INVESTMENT GRANTS AT DEVELOPMENT AREA RATES FOR TEXTILE MACHINERY TO BE: USED IN INTERMEDIATE AREAS (Hansard, 20 January 1970)

§ Mr. Waddington
I beg to move, That the Clause be read a Second time.
The object of this important new Clause is to make available 40 per cent. investment grants in intermediate areas in the case of textile machinery or plant.
406 I appreciate that Section 7 of the Industrial Development Act, 1966, gives the Minister power to vary the rates at which the grant is payable in the case of a particular class of machinery, but this is an opportunity to debate an important matter and I hope that the Government will not shelter behind a technicality, and that they will deal with the important arguments on their merits. If the Government accept the Clause, they will be implementing a very important recommendation of the Report of the Textile Council in May last year. In paragraph 619, that Council said: One of the main themes of this report…is the need for effective vertical integration at every stage of the production process and for a marked rise in total investment. We believe that the national interests are not being best served by encouraging the building of new unintegrated plants outside the existing textile areas, and we believe that further encouragement should be given to new investment in the traditional districts. We strongly urge, therefore, that the Government establish a temporary 40 per cent. investment grant for that section of the textile industry covered by this Report and situated outside the Development Areas. I am sure that the House accepts that that recommendation was not lightly made. It followed the most critical analysis of the industry's problems, and incidentally, a forecast of a 50 per cent. reduction of the labour force in the industry by 1975.
The Government would be taking a very serious step if they cast aside this recommendation and, while continuing to spend considerable sums in the development areas, ignored what is considered by the experts a most important step towards the modernisation of an industry which has certainly had more than its fair share of troubles in recent years and is now trying to put its house in order. I am sure that the Government are aware of the concern felt in North-East Lancashire at the fact that, in recent years, Courtaulds has, because of the development area incentives, chosen to extend outside the traditional textile areas. It is difficult to see what benefit the community receives from its so doing. I hope that the Government agree that this trend should be discouraged rather than encouraged.
Therefore, I hope that they will accept the Amendment. If not, I hope that they will at least state plainly whether they accept or reject the logic of the 407 Council's recommendation. As I said, I hope that they will not shelter behind a welter of words and technicalities but will try to give their considered view of the merits or demerits of this suggestion.

§ Mr. Mapp
I am amazed that the members of the Textile Council, some of whom are knowledgeable folk, but not all of whom have the breadth of knowledge wanted in an industry of this kind, should, by this proposal, imply a split of the industry into two areas. There would be a positive premium for that part of the industry in the intermediate areas, but nothing for the three-fourths outside those areas. This discrimination is quite unjustified in a territorial industry. I accept the implications of going to Carlisle: that is a discrimination through the nature of events, and has nothing to do with the present Government's policy.
This proposal has dangerous implications. I speak with some knowledge of the industry and of many of the textile leaders on the Council—

§ Mr. Waddington
In fairness to the Textile Council, might I remind the hon. Gentleman that it is not a recommendation of the Council that the 40 per cent. grant should be available only in the intermediate areas? It was that the grant should be available in what it describes as the traditional textile areas, which I would always have imagined would include Oldham and Rochdale.

§ Mr. Mapp
But the hon. Gentleman must look at the implications. I could, with some reservation, see the point made by the Textile Council if there had been a blanket recommendation accepted by the Government, but, once there is not a blanket recommendation and there is discrimination, for good reasons, in its judgment, for a particular part of the county, we cannot follow the logic of the argument in making a further discrimination between competitive parts of the industry in the one geographical area. The thing is complete nonsense, and I could tell the Textile Council, for which I have some regard, what I think of the misapplication of its thinking in this instance.

§ Mr. Varley
The effect of the new Clause would be to make investment 408 grants payable at the development area rate on textile machinery for use in intermediate areas, and it would have precisely the result pointed out by my hon. Friend the Member for Oldham, East (Mr. Mapp).
In considering the Clause, the House may find it helpful to keep in mind the distinction between investment incentives given for the purposes of regional development and incentives given to stimulate investment in one or more specific industries. The hon. Gentleman the Member for Nelson and Colne (Mr. Waddington) and his hon. Friends seem to be primarily concerned with the need to stimulate investment in the textile industry. If that be so, there is no particular merit in limiting the higher rate of investment grant to textile machinery for use in intermediate areas, although in the context of a Bill concerned with regional development they may have thought it more reasonable to present their proposals in this way.
It is true that a substantial part of the cotton textile industry, mainly in the weaving section, is to be found in the proposed North-East Lancashire intermediate area. However, although there are significant numbers of wool textile manufacturers in the northern part of the Yorkshire coalfield intermediate area, the greater part of the wool textile industry is to be found in that part of the West Riding which is not within the intermediate area. I think that these inconsistencies result probably from some confusion in the mind of the hon. Gentleman as to whether the aim of the new Clause is to promote regional development or to assist the textile industry.
We on this side are fully conscious of the problems of the textile industry, particularly in the North-West. From time to time, my hon. Friend the Member for Oldham, East and others of my hon. Friends press most effectively the case of the textile industry in their areas. My right hon. Friend the former President of the Board of Trade told the House on 22nd July that the Government had decided to replace the present quota system by a tariff on imports of cotton textiles from the Commonwealth as from 1st January 1972, as the Textile Council had recommended. The Council said, and the Government agreed, that this would give the industry the confidence it 409 required to undertake the investment needed to make it more competitive.
I know that the Textile Council recommended also that firms in the traditional textile areas should be eligible for investment grants no less favourable than those available in the development areas, but its reason for putting forward this proposal was not that the investment would not otherwise take place but that it would not be in the national interest to encourage the building of new unintegrated plants outside the existing textile areas when the need was for effective vertical integration at every stage of the production process.
The Government considered these arguments very carefully. They recognise that the industry had made out a good case, by its own lights, but, as my right hon. Friend said, they were unable to accept the proposal both on general grounds of regional policy and because in present circumstances, including, in particular, the position on public expenditure, they would not be justified in singling out the textile industry for financial assistance on such a scale. The Hunt Committee did not suggest that assistance to specific industries was appropriate to regional problems.
I realise that the hon. Member for Nelson and Colne will not regard that reply an entirely satisfactory, but, for those reasons, I must ask the House to reject the new Clause.

§ Mr. Ridley
My hon. Friend the Member for Nelson and Colne (Mr. Waddington) has done the House a service by bringing forward this new Clause. First, it is a good thing for the recommendations of industry councils to receive occasional attention in the House, and if the Textile Council has made this recommendation, it is only right and proper and fair to the Council that it should receive some attention by Parliament. I am sure that it will be glad that the matter has been debated, even if only briefly and at this somewhat late hour.
Secondly, my hon. Friend has underlined what will clearly be a problem which will develop more and more. It is that the effect of the heavy subsidies available in development areas will often be to draw industry away from areas where the economic strength and the employment position are not all that 410 strong and are getting weaker. This is certainly true of textiles. Although my knowledge of the industry is limited, I know that a large amount of the new investment is going into development districts—Carlisle has been mentioned and Spennymoor in Durham is another place where big expansion is going on—because the investment is subsidised as to 40 per cent. and regional employment premiums are payable. This bears out what was said in an earlier debate when it was said that the effect of the development areas policy could be to take industry from parts of the country which could little afford to lose it.
But the objections which the Minister of State has made to the Clause are strong in that we do not want to single out specific industries for specific treatment if we can help it. There would probably be large problems of definition about where the textile industry began and finished. These problems would make the whole thing more complicated.
The moral to be drawn from this short but interesting debate must be that there will be all sorts of side effects from present development area policies and that is why we have to keep this subject of a review very much before us. It would be wrong to press the new Clause but I congratulate my hon. Friend on bringing it forward, for this has been a useful and interesting interchange.

§ Mr. Waddington
I beg to ask leave to withdraw the Motion.