§ 7.56 a.m.
§ Mr. Gavin Strang (Edinburgh, East)No one would disagree with the fact that unemployment in Scotland for many years now has been at an intolerably high level. The Scottish people have been asked to bear for far too long far too large a share of the misery and demoralisation and poverty which is associated with unemployment.
It has been a feature of our debates on the Scottish economy over the last few years for there to be a great deal of bitterness and recrimination on this side. This is understandable, partly because of the extreme nature of the problem but also because of the policies pursued by the Government during their first two years in office such as the removal of the investment grants and, above all, the whole philosophy of disengagement.
There has been a very sharp change in the Government's approach to industry. I do not wish to spend any time in this brief exchange going over the Government's record and hammering away at the statistics. We know that unemployment in Scotland is at an intolerably high level and that in recent years it has been at a particularly high level.
We may well be moving into a situation, although it is too early to be sure, where unemployment will fall. We have a very long way to go before it will be at an acceptable level. I am sure the Minister would not claim that the suggestion that unemployment may fall over the next few years is a reflection of the change in the regional policy. It is too early for that. If unemployment does 1614 begin to fall over the next year or so in a reasonably significant manner it will be to some extent a reflection of the growth which we hope at long last will take place in the UK economy. To some extent it will also be a reflection of the developments associated with North Sea oil.
I should like to say one or two brief, and therefore perhaps superficial, things about the general situation in Scotland concerning regional development; and finally to say something about a specific aspect of Scottish regional policy which concerns us particularly in Edinburgh.
It is too early to assess the effect which the Industry Act will have on Scotland. The Industrial Development Executive and its officers, at least the regional officers, now have legislation and a framework whereby they could give assistance to Scottish industry on a scale greater than in the past. I hope this potential will be realised. There is one danger. Although the framework exists for intervening in this way, it may not be fully realised, because what matters is not what the legislation says or what the machinery is; what matters is how many new jobs are created as a result of this.
Do the Government believe that industry is now getting a faster service? Has the staff been increased at the DTI regional office to give this faster service? Will assistance be directed towards creating new jobs and when shall we obtain some tangible and significant new benefits from the Government's regional policy? I hope that we shall see substantial benefits.
In the White Paper on Industrial and Regional Development it was stated that the regional employment premium would be phased out from 1974. The rate and method of phasing out would be announced in due course in the light of circumstances at the time and after consultation with industry. I believe that it would be a great mistake for the REP to be reduced in 1974. Expressed as a percentage of a firm's payroll the value of the REP has fallen substantially since it was introduced in 1967. I believe that it could make an important contribution in enabling development areas to obtain a higher proportion of industrial expansion, and we need Quickly a clear statement from the Government that 1615 REP will be increased. The Scottish Trade Union Congress has advocated that it should be doubled. I hope that the Government will do that.
I have always been attracted to the idea that the REP should be replaced by a system of payroll tax or a levy on all labour in congested expanding areas like the South-East of England. In the intermediate areas there might be a small, positive premium and in the development areas the full premium value could be paid, perhaps at the rate of £3 a head. That could be administratively difficult and the Government might turn it down for that reason.
It is worth recalling the views of Mr. Gilbert Hunt, Managing Director of Chrysler (UK) Ltd., when he submitted evidence to the House of Commons Expenditure Committee in October. He made a number of points, some of which I know the DTI in Scotland were unhappy about—but I think the Minister agrees with two of his observations. He said that if the Government wanted industry to move to certain areas the inducements for development must be sufficient to make the company want to go there using the normal financial criteria. He also criticised the switching of incentive policies and said that the Government should guarantee to companies that they would not lose benefits by one system being changed for another. That is another reason why I believe that it is tremendously important not to phase out the REP. These general regional inducements to industry are important and in an expanding United Kingdom economy they can make a real contribution to creating more jobs in Scotland but I believe that regional policy in Scotland at present should be primarily concerned with major specific economic developments.
Incentives alone will never remove Scotland's economic problems. The great change in recent years is that Scotland has two immensely valuable natural assets—the deep water facilities at Hunterston and North Sea oil—the economic potential of which is now appreciated. Many cogent things have been said about Hunterston by the Scottish Council, the Scottish CBI and the STUC in recent 1616 weeks. I do not intend to repeat their arguments here. A major new development at Hunterston will come only as a result of a political decision by the Government. It is not true that the decision is that of the British Steel Corporation. Although everyone, including BSC officials, accepts the value of Hunterston, there are short-term narrow pressures to achieve commercial profitability which are against Hunterston.
It is not primarily the number of jobs in the proposed integrated steel works at Hunterston which is important but the fact that we must maintain a large and diversified steel industry in Scotland in the long term—so many of our industrial goods have a high steel content. A major new steel works in areas leads to other important industrial developments, as we know from our experience at Ravenscraig.
But the main natural asset which interests me is North Sea oil. We had a useful debate on this in the Scottish Grand Committee. If the development of North Sea oil were handled right, it could make a massive contribution over the next decade to solving Scotland's regional problems. Although we are concerned about energy and pollution aspects and about how long the oil will be there, the over-riding short-term issue is to see that the maximum number of jobs and industrial opportunities flow to Scotland.
It is true that we are now obtaining quite a number of exciting developments in Moray Firth and other parts of north and north-east Scotland. It is equally true that we are not getting a big enough share of this market, and we have heard it from Ministers on regular visits to these areas. The Prime Minister himself said that during the recess. The Secretary of State for Trade and Industry also said that they would get tougher with the oil companies and would see that more goods and services were obtained from Scotland. Thus, by their own admission, we are still not obtaining nearly enough from the supply of these goods and services, and that is to be expected.
I was impressed by the Brown and Root development when I visited the area in the recess. We now know enough to appreciate that North Sea oil is a major economic development, not just for 1617 Scotland but for Europe. The Government should answer a number of questions so that they can be openly discussed. On the matter of rate of extraction, there is inevitably a conflict between getting the oil out as fast as possible and getting the maximum participation from Scottish and British industry. Government policy has been to get oil out as fast as possible. That is what the oil companies want.
However, there should be a reassessment because there may be a case for slowing the rate of extraction to obtain a bigger share of the market for our goods and services. We are entitled to an open statement of the Government attitude on this matter.
How are the Government going to monitor the use of goods and services by the oil companies? In discussing the monitoring and supply of goods and services we are talking of thousands of millions of £s in the years ahead and the Government have not spelt out how they will monitor accurately. It is a question of obtaining statistics on the use of services and equipment by oil companies and indicating the proportion of those goods and services which come from Scottish industry.
The licensing issue was dealt with at some length in our debate. The Government should explain why they are not prepared to allow any requirements for the purchase of Scottish or United Kingdom equipment in licensing. It is all very well to say that next time licensing takes place they will attach great significance to the amount of goods and services the companies have ordered in the past. Would this conflict with our international obligations? Let us have an open discussion on that, as asked for by my hon. Friend the Member for East Stirlingshire (Mr. Douglas) in the debate on Tuesday. It is this sort of principle: how we develop this issue, which we would have liked to have had discussed in a White Paper.
We shall have the annual report before the end of the year, but I suspect that it will concentrate on the present development and what is to occur in the near future and will not discuss objectively the basic questions which should be openly faced. For me the most important pub- 1618 lication will be that of the IMEG report which we shall get before the end of the year. I am glad that the Government decided to employ the firm to carry out this important survey into the market for goods and services used in the exploration and development of North Sea oil.
May we have an assurance that when the report is published it will be the full report, the only exception being information removed solely because it happens to be confidential to companies concerned? We had a long argument in the Select Committee on Science and Technology on the Docksey Report. Eventually we won, and Docksey was published. There will be a great deal of resentment if we have a very modified version of the IMEG report, with substantial parts removed on grounds other than confidentiality
But it is not so much the report itself that matters as the Government's reaction to it. I hope that they will respond in a positive interventionist way and accept responsibility to see that Scotland obtains the maximum benefit from the North Sea oil.
There is an over-riding case for the establishment of a separate agency to sponsor the development of industry in connection with North Sea oil. I was very glad that my hon. Friend the Member for Glasgow, Craigton (Mr. Millan) spelt out that aspect when he wound up for the Opposition in Tuesday's debate. Britain spends a colossal amount of R & D money on Concorde, and now on the computer industry. We should be prepared to give substantial financial support to industry so that it can gear up and acquire the expertise to make the maximum contribution to the North Sea oil industry quickly.
It is not just a question of support for some of the shipping firms on the East Coast, which surprisingly have been complaining about lack of business, although that is important in the short term. What is more important is that we want an oil board which will accept responsibility for creating the sophisticated technology which will be required to get the oil out from very deep waters.
Recently we read of Scottish investors buying a drill ship. Perhaps understandably, for commercial reasons, it has not been built in Britain. There are 1619 many other types of sophisticated equipment for which British advanced technology could be created. It cannot be done overnight, but, given a board prepared to put in the same sums of money as were put into the aircraft and computer industries, we could have a successful industry, which, as the Secretary of State said on Tuesday, could then sell its goods and services to other areas where oil is being exploited.
I support the view that a substantial portion of the revenue from oil should go to the board. The board should develop not only those industries associated with North Sea oil, but should be given wider regional powers to enable it to develop other industries, too. I am not saying that it should be a purely Scottish board, but it should be based in Scotland. I should welcome the board's being able to invest some of the money on Teesside and elsewhere, but the bulk of the revenue should be invested in Scotland. That is where the headquarters would be.
I said at the beginning of my speech that in the time available I should be able to deal only briefly with some of the general aspects of regional policy, but there is one specific issue that I want to raise, and I have given the Minister notice of it.
We in Edinburgh have for a long time resented the fact that Edinburgh was not included in a development area in 1966. The Minister looks surprised. I assure him that a number of us in Edinburgh were unhappy about the 1966 decision. During the 1970 election campaign I made it clear that I did not believe that it was right to keep Edinburgh out of the development area and I promised that if I were elected—I expected a Labour Government to be returned to office—I would campaign for its inclusion in the development area. This is not a party issue. I think the Minister will agree that discrimination against Edinburgh has become almost a bipartisan policy, because we have now had 2½ years of this Government and there has been no acceptable change in the situation. They gave the Edinburgh and Portobello employment exchange areas intermediate status, and we gave it to Leith, but the fact is that Edinburgh is still being discriminated against.
1620 Although some of us were unhappy about the position in 1966, a case could be made—and was made and accepted by many people in England, and in Scotland, too—that Edinburgh was much more prosperous than the rest of Scotland and that if new industries were coming to Scotland it was only reasonable that they should go to areas other than Edinburgh. But things have changed since then. In 1966, unemployment in Edinburgh was comparable with unemployment in Great Britain as a whole, and was very much lower than in Scotland generally. Since then unemployment—particularly male unemployment—has risen much faster there than in Britain and faster than in the rest of Scotland. These statistics have repeatedly been made available to the Government Departments concerned, and I do not want to go over them again. Suffice to say that in June 1967, 5.3 per cent. of the unemployed males in Scotland resided in the Edinburgh, Leith and Portobello employment exchange areas. By June 1972, that figure had risen to 7.4 per cent.
When the Hunt Committee looked at this it said—and it is worth reminding ourselves of this—
§ Mr. SpeakerOrder. I remind the hon. Member that a moment ago he said that he was dealing with these matters very briefly. He has been speaking for nearly half an hour.
§ Mr. StrangI apologise, Mr. Speaker. I had not realised that I had taken so long.
The Hunt Report said that it was far too early to say whether this discrimination was having a serious effect upon Edinburgh. This has happened. An interesting map has been produced showing the precise sites of industry that has moved out of and into the area. Nearly all the industry that has been lost has been from within Edinburgh and all industry that has come in has come to areas outside Edinburgh. If the industry we had lost moved just outside Edinburgh we would not complain, but a large proportion of it has moved away from the area altogether.
The issue that is repeatedly brought up by industry is the denial of REP. Only last week a councillor told me that his publishing firm would leave if Edinburgh did not get development area status in 1621 the near future. The Scottish Development Council has changed its view, and so has the Scottish TUC. They both accept our case, and there has been a big deputation recently from Edinburgh to the former Secretary of State for Trade and Industry. We await the reply.
Will the Minister look again at this and, on the basis of the evidence that is available, make representations to the Department of Trade and Industry that this discrimination against Edinburgh must stop?
§ 8.26 a.m.
§ The Under-Secretary of State for Development, Scottish Office (Mr. George Younger)I am grateful to the hon. Member for Edinburgh, East (Mr. Strang) for raising this subject, which is extremely important to all of us who live and work in Scotland. I will outline the regional development policy as it now is and comment on the points that he has raised.
Perhaps the most important single thing about the running of the Scottish economy is—and has been for some years—the carrying out of a successful and positive regional development policy. The aim of successive Governments has been to get the best possible system for encouraging investment and expansion in the development areas, and most of Scotland is a development area. Going with that positive regional development policy is the equally, and possibly more, important requirement to get the British economy as a whole expanding at a much better rate than it has in the past 15 to 20 years. Those two aims have overlaid the determination of the Government for the past 2½ years to devise policies which ensure that we have a much higher level of growth generally in the economy and, secondly, that we have a thoroughly effective regional development policy which encourages expansion of all kinds in the development areas.
There are now positive signs that we are making satisfactory progress on both counts. I am sure the hon. Gentleman knows that we are achieving a rate of growth in the economy generally the like of which we have not seen for a considerable time. That in itself is a tremendous encouragement to all of us who work in Scotland. Secondly, the general package of our regional development incentives is now the best we have ever had, is as good as it is in any other country in 1622 Western Europe and is probably better than in most of them.
None of these things alone will solve all our problems. But in those two areas we have made substantial progress and, if the economy continues to expand as it is doing now, we can look to the future with a measure of confidence that we in Scotland have not had for a long time. I am sure I carry the hon. Gentleman with me in saying that if this happened it would be very welcome to all of us.
The hon. Gentleman is right to say that it is still too early to tell what will be the exact results of the new industrial development policy which was introduced in the Industry Act. Indeed, he was so right to say that, because it is, perhaps, too seldom appreciated by the public in general that changes of policy of this kind take a quite extraordinary length of time to take effect. Without trying to make any party point about this, perhaps I should add that any action that any Government take on this matter is bound to take about two years or more before one sees its effects working through the economy.
In all fairness, one has to see the intolerably high levels of unemployment of the last two years in the context of the policies we have been following, under successive Governments, for many years. No one would seriously contend that all of the blame for that high level of unemployment can be laid at the door of the present Government, because of the fact that the hon. Gentleman mentioned, which is the long time that these things take to work through.
We are now set on a course of very much more optimism and much greater prospects than we have had for some time. This is something which is very welcome. I shall not outline the details of the present incentives. There are only three features which I should like to emphasise.
First, the regional development grants that we now are able to offer are for the first time available on completely equal terms to both incoming industry and industry which is there already and wishes to expand. The old system was under considerable criticism because of the feeling that many of our indigenous industries were not getting equal treatment with industries which might come in from outside.
1623 Secondly, the new grants are quite different from the old in that not only is there a rate of grant on buildings and plant and machinery of 20 per cent., and 22 per cent. in the special development areas, but these grants are no longer deducted from the value of the investment when tax allowances are included. That makes the total value to the company receiving a grant very much greater, and it relates the value to the profitability of the company. As that is where tax allowances come in, I have always felt it to be very important, and I think that industry in general feels it to be very important, too.
Thirdly, in the new arrangements we have at last succeeded in getting the dc-tailed administration of these grants and regional development policies very largely decentralised to the areas where the activity is taking place—in our case in Scotland. I am very glad that we now have the Scottish Industrial Development Office centred in Glasgow with its own staff. I can assure the hon. Gentleman that it has a proper staff of its own, who have been set aside to do this work under the Scottish industrial director, Mr. Denis Kirby, under the overall control of the controller of the Department of Trade and Industry. It is on the ground now in Glasgow and is swinging into its work very effectively. We also have the Scottish Industrial Development Board, which is able to take major decisions, and again, to take them in Scotland.
Apart from the largest industrial developments, which have a national significance because of their great size, this organisation situated in Glasgow has a very large measure of authority to spend money devolved to it. It is already clear that this is resulting in a much quicker, better and closer contact between Scottish industries and business people and the organisation which considers their applications for assistance.
It is too early to say how this will work in practice. However, it is certainly not too early to say that it has got off the ground very quickly, is now in business and working and that people are turning to it in Scotland. It is an important development which will be very much welcomed and it will be of great benefit to us for a long time.
1624 The hon. Gentleman asked about regional employment premium, and I accept that there is concern about what is to happen when REP is phased out. May I remind the hon. Gentleman of the precise position? When REP was originally introduced it was clearly stated then to be until 1974. The only undertaking given when it was introduced was that it would continue until 1974. We have confirmed that undertaking. It will go on until September 1974. We shall consider in what way it will be phased out after 1974. Therefore, Scottish industry and the rest of British industry receiving REP can be sure of getting it until 1974 and that will enable industrialists to plan ahead that far. There will not be an abrupt removal of REP. It will be phased out and we shall consult people about the proper means of phasing it out. The decision as to what should replace it must be taken a little nearer that time.
The hon. Gentleman mentioned Scotland's two great natural assets. I agree with the importance which he ascribed to them. I should like to make two points about the great natural asset of deep water, which has been occupying our attention for many years and which we all agree is of great importance to Scotland. The first is the purely temporary position that the decisions concerning steel development are very near to being made. My right hon. Friend the Lord President of the Council has given an undertaking that a decision will be announced before the end of the year. Therefore, the hon. Gentleman will not expect me to anticipate that decision.
The British Steel Corporation has made its plan known; it has presented it to the Government. The public and the hon. Gentleman and others know more or less what is in the plan from what has appeared in public announcements. Lord Melchett has been to Scotland and has mentioned some of its features. It is now with the Government who are considering it very urgently. I assure the hon. Gentleman that the Government will take very carefully into account all the many representations which have been made by organisations in Scotland which have made a most useful contribution to the debate on this subject. In particular, they will take into account 1625 regional development considerations, as it is their duty to do.
Turning to the second point about deep waiter, I reinforce what the right hon. Gentleman the Secretary of State has said on several occasions. There is no doubt that our duty to the Scottish economy is to ensure that this great natural asset is used for the maximum benefit of our economy. On the one hand, it is very important that we should not let this great natural resource go unused. On the other hand, it is equally important that we should not let it be used in a way which does not ensure that the maximum use is made of it. It would be a tragedy to fritter it away on enterprises or uses which did not bring the maximum benefit. My right hon. Friend has said that often, and I say it again.
The hon. Gentleman spoke most interestingly and deeply about the question of North Sea oil, which has occupied a great deal of my attention in the past two years. He is right in saying that it will make a massive contribution to the Scottish economy and to the solution of many of our problems. He said that it would do that over the next decade. I would make the time scale very much longer. We can look for at least 25 years of important and great benefit from North Sea oil.
The hon. Gentleman raised three particular points, all of which were very important. First, he wondered whether the rate of oil extraction was too fast. Matters of licensing policy and detailed oil industry policy are for my hon. Friends in the Department of Trade and Industry; it is for them to answer any detailed technical points. However, we keep in very close touch with one another on this important subject. My hon. Friend the Member for Honiton (Mr. Emery), when speaking in the debate which the hon. Gentleman mentioned in the Scottish Grand Committee earlier this week, described very well the considerations which have led us to follow the rate of extraction and licensing policies which we have followed.
It is open to any country—and Norway has started this policy—to operate the slow development of oil resources. But we do not think that that would be the right policy for this country now because we believe that the existence of these 1626 resources leads us to ensure that we develop them as fast as we can in order to get the maximum benefit for our economy and our balance of payments. I do not think that we are going too fast.
I am certain that it has been of great benefit to us to have gone as fast as possible during the last few years. For the future, however, these policies must be kept continually under review. We cannot say now that it will always be right to go at any particular pace.
The hon. Gentleman asked about manufacturing contracts. I accept, as does my right hon. Friend the Secretary of State for Trade and Industry, that it is necessary to keep an eye on the performance of Scottish industry in getting contracts and in exploiting North Sea oil and to ensure that the incoming companies bear this in mind. I do not think that it is open to us, or that it would be right for us, to go in for any compulsion on this point. We do not need to do so. We are not in a position where each industry cannot compete in getting contracts for oil rigs and so on. I believe that they are well able to do so and will become increasingly well able to do so. It would not be right for us to try to make a compulsory policy of that kind. I do not think that the hon. Gentleman was suggesting that we should.
However, it is our duty to keep to the forefront of the minds of the incoming companies that we expect them to make as much contribution as they can to the local economy. All my contacts with the incoming companies, the oil companies and the other large companies which will help extract the oil have made it clear that they are most anxious to make as much use as they can of local industry. They are anxious to do so for financial reasons and for public relations reasons. They have all emphasised to me that from their point of view the more they can do locally the better.
It is the case that the incoming companies will at first have to get their specialised products from their traditional suppliers. But that does not mean that they will always want to do so. It is not surprising that this has taken a long time to get under way. Six months ago I was feeling that we were not getting enough response from Scottish industry in taking up these contracts. I do not think now 1627 that this is anything like so much the case. There are welcome signs that Scottish industry is responding quickly and alertly to the new challenge. We shall keep the matter carefully under review. I am sure that we can ensure that the trend continues.
The hon. Gentleman asked about the writing in of requirements to license. This is a matter which would best be taken up with the Department of Trade and Industry. Licensing is a highly technical matter on which it has built up a lot of expertise. It would be worth the hon. Gentleman's while to take the matter up with the Department. I will draw their attention to what the hon. Gentleman said this morning.
The hon. Gentleman mentioned a White Paper. I am sure that when the annual report, which the Government will produce, is published, he will find that it is much better in terms of value of information than a White Paper, which is inevitably restricted to a parliamentary context. A White Paper is inevitably restricted because the Government of the day have to relate what is in it to specific Government policies. It would be very difficult for a White Paper to contain the fullness of general commercial information about North Sea oil development which is now needed. I am sure that we shall find that the publication being produced is as good as or very much better than a White Paper.
I assure the hon. Gentleman about the IMEG report coming out. My right hon. Friend the Secretary of State for Trade and Industry gave an assurance recently that the fullest possible information will be given in the publication of the report, with the only proviso that any matters genuinely affecting commercial confidentiality may have to be left out. I am glad to repeat that assurance. The hon. Gentleman outlined his views about the need for an oil board. I shall not go into that any more because it should be considered when we have the IMEG report before us.
The hon. Gentleman raised the question of Edinburgh's status in being excluded from development area status. I appreciate the many meetings with representatives of Edinburgh, which I have had about this and the feelings 1628 there are in the city. So does my right hon. Friend the Secretary of State for Trade and Industry, as did his predecessor, who had a meeting comparatively recently about it. All that was said then has been and is being taken into account. I assure the hon. Gentleman that none of this is overlooked. It is all being carefully considered.
I emphasise what the hon. Gentleman said about the original rather strange decision in 1967 to leave Edinburgh out of development area assistance. He said that he did not feel too happy about it. Nor did I. However, since then we have been able to raise its status to that of intermediate area, which means that it gets a 20 per cent. building grant, which it did not get before. I am glad that we have been able to raise Edinburgh from nothing to intermediate status. I accept that many people in Edinburgh are anxious to go the whole way to development area status and we shall take that very much into account.
I am glad that we have had the debate. It has been most valuable and has enabled us to look at the present policy of regional development. As I have said, we have every reason to feel that we have a package which is thoroughly effective and that where firms are mobile and expanding they have the strongest incentive to expand in development areas—a stronger incentive than in any previous system. The time is ripe for this system to be given a chance to work. I agree that it should not be chopped and changed, because that causes confusion. I believe that it will be successful. I think we shall see that the Industry Act and the new system will prove to be a major watershed in changing the continual trend of adverse economic forces in Scotland to one which will get us into a much more prosperous phase, with expansion coming not only to Britain as a whole but in particular to Scotland, something for which many of us have fought for a long time.
§ Question put and agreed to.
§ Bill accordingly read a Second time and committed to a Committee of the whole House.
§ Committee this day.