs, and that kept wages low and perhaps encouraged manufacturers to invest less and take on more labour. That transition has been painful to us, but it is certainly not a transition we can avoid. I shall make the point about VAT in the confectionery industry to my noble friend Lord Cockfield.
The noble Viscount, Lord Hanworth, announced that he was debating with me for the first time from the choristers' stall. I always longed to meet a Social Democrat in the flesh, and this has been an interesting and new experience. The noble Viscount said we must desist from adversary politics. I hope that he and his colleagues will promise to desist from adversary politics on behalf of the Social Democratic movement. More seriously, he made the point, with which I think we all agreed, about not downgrading the status of those involved in marketing. As a temporarily-retired commercial traveller myself, I must agree with that.
He talked about the status of engineers, and we have often debated that issue in the context of the Finniston Report. I hope it is not too material of me, but to some degree (and it may be regrettable) the problems of status are fundamentally the problems of pay. If we had lots of engineers in their 30s earning what, say, barristers in their 30s can earn, we should not have too much anxiety about status. However, I was glad to see that the noble Viscount acknowledged that the Budget gave small business the encouragement it deserves. I will see that my various right honourable friends in the various departments I represent, not least my own crucial one of Employment, take all points on board; and I am grateful to the House for having given me leave to reply to the debate.
§ 7.44 p.m.
§ The Earl of Shannon
My Lords, we come to the end of what I think we all agree has been a most interesting and constructive debate. As I forecast, many noble Lords have given us the benefit of their highly specialised and expert knowledge. Our three maiden speakers acquitted themselves with great distinction. The noble Lord, Lord Benson, referred to our self-inflicted restrictions on industry and stressed the importance of working with a common purpose. The noble Lord, Lord McAlpine of Moffat, emphasised the need for good management and sound and progressive leadership. The noble Lord, Lord Matthews, forecast the 354 necessity of modern trade union structure. I know that I speak for all noble Lords when I say that we congratulate our maiden speakers and will welcome their future contributions on the basis of their performance today.
In his original speech, the Minister noted the strong Anglo-Irish contingent participating in the debate this afternoon. Perhaps therefore I was wrong in my speech in suggesting that this debate should more appropriately have taken place before the Budget so that we really could have given the Chancellor some helpful advice. I was wrong in that because, in view of what the Minister said, the debate obviously should have taken place next Tuesday, and I would inform the uninitiated that that is the Feast of St. Patrick.
I admit that I cast a fly over the House with my statement about industrial robots reducing unemployment. The noble Earl, Lord Bessborough, almost rose to my fly but then declined it, though the noble Earl, Lord Halsbury, took the fly completely and gave a full and interesting description of how this apparent anomaly comes about. He went on to abolish the industries of at least two of our maiden speakers and for good measure, with devastating etymological logic, then destroyed the Labour Party completely.
The hour is late and it is quite beyond my ability to do justice in commenting on the expert contributions that have been made this afternoon, and already that has been well done by the Minister. I thank all those who have contributed and I hope that their expert and knowledgeable observations will be valuable to Her Majesty's Government. They might even help them repair the errors of their ways and encourage them to further efforts in the fields where they are on the right path.
Finally, I will once again refer to the figures given by the Secretary of State for Industry in his address to the National Economic Development Office; namely, that the British Government give only one-tenth of the support to research and development in industrial productivity as do the West German Government, so perhaps there is a very good case for considering whether we should improve on the figure. I conclude by once again thanking noble Lords who have contributed to the debate and I beg leave to withdraw the Motion.
§ Motion for Papers, by leave, withdrawn.