Clause 1.

HC Deb 19 February 1968 vol 759 cc43-78

(WITHDRAWAL OF PART OF SELECTIVE EMPLOYMENT PAYMENTS OUTSIDE DEVELOPMENT AREAS.)

Mr. Stanley Henig (Lancaster)

I beg to move Amendment No. 1, in page 1, line 14, leave out '1968' and insert '1969 '.

The Chairman

I think that it would be for the convenience of the Committee if at the same time we discussed Amendment No. 5, in page 2, line 9, leave out '1968' and insert '1969', and Amendment No. 6, in line 41, leave out '1968' and insert `1969'.

Mr. Henig

The object of the Amendment is to be both helpful and to probe. The effect of the three Amendments would be to put off for twelve months, from April, 1968, to April, 1969, the coming into force of a further discrimination in the treatment given to development areas and all other areas not being development areas. My right hon. Friends will appreciate that the events of the last week or two mean that we now cannot be concerned simply with discrimination between development and grey areas and that all sorts of areas are now claiming to be grey, for example, East London. I make no comment on that; it simply serves to show the importance of this issue.

The date proposed for the effective coming into force of the changes proposed by Clause 1, 1st April, is only seven months from the introduction on 4th September, last year, of the regional employment premium. As the objectives of the premium and the selective employment premium, as it will be, are roughly similar, it may be in order to make a number of brief references to the regional employment premium. The principle of that premium was that 30s. per employee per week should be paid to an employer with an establishment in a development area. The Bill suggests that 7s. 6d. per week per employee should also be given to an employer in a development area, so that the total from the two sources is 37s. 6d.

In effect, what Clause I does is to amend not so much the Selective Payments Act, 1966, as it does nominally, but the regional employment premium Sections of the Finance Act, 1967. Delaying the putting into operation of these provisions for twelve months would be helpful to the Government for a number of reasons.

First, having been made aware by some of us of the problems of some parts of the country because of this 30s. subvention, the Government agreed to establish the Hunt Committee to consider them. It is meeting now, although not with any great urgency—about once a month, when its Chairman is not out of the country, I believe. Perhaps it will meet more often in future.

But what will be its job? It has to consider the effects on grey areas of a Government subvention of 30s. a man per week in the development areas, yet, seven months later, that 30s. has been increased to 37s. 6d. This might set the Hunt Committee right back to the beginning, since it will have to consider something new, but then one will want to know what made the Government decide to increase the sum. What is the evidence?

One of the reasons for the Bill and this new discrimination is that it will save money—£75 million a year—by means of Clause 1. Is it a saving? I gather that the regional employment premium constituted "spending" but that this Clause involves "saving", because it is concerned with non-development areas. If the selective employment premium is given to employers within development areas, that is "spending" but outside development areas it is not. But unemployment outside may be just as high. I do not understand this and would like an explanation.

In suggesting this deferment for 12 months, I accept the principle that giving all employers 7s. 6d. per employee in all parts of the country was nonsense. There was never any real justification for it, but we are saying something more if the Amendment is accepted—that to dismantle parts of this structure without dismantling the whole will cause great problems and throw into jeopardy the Hunt Committee's investigations of the difficulties by increasing those difficulties in the middle and so on.

For this reason, and to inquire into the Government's motivations, I propose the Amendment, because it will help them to sort out in the next 12 months their policy and what they want inducements in development areas to be, as well as giving the Committee proper time to report and allowing whatever other measures may possibly be brought in to come into effect in April, 1969.

The Chief Secretary to the Treasury (Mr. John Diamond)

I have listened carefully to my hon. Friend the Member for Lancaster (Mr. Henig) and I understand his interest in this matter and in those particular problems, which he is well equipped to know, of his own constituency, but he has not set the matter in its full context. What is being proposed here—although the results are not very different—is not an addition of 7s 6d. to the regional employment premium in development areas but that, as a result of the alteration of the exchange rate, it is no longer necessary to provide in most areas the advantage previously provided.

That does not mean that it is clear that the advantage is no longer required in development areas. Indeed, we are seeing that it is and continues to be required there. The simple reason is that, in the development areas, broadly, unemployment is approximately twice that of the rest of the country. So if one puts this matter into its proper context, my hon. Friend will agree that there is every reason for not withdrawing an economic advantage to the development areas under S.E.T., because those areas suffer so many economic disadvantages, as is demonstrated by their unused resources and unemployment figures.

I turn now to the details of my hon. Friend's suggestion. He said that this is a probing Amendment, so I am anxious to give him all the information he wants. He referred to East London and said that that is now claimed to be a grey area. I am not sure whether he had his tongue in his cheek when he said that, but I accept it as a straightforward comment. It is true that areas all over the country are being claimed as grey areas simply because there is no definition of such an area; the characteristics of what are held to be grey areas vary enormously, including such totally different characteristics as are to be found in the area of East London which he obviously had in mind.

There is really no such thing as a grey area. What my hon. Friend has in mind are areas of widely differing characteristics, whose unemployment rates are not on average worse than those in the whole country and which therefore are not, on average, as much as half the unemployment rates of the development areas.

My hon. Friend was concerned about what is and is not a demand on resources and that therefore public expenditure is being incurred by paying selective employment premium but not regional employment premium. It is simply a question of incentive to use unused resources, which applies in the development areas, and as a result of which resources from elsewhere are switched into them. If there is such a switch, there is no demand on resources and vice versa. If money is poured into an area but does not result in a switch from another area, there is an increased demand on resources in the country as a whole. If there is a switch, the demand on the country's resources is not affected. That was made clear when regional employment premium was introduced. I do not say that everyone accepts this philosophy—[HON. MEMBERS: "Hear, hear."]—but that is its basis. Much encouraged though I always am by the interesting comments of distinguished occupants of the Opposition Front Bench, I return to what my hon. Friend said about East London and what is happening in Woolwich. Of course, there, we are seeing the effect of a switch of resources from a non-development area into one which is especially a development area and has special economic incentives, in view of its great difficulties. This, therefore, exemplifies what my hon. Friend was asking and the explanation which I have given.

I hope that he will agree that, although the change in the exchange rate justifies our claim that it is no longer necessary to help manufacturers in non-development areas to the same extent, it is still true that there are unused resources and, more particularly, unemployed men and women in the development areas and that we must continue to help them. I know that this is merely a probing Amendment, and I hope that my hon. Friend will understand that, grateful as I am for the opportunity of explaining the Government's point of view, we cannot recommend the Committee to accept it.

Mr. Robert Sheldon (Ashton-under-Lyne)

An assurance has been given that the regional employment premium will last for seven years. Does that assurance apply also to the Selective Employment Tax refund?

Mr. Diamond

As my hon. Friend says, an assurance has been given about the regional employment premium, which we are not discussing. But, as far as I am aware, no such assurance has been given about the Selective Employment Tax or selective employment payments. 4.0 p.m.

Mr. Ronald Atkins (Preston, North)

The Chief Secretary has not answered the points raised by my hon. Friend the Member for Lancaster (Mr. Henig). It has been made clear that the discrimination between grey areas and development areas has been increased by the fact that the refund of the Selective Employment Tax is still payable in development areas and not in other areas. My right hon. Friend's remarks about what are grey areas are not good enough. I know that they have not an exact definition, but they are well known in the popular mind. They have been called grey areas largely because of what people have seen in these parts of Lancashire and other parts of the country, but particularly in the Lancashire cotton district.

The position in these areas is very different from the position in Woolwich. If one goes to the areas which my hon. Friend had in mind, one will see empty factories galore, slag heaps and derelict sites. Nothing has been done about them. One will see workers who have become unemployed in industries which have died in the area and which are being set up outside in development areas, with many employees in the fifties and sixties with no hope of seeing employment again. Industry is going out of the area.

"Existing unemployment" is not a satisfactory definition, because, bad as unemployment is, it is not worse only because people are moving from the area. A large number of people are leaving Lancashire, as with other areas, which keeps unemployment down, but there is no doubt that there is all the difference in the world between Woolwich and these genuinely grey areas. The discrimination between the development areas and the grey areas has been made worse by the fact that the Selective Employment Tax refund has been withdrawn.

Mr. Joseph Hiley (Pudsey)

I agree with most of what the hon. Member for Lancaster (Mr. Henig) said about discrimination, but I fear that the Amendment is very much of a mouse. Surely twelve months will not make very much difference to this problem.

The Government have gone a bit mad over their development area policy; it has been considerably overdone. Industries which are fortunate enough to be established in development areas have had very considerable financial advantages. There are those which are renting premises at an uneconomic rent. Their cash grants are, I think, double those of industries situated in other than development areas. They have very special terms for training their operatives. In addition, there is the 30s. to which the hon. Member for Lancaster referred.

If hon. Members are to be merely concerned with their own constituency interests, and if when one area has a concession another area clamours for the same concession, we shall have a situation very much like that of the man who decided to take a ginger beer box to a football match. It was not long before everybody took a ginger beer box, with the result that everybody was in the same position. I suspect that, when the situation dawns on the Government, they too will have to redress some of the anomalies which have been created by their extreme generosity to development areas.

I asked a manufacturer of cloth in my constituency what he considered was the effect of the 37s. 6d. a week—7s. 6d. in respect of the S.E.T. premium and 30s. in respect of the regional employment premium—on the production of cloth. He assures me that it makes a difference of 6d. on every yard of cloth produced. This is putting the old-established businesses at a great disadvantage.

Since addressing the House a week ago, I have heard about a firm of shipbuilders in the south of England. Its trade was divided roughly into two parts. It prod aced a specialty article largely for the export market, and the other half of its business consisted of the "bread and butter" business of repairs in the shipping industry. Because of the tremendous advantages which firms on the Clyde have, it has been deprived entirely of what I call the "bread and butter" part of it; business. In order to allow it to continue the export development of a line in which it was a specialist, as a result of this unfair discrimination, it has lost the "bread and butter" part of its trade, which has had most serious effects on its ability to export the specialty article to Europe and elsewhere.

The Government have not looked far enough for the implications of a system of this kind. This is the time when they should not seek to increase discrimination between one part of the country and another. Many other parts are suffering unfairly. Something will have to be done. No doubt the Hunt Committee will make recommendations. Industry is disturbed by continuous changes of this kind. The Government have the opportunity to level things up a bit, and they can do it by trying to solve the problem of this 7s. 6d.

Mr. Arthur Davidson (Accrington)

I should like to make two points which I hope my right hon. Friend the Chief Secretary will bear in mind.

First, would he issue a directive or something to other Government Ministers' about an embargo on the phrase "grey area". It is an inelegant phrase. It does not describe the districts to which it is supposed to refer. Least of all does it describe the people or the countryside of my constituency and its surrounding areas in North-East Lancashire. I hope that the Government will not refer to "grey areas" in their replies in future.

Secondly, I wish to reinforce what has been said by my hon. Friends the Member; for Lancaster (Mr. Henig) and Preston, North (Mr. Ronald Atkins). The objection of those of us in areas which surround development areas—this is true of North-East Lancashire—to the premium is not that it gives an unfair advantage to development areas, because we appreciate the need for Government assistance in development areas. What we object to, mildly, and in our usual gentlemanly manner, is that it ignores the problems of areas such as North-East Lancashire, which are very near development areas and have similar problems.

This added inducement we fear will not only encourage new industry which is badly needed in areas like North-East Lancashire to by-pass North-East Lancashire, but, even more important, it will encourage existing industrialists inside to develop outside the area. Despite what my right hon. Friend said about the change in exchange rate, the problems remain the same, even if the exchange rate has changed.

Mr. James Dempsey (Coatbridge and Airdrie)

I did not intend to take part in this debate, but I have been tempted to do so by the amazing references to the extreme favouritism given to the development areas established by the Government and to the so-called unfair discrimination.

I come from a development area. My constituency is a development area. Scotland is a development area. I fail to see how this so-called bias operates in Scotland. In spite of the regional employment premium, Selective Employment Tax refunds, buildings grants and cash grants for equipment, Scotland still has twice the number of unemployed per head of population than England and Wales. In my constituency, and in my part of the County of Lanark, between 5 and 6 per cent. of our insurable population is unemployed, in spite of all that the Government are endeavouring to do. We have reached the stage where we are asking the Government to do more. If anyone suffers from discrimination, we in Scotland suffer from it.

Coal and gas prices are discriminated against us. Indeed, parts of Scotland now find it cheaper to send their iron to England to be rolled and smelted and to pay the freight than to have it done in Scotland and to pay the coal charges operating there against industrialists. That is indicative that the Government are looking at the situation objectively. They are endeavouring to do what they can within the limits of their purse to try to assist those parts of the country which are suffering more than others.

I have sympathy for the grey areas—we all have—but to compare areas of impending unemployment with areas in which there is existing unemployment is not a very fair comparison. The Government must get their priorities right. I have heard my hon. Friends on this side preaching the famous saying of the late Nye Bevan that Socialism is a religion of priorities. Here is a priority for the areas already suffering from unemployment.

My hon. Friends have spoken about the difficulty of people in the 50s and 60s being able to find jobs because industries have closed down. In Scotland, one is too old at 45 to get a job. That is the policy which has been operated by many employers, both American and indigenous. It is indicative of the serious problem which confronts development areas such as Scotland and the North-East, as well as Wales.

I hope that my right hon. Friend the Chief Secretary will err on the right side, on the side of justice, and that whatever financial assistance we can give will be given to areas with increased or abnormal unemployment figures—the areas, for instance, which have more than the national average of unemployment to contend with. Those are the areas which should get the Government's priority and on which the Government should concentrate financial assistance.

We have reached the stage that we are thinking of asking the Government to set up and operate factories, because, in spite or of all the tempting inducements, industry is still not coming to Scotland as fast or as equitably as it could to give us a fairer share of the employment prospects. I therefore want my right hon. Friend to ensure that whatever he does for the grey areas will not be done at the expense of areas such as Scotland. [HON. MEMBERS: "Hear, hear."] I am happy to have the agreement of my hon. Friends. That is where we should spend the money.

By all means take care of the grey areas, but let us first spend the money where the need is urgent and then proceed to spend it in areas where the need is less urgent. All I ask is that whatever my right hon. Friend does for the grey areas—and I hope that he will help them—he will not do it at the expense of the financial steps which must be taken if we are to break the back of unemployment in Scotland.

Mr. J. T. Price (Westhoughton)

It so happened that a few days ago I spent a couple of hours with the Lancashire and Merseyside Industrial Development Association in Wigan. Whilst I do not represent the County Borough of Wigan in this House, I represent many of the urban and rural areas stretching across Central Lancashire, of which Wigan is their pivotal point. I wish to convey as temperately as I can to my right hon. Friend the Chief Secretary, who has already commented on the Amendment, the great apprehensions which exist in the Wigan area, which is a dying coal area, where the mines and many of the cotton mills also are closed.

It might be refreshing to bring this short debate out of the realm of general statement and to quote a few figures. I think it was Bertrand Russell who said that any man who could think acutely enough could reduce any abstract idea to figures if only he thought sufficiently about it.

4.15 p.m.

My right hon. Friend this afternoon said that the South Lancashire area and the areas to which my hon. Friend the Member for Lancaster (Mr. Henig) referred have only about the national average of unemployment. Like other massive generalisations, that is only partly true. It so happens that in January, which is the latest month for which figures are available from the Ministry of Labour, the number of totally unemployed in Great Britain as a whole averaged 277 per cent. and in the North-West as a whole 2.76 per cent. When, however, those figures are broken down for Central Lancashire—although I do not want to be parochial about it—for the old cotton and coal areas, where the traditional sources of employment have dried up. in January, only a month ago. the number of totally unemployed in South Lancashire was 3.034 of, whom a very high percentage2.948–2,948—were totally unemployed males. the highest number of male unemployed in any month since May, 1963.

Therefore, when we consider male employment, which is the key employment for the traditional breadwinner of the family, we find that the rate of unemployment in South Lancashire for males alone in January was 372 per cent. against 277 nationally and 373 per cent. in the Merseyside development area, which is the highest figure in that area for some months, marginally higher than it has been.

My hon. Friend the Member for Lancaster referred to the problem in East Lancashire, where there are what I might almost describe as dying communities, if that is not too depressing an adjective to use, where the old cotton towns have a reduced population and large numbers of empty houses, which cannot be let because the people have gone away. It may comfort some of my right hon. Friends and hon. Friends to point to relatively low unemployment figures, but the truth of the situation is that if the people who have been forced to leave their home towns and go elsewhere had not done so, the figures would have been much higher.

Without labouring the point too much, I should try to impress upon my right hon. Friends in the Government that the figure of 372 per cent. wholly unemployed male workers in the Wigan area is totally unacceptable to us. I am constantly told by industrialists and others whom I meet it the ordinary course of my journeyings about the county, part of which I represent, that the discrimination represented by 37s. 6d. premium and the Selective Employment Tax rebate of 7s. 6d.. plus the capital grant of 45 per cent. which is available in the development areas as against 25 per cent. outside those areas, is an impossible situation.

My right hon. Friend the Minister of State, Board of Trade, who is present on the Front Bench, understands the problem very well. I have often discussed it with him. I have tried my best to brainwash him. People try to brainwash me, so why should I not get a bit of my own back occasionally?

Here we have a situation in which areas which have been stripped of their traditional employment are so placed that neighbouring areas obtain the premium payments plus the 20 per cent. advantage in capital grants and it is quite impossible to get my development of industry on the perimeter, for example, of the Skelmersdalf new town. Industrialists tell me that they cannot hold engineering labour, for example, in some places. I do not want to sound alarmist or to be unfair to my hon. Friends who have a difficult problem on their hands.

It is time some of us in this House joined those who have said on other occasions that they regard the Selective Employment Tax and what has flowed from it as complete nonsense—complete nonsense. Let it be on the record. I have always been concerned about these devices which very often appeal to the academic mind. I am not anti-intellectual—I am rather the opposite, if it comes to that—but I am shocked that some of these boffins can sell these ideas to a Government with a radical, Socialist background.

Mr. John Peyton (Yeovil)

But that is why they do.

Mr. Price

Let us be fair. I am trying to be fair to everybody. I do not want to be offensive to anybody. But this is an extremely difficult problem. The general proposition of the development areas, of trying to spread out industry where it is most needed, is sound in principle, and the Government have no power to direct industry except by positive or negative incentives—or discriminations, as the case may be. I can understand the argument. Bless my soul, I have been arguing this since I entered the House 17 years ago.

There is still a great deal of tidying up to do. Whatever the Hunt Committee may say when it reports, the fact is that there are still strips of Lancashire which are desparately short of employment because of the collapse in the cotton and coal industries. We want a different outlook on this, and I hope that the Government will give further consideration to the grey areas—as they are often wrongly called, for I agree with my hon. Friend the Member for Accrington (Mr. Arthur Davidson) that we ought not to call them grey, and the people in them are very cheerful. However, we ought to reduce the gap which exists between the conditions in those areas and others, and the problems of the grey areas are manifest to everybody who has lived with the situation. We want to get a good deal of liberalisation in these policies so that we do not get into the difficulties of discrimination, which already exists.

Mr. Peyton

I think someone on this side of the Committee should rise immediately to thank the hon. Member for Westhoughton (Mr. J. T. Price) for his speech. It is not the first time in this Session I have had occasion to do this, and I would like very sincerely and warmly, without, I hope, embarrassing him, to praise his common sense and his sense of realism.

I would wish him well, but I think he was a little optimistic in suggesting that he might successfully undertake the task of brainwashing Treasury Ministers. We know very well how impossible that is. Treasury Ministers are already under the influence of the boffins to whom the hon. Gentleman alluded. I would exclude the ordinary Treasury officials from this, but the hon. Gentleman went on to ask how these boffins sell such ideas to Ministers and said that he could not understand their success. The hon. Gentleman must really remember that this Government bought this absolute tomfoolery and bought it very readily. It has taken them and some hon. Members a very long time to catch up with the rest of the country in the conviction which started after the mad idea which never had any sense in it of this Selective Employment Tax. I absolutely share the hon. Gentleman's sense of shock that anyone so intelligent as the Chief Secretary should ever find himself in the position of being able to defend such monstrosities as those in the Selective Employment Tax.

The one point I want to make—it in some way echoes points which have been made by hon. Gentlemen opposite—is that the idea of development areas was all very well when it started a long time ago, but really so many things have happened since, even under the present Government, who do not really change, except when they occasionally produce a monster such as the Selective Employment Tax. What they have done is to spread the development area idea far too thin, so that really very few people get any conspicuous benefit from it, and there are many areas which also need this help and are denied it simply because they do not qualify under the rule. If the Committee will forgive me for mentioning the West Country, why should it not share widely in the advantages of being a development area? But it does not do so. I personally believe that a far more modern and up-to-date approach is needed for areas with special problems, and for goodness sake let us accept as a start that one point at which the Government can always help is that of the infrastructure of a community, rather than bribing industry to go to places, so that they can become commercially and economically profitable.

I do not wish to detain the Committee any more, except to finish as I began, by thanking the hon. Gentleman the Member for Westhoughton for a very welcome outburst of common sense from those benches, an outburst in which he eloquently and with conviction condemned a really monstrous and silly proposition.

Mr. Henig

I apologise to the Committee for taking up more time, but in answer to my probe my right hon. Friend, although, with his customary courtesy, he dealt with some of the points I made, did not, I think go far enough. May I, therefore, probe this a little bit deeper?

I should like to make it quite clear to my hon. Friend the Member for Coat-bridge and Airdrie (Mr. Dempsey) that nobody who has spoken in favour of this Amendment, so far as I am aware, would begrudge for one minute any help whatsoever going to areas like Scotland which have suffered so appallingly in the past. The only point we want to make is this: are the Government really sold on the idea that the only way to give help and to alleviate suffering in Scotland is by causing it somewhere else? If this is the proposition then I am perfectly prepared to consider it, prepared to consider Lancashire and London and other places which may have had no share in the past and say, "Let us share out the suffering more equitably", but I would hope that my right hon. Friend, who is so subtle and sophisticated in these matters, would not want to offer that particular argument to the Committee this afternoon.

Right at the beginning of my right hon. Friend's reply he said that it was not quite the same thing as increasing the regional employment premium to introduce this selective employment premium differentiated between different areas of the country at 7s. 6d. Could he explain this? Where is there any difference between 37s. 6d. under one piece of legislation, on the one hand, and, on the other hand, 30s. under one piece and 7s. 6d. under the other? Does 30s. plus 7s. 6d. net equal 37s. 6d.? Would he explain this? I can understand the administrative reasons why my right hon. Friend needs to do it this way, but I do not see what is the virtue of it.

He referred, secondly, to the change in the exchange rate of sterling, implying that it meant that areas outside the development areas no longer needed 7s. 6d. I never fully understood, I must confess, how the premium was supposed to help exports when given to all sorts of people who have never done any exporting in their lives. That is, I suppose, the old argument which we cannot enter into now, but I would like to assure my right hon. Friend of this, that there are many areas of the country which still need help despite the change in the exchange rate, which is somewhat incidental.

My right hon. Friend suggested that there were unused resources in the development areas. This is simply not true. There are many unused resources in many other parts of the country. Something was said about employment, and I made a quick check, and I find that in tae last five years the total number of people registered as employed and unemployed in the area of Lancaster has dropped by 1,000. Why? Because they have gone elsewhere.

There are other places outside the development areas where there are unused resources. This means that, if we are to continue to pay 7s. 6d. per week per employee in these areas, where there are no unused resources, we shall not be spending. It would appear to follow that ceasing to pay 7s. 6d. would similarly not be a real saving. In other words, the saving of£75 million seems to me to be completely mythical. Could my right hon. Friend explain that one? The hon. Member said I had produced a mouse. I hope that he will realise that there are certain difficulties in framing an Amendment which will be in order so that we can have a debate of the kind that we have had.

I have mentioned the problem which the Clause will create for my constituents. I do not like the idea of each of us asking, "What about my constituency? What will the Government do about that?" But I want to hear from the Front Bench how the Government consider that this kind of measure and Clause will solve the real problems. Why was the premium 30s. before, and why is it 37s. 6d. now? When will it be 45s.?

4.30 p.m.

I return to the basic question. The Hunt Committee has been established to consider the problem of the grey areas and has been working on it for six months. In three months' time, before it is due to report, there will be a complete change in the discrimination between grey areas and development areas. Has my hon. Friend contacted the Hunt Committee to see how this will affect its work? Will it have to start again on the basis of the extra 7s. 6d.? Was it informed in advance that this would come? What evidence is there that the 30s. premium has failed, making it necessary to have a premium of 37s. 6d.?

Mr. George Lawson (Motherwell)

I support the Clause. I understand that the Government are resisting the Amendment and are seeking to carry on with their comparatively new policy of seeking to assist certain areas. It may be that some of the provisions are not ideal, but we must recognise that we do not devise ideal measures right away. We grope towards better and better methods of dealing with certain problems.

Hon. Members on both sides of the Committee have paid lip-service to the existence of the problem arising from the fact that, left to itself, industry drains away from certain parts of the country. It does this not just because certain parts are superior to others but for a variety of other reasons. Perhaps because large centres of population can provide more amenities, and so forth, industry has tended to drain towards those centres, and other parts of the country have been left at an increasing disadvantage. It had become increasingly apparent to many of us that unless the Government intervened in a massive, sustained and systematic way, this process of draining away to areas representing, perhaps, only one-third of our total area, would continue.

Hon. Members on both sides of the Committee have urged the Government to take steps to rectify this maldistribution of industry and have put forward strong views on those lines. I hope that the Government will continue with this kind of Measure. I am not arguing that, at this stage, the provisions in the Bill are necessarily the best; I am prepared to see other methods being sought. But at this stage the Bill offers one of the best solutions.

So long as it does not affect my hon. Friends they are apparently prepared to pay lip service to this method, but immediately it appears to begin to bite and to affect their own areas they raise an outcry against it. I am not opposed to this kind of provision. Industry has drained away from my part of the country, and youngsters who are unable to find jobs in their own areas have had to go to London. Sometimes they have been almost children, who have had to leave their own areas because there were no jobs for them there.

It would seem to me that hon. Members representing not merely areas in Scotland but any peripheral areas in this quite small island ought to be encouraged by the measures that the Government are putting forward. They should welcome them. It may be that in some instances they can be refined, but at a time when they are just beginning to work I am opposed to hon. Members representing areas which have had it all their own way for so long bringing pressure to bear on the Government to scrap their proposals.

Mr. Arthur Davidson

How can my hon. Friend say that areas such as Lancashire have had it all their own way for years and years? Does not he know that there has been a drift from Lancashire for years and that during the past 10 or 15 years coal mines and cotton mills have been shutting down? He cannot compare the position of Lancashire with that of London.

Mr. Hiley

On a point of order. This is the first time that I have ever raised a point of order, Sir Eric. Is it appropriate for an hon. Member who has not heard the debate to speak about it in terms which obviously incur the wrath of his colleagues? Is it not wasting the time of the Committee?

The Chairman

Any hon. Member must decide for himself whether he has heard sufficient of the debate to justify his making a contribution.

Mr. Lawson

Thank you, Sir Eric. This is a theme about which I have spoken for many years. I know it very well. I am talking about central areas which, over the years, have attracted industry. I am aware that some are more fortunate than others. Some may be described as grey areas. I am prepared to see methods brought forward to help them. But the kind of campaign that is being mounted in this case seems to me to be designed to stop any measures from effectively biting.

Mr. Henig

I have every sympathy with the problems of Scotland. In my Amendment, or in any other action I may take, I am not attempting to reduce the amount of help that is already being given to areas such as Scotland and the development areas. I am concerned with the extra 7s. 6d. which is now proposed because I believe that it will have a deleterious effect on other areas.

Mr. Lawson

I accept what my hon. Friend says, in part, but I come back to the fact that just at a time when these measures appear to be beginning to bite an outcry is raised which in some cases has taken the form of saying, "Surely, in order to help Scotland and other areas, those areas which are nearer to the centre ought not to be penalised." If, as a result of recent reorganisations, it is necessary that certain factories should be closed down it would seem to me more desirable for those factories to be closed in areas where there is relatively more alternative employment rather than much less alternative.

If the result of this extra 7s. 6d. on top of the regional employment premium, as it has been operating, is an important factor in deciding whether a factory will close or remain open, it would seem to me that the proposals in the Bill will perform a very useful job. I am behind the Government in the job they are doing, and I hope to continue to be behind them in this policy.

Mr. Diamond

I am sure that the Committee wishes me to reply shortly to the additional points which have been made since I last spoke. I apologise for having replied at that stage, but it did not then seem that any other hon. Member wished to speak on the Amendment.

I am grateful to my hon. Friend the Member for Motherwell (Mr. Lawson) for his very moving speech and I am also grateful to my hon. Friend the Member for Coatbridge and Airdrie (Mr. Dmpsey). Development areas have been suffering greater unemployment than the rest of the country for so long that they have come almost to accept it as part of their lot. I do not accept it for one minute. A Labour Government must intervene in the economic affairs of the country so as to create greater justice. This is a fundamental way of doing it—of encouraging industry to move into the development areas so as to achieve nearer to a balance of economic activity in terms of full employment by comparison with that which other areas have enjoyed.

My hon. Friend the Member for Motherwell is quite right. The attacks which have been made on the Selective Employment Tax and the regional employment premium have been based on the allegation that they do not work. Now, when we see them beginning to work, it is obviously the duty of hon. Members whose constituents are prejudicially affected to draw that fact to the attention of the Committee. I well understand that. But we must recognise that the function of these two Acts taken together—and that is why we are resisting the Amendment—is to encourage the movement of industry into the development areas so that when a greater level of activity has been achieved generally, then that greater level of activity can be enjoyed in the development areas, too.

This has been prevented in the past because in areas of full employment there has been what I can only describe as overheating, boiling over in terms of economic activity, while in other areas of. the country there have still been freezing conditions, economically. The way to enable a higher level of economic activity to be achieved is to secure a greater equality of activity between different area, particularly in terms of employment or in the absence of unemployment.

This is a marked differential. The hon. Member for Pudsey (Mr. Hiley) made an interesting speech on Second Reading—and he referred to the matter again today—in which he said that in terms of cloth manufacture, the differential was excess ive He said that it is having a marked effect on certain orders which might have gone to some of his constituents but which, in fact, will go to manufacturers in development areas.

We have to recognise that this is what it is all about. This is why we have the differential. My hon. Friend must share the view so well expressed by my hon. Friend the Member for Coatbridge and Airdrie that whatever we do we should not take away from the development areas. If we all accept that premise, then the question put to me is: what are the Government doing to help areas which I may not describe by the colour of the sky but which I may perhaps describe as intermediate areas?

We have recognised that in the intermediate areas there is a problem which needs special investigation. The level of unemployment in the intermediate areas as a whole is broadly the same as the level throughout the country, but it varies enormously from area to area. Indeed, the level of unemployment varies in the development areas, too. It is no good comparing the level of unemployment in one part of a constituency or one part of an area with the general level of unemployment in the development areas because certain parts of the development areas have a very high and acute level of unemployment.

In answer to my hon. Friend the Member for Lancaster (Mr. Henig), I would point out that that was why we set up the Hunt Committee. They are doing their job. They are aware of the changes which are taking place and conscious of everything which is going on. I am sure that they read my hon. Friend's speeches with great care, because they are relevant to the points which the Hunt Committee are considering. They will note what he said about the speed with which they are carrying on their difficult task. It is for them to decide how fast they can usefully go in carrying out their important task. As a Government we, naturally, are anxious to hear the results of their inquiry when they are available.

Mr. Henig

I do not think that my right hon. Friend follows the point which I made. I appreciate that the Hunt Committee have been set up and that they will make their recommendations. But I cannot understand—it must be my fault —how one can first set up a Committee to inquire into what positively needs to be done to help the intermediate areas and then, a few months later, do something which positively injures the grey areas once more. How was that decision taken? What is the point of having a Committee sitting on this subject if in the middle of it something is done which changes the whole basis of their study?

4.45 p.m.

Mr. Diamond

My hon. Friend misconceives the position. The division is between the development areas and the rest of the country. We are preparing to save in a full year£100 million of public expenditure by withdrawing the S.E.T. additional payments from manufacturers outside the development area. No distinction is drawn between the intermediate areas—my hon. Friend does not like them called the grey areas—and the rest of the country, other than the development areas. I therefore cannot accept that we are taking deliberate steps to prejudice the intermediate areas. That is far from the case. We are proposing to continue to help the development areas. The evidence is that the help continues to be needed. The Amendment would go against that, and therefore I must recommend the Committee that we should not accept it.

Mr. Henig

Does my right hon. Friend consider that this Clause simply continues help to development areas or will he not at least agree that, in effect, it increases that help as against all the other areas of the country and in a way in which those of the remaining areas with least natural advantages will suffer most?

Mr. Diamond

I think that I have answered my hon. Friend's question on more than one occasion but I am anxious, if possible, to satisfy him. I will therefore repeat that we are proposing to save£100 million of public expenditure, which is very relevant in our present considerations and extremely relevant in terms of increasing economic activity in the country as a whole, including Lancaster. We propose to do that by removing the additional selective employment payments from areas other than development areas. We are not proposing to withdraw them from the development areas because, in spite of everything which we are doing for those areas, we are not satisfied that they can at present withstand such a withdrawal of assistance and of incentives.

Amendment negatived.

Mr. lain Macleod (Enfield, West)

I beg to move, Amendment No. 2, in page 1, line 17, leave out 'wholly'.

The Chairman

It would be for the convenience of the Committee to discuss at the same time the following related Amendments:

Amendment No. 3, in page 1, line 23, leave out 'wholly'.

Amendment No. 4, in page 2, line 4, leave out 'wholly'.

Amendment No. 7, in page 2, line 43, leave out 'wholly'.

Mr. Macleod

As you say, Sir Eric, there are three consequential Amendments to the Clause.

I am not particularly devoted to the Amendment, unlike some to which we shall come on Clause 2, and it is most unlikely that I shall invite my hon. and right hon. Friends to divide on it. But I should be grateful if the Chief Secretary would clear up one issue. The Clause withdraws part of the Selective Employment payments outside the development areas and it refers to the Selective Employment Payments Act, 1966. For our immediate purposes that Act is not relevant because it applied to the whole country whether the area was a development area or not. The question whether an area was wholly in or wholly out, or partly in or partly out, was therefore not particularly relevant. One has to look then at the regional employment premium which was finally embodied in Clause 26(1) of the Finance Act of 1967. There the word "wholly" is used.

My point is quite simple. Leaving aside altogether the merits of S.E.T.—and here I agree very much with what was said by the hon. Member for Westhoughton (Mr. J. T. Price) and with the comment of my hon. Friend the Member for Yeovil (Mr. Peyton)—one had to find a fairly rough and ready method of classifying establishments. With all its faults, the only means available was the Industrial Classification, for which I think I was myself responsible when Minister of Labour about 10 years ago.

The problem that can or may arise in this case is where the development area cuts through part of an establishment. Normally, if I have it right, an establishment consists of activities carried on at the same address, and the Minister of Labour has, on the whole, been extremely sensible in deciding the many difficult problems of location that arise from that definition.

Does the Chief Secretary need the words …wholly within a development area… repeated four times? May there not be cases in which that has the undesirable effect of withholding a payment from an establishment which is mainly—or, indeed, almost entirely—within a development area, but may have one small part—an accounts department, say—down the road geographically but, in the curious way we have our boundaries, very conceivably in a different county or county borough, as the case may be? There must be illustrations of this, and I should have thought that they would have come to the notice of the Minister of Labour or the right hon. Gentleman.

I have paid tribute before to the way in which the Minister of Labour has coped with the difficult questions of definition that arise, but as I looked through the Bill from the point of view of Amendments in Committee, I was struck with this word. It occurs to me—the point is obvious, and I need not labour it—that although the establishment may be almost entirely within a development area, one part—perhaps an unimportant part—may lie outside and, according to the way I read the Bill, that fact might disqualify the whole of the establishment from receiving the premium. I should be grateful to have the Chief Secretary's comment.

Mr. Diamond

I am grateful to the right hon. Gentleman the Member for Enfield, West (Mr. Iain Macleod) for raising this point, because it needs to be made clear. He refers to the possibility of an establishment being mainly within a development area but having, for example, an accounts department in a separate office down the road. He has asked me whether we have had examples of works straddling the two areas. Furthermore, he asks what principle we are applying.

We require the word "wholly". We are applying the principle that is behind the word. We have had only one example, and it has not presented any problem because the geography has been very much of the kind that the right hon. Gentleman has just mentioned. The right hon. Gentleman was good enough to say that the Ministry of Labour has acted wisely in these matters, and he knows that the Minister has a discretion with regard to the defining of "establishment."

In the case that has occurred—and in the case of the theoretical accounts department to which the right hon. Gentleman referred—the Ministry of Labour has regarded—or, in the right hon. Gentleman's case, would regard—the main establishment which is wholly within the development area as one establishment which would rank for the additional sum, and any smaller, separate office on the other side of the road—the "road" being the boundary; and, in the right hon. Gentleman's case, the office being the accounts department—as being a separate establishment which, being wholly outside the development area, would not rank. Therefore, the firm in question is not prejudiced at all, because the main part of its establishment which is in the development area ranks for the additional payment.

Having dealt with the one example and with the method of dealing with the right hon. Gentleman's example, let me now turn to the theory. The right hon. Gentleman is much more experienced in these matters than I am, and he knows that wherever one draws a line one has difficulty. In theory, the question is: is it right to exclude those firms which might exist—though only one has con_ to notice, and that has not presented a problem—which have their main establishment in a development area, but have, as it were, put their toe into the non-development area and, because of the word "wholly" lose the total advantage?

Perhaps I might put it the other way round. Equally, one has the problem of the firm which is mainly in a non-development area and could, without these words, seek to gain advantage for the whole of its establishment in the non-development area by putting its toe, as it were, into the development area and seeking to get classification as one establishment—putting an office on one side of the road, building a bridge across the road, and then saying, "We are one establishment." As I say, one always has difficulty with a dividing line and this dividing line is consistent with all the other relevant dividing lines.

The right hon. Gentleman mentioned the regional employment premium—that is the dividing line used there, and it is also the dividing line used with regard to Board of Trade legislation in helping development areas. That being so, and having regard to the need for consistency and the fact that only one example has come to notice and that that example in practice has presented no real problem, I hope that the right hon. Gentleman will feel his Amendment has served the very useful purpose of clarifying the situation but need not be pressed further.

Mr. Peyton

The whole Committee will be grateful to the Chief Secretary for the trouble he has taken, but I should like to make just one or two points. Leaving aside the fact that I am against S.E.T. and all its work, and abominate it, it seems to me to be most undesirable that because of the accident of yards, a very small measurement being involved, one firm suffering from the same disadvantages of terrain, bad transport conditions, out-dated industry, and so on, could be very severely prejudiced as against its competitors facing the same conditions and obstacles.

My second point is a slight refinement of the first. One firm might be able to cure itself of its disadvantages by selling off a quite unnecessary or not vital part of its establishment, and thereby putting itself wholly within a development area. On the other hand, a similar cure might not be available to its neighbour who, as I say, is suffering from the same problem.

5.0 p.m.

I raise a serious point arising out of the right hon. Gentleman's answer to what was said by my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod). The Chief Secretary justifiably commended the Ministry of Labour for its immensely detailed and careful work in dealing with these difficulties. I agree with and endorse that commendation very strongly, but we have to face the fact that the Chief Secretary appeared to be saying that there was vested in the Department a discretion to disregard words in an Act of Parliament. That is a very serious matter. Parliament should not be so sloppy in its legislative habits as to say, as apparently we shall say, that in this Clause there is something that we do not completely mean.

I wonder whether we are setting a dangerous precedent. It is all very well if only one firm is involved, but one knows from experience of these things that problems and complaints are likely to come some time afterwards. To put it politely, people are slow to appreciate the extent of legislative folly in which we sometimes indulge, and only when they meet the impact do they realise, dumbfounded and amazed, that Parliament has done an incredible thing. They do not always lightly forgive Members of Parliament who have done so at the behest of an Administration which has got itself tied by the heels with a stupid proposal such as Selective Employment Tax.

Bearing in mind that the Chief Secretary could not give an undertaking that there will not be other firms in this position, I ask him to address his mind to the question whether it is wise for a Minister to say that although we have the words "wholly within a development area", nevertheless a kindly and benign Administration, through the Ministry of Labour, would easily be able to overcome a difficulty such as that by a sensible and generous exercise of a discretion which we have not written into the Bill.

Mr. Diamond

I gladly reply to the hon. Member for Yeovil (Mr. Peyton), although very shortly. He has referred to a discretion which is embodied in the Selective Employment Payments Act, 1966, in Section 10(3), which says: The Minister by whom any register of establishments is maintained… may if he thinks fit on the application of an employer— (a)treat different parts of premises occupied for the purposes of his business by that employer as constituting the sites of different establishments; or (b)treat different premises so occupied as constituting the site of a single establishment. I recognise the democratic spirit behind what the hon. Member said and the fact that we do not want too much power vested in Ministers who in turn have to delegate that power to others, but this matter was fully discussed at the time. He will realise as a practical man that it is quite impossible to provide in legislation exactly how we should divide different workshops and offices of innumerable kinds which constitute a problem. The sensible way, therefore, is to achieve justice as far as we can by giving an element of discretion to the Minister who is answerable to Parliament. I am glad that the hon. Member and his right hon. Friend feel that the Minister is exercising his discretion wisely.

Mr. Iain Macleod

The two points made by my hon. Friend the Member for Yeovil (Mr. Peyton) are of great importance, but I am afraid that neither of them can be met under the Selective Employment Tax as we have it. That is an additional reason for getting rid of the tax. The difficulty about an establishment is that it might be only a few yards from a development area, but it might be 100 yards away or half a mile away and so on. It is true that we agreed to a certain discretion a year ago. Although I am wholly sympathetic in principle to what my hon. Friend said and he and I believe that a tax like this is a nonsense, it makes it less of a nonsense if a certain amount of common sense can be injected into its interpretation by the Minister of Labour.

I am grateful to the Chief Secretary for having explained this matter. I think that on balance he needs the word "wholly". We shall have to rely in the odd case which will crop up on the discretion which we hope and believe the Minister of Labour will exercise wisely. I therefore beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Question proposed, That the Clause stand part of the Bill.

Mr. Henig

I wish to make one or two brief points, partly because some of the reservations expressed earlier in the debate and on Second Reading have never been adequately met. This Bill falls into two parts. Clause 1 is quite self-contained, and Clauses 2 and 3 are quite self-contained, even though the latter contain two things. The rest of the Bill could continue if Clause I disappeared, which I would think no very bad thing.

The object of Clause 1 is to make an increase in the amount of economic help given to some parts of the country as against others. I do not think anyone would deny this. A question remains which has not been answered by my right hon. Friend the Chief Secretary. If he cannot answer it, I hope he will say so, but if he can answer it I hope he will give us the answer. How was it that the previous amount of help could be held to be insufficient so soon, necessitating that it be increased? When was it known that 30s. was inadequate? How was it established that 37s. 6d. is adequate, and have we a firm pledge that in a few months my right hon. Friend will not come back to us asking that it should be made 45s.?

This Measure was announced originally last November as part of the savings consequent on devaluation. In fact, there was a muddle and we were told that we no longer needed the S.E.T. premium for three-quarters of the country because with devaluation our exporting problems would be solved. It was held that the S.E.T. premium was somehow or other a help to exports—an argument which I never followed. It was therefore removed. The second thing which seems to have been confused is that this is part of the savings which have been effected. If the areas in which the premium was given—the regional employment premium or S.E.T. premium—were those in which there were no unused resources, then this was spending, but if there were unused resources this meant a lot of saving. Perhaps my right hon. Friend will admit that the savings which this proposal is supposed to yield amount to a figure very much more apparent than real.

On my reservation about Clause 1 I part company with hon. Members opposite. The Clause seems to me S.E.T. and regional employment premium legislation in a worse mess than ever before. I understand that the Opposition support the Clause because they think that it removes some of the anomalies. I believe that it creates far more anomalies than it removes.

Help is given to development areas and to people in those areas under two separate Measures—30s. in one case, and a less significant but still substantial amount of 7s. 6d. under the Bill. The brunt of this is being borne by service industries outside development areas. There is the ludicrous position that in a development area manufacturing industry benefits at the expense of service industries, so that hotels in the Highlands may be subsidising industry for the Highlands. This may be logical, but the logic escapes me.

I ask my right hon. Friend the Chief Secretary to recognise that, the Government having taken decisions for specific purposes at specific times, there is now a certain amount of legislation on the Statute Book which, together with the Clause, makes up the regional employment premium/S.E.T. legislation. I want my right hon. Friend to recognise that there is no logic in this and to agree that the Government will look at the whole thing again and consider whether perhaps, after all, they have not committed under every conceivable circumstance the country to paying regional employment premium for seven years. I ask them to look at the matter again, to study how it will affect people, and to agree that this will be the last occasion on which they come to Parliament to tamper with a little more of the R.E.P./S.E.T. structure, until the day comes when they have a brand new plan to replace it.

I have the gravest reservations about the Clause, but if my right hon. Friend can go some way to alleviating my concern on this point I have no doubt that, like other hon. Members, I shall accept it.

Mr. Hiley

It has been demonstrated that many hon. Members believe that development areas enjoy an unfair advantage over other areas which are not so fortunately placed. The Chief Secretary referred to the speech I made last week. The points I made in that speech were not dealt with by the Government spokesman when he wound up in that debate. I feel even more strongly on this issue than I do over the general consideration of which areas should be designated as development areas.

I want to refer to industries which have been established for a long time and which quite fortuitously find themselves in an area which is now designated as a development area. I concede that people who start from scratch in a development area incur many risks and high costs in establishing themselves in a new area where there is probably no industrial tradition and which is probably the sort of area which most of us used to envisage as a development area. I have in mind places where there is probably a coalmine or two but no experience in manufacturing work. I concede that those who go into development areas on that basis, require, and rightly receive some consideration.

This does not apply to industries which have been established for a very long time. Probably the trouble here is, not only that the Government have been too lavish in their aid to development areas, but that they have been too haphazard in their selection of development areas. It is manifestly unfair to take a whole country such as Scotland, which contains all sorts of long-established industries, and give those industries all these advantages at the expense of their competitors in other parts of the United Kingdom.

I have tabled an Amendment which, unfortunately, has not been called. I should like guidance as to how best to appeal to the Chief Secretary to give some consideration as a special case to industries which have been long-established. The seven years for the regional employment premium may be considered sufficiently long for such industries to enjoy these advantages. I would not mind if it were 10 years, or even 15, because the people to whom I have been referring have been established for far longer than that.

This is a great injustice to those firms and it will be accentuated by the addition of this 7s. 6d. I am not speaking on a purely constituency basis. This refers to the whole of the non-development areas, in which many people will be seriously affected. It is wrong that an additional burden of 7s. 6d. per week should be put upon them. I hope that I have impressed upon the Chief Secretary the injustice which is being done in this case.

5.15 p.m.

Mr. Sheldon

The hon. Member for Pudsey (Mr. Hiley) drew attention to some of the unfair competition which can result from this donation. I would have no objection if it could be conclusively shown that this was an incentive rather than a donation. For it to be an incentive it is not sufficient that it be given to a firm which at present employs a certain number of workers. It must be given to a firm which, because of this incentive, will increase the number of workers it employs. This is the whole purpose of the Selective Employment Tax refund, as I understand it, and of the regional employment premium.

The difficulty is that nobody has any real conviction that this will go for the whole time required to enable people to plan ahead and create the factories and jobs necessary to take advantage of this commitment. As my right hon. Friend the Chief Secretary said earlier, there is no commitment as to the future of the Selective Employment Tax refund, and therefore there is no future as to its incentive effects on people to try to increase the numbers they employ to take advantage of this. To enable people to make the plans, to lay in materials, etc., a number of years is needed. This was clearly accepted in the case of the regional employment premium. Therefore, this 7s. 6d. which is being given to manufacturers in development areas is virtually a donation.

It can be said that this will result in an extra profit to the manufacturers. Those who are not against all kinds of profits might accept that this is not necessarily a bad thing, but it is clearly wrong for the Government to increase or main. tam taxation to provide this kind of indiscriminate dole. We are becoming utterly confused between the incentive effects of increasing employment in the regions, which is wholly admirable, and giving a donation to manufacturers in development areas, which is not admirable.

I only hope that the donation has, at any rate, been reduced by the Clause in that we have reduced the areas in which it is to be given. I hope that this is a halt on the way to its ultimate abolition.

Mr. Peyton

It is not always—indeed, it is not very frequent—that I find myself in sympathy with Treasury Ministers. I: has not happened in recent years. Yet, when the Chief Secretary was being addressed by the hon. Member for Lancaster (Mr. Henig) I found myself more and more sympathetic to the right hon. Gentleman, warmhearted towards him, sorry for him in the difficult rôle he has to perform, and almost embarrassingly on his side.

The hon. Member for Lancaster lectured both his right hon. Friend and the Committee on the evils of this proposal and of the Clause. The hon. Gentleman announced, to my great relief and satisfaction, that he parted company with this side of the Committee even more emphatically than he parted company from the Chief Secretary. Although I wish nothing good to the hon. Gentleman, nevertheless I rather dread the day when I find myself in serious agreement with him on a problem of this kind, because I shall then be not only suspicious but wholly certain that I am in the wrong.

I very much agree with what was said by my hon. Friend the Member for Pudsey (Mr. Hiley) about the benefits of development area circumstances being denied to many who would not only like them very much but might benefit from them considerably. One of my objections to the whole of this system is that it is administered by a Government machine which is slow-moving and ponderous, which is immensely convinced that it is always right and most reluctant to change the pattern of the past in any way, the consequences of this sort of process being disastrous for the country as a whole and highly prejudicial to that dynamism which the Prime Minister, in his days of credit, once prophesied he would bring to this country.

To take an example—again, I am not making a constituency point here—there are serious needs in the West Country. I do not suggest that these would be met by the main development area scheme, but what we badly want there, as elsewhere, is a considerable improvement in the infrastructure of the whole community. If the Government would only do the things which no one else can do, provide the roads and the training facilities and improve transport instead of making a muck of it, we should be very glad. But we fear this pattern from the past which is imposed and sometimes extended as misfortune strikes one area so that the development area system is spread, and with that spread the prejudice against other areas not covered is increased. The time has come to undertake a careful review of the whole system.

I agree with what my hon. Friend the Member for Pudsey said about our continuing advantages for ever to concerns which may not necessarily deserve them. I am sorry that the Amendment which he put down has not been selected for discussion because I think that it enshrines an important principle, although it may not be strictly relevant to this Bill. I am sorry that the Committee did not have a chance to pursue the point which my hon. Friend raised. What I fear here is the danger of giving subsidies to bad concerns and to concerns which are really just kept afloat by them and not helped to develop as they should.

The hon. Member for Ashton-under-Lyne (Mr. Sheldon) referred with great innocence and frankness to the disastrous confusion between incentive and donation. I warmly agree. We can see the pathos of it as hon. Members opposite begin to understand the confusions to which their claim to omniscience has led. They told us that they would plan this and organise that, but they made what is only a human mistake—

Mr. Sheldon

I cannot claim naivety since I was against the Green Paper at the time when hon. Members opposite refrained from voting against it.

Mr. Peyton

Very well; the hon. Gentleman can have his debating point not once or twice but many times. The point I make is that, by and large, hon. Members opposite believe that the Government machine is a highly competent affair which smoothly discharges and puts into effect even the most elaborate plans. Let us make the quite unjustified assumption that the Government's plans are right. Nevertheless, it is totally impossible—

Mr. Joel Barnett (Heywood and Royton) rose—

Mr. Peyton

No—it is totally impossible for the administrative machine to put its plans into effect. What I find impressive, and perhaps something of a relief at last, is that dawning upon the consciousness of hon. Members opposite now is a realisation that they may have bitten off a good deal more than they can chew.

Mr. Diamond

If I may say so, the speech of the hon. Member for Pudsey (Mr. Hiley) answered the speech of my hon. Friend the Member for Lancaster (Mr. Henig). If my hon. Friend fails to understand my answers, oft repeated in my humble way, he may understand more readily the answer given by the hon. Member for Pudsey. The hon. Member for Pudsey referred to what he called the unfair advantage over other less advantageously placed areas which the development areas enjoy. He returned to the same theme several times. It is his belief that those old-established firms which have been carrying on a satisfactory business now find themselves against a new competition engendered by the help given to development areas.

Mr. Hiley

The right hon. Gentleman has got it the wrong way round. I am complaining about the advantages which long-established firms in development areas are enjoying at the expense of their competitors outside.

Mr. Diamond

I understood the hon. Gentleman to be referring to an old-established firm, which I foolishly took to be in his own constituency.

Mr. Hiley

No. I am not a single constituency man.

Mr. Diamond

I am sorry. I was misled by some of the speeches into thinking that constituency matters were uppermost in some minds. I now understand that the hon. Gentleman was referring to an additional advantage enjoyed by firms in development areas. The point is exactly the same, and it answers the question put to me by my hon. Friend the Member for Lancaster. My hon. Friend asked why it is that the regional employment premium, that is to say, an incentive which enables a manufacturer only in a development area to have an advantage over others elsewhere, does not create a demand upon resources whereas an incentive which takes the form of a payment or subsidy to every manufacturer in all areas does.

The hon. Member for Pudsey has given the answer. He does not like firms in development areas having advantages as a result of which firms in non-development areas tend to move or tend to expand in development areas at the expense of expansion elsewhere or tend to withdraw their factories and their employment from regions, as my hon. Friend made clear, in South London, in order to move into highly difficult—difficult in economic terms, that is—development areas. This is the answer. It is a switch of resources. If my hon. Friend would be good enough occasionally to pay attention to what I say, he would see the point. I am sorry to put it so simply, but I have tried to answer him with my usual patience and, I hope, my usual courtesy. If, for example, he would read what I said in reply on Second Reading, or if he would read tomorrow what I have said several times today, he would see that I have endeavoured very hard to answer the question and make the matter perfectly clear.

Mr. Henig rose—

Mr. Diamond

I hope that my hon. Friend will contain himself in patience for a few moments more. Where there is a switch of resources, there is one situation. Where there is not a switch but additional demand spread all over the country, there is another situation.

Mr. Henig

The point I am making—I am not the only one who makes it—is this. What is the difference between the Government giving this 7s. 6d., or the whole 37s. 6d. for that matter, to areas in Lancashire which, massively, have unused resources and giving it to development areas which have unused resources? Why is one classified as spending and the other not? I see no difference.

Mr. Diamond

My hon. Friend makes it difficult for himself by using terms which do not describe the facts. Let us return to the facts, and let me repeat what I have already said three times. In the non-development areas, the intermediate areas to which my hon. Friend refers, the level of unemployment as a whole is the same as the level of unemployment in the country as a whole. If, therefore, my hon. Friend picks out a particular intermediate area where there is a high level of unemployment, he must contrast that with a particular area in a development area where there is an extremely high level of unemployment. He must compare like with like.

My answer to my hon. Friend, if he will stick to the facts of the case, is that giving an incentive which results in unemployed human resources being used in development areas and therefore results in a switch of demand from one area to another is a different proposition from giving an incentive over the country as a whole for manufacturers. That is why we are continuing with the policy of assisting development areas. The Clause does not detract from the benefit to development areas. The only speeches I heard which were not in favour of the Clause were in aid of removing the benefit from development areas, and I am sure that is not the wish of the Committee. Therefore, I hope that the Committee will be good enough to allow the Clause to stand part of the Bill.

5.30 p.m.

Mr. Henig

I am sorry but I must return to the point. My right hon. Friend keeps making out that the purpose of the Clause is to continue the aid already given to development areas. Will he now at least be honest enough to admit that what the Clause does is to increase that aid? Also, will he answer, or admit that he is incapable of answering, the question that has been put to him many times: When and how did the Government reach the conclusion that 30s. was inadequate aid; why have they decided that 37s. 6d. is the right level; and for how long is it to remain the right level?

Question put and agreed to.

Clause ordered to stand part of the Bill.