HC Deb 05 May 1971 vol 816 cc1380-505

Order for Second Reading read.

3.43 p.m.

The Minister for Industry (Sir John Eden)

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

Last October we announced our reform of investment incentives. This involved a number of changes of policy, including a cut in corporation tax, the abolition of investment grants and their replacement by new and improved writing down allowances, and improved building grants. The cut in corporation tax was enacted in the Income and Corporation Taxes Act (No. 2), which the House considered last autumn. Our proposals for improved capital allowances are contained in the Finance Bill. This afternoon we are concerned with a third, and very short Bill, which provides for the winding up of the investment grant scheme and the improvements in the rates of building grant.

The merits of our proposals for improving the incentives to invest were debated by this House last November. They are, therefore, already widely known, and hon. Members will not expect me to rehearse them again now at any length.

Briefly, the changes are being made because investment grants have proved to be both costly and ineffective. They have turned out to be an incentive not so much for the profitable use of new plant and machinery, as for the purchase of it. In addition, the investment grants scheme discriminated against the service industries, although they make an important contribution to economic growth and are good earners of foreign currency. It even discriminated between different types of plant and machinery bought by manufacturers, and, because it was complex and discriminatory, it led to difficulties and anomalies at the margins and was costly to administer for both industry and the Government, so it was absolutely right to end the scheme and introduce new proposals.

Mr. Arthur Blenkinsop (South Shields)

The hon. Gentleman says that the scheme has proved unsatisfactory. Is he proposing to publish the details of the findings of the inquiry into the practical working of the scheme?

Sir J. Eden

As the hon. Gentleman knows, under the auspices of the right hon. Member for Birkenhead (Mr. Dell), there was an inquiry, the substance of whose findings have already been given in an Answer in HANSARD to the right hon. Gentleman. The study was largely of a somewhat academic nature, so that it was felt right to produce the substance. But if I can find some convenient means of giving the full document wider publicity, I will do so. I undertake to look into that point.

As a general incentive, grants are being replaced by reductions in taxation, achieved both by cutting the rate of corporation tax and improving the capital allowances available on fixed investment. The chief feature of this package is that, unlike grants, it will provide no incentive to invest unprofitably, but it will provide a powerful incentive for profitable investment. Obviously, the greater the prospective profit, the more powerful the incentive will be.

I emphasise the need for profitable investment, for this is the key to secure employment in the future. There is no sense in the pursuit of investment for its own sake, simply as a statistical exercise. Equally there is no sense in undermining new investment by failing, through weaknesses in management or shortsightedness in labour, to make the best use of it. It must be clear to every hon. Member that the pressing need today is for efficient investment, and profitable investment is efficient investment. No business, whatever its size, can survive if it is unprofitable; no body of men, however skilled, can find security in an enterprise which is loss-making. This is as true in the regions and in development areas as it is anywhere else.

Investment grants were, of course, used as a regional incentive. But despite the size of the expenditure their impact on the creation of new jobs was on the whole disappointing. We should be clear about what was happening. Any manufacturer buying a new piece of plant and machinery for use in manufacturing, in a development area was given a grant double the amount he would have received for investment elsewhere. There was additional help for setting up a new factory in the development areas. There was also for the replacement of existing machinery additional incentives and for the replacement of men by machines. These grants, like those in the rest of the country, were available regardless of the prospective profitability of the investment. So the money was being spent, but the actual needs of the areas were not being met.

We are certainly not in favour of restricting labour-saving machinery to the prosperous areas alone. We aim to keep the balance. There is no doubt that the development areas are just as much in need of new and efficient machinery. We are continuing to give an additional incentive for investment in industrial plant and machinery in the development areas, but this is to be through free depreciations, a tax relief, which unlike grants, will be linked to profits. But we are also placing greater emphasis on the provision of additional industrial capacity. I think this is really what matters in the development areas. I am sure it is right in the regions to concentrate more on this than on saving labour.

We are doing this, in part, by continuing in the intermediate as well as the development areas, the favourable 40 per cent. initial allowance for new industrial buildings which, like free depreciation, is linked to profits. And, for the development areas only, we are increasing the building grants, the availability of which is specifically linked to the creation of new employment. This is a much more balanced package. In our view regional incentives forcused on the creation of expanded industrial capacity are far more relevant to the needs of the development and intermediate areas than others in which the scales are unduly weighted in favour of the replacement of men by machinery.

The effect of the changes that we made last October on public expenditure and, therefore, on the liquidity of the private corporate sector has been largely misunderstood. The suggestion that our changes were harmful to the liquidity of the private sector has gained wide currency, and we must establish the true position. Hon. Members will know that, as the Financial Memorandum to this Bill explains, the winding-up of investment grants is expected to produce gross savings of some £1,500 million over the period 1970–75. But this does not represent a net saving to the Exchequer. Although the abolition of grants and the substitution of capital allowances should, all other things being equal, cause savings for the Exchequer in the long term, the immediate effect is an Exchequer loss, or a gain in the private corporate liquidity.

But all other things were not equal, because we cut the rate of corporation tax as well. The cut last October added £60 million to the liquidity of the private sector in 1970–71, and there was expected to be a further benefit of £90 million in the current financial year. There would have been Exchequer gains thereafter, but comparatively small ones for the first three years, if all had then remained unchanged.

It did not. As the Chancellor said in the debate on the White Paper, it was only our first step towards creating a more favourable industrial climate. Since then we have had the Budget. The further cut in corporation tax then announced will add a further £55 million to private corporate liquidity this year and, together with the October measures, there will now be gains to corporate liquidity in every year until at least 1974–75. None of this takes into account the additional Local Employment Acts assistance.

Mr. Eric S. Heller (Liverpool, Walton)

Could the Minister briefly explain how it is that the industrial climate has improved with a scale of unemployment of 814,000?

Sir J. Eden

The climate is improving because the measures which this Government have taken to stimulate the resurgence of confidence in the economy, through budgetary measures and the measures taken last October, which I have described. Rising unemployment is substantially due to measures taken by the hon. Gentleman's Government and the policies pursued by them.

The cost of the improved building grants announced last October cannot be estimated with precision, since the exact cost will depend on decisions about investment and location that have yet to be taken by industry. They are, however, together with other improvements in assistance under the Local Employment Acts, including improved grants for infrastructure that were also announced last October, expected to build up to some £25 million a year. The White Paper last October estimated that the differential benefit provided to the development areas by the differential tax allowances, in conjunction with the additional assistance under the Local Employment Acts then announced, would be broadly equivalent to the differential in the rate of investment grants which the development areas had previously enjoyed. None of this, of course, takes into account the additional assistance that was made available in the expanded special development areas announced last February. In Committee there will be opportunity for discussion later on the detailed provisions of Clause 1. All I would say now is that with two exceptions the Clause is based strictly on the principle that investment grant should be paid only on those sums of money which on 26th October, a firm was legally bound to pay at some future date on providing an asset on which it has been the Department's policy to pay grant.

The two exceptions are first that we shall not be precluded from paying grant if a firm makes a new contract after 26th October, for example with a different supplier, in substitution of one made on or before that date and the assets or services to be provided under the new contract are substantially similar to those covered by the original one, or if there are minor variations made after 26th October, 1970, in the specification of assets or services to be provided under a contract made before then. But I must emphasise that the Bill does prohibit the payment of grant where the applicant was not himself a party to a contract on 26th October, 1970.

Secondly, we did not think it right that we should be precluded from paying grant on the cost of any import duty which a firm might have to pay on an asset which qualified for grant. Where a firm buys an imported asset from a supplier in this country, the contract price would include the import duty. But if he bought it direct from an overseas supplier, while the capital cost of the asset would include the import duty which he had to pay, it would not normally and probably could not be included in the contract price. It did not seem right to differentiate between the two types of case.

Mr. J. T. Price (Westhoughton)

May I inquire if this provision would include British orders for ships built in foreign yards and imported into this country? Would this carry a claw-back of duty?

Sir J. Eden

I will deal with ships later.

A great deal of interest has naturally been shown in the way in which investment grants are to be ended. We took the view that the disadvantages of grants were such that the transition to the new system of capital allowances must be achieved as quickly as possible. Nonetheless we recognised that there would be firms who were legally committed by contracts made before the Chancellor's announcement and the publication of the White Paper on Investment Incentives to incur expenditure on or after that date. We felt it right that grants should continue to be paid on such expenditure, but that it would be wrong to extend the arrangements to cover commitments falling shot of a binding contractual obligation. I am sure it was right to draw a distinction between those who, by acting on their decisions, have committed themselves at law to incurring expenditure, and those who have not.

The possible effect of these changes on individual investment decisions has been exaggerated. Of course, particular projects have had to be reconsidered. There is nothing novel about this; indeed it would be strange if it were not being done. It is both normal and prudent for firms to keep projects under continuous review from the moment a decision to proceed has been taken. It is inconceivable that any self-respecting management would fail to assess the significance of changed circumstances affecting the basis of their original investment decision.

The change in incentives is just one factor—and possibly not the most important—among many which have to he taken into account. The rapid rise in wage-levels and their consequent impact on industrial costs is undoubtedly a much more serious consideration. Even so, of the comparatively small number of development area projects which we have been told are being reconsidered since October 1970 there seems little doubt that most will eventually go ahead.

Following the publication of the White Paper, a number of hon. Members and firms have asked what criteria we propose to adopt in deciding whether a contract existed on 26th October. The answer is that we shall be guided by the established law of contract. We do not intend, nor does the Bill seek, to introduce a new definition for the purposes of the transitional arrangements. We shall wish to satisfy ourselves in each case that the applicant was legally bound by his arrangements on 26th October to incur the expenditure in respect of which grant is sought. We shall therefore require evidence that firm orders, and not merely inquiries or indications of intent, were either orally or in writing made by the applicant and accepted by the supplier before 27th October. I should make it clear that orders placed but not accepted before 27th October or mere letters of intent written before 27th October will not constitute evidence which will enable us to pay grant.

The Finance Houses Association sought a concession in the Bill which would allow a finance company to receive grant in circumstances where the hirer had made a contract for the asset in question with a supplier before 27th October but the arrangements between the finance company and the other parties had not been made by that date. I have had discussions with the association, but I saw no alternative but to keep to the strict principle outlined in the White Paper that to qualify for grant on expenditure incurred after 26th October the applicant, on that date, must have been under a contractual obligation in respect of the expenditure.

I apologise to the House for the fact that this is a complicated matter. However, I think it absolutely necessary—and I know that hon. Members will appreciate this—that I spell out these things because there are many people outside the House who are taking a great interest in the terms of the proposals.

Mr. Dick Douglas (East Stirlingshire)

In view of the complicated nature of the contractual arrangements which the Minister for Industry has described, would he indicate whether, because of the differences in Scottish law, he has had discussions with Scottish interests?

Sir J. Eden

I have not had direct discussions with Scottish interests, but I shall ask my hon. Friend the Under-Secretary of State if he can shed any light on the interesting point which the hon. Member has raised.

Mr. J. T. Price

If the hon. Gentleman is not clear in his own mind, may I make a helpful suggestion to him? Faced as he is with all the academic arguments to which he has referred, may I suggest that he publishes the White Paper, which is half promised, and adjourn the debate until such time as the House has had a reasonable change of digesting all this academic piffle? If he did that, we should be better pleased with him.

Sir J. Eden

The hon. Gentleman misunderstands the position. The White Paper was published and it spelled out very clearly the terms on which grant would be paid. I am merely underlining the matter for the purposes of discussion on the Bill. The hon. Gentleman is getting confused with some other form of inquiry to which his right hon. Friend referred.

I have explained to industry how investment grant can be paid, in sale and lease back cases, to a person who had a contract on 26th October. This should overcome the difficulties on hired assets without breaching the principle to which I have referred. I am sure it would be wrong to go further than this in making a concession in favour of companies which ignored the White Paper and entered into arrangements on the assumption that grant would be paid to someone who had no contract at that date.

The Chamber of Shipping made similar representations to those made by the Finance Houses Association in respect of arrangements for the "sale and lease back" of ships made, for financing reasons, after 26th October, 1970. Its main object was to ensure that both investment grant and free depreciation should be available on ships contracted for before 27th October if their purchase was financed in this way. The Chamber's point has now been met by provisions in the Finance Bill relating to free depreciation. Where "sale and lease back" takes place shortly after delivery of an asset, grant may be paid to the first owner provided he placed his contract before the cut-off date and met his obligations under it, and provided the second owner agrees to observe the conditions of grant.

Under the terms of the Finance Bill, to which the House gave a Second Reading last week, free depreciation may be given to the second owner provided the transfer is effected before the ship is brought into commercial use. As regards transfers to an associated shipping company, difficulties might arise over payment of grant, but, as we have told the Chamber of Shipping, this could be overcome if the first company chartered instead of sold the ship to its associate.

Dame Irene Ward (Tynemouth)

I am very interested in what my hon. Friend has said, and I thank him for giving way. Is the Chamber of Shipping satisfied? Representatives of the Chamber telephoned me yesterday and asked me if I would speak today. Unfortunately, I shall not be able to try to catch your eye, Mr. Speaker. [HON. MEMBERS: "Shame."] I have other things to do—very important things. My hon. Friend has made a very interesting statement about the Finance Bill, and I merely wish to know from him whether it satisfies the Chamber of Shipping. If he can tell me that I shall know where I am, and so will the Chamber.

Sir J. Eden

I am sorry that my hon. Friend will not be able to take part in the debate—

Dame Irene Ward

I may do so later.

Sir J. Eden

—but the Chamber of Shipping is not completely satisfied, and I make that clear. As my hon. Friend knows, in answer to a request which she made, I went to the length of arranging publication of the correspondence between myself and the Chamber of Shipping.

Before I turn to Clause 2 and the question of building grants, there are two points on which I might call ancillary questions on Clause 1—

Mr. Simon Wingfield Digby (Dorset, West)

Before my hon. Friend leaves the question of shipping, may I ask him this? Is not the big grievance of the shipping industry that the long-standing custom of ordering an entire ship and specifying things like radar and containers at a later date will be ignored and that the transitional arrangements will cost the industry about £9½ million?

Sir J. Eden

My hon. Friend's point has not been ignored, but it has not been met, because if the extras, as I think they are commonly referred to, which I accept can be pretty substantial items, had not been the subject of a contractual arrangement entered into before 27th October, they would not fall within the provisions of the transitional arrangements. We must stick by that because, although it is possible to make out a case, careful study of any case at once shows that the principle is opened wide and destroys the whole basis of the proposals I am putting before the House. I am sure it is right to stick strictly to the principle I have already defined.

There are two points on the ancillary provisions of Clause 1 to which I wish to draw attention—

Mr. George Lawson (Motherwell) rose

Sir J. Eden

I must proceed. No doubt many hon. Members wish to take part in the debate, and I hope that the hon. Gentleman will allow me to continue. I have given way a lot. This is a highly complex subject, as the House recognises.

Subsection (5) of Clause 1 gives legislative effect to the intention, which I expressed to the House on 12th February, of imposing time limits on applications for investment grant. As soon as possible after the Bill becomes law, we intend to make an order under this subsection which will have the effect of precluding payment of grant on expenditure incurred before 1st January, 1969, unless an application, in a prescribed form, is made before the end of this year. Industry will have had nearly a year's notice of this first time limit and we shall similarly give ample notice of further time limits and of any change in the interval between the incurring of expenditure and the closing date for applications.

Secondly, I should refer to subsection (7). This will repeal the provision of the 1966 Act under which the Department is required to make an annual report to Parliament. The reason for taking this step now is simply to avoid the need for further legislation later. But I should like to make it clear to the House that we shall make suitable reports for so long as the annual sums paid out are substantial; and the report for the year 1970–71 will be in the same form as those of previous years.

I now come to Clause 2—

Mr. Lawson

Before the hon. Gentleman leaves investment grants, will he give me some enlightenment on this point? If in the opinion of the hon. Gentleman and his Government the investment grant as a means of attracting industry to a development area is inferior to the income tax allowance, why, in the difficult Northern Ireland area, is the investment grant being retained?

Sir J. Eden

That is primarily a matter for the Northern Ireland Government and dependent on the special circumstances obtaining in Northern Ireland. I have described the needs of development areas in this country and the measures we are taking to meet them. I am certain that what I have proposed will go very much further to improve the economic prospects of these areas than the expensive measures introduced by the previous Government.

I now come to Clause 2, which deals with building grants. Its main purpose is to implement the proposal announced in the White Paper on Investment Incentives, published last October, to increase by 10 percentage points the rate of the building grant payable under the Local Employment Acts in the development areas. The White Paper describes a number of steps we intend to take to provide further assistance to industry under these Acts, but the increase in the rates of building grant is the only one that requires legislation.

The Clause at first sight may appear to cover an unnecessary amount of ground in achieving this end, but it will be seen that not all of its provisions are new. The original provisions for building grants in the Local Employment Act, 1960 have been altered and tidied up by several later Statutes, and the Bill restates the relevant provisions of the Local Employment Act, 1963, and Part II of the Industrial Development Act, 1966, in order to reduce the need for continual reference back to these other Statutes. The Clause gives effect to the intentions which I explained to the House on 28th October last year about the circumstances in which the increased rates of grant will apply.

Broadly speaking, they will be available for buildings started on or after the date of the publication of the White Paper and, so that firms which have received offers or payments of grant for such buildings at the existing rates before the Bill becomes law should not miss the benefit of the new rates, there is a provision to enable us to make appropriate adjustments in these cases. We are seeking discretion to make exceptions in special circumstances to the general rule that the new rates shall not apply if any of the relevant work was done before 27th October, 1970. It is possible that a quite exceptional case may occasionally arise in the future when in all the circumstances it would seem unreasonable to refuse the new rate. I emphasise that we expect to make use of this discretion very sparingly and only in highly unusual cases.

The only other point I need mention in connection with the increase in rates is the provision in subsections (5) and (6) for transitional arrangements in the event of future changes in the coverage of development and intermediate areas. They do not affect the existing powers to make changes of this kind, but deal only with the effect on projects with which some progress has been made while the site was still in the development or intermediate area.

The present transitional provisions relating to building grant in Section 21(4) of the 1966 Act cover the possibility of a locality ceasing to be included in the assisted areas. Subsection (5) restates them with a small change, the effect of which would be to broaden the circumstances in which projects planned in an assisted area could receive grants after it had ceased to be one. The 1966 Act did not, however, contemplate the existence of different rates of grant in development and intermediate areas for which the Bill provides. Consequently, additional provisions would be needed to determine the appropriate rate of grant in the event of a transition from development to intermediate areas status or vice versa. Subsection (6) provides for this.

In addition to providing for the increase in the rates of grant in development areas, we are taking the opportunity in the Bill to seek an alteration in the basis on which building grants are calculated generally. At present the amount has to be based on the actual cost of providing the building after deducting certain broadly defined types of expenditure. The Clause would do away with the obligation to make exclusions on the basis of these broad definitions, which involve a great deal of scrutiny of building details to little purpose, and would enable us to decide how much of the whole expenditure should be approved for the purposes of the grant.

I assure the House that we have no intention of making any major changes in the range of costs taken into account in calculating the grant. The object of the new provisions is to enable us to define more clearly and precisely the expenditure which will be eligible for grant, and so both to clarify the basis of calculation for applicants and to simplify and speed up the processing of applications.

When the Government took office last year we were confronted with a thoroughly unhealthy economic situation. Following four years of deflation the economy was stagnant and growth had dropped to a mere 1 per cent. Despite the lavish use of public money in the form of subsidies and grants, the corporate sector was severely depressed. Company profits as a share of total domestic incomes fell, company liquidity was hit and unemployment more than doubled between 1964 and 1970. At the same time, following the total collapse of their prices and incomes policy, right hon. Gentlemen opposite permitted an unprecedented acceleration of wage and cost inflation to develop.

We are determined to reverse this process of low growth, low profits and low job opportunities accompanied by high cost inflation which has been our experience in the last few years under the previous Government. The reductions in the burden of tax on the individual and the corporate sector and the overall stimulus of the Budget are a beginning, but they have already given a much-needed impetus to industrial confidence. Seen in this context, with its emphasis on value for money and profitable investment, the Bill is an important element in the general strategy to strengthen the economy, and I commend it to the House.

4.17 p.m.

Mr. Eric G. Varley (Chesterfield)

With the exception of the last two or three sentences of his speech, the Minister for Industry has introduced the Bill in a manner which might suggest to an innocent spectator that it is a routine Measure, an uncontroversial and simple piece of tidying-up legislation after the mini-Budget of October last year. But we on this side of the House refuse to be beguiled by the hon. Gentleman and our contributions will be much more contentious than most of the hon. Gentleman's speech. The Bill is a doctrinaire and irrelevant Measure which will deter much-needed investment and still further tilt the balance against the weaker regions of Britain. When one looks at what has happened to the weaker regions of Britain in the last few months, it seems that the Government have a special vendetta against them.

As the Minister said, the Bill abolishes the payment of investment grants which were paid under Part I of the Industrial Development Act, and we fundamentally disagree with the manner in which it has been prepared and brought to the House. The introduction of investment grants provided a more readily understandable form of investment incentive and a major instrument in the armoury of regional development incentives. Following the rationalisation of traditional industries, there is no doubt that without investment grants the regional unemployment problem would have been even worse than it is now. When the Industrial Development Act was introduced in 1966, the present Chancellor of the Exchequer, who was leading for the Opposition at that time, described the Bill as "Socialism with a vengeance". But from the cries of private industry and leading Conservative spokesmen now that the grants have been abolished—whether it is Socialism or not—there appear to be many people who want to go back to them.

The British Shipping Federation, about which there has been some concern expressed in this debate, had this to say: Shipping has made no use of this form of investment grant over the past five years and went on to say: Further orders are bound to be affected by the stoppage of investment grant. We know that the chemical industry, the steel industry and many professional bodies have voiced concern about this matter.

There is a tremendous amount of confusion as to the manner in which grants have been abolished and the way in which allowances have been substituted. However, it is no part of our case to help the Government out of their confusion. They have a duty to give an explanation to the hon. Member for Tynemouth (Dame Irene Ward)—

Dame Irene Ward

I will get an explanation.

Mr. Varley

No doubt the hon. Lady will receive an explanation, but I do not think it will be this afternoon. It is certainly the Government's responsibility to explain to her, to my hon. Friend the Member for Motherwell (Mr. Lawson) and others who represent shipping constituencies how the proposal will work out. This matter is of crucial importance to them and to others.

Investment grants were simple to calculate. They did not depend on future tax rates. It is true they were not related to profits, but is it part of the Government's case—and from what we heard in the Minister's speech today it may well be—that private industry which has been receiving grant unrelated to profit has been squandering this money? If the Government are saying that, it is a grave indictment of private enterprise. It was precisely the type of investment which when applied to development areas attracted the thrusting, vigorous entrepreneur, the sort of spirit which hon. Gentlemen opposite profess to encourage. I cannot understand why the Government say that the grant was not linked to profit and therefore was wasteful. The majority of the money went to private enterprise. If the hon. Gentleman is saying that it has been squandered, then it is a massive indictment of his friends in private enterprise.

The Minister made great play about the waste of resources. I am surprised that he did not call in aid Mr. Jeremy Bray; it may well be that the Parliamentary Secretary will do so a little later in his reply. It may be that that is the sort of bombshell that is to come. Mr. Bray's solution to these problems is not what is being proposed by the Government. It was not a question of going back to allowances. Mr. Jeremy Bray's solution to some of the problems is to see how far there can be an extension of public ownership.

What is being overlooked by the Minister and the Government is that when it comes to regional development we need a proper spread of industry, capital-intensive, and indeed labour-intensive, industries. In the short term capital-intensive industries attracted substantial grants, but they were short-term grants with long-term aims. If one is to maintain a living community with a strong industrial base from which full employment is eventually to be built up, then there must be diversified industrial strength.

For example, it is being suggested that the weaker regions of Britain, which have suffered most from the rationalisation of traditional industries, should only have a form of incentive which attracts shirt factories or the manufacture of dolls' eyes? I saw an article in the Sunday Times on this aspect quite recently. The suggestion apparently is that all that is required by the regions, by Wales and Scotland, is some sort of shirt factory and that they do not want other industries. The pay-off from investment does not come immediately but in a steady build-up. Although it is easy for the Minister to make short-term calculations—and no doubt we shall have them today from hon. Members opposite—I would ask whether the oil refineries would have gone to the development areas, or the aluminium smelter to Invergordon, without investment grants?

Mr. William Ross (Kilmarnock)

And Government initiative.

Mr. Varley

My right hon. Friend the Member for Kilmarnock (Mr. Ross) knows more about these matters than most, and I would agree with him when he mentions Government initiative. It is absolutely essential that there should be a proper spread of industries throughout the weaker regions of Britain.

The Minister in introducing the Bill made great play with the cost of investment grants to public funds. Before the General Election there were all sorts of claims by Conservative Members of Parliament in regard to the abolition of investment grants which, they said, would mean a saving of some £600 million. But here again we were not given the true picture. There is no evidence at all which I have seen to show that over a period investment grants cost more than the previous system of investment allowances. There is much confusion about this. Last October the Government gave a qualified estimate that total savings up to March, 1975, would amount to about £200 million, but in February of this year the Industrial Editor of The Times said that the Treasury had revised its estimates and that the saving now would be only about £45 million. Last December the Chief Secretary to the Treasury, in answer to a Question in this House, said that there would be no significant savings at all before 1972–73.

The game was really given away by the present Secretary of State for Social Services when leading for the Opposition on this subject and writing for the Spectator on 21st March last year, when he said: We are certainly not pretending that a mere shift from grant to allowance would save money. That is what the right hon. Gentleman said before his party came into power. Let us be clear about this matter once and for all. Let the hon. Gentleman when he replies give a definite statement as to the figure the Government expect to save. Let him say exactly what the saving will be, how it is calculated, and on what assumptions it is made. Investment grants are not only easily calculated, but the true cost is there for all to see. This is not the case with allowances.

The confusion began a long time ago. We all remember the Selsdon Park conference, which took place from 30th January to 1st February last year. On the following morning The Times and Financial Times set out the details of how the Conservative Government would abolish investment grants. However, this news did not get through to some of the Members of the then Opposition who are now members of the Government. It did not get through to the Secretary of State for Scotland when he was Shadow Secretary of State for Scotland—

Mr. Ross

We must not expect too much.

Mr. Varley

Again I would agree with my right hon. Friend that we should not expect too much of the right hon. Gentleman. When the right hon. Gentleman was Shadow Secretary of State, speaking from this Dispatch Box in Opposition on 16th March last year, he pointed to the … concern on both sides of the House that the system of grants for development should be made more effective—not abolished, as is sometimes incorrectly ascribed to us."—[OFFICIAL REPORT, 16th March, 1970; Vol. 798, c. 10.] That is what the right hon. Gentleman thought at that time. Therefore, it must have come as a surprise to him when he saw his name printed on this Bill.

Mr. Ross

He got a bigger surprise yesterday.

Mr. Varley

I am sure that many of my hon. Friends will have, seen the monthly survey of business opinion in Monday's Financial Times. I was astonished when the Minister said that confidence was returning and that the Budget had done this, that and the other. When one examines the Financial Times Monthly Survey of Business Opinion relating to capital investment, reflecting people who expect an improvement in investment over those who expect a decline, the marked dip in confidence comes almost precisely with the Government's decision to abolish investment grants. I am surprised that the Minister can make statements such as those he made today about confidence, when we see this kind of evidence.

It is clear from the survey that, in the engineering sector, one of the three industries surveyed, there are now only 18 per cent. expecting industrial investment to improve, with 46 per cent. expecting it to decrease. In balance of payments terms, in terms of international competitiveness, the anticipated decline in engineering investment is very serious.

The position is even worse when one looks at paper, packaging, printing and publishing, another sector surveyed by the Financial Times. Only 6 per cent. expect an increase in investment, with a massive 87 per cent. expecting a decrease. Only in brewing is there any optimism. This at least must gladden the hearts of the fund collectors in the Tory Central Office. But even the brewers add a cautious note. They say that even their demand may be affected by the higher level of unemployment.

Part of the Financial Times survey which makes very dismal reading says: The Budget has yet to halt the slide in industry's capital spending plans, as the boost to the economy which was the centre-piece of the Budget judgment is expected to take some considerable time to show through … Those who expect to spend less now outnumber those who expect to spend more. This is the first time the 'downs' have outweighed the 'ups' in the four years of this monthly survey. Clearly the decision to abolish investment grants in the way that they were abolished, though we do not say that they were absolutely perfect, played a major part in the loss of confidence.

I said earlier that the differential rate of the investment grants in development areas was a valuable aid to regional development. The House is now familiar with the disastrous levels of unemployment in various parts of the country, and there have been many opportunities in the past few weeks to highlight the figures. No doubt those of my hon. Friends who catch your eye, Mr. Deputy Speaker, will outline the position in their individual constituencies. It is not for me to say that, measured by any standards, the unemployment position in the development areas has deteriorated.

In 1969–70 the regional differential element of investment grants accounted for over £100 million. While the Government will try to say that their package for the development areas is broadly equivalent, they will have to prove it. So far, they have not proved it.

It was the manner and the nature of cutting off investment grants at a stroke—about the only thing that was cut off at a stroke—which did so much damage to the regions. Immediately, confidence began to drain from the development areas. In its place, we have confusion. The House need not take my word for it, because the Director-General of the C.B.I. has said as much. The Guardian of 13th March reports: The Director-General of the Confederation of British Industry, Mr. W. O. Campbell Adamson, has called for a basic re-examination of regional problems in a speech strongly critical of recent changes in Government policy. He told members of the North-East Development Council at Durham yesterday that a lack of clear objectives and confusion brought about by changes had fundamentally weakened the whole creditability of the system. 'Since it has been proved highly dangerous to rely upon the continuance of any particular incentives, businessmen have simply discounted them,' he said. I can go even one better. Viscount Ridley—

Mr. Heller

Who is he?

Mr. Varley

If my hon. Friend will be patient, I shall reveal who lie is. A speech of his is reported in the Sunday Times of 14th March under the heading, "Tory Attacks Regional Policy", as follows: Viscount Ridley, Conservative chairman of Northumberland County Council, attacked the Government for lacking a clear financial and economic policy for the development areas in a speech at the party's Local Government conference in Newcastle yesterday. There had been a vital loss of momentum in the flow of inquiries for new industry in the North-East, and 'an almost total lack of new business since June.' Substitution of free depreciation for investment grants had in some cases been 'quite harmful'. My hon. Friend the Member for Liverpool, Walton (Mr. Heffer) asks who is Viscount Ridley. He is the brother of one of the Under-Secretaries of State in the Department of Trade and Industry—

Mr. Heffer

The difference being that he has more sense.

Mr. Varley

The Under-Secretary of State has taken the wise precaution, unlike the Secretary of State for Scotland, of ensuring that his name does not appear on this Bill.

Mr. Ross

He is keeping out of the way.

Sir J. Eden

The hon. Gentleman has claimed that there was a fall-off in interest in going to the development areas. The figures do not bear out what he has said. In the nine months beginning 1st July, 1970, the share of I.D.C.s going to assisted areas increased considerably over the same period a year previously.

Mr. Varley

I have checked all the available figures in the last few days. The most recent information came in an Answer to a Parliamentary Question by the Secretary of State for Trade and Industry only the other day about I.D.C.s. That shows that, compared with any quarter over the last 15 months, the position has deteriorated. It has deteriorated especially since June.

I rather go along with Viscount Ridley. His view was reported as recently as 14th March. I would not normally associate with someone like Viscount Ridley, because I am particular about the company that I keep. But on this occasion, Viscount Ridley will do for me.

The Director-General of the C.B.I. called for a review of regional policy. He ought to have known that the Government claimed that they had already had one. On 22nd February, the Secretary of State for the Environment announced in a Written Answer: … no further changes in … regional policy are planned at … present ".[OFFICIAL REPORT, 22nd February, 1971; Vol. 812, c. 42.] The Government's Election manifesto said that they would initiate a thorough-going study of regional policy. The very same words appear in paragraph 14 of the White Paper on Investment Incentives (Cmnd. 4516). But everyone knows that no such thoroughgoing review has taken place. It has been a complete charade. There has not been a thorough-going review. There has been a trickle of announcements in response to planted Questions about I.D.C.s. There have been Opposition censure Motions. Rabbits have been pulled out of hats, and so on. But the very least that the Government can do now, if they seriously maintain that there has been a review, is to produce a White Paper setting out the nature of the detailed study of the cost effectiveness of investment grants before they ended them. Surely that is not too much to ask.

We have had many White Papers from this Government. We have had them on commercial radio, on the export of Arts, and we have even had one on olive oil. Surely we ought to have a White Paper on a subject which is so vital to the future prosperity of all those living in development areas and intermediate areas. Even this Government ought to respond to the confusion. If they cannot respond to the confusion that some of their hon. Friends have expressed today in their interventions during the Minister's speech, at least they ought to produce a White Paper to satisfy Mr. Campbell Adamson.

The Explanatory and Financial Memorandum says: The administration of investment grants requires a staff of about 1,000. Apparently this staff will go. It is always a good thing to fire civil servants. A Tory Government firing civil servants will always get a cheer. Firing civil servants is a blood sport for the Conservative Party. It is always good for a cheer in that sense.

But we all know that the numbers of civil servants have not gone down significantly in the last 10 months. If there is any despondent civil servant working in some investment grant office in the North-East, in Cardiff or in Southend when the last investment grant claim has been processed, he need not worry, because by 1973 when we have the value-added tax he and thousands of other civil servants too will be needed.

It might be useful to look ht what is happening in other countries concerning investment incentives. In the Common Market, grants for machinery and equipment are paid in France, Belgium, the Netherlands, Luxembourg and Italy—five out of the six. Yet the Government expect us to go into Europe—I do not know whether we shall succeed—in competition with those countries having abandoned the instrument which they regard as so essential.

The present Chancellor of the Exchequer said in 1966, that the investment grant was "Socialism with a vengeance". But it is not only the Common Market countries which have succumbed to "Socialism with a vengeance". There is an example nearer home, as my hon. Friend the Member for Motherwell pointed out earlier. In paragraph 2 of the White Paper on Investment Incentives, we are told: In the Government's view the investment grants scheme has involved a high public expenditure cost without achieving its objectives. It goes on to talk about investment leading to waste of resources. The scheme discriminates.… The discriminatory nature of the scheme". It is all terrible stuff as far as the Government are concerned.

But, turning to paragraph 23, it says: The application of these proposals to Northern Ireland will be discussed with the Government of Northern Ireland. What happened after these discussions with the Northern Ireland Government about these wicked Socialist investment grants? They were kept in Northern Ireland. No doubt the hon. Gentleman who is P.P.S. to the Minister is grateful for them. They are very pleased with them in Northern Ireland. I have obtained a copy of the OFFICIAL REPORT of Stormont. Mr. Roy Bradford, then the Minister of Commerce for Northern Ireland, announcing that statement on 16th February, said: … these grants which nobody else has … Surely this is a cause for sober satisfaction when it does not exist anywhere else in the United Kingdom.… we are now in a position to offer more generous grants than any other area of the United Kingdom.… In terms of what we can offer compared with what our competitors for new industry are offering we are much better off than any other area in the United Kingdom. Socialism with a vengeance!

Mr. J. T. Price

Racial discrimination.

Mr. Varley

But Ulster Tories boast that they are the only ones who have still got investment grants, and they are grateful for them.

We know that by abolishing investment grants there is no real saving to public funds. If there is, we ought to have precise information from the Government.

Going back to tax allowances will mean interminable wrangles between company accountants and officials of the Inland Revenue. I know that my hon. Friend the Member for Westhoughton (Mr. J. T. Price) was always active in the House on investment allowances when it came to cars. Again, we shall not have investment wholly related to basic essential equipment to modernise our factories and improve our competitive position. We shall be going back to wrangles whether the carpets and curtains in the managing director's office or the cups and saucers or furniture are plant "for the purposes of trade", using the jargon of the Finance Bill. It is well known that under the allowances system, before the Industrial Development Act 1966, even rented television sets attracted allowances.

The ending of investment grants without a proper study has caused investment uncertainty throughout the country in steel, shipping, chemicals, and elsewhere. There is no doubt that it has also caused confusion in the development areas. Many major industries, vital to the economic well-being of the nation, have been badly hit. For all those reasons, we shall vote against the Bill tonight.

4.45 p.m.

Mr. John Sutcliffe (Middlesbrough, West)

The hon. Member for Chesterfield (Mr. Varley) mentioned his one time colleague and my predecessor, Dr. Jeremy Bray. If there was one thing on which Dr. Bray agreed with this Government and disagreed with the Opposition, it was the waste of resources arising from the Labour Government's investment grant policy. He even went so far as to say that it would be cheaper to send workers to live at Government expense in the South of France. Whatever his solution may have been, his point was that there was a case for spending the money better than it was being spent.

I want to raise a point of principle. The Bill allows investment grants to be made in respect of sums falling due under a contract made before 27th October, 1970. This is a reasonable provision for most construction operations, but I believe that it will apply unfairly to deep mining operations.

I wish to demonstrate this by giving a number of reasons. The length of the construction period for a deep mine is very much longer than that for even the largest factory complex—up to six years compared with two or three years.

Contracts can be placed only in stages as the work proceeds, because with mining it is not possible to predict at the start exactly what work and equipment will be needed in the later stages; nor is it economic to place orders for equipment which will not be needed for several years.

The cost of opening a deep mine may be very considerable—up to £40 million—and the construction period may be up to six years. Therefore, it is not feasible to complete the detailed design at the time when the shaft sinking begins. This is partly because of the amount of design work involved and partly because, until the work proceeds, it is not possible to know exactly what will be required at different depths of the shaft.

As the design work is done in stages, so the establishment of prices for the work and the equipment has also to be done in stages, because neither the purchaser nor the contractor can give a price for work or equipment which is to be done or supplied several years ahead. Neither is it feasible for the mining operator to enter into a single contract for differing activities; he has to retain in his own hands the direction and control of the whole operation. It would obviously be foolish to order equipment some six years before it will be used, because the most up-to-date equipment will be required when the mine goes into operation.

As I have said, the design work and the placing of contracts proceed in stages. The whole operation is nevertheless virtually committed when work starts on the sinking of the main shaft. It is a single highly integrated complex; each contract is totally dependent on all the others and meaningless in isolation. Some contracts depend on the grant of statutory approvals, and the design work on which these contracts are based cannot proceed until the terms and conditions of those consent are known. Because of the uncertainty about the future stages of the working, relations between the mine operator and the contractors are often left for some time on the basis of exchanged letters of intent, rather than on the basis of formal contracts.

The mining operation may have been well advanced on 27th October, 1970, but, even so, it may not have been possible to place contracts for all the work and the equipment that would be needed to complete the whole project. On the other hand, it will not, apparently, be open to a mining operator to claim the extended assistance under the Local Employment Acts which applies to development areas and which is referred to in paragraph 14 of the White Paper on Investment Incentives. The reason is that the project was started before 27th October, 1970.

A deep mining operation appears to fall between two stools, and I believe that these operations should be a specific exception under the terms of the Bill. They would constitute, not a wide, but a very limited exception and result in little increase in the cost to public funds. Although the shipping industry has been mentioned, I think it is true to say that the peculiar circumstances which apply to deep mining do not apply to a similar extent to other sectors of industry, and that the problem in deep mining operations is sufficiently special to justify special treatment.

The financing of deep mining is a problem to be taken very seriously indeed, because great benefits can accrue to the national economy from developments of this kind. That is why I intend to press this case, and I remind my hon. Friend of the Government's own words in paragraph 5 of the White Paper: In deciding to end the investment grants scheme the Government are conscious of the need to avoid any sudden reduction in companies' cash flow and the profitability of their investment. If those words have any meaning at all, the case that I have sought to make for a modification of the Bill must be a good one.

4.53 p.m.

Mr. T. W. Urwin (Houghton-le-Spring)

My hon. Friend the Member for Chesterfield (Mr. Varley), in an excellent opening speech, has made clear what the reaction of this side of the House is to the Bill. As I see it, the content of the Bill is summarised in the paragraph headed "Financial effects of the Bill" in the Explanatory and Financial Memorandum, where one gets the information—startling to many hon. Members, but even more startling to those outside the House—that as a result of the abolition of investment grants there will be a saving of £1,500 million by the Government up to 1974–75.

It is, to say the least, not surprising that the prospect of the forfeiture of such an amount from the massive investments provided by the previous Administration in new job generation in development and intermediate areas has caused consternation and a great deal of alarm in those areas. This policy is construed as a major departure from the conceptual approach to the manifold problems of the areas concerned of maximising all the physical resources, to the ultimate advantage of both the regional and the national economy.

We are in a period of rapid escalation of unemployment, and I was more than a little surprised to note that the Minister scarcely referred to unemployment, save at the end of his speech. It is unemployment, and the relationship of the Bill to that problem, which concerns everybody on this side of the House, and it causes us, almost compels us, to examine the Bill not so much from the angle of what it seeks to provide but rather from the point of view of what it proposes to take away from the less prosperous regions, together with the immediate and foreseeable effect on the economic development of those areas.

The Minister treated us to a somewhat long discourse on the incentives to profitability under the new system. He omitted to refer to the position of many small firms with low profit margins in the development areas. These firms are highly efficient but under the new system, because of the departure from the provision of investment grants, will profit to a lesser degree than will the much larger firms, and at the same time the difficulties of their being able to expand will be increased.

The advantages accruing to industry generally as a result of the change are largely unquantifiable because of the longer time factor involved in making payments under the new system. The new scheme can, to a large extent, be regarded as a disincentive to prospective developers in development areas, rather than as something that will provide, as the Government should do, new and additional stimuli to mobility.

I detected a note of complacency in the Minister's speech. The Government cannot afford such a luxury, nor can they derive any satisfaction or encouragement from the response to their proposals by industrialists, well-informed people, members of local authorities and economists. There has been a wholesale condemnation not only of these proposals but of the general package which the Government have evolved through this system of spasmodic appearances and statements by Ministers about regional policy.

My hon. Friend the Member for Chesterfield referred to the Selsdon Conference. I have said on more than one occasion that stemming directly from that conference, when the Conservative Party's proposals for regional policy became manifest, was a decline in confidence among industrialists in the development areas. During frequent incursions into the Northern Region during my time as Minister for the North I had many opportunities to discuss with people established in the region what the consequences might be of changes such as those which were being considered at Selsdon, and which have now been put into effect.

An integral part of the package deal is the abandonment of the regional employment premium by 1974. The Minister spoke about savings, and about the amount of money that would be paid in return for those savings, but he made no reference to the £100 million that will be saved after 1974 as a result of the abolition of the R.E.P. This was intensified during the General Election, and the Chancellor's formal decision in October achieved at one stroke a monumental decline in confidence in industrial investment in the development areas—especially the Northern Region.

In the paragraph headed "Financial effects of the Bill" we are told that the cost of increasing the rates of building grant will depend substantially on the response of industry. Again we are faced with the indefinable. Although the promotion of new industry means to some extent an open-ended commitment within the confines of Government policy, we have no idea of the present Government's ceiling for the investment of public money in the development areas. Perhaps the Minister will give us some idea of how far Government investment is estimated to fall short in the first nine months of their first year of that vouchsafed to those areas by a Labour Government.

The Minister intervened in the speech of my hon. Friend the Member for Chesterfield when he was describing the effects of Government policy on the development areas. There has been an overwhelming decline in industrial inquiries since 18th June last year. The Minister told us somewhat piously—as did his hon. Friend in answer to my Adjournment debate on Monday—that the share of industrial development certificates in development areas has increased since 1st July. Perhaps it has, but what we are more concerned about is the actual flow of jobs.

According to figures given me last Friday by the Minister's Department, in the March quarter of 1965 4,580 new jobs were created in the Northern Region; in the same quarter in 1966 it was 3,600; in 1967 5,650; in 1968 4,180; in 1969 5,460; in 1970 3,620; and in the first quarter of this year, directly contrary to what the hon. Gentleman claimed, the number has fallen alarmingly to 2,720. We are getting an increasing share of the cake, but it is a smaller cake, and we are getting fewer jobs.

Obviously, in the first half of 1970, despite Selsdon Park, many people still firmly believed that a Labour Government would be returned to office. Many people are now wishing that they had returned a Labour Government, having seen the sorry mess which the Conservative Government are making of regional policy. In the first half of 1970 it was estimated that 13,900 jobs were created as a result of I.D.C.s in the Northern Region. In the second half of 1970 it had fallen to the absymally low figure of 4,400. As I have said, it has fallen even further in the first quarter of 1971, to 2,700.

The clear indication is that we have lost the sharp impetus to industrial expansion and relocation in the development areas as a result of the policies developed by the last Administration not being pursued. There is much to be said for continuing policies which are proving successful in terms of new job generation rather than creating uncertainty, which was the result of some of the remarks of Campbell Adamson, Director-General of the C.B.I., a few weeks ago. Industrial activity is declining massively, and the Bill contains nothing to help us recover the position which we had attained by mid-1970. It is also clear, despite what the Minister said, that the Government's total financial commitment to industrial production will be substantially less as a result of this decline next year than it will be this year.

The same section on the financial effects of the Bill refers to a loss of about 1,000 jobs in the Civil Service as a result of the abolition of investment grants. My hon. Friend has suggested that these 1,000 will be easily absorbed among the many thousands more who will be required to man the V.A.T. offices if that tax ever gets off the ground. But I hope that we do not have an intellectual transfusion in the shape of 1,000 civil servants to the 814,000 already unemployed.

The Minister said that the Government are determined, as part of their legislation, to reverse the trend. The 72,300 unemployed in the Northern Region are anxiously looking forward to the day when this policy begins to develop and some incursions begin to be made into the intolerably high level of unemployment in the development areas.

The Bill does nothing to improve the existing facilities which the present Government inherited to stimulate industrial production in the development areas. Quite the reverse; the Minister said that the position of the shipbuilding industry will become increasingly worse as a result of the abolition of investment grants. If he thinks that that is a commendation, he will have a lot more to put up with from this side of the House before the debate is over.

Paragraph 14 of the Command Paper on investment incentives said that a thorough-going review of regional policy had been put in hand. We expected from that simple statement of fact that there would be a comprehensive review—there has been time to conduct one—of the whole field of regional policy, and that something much more tangible and constructive than this Bill would have emerged. Instead, we have had a multiplicity of statements from Ministers which have done nothing but add to the confusion and the growing lack of interest in industrial development in the development areas. Together with my hon. Friends, I look forward to voting against the Bill.

5.10 p.m.

Mr. James Hill (Southampton, Test)

Hon. Members on both sides are agreed that the only point over which we need strike sparks is the withdrawal of investment grants.

Scarcely a mention has been made of building grants, though it has been pointed out that the increase in the rate of these grants can be effected without further staff requirements. Doing away with investment grants will save £1,500 million, and that cannot be bad. It has been said that the popular Tory image is of a party trying to do away with civil servants as a sort of blood sport. If this is so my right hon. Friend has has quite a field day in that respect. About 1,000 civil servants will not be required, and that, too, cannot be bad.

I must comment at the outset on the extreme shortage of I.D.C.s, to which reference has been made. As I represent an area of the country which might be considered one of the more prosperous parts of the United Kingdom it might be suggested that my constituency should not get as many I.D.C.s as the development areas. Nevertheless, my constituency could do with more I.D.C.s. However, as a practical politician, I appreciate that it is not simply the question of the issue of an I.D.C. but the fact that for every acre of land used for industrial purposes, about 20 acres will be necessary to accommodate the amenities and housing which the factory workers will need.

I feel that my right hon. Friend made out a good case for the withdrawal of investment grants inasmuch as he quoted the capital allowances on investment and spoke of the corporation tax reduction. This will all work in the right direction.

In his poignant plea on behalf of deep-cast mining, my hon. Friend the Member for Middlesbrough, West (Mr. Sutcliffe) mentioned his predecessor, Dr. Jeremy Bray, about whom we do not know whether it was his twilight song which brought him out strongly against investment grants. Indeed, Dr. Bray went much further and said that the jobs provided by these grants had cost so much that it would have been cheaper to have sent the workers to live in the South of France, but he claimed that it had cost about £20,000 in subsidies for each worker whose job had been created by investment grants. He also claimed that I.C.I. had received £106 million in investment grants over three years, of which perhaps £40 million represented the development area differential. Yet employment by I.C.I. had remained steady at about 127,000 persons.

The Financial Times made this point stongly in an article on 29th October, 1970, which said: British investors are among the most encouraged in the world. Despite the change, Britain remains among the countries where new investment is given the most official help. Despite this, high-level subsidy investment in the manufacturing and related industries represents a lower percentage of the gross national product in Britain than in any other major Western European country, with the exception of Italy. We had 7.5 per cent. in 1969. Comparable figures for France, the Netherlands and Belgium were 9.6 per cent., 8.7 per cent. and 8.3 per cent. respectively. Those statistics were given in a Written Answer on 8th March.

As an hon. Member who represents a great—indeed, the foremost—seaport in the United Kingdom, I do not for a moment suggest that the removal of investment grants—as all other Members will say who are affected—should apply to my constituency—[Interruption.] While this may seem a colloquial and insular point of view, the Chamber of Shipping is worried about the way in which these grants are being removed.

The Bill gives effect to the October White Paper—there seems to have been some doubt about whether there was, in fact, a White Paper in October—and shipping has made good use of this form of investment in the last five years. It has greatly helped the industry to reequip and redeploy in the face of the immense technological and trading changes which have revolutionised world shipping.

Mr. Heffer

What about orders during that period?

Mr. Hill

I had intended to deal with that point, which the hon. Gentleman made from a seated position.

Further orders are bound to be affected by the stoppage of investment grants—[HON. MEMBERS: "Hear, hear."]—and, in deference to my Front Bench, this move is bound to have an effect on the rapidly rising capital and operational costs of the industry, which are already outstripping revenue. Indeed, considering the period through which we are passing, within half a decade Southampton will have no liner trade at all.

When we in Southampton talk of re-equipping, we mean containerisation and we look for more prosperity in the expansion of our docks to take further trade from London and Liverpool, which do not seem to be able to cope with the orders they are getting.

Mr. Urwin

You must be joking.

Mr. Hill

We in Southampton do not joke about these things. We are the foremost container seaport in the United Kingdom.

In January, 1966, total orders by United Kingdom owners were for 4.6 million deadweight tons. By January, 1971, the figure had increased to 22.6 million. This represented annual average capital investment of £100 million. The Chamber of Shipping is, therefore, disappointed at the Rochdale Committee's recommendation that there should be no substantial change in the level of assistance accorded the shipping industry, on the basis that investment grants must go for the whole of industry.

Mr. Albert Booth (Barrow-in-Furness)

The hon. Gentleman said that average annual investment by owners in shipping had been running at £100 million. Does he agree that that figure is somewhat outdated and that the present sum is £300 million?

Mr. Hill

I agree. I should, of course, have referred to £300 million and not £100 million.

When ordering a ship, which is not something most of us have to do, one places the order complete in all respects necessary for operation, though it is unusual for the contract to cover more than the hull. For example, items like radar and technical equipment, including the engines, are usually left so that the most modern equipment may finally be used in the vessel, and it may not be chosen for a year or more after the completion of the hull. The delay in ordering engines for the "Queen Elizabeth 2" resulted in a delay in her maiden voyage.

These are the sort of things which should be pointed out to my right hon. Friends. Naturally, we shall never fall out over this. We feel that they are doing an extremely good job in very difficult times. They were left with an inheritance which no one would have wished on them. It is only too clear now that the sun is on the horizon and it will not be very long before we see results. But on this Bill, we should be satisfied if my right hon. Friends could have another look at the way in which the investment grants have been removed from the shipping industry.

5.21 p.m.

Mr. Frederick Willey (Sunderland, North)

I shall be brief. The Minister and the Secretary of State are victims of their own castigation. If ever there were lame ducks, they are the Secretary of State and his Ministers. They are lame ducks in a glass duck-house.

On the Bill, I agree that whatever the merits of the argument about the replacement of grants by allowances it is flatly rejected by everyone in shipping, and consequently by all shipbuilders. The main stay of my constituency is shipbuilding, so I join them in opposing the Bill. I join also the North East Development Council in protesting that the replacement of grants by allowances amounts to a serious cut-back in the inducements to industry to come to the North-East Coast. With our present heavy unemployment, we cannot afford to be so prejudiced.

I did not intervene to pursue the dialectics of this particular controversy. They are marginal and peripheral. They obscure the stark reality that development area policy has failed. The witnesses of that failure are the development areas themselves. After 25 years the development areas remain. They remain more heavily scarred by unemployment than they were in the years immediately after the war.

The self-same areas remain—monuments to the failure of the policy that has affected them. Indeed, they have been extended; the disease has not even been contained—the canker has spread.

I have heard successive Ministers, one after another, saying that it would take time, that it would take five years, perhaps, or even 10 years, to finish the job. But not five years, not even 10—more than 25 years have gone by and the problem is worse than when we started. Year in and year out, the development areas have endured twice as much unemployment as the rest of the country. This is not a regional but a national failure. The development areas have remained a constant indictment of our failure to make full use of our national resources. All that we can do is to continue saying the same thing and pursuing the same policies.

The Secretary of State for the Environment flamboyantly talks about tidying up the pit heaps, and I should be the last to discourage him; but it is sobering to reflect that longer ago than I care to remember, Ramsay MacDonald used to make the same speeches.

The fact that these ugly eyesores still disfigure our countryside in the development areas exposes the lack of pace and dynamism in our development area policy. In any case, this does not go to the heart of the problem. The crux of any effective policy affecting the development areas is a policy of industrial location. This is a mixed, complex problem which demands a national concerted effort and acceptance of intelligent national planning, and a recognition that a healthy private enterprise should also serve the national good. It demands—this is our national tragedy—what many comparable countries with which we are now in competition, have been able to invoke.

But we shall not get this through any blanket formulae, however great the differentials may be. This is not a matter that can be left to subsidies and clerks. It needs the courage of judgments and the vitality that will induce their acceptance, pragmatic partnership between planners and industry, and, above all, recognised and identifiable responsibility. It demands nothing short of a complete restructuring of development area policy, an escape from Whitehall, more direct regional responsibility, and more direct participation by industry.

As has been repeatedly said, the Government promised a through-going study of regional development policy. I am willing to accept their good intentions, but they have been hamstrung by their doctrinaire dogmatism. They have been smothered by the clerks. I ask them to forget the Bill and to set up a high-powered working party and to tell its members to take their jackets off and to try to devise the real development area policy that the country desperately needs.

5.27 p.m.

Mr. Robert Redmond (Bolton, West)

The right hon. Member for Sunderland, North (Mr. Willey) is right to talk about the infrastructure of some of our older industrial areas, and I shall take up that point shortly.

I was interested in what the hon. Member for Houghton-le-Spring (Mr. Urwin) said about small firms which have low profit margins and yet are highly efficient. My experience is that the small firms usually show a better return on capital invested than many of the larger firms. I know something about small firms, and from discussion with not an inconsiderable number of them, my experience is that they prefer the idea of allowances as opposed to grants. But then the hon. Gentleman went on to talk about unemployment in the Northern Region. I do not have the figures for the Northern Region or for the area which I know far better, the North-Western Region, which contains the Merseyside development area. But I know, very definitely, that the number of unemployed in the North West area was greater last June than in 1964, when the previous Government came in to operate the policies which we are now putting into reverse.

We cannot take the Bill on its own. We have to refer to the whole financial package that the Government is producing. But I am sure that you, Mr. Deputy Speaker, would not allow me to make a speech which would be more appropriate to the Second Reading of the Finance Bill.

The hon. Member for Chesterfield (Mr. Varley) and the hon. Member for Houghton-le-Spring spoke about regional policies. That is a subject dear to my heart and relevant to the Bill. But the hon. Member for Chesterfield mentioned the investment expectations which industry appears to be holding at present, and he coincides that with the Bill. It is a coincidence. I think that it is a coincidence, because business cannot invest if the money goes to pay excessive wage claims. A number of companies with which I have had discussions in the last week have said that they must see what will happen to their wage cost before they begin to think about any further expansion.

How do the Opposition square the declared aim of the Labour Government's policies, namely, to be of help to the development areas, with what happened at the English Electric Napier factory at the Kirkby Industrial Estate in the constituency of the then Prime Minister? The General Electric Company, helped by the I.R.C., took over the English Electric Company and almost immediately closed that factory which provided employment for several thousand people in a development area. If the Labour Gov- ernment's development area policies were a benefit to industry, surely the General Electric Company would have concentrated at Kirkby and not run away from it. That example is sufficient to shoot down in flames the whole of the Labour Government's policy.

Mr. J. T. Price

The hon. Gentleman is adducing a strong argument, but judgments on a matter like this cannot be made on an isolated incident with only part of the facts being revealed. There were many other factors involved in that closure and it would take the hon. Gentleman till 10 o'clock to debate the matter properly. The hon. Gentleman is taking advantage of patient people like myself by making such points.

Mr. Redmond

I am glad to hear that the hon. Member for Westhoughton (Mr. J. T. Price) is patient. I was patient with him during the proceedings on the Industrial Relations Bill. The fact remains that that was a very large factory in a development area receiving all the aid due to a factory in a development area, but a large corporation which took it over found it more economic to do the work elsewhere.

The statement in the Explanatory and Financial Memorandum that the Bill will effect a saving of about 1,000 staff has excited comment amongst Opposition Members. However, this is precisely what we promised to do—to reduce the size of the Civil Service. Every time the Government fulfil a promise the Opposition show surprise, because they cannot understand how a Government can fulfil their election promises. It has been argued that with the introduction of a value-added tax these civil servants will be required again. We have already been told that the civil servants needed for the value-added tax will come from the Special Commissioners because they will not be working on surtax.

Mr. Douglas

Will not the administration of tax-based incentives require a transfer of civil servants from the Department of Trade and Industry to the Inland Revenue? Will the hon. Gentleman consult his Front Bench as to the numbers involved?

Mr. Redmond

I cannot accept that, unless we accept that the civil servants who used to look after investment allowances with the Inland Revenue were moved to the Board of Trade to do this. I still maintain that we are making an overall saving in the Inland Revenue Department.

The whole trouble about investment grants is that they provide cash irrespective of a firm's profitability and viability. In many cases they provide cash for the unprofitable business and take it in taxation from the profitable business which should be encouraged.

I think it was Abraham Lincoln who said—at any rate, if he did not say it it is still true—that we can never make the weak strong by making the strong weak.

Mr. J. T. Price

It was Mark Twain who said that.

Mr. Redmond

I thought it was Abraham Lincoln, but the saying was right. The Government's job must be to do everything possible to get the maximum growth in industries and firms which are healthy and which have proper prospects or which would have them but for high taxation.

As I represent the constituency of Bolton, West I cannot in my heart feel completely happy about the matter of building grants; because the Bill continues the principle of the policy of the Labour Government with regard to development areas and intermediate areas and there is no apparent change for old industrial towns like Bolton which is neither a development area nor an intermediate area but which geographically lies between both. To the south-west of Bolton is the Merseyside development area. To the north-east of Bolton there is North-East Lancashire. Bolton is an old industrial town squeezed between two areas which get building grants. My colleague my hon. Friend the Member for Bolton, East (Mr. Laurance Reed) raised this matter in an Adjournment debate last week. I hope that later this evening the people of Bolton will be given some reassurances.

In older towns such as Bolton, which have no status either as development areas or as intermediate areas, there is a form of obsolescence which is worrying everyone there. Lancashire has the most industrious people in the world and the finest people for industry, but because of the obsolescence in these areas they are tending to drift away, with the result that the average age of the population is increasing. There is a lack of buoyancy in the rateable value. This can only result in the long term in trouble unless action is taken to correct the trend.

Subject to that, I support the Bill and will certainly vote for it, hoping that something will be done in Committee.

5.37 p.m.

Mr. Peter Hardy (Rother Valley)

Fortunately, I have the figures which the hon. Member for Bolton, West (Mr. Redmond) omitted to bring into the Chamber. The north-western area has an unemployment total of 109,578. The hon. Gentleman said that the figure was quite high before the General Election. The rate of increase in the North-West is higher than in any other part of England and Wales. Scotland is a different kettle of fish.

I hesitate to criticise any hon. Member from another area, but I should have thought that anyone concerned to reduce the unemployment rate in his own area would be very anxious to ensure that the Government did not throw away the valuable inducements offered by the previous arrangements. During recent months, in several weeks 10,000 people have been made unemployed, and in an even greater number of weeks there have been announcements by British industry of a further 10,000, 12,000 or 15,000 jobs which are likely to disappear soon.

In this critical situation it is untimely for the Government to bring in these proposals, particularly as there is a declining number of jobs available. The number of unfilled vacancies in the last six months has fallen by about 55,000. The Yorkshire area has suffered a considerable reduction in the number of jobs available, particularly in the number of jobs available for young people. Yorkshire has a male unemployment rate of 5.1 per cent. It is about that in my constituency.

In recent days I have been astonished to learn that the Government Front Bench believes that there is a great deal more vigour and activity in the economy than we in the Yorkshire region have noticed. For example, last Thursday the Secretary of State for Trade and Industry told the House that in the first three months of this year there had been 1,083 inquiries as compared with 538 inquiries in the first three months of 1970.

Mr. Neil Kinnock (Bedwellty)

On the basis of that figure does it not appear that more inquiries have been made at the Department than jobs are being created by the Department?

Mr. Hardy

I certainly think that that is the case and I intend to say a little more about it.

We had the Secretary of State telling the House that there were 1,083 inquiries in the first three months of this year, and yet in my constituency and all the others I know, and others about which I have been told by my colleagues, we are all convinced that the number of inquiries by industry has dropped considerably. In my area they have virtually dried up since the mini-Budget in October, when the proposals were first made.

The result is that the improvement which we were making in the South Yorkshire intermediate area has stopped. We began to reduce our unemployment in 1969, and this reduction continued through 1970, so that I could be told by the Under-Secretary of State for Employment in answer to a Question I asked in the middle of March that unemployment in March, 1971, was somewhat less than in March, 1970. I think that the hon. Gentleman felt that we should congratulate him. I was very pleased about the answer, because I want to see unemployment drop in my area no matter which Government are in power. Unfortunately, the improvement we managed to make because of the intermediate status we were given has now stopped. With the announcement in March of closures and redundancies in the Special Steels Division of the British Steel Corporation, we shall face a very serious situation and I shall find many hundreds of my constituents unemployed. There will be a reduction in the inducements we can offer to new industry which would give them some hope for the future.

The Minister suggested that we should be far more concerned about the development of labour-intensive industries, and this is desirable. I want to see labour-intensive industry developed in my constituency, but there are other points. When we consider unemployment we tend to think of the individual or the family affected by the blight oppressing so many parts of the country, but we should also remember the effect upon the community of the present decline in activity and the present hopelessness.

My constituency provides an example. The major part of the closures in the Special Steels Division seems to fall in the urban district of Rawmarsh, where three parts of the Parkgate section of the Rotherham works of the Division are to close. Rawmarsh is not a salubrious watering-place. It is a town of about 20,000 people which has grown up on steel and coal. It is a town which has created a great deal of wealth, and the people of Rawmarsh and anyone with sense wish it to create a great deal more. The problem of the town was the historic one of decay, dereliction and substandard houses. The local authority has made tremendous strides in the past three or four years in clearing the slums and sub-standard houses which proliferated around the steelworks. The result is that we now have splendid housing estates. The council has done many other things to improve the condition of its people.

Everyone seemed to think that the place would further improve. But now hundreds of men in that district will be redundant. Some got their notice this week. They will find it difficult to pay the rents of the new houses the council so wisely and properly built, and will find life very much more difficult. At the same time we shall find, as the local authorities in my area have found, that the decline in the level of inquiries about industrial development creates an intolerable situation. Therefore, we have the community effect, the tremendous loss in rateable value which will reduce the capacity of that council, like so many more, to promote further improvement of the conditions and environment of the people.

As a result, I am not too worried at this stage in our history whether I get labour-intensive or capital-intensive industry in my area, because we need to create wealth in such areas. Instead of creating wealth, we have the creation of anxiety. It is seven weeks tomorrow since the Secretary of State for Trade and Industry promised to announce to the House his decisions about the short-term financial and development plans of the British Steel Corporation. We are still waiting. The right hon. Gentleman has one week left, because I think that he said he would do it within six weeks to two months. We hope that he will make an announcement by a week tomorrow which will relieve my constituents' anxieties.

Mr. Raymond Gower (Barry)

I am not trying to be difficult, but merely asking a question for information. The hon. Gentleman is painting an interesting picture of part of his constituency. In view of the difficulties of the works to which he has referred, is he making a special case that those difficulties could be remedied by the retention of investment grants? I was not sure whether that was his point, because he said earlier that it was not in the development area.

Mr. Hardy

It is an intermediate area, not a development area. Certainly, the development grants would be of considerable assistance to the steel industry.

I have met both management and men at that plant. I visited the works within two or three days of the British Steel Corporation's announcement. The men said, quite responsibly, that they were not seeking to keep open plants merely to keep them open, that they accept that there must be change and rationalisation. Part of the plant is a blast furnace which came into commission in 1905. They are not saying that that blast furnace should remain open, but they are saying that they should be offered jobs in the Corporation or outside when the closure takes place. That is sensible.

I am concerned, therefore, not merely about the effect upon the individual and the community but with the whole question of the attitudes of the labour force in the steel industry and the rest of my constituency generally. The weekend after the announcement, I went into the Labour Club at Rawmarsh and spoke to some of the men who are likely to be affected. I was very impressed by one man of middle years, who is not an active party political worker and I do not think is even an active member of his trade union branch committee. He is an ordinary, middle-aged, middle-of-the-road, modest man, the sort of man Conservative hon. Members would describe in times of national emergency as the salt of the earth. He told me, "I have been working at that place for many years. I have never been involved in an industrial dispute. I have always sought to do my part to promote increased production, and now I am likely to get my cards. We might have been better off if we had been militant."

Unfortunately, that sort of shifting in attitude is likely to prove dangerous. I say "unfortunately", because I think that it is unfortunate for Britain. We heard earlier in the debate that Northern Ireland is being excluded from the new methods of assistance. That suggests to me that if my workers start throwing bombs or creating a tremendous fuss and disturbance, behaving in a way entirely alien to the habits and behaviour of South Yorkshire, we might begin to get more consideration from the Government. It is ridiculous that we are prepared to reward civil disorder and irresponsibility. My people are responsible. In my area we are not volatile either in our industrial or social conduct. Yet we are likely to suffer very severely under this Government.

I want to quote from the words of the present "Secretary of State for Unemployment" on the subject of employment just before the last General Election. He said: If we could get back to Tory policies, the unemployment situation would be a great deal better.… He probably may feel that it will be better when it reaches 1 million. A little later he said that it was a mistake for the then Government not to have taken steps specifically to encourage industrial investment.…"—[OFFICIAL REPORT, 6th May, 1970; Vol. 801, c. 421–25.] I do not think that the Bill will act as an encouragement to industrial investment. Clause 1 provides a complex arrangement which seems to me to make delay unavoidable. If delay is unavoidable, it will reduce the attraction of the scheme to industry.

Under Clause 2, the Secretary of State can reduce the assistance to be given if he feels that it is not likely to provide an adequate amount of labour. My earlier point about the need for capital-intensive as well as labour-intensive industries is relevant, and I hope that we shall get guidance from the Government about the scale of values they envisage so that we can tell at what point the Minister will begin to reduce the level of grants that he makes available. If we are to have this kind of provision, we should have from the Government at the same time as this complicated Bill some idea of the scale of the problem they expect to affect the country within a reasonable time. In that debate on 6th May, 1970, the present Secretary of State for Employment said that the Labour Government should … tell us what their forecasts really are, give us reasons for those forecasts, and tell us and the country what hard action they will take to bring down this unemployment.…"—[OFFICIAL REPORT, 6th May, 1971; Vol. 801, c. 430.] The only forecast I can see which is relevant to the present situation is that in 1974–75, there will be a reduction of £150 million in public expenditure on the promotion of industrial and economic activity in regions such as the one I represent. The right hon. Gentleman said on 3rd February, 1970: We … want … some plain truth and some hard, properly-thought-out action. We want no more dishonest assurances. The facts, when compared with the promises, are inexcusable."—[OFFICIAL REPORT, 3rd February, 1970; Vol. 795, c. 225.] The facts are inexcusable—perhaps even more so than the promises so lavishly made last June by the present Government.

5.52 p.m.

Mr. John Hall (Wycombe)

Before I consider the general principles of the Bill and of investment grants, I want to ask the Government for guidance. Under Clause 1, as I understand it, any expenditure which has been incurred before 27th October, or any contracts which have been made before that date but where the plant or equipment may be delivered after that date, will become eligible for grant under the old scheme. The problem which occurs to me is not an unusual one. This concerns where a firm building an item of plant, which may be costly, has placed contracts, before 27th October, for different parts of it to be made by outside firms. The parts are delivered either before or after that date but the plant is not assembled. A good deal of the cost of the plant is the labour put into it by the employees of the firm erecting the plant for itself.

In the case I have in mind, the total cost incurred by the firm through its own labour and resources is about £50,000. All that sum will be incurred after 27th October, although it relates directly to orders placed before that date. Indeed, the plant, which have been delivered, will be quite useless unless it is assembled and put into use, which will be after the relevant date. It is not clear to me from Clause 1 whether such a piece of plant or equipment would be covered under the previous arrangements, as allowed for in the Bill. Perhaps my hon. Friend will tell me.

On the matter of general principle, I was interested in the speech made by the right hon. Member for Sunderland, North (Mr. Willey) who, I regret to say, is not with us now. He threw some doubt on the efficacy of the policies followed by successive Governments for many years since the war. I understood him to express doubt as to whether all the efforts that had been made by successive Governments had in fact stimulated investment to the degree we should like to see, particularly, of course, in the development areas, on which we have been concentrating, I think that he is right.

The record of capital development since the war has been disappointing, to say the least. It has been patchy. During a few years it rose at a not unreasonable rate, but in general it has been far lower than it should have been, and certainly in recent years much lower than that of our major industrial rivals. So far we have not succeeded in finding a way of stimulating investment as we should like to see it.

We have concentrated much of our effort in the past, and again in this Bill, on the development areas. I wonder sometimes whether this is quite the right way. One example, although it is not covered by the Bill but is part of the development incentive, is the regional employment premium. It was introduced by the last Government with the best of intentions. It was designed to encourage industry to develop in those areas where development was required so as to stimulate the provision of more jobs. It did not do that. In many cases, the firms which benefited were those already situated in development areas and in some cases they used the premium for developing improvements in their plant and general lay-out and organisation which were designed to reduce the number of jobs rather than increase them.

It seems to me that the best way to encourage industry to go into the development areas is not to give direct benefits but to improve the areas themselves. One must ask, "Why is it that it is so difficult very often to get firms to go to development areas?" There are a number of answers. One is that the communications are not what those firms need. The areas may be a long way from their main markets. It may be difficult to get employees to go to development areas or to get the right type of employee for that particular type of industry.

I have always thought that the best way of encouraging development in the more difficult areas is to improve the facilities and amenities of those areas. I would sooner see money spent on better communications, whether by rail or road or docks or harbours, and on improving the area generally so that people would be encouraged to go to live there. We should make these areas attractive propositions for industrialists who have to consider the long-term economics of any developments they may have in mind.

Mr. Kinnock

In the last financial year, the regional employment premiums in Wales totalled £13 million. I agree that improved communications are vitally necessary, but how many miles of motorway could be built with £13 million? Does not the hon. Gentleman accept that the injection of £13 million would help the Welsh economy and have a much more dramatic effect on the mounting unemployment problem than the building of a couple of miles of new motorway?

Mr. Hall

It would be difficult to prove that expenditure of that money would be reflected in real advantage to industry in that area, except to add to its profits or ability to meet overseas competition. It would be hard to say even that it would give more jobs to any appreciable number in such areas. I have some experience of industry in South Wales and I would not believe that the premium was used really for the purpose for which it was basically intended. I agree that £13 million would not go far towards improving the infrastructure of the area, but if one is to take measures which are designed to make a development area more attractive to industry, it might be better in the long run to spend more money on improving communications or providing conditions in which industry would flourish rather than give the money in the form of direct grants to industry.

We have been encouraged from time to time to look at our investment grant system and to take account of the incentives given by our industrial competitors overseas. We know that when a foreign firm is considering where to base a factory in Europe it often takes into account the investment grants and other benefits available to it in a given area. For example, an American company may wish to set up a factory serving Europe and might have a number of alternatives. It might have the alternative of coming here, of going to Eire, which gives generous allowances, or of going to one of the other European countries which also give facilities and which may be nearer to the centre of the Common Market, which we may or may not join.

We have often been tempted to compete by offering facilities and benefits which we think will attract industrialists from outside, but I am not certain whether this is the right philosophy. If we look at the benefits that we have gained in the past by the large amounts of money that have been spent in this way over the years, under both Governments, I do not think it can be said that there has been a large measure of capital expansion and development. No hon. Member could claim that the policies followed by either Government have succeeded.

I am not sure, although I prefer this way of approaching the problem to the previous one, whether it will succeed. I prefer this method, because it is far better to apply the help so that it goes to companies which make profits rather than to companies whether or not they make profits. To that extent it is an improvement, and it is also an improvement in that it is simpler to administer and is likely to result in some saving of money. That is the only value, if we accept that there will not be much value from the total money spent.

The right hon. Member for Sunderland, North was right when he said that the whole problem requires extremely careful examination. I do not know what departmental committees or other committees have been set up to look at this problem from time to time, but I imagine that it has been studied fairly intensively. I am not certain yet whether we have studied it sufficiently, because in looking at the way in which industrialists are encouraged to invest more money, to expand in what we consider to be the right places, we have to do mole than produce a Bill which deals with incentives. There are a range of measures which have to be introduced in a number of different ways, some of them through the Budget and Finance Bills. We perhaps have not carried out sufficient investigation into this difficult and intractable problem.

I was interested in the comments in the Hunt Report made by Professor Brown in his note of dissent when he referred to the fact that investment grants tend to attract capital-intensive industry into development areas when what we really require are labour-intensive industries. He said: … since capital costs are still subsidised in development areas twice as heavily as labour costs, a good deal of the tendency presumably survives. It is contrary to good sense in that it means the concentration of capital-intensive industry where labour is relatively most plentiful, leaving labour-intensive industry on the whole where labour is scarcest, it makes investment grants expensive to the Exchequer in relation to the amount of unused labour absorbed into employment, and promotes a geographical concentration of particular kinds of industry that has no obvious economic merit, even if it is not in some degree uneconomic in terms of transport costs or concentrations of economic risk. It seems to be rather important that incentives (at least when they reach anything like their present scale) should be balanced between assistance to capital and to labour costs.

Mr. Douglas

The hon. Gentleman has answered the point I was about to put, in the last few words of the quotation, which indicate clearly the need for a regional employment premium. That is why Professor Brown, in other works, has supported the idea of a premium, which the hon. Gentleman rejects.

Mr. Hall

I agree that it means no more than is said, but I do not accept the view that the regional employment premium is the best way of achieving this balance between capital and labour costs. This is a different view about the instrument to be used. Professor Brown is right in his general view of the effect of development grants. They do attract capital-intensive industries, because it is the capital-intensive industries that are most concerned with the size of the investment grant that they are likely to get. It can make a great deal of difference to their plans if they know that they can get greater allowances for putting in expensive plant from Government or taxpayer sources. It plays a large part in the calculation of their cash flow.

Mr. Gower

Is it not one of the difficulties that some of the most modern and interesting industries which every area longs to have tend to be expensive in terms of capital? If we leave to the development areas merely those which are labour-intensive will it not mean a deprivation in these areas in future?

Mr. Hall

I apologise for the fact that I have failed to make my meaning entirely clear. I agree with my hon. Friend. It would be true that if we were to allow the capital-intensive industries to go only to certain areas, not to areas where there is a labour surplus, it might have undesirable effects upon the general balance of industry throughout the country. All I am saying is that the effect of the investment incentives in the Bill will be to encourage capital-intensive industries to go to areas where there is a surplus of labour, whereas we should have some system which effects a balance between the two so that we can encourage the development of some areas which tend to be labour rather than capital-intensive.

The investment grants are most attractive to the major spenders, those who have to put in very expensive plant. A consideration of the grants they will get can play a big part in their decision over where to site a new factory or plant. While supporting the Bill as an improvement on the present system, I think that we must go much further than we have so far done into finding, first the solution to the problem of encouraging faster capital expansion than we have had hitherto, and secondly we must find a rather different way of dealing with special development areas which have their own problems. There are the difficulties with the grey areas and the areas just outside the boundaries of both which become slightly grieved because they feel that they have as much right to be considered as the development and grey areas.

The right hon. Member for Sunderland, North made a brief reference to the establishment of regional authorities, and I think that he was probably on the right lines. I was not entirely certain of what he had in mind, but my view is that as we move towards regional government and we have the country divided up into some much larger regions we might find a much better way of dealing with local unemployment problems and the development areas than we have so far.

6.8 p.m.

Mr. John Horam (Gateshead, West)

I was amused by the slightly Olympian, if rather vague, remarks of the hon. Member for Wycombe (Mr. John Hall). At one stage they even sent a tremor of apprehension down his own Front Bench. If he stays in the Chamber longer after finishing his speech than he was in it before he got up to speak he may be interested in some of the comments I have to make.

The Government's proposed changes are quite absurd. I believe that the Government will regret ever having brought them forward. They are absurd first because they mean that this country will be stepping one way just at the moment when all the other major industrial nations are stepping the other. Secondly, they are absurd because the Government have done this in the middle of the worst investment recession since the war—a piece of monumentally inept timing, about the worst by any Government since the war. Thirdly, this Measure will be a serious setback to regional development. Fourthly, it is utterly mistaken in principle—so mistaken that it calls into question whether the Government really understand the relationship between investment and economic growth. That is a very serious matter.

The latter point is the heart of the matter. In their White Paper on Investment Incentives, the Government set out their argument against investment grants. Two of the three reasons they give are trivial and I will not waste time on them. The third is the nub of the issue: Investment grants benefit firms whether or not they are making profits and they can therefore result in uneconomic investment and waste of resources". The Minister spoke at considerable length and with considerable vehemence about the subject of profitability, and several hon. Members opposite reiterated the same point. By contrast, the new system—tax allowances—is profit-oriented. A company receives the full benefits for its capital investment only if it is making reasonable profits. If it is not making reasonable profits, it receives very little help.

That is fine if one wants to maximise profits. But one does not necessarily want to do that. Nor do the Government say that their aim is to maximise profits. Their aim is clearly stated in the White Paper on Investment Incentives, the first sentence of which shows the significance which the Government attach to this matter: It is the Government's objective to secure an improvement in the long-term rate of growth of the economy". That is a laudable aim. Indeed, it has been the aim of every Government since the war. But it is quite different from saying that we want to maximise profits. Profits and growth are related, but, they are not identical and considerations of maximising long-term economic growth can run contrary to considerations affecting short term profitability. I believe this to be the case with investment.

Let me give an example of the sort of thing I have in mind. In Japan, the Government and country have achieved a rate of investment double that which we in this country have achieved. They are investing each year twice the proportion of the gross national product which we are investing. The main reason for that is obvious. The Japanese have managed to achieve a sustained and high rate of economic growth. We have not managed to do that and therefore the proportion of our gross national product which we are devoting to investment is much lower.

But there is another point. The Japanese do not worry too much about profitability. The rate of profitability of their major companies is quite low; the rate of return is relatively miserable. Some of the things which Japanese businessmen and industrialists go in for would not be given a second glance by British industrialists. Japanese businessmen are concerned with production and growth and winning world markets, and they are quite right. Of course their approach leads to some waste, but it is more than offset by the extra wealth created by going hell for leather.

Mr. Gower

Surely the hon. Gentleman is aware that all the evidence shows that the Japanese entrepreneur has the advantage of a system of expense allowances which would not easily be tolerated in this country. I hope that the hon. Gentleman appreciates that. It is contrary to the ideas of most of us about the fairness of a tax system.

Mr. Horam

I would not argue that the expense account system in any country has a major effect on economic growth. The argument of those of us on this side of the House is that it has no effect on economic growth. The Japanese system may be wasteful, but the wealth created by this approach entirely outweighs any waste. And since the Japanese go for growth year by year, we can understand why they are rapidly overhauling this country in the economic growth table.

This shows that we need, not better quality investment, more capital intensive investment or more profitable investment, but simply more investment. This is the fundamental point, and this is preeminently what investment grants give. They are simple and crude, and they give a direct and handsome immediate cash benefit to the industrialist, who does not have to wait. He does not have to fiddle around with complicated and complex calculations about his accounts and future profits, with the uncertainty that all that involves. He knows then and there that he will get the money on the nail. In the nature of things it is obvious a priori that this will give more investment, which is what we want.

Mr. Cecil Parkinson (Enfield, West)

The hon. Gentleman has made the assertion that investment grants create more investment. We have had them for some years. Can the hon. Gentleman produce a single statistic to back up his assertion?

Mr. Horam

The Government do not deny that my assertion is true. They argue that the new system will be less wasteful of investment. They have not said at any stage that it will bring more investment, and indeed it will not.

I will take the point further. Last Sunday the lead story on the front page of The Sunday Times Business News was headlined Study reveals U.K.'s road to export ruin". It sounds rather like a Victorian tract against drunkenness, but the story beneath the alarming headline was rather interesting. It dealt with a detailed analysis of Britain's export trade which was undertaken by the National Economic Development Office. It showed that one of the reasons for Britain's relatively poor performance over the years was that it is relatively poorly represented in those product groups in which growth is fastest, particularly advanced engineering and chemicals. This re-emphasises the point. If we do not invest much, we do not achieve much high technology, and it is in the area of high technology that growth is fastest.

We have not invested much in those areas mainly because our rate of growth has been slow. No statistic about investment will ever prove that one system is better than another because the whole thing is so affected by total growth rate. Nonetheless, one can work from a priori assumptions, as we are doing, and as right hon. and hon. Members opposite are doing in the debate.

We have invested less in these high technology industries because we have a low rate of growth. But we have also invested less because we have given too much consideration to the question of profitability. It is in the areas of high technology that it is most difficult to obtain high profits year in and year out. Rolls-Royce is the most recent and perhaps the most spectacular example of this tendency which is endemic in other areas of engineering and chemicals. The profitability of the smaller chemical companies shows that they have been extremely poor performers. I.C.I. has been rather erratic, and the performance of the car industry and some engineering industries is well known to be rather poor.

In these circumstances it would have paid the Government and the country to subsidise investment in these industries, even if the return on the investment had been low. This was the direction in which the policies of the last Government were moving. The Industrial Reorganisation Corporation, the creation of the Ministry of Technology and the systems used and the investment grant system were part of this. It has been blown aside by the naïve and out-of-date ideologies peddled by the Government.

There are other reasons why the new system, with its emphasis on profitability, will damage our economic growth. For instance, many of our larger and international companies pay very little tax in this country, for various reasons, because much of their trading is done abroad. They will suffer as a result of the new system. It is these multinational and large international companies which undertake most of the world trade, and we cannot afford to put ourselves at a competitive disadvantage in this field.

Again, our economy has benefited a great deal over the last few years from foreign investment in this country. The development regions have taken advantage of this. It is reckoned in one calculation that one-third of the total fresh investment in the last six years which has gone into development areas has been investment by foreign based companies. These, too, will be hit by this new system because they will no longer have the immediate incentive of large cash grants. We know the importance of this in Scotland. The latest news from there is that the Chevron Oil Company is reconsidering the investment of a large amount of money, according to The Scotsman, because of the change-over from investment grants to investment allowances.

This is true also of new companies. We all know that new companies have a gestation period during which their profitability may be extremely low, or when they may be totally unprofitable, regardless of the eventual failure or degree of success of their venture. In this period cash grants can be of inestimable value to them.

Mr. Gower

Will the hon. Gentleman relate that to the problem of most of the development areas? Do development areas really look to absolutely new companies for their salvation? Is it not inevitable that the companies which are steered into development and intermediate areas are existing companies which are moving rather than absolutely new companies?

Mr. Horam

Proportionately, existing companies must have a larger share than new companies of any new investment simply because they are existing companies and have larger resources, but that does not alter my point that anything we can do to help new companies in the first years of their life may be of great advantage to the economy as a whole—and at small cost.

Thus, in many ways this reversion to pure market principles, reinforced by the emphasis on profitability, undertaken by the Government is wholly wrong. Market forces are too narrow for the national economic good. We need to widen the whole idea of market forces by using the modern planning tools, largely developed on this side of the House, which are available to a modern Government. Instead, the Government have taken a step back into the narrow confines of 19th century economics.

The crying shame of it all is that the grant system had begun to work very smoothly and well. Like all innovations, when it first came in there were transitional problems. Indeed, there has been a great deal of litigation over the years between the Ministry of Technology and companies which wanted investment grants, the most famous example being the protracted case of the British Oxygen Company against the Ministry of Technology. But by and large industry got used to this system and liked it.

Inside the Civil Service we have created a substantial body of people who understand the system and who have themselves benefited from their contacts with industry. This is something which our Civil Service badly needs. We are well behind the French, for example, in the understanding of our Civil Service of the needs of industry. Now all this is to be lost. All this is to be changed, and it is to be changed at a moment when we have an investment crisis, just when order, stability and confidence are at a premium.

The Minister sought to prove that the system was no worse financially, and that the cash flow situation had not deteriorated in the last few months. That may or may not be true, depending on how one looks at the figures. But when we have to go through such a major change, with all the administrative complications—and the Minister's speech reflected the administrative complexity—the change itself produces consequences and trouble which we simply cannot afford at this moment of our economic history. No wonder we have been hearing the most uncomradely epithets from industrialists who financed the return of this Government. That is certainly a piece of investment they will rue. If they set that against their profits, they might think twice about future elections.

Mr. John Hall

The hon. Gentleman will recall that during the election, and indeed before, the proposals which are now before the House were put to the country, and industrialists knew precisely what they were voting for.

Mr. Horam

They will have second thoughts when they see the goods. There is a great difference between the euphoric simplistic statements of Selsdon Park and the reality of this Government, and the whole country bears witness to that.

As the Government are pushing through this massive change at such a time, one might suppose they would have some pressing reasons for doing so. One might suppose that at last this country in a major aspect of its industry was being brought up to modern practice or brought in line with the best industrial nations, or with the Common Market. The Government are very keen with food levies and value added tax to get us in line with other countries, but quite the reverse is true, as my hon. Friend the Member for Chesterfield (Mr. Varley) pointed out. Five out of the six Common Market countries have investment grants.

Who have tax allowances? South Africa and Australia. The one is a slave economy and the other would be in desperate trouble were it not for its mineral boom; both are part of the dear old Commonwealth. This is an absurd example of the Government going in the wrong direction at the wrong point in history.

Indeed, if I may add further to this point, this very week the Governments of the Six countries and the Commission are meeting in Brussels to look at their respective regional policies. They intend to harmonise those policies, and one decision which the Commission is pressing for and which it is virtually certain to get, is the standardisation of investment grants. It is perfectly plain that they will do this. First, five out of six countries already have them and, secondly, the Commission knows that they are better. That is why they are standardising investment grants.

What will happen if and when we get into the Common Market? Presumably, in three years' time, or possibly four or five years' time, not much longer, we shall be going back to investment grants, so as to harmonise with the Common market. How will the Government explain this to their friends in industry? After five years of one system and five years of another system, how will they explain going back to the old system? Is not this absolute insanity?

In short, the Government are making fools of themselves by introducing this change. I look with a certain relish at them making fools of themselves from a strictly political point of view, but it is none the less causing our economic growth rate prospects serious harm. From that point of view I wholly disapprove of the change.

6.28 p.m.

Mr. Ronald Bray (Rossendale)

I regret that, in many respects, other than in the OFFICIAL REPORT, I cannot in my remarks follow the hon. Member for Gatehead, West (Mr. Horam).

Speaking as a Tory, a Conservative or a capitalist, I see the main purpose of the Bill as being to make money work. There is no guarantee that money given away in the form of a grant will actually produce a worth-while return. If, however, a person buys the most profit-earning machines suited to the job, whether it be in manpower, high value equipment or any combination, and a profit is made, he will receive a certain amount by way of investment allowances. This puts people on their toes to achieve a proper return. It is what they must do to get the money.

The change in policy will have the great advantage of ensuring that the Government know what their expenditure will be in a given period. Under a system of grants people may either buy their plant and equipment from a British manufacturer or import it. In other words, they can buy ad lib and, if they wish, can then get a grant. However, they will not buy equipment if they find that it ties up too much of their capital and if they can make do equally well with less expensive plant. This was the fallacy of the previous scheme which was operated by the Labour Government. The idea then was that if enough money was put into an area something would happen and, it was hoped, business would continue to operate. That at any rate was the theory. Our theory, which has been proved in practice time and time again, is that with efficient management and the right tools and products a profit can be achieved, ploughed back into the business, and in this way generate capital. This is the fundamental purpose which lies behind this change. I regret that right hon. and hon. Gentlemen opposite failed to realise these facts of life when they were in Government.

I have always been against grants or any form of cash hand-out because I believe they make industry inefficient. We have seen what has happened in Rolls-Royce, which in one form or another has received large amounts of Government aid. That company appeared to look on that money—as indeed do other companies—as a method of helping itself. I would not use the term "lame ducks", but that is what companies become if they are over-reliant on outside support. That is the picture as I see it.

In respect of shipbuilding, I see the reason for the continuation of grant because it involves long-term policy. [HON. MEMBERS: "Oh."] But at the same time I would be against it as a basic principle if I were making a decision.

Mr. Heffer

There is always an exception.

Mr. Bray

Once the door is opened to one form of grant, the door is opened to all the rest. I would not favour such a system in any way.

We have heard a great deal about development areas and intermediate areas. I am privileged to represent a constituency in which three out of four of my towns are of intermediate status. Despite what has been said by hon. Members opposite I am happy to say that the area is improving notwithstanding what the previous Government are said to have done. The area is improving because there is the will to improve. There is good administration within many of the small factories, and these firms are working hard and not merely bewailing their lot. If they run along to Whitehall every minute of every day, caps in hand, they not only undermine the confidence of the people living and working in their area but deter other people from moving into it since it is felt that it is not a happy area in which to live or a profitable area for investment.

The intermediate and development areas, many of which are represented by hon. Members opposite, would do a great deal better if they were prepared to stand on their own feet and not bleat left, right and centre, "We want more this, more that and more of everything. If we get enough in the way of grants, we might get rid of our unemployment." It is well known that there have been fewer jobs in certain development areas within the last year or so than there were six years previously. Therefore, it would appear that the policies of the Labour Government have not worked satisfactorily.

I suggest that if the policies of the pre-1964 Conservative Government in the form of allowances had been maintained we would have seen far greater development in those areas than we have witnessed over the past few years. I may be regarded as dyed-in-the-wool in my thinking on this subject. However, I do not mind being accused of this, since I am convinced that if people have money they have got to make it work. It is essential that they should get a fair return upon it. That is the purpose behind this Bill, and for that reason I give it my support.

6.36 p.m.

Mr. Eric S. Heffer (Liverpool, Walton)

The hon. Member for Rossendale (Mr. Bray), who has just spoken, can be considered as an honest representative of the Tory Party. He outlined the old-fashioned basic Tory philosophy, and I have no intention of taking up all his points—

Mr. Blenkinsop

You cannot. He has gone.

Mr. Heffer

If the hon. Member has now left the Chamber, I will not spend any time dealing with his speech. It is hardly worth doing so if the hon. Member is not prepared to listen to the speeches of other hon. Members.

The White Paper on Investment Incentives begins in paragraph 1 by saying: It is the Government's objective to secure an improvement in the long term rate of growth of the economy. This calls for the creation of an economic climate within which individual firms can plan with confidence an expansion of their output and for the removal of obstacles which are likely to discourage or impede such expansion. I suggest that that is something of a sick joke. We must look at the situation which has developed since the White Paper was produced in October last.

We were told months ago that the Government policy aimed at getting rid of investment grants and replacing them with investment incentives. I should like to quote from Newsletter No. 38 of the North-West Industrial Development Association: Tight monetary control has undoubtedly contributed to the current difficulties of industry. In conjunction with rising costs and low profit margins, the Treasury's tough monetary policy has placed many firms in a very difficult financial position from which they have tried to extricate themselves by trimming back investment programmes and by shedding labour wherever possible. These difficulties have not been helped by the change over from cash grants to tax allowances for investment announced by the Chancellor last October. A number of companies such as Shell have given the revised system of incentives as one of the reasons for deferring investment plans. Capital expenditure programmes are being scaled down in many sectors, particularly in oils and chemicals, where the change-over in investment incentives has made a big difference to previous calculations of cash flow and post-tax profitability. The North-West Industrial Development Association is not a dyed-in-the-wood affiliate to the Labour Party. As far as I know, it has on it no revolutionary Marxist of the International Socialists. It has on it highly respectable people from various parts of the North-West, some of whom are members of the Conservative Party and one of whom is the leader of the Conservative Party in Liverpool. I assume that documents of this sort go out with the full agreement of members of the association. In fact, so perturbed is the association at the present unemployment situation in the North-West that it has asked for a special meeting with the Prime Minister.

The Development Association has this to say about redundancies in general: Unfortunately, during periods when the national economy is slack, it is the relatively less prosperous parts of the country, including much of the North-West, which suffer most". Let me give details of the present unemployment position in the North-West. At the March count a total of 106,256 persons were registered as unemployed, a rate of 3.6 per cent. compared with the national rate of 3.3 per cent. Of course, it has gone up since. A year ago the rate in the North-West was 2.7 per cent. Males account for 87,768 of the region's total unemployment. Male unemployment is running at 4.9 per cent. compared with only 1.6 per cent. for females. The region's unemployment black spots are the Fylde area with 5.9 per cent., Lancaster-Morecambe 5.4 per cent., Merseyside 5.6 per cent., Ormskirk-Skelmersdale 5 per cent., Southport 4.9 per cent., Wigan 4.7 per cent., and Congleton 4.8 per cent.

Mr. Redmond

Has the hon. Gentleman figures to show what the unemployment position was in Merseyside in 1964, when the policies of the last Conservative Government were in operation?

Mr. Heifer

Oh, yes. The hon. Gentleman should not ask me questions about unemployment on Merseyside. If I know about anything at all, it is about unemployment on Merseyside.

Mr. Laurance Reed (Bolton, East)

Then what about answering the question?

Mr. Heifer

I will tell the hon. Gentleman the position in 1963–64. Under a Tory Government we had 29,000 unemployed. At the moment, under a Tory Government, we have 41,000 unemployed. That is the present unemployment position on Merseyside, and the rate has shot up in the last nine months since the Tory Government came to office.

No one has been satisfied that any Government has solved the problem of unemployment. Throughout the six years of Labour Government I made speeches in this House consistently urging that policies should be pursued which lowered the level of unemployment on Merseyside and elsewhere. Sometimes I spoke against my own Government's policy when unemployment was allowed to rise. Certainly we did not solve all the problems. However, we contained the position. We held it.

Really, we were running faster in order to stand still. As soon as we had a Conservative Government and once investment grants were removed, there was a rapid rise in unemployment affecting development areas like Merseyside. It is no good right hon. and hon. Gentlemen opposite pretending that nothing has happened in the last nine months and that they are not responsible for the rising level of unemployment.

I have always regarded unemployment as a crime. It is a crime against people who are pushed on to the streets because they have no work. I have walked the streets of Liverpool seeking employment. We have had a pool of unemployment for years, it being the residue of the mass unemployment that we experienced before the Second World War. We have never solved the problem on Merseyside. But the Labour Government contained it and brought it to its lowest level.

Mr. Richard Body (Holland with Boston)

Is the hon. Gentleman saying that it never rose beyond 19,000 in the years when he was making the speeches to which he has referred?

Mr. Heffer

I did not say that it did not rise beyond 19,000. I said that there were 29,000 unemployed when the Conservatives were in office before, and it is 41,000 now. Certainly it rose beyond 19,000 under the Labour Government, but it never rose to the level at which it stood when the Conservatives were in office in 1963. That happens to be a fact, and before hon. Gentlemen attempt to argue about it, they ought to look at the figures.

Mr. Laurance Reed rose

Mr. Heller

No. I shall not give way any more. I know that hon. Gentlemen opposite do not like my speeches. Their thinking is not in line with mine. They must accept that they do not like what I say.

One hon. Member referred to the position at General Electric. In fact, it was at Napier. The whole G.E.C. complex on Merseyside was not closed down. The hon. Gentleman will be interested to know that on that occasion I led deputations of Liverpool Labour Members of Parliament to see my right hon. Friend the Member for Bristol, South-East (Mr. Benn), and I also went to see Arnold Weinstock. Arising out of those meetings, there was a phased programme. I was not happy with it, of course. I wanted the work to remain on Merseyside. But that was one battle that I did not win.

When the Cammell Laird shipyard came under pressure, it appeared that it would have to close. It would have closed on the basis of the "lame duck" theory, and one of the biggest shipyards in the country would have gone out of existence. It was saved by the intervention and policy of the Labour Government. Today, Cammell Laird is working on Merseyside and making a profit. That was a battle that we won, though we did not win them all.

One or two semi-critical speeches have been made today by hon. Gentlemen opposite about the Government's policy on investment grants. When are they going to stand up like men and refuse to go in the Government Lobby? When will they do what some of us did when we disagreed with our Government and be prepared to vote the other way? Hon. Gentlemen opposite should not come into the House and be critcal of hon. Members on this side, as well as of their own Front Bench, unless they are prepared to fight for what they believe. Politics in this country have got into a bad situation because not enough people are prepared to get up and follow through their beliefs by acting on the basis of their convictions. Hon. Gentlemen opposite can do that tonight. I do not ask hon. Gentlemen to vote with the Opposition—of course not—but I ask them to have sufficient conviction to show their opposition to the Government by refusing to go into the Lobby and giving them 100 per cent. support on the Bill.

I mentioned earlier that the North West Industrial Development Association was so concerned about the situation that it had aked for a meeting with the Prime Minister. The association issued a Press release on 22nd April—at the risk of boring the House I shall read it, because it should go into the record—in which it said: Unemployment has risen sharply in the North West in recent weeks and there has been a spate of company anouncements of redundancies and factory closures. Few companies are planning new development and many projects n the pipeline are being deferred. During the past 12 months redundancy announcements affecting some 40,000 work people in the North West have been made. It ends by saying: The Association is concerned that little encouragement is at present given to firms to expand and feel that the Government must take much stronger measures to stimulate industrial investment and consumer demand in order to provide more employment opportunities. The Government appear to attribute all our current economic difficulties to the problems of wage-cost inflation but the Association considers that this is but one of a number of factors causing the current recession in economic activity. I should like now to refer to redundancies and closures which have taken place in the North-West: British Tissues is to close its two factories near Garstang and 300 people will be made redundant; Butterworth and Dickinson, textile engineers of Burnley, where 200 workers were employed; Courtaulds, Stockport, 100 workers; Arthur J. Green, 50 workers. I could go on right through the list: 260 workers, 483 workers, 130 workers, 250 workers, and so on. This is a long list of closures which have taken place in the last few months as a result of the Government's policy.

There is another list headed, Major employment losses (not connected with complete closures). I shall not read them all; I shall read only those affecting Liverpool: C.A.V. (Joseph Lucas), 175 workers; Joseph Lucas again, 700 workers; Silcock and Lever Feeds Ltd., 450 workers. In Kirby, which we regard as part of Liverpool, Bird's Eye, Ltd., 240 workers; Fisher Bendix, 175 workers; Wallasey, Cadbury-Schweppes, 1,200 workers. At Birkenhead, Cammell Laird has had to put off 400 workers; Electro-Hydraulics Limited, 400 workers; and Bear Brand 60 workers. All these redundancies in Liverpool have taken place within the last few months. The numbers are growing the whole time. The problem is developing week after week. If one goes round the council estates in Liverpool one will find that in every street one or two workers are now unemployed. This situation has developed rapidly because of the Government's failure to deal with it.

I welcome only one part of the Bill—the building grants. Many hon. Members will know that I am, and have been for some time, concerned with unemployment in the building industry. I have argued again and again that all Governments should take positive action to deal with the growth of unemployment in the building industry. Althought I do not regard building grants as a final solution, I think that they are a step in the right direction. Therefore, I welcome that part of the Bill.

What do we find in the construction industry in the Merseyside area? In 1968 the number of wholly unemployed construction workers was 4,952. The number today is 7,176. That includes, for example, 337 joiners and 196 bricklayers. I could go through the list in that way. This is at a time when we have vast areas of the city of Liverpool practically derelict, not a house or building being put on them, people demanding houses, and a need for a real public works programme to ensure that we have more schools and improved hospitals. The Labour Government tackled this problem much better than this Government, but it needs to be speeded up.

No Government have finally solved the problem of the regions. It is a longstanding difficult problem which will require a different answer from that which has so far been given by either Government. Whilst I believe in holding the financial carrot before the noses of the industrialists to attract industries into those areas, and whilst I agree with au I.D.C. policy—incidentally, I.D.C.s were controlled much better by the Labour Government than the Tory Government—that does not in the long run solve the problem.

I believe that two things must be done. First, there must be a general reflation of the economy to get a general upturn. For the regions, whilst I think that the Government should reverse their policy and get back to a policy of investment grants, we need a planned approach to the development of industries in the development areas. That can be done only on the basis of public ownership. There is no other answer to this problem. If we are to ensure that new industries are developed in those areas, it will have to be on the basis of a planned approach. We could do this by linking such industries with the necessities of the under-developed parts of the world. We could gear and build factories in our development areas to produce goods for shipment abroad to assist the underdeveloped countries. We could ensure that the financial aid granted to those countries was part of this process. That is the only real answer to this problem in the long run.

In the meantime, the Government must get back to a policy of investment grants, and of assisting the shipping industry, because the cry from the heart that has been heard in the House today on behalf of the shipping industry is genuine. Our shipping industry was about to collapse, and it was saved by the policies of the Labour Government. If the industry does not receive equivalent aid in future, there is no guarantee that we shall have a shipping industry of the kind that we have had during the last few years.

I believe that even at this late hour the Government should be prepared to reverse their policy, but, of course, they will not do so, because they do not really care about the level of unemployment. Hon. Gentlemen opposite come to the House and say that they are as deeply concerned as we are about the rise in unemployment; but I do not believe they are. If they were as concerned about the problem as we are, they would have taken positive action within the last nine months to bring down the level of unemployment.

The reason why the Government are prepared to allow unemployment to rise is that they wish to use the weapon of unemployment against the rising standards of British workpeople. Unemployment is one of the Government's weapons. Their other weapon is the Industrial Relations Bill. This is all part of the strategy of the Government, the most reactionary Government that we have had since the end of the Second World War.

The era of Macmillan, with his middle way, has gone. We now have a Government which, while not being entirely Powellite—the right hon. Gentleman would like the Government to go further—have gone well along that path. I think the House should recognise what is happening, and ensure that the Bill is thrown out.

7.3 p.m.

Mr. Raymond Gower (Barry)

Towards the end of his speech the hon. Member for Liverpool, Walton (Mr. Heifer) said that the only solution to the problem was public ownership. I have had the good—or bad—fortune, at different times, to have visited many countries in Europe where there has been a high proportion of public ownership. I have seen a lot of evidence that their system has not protected them from severe distortions of their economies from time to time.

The hon. Gentleman suggests that public ownership is the answer to all our problems, but there is a good deal of evidence from many countries which have embarked on a system of almost complete public ownership that the distortions which occur in their economies are sometimes much more severe than those in countries which have a widely distributed form of industrial ownership.

The hon. Gentleman said that there was an insuperable gap between himself and some of my hon. Friends, between that side of the House and this, on matters of this kind. I think he is wrong, because when he says that he wants to get rid of unemployment, and when he says that part of his political life has been spent in Liverpool hating it, he should realise that we are as prepared as his hon. Friends are to applaud him for that view. We see, as he does, the undesirable disfigurement of society and its values that is caused by the predicament of those who cannot find work when they want it.

I was a Member of the House throughout the 1951 to 1964 period, when successive Conservative Governments were in power. At no time during that fairly long period did unemployment reach the very high levels to which the hon. Gentleman referred. Indeed, just as Labour Governments did, so postwar Conservative Governments benefited by the experience of those who were here before us. Only recently I have been re-reading some of the long history of legislation dealing with the problems of the less fortunate parts of the United Kingdom. As the hon. Gentleman will recall, the history of this legislation goes back to the inter-war years, when our predecessors had to deal with similar problems, but when they had much less experience and know-how than we have today.

The long history of finding methods to give special aid to industry has been divided into two headings: first, to encourage more intensive capital investment; second, to steer industrial investment and development into those areas which we now describe as development areas but which in earlier times were called special areas, depressed areas, and so on.

Those two forms of aid are not always the same. The hon. Member for Gateshead, West (Mr. Horam) appeared at times, no doubt unwittingly, to be speaking about investment under those two heads as though they were the same thing. The hon. Gentleman may agree that there are two different kinds of incentive. The first is that which makes our industry tend to invest more in new equipment, in re-tooling, and in replacing obsolescent machinery. The second is the much more specialised incentive which is designed to attract industry to development areas or to intermediate areas. Those two incentives often overlap, and they often share a common device, but at times they are not the same thing.

Several hon. Members have referred to the importance of matters other than the kind of help given by Measures such as we are debating today. Several have referred to the importance of improving the infrastructure, the communications and the whole tone of life in some areas. I believe that in the long term those factors may be just as important as—in some cases more important than—the financial incentives embodied in legislation of this kind.

The accessibility of an area can be of vital importance. When we think of the harsh competitive atmosphere of international trade, I hope that both sides of the House realise that our industry has to be extremely efficient to compete in the world in this part of the twentieth century. Our industry has to be well equipped, well tooled—

Mr. Heffer

That can be done only with investment.

Mr. Gower

I accept that, but I suggest that the other things to which I have referred are also important, such as infrastructure and communications. These should be the best that we can provide, both in the short and in the longer term.

I am the first to admit that when one compares investment grants with invest- ment allowances, the former have a superficial attraction which is not possessed by the latter. To the newcomer embarking on a new venture, the prospect of having an immediate grant is an attractive proposition. I am not sure, though, whether this is in the best interests of everyone, and, particularly of the development areas.

Surely any hon. Member representing part of a development area would want, in most cases, those firms which come to his area to be highly efficient, with some history of achievement, rather than firms starting from scratch. That is why I asked the hon. Member for Gateshead, West whether he was thinking only in terms of new firms. Surely the biggest help will be given in future, as in the immediate past, by firms which are already well established and are moving either all or part of their undertaking into a development area.

It is not always easy to persuade a firm to do this. In some cases the inducement of a grant may do the trick where the much more long-term benefit of an allowance might be more difficult to interpret and sell. Nevertheless, on balance, it is more consistent with the long-term interests of our industry, and certainly with the long-term interests of the development areas, that we should have a method which is likely to bring into these areas the efficient firms and those which are likely to stay and have a durable and prolonged record of success.

Mr. Kinnock

The hon. Member is emphasising the longt-term benefits of this policy. Is he familiar with the saying of John Maynard Keynes, that in the long run we are all dead?

Mr. Gower

That sort of specious remark does not contribute a great deal to our discussion. The development areas need industry which is likely to be successful not for six months or a year or two but for a fairly long period. I am not talking in terms of a lifetime, until we are dead, but in terms of perhaps a few years.

With a system of grants, one may attract a number of entrepreneurs who are willing to have a go. They may not even have the ability, the experience or the training to undertake a successful industry in a particular area, but they may be induced to do so by the promise of an instant grant based on nothing but the hope that they will make some contribution in the area.

But with the arrangement embodied in the Bill we have some assurance that all those who will benefit will be firms which will demonstrate over a year or two their ability to serve the area. To that extent, while the allowance may lack some of the ostensible, superficial, perhaps specious, attractions of the grant, I believe that it is more soundly conceived. To that extent, I agree with those who have spoken in its support.

The type of company which we want in our development areas can be varied. One hon. Member said that many would come from overseas. There is nothing wrong with that. I would be the last to say that we do not want investment from overseas. We have had valuable investment from North America, Switzerland and other places in Europe, and no doubt we shall have more. But we do not want to attract firms from those countries merely by incentives which will seem attractive to them but which will not be designed to make them stay with us for a fairly long time. This applies just as much to overseas companies as to those which move from Greater London or the Midlands.

This Bill is merely a part of the whole. The hon. Member for Walton supports building grants.

Mr. Heffer

indicated assent.

Mr. Gower

I think he will agree that the Bill's provisions for building grants are an improvement on what has gone before. In addition to this Bill, there are valuable incentives in the system of depreciation which has proved its merit over generations. It has been a method of accounting which has been shown to be effective for many years, both here and overseas. That is also embodied in changes introduced in the last few months.

I deplore any attempt by anyone to form final conclusions about changes in such a short period. It is unfortunate that anyone should suggest that our present difficulties are due to any changes like this. I believe that most of them are due to the fact that, in addition to these difficulties which have existed during the term of the previous Government, there has been over the last two years a gradual growth to an inflationary state which has not been contained. It is a difficult matter. I am not blaming anyone—it is the result of a number of factors—but we surely cannot discuss this Bill without making some reference to that. Unless we solve the inflation problem, these employment problems must prove far more difficult to solve.

We must meet at the same time the problems which have produced this grotesque inflation, which cannot do any good to anyone. The hon. Member for Walton said that he regarded unemployment as a crime. I do not quarrel with that term. Certainly, although the failure of an industrial enterprise is not a crime but a misfortune, the result may be equivalent to something criminal. It is a misfortune to those who fail in the industry and to those who are employed in it. But inflation also—

Mr. Heffer

I was not talking about the failure of a firm in normal circumstances, which results in people being unemployed. I was talking about the fact that at the moment unemployment is being deliberately allowed to rise, the fact that it is a planned instrument of the Government. That is what I find absolutely criminal.

Mr. Gower

It would be quite inexcusable if that were so, but it is quite untrue. I am sure that not one member of the Government would agree with the hon. Member, and it is deplorable that he should say that.

I admit the awful effects of unemployment. Indeed, I understand what the hon. Member meant by saying that it was criminal. But also criminal in his terminology, in certain circumstances, are the effects of inflation. I have seen evidence of those who have not been able to enjoy a State pension, who have made a modest saving in a long and hard-working life, and who have seen the value of that saving destroyed by the cruel effects of inflation. We want to banish and exorcise both. We want stability in our national finances, side by side with industrial growth which will provide continuity and improvement of employment. For that, both sides of the House should fight together, and we should not denounce the methods of our opponents.

7.18 p.m.

Mr. Neil Kinnock (Bedwellty)

I am very pleased to be called to speak after the hon. Member for Barry (Mr. Gower), especially since he described a remark of mine as specious. Perhaps I might be allowed to explain at greater length what I meant by taking that quote from John Maynard Keynes—although from the activities of the Government at present one would think that Keynes had never been born. What he meant was that an overwhelming concern with what could happen in the long run is generally intended by politicians to obscure what will happen in the short and medium term.

What I accuse the Government of—and, unfortunately, also the hon. Member for Barry, who is not usually given to excesses—is that they are trying to explain away several of their policies in terms of a long-term benefit—"We will overcome inflation and so on in the long term"—because, in the short term, as my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) said, there is a deliberate creation of unemployment, and, I might add, in certain Government policies, a deliberate creation of price rises.

The hon. Member for Walton said that unemployment was criminal. There are crimes of omission and commission, and the fact that my hon. Friends are saying that unemployment is criminal is indicting the Government for their crimes of omission. There are a number of things which they have not sought to do to prevent the level of unemployment rising, and that is what we consider to be criminal.

The debate has shown a fundamental difference, not only in aims but in methods of achieving a regional balance. In last Thursday's debate on unemployment the Secretary of State for Trade and Industry said there was little difference between us in aims. The Government must be judged not on their targets or what they protest to be their aims but on the results we have before us, and on the basis of those results it seems that the economy is entering a major recession.

Setting aside the aims and going on the basis of the results after a comparatively short period of Conservatism, we have the most profound reasons for being critical of the Government. The function of regional economic policies, in whichever country they have been practised, is to create differentials between the prosperous, generally over-populated areas, and the depressed, generally under-populated and under-used areas of the economy.

The value of any regional economic policy for the employers and people of the regions must be judged on the relative worth of the development incentives in the prosperous, non-assisted regions compared with th edepressed, assisted ones. On this, if on no other, point the Government have manifested their complete cynicism by refusing to acknowledge the value of discriminatory assistance, which is being reduced by them as a conscious end of policy.

It is not an accident that this assistance is being reduced. It is being done by design, and the Government are introducing measures which will reduce the differential between the prosperous and depressed areas of the nation. For that they cannot be excused. No Government can protest that they earnestly desire to assist the regions and simultaneously introduce measures which will reduce the relative attractiveness of the depressed areas.

After talking about the "unanimity of purpose" of hon. Members on both sides of the House in wishing to attain full employment throughout the country, including the regions, the Secretary of State went on to speak on Thursday about his review of regional policy and said that he had done it in two directions, which I suppose is typical of a Government with two faces.

However, the right hon. Gentleman cannot protest that he is trying to do something to maintain the prospects of the regions if, at the same time, he is introducing policies which will cut down the margin of differential between the regions and the over-developed areas. As a general principle, it is logical to say that, at best, a Tory Government act in this matter unwillingly and churlishly and have a clear lack of commitment to regional development policies.

Mr. Wilfred Proudfoot (Brighouse and Spenborough)

Does the hon. Gentleman recall the Hailsham Report and its importance for the North?

Mr. Kinnock

I am well aware of the activities of the "Stop-go Peer", but few people will give very great praise to either the antics of Lord Hailsham in trying to inaugurate a regional policy or to the consequences of that policy, especially compared with the concrete and identifiable results achieved under the conscious development area assistance policies practised in recent years under Labour in the North-West, Wales, the North-East, Scotland and elsewhere. If the hon. Gentleman really believes that Tory policies have been successful, he cannot base that belief on recent election results.

The T.U.C.'s 1971 Economic Review contains a lengthy section on investment policies. The Congress reckons that the £100 million differential that existed under Labour between the depressed and prosperous areas will be replaced through the investment allowance system to provide a differential of about £75 million in aid to Development Areas. In practice, the estimate of £75 million is likely to be a maximum figure, since it must be based on optimistic profitability estimates. Profitability of enterprise in Development Areas is likely to be less initially than the national average, particularly for new firms. At worst—I am not supposing that this will happen—the differential could be nil, for if the Government base the differential mainly on the creation of profit, it is conceivable, especially in the current economic climate, that few firms in the regions will be able to make the sort of profits that will qualify them for the incentive allowances which the Government are proposing.

The closing of this margin between the prosperous and depressed regions could mean the throttling of economies like Wales and Scotland, which are dependent to a large extent on the injection of discriminatory assistance. It could put Wales and the other development areas out of the current technological revolution, and that would be a disaster not only for the workers and businessmen of Wales but for the British economy, for a dead Wales or a stagnating Scotland would be a direct encumbrance on the already over-congested other regions.

Not only will the change in the system of assistance to the regions bring a reduction of investment in the regions, it will have a disincentive effect on investment generally, something which those even outside the regions should note. The T.U.C. reckon—and I have no reason to doubt its estimate—that by 1974–75 the incentive to investment will be reduced by £150 million nationally, and to anybody who has studied any sort of economics the reasons for this will be obvious. Karl Marx was probably the first to put his finger on it, and certainly John Maynard Keynes did so when, in his general theory, he said that in a mature economy the lack of opportunity for fresh investment meant a lowering of the propensity to invest.

There is, therefore, a great argument in favour of giving major investment assistance in a mature economy—as much, if not more so, in a mature than in an under-devesloped economy. By neglecting this truth, the Tories have shown themselves prepared to do a back-dive, way back to the days before Keynes influenced economic thinking throughout the world.

For new and expanding industries in the regions, the gearing of incentives directly to profit levels will be a positive disincentive to development. Already they are asking why and how they should develop. The removal of Government assistance with cash will have dire consequences for many firms in these areas. In an economy which is already under-invested, which is not sufficiently capital intensive and which has over the years shown itself to lag behind its major industrial competitors in capital investment terms, it is clear that the Bill will have a major disincentive effect on capital intensive firms to invest.

I have heard hon. Gentlemen opposide declare that they intend to provide labour-intensive industry in the regions. As the representative of a South Wales constituency with one in ten men unemployed, I would welcome labour-intensive industry in my area. If anyone can draw my attention to a thriving, modern, high technology industry which can offer guarantees of security for the future and which is labour-intensive, we should be glad to have it. But everyone knows that no such industry exists. The future belongs to capital-intensive industry. There is no reason why Wales or the other regions—but for some peculiar quirk of Tory philosophy—should be denied capital-intensive industry. But under the Bill, denied they will be, because there is a disincentive.

Turning from the general principles, a very illuminating document has been published by the economic panel of the Welsh Council, entitled "Investment Incentives". At the earliest possible date, recognising the difficulties that this new scheme will present to Wales, the Welsh Council produced a worthy document, for which I applaud it on the subject of the changeover from investment grants to investment allowances.

This is an interesting description of what the change will mean. It is a practical document, and I quote from it. The panel says this: The value of the new incentives depends on the circumstances of the individual firm. We should not be surprised that it depends upon the fortunate circumstances of an individual firm whether it will benefit under the Bill. It will not be the first time in the history of British regional economic policy that we have been prepared to award assistance only to firms which are completely redoubtable, so safe, secure and assured of a future that they do not need the money which the Government are prepared to offer in one form or another. But what one wonders at is the fact that the Government are now prepared to return to the system where they are to award money only to the safest possible firms. That is like confining discretionary building grants to Buckingham Palace and the Hilton Hotel. In our regional development, there is no point in confining assistance to industries which do not need it.

I come to matters of detail. The Welsh Council considered the position of different firms. The report says that a firm with … a profit-making base against which reliefs can be set, and the differential advantage to a firm deciding to locate a unit within a development area as opposed to outside a development area can be materially improved if there is a large element of building expenditure. That is a very substantial "if". Again, … in the case of a subsidiary of an overseas group, the fact that profitability within two years from the commencement of a project … focuses attention on the rent-free period and the new increased rates of building grants. "Focuses attention" in the same way, I suppose, as Dr. Johnson tells us that death concentrates the mind. The change- over from investment grants to investment allowances, I suppose, in the same way focuses attention of the firm on its position. A company moving to a development area and transferring plant and machinery will have a higher ratio of new investment in buildings and will benefit from the increase in the rate of building grant. But this applies only to firms transferring plant and machinery. We are very glad to have them.

Two matters arise. First, how many firms transfer their plant and machinery? Second, in an economy renowned throughout the world for harbouring ancient machinery, is it really a laudable comment on the nature and conduct of our economic affairs to say that here is a Government positively encouraging the retention of out-of-date machinery by its regional policies? Another interesting point—because it is native, home-grown development that people in Wales and Scotland want; firms which put down roots—is that the panel goes on to say: A new firm commencing production in a development area is likely to have a lower capacity to borrow and a reduced cash flow in the earlier years. The home-grown firms will, during the period of this Administration and under this Bill, become almost a thing of the past. The document goes on to several different kinds of firms, but of each one the best it can say about the Government's policies is that their effect will be of dubious value to the Welsh economy, with which the report is concerned, and the worse it can say is that they will be of absolutely no value. In many ways, the findings coincide with those of the O.E.C.D. report on inflation published in December, a report which asks for more assistance for the regions, as a deflationary measure if nothing else, and a report which the Government have completely ignored.

More than ever before, under any kind of regional development policy, it appears that the regions are depending to a greater extent upon the buoyancy, the affluence and the security of the whole national economy. We can draw no comfort from that, because a Government who have presided over an increase in unemployment to 814,000 can hardly qualify for the title of "Growth Men of the Year"; neither can a Government who acknowledge that we have a liquidity crisis throughout the whole business economy enjoy any confidence in the regions when they produce legislation which will mean less cash available for regional development. The Government's cafeteria economics—the Budget, the hit-or-miss reflationary measures, cuts in corporation tax and income tax—will be a total failure as a method of shaking out industry and bring job security to the regions.

In the main, cuts in corporation tax and S.E.T. will be a little cash bounty that firms expected to pay but will not have to pay. The seed corn will be gobbled up either in the form of rising prices or by being distributed in the form of extra dividends—which I suspect will happen—neither of which will be any good to the regions.

In his opening remarks, the Minister talked about the balance being one of Exchequer loss and corporate gain. Yet again, as another piece of legislation comes before the House, we see an even more insidious reward being paid to the people who financed the Tory assault on power last June. They can simultaneously fulfil their so called promises, to cut taxation and public expenditure, but for the big boys, the firms which make large profits and those who dictate economic movement in our economy, there is an under-the-counter return in the form of tax reductions. This is not only an insidious policy; in economic terms, it is ridiculous. Sooner or later, the Government will have to revert to the policy which we followed before.

7.38 p.m.

Mr. John Biffen (Oswestry)

I suspect that for years the House has entertained, to some degree, the belief that there was a causal relationship between investment subsidy, in one form or another, and the subsequent quantum of investment. There were many who believed that that causal relationship could be refined and perfected. That view was most eloquently expressed—with, perhaps, an engaging air of omniscience—by the hon. Member for Gateshead, West (Mr. Horam), who said that what we wanted was simply more investment and then talked about the modern planning tools which he believed could be directed to the refinement of that investment.

It is a measure of the very substantial nature of the Bill that Clause 1 totally repudiates that thesis. I congratulate my right hon. Friend on the Bill, and will be delighted to support it in the Lobbies.

The hon. Member for Liverpool, Walton (Mr. Heffer), who is always very keen to encourage a certain degree of independence—so much so that he confuses many of his hon. Friends as to whether he is really a trusty or a screw—will not find me rising to his blandishments. There were times in the last Parliament when he and I were happy to share a Lobby, and if I can persuade him to drop his Common Market dogmatism there might even be such times again.

Mr. Stanley Orme (Salford, West)

If the Tory Government introduce a statutory incomes policy we shall be only too glad to join the hon. Gentleman in the Lobby against it.

Mr. Biffen

I do not see why we should not anticipate happier times. If I were to follow that line of argument, however, my speech would be much longer than it is intended to be and would preclude several hon. Members opposite and several of my hon. Friends from speaking.

I want the Minister to be fortified in the knowledge that all academic learning and fashion is no longer on the side of those who argue that investment grants or investment subsidies or investment allowances somehow or other have a material and identifiable contribution to make to the levels of investment, let alone to the quality of that investment. Perhaps the latest contribution from an academic source is to be found of all places coming from the University of Lancaster, which hon. Members may have had the chance of reading in the latest issue of the Moorgate and Wall Street Review.

My main object is to give three simple reasons why I am very happy to be supporting my hon. Friend the Minister in the Lobby tonight. The first may seem a peculiarly odd reason. It is very much a House of Commons reason. One of the premier Committees of the House—the Public Accounts Committee—has twice reported on the abuses to which the whole system of subsidised investment can give rise—once under the system of investment allowances which existed before the 1965 legislation and again more recently on the question of investment grants which were finding their ways overseas. In both instances the difficulties tended to arise from the highly technical way in which the investment subsidies were being paid, and, above all, in the case of the grants the question of foreign recipients was wholly contrary to any intent entertained by the original authors of the legislation.

I think to think that in this Bill the flaws that have been highlighted by one of the premier Committees of the House will be taken care of.

The second reason turns much more upon the matters raised by the hon. Member for Bedwellty (Mr. Kinnock) and concerns the whole question of the reshaping of the pattern of public expenditure and the question of tax reduction. I do not live in quite the happy jingling capitalistic world that the hon. Gentleman portrayed for the Tory Party, in which there are substantial business payoffs. Perhaps I have not yet learned how to pitch my price. The hon. Gentleman does his argument a disservice, because I do not think that the considerations that have prompted these changes can be in any sense explained in terms of pork barrel politics. It goes much wider than that.

I do not want to sound like a sort of Tory Trotskyite, but one of the things that should properly be exercising the attention of the House has been the emergence of a kind of managerial class in industry which has become increasingly unresponsive to pressures, to pressures above all through shareholders or through other public agencies. I am particularly concerned at the development of such a managerial elite enjoying very close and cosy relationships with government and turning to government for a major source of its funds in preference to other more diffuse, possibly more critical and less co-operative agencies.

One of the consequences of what is being proposed—the reductions in taxation and the reductions in the subsidy to investment—will be that British business and British businessmen will be obliged to face far closer scrutiny, perhaps often ungenerous and uncomprehending scrutiny. I am sure that they will believe that civil servants and politicians can often be induced to be much more understanding, and can be flattered into being much more understanding, than possibly the British public can be if they are asked to subscribe for many risky capital ventures.

I believe that that will be beneficial if it curbs to some extent the power of business bureaucracy. I believe that business bureaucracy, allied to governmental bureaucracy, even in a national setting, let alone in the wider setting of a Common Market, should properly exercise the vigilance of all those who believe that the division of power is perhaps one of the necessary attributes for some continued degree of liberty in a contemporary industrial society. I put it in these generalised and, I fear, rather pompous terms but I think it is none the less a point of real substance, because there is no doubt that my hon. Friend will be under belligerent attack from many of the business managerial elements so often portrayed as representing the heartland of Tory interests. It is an indication of the significance of the policy that there is this apparent paradox.

The House should be under no illusions about the real significance of what my hon. Friend is doing in terms of public expenditure and in terms of funds available for tax reduction. As the table in the White Paper "Investment Incentives"—Cmnd. 4516—indicates, there is an availability to the Exchequer for tax reduction of sums rising to £150 million by 1974–75. I suspect that if the table had been projected beyond that period it would have been evident that that figure would have become greater.

The third point concerns the extent to which the Bill might have some impact upon levels of unemployment. The hon. Member for Walton made, as we would expect, a trenchant speech on the issues of unemployment. He said that once the investment grants were removed there was a rapid rise in unemployment. The hon. Gentleman was speaking in respect particularly of Merseyside, although I am sure he would apply that observation to the United Kingdom generally. That implies a causal relationship which it is difficult to demonstrate.

I am unmoved by the proposition that the levels of investment grants have an effect upon levels of unemployment. We may instinctively believe that this is so, or that it is not.

I want to quote one piece of evidence Out of courtesy to the hon. Member for Gateshead, West and other hon. Members from the North-East, it is appropriate to quote someone with working political experience of the North-East, and I want to read a short passage from a speech by Dr. Jeremy Bray, when he was a Member of this House, speaking in the debate on 3rd November, 1969, on investment grants when he said: In many cases the effect of this indiscriminate hand-out, given without any test of the number of jobs created, is actually to reduce employment in the development areas. I.C.I., probably the biggest single recipient, has received £106 million in investment grants in the last three years, of which perhaps £40 millions represents the development area differential. Yet employment in I.C.I., net of acquisitions, has remained steady at around 127,000 for the past four years. In effect I.C.I. has been given £40 million for making no contribution to development area policy."—[OFFICIAL, REPORT, 3rd November, 1969; Vol. 790, c. 721.] Those words constitute a fairly formidable indictment of a policy from which my hon. Friend the Minister of State is very rightly now moving.

I would like to take this one stage further. For a number of years we have followed a policy which has, broadly speaking, in terms of fiscal measures sought to subsidise investment and tax the use of labour. I wonder whether over a long period of time we should not be surprised if this has some effect upon the general levels of employment. I leave it no more than a question mark, but I am not entirely surprised to see emerging what seems to me to be a fundamental change in the pattern of employment in this country. I am delighted that the Government are seeking to reverse the former trend by cutting investment subsidies and reducing the tax on labour, for example, by halving the selective employment tax.

Mr. Dennis Skinner (Bolsover)

I have listened intently to the hon. Gentleman's argument. I wonder whether he will now be prepared to lead a deputation from the Oswestry local authority to the Department of Trade and Industry to ensure that the inclusion of Oswestry as an intermediate area two months ago is cancelled.

Mr. Biffen

I am happy to lead the Oswestry Rural District Council wherever it requests me. I have always found that a prudent and courteous way to behave to the Oswestry R.D.C., and I shall continue to observe that sensible and courteous attitude to the local authority which comprises one-third of my constituency.

The Government deserve very strong encouragement and applause for pursuing such a major change in their policy in respect of investment taxation and their regional policy which is quite independent of what is being planned at Brussels. All the signs are that there will be a move to have a harmonised policy in respect of the tax treatment of investment. The Government are rightly raising a flag of national independence. I welcome it, and it will be one more reason for my support in the Lobby tonight.

7.54 p.m.

Mr. Dick Douglas (Clackmannan and East Stirlingshire)

The hon. Member for Oswestry (Mr. Biffen) referred to what the Public Accounts Committee has done, but he will appreciate that in any form of incentive there are bound to be anomalies. I do not wish to defend the anomalies in the administration of investment grant procedure. They were serious, but fortunately the House managed to plug one or two of the gaps. Even after the switch from investment grants to tax-based incentives there are bound to be anomalies, and there must be a great deal of administrative work to ensure that the asset upon which the tax allowance is claimed is really on the premises concerned. No matter what the system of giving incentives to industry, there will be some form of bureaucracy to administer it.

What we are discussing today is whether the removal of a piece of the regional incentive jigsaw by the Bill is merited. In examining the results of the Government's policies, we must have regard to the fact that the dismantling of the Labour Government's regional economic incentives and of their overall policy has resulted in high regional levels of unemployment. It is no accident that the present level of unemployment in Scotland is 50 per cent. higher than it was in June-July, 1970. The Government can make repetitious excuses about inflationary wage settlements and so on.

I would cross verbal swords with my right hon. Friend the Member for Sunderland, North (Mr. Willey), who said, I hope inadvertently, that little or nothing had been done in the way of regional policies to cure the regional imbalance. I deny this as it affects Scotland. I ask the Government to look very searchingly at what has happened there, particularly over the past 10 years, with the alteration in the whole basis in the structure of the Scottish economy. Hon. Members on both sides should realise that in 1970 we were capable of looking forward to a period of sustained growth in the Scottish economy. We had reduced the imbalance between the level of unemployment in Scotland and the level in the rest of the United Kingdom. We had narrowed the incomes gap, and had reduced the net migration gap. We had improved the infrastructure generally. The character of the assets which are ill-used or unused in Scotland in 1971 is totally different from what it was in 1961. In the main, the mines that were to be run down have been run down. Some of the shipyards, it is sad to say, are no longer the size they were, but the shipyards we have are not lying unused, and generally they are not wasting assets. Many of the assets now unused are capable of being brought into economic performance again if there should be a resurgence in economic activity in the United Kingdom as a whole.

I must accuse the Government of a doctrinaire attitude here. I am sorry to use that verbal shorthand, but the fact is that they have a doctrinaire attitude towards regional policy which is unjustified in the circumstances. I am very mindful of Scotland's problems, but the area of the United Kingdom with the most pressing regional problem is Northern Ireland. What is the Northern Ireland Government doing? On 20th April a Bill was introduced into that Parliament with the following provision in Clause 4: The Ministry may make to any person specified in an order made, subject to affirmative resolution, by the Ministry with the approval of the Ministry of Finance, grants of such amounts and on such terms and conditions … as the Ministry may consider proper, for the purpose of enabling that person to stimulate or assist industrial enterprise, the development of industry or the provision of employment. Here we have a Tory Government—the most Tory of all Tory Governments— using the grants system. I read a Press report of the speech by the Prime Minister of Northern Ireland to the Irish T.U.C. He said that he would not be doctrinaire and would use any device, including public ownership. My hon. Friend the Member for Liverpool, Walton (Mr. Heifer) and I may disagree with him on the method of approach, but he said that he was not afraid of public ownership, certainly not on the lines of this Bill, Clause 5 of which says: The assistance which may be given by the Ministry under section 1 of the Act of 1966 to any company incorporated in the United Kingdom may include or consist of the subscription for or acquisition of any shares or stock in that company or that company's holding company. Here again are a Tory Government taking measures not unlike those employed by the last Government under the Industrial Expansion Act and through the Industrial Reorganisation Corporation, which the present Government are wiping out.

In terms of the overall impact of regional policy in Scotland, the North of England, Wales and Northern Ireland, we have to consider the character of the decisions. I want to press the Government about their decision to site the third London airport at Foulness. That decision, it is argued, was taken on social grounds, but parts of the Secretary of State's statement bear more searching analysis, because they indicated further studies of the possible relationship of the airport to a seaport and industrial development in that area.

The whole objective of regional policy, going back prior to the Barlow Report in 1940, was on the basis that the metropolitan area was too overcrowded and that therefore we had to restrict the growth of excessive industrial and commercial development in that area. I do not expect a direct reply tonight, but if private and public money is to be used in such ventures as Foulness, the rest of the country will give its answer at the next General Election. It might be too late then in relation to the development of resources and in terms of planning expediency, but the rest of the country will not tolerate this type of subvention of private enterprise by the Government in this already congested area of the United Kingdom when areas like Scotland are so badly in need.

For example, the Clyde Port Authority cannot, because of the Government's mishandling of the capital market, particularly in relation to the Mersey Docks and Harbours Board, go to the capital market to raise the relatively paltry sum, in this context, of £20 million for the development of port facilities in Scotland. The same applies to other public concerns in Scotland and to Scottish industrialists. We shall watch very searchingly what happens at Foulness, and the test of the Government's design to get the concept of one-nation going will be closely related to their regional policy. That is why we are so concerned when we see the over all dismantling of the last Government's policy and why we are so manifestly opposed to the Bill.

8.5 p.m.

Mr. Ian MacArthur (Perth and East Perthshire)

I am glad to follow the hon. Member for East Stirlingshire (Mr. Douglas), if only to reject at once his proposition that the proposed change fro mas ystem of inducements based on grants to one based on allowances has contributed in any way to the increase in unemployment in Scotland. I believe, as does my hon. Friend the Member for Oswestry (Mr. Biffen), that the nature of the inducement is almost totally irrelevant, and possibly totally irrelevant to the level of unemployment today.

The hon. Gentleman made it clear that he wants us to retain the pattern of inducements introduced by the Labour Government, to return to investment grants rather than have the investment allowances proposed in the Bill. He made the point, fairly, that, no matter what the pattern of grants or allowances, there will be inescapable anomalies. That is bound to be so. He will also agree, whatever his strength of feeling, that there is conflicting evidence about the effectiveness of the two systems as a means of attracting new industry to the development areas. The Select Committee on Scottish Affairs spent a great deal of time studying this question, and its conclusion in its report last year was, in effect, that certain firms preferred grants while other firms preferred a system based on tax allowances.

The attraction of the tax allowance system to me is surely that it benefits firms which operate profitably, and the attraction in that is that we want to see Scotland with profitable industry. We in Scotland have suffered too much in the past from the closure of factories which were operating unprofitably or whose profits represented an unacceptably low return on the capital employed. Surely it is profitable industry that we should encourage most of all because profitability is the best guarantee of employment and profitability provides the new investment for new growth, new development and more jobs in the future.

The hon. Gentleman also invited us to look at the change in the pattern of industry in the last 10 years. He made the important point that the pattern of our industrial assets in Scotland today—and I agree with him—is very different from the pattern of the assets we had 10 years or more ago. I say "or more ago" because the change started before 1961 and it progressed under both Governments. The quality of the assets today is such that they could make an active contribution to prosperity in an atmosphere of growth.

I have referred to the evidence considered by the Select Committee. We have evidence of another kind—performance. I prefer evidence of that kind, which is real evidence, to the theoretical strictures which we have just heard, though I do not want to be discourteous to the hon. Gentleman. But the introduction of the free depreciation tax allowance in the Conservative Budget of 1963 generated enormous interest in the development of industry in the development districts, particularly in Scotland. There is no doubt that in Scotland, judging by the figures, the free depreciation system helped to produce growth of employment. The extent of this success was masked. I believe, by the general success of Conservative policies in Scotland at that time. The hon. Gentleman may look surprised, but I remind him that employment in Scotland increased by 30,000 between 1960 and 1964.

I recall the significant figures in the White Paper, "Development and Growth in Scotland, 1963–64", published in September, 1964. It reviewed the progress of the Central Scotland Development Scheme. There was a paragraph which showed that the increase in employment between mid-1963 and mid-1964 in Scotland was proportionately larger than the increase in the rest of Great Britain. At that time, anyway, Scotland was in the lead. I do not believe that the significance of that advance has ever been fully realised. It is clear that the benefits of the free depreciation system must have made at least some contribution to that progress.

Mr. Douglas

I do not want to be in the least doctrinaire, and if we cannot determine the value of one system as against another, why does the hon. Gentleman not persuade his Government to let the two systems run in harness, to allow firms to opt for cash grants or tax-based incentives for, say, three or four years? The effectiveness of the systems could then be proved.

Mr. MacArthur

I prefer a single clear-cut system, which is far less confusing, and I prefer this system because of the evidence that we have of its performance and because of the contrary evidence that we have about the system which operated under the former Government. When the hon. Gentleman's right hon. Friends were in power, they scrapped the free depreciation allowance and introduced investment grants. I suppose it is fair to say that the new system introduced by them was never really tested.

This was because industrial advance in Scotland, as everywhere else, depends on growth in the total economy, and economic growth virtually vanished under the damp and clammy hand of the last Government. Whether or not the scheme was properly tested, it did not continue the growth of employment in Scotland which had previously been experienced. A decline swiftly set in. In my constituency we were previously outside the development districts, but we became part of the new Scottish development area with the apparent attraction of the investment grant system. Employment in Perth had been declining over the previous years, but despite the heady claims made by Labour spokesmen at the time, despite this new development area status and the apparent attractions of the grant, the decline continued. Indeed, it accelerated. The fact is that twice as many jobs were lost twice as fast.

The clearest evidence lies in the White Paper published by the Labour Government in January, 1966, the notorious White Paper called, "The Scottish Economy 1965–1970. A Plan for Expansion." This forecast an increase of between 50,000 and 60,000 jobs in Scotland by 1970—[Interruption.] The hon. Member for East Stirlingshire, instead of making those noises, would be better advised to get up and make a public apology for his right hon. Friends. There was not an increase in jobs but a decrease. We lost 82,000 jobs in Scotland over that period.

The plan was a total failure, and the bequest which the Labour Government made to us was of 82,000 lost jobs in Scotland, high and rising unemployment, a stagnant economy and an intolerable burden of taxation. It is interesting to note that to reach that target of a net increase of between 50,000 and 60,000 extra jobs it was necessary in the Government forecast to produce 20,000 extra jobs in construction and 60,000 extra jobs in the service industries. That was in January, 1966, and that was what the then Secretary of State for Scotland said.

Three months later, with the Election safely out of the way, the selective employment tax was introduced, placing a heavy burden on the very industries which the Government were pledged to encourage in Scotland. This tax was a very grave imposition on Scotland, particularly in areas such as the Highlands where employment had been primarily in the service industries. Far more money has been sucked out of the Highlands of Scotland by S.E.T. than has been injected into the Highlands by the splendid work of the Highlands and Islands Development Board.

This tax held back the development of the service and construction industries which had been growth points in the Scottish economy and which are generators of industrial development, as the White Paper recognised. I welcome the halving of S.E.T. and its projected abolition in two years' time, because this is of particular help to the Scottish economy. I emphasise S.E.T. because I do not believe that the Bill can be seen in isolation. Of itself the Bill will not create new employment. It must be seen as one in a series of measures; it must be seen in the context of the reduction in taxation and the future abolition of S.E.T., the 5 per cent. cut in corporation tax, and the new spirit of confidence in industry and commerce.

These are among the many factors generating new growth without which there will be little development in Scotland or anywhere else. The Bill must also be seen against the background of unemployment in Scotland, which is intolerably high, and the wage-cost inflation, which has increased the already rising unemployment.

I mentioned the return of confidence in industry. Confidence begets investment and growth, and it is growth of the total economy of the United Kingdom that will produce new jobs in Scotland and bring our heavy unemployment down. But confidence requires the spur of certainty that wage-cost inflation will be brought under control. That battle is well advanced but not yet won.

I welcome the Bill, not by itself, but as one of a series of measures which will produce confidence in Scotland. I welcome it because it is geared to profitability, and we need profitable industry in Scotland to generate new growth. I welcome it, too, because it does not discriminate, as did the grant system, against the service industries, which were and will be a growth point in the Scottish economy.

8.17 p.m.

Mr. Arthur Blenkinsop (South Shields)

I will not follow the hon. Member for Perth and East Perthshire (Mr. MacArthur) in discussing the Scottish position because I would not be qualified to do so, near as my constituency is to Scotland, but I find it extraordinary to hear him discussing what he describes as the new-found industrial confidence in the future when all our experience, in Scotland and elsewhere, is that there is a general run-down of employment, a closing-down of factories, with further redundancies, which can only mean that there are extreme doubts on the part of business men over the future after the Budget.

I found the contrasting views from the other side of the House most interesting. They appear to be mutually exclusive, in that one set of hon. Members declared that they support the Bill because they see it as a stage in the general policy of the Government to disengage from interference, or intervention, in industry generally, while many other hon. Members opposite have said that they see the Bill as being a more practical method than the previous grant system of assisting industry in development areas and elsewhere. They cannot have it both ways. I suspect that those who see this as one example of the Government's major change of policy are right, alas. I see it as only one measure among many. I see it as part of the Government's tearing down of positive efforts of construction—for example, the destruction of the Industrial Reorganisation Corporation, of the Prices and Incomes Board and of the Land Commission.

Mr. MacArthur

Hear, hear.

Mr. Blenkinsop

These were destructive measures. Few, if any constructive alternatives were offered. Yet every one of the Labour Government's proposals, as more and more independent commentators are recognising, requires some alternative to be put in its place, if not its reintroduction, because all of them were constructive efforts to put some kind of basic development opportunities before industry. The Bill, apart from one Clause which we accept, is just another of many of the destructive measures of the Government.

I wish to deal with the argument put by some hon. Members opposite that the Bill represents a more practical method of assistance. Let us assume that that was the Government's intention in introducing the Bill. What I find impossible to understand is why the House has not been brought into the confidence of the Government and presented with the facts and figures and information which would help us to make our own individual judgments. I gather from the Minister's reply to my intervention in his speech that he would consider the possibility of going further than merely giving information by way of answer to a Written Question and see whether it was possible for the House to have a fairly full account of the studies which we know were carried out into assistance by way of investment grant and the other forms of assistance in development areas. I am unable to accept that it was not possible to make that information available before the Bill was introduced.

Why should the Government introduce their proposals, and, indeed, announce their rejection of the investment grant procedure, before letting the House have the information which emanated from the studies initiated by my right hon. Friends? This was not a new matter. It was discussed many times in the House, and my right hon. Friends in the previous Government initiated a series of inquiries to establish the facts. But we have never had a full report of those inquiries, and I should like to know why.

If it is said that the Bill has been introduced because it proposes a more efficient way of making aid available in the development areas, why cannot we be trusted with the full information which resulted from the studies? It is intolerable that the Government, which when they came to office took pride in saying that they would be open in their dealings with the House and the country, should on so many occasions hide what we might reasonably regard as important information.

I am not one of those who say automatically that the possibility of review of the investment grant procedure should be ruled out. It is perfectly fair to say that that procedure and others which we introduced require full investigation. I certainly would not wish Government money to be wasted and not to be as effective as we want it to be. Many of us—and not only Dr. Bray, who, alas, left us as a result of the last election—had criticisms to make of the effectiveness of some forms of regional support which the Labour Government introduced. Of course an investigation should be carried out, but the results of it should be presented to the House and we should have the opportunity of discussing them fully. The views of hon. Members with experience in the areas should be taken, and then the Government should come to a decision but in the meantime maintain the investment grant procedures.

Mr. James Hamilton (Bothwell)

Dr. Jeremy Bray has been mentioned many times on both sides of the House. Would my hon. Friend agree that in some cases, when an investment grant is made for a new machine, a new machine is absolutely necessary because of the obsolescence of existing machinery? A better performance is achieved with a new machine and there is more possibility of maintaining jobs in the factory, whereas if the old machine is retained loss of jobs is possible because of loss of orders.

Mr. Blenkinsop

Yes. I did not agree with many of Dr. Jeremy Bray's criticisms. I had doubts about some of the examples he quoted of funds being made available to, for example, the chemical industry and elsewhere which he thought included an element of waste. We cannot merely ask what new jobs have been created. We must try to determine what the situation would have been in the area in question had the grants not been made available and what loss of employment might have resulted if the modernisation resulting from the expediture of very large sums had not been carried out. It might very well have meant that the North-East of England would have lost some very important industrial development, and many people working there now possibly would not be working there.

I take the point made by many hon. Members. I do not assume that the only thing we need to encourage in development areas is labour-intensive industry. Capital-intensive industry is also needed. I do not know the answer to the point raised by one of my hon. Friends who said, "Tell me a labour-intensive industry which is modern and developing". We automatically regard labour-intensive industries as industries which are declining. It may be worth investing considerable national funds to encourage the development of capital-intensive industry in the North-East, Wales, Scotland and elsewhere, around which smaller industries may collect. This is the sort of argument we should be having, based upon tangible material produced from investigation. It is incredible that we should be confronted with this legislation without such evidence.

I have not just started to complain about unemployment; I have been doing so for the past three years. My constituency and the constituencies of some of my hon. Friends have suffered grievously. In the past we have not accepted the answers given by our hon. and right hon. Friends. But when we set the actions taken by the Labour Government against the actions taken by this Government there is no doubt where the advantage lies for the development areas. Then at least we could see the reason for the difficulties we faced. There was the decline in the coal industry and the modernisation of the shipbuilding yards.

Today, the real tragedy is that the problem is universal and occurs in every industry in the area. Pay-offs are announced almost every day of the week in the local Press by firms of all kinds, not just by one or two major industries. Today, one of the few hopeful signs is a revival in the mining industry, which provides the only new opportunities for jobs in my constituency. Shipbuilding is under severe threat, partly Government-induced, because of the new anxiety and uncertainty imposed by the Government on the shipbuilding and ship repairing industries. In my constituency 14 or 15 per cent. of the men are out of work, and this is 50 per cent. worse than a year ago, when there was real hope of the future. Industrialists in the area were saying then that if only the Government could maintain for a reasonable period a clear line of policy they would have more chance of success, but the Government have destroyed our hopes without giving us the information on which to base our judgment.

8.32 p.m.

Mr. Cecil Parkinson (Enfield, West)

I came to the House this afternoon looking forward to hearing Herr Willy Brandt and to doing some constituency work. I learned the hard way the lesson which all new Members of Parliament have to learn. I returned the smile of one of the Whips—which will not happen again—and that is why I have spent three hours listening to this interesting debate and doing something which was not part of my plan. The smile on the face of the tiger has become real to me.

I must declare an interest. I act as financial adviser to several groups of building companies and I have, therefore, a particular interest in the building industry. I listened with interest to the hon. Member for Liverpool, Walton (Mr. Heffer). He gave a moving and persuasive account of his feelings about unemployment in the building industry. His speech symbolised the speeches and attitudes of many of his colleagues in the debate today. The Labour Government, in their six years of office, did more to damage the prospects of the building industry than any Government in our history. Nobody knows that better than he does. His attitude to the building industry was schizophrenic. The building industry was not regarded as a manufacturing industry and had to bear the whole burden of S.E.T.

Mr. Heffer

Let us put the record straight. I personally opposed S.E.T. as it applied to the building industry from the day it was introduced.

Mr. Parkinson

I thank the hon. Gentleman for that information, but it does not affect the point I was making. I am talking about the hon. Gentleman's Government, not about the hon. Gentleman in particular.

We have also heard a lot about investment grants. The building industry was not regarded as an industry important enough to qualify for investment grant. It was only at a later stage that it qualified for grant. It was regarded on Government instructions as an industry which must be classed as among the lowest possible priority borrowers. Bank manager after bank manager has informed me that the building industry was at the bottom of the list of priorities. It can be no surprise to anybody that, during the period of office of the Labour Government, some 7,000 building companies went out of business and left the industry in a highly damaged state.

If the hon. Gentleman reads his newspapers today, he will see in the Financial Times and Daily Telegraph headlines such as Prospects for the building industry better than for some years. The Chairman of the London Brick Company said in a recent statement: During 1970 there was a further reduction of 7 per cent. in the commencement of new houses, bringing the fall over a three-year period to nearly a third. It is no good hon. Members opposite pretending that the building industry's problems and the problems of other industries began on 19th June since the chairman of that large company said that the decline began some three years earlier. Nor is it any good hon. Members opposite trying to relate that decline to the cut in investment grants. It was a minor part of the total investment incentive programme. It did not make or break the building industry and did not cause unemployment, about which the hon. Member for Liverpool, Walton feels so strongly and speaks so movingly.

I think it was Aristotle who said that a prerequisite to the enjoyment of drama was a willing suspension of disbelief. Such a suspension is certainly a prerequisite of enjoyment of speeches by hon. Members opposite because, as one listens to them, time and again one gets the impression that all our problems started on 19th June. They talk as though the fall in investment, and indeed the lack of any increase in the amount of investment, is to be laid at our door and at the door of the Bill which we are today discussing.

We have heard hon. Members from various regions of the country talking about a decline in the amount of employment and a fall in investment, but anybody who has had anything to do with business will remember the sort of situation that faced the average business when we came to power and took over the situation. Businesses in general had faced a major squeeze of cash; bank finance was not available in the quantities needed and this was being done as a matter of Government policy. They had experienced interest rates at levels that made it uneconomic to raise money to finance projects.

When we came to power the profits in industry were declining in ratio, and we all know the figures of the fall. The amount of profit available for investment was falling. Business also faced severe increases in taxes and a brake upon cash resources which are the source of investment funds. We faced a capital market shot to pieces. It was certainly no joke a year or two years ago for a small company trying to raise money in the capital market. Companies were experiencing a bad squeeze and had available to them no approach to the market. They had the prospect of falling profits and high taxes. This was nothing to do with whether there were investment grants or investment allowances.

It is no good the hon. Member for Chesterfield (Mr. Varley) saying that future investment entirely depends on assessments for the future and that people will not invest unless the future is bright. This is one element in the overall situa- tion, but the other is the availability of cash. One can raise money only on the basis of past performance. A firm can go to the market and say, "This is what we have done, and this is what we plan to do—will you advance funds?". If a company has a bad record or a shortage of cash, its opportunities for raising finance are very much reduced. These are the real reasons why investment is falling and unemployment is rising, and nothing that has happened since June has affected the situation.

In our daily newspapers, we read of chairman after chairman saying that the prospects are better. They are better than they have been for some years, and the future looks rosier. I hope that that is as good news to the hon. Member for Walton as it is to me, because I am one of those Conservatives—and there are more than 300 of us in this House—who get no pleasure from the increase in unemployment. However, we do no service by pinning the blame on the wrong cause and hiding the facts from the people.

This Bill will not be the cause or the cure of our bad investment record. It will not result in a fall or an increase in unemployment over the next few months. However, it is a correct and sensible Measure which has my support, and I hope that the House will permit me to say why.

The hon. Member for East Stirling-shire (Mr. Douglas) said that there would be no administrative saving since the Inland Revenue would require extra staff. I am a practising accountant. My firm produces tax computations and capital allowance computations. Merely adding another list to capital allowance computations will require no additional effort. The production of an investment grant claim involves a tremendous amount of work, and it must all be checked. I know how much less work there was in the days when we made investment allowance computations and capital allowance computations. It is no good saying that there will not be a reduction in work. There will be a very substantial reduction. Any hon. Member who does not believe me is welcome to talk to my partners about how much less work this Measure will involve for my firm. We have mixed feelings about it, because we make a living by charging our clients for the amount of work that we do. But there will be less work for us and for the Department. On this occasion, the hon. Member for East Stirlingshire is not correct in his assertion.

An interesting feature of investment grants is that very few facts are known about them. There is massive scope for speculation, and they represent a wonderful opportunity for a prolonged debate in which no one will be able to prove anyone else right or wrong. But one fact is known. It is that, in the year to 31st March, 1970, the Government paid out £568.8 million and that a thousand people were employed in the administration of that expenditure. Any of us facing any form of expenditure would want tangible evidence that we were getting value for money. In the same way, when the Government are spending £570 million of taxpayers' money, one would expect them to make sure that they were producing a worth-while result. One would expect them to want some assurance that the expenditure was effective.

One looks round to see whether anyone appreciates these payments and says anything on their behalf, or to the contrary. The Report of the Public Accounts Committee in the last Parliament was quite clear on the subject. It said that much of the expenditure was made in respect of investments which would have been made in any case. There was no worthwhile evidence to the contrary. Certainly the Public Accounts Committee could find none. Its finding was that, on the whole, much of the investment would have taken place in any case, so that the expenditure did not generate very much.

Despite having more investment incentives than any other major Western European country, we lag behind. There is no evidence of a spectacular upsurge in investment because of the grant. Over the four years since the grant was introduced compared with the four years before, in real terms there was no increase in investment. We know that £570 million was spent. That is still the only thing that we know. We also know that there was no increase in investment as a result of that expenditure.

Do we aknow that that expenditure went to hands which used it well? Do we know that it generated anything? No, because the grant is totally indiscriminate. To qualify for the grant one has only to submit invoices which prove that the expenditure has been incurred. The Government then send a cheque, and that is the end of their interest in the matter. So there is no way of knowing whether that £570 million found its way into hands capable of using it. It just disappeared into the pot, and nobody can prove whether it was well or badly spent.

No Government should dispense £570 million on the basis of such a set of surmises, hopes and ambitions without access to evidence that what they are doing is producing results. It seems an extraordinary way to run a country's finances. I am sure that none of us would apply the same criteria to his finances or to the finances of any business in which he was involved. If he did, it would be a rapid way to bankruptcy.

We have had preliminary results from the survey on the effectiveness of business investment. The preliminary finding was extremely interesting. It showed that 60 per cent. of the investors, who account for 60 per cent. of the investment, prefer the free depreciation method. They think that it is better and they welcome it. There is no need to remind hon. Gentlemen opposite that the free depreciation method has been introduced for the development areas. The very method which 60 per cent. of the investors making 60 per cent. of the investment think is preferable is being extended to the development areas.

All that we know in favour of the investment grant system is the claim by, for instance, the hon. Member for Gateshead, West (Mr. Horam) that investment grants are producing more investment. That is a totally unsubstantiated claim. The hon. Gentleman is in no position to substantiate it and I cannot argue about it, because nobody really knows. However, £570 million of the nation's money has been spent and nobody has the faintest idea whether it is doing any good.

I shall not rehearse the reasons for my belief that a return to capital allowances given to businesses which make profits as a relief against tax is a more suitable method. They have been rehearsed time and again from this side of the House, and I find them convincing.

When the new system is introduced we shall be cutting out the indiscriminate hand-out of £570 million, we shall be ending discrimination against the service industries which are producers of tremendous invisible earnings, and we shall still leave British industry with more investment incentives than any other industry in Western Europe. British industry will have no excuse, nor will it look for one, because our measures have, in the main, been very enthusiastically welcomed by industry.

Earlier, we had a quotation from Campbell Adamson. In one long passage, with which I shall not bore the House, he wholeheartedly welcomes our measures. This is a sensible Bill which will cut out waste and encourage worth-while investment. I wholeheartedly support it.

8.50 p.m.

Mr. James Hamilton (Bothwell)

I do not propose to follow the hon. Member for Enfield, West (Mr. Parkinson) in what he said, because I am not an accountant, but my son-in-law is, and he is in good company this evening because he is very much in favour of investment grants, as is every speaker from this side of the House.

Many hon. Gentlemen on the Government benches have shown that they are concerned about the Government's policy, and I remind them that the C.B.I. at least in Scotland, is very much in favour of the previous Government's investment policy, as was the Chamber of Commerce in Glasgow, the British T.U.C., the Scottish T.U.C., and the present Secretary of State for Scotland. My hon. Friend the Member for Chesterfield (Mr. Varley) reminded the House that when the Secretary of State for Scotland was a member of the Opposition he said that he and his party were in favour of increasing investment grants, and not demolishing them or departing from them. I think it is only fair to mention that.

I am prepared to recognise that the Government are not callous enough to allow the unemployment figure to get to the 1 million mark. We in Scotland know better than most people what unemployment means. In Lanarkshire we have an unemployment figure of 7.3 per cent. That does not take account of the many redundancies which have been announced, but have not yet occurred—I refer to the Rolls-Royce redundancies—and on the basis of that situation we must be concerned about the Government's policies.

When my Government were in office, I put to them points of view expressed to me by various industrialists in my constituency. Leading industrialists in Lanarkshire have said categorically that investment grants were of tremendous assistance to them, not only in maintaining their existing labour force but in giving them the added incentive to employ more people. In my constituency we have Honeywells, the computer manufacturers, General Motors, Ranco, and the Caterpillar Tractor Company. These are all American companies which came to Lanarkshire because of assistance given by the previous Tory Government, which was continued by my Government when they were in office. Among them, these firms employed more than 12,000 people, and I think therefore, that when they put forward a point of view we should examine it very carefully.

Some of these firms have put forward one matter which I think is worthy of recognition and of being analysed. They say quite clearly that companies which have gone to the development areas and are making profits—they make no secret of the fact that they are making profits because, whether we like it or not, companies are in business to make profits—and which in the initial stages received grants from the Government should be relieved of 50 per cent. of the corporation tax, that no further grants should be given to them, and that no depreciation allowance should be given, as suggested in the Bill. They merely suggest that there should be a 50 per cent. reduction in the corporation tax, the rate of which is now, I believe, 42½ per cent. I hope that when the Minister replies to the debate he will deal with this issue, because we are all concerned about the situation.

We are agreed that the Clause about which we disagree is Clause 1. Little reference has been made to Clause 2. I propose to refer to it, because I have written to the Minister and sent him a copy of a letter that I received from one of my constituents. He is an industrialist who has been giving steady employment. He decided that, so as to stop goods coming from the South, from areas which are not development areas, and from some continental countries, he and one or two others should start a new company.

At the Department of Trade and Industry, the civil servants told him that he was not entitled to the grants, because he was the managing director of the company which I mentioned in my correspondence. They said that if he was prepared to move South he could get all the grants, and that if he moved 30 miles to Irvine in Ayrshire he would also get all the grants.

This is ludicrous. He is being asked to move 30 miles from a special development area with unemployment at 7.5 per cent. to another special development area. Paradoxically, if a company 30 miles away moved to my area it would get all the grants. I was amazed at this episode because my constituency cannot afford to lose 24 jobs.

The Government must take into account expert advice on investment grants. Everyone involved in industry is entitled to be considered, including the unions. They are not only fighting for wages and conditions; at the moment they are fighting for their very existence and are trying to assure their members of the fundamental right to work and the right to leisure.

Some hon. Members opposite have been reckless enough to say that the £570 million has been squandered. Sometimes the civil servants are attacked because they are not doing what they have been asked to do. But they go through an application with a fine-tooth comb and, in the interests of the taxpayer and the Government, find out to the best of their ability whether a company is an asset. I would not decry the civil servants. Our criticism has been levelled against the Government. We are the legislators, and the administrators only carry out the legislation.

I ask the Government at this late stage, in the interests of the special development areas particularly, to do something sensational to inspire confidence; otherwise, the 1963 Scottish unemployment total of 136,000 will be surpassed. Even hon. Gentlemen opposite must regard that as an unenviable record. I therefore ask the Government to give serious thought not only to my point of view but to the view of the Secretary of State for Scotland, who, I know, is very much in favour of increasing, rather than abolishing, investment grants.

9.0 p.m.

Mr. Michael Foot (Ebbw Vale)

In some respects this debate has taken a different course from the one I had originally expected. In view of the arguments which have arisen in most of the other debates on regional policy since the Tories came to power, I had expected that there would be a renewal of the discussion of whether the system of investment grants or the system of taxation allowances provided the same amount of assistance for the regions generally.

After all, that has been the claim—or should I say counter-claim?—which has figured most prominently in previous debates, though very little has been said about it today. It is significant that few hon. Gentlemen opposite, including the Minister, sought to sustain the case which the Government have made in the past in this respect. Instead, they relied more on theoretical arguments.

Indeed, the hon. Member for Enfield, West (Mr. Parkinson) underlined that it was impossible for hon. Members on either side to prove their case, because the whole thing was hypothetical. In that case, an extraordinary light is cast on what the Government have claimed for this change on previous occasions, but I will come to that later.

Perhaps one reason why this debate has taken a different course is because of the Minister's speech. One of my hon. Friends said that he had struck a note of complacency. That was a moderate expression, because when the hon. Gentleman talked of a resurgence of confidence in our future industrial prospects, far from merely striking a note of complacency he was treating us to a positive symphony of smugness.

We appreciate that the Minister is in some difficulty. The Bournemouth backwoodsmen have forsaken the forest and are rampaging all over the countryside. One is bound to wonder, therefore, whether the anthem of complacency to which we were treated was the hon. Gentleman's swan-song. I certainly do not propose to come to his rescue, and I am sure I shall have the support of my hon. Friends in saying that.

Perhaps that was one reason why this debate had taken that course. Instead of our discussing the complicated figures which have been given in these debates, one hon. Member after another, from both sides, has been quoting specific practical examples. It is of some interest that every industry mentioned by hon. Members, including hon. Gentlemen opposite, has resulted in a plea for the continuance of investment grants.

The hon. Member for Enfield, West said that we could not judge these matters because of the hypothetical nature of the figures. He should have been here to hear the rest of the debate, instead of being bullied by his Whips to come in late in the day. His hon. Friends with practical experience have pleaded on behalf of the mining industry, shipping and one industry after another in favour of investment grants. Indeed, all hon. Members who have spoken in practical terms have said that investment grants should continue, while those who have spoken in highly theoretical terms have said that there might be a case for tax allowances.

Let me seek to fortify that claim with some particular examples. First, an example from my own constituency, about which I have had correspondence with the hon. Gentleman. We have had references to many of the major industries, but it is quite right that somebody should speak on behalf of the small businessman. Since no one on the Government side has done so, we on this side undertake the responsibility. I received a letter from the director of a small mining firm in my constituency—I sent the letter to the hon. Gentleman—and I now read it. We have been engaged in mining works at our Tredegar Colliery, basing all our plans and calculations upon the Investment Grants in the Industrial Development Act of 1966 and we will experience considerable difficulty, to put it mildly, and may have to reduce staff, due to the present Government changing horses in mid stream. We are engaged upon mining coal, with particular emphasis upon Coking Coal which we supply to the British Steel Corporation and because of the Investment Grants for mining works have been able to increase our employees from six to 25 and are bent upon seeking out and opening up further seams of coal. All our employees are experienced mine workers who have been thrown out of work by the closure of N.C.B. mines, and should we be forced to reduce staff, or even close down, these men will go back to the unemployed list. Whilst we realise that the new Government are unlikely to continue Labour's policy, we feel that it is extremely unfair to completely change the Law during the course of an existing project and we would therefore ask for your guidance and support in attempting to get permission to continue with the Investment Grant system, in our case, until the completion of this particular project. So, without much hope, I wrote to obtain the guidance of the lion. Gentleman, and he replied as follows: Inevitably our decision may result in some firms receiving less in investment grants than they had expected when deciding to launch their programmes. I see great difficulty, however, in extending the transitional arrangements. To do so would prolong the transitional period and increase the cost to public funds of a scheme which has not in general given good value for money. The hon. Gentleman then goes on with the general argument, to which my businessman friend in Tredegar said—and in Tredegar we put these matters very moderately, as the hon. Gentleman is well aware— Sir John Eden would appear to miss the point entirely in that we are not asking for feather-bedding but that up to the present time we can see no way in which a company can make a profit by digging a hole, and until we do make a profit from 'our' hole the Tory tax allowance doesn't help us one jot. Tens of thousands of small businessmen are affected by a similar situation. But if the Government are not prepared to be interested in what is said by small businessmen, let us look at what some of the big ones have to say.

The top financial expert of Rio Tinto Zinc, Mr. Alun Davies, in a recent article in the magazine "Mining and Metallurgy" says: There has in recent years been a large-scale revival of interest in mineral exploration in the United Kingdom". Perhaps I may say in parenthesis here that one of the subjects that a previous Member for Ebbw Vale, Aneurin Beva, was interested in years ago was that there should be a proper geological survey of the country so that we could make the best use of its resources. And this is the opinion of an expert engaged in the business of mineral exploration: There can be no doubt that there are three main reasons for this. Changes were promised to the tax system to make it attractive to the landowner to exploit a mineral royalty. This was carried out under a previous Labour Government. The precarious tenure of mineral companies was to be strengthened; and, perhaps most important of all, the investment grant system applied to mines, with its high-risk capital-intensive and long lead-time characteristics, the mining industry was particularly well served by the investment grant system, which supplied a stimulus to investment that is totally absent from the new tax-related allowances which are to replace it. The hon. Member for Middlesbrough, West (Mr. Sutcliffe) supported the same case in that industry. There is no doubt about what happens in that industry.

I do not know what consultations the Minister and his friends had with the British Steel Corporation before deciding to abolish the investment grants, but the decision should not have been taken without an understanding of what the consequences would be for the Corporation. It is not easy to work out the exact figures, but it is probable that the Corporation will lose about £100 million a year because of the withdrawal of investment grants and very little of that amount will be recouped in the tax allowances. That £100 million a year was to form a very considerable part of the total amount which the steel industry required to carry out the whole of its development programme. It was reckoned that over the next 10 years more than £1,000 million would be used by the Corporation to assist it in its investment programme.

Therefore, perhaps the major single consequence of the abolition of investment grants was the striking of a savage and immediate blow at the Corporation's finances.

It is no good businessmen opposite like the hon. Member for Enfield, West and others telling us that these are such hypothetical matters that nobody can work out exactly what they mean. They can be worked out. They have been worked out in the case of the steel industry. What the steel industry has is a programme, different sections of which are still awaiting Government approval, of £3,000 million to £4,000 million over the next 10 years. The Corporation had a right to calculate that part of that huge amount would be financed by in- vestment grants, but a considerable part was to be financed from its own resources. The whole of that calculation has been knocked sideways by this action by the Government. The Corporation's cash flow position has been damaged over the last three or four months in a most grievous fashion. More serious still, the industry's whole investment programme is affected by this action.

Mr. Norman Tebbit (Epping)

My understanding of what my hon. Friend the Member for Enfield, West (Mr. Parkinson) said was, not that a calculation could not be made of how much a company had spent or how much it had received in investment grants, but that it could not be calculated in a sensible manner whether it would have chosen to make investments on that scale or some other scale. That is not what the hon. Member for Ebbw Vale (Mr. Michael Foot) is attributing to my hon. Friend.

Mr. Foot

I am not trying to misinterpret the hon. Member for Enfield, West. If he were here to speak for himself I do not think that he would accuse me of having done so. He made it part of his case that it was impossible for one side or the other to prove its case for investment grants or tax allowances, because both calculations were so largely hypothetical. I say, and I do not think that this can be refuted, that in the case of the steel industry the exact figure is not easy to calculate but that it is about £100 million a year; the Corporation says that it is about £100 million a year, and no doubt the Minister will give us his estimate of what damage the Government have done to the Corporation by this Measure.

We should be glad if the Minister would deal with that question first, particularly as in another place recently he was responsible for boasting that he and his Government were assisting the steel industry. The assistance they gave to the steel industry to which the hon. Gentleman referred was that the Government had graciously agreed that the plans for Llanwern should go ahead, and the hon. Gentleman accused me of being churlish in not welcoming that announcement. I had to point out to the hon. Gentleman that that approval had been given by the Labour Government 12 months previously.

In the case of the steel industry the Secretary of State for Trade and Industry has held up a large part of the investment programme, although apparently nobody has told the Prime Minister exactly what is happening. This is not an original state of affairs. It happens in the case of the steel industry as with other enterprises. What has happened in the case of the steel industry and its investment is that the Secretary of State for Trade and Industry, having held up the whole investment programme of the industry, now claims credit for having released parts of it. This reminds me of the story in Victor Hugo's book, "Ninety-three-", of the sailor who let loose a battering ram against his ship which almost shipwrecked it and then at the last moment, by a feat of agility, managed to stop the damage being so considerable. What happened to the sailor in the story I recommend as what might happen to the Secretary of State. The sailor was first decorated and then shot.

Let me come to a further practical proof that anyone who has studied the matter prefers the investment grants. There have been many references to what is happening in Northern Ireland. The Government there prefer to go ahead with the investment grants. It is no good the hon. Gentleman saying, as he did in answer to questions, that it is a matter for the Northern Ireland Government, and that we cannot go into it. There is a logical argument which he must acknowledge. Will the Minister who replies to the debate tell us why he thinks the Northern Ireland Government are as foolish as some of his hon. Friends have been saying? The hon. Member for Enfield, West said that it is absurd and outrageous to use the investment grants system, and that no sensible businessman would prefer it. Yet at this very moment the Industries Development (Northern Ireland) Bill is passing through the Stormont Parliament. What does the Minister say about that? Does he think they are fools to make this choice?

The fact is that Northern Ireland is the only part of the United Kingdom where Tories represent a development area, and where they happen to know the facts they prefer to choose investment grants. I hope that the hon. Member for Belfast, South (Mr. Pounder), who is standing so diffidently in a part of the House to which I think I am not entitled to refer, will return to his place. He is the only Member for a Northern Ireland constituency who has dared to show his face in this debate.

Mr. Deputy Speaker (Sir Robert Grant-Ferris)

Order. I think that I am right in saying that this Bill does not apply to Northern Ireland.

Mr. Foot

I am most grateful to you, Mr. Deputy Speaker, for underlining my point so perfectly. That was one of your most powerful interventions, if I may put it that way. I greatly look forward to hearing you on a future occasion, because you have emphasised the fact that where the unemployment is highest in this country even this Government have not dared to put through measures withdrawing investment grants.

The matter is more serious than that, even. It raises serious constitutional questions. I do not know which way the Northern Ireland Members will vote. Maybe the hon. Member for Belfast, South has been attending the debate as a kind of non-voting Parliamentary Private Secretary. I hope that neither he nor any other hon. Member for a Northern Ireland constituency will dare vote for the Bill, because in Northern Ireland they vote for investment grants. Are they to come to Westminster and vote against our having the same kind of assistance as they vote for there? We will not stand that from these saboteurs from Stormont, these people who come here with their I.R.A. political tactics, trying to upset our way of presenting our case. It would be a most disreputable state of affairs if the Bill were carried through the House of Commons with the cynical votes of those from Northern Ireland, who are the only Tories who really know how the investment grant systems work.

I come to the other major aspect of the debate which has been curiously overlooked in our previous arguments—the claim that tax allowances can assist the regions as well as investment grants or that the money provided for the regions will be just as great.

I do not know what claim the Government are going to make on this occasion. I am not sure which horn of the dilemma they would prefer. They can take their choice. If they say they do believe that the allowances and the support for the regions provided by their policy will be just as effective in amount as is provided now, then they will find themselves awkwardly placed by the fact that every Treasury Minister has said that it is impossible to calculate what the assistance will be. On the other hand, if the Under-Secretary of State chooses the other horn—I am giving him every assistance in dealing with the matter—and says that it is impossible, a matter of guesswork, that no one knows how the assistance will be taken up and that no one can calculate whether the regions will get as much assistance as under the Labour Government, he will make a monkey of the Prime Minister. The hon. Gentleman may say that that is probably the easier choice because that was what was done by the Financial Secretary to the Treasury.

The name of the Financial Secretary is attached to the Bill, but he has not dared to show his face here all day. I am not surprised. He had an argument with my right hon. Friend the Member for Birkenhead (Mr. Dell) on this matter and retired completely from the debate. Hon. Members can look up the exchange in HANSARD of 22nd February. I shall not read the whole column but it is all there. The Financial Secretary told my right hon. Friend: one cannot state this because it depends entirely on the nature of the take-up". I could read out whole lists of quotations from letters which have been sent to my hon. Friends by the Department saying that it is impossible to calculate what assistance will go to the regions under the tax allowance system. That is the state of affairs. On 22nd February my right hon. Friend put a question to which we have not yet had the answer, and that is why I am so indelicate as to put it again. He interrupted the Financial Secretary to say: If one cannot state it, why did the Prime Minister state it on Thursday and why did he repeat it today? In other words, the Prime Minister has continued to repeat the claim that the regions are going to be as well off under this system as under the previous one. The Financial Secretary knew better than the Prime Minister. He replied by sidestepping the whole question very skilfully—indeed, so skilfully and with such agility that I think he should win instant promotion in this clodhopping Administration. He said: I was not hre today and did not hear what my right hon. Friend said"— lucky he— but I was present on Thursday and heard what he said then, and that is what I said to the right hon. Gentleman a moment ago. It is possible to give the relative value of the various incentives which are available to measure the differential in attractiveness between investment in special development areas and the rest of the country."—[OFFICIAL REPORT, 22nd February, 1971; Vol. 812, c. 226–7.] But that is only part of the question. The other part is about how much employment is going to be affected. What is going to happen in those areas depends not only on the relative amount but on the total amount as well, which the Government say they cannot calculate. Yet the Prime Minister says that the regions are not going to be worse off.

We believe that the regions will be worse off under this new policy, partly for the reasons adumbrated by my hon. Friends, with expert knowledge of different industries, and partly for the reasons which have been given by those speaking for shipping, for the mining industry—indeed, for every industry mentioned in the debate.

We also believe it because we do not think, in spite of all their professions, that hon. Gentlemen opposite are really interested in what happens in the old development areas. The Conservative Party has never been very much interested in them. The real reason, as my hon. Friend the Member for Bedwellty (Mr. Kinnock) pointed out in what I think everyone will agree was a remarkable speech, is because this policy fits into the rest of the economic thinking of hon. Gentlemen opposite. We can call it the policy of stand on your own feet, away with the lame ducks, link everything to profitability, no distortion of free market—the "Heath-Powell policy" or the "Heath-Powell-Eden-Biffen policy". It is all one policy.

Mr. James Hill


Mr. Foot

Oh yes. The Prime Minister talks in this way because the Prime Minister thinks that when he reads a statement in the campaign of the Conservative Party it is one of the eternal verities. For the Prime Minister the proof of the pudding is always in the cookery book. If anyone wants to know where the Prime Minister is heading they have only to listen to the right hon. Member for Wolverhampton, South-West (Mr. Powell) who says it in much better English.

The right hon. Member for Wolverhampton, South-West describes exactly where this laissez faire policy will go. He is opposed to all regional policy on the same grounds as he is against lame ducks, the distortion of the market economy, and is in favour of the laissez faire doctrine. One complaint against the right hon. Member for Wolverhampton, South-West—not the only complaint—is that he enunciates this discovery of the laissez faire doctrine as if he had suddenly discovered the secret of perpetual motion; he comes out with it as if it was something new. Let alone this being a cure for the distressed areas, it is the cause of the distressed areas.

For generations laissez faire doctrines were the cause of every major distressed area in the world—whether it was Ireland in the famine, the dust bowls in the United States, or what happened in South Wales or Scotland in the 30s. We are therefore bitterly opposed to this Bill, because we regard it as part of the policy of tolerating mass unemployment, part of the policy of seeing the regions return to the kind of desperate situation that they knew before.

I was struck by the speeches made today, and in a previous debate, by my hon. Friend the Member for Gateshead, West (Mr. Horam) who spoke of how fragile are the advantages that we have in the regions, how easily the regions can be plunged back into the kind of desperation they knew before. It is a very difficult contrivance to get new industries in as older industries decline. It takes every kind of device that can be organised; it needs a Government who have a driving will to achieve it. Anyone who believes that there is such a driving will has only to listen to the speeches of the right hon. Member for Wolverhampton, South-West, or the speech of the Member for Bournemouth, West (Sir J. Eden), or above all to the speech of the Prime Minister himself.

They are dedicated to the idea of laissez faire in economics. They believe that competition is the only way in which these matters can be solved. It was laissez faire economics and competition allowed off the leash in that fashion which drove tens of thousands out of Wales, Scotland and the North-East. It happened before, we are determined that it shall not happen again. Some one once said, speaking in this House: I would speak so loud that it will be heard outside this House. We on these benches are determined to speak loud on this question of unemployment, day after day, week after week, month after month, until the policy is changed. Many of us were not satisfied with the policy followed during the previous six years. Many of us expressed our dissatisfaction with an unemployment total of 600,000. Many of us fought it, and we shall continue to fight it. Reshaped policies will be needed to reduce it.

Right hon. and hon. Members opposite are leading us not to the kind of policy backed by public ownership which some of us call Socialism, which is the way to solve these problems, but to what they gave us in the 1930s, and they had better make up their minds and learn that this country will not stand for it. We shall not stand for it in Wales, Scotland or anywhere else. We shall fight this Bill and all the Government's other measures until we have a Government in power which are determined to ensure that for the first time, on a major scale, the regions have a proper deal.

9.30 p.m.

The Under-Secretary of State for Trade and Industry (Mr. Anthony Grant)

The hon. Member for Ebbw Vale (Mr. Michael Foot) has spoken with a loud voice tonight. I remember his speaking with a voice a few decibels lower when he was sitting on this side of the House. If he spoke about unemployment with such a loud voice then, a fat lot of good it did the people of this country. Nevertheless, it is a great pleasure for me, for the first time, to follow the hon. Gentleman in debate. We all enjoyed his speech. No one enjoyed it more than himself. It was, however, something of a surprise to find him winding up the debate for the Opposition. I expected him to open it. Anyway, it is nice to have another "Shadow" Under-Secretary of State for Trade and Industry.

Many interesting points have been made in the debate, and I will endeavour to answer as many of them as I can. Many of them were entirely predictable, but some were important. May I say to the hon. Member for Bothwell (Mr. James Hamilton) that I was concerned with what he said about the firm on which he has had correspondence with me. We will continue that correspondence, and if the hon. Gentleman is dissatisfied I shall be only too delighted to speak to him. I have noted what he said. I should not like to feel that any of the officials in my Department were doing anything to damage the position of such firms. We shall look at the matter further.

I echo what was said by my hon. Friend the Minister for Industry, and wish to make clear the aims of our policy. We are determined to reverse the processes of low growth, low profit and low job opportunities accompanied by high wage inflation which we have had in the last few years. Our cuts in taxation and reformed incentives are a beginning—only a beginning—and the Bill, placing emphasis on profitable investment, is an important element in our general strategy.

The hon. Member for Chesterfield (Mr. Varley) announced—I did not hear the hon. Member for Ebbw Vale repeat it but I assume that he endorsed it—that the Opposition will vote against the Bill. They, and the country, should be clear what they will be voting against. They will be voting against a change to a system designed to encourage profitable investment, both in the regions and elsewhere, and against an increase in building grants.

The hon. Member for Chesterfield in an interesting speech made several statements about investment grants and taxation which should be corrected. He complained that the accountants find the administration of these matters in industry enormously difficult; but the accountants who have to do this would hardly recognise what he said. The hon. Member for Chesterfield said that grants were good because they were more readily understandable. They were so understandable that the English Institute of Chartered Accountants recommended two different methods of accounting for them. The Scottish Institute recom- mended a third method and the Institute of Cost and Works Accountants published an article about 10 pages long showing the inadequacies of all these methods, and saying how difficult the accounting was.

The hon. Member for Chesterfield said that grants were more certain because their value was not affected by future changes in tax rates and because the Treasury could work out "their absolute true cost". This is absolutely wrong.

Mr. Varley

If I did say that, what I meant to say was that when the grants had been made the true cost was there for all to see. It depends, as many of these measures depend, on the actual take-up of industry. This was never the case with allowances.

Mr. Grant

I am sorry if I misquoted the hon. Gentleman, but that was the impression I had. Grants were deducted from the cost of an asset for the purpose of capital allowances. The rates of grant, the rates of capital allowances and the rates of tax interact, and a change in one affects the net cost of both the others. This is one part of the difficulty which accountants and others have in dealing with the supposedly understandable grants. My hon. Friend the Member for Enfield, West (Mr. Parkinson) in an extremely interesting speech made broadly the same point.

My hon. Friend the Member for Tynemouth (Dame Irene Ward), in an intervention, drew attention to the attitude of the Chamber of Shipping, and my hon. Friend the Member for Dorset, South (Mr. Evelyn King) also referred to this. As my hon. Friend the Minister for Industry said, the Chamber of Shipping does not view the scene with entirely unalloyed pleasure, but it has recognised that the Government have been most helpful to the shipping industry in several respects, notably in the so-called assignment of contracts, which is a complex matter of great importance for it. This help will be given in the main through the provisions of the Finance Bill, which will permit free depreciation to be claimed by a finance company which has assisted a shipping company to finance the purchase of a ship by buying it and then chartering it back to the shipping company. The difficulties arose on the extras which go into a ship. Unfortunately, we have not felt able—

Mr. Douglas

The hon. Gentleman should not continuously refer to the extras. We are talking about a bulk carrier for containers. The containerisation of a ship is not an extra. By drawing a deadline on 27th October the Government are drawing a deadline for a considerable proportion of the capital cost of that asset; so, with great respect, the hon. Gentleman should not talk about extras.

Mr. Grant

All right; if the phrase offends the hon. Gentleman I will use another one. The phrase is well known to apply to things over and above the ship itself which have to be used in a vessel—

Dame Irene Ward

Perhaps my hon. Friend, having listened to that intervention as he was speaking about my intervention, would like to know that the Chamber of Shipping will not be satisfied with what is being done in the Finance Bill, because it wanted an alteration of the system over which, quite wrongly, my Government have "done them in".

Mr. Grant

The answer to my hon. Friend is that what is to happen in the Finance Bill will be of help to the industry. Therefore, I ask her to await those debates, and, if there is any difficulty, no doubt she will pursue the matter there.

Dame Irene Ward

I will.

Mr. Grant

But I repeat that the provisions in the Finance Bill will be of value to the industry, and I believe that the industry understands this.

I want to deal with one point on which the industry is disappointed, and that is about its request that investment grants should be made on ships in regard to extras or containers which have not been contracted for before 27th October, even if the ships for which they were destined have been contracted before that date. To do this would run counter to the whole principle on which Clause 1 is based. All expenditure incurred before 27th October will be considered for grant, but not that after that date.

We should not get the matter of extras out of perspective. Although some un- doubtedly are expensive items in relation to the total cost of the ships, they can hardly be regarded as of major significance. Less than 5 per cent. of total expenditure in connection with ships ordered before 27th October is involved. On this basis, the grant on this expenditure is less than 1 per cent. I mention this matter in order to get the thing into proportion.

Mr. Douglas

What is the total figure?

Mr. Grant

No, I must move on.

Mr. Douglas rose

Mr. Grant

No, I will not give way again. My hon. Friend the Member for High Wycombe (Mr. John Hall) referred to another aspect of difficulty under the Bill, the question of self-built assets. He asked for guidance about how firms which build their own assets will fare under Clause 1. I can tell him that any expenditure which they incur before 27th October will continue to be eligible for investment grant, as also will expenditure on the components which they had contracted to buy before 27th October specifically for a piece of eligible plant, even if they paid for them afterwards. Expenditure after 27th October on general materials labour and overheads—for example, on installation of equipment—will not be regarded as expenditure directly related under a contract to an eligible asset, and we shall not be able to pay investment grant on it. The expenditure will qualify for the new capital allowance under the Finance Bill.

My hon. Friend the Member for Middlesbrough, West (Mr. Sutcliffe), and, indeed, the hon. Member for Ebbw Vale, raised the matter of the mining industry. The only difference between them was that my hon. Friend put the matter quite clearly, whereas the hon. Member for Ebbw Vale treated us to an interesting correspondence with his constituent in Tredegar. However, I got the point and I think I understand what he was getting at.

I appreciate the problems in regard to the mining industry. We understand its difficulties, particularly the high risks involved in searching for and proving mineral deposits, and the long time which may elapse before expenditure on successful exploration can be recovered. We have had extensive talks with the industry and are considering what we can do to help. Those discussions will, of course, continue.

Mr. Michael Foot

Does the hon. Gentleman mean that the propositions he is putting forward to help the mining industry—and presumably also the shipping industry, because a specific undertaking was especially given to the shipping industry in the Conservative manifesto—will be dealt with at Committee stage?

Mr. Grant

It will be possible for anyone in Committee to raise these matters, but so far as the mining industry is concerned I can go no further than to say that discussions are continuing with the industry to see what we can do to help.

I move on to deal with the regions, which are very important, and many of the speeches today have been made by hon. Members who come from development areas. Hon. Members opposite have suggested that the Government have not carried out the thorough review of regional policy which we promised. This is untrue. A review has been carried out.

Mr. Douglas

Where is it?

Mr. Grant

As a result, we have taken a series of new initiatives. The previous Government, in our view, failed to take effective measures to deal with regional disparities. Indeed, they failed to recognise the true nature of the problem. Therefore, as soon as we took office we set in hand a thorough review of the measures to encourage industrial investment and the coverage of areas in which the incentives are deployed. The first priority was to try to get the economy on a healthier footing—

Mr. Gerald Kaufman (Manchester, Ardwick)

A £600 million surplus.

Mr. Grant

I am interested to hear the suggestion that the economy was in a healthy state. However, as I say, our first task was to get the economy on a sound footing, in the interests of the nation and the development areas as a whole. The first results of the review were published in the White Paper in October. They gave greater emphasis to profitable investment and greater employment.

The other major aspect—

Mr. Kaufman rose

Mr. Grant

No, I shall not give way. The House knows that I normally give way and have given way a number of times. But I usually confine myself to hon. Members who have taken the trouble to spend most of the time of the debate in the Chamber.

The other major aspect of the review dealt with the areas in which the regional incentives were available. Our conclusion was that the previous Administration's policy failed to deal with the real problems of older industrial conurbations with high and persistent unemployment which they have had for a number of years. Therefore, in February we announced measures to give these areas special priority by extending to them the special development area status and by substantially increasing the operational grant. Because of the shortage of mobile industry, it was impossible to extend intermediate area status except in a few special cases. But we are confident that the measures that we are introducing will be better tailored to meet both the need throughout the country for profitable investment and the special need in the development areas to provide additional industrial capacity which will lead to the provision of more employment.

As a result of the Government's reappraisal of the needs of various areas, we now have coherent evidence of priority as between special development areas, development areas and intermediate areas, and we have incentives to meet their needs. Hon. Gentlemen opposite do no service to the development of their regions or of their own constituencies by falsely denigrating the very great assistance which has been given.

Mr. Varley

If the hon. Gentleman is making the case that a thorough review has taken place, will he now give an undertaking that a White Paper will be produced so that we may make an evaluation of the review.

Mr. Grant

I shall give no such undertaking. We have published one White Paper already, and the information is readily available to anyone who cares to look at it.

Mr. Blenkinsop rose

Mr. Grant

I can help the hon. Gentleman. I shall be coming to his point about the Manchester review.

A number of hon. Members have referred to Dr. Jeremy Bray. In view of the remarks that have been made about him, his ears must be burning. My hon. Friend the Member for Oswestry (Mr. Biffen) quite rightly referred to the fact that Dr. Bray said in his speech: In many cases, the effect of this indiscriminate handout, given without any test of the number of jobs created, is actually to reduce employment in the development areas. My hon. Friend might have gone further and read another part of that speech in which Dr. Bray said: Industry could have no cause for complaining, given two years' notice of a cut-off in the payment of the investment grant differential at the level of £5,000 per job created on projects costing more than £1 million."—[OFFICIAL REPORT, 3rd November, 1969; Vol. 790, c. 721–3.] By contrast with the previous Government's policy, in this Bill we are providing a switch in emphasis to employment-creating investment. The increased rates of building grant linked to employment will, together with the initial allowance of 40 per cent. on new industrial buildings and the other regional measures, provide a stronger incentive for industry to locate its new investment in the development areas, which will provide new jobs of a lasting nature.

I now turn to the survey to which the hon. Member for South Shields (Mr. Blenkinsop) referred. That survey was set in hand by the right hon. Member for Birkenhead (Mr. Dell), and the results are not yet published. I cannot go beyond what my hon. Friend the Minister for Industry said as to the publication of that document. It is complex and of a somewhat academic nature. Nevertheless, my hon. Friend has indicated what course he proposes to take. The important thing to learn from it is that most of the people who invest in industry—60 per cent. of them—indicated that they preferred allowances to the investment grant system.

The hon. Member for Chesterfield prayed in aid in his case no less a person than Mr. Campbell Adamson of the C.B.I.

Mr. Varley

And Viscount Ridley.

Mr. Grant

Mr. Campbell Adamson, in his position at the C.B.I., is in a better position to assess industry throughout the country than Viscount Ridley. Speaking in his capacity as Director-General of the C.B.I., Mr. Campbell Adamson said: The Government has responded to three of the main requirements the C.B.I. has put to it to help increase investment. There is the cut in Corporation Tax and Income Tax, and the switch from grants to profit related incentives, and the spread of incentives to the service industries.

Mr. Varley rose

Mr. Grant

Perhaps I may finish the quotation. It was well after the White Paper—November, 1970. We have long argued that the main aim of the Government should be to get the economic climate right. The measures the Government have taken are in the right direction.

Mr. Varley

Is the hon. Gentleman saying that the document from which he has just read indicates a speech made by Mr. Campbell Adamson in November, 1970? If so, Mr. Campbell Adamson, on 13th March, 1971, said: Since it has been proved highly dangerous to rely upon the continuance of any particular incentives, businessmen have simply discounted them. This was after that.

Mr. Grant

Yes; but this speech was made after the C.B.I. had studied the White Paper. It is true, as intelligent people admit, that the effects of regional incentives—this comes out in the report which the hon. Member for South Shields wants to see—are marginal in nature. Nevertheless, the report shows, and it is accepted, that a clear majority of investing firms prefer tax allowances to grants. This we have acted upon, and are acting upon in the Bill. But it shows—this is consistent with what the Director-General said—how marginal the effect of the incentive is compared with other factors.

Mr. Michael Foot

On a point of order, Mr. Speaker. I apologise for interrupting the hon. Gentleman at this stage, but he is referring to this document to such an extensive degree that I think you would agree that it ought to be laid before the House.

Mr. Speaker

So far as that sort of point of order is concerned, I shall consider the matter.

Mr. Grant

My purpose, Mr. Speaker, in referring to the document was that the hon. Member for Chesterfield, in opening, prayed in aid the words of the Director-General of the C.B.I. Therefore, I think I am entitled to deal with that point in this way. It is true that the effect of incentives is marginal.

An hon. Member mentioned business confidence in the regions. Consistently, Labour Members have put down Questions about the number of firms which have said that they are reconsidering projects, trying to attach this to the fact that the firms are worried about the investment incentive changes. They have repeatedly tried to represent the information given about the number of firms which have told the Government that they are reconsidering projects as showing the number of projects abandoned because of the change. This distorts the true situation. Sensible firms keep any project under constant review from the moment of a decision. Of course, they will reassess changes in incentive. Of course some may make different plans, but many others will take advantage of the new measures.

Since 27th October 63 firms have told the Government that they are reappraising projects in the development areas, but only seven have said that they are cancelling or postponing projects because, or partly because, of the changes in investment incentives. These figures clearly represent an insignificant proportion of all the projects which industry has in hand.

The hon. Member for Ebbw Vale made a deplorable accusation at the end of his speech. I accept that he gets excited—sometimes so excited that I think he is going to have apoplexy—but in so doing he should not make false accusations that, in some way, this Government are deliberately causing unemployment—

Mr. Kaufman

It is true.

Mr. Grant

This comment of the hon. Member for Ebbw Vale shows particular effrontery. I shall prove this by drawing to the attention of the House exactly what happened when they were in charge.

I would quote the hon. Member for Heywood and Royton (Mr. Barnett), who, as recently as 4th November, 1970, talking about investment grants, said: … one must first look at the economic situation that existed at the time of the cash investment grant. During that period —that was the period when the hon. Member for Ebbw Vale was hammering this Government, or shouting loudly— we were consistently running a deflationary policy …".—[OFFICIAL REPORT 4th November, 1970; Vol. 805, c. 1183.] That is what we have inherited. Our policies are aimed at creating a situation in which we can reverse these inflationary policies, but responsibly.

I am glad that the hon. Member for Ebbw Vale wound up, because he is the successor to and distinguished biographer of the late Aneurin Bevan, and one of the phrases of that gentleman which I like best was, "Why look at the crystal ball when you can read the book?" We can read the book on the effect of investment grants. When the Government took office we inherited a situation of domestic economic crisis of great magnitude. We had economic stagnation after four years of inflation. We had a growth rate which had fallen and which fell a further 1 per cent. in the last year of the Labour Government, and we had a situation in which company liquidity showed a huge deficit of £1,214 million in 1970 and a situation in which unemployment under a Labour Government had more than doubled.

At the same time, the previous Government promoted an unprecedented acceleration of wage and cost inflation, following the break-down of their statutory incomes policy and their retreat in funk from their Industrial Relations Bill. This is what we inherited; which we suffered. But we are determined to rectify it. This Bill is one step in that direction. I hope, and confidently predict, that it will be passed by the House tonight.

Question put, That the Bill be now read a Second time:—

The House divided: Ayes 224, Noes 189.

Division No. 355.] AYES [10.0 p.m.
Alison, Michael (Barkston Ash) Archer, Jeffrey (Louth) Awdry, Daniel
Allason, James (Hemel Hempstead) Astor, John Baker, Kenneth (St. Marylebone)
Adley, Robert Atkins, Humphrey Balniel, Lord
Batsford, Brian Hamilton, Michael (Satisbury) Owen, Idris (Stockport, N.)
Bennett, Sir Frederic (Torquay) Hannam, John (Exeter) Page, Graham (Crosby)
Berry, Hn. Anthony Harrison, Col. Sir Harwood (Eye) Parkinson, Cecil (Enfield, W.)
Biffen, John Haselhurst, Alan Percival, Ian
Biggs-Davison, John Havers, Michael Pounder, Rafton
Boardman, Tom (Leicester, S.W.) Hicks, Robert Powell, Rt. Hn. J. Enoch
Body, Richard Higgins, Terence L, Price, David (Eastleigh)
Boscawen, Robert Hiley, Joseph Prior, Rt. Hn. J. M. L.
Bossom, Sir Clive Hill, John E. B. (Norfolk, S.) Proudfoot, Wilfned
Bowden, Andrew Hill, James (Southampton, Test) Pym, Rt. Hn. Francis
Boyd-Carpenter, Rt. Hn. John Holland, Philip Quennell, Miss J. M.
Bray, Ronald Holt, Miss Mary Redmond, Robert
Brinton, Sir Tatton Hordern, Peter Reed, Laurance (Bolton, E.)
Brocklebank-Fowler, Christopher Hornsby-Smith, Rt.Hn. Dame Patricia Rees, Peter (Dover)
Bruce-Gardyne, J. Howe, Hn. Sir Geoffrey (Reigate) Renton, Rt. Hn. Sir David
Buchanan-Smith, Alick (Angus, N & M) Howell, David (Guildford) Rhys Williams, Sir Brandon
Howell, Ralph (Norfolk, N.) Ridley, Hn. Nicholas
Bullus, Sir Eric Hutchison, Michael Clark Ridsdale, Julian
Butler, Adam (Bosworth) Iremonger, T. L. Roberts, Michael (Cardiff, N.)
Campbell, Rt. Hn.G. (Moray & Nairn) James, David Roberts, Wyn (Conway)
Carlisle, Mark Jenkin, Patrick (Woodford) Rost, Peter
Channon, Paul Jennings, J. C. (Burton) Russell, Sir Ronald
Chapman, Sydney Jessel, Toby Sandys, Rt. Hn. D.
Chataway, Rt. Hn. Christopher Jopling, Michael Scott-Hapkins, James
Churchill, W. S. Kellett, Mrs. Elaine Sharpies, Richard
Clarke, Kenneth (Rushcliffe) Kershaw, Anthony
Clegg, Walter Kilfedder, James Shaw, Michael (Sc'b'gh & Whithy)
Cockeram, Eric Kimball, Marcus Shelton, William (Clapham)
Cooke, Robert King, Evelyn (Dorset, S.) Sinclair, Sir George
Cooper, A. E. King, Tom (Bridgwater) Skeet, T. H. H.
Cormack, Patrick Kinsey, J. R. Smith, Dudley (W'wick & L'mington)
Costain, A. P. Kitson, Timothy Soref, Harold
Crouch, David Knight, Mrs. Jill Speed, Keith
Crowder, F. P. Knox, David Spence, John
Curran, Charles Lane, David Sproat, Iain
d'Avigdor-Goldsmid, Maj.-Gen. James Legge-Bourke, Sir Harry Stainton, Keith
Dean, Paul Le Marchant, Spencer Stanbrook, Ivor
Deedes, Rt. Hn. W. F. Longden, Gilbert Stewart-Smith, D. G. (Belper)
Digby, Simon Wingfield Loveridge, John Stoddart-Scott, Col. Sir M.
Dodds-Parker, Douglas Luce, R. N. Stokes, John
Dykes, Hugh McAdden, Sir Stephen Stuttaford, Dr. Tom
Eden, Sir John MacArthur, Ian Sutcliffe, John
Edwards, Nicholas (Pembroke) McCrindle, R. A. Tapsell, Peter
Elliot, Capt. Walter (Carshalton) McLaren, Martin Taylor, Edward M.(G'gow, Cathcart)
Elliott, R. W. (N'c'tle-upon-Tyne, N.) McMaster, Stanley Taylor, Frank (Moss Side)
Emery, Peter Macmillan, Maurice (Farnham) Taylor, Robert (Croydon, N.W.)
Eyre, Reginald McNair-Wilson, Michael Tebbit, Norman
Fell, Anthony Madel, David Thatcher, Rt. Hn. Mrs. Margaret
Fenner, Mrs. Peggy Maginnis, John E. Thomas, John Stradling (Monmouth)
Finsberg, Geoffrey (Hampstead) Mather, Carol Thomas, Rt. Hn. Peter (Hendon, S.)
Fisher, Nigel (Surbiton) Mawby, Ray Thompson, Sir Richard (Croydon, S.)
Fletcher-Cooke, Charles Maxwetl-Hyslop, R. J. Trafford, Dr. Anthony
Fookes, Miss Janet Meyer, Sir Anthony Trew, Peter
Fortescue, Tim Mills, Stratton (Belfast, N.) Turton, Rt. Hn. R. H.
Foster, Sir John Mrscampbelf, Norman van Straubenzee, W. R.
Fowler, Norman Mitchell, Lt.-Col.C. (Aberdeenshire, W) Vaughan, Dr. Gerard
Fraser,Rt.Hn. Hugh (St'fford & Stone) Mitchell, David (Basingstoke) Waddington, David
Fry, Peter Moate, Roger Walder, David (Clitheroe)
Gibson-Watt, David Molyneaux, James Walker-Smith, Rt. Hn. Sir Derek
Gilmour, Sir John (Fife, E.) Money, Ernie Walters, Dennis
Glyn, Dr. Alan Monks, Mrs. Connie Ward, Dame Irene
Goodhart, Philip Monro, Hector Warren, Kenneth
Goodhew, Victor Montgomery, Fergus Weatherill, Bernard
Gower, Raymond More, Jasper White, Roger (Gravesend)
Grant, Anthony (Harrow, C.) Morgan-Giles, Rear-Adm. Wiggin, Jerry
Gray, Hamish Morrison, Charles (Devizes) Wilkinson, John
Green, Alan Mudel, David Wolrige-Gordon, Patrick
Grieve, Percy Murton, Oscar Woodhouse, Hn. Christopher
Griffiths, Eldon (Bury St. Edmunds) Nabarro, Sir Gerald Worsley, Marcus
Grylls, Michael Noble, Rt. Hn. Michael
Gummer, Selwyn Onslow, Cranley TELLERS FOR THE AYES:
Gurden, Harold Oppenheim, Mrs. Sally Mr. Paul Hawkins and
Hall, Miss Joan (Keighley) Orr, Capt. L. P. S. Mr. Hugh Rossi.
Hall, John (Wycombe) Osborn, John
Albu, Austen Benn, Rt. Hn. Anthony Wedgwood Buchanan, Richard (G'gow, Sp'burn)
Allaun, Frank (Salford, E.) Bennett, James (Glasgow, Bridgeton) Campbell, I. (Dunbartonshire, W.)
Allen, Scholefield Bishop, E. S. Carmichael, Neil
Armstrong, Ernest Blenkinsop, Arthur Carter-Jones, Lewis (Eccles)
Bagier, Gordon A, T, Boardman, Tom (Leicester, S.W.) Clark, David (Colone Valley)
Barnett, Joel Booth, Albert Cocks, Michael (Bristol, S.)
Beamy, Alan Brown, Ronald (Shoreditch & F'bury) Cohen, Stanley
Coleman, Donald Hughes, Robert (Aberdeen, N.) Pavitt, Laurie
Concannon, J. D. Hughes, Roy (Newport) Pentland, Norman
Corbet, Mrs. Freda Janner, Greville Perry, Ernest G.
Cox, Thomas (Wandsworth, C.) John, Brynmor Prentice, Rt. Hn. Reg.
Crawshaw, Richard Jones, Barry (Flint, E.) Prescott, John
Crosland, Rt. Hn. Anthony Jones, Dan (Burnley) Price, J. T. (Westhoughton)
Cunningham, G. (Islington, S.W.) Kaufman, Gerald Price, William (Rugby)
Dalyell, Tam Kerr, Russell Probert, Arthur
Davidson, Arthur Kinnock, Neil Reed, D. (Sedgefield)
Davies, Denzil (Llanelly) Lambie, David Roberts, Albert (Normanton)
Davies, G. Elfed (Rhondda, E.) Lamond, James Roberts, Rt. Hn. Goronwy (Caernarvon)
Davies, Ifor (Gower) Latham, Arthur Roderick, Caerwyn E.(Br'c'n&R'dnor)
Davies, S. O. (Merthyr Tydvil) Lawson, George Rodgers, WiHiam(Stockton-on-Tees)
Davis, Clinton (Hackney, C.) Leadbitter, Ted Roper, John
Deakins, Eric Lee, Rt. Hn. Frederick Ross, Rt. Hn. William (Kilmarnock)
Delargy, H. J. Lestor, Miss Joan Sheldon, Robert (Ashton-under-Lyne)
Dell, Rt. Hn. Edmund Lewis, Arthur (W. Ham N.) Shore, Rt. Hn. Peter (Stepney)
Dempsey, James Lewis, Ron (Carlisle) Short, Rt. Hn. Edward (N'c'tle-u-Tyne)
Doig, Peter Lipton, Marcus Silkin, Rt. Hn, John (Deptford)
Dormand, J. D. Lomas, Kenneth Silkin, Hn. S. C. (Dulwich)
Douglas, Dick (Stirlingshire, E.) Loughlin, Charles Sillars, James
Douglas-Mann, Bruce Lyon, Alexander W. (York) Silverman, Julius
Duffy, A. E. P. Lyons, Edward (Bradford, E.)
Eadie, Alex McBride, Neil Skinner, Dennis
Edelman, Maurice McCartney, Hugh Small, William
Edwards, Robert (Bilston) Mackenzie, Gregor Spearing, Nigel
Edwards, William (Merioneth) Mackie, John Spriggs, Leslie
Evans, Fred Mackintosh, John P. Stallard, A. W.
Faulds, Andrew Maclennan, Robert Stewart, Donald (Western Isles)
Fernyhough, Rt. Hn. E. McMillan, Tom (Glasgow, C.) Stoddart, David (Swindon)
Fisher, Mrs. Doris (B'ham, Ladywood) McNamara, J. Kevin Stonehouse, Rt. Hn. John
Fitch, Alan (Wigan) MacPherson, Malcolm Strang, Gavin
Fletcher, Ted (Darlington) Mallalieu, E. L. (Brigg) Taverne, Dick
Foot, Michael Marsden, F. Thomas, Rt. Hn. George (Cardiff, W.)
Ford, Ben Mason, Rt. Hn. Roy Tinn, James
Fraser, John (Norwood) Meacher, Michael Torney, Tom
Freeson, Reginald Mellish, Rt. Hn. Robert Urwin, T. W.
Galpern, Sir Myer Mendelson, John Varley, Eric G.
Gilbert, Dr. John Millan, Bruce Wainwright, Edwin
Gordon Walker, Rt. Hn. P. C. Miller, Dr. M. S. Walden, Brain (B'm'ham, All Saints)
Gourlay, Harry Milne, Edward (Blyth) Walker, Harold (Doncaster)
Grant, George (Morpeth) Molloy, William Wallace, George
Grant, John D. (Islington, E.) Morgan, Elystan (Cardiganshire) Watkins, David
Griffiths, Eddie (Brightside) Morris, Alfred (Wythenshawe) Weitzman, David
Griffiths, Will (Exchange) Morris, Rt. Hn. John (Aberavon) Wells, William (Walsall, N.)
Hamilton, James (Bothwell) Moyle, Roland Whitehead, Phillip
Hamilton, William (Fife, W.) Mulley, Rt. Hn. Frederick Whitlock, William
Hannan, William (G'gow, Maryhill) Murray, Ronald King Willey, Rt. Hn. Frederick
Hardy, Peter O'Halioran, Michael Williams, Alan (Swansea, W.)
Harper, Joseph O'Malley, Brian Williams, W. T. (Warrington)
Harrison, Walter (Wakefield) Oram, Bert Wilson, Alexander (Hamilton)
Hattersley, Roy Orbach, Maurice Wilson, William (Coventry, S.)
Heffer, Eric S. Orme, Stanley Woof, Robert
Horam, John Oswald, Thomas
Houghton, Rt. Hn. Douglas Owen, Dr. David (Plymouth, Sutton) TELLERS FOR THE NOES:
Howell, Denis, (Small Heath) Pannell, Rt. Hn. Charles Mr. William Hamling and
Hughes, Rt. Hn. Cledwyn (Anglesey) Parker, John (Dagenham) Mr. John Golding.
Hughes, Mark (Durham) Parry, Robert (Liverpool, Exchange)

Bill accordingly read a Second Tune.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).