HC Deb 05 April 1967 vol 744 cc244-51
The First Secretary of State and Secretary of State for Economic Affairs (Mr. Michael Stewart)

With your permission, Mr. Speaker, I would like to make a statement.

During the course of the Government's consideration of the problems of the development areas and the studies carried out by the Treasury, the Department of Economic Affairs and other Departments concerned with the system of selective employment payments, a proposal has been developed for the payment of a regional employment premium to those categories of manufacturing establishments in development areas which already attract premia under the Selective Employment Payments Act. This proposal has been set out in a memorandum which was issued this morning on behalf of the Government by the Department of Economic Affairs and the Treasury. Copies are available in the Vote Office.

The memorandum was also given initial consideration by the National Economic Development Council at its meeting this morning and will be considered more fully at its meeting in May. I have also arranged with the chairmen for it to be considered by the Regional Economic Planning Councils in England, and my right hon. Friends the Secretaries of State for Scotland and Wales will make similar arrangements for consultation on it with their Economic Councils.

I wish to make clear that the public presentation of this proposal is an initiative to which the Government attach great importance, because of the high priority which they give to a reduction of the disparity in unemployment levels between the development areas and the rest of Britain and to the achievement of the maximum rate of economic growth consistent with the maintenance of the stability and balance of the economy both internally and externally.

The view is frequently expressed by the Confederation of British Industry, the T.U.C. and other bodies that the opinion of informed and interested parties should be sought and publicly discussed while policy is still in a formative stage. The Government have much sympathy with this view, and it is in this spirit that they put forward this proposal for full consultation and public discussion. Following this consultation and discussion, the Government will decide whether or not to submit a proposal for legislation to Parliament.

Mr. Iain Macleod

Will the First Secretary of State take it that, leaving aside for the moment the merits of the proposal, the idea of having public discussion is wholly to be welcomed? I hope that Parliament will not be excluded from the discussions. Is he aware that both sides of the House welcome the fact that there is a further intention to reduce the disparity in prosperity between different areas of the country? This is not in dispute.

Without prejudicing the arguments which will take place, may I ask the right hon. Gentleman whether he agrees that this traces back to the fundamental flaw in the Selective Employment Tax which encourages manufacturing however trivial and penalises services however essential, the result of which has been to harm countries like Scotland and regions like the south-west of England? Does he recall that all the Amendments moved from this side of the House to put this right were opposed by the Government a year ago? Does not the right hon. Gentleman think, therefore, that he would be better advised to consider recasting, and in due course abolishing, the S.E.T. rather than build fresh anomalies into it?

Mr. Stewart

I would not agree with the last part of the right hon. Gentleman's remarks. One must remember that he did not want any premiums paid at all. But I shall not pursue that now, because this is not the moment to discuss the actual merits of the proposal. If views similar to those expressed by the right hon. Gentleman are held, it will be open to those who hold them to make their point in the course of discussion.

I am glad that the right hon. Gentleman welcomes the concept of public discussion of this proposal. Parliament, of course, is not excluded. I have sought to arrange the announcement of the proposal so as to synchronise as nearly as possible the announcement to Parliament, the N.E.D.C. and the regional councils. It is a matter for the Chairman of Ways and Means, but I would think and hope that, during the debates next week, we shall begin to get the opinions of hon. Members on this proposal.

Mr. Thorpe

Any help given to the development districts will be welcomed. I particularly welcome the recognition by the Government of the adverse effect of the present S.E.T. upon the development districts, but is the First Secretary of State aware that this proposal does nothing to assist the service industries, many of which are valuable dollar earners? Second, does not he consider that, instead of creating more anomalies, it would be much better in the Budget to have regional variations, with development districts paying a much lower rate of S.E.T.?

Mr. Stewart

It seems to me that these are all views which the right hon. Gentleman and others can put forward in the discussion of the proposal.

Mr. Woodburn

Will the bodies and people concerned be able to put forward alternative or supplementary proposals such as the excellent ideas which the right hon. Member for Enfield, West (Mr. Iain Macleod) proposed for Malta, with remission of Profits Tax in respect of earlier years of working and other similar inducements as were offered at Shannon? Will these suggestions be considered if they are put forward as supplementary proposals?

Mr. Stewart

I shall be extremely surprised if alternative proposals are not put forward in the discussions, but I should add that we might discredit the whole idea of public discussion if it were allowed to go on for too long. I think that there will be adequate opportunity for exchange of views, but the House and the country will want the Government, within reasonable time and so as to avoid uncertainty for business, to reach a decision.

Mr. Dalyell

We on this side very much welcome discussion at a formative stage, but is my right hon. Friend aware that there must be many constituencies like my own, in parts of which, frankly, I do not think that there ought to be any expenditure of public funds, whereas in other parts, such as that bordering the constituency of my right hon. Friend the Member for Lanarkshire, North (Miss Herbison), public funds are desperately needed? Can my right hon. Friend introduce into his thinking a greater element of selectivity?

Mr. Stewart

This is one of the reasons why one wants to put forward a proposal of this sort for public discussion. It will involve a good many arguments about borderline cases. I do not think that one can properly judge them until one has heard a wide variety of views.

Mr. Henig

Will my right hon. Friend bear in mind that, although most of us on this side would welcome any further help given to development areas, there are certain areas which have not been scheduled as development areas—one might call them the grey areas—particularly in the north-west of the country, which also need help? Has he any plans for helping these areas?

Mr. Stewart

No, Sir, I cannot say that I have plans on that at present. But it seems to me inevitable that, in the discussion of this proposal, people will be bound to raise the question of the delimitation of the areas.

Mr. Noble

Does the right hon. Gentleman realise that while we all appreciate his idea of public discussion and agree that perhaps it could go on too long, the discussion in the Highland region, where there is a very serious problem, would not last 10 seconds because there is total unanimity about the absurdity of S.E.T. as it is at the moment?

Captain Orr

Has the Minister discussed the matter with the Government of Northern Ireland, which is the area of the United Kingdom with the highest level of unemployment? I understand why he did not mention it in his statement, but could he say, as a general principle, whether it is the Government's intention that this should apply in Northern Ireland?

Mr. Stewart

That is really up to the Government of Northern Ireland, but, of course, if they wish to express views on the matter Her Majesty's Government will certainly listen.

Mr. Bence

While I appreciate the measures being taken by my right hon. Friend, may I ask whether he would look again at the distinction between productive and service industry, because over the whole range of consumer durables the service industry is an essential link in the economic production and distribution of the product? There is a serious anomaly here.

Mr. Stewart

I do not think that I should enter into that argument now, but it was clear to the Government when this proposal was put forward that that would be one of the reactions to it. We shall no doubt hear more of that during the coming weeks.

Mr. Henry Clark

Is the right hon. Gentleman aware how much the House will welcome his rather tardy conversion to regional variation in S.E.T., which was regularly advocated last year from these benches? How does he hope to protect the development areas from the growth of mushroom, labour-intensive industries, which do not give the development areas what they want—stable employment in capital-intensive factories?

Mr. Stewart

I do not think that I can develop the answer to the second part of the question now, and I do not think, either, that the hon. Member can speak of tardy conversion. The Government have pursued a whole range of regional measures which have been of great value to the regions in recent months. It was partly as a result of the study of their working, with the thought in mind that it might be desirable to take further steps, that this proposal has come forward.

Mr. Ogden

Has my right hon. Friend noted that sometimes Members of Parliament are very hard to please, but that his statement will be welcomed not only in Scotland but on Merseyside and elsewhere? The House will not wish there to be merely a hope that the Chairman of Ways and Means will allow discussion, but will want discussion at the same time as other bodies are discussing the proposal.

Mr. Stewart

I agree with my hon. Friend on the first point; I have noted that Members are often hard to please. On the second point, it is clear that there will be proper discussion in the House, but I felt it right to say that what is or is not in order in the debate next week is in the hands of the Chairman of Ways and Means.

Mr. G. Campbell

Is the right hon. Gentleman aware that if the proposal is confined to manufacturing industry at will have little effect and do little good in areas where there is a low proportion of qualifying manufacturing industry, such as the Highlands, where only 10 per cent. of employment is provided by such industry, and where the situation cannot be changed overnight?

Mr. Stewart

That point has already been made. It would be no good assuming that the proposal should solve all regional problems. It is put forward as a possible valuable contribution to the problems of areas such as the Highlands of Scotland.

Mr. McNamara

Is my right hon. Friend aware that some areas are neither boom nor development areas, but have a creeping malaise of growing unemployment and net emigration, and that that is why we should have a variation of this type of tax to help them not to become development areas in the future?

Mr. Stewart

That seems to me to be one of the things that we shall have to take into account during the discussions.

Mr. R. W. Elliott

Whilst I recognise that the right hon. Gentleman does not want to discuss the proposal in detail at present, may I ask the right hon. Gentleman whether he has been made fully aware that there is at present enormous competition for skill in the north-east of England between manufacturing and service industry, and that this substantial proposed subsidy to manufacturing industry will not help in that direction?

Mr. Stewart

I have been made aware of that point, but I think that there is rather more to it than the hon. Member has suggested.

Mr. Rhodes

Is my right hon. Friend aware that the proposal was widely acclaimed throughout the north of England this morning? Will he bear in mind that financial incentives already operating in the north-east of England, together with measures of this kind, would not only attract new manufacturing industry to the area to deal with male unemployment, but also strengthen existing industries, such as shipbuilding, which need it? But would not a scheme of this kind be effective only if there are at least several years' advance notice that it will continue to operate?

Mr. Stewart

I am obliged to my hon. Friend for what he said in the first part of his question. One of the things referred to in the memorandum is the question of the duration of such a scheme, and my hon. Friend will see that it is in line with what he said.

Mr. MacArthur

Will the right hon. Gentleman assure the House that he will not allow the public discussion to divert his attention from the very pressing problem confronting the service industries? Will he recognise that S.E.T. has borne very heavily on them in the development areas, and particularly on the elderly, the part-time workers and married women who depend on them for their employment and who will not be helped one whit by the Government's proposal?

Mr. Stewart

I think that I said in answer to an earlier question that I am not putting forward the proposal as capable of solving all problems. The opinions that the hon. Member expressed, which are not universally shared, are on another matter.

Mr. Elystan Morgan

Does my right hon. Friend agree that although the proposals are excellent in general there are constituencies like mine, with only 6 per cent. manufacturing industry, that cannot benefit from them, and that more specific and radical measures are required to combat the parlous economic conditions of such areas?

Mr. Stewart

It could not be claimed that the proposal by itself could solve all problems of that kind, but I hope that that will not inhibit the discussion of it as a valuable proposal in a particular sphere.

Mr. Peyton

Does the right hon. Gentleman realise that, while he will be widely thanked by those who receive benefit, it is very unwise to build further upon a tax which has been in force for less than a year, and which many of us think is very bad, and that by this measure it will be put in even more concrete form and will be more difficult to get rid of?

Mr. Stewart

I was aware that that point would be made. We must see how the discussion goes.

Mr. English

Is my right hon. Friend aware that the Opposition Front Bench's welcome to the proposal is diametrically opposed to their desire that Britain should sign the Treaty of Rome unconditionally? Will the proposal therefore be a condition of British entry?

Mr. Stewart

If one looks at certain regional policies pursued by member countries of the European Economic Community, I do not think that one can conclude that there would be anything inconsistent between such membership and a policy of this kind.

Several Hon. Members rose—

Mr. Speaker

Order. We must move on.