HC Deb 19 January 1970 vol 794 cc13-6
17. Mr. Kenneth Baker

asked the Minister of Technology what progress he is making with his study of investment grants.

Mr. Benn

Good progress has been made. The next stage of the study, which involves a direct approach to industry, is to begin very shortly.

Mr. Baker

How long will it take the Ministry to recognise the self-evident fact that investment grants are wasteful and very expensive? Would it not be more sensible, in order to stimulate investment, to introduce a system of freer depreciation which would stimulate productive and profitable investment?

Mr. Benn

These are old arguments that we have had in the House over quite a period. The hon. Gentleman is saying that we should not have a study at ail but that we should reverse engines on a decision that has been taken. I would point out that a degree of confidence in the stability of Government measures to encourage investment is an essential part of the further growth of investment.

Mr. Barnett

Will my right hon. Friend not exclude from his conclusions, when he gets the report, the possibility of more discrimination in this field so as to exclude giving very large grants to industries and regions which are not using them as any kind of incentive at all?

Mr. Benn

Of course there is a selective element built in in respect of development areas, and undoubtedly the growth of new industry in those areas owes something to that degree of selectivity. My right hon. Friend is now bringing forward a Bill introducing another element of selectivity, in respect of balance of payments tests. I repeat, if any policy is to have its effect, there must be a measure of stability and confidence on the part of industry as to the continuation of it.

Mr. Ridley

But would the right hon. Gentleman not agree that, despite investment grants, investment in manufacturing industry has declined as a percentage of the gross national product over the period of their existence?

Mr. Benn

Such preliminary studies as I have asked for indicate that the investment grants have certainly cushioned what would otherwise have been a more serious fall in investment at comparable periods in the trade cycle. The current investment intentions made available for us show that there is some reason to be confident about the future.

18. Mr. Bruce-Gardyne

asked the Minister of Technology what is his latest estimate of the aggregate cost to public funds of investment grants in the current financial year.

The Joint Parliamentary Secretary to the Ministry of Technology (Mr. Neil Carmichael)

£590 million, of which provision for £560 million has already been sought. It is expected that the remainder will be sought in a spring Supplementary Estimate.

Mr. Bruce-Gardyne

When investment grants reach the scale of £600 million a year, is it not evident that they are approaching almost the level of a scandal, particularly when so much of the money goes to capital-intensive industries which would probably make the investment anyway? How does the hon. Gentleman justify the prospect of paying out over £90 million to one company in taxpayers' money over the next five years?

Mr. Carmichael

It is expected that, over a period, the investment grants will not cost more and might even cost less than if the previous incentives had been continued.

Sir K. Joseph

Yes, but will the hon. Gentleman go on, despite the criticisms of his hon. Friend the Member for Middlesbrough, West (Dr. Bray) and of Her Majesty's Opposition, paying large grants from the taxpayer to capital-intensive projects with low use of labour to go to areas where they would have gone anyway?

Mr. Carmichael

Whether they would have gone to the areas anyway is extremely doubtful, but the facts are that the investment grant was not primarily intended to increase labour in particular areas. There are other methods of doing that. The investment grant was meant to increase the investment in the area and the efficiency of industry there, and to make the area more competitive with other parts of the country.

Mr. Sheldon

Would my hon. Friend note that many who are in favour of giving investment incentives are particularly unhappy about the effect of this power on the present scheme—that is, that the Government are giving very large sums of money and we cannot see anything like a comparable benefit in return?

Mr. Carmichael

This, of course, was dealt with in the Estimates Committee's Report and some of it should not be dealt with piecemeal. There will be an official reply by the Department on these points.

38. Mr. Biffen

asked the Minister of Technology what assessment he has now made of the effect of investment grants on the levels of investment generally and on employment in the development areas; and if he will publish these findings in the OFFICIAL REPORT.

Mr. Carmichael

The effectiveness of investment grants is currently the subject of a special study. Whilst it is not possible to separate the effect of different measures, the development area package has clearly helped to reduce regional disparities in unemployment, notwithstanding the rapid run-down of traditional industries in development areas.

Mr. Biffen

Is the hon. Gentleman aware that he has caused considerable mystification by his assertion earlier that the regional variation of the investment grant was not primarily designed to increase employment? if that is not the purpose, what is the purpose? If there are more sophisticated purposes, may we have evidence that they are being fulfilled?

Mr. Carmichael

I said that it was not necessarily to increase employment. The White Paper on Investment Incentives, in which the investment grant scheme was announced, said that grants would be available whether or not the effects of the investment were to provide employment.

Mr. Mikardo

Has my hon. Friend observed the judgment of the Select Committee on Nationalised Industries in its report on the coal industry that the effect on the development and special development areas of this and other Government assistance measures has been pitifully slow and pitifully small and that therefore a rethinking of Government policy is demanded?

Mr. Carmichael

There is a study going on of the effects of investment grants. While investment may have been slower than we would all have hoped, there is no doubt that investment in areas where old industries are running down or dying out is much greater than it would have been had there not been such grants.