19 APRIL 1963, Page 28

Is Britain in Industrial Decline?


WHILE we are all congratu- lating ourselves that the fallacious economic policies of Mr. Selwyn Lloyd are now so discredited that they are 'a.R,K,Zz unlikely to be revived, we

must not assume that Mr.

Maudling's budgetary expan- sionism is sufficient to stop the industrial decline which began in 1961. 1 fear that his measures are too indiscriminate, too lacking in economic purpose. To give extra investment allowances without any quality test may simply increase the quantity of useless or unnecessary investment which does nothing to help our in- dustrial competitiveness. To give bribes to com- panies to build their factories in areas of high unemployment may simply encourage uneco- nomic investment and production. Taxation con- cessions without an overall investment plan and without direction of the concessionaires may end in a waste of resources and a further in- dustrial malaise.

These arguments have been advanced before on this page, but a recent bank review prompts me to bring them forward again. Mr. Duncan Burn in Lloyds Bank Review for April reminds us that the fall in manufacturing investment since 1961 has been greater and steeper than in the 1958 period-12 per cent against 5.4 per cent— and emphasises the point I have been making: that if we are to strengthen our position eco- nomically in an international setting 'we must concern ourselves more with the pattern and quality and less with the quantity of investment.' Unfortunately the NEDC target for manufactur- ing investment of £1,500 million by 1966 (against £1,054 million in 1962) seems, as he says, to reflect the view that any increase in investment is good.

As we all know, a Conservative Government sets its old party face against the central direc- tion of industrial investment. It uses, of course, the machinery set up by Labour of the Industrial Development Certificate (required for new fac- tories over 5,000 sq. ft. in size) but although this is supposed to direct companies to areas where labour is in good supply it has not pre- vented the horrible industrial congestion of the south. The Local Employment Act, which gives grants to companies setting up in development districts, is another example of the social direc- tion of industry without economic planning. Mr. Maudling's new grants for the same pur- pose are really a further encouragement to uneconomic investment. Clearly this is not the way to plan the industrial future of the nation.

Even a Conservative Government has had on occasion to intervene in manufacturing industry in order to bring about investment of the right quality. The outstanding case is the textile in- dustry where it has given grants to firms which are prepared to scrap obsolete machinery. Here it rightly declared that it would assist firms to become efficient and competitive but would not bolster up the inefficient. It did, in fact, tell Lancashire that it should concentrate on high- quality specialised goods and leave the ordinary cloth and yarn to the poorer developing countries overseas. That surely was a good example of government investment planning. The only trouble was that it lacked bite, for many com-

panies took the compensation for closing down obsolete plant and then went out of manufac- turing altogether!

Why is the Government not giving to other industries in decline the investment directive that it gave to Lancashire textiles? Shipbuilding, for example, is crying out for rationalisation. Is the industry simply to be kept alive by government orders? Defence orders already account for 23 per cent of output and repair work. British ship- builders are up against the competition of newer yards in West Germany, Japan and Sweden and the less restrictive practices of foreign labour. There is scope here for a government-directed rationalisation scheme worked out by the indus- trial experts in conjunction with both sides of the industry.

Of course, where an industry is nationalised the Government is forced to undertake its invest- ment direction. But how embarrassing it finds its task when it is confronted with the energetic lords of the new feudalism—the public corpora- tions! Here is Dr. Beeching rationalising the rail- ways on purely economic lines without regard to political or social consequences! And there is Lord Robens waving his big stick at Mr.

Maudling when he wanted to reduce or eliminate the fuel oil tax which has made our cement exports uneconomical and added 10s. per ton to the cost of our steel! All this goes to show that the pros and cons of industrial in- vestment should be thrashed out in public at some expert planning investment board and not conducted backstairs (as in the case of Lord Robens at the Treasury) or upstairs in the House of Commons (as in the case of Dr. Beeching's plan for the railways).

Great Britain is lagging behind Europe in its spasmodic and piecemeal attempts to plan in- dustrial investment. I was reminded of our failure by an excellent article in the Westminster Bank Review of February on the Europlan Bureau. France has a small independent body called the Commissariat General du Plan which analyses and discusses proposals from official and business sources and puts up its plans to the Modernisation Commission consisting of thirty to fifty people, which includes the heads of companies, the leaders of employers' asso- ciations, the trade unions' representatives, indus- trially educated civil servants (not uneducated civil servants from Oxford and Cambridge), ex- perts from the specialised universities and even users' representatives. This system of planning has worked admirably. In Holland they have the Central Plan Bureau, set up as tong ago as 1945, which produces the five-year plans, and the Foundation of Labour, through which em- ployers and trade unions settle an agreed policy on wages. (Poor old NIC!) In Belgium they have the Bureau of Economic Programmation, which prepares investment plans for discussion by the Government's Commission for the Co-ordination of Public Investment. This is the body which is charged with the task of 'revitalising the indus- trial structure.' Only in Germany has there been any opposition to central planning. Dr. Erhard takes the view that business activity should re- main free from all State intervention. But this spirit of independence will scarcely survive the EEC attempts to unify industrial investment through the central Trogramme d'Action' which the Commission launched last winter.

Is Great Britain going to be left out in the European race for industrial modernisation? Surely there is a clamant need to adopt some- thing similar to the French, Belgian and Dutch planning organisations. At the moment we are limping along with some of the old industries still in decline while the more virile industries —steel, motors and chemicals—have temporarily over-invested and put themselves into a state of over-capacity. If nothing is done to revitalise the old industries Great Britain will go on quietly sinking into an industrial decline. The fact that our exports are already lagging in the newest type of industrial equipment which the world requires is the writing on the wall.