HC Deb 07 May 1936 vol 311 cc1903-92

Order for Second Reading read.

4 p.m.

The CHANCELLOR of the EXCHEQUER (Mr. Chamberlain)

I beg to move, "That the Bill be now read a Second time."

This Bill has already been discussed in general terms and at considerable length on the Money Resolution. The first thing I would say is that I hope the House will recollect that the Bill is not put forward as a complete solution of the difficulties of the Special Areas. Therefore it is no use to criticise the Bill on that score, because it does not pretend to be more than an attempt to solve a particular problem to which the attention of the Government has been repeatedly drawn, and in particular by the Commissioner for the Special Areas. This is an experiment which we thought it well worth while trying and which, if it proves successful, may be enlarged hereafter. Let me say in that connection that although some criticism has been directed to the fact that the capital of the company is to be only £1,000,000, the House will of course realise that that £1,000,000 can be lent over and over again. Furthermore, I would add that there is a provision in the memorandum of association that if it is considered desirable the capital of the company can be hereafter increased with the written consent of the Treasury.

The proposition is that this £1,000,000 should be in the form of redeemable cumulative shares bearing interest at 3½ per cent. and of the nominal value of £1 each, to the extent of £900,000. The remaining £100,000 will be represented by £1 ordinary shares on which the dividend is limited to 3 per cent. per annum. As I have said on a previous occasion, it is the intention that the company is to be limited to a life of ten years. In the memorandum of association it will be provided that the company shall be wound up not later than ten years from the date of its incorporation. This is really only a precautionary measure in order to limit the possible liability of the shareholders. It does not, of course, mean necessarily that if this experiment were a success it must come to an end in ten years, because it will be quite possible, in that event, by agreement of all parties, to obtain an extension of the period during which the company may function.

With regard to the constitution of the company I would say that it will have a central board of directors, who will not be paid fees, but power is taken to pay some remuneration to the Chairman, the Managing Director or the technical directors, and as I mentioned on a previous occasion it is intended to have local boards and local offices in each of the Special Areas. I have also mentioned that it was not intended as a general rule that the loans which are to be made by the company should exceed the sum of £10,000 in the case of any one concern. I know that some hon. Members rather deprecated that minimum and thought that it might exclude eases in which it would be desirable to lend a larger sum. On that I repeat that the provisions will contemplate the possibility that such a thing may happen in exceptional cases; but the whole purpose of the formation of the company, in accordance with the representations which have been made to the Government, is to give finance to small industries and not to large industries, and it is for that reason that we have put in this limit.

I think the House will see that that is quite reasonable, because there is no case made out for any necessity for special provisions of this kind in the case of really large concerns. They can find their finance through the ordinary sources. This is an experiment which is directed to meet a want which is at present said to exist, namely, that of small people who cannot get financial assistance through the ordinary sources, but who nevertheless believe that they could put forward a reasonable proposition for the financial aid which they require. I might mention, in further comment on one observation which I made on a previous occasion, namely, that the losses of the State through the guarantee which it gives could not exceed £1,000,000—that that, of course, remains true as long as the capital of the company is limited to £1,000,000, but if the capital were to be increased then of course that would also increase the possible losses on the part of the State.

Let me turn to the Bill Hon. Members will see that it consists practically of one operative Clause and a Schedule. The operative Clause is Clause 1, and that gives the Treasury power to enter into an agreement with the company, which agreement has to contain the matters set out in the Schedule. It is followed by some other provisions. If the agreement had already been entered into it would no doubt have appeared in the Schedule but as the company has not yet been formed all that it has been possible to do is to set out in the Schedule the subjects which are to form the substance of the agreement. In Sub-section (2) of Clause 1 it is provided that if the capital of the company is increased with the written consent of the Treasury, then paragraphs 5 and 6 of the Schedule may be modified, and the purpose of it is that if the capital were increased it might be necessary to make some modifications in the arrangements for the liquidation of the company, which form the subject of paragraphs 5 and 6. Sub-section (3) provides that the Treasury is to lay before Parliament a copy of the agreement when it is made, and of any further agreement, if any, which may modify the original agreement. Paragraph 4 is a machinery provision.

Clause 2 is merely a Clause to exempt the company from the provisions of the Moneylenders Act. Then I come to the Schedule which really contains the greater part of the information in the Bill and sets out the scheme. The first paragraph provides for the payment by the Treasury of the preliminary expenses of the company and subsequently of the costs and expenses which may be incurred when it is wound up. The second paragraph deals with the payment by the Treasury of the expenses of administration. In this case the payment is to be an annual one, but there is a limit of £20,000 in any one year of the Treasury contribution towards the expenses. The third paragraph deals with the Treasury contribution to the losses reserve of the company, and that is limited to the sum of £100,000. The fourth paragraph is perhaps a little complicated, but it is necessary because the scheme is a little complicated in this respect. I can perhaps explain what I mean in this way: The first year's loans are to be taken by themselves. Suppose therefore that in the first year the whole of the capital were lent and it were then to return without loss, when you came to the next time the capital was lent, if there was a loss the 25 per cent. guarantee would not be calculated upon the addition of two years' loans, that is on the £2,000,000, but only on the second year loans, the first year having been treated as entirely an independent transaction. Therefore if the whole of the capital were lost on the second lending the Treasury contribution would be limited to £250,000, in addition, of course, to the £100,000 provided for in paragraph 3.

As I have said, paragraphs 5 and 6 deal with the provision in case of winding up. They show how any surplus which may remain after the payment of the company's liabilities is to be distributed in that event. The order of priority for the distribution of this surplus would be as follows: One, the amount paid up on the initial share capital of the company would be returned to the shareholders; two, the sum of £100,000 which the Treasury will have contributed as a reserve against losses will be repaid to the Treasury; three, the preference shareholders will receive any arrears of dividends on their shares; four, the ordinary shareholders will receive whatever is necessary to give them from the origin of the company a rate of interest amounting to 3 per cent. at simple interest for each year; five, the Treasury are to be repaid any sums which they have paid to the company under paragraph 1, that is to say, initial expenses and winding up expenses.

If the company's capital should at any time be increased it might be necessary to give the shareholders for the increased capital the same rights of priority as those of the original shareholders. Otherwise it might be extremely difficult to raise money. That is what is meant when in Clause 1, Sub-section (2), it is provided that paragraphs 5 and 6 of the Schedule may be modified in case of any increase in the capital. The purpose of the modification would be to give the new shareholders the same rights of priority as the old ones. Paragraph 7 provides for the certification by the Treasury, a mere matter of financial machinery. Paragraph 8 is a provision to protect the Treasury against any alteration made by the company in the articles of association, if such an alteration would affect the matters set out in the Schedule. For example, if the directors resolved to increase their capital without the consent of the Treasury which is called for in the Bill, the Treasury will be exempted from any liability.

I have dealt, shortly but I hope clearly, with the matters contained in the Bill. In view of the fact that we had so long a discussion upon the subject matter of the Bill, I do not propose to say any more at the present time. If particular questions are raised in the course of the Debate my hon. and learned Friend the Financial Secretary to the Treasury will have great pleasure in answering them later.


Who will float the company, and will the Government appoint any directors?


The directors will be appointed in consultation with the Treasury. In the formation of the company everything will be done in consultation with the Treasury.


Will the Bill apply to any area which may subsequently be classified as Special?


No, Sir. This Bill can only apply to the Special Areas as are now defined. I made it clear on the previous occasion that we have all along considered that any experiment which we are trying in the Special Areas and which has proved successful on that limited scale, may subsequently be applied to other areas where it is shown that they could be usefully applied.


May I ask about the rate of repayment? Has any agreement been entered into with regard to the loan capital? Will there be a minimum rate of repayment of the capital?


I am asking my hon. and learned Friend to deal with that in his reply.

4.18 p.m.


The Chancellor stated that the Bill is experimental and that it is a complicated Bill. I consider the Bill very complicated on its financial side. I am glad to have the opportunity of calling the Chancellor's attention to the situation of the distressed areas in Scotland which were not dealt with on the occasion to which he referred, when the Special Areas were first considered. I do not pretend to be a financial expert, and nobody who knows me would expect me to be, but I am satisfied that there is justification for the statement which I am making that the Bill, notwithstanding the more or less diffident promises made by the Chancellor of the Exchequer, will be quite insufficient to meet the needs of the Special Areas.

What are the Special Areas? The Bill does not make any reference to the position in Scotland, and I would like to draw the Chancellor's attention to it. The Special Areas represent, roughly, 42 per cent. of the total population of this country. I believe that statement to be substantially correct. The Special Areas are the whole of the North-East Coast of England and the West and North Ridings of Yorkshire. The money is not sufficient because the areas are much larger than the Chancellor evidently has in mind. The distress, which is the reason for the introduction of the Bill, is as keen and as severe in York and Lancaster as in Durham and Northumberland. I hope to be able to give evidence of the truth of that statement.

I am not a financial expert or one of those people who are supposed to be capable of putting forward constructive ideas, but I am going to read the opinions of gentlemen who belong to the same school of thought as the majority in this House, and who are recognised as men of constructive capacity and ability. There is distress in South Wales and in North and Central Wales. In addition, there is the whole of the Clyde Valley, and the four counties of Lanark, Renfrew, Dumbarton and Ayr. The situation is so serious in those four counties that the whole of this money could be spent, with very little real advantage to those who are supposed to benefit from it. That is the position of the Scottish areas, and it is well known to the Chancellor, because last year his attention was specifically drawn to the serious situation which confronted the local authorities, and he was invited to allow those authorities to submit their case. He refused to agree.

I have been asked to draw attention to that point, and I hope that the Chancellor will be prepared to meet the repre- sentatives of the local authorities, not only of Scotland but of England and Wales, and to discuss with them their difficulties in recent years. This is not only a question of months but of a series of years. While I do not agree with the politics of the Chancellor of the Exchequer or of the Government with which he is associated, I agree that he can put a fairly decent case and that he has considerable courage. I should feel very sorry if he were unwilling to meet the representatives of the local authorities. They are particularly anxious to put their case to him. I sincerely hope that he will be prepared to change the attitude he adopted last year and to meet these people. No harm would be done, and most of the gentleman are members of his own political party. They would be willing to accept any decision which might be the outcome of such a meeting. I particularly appeal to the Chancellor to concede the request which I am making on behalf of the local authorities. If he will allow them to have a discussion on the definition of the distressed areas he will satisfy members of all parties.

Let us come to the position of Scotland I want to give the evidence of men who have constructive capacity and who are recognised by our political opponents as men of financial probity and ability. I am going to read from the Annual Survey of the Clydesdale Bank on the economic position in Scotland. Referring to the prosperity so much acclaimed by the present Government, they say: It must be observed that although recovery is still proceeding it has not brought Scotland up to the level of business activity attained in Great Britain as a whole. Statistics of unemployment demonstrate this fact and place Scotland quite definitely among what might legitimately be called the 'depressed areas'. The writers of that statement do not speak of a part of Scotland but of the whole of Scotland, and they are correct. The unemployment index makes it plain that distress is not confined to Scotland or to the Clyde Valley. It extends as far north as Sutherland and Caithness, and south, below Glasgow. The unemployment index for Scotland was 21.3, for the north-eastern part of England 20.7, for the north-western part of England 19.7 and for Wales 31.2. The last figure is the average for the whole of Wales. Practi- cally one-third of the population is compulsorily idle and has been so for a number of years. That area is reasonably entitled to be called a distressed area. The survey goes on to say, referring to Scotland: Comparing with the averages for three years earlier, the figures for those four areas have fallen by 6.4, 7.8, 6.1 and 5.3 points respectively. Thus the experience of all four in the recovery phase has been roughly similar; it corresponds, moreover, with the recovery record for Great Britain as a whole, though the remaining level of unemployment in the four areas is still disproportionately high. I do not want to be in any way personal, but I am satisfied of this, and I have been for a long time, that if the unemployment question had affected the Birmingham area in the same way as it affects the Glasgow, Liverpool, and Newcastle areas, there would have been a very different attitude of mind on the part of the Chancellor of the Exchequer. The men and women living in the areas to which I am now referring are just as capable, hardworking, sober, temperate, and good citizens as those in any part of the country, and we are entitled to ask that the Government should be a bit more generous in their treatment of these areas. The Clydesdale Bank go on to say, referring to the statements made by the Commissioner for Special Areas in Scotland: His own statements show in what various ways it has been possible to encourage business enterprise, yet it seems evident, as in England, that he is unduly hampered by the severity of some of the restrictions placed on his activities under the terms of his appointment. Shall we have any assurance that the restrictions will be any less severe under this Bill than they have been hitherto? They go on: There is at this stage a clear case for full and sympathetic re-examination of the powers of the Commissioners, looking to the removal of all unnecessary impediments to the more complete fulfilment of their task. Recognising that the areas concerned are truly 'special,' they need special methods of treatment, even at the cost, if need be, of some reasonable departure from old established notions of the precise dividing line between private enterprise and public activity. That is not a statement made by irresponsible persons, but one made by men who have to a very large extent to meet the claims of those elements in the dis- tressed areas who are not manual workers. It is sometimes forgotten that the small shopkeepers and the various other tradespeople are almost as badly affected by the depression in those areas as are the ordinary workers themselves.

I understand that Sir Arthur Rose has resigned, and that means that we have no Special Commissioner for Scotland now at all. I should, therefore, like to ask the Secretary of State for Scotland whether any action is being taken by his Department to appoint a successor. I understand that Sir Arthur has been compelled to resign on account of ill-health, and I do not wonder at it. I believe he has had a pretty severe task imposed upon him, with very little encouragement and little hope of any real advantage being utimately secured to these areas. It is a most disheartening and dispiriting job, and I personally would be very unwilling, to say the least of it, to have anything to do with a work of that kind.

While I am not a financial expert, I know something about the mining industry, and I should like to draw the attention of the House to the situation in Scotland. I am taking, again from the Clydesdale Bank report, the figures which they give. They show that in 1920 there were 147,323 persons employed in the Scottish mines, and that in 1935 that number was reduced to 82,849, a decrease of 64,474, equal to 43.7 per cent. That is to say, only 57 men are now engaged in the Scottish mines where 100 were engaged or could have been engaged in 1920. In Lanarkshire the position is worse, because there the number of persons now employed in the mines, as compared with 1920, has fallen by over 51 per cent. But the most remarkable feature in the figures given by the Clydesdale Bank is that they tell us the production of coal in Scotland in the two years which I have named. In 1920 the production of coal was 31,524,000 tons, and in 1935 it was 31,536,000 tons, an increase of 12,000 tons, during a period in which 64,000 men had gone out of the industry. There is no work for these men other than the work that may be given to them by local authorities, at least to a very large extent. Thousands of these men are travelling miners looking for work and not being able to find it.

Thousands of them have been idle for the last 10 years, are no longer entitled to unemployment benefit, and are compelled to resort to the public assistance committees for the means of sustenance.

Evidence as to that position is to be found in a book published last April by Allen and Unwin, entitled "The Home Market." That book tells us—and I have no reason to doubt the accuracy of the statements made in it—that the persons in receipt of poor relief per 10,000 of the population in Great Britain on 1st January, 1934, were 384, and in 1935 they were 450, an increase of 66. In England and Wales the numbers were 346 in January, 1934, and 364 in January, 1935, an increase of 18. In Scotland the numbers were 696 on 1st January, 1934, and 1,160 on the same date in 1935, which shows an increase of 464 persons entitled to receive public assistance per 10,000 of the population. I do not want to weary the House with a long speech. I know there are many hon. Members who want to speak, but I have rather shortly indicated the condition of affairs as far as Scotland is concerned and the problems affecting the local authorities in those areas.

I will conclude by asking the Department over which the Chancellor of the Exchequer presides, the Department presided over by the Secretary of State for Scotland, and also the Cabinet to take a much more serious and more generous view of the situation in the distressed areas than has evidently been taken up to the present time. I can quite appreciate the anxiety of a large number of our friends and political enemies on the other side for a considerable expenditure for defence purposes, but when they are spending any amount of money for building ships and making it comparatively easy for men to get into the Army, either the Regulars or the Territorials, and the Navy, they are forgetting that the men are of comparative unimportance unless they have a good, sound training before they enter the Army or the Navy at all. They are forgetting that the man is more important sometimes than the machine. In the areas that we represent the vast majority of the men who rendered service during the Great War were men who came from these particular areas. They are deteriorating, and I look forward with fear to the possibility of anything in the nature of war occurring similar to that which we all lived to go through from 1914–1918, with the type of men that our country is now producing in those areas and from which the country drew a very large part of its support in those fateful years.

My last words will be to appeal to the Chancellor of the Exchequer and to the Government to be much more generous in their treatment of these men and of their dependants, and to recognise that, while we cannot pretend to have the information that would enable us to deal with the points raised by the Chancellor in his opening speech, we have a knowledge of the conditions under which these people are living, and we appeal to him, and to the Government, and to their supporters to endeavour to ensure that a very large measure of fairer treatment should be meted out, not only to the men engaged in the various occupations in those areas, but to the large percentage of the population, who are almost as badly placed as they are, belonging to the distributive and other businesses. I believe I am correct in saying that we do not propose to vote against the Second Reading of the Bill. It is something, though not sufficient, and we hope that in time further provision may be made. We put the very best construction on the statement of the Chancellor of the Exchequer that this is only an experiment and that, if it is found necessary for more money to be provided, he will be prepared to consider it. I hope he will consider favourably the point of view which has been put from this side of the House.

4.45 p.m.


I feel that I must apologise for choosing the present occasion to intervene for the first time in debate. I am afraid that many Members with a much more intimate knowledge of this subject than myself may well wonder why it is that I, who have the good fortune to come from one of the most properous areas in the United Kingdom, should not have kept silent on such an occasion as this. But this is not a local problem; it is a national problem; and anxiety about these particular areas is not confined to the areas themselves. As the Chancellor of the Exchequer knows, there is in Birmingham grave anxiety about the depressed areas, and I feel bound to say that there is a very general feeling that the Government are not facing up to this problem. There is, I believe, in our people a very acute social conscience, and the social conscience of the nation has been very deeply stirred by what is happening in the depressed areas. This Bill does very little to relieve the idea that the problem is being trifled with. If the Government had brought forward the Bill as an item in a general programme, whether a long-range programme or a short-range programme, it would perhaps have been better.

Are we dealing with this problem in the right way? Is it really a problem of depressed areas? Is it not rather a problem of depressed industries? It seems to me that one can envisage a situation arising in a few years' time of industrial depression—depression in certain industries—which has nothing to do with areas, but which has to do with industries. We may be faced with identically the same problem of depression, and, unless on this occasion we attempt to deal with the problem on correct lines, we shall have no idea how to deal with it if it arises in the years to come. This Bill has been introduced, very rightly, because the Commissioner suggested that it should be introduced, but I feel bound to say that the opinion of the country is that the appointment of the Commissioner—and one pays full respect to all the good work that Mr. Stewart has done—has not relieved the Government of responsibility. There is a feeling that it would be far better if this problem of the depressed areas were being dealt with by the Minister of Labour. My right hon. Friend the Minister of Labour has a great reputation in the country, and one feels that this growing delegation of responsibility to bodies outside Parliament is neither popular nor very satisfactory.

The Chancellor of the Exchequer has told us nothing this afternoon about the effects of the Bill. We have not been told whether there are industries waiting and anxious to start in these areas, or how many are waiting for the word "Go." As soon as this Bill is on the Statute Book, will the industrialists start industries in these areas? We have been told nothing about that, nor have we been told anything with regard to the employ- ment that is envisaged as a result of this Bill. I venture to ask the House to consider whether we are dealing with the problem in the right way. My right hon. Friend said some time ago, "We expect losses," and it is provided for in the Bill. But I would ask the House to consider the psychological effect on a man who has been out of work for a number of years—say a coal miner—and who gets occupation in one of these new industries, if six months later that industry, which was going to give him a chance of life after many years' unemployment, fails. What is the psychological effect, not only upon him, but upon his family and friends, and, in fact, upon the whole area? If a new industry comes in and then fails, that is bound to have an appallingly tragic and depressing effect on the whole circle of those who know that this new industry has failed, as the old ones have failed.

Like many other Members, I have taken some trouble to try to find out why these light industries have not gone to the Special Areas. I have in my division a trading estate. Hon. Members opposite were inclined to laugh at the idea of trading estates, but I can assure them that these trading estates are extraordinarily successful. Knowing that this Bill was coming on, I took the opportunity to ask them to give me their opinion as to why it was that the light industries were going to the trading estates, particularly those at Slough and at King's Norton, and why they are not going to the depresed areas. They gave me their opinion, and I give it to the House for what it is worth, because I feel that we are bound to consider these questions in deciding whether we are dealing with the problem effectively.

The first reason they gave was that of proximity to markets, the importance of which everyone admits. The second was that these light industries are both manufacturing and selling industries. They are a combination of the two, and at least 50 per cent. of their effort is spent in selling. There is a big saving both in effort and in finance if they are placed near to their biggest markets. The third reason was that many of them are run by small employers. They are owned and organised by the small man, and he, apparently, prefers to live either in the Midlands or in the South. I do not say that that is light; I am only saying what is the opinion of the trading estate. The fourth reason was that nowadays it is generally considered to be both cheaper and more convenient to bring your raw materials to your manufacturing establishment, rather than, as previously, to take your manufacturing establishment to your raw materials; and I am told, though I was not able to secure any figures, that there is a definite advantage in freight rates. These are circumstances which we have to take into account in considering this Bill.

A feeling has often been expressed that the concentration of new industries near to their markets, and the resulting concentration of population near to big towns, ought not to be encouraged, but it is a perfectly legitimate and normal trend for industry to go as near as possible to the big centres of population. In 1921, when the balance was more towards export than towards domestic trade, one-half of the population of Great Britain lived within 15 miles of the ports, which, after all, were the gateways to their markets. Since the balance has gone over, and now the domestic market is on the up-grade and the export market is on the down-grade, it is natural and obvious that population and industries should be concentrated near these centres. The only thing which interests the House is the action of the Government in relation to this trend, and I venture to put to the House the suggestion that the duty of the Government, and the only way in which a government can assist industry, is to accelerate the natural trend of industry, rather than to take some artificial means of stimulating what I might call unnatural development.

I do not think that we have considered, and I am not certain whether my right hon. Friend has considered, the effect that this Bill is going to have upon the national development of industry, but it is only by surveying industries as a whole that we can hope to find any solution of this problem. It is no new problem. The Balfour Committee on Industry and Trade, which many of us would have liked to see continued as a permanent body, dealt very fully with this problem of depressed industries, and I am bound to say, without, I hope, getting into any controversy with hon. Members opposite, that when they take, as they are rather inclined to do, this problem as their particular business, I think that we on this side of the House are entitled to ask them why they never did anything to face up to the problem in 1929–31. The problem existed then. I say it without offence, but they did very little towards the problem, although it had been going on for some time, and it would have been far easier to find a solution for it in 1929 than it is in 1936.

In trying to find a solution of the problem of the distressed areas, we have to look at the problem from two angles—first, from the point of view of the relation of the State to industry, and, secondly, from the point of view of the relation of the industry to the people who work in it. As regards the relation of the State to industry, I would take the point with which the hon. Member for Hamilton (Mr. D. Graham) concluded his remarks, namely, the question of national defence. My right hon. Friend the Member for Epping (Mr. Churchill), in the Defence Debate, made a, great point about skilled labour and national industry in connection with the whole question of defence, and I would ask the Government whether they can afford to let the docks fall into disrepair, to let the shipbuilding industry break down, to let the miners drop out of work. Can they afford to allow any body of skilled labour which they may find it necessary to draw upon in the future to run to seed? Some of the most tragic passages in the Commissioner's report are those in which he deals with the decay of craftsmanship, and I think it is deplorable from the moral point of view as well as from every other point of view to allow craftsmanship in any volume of the population to run to seed.

In considering the industry and those who are dependent upon it for their livelihood, we are bound to accept the fact that, in what I would call the essential, the great trades of the country, labour has a definite vested interest, just as much as capital has. It is essential that we should realise that in these essential trades capital and labour have equal interests. Capital has some form of protection through its mobility, and we can only balance that by giving some sort of protection to labour. If one accepts the points which I have submitted to the House—and, unless one accepts them, one can find no solution for the problem of the depressed areas—one is forced to the conclusion that in the essential industries there must be some form of public control. With that there are very likely, and, indeed, bound, to be subsidies, increased wages, better conditions and so on. It seems to me that in this Bill we are subsidising, and subsidising with very little control.

I would like to ask my hon. Friend who is going to wind up the Debate where is the market for the goods which these light industries will produce? Are the Government looking solely to the depressed areas for that market? If they are, I am afraid they will be disappointed. If they are not, and if the goods are going to be sold in the ordinary industrial market, we shall have Government-subsidised goods competing with the goods produced and turned out in the ordinary Way extremely economically by existing light industries. From that point of view the principle of the Bill is quite untenable. I am not against subsidies, but, if we are to have subsidies, we must have them with control; and it is far better, if there are to be subsidies, that they should be paid direct to the essential industries, where they would be far more useful than if they were paid to light trades.

I must apologise for having detained the House so long, but I would beg leave to submit one or two more points. I think labour has to play its part. We have every right to ask the trade unions to look into the whole question of apprenticeship. Take the question of boys and girls in the distributive trades. I am appalled at the enormous number of boys and girls who are going into those trades. A quarter of the boys and nearly a quarter of the girls in work are in them. It is not very healthy, because many of them are blind-alley occupations. If we are to solve the problem, we have every right to look to the trade unions to give us their support in thinking it out. We are all in favour of some sort of transference. but I would far rather that it were family transference. Individual transference is of very little use.

I see the hon. Member for Ebbw Vale (Mr. Bevan) in his place. Last week I came across two young men who came from his constituency and I discussed this problem with them. Their whole point was that, unless they were able to bring their families to Birmingham, which they would like to do, they must give up their jobs in Birmingham and go back to Ebbw Vale. I can see no way out of that unless we adopt the system of family transference. We may be faced with a demand for skilled labour from certain trades which we are quite unable to satisfy because we have taken no trouble to train boys and girls. On all estimates, there is going to be an acute shortage of skilled labour in 20 years' time and there will be some shortage in 15 years' time. We ought to begin now to start trying to estimate what our industrial requirements will be, and also try to work out how we are to cope with the shortage of skilled labour. I am certainly not against the Bill. By all means let us have it. There is an uneasy suspicion that there must be some gap in the financial machinery of the country to account for the introduction of the Bill at all. I should like to see it extended so that any small industry requiring money could come and demand it. It applies only to the Special Areas. Such as it is, we are bound to accept it, but let us not delude ourselves that it will assist the problem in any way. Above all, let us not delude with false hopes those men and women in the depressed industries who for too long have held out, their craftsmanship disappearing, their faith vanishing, against growing misery and neglect.

5.3 p.m.


I should like to congratulate the hon. Member most heartily on a speech which was not only attractive and informing but extremely courageous. He has faced not only the actual problems of the Bill but the problems underlying it with a comprehensiveness which has commanded the admiration of all who have heard it. I do not intend to go as widely as he has done or as the hon. Member did who opened the Debate. I shall confine myself to the actual provisions of the Bill. But I am very glad that we have had this background given to the Debate and I hope the Financial Secretary may be able to reply to some of the questions that the hon. Member has put to him. In a way what is wrong with the Bill is its Title. It is very misleading. When you read it you expect to find all sorts of things inside it which obviously are not there. The Title suggests that this is the Government's programme for reconstructing the Special Areas. We have had it from the Chancellor of the Exchequer already that that is exactly what it is not. It addresses itself in fact to a very modest proposition in a very modest way.

As an experiment I am glad to welcome it, though I feel I am displaying a considerable amount of magnanimity in welcoming it, seeing that it does not affect the area that I represent. The line of criticism which would suggest itself at first is that the amount of money is insufficient, and it sounds an extraordinarily small sum when taken into consideration together with the title. Of course the actual result of the matter may be exactly the other way. It may turn out that what is wrong with the Bill is that, the money having been provided, there will not be enough applications for it. We are entirely in the dark as to what kind of demand there is likely to be, because it is important to see that the reconstruction, so far as there is to be reconstruction, is not being done by the Government. The Government are not taking the Special Areas in hand and reconstructing them. Even this company that is to be set up is not going to do the reconstruction. The company, as I understand it, sits there ready to receive applications from people who think that with a little financial help they may make a success of a light industry in a distressed area. The extent of the success of the Bill depends in no small degree on the number of people who are optimistic enough to think that, if they get assistance, they will be able to carry on.

There, of course, the question of consuming power 18 of the first importance. If the main industries in the areas are going to remain depressed, with a lot of their people out of work, and those people still on the family means test, which is keeping them down to the barest subsistence level, the chance of these light industries finding a market in the areas is bound to be very small., Therefore, let us by all means welcome the Bill but let us realise its necessary limitations. I believe it may be of use and, if some good is going to come out of it, I should like to have such advantages as there are for the area that I repre- sent. I am sorry to bring this grievance up time and again, but it is necessary to emphasise on every possible occasion that, whenever we are dealing with what used to be called the distressed areas, we are brought up against the Schedule of the Act of 1934, and it is an unscientific and false basis for dealing with the problem. I am sure that it was never intended by the hon. Gentleman who is now Secretary of the Overseas Trade Department that the districts which he happens to have visited should become the permanent bases of legislation. It is not reasonable.

To some extent the Chancellor has met this point, which I endeavoured to make on the Financial Resolution, by saying, "This is not our last word. If we find that the provision of these facilities is a success in the Special Areas we shall think about extending them further." If the right hon. Gentleman really thinks there is a prospect of that, why not make some provision for it in the Bill itself? It surely would be easy enough to provide some machinery whereby the Schedule could be added to, or whereby other areas besides those mentioned in the Schedule could be brought in for the purposes of this Bill. By not doing that the Chancellor gives himself and the House the trouble of having to begin all over again, to go through the stages of a Financial Resolution, Second Reading and Committee, and the stages in another place, when he need not make two bites at a cherry at all. He could have done it all at one and the same time.

I should like to ask the Financial Secretary whether he can help me on this point. In the Act of 1934 there was a provision that assistance could be given in promoting work outside the Special Areas if it could be shown to be for the benefit of those inside the Special Areas. How far it has been used I cannot say, but in this Bill at present there is not even that amount of elasticity. As far as I can gather, the persons must have their premises actually inside the ringed fence set up by the Schedule and, even though if they are outside they might be drawing their workpeople from inside, as far as I can see they would not be able to apply for financial facilities. Would it not be possible within the Title and Preamble of the Bill to put in an Amendment which would give that amount cf elasticity? I should not be satisfied with that, but I should like to have it. Doubtless the financial provisions, which are necessarily somewhat complicated, will be subjected to keen scrutiny in Committee so that we may see that there is adequate security for getting the best value out of the money that is provided. I welcome the Bill on the basis of the Chancellor's statement that he did not regard this as the Government's programme, but rather in the nature of a modest answer to a particular suggestion made by the Commissioner. On that basis it is welcome but, regarded as a solution of the problem, it would be fantastically inadequate.

5.12 p.m.


I should like to add my encomium to that which has been so gracefully pronounced on the speech of the hon. Member below me. He displayed a facility which at the end of a long Parliamentary career I have not yet for myself achieved. The House will listen to him on many subsequent occasions with the same pleasure and admiration that we have felt to-day. Like the hon. Member who has just spoken, I shall not venture to tread over so wide a field as the hon. Member did in his maiden speech. This is indeed a very small Measure, and I gather from the Chancellor of the Exchequer that it does not pretend to be anything else. But everyone, especially those who come from the distressed areas, is glad to welcome any kind of mitigation of the evils from which we are suffering, and I do not think any of us will criticise the Bill on the ground that it does not solve the whole problem. Any Measure which solves any part of the problem is something that we will receive with open arms.

The difficulty which this Bill is meant to solve, as I see it, is the question of finance. There is in our financial system at present a gap which requires to be filled in the way of providing capital for extending businesses of small capacity and size, or for the starting of new industries. The usual experience of small industrial people is that, while there is capital available for very large ventures, which the issuing houses will welcome, there are very few facilities for the small man who wishes either to start a business or to extend it. Banking facilities, as the House will well understand, cannot extend over perhaps the loan of a year, and the whole banking system of our country involves the principle that you must always be sure of getting your money back, and getting it back quickly, if you are to be able to satisfy your depositors at any moment they choose to abstract from your bank the money which they require. Therefore, sound banks will never grant loans for which they do not see the prospect of being rapidly repaid. The man who wants, say, £10,000, which he cannot possibly pay back within a period of five or ten years, cannot get banking facilities, and, on the other hand, he cannot get the benefit of the aid which he might obtain if he were going to make a very large issue of capital from the great issuing houses.


As the right hon. Gentleman knows more about this sort of thing than anyone in the House, will he enlighten the House by stating why banking and insurance houses have practically ignored the small men who are included in this Bill?


Oh, no, I think that any kind of suggestion that banking has been reluctant to lend money upon any kind of reasonable security is entirely fallacious. The experience of anybody connected with any form of banking is that no such instances exist. The banks have run far more risks than they would ordinarily have run during these times of difficulty. It has been the experience of all of us. I have been endeavouring to explain why it is that for a man who wishes a small amount of capital for an extended period, the facilities at the present time do not exist, or that they exist in a very small measure. There are certain houses which have taken up a very restricted amount of business of that kind. What the Government are doing, and I hope to the advantage of small industrialists, is to provide means by which capital will be advanced to such people. In order that the Special Areas shall receive the primary advantage, benefit is being conferred upon people who undertake to start businesses within the Special Areas, thus giving them an important inducement. In that way business will fructify and the special Areas will benefit, and from that point of view I heartily welcome the Bill.

The attractions of the Special Areas are not very great, if you wish to start business at the present time. My hon. Friend sitting below me read out a list of the disadvantages which apparently some of his Friends have indicated to him, but he omitted entirely to put what is, after all, the most important disadvantage which deters people from going into Special areas. It is that they are the places with the highest rates in the country. Whatever advantage business may get from the rebates in rates, everything else is made more expensive because of the terrible rates the general community have to bear. People most therefore be induced by some other compensating advantage. No one pretends that the proposal in this Bill is more than an experiment, but it is an experiment upon which, if successful, we shall all congratulate ourselves, and, as the Chancellor of the Exchequer says, he is willing to find more money for the purpose if success attends his efforts.


It is not only a question of money to start new industries, but the financial embarrassment in industries already existing, and can the right hon. Gentleman amplify that position?


I am not responsible for the Bill. I am taking the Bill as I find it and accepting it, and talking of its financial prospects. Therefore it is not in my province to make any reply on that particular matter. The question was raised with regard to markets. It is a mistake to suppose that there are not good markets within the Special Areas. There are still good markets among those great communities. Industry is being carried on. They are not absolutely derelict. There are great coal communities and great iron and steel enterprises, one of which, I am glad to think, is being re-started at the present time in the constituency of the hon. Gentleman the Member for Ebbw Vale (Mr. Bevan). These are great markets, and one of the things which are so distressing at the present time is that these great companies in the Special Areas are compelled to go outside for many parts of their equipment which they ought to be able to purchase within their own community. For example, on the Clydeside there are several instances. There is the absence of many industries which otherwise would be able to supply small portions of the equipment of ships which sail the sea. One of the things which I should like to see established, and what I am glad to think may be established because of the inducement of this Bill, is minor industries of that character, which would feed the great industries within the Special Areas. From every point of view, therefore, I welcome the Bill.

I think that the hon. Gentleman who led the Opposition in this matter to-day, in talking about the question of the increase of our defences failed to realise the extent to which the Special Areas will be benefited by the work given by the Government for the improvement of our defences. I am delighted to think, upon the question of crafts, which my hon. Friend below me raised, that a great many people will be brought into the crafts of this country where at the present time we have almost a complete absence of men who can use their hands. I hope and expect that we shall have a great many more of these people than we have had in the recent past.

In alluding to the criticism made by the hon. Gentleman the Member for West Middlesbrough (Mr. Griffith), I think that it is a pity that this benefit is to be confined to areas as described in the terms of this Bill. It is impossible to draw a line round an area and say that that is a Special Area to which distress is confined. In fact, distress spreads itself over all the margins of its own area, and into the areas surrounding it. I could give repeated examples of work being given in what is described as a distressed area and being refused in another area far more distressed than the one alongside it, simply because it does not come within the Government definition in the Schedule.

There is no more distressed community in this Kingdom than Glasgow. It does not form one of the Special Areas in the Schedule of the previous Act, but it is far more distressed than many of the areas round about it which are so described. In consequence certain Government orders were being given entirely outside Glasgow on the ground that Glasgow was not a Special Area, and yet an order to Glasgow would have done far more for employment in Scotland than the firms obtaining those orders in areas outside. That is a practical illustration of the disadvantages which occur under this far too rigid definition. I beg of the Chancellor of the Exchequer to take account of what has been said by the hon. Gentleman the Member for West Middlesbrough and see whether it is not possible, still within the limits of this Bill, to make some definition of the areas to which the benefits have to be applied which will really spread the benefits to the greatest possible advantage. It might be possible, for example, to set up one of these small businesses or to induce somebody to come forward and ask for the necessary capital to set up one of these small businesses to the benefit of the places in great distress, whereas it might not be possible to do it in a Special Area. There are all sorts of considerations of that kind which determine whether businesses should be set up and whether it is worth while to do it. I will not unduly press my right hon. Friend upon this matter, but I would ask the House to believe me that this Bill would have given greater confidence if the definition of the Special Areas had not been made too rigid. With those comments I welcome the Bill and I hope it will have a great success.

5.26 p.m.


Coming from a particularly distressed area, I am glad to express my gratitude for and approval of this Measure, and to know that the Opposition will give it their support, or at least will not vote against it. One cannot but agree that it is a Measure of such relatively diminutive proportions that it will not go very far upon the road to help to save the mining areas. One would hope that even now the Chancellor of the Exchequer may consider the desirability of entering into a bolder scheme, giving us, if necessary, another Bill to deal particularly with those areas which require not light industries, but something of a more formidable character. If we could have schemes, say, for coal distillation or the manufacture of cement in County Durham, the former requiring £750,000 and the latter £200,000, they would undoubtedly have an immediate and an appreciable beneficial effect.

It is interesting to note that the Special Commissioner has not the paro- chial views which are expressed in the Measure now before us. I happen to be a member of the Tyne Improvement Commission. We have had under consideration for some years past the development of part of the River Tyne but it was not possible, owing to the lack of the necessary finance, until the Commissioner turned his attention to it. It is true that that is a non-profit making industrial concern, that its interest is the trade and the facilities of the Port of Newcastle-on-Tyne. It is a large and a bold scheme. The sum of £1,350,000 was the sum involved. But the Commissioner comes along, and uses the powers conferred upon him and offers the Tyne Improvement Commission the sum of £400,000. That is a reasonable amount and they now propose to purchase Tyne dock from the North Eastern Railway Company, to build a new quay, 1,400 feet long, for deep-water vessels of the largest type. The depth of the water at low tide is to be 35 feet and the river channel is to be deepened also to 35 feet, so that there will be no river in the British Isles that offers such facilities as the River Tyne so far as deep-water vessels are concerned.

I mention these matters because if the Commissioner were allowed to deal with the situation, particularly in the North Eastern area, as he sees it, large sums of money could be beneficially expended on these lines. I fail to see why the Chancellor of the Exchequer should adopt a narrow outlook and restrict his operations merely to new companies in which the maximum capital to be expended is only £10,000. Many light industries will, we hope, grow up into big industries. The term "light industry" was never intended, in my judgment, and in the judgment of the Commissioner—I have had many interviews with him—to mean an industry restricted in size. You can have a light industry producing many things of a light character, although the capital involved may be very large. Certain aspects of Vickers' business are those of a light industry, but many million pounds of capital are involved in it.

I am wondering whether the Chancellor could entertain the idea, perhaps a revolutionary one, that local authorities should be released from their legal bonds and facilities given them to enter into trade either as local authorities or as intermunicipal authorities. If they had facilities for engaging in trade, there is little doubt that they would turn their eyes towards many industrial concerns thereby relieve the pressure of unemployment in their midst. I am sorry to say that the Act of 1935 certainly restricted municipal enterprise so far as direct house building was concerned. The Commissioner has expended the resources placed at his disposal in a bold way. He has granted £1,500,000, a very large sum, for non-trading purposes. Why should not the same facilities be given to him for trading facilities? If we are to deal with the problem on large lines we shall require further legislation. I hope the Chancellor of the Exchequer will entertain it, on the lines of the Trade Facilities Act, which was beneficial in aiding shipping and other industries. That is the line the Chancellor should pursue. In the meantime, we are grateful for this small Measure on account.

5.35 p.m.


I should like to put before the House and the Chancellor of the Exchequer an aspect of this case which has already been mentioned by a former Chancellor of the Exchequer, the right hon. Member for Hillhead (Sir R. Home). It is most desirable that the Chancellor of the Exchequer should take his courage in both hands and go a little further in regard to the administration of the money that he is providing. In the Scottish constituency that I represent there is a village where the only persons employed are the policeman, the postman, the parson and the schoolmaster, but they are not resident in a distressed area.


And the undertaker.


The undertaker is very busily employed. I would appeal to the Chancellor of the Exchequer to give us a chance of stating our case for the areas that are placed outside the schedule of the distressed areas by artificial lines. The particular instance in which I am interested is a lead mine. Lead has been produced there for 250 years. Under the Ottawa Agreement, however, the price of lead came down to something like £7 or £8 a ton, and as lead could not be produced there at a profit this mine, employing 200 people, closed down. If we could get a little assistance under this scheme there are persons who would supplement the amount that might be provided and work could be found for these unemployed people. But in connection with every effort I have made up to now I have been met with the answer: "You are not a distressed area." I would therefore, appeal to the Chancellor of the Exchequer to widen the scope of this scheme. A definite mistake has been made in defining the distressed areas, but the Chancellor of the Exchequer has an opportunity now of giving some elasticity to the scheme, which would enable the mistakes that have been made to be remedied.


We hear about mistakes having been made in defining the Special Areas, but I should like the supporters of the Government to explain to me how it is that those of us who are inside the boundaries of the Special Areas who have protested against the limitations of this Bill have received no consideration from the supporters of the Government.


My hon. Friend and others associated with him have been very vocal and vociferous, while the law-abiding citizens for whom I appeal have suffered in silence. It may be a belated appeal that I am making to the Chancellor of the Exchequer, but I would ask him to give us some help. I should also like to say to my hon. Friends who represent the distressed areas that they might stand aside for once and allow unfortunate people in other areas to get a share of the benefits that they have been receiving for several years. I am raising a serious point which affects many parts of the Kingdom and all classes of citizens. I would beg the Chancellor of the Exchequer not to be bound by artificial limitations in dealing with this scheme. If there is any loss, it will be made good by the whole of the ratepayers and taxpayers of the Kingdom. It is only fair that if a case can be made out that there is injustice in excluding certain areas from the ambit of the Bill, the Chancellor of the Exchequer should either retain powers for himself, or delegate powers, which would enable other districts to obtain justice, because the conditions of things is indeed very distressing.

5.40 p. m.


The hon. Member for Middlesbrough, West (Mr. K. Griffith) suggested that we might find ourselves possessed of this sum of £1,000,000 and then find that we should be unable to use it by reason of the lack of demand. It seems to me that the hon. Member is counting his chickens before they are hatched. We have not got the £1,000,000 yet, and so far as I can see, unless the Chancellor of the Exchequer has definite pledges from private individuals that they are prepared to raise the money, there is not very much likelihood that by going on to the Stock Exchange or by using the usual channels we shall raise the £1,000,000. The financial proposals in this Bill are very extraordinary. There is a Government guarantee on the first £1,000,000 of 35 per cent. Then a sum of £100,000 has to be paid to reserve, and there is a 25 per cent. guarantee against loss. If further capital is raised the 35 per cent. will gradually diminish. On the capital raised the interest is to be 3½ per cent. for the preference shares and 3 per cent. for the ordinary shares. One can buy Government stock to show more than 3 per cent., with a full 100 per cent. Government responsibility behind it. What ordinary investor is likely to choose a 3 per cent. investment with a 35 per cent. Government guarantee as compared with an investment in Government funds showing more than 3 per cent., which has a sinking fund to guarantee it. The chances of raising this sum of £1,000,000 in the ordinary market are, I think, very small.

Another very extraordinary proposition in the Bill is that the ordinary shares, which have definite limitations of interest, are to bear a lower rate of interest than the preference shares. The preference shares, which for repayment will rank in front of the ordinary shares, are to bear 3½ per cent., while the ordinary shares, which rank after them, are to bear only 3 per cent. Had it been the other way round there might be some rhyme or reason in the proposal. This is one of the most extraordinary financial proposals that I have ever come across. I hope that in putting the Bill before the House, with its very limited possibilities of raising the money, the Chancellor of the Exchequer has looked into the question definitely and has some guarantee that the money will be raised, because there is nothing in the Bill to say that the Government is to raise the money. Apart from the £100,000 payable to the reserve fund, the only liability of the Government is in regard to the money, once it has been raised.

In his opening speech the Chancellor of the Exchequer referred to the repayment of the money by the borrowers and used the phrase "in the first year." I do not suppose he intended to suggest that the money should be lent only for one year, but I should like to know whether provision is to be made for repayment by the borrowing firms within a certain period. If there is to be a definite amortisation I hope it will be spread over as long a period as possible, because it will be a very heavy burden on a small firm which raises £5,000 or £10,000 of capital from this company if it has to pay not only a substantial amount in interest but also to allow a heavy rate for amortisation of its loan. I hope the Financial Secretary will deal with these two points—first, how far they can be sure of raising this money on the extra keen cut terms; and, secondly, whether they propose to burden borrowers with any specific regulations as to the amortisation of the loan.

5.47 p.m.


I am glad of an opportunity of saying a word in favour of the Bill. I have been unable to catch Mr. Speaker's eye on previous occasions, and it might be thought that hon. Members from distressed areas were a little ungrateful if not ungracious to the Government and, therefore, I should like to express my thanks for what they are doing in this matter, and also, I am sure, the thanks of my constituents and the northeastern group of Members of Parliament. Having regard to what the hon. Member for Dumfries (Sir H. Fildes) and the right hon. Member for Hillhead (Sir R. Horne) have said, I will only quote the words of a man who did a great deal for the betterment of England; that assistance should go not to the people who need it but to those who need it most. As a humble follower of that man, John Wesley, I think that is a sound principle even in politics. You should go not to all the distressed areas but to those Special Areas which need special assistance. Wesley was an Arminian in theology. To-day I am a Calvinist in politics. It has been decreed by the powers that be that my constituency shall be considered to be a Special Area, and, therefore, as one of the elect I am quite easy about the matter. I hope that other areas will not think any the less of us because this dish has been put before us, and that as we have got our spoon into it we are to get a helping out of it first.

A new trading estate will not be in full working order in a few months' time or in a few years' time. Obviously, it is a long-term policy. A trading estate must be on a somewhat large scale, indeed 1,000 acres ought not to frighten anyone. But the real object of this trading estate and the finance corporation which is to make it workable, is to change the balance of industry, particularly for young persons. On the North-East Coast we pride ourselves that we can make anything from a needle to an anchor, but my concern is that in a few years' time, unless we are very careful, we shall lose all our craftsmen and become a race of labourers. I suggest that this trading estate and corporation will keep our skilled men on the North-East Coast. I was much amused the other day by some advertisements I saw in the "Newcastle Evening Chronicle," from Birmingham, Saltney, and Coventry, and, of all places in the world, from the Isle of Wight, asking for skilled men to go to these districts to fulfil Government contracts which they had been fortunate enough to get. We want to keep our skilled men on the-North-East Coast.

This matter has received the closest consideration by the North-East Development Board, and they have given figures showing that the Chancellor of the Exchequer in his Budget speech proposed to do the very thing for which we in that district are asking. Who composes the North-Eastern Development Board? There is the Lord Mayor of Newcastle, a very good friend of mine, although a Member of the party opposite and if I may say so a more intelligent Member than usual of the Labour party. Then there is William Straker, a name to conjure with in Labour circles; Sir Luke Thompson, members of trade unions, Mr. Westwood, Mr.

Gilbert, Professors of Universities, and representatives of the North-East Steelmakers Association and Coal Trades Association. A few months ago they said that to advertise for trades to come up north was not enough. If I may use an expression of my own, adversity is no good as an advertisement. They made this recommendation: We feel it is vital that Industrial Estates should be created in various parts of the area on the lines of the Slough Trading Estate, Welwyn, Trafford Park, Park Royal, etc. The Commissioner for Special Areas has already undertaken the clearance of derelict sites, but he has no power to erect buildings, build roads, etc. Modern factory buildings are required, supplied with facilities such as roads, sidings, power, river frontage, in convenient localities with good housing nearby ready to be leased to an intending manufacturer. The finance for this undertaking would have to be provided either by Government funds or by Government guarantee, and there is no reason why such an undertaking should not in time become self-supporting. The administration could be in the hands of a body appointed by the Government or of the Commissioner for Special Areas, or of some form of development board or nonprofit-earning organisation. Before the North Eastern Development Board made this recommendation the Secretary for the Overseas Trade Department in his report said: Within the limitations imposed by its financial resources the Development Board has proved of real value, and I believe that some such organisation upon a much larger scale would be worthy of Government support. Mr. Malcolm Stewart, the Commissioner for the Special Areas, in his report said: The capital which they are able to raise on Tyneside was not sufficient to enable them to operate on a sufficiently large scale to give the experiment a fair chance. It seems doubtful whether any organisation run on a purely commercial basis can meet the needs of the areas. Exactly what those needs are no one can at present say. I am therefore proposing to take further steps in order to ascertain the extent of the demand for financial assistance. If, as a result, it is found that there is a real opening for new enterprise in the areas if the necessary capital were provided (especially for smaller undertakings and those which are not large enough to float a public issue) I may find it necessary to advise that a special fund should be created for the purpose. That is precisely what the Bill proposes to do. In no other way can we attract new industries. We want to mix our industries better. Whenever I go to Birmingham, Coventry, Leicester or Nottingham, I am amazed at the variety of industries. We in the north have deliberately put all our eggs into one basket, mining, engineering and coal, basic industries, by which we have lived as a nation, and we have rather looked down upon such places as Birmingham, which has gathered together all these smaller industries, this smaller fry. But they were well advised, and we should also try to attract new industries. How are we going to do that unless we establish such finance corporations as are suggested in order to make it possible for new industries to be set up and to grow? There must be generous Treasury assistance and continued backing. I take comfort from the thought that in the Bill there are multiples of 10, which I understand means quantity, i.e., £10,000 for each company for 10 years up to £1,000,000. In fact, I take it to mean that these financial figures are merely nominal and that if the thing is a success we can expect more backing from the Government.

This Bill proposes to do the very things which are the recommendations of the North-Eastern Development Board, and it seems to me it will enable us to have these new industries and better mixed industries. To be frank, I never expected the Chancellor of the Exchequer would do this. This heterodox finance, coming from him, amazed me not a little, but it just shows what a realist he is. As the right hon. Gentleman knows—and it may interest him if I tell him again—in some other things, such as equalisation of the poor rate, he and I do not agree, but at any rate one always knows where he is, for he does not wobble. He is a realist. As I come from a Special Area and as this Bill will, I think, specially benefit my constituency, it would be ungrateful and ungracious of me if I did not express my thanks for it. I thank the House for listening to me so patiently and kindly.

6.2 p.m.


I am very much astonished at the enthusiasm displayed by the hon. Member for Gateshead (Mr. Magnay) at what is to be done for the depressed and Special Areas in the Bill which has been presented to the House to-day. The Chancellor of the Exchequer himself was very careful to explain to the House that it was only a small experiment.


I have the Chancellor of the Exchequer's speech here and I would point out that he did not say it was a small experiment. He said: I think this is eminently a case where it is desirable to experiment."—[OFFICIAL REPORT, 21st April, 1936; col. 51, Vol. 311.]


This is not a dialogue.


I accept the correction that the Chancellor of the Exchequer did not use the word "small," but I shall apply the word "small" to it because it is an experiment applied to a problem which is extremely large. When a solution of this kind is brought forward for a problem affecting many parts of the country and many industries of the country, and when the problem is that of 2,000,000 unemployed and over 4,000,000 not receiving enough nourishment, even in the district from which my hon. Friend comes, the provision of £1,000,000 for the purpose of trying to find employment or attract industries to the distressed areas is a very, very small contribution indeed to the great problem which confronts the country. If the Bill had spoken of £100,000,000 it would not have been sufficient.

What are we faced with to-day? Britain can be roughly divided so far as this problem is concerned by a line drawn from Newport on the Bristol Channel to the Wash. South of that line unemployment is something in the region of 4.8 per cent.; at about the lower Midlands it amounts to approximately 7 to 8 per cent. On the North-East Coast, from where my enthusiastic hon. Friend comes, it goes up to 18 or 19 per cent., and the same applies in the North-West area. In Scotland it is over 23 per cent., and down in South Wales it reaches the same figure as in Scotland. The point which the House, and the Government in particular, ought to notice is that the bulk of the unemployment is contained in these areas and that it applies to certain industries—coal mining, iron and steel, shipbuilding, engineering and cotton. If the problem could be solved in those five industries, we would have solved the problem of unemployment for the whole of the country. That problem will not be solved by our trying to attract industries into those areas by the offering of cheap money. This Bill has about as much chance of attracting industries into those areas as a penny magnet has of attracting a 20-tons steel plate. Hon. Members ought frankly to realise that. But this Bill is on a par with all that the Government have clone to try to deal with the unemployment problem or the depressed or Special Areas.

I make bold to say that if you were to offer to the local authorities which control all these depressed and Special Areas the repeal of Section 45 of the 1934 Act and the abolition of the means test, they would tell you that that would do more for the Special Areas than anything contained in this Bill. They know what they are faced with. To-day we were told by the right hon. Gentleman the Member for Hillhead (Sir R. Horne) that he was glad to see that certain industries were making a recovery. One of the industries he mentioned—an industry which has been mentioned here very often—was the iron and steel industry. Last year that industry produced a record output. It beat the record of 1929 and was over 2,000,000 tons better than the output in the year 1913. Yet there still remains the fact that there is over 17 per cent. of unemployment in the iron and steel industry to-day, and that industry ranges from South Wales right up to Lanarkshire in Scotland. If in an industry which it is boasted has recovered and which is making profits to-day that it has never made during the past 10 or 12 years, there are still so many unemployed men, surely the problem is going to be very much bigger than is contemplated in the pigmy Bill which is brought forward here to try to solve the problem of the depressed and Special Areas.

The hon. Member for King's Norton (Mr. Cartland), who made such an interesting and courageous speech from the benches opposite, said that the reason why industry is going South from the North is that it is cheaper to take the raw materials to the factory than to take the factory to the raw materials. That all depends on the kind of factory. The tube industry has been removed from Scotland; the reason being that they wanted to take the industry right to the raw materials—right on top of the ore. The reason for shifting that industry was exactly the reverse of that which was suggested by the hon. Member for King's Norton in his very interesting and delightful speech. The same thing applies in the case of shipbuilding and heavy engineering in all its branches.

What we require is not a Bill of this sort to deal with the depressed and Special Areas. We want a Bill which is very much bigger and which has very much more finance and Government planning behind it. We do not want merely the appointment of a committee which is to sit in London and decide as to whether it will lend money here or there for the purpose of starting an industry in some part of the country. As a matter of fact, the City of London has done far more in settling where the industries of this country shall go than any other section of the community. Small committees of men are sitting in London at any given moment and deciding whether a coal pit shall close down in one place and whether one shall be opened up in another place, or whether a steel works shall close down in Lanarkshire and one be opened in Nottinghamshire. It is they who decide—not the Government, not Parliament, not the people, not the workers in the industry, not even the employers in the industry. The City financiers have the whole of the industries of the country in the hollows of their hands. One great steel works in Bellshill in Lanarkshire has been closed down completely. It was one of the most efficient works in the country, and an American firm said it was just the sort of works for carrying on certain sections of the iron and steel industry. But the financial interests of the Bank of England, who were heavily inside that firm in connection with overdrafts, sold it out to another firm and the works was transferred. That area has become a distressed area because of the closing down of that works and another works.

We want Government planning, and Government planning which will not have the idea that the profits of the financier and the investor are the chief consideration, but the lives and livelihood generally of the people who are in these areas and who for the past 15 years have been suffering from the depression. Some people think that the industrial crisis started in 1931 because the City of London got into a financial mess. In the iron and steel industry the depression started at the begining of 1921. Throughout all these years the areas in which the iron and steel industry is situated have been suffering from the depression —wages have been falling, employment has been scarce and the standard of life generally has been diminishing. We want something done to remove that, and that something can be done only if the Government will step in and say that, irrespective of the desires of the people who have manipulated industry in the past—the people who because it paid them to do so shifted industry from one part of the country to another—but in the interests of the people generally, this planning shall take place on a very much larger and wider scale than exists or is contemplated in this Bill. Only then will it be possible for anything to be done which will really touch the problem which confronts the people of this country.

6.14 p.m.


I will not detain the House for more than a few minutes, but I would like to ask for a little explanation from the Financial Secretary to the Treasury as to the details involved in the working of this suggested company. There are two things that have to be considered. The first is the principle behind it and the second is whether the machinery which is suggested will do what the Chancellor hopes it will. On the principle, I would only say that the real question is one of industry and not of area. Unless you tackle the problem from the point of view of industry primarily, and regard the area only as secondary, you will never solve the problem as it ought to be solved if we are to reach any finality. I would, however, rather direct myself to the smaller matter of machinery. It is obvious from the steps which the Treasury have taken that they do not expect the company to be successful. They propose to start it with a nominal capital of £1,000,000 and to put on one side 2 per cent. to pay managing expenses and also a certain amount for some kind of reserve.

Let us work it out as a matter of practice. First, you cannot raise your money at less than 3 or 3½ per cent. Then it will cost you, on the basis of the Treasury allowance 2 per cent. on your £1,000,000 in order to carry out the ordinary business of the concern and pay running expenses. That is something like 5 per cent. Then you must make some provision in reserve for losses on the basis of the £1,000,000 and you could hardly put less than 1 per cent. per annum to reserve under that head considering that you are only going to run for 10 years. Thus you start with that burden on your back. You lend money in these distressed areas, to people who have found the greatest difficulty in providing any money at all for themselves, on a basis of something over 6 per cent. before you can hope for a single possibility of profit. Personally I think the machinery which has been chosen is not that which is best calculated to carry out what the Government apparently are willing to do. They are, obviously, willing to make a subsidy for certain purposes in these areas. If they have come to that conclusion, it would be better to devise some form of machinery for paying that subsidy which will cost as little as possible, rather than to establish, in a roundabout way, a large company which must cost much more than other methods would cost.

For instance, would it not have been possible to take into account existing sources of credit in these areas? We could say to those responsible "We start on the basis that there are some loans which it is not proper for you to make." But looking at the matter from the point of view of security, many of those undertakings would be prepared to make the loans if they could get just a little more security than is already being offered. If the Government were prepared to deal with them and to make guarantees in certain events, I suggest to the right hon. Gentleman that they would have carried out his purpose just as well as this company will do it, and at far less cost. I believe it would have been easy to get local committees to pass on applica- tions for loans and make recommendations to the Government acting in conjunction with the existing sources of credit.

Do not let us run away with the idea that this company is, in any sense, a bank. It is not. It is simply a mortgage loan company subject to all the difficulties and dangers that every mortgage loan company has to face, with this difference that it is dealing with current business, instead of securities like land and buildings. In addition, it will be working in districts where, in many cases, trade has little hope of recovery. When a loan is made it will be on the basis that the company is beginning with a bad debtor. You then pass to the point that you are lending money in an area where prima facie there is little hope of trade recovery. I suggest that the method chosen by the Government is a long and roundabout way of achieving a purpose which they could have achieved, for far less money and in a better manner by other means.

6.20 p.m.


I have no doubt that the Financial Secretary will reply to the very interesting financial point raised by my hon. Friend who has just spoken, and I propose to deal with another aspect of the Bill. The Chancellor of the Exchequer has told us that the Bill is to be experimental and that is so, but one thing I regard as certain is that some amount of employment will be given as a result of the Bill in the distressed areas, and. as a representative of one of the distressed areas, I welcome it from a local point of view. I also welcome a letter which I have received from the county clerk of Lanarkshire and the town clerk of Glasgow on behalf of local authorities in the distressed areas in Scotland, assuring us of their wholehearted support for the Government's efforts in this direction. In fairness, I ought to add that the letter also refers to Section 45 of the Unemployment Act of 1934, but I do not think that is relevant to the present Debate.

My support for the Bill, however, is not on local but on national grounds. As I understand it, the company which is to be formed will lend money to businesses and individuals and firms on three conditions, first, that the money will give em- ployment in the distressed areas where employment is most needed; second, that it will have a reasonable hope of success —the economic prospects of the scheme must be reasonable—and, thirdly, that before money is lent through this company, it must be proved that the individual or firm concerned has been unable to raise money through the ordinary financial channels. I am not at all dismayed by the prospect of this company taking risks which private capital would pot take. Nor do I think that it proves the shortcomings of private enterprise. Obviously with private enterprise the first consideration is bound to be security, and rightly so, because those institutions are trustees of the money of their shareholders, and, without security, they are naturally unwilling to lend, however promising a scheme may be. I think the Government's guarantee to meet 25 per cent. of losses will make up for that lack of security. Furthermore I think the 75 per cent. of private interest will ensure that this company will be reasonably administered and that the money will not be wasted on harum-scarum schemes.

I think there are plenty of good schemes. Both the Commissioners for the Special Areas in their reports referred to individuals who had inventions or plans, possibly quite feasible, which could not be started because there was not the necessary security. I understand that the Commissioner in Scotland, Sir Arthur Rose, has been approached in certain definite cases. I mention this point in reply to my hon. Friend the Member for Kings Norton (Mr. Cartland), whose maiden speech the whole House appreciated so much. He asked where was the demand for credits? I have here a list of schemes put forward to the Special Areas Commissioner for Scotland, which includes the renewal and extension and equipment of small factories and light engineering trades; investigation of patents and finance for the manufacture of household utensils, aircraft devices, engineering and electrical gadgets, motor car small parts and gadgets, demonstration units of new patents and toys. There are also references to financial assistance for the co-operative canning of fruit by growers—which will, perhaps, appeal to hon. Members opposite—the cultivation and marketing of mushrooms, the manufacture of composts and fertilisers from sewage and refuse and the manufacture of peat products, There are also references to the incubation and preservation of eggs by new processes; the production of skins and hides for the leather trade and the erection of a building for shows and trade exhibitions. Though it may be that that would not come within the £10,000 limit which the Chancellor of the Exchequer has set. Beside these, numerous applications have been made for assistance for small men to start tomato-growing under glass and other horticultural developments. I ask the Financial Secretary in his reply to give us the assurance that agricultural development is intended to be included in these schemes. The cases I have mentioned are cases in which I think this company might very well help. Further, some of these cases have this advantage—that small industries could be started which would be suitable for some of the derelict villages. One does not like the word "derelict," but I am afraid that hon. Members opposite and hon. Members on this side know only too well that there are villages which are, virtually, derelict. If this company succeeds in getting live little industries at work in some of these villages, this Bill will not have been in vain.

In suggesting that public money should be risked here where private money cannot be risked, I do so because I think that whether a loan is lost or not the public will derive some advantage from it. They will derive the advantage of the employment that a scheme gives before it fails. My hon. Friend the Member for King's Norton alluded to the psychological effect on the minds of those employed in a newly established industry which fails after a time. But surely those who are in close contact with unemployment know that the real degeneration arises from permanent unemployment and that employment of any sort is desirable, even though it be only temporary and not premanent. We should appreciate the fact that in granting this £1,000,000 to the company the State is, deliberately, hazarding money in a good cause—in order to give natural employment twhere it is most needed. I have always been opposed to barren relief works but to give natural employment where it is most needed is well worth the risk involved.

I am not so pessimistic. I do not see why this Bill should not be a financial success certainly from a national point of view. If it works out as we hope, it is going to provide capital for hundreds and it may be thousands of undertakings and I hope that the small undertakings will not be ruled out. I refer to undertakings in which the capital required is only in the nature, perhaps, of £100.

It is in the last degree unreasonable to expect that all these undertakings are going to fail. I think that probably a good percentage of them will flourish. They may not counterbalance the failures but if the scheme is boldly worked by the company—as I hope it will be because unemployment in the distressed areas calls out for drastic action—the ultimate advantage to the State of having new thriving industries will be well worth any money lost. I do not want to anticipate that the company will lose, but even if it does lose the country may gain. It would be possible to lose the whole £1,000,000, and yet for the country to gain. That is a, point we should appreciate, because whereas the benefit of a successful scheme to the company would merely be the return of the loan with interest, the benefit to the country as a whole and to the distressed area in particular, may be a new industry. Equally, while a loss to the company will be a dead loss and the money will be gone, the loss to the country will always be greatly mitigated by the employment that will have been given.

There has been a criticism that this Bill does not go far enough. I do not agree with that. As I see it, the £1,000,000, covering as it does only 25 per cent. of the total loans, may allow for a total of £4,000,000 being out in loans at once. This will be circulated and re-loaned as it is repaid. That is a considerable sum with which to start on this experiment, and there is nothing to prevent an expansion if the experiment justifies itself. Another point has been made by hon. Members, principally those who do not represent depressed areas. They complain that the scheme is limited to the Special Areas. I doubt whether I could support the Bill if it were not limited to the Special Areas, because, if it were not, the result would be merely to encourage the drift, of industry to the south which those of as in Scotland have been trying so hard to combat.

This Bill is not going to move labour from one district to mother, but it will bring work to places where the labour is. Although there may be, as I think there is, a case for transference of labour from places which are workless to places where there is work, there is a much stronger case for moving work to where it is most needed. That is what this Bill will do. I feel that the Bill should receive the general support of the House, not only of Members from depressed areas, but of everybody interested in the general employment problem. It is, as the Chancellor told us, an experiment well worth trying. At the worst, it will give some employment where employment is badly needed, and at the best it may give birth to new industries which, in course of time, may go far to rejuvenating the distressed areas.

6.35 p.m.


The whole House will have felicitated the hon. Member for North Lanarkshire (Mr. Anstruther-Gray) for his sanguine disposition. His, indeed, must be a very happy life if he can see any ground for optimism in the proposal which is now before the House. I should be much more contented if I could find in the proposal any grounds whatever for hoping that it will have the effect which the hon. Member described. For the life of me, I cannot see how a potential manufacturer is to be attracted to establish a factory in a distressed area by being told that if he loses money he will not be required to bear all the loss, but only 75 per cent. of it. I have, I think, had a great deal more than the Chancellor to do with trying to promote schemes, to encourage schemes and to define schemes for the distressed areas in the last 10 or 15 years, and I venture to tell him that, although there is a general hope in all parts of the House that some measure of success will attend his proposal, those of us who occupy these benches do not expect any success whatever. I do not altogether blame the Chancellor for the paucity of the proposal which he is making. It is entirely unfair to expect the Chancellor of the Exchequer to turn aside from his many other preoccupations and to provide a scheme of any value dealing with this problem.

I have held the view for some time, and I believe many other Members share it, that there ought to have been long ago a special Minister to deal with the Special Areas. The Chancellor brings his annual Budget before the House, and of course he thinks that something must be in it about the Special Areas, and the proposal which he is now making is really an afterthought. It is not intended to be a contribution to deal with the problem at all. It is merely intended to be a proposal in order to dissuade people from saying that the problem is being entirely neglected. When I first examined the proposal I was hoping that there was something in it, but having looked at it carefully and having thought about a number of concrete instances where it might be applied, I came to the conclusion that a potential manufacturer would not be able to get money on any more favourable terms than he would be able to obtain in the open market.

Let us suppose there is a finance house which has spare money on its hands and a man goes to it and says, "I believe I have a proposal for a factory in South Wales to produce this or that commodity. I can assure you that if I fail the money that you advance to me to set up the factory will not be entirely lost. You will lose only 75 per cent." I would like the Financial Secretary to tell me who would lend money in such circumstances. It is true that there might be borderline cases where a little additional assistance might incline the balance over, but what is there in such a border-line case to persuade the manufacturer to establish his factory in a distressed area rather than outside? As I understand it, the actual loss has to be made before a manufacturer gets the assistance of the company. I understand that it is not an annual subsidy.


The company provides facilities by which money can be borrowed which cannot otherwise be provided. It will be in no case necessary for a manufacturer to make a loss before he can borrow.


I suggest that 'the advantage of having to bear only 75 per cent. of the loss will not accrue to the manufacturer until the end. You are saying to the manufacturer, "If you have a proposal, we will assist you to borrow money for it by telling whatever person will lend the money that if a loss is incurred 75 per cent. will be borne by you"—


indicated dissent.


That is how I understand the position at the moment. If that is not the position, perhaps the Financial Secretary will say what it is. Is it to be a subsidy advanced to a company annually I Will manufacturers annually get the advantage of the additional credit facilties which the company will be able to afford to them? What advantage is furnished to a potential manufacturer intending to set up a factory in the distressed areas which he will not be able to obtain in the open market, except the advantage that only 75 per cent. of any loss will have to be borne?


I almost despair of making the hon. Member understand the meaning of the proposal. It is a proposal to advance loans. The advantage that the potential manufacturer will get if he is situated in a Special Area is that he will be able to obtain a loan from this company, provided that he can satisfy them, on terms which he could not obtain if he were not in a Special Area.


I am still at a loss to know what advantage the manufacturer is to have. In the last two days I have been discussing the proposal with several business men, and they all take the view that the proposal of the Chancellor cannot in these circumstances provide any manufacturer with an additional inducement beyond what he has at the moment, because, in point of fact, if he hiss a proposal to construct a factory, the advantages of putting that factory outside the distressed areas will still outweigh any advantages of putting it inside the distressed areas under this scheme. I admit that, as things are now, it is possible for the Chancellor to make an abstract case to show that there may be certain advantages to a manufacturer in establishing a factory under this proposal. If, however, the Chancellor had a concrete proposal and a specific manu- facturer in mind rather than a general category, I fail to see that he is offering any inducement that will result in the establishment of a factory.

Why should the Chancellor start an experiment of this sort without first exhausting certain remedies that he is able to apply? Why should we enter the area of experiment when we have not yet exhausted the possibilities of absolute advantages? There has not yet been general agreement as to what it is specifically that the distressed areas are suffering from. If we could agree about that we should make some progress. They are suffering because they are not able to attract their proper share of the new industries established in the country, and not merely from the fact that the heavy industries are declining; and it is difficult to see how these heavy industries can be revived, how, for example, to increase the production of coal by 50,000,000 or 100,000,000 tons per annum. The fact that there is unemployment in the distressed areas and not elsewhere is because the distressed areas cannot attract new industries. They cannot do so because they have special disadvantages. The light industries tend to establish themselves where there is a local market for a large proportion of their products. That is why I could not understand the hon. Member for North Lanark when he said that the abolition of the means test was irrelevant to this problem.


I do not think I said that it was irrelevant to the problem, but irrelevant to this Bill.


But this Bill is supposed to be a contribution towards the problem. One of the reasons why the light industries do not establish themselves in the distressed areas is that a light industry is a peculiar sort of industry, which fastens on an area where there is a local market for its products. That is one of the reasons, as is universally agreed by industrialists, why those industries are found round about London. I ask, therefore, not as a partisan point but as a business point, why we should drain away from the distressed areas sums of money which ought to be left among the people there to provide the market for the products of the industries it is hoped to establish there. We have asked that question over and over again but the Chancellor always rides off and does not attempt to face up to it. Why take those millions of pounds every year from South Wales, from Scotland and from the North-East Coast? Frankly it seems to me there is no reply to the question, except that the Government think a means test is justified on other grounds, and that it is merely an unfortunate incident that those who suffer most from it are those living in distressed areas. I should have thought that if the Government were seriously facing up to the problem they would leave the money in those areas. That is one line of approach to the problem. I do not suggest that it is the only one, because the problem is a highly-complicated one and will have to be tackled from many angles, and I am sure no hon. Member on this side of the House will say that he has the sword of Excalibur with which he can lop off the head of the problem. Hon. Members should ask themselves what contributions can be made to the problem. I believe it is reasonable to suggest that we should not continue to extract from these distressed areas sums of money which in equity and from the economic point of view should be left to be spent there.

We have made this plea over and over again, but hon. Members opposite always regard arguments from this side as though they were put forward merely to wound the Government, and our view has never received proper consideration. Some part of the problem arises from the fact that the distressed areas are the exporting coal areas. Two-thirds to three-fourths of the coal produced in South Wales is sold in the export market. The burden of selling that product in a competitive market falls upon one area, and that a distressed area, and the revenue flowing into the coal industry in that area is far less per ton than the revenue flowing into the other areas supplying the home market. If the home consumer of coal is called upon to pay an artificial price, as he is—and after June or July it will be an artificial price fixed by statutory companies—is not the community entitled to say that that artificial price shall support the revenue flowing into all parts of the industry and not go more to one part than to another?

I will put another argument, because I feel keenly about this matter, and this argument has been ignored for years. In 1930 I put on the Order Paper an Amendment to establish an export levy in Great Britain. That Amendment was not moved and never received the proper consideration of the House, because the Labour Government, being in a minority, could not allow the Amendment to be moved if they were to secure the rest of the Measure. If an export levy had been fixed in 1930 a very substantial inroad would have been made into this problem. I admit that the Chancellor may have the right to feel impatient about this, but the only reason is because he is the Chancellor and not a special Minister called upon to deal with this problem. If he were the thing would be immediately relevant to the whole problem. Every ton of grain and every bit of raw material coming into Britain is cheaper because of the coal sent out. If our imports had to bear the cost of double freights the cost of grain and raw materials would be very much higher. Therefore, these coal-exporting areas are subsidising every consumer of cereals and of raw materials in Great Britain. The burden of cheapening these imports falls upon three or four coal-exporting districts, and it seems to me quite reasonable to suggest that those districts should have access to the revenue which flows into the coal industry as a whole. The result of that would be that South Wales, Durham, Northumberland and Cumberland would be on the same basis as Nottingham, and portions of Yorkshire. In other words the coal industry in the exporting districts would be lifted out of the category of a. distressed industry. I sincerely hope that in the proposals which are to be brought forward in a month or two by the coal industry provision will be made for such a plan. The Chancellor of the Exchequer has on several occasions challenged us to be constructive and, therefore, I make no apology for going into this subject in some detail. There are afforestation Commissions.


I must ask the hon. Member to keep to the proposals in the Bill.


I bow to your Ruling, Sir, but some hon. Members have been permitted to go outside the provisions of the Bill, and I thought I was entitled to say that there are some provisions which the Bill ought to contain. I will not pursue that point very much further. I am merely anxious to say these one or two words before I sit down. After we have established these factories in distressed areas we shall then have to keep them going. Two years ago it was suggested that there was only one way tot assist the areas to get back the industrial: life they have lost, and that was by the-grant of preferential railway rates. I see, no reason why that should not be done.- If the rest of the country is enjoying such-vitality that it is able to sap the life out of the distressed areas, then out of its superabundant vitality it should make some contribution towards the restoration of vitality in those areas, and it is reasonable to suggest that the distressed industries in the distressed areas should have preferential railway rates. It is not a novel idea. It has been adopted in the case of coal going to the ports and for some forms of raw material. These factories will die, after they have been established, unless they are given advantages against industries elsewhere. Hon. Members may say, "But why should a man who establishes a factory near Cardiff have to pay less for the transit of the products of his factory than his competitor near London?" The answer is that you are trying to give preferential advantages to industries in a distressed area, and preferential rates are a much more effective way of giving an advantage than this roundabout way of lending money. It is a continual advantage; the costs are kept down all the time, and it provides him with just that advantage over his rival which he needs to establish his factory in a distressed area. There is a further point. These industries will require light and power. We have in Great Britain an electric grid deriving its revenues from the country as a whole. Why should not these industries in the distressed areas receive preferential rates from the grid and the power companies? If you really want to give advantages to the distressed areas why do you not give, these preferential rates? I apologise for going, to some extent, beyond the proposals before the House and if I have done so it is because there is nothing in the proposals. I should have been only too delighted to confine myself to the limits of the Bill except.

that those limits are so narrow that it is impossible to stand on them for five minutes. I have been attempting to provide the House with concrete suggestions. If you are really sincere in your desire to re-establish the distressed areas you can do it. Some hon. Members may say, "No, we are not going to have this interference with the laws of supply and demand; industries must fight for themselves, and if industries cannot establish themselves in the distressed areas, let them go elsewhere." I can understand that point of view. They say that it is unfair, unjust, and uneconomic for the country out of the resources of the Treasury, or by the use of the national credit, to give to one competitor an advantage over his rival. I can see that. But that is not the ground taken by the Government. The ground taken by the Government is that it is now necessary to offer inducements to industries to establish and maintain themselves in the distressed areas. If that is admitted, the inducements offered by the Government are not nearly as effective as the inducements which lie in their power. That is a case to which the Financial Secretary to the Treasury ought to make some reply.

I am sorry that I cannot take a more optimistic view of the proposals before the House. There are one or two other suggestions which I should like to have made except that the Speaker's eye is on me. I hope that this is not the last proposal of the Government in this matter. Some of my hon. Friends and I are rapidly reaching the conclusion that we shall not get any attention paid to this problem unless we make nuisances of ourselves in the House. I am beginning to feel that as representatives of the distressed areas we have been much too docile, and that if we had given the Chancellor of the Exchequer as much trouble over the unemployed in the distressed areas as his own friends give him when he proposes to tax them a little more, we should probably have had more attention given to us long ago. We are not going to rest content with this. The local authorities in the distressed areas all feel that they are being played with. They feel that these are merely empty gestures, and although I know that it will be possible for the Financial Secretary to the Treasury to explain these proposals in midi more attractive terms, it is not his speech which is going to attract industries, but the proposals themselves. In the next few months before the Recess, unless the Government come forward with something much more substantial than this, we shall make their life very miserable.

7.6 p.m.


It is inspiring to find British people in the old and best traditions of this House really trying in a constructive way to carry out one of the greatest tasks that has ever been in front of us. The great majority of the speeches which have been delivered might almost equally well have come from any corner of the House. If there has been any difference it has been in the rather more detailed knowledge of company promoting that so many have shown on the Labour benches and which is not perhaps shared to the same extent by those on the Government side of the House. We all feel that the National Government has carried out a great work if we compare the condition of our country now with what it was years ago when this Government first took office. From my own point of view, if I had to face my constituents at the present time I should go to them with far greater confidence than I did at the General Election. The National Government is strengthening throughout the length and breadth of the country. [Interruption.] I know what hon. Members are thinking. Let me tell them what I am thinking. In a local council election last month we won three seats from the Socialists. I feel that perhaps I have been wrong to enter on even this amount of party bias, because I feel there has been something splendid in this Debate. At the present time nobody would deny that our country is on the whole in the best position of the seven great Powers, from the point of view of its economic position generally. The small Powers, not caving the—


I am afraid that that debate took place yesterday.


It is a magnificent thing that we have the opportunity of carrying out this great experiment, for it is nothing less. The hon. Member for Motherwell (Mr. Walker), said that it would have been a good deal better if instead of a small sum £100,000,000 could have been provided. I cannot for a moment agree with him on that. America has shown how dangerous it is to try out an experiment on a huge scale without precedents, without anything really to guide you. Somehow or other things will come out differently from what anybody expects. From this small beginning, gradually learning from experience, we can work up to something bigger. The Chancellor of the Exchequer has very properly said that this is a tentative and relatively small experiment. I hope that we shall get the opportunity, on perfectly sound lines, of carrying out this great programme for bringing prosperity once more to these districts which once were the backbone of British industry. It has sometimes been said that a special providence looks after drunken men and fools and the British Empire, and I think that at the present time we have a special providence in this. Rearmament, which we all realise is entirely necessary, will help to a very considerable extent the difficulties in the distressed areas. In carrying out the new armament proposals of the Government we shall do a great deal to cure those difficulties. I want to appeal to the entire House for real enthusiasm. Let us try to make this work the beginning of a great new development. Let us sink mere party differences, realise that this is mainly an economic problem and do the best we can to carry out these proposals to a triumphant conclusion.

7.13 p.m.


I am afraid that after the rather lyrical speech of the hon. Gentleman who has just addressed the House the few observations which I shall make will have to be on a lower plane. Nor will I attempt to follow the hon. Member for Ebbw Vale (Mr. Bevan), except to say that in the latter part of his speech he was on safer ground and conforming more to the rules of order than in the earlier part, when he was explaining the financial Clauses, which he did not seem to understand or had not read. I hardly like to speak in this Debate without paying my tribute to an attractive maiden speech which was one of its features, and I should like to offer my congratulations to the hon. Member for King's Norton (Mr. Gartland) for his first contribution to our Debates. He addressed himself with great breadth of vision and clarity of argument to this problem on a very wide field, and he showed all the enthusiasm of youth which we like to see in this House. I am bound to say that it made me feel rather sad and old, and it recalled the enthusiasm with which 12 years ago, when I first came to the House, my hon. Friends and myself used to address ourselves to this problem. I am afraid that we have made little headway. There was in the hon. Member's speech a note of courage and critical observations on the Government of the day. I am afraid that he must learn to conceal that method, at any rate as long as the present control of our administration remains in hands similar to those which have controlled it in the last 40 years.

The Chancellor of the Exchequer made a very proper appeal to the House. He said the Bill was a contribution upon a limited field and for a very small purpose, and that it was in no case a contribution to the wide problem of the Special Areas. He justly complained that there was a tendency for hon. Members to call for this or that remedy and when anything was done to ridicule—I think he said "denigrate"—the proposals put forward by the Government on a very limited field. That is possibly a fair and reasonable complaint. I shall try, therefore, to avoid that danger to-day.

One of the troubles in our consideration of this question is that there are very few occasions when we can consider the wide policy of the Government. We are able to have either a Supply day at the request of the Opposition, and that precludes us from any reference to legislation, or a Vote of Censure, which is conducted in an atmosphere not altogether the kind in which we want to address ourselves to a consideration of these problems and to discuss them upon wide fronts. I remember that on the last occasion we had, by arrangement, two or three days set aside for just such a discussion. It was a useful and valuable experiment in this House. While I certainly respond to the appeal of the Chancellor that we should do nothing to minimise the practical proposals contained in the Bill, I appeal to him to give us, before the Session goes very much further, an opportunity for one of those wide discus- sions upon the whole question of unemployment and the reconstruction of the distressed areas which will not be limited by the Rules of Supply or the circumstances of a Vote of Censure Debate.

In spite of this self-denying ordinance, in which I appear in the rather unusual role of a strong supporter of the Government on this Bill, there is one thing which I must add to what has already been said, although I will not underline it. The hon. Member for West Middlesbrough (Mr. K. Griffith), the right hon. Gentleman the Member for Hillhead (Sir R. Horne), and other hon. Members, have referred to the question of the Special Areas being, as it were, for ever laid down by the mere chance determination of the Schedule to the Act of 1934. Everybody who knows how that came into being will know that it is not a scientific delimitation, to be carried on for all time. In respect of certain other considerations, the Minister of Labour has recognised that there are areas which should be called depressed areas, in connection with the administration of the Ministry of Labour and the working of the Treasury Minute regarding the placing of contracts. That shows that the Government recognise that the particular areas chosen, in the Schedule to which I have just referred, are based upon considerations which were perfectly reasonable in the summer of 1934 but cannot be regarded as permanently satisfactory. Indeed, the very reason given by the hon. and gallant Gentleman who was Commissioner for the Durham area, that he did not visit Tees-side because he was asked to make his report before he had time to go, shows that you cannot make that a permanent basis for the delimitation of particular areas.

Nevertheless, I welcome the introduction of the Bill dealing with this limited part of the field. It is definitely in response, first to a recommendation of the Commissioner and, secondly, to a view which has long been felt necessary to meet a gap in the general financial system. As far back as the Macmillan Committee's Report there is reference to a procedure not altogether different from that which is embodied in the Bill, but it is fair to welcome any action of the Government that is taken in response to the points put forward by the Commissioner and to those which have been discussed and supported by large bodies of opinion. There are one or two points of detail to which I hope the Financial Secretary will be good enough to give me a reply. The hon. Member for Ecclesall (Sir G. Ellis) has raised pouts to which I am sure the hon. and learned Gentleman will also reply.

What interests me is, why do we choose this form of capital structure for the Bill? I strongly support the purpose of the Bill, which is to give long or middle-term credit to undertakings that otherwise would not be able to obtain it, but why is the financial structure of the Bill in this form? That question is bound up with the second question which is, what is expected to be the normal rate of interest at which these undertakings will borrow? What will be its relation to the market rates of to-day? The Government have chosen a capital structure that is more expensive than if they had borrowed the whole of the capital required on their own credit or had borrowed it short or long. If the Government had borrowed short and had advanced this comparatively small sum from day to day, they would have paid one-half of 1 per cent. If they had borrowed for 10 years on their own credit they could have borrowed for 2½ per cent. They have chosen a capital structure which will make the ordinary shares carry an interest of 3 per cent., and in respect of the preference shares the interest will be 3½ per cent. If the company is to be carried on and not to lose, the rate of interest for these loans must relate to the capital at which the money has been raised, and if the capital has been raised, as I think, unnecessarily extravagantly, considering the present situation in the money market, it is pro tanto to the rate at which the money will be re-lent to the undertakings that apply for it.

What is to be the normal term for which these loans are to be made? I ask that only because there was something in the Chancellor's speech which I did not altogether understand. He explained the operation of the agreement referred to in paragraph 4 of the Schedule, and he alluded to what he called "the £2,000,000," and, "in the first year." He used the words not "the first million pounds" but "the first year." Perhaps that was an error and he really referred to the first block of £1,000,000 of loan.

I ask that only because I take it that the normal term for which this loan would be made would certainly be for much more than a year. It would be a three-year, four-year, five-year or, perhaps, 10-year loan, and the purpose of the company would be, not to demand a high rate of interest so that the loan would be paid off, but rather to hope that, during the period in which the loan is made to start an undertaking, and by the end of four or five years, the promoters may be in a position to float a loan in the ordinary way, and to obtain their capital in the money market by the ordinary method. Otherwise the rate of amortisation would be made rather heavy for the character of the undertaking. I hope that the Financial Secretary will be able to reassure me on those points. They are obviously important if this company is to perform the functions that we hope for it.

The Bill clearly is not a very great or important contribution to this huge problem, but it is a contribution that has been asked for by successive inquiries, and in all parts of this House. Whether it contains exactly the right details, or whether it can be spread, as I hope, to a much wider field, it is a contribution to what is, fundamentally, one of the great problems of the day, that is of marrying the enormous rate of annual savings to the need for new investments, other than of a purely security type. It contains the solution of one of the most fundamental monetary problems with which our future is bound up. I welcome the Bill, and I am glad that the Government have gone forward with it. I hope that, having gone forward with this one of the many proposals that have been put forward, they will go forward with others, and that they will interpret the very real good will with which the House has met their proposals, not as showing that the House is satisfied that this is in any way a solution of these problems, but as showing that the House is prepared to accept it. I hope that the Government will, in the same spirit, give us an opportunity of debating in full the problem as a whole, and that they will come forward with much more far-reaching proposals when they have been able to frame a policy satisfactory to themselves and to the House.

7.27 p.m.


I rise to protest against the narrow scope of the Bill. I do not represent a constituency that can be called a Special Area. There are constituencies in Lancashire which cannot be described as suffering to the same extent from the unemployment problem as others, but we are suffering an injustice, as a county, in not being classed as a Special Area, entitled to consideration in the Bill. I have listened to the arguments put forward by hon. Members on the other side and to those put forward on this side, and I agree that steps should be taken to bring new industries into any area where they are needed.

We are in a peculiar position in Lancashire. While we may desire new industries to be brought in, we have just passed in this Parliament the Cotton Industry Act for the specific purpose of buying out certain cotton spindles and closing down the mills. The Government are introducing Measures to assist industry at the behest of certain capitalists in Lancashire, but they are taking steps to close down certain mills and are narrowing thereby the field of employment. I know that it will be urged in support of the Bill that somebody may start a new industry, thereby lessening the number of unemployed in a given area, but hon. Members ought to know some of the facts with which we have to deal. The hon. Member for North Lanarkshire (Mr. Anstruther-Gray) claimed that a new light industry should be provided out of this Bill for North Lanarkshire, because it would relieve the distress of those who are suffering from unemployment in the coal and iron industries. One of the problems which we have to face is that although Lanarkshire had in 1935 only about 55 men employed in the mining industry for every 100 men employed in that industry in 1920, they produced more coal in 1935 than they did in 1920. It seems to me that this Bill will not, with all the support which we can give it, provide any remedy for that state of affairs.

I mentioned the narrow scope of the Bill, and I want to protest, as a Lancashire man, against it. I would like it to be extended to other areas than those that may be specified. I understand that the right hon. and learned Member for Hillhead protested along the same lines. Let us take the district of Westhoughton, which is not my constituency, but the hon. Member for that constituency has pleaded on its behalf in this House on many occasions. I am living in it, and I know the actual conditions that prevail there. Since 1934 no fewer than 19 different collieries in that constituency have closed down, and I protest that any Measure that is put forward in this House to relieve distressed areas ought to include an area of that kind. In the town in which I live there are three cotton mills which have gone out since 1926. Two of them have been demolished, and one of them stands idle to-day because it went into liquidation in March of last year. We ask that some consideration shall be given to a case of that kind. We have a large percentage of unemployed in our area, but there seems to be no extension of the provisions of this Bill to it. With regard to the mill that went into liquidation last year, schemes have been proposed, and I suggest that an area like that might be taken into consideration in connection with this Bill, because if the company in charge of that mill could get facilities like these, I aim certain they would take every advantage of them, and there would be a possibility of restarting the mill.

On the general question of unemployment, we have had various statements made, but to my mind the Measures that have been taken by the Government to deal with the distressed areas are simply niggling, and they are quite likely to have no serious effect on the problem. We welcome what the Government are trying to do, but in my view these steps are certain not to touch more than the fringe of the problem, and I want hon. Members opposite to bear in mind what was said by the previous speaker, that it is necessary to deal with this matter in a more comprehensive fashion. We who are in the industrial areas and have to deal with the people who are suffering from unemployment there think that the Government would do far more good if they would agree not merely to act on these niggling lines, but to help us in our efforts to get abolished at least the household means test.

7.35 p.m.


It has been some consolation to those who support this Bill to have heard to-day the general view ex- pressed that it will meet a need and that its main apparent disadvantage is that it does not include sufficient areas. That is a great advance, we, believe, upon the point of view expressed by the hon. Member for Seaham (Mr. Shinwell), that even the £1,000,000 mentioned in the Bill would not be used. When one considers the criticisms that have been made against the Bill, and especially those by the hon. Member for Ebbw Vale (Mr. A. Bevan), who has unfortunately loft his place in the House, apart from the original confusion regarding the bearing of 75 per cent. of the loss, the hon. Member seemed to have the view, which I hope is held by him only, that that was going to fall on the person who borrowed the money and not on the Government supporting this company which is going to lend it.

But apart from that, his criticisms seem to have fallen into two divisions. In, the first place, Is this really going to provide an additionally attractive means of getting money at all? The hon. Member said, "How is it going to be more attractive than any other form of borrowing?" The real support that the Bill gives to these areas is that it will enable money to be got where, without the machinery of this Bill, it could not be got at all. It is not a question of getting it on more attractive terms; it is a question of getting it at all, which could not be done without this machinery. Hon. Members know very well that in all these areas to-day there are the shells, the buildings, that once housed industries which were active. What good are these shells if you have to go to a hank for an overdraft to start a new industry?

This company will provide, not only the only means by which that money would be forthcoming when the risk is so great, but provides at the same time a machinery of assistance to those who are setting out on a new venture. As I understand the purpose of the company, it is that there will be at the disposal of those who wish to start a new industry financial guides who will give them the help when the money is lent which otherwise they would only receive at that time in the history of a business when its overdraft is so high that the bank has to place a director on the board. It is to anticipate that, that the machinery of this Bill is present to help an industry.

The hon. Member went on to his second point, which was this: Why should they go into the distressed areas at all? It is surely rather a trite and poor view of human nature, even of those who happen to be politically opposed, to suppose that to-day there are not those who are most eager, if they are given any vestige of an opportunity, to do something which will help these areas and especially to do something which will benefit the people in them. Local patriotism, local feeling—call it what you like—a realisation of what people are suffering in these areas will draw people there if they get the chance. As I have pointed out, in so many cases to-day it is not a question of getting your buildings, because they are there; you want the capital to put into the plant and to get something going.

We had to find a scheme that would give people the chance of acquiring plants, and we shall have in due course to consider whether there is not a necessity, not merely to provide capital for those who are to purchase plant for an industry, but to have some central body which will purchase plant wholesale and may adopt some leasing system by which it can be given out to new industries, without their being required to exhaust so much of their capital in expenditure on plant. Some system of that kind may be a most helpful adjunct, but the first thing is to provide the chance of getting the plant, and that is what this Bill is doing.

The hon. Member said it was an afterthought, dragged in at the tail-end of Budget activities to show some regard to the special areas of this country to-day. Hon. Member after hon. Member has pointed out, however, that this is in answer to a request made by the Commissioner for the Special Areas, and not only so, but the Commissioner pointed out that the industries which were required were the smaller industries, which are those for which this assistance is designed. It is idle to say that the smaller industries demand a market ready at their hands, when the Commissioner, after these exhaustive and full inquiries, has said that these are the very industries which these areas require. That being so, surely these are the industries to be helped, and surely that is the purpose of the Bill.

We all agree that it would be better to see the Bill extended to areas which are not at present scheduled, but when one finds that this Measure was greeted by hon. Members like the hon. Member to whom I have just referred, and who has just left the House, as one which was bound to fail and one which, according to him, was bound to have the result that its facilities would not be drawn upon, surely it is necessary to test that out where, according to the report itself, the conditions demand it most urgently at the preent time. We firmly believe that this is only a first step and that we shall find, through the success which this first application of it will have, that it will be extended, and we shall see the same facilities offered to those areas which, although not now scheduled, yet seriously need the assistance which such a plan would give.

I have endeavoured to deal with criticisms which have tried to show either that there will not be a demand for these facilities, or that they would not help if they were demanded. I only ask, in conclusion, that hon. Members should consider these proposals from the point of view of the type of industry and business that they are designed to help. I could not help being slightly amused when I heard my hon. Friend the Member for Stockton-on-Tees (Mr. Macmillan), who, I am sorry, has also left the House, talking of the amortisation of the loans. Unfortunately, it is not by a local authority amortisation that you can deal with loans to businesses of this type. You hope to reduce your indebtedness to such an amount that the bank will let you carry on and will not press you, and I feel—and I say it in all humility and sincerity —that what we are seeking for here is that these five-year loans up to £10,000 will bring the businesses to this position, that at the end of the five years they will be able to say to the banks, "Well, we are a going concern. It is true that we still owe you £7,000, it may be, but there is the business, there is our good will, there is our plant, in addition to the shells that were there before. Is not that worth giving us our ovedraft for and letting us carry on until things improve still further?"

Nobody suggests that any venture can at once start an amortisation fund of over £2,000 a year providing for the interest, but they can bring the business to that state that they will be able to go to the bank, or the insurance company, or some other persons, and get the necessary help from them. That is what we are looking to. This is a practical Measure dealing with the practical problems which meet the small business man and the small industrialists as we know them in the industrial parts of this country. It is because it does something practically to meet what has been so badly needed during the last few years that we welcome it, not only for itself, but as the harbinger of better things to come.

7.45 p.m.


I have listened with somewhat mixed feelings to this discussion, and have been wondering what is the picture of the areas referred to as Special Areas that exists in the mind of each hon. Member as he speaks. The hon. Member who has just spoken evidently had in mind an area where there are empty factories or workshops, with buildings intact, suitable for the commencement of the new business, subject only to the introduction of the machinery and raw material required. I represent the most distressed area in this country, and there is no such workshop or factory, idle or working, there. Such a thing does not exist. The black areas of South Wales, the valleys running down towards the ports of Newport, Cardiff and Swansea, present no idle workshops; they are not there, and never were there. This is what the Government have to realise. We are discussing the problem of depression, but this afternoon what has impressed my mind much more than the depression in certain parts of the country has been the depression in the Government, and the deepening depression of hon. Members who have spoken here to-day.

I cannot understand where the hon. Member got the idea that there is a general impression that this proposal is going to meet the problem. Believe me, no one who sits on these benches is under that impression. There cannot be an individual here who for one moment would express the view that this proposal is in any way meeting the problem of the depressed areas. Examine the proposal itself. Special Commissioners were set up some time ago, and in their reports they have happened to refer to the fact that under their authority they are not entitled to assist any undertaking carried on for profit: The Government have fastened upon this one question: Is it possible that, somewhere, there may be some individual who has failed to obtain credit, but who, if he had it, might start some little workshop that would employ some boy or girl in one of these depressed areas? And, to remove the possibility of that being the case, they create this corporation. There is no evidence at all that there are individuals anywhere in South Wales who have been seeking this credit and have failed to get it. Is there any such evidence from any other part of the country? I should have expected the Chancellor to say, "We are being continually besieged from all the areas regarded as Special Areas with requests for credit facilities, and in order to meet those requests, we are creating this new piece of credit machinery"; but all that they have had so far is a suggestion from the Commissioner.

The suggestion of the Commissioner, however, is not going to make this work. However laudable may have been the appeal of one hon. Member this afternoon, that we should all combine in a vast united effort to make this a practical proposition and to make it work when it has left us, unless the Bill contains within itself the conditions that will make it practical, nothing will ever make it practicable when it has left this House; and there is nothing in the Bill at this moment that will ever provide work for a single individual in the Rhondda Valley. I represent those people, and possibly the Chancellor would excuse me if I expressed myself in stronger terms on this question. Those people are looking for something, and the House of Commons this afternoon is calmly going through a farce. It is a farce pure and simple. The Chancellor himself—let us give him the credit of having said so—in introducing the Bill this afternoon, said that it is a farce. He did not use the word "farce," but he was careful to explain that this is not intended to deal with the problem of the depressed areas, but is simply going to deal with one special little thing. In other words, we are going to make it impossible for the Commissioner next year to say that there are no credit facilities available for those who want them.

But, as has been pointed out many times already, the credit facilities will be no cheaper, they will be on no easier terms than before, because, whoever the individual may be, and wherever be is situated, who has some notion of commencing a new business, if he has no capital resources himself, or only limited capital resources, he will seek assistance to obtain what he wants. He will go to some bank or financial institution, place his proposal before them, and, if he satisfies them, there is no need for him to be without credit to-day. Indeed, if we were discussing the British banking system, instead of this special little problem, there would be heated defenders of the banking system from the opposite side of the House. I have heard them more than once, during my brief membership of the House, defend very heatedly the British banking system, and assert that there is no sound business proposition in the country for which credit facilities cannot be obtained. That has been said over and over again. Therefore, it comes to this, that it may be possible that, by carrying a slight additional risk beyond that which is ordinarily taken, we may find somebody, somewhere, opening a fried-fish shop or something of that kind.

These small capital units of £10,000 are not going to find employment for the tens of thousands of people who are unemployed. How many of these little capital units would require to be dotted around within a short distance of, say, the Port of Cardiff? We have in the Rhondda Valley over 20,000 people unemployed. How many of these units of capital must be situated somewhere in that district before all those people will get employment? Moreover, the Commissioner who referred to credit facilities has already informed the Government that the Rhondda Valley cannot expect to have this scheme applied to it. The Government have been told that quite clearly, and it is the greatest condemnation against them. In that district there is an idle population at the present time of at least 50,000, and, as a, matter of fact, 80 per cent. of the total population of 140,000 are living on public funds. The Commissioner said that it will not be possible to attract new works into that area, and, therefore, the Government are going to leave that community, within the narrow confines of that valley bounded by its mountains, until by some natural process they die out. That is the prospect and that is the proposal so far as the depressed areas are concerned.

To meet that problem we have this Bill, and that is all. I repeat what my hon. Friend the Member for Ebbw Vale (Mr. Bevan) said—it will never do it. I am confident that, when the next Budget is introduced by the right hon. Gentleman, he will, after having referred to this experiment of creating one company with a nominal capital of £1,000,000 which has produced no results, bring forward a new proposal to create a new corporation with a, nominal capital of £10,000,000 in order to see whether that will attract anything. On the assumptions laid down in this Bill there is no promise of any kind that any relief will be given to our people. It is really farcical, and, indeed, worse than farcical, because a thing cannot be an unrelieved farce when there is so much tragedy behind it. It is the tragedy of that valley, and of similar areas that I know well in this country, that compels me to tell the Government here and now that they are not merely tinkering with a business proposition, but are tinkering with a ghastly tragedy affecting thousands of lives in this country, and all that they can do is to ask that this Bill should receive a Second Reading. The worst we can say about it is that its terms are such that it fails to get anybody to go into the Lobby to vote against it.

7.58 p.m.


I had not intended to intervene in this Debate, but, on listening to some of the arguments from the Opposition benches, certain facts occurred to me which I think are applicable to the Bill, and which I should like the opportunity of putting before the House. Many hon. Members on the Labour benches have talked as if this Bill was intended to bring about a complete revolution in the distressed or Special Areas, but that is not the object of the Bill at all. The Bill is not a panacea for all the troubles of the distressed areas, which we on this side know just as well as hon. Members opposite. It has a definite object. It is an experiment—a modest experiment. The Chancellor of the Exchequer did not put his claim very high when he referred to it in his Budget speech. But it is an experiment which has great potentialities, and, I for one, am disappointed that the Opposition should have treated it so scurvily. I hardly expected anything else, however, because we all realise how depressed and how pessimistic Members on the other side are.

It is only natural, perhaps, that they should be pessimistic about this Bill, but we are not pessimistic. I believe in its own way it is going to be a great experiment. One hon. Member declared, perhaps rightly, that it would not affect the unemployed in the iron and steel industry. Whether that is so or not, it has not been brought in with that express object. It has been brought in to encourage the starting of new industries in a comparatively small way in the various areas that are called "special." You cannot stimulate the heavy industries artificially. I have no doubt that the Socialists, if they got into power again, would endeavour to start national factories or mills for manufacturing steel or iron, but that would inevitably lead to disaster sooner or later. The general policy of the Government is gradually to make inroads into the unemployment in the iron and steel industry. If you compare it with what it was four years ago, you will see the improvement that has been brought about by the steady, sane policy of the Government.

I have said this is an effort to start new industries and I believe it will do so, not immediately, perhaps, but gradually. The Government have been charged again and again with doing little for the depressed areas. Now, when they come forward with this little Measure, it is received in a very ungrateful manner. No Government can start new industries themselves successfully. I have been in business all my life and experience has shown that new industries can only be started by private enterprise. There is a saying that the Almighty helps those who help themselves, or at least show willingness to do so, and I wish I could see more of that willingness on the other side of the House than is displayed when this matter is under discussion. I have felt for some time that the people in the depressed areas are too apt to take up a defeatist attitude, to throw in their hands as it were. That will never lead a depressed area anywhere. In my constituency and the neighbourhood, when the crisis came in 1931 we found ourselves a very depressed area. There was tremendous unemployment. The heavy iron and steel works, which we had had for a century, simply closed down and have now left the district never to return. But I am glad to say the manufacturers in the district did not take that unfortunate position lying down. With the grit which always stands out in South Staffordshire men, they looked out for new directions for their energies and, with the co-operation of their workpeople, many industries that were quite new to the district have been opened up, and other industries have been widened out considerably. Many of them have been started in a very small way.

It is that kind of business that the Bill is going to encourage. I know a man who started a business in a small way a few years ago with a guaranteed overdraft of a small sum at the bank. He has gone on from strength to strength, and he is now the proprietor of a very flourishing business employing a considerable number of men and women. I know another man who started in a small way and he has also gone ahead steadily, and is now employing many hundreds of hands in manufacturing lines which were not manufactured in the district before. So that in these four years South Staffordshire has been taken out of the slough of despond in which it was in 1931 and, while it is not so prosperous as we should like it to be, there is no comparison between the present position and that of four years ago. What South Staffordshire has done other areas can do if they have the faith in themselves, and the pluck that is necessary to carry it out. This Bill will provide the wherewithal for doing it, and I welcome it very heartily as a step in the right direction. I would advise hon. Members opposite not to despise the day of small things. Small businesses become great businesses and we know, alas, that sometimes great businesses become small businesses through inattention. I hope that, in spite of the opposition that has been expressed, the Bill will do a great deal in a quiet way in helping the depressed areas. I look forward very hopefully to its operation. The Chancellor deserves every encouragement for bringing it in instead of the cold water, a plentiful supply of which is always ready from the Opposition benches. I am sure he will not be deterred by any of the criticisms that we have heard from putting it on the Statute Book at the earliest moment.

8.10 p.m.


The last time that I raised the question of my constituency the Minister of Health made the definite statement that Barnsley would be considered. Relying on that statement I have not troubled the House again till now. I assume that the Minister had authority to make the statement in the absence of the Chancellor of the Exchequer. Barnsley is the centre of the mining industry of Yorkshire. Large numbers of people are suffering enormously, and the borough is in a very serious condition. If the Chancellor is going to do nothing, we Yorkshire Members must come together in joint consultation to force his hand. In January, 1930, there were in Barnsley 6,710 wholly unemployed; in March, 1935, there were 6,738, and the figure that I have received to-day is 6,780. There is also a very large number of suspended people who get three days work in a week and three days unemployment pay. There is one large colliery outside the town which is working three days a week and looks like continuing to do so, and other collieries in that part of the West Riding are doing very much the same. The Chancellor ought to do something for Yorkshire, and for Barnsley in particular. Now that I have brought the matter to his notice I would ask him to keep his mind centred on this area. Rates in Barnsley last year were 18s. 11d. in the £, and in the ensuing year 18s. 2d. In such a distressed area it is a serious matter for the people resident there, and even for the business people, who have drawn my attention to the position and asked me to urge upon the Cabinet or the appropriate Ministers that they should endeavour to do something for Barnsley. I leave the matter there, and will conclude by again asking the Chancellor of the Exchequer to give consideration to Barnsley, which I hope he will do to the best of his ability.

8.16 p.m.


The hon. Gentleman the Member for Barnsley (Mr. Potts) has put in a very eloquent plea for the special consideration of his own area, and by so doing has drawn attention to one of the greater objections to this Bill as it stands. The moment this sort of thing is done as a Government measure, there is not one of us representing the industrial areas who will not have the same difficulty of our people saying, "Why should we not have a cut out of this?" That is a very serious objection to the Bill. But there are more serious objections even than extending what I may call the dockyard complaint to every industrial area. We have seen this so often in this House. Hon. Members, quite properly, whenever the Government build a cruiser rise to their feet and say, "Why the Clyde built two cruisers last year and the Tyne only one. What has the Tyne done wrong?" Surely we do not want to extend that principle. The fundamental objection to the Bill goes deeper than that, and it was well expressed in the speech of the hon. Member for East Rhondda (Mr. Mainwaring), to which I listened with very considerable agreement. His area is one of the worst in the country from the point of view of distress, and he said quite truly that there was no hope of relief for that area in this Measure because this picture, which he so truthfully said, of beautiful factory buildings merely waiting equipment and working capital in order to produce goods does not exist. Even in most of the areas, to assume that the factory buildings are fit for use now is to assume that there has been no change in factory construction in the last 70 or 80 years.

Industries did not leave these areas for fun. There was no reason to drive them out except the cessation of the demand for the goods which they were producing. In the South Wales area and in Durham there is ample and very good labour to work the factories, fully desirous of obtaining employment, and yet employment has gone from them. We must go back to the fundamental cause of why that employment has gone, and even to the fundamental cause of why that enormous supply of labour ever went there. We must remember that the vast bulk of it has not been in those distressed areas for many generations. A very simple example is the County of Durham, where in the nineteenth century the population of the county increased 10 times, whereas the whole population of Great Britain only doubled. There was an enormous inflow of men seeking work because at that time there was work in Durham. There was a demand for the coal which Durham was able to produce, and many of the heavy industries went northwards in order to get near to the source of their main raw material, which was coal.

Exactly the same consideration applies to South Wales. When you see the assemblage of the unemployed in South Wales now you find among them Irishmen, Scotsmen and even in one place, I believe, in Merthyr, a very healthy and flourishing colony of 'Spaniards, who have been there for three generations. [An HON. MEMBER "Any Englishmen?"] Very few Englishmen, and a certain number, naturally, of Welshmen. All this vast number of people went into those areas, and the industry moved from them. There is only one solution. They also must move. You cannot restore to the areas from which this industry has gone any fresh little driblet sof workshops here and there, and if you could, under this Bill, so restore it, would it, in fact, be playing fair with the other industries of this country to subsidise competition, even though it were in distressed areas? The transference of the population is going on the whole time. I believe that I am correct in saying that in the last 10 years 250,000 people have left South Wales for areas where there is more work. The bulk of them have found profitable employment and have now settled down as citizens in those areas. In the prosperous areas of the Midlands, in many cases, there is a shortage of labour. Surely it would be better to absorb these populations there than to consider some form of patching up, and it would be better, instead of this very temporary palliative condition—I do not think that anybody really expects it to do very much good—if we could have a little longer vision and a more permanent policy in dealing with this problem. The problem has been permanent enough. It is not merely the result of the last depression. The depression in these distressed areas started many years before the financial crisis, the slump or the economic blizzard, or anything else.

I would appeal particularly to the Chancellor of the Exchequer in this year of all years, when we hope to celebrate most fittingly, if we can, the centenary of the birth of his very great father. Would he have taken so short a view of the solution of this problem? He was the only Englishman, I think, in the last 100 years who has understood the purpose for which the British Empire was meant, where there is undeveloped wealth, where there is room and opportunity, and where these men could go, remembering always that in these distressed areas you have the finest material for new development that you can find. The record of Wales in migration a very good one. You have a Welsh settlement in the middle of South America still speaking Welsh, building up a new Wales in the countries to which those people have gone. Surely it is possible to do that. If you can do it in an alien country, do it under the shelter of our own flag. There has been to date only two things lacking to make this policy successful—a well-worked out scheme for complete community settlement and an assured market for any surplus goods which those communities may produce, and the adequate finance to ensure a fair chance for these communities and a guarantee to the countries to which they go, that these communities are never likely to become a charge upon public funds. Surely if we are going to guarantee losses, would it not be better to guarantee the losses of individual communal migrants than to guarantee losses in the way proposed in the Bill? There is a shortness of view in these matters that might easily be overcome.

I do not believe that there is unwillingness in the overseas countries to assist these schemes. At least their statesmen say there is not. Statesmen in many parts of the Empire say that they are awaiting the provision of such schemes. The Chancellor of the Exchequer would probably find it not necessary to give a guarantee with the taxpayers' money. Surely in this form of development there lies the only solution which can be provided for this most appalling problem which all of us feel so deeply. Here are these men. If they are left in the distressed areas we know that they will not be re-employed. we know perfectly well that these small workshops here and there are not going to provide, as the hon. Member for East Rhondda truthfully said, employment for any large number of men. They are not even going to start the ball rolling so that other industries will come after them into the sort of partial prosperity that they may create. We know that transference must take place. The unemployed to whom I have spoken also know that transference must take place. They know that they have to leave and go somewhere else, but at the moment their vision is limited to this country. They realise that they have to go somewhere else in Great Britain.


Does the hon. Member really put forward the suggestion that migration is the solution of the problem in this country to-day? If so, to what country will they go?


Is the hon. Member not aware that during the past four or five years in particular a very large number of people who emigrated to the Colonies have come back to this country?

Mr. DEPUTY-SPEAKER (Captain Bourne)

I do not think that we can go into a general discussion of migration on this Bill. I have allowed the hon. Member to raise the subject as a. possible alternative suggestion, but we cannot pursue it in detail.


I am afraid that that Ruling will preclude me from replying to hon. Members opposite, but I hope that I shall have an opportunity to reply in detail on some subsequent occasion. It seems to me that this Bill can only mean extending credit where that credit must of necessity be wasted. I cannot see how any industry likely to prosper is going to get very much help. I cannot see how these small sums are going to enable any reasonable factory to be set up to bring employment to a district. The lighter industries are not going to the distressed areas to put up their factories. Even with this partial subsidy I doubt whether they will be attracted to go there. They have the question of transport, the nearness of markets and many other things to consider, which will govern the situation. I hope that this will be the last effort of this kind to deal with this problem and that we shall have a much longer vision, not confined to paying the promotion expenses of a financial syndicate, and guaranteeing their losses in respect of too small a sum to do any real good.

8.30 p.m.


It would be interesting to the House and the country if the Government, having decided to bring in this Bill, would apply their minds to seeing how it will work and how to make it work. I am vitally interested, and I have listened all day to find out if this is a really practical proposition. I come from a district which will perhaps be much affected. The last speaker from the other side said that my colleagues on this side take a very poor view of humanity. There are some very good reasons why hon. Members on this side look with suspicion upon some of the proposals that come from the Government. One of my colleagues from another iron and steel district had something to say about the iron and steel industry, and I should like to tell the House something that happened 14 or 15 years ago, during the Sankey Commission. The miners of this country were appealing for a rather higher standard of life, and one of the iron and steel magnates was called to give evidence. He said that if their demand was granted it would absolutely ruin the industry. In cross-examination he was asked for certain figures. He was asked how much royalty was paid on the production of a ton of iron, iron ore, and coal, and in the end the figure totalled up to 10s. 10d. royalty paid to people who never touch the commodity and had nothing to do with it. He was asked by one of the members of the Commission if he still felt that the miners could not be guaranteed a little more if something could be done with regard to royalties, but he said that that was not his business.

The last speaker told us that the one solution for the problem is migration, and that was the solution offered to the Commission by that particular witness. A comparison was made with wages paid in this country and America, and he said that if we could get the production that they have in America we could pay just as high wages. One of my colleagues has already told the House that last year the iron and steel industry reached a record of production and profits. Another speaker reminded us of the progress in the last four years. They have broken all records in the industry in that period, but there has never been a voluntary increase in the wages during all those years. Moreover, during those years some 6,000 fewer men have been employed in our local iron and steel industry than in 1929. The workmen in this industry have as much right to live as anybody else.

When hon. Members opposite consider these questions they have rather a different background from ours. They have a background of prosperity and privilege; hon. Members on this side have the background of poverty and degradation. You must, therefore, make due allowance for the expressions of opinion of hon. Members on this side of the House. When the Chancellor of the Exchequer was speaking the other day about strengthening our defensive forces I thought that he might have said a word about strengthening the men who will have to man them. I do not think that the Chancellor of the Exchequer seriously believes that this £1,000,000 is going to help very much. I doubt whether industries will be attracted to these areas by this proposal, but, as he has said, it is an experiment, and in that case I want to make an appeal to him. I know something about one particular industry which is not represented in the North-East Coast area, but which is one of the most prosperous industries in the country. It is working full time and, indeed, overtime. It is the kind of industry which I think should be placed and could be placed in distressed areas.

If you introduce factories it is going to take away work from other districts. It is no good putting don a steel plant in Jarrow to employ 3,000 men, because it will put out of work 3,000 people in Middlesbrough. That is not good business. But the industry about which I am speaking could be started there. We have the men, the brains and the ability to build up a successful undertaking. But £10,000 will not do it. An amount of £100,000 would do a good job. It would be a safe investment. If a factory of this kind could be put down with a guarantee it would be sensible business. I do not want to mention the name of the business, but I am quite prepared to give hon. Members particulars privately. If the proposals in the Bill to help, small businesses are not successful, I hope the Chancellor of the Exchequer will tackle larger businesses of the kind I have mentioned, which might succeed in these areas. I do not like the idea that the Government have no alternative for these people except for them to go abroad; especially when the people abroad do not want them. That is not a serious contribution to the Debate. I hope the Chancellor of the Exchequer will bear in mind the possibilities there are if he would be a little more lavish in his guarantees, for in that way the scheme might be of benefit to the Special Areas.

8.39 p.m.


Whenever these melancholy Debates take place we can almost tell how many Members are going to attend and even the names of those hon. Members who will be present. But we had a stranger in the House to-day. Indeed, I was so startled when I saw him that I almost spied strangers. The speech of the hon. Member for King's Norton (Mr. Cartland) was a maiden speech and notable for the fact that in eloquent terms it expressed what we know is the deep dissatisfaction of hon. Members behind the Government with their handling of this serious problem. In fairly emphatic language the hon. Member told the Chancellor of the Exchequer that whatever value there was in the Bill it was merely playing with a, vast problem. The Chancellor of the Exchequer made it quite plain that this is merely an experiment. We who know the problem so well, its range, its tragedy and the great damage that it is doing to the physical and moral welfare of the country by its continuance, would be wrong both to ourselves and to the nation if we grew enthusiastic over a Bill of this nature. It is said to be an experiment. How many more experiments of this kind are we going to have? The hon. Member for Smethwick (Mr. Wise) spoke about transference. It has been going on for at least 10 years; at least 150,000 men have been moved from Durham in the last 10 years. But in spite of that the problem gets worse. In a recent report the authorities of Armstrong College said: In 1931 a survey was undertaken by the Armstrong College of the industrial position of the North-East Coast area as things were at that time, and it was apparent from this survey that even in a good year of trading there was a surplus of some 64,000 males. This survey has been recently brought up to date by the staff of the Economic Department of Armstrong College in a publication entitled The Industrial Position of the North-East Coast of England,' and it is clear from this new survey that the area has not yet passed its depressed economic condition and that the 1931 estimate of the surplus male labour was too low. That means that it is higher to-day than it was in 1931. We have had transfers and we have had emigration, which was tried on a great scale. We have had derating as an experiment. The right hon. Gentleman had great hopes with regard to his derating scheme, but the people in those areas would not exactly say that derating has been a success as far as they are concerned.


They would not like to change it.


I can tell the right hon. Gentleman that if he would put Durham, so far as the county area is concerned, in the position they were in prior to de-rating, they would be glad of it. All that happened as a result of derating was that the great industrial plants in each area —and Wales was in the same position—were relieved of three-quarters of their rates. That enabled them to produce more cheaply. They sold cheaper coal and thus passed on the benefit to the foreigner. I do not know what the right hon. Gentleman's view may be, but there is a school in this House and in the country which sometimes whispers, but sometimes says bluntly, that the areas such as Wales and Durham, and some of the other depressed areas, suffer because of extravagance in their administration. I would like to point out that there hat been an inquiry in Durham on the question of administrative costs, and we should be glad if there could be a person or body in this House responsible to the Government who could take note of the results of that inquest. Will the House believe that in education, both high and low, and in the Poor Law institutions—the workhouses as we used to call them—the costs in Durham are considerably lower than the average for England and Wales? The real trouble is the rateable value.

Until quite recent years in these old areas, which were the first products of the industrial revolution, and in my own county, the great mass of the people was what might be called a shanty population, because the houses were so poor. I am sure that the critics of South Wales, Durham and Scotland, if they knew intimately the problems that had to be dealt with there, the grossness of sanitation until 20 years ago and the scandalous condition of housing, would appreciate the magnitude of those problems. I could describe conditions which existed nearly up to the War—and I am sure my fellow Members from the mining areas could do so—which would positively make the House sick. Such were the problems that had to be faced. The only rateable value worth while was that of the industrial plant.

As an illustration let me refer to the county of Durham, where the inquest has been held—an inquest of which more will be heard. Throughout England and Wales the houses containing five rooms or more for rating purposes represent about 34 per cent. of the whole houses to be rated, but in Durham they represent 9 per cent. There has been no rateable value at all since the right hon. Gentleman took the industrial plant from us. However, he only completed what had been going on for a long period.

This experiment has been going on for some years now. The right hon. Gentleman gave us the Commissioner for the Special Areas, and he cannot charge us with falling before him with enthusaism for that. He will well remember what we said at the time. We told him that he was only dodging the issue of the Special Areas. We told him that he had appointed the Commissioner only for the purpose of getting rid of the problem here as far as he could, and that has turned out to be the case. His Commissioner is doing nothing. The local authorities have to meet the Commissioner sometimes and they get a little here and a little there, but all that has really happened has been that the Commissioner has enabled the Government to dodge their own responsibility.

I have heard hon. Members to-night complain that the Special Areas are very limited. Some of them were complaining that their constituencies were outside the Special Areas. I was complaining in the same way when the Measure dealing with the Special Areas was passed. The astonishing fact is that one has to think twice before one knows which areas are inside and which are outside. I heard speaking to-night an hon. Member on this side of the House who was under the impression that his division—which is next to mine—was in a Special Area, but I can assure him that it is not. I believe it is calculated that there are only between 300,000 and 400,000 in the Special Areas, and that does not touch the edge of the problem. The unemployed population in the industrial divisions affected is 1,300,000, and it is only playing with the problem to limit it to 300,000 or 400,000. The right hon. Gentleman said, of course, that the front was being narrowed in order to experiment. Is he satisfied with the result of that experiment? His Commissioner has now been working for some three years. He has been in close touch with the authorities, and they have given him all facilities and co-operated with him. As a matter of fact, I sometimes think the local authorities have been too kind to the Commissioner, for the very simple reason that had they been less easily satisfied by him the Government would have had a little more trouble on their hands.

I think it was the hon. Member for King's Norton who pointed out that a great mass of people were being physically undermined and in some cases were being undermined in moral by unemployment, and my hon. Friend who opened the Debate from this side also dealt with that aspect of the question. There are whole villages populated by people who used to be among the most independent and virile types to be found in this or any other country, and in what plight do we find them to-day? Up in the fells, in the remote parts of Durham, down in the valleys of Wales, you had, years ago, in the days when there was regular work, men and women who would have been insulted by the offer of a new suit of clothes. They would not take anything from anyone. In what condition are they now? I do not want to undervalue the work of those engaged in the social service movement. I appreciate the spirit of the people who adopt villages. But knowing what I know of these men and women as they once were, and in view of what I have seen lately, I am bound to say that I would respect my people far more if they refused to accept a single copper or a single suit or a single element of charity from the people who are giving charity.

The Government have a great load of responsibility to bear in this respect to hundreds of thousands of these men and women. There are about 2,000,000 unemployed and well up to 400,000 of them have been unemployed for nearly a year. About 800,000 have been unemployed for more than three months. Surely, that is a national emergency. Hon. Members opposite who are concerned about the defence of the nation do not want experiments in that direction. They want to have things done at once and they have compelled the Government to do things at once.


To build the battleships first and experiment afterwards.


The Government did not put somebody from outside the House in charge of that matter. They did not even put a private Member in charge of it. They appointed one of the chief Members of the Government to look after the question of rearmament. Hon. Gentlemen sitting behind them saw to it, that no one outside the House was appointed to take charge of that matter. They wanted someone whom they could deal with and criticise here. My charge against the Government and the reason why I am not going to say "thanks" for this Bill, is not that the Government have not done all that they might have done. I agree that this is a many-sided problem, a problem so great that it will almost break the hearts of statesmen before they can dispose of it. My charge against the Government is that they have never attempted to face the problem. They have shoved the responsibility as far away as possible. They have never got down to it or even shown that they meant to get down to a proper examination of it either as to its range or its depth or possible methods of solution.

Before there is any settlement, I am sure the particular feature of the problem to which attention has been called by the right hon. Gentleman the Member for Hillhead (Sir R. Home) will have to receive consideration. I do not wish to go outside the terms of the Bill in dealing with that matter. I am not so much concerned about the financial aspect of the Bill. If it does any good at all I shall be the first to thank the Government and to say that I was wrong. But I am sure that there is a much bigger element in the problem to which the Government will have to direct attention and that is the question of rates and rateable values. The Government are faced with a situation which is growing worse and worse. I do not want to exaggerate, but I do not want people to be misled. A general impression is being spread abroad outside that, somehow or other, things are improving in these areas. Neither the facts nor the figures show that there is any improvement. The right hon. Gentleman may be disappointed at our lack of gratitude, but all we can say to him is that we are getting nothing, that we have got nothing, and that we hope for nothing except a Government that, some day very soon, will deal adequately with this problem.

9.1 p.m.


I was sorry, and I am sure the House was also sorry, to hear the hon. Member for Chester-le-Street (Mr. Lawson) wind up his speech on such a depressing note. He said that he and his colleagues thanked us for nothing and hoped for nothing until some date, indefinitely postponed, when he instead of us might have the handling of this problem. We do not cherish such a hopeless outlook on the problem as the hon. Gentleman does. We believe that it is one of those problems, vast in its scale and multifarious in its complications, which has to be dealt with, not by knuckling down to it and adopting an attitude of despair because of its very magnitude, but by adopting practical measures, each, perhaps, limited in scope, but each capable of dealing with one aspect of the problem at a time. We hope by the cumulative effect of such practical measures, which must vary one from another as the features of the problem vary, to achieve that improvement in the Special Areas which is the desire on all sides in the House. The hon. Member was inclined to be critical of my right hon. Friend's description of this Measure as experimental. He asked us how much more experimenting we were going to do. For my part, I profoundly hope that we shall have a lot of experimenting, because it is a problem worthy of research and experiment.


Experiment or vivisection of the depressed areas?


I would remind the hon. Lady that experiment may be productive of much good, and that a great deal of our present advance is due to experiment. I know there are minds which dislike experiments and would prefer to deal with problems on a theoretical and deductive basis, which would like to seek a refuge from the hard realities with which we are confronted in an easy reliance upon some preconceived theory of human life. But when we are confronted with a problem of such gravity and difficulty as this problem of the Special Areas, which we have inherited, I believe that no theory should be used until all the resources of experiment have been tried to the utmost. Against that general background I ask the House to regard this Bill. I make no apology for it on the ground that it is an experiment. Rather I rejoice that we have in office a Government who are prepared to make experiments along unorthodox lines in the hope that they will make some contribution towards a solution of the problem that distresses us all. It is clear that without experiment there can be no illumination on this problem. The hon. Member for Ebbw Vale (Mr. Bevan) truly said that no one can claim that we are in possession of a magic sword such as Excalibur which with one blow could smite off the heads of this many-headed monster. That is the attitude we should adopt towards this problem.

The Bill that is before the House is an attempt to deal with one particular aspect of it which, I suggest, is worthy of being dealt with experimentally because it is an aspect which has puzzled many people who have tried to deal with the problem of the Special Areas. It is a particular aspect which has been singled out for special mention in the report of the Commissioner for the Special Areas. It is to some extent a financial problem, and the Bill is an attempt to deal with that particular side of it. Therefore, I am not at all disappointed that the hon. Member received this Bill without any gratitude, because I should not expect a measure emanating from this side of the House to be received with rapturous enthusiasm by Members opposite; nor am I unduly distressed that this is a gift horse that has been looked at in the mouth, every dental peculiarity, real or imagined, having been described at considerable length. I make no complaint about that. It is natural that hon. Members who represent the Special Areas should make this Measure, limited though its real scope and purpose may be, an opportunity for describing to us the conditions of their areas and reminding the House of circumstances of a sad character of which no hon. Member is ever likely to require reminding.

The hon. Member for Hamilton (Mr. D. Graham), who opened the discussion, made at the outset the criticism, with which I shall deal in greater detail later, that the Bill should apply to a greater area. He also suggested that the sum of money involved in it was too small. On that criticism has centred most of the discussion which followed. The general idea has been, "This is a bad Bill, but let us have more of it and apply it to a wider area." The hon. Member will excuse me if I cannot follow him into his description of the plight of Scotland, which I was very sorry to hear, because the Bill, although it is an attempt to deal with one particular aspect of the problem of the Special Areas, does not profess to be a Measure of such scope as can deal with all the problems in the Special Areas. It has never professed to be that. It is an attempt to remedy a particular matter that was brought to our attention by the Commissioner for the Special Areas. My right hon. Friend has previously referred to the passages in the Commissioner's Report, but I ask the House to bear with me if I make a further reference to what the Commissioner said about the obstacles which he found confronting him and about the remedy which he suggested. This is strictly relevant to the Bill. I refer to the second report of the Commissioner and to that passage on page 15 which is headed with the significant title, "Finance for new or expanding industries." That is the area in which this Bill is to be operated. The Commissioner says, in paragraph 51: There is no need here to examine at length the reasons why difficulty is experienced in obtaining capital to finance new industries in the Special Areas. The all-important fact is that the difficulty exists and is the subject of constant representation from each area. Then he goes on to analyse the difficulties very much as they have been analysed to-day by the right hon. Gentleman the Member for Hillhead (Sir R. Horne). Then he goes on to say: Shortly after my First Report was rendered I came to the conclusion that, if the Areas were to be given a good chance of partaking in the general economic recovery of the country and in the advantage of the present abundance of cheap money, it was essential that further facilities should be provided and that a fund should be created and used for the express purpose of stimulating the establishment of new industries and expansion of existing industries in the Areas. The Special Areas Fund cannot, of course, be used for this purpose, and I therefore submitted a recommendation on the 26th July that a special fund should be created. I realised that this recommendation would not be easy of acceptance and would require careful consideration. I am of the opinion that Government Funds should not generally be used to finance private enterprise, and I hope that the necessary fund would be put up by financial interests in the City. However, if private financial interests are not prepared to find the necessary money without some Government guarantee, I should regard the giving of such guarantee as one of those unorthodox measures essential to the Special Areas if they are to be given opportunities for effective recovery. The use of the fund should be limited to the Special Areas and the period of the loans defined.


Does the Commissioner ever suggest such a small figure as £1,000,000?


I am dealing with the alleged smallness of the figure later on. I would ask the hon. Member to note that what the Commissioner is asking the Government to do is to make up for this blank in the financial organisation of the country which is preventing the Special Areas, through lack of adequate finance, from participating in the general recovery. He asks us further, if we cannot get the money through the ordinary interests in the City, to take the unorthodox step of furnishing some Government guarantee in order that that object may be accomplished. That is what this Bill is doing. While hon. Members have used the discussion as a vehicle for enlarging on the general problems of the Special Areas—and no one, recognising the gravity of the problem, can take exception to that—the particular purpose which this Bill sets out to achieve should be the criterion for deciding whether it should be given a Second Reading. I claim that if the Bill is an attempt, which is likely to prove successful, to adopt the particular measure of relief which was commended to us by the Commissioner, it will enable the Special Areas to participate in the general recovery.

We had a very delightful maiden speech from the hon. Member for King's Norton (Mr. Cartland) which we all enjoyed, and we hope it was the precursor of many other occasions on which he will address the House. In regard to many of the things he said, particularly those that were of a more general character, there was a strong disposition to agree with him in many parts of the House. In particular, when he described this as a national and not a local problem, I think there would be general agreement with him; and that is why, in this national House of Commons, we are introducing a Measure to deal with what is sometimes supposed to be only a local problem. The hon. Member commended his ideas to us with such freshness that I do not propose to traverse them at any great length and, indeed, I would only ask him to consider one aspect of the problem he brought up, in order that I may give the House a little information on the matter. The hon. Member thought we ought to encourage the present trend of industry to move to other parts of the country rather than attempt to keep industries in the Special Areas. I could not help thinking that he and his friends—because we had similar speeches from other hon. Members—are really giving very little hope to the Special Areas and the people in them. It is not as easy for men to transfer from a Special Area as is sometimes supposed. They have the bonds of home and kindred to consider, and it is not often a wise thing for a family to move unless there is some prospect that their security will be materially increased.

The Government's scheme for assisting transference has proved markedly successful in selected cases. We have found that where one member of a family from a Special Area succeeds in getting employment elsewhere it is often possible, by Government assistance, to enable the rest of the family to follow—when the ground has been mapped out by the pioneer—with prospects that the whole lot will be settled there in the end. There has been a hopeful acceleration of that movement in recent years. Whereas in 1933 there were 605 family removalshouseholds—in 1934 there were 1,308, and in 1935 there were 3,595 successful removals. If we take the first two months of each of the last three years we find the position to be this: In the first two months of 1934 the number was 105; in the same two months of 1935 the number was 164; and this year the figure rose to 838.


When you say "households" do you mean a man and wife and family?


The figures relate to the number of households removed under this scheme. I mention these figures to let the hon. Member see that though we have brought in this Measure to deal with one aspect of the problem, we are by no means neglecting the other. We ask the House to take the line that we takes that every conceivable measure should be tried, that this is no problem that can be solved by any quick formula of any description. We regard this Bill as another example of a practical experiment, and we ask the House to agree to it for that reason. The hon. Member for West Middlesbrough (Mr. K. Griffith) dealt with one familiar aspect of the problem, and that is the complaint that the Bill is limited to the areas scheduled as Special Areas under the Act of 1934. He will realise that one reason for that is that the genesis of this Bill is to be found in the report of the Special Commissioners, which dealt with certain areas. The question whether or not the Special Areas should be extended and other areas brought into the category of Special Areas is not a question before us in this Bill, but if at any time Parliament considers that the Special Areas should include other stretches of the country not now included in that category the operations of the company formed under this Bill will automatically apply to the area thus extended.


Does the hon. and learned Gentleman mean that before we can do anything we have to go back and, by new legislation, amend the Act of 1934? That was rather what I wanted to avoid?


When the hon. and learned Gentleman says "if at any time Parliament decides to extend the Special Areas," does he mean that the Government have in contemplation some amendment of that kind?


No, Sir. I say nothing of that kind at the moment. All I am saying is that it will be in the memorandum of association of the company that the term "Special Areas" will include not only the Special Areas as in the Act of 1934 but those areas as described in any subsequent Act which amends the original Act.


This is a very important point. I should like to know whether that would be consistent with the Preamble of the Bill as it is drawn, whether it would be possible for the articles of association to be so drawn without a fresh Financial Resolution and a fresh Bill. If the position is as the hon. Gentleman has stated it, I am glad to hear it.


I can reassure the hon. Member on that point. The term "Special Area" is now to be understood by reference to its present statutory definition, and if at any time that definition is by statute varied or enlarged, it will apply to the company which is to be created, and that is perfectly consistent with the terms of this Bill.

The hon. Member for Chesterfield (Mr. Benson) asked me two questions. The first was rather in the form of the expression of an apprehension that we should not get the money. It is true that the terms offered to shareholders in this company are not commercially attractive, but I can assure him that we shall get the money all right, that there are persons with sufficient public spirit not entirely concerned with the commercial aspects of the case who wish to assist in this effort to create a new measure of hope for the Special Areas, and I can assure him that we are assured of the necessary support. He asked me also what would be the period of the loan. There will be a period as in every loan transaction, but when he asks me to define what the term will be I am unable to answer him. The term for which a loan is granted will depend very much on the particular case. Propositions of varying attractiveness will present themselves to the company, and concerns of varying financial strength may apply for loans, and therefore the term of years for the loan will have to suit the necessities of each case.


Is it not necessary to have some information as to the repayment terms before we can ascertain how far the provision to which the right hon. Gentleman referred has any application?


It is clear that if the whole of the capital were lent out for a very long time it would make a difference. There are all sorts of problems that may present themselves. There may be redemption over a period of years, which each year will bring back to the company a fresh supply of money. The matter will have to be decided according to the best commercial practice that the company can bring to bear.


The best commercial practice would insist on the most rapid repayment from those firms which were the least attractive borrowers. If one is to help these areas and firms over their difficulties a longer term of loan should be granted to the weaker firms who are the least attractive borrowers.


What I mean by the best commercial practice is the best common-sense practice to achieve the object of this company. The main object of the company must always be borne in mind, but at the same time it must arrange its terms of lending to suit the necessities of each particular case. The hon. Member for Motherwell (Mr. Walker) complained of our trying to solve these problems by a committee in London. It is intended that this new company should have nut only a central board here but local boards in the Special Areas, and also that these local boards should co-operate to the fullest extent with the local authorities and other agencies at work in the Special Areas. It is to have a central home, but it is to be an organisation with a local habitation and name in each of the Special Areas, and to keep closely in touch with the conditions, which vary from point to point. The hon. Member for Ecclesall (Sir G. Ellis) addressed some observations to me, and so did the hon. Member for Stockton-on-Tees (Mr. H. Macmillan), suggesting that this was an unduly expensive financial structure. I think the alternative which the lion. Member proposed was that we should do better by entrusting the operations to the existing credit organisations. The hon. Member for Stockton-on-Tees was of opinion that we would do better if we were to raise the whole money with Government credit. I do not agree that this is an expensive structure. Both hon. Members have arrived at that concision by using as an interest charge the maximum prescribed rate. I ask them to reconsider this matter, and to put against that the contribution which the Treasury is making to the administrative expenses, reserve fund and so on. They will then see that in reality this is an exceedingly cheap capital structure, much cheaper than could be provided without Government assistance.


If it did not have the administrative expenses as under this Bill, and used the existing structure, he would save that amount of money.


The existing credit organisations have failed to provide what is required.


They have failed to provide it because they have never had the opportunity now suggested. If the means now to be taken were offered them they would probably be only too willing to do so.


I understand the suggestion is that the Treasury should give a guarantee to these organisations to lend out as they see fit.


I have never suggested anything of the sort. I said that there were these marginal cases which in present circumstances the ordinary credit organisations were not prepared to advance to the full extent, but that had they a little extra guarantee from the Government the whole proposition became entirely different.


I think I have not misrepresented the hon. Member. He is suggesting that the Government should give its guarantee to enable them to take risks which they will not at present take.


The margin of risk.


The hon. Member is asking the Treasury to assume a very large liability. We are to say, "It is true there are some risks you will not take. Have our credit behind you if you will take them."


Not to a greater extent than is provided under this Bill.


Both from the point of view of the Treasury and from the effectiveness of this object it is far better to adopt the measures we have adopted, in which a special body with this object is set up and given the advantage which the Treasury proposes to give it.


What is meant by the maximum rate of preference interest? Surely it is a fixed rate of interest.


No, I understand that what is provided is a maximum. If in any year there are losses, there is no dividend paid or the dividend is less than this maximum, the dividends are cumulative and at the end of the period any assets may be used to repay the dividends which have not been paid.


When the company is floated surely the rate of dividend will be stated, and the preference rate will be 3½ per cent. I do not understand what the hon. and learned Gentleman means by saying that it is a maximum rate, which would seem to indicate that in certain years or in certain circumstances it may be varied.


The hon. Member is making a great difficulty over what is a very simple matter. What I said is perfectly true. The rate of preference dividend is fixed at 3½ per cent., but the hon. Member must know, if he has ever held preference shares, as I have no doubt he has, that you do not always get the full rate on your shares. You may get less. It is true, therefore, to say that this' is a maximum. The hon. Member also asked what is the normal term of the loan. As I have explained, that must be determined according to the circumstances of each case. He drew attention to a phrase which he said was used by my right hon. Friend, "the first year." That had reference to the total circulation of the £1,000,000, until it came back again.


Not the first year?


No, not the first year. It was in reference to the number of fresh times the capital sum of money had gone out. An hon. Member referred to our proposals as a farce, but I can assure him that the Government consider this to be a very serious effort to solve one particular problem. This is an experiment, limited to the Special Areas at the moment, and, if it proves a successful experiment, no doubt the Government and the House would like to see it ex- tended to other areas where it could prove successful. It has been said that the sum provided is too small.


May I take it that Barnsley will have no consideration in this matter?


I do not know about Barnsley, but what I am saying is that the operation of the Bill is limited to the Special Areas as defined in the Act of 1934. Perhaps the hon. Member will look at that Act and see whether Barnsley is defined.




I think I have given way sufficiently.


I simply wanted to ask whether anything further could be done from any other source.


That is another matter. It is said that the Bill is too small, but it is an experiment, to test what can be done on other lines. It is not too small a proposal, because it may be extended. The capital may be increased with the written consent of the Treasury and if the Bill proves successful no doubt it will be increased. The capital sum of £1,000,000 must never be considered as fixing the total capital that can be lent by the operations of this company. It is a revolving sum, which can be lent again and again. I would like the Housce to consider what the total effect of the Measure will be upon the industries which derive benefit from it. Any hon. Member who considers the problem of the Special Areas will know that if a successful industry is set up in one of them, the additional prosperity to the area will be not only the wages paid and the purchasing power created by that industry, because one spot of success in an area of desolation is apt to spread. This form of assistance, coming to a new industry in one area, may be just what is required to act as a catalyst to release the energies of other potential industries in the area.

I ask the House to bear in mind the admirable sentiments that were expressed in the very forceful speech of the hon. Member for Walsall (Mr. Leckie), who urged us not to despise the small industry because it frequently became a large one.

I hope I have said enough to indicate the scope of the Bill. It is, as I have said, an attempt to give effect to a recommendation which has been put before us not only by the Special Commissioner, but constantly has been urged upon His Majestys' Government by hon. Members in all parts of the House. The proposal has never been the subject of criticism until the Government has tried to carry it into effect. I ask the House to show something of the enthusiasm with which the proposal was demanded before it was in draft, and to give the Bill a Second Reading. I commend it to the House.

Bill committed to a Committee of the Whole House for Monday next.—[Commander Southby.]