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Lord Clement-Jones: My Lords, if it were only noble Lords putting these points today, I would understand the absolute certainty with which the Minister puts the case. But he is aware that laboratory managers, the PHLS board, Unison and anyone else with intimate understanding of these laboratories disagrees with him. He has not addressed the points made. No doubt he will have read all the documents from groups such as the laboratory managers forum. He does not address the points they make.

Lord Hunt of Kings Heath: My Lords, I shall come to the detailed points raised. However, one should not underestimate the innate conservatism of people working in the National Health Service with regard to any change proposed—certainly during my years in the health service.

Lord Clement-Jones: My Lords, that includes presumably the noble Lord's colleague on the Labour Back-Benches.

Lord Hunt of Kings Heath: My Lords, I do not know to whom the noble Lord refers, but if he refers to the noble Lord, Lord Turnberg, I have had some useful discussions with him. I also know that whatever reservations the PHLS board may have had, it has pledged itself to co-operate as fully as possible with the transfer of those laboratories.

Baroness Finlay of Llandaff: My Lords, I am grateful to the noble Lord for giving way, but I must protest.

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The evidence from Wales has been that staff have transferred willingly from the NHS laboratories to the PHLS managed network. They have embraced change and the transition has been very smooth with no disruption. The staff themselves have wanted to move into a managed clinical network.

Lord Hunt of Kings Heath: My Lords, I am delighted to hear that. I take the point raised by the noble Baroness. I am keen to ensure that in terms of arrangements and co-ordination there is no fragmentation between England, Scotland, Wales and Northern Ireland. I agree with her on that.

Let me pick up some specific points. On the issue of speed, my long experience of structural change in the National Health Service demonstrates that time and again we have had great problems because change has taken place too slowly. Decisions become blighted. People become uncertain about what is to happen to them. I am convinced that the key to organisational change is that once you have decided what to do, you do it decisively, of course with due regard to the interest and concerns of the staff involved and ensuring that you maintain a stable service.

I come back to the point that the noble Earl raised about risk assessment. Surely it is right that a risk assessment should be undertaken. I do not think that there is any disagreement about that. I would expect any risk assessment to be undertaken seriously and for the relevant organisation to be as confident as it could be that it had quantified all the risks so far as possible. I believe that that has happened. I welcome the work of the HPA steering group that received the report to which the noble Earl referred. It agreed the key risks but it also agreed the action to be taken to address them. It agreed especially that interim directors would be appointed to the HPA to provide clear continuity of leadership during the transitional period. That is necessary to ensure that the identified risks are kept to a minimum.

I turn to the question of whether the effective managed network of laboratories will be undermined, or, indeed, destroyed, as some noble Lords allege. That is the last thing that we would wish. We want to encourage the existing network to be maintained in the NHS environment and, indeed, to act as a catalyst for the growth of wider NHS pathology networks. The PHLS experience gained in overseeing networks activities such as standardising operating procedures and procuring media and other supplies will now become widely available to NHS trusts. The idea that the NHS is not able to run networks runs counter to the whole direction and trend in which the NHS is going, in which increasingly care is delivered across networks.

The proposed Health Protection Agency will have a public health laboratory in every public health region. The public health and training outputs will be strengthened with the introduction of the funded public health microbiology posts at local and regional levels as well as by the inspector of microbiology who will oversee standards in service and security.

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On the question of funding, we are taking steps to ensure that all the laboratories transferred to NHS trusts are appropriately resourced and motivated to meet their public health responsibilities. We have already said that the public health funding for existing laboratories will be protected for that purpose for at least the first two years.

As regards whether public health will figure as part of future NHS priorities, we are confident that the locally based public health microbiologists, together with the new regional public health microbiologists, and the national microbiology inspector will combine to make sure that the NHS keeps an appropriate focus on public health. I have met directors of public health in primary care trusts who are as concerned as everyone else to ensure that the new arrangements work effectively. We have ensured that directors of public health will be executive directors of primary care trusts. They will be in an excellent position to ensure that future resources will be adequate to meet the challenge that is faced.

Noble Lords mentioned the supply of media for these laboratories being endangered. That is a vitally important matter. Media will continue to be procured in the existing four PHLS media production centres. Of course, some staff have concerns. We have been involved in discussions about the HPA with them for some months. But they know that they will have a future career either in the HPA, where they can have a better career path in specialist public health services, or in the NHS where they can have a better career path in pathology networks. The PHLS management is currently in the process of discussing with individual staff the implications as they affect them.

I have spoken for considerably longer than the time I am allotted to reply to the debate, for which I apologise. However, it is important that I emphasise that I have listened to noble Lords' concerns and I understand their anxieties and motivation. We all wish there to be effective arrangements in future to enhance public protection. I am confident that what the Chief Medical Officer has proposed and the implementation programme will ensure enhanced public protection. I am absolutely confident, when a decision has been made in the National Health Service, that everyone involved will do everything that they can to minimise the risks and ensure that changes are made as swiftly as possible.

Lord Clement-Jones: My Lords, I do not want to delay the Minister unduly, but will he comment on the legal authority for these changes?

Lord Hunt of Kings Heath: My Lords, we intend that the agency will be established from 1st April 2003. We can establish it now as a special health authority, to be called the Health Protection Agency, which we will do. It will be responsible for functions under the NHS legislation which are to be given to the new agency.

Our eventual aim is that the agency will be fully established as a non-departmental public body from 1st April 2004. That will be subject to legislative time being available. At that stage, it would take responsibility

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for functions currently performed by the National Radiological Protection Board. During the period when the HPA is a special health authority, we would expect the HPA and the NRPB to work closely together to prepare the merger. As for the transfer of laboratories from the PHLS to the NHS, I am reliably informed that no legislative power is needed to do that. It has been done before.

Soap and Detergent Industry

6.37 p.m.

Lord Harrison rose to ask Her Majesty's Government what plans they have to promote the well-being and competitiveness of the United Kingdom's soap and detergent industry.

The noble Lord said: My Lords, I come from the land of soap, Cheshire and the Wirral, which I was honoured to represent for a decade in the European Parliament. Cheshire contains the salt mines whose deposits spawned the British chemicals industry. The Wirral hosts, among other firms, the soap giant, Unilever. Cheshire is also the home of the United Kingdom Cleaning Products Industry Association, to which I and other parliamentary colleagues are grateful for its servicing of our all-party group.

I also come from the land of soap operas. Britain's North West is the home of "Coronation Street", "Brookside", "Hollyoaks" and north Wales's "Pobol y Cwm". The link between the soap industry and the soap operas is not accidental. The latter grew out of the playlets promoting soap products shown on TV at the dawn of commercial television. Those adverts themselves extended the established tradition of pictorial advertising promoting soap products. Indeed, the Lady Lever Art Gallery at Port Sunlight houses the wonderful picture collection of the annually chosen Pears soap girls.

Today, the soap and detergent industry generates a 3 billion turnover, employs some 16,000 people and competes successfully with rivals in France and Germany in the single European market and beyond. Indeed, in the past five years, three out of five UK CPI members have experienced export growth. Soap and detergents represent approximately one-tenth of the UK chemicals industry, so it is a strategically important industry in modern Britain.

How, then, can the Government help the industry to prosper further? First, the trade association tells us that the foam and froth of ever-growing legislation undermines firms, especially those in the SME sector. Typically, a small soap-maker in the North of England avers that implementing the integrated pollution prevention controls programme could cost 30,000 in compliance costs. The owner exclaims that it represents the difference between happiness or misery for the future of that firm. Will the Government dam that tide of legislation?

Secondly, the high-street retailers of soap and detergent products are reluctant to shoulder the costs of the legislation. Everything falls on the manufacturer or

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the consumer, thereby eroding valuable margins and profits. When considering the soap and detergent sector, will my noble friend bear in mind the strictures of the Prime Minister on supermarkets in the analogous case of the Government's dealings with the farming industry?

Thirdly, will the Government seek solutions with the industry to the vexed question of the differences in retail distribution structures in the United Kingdom and Europe?

Indeed, I move specifically to the single European market and how the soaps and detergent industry might be affected by the draft proposals found in the EU's 2001 chemical strategy paper. The application of that to the chemical industry as a whole was discussed on Tuesday night in this House in relation to the February 2002 report, Reducing the Risk: Regulating Industrial Chemicals. I will not rehearse the many points made then, but does my noble friend recognise that the industry, although welcoming the White Paper, retains real concerns? Will any EU-wide regulation system, for instance, be fast, efficient and workable? Are the proposed timescales truly realistic?

Will the Minister also agree that the proposed sizeable increase in testing of chemicals using invertebrate animals must be kept to a minimum, not only to satisfy animal welfare concerns, but to avoid unwanted additional costs? The UK CBI has calculated that such costs over the next 10 years could approach some 5 per cent of the industry's turnover, thereby rendering the industry less competitive.

There are genuine anxieties associated with any industry dealing with potentially dangerous chemicals. Greenpeace does the industry a service by pointing to possible vulnerabilities of the regulatory regime proposed by the European Union. Greenpeace believes that regulation should be based on chemical properties, not solely on a risk assessment of the practical application of chemicals. Similarly, it supports registration based on the assessment of chemical groups, rather than of individual substances. Its fears may be overblown and otherwise impractical, but the Government must, for instance, press for greater dispatch in identifying those chemicals that give rise to the greatest concerns, and ensure that they are assessed competently and promptly for the sake of continuing consumer confidence in the industry.

Perhaps Greenpeace has a more substantial point in calling for greater transparency from the chemical manufacturers in providing the relevant basic data on chemicals put on the market. Recourse to the claim that such transparency would trespass on commercial confidentiality is too often taken off the shelf as an easy get-out clause. That point was made forcefully by the noble Earl, Lord Selborne, in Tuesday's debate. The cleaning industry must come clean in all but the most clearly demonstrated commercial instances.

I congratulate the DTI—the Minister's department—on its excellent report analysing the soap and detergent industry. However, after identifying four strengths of the industry, the report lists 11 weaknesses that clearly impede the industry's competitiveness. In many instances, the Government have it in their power to help.

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The soap and detergent industry in the United Kingdom is characterised as being isolated from Europe and is suffering from an unfavourable sterling/euro exchange rate. Will the Minister press for that and other manufacturing industries to feature strongly in Gordon Brown's eventual assessment of the five economic tests as to whether we go into the euro?

Secondly, early and more stringent implementation of contingent EU directives by the United Kingdom appears to disadvantage our own British firms. What is the solution? It is not the weakening or delay of sensible legislation but a rigorous, indeed combative, approach to the Commission to oblige all EU partners to implement legislation agreed in Brussels without hesitation, deviation or repetition of past backsliding.

The DTI report also alludes to an issue in the industrial and institutional product sector, which has implications not only for the well-being of the industry, but also for the cleanliness of our hospital wards and the care of NHS patients. I understand that the lack of cleaning operation standards and agreed procedures means that some hospital trusts purchase cleaning materials from the industry solely on cost grounds when efficacy should be the deciding factor. Will the Minister agree to consult his health colleagues on that particular issue?

Classically, the industry is split between big companies and small firms. The big firms can often look after themselves, but small firms experience real difficulty, according to the DTI report, in obtaining government information, advice and help, which has so visibly helped small firms in other manufacturing sectors. Can the Government redouble their efforts to help the soap and detergent industry and the small firms within it?

Another issue is energy. Its costs fall disproportionately on this sector. Natural gas premiums, for instance, have risen 60 per cent in the past 12 months and the climate change levy has yet to kick in.

Finally, I mention the report's observations on the United Kingdom educational system, which has failed to supply in sufficient numbers employees with technical and engineering skills to match the industry's needs and ambitions. Disappointingly, the soap and detergent industry is perceived as being even less attractive to the public and to graduates than almost any other manufacturing industry. The Government can help here, but the greater burden falls on the industry itself, which sometimes displays a defensiveness and a lack of confidence that conceals its attractiveness as a career to our young people. In recruitment terms, we might say that, "It's time more young people were taken to the cleaners".

However, the situation is beginning to change and the industry is striving to give a better account of itself. I note with pleasure the industry's recent "Hooray for Handwashing" initiative, which has successfully sponsored excellent classroom materials, and which is designed for four to seven-year olds as a fun and easy way to teach children good health habits. Some 2,000 primary schools have already benefited from the programme.

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The industry, backed by the Government, must find more imaginative and innovative ways to tell its good story as one of Britain's brightest and cleanest industries. Perhaps it is time for another soap opera to tell of the every-day life of its employees, entitled perhaps, "The Port Sunlighters".

In the meantime, let us not wash our hands of this important industry that supports Britain in a widening Europe and in a cleaner world.

6.49 p.m.

Lord Razzall: My Lords, like, I suspect, a number of noble Lords, when I first saw the Unstarred Question on the Order Paper I was tempted to wonder how I was going to speak for 10 minutes without deviation, hesitation or repetition on the topic of soap and detergent. The noble Lord, Lord Harrison, did not resist the temptation to make those allusions, but I shall not repeat them here. The noble Lord has raised an important issue, and he has proved to be an accurate and adequate exponent of the views of the UK Cleaning Products Industry Association and the parliamentary all-party group on the topic. The noble Lord has raised several important issues for the Government.

I shall not repeat anything that the noble Lord said, and I shall examine the industry from a slightly different perspective. The industry has several characteristics that are not entirely shared by most manufacturing industries. That is certainly true for Unilever and Procter & Gamble, which are the two main players in the industry. Primarily, it is a brand business. One of the major characteristics of a brand business is that it is driven not by scientific or technological developments but, primarily, by a perception of what the customer wants. What the customer wants is driven, to a large extent, by Procter & Gamble and Unilever through massive advertising and marketing campaigns and not necessarily by the nature of the product. As the noble Lord, Lord Harrison, said, all of us have been brought up, through the formative years of ITV, since its creation in the early 1950s, with the massive soap powder wars between Persil and Tide, Persil and Ariel and so on. To a large extent, that has created the market, as well as fulfilling it.

The massive advertising spend of Unilever and Procter & Gamble means that a product such as Ecover, produced by a Belgian company that produces green, ecologically friendly detergent and washing machine powders, has not made the impact on the UK market that many of us would have wished. The massive drive towards expenditure on advertising also means that, when costs need to be cut, products get shelved. For example, when, two years ago, Durk Jager was replaced as chief executive of Procter & Gamble by AG Lafley, Lafley's immediate strategy was to talk about,


    "big brands, big countries and big customers".

That meant that the Procter & Gamble business strategy was to have 12 1 billion dollar-plus brands, delivering 50 per cent of Procter & Gamble's sales and

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profits. Inevitably, that meant that products were eliminated from the manufacturing process in the United Kingdom. When Niall FitzGerald faced similar problems at Unilever, two or three years ago, he admitted that the policy was to target brands. He said:


    "We want about 40 to 50 true global brands".

The interesting thing about both those quotations is that in neither case did the chief executive of the company say that what he wanted was more and better technological innovation for the customer. That raises serious issues for the industry and, particularly, the way in which the industry is lobbying the Government.

The industry must answer four major questions. It believes that it has answered them, but I would welcome the Minister's views on them. First, do the Government accept the industry's view that detergents do not biodegrade? Secondly, do the Government accept the industry's view that phosphate in detergent is not a major cause of pollution? Thirdly, do Her Majesty's Government accept the industry's view that cleaning products, detergents and soaps contain disrupters that produce oestrogenic effects in the environment? Fourthly, do Her Majesty's Government accept the industry's view that cleaning, hygiene and surface care products do not have a poor environmental and safety standard, with inadequate labelling? Those are four significant questions. The industry believes that it has been misrepresented on those four questions. It would be interesting if the Minister could give the view of Her Majesty's Government.

One of the problems with certainly the two major companies is that when they are faced with a perception it is dealt with not by technological development but by marketing. In my research for this debate, I was intrigued to read an article in the Independent on Sunday, in May of last year, in which Peter York described in the following way the Persil advertising programme that had just been launched:


    "So there's a new Persil and they're advertising it furiously, in a most singular way. A fantasy animated way that's somewhere between Teletubbies and Yellow Submarine. It's a subconscious infantile world where everything is nice and natural. The naturalness, the greenness, comes from aloe vera, which is some sort of plant mush they put in skin creams and cosmetics. Here it's a magical green Persil that makes tropical plants sprout and causes naked sexless types with funny haircuts . . . to blurp and twitter".

The point, of course, is to address and give the impression to people that Persil is ecologically clean and ecologically green. The advertising is designed to do that rather than the product itself.

I believe that that is a concern about the advertising industry and a concern about Unilever and Procter & Gamble. Although I understand that this is an important industry, I think that there is a danger that they doth protest a little too much about the way in which they have been treated.

However, there is a real challenge to the detergent industry. It comes from the development of a washing machine that runs without soap and produces clean, fresh-laundered garments every time. The Sanyo corporation launched such a machine just over a year

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ago. That will provide a significant test for the detergent industry because even in the best case scenario where the new technology results in consumers using washing products for, let us say, half of their washing needs, that will provide a massive problem for the two major companies in particular—and the small and medium-sized enterprises which are dependent on them—as to how they deal with it. In the mean time, I shall be using Ecover.

6.58 p.m.

Lord Hodgson of Astley Abbotts: My Lords, I am sure that the whole House will be grateful to the noble Lord, Lord Harrison, for having given us the chance to have this debate today. I am grateful not only for the clear and thoughtful way in which he opened the debate, but it also gives the House the chance to consider the problems of a particular industry. I find that in debates in your Lordships' House we are inclined to talk about industry in a very broad-based macro sense of that term. To be sure, there are fundamental trends at work affecting industry as a whole. We have already heard about some of them from the noble Lord and I shall want to refer to some of them too.

However, we must not forget that a macro industry is made up of a whole series of micro sub-sets—particular industrial sub-sectors all with their own particular challenges and opportunities. Finally, we must remember that those sub-sectors are, in turn, made up of individual companies in which real people work; people for whom contraction or consolidation is not a paper concept in some government office, but job losses causing at least disappointment and broken dreams and, at worst, genuine hardship and pain.

As the noble Lord, Lord Harrison, pointed out, some of the issues in the debate were touched on in your Lordships' House on Tuesday; notably the dangers of cumbersome, bureaucratic procedures and the actions of some EU member states in seeking to delay the implementation of individual directives. I do not wish to take up the time of the House by repeating that. The noble Lord, Lord Whitty, replying for the Government in the debate, did not seem able to offer much comfort, so I hope we shall fare better with the noble Lord, Lord Sainsbury, today, bearing in mind that his full title is Parliamentary Under-Secretary of State for Science and Innovation.

As regards this sub-sector, our discussions can be illuminated by the study referred to by the noble Lord, commissioned by the Department of Trade and Industry. It is a heavy study but, in contravention of what was said by the noble Lord, Lord Harrison, I did not find it convincing in part in its analysis. It seems to be contradictory. Let us take research and development and a key issue in a fast-moving industry such as soap and detergent. Despite the words of the noble Lord, Lord Razzall, the SWOT analysis in the report states:


    "Currently, the levels and quality of R&D in the sector are considered to be approaching world class standard".

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The Minister knows I am keen on world class. However, the competitive situation and analysis at Chapter 2, page 9, concludes by stating:


    "The science base is strong but there are weaknesses in R&D".

That is a critical issue and I believe that a report such as this needs to be clear about whether or not the R&D within the industry is adequate.

I must say that in other areas the report would have benefited from a good editor to remove typos, some of which make the passages unintelligible; repetitions of sentences and sometimes paragraphs; and the removal of many parts of the report which, frankly, represent no more than today's glimpse of the obvious. A section in Chapter 6, page 66, states:


    "Conversely, fewer new buildings in relevant sectors may result in reduced demand for cleaning chemicals".

I could have worked that out for myself: I do not need an expensive consultant to be told that.

Those defects affect one's confidence in the whole report, but undoubtedly it has illuminated two key issues to which the Government need to react and consider. The first has been touched upon already: it is the future role, if any, for the small and medium-sized enterprise in the consumer manufacturing business in an age of mass retailing.

I am sure that the Minister will have seen in yesterday's Financial Times the interview with Lee Scott, chief executive of Wal-Mart. It contained some challenging trends which are clearly the way of the future. We discussed some of those issues during our debates on the Enterprise Act earlier in the year. There is a balance to be struck between price reductions on the one hand—clearly very desirable and attractive—as against consumer choice and availability on the other. The noble Lord, Lord Razzall, referred to the green issue, which is an important sub-set of the whole issue of consumer choice and availability. I hope that the Minister will be able to tell us what role, if any, he sees the Government having in trying to square this admittedly intractable circle.

Secondly, I turn to the impact of regulatory directives, especially where these emanate from the European Union. The report makes clear that there is widespread concern in the soap and detergent industry and it is shared by many other industrial sub-sectors. Rightly or wrongly, it is believed that the UK adopts directives faster than its EU competitors; secondly, that it improves and gold-plates them by widening, broadening and strengthening them far beyond what is required by the original directive; and, thirdly, that it enforces the provisions more stringently and effectively than its EU competitors, thus putting firms in this country at a competitive disadvantage.

To these I would add a fourth issue—that is, that while the UK is fairly quick to bring in the legislation it is often slow to bring in the detailed guidance. Three weeks ago, just before Christmas, the Minister and I had the pleasure of debating the flexible working regulations. These regulations enable parents of young or disabled children to apply for flexible working.

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They will affect every company, big or small, in this country. They are complex and they come into effect on 23rd April.

When I asked the Minister how companies, particularly smaller companies, would be able to interpret the regulations, he told me that I should not be at all concerned about it because clear guidance would be provided. But, on inquiry, he said that it was not yet available. I will hazard a small wager with the Minister that the guidance is still not available today.

We are now 12 weeks away from the coming into force of the regulations and we still have no practical guidance for businesses. This does not help businesses to keep down the cost of complying with regulation. Indeed, it leads to an increase in complaints about the regulatory burden as a whole.

Another area to which, in my view, the report paid insufficient attention was the impact that the decline of one sub-sector has on other sub-sectors, for these individual sub-sectors do not exist in isolation. My analysis of discussions with sources within the industry suggests that if there were to be declines in the soap and detergent industry within the UK there will be significant knock-on effects in at least five other industrial sectors—that is, the trade in fats and oils; firms that purify and process fats and oils; firms that produce soda ash and other bulking agents used in soaps and detergents; firms that produce silicates; and firms that produce perfumes and fragrances.

We need to be very clear about what are these knock-on effects and how they are impacting. In his opening remarks, the noble Lord said that they do not affect only the soap and detergent industry. That is quite true. I declare an interest as the chairman of an engineering company based in the north-west which supplies the engineering industry. Our business in the UK is in steady decline because our customers are all getting smaller—down sizing, in the ghastly modern phrase—or closing down completely.

I am afraid that the inevitable conclusion is that one is forced to accept that the Government have been extraordinarily careless about and/or indifferent to the challenges faced by manufacturing industry. I have referred already to the regulatory burden, but there is an equally heavy cost burden—for example, the climate change levy, the aggregate tax levy, the landfill tax levy. Individual firms may be able to escape these in whole or in part, but no firm can escape the proposed increase in national insurance. Far from being only an additional 1 per cent on the employee—in fact, more truthfully, it is not a 1 per cent but a 10 per cent increase in the tax collected—it is matched by an additional burden on the employer.

And, of course, as the noble Lord, Lord Harrison, pointed out, no exporting firm has been able to avoid the impact of the strength of sterling.

It is no wonder that, as companies struggle to contain costs by seeking scale, they are increasingly looking to other regions, such as Eastern Europe, where wage costs are lower and where perhaps directives and regulations may be less stringently enforced. The result of all this across the UK manufacturing sector has been the loss of

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450,000 jobs since 1997, down from 4.1 million to 3.7 million. This represents 1,700 jobs every week since the Government took office—1,700 people whose dreams are shattered. That is why this House—and, indeed, the country—should be grateful to the noble Lord, Lord Harrison, for introducing this important debate today.

7.9 p.m.

Lord Sainsbury of Turville: My Lords, I congratulate my noble friend Lord Harrison on initiating the debate. He spoke eloquently on behalf of the soap and detergents industry, which plays such an important part in the history of the area in which he lives and which he has so ably represented for 10 years in the European Parliament.

As my noble friend said, this sector represents an important part of our manufacturing base, not only in the north-west but at a national level. He has given the figures illustrating its importance.

I should like to add that it is a very innovative industry and is a growth sector. Over the past decade the output of the soap and detergent industry has grown in real terms by an average of 1.3 per cent per year. So this is not a declining industry, but one of growth and innovation. Beyond its economic importance, the products of the industry play a fundamental part in the general health and well-being of the nation.

First, I should make it clear that we have done a number of important studies and have taken important action which impinges on this industry. So this is not a question of coming to the Dispatch Box and saying that we are very concerned about this: we have already taken important action.

A good starting-point for looking at the future competitiveness and well-being of the industry is the report presented to government last month by the Chemicals Innovation and Growth Team. This body was set up at the beginning of 2002 to examine the main issues and challenges facing the whole of the chemicals industry and as a focus for engagement between government and the industry.

The report recommends action in a number of areas. I am pleased that the industry has taken up this challenge in a number of key areas through the establishment of a chemistry leadership council. The report sets out a number of key areas for action: first, to seek to improve the industry's reputation, self-regulation and communication with its stakeholders.

I do not propose to enter into the debate raised by the noble Lord, Lord Razzall; namely, whether or not the reputation of the industry reflects its performance. I merely say that we believe that the chemical industry, and indeed this particular industry, should be regulated carefully because of the issues of its impact on the environment. It is to the credit of the chemical industry in its totality that it is prepared to accept the necessity for such regulation and the necessity for it to do more to communicate both what it is already doing and the further action that it will take in terms of self-regulation.

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The chemical industry leadership also believes that it has to prioritise and drive research and innovation in the industry for a chemicals innovation centre; to promote the UK as a location of choice for start-ups and investors in the chemical industry; and to define the nature of the skills issues and to work with the skills providers to improve training in the industry. All these issues impact on the soap and detergent sector. I am sure that the industry will engage fully in taking forward these recommendations. For their part, the Government are pledged to work with the industry on these and other issues to help to ensure that we continue to have a thriving and sustainable chemical industry in this country.

In addition, last year the Government published their manufacturing strategy, which highlighted the fundamental importance to our economy of manufacturing and the actions that the Government were taking to support it.

The noble Lord, Lord Hodgson, produced figures relating to the decline in manufacturing jobs in recent years. I am sure that he is well aware of the much faster decline in manufacturing that took place under the previous Conservative government.

I refer also to the specific SWOT analysis of the UK soap and detergent industry undertaken jointly by the DTI and the UK Cleaning Products Industry Association. I mention this as a lead-in to some specific points that were raised, but also to show that we are taking very seriously the competitive position of this industry.

I turn to some of the issues raised in the debate. My noble friend Lord Harrison and the noble Lord, Lord Hodgson, raised the question of the burdens of regulation on the soap and detergent industry and the effects that this is having on the competitive sector and the relative attractiveness of the UK as a manufacturing base.

The UK scores well internationally on its regulatory environment. The Government are, nevertheless, conscious of the need to maintain that advantage and to retain the right balance. We are committed to better regulation and to reducing the burden of regulation, particularly on small companies. But we think that the chemical industry should be highly regulated because of its potential impact on the environment. To achieve the right balance, the Government are stepping up their actions to promote the involvement of business and other stakeholders at an early stage. We are championing better regulation in Europe and looking to improve the way in which specific regulations are enforced to address business concerns about unfair or inconsistent enforcement.

The EU chemical strategy is enormously important. The Government support the overall aim and approach of the EU's White Paper on chemicals, on improving our knowledge about any risks associated with chemicals currently in use, and establishing authorisations on their use. We are, however, extremely concerned that the system put in place to cover the registration, evaluation and authorisation of such chemicals is streamlined, workable and focused on the chemicals of most concern.

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To this end, the Government have published a position statement, before the legislation comes out, outlining how we think key elements of the system might operate in a practicable way. We are sufficiently concerned that we produced that position paper to make very clear to the Commission that we think major changes must be made to what was initially put forward, if the legislation is to be practicable and, critically, if it is not to reduce the amount of innovation in the chemical industry. Innovation in the chemical industry will be critically important in the future. If we are to solve many of our environmental problems, it will be because of more innovation in the chemical industry. Therefore, it is fundamentally important that we get the EU chemical strategy right. The UK Cleaning Products Industry Association says that it,


    "fully supports the Government's approach as outlined in their position paper".

So, in this case, we and the industry are working together to make certain that this is practicable.

The Government have also formed a downstream users' group to ensure that the users, as well as the manufacturers, of chemicals can input into the development of the EU regulation. The soap and detergent sector is represented on that group, and we very much welcome their contributions. In many ways I appreciate that the soap and detergent industry has paved the way for some of this work through its voluntary initiative on human and environmental risk assessment. It has started the process of analysis of the risks and hazards to both consumers and the environment of the chemical ingredients in its products. This is a very welcome and positive step. I am sure that the model it has adopted and the experience it has gained from it will be helpful in framing the mechanism under which the EU chemical strategy may operate.

The noble Lords, Lord Harrison and Lord Hodgson, raised the issue of the relative power of the retailers in this country, and the relative cost pressures this puts upon manufacturers of soap and detergents. I appreciate the point. Soap and detergent companies are not alone in this complaint. But, essentially, this must be a matter for the companies concerned and the relationship they have along all aspects of the supply chain within normal competition rules.

The Government are, however, keen to help companies to reduce their cost base in their manufacturing operations and within their supply chain. To this end, we have supported a number of industry forums to help companies to look at their internal efficiencies. There is such a body for the chemical industry: the Process Industry Centre for Manufacturing Excellence, which is doing an extremely good job. I urge soap and detergent companies to take advantage of this support.

The noble Lord, Lord Harrison, mentioned hospital cleaning standards. I gather that the industry is in

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touch with the Department of Health and the Food Standards Agency about this. I will draw the issue to the attention of my right honourable friend the Secretary of State for Health. DTI officials would also be happy to support the industry in this matter with other departments.

Finally, I shall deal with two positive aspects of this industry. The noble Lord, Lord Razzall, suggested that science and innovation was not very important to this industry. In fact, science and innovation is a particular feature of the soap and detergent industry because it is an industry which needs to be fast-moving, innovative and adaptable to changing consumer demand and the needs of the environment. Consumers are looking for products giving added convenience and different effects. This is manifested in new product forms such as tablets and liquid soaps or in the move towards easy ironing and fresher smelling clothing. At the same time society demands higher standards on the effects of these soaps and detergents entering our environment, both at the manufacturing stage and after use.

I am very pleased that the soap and detergent industry of the United Kingdom has risen to these challenges. The UK hosts important centres of global R&D in some of the technologies critical to the future development of this industry. The DTI is supporting activities to bring researchers and businesses together in these key areas. In particular we have two Faraday partnerships relevant to developments on the soap and detergent industry and funded by the DTI. One is the IMPACT Faraday on the use of colloid technology to support the design and development of innovative materials and new formulated products across the chemicals industry. Clearly, that is extremely important for the soaps and detergent industry. The second is the CRYSTAL Faraday partnership to help spread the implementation of green technology and practices in the industry.

As welcome as all this is, the chemical industry's Innovation and Growth Team report has said that the chemical industry generally needs to invest more in R&D. As I have said, one of its recommendations is for the establishment of a chemicals innovation centre to act as the specialist central hub for knowledge transfer for innovation technology and product development. I am sure that the soap and detergent industry will want to play an active part in the development of these ideas.

The second area which I would like to spend a couple of minutes on is skills and training because it is obviously also something which is important to the industry in terms of contributing to higher productivity and the exploitation of investment and new ideas. Again, referring to the chemical industry's Innovation and Growth Team report, it points out that that is a particular issue for the chemical industry. I know that the quality and number of potential recruits has been highlighted as a particular concern in the soaps and detergent sector.

The Chemical Innovation Growth Team report recognises that the chemical industry needs to engage more closely with the development of the skills

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infrastructure in the country and to articulate more clearly what the needs may be. I therefore welcome its recommendation to establish a chemicals skills network to enable the industry to formulate more clearly and inclusively its priorities on skills issues through the sector skills councils and the learning and skills centres.

I hope that I have illustrated that the Government take seriously the future competitiveness and sustainable development of the manufacturing of soap and detergents in this country. Not only have we already done some of the important work with the chemical industry to establish what the key issues are, but we have also, as I have illustrated as regards the science and innovation side, taken some action to provide help.

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The industry's destiny must lie primarily in its own hands. I very much welcome what UK companies are doing, and have done, to improve their competitiveness and environmental performance. However, we recognise that the Government have a supportive role to play. We need to set a macro-economic framework for the industry's growth and development. We need to ensure that it has access to a supportive science base; we need to ensure that it has access to the qualified workforce that it needs; and we need to reflect its needs and circumstances in the development and enactment of regulation. This we will do. We will also continue to promote and champion the industry in whatever ways that we can.


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