§ Order for Second Reading read
§ Mr. Speaker
Before I call on the right hon. Gentleman to move the Second Reading of this Bill, I have to inform the House that I have a very long list of hon. and right hon. Members whom I already know want to speak. I will do my best to secure a proper geographical selection and also to pay appropriate regard to the requests of those who have spoken very little during this Session. One certain help that hon. Members can give to the Chair is for those who do catch my eye to be brief. Even then there will be many disappointments.
§ Mr. Anthony Fell (Yarmouth)
On a point of order, Mr. Speaker. I had no intention of raising any matter until I heard what you have just said when you referred to geographical areas. I do not know whether it has occurred to you that some of the areas that will not be affected by this Bill will, in the minds of the people who live in those areas, be more affected by it because they are not included in the Bill than those areas in which there is an effect. It would seem to be very fair to have regard to that fact in your thinking about geography.
§ Mr. Speaker
I am grateful to the hon. Member. That was precisely what I meant by an appropriate geographical selection.
§ The Secretary of State for Trade and Industry and President of the Board of Trade (Mr. John Davies)
I beg to move, That the Bill be now read a Second time.
In the light of what you have just said, Mr. Speaker, I have some diffidence in making my introductory speech because inevitably it is bound to be a little longer than I would normally make in this House, and so I hope that the House will forgive me.
The purpose of the Bill is to give effect to certain provisions of the Chancellor's Budget Statement in relation to industrial incentives as well as to provide for the wide range of support proposed for regional regeneration and the modernisation of industry comprised within the 1009 White Paper of 22nd March this year, Cmnd. 4942.
As the House knows, the Government engaged from the time of the formation of the Department of Trade and Industry in a deep review of the efficacy of past industrial regional policies and of the means most likely to restore those parts of the country now suffering from industrial decline to a more prosperous situation. Successive Governments have sought to reverse what at times has seemed to be an inexorable tendency for the former centres of industrial dynamism to become progressively industrial black-spots with all the cost in terms of human distress and national loss that such situations entail.
It is not in criticism of those who have worked away at this for generations that I say that all those efforts at best served to slow down the rate of decline and that hitherto with rare exceptions there is no evidence of the resulting regeneration for which they strove. The Government fully realise that any new line of policy in this field could not, in the light of the very persistence of the problem, be expected to bring about a sudden and abrupt change from decline to revival. Moreover, as the House well knows, the problem is not a homogeneous one, and, although a foundation of general provisions can, and should, serve as the base upon which the revival might be built, there is a need, too, for a flexible effort in addition in order to meet the special characteristics of the various regions.
The problem of industrial decline is one not only involved in the less prosperous parts of the country. It is to be found in individual industries and concerns throughout the length and breadth of the nation. In many cases that decline afflicts individual concerns within healthy and successful industries. It may be due to incompetent management, failure to modernise plant and designs, unsatisfactory labour relations and a whole host of other contributory causes. Such situations are part of the inevitable ebb and flow of a free enterprise society, and their counterparts are the success stories of dynamic advance which, fortunately, more than compensate the failures. It is certainly no part of Government in normal circumstances to intervene in the ebb and flow process 1010 save only where quite exceptional circumstances demand some temporary action to allay the harshest social impact of failure.
But there are other cases, too, where decline derives from other considerations than the shortcomings of those directly engaged and where come Government assistance may be justified. There is, for instance, the situation that arises where basically healthy and well-run concerns are themselves put in jeopardy by the very support that may be tendered to their competitors within the framework of regional policy: the discriminatory nature of regional policy, which is its essential characteristic, can imply a positive distortion of fair competition. The alternatives are then to retire from the regional objective, with all the hardship such a course implies, or to provide some measure of counterpart assistance to the non-regional sufferers.
Again, there are areas of industry—particularly in the field of high technology—where the risks involved and the time taken in project development are so great as to frighten off private capital to the point of making the pursuit of such projects impossible. The alternatives then are to abandon the pursuit of those projects entirely or to tender Government support by one means or another.
There are additional considerations, too, that need to be borne in mind: the extent of other countries' own support of their equivalent industries rendering the private backing of such ventures even more precarious; the fact that in many cases the industries concerned are the key to so many others and that with the central span removed a whole sectional edifice is at risk; again that the outlook may well indicate a merging internationally of effort in a given area but there is a need to maintain the technical and managerial competence in that field until the merger can be consummated.
There is yet another variant on the theme of non-culpable decline. There are industries where the evolution of technical method or the nature of competitive production elsewhere involves an inescapable contraction in an industry. But to assent to a precipitate dissolution 1011 may occasion problems of unemployment and hardship which no Government could reasonably tolerate: and here, too, some measure of assistance to achieve an orderly run-down seems justified.
§ Mr. Neil Marten (Banbury)
Is non-culpability, if that were the word, included in Articles 92 to 94 of the Treaty of Rome? If the Bill has not been approved by the supranational Commission, there seems little point in debating it.
§ Mr. Davies
I am able to reply succinctly. Articles 92 to 94 do not allude to such a phrase. However, my hon. Friend will be interested to know that the White Paper upon which the Bill is largely based has been the subject of consultation with the Commission in Brussels. No objection has been raised by the Commission.
In facing the problems of industrial decline and its effects on the most prosperous regions, it becomes——
§ Mr. Anthony Wedgwood Benn (Bristol, South-East) rose——
§ Mr. Davies
I mean to confine myself at your suggestion, Mr. Speaker, and to be brief, and so I ask the right hon. Gentleman to be brief.
§ Mr. Wedgwood Benn
The right hon. Gentleman has just told the House that he consulted the Commission——
§ Mr. Davies
No, it did not. On the contrary, the issue was quite the opposite. It is to give a sustained effect to Clause 8 instead of an abrupt cut-off. I am sure that the right hon. Gentleman recognises that the period involved in the provisions of Clause 8 is therefore a guarantee and not a threat. It becomes virtually inescapable when facing problems of industrial decline and its effects on the most pros- 1012 perous regions, to face those, too, which are not part of the regional problem, though often having close affiliation with it.
The whole, moreover, regional and national alike, is now coloured by the poor industrial performance of the country over the last seven or eight years. The whole has to be seen in the context of an industrial country seeking to swim against the current of steadily deteriorating real profit levels and a continuingly deadened domestic market. The Government's consideration of all these problems cannot fail to take account of the fact that industry has been the sufferer from the deflationary virtuosity of the Labour Front Bench when in power and it needs more than ever before understanding and support from the Government to regain health and strength.
The review of policy to which I have referred has inevitably been protracted. The wide range of people consulted has not been to satisfy their own sense of amour proper, but to tune into the widest possible spectrum of knowledgeable opinion. That was for two good reasons: first, to learn from them secondly, to earn the right to call upon them all to support the policy finally devised—providing that it did not reject root and branch what they proposed
The views of those with experience and knowledge in this difficult area of work did not greatly diverge. The new regional policy, together with the wider approach to national industrial policy generally, seems, in the light of the wide spectrum of advice I have canvassed, to meet the general attitude of the vast majority of people who have studied and who know the problem. It is for that reason that I feel justified in calling for the widest degree of support for the measures proposed in the Bill.
It may be for the convenience of the House if I review some of the critical issues which my consultation has covered. First, there is the issue of priorities as between employment creation viewed in isolation and the broader concept of modernisation as a means of industrial and regional regeneration. Here there were some views at the extremes—those who considered that the creation of immediate jobs must be the prime purpose of policy, and those who, on the contrary, believed that the enhancement of 1013 the industrial complex must precede the employment revival. We have sought to take a middle course in the Bill: we still emphasise strongly an employment link, but do not deny the benefits of the Bill to those whose purpose is primarily modernisation.
§ Mr. Dan Jones (Burnley)
Could the right hon. Gentleman be persuaded that there is an argument that what is needed is not to create but to disperse administrative jobs? Does not the right hon. Gentleman agree that London is choked and the provinces could do the work just as well and probably a damned sight cheaper?
§ Mr. Davies
There are great inducements which have been further reinforced by the Chancellor of the Exchequer to develop administrative jobs both regionally and nationally. The Government have this whole matter under serious consideration. I assure the hon. Gentleman that the matter is far from absent from one's mind. I am sure that the hon. Gentleman has made an important point.
Next we have grappled with the rival arguments of those who believe that special regional incentives need to be available for incoming investors against those who have maintained that resurgence should primarily be sought from indigenous industry. After much thought, we have come down with the latter and the Bill provides that any of its benefits are as available to the local man wishing to develop as they are to the newcomer.
Thirdly, we have wrestled with the contestants on IDC policy. On the one side there are those who maintain that only by the most abrasive application of such policy will mobile industry be created on the scale necessary to refurbish the declining regions: on the other, there are those who equally firmly warn of the shutting out of projects in the more prosperous areas, or their removal abroad, with dire consequences for the future development of new industries, with their importance to the country as a whole. In the event, we have decided to intensify the incentives to mobility whilst somewhat easing the harsher edges of IDC policy.
Fourthly, we have considered the claims of service industries to be treated on all fours with manufacturing industry. We have no prejudice against the service 1014 industries. Quite the contrary: we believe that they may prove to be the providers of perhaps more job opportunities than manufacturing industries in future years. But experience has shown that the primary stimulus to the installation of the services in any area is the demand for the service in question and that that is closely linked to the state of prosperity of the area concerned. The effectiveness of incentives to procure service implantation has, on the basis of experience, not been the determinant. The service industries will, of course, with all other industry, benefit from the immense advantage of free depreciation on plant and machinery announced by the Chancellor. In the Bill, therefore, we provide for service industries to have access to selective assistance but not to the regional development grants.
Fifthly, the balance between generalised incentives and selective assistance has been the subject of intense discussion. Clearly, incentives need to be distinctive and considerable, not just to attain differential pressures in persuading investors to choose one location rather than another but to encourage the whole concept of investment mobility. On the other hand—and I have already referred to it—the variety of problems confronting us in the regions requires the utmost flexibility to enable individual needs and objectives to be met. We believe that in the Bill we have attained the right balance. The new pattern of the assisted areas coupled with the substantial and distinctive new regional development grants constitute a powerful incentive stimulus. The complementary selective assistance system available through the Industrial Development Executive ensures positive support tailored to the individual characteristics of projects and regions.
Sixthly, the nature of mechanism to undertake the selective assistance envisaged has been the subject of much consultation. There are those who propound the virtues of an external agency or agencies, modelled on the pattern of the Labour Administration's IRC: they extol its independence and adaptability. But we have serious objections to such a mechanism. It handles public money without a proper degree of accountability to Parliament and its institutions. It intervenes in the market at its own whim. It becomes a force of manipulation and coercion. This is precisely what we do 1015 not want to see the kind of selective support that we favour become.
We have therefore decided that the mechanism should be part of Government itself, though staffed and counselled to a substantial extent by those experienced in the promotion of industrial projects and recruited from industry and commerce. This will help, too, in achieving another of our positive requirements, namely, that the Executive should not displace private finance wherever that is available to a project.
This brings me next to the vexed question of local versus central initiative. The universality and weight of advice to rely more heavily on local knowledge in the stimulations and support of regional projects has been overwhelming. This is partly due, of course, to a natural desire not to be "run from London" but owes much also to a genuine belief that the greater sympathy and understanding likely to reside in a local body will itself be a spur to dynamic effort. I sincerely hope that the step we have taken of moving towards a very strong local initiative in regional policy will tend to stimulate and concentrate feelings of confidence in such areas where all those who have been exposed to them realise that that confidence is at present sadly lacking.
The Bill accordingly allows the devolution of the authority in the exercise of selective support to be accredited to regional organisations, and it is the purpose that they should be encouraged to make the fullest use possible of such delegated powers, accountability still being rendered through Ministers to Parliament.
I turn now to the details of the Bill itself to give effect to the conclusions I have enumerated as well as some to which I have not referred: the Bill has other purposes, too, which I will mention.
Part I, which covers the first six Clauses, is concerned with the introduction of regional development grants; the assets and activities to which they apply; the criteria attaching to their allocation; the restrictions imposed upon their variation either in value or in regional attribution. As will be seen, the grants cover a very wide range of 1016 investments in both plant, machinery, mining works and buildings. They are framed to give that distinctive and substantial characteristic which I mentioned earlier as the necessary attribute of a generalised regional incentive. The fact that they are payable over and above any depreciation provision which attaches to the asset with which they are concerned is one of their principal qualities. The aggregate of free depreciation and substantial tax allowances on building works, taken together with the distinctive regional grant, constitutes a powerful incentive to invest, in the first place, and, in the second, to invest in the assisted areas.
It is the composite effect of the profit-related depreciation provision coupled with the generous level of regional development grants which make the generalised incentives to industry unparalleled in our history. Moreover, they are framed in such a way—this part of the Bill makes it clear—as to be as nearly as possible certain in their attribution, a quality which the investment grants favoured by the last Administration clearly did not enjoy.
However, this is achieved by making the grants, broadly speaking, related to qualifying premises rather than qualifying assets. I readily agree that this will inevitably entail a certain amount of rough justice at the margin, but I believe that that rough justice will be borne out in its effectiveness in terms of simplicity.
§ Mr. Joel Barnett (Heywood and Royton)
Will the right hon. Gentleman make clear that, as before, companies will get grants regardless of whether they make profits?
§ Mr. Davies
That is so as regards the regional development grants, and, as I have clearly stated, it is in order to provide a clear differential that that has been done. However, the hon. Gentleman would be wrong to infer from that that the total of investment does not respond to the basically profit initiative which the effectiveness of free depreciation is there to serve.
§ Mr. J. Bruce-Gardyne (South Angus)
Will my right hon. Friend clear up one point about regional development grants'? Under the old system of development grants, the grant was not payable until the invoice for the qualifying asset was 1017 produced. It would appear from Clause 5(2) that this provision has been abandoned and that my right hon. Friend will be able to pay the grant when he is satisfied that the asset is on the way. What is the reason for this change?
§ Mr. Davies
The Clause states that the asset must effectively have been provided or paid for, so that, broadly, the position is not greatly different, although it still responds to the broad field of decision and discretion which resides with the Secretary of State.
Part II, covering Clauses 7 and 8, deals with the whole field of selective assistance on the lines that I have already indicated. As far as the regional aspects of this are concerned, the basic powers we require to carry through this programme are contained in Clause 7 of the Bill now before the House.
The House, and industry, will wish to have a clear view of the assistance which may be provided under this section. Final answers will not, of course, be possible until the Bill has passed into law. Nevertheless, a good deal can be said about our intentions. Essentially we shall be deploying five weapons.
First, loans. These will continue to be available on a substantial scale for projects providing employment. They will also be available for suitable modernisation projects which will sustain employment in the longer term. The terms and conditions will be tailored to suit individual circumstances, but, broadly, loans for employment-creating projects will be at preferential rates of interest, whereas normally loans for modernisation will be at rates which approximate to full commercial terms. In modernisation projects, too, we would intend to limit assistance to cases where it appears that the necessary funds could not reasonably be provided from private sources.
Second, as an alternative to loans and as a new departure, we shall be prepared to consider giving assistance towards the interest payable on moneys obtained from private sources for projects providing employment.
Third, and very exceptionally, we shall be prepared to consider the provision of a Government guarantee to private loans where, for example, such a guarantee is judged necessary to ensure that a 1018 worthwhile project secures outside support in its early years. I stress, however, that guarantees will be exceptional and will not be available for the generality of cases.
Fourth, removal grants similar to those previously available under the Local Employment Acts will be on offer to help firms seeking to move an existing operation—including significant operations in the service sector—from a non-assisted to an assisted area.
Fifth, we propose to make full use of our powers to provide factory space in the assisted areas. Rents, as in the past, will be based on current market value as assessed by the district valuer, but for projects creating new employment we shall be prepared to consider a two-year rent-free period to a new tenant, this being the rough equivalent of the building grant which would have been payable and the tenant built or purchased a qualifying factory.
As the White Paper foreshadowed, we also intend to make greater use of our existing stock of factories to rehouse industry already established in an assisted area and whose present premises are wholly unsuited to modern production techniques. This should both assist such firms to establish their operations on a sounder basis and ensure that maximum use is made of our existing resources. It is not the intention to offer rent-free periods to tenants qualifying under these arrangements.
Finally, the Bill provides that we may, with the company's consent, take an equity interest in a company where this is agreed to be essential. I cannot foretell how frequently situations will arise, but I am satisfied that, subject to the important safeguard about consent to which I have already referred, it is right to have the power at our disposal. The House will wish to know that it is our intention that any equity acquired in this way should subsequently be disposed of at the first appropriate opportunity.
Clause 8 provides for the support contemplated on a national rather than a regional scale, and clearly the criteria applying here are different.
§ Mr. Edmund Dell (Birkenhead)
Before the right hon. Gentleman deals with Clause 8, will he refer to Clause 7(3)(a), which refers to the possibility of 1019 a new company being formed in which there would be a Government equity shareholdingfor the purpose of giving…financial assistance"?Will he indicate the circumstances in which he expects that power to be used?
§ Mr. Davies
I think that the right lion. Gentleman himself will have experienced the fact that it may prove necessary, for instance, to create a concern which, after having made a study of a given project, would be enabled to be the channel for financing it or for financing part of it coupled with private interests. This is the kind of issue which might arise in these circumstances. There is simply an added element of flexibility in this provision.
I must make it plain that we have no intention to supplant or interfere with the normal market sources of finance for industry. We have, therefore, imposed a statutory requirement that, before assistance can be made available in the national interest, the necessary funds cannot be provided from any other source. Further, the powers conferred by Clause 8 are subject to important safeguards. They are limited to the transitional period of our entry to Europe; that is, until the end of 1977. This matter was referred to by the right hon. Member for Bristol, South-East (Mr. Benn).
§ Mr. Davies
The right hon. Gentleman either did not frame his question correctly or did not listen to my answer. He asked whether this matter had been framed in relation to the consultations we had had with the Commission. It has not. It has nothing to do with those consultations.
The funds available, including guarantees, are limited to £250 million, and a positive resolution will be required in each case before a further tranche of £150 million can be used. Finally, there will be no question of action being taken against the wishes of a company being assisted. As with the assistance provided 1020 under Clause 7, there is an express prohibition on shares or stock being acquired without the consent of the company concerned.
The general intention is to make aid available under Part II of the Bill for the benefit of firms and projects with sound economic prospects. But in considering such cases regard has to be paid to a number of different situations.
First, where selective assistance is made available to firms moving to the assisted areas or for the expansion of firms already there a normal test of commercial viability is appropriate and will be employed. Thus, applicants in this category will need to be able to show that the resources available to them, together with the selective aid, will produce a profitable project at the end of the period required to bring the project to fruition.
Second, the position is more complex where assistance is to be given to an industry or a substantial section of it. In this case the main question is not the commercial viability of individual undertakings, important though that is, but the prospects for the industry as a whole within the economy of the United Kingdom. This means, for example, taking into account the prospects for the industry in relation to our domestic market and the part that, with the help offered, it can be expected to play in world markets. Our aim here must be to ensure that the skills and resources of the industry are allowed the opportunities they deserve.
Third, there are the difficult and sometimes controversial cases where important concerns suffer a severe financial setback. We certainly have no intention of propping up inefficient management or an inefficient work force. But where such a firm has an important place in the economy we need to be sure that there really are insuperable obstacles to its continuation on a sound basis. It cannot be presumed that a particular setback to a vital sector of the economy is necessarily final. We may also have to be ready, on occasion, to provide financial assistance on a temporary basis while the situation is being fully assessed.
In carrying out such an assessment, regard has to be paid to the whole range of relevant economic factors. Future 1021 profitability is one, but others cannot be ignored. These include international competition and whether it be fair or unfair; the employment the industry provides in relation to the future of a particular area is also very important. This must be taken into account and care taken to examine whether it makes sense to allow a sudden collapse or whether it may not be preferable to aim for a slower run-down while alternative employment opportunities are provided. A viable enterprise at a lower level of operations is frequently a possible solution, too. Other factors may also be relevant, but I wish to emphasise the need for a thorough examination of all the factors so that a proper assessment of economic prospects and potential viability over the long term is made in each such case.
I do not conceal the fact that, inevitably, these assessments are very often made against great pressure of urgency, and to pretend that risks do not have to be taken would be foolish, but they may be justified to achieve the wider purposes of policy.
Part III of the Bill comprising Clauses 9, 10 and 11 provides for the two forms of assistance intended for the shipbuilding industry. On the one side the home credit scheme, which is well known to the House, needs to be somewhat re-reframed in view of the demise of the Shipbuilding Industry Board. I propose that this should be done and that the financial coverage of the scheme should be extended to increase the limit of liability at any one time to £1,000 million, with a further provision to increase that to £1,400 million by order subject to the approval of the House.
On the other hand, there is the temporary construction grant scheme, the need for which I outlined in my speech in the Budget debates. The House will recall the considerations I mentioned as justifying some interim assistance to the shipbuilding industry in view of the difficult outlook of the industry arising from the low level of current ordering and the extent of subsidy being granted abroad to competitors.
As the House knows, it is one of the priority requirements for the Industrial Development Executive that it should turn its attention to the future of this industry in order to allow a strategic 1022 plan to be outlined taking into account likely developments in European policy.
As far as special assistance to Govan Shipbuilders and to Cammell-Laird is concerned, it is intended that this should be provided under the arrangements proposed in Part II of this Bill.
§ Mr. Dick Douglas (Clackmannan and East Stirlingshire)
Would assistance to Harland and Wolff come under Part II of the Bill as well?
§ Mr. Davies
No; the assistance to Harland and Wolff was mentioned the other day by my right hon. Friend the Secretary of State for Northern Ireland and is entirely within the framework of existing provisions affecting Northern Ireland and is not within the framework of this Bill. However, the Bill is drafted to deal with problems of Northern Ireland should any such problems arise.
§ Mr. Mark Hughes (Durham)
Is the £35 million already earmarked for Govan Shipbuilders included in the figure of £250 million or is it additional thereto?
§ Mr. Davies
There are two separate tranches of £150 million subsequent to the first £250 million, but provision for Govan could be within the framework of those figures.
Part IV of the Bill is concerned with miscellaneous provisions, and I wish particularly to emphasise the provision of Clause 15. It is my very firm intention to keep the House clearly and closely informed of the way in which the provisions of this Bill as and when it becomes law are used. It is my firm belief that the powers we seek are needed and that without them we should be on balance worse off nationally and much worse off regionally. But I am very conscious that access to arbitrary and discriminatory powers constitutes a heavy responsibility, not least to justify to those who might be the victims of such discrimination the methods practised and the decisions reached. The House is rightly conscious of its role to be vigilant in these matters, and I certainly undertake on behalf of the Government to respond positively to that vigilance.
I commend this Bill to the House. It represents a major new initiative in the drive towards the industrial attainments which seem so persistently to have eluded us over recent years. In particular, it 1023 constitutes a resolute attack on the scourge of regional degeneration which constitutes so grievous a penalty on the people inhabiting more than half of our country whilst, at the same time, undermining the potential of the whole. The Bill alone will not achieve the objective in these fields we so ardently desire: it depends for its efficacy upon the whole conduct of the economy. But it seems clear that we are at long last moving out of the trough in which we seem latterly to have been sunk. That being so, the measures proposed in this Bill add up to a powerful stimulus to our national prosperity and should lead to the kind of results which I am sure every one of us seeks. To have their effect, those measures must be allowed to work they are not short-term palliatives in any sense whatever. They rely on consistency of application and the maintenance of a resolute attack against the weaknesses that have so long beset us.
§ 4.30 p.m.
§ Mr. Anthony Wedgwood Benn (Bristol, South-East)
We have listened to one of the most remarkable speeches to which this House has been treated by the right hon. Gentleman the Secretary of State. He has introduced a Bill, which the Opposition welcome, by announcing the largest subsidies by the taxpayers to the regions that we have ever known; to industry generally, and to shipbuilding in particular, with total expenditure far exceeding anything that has been brought forward by previous Governments.
The instruments of intervention which the right hon. Gentleman invites the House to grant to him are virtually unlimited in their impact. The criteria are left deliberately wide to permit the Government to assess the economic prospects of the companies they wish to support. Clause 7, laying down the purposes for which these powers may be used, has a familiar ring about it. Those purposes areto promote the development…of an industry…to promote the efficiency of an industry…to create, expand or sustain productive capacity in an industry…to promote the reconstruction, reorganisation or conversion of an industry… to encourage the growth of, or the proper distribution of undertakings, in an industry".Those purposes have a familiar ring because they come from another Measure to which the right hon. Gentleman made 1024 no reference—the Industrial Expansion Act, 1968. Section 2(1) of that Act had among its purposesto improve the efficiency…of an industry or a section of an industry…to create, expand or sustain productive capacity in an industry or section of an Industry…to promote or support technological improvements…and so on.
The right hon. Gentleman had every one of the powers he now requires of us when he assumed his present office. He had those powers, including the power, to which he attaches such importance, to take equity with the consent of the company involved—a phrase again taken word for word from the Industrial Expansion Act. Yet he forced through Parliament as recently as last year a repeal of that Act, and he made no reference today to the fact that this is not his first Industry Bill as Secretary of State but his second Industry Bill. Clause 2 of his first Bill provided that no industrial investment scheme was to be made under the Industrial Expansion Act. I forget the date of the enactment and Royal Assent of that Measure, but it cannot have been more than 12 months ago from this moment.
The right hon. Gentleman inherited from the previous Administration an Act which gave him all or virtually all the powers he needed and which, if it had loopholes in it, could certainly have been expanded by a further Measure, and we should not have opposed that. But having inherited instruments which, were they not adequate, he could have expanded by his own first Industry Bill, he first winds up and then re-enacts instruments which he saw to have been necessary many years ago——
§ Mr. John Hall (Wycombe)
But would not the right hon. Gentleman agree that the present Bill goes very much further than the Act to which he refers?
§ Mr. Benn
I must yield to the hon. Gentleman. If I may say so, I shall always give way to him if he is to be as helpful as he has been in that comment. Of course the present Bill goes further. The powers are wider, the amount of money is greater, the criteria are looser, the degree of accountability is less. Indeed, I shall argue that in some respects the Minister has taken powers which will greatly diminish parliamentary accountability for the investments he wishes to make.
§ Mr. Davies
Does not the right hon. Gentleman think that the provisions in the Bill as related to the regional interests are entirely different from and having nothing whatever to do with his Industrial Expansion Act?
§ Mr. Benn
One of the powers which the right hon. Gentleman now has taken in his own Bill for capital grant in the regions could have been exercised under our own legislation dealing with investment grants—and I shall come to them in a minute. The right hon. Gentleman abolished investment grants and now reintroduces them. More could have been made available under one section of the Industrial Expansion Act. The Industrial Reorganisation Corporation also had powers under the Industrial Reorganisation Act, though it had nothing like as much money available to it. I think that it was £150 million that the IRC modestly had, and the right hon. Gentleman now talks of £250 million, with two further tranches of £150, to be made available for his own measures. But it is not only that the range of criteria is wider and the instruments are greater, but the Government's regional policy has radically altered since October, 1970.
Then the object was to save money on the regions, and during the campaign of 1970 it was the Conservative Party which claimed that money could be saved on regional policy. Now, the object is to spend more. In 1970 the object was to concentrate on infrastructure; now it is to move back to investment grants and selective support. Then, the object was to concentrate on growth areas; now the assisted areas have been widened. Then, it was an attack on investment not linked to job creation. Now the Secretary of State has even abolished that criterion. Then he ignored the regional implications of the EEC; now, today, for the first time, he confesses that the limitation of some of the powers of the Bill has been made to correspond with the end of the transitional period. Then, it was national growth that was to provide answers to the regional problem; now we are back to the regional emphasis. Then, the differentials were narrowed—between October, 1970, and this spring; now, wider differentials are provided.
1026 Turning to Part III, which refers to shipbuilding, we find an even more astonishing story, for it will be remembered by many hon. Members that only a few months ago the then Minister for Industry, now moved to Posts and Telecommunications, announced that it was the considered view of the Government that no further assistance whatever would be needed for the shipbuilding industry other than the continuing credit scheme. The right hon. Gentleman speaks of the demise of the Shipbuilding Industry Board as though that demise was unconnected with his own decision to wind it up. Of course these powers were available to him in regard to the Shipbuilding Industry Board, and he could have used them if he had wished to do so.
Let us take some individual instances, because it is only nine months since we heard of the rejection of £6 million for Upper Clyde—now to get £35 million in respect of Govan Shipbuilders and possibly £12 million to £15 million for Clydebank—nearly £50 million of public money. These are not even under the shipbuilding provisions of the Bill, but are to be made available to those four yards which last summer were, in his view, not capable of development because of lack of viability.
§ Mr. F. A. Burden (Gillingham)
Would not the right hon. Gentleman agree that my right hon. Friend's attitude is much more realistic and helpful than his was when, on 2nd August last, in this House the right hon. Gentleman admitted that in June, 1969, he had intervened with the directors of Upper Clyde and had told them that unless they reorganised management, stopped restrictive practices and reduced the labour force by several thousands of men there would not be one more penny forthcoming for them?
§ Mr. Benn
It is not word for word. I remember my words. In the summer of 1969 we were insisting on changes, as 1027 the right hon. Gentleman now claims that he will insist whenever he gives money to a private firm. Any firm that takes money from the right hon. Gentleman will be subject to this rigid examination of its economic prospects. But such powers as I exercised myself in the summer of 1969 will be exercised over a much wider range of firms. Since then Cammell-Laird has had £3 million; Harland and Wolff £14 million; £70 million has been provided in naval orders and £50 million more is to come in shipbuilding grants. Finally, the right hon. Gentleman makes no reference to the extra 500 civil servants who are to go into the Department of Trade and Industry to implement the Bill.
In the course of his presenting the argument today, with much of which we found ourselves in agreement, the right hon. Gentleman's personal credibility would have improved had he admitted that it ran counter to everything that, both at the CBI and as Minister, he has said time and again over the last few years. Anyone not knowing his history and reading that speech today would think that he invented socialist intervention in a mixed economy. That is why the House will look with some scepticism at his capacity to apply his Bill seriously. We know from what he has told us ceaselessly over the years that in his heart he really does not believe in this kind of industrial policy. Indeed, when the Industrial Expansion Bill was going through the House and he was at the CBI, the CBI broke off negotiations with the Government simply because the Bill had provisions of the kind which the right hon. Gentleman now introduces. The present Chansellor of the Exchequer denounced that Bill, as did The Times, the Sunday Times, the Financial Times, the Daily Telegraph. The Spectator, the Economist, the CBI and the Director. All denounced the measures which the right hon. Gentleman brings before the House today.
On a famous occasion on Second Reading of that Bill, the present Secretary of State for Social Services said that the Bill would open the way to corruption because firms would always be going to civil servants. This may well still be the view of some hon. Members on the Government side. I remember their contributions to that debate.
I do not have to remind the right hon. 1028 Gentleman of the speech that he made to the Parliamentary Press Gallery 14 months ago, in which he absolutely excluded from his mind any possibility that measures of this kind would be necessary. The only passage I shall read is this:In saying this"—he was talking about his attitude to private industry—I underline, by contrast, that we do not believe in seeking by Prices and Incomes Boards to control the wages they pay or the prices they charge; by Industrial Reorganisation Corporations to impel them to marriages they do not contemplate, providing them with dowries they do not justify; by Shipbuilding Industry Boards to induce them to undertake projects whose success they are not organised to attain; by industrial expansion Acts to stimulate them to expansions not within the capacity of the resources they can organically command; and so on through the whole gamut of policies and institutions devised to confuse the judgment of businessmen within their own field of comprehension by considerations wholly outside it.That was 14 months ago. In March of this year, in the Daily Telegraph, the right hon. Gentleman is reported as saying that he had not changed his mind.
The reason I refer to this background is partly because the credibility of the Government in implementing a policy in which their principal spokesman manifestly does not believe must certainly be in doubt; secondly, it is because it would be wrong, looking at the major crisis in employment—to which I want to come shortly—to leave out of account the damage done to business confidence by the right hon. Gentleman's discharge of his stewardship over the last two years, when he went out of his way—I believe that this is the real explanation for the Rolls-Royce collapse as well—to try to persuade British industry that if it got into difficulties there would be no Government support of any kind for it. If that did not have an effect upon major investment decisions I should be very surprised.
§ Mr. Benn
The hon. Gentleman knows that there is a Board of Trade inquiry in progress on this matter and that in October, 1970, when the right hon. Gentleman the Secretary of State was in charge, he advanced a further £40 million tranche. It is nothing whatsoever to do with the question with which I am dealing, except to say that as soon as Rolls-Royce collapsed the Prime Minister used that collapse in a public speech in order to underline the fact that no firm could rely upon the Government for help. The right hon. Gentleman has not changed his mind because of arguments from this side of the House. He has changed his mind because of rising unemployment and because of political pressures created by rising unemployment. It is no secret that at present the reason why the Treasury Bench is so empty is that the Cabinet are rethinking Selsdon in the security of Chequers. Their rethinking of Selsdon arises because they have discovered that the policies devised at Selsdon, which commanded great support from them in the past, including support from the hon Member for Cirencester and Tewkesbury (Mr. Ridley), have created a political situation which they cannot sustain.
On behalf of the Opposition I say with great sincerity that the fall in the unemployment figures announced last Thursday was very welcome indeed. It is astonishing that we should have to be pleased when unemployment falls below 1 million for the first time in 1972; but we are pleased. However, the figure is still substantially higher than it was in June, 1970–325,000 higher. If one takes into account the people who we are certain do not register as unemployed, the true unemployment figure is almost certainly still well over 1 million. In Scotland, taking the latest figures, there is still 8 per cent. male unemployment, and in the North-East, and 5.5 per cent. in the West Midlands. The figure for wholly unemployed in the West Midlands has increased by more than 100 per cent. since the right hon. Gentleman took charge, and in the North-West it has increased by 81 per cent. There are still five men, women and young persons looking for each vacancy, even though vacancies have 1030 increased—and we are glad about that. But 70 per cent. of the vacancies are in the South-East of England, where unemployment is still only 2.1 per cent.
Taking regional vacancies, in Scotland there are still 18 men looking for every job. In the North-West and the North, for men and women, there are 13 people looking for every job. The position for school leavers has radically deteriorated in the last two years, the number of vacancies having halved and the number of unemployed school leavers and young people under the age of 18 having muliplied by three.
Regarding the occupational aspect of unemployment—for this, after all, is a debate about unemployment as well as the Government's measures to deal with it—I deal with the vacancies by certain areas. There are 16 male and female clerical workers looking for every clerical vacancy. For Scotland the figure is 34 men and women looking for every clerical vacancy. In skilled engineering the figure for Great Britain is seven skilled engineers for every vacancy; in Scotland the figure is 29. Taking general light labourers, the category where the position is most serious, the figure is 500 looking for every vacancy in Great Britain as a whole, and the Department of Employment Gazette says, I think, that 12,000 are looking for every vacancy in Scotland.
The unemployment position with which the right hon. Gentleman has to deal by the Bill is far more serious than the one he inherited in the summer of 1970.
IDC approvals in the last winter period compared with the winter before are 30 per cent. down in development areas and 20 per cent. down in the intermediate areas. They are 24 per cent. down in Great Britain as a whole. Other indications of economic growth and development are manufacturing stocks and consumer expenditure, road building, or investment generally. The Bill has to measure up against an absolutely massive problem of unemployment, which has not been dealt with by the present Government during their period in office.
§ Mr. Benn
The hon. Gentleman has intervened once. If he wishes me to 1031 engage in a re-examination all the debates on Upper Clyde Shipbuilders, I cannot do so in the middle of my speech. We had better correspond, and I send a copy of our letters to Mr. Speaker.
Shipbuilding proposals are contained in the Bill. The tonnage of new orders is one third down in the first quarter of this year on what it was in the first quarter of last year. All this is against a deteriorating balance of payments position, which indicates that for the future there are shadows and clouds over the horizon which could make the position much worse.
The classic Government answer to explain our difficulties has always been that it was all due to wage inflation. But we now know that the figure for wage inflation in Britain in 1971, 6½ per cent., was below that of West Germany, 8 per cent., and below that of Belgium and Italy. The old argument that the right hon. Gentleman and others have produced simply does not stand examination.
I turn to the provisions of the Bill in greater detail. The regional provision for capital grants or investment grants we welcome. The selective assistance in the regions running to about £75 million a year we welcome. We welcome the provision, contained within a £550 million total to the end of 1977, for support to industry nationally. But in Committee we shall make the following points and explore them with Ministers.
We believe that the arbitrary nature of the Bill is likely to strain relations between Government and industry given the massive range of powers which the Secretary of State has and the large sums involved. I do not go so far as the Secretary of State for Social Services in speaking of corruption, but where intervention, having stopped, now begins again on such a massive scale there is bound to be strain between Government and industry. I share the view of the CBI that certainty both of duration and of rates of grant is necessary if the grants are to be effective.
I want to hear a great deal more, and so will the House, about the relationship of the new Industrial Development Executive with physical and land use planning. I know what the Minister will say, be- 1032 cause I heard him say it on the radio the other night. There will be co-ordination; but co-ordination between the Department of Trade and Industry, the Minister of Industrial Development, the Industrial Development Executive, industrial development boards, the Department of the Environment, the Department of Employment, regional councils and the new local authorities being set up under the Local Government Bill could be a nightmare of cross-interdepartmental committees unless we are absolutely clear how the system will work.
I regret, and so do my hon. Friends, that the Government still intend to phase out REP, which is much the best way of maintaining employment in areas where difficulties persist. I regret, like the TUC, that there is no employment criterion provided in the Bill. I am anxious lest the differential, which I recognise is now wider between development areas and the rest of the country, may have narrowed dengerously between special development areas and development areas, where building grants have dropped from 45 per cent. to 22 per cent. and plant and machinery grants in the special development areas are now only 2 per cent. above the development area level.
We are anxious about IDC policy, which the right hon. Gentleman admits has been relaxed, and we are wondering what its future will be inside the European Communities. Nothing is done for service industries, on which the CBI has expressed strong views, and, although the right hon. Gentleman claims that service industries follow industrial growth, that is not the only type of office, service or tertiary industry that might be provided. We have heard nothing on the 1970 White Paper on devolving Government offices to indicate that the Government will play their part in taking office development to the development areas.
The time has come for a new approach, and we do not think that the measures which the Government are introducing now are adequate. The social costs that have to be taken into account in planning must include the growing costs of congestion in the congested areas in the South and East as well as the problems of unemployment in the development areas. We believe that IDCs and office development certificates are vital for the purpose of steering employment into areas where 1033 it is needed. We want to see public enterprise playing a larger part in the development areas, and we are disappointed that, despite the TUC proposal for development authorities which was brought forward last autumn in connection with the Upper Clyde, the Government have not decided to make this possible. Under the Industrial Expansion Act, now repealed, the capacity to set up regional industry boards was already provided. I take note from what my right hon. Friend the Member for Birkenhead (Mr. Dell) said that it will be possible under Clause 7(2)(a) to set up a State holding company, and I am glad that this provision has been included in the Bill. If a new company is formed for the purpose of giving financial assistance and the Government can take shares in that company without its consent because they will be creating that company, the Government are giving us what we have demanded for some time—a power to create a State holding company- and a future Labour Government would deal with that.
§ Mr. Burden rose——
§ Mr. Benn
I have already given way to the hon. Member for Gillingham (Mr. Burden), who is pursuing a private battle on his own, which I am quite happy to take up with him.
I turn now to the need to have a much fuller consultative planning mechanism with both sides of industry. It is no good talking about a problem of unemployment due to technical change if the measure of contact between Government and industry forecasting the run-down of employment in certain industries and certain areas is not carried forward in far greater depth than it is today. As the Government have changed their mind on so much in the Bill, I hope that I do not look forward with undue hope to the possibility that they will return to the type of consultative planning we had in hand to anticipate the scope of future problems.
I want now to refer to the effect of the Bill in relation to the Government's proposals for entry into Europe. If the growth which the Minister and the Government say will come from entry really occurs, the rate of technical change will accelerate and the problems of areas which at the moment are not affected 1034 will become apparent. It is certainly arguable that the West Midlands could become a development area, of a kind, as a result of the impact of entry into the Common Market. If so, the measures that need to be taken are much more radical than those which have been considered hitherto.
If trans-national mergers take place, which the Commission is anxious to promote, the country will be faced with an even greater rate of closure of uneconomic plant and a bigger shakeout in those elements of that new company in Britain. If the free movement of capital occurs, the Government's influence in encouraging people to move to development areas will be much diminished—a point which my right hon. Friend made on 3rd May.
Public enterprise which can be used to create employment, as we used public procurement, for example, with the Post Office to buy telephone equipment from Wales, will be ruled out by the Commission. The Commission has made it absolutely clear that it intends to intervene centrally in the area of regional policy. and the great question as yet unresolved is whether the Commission will be prepared to accept that our areas of industrial run-down qualify for regional aid. Everybody knows about the Mezzogiorno in Italy and about the area just bordering East Germany, but I will quote from a leaflet issued by Barclays Bank on the regional policy of the Commission:An assimilation of United Kingdom regional policies with the EEC system should not present any major obstacles unless 'Central Areas' are defined to include the British industrial conurbations which at present enjoy development and intermediate area status.But that is the whole point. Much of our development area assistance is in areas where there has been industrial development which has been run down as a result of all the factors mentioned by the right hon. Gentleman in his speech. These are problems which have never been fully explored by the Government in public debate.
The powers of the Commission under Article 93 of the Treaty of Rome to which my right hon. Friend referred in his speech are enormous. M. Borschette who recently participated in the broadcast with the Minister said that the Commission would have the power to decide 1035 which regional policies were "permissible". The Commission has also made it clear that it does not intend to allow incentives to be given to unprofitable companies.
Here we come right up against the Govan Shipbuilders problem. Lord Strathalmond, in his letter of 17th February, said that despite the £35 million which the Government were prepared to give to the Upper Clyde Shipbuilders, of which Govan Shipbuilders are part, he could not undertake that that company would ever be viable. Therefore, the central features of this Bill immediately come into potential conflict with the Commission for the Common Market. When one adds to that the uncertain role of a possible economic and monetary union, or the regional development fund, the social fund and the question of the control of development area frontiers as in the recent Belgian case, coupled with the expiry of Clause 8 in 1977, one realises that the Bill, although presented to Parliament in the guise of parliamentary accountability, is a Bill the execution of which will be accountable not to the House but to the Commission.
Under Clause 2 of the European Communities Bill the whole Measure can be amended or changed at any time by superior law laid down by the Commission. It is the European Ministers and the European Commission who will be vetting how the Minister uses these powers—and not the House of Commons. That factor must be made clear. In this way we slide unperceptibly from parliamentary control of and intervention in industry to ministerial control and intervention, from democratic control to bureaucratic control. In fact, the Commission decides whether or not the areas laid down are to be allowed, whether the classifications are to be allowed, and how much support can be given. The Government will not have to worry about what the House says.
Here is where I come to the point that I made at the beginning of my speech, as to why this Bill has been brought forward. I hope I am not insulting the right hon. Gentleman the Secretary of State, for I do not mean to do so, in saying that, like all Ministers, he is affected by the development of public opinion in matters of current policy. That 1036 is to say, when unemployment develops, when the public is manifestly agitated and deputations of decent people express their anxieties, and even more when this is reflected in debates in each party—for both parties are sensitive to the development of opinion—that is a factor which Governments take into account in changing their policies. That is the democratic interplay between electors and those whom they elect.
What I am afraid of—and I do not want to put it more strongly than this—is that when these powers are exercised not here but in Brussels that democratic interplay will be lacking. The regional deputation from Scotland which comes to see the Minister has to be listened to because it will determine whether his party returns to power, but the regional deputation that goes from Scotland to Brussels will be confronted with good, kind and wise men who have to bother only about whether the proposal which is made fits in with their plans, and not about the politics.
That is the core of our political democracy. That is what it is all about. When we talk about sovereignty and all these theoretical things, it is the flesh and blood of this interplay covering the skeleton of sovereignty that makes one so cautious.
These are some of the issues that we shall raise in Committee.
The Bill is a massive measure of intervention. Huge sums of taxpayers' money are to be committed. The problems with which it is designed to deal are massive and have been greatly worsened by the Government's failure to apply this policy from the outset with instruments similar to the one which they are taking and which we left to them to use. We shall seek to remedy the deficiencies. We shall make use of the powers of the Bill, when we inherit power again, more radically than the right hon. Gentleman himself will use them, and we shall probe still further the relationship of this whole problem to our proposed membership of the Community.
Let me say this to the right hon. Gentleman in conclusion. We do not believe that public subsidies for private shareholders on the scale now contemplated will any longer be accepted by the public as a whole. It fell to his 1037 Government to take Rolls-Royce into public ownership because they forced it to liquidate when it did.
In practice, the right hon. Gentleman's speech today—all party bantering apart—marks the end of the argument between public and private enterprise in the handling of the affairs with which we have been dealing. I can assure the right hon. Gentleman that, although he is six, eight or 20 years late in recognising the validity of the arguments which he put to the House today, by recognising them the whole nature of the argument about the relationship between public and private enterprise will have to change. It is a curious turn of fate that it should he the Secretary of State himself, associated during his term of office more than anyone else with the rejection of all these ideas, who should have by his own second Industry Bill signed the death warrant of market forces and competition as a solution of all our problems and opened up an advance which we shall carry forward when the opportunity is given to us again by the electors.
§ Mr. Dan Jones
On a point of order, Mr. Deputy Speaker. Would this be an appropriate moment to remind the House of the words of Mr. Speaker, who asked that speeches should be brief?
§ Mr. Deputy Speaker
The hon. Gentleman, on reflection, will realise that this is an inappropriate moment because the hon. Member for Manchester, Withington (Sir R. Cary) is one of the shortest speakers in the House.
§ 5.6 p.m.
§ Sir Robert Cary (Manchester, Withington)
I have waited a long time for compliments, Mr. Deputy Speaker, and I thank you for that one.
In following the right hon. Member for Bristol, South-East (Mr. Benn), I am sure that he will forgive me when I say that he is always easy to listen to; he is fluent and sometimes dangerously persuasive, but he is not always right. Although there has been some inheritance by my right hon. Friend the Secretary of State from the Labour Party, in fact this Bill is his child. It is a regional Bill; it is a generous Bill, and I think my right hon. Friend is to be congratulated upon its introduction.
1038 At the beginning of his speech the right hon. Member for Bristol, South-East raised the question of the Minister's credibility. On 28th April I attended that great meeting of industrialists in the Manchester town hall addressed by my right hon. Friend as well as by the right hon. Member for Manchester, Cheetham (Mr. Harold Lever) and by Mr. Campbell Adamson, Chairman of the CBI. This is what my right hon. Friend said on that occasion:Regional policy lies at the heart of the British dilemma and has done so for many years. More than in any country the increasing imbalance between the buoyancy and confidence of the new industrial areas contrasts with the decline and depression of the old. This is intolerable. I feel we cannot witness that contrast and its inbuilt tendency to intensify without firmly resolving to change the course of events.May I congratulate my right hon. Friend on changing the course of events by the introduction of this Bill. I hope it will cover some of the areas which I have been privileged to represent for over 30 years along the Manchester-Cheshire border. The need there for the assistance indicated in this Bill is urgent. If we are to face anything like the intensive competition illustrated by the right hon. Member for Bristol, South-East at the conclusion of his speech by entry into another sphere of industrial activity, we ought to do all we possibly can to aid the ancient industrial areas which I have been privileged to represent for so many years.
There are some matters of detail which I could raise, but I shall not do that now. I do not wish to make, so to speak, an industrial debate speech. I wish to congratulate my right hon. Friend on introducing the Bill. I have a preoccupation with steel, the matter which will be discussed tomorrow, because, as some of my hon. Friends know, I am directly concerned with the Irlam steel plant, but that will come within the province of my hon. Friend the Minister for Industry then.
However, as I imagine that tomorrow's debate will deal with matters generally rather than with precise plants and local problems, I shall raise a matter now arising out of paragraph 17 of the White Paper:The nationalised industries as such will not be excluded from the new arrangements, but, with the important exceptions of coal and steel, the main activities of the nationalised 1039 industries will not, in general, qualify for grant.I cite here the example of the Irlam plant, both the older part already shut down and the surviving part which may be threatened next month with extinction. Will the old site become eligible to be rehabilitated under the provisions of the Bill, in spite of the younger element of the plant being allowed to continue with electrical furnaces? Or, if the whole plant is swept away and there is no Irlam steel plant as we have known it for so many years, will the whole of that site become eligible under the Bill for rehabilitation? I know that my right hon. Friend has this matter in mind, and I hope that we shall be given further information on it.
I again congratulate my right hon. Friend on introducing his Bill. He promised it within a month of making his speech at the Manchester Town Hall, and I hope that it has a swift and easy passage. Speed is of the essence of the contract. The right hon. Member for Bristol, South-East made the same point. We must not delay or falter in preparing our industries to go into Europe. So much remains to be done that it is a little intimidating even to begin to examine it. I wish my right hon. Friend well in pursuing his policy.
§ 5.13 p.m.
§ Mr. Bruce Millan (Glasgow, Craigton)
I am glad to follow the hon. Member for Manchester, Withington (Sir R. Cary) in welcoming the Bill. It is introduced against an appalling background of unemployment. We are extremely glad that there has just been a substantial reduction, but the figures remain extremely serious.
I am not sure to what factors the reduction in the last month is attributable. I hope and believe that it is at least partly attributable to the fact that industry, through the Budget and through the advanced notice which we have had of the Bill, now appreciates for the first time that the Government are serious about dealing with the unemployment problem. One of the great difficulties of the past two years has been that, while the Government have, on the one hand, deplored the unemployment problem they have, on the other, seemed to be conspicuously 1040 unable to produce any policies which seemed in the slighest able to deal with the immensity of it.
The various proposals in the Bill reverting their regional policy so far is the first sign we have had that the Government are seriously tackling unemployment. My right hon. Friend the Member for Bristol, South-East (Mr. Benn) has demonstrated how much of a reversal of Government policy the various provisions are. I welcome both the reversal of policy on fiscal incentives and the reversal of the Government's general philosophy regarding intervention in industry. The latter, I believe, even more than the reversal of policy on fiscal incentives, is the significant feature of the Bill.
Nevertheless, it is not sufficiently appreciated, that the change back to investment grants does little, if anything, more than take us back in terms of financial advantage for developing in the regions to the position prior to October, 1970. The changes represent a considerable improvement over the immediately preceding situation, but they do little more than take us back to the Labour Government's system. They take us back to the sort of policy which the Opposition have been urging on the Government ever since June, 1970.
We are entitled, therefore, to remind the Government that we warned them at the time of the October, 1970, changes that the considerable diminution in regional incentives and the changes then made entailing a general lessening of Government will towards the regions would inevitably bring extremely serious developments in unemployment. In fact, all that has happened since October, 1970, is no more than we forecast when the Chancellor made his changes then. However, as I say, we welcome the change back to the investment grant system now.
The Government have said—the Secretary of State said it today—that there would be an emphasis in the new system of incentives on profit-making companies as against those not making profits. The right hon. Gentleman gave that as one of the virtues of his system. As regards employment, the new incentives are virtually indiscriminate. In my view, if one is to have discrimination at all in these matters, it is far preferable to have dis- 1041 crimination in favour of industry which is providing employment rather than in favour of industry which is making profits. We know from experience in the regions that incoming industry, certainly in the earlier years, cannot always guarantee a profit and is not always sure whether a profit will be made.
There is no evidence that industries coming into the regions on the basis that they are not likely to make profits in the earlier years but expect profits later have been any worse a bargain for the development areas than industries coming in with the guaranteed expectation that they will make profits immediately.
In my view, it is both unnecessary and undesirable to have that emphasis on profit-making industry as distinct from industries which are, so to speak, taking a calculated risk in coming into the development areas. I hope that we shall be able to discuss these matters in Committee. I am referring here not just to what is in this Bill but to the corresponding provisions in the Finance Bill as well.
It is important to give proper attention to assistance towards office and service employment. I understood the Secretary of State to say that incentives in the past have not necessarily proved their worth. In fact, there has been very little in the way of financial incentive in the past for office or service employment literally coming into development areas as distinct from being attracted there or being generated there by the normal process of activities auxiliary to manufacturing employment.
There should be increasing emphasis on office and service employment, and this also should be pursued in the context of the Bill. In my view—it is, perhaps, a view which I have not always held—we have in the past given too much emphasis to improving the attractiveness of regional areas for manufacturing industry and not enough to office and service employment. I was, therefore, disappointed by what the right hon. Gentleman said about that today.
It is necessary that the position on the regional employment premium, as it affects industry in the development areas and industry which may be coming into those areas, should be completely clarified. The Government's original intention was to abolish it in 1974, but they 1042 are now talking of phasing it out after 1974. The sooner this is clarified the better. I hope that REP will continue because there is a tremendous amount to be said for it in comparison with investment grants in enhancing the attractions of development areas for incoming industry.
I welcome the Government's change of heart over their philosophy of intervention as represented by the Bill. I welcome it particularly in the shipbuilding industry and I recall that in all our previous shipbuilding debates we on this side of the House said that it was essential for the industry's future prosperity and indeed its continuance in this country that the Government indicate that they saw a future for the industry and were willing to support it through its present extremely difficult period. When we said that to the Government we met with no response and they gave every indication that they had virtually written off the industry in this country. I am delighted that this is not so and that they have now expressed their confidence in the industry, through this Bill, and I hope that the industry will respond to it.
But we must also remember the shipping industry. The amount of orders placed by British shipping companies in the last 18 months or so, since the abolition of investment grants, is a very worrying feature of the present shipbuilding situation. I hope very much that we shall have something from the Government tonight about their attitude towards the representations which I know have been made to them by the Chamber of Shipping about investment grants for British shipowners. I do not want to develop the point at any length, but if there is to be the kind of assistance to British shipowners for which I understand they have asked, I hope the Government will look carefully at the proportion of orders going to British shipbuilding yards. For example, one of the essential features of the build-up of the Japanese shipbuilding industry has been that all Japanese shipping orders go to Japanese yards. But in this country about three-quarters of the orders by British shipping companies are placed in foreign yards.
While I am personally very anxious that something should be done to help British shipping, I think we require a 1043 certain amount in return, and some kind of linkage to orders in British yards should be considered by the Government.
We have been asked to make brief speeches, and I am rushing through these points, but I should like to deal briefly with the Scottish situation. We require a considerable clarification of the position of the industrial directives and the Industrial Development Executive in Scotland. I was disappointed that the Secretary of State did not mention these matters this afternoon. As I understand them, the arrangements in the White Paper are intended to provide an administrative structure for the various forms of assistance in Part II of the Bill. The Secretary of State, for example, said that help to Govan Shipbuilders would be handled under Part II; but it was not clear to me whether it would need to go to the Industrial Development Executive or to the new board, or whether it was considered to be a decision which had already been taken by the Government and it would not, therefore, be necessary to go to the new board. In spite of answers I received last Friday, it is not clear to me how far the Scottish Office will participate in the work of the new executive. As far as I can see, the new arrangements represent a diminution of the responsibility of the Scottish Office in these matters, and if this is not the case we should have it clarified more fully than it has been so far.
On the general question of the new arrangements for special assistance, we need to know whether the new bodies will operate completely independently and autonomously—of course, with Government money—or whether they will operate under guidelines laid down by the Minister. If there are a number of regional bodies in different parts of the United Kingdom, all with a fair amount of autonomy, there is obviously the danger of competition between one board and another for what might be termed "foot-loose" industry. I do not believe that the Government's whole purpose is to prevent it, but if it is their purpose it is not clear to me how these various agencies will work. It is not clear whether there will be fairly stringent guidelines laid down by the Government, or whether the boards will have to apply to the appropriate Minister for approval 1044 of any particular project of special assistance that they may wish to give, or exactly how the system will operate.
We have had no clarification of that, and I hope we shall have it when the Minister winds up tonight. But, however the new machinery operates, there now seems an overwhelming case for direct Government intervention, whether through a State holding company or in some other way. Whatever structure is built up, under the present arrangements it is essential for a private enterprise company of some sort to be interested in developing in these areas. If not, the structure does not operate at all. In the last analysis it depends on the general state of the economy and on the general willingness of private enterprise to be willing to locate enterprises in the development areas.
It is the bitter experience of many of us, particularly hon. Members from Scotland. that it is precisely that latter requirement which is so often lacking. In many instances it can be produced if the financial incentives are high enough. But there comes a time when increasing the financial incentives simply means giving away more money without necessarily producing the desired result. It is in that kind of situation that the case for direct Government intervention—direct Government public enterprise—becomes overwhelming. The most significant gap in the Bill is the lack of that direct Government intervention.
Nevertheless, I welcome the Bill very much. I welcome the Government's conversion to the policy of intervention and the reversal of their policy on fiscal incentives. Nevertheless I think the Bill can be considerably improved in Committee.
§ 5.28 p.m.
§ Mr. R. W. Elliott (Newcastle-upon-Tyne, North)
I wish to make as brief a speech as possible. I welcome the Bill very much as the representative of a development area.
In spite of what the hon. Member for Glasgow, Craigton (Mr. Millan) has said. of course the Bill has a great deal to do with unemployment. He said he welcomes the fall in unemployment; but so do we all. At least he was generous enough to link the fall with this year's Budget, unlike the right hon. Member for 1045 Bristol, South-East (Mr. Benn). But when the hon. Member went on to say that the Conservative Government had ignored unemployment in the past two years, I doubt whether any statement could be wider of the mark.
Perhaps the hon. Member will be generous enough in subsequent speeches to mention reduced taxation, not only for this year and through the medium of the present Finance Bill and the Budget, but over the last two years as well. The reduction in taxation has been very substantial; but taxation was never reduced by the Labour Government. I welcome his recognition of the connection between reduced taxation and falling unemployment.
I very much agree with what the hon. Gentleman said about shipbuilding, but when in heaven's name did a Conservative Government or the Conservative Party ever write off shipbuilding? Some preposterous things are said to us in the House from time to time, but that is one of the most preposterous I have ever heard. But I wholly agree with the hon. Gentleman that we wish to look very hard at the proportion of ships for British owners being built outside this country. This is a very serious problem, but, as I interpret it, one of the features of the Bill is that there shall be encouragement for the building of British ships in British yards.
I have taken part in debates in the House on development areas over a long period. It has been the constant plea of not only myself but other hon. Members from development areas that those areas should be given the maximum encouragement and aid to play their full part in achieving national prosperity. Much has been done by successive Governments. It would be wholly wrong for anyone on this side to deny that the Labour Government did a great deal to aid the development areas. They tried to do a great deal. If their central fiscal and economic policy failed, that is not to say that a great deal was not done in areas like mine to improve what has come to be called the infrastructure.
Much financial aid was poured into the regions by a Labour Government. Our criticism was that it was poured in indiscriminately. I welcome the Bill because it gives the clearest, strongest and 1046 most tremendous regional advantages we have yet known. I say that having taken part in debates on regional policy for quite a number of years. The Bill recognises the great need to link aid to modern requirements. I do not think that challenge has been met as fully in any previous legislation as it seems to be met in this Bill. There is an attempt to be discriminatory, to get at exactly where we need to put money into development areas to bring lasting employment and aid the areas to play their full part in the national economic performance.
A comprehensive development area policy was overdue. We have moved steadily on, but the main impact of any regional policy must be to induce national prosperity to spread itself much more evenly than it would otherwise do. The Bill meets and answers quite a number of worries of people from development areas, people like myself. We have more selective aid, which faces the ever-increasing problem of the grey areas. I do not believe the previous Government ever faced to the full the rising problem of the grey areas. The Hunt Committee was brought into being in the face of that problem. The Bill recognises that undue emphasis on the development areas in the long term leads to terrible problems on their borders. It recognises and faces the rising irritation—which of us from development areas has not known this?—of existent industry not being aided also. Over and over again over the years I have visited industrial intallations in the North-East and been told "It is all very well for those who are just coming in, because they get all the aid, but what about us? We have been providing employment for years, and we can employ more people. For goodness' sake, include us in your encouragement provisions." The Bill does that, and I am very grateful to my right hon. Friend and the Government for recognising this great need.
Thirdly, the Bill recognises the need for a comprehensive approach to credits and grants for shipbuilding. The shipyards of our country are almost without exception in the development areas. When emergency aid has been given, as it was recently on the Upper Clyde, shipbuilding firms in other parts of the country understandably say to Members of Parliament like myself "What about us? Do your realise that our competitors are being 1047 given a substantial injection'?" Therefore, it is with considerable enthusiasm that I welcome that part of the Bill which attempts to meet that criticism and to see the shipbuilding industry as a whole, as a very important industry, a lasting one which needs the maximum encouragement possible and which will certainly receive it under the Bill.
I welcome very much our new Industrial Development Executive, and the appointment of my right hon. Friend the Minister for Industrial Development as a man for all regions. As a Tyneside MP, I welcome very much his recent announcement of an inquiry into the shipbuilding industry.
The inclusion of offshore installations is most timely. The North-East of England could greatly benefit if pipelines from Ekofisk and Auk are brought to Teesside. A recent article in theEconomistestimated that each rig spends £1 million with local industry and £2 million with industry further afield. It is a very pleasant prospect for the north-east of England if we can attract this type of industry. I very much welcome the inclusion of offshore installations as being subject to grant under the Bill.
I note also that the north of England Shipowners Annual Report estimates a possible doubling of short-distance sea traffic subsequent to our entry into the European Economic Community. This, too, should augur well for shipbuilding on the North-East coast and in other shipbuilding areas.
I very much welcome also the encouragement of the industrial estates corporations, which have done a considerable job in areas of high unemployment. Their headquarters for England is quite close to my constituency. They will obtain great encouragement from realising that their considerable expertise is now to be used in a much wider area.
The general powers associated with financial assistance in the Bill will benefit the United Kingdom economy as a whole. They will encourage efficiency, reconstruction. reorganisation and conversion. Quite sensibly and realistically, there is provision in the Bill to cope with contraction of industry also.
I wish to see for my own region a chance to contribute to the national well- 1048 being, and I see it in the Bill. I see no departure here from the principle of encouragement of viable entities. I see a considerable advantage and emphasis on aid to the development areas to a degree we have never known before. I see an end to nonsensical anomalies. In other words, the Bill is a piece of potential legislation which will do a great deal for the economy as a whole and for the development areas in particular.
§ 5.39 p.m.
§ Mr. Harold Lever (Manchester, Cheetham)
I, too, welcome the purposes of the Bill. It means that we can put an end to the sterile debates on the intellectual level of election manifestos and talk seriously. Now that the Conservative Government are safely ensconced in power and have had the responsibility of dealing with regional problems, it is just as well that they have sought to get on to better terms with reality and less intimate terms with their own election pledges and election oratory. However much that may incense some sterner right hon. and lion. Members opposite, it is in accord with the overwhelming opinion of sensible men in the country.
The reason is clear. It is evident that, as industry changes, private enterprise cannot over a reasonable time scale assure to us that degree of restructuring which is adequate to support our economic objectives and our moral imperatives in relation to employment.
There is an asymmetry which has long been visible in private enterprise. Private enterprise is excellent at the restless search for profitable innovation. Its reflexes are powerful and continuing. But its reflexes in achieving restructuring are not as effective or as speedy. That is not surprising. It is more difficult to restructure to meet the changes in industrial design and effort than it is to achieve these new inventions of productivity. The development of productivity in the modern world is proceeding at an accelerating pace not only across frontiers but within frontiers so that the restructuring problem in society is growing with the years rather than weakening.
We have to abandon totally the almost complacent attitude in relation to restructuring that we are dealing with the need to repair some of the neglects of the past in a somewhat half-hearted way which 1049 has increased over the century. We have to move our thinking on unemployment in the regions to a dramatic new level which takes into account that not merely do we have to face in a more serious way the problems inherited from the past but we have to meet the current and future pressures of the remarkable speed of industrial change which is taking place throughout the world. It is well that the Tory Party has abandoned a great deal of its intellectual inheritance, if I can dignify the pronouncements of right hon. and hon. Gentlemen opposite on this subject with that adjective, and come to better terms with reality.
I want at this point to say a word or two about the EEC. Speaking for myself, I am very happy that the Secretary of State consulted the Commission on this matter after the issue of the White Paper. I am very happy that this has been discussed today. Hitherto, many of my right hon. and hon. Friends, understandably, have been anxious that our entry into the EEC might inhibit some of the ideals and objectives of our party about the regions which I heartily endorse—not the anxieties, but the ideals——
§ Mr. Lever
My right hon. and hon. Friends can take some comfort today. After the consultations, the Conservative Party has not been held back in its regional activity but has produced a Bill which exceeds in its objectives and expenditures any piece of legislation dealing with this problem that we have seen before. That was emphasised very fairly by my right hon. Friend the Member for Bristol, South-East (Mr. Benn), who said that this Bill spent more and went further than any Measure introduced by any previous Government. It needs to be done, and it is comforting to know that in this giant step forward the EEC Commission appears to be in entirely encouraging concurrence. I think that after we enter the EEC my right hon. and hon. Friends will find that the problem will not be the EEC holding us back but the Community insisting that we do our share of regional work.
I say that for this reason. If one country in competition with another holds back for a period the sacrifice of resources which are required for the long-term benefit of the regions but which are to the short-term disadvantage of the com- 1050 petitiveness of the nation, it is liable to endanger the competitive prospects of the neighbouring countries. Entry into the Community will not be restrictive of the amount. It will be insistent that we play our part and do not seek to sneak a temporary competitive advantage by not doing our share of regional activity.
I have said that we have to move to a dramatically new level of thought on this question, and the amounts envisaged here do not dismay me. I think that it will be found that we shall need a vast expenditure as well organised as possible and as rapidly as possible to redress the balance in our country between those areas which are able to prosper under normal circumstances and those which must languish and decay unless the Government step in.
I have advocated for a long time that this dramatic increase in the level of our effort was best undertaken by a development bank. Though it is not called that, I see that this Bill is creating a development bank. However, there are a number of reasons why I should have preferred to see it done on a larger scale with more emphasis placed on the discretionary and flexible arrangements which are possible under a bank. Whether or not one calls the Minister a bank, the right hon. Gentleman becomes a development bank for the purposes of this part of the Bill. I should have preferred him to come out in the open and say that he was a bank.
Why do I want a bank? I want a bank because I want to see a subsidy to redress the balance between those areas which can prosper without aid and those which need a subsidy. The only question is: what is the most effective and economical way of giving the subsidy? I believe that it is by providing money. A bank which offers interest-free long-term loans on terms better than any available in the non-selected areas—not just the development areas, but any areas of high unemployment—makes the biggest, the quickest and the most wide-ranging impact with the money available. Inevitably, that will be described as arbitrary and discriminatory. However, I believe that a discriminatory power is essential unless we wish to hand out the money throughout the regions without discrimination. In order to make every £100 million produce its maximum in terms of additional employment and activity in the 1051 regions, it is necessary to be selective and discriminatory.
At the moment we have a patchwork of piecemeal efforts to encourage industry and employment in the regions. Some are fiscal and some are grants. I should like to see them gradually phased out and replaced by all-embracing financial support, one of the terms being that anyone given it does not have recourse to the other advantages. As the bank builds up, the Minister ought to envisage not complex calculations with his customers about how much they are getting under investment grants and what other advantages they get; he should seek to have those waived and he should push his financial assistance in the form of long-term interest-free or low-interest loans to get enterprises going.
This is very important because of this sterile question of whether we prop up existing enterprises which are noncompetitive or bring in new competitive enterprises. Nothing could be healthier than that the central fund from which existing industry was propped up should be able to count the cost of doing so. It has to be done. It is idle to talk about leaving vast areas of the country to become derelict waste land with whole populations out of work. There are periods when existing industries have to be propped up, even if one is not convinced that they will be viable in giving employment in the long term. Nothing could be healthier than that the same fund as financed that was responsible for finding the alternative employment which made it possible to taper off assistance to industries about which there were not long-term hopes and bring in those about which there were long-term hopes. I would like to see a bank operating for that reason.
A bank is so much better because it has greater flexibility. It leaps over territorial and industrial boundaries. It does not discriminate between service and non-service industries. It can meet the whole range of needs of industry of all sizes. It does not have to go only for large firms, trying only to persuade them, although they are very welcome, to open up a branch in areas of high unemployment. It can go for a firm of any size because the flexibility is there.
1052 It does not need to go for a firm that needs a factory or for a firm that needs to employ to get the benefit of the capital grants and the like. Maybe that firm needs help in financing stock-in-trade, maybe it needs help in financing exports, maybe it needs cheap reliable money to finance work-in-progress. All of these things can be flexibly undertaken, and we can bring in a whole range of entrepreneurs because it will not deal as at present, with those whose needs are tailored to a rigid and necessarily bureaucratic structure of subsidised support. It gives total freedom for intelligent judgment to be applied.
Incidentally, I hope that in the reform we can have that intelligent judgment applied to nationalised industries, too. Why should not the coal industry, for example, receive in respect of some of its pits either temporary or long-term encouragement by interest-free loans to keep the pits alive? Why should it be forced to price itself out of the market by increasing the price of coal and, therefore, closing marginally profitable pits? This is again a simple method that we have available to us. Why should we not have cheaper power in these regions, encouraged by the fund that is at the Minister's disposal? He could finance arrangements for bulk supply of electricity, especially at non-peak periods, to industry. That would enable them to compete with many other industries.
§ Mr. Julian Ridsdale (Harwich)
The ideals which the right hon. Gentleman is putting forward are very good, but how does he think they will be possible against a background of wage inflation?
§ Mr. Lever
The hon. Gentleman is really quite naughty even to trouble me with that question because, clearly, if I am to be at all within a reasonable compass of time I cannot cover the major and unsolved problem at this time in all countries.
The Minister ought to seek always to move to this flexible means of financing in his role as a bank providing subsidised funds cheaply. He also ought to use the agencies within these areas. Through the intimate contact that would build up he could invite the banks, solicitors, accountants and estate agents to 1053 submit propositions to him from their clients. He should let it be known that he is possessed of a fund which has as its open purpose the redressing of the balance between areas of high unemployment and the rest of the country that he is operating not to get the highest rate of interest on his funds but, on the contrary, a high rate of enterprise and employment in industry and is ready to sacrifice the interest on his money or the short-term character of his lending to get that, provided that he lends to reputable people. There are hundreds of small-scale entrepreneurs already in the regions who could respond to an initiative by the Minister and put forward all sorts of enterprises. He can tailor the subsidy to each individual need.
I am convinced that no one needs to apologise any further for the need for discrimination and discretion in the wielding of these vast funds. No one needs to retain a reputation as a practical man to say that he is against all subsidy in all circumstances at all times. On the contrary, people who claim to practicality at this time and with this background are really demonstrating their lack either of vision or of sensitivity in believing that this is morally justifiable or in the long-term economically advantageous policy. It is not. We have to shed the intellectual inheritance to which some still cling, one of whom I am sorry to say is the hon. Member for Oswestry (Mr. Biffen), who must be in pain at every word I utter. We have to shed these supposed principles which are based upon a model of the economy and upon conditions no longer extant.
It is as if we had a moral and economic obligation to help a dying man 200 miles away and we had to get some medicine to him within the hour. Of course it would be right to say that we should not waste our time on this before the invention of the aeroplane. Those who have not come to terms with the changes in the modern economy and modern politics and conditions generally are startled when they are asked to abandon these long-cherished principles of the past which act by their repetition as a sort of soothing, nostalgic lullaby to them instead of allowing their excellent brains, certainly in the case of the hon. Member for Oswestry, to perform at their normal high level.
1054 I welcome the Bill. I hope the Minister will now write off his own past, which has already been copiously commented upon by my right hon. Friend the Member for Bristol, South-East. I hope that he will go forward boldly with courage, and I hope that he will not be afraid to weaken the bureaucratic procedures of accountability which lead to unnecessary delay and rigidity. I hope that he will regard himself as the beginning of a substantial development bank for the regions of high unemployment, and that he will make himself effective in that capacity by the constructive use of public money.
§ 5.57 p.m.
§ Mr. Edward Taylor (Glasgow, Cathcart)
It is always agreeable to listen to the right hon. Member for Manchester, Cheetham (Mr. Harold Lever), particularly when he is supporting a Government Measure. We were more interested to hear his views about the new bank which is proposed, and every one of us would agree that if such a bank was established it would certainly have no shortage of customers. What I found interesting was the general assumption which the right hon. Gentleman and previous speakers have made that this Bill is a continuation of policies brought forward by the Labour Government. I do not accept that, and a study of the Bill and a comparison of the practices of the present Government and the previous one shows that this is not the case.
The obvious things which come to mind are what we complained about in the regions when the previous Government were in power, the fact that grants were made available only to incoming industry and were not available to local firms seeking to expand. This was a great injustice which we constantly brought to the attention of the Government and which has now been put right. It is wrong to talk about the move to investment grants as being a remarkable reversal of our policy, because the new grants are in addition to the other investment incentives available by way of investment allowances, free depreciation and so on. The special development area provisions are not similar bearing in mind the extent to which the special development areas have expanded. The whole of the west of Scotland is now classified as a special development area.
1055 There was one point on which 1 found myself in slight disagreement with the right hon. Gentleman, and that was his reference to the provisions of the Bill in relation to our application to join the Common Market. It certainly is encouraging to see that certain measures have been discussed with the Community, but what I am not quite sure about, and what I hope my right hon. Friend will be able to clarify, is the exact relevance of the year 1977 to Clause 8. It was encouraging to know that this proposition had in no way been turned down by the Commission, but it would be interesting to know why the date of 1977 has been fixed.
§ Mr. Burden
My hon. Friend made it perfectly clear that it had no significance in that direction, because the consultation took place after the White Paper had been published. The five-year period is reasonable.
§ Mr. Taylor
I accept what my hon. Friend has said. It might be appropriate, following our ideological argument on the Bill so far, to refer to the cash in Clause 8 as our five-year plan for helping the regions.
§ Mr. Harold Lever
Is not the sensible inference to be drawn from what the Minister has said and what is contained in the Bill that if this was permitted in the interim period, before the full rigours of a competitive situation, there is every reason to hope that after entry, should it be necessary, more would be permitted than would be permitted in the interim?
§ Mr. Taylor
I hope the Minister will be able to confirm that. Will it be possible, following the consultations with the Commission, to continue the selective assistance provided in Clause 8 after the transitional period? I should like clarification of that. No doubt my right hon. Friend will be able to give me an answer.
I find it encouraging that the Bill tries to concentrate special help on the regions. The most encouraging aspect of the unemployment figures was not just the fall of 100,000 in the Great Britain figures but the fact that in Scotland there was a reduction of 16,000, proportionately more than for the country as a whole. That shows that existing policies have re- 1056 sulted in unemployment in Scotland falling, admittedly in the first part of the year, faster than in the country as a whole. I hope that as a result of the Bill that movement will continue.
The most important feature of the Bill is the special help which is being given in the west of Scotland to shipbuilding. We have £50 million worth of grants, expansion and continuation of credits, plus the Part II arrangements which apply to Upper Clyde. Some hon. Members have questioned whether shipbuilding needs or deserves this kind of assistance.
British shipbuilding is in a unique situation by comparison with other industries. It is the only industry that has to meet the full force of foreign competition which is often subsidised or has a secure home market, as in Japan. It does so without any form of tariff protection and, until recently, without Government help. Shipbuilding is probably the only industry having to face competition without tariff protection. Until we had the Marples scheme of credits, and later Government assistance, shipbuilding was without any help whatsoever.
There is little doubt that shipbuilding is a growth industry throughout the world. To ensure that Britain gets its full share of shipbuilding, measures similar to those in the Bill have to be taken. Some people take the view that shipbuilding has been in receipt of vast sums of Government money and has not done a great deal to help itself. The facts show that this is not so.
We hear a great deal in the news these days about, for instance, Scott Lithgow. Over the past 12 years it has invested £16 million on improvement, modernisation and expansion of its fixed assets. Of that, £10 million was from its own resources, £3 million as a loan from the Shipbuilding Industry Board and £3 million from investment, Local Employment Act and SIB grants. It has constructed a new yard which has enabled it to enter the market for mammoth tankers, to be built in two halves and joined together afloat.
Swan Hunter too has spent vast sums of money in recent years to modernise facilities to build such tankers and three have already been delivered. It has also open a new panel line which was installed at a cost of £3 million from its own 1057 resources. Among other yards, the Doxford and Sunderland group in the past few years has spent about £4 million in modernising facilities and can now build ships of up to 150,000 tons deadweight.
Vickers in the past 10 years has invested about £10 million on facilities and is committed to spend a further £7 million over the next five years. The same may be said about Austin and Pickersgill Limited which is building a standardised SD14 cargo ship, a fact too well known to need repetition. Despite recent cancellations, 101 of these ships have been built or are on order.
The fact that so much money has been invested by the industry itself shows it is not a question of an industry relying on handouts from the Government. The fact that the yards that have invested themselves, including Scott Lithgow, Appledore and Vickers, have been more successful in facing international competition shows that if shipbuilding is to be successful there must be investment in plant and machinery.
That is the whole story of the Upper Clyde, A great deal of money was poured in to help the yards from one crisis to another, but the money was not spent on new plant and equipment and investment. If we are to have success in shipbuilding, it must be on the basis of growth. Government grants to stave off various crises is not the answer. There must be spending on new investment machinery, new plant and covered berths. That is what the Bill will do, and for that reason alone it deserves support.
Apart from that, the industry has been greatly maligned because of demarcation problems and its general labour relations. So often we hear about how grand it would be if there were one union in shipbuilding instead of so-called hundreds or scores. Few people have noticed that in the last few years almost all the steel-working trades in the shipyards—the platers, caulkers, welders, burners, riveters, shipwrights, drillers and sheet metal workers—have come together to form one union, and demarcation between the steel-working trades in most shipyards has ceased to exist as a major problem.
In recent months there have been discussions of a national wage award in the 1058 industry. A long-lasting agreement has been reached between the unions and the employers. It was secured despite violent opposition from the engineering unions which refused to have any such agreement for the engineering industry. I do not mean physical violence, but reports of meetings at York show that strong guidance was given by the shipbuilding unions after the agreement had been signed urging that that sort of arrangement should not be made and then cancelled, and it is to the credit of the companies that they stood by the agreement 100 per cent.
§ Mr. Douglas
Great credit must be given to the part Dan McGarvey played in these negotiations. It was his persuasiveness that carried through the negotiations in spite of opposition.
§ Mr. Taylor
The hon. Gentleman may have misunderstood me. I meant to praise Dan McGarvey. Facing opposition from elsewhere, he stood up to his agreement. That is a great tribute to negotiations in the industry. I was trying to point out that that is the kind of progress that has been made in the industry. Unlike the situation in engineering, the demarcation procedure agreement is effective in most cases. To that extent if the Minister is looking at progress in getting rid of demarcation problems in the yards, apart from getting sensible wage negotiations at national level, he will see that we are making considerable progress.
This is not a hopeless industry that is doing nothing for itself but an industry that has been facing up to alarming foreign competition which is enjoying great subsidies, and it has made considerable progress. On the other hand the House and the Minister, following his visit to Scotland, will be aware that there has been a drastic fall in freight rates. There is a shortage of orders and if we do not have more within the next 12 months we could be faced with a critical situation.
The major argument against the Bill for shipbuilding concerns subsidy. Some people have argued, privately and publicly, that it is wrong to give subsidies to shipbuilding because it is unfair to other industries. What we have to remember is the extent of subsidising in other shipbuilding countries. Their 1059 subsidies are rarely spelled out in detail in public.
The Secretary of State said at the time of the White Paper that he had come to the conclusion, having made a study, that subsidies under the Bill would be no greater than those offered in other countries. I hope he will confirm that that is simply what we are doing for shipbuilding. In Japan, for example, there are no direct subsidies to builders, but almost certainly there is cheap credit for approved capital investment projects. But the most important form of subsidy is that Japanese owners get a complex package of operating and accounting benefits bordering on subsidies, plus new building credits, that may amount to 95 per cent. of the contract price, at around 6½ per cent. Also, Japanese builders have a virtually guaranteed home market.
In Italy there is a direct 10 per cent. subsidy payable to the builder and so far, despite approaches from the EEC to stop Italy from continuing this practice, Italy has stood firm against the Commission and is to continue with this 10 per cent. subsidy. In addition, there is a form of assistance for regional development. In Sicily, for example, there is a substantial additional subsidy to owners who register new ships in the area.
In Germany owners get a straight cash grant of 10 per cent. of the total cost of shipbuilding whether the ship is built in Germany or elsewhere. In France, as the right hon. Member for Cheetham will confirm, all matters of subsidy and taxation are very complex. The rules are difficult to discover and practices often vary greatly from the rules. However, we know from the figures in the French Budget that 80 million dollars were given in 1971 in selective operational grants for shipbuilding.
In Norway there is an arrangement by which the owner may set aside up to 25 per cent. of his profit each year into a special revenue fund where it earns tax-free interest and from which it may be used, still tax-free if used within four years, to buy new ships. In Sweden there has been a remarkable innovation in recent weeks involving a considerable subsidising of one large owner, a practice which appears to be spreading to other owners.
Substantial help will be given by the Bill to shipbuilding, and that help should 1060 encourage the industry, but we cannot ignore that almost every other shipbuilding country is doing something similar and in some instances, such as those of Sweden and Italy, something rather better. If we do not have measures like this, we shall be condemning our industry to total collapse because of unfair international competition.
I hope that the day will come when it will be possible to wipe out all the various forms of assistance for industry, shipbuilding and others, but only on the basis of a firm international agreement will it be possible to eliminate all subsidies, and I hope that until that time comes we shall continue with these measures to assist our own industry.
Without a Bill of this sort to steer special assistance to the regions, for years and perhaps for generations Scotland and the other regions would inevitably be deprived of the prosperity which comes from Government measures. The only way in which to ensure even growth and even prosperity is to proceed along the lines of the Bill, and I strongly support it.
§ 6.12 p.m.
§ Mr. Russell Johnston (Inverness)
The hon. Member for Glasgow, Cathcart (Mr. Edward Taylor) finally developed a very good speech, although in its beginning, when he tried to demonstrate that the Government were not changing their policy, he expressed a view with which I would not agree. The right hon. Member for Bristol, South-East (Mr. Benn) was perfectly correct to say that it was politically significant that an approach consciously decided before the last General Election should have now been abandoned.
For a long time, Liberals have been consistently arguing for direct aid through grants and other differentials to Scotland. Wales, Northern Ireland and the regions of England, and we therefore welcome in principle the reversal to investment grants as opposed to investment allowances. I do not propose to spend any time chiding the Minister for standing on his head, because we have been trying to get him to change his mind and we should be pleased that he has now done so. However, I do not fully agree with the apparent satisfaction which appears to be present to some extent on both 1061 sides of the House about the Bill's effect on regional policy. I doubt whether there is evidence in the Bill that the Government are prepared to give to underdeveloped areas the degree of preference that is essential if their deep-seated economic problems and their often disastrous unemployment figures are to be effectively tackled.
We all agree that we must get industry going. I concede to the Government at once that they have taken many measures which one would have expected to have an effect on industry and to have shown results by now. One never knows what it is that causes confidence or what causes its disappearance, but there is no doubt that industry has not been expanding at the rate that the Government in all reason have been entitled to expect.
But I do not accept that they have yet evolved a complementary regional strategy to ensure that when expansion comes, as more than likely it will, the major benefit will go to the areas that have suffered most. Regional development, as the right hon. Member for Manchester, Cheetham (Mr. Harold Lever) reminded us and as the Secretary of State said, is essentially a matter of differentials, and the second question, therefore, is whether the differentials are adequate.
An extension of the 100 per cent. free depreciation from development areas to the entire country will inevitably devalue the benefit that investment grants will offer. The raising of the limit for industrial development certificates too will act against regional growth. We do not yet have any attempt to tax congestion, although goodness knows we have been discussing that for a long time. I remember that the year before last, when I was a member of the Select Committee on Scottish Affairs, one of the proposals made by that Committee on which the Government did not act was that there should be such a tax. It has been discussed in the House and elsewhere a great deal and it has been discussed abroad a great deal, and one had hoped that it would be embodied to some extent in the Bill.
§ Mr. Robert Maclennan (Caithness and Sutherland)
Would the hon. Gentleman recall that the Select Committee on Scottish Affairs on the subject of differentials for the Highlands urged that the different- 1062 tial then existing should be increased, although the Government appear to have done the very reverse?
§ Mr. Johnston
The hon. Gentleman makes my next point for me most conveniently, which means that I do not need to make it myself. He is correct. The differential available to the Highlands and Islands Development Board is now so little that the board is concentrating on promotional activities rather than on direct action.
The Government have put an emphasis on infrastructure improvement. Where it is introduced it is welcome, but there must also be some phasing of these measures to try to counter-balance the seasonal cycle to which we are subject. Again, it is hardly sufficient. The reason why the expenditure of £10 million on the A9 in Scotland will not be received with rapturous delight is simply that that rules out for the foreseeable future a dual carriageway.
The right hon. Member for Cheetham spoke about a development plan. Some hon. Members have referred to the withdrawal of the regional employment premium. Unless there is something to replace REP, its withdrawal will be extremely damaging to the regions. We on the Liberal bench have argued that a method of regional development which has not been tried but which could be very effective and markedly differential in its impact is a regionally varied payroll tax. I recommend that for the Government's consideration.
I turn to Part III of the Bill which deals with the question of credits and grants for ships and mobile offshore installations. I shall not go over the ground which was adequately covered by the hon. Member for Cathcart but I wonder to what extent the value of these grants to the shipping industry will work its way through to the marine equipment industry which, as the Minister well knows, has suffered considerably—for example, on the Clyde. I wonder to what extent the proportion of grants relating to British equipment will be paid to the marine equipment industry.
The proposals for the offshore installations clearly refer to oil and gas and their development. This has aroused great interest, particularly in Scotland but also in the north of England. The 1063 Minister will probably know about the conference held by the Scottish Council which the Secretary of State attended. One of the remarks made at that conference which has remained in my mind was made by Sir John Toothill, who is not a small man in industrial development. He said that it seemed to him likely that the only benefit which Scotland would derive from oil exploration was increased rents in Aberdeen and employment on a few oil rigs. Sir John is not lightly given to expressions of opinion of that sort. I am very concerned about this for such benefit as will be derived will be derived during the exploratory period.
I therefore hope that the Government will ensure that there is a direct link between assistance given and employment offered. For example, it is said that it is becoming more economical to have rigs constructed in Holland rather than in the United Kingdom. That is not a happy situation.
I am sure that the Bill will help industry but I do not regard it as a sufficient vehicle for regional development. I believe we shall not get the necessary drive and push in the regions of England or in Scotland and Wales until there are democratically elected institutions there or until we have a degree of differential financial aid such as has not yet been contemplated.
§ 6.23 p.m.
§ Mr. Nicholas Edwards (Pembroke)
I must confess to a degree of schizophrenia about regional policy. I am at the same time conscious of the absolute necessity for such a policy while being unhappy about some of the methods suggested.
My approach is essentially pragmatic. This is not for me a matter of fundamental philosophy. I do not care a jot for the theoretical conflicts between differing concepts put forward by the political parties. I am concerned only to find something which works, and the truth is that neither party has yet done that. Of course we have achieved something. Imperfect though our actions may have been, I have no doubt that the state of the regions would have been a great deal worse if they had not been attempted at all. I do not question the fact that some industry, and profitable industry, has been attracted to the regions, and 1064 I am sure that the rundown of traditional industries would have been more painful but for Government intervention.
However, we are bound to judge regional policy not just by its marginal impact but by its cost effectiveness. As Professor Glyn Davies of the Institute of Science and Technology in Cardiff pointed out in an article in the Scotsman of 21st October last year,One of the further grim ironies of the economic situation in recent years in Scotland has been the fact that the record increase in unemployment has come about despite an increase in financial assistance in the form of subsidies, public investment and so on also of record proportions".He went on to say:It is clear that past policies, however beloved of their progenitors, have failed—not absolutely of course—but failed in any reasonable assessment of what the population of Great Britain, who are footing the bill, might expect. To withdraw assistance is unthinkable. to carry on with such assistance in the same way should also be unthinkable. Consequently, a radical new departure in tackling the Scottish economic problem is urgently required".
§ Mr. John Robertson (Paisley)
Perhaps the hon. Gentleman will quote another two paragraphs and give us the solution.
§ Mr. Edwards
I am coming to that. Some of the solutions which Professor Glyn Davies put forward have already been accepted by the Government and are included in this Bill.
We can extend Professor Glyn Davies' remark beyond Scotland. The question we must surely ask is whether we are making the radical new departure for which he call and, if so, whether it is the right one. It is certainly radical; that has been acknowledged by both sides of the House. Certainly it will be terrifyingly expensive. Will it he money well spent? I am not sure that all of it will be.
It would be wrong of me not to take this opportunity to record in public what I have always said in private—that of all the decisions which the Government have taken since the General Election the one about which I am least happy is their handling of the Upper Clyde situation. Nothing which has been said or which has happened in past months has convinced me that it was right to spend huge sums of money on modernising shipyards in a place where no sane man, I believe, would seek to build a shipyard in the second half of the twentieth century. I should 1065 have preferred to spend, if necessary, at least twice as much on a new yard on the Lower Clyde and on transport and housing and all the other facilities which go with it.
It is also useless to spend vast sums of money on shipyards if they cannot build the ships on time. Our yards do not seem to be capable of standing up to our competitors in this respect. I am therefore doubtful whether we shall get value for money for what we are putting into the shipbuilding industry. I hope I am proved wrong.
We should ask whether we are getting value for money in other areas. If it is right to spend large sums of public money on regional policy—and I think it is—the largest part should be directed to those tasks which only the Government can do. Lord Clydesmuir, in his statement to the Scottish Council, pinpointed those tasks. He said:The challenge is far greater than many people yet realise. We have to respond on a corresponding scale—by investment in port facilities, in pipelines which will link us to the markets of the south and the continent, in rail, air and road communication. Similarly, there is great need for physical planning machinery on a new scale, able to act with speed, and over a wide area, while yet responding properly to the need for environmental care. Only Government can take the necessary initiative in investment and in planing machinery on this scale. Only when Goverment shows such an initiative will industry and other bodies follow.I am still not satisfied that the Government's initiative in this direction is sufficiently energetic.
All the incentives proposed in the Bill and all those we have had in the past cannot succeed in solving the problems of the regions without basic Government action. It is true that we have speeded up the inadequate road programme of our predecessors, but it is still inadequate and it still takes too long to complete any major road project. We need a massive programme on a quite unprecedented scale.
The main need for Government action is in terms of communications. Good communications are a prerequisite of economic development. By "good" I mean six-lane motorways, easy access to international airports and an adequate number of deep-water ports. Our secondary road system compares very well with that of any other country, but 1066 our motorways still lag far behind other motorways throughout the world. The construction of four-lane motorways and the chipping away at the problem with a bypass here and a stretch of dual carriageway there is a total waste of public money. For example the Severn Bridge, the construction of which was greeted with such pride a few years ago, is already obsolescent and unable to meet the demands put upon it. We shall soon need a second bridge.
I turn to the road requirements of Wales. It is clear to me that when we are considering a road programme and are rebuilding the two essential main link motorways along the north and south coasts, we cannot overlook the other road links which will be required up the valleys and to the growth points in the rural areas. The programme needs to be viewed as one. The construction of the M4 on its own will lead to further migration from rural areas and a failure of the selected towns concept.
In dealing with Government initiatives I am not concerned simply with the question of communications. I believe the growth point concept still has a fundamental validity whether it takes the form of an Oceanspan project in Scotland, a new town like Llantrisant in South Wales, a maritime industrial area of the sort proposed for the Severn or even a small grouping in rural areas. It seems to me that the implementation and consideration of such schemes still take far too long. We should be able to approach these schemes with a greater sense of urgency.
I turn to the incentives provided under this remarkable Bill, which takes such widespread and unfettered powers. There are two matters that cause me concern. Powers are being taken to spend huge sums with no form of parliamentary supervision and I wish to draw attention to the continuing nature of those powers. I appreciate that constant variation of incentives is exceedingly undesirable, but we can go too far in the other direction.
In terms of economic management, what will happen if we find ourselves before 1978 in an upward spiral of uncontrollable demand, with its predictable effects on the balance of payments? What will the Government do then? Will 1067 they continue to pay out over £700 million a year in subsidy or will they go back on their promise of blanket assistance until 1978? Surely the main objective in terms of incentives should be to attract industry into the regions, and I hope that once industry goes there it will continue to be viable.
For the most part—and there may be exceptions—the Bill does not seek to provide continuing subsidies. We should ask ourselves whether within the powers provided in the Bill there should be some system of control under which new firms, having benefited from an initial series of grants, have their accounts scrutinised before being allowed anything, more. The firms which show a chronic lack of profitability should not continue to receive unlimited aid for ever.
I should like to draw my right hon. Friend's attention to a few specific points. Some firms with high building costs but with little plant find themselves worse off under this system of incentives than they were before. One suggestion which has been made to me is that they should be given a system of options. I do not welcome that suggestion, but I hope my right hon. Friend will be able to say that they will be treated sympathetically under Part II of the Bill.
I believe that there is urgent need of greater flexibility in the construction of advance factories to meet particular requirements of particular areas. We should not seek in the rural areas to build massive factories which are not needed. Often the need is for a small, light factory in which assembly work may be carried out. We do not need to build factories to last for 60 years. In this respect above all others the motto should be flexibility. I hope that those factories will be available to provide jobs for females as well as for males. I should like the Minister's confirmation on this point because in some areas this is a big problem.
I hope that it will be possible to have a collective minimum in respect of the limitation on machinery grants of £100. In other words, if there are five machines costing £90 each it should not be impossible to obtain a grant for them.
My main lines of criticism and anxiety are directed to particular aspects of the 1068 problem, but as a Member for a regional constituency it would be wrong if I did not welcome the evidence of the Government's determination and also many of the changes for which I have pressed in the past. I refer to the introduction of free depreciation, though I should like to see it extended to the tourist industry, and the extension of aid for modernisation or enlargement of industry already within a region. These are two examples of changes which I welcome. Furthermore I welcome the move to localised administration, although I am worried lest there should be a conflict of interest between members of a board and their own business interests.
The Government have had to face many of the dilemmas to which I have referred. I do not go along with criticisms which have come from some of my lion. Friends. I believe that on the central issue the Government must be right because it is essential that regional policy should be a central part of any management of the economy.
§ 6.38 p.m.
§ Mr. Frederick Willey (Sunderland, North)
I shall be brief and therefore content myself by saying that I welcome the recantation by the Government and congratulate the Secretary of State for Trade and Industry on his agility in performing his double somersault.
May I first mention something outside the Bill, and that is the machinery for administering Government aid. I warmly welcome the changes which have been made. My experience is that the way in which aid is administered is as important as the policies. At the same time I am sorry that the Secretary of State has not gone as far as my right hon. Friend the Member for Birkenhead (Mr. Dell) and my hon. Friend the Member for Stockton-on-Tees (Mr. William Rodgers) suggested and that the board is advisory and not executive. I believe that the boards should have been executive and regional. The initiative should have rested in the regions but at the same time I recognise that the Government have made substantial improvements in the administration of aid to the regions.
My fears are that there is a danger in the regions of our having too many cooks, and I doubt whether we have a sufficient sense of urgency. We have disastrously 1069 lost two years and it will take time unless there is real energy to get the new machinery going.
I welcome the return to selective assistance. I have always argued that across-the-board incentives are wasteful. I welcome the fact that there is now to be provision for selective assistance which might be as much as £550 million. I agree that this should be exercised primarily as a banking operation—flexibly, pragmatically and with guidelines of public and social responsibility.
I wish to mention in passing a particular form of selective assistance, namely the provision of Government office employment. I know that the Government are carrying out a reappraisal of the situation, but I feel the time has come to have a really drastic reappraisal. Speaking for the North-East I should like to see Newcastle as a Government centre. This is the sort of thing that must happen if Government office employment is to be provided on a satisfactory basis in the regions.
In conclusion, I wish to say a few words about shipbuilding, 90 per cent. of which is carried out in development areas. It was a tragic mistake that we regarded shipbuilding as a declining basic industry when since the war this has been one of the world's boom industries. It was a tragic mistake to allow this industry to contract when a realistic development area policy would have concentrated on expanding it. That has been especially true over the past four or five years, during which time both Japanese and European yards have had difficulty in obtaining skilled labour while our development areas have had thousands of skilled shipyard workers standing idle.
However, I welcome the extension of credit guarantees—the most inexpensive way of providing aid to industry. I also welcome the fact, as Mr. Tindale has said, that the Government are giving a high priority to the shipbuilding industry.
My main concern is about shipbuilding in Sunderland, which has the best management and work force in the country. Indeed it has been for those very reasons that we have suffered under previous policies. It is the most efficient in this industry who have been given the least benefit. The Sunderland yards now 1070 welcome the 10 per cent. tapering grant because it is for the industry generally. The Sunderland yards will receive it on equal terms and will obtain a fair share. But that is merely a holding operation. The main problem remains—the problem of inducing British owners once again to place orders mainly with British yards and to create an overall national policy for the industry.
It is within that context that I want to refer to the Court Line bid for Doxford. Since the possibility is being examined I shall not comment on it further. save to say that I regard A.P.—Appledore—as one of the most significant developments in British shipbuilding and that 1 share with Mr. Venus at least the distinction that I have argued for many years that what British shipbuilding needs is entirely new capacity. One of the attractions about this take-over proposal is the suggestion that there may be a new covered yard on the Wear. I mention that because it is necessary to consider the Doxford development within the wider context of Sunderland and the very great difficulties involved in increasing the overall shipbuilding capacity of the Wear.
But I am not discouraged. We must consider the problem also in the context of the considerable assistance that is already committed to the Upper Clyde and to Harland and Wolff. In Sunderland we have to envisage capital investment beyond the capabilities of any of the Wear yards. I am not pleading for a write-off of losses, such as the £17 million in the case of Govan Shipbuilders or the £17 million to Harland and Wolff. I plead for an entirely different approach. I ask the Government to back profitable investment, in the interests of employment in Sunderland. I believe that to be effective that has to he so massive that it needs to be publicly supported; it is beyond the capacity of the shipbuilders themselves.
I plead with the right hon. Gentleman to consider this matter imaginatively—to think, if necessary, of the possibility under the Bill of a new company which might provide the capital works and leasing back to the shipbuilders. In Sunderland we want an overall increase in our shipbuilding capacity, recognising all the difficulties involved in providing it on the Wear.
1071 I welcome the Bill. I hope that Sunderland will provide the Government with an opportunity for giving selective financial assistance. I can assure the Minister that if he gives that assistance he will prove—as I have always argued—that the best way to help British shipbuilding is to back the most efficient shipbuilders. If he does that it will inevitably involve calling upon public support, but it will be investment which will make the yards nationally far more prosperous and efficient.
§ 6.45 p.m.
§ Mr. Julian Ridsdale (Harwich)
Right hon. and hon. Members opposite have had many smiles on their faces this afternoon, but in my experience Conservative Governments are much more dangerous when they are being pragmatic than when they are being doctrinnaire, especially in dealing with such problems as the EEC and wage inflation, and especially at a time when it is necessary to deal with many changes in our economy and when the room for manoeuvre by the Government is much narrower than many people believe.
I hope that now that the Government have become pragmatic rather than doctrinaire we shall see the implementation of more moderate policies, as a result of which we may be able to obtain the co-operation of the more moderate people, especially over wage inflation. That is why I welcome the Bill. I do so, however, with a tinge of regret that there is nothing in it for my constituency at the moment. I say "at the moment" because my constituency is in the South-East of England. In spite of that. Clacton-on-Sea has an annual rate of unemployment of between 7 per cent. and 8 per cent., which is higher than the average for development areas, of 7 per cent., and intermediate areas, of 4.7 per cent. Unemployment in the town of Clacton-on-Sea, with its average of between 7 per cent. and 8 per cent., is not so bad as it is in Sunderland, but there are only two other towns of comparable size with a higher rate of unemployment. I hope that my right hon. Friend and the Ministry will try to achieve a solution to the problems of such constituencies as mine.
Most seaside towns have an unemployment problem, and most of it is 1072 amongst the over-50s. I hope that the Ministry will pursue the suggestion made by the hon. Member for Glasgow, Craigton (Mr. Millan) that the possibility of office and service development in such areas should be considered. I am sure that such a policy could go a long way to solve the problem of pockets of unemployment such as exist in Clacton.
I welcome the Bill; I welcome anything which helps to create investment in manufacturing industry, particularly bearing in mind the fact that our investment has been lagging behind that of Germany, Japan and other countries.
I also welcome the fact that the Bill is introduced against the background of the £3,000 million cuts in taxation, the reduction from 45 per cent. to 40 per cent, in corporation tax, the reduction in the Bank Rate from 7 per cent. to 5 per cent., the help given to nationalised industries and the bringing forward of capital expenditure. For the sake of Harwich, I also welcome the investment in two rail ferries for British Rail.
Anybody who examines our economy over the years, especially in comparison with what has been happening in Germany and Japan, knows that our growth has been slow, and that anything which can be done to encourage it should be done. It must be right to help manufacturing industry. Germany and, more particularly, Japan—to which country my right hon. Friend is going this month; I wish him well in his visit—provide much more help, through their banks, to industry. That is what has helped them to achieve their great industrial growth. The biggest barrier to investment is the severe wage inflation we are now facing. We can join the EEC and so get a market of 300 million people, but if severe wage inflation is still with us joining will be no help at all.
Against this background one tries to measure the objectives of the Bill. It provides grants towards capital expenditure and other works. It provides financial assistance to industry generally, and credits and grants for the construction of ships—and I can well understand the right hon. Gentleman the Member for Sunderland, North (Mr. Willey) speaking as he did. Another objective is to make offshore installations in the North Sea for the United Kingdom.
1073 Nevertheless, I have a fear at the back of my mind because I remember talking in this House on the railway grants Bill. It was for this reason that I interrupted the right hon. Gentleman the Member for Cheetham (Mr. Harold Lever), who is my Chairman on the Public Accounts Committee. I did not want to interrupt his excellent speech, but he was talking of ways and means of giving grants to keep down prices in the nationalised industries, and in that earlier speech I wanted to see money going into the railways because I know how important that is. I spoke against a background of £27 million, and I said that I hoped that it would help keep down commuters' fares and unemployment. I knew that wages and employment were being lost because of productivity deals on the railways.
Then came the blow. I accepted the £27 million against a background of a 5 per cent. voluntary prices and incomes policy. I was chided very strongly by Opposition Members because I said that I would have started off negotiating at 5 per cent., not because I did not want to see people have more wages but because I believe that unless we can control this tendency, have a pragmatic approach and get a wages and incomes policy we shall not get the advance in industry that we want or keep prices down.
It is for this reason that I say again that I welcome a change from the doctrinaire to the pragmatic approach. But the question I ask most strongly of the Government is: what do they estimate will be the increases in the cost of living in the next six months, 12 months, 18 months, two years? I ask, because all this investment going into industry could so easily be destroyed if we have the present kind of wage inflation.
In order to create investment in manufacturing industry in order to overcome the inflation which he faced in America, Mr. Nixon had to order a freeze, and he had to order a prices and incomes policy—and a severe prices and incomes policy. If the Government estimate an increase in the cost of living of above 5 per cent. a year for the next six months, 12 months, 18 months or two years, I hope that they will not be doctrinaire but will be pragmatic and say "We must secure the investment we are now making in industry and initiate a stronger prices 1074 and incomes policy". It is against that background that we can secure the investment and ensure the progress of the country in the very many difficult steps that we must take.
I welcome the Bill, but I hope that it is a sign that the Government intend to be not doctrinaire but pragmatic in their approaches to industry as well.
§ 6.55 p.m.
§ Mr. Neil Kinnock (Bedwellty)
I agreed with the hon. Member for Harwich (Mr. Ridsdale) when he said that the Conservative Party is most dangerous when it is being pragmatic and not doctrinaire. I say that because Conservatives are past practitioners of the confidence trick; if giving the impression that they are not such bad chaps; that they are on the side of the working class; that they favour a one-nation policy. So they become the Government, and that gives them the opportunity to use the disgusting and doctrinaire policies of the last two years.
I am glad that the hon. Member for Harwich is a pragmatist. He always has been, and his speech had in it something of a General Election thought. It is rather apparent, not only in the Bill but in so many other fields, that the Government, having created a Frankenstein monster of non-intervention, profit-pampering and unemployment, are now frightened and realise that they must destroy that monster of doctrinaire Toryism before it destroys them. They are very conscious of the next General Election. Therefore, we have the Bill not because of their abiding concern for the regions but because they have been frightened by the system of which two years ago they were so proud to boast.
Against that background my remarks about the Bill will perhaps be a little less liberal, a little less understanding and accommodating than have been those of some of my colleagues, but as I have said before one of my reasons for being in the House at all is to fight Tories and this is a good opportunity to do so.
The road from Selsdon in January, 1970, to Chequers this very day in May, 1972, apparently goes by way of Damascus because, as previous speakers have remarked, the Bill represents a major turnround for the Government. But however sincere the Government are in their repentance and in their contrition 1075 they have left a trail of unemployment and insecurity, stagnated economy and depressed regions as a consequence of having no significant, useful or effective regional policy for the last two years. Those youngsters who have lost opportunities in those last two years, those men and women who have experienced redundancy in that time, will neither forgive nor forget what has happened no matter how effective this change in policy may be in the years ahead. The two years that totally lacked any beneficial effect on the regions set back the clock of economic growth nationally.
One lesson that has been learned, and I am sure that it has seared itself on the minds of all hon. Members, is that there is no national prosperity without regional prosperity. It is for that reason that I welcome without reluctance the Government's change as represented by the form of the Bill. The Government have learned that lesson. They have learned, too, the lesson that dogmatic free-enterprise Toryism does not provide the blueprint for industrial prosperity in a modern economy and that however "new frontier" their ideas might have been in June, 1970, however appealing they may have been then, they did not come up to the demand that people in a modern economy and a modern democracy place on their Government, which is to provide security of employment, full employment and decent opportunities for young, middle-aged and older workers alike.
Perhaps as a result of the experience of those years we have what a sycophantic Press has described has a new deal for the regions, a great new chance for the regions, a fresh hope for the regions—after investment has fallen by 8 per cent. in recent years and after four months when the unemployment total has been in excess of a million. So it is time we had some fresh chances, some fresh hope. I therefore welcome the Bill in its principle, but I do not think that any Government supporters would expect the welcome from this side of the House to be ecstatic, especially when we remember that various kinds of regional policy have failed to provide resilience in the regional economy.
This is a Bill not to transform the situation of the regions but merely to 1076 try to maintain some of the momentum that was established between 1966 and 1970. Its work is made all the harder because of the loss of momentum over the past two years. The Bill will not give the fresh start and the firm basis for industrial growth that the regions require. But the extra money will obviously be most welcome.
The Government now appear as the saviour of the regions with their Industry Bill. But we cannot forget that they are the same Government who, in a statement on 8th May, virtually wrote off the British steel industry, condemning it to stagnation, and that they have been fervently encouraging alternative forms of energy to our indigenous fuel, coal. In Wales 80,000 people are employed in those two nationalised industries. We cannot accept the overtures of a Government who, on the one hand, are proffering new industrial development grants and, on the other hand, have condemned to either death or stagnation our mainstay industries.
§ Mr. Burden
I appreciate the hon. Gentleman's concern for the coal industry, but does he remember that under a Labour Government about half the mines were closed and about 218,900 miners lost their jobs?
§ Mr. Kinnock
Taken over a 10-year period, the records of the two consecutive Governments, Conservative and Labour, are about the same for pit closures and lost jobs. With all due respect to the hon. Member, I fought my Government in the valleys from which I come, much harder than he did, to try to prevent such pit closures. I am not here to back-slap my Front Bench. I think too much of the miners, and I stand by them continually. I hope that the hon. Gentleman will take note of that and will not again raise such silly questions about my credentials for commenting on the coal industry.
Some hon. Members on the Government benches are at present encouraging the continual rundown of the coal industry. They have no right to protest about their interest in that industry, especially after the stance adopted by some of them in the recent dispute. We learned a great lesson about Toryism then; so did the miners. After what the Government are doing to coal and steel, 1077 we cannot forget that the same Government have wilfully avoided making any real demands upon the EEC in their negotiations about regional policy.
Although I do not want to go into the details of the Bill—because we shall have the opportunity for nit-picking in Committee—there has been a great deal of talk about new inducement. But in 1974 the regional employment premium goes. I quote from the annual report of the Development Corporation for Wales, which is hardly a Labour Party institution. These are its comments on regional employment problems:Those firms engaged in labour intensive activities, who are particularly vulnerable to extensive wage pressures and competing with imports from low labour cost areas, seem likely to suffer the most.A squeeze on profitability, increase in prices and close scrutiny of labour requirements, leading to possible redundancies, are the threefold major effects of the abolition of regional employment premium.
Added to that is the fact that under the Bill the operational grant, the major differential between intermediate areas, development areas and special development areas, which make up most of my constituency and large parts of South Wales, is being removed. What faith can we place in the Government to take action in these crippled areas, which have been sadly neglected for so long, when we find a relaxation of the industrial development certificate exemption limits and the extension of the depreciation allowances to the whole of the United Kingdom, to areas which do not need any additional inducement? We should reverse that. As the hon. Member for Inverness (Mr. Russell Johnston) said, we should have a tax on congestion. With all the damage done, we cannot think of the Government as saviours of the regions.
Against the background of the abolition of labour subsidies, steel stagnation, coal rundown and a sell-out to the EEC, the Bill is half a loaf which everyone seems to be welcoming but which may yet turn out to be a dry crust to the regions.
§ 7.5 p.m.
§ Mr. Laurance Reed (Bolton, East)
In the last 12 months or so Bolton has experienced an increase in unemployment 1078 of about 172 per cent. This is the highest percentage increase of any travel-to-work area in the North-West region, and certainly one of the highest in the country. It puts us not far short of the existing position on Merseyside, and certainly in a very much worse position than that existing in the old intermediate area of North-East Lancashire.
This dramatic escalation in the number of jobless is directly attributable to the difficulties we have had to face as a result of the old regional policies, particularly over the question of where the boundaries were drawn.
We had three basic criticisms of the old policy. First, we felt that the inflexion was wrong in that it placed too much emphasis on employment statistics and too little emphasis on the underlying structural weaknesses in the North-West region as a whole. Second, we felt that the whole policy lacked flexibility in that it provided a plethora of benefits for districts within the scheduled areas hut nothing for districts which just happened to be on the wrong side of the demarcation line. Third, we felt that the policy was inequitable and psychologically damaging in that it penalised people for the success that they had had in overcoming their difficulties by their own efforts.
The latter point is very important if people are to understand the degree of resentment aroused by the old policy. The whole of Lancashire has had to face a massive contraction in textiles and coal in the last two decades. In my constituency we have lost 15,000 jobs in 15 years in the textile industry alone. Yet throughout this period, by dint of our efforts exclusively, we have been able to keep unemployment either at or below the national average. After all that, it was extremely aggravating to find ourselves not only disqualified from any assistance but also, because it is inherent in any regional policy, actively discriminated against when dealing with these continuing problems.
Under the old system we stood no chance of attracting new investment, and there was a serious danger that established industry, when seeking to modernise or expand, would be tempted to move out of the town altogether into the intermediate areas of North-East 1079 Lancashire which were virtually on our doorstep. It is no exaggeration to say that we were glad to see the back of the old policy.
But let us be absolutely clear about whose old policy we are glad to see the back of. It was the Wilson Administration which drew the watertight compartments between one part of Lancashire and another. It was the Wilson Administration who totally failed to comprehend the problems of South-East Lancashire. It was the Wilson Administration who arrogantly, within 24 hours of publication, brushed aside the conclusions of the Hunt Committee's Report and attempted to bribe the towns of North-East Lancashire into supporting them, and it was they who victimised the towns of South-East Lancashire.
The new policy, a Conservative policy, has been universally welcomed in all parts. I have met Socialists who have been embarrassed to discover that it is a Conservative Administration who have recognised their requirements when the Labour Party did not.
We welcome this new policy, first, because it ends discrimination between one part of Lancashire and another, and, second, because it emphasises the safeguarding of existing jobs by improving the efficiency of established industry, and it has an element of flexibility with a variety of measures applicable to different categories of area.
We welcome particularly the grants for ageing industrial premises. The North-West generally—certainly in South-East Lancashire—has an unusually large stock of ageing industrial premises which are now used for purposes very different from those for which they were originally designed. These old buildings are completely unsuited to high-speed methods of production and have low standards of efficiency and poor working conditions—in some cases scandalously poor working conditions.
Firms which occupy such property have to employ more labour than they would in a modern streamlined plant, the layout is bad, there is poor access and inadequate floor loading. All this tends to have an adverse effect on the level of productivity. If one tries to introduce more efficient modern plant one is faced 1080 with the huge cost of restructuring the buildings. if one decides to move out, the value of the premises is so low compared with the costs of moving that one cannot afford to do so.
Another problem with these old buildings is the rate of industrial accidents. In my constituency in the engineering trades there are 67 accidents per 1,000 employed, which compares with a national average of 45 per 1,000 employed. This high rate is largely due to poor layout and conditions in slum factories.
All this makes it difficult for existing firms to raise productivity and keep pace with rising wage levels and other overhead costs. Consequently, the competititive position of these firms is steadily eroded until we reach the point where more unemployment is created. During periods of financial squeeze or rationalisation it is these old factories which tend to get the chop first. That, fundamentally, is why we have had such a dramatic escalation in unemployment in South-East Lancashire in the last 12 months.
We have long argued that building grants should be available for firms wishing to move from obsolete premises, irrespective of the number of jobs that would be created, and also for factory modernisation grants similar to those for improving old houses. The Bill, for which I am very grateful, gives us just this. Towns like Chadderton, Heywood, Middleton, Oldham, Radcliffe and Bolton will gain substantially by this Measure. More than 75 per cent. of the industrial property in all these towns was built before the First World War, and in my own constituency 40 per cent. of all industrial property was built more than 100 years ago.
§ 7.12 p.m.
§ Mr. John Robertson (Paisley)
I do not intend to follow the remarks of the hon. Member for Bolton, East (Mr. Laurance Reed), except to say that the Bill and the Secretary of State's speech this afternoon are a turn-up for the books. My right hon. Friend the Member for Bristol, South-East (Mr. Benn) was a little less than generous in welcoming the Bill. After all, if fatted calves are not to be found under every tree, he could at least have found one scraggy, underfed regional calf and made a sacrifice of it.
1081 The Government's conversion is significant. I do not know whom the people up in UCS will hate now. After all that struggle, here we have assistance being given away hand over fist.
I expected hon. Gentlemen who support the Government, particularly those representing Scottish constituencies, to have been crowding in on the Government benches—or at least one of them—this afternoon, but they are conspicuous by their absence, except for one. There is not even an hon. or right hon. Gentleman from the Scottish Office on the Front Bench. That shows the significance that hon. Gentlemen opposite attach to the Bill.
I do not know whether hon. Members have ever heard of Carnwath where the ducks, lame or otherwise, fly backwards. We are told by the local people that the reason why they fly backwards is "to keep the stour out of their een." To translate, that means to keep the dust out of their eyes. I warn the Secretary of State that there are a lot of Carnwath ducks on this side of the House who will not have the dust put into their eyes.
We are told that the Bill will solve all the problems, but we remember the statement from the Front Bench last week that the Government's steel investment policy will mean that 8,000 jobs in the Scottish steel industry will be lost in the next three years. We remember that the UCS story is not finished and that there are thousands of redundancies still to come. We remember that the changes being discussed in British Railways will mean up to 2,000 redundancies in Scotland. We remember the discussions between the National Coal Board and the Scottish mine workers which meant redundancies of up to 3,000 in Scotland. That is the context in which we see the Bill.
We also remember that over the past two years the rundown in the labour force of the computer and electronics industry in Scotland has been about 15,000. That is not one of the old traditional industries but one of the new growth industries that will not grow. Why did not the new growth industries grow? Because the means by which they could grow was taken away. The sustenance was stopped by the Secretary of State for Trade and Industry. It may be that all the lame ducks are now dead and beyond all help 1082 so that the measures being introduced will be ineffective.
I recognise the significance of the Bill. If a Labour Government had been introducing a similar Bill, except for a change of emphasis here and there the mixture would have been much the same, so perhaps I should not complain. I merely sound a note of caution. The people of Scotland do not think of Scotland as a region. Scotland is a country in its own right. If England wishes to have a regional policy for some of its regions, fair enough, but Scotland is not a region. The Scots are a nation in their own right. I expected some protests from my hon. Friends who year after year in speech after speech have proved this to be so. Scotland had insisted on a separate legal system and different systems of education and local government. We have all along insisted that we are different and separate, and there is no use in our now trying to say anything else.
It is not enough to find a regional policy for Scotland. Neither this policy nor the previous policy of the Labour Government will solve anything——
§ Mr. Robertson
I am surprised that the hon. Member for South Angus (Mr. Bruce-Gardyne) should intervene. He was a disciple of the right hon. Member for Wolverhampton, South-West (Mr. Powell), but he has become a European. I dare say that he will find a back door out when the going gets a bit rough.
What is good for England is not necessarily good for Scotland. We need a political decision to create a Scottish economy. We need a balanced economy, and that cannot be achieved with the old technique of the stick and the carrot. We need our own steel industry.
Lord Clydesmuir, the Chairman of the Scottish Development Corporation, who recently spoke to the Prime Minister, has been quoted. He referred to the need for Scotland to have its own steel industry and not just a segment of the United Kingdom's steel industry. We need our own shipbuilding industry—not a part of a bigger shipbuilding industry. We need our own agricultural industry, and our own agricultural policy, because the problems are different from those in the rest of the United Kingdom. We need our 1083 own oil, gas and electricity industries. We need a proper balance of manufacturing and service industries.
However, this Bill will not give us these things. It will give us those industries which are prepared to be attracted to Scotland, and that is not good enough. This proper balance of industries cannot be achieved by the carrot and stick technique; it can only be achieved by having planned development in Scotland.
However, we must admit that the Bill has done some good. At least we have one major growth point—development boards. I should think we have a development board for every 100,000 of the population or for every large-sized burgh or community of equivalent size. I believe we have more development boards than industries. It is a most astonishing situation. However, who am I to complain? Considering that the chairmen get £9,000 a year, I only hope that these boards continue long enough to enable me to get one of those jobs. Even the hon. Member for South Angus might get one of these jobs, and that would solve his problems. He could then co and live in Arbroath.
This kind of Measure is not good enough. All that is required in the Bill is to give the Government the right to take whatever measures are required in order to achieve a solution, and I would think that the fewer words there were in the Bill the better. What we really require is the political will to find a solution—not a lot of words and promises.
§ 7.22 p.m.
§ Mr. J. Bruce-Gardyne (South Angus)
I am happy to follow the hon. Member for Paisley (Mr. John Robertson). In view of what he said, I was rather hoping that he would consider following me into the Lobby later this evening, although I do not know that his grounds for doubt about this piece of legislation would be exactly the same as mine. I do not think I could go very far with his argument.
The one thing that I am certain of is that it comes ill from the mouth of any hon. Members opposite to prate about lame ducks. The posture of the right hon. Member for Bristol, South-East (Mr. 1084 Benn) seemed to be like that of a casual wild-fowler who has left the waterways of Britain littered with walking wounded, and then has the effrontery to make deprecatory noises when somebody comes along and provides a nursery for them.
So many of the situations with which the thinking behind this Bill is designed to deal are the legacies of the right hon. Gentleman and his hon. Friends—Upper Clyde, the industrial graveyard which they created and called the white-heated technological revolution——
§ Mr. Robert Hughes (Aberdeen, North) rose——
§ Mr. Bruce-Gardyne
I cannot give way now because I do not wish to take up too much time.
Then there is the whole state of the machine tool industry, which reflects a catastrophic decline in profitability and the effect of escalating wage costs and inflation which the last Government left behind.
The argument today, if it has any relevance, is between us on this side of the House. Any of us who have serious doubts about the wisdom of the strategy implied in this Bill are liable to be accused of deprecating all forms of regional development policy, and I should like briefly to set out what makes a coherent regional policy.
First, I think we should look to the fiscal discriminations against family companies which so often are the only ones which have real roots and whole purposes in the development areas.
Second, we should eliminate the huge additional burden which the last Government imposed on the road haulage industry, which hits so hard at firms in areas like mine which are inevitably relatively remote from their suppliers and markets.
Third, we should look very hard at some of the activities of my right hon. Friend the Secretary of State for the Environment and his colleagues. I sometimes think that the Department of the Environment is really the Department for the concentration of industry in the South-East. What on earth are we doing inviting my constituents to contribute through the tax system to financing a Thames barrage? 1085 If the citizens of London want a Thames barrage, I suggest that it should be financed by the citizens of London.
Fourth, I believe that we have got to think hard about the case for a regionally differentiated pay-roll tax—a congestion tax, if you like. If we are not prepared to go that far, I sympathise with those on the other side of the House who have argued that there is much more to he said for the extension of REP than there is to be said for the reintroduction of the types of regional stimulus which are contained in this Bill.
What precisely does the Bill propose? First of all, investment grants. We used to say—and I believe we were right—that investment grants suffered from being excessively capital-intensive. They were available regardless of profitability and they were not noticeably cost-effective. All these arguments are as valid today as they were when we made them. On the point of capital intensiveness, I hope that my right hon. and hon. Friends have studied the comments made in the last Parliament by Dr. Gray. We have carried this process of capital-intensiveness a good deal further by abolishing the links which used to exist between employment and the creation of grants and loans under the Local Employment Acts. As to availability regardless of profitability, this is indisputable. If a man chooses to set up a factory to manufacture 30 ft. plastic mousetraps he will get an investment grant provided that the manufactory is a qualifying institution.
§ The Minister of Industrial Development (Mr. Christopher Chataway)
My hon. Friend will not have overlooked the information which the Chancellor gave a few weeks ago; namely, that now that these grants are combined with 100 per cent. depreciation, the profitable firm will get three times as much out of it as the unprofitable one.
§ Mr. Bruce-Gardyne
I accept that, but it still does not alter the fact that if one chooses to make 30-ft. plastic mousetraps one will get investment grant for the qualifying plant and machinery.
§ Mr. Harold Lever
Is the hon. Gentleman speaking with actual knowledge of unprofitable concerns which in order to get a percentage of their useless expenditure—as, for example, in the illustration of the mousetraps—are prepared to 1086 sacrifice their own money for the pleasure of getting a grant from the Government? Has the hon. Gentleman any actual evidence? This question of profitability is much discussed. I am no friend of investment grants as such, but I should like to know whether the hon. Gentleman is speaking from any experience or whether he is conjuring up a fanciful case.
§ Mr. Bruce-Gardyne
I can recall a case under the last Administration where there seemed a prospect of enormous investment grants going to a project without the remotest chance of profitability. [Interruption.] I recall discussing the issue with the right hon. Gentleman. All I say now is that I accept that the American firm which was behind the venture was, 1 believe, basically a share-pushing operation and, having flogged off its shares to unwise American speculators, was likely to move out. Nevertheless, it was believed in the oil industry at that time that there was a real prospect that that venture would take place.
As to the cost-effectiveness of investment grants and Labour's system of investment incentives, one can only say that the Labour Government ploughed in £300 million a year and left us with 300,000 fewer jobs in the development areas than when they started. It is unnecessary to say more than that.
The Bill goes on to give a further refinement of so-called assisted areas. I sometimes think that my right hon. Friends in the Department of Trade and Industry will not be satisfied until there is not a corner of the British field that is not an assisted area of some gradation or other. When my hon. Friend the Member for Harwich (Mr. Ridsdale) speaks of the exclusion of his constituency, I am inclined to think that he will not have to wait too long.
I come now to Clauses 7 and 8, the selective assistance Clauses. My right hon. Friends seem to think—at least, one has this impression—that the country can be divided into development areas in which there is precious little in the way of profitable activity going on and other areas where only profitable activity goes on. The truth is that the burden of financing the sort of so-called incentives provided in the Bill and other legislation like it falls just as much on profitable firms in 1087 the development areas, and in the long run, as we saw under the Labour Government, has a serious effect on the viability of those firms.
I am interested in what seems to be implied in the thinking of my right hon. Friend the Secretary of State on the subject of bailing out operations. For example, he said in Perth the other day:So we rescue them. But in doing so we must distinguish sharply between the industry itself and those whose risk has turned out badly—be they managers or shareholders.So the managers and shareholders go down, but if the unions, for example, were responsible for the condition into which the company had got itself, they, presumably, would still be eligible for the selected assistance.
I have a considerable reservation regarding the nature and extent of Clauses 7 and 8. I do not believe in going back over the old argument which we had in the last Parliament. We all recognise where the parentage of this Bill lay, in previous pieces of legislation, and I think that any Government who do not have a reasonably strong stomach for their own words are unlikely to command much of the art of political survival. But I have in mind in this connection a significant comment by my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph), now Secretary of State for Social Services, on the Second Reading of the Industrial Expansion Bill on 2nd February, 1968:…We object passionately to these large powers being given to the Government by way of an enabling Bill.…We brought forward individual Bills and, if necessary, we shall bring forward individual Bills again.…"—[OFFICIAL REPORT. 1st Feb., 1968; Vol. 757, c. 1599.]I rather wish we would. I wish we would in the case of some of the most obvious and most substantial provisions of public money which we already know are being made under the Bill. If I may be forgiven for referring to it, there is a special Clause for the Winsford Urban District Council, but there is no mention anywhere in the Bill of Govan Shipbuilders.
Before turning to that, however, which I regard as one of the most important aspects of the Bill, I have two questions of detail to raise on Clause 7. Subsection (2)(e) refers to, 1088the proper distribution of undertakings in an industry".What on earth does that mean? Are we to take it that my right hon. Friend will ensure that factories in Labour-held constituencies are closed and factories in Conservative-held constituencies are expanded? I remind him of Disraeli's dictum that there is no point in patronage unless one uses it to reward one's friends. I take it, therefore, that there may be scope here for a useful piece of Disraelian patronage.
I come now to the Upper Clyde issue. We have here not only the raison d'etre of what is done but the shadow of things to come under the Bill. We have no details of the sort of operation in which my right hon. Friend will be engaged, so we must look at one operation in which we know he is engaged and which conies within the scope of the Bill.
I shall not go back over the history—this is no time for doing that—but I turn to the White Paper, Shipbuilding on the Upper Clyde, Cmnd. 4918, containing the Hill Samuel Report, published by my right hon. Friend in March. Does this contain a full and unexpurgated version of the Hill Samuel Report? If it does, there are some curious lacunae in it. On page 11, for example, we read:While we are not, at this stage, in a position to make firm recommendations, we are able to outline reasonable alternatives and comment on their advantages and disadvantages.One can search the length of the White Paper for any comment on the advantages or disadvantages of including Scotstoun in the scheme. Scotstoun was not in the original scheme. Was there no comment—Hill Samuel was told that it would be included in the scheme at the behest of the unions, whether it made sense or not—or was there comment to suggest that it made no sense, and was that deleted from the White Paper as we see it?
The second and most devastating aspect of the White Paper is the evidence, which is fairly extensive on page 6, of the folly—my hon. Friend the Member for Pembroke (Mr. Nicholas Edwards) referred to this—of imagining that there can be a viable future for shipbuilding this high up the Clyde in the last quarter of the 20th century. There ate references to "the added complication of the Clyde 1089 Tunnel", "navigation difficulties on the Upper Clyde", the "limitations imposed by the Upper Clyde", and "the restricted site". It does not take much reading between the lines to see that Hill Samuel at least believed that this was the wrong place to build ships in the last quarter of the 20th century.
Not only was Scotstoun included in the Hill Samuel remit halfway along, but, in response to union pressures, it was decided that the hunt must be on to find a purchaser for Clydebank. It was eventually Mr. Dannie McGarvey who produced a gentleman from Texas. I have the greatest respect for Mr. McGarvey and his many qualities in many ways, but I must say that his would not be the first name to occur to my mind if I were choosing a list for the task of executive search. All one can say is that one hopes that in this instance his enterprise will prove successful.
We have no means of knowing what are the terms on which Mr. Harbin has agreed to undertake this operation. My right hon. Friends assure us that it was all done by kindness, under the Local Employment Acts as they existed before the introduction of this Bill. Last week I had some interesting figures from my hon. Friend the Under-Secretary of State which showed that the average assistance provided under the Local Employment Acts between 1962 and 1972, per project assisted, ranged from £200,000 in 1962 to £37,000 in 1971–72, and the average was declining all the time. Now we are talking about £12 million, £13 million, £14 million or £15 million—we do not know. I challenge my right hon. Friend to give us tonight in winding up a single precedent for assistance on this scale to a single project without detailed legislative provision passed by the House.
I turn now to what seems to me to be the most dangerous aspect of this whole legislative process. In the days when the Ministry of Technology had responsibility for him and looked after him, the right hon. Member for Bristol, South-East used to tell the shipyards of the Upper Clyde that to give an open-ended subsidy to one yard undermined the viability of every other shipyard.
I think again that the Hill Samuel Report puts the same thing in very similar words where it says on page 13 1090Also, the knowledge that the Government would be standing the loss in the first two yearsand I would add for several, and perhaps for an indefinite number of, years thereaftermight influence management and labour adversely.It can say that again.
My right hon. Friends have tackled this position this time because they have said that they accept that if they provide an open-ended subsidy for one yard they must subsidise all the others, and this is what Part III is about. But let us not have any nonsense about subsidising yards in order to enable them to compete with subsidised yards overseas. The purpose of these subsidies is to enable them to compete, and, above all, to compete in wage inflation, with one yard, and that is Upper Clyde, which has an open-ended taxpayer subsidy behind it.
I am sorry to say to my hon. Friend the Member for Glasgow, Cathcart (Mr. Edward Taylor) that I do not accept, and I do not think anyone can accept, that we can stop here. We are on a slippery slope once we start providing individual industries with inflation subsidies. Already the marine engine manufacturers are demanding similar treatment, and they will not be the last by any means. I just wonder how long it will take my right hon. Friend the Secretary of State to exhaust the financial provisions in Part II and come back to us for more and a wider range of industries to be subsidised.
I am profoundly worried about one aspect of the Bill. If I believed that it would help to eliminate the intolerably high level of unemployment which exists in my constituency and in many other parts of Scotland, I would support it wholeheartedly. But I believe it will have precisely the reverse effect. In the short term it may alleviate unemployment. But as the inflation subsidy builds up and as the pressures of an expansion of the public sector, which is completely open-ended in the Bill, gather momentum, taking into account that while unemployment has begun to fall decisively, inflation, unfortunately, seems to be beginning to gather momentum again, then we face the real risk of a repetition of the situation of 1970 and 1971 when companies were driven to declaring massive redundancies 1091 by the spiralling escalation of inflation costs with which they could not keep up. If that is our situation, and I am afraid that it might be, and if this Bill contributes to it, then far from alleviating unemployment in areas like mine it could make the situation worse. It is because I believe it may develop and that the risks that it will do so are too great that I shall be voting against it tonight.
§ 7.43 p.m.
§ Mr. Edmund Dell (Birkenhead)
I suppose I should apologise to the hon. Member for South Angus (Mr. Bruce-Gardyne) for intervening in the debate, as he appears to believe that it is solely between hon. Members opposite. Contrary to what my hon. Friend the Member for Paisley (Mr. John Robertson) was suggesting, however, I hope this is not the sort of Bill which we on this side of the House would have introduced had we been in government.
I will not comment, merely for the sake of time, on the Minister's intervention in the speech of the hon. Member for South Angus when he repeated the now hoary story about three times more assistance going to the profitable firm than to the unprofitable firm. This is the sort of nonsense that Governments come forward with when they are attempting to reconcile drastic changes in policy with their old philosophies. It has no greater merit than that. The fact is that the Government will now give grants to firms irrespective of profitability and they will do it contrary to everything they have said on this point in the past.
Because of shortage of time I propose to make only one point during the debate. I believe that the sort of Bill or the sort of approach that we on this side would have had to these problems would have had three elements. The first would have been a State holding company with clear economic objectives and the resources to fulfil those objectives, the sort of resources and the sort of objectives which I outlined when I introduced a debate on this specific proposition last December.
The second element is that there should he general Government incentives to investment and in the regions to employment, such as the regional employment premium. The third element should be some power of selective assistance vested in the Government but a power under 1092 strict parliamentary control and with expert non-political advice to assist it in exercising the power.
In his speech of recantation to the Scottish Tory Conference at Perth the Secretary of State said that the Government were going to make sure that public investment under the Bill was subject to extraordinary supervision. What extraordinary supervision is provided in the Bill? Certainly it is not supervision by Parliament. Let us first get the facts clear. Under Clause 7 there is no limit whatever to expenditure. There is a statement in the Explanatory Memorandum that it is expected by the middle 1970s that expenditure will be £75 million. I do not know whether that is per year or in total up to that date. Perhaps we could be told this tonight. Under Clause 8 there is provision for expenditure of £550 million over five years. This is supposed to be selective assistance but it is certainly the most generous selective assistance in the history of the United Kingdom.
The Secretary of State does not have in his Department the administrative capacity to spend these amounts of money selectively and wisely. I therefore suspect that a great deal of it will be spent unwisely and for political and not economic and social ends. Certainly it would have been far better to do as the hon. Member for South Angus suggested and spend a very large part of the money not on Government-sponsored selective assistance but on doubling or even trebling the regional employment premium which would go to firms in the development areas and which would act as an employment subsidy there.
Where is this extraordinary supervision which the Secretary of State was speaking about? Under the Industrial Expansion Act, 1968, there was a limit to expenditure of £150 million. My right hon. Friend the Member for Bristol, South-East (Mr. Benn) must be amazed these days at his moderation at that time. The Act said thatno such scheme"—that is, an industrial investment scheme—shall be made unless a draft of the scheme has been laid before Parliament and approved by Resolution of the House of Commons.The hon. Member for South Angus told how, during the Second Reading debate 1093 on that Bill, the present Secretary of State for Social Services said that if a Conservative Government did this sort of thing they would put it through the whole legislative process so that the whole business could be revealed to the House and examined in detail by it. But there is in this Bill no procedure such as was contained in the Industrial Expansion Act. There is no parliamentary scrutiny as was called for by the Secretary of State for Social Services. There is not even the affirmative procedure. The only sort of control, if it is control, is retrospective control through accountability to the Public Accounts Committee which my right hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever) will no doubt make sure is wisely conducted and the annual reports we will get under the Bill.
§ Mr. Chataway
Would the right hon. Gentleman accept that in all this the selective assistance follows exactly the precedence set for selective assistance under the Local Employment Acts?
§ Mr. Dell
The right hon. Gentleman must wake up and get to know the subject. On the contrary, under the Local Employment Acts there was an advisory committee. Without its agreement the Government could not spend the money.
I now come to what is evidently intended to be the Government's substitute for the advisory committee under the Local Employment Acts, the Industrial Development Board. The board is so important in this picture that the Secretary of State did not mention it once during his speech. The right hon. Gentleman can correct me if he can. As a means of controlling Government expenditure under the Bill, the board is so important that it did not even have to be mentioned during a Second Reading speech by the Minister dealing with the matter.
§ Mr. John Davies
Perhaps the right hon. Gentleman will be kind enough to recollect that the importance of the board was very deeply recognised in what I said on 22nd March in the Budget debate, when I was speaking about the purposes of the White Paper. It seemed to me that it received then the due degree of emphasis which I am sure it had, and 1094 I hope the right hon. Gentleman will acknowledge that.
§ Mr. Dell
I certainly recognise the degree of emphasis the right hon. Gentleman gave it during his speech in the Budget debate. But if the board is to fulfil the sort of functions of control equivalent to those which the right hon. Gentleman's colleague the Minister for Industrial Development apparently believes should be applied in these cases, and which were available under the Local Employment Acts, I should have thought it deserved at least one mention during the Secretary of State's speech today.
Incidentally, what is the board called? It was not mentioned in the right hon. Gentleman's speech and there is no mention of it in the Bill, so we must look to the White Paper even to know what it is called. In paragraph 42 there is reference to "an Industrial Development Board" but in Annex D it is the "Industrial Advisory Board". I suspect it was a last-minute thing thought up without much previous consideration.
Let us see what the board is supposed to do. In paragraph 42 we read:The Board will be available to advise generally on industry-wide problems and priorities and to consider specific major cases for selective assistance.It will be available to do so. Will it have to do so? Will its reports be published? Will the Government be able to proceed against its advice? Will its reports be available to the Public Accounts Committee? There is no control here whatever to ensure that the Government proceed according to the advice of the board or even that they obtain its advice before they act. That is no control.
In the legislation of the Labour Government we ensured that there was in every situation a non-political control. In the Local Employment Acts there was the advisory committee. In the Shipbuilding Industry Act there was the Shipbuilding Industry Board, on whose recommendation alone public money could be spent. The Industrial Reorganisation Corporation had its stated objectives written into the legislation and if the Minister wanted it to do anything else under Section 2(1)(b) of the Act setting it up he had to ask the corporation, which could refuse if it felt the job was not in accordance with its real task or 1095 remit. Here, however, there is no control from any sort of outside non-political body. All that we have to control the expenditure of these vast sums of money are the Minister and his Department, who cannot do the job on this scale.
What is their objective? It is stated in words of unprecedented generality in Clause 8(1)(b), words of such generality that we do not need any of the other objectives stated elsewhere. It says thatthe Secretary of State may, with the consent of the Treasury, provide financial assistance where, in his opinion…(b) it is in the national interest that the financial assistance should be provided on the scale, and in the form and manner, proposed".That is an objective of unprecedented generality—"in the national interest". It does not even have to be an economic objective. Anything can come under that heading. I suppose that the return of a Conservative Government could come under it in the right hon. Gentleman's opinion.
§ Mr. Bruce-Gardyne
Surely the right hon. Gentleman is not suggesting that the phrase "in the national interest" did not feature in a number of the pieces of legislation which provide the origin for this measure.
§ Mr. Dell
I am not suggesting that. What I am suggesting is that in this sort of legislation, in this sort of Government intervention in industry, it is always vital to provide a non-political control of some kind, if it is to be done by political Ministers, and there is nothing of that sort in the Bill. In every piece of legislation of this kind introduced by the previous Government we strove to do that, so that if the Government wanted to do something for political or social ends they had to tell the House honestly. They did it in the case of Upper Clyde Shipbuilders, when the Shipbuilding Industry Board refused to give assistance, and in the case of Cammell Laird when the board refused to give assistance. Under the Bill there is no control of that kind.
The greatest illusion the Bill shatters is that the Government prepared themselves for office. In fact, they are searching wildly and desperately for solutions to their problems. Our pragmatic Prime 1096 Minister, having marched his troops up the hill tolaissez-faire and disengagement, is marching them down to selective intervention on a massive scale. With the enthusiasm of the convert, the Government have moved at a stroke from the extreme of disengagement on the one hand to selective squandermania at the other extreme, without precedent and without parliamentary control.
When I consider the Bill the principal thought that comes into my mind is that at any rate we have in this country one priceless possession, the integrity of the Civil Service. When I read Bills of this sort I understand how much we depend on that integrity.
§ 7.57 p.m.
§ Mr. F. A. Burden (Gillingham)
I am very pleased to follow the right hon. Member for Birkenhead (Mr. Dell). He referred to Governments changing their mind and not being ready for office, but we all remember the National Plan, that great national tome produced by the Labour Government that was to solve all our problems and then was thrown to the floor. We all remember "In Place of Strife", but it came to nothing.
The right hon. Member for Bristol, South-East (Mr. Benn), as might be expected, gave evidence of great concern for the unemployed. We have all become used to that, and the intensity of his feelings on the matter. But the right hon. Gentleman was rather hurt when I intervened and paraphrased what he said last August about Upper Clyde Shipbuilders. I should hate it to be on the record that I had in any may misrepresented what the right hon. Gentleman said, so I have looked it up in HANSARD. He said:I made it clear in June, 1969, that we were not prepared to continue financial credit unless there were substantail changes in management practice, unless working practices were altered, unless there were some slimming of the labour force amounting to some thousands of men."—[OFFICIAL REPORT, 2nd August, 1971; ol. 822, c. 1088.]I find it rather difficult to listen to some of the right hon. Gentleman's fulminations against my party because unemployment has increased, though now there is a big movement downward, whereas it doubled under the Government of the right hon. Gentleman, who is one the Opposition's leading spokesmen on the subject. When he speaks about unemployment, the fire that appears 1097 in his eyes would delight the greatest zealot in the world. If he will compare what I said during the intervention and the quotation that I have just given he will find that, although the words differ, the meaning is precisely the same. Yet he told UCS to slim its labour force by several thousand. This is a matter that the right hon. Gentleman should always bear in mind when he criticises the present Government for their actions or for the rise in unemployment.
The value of the Bill is widely accepted. Anyone looking at it must agree with what it proposes. It implements the Government's intentions as they were set out in the White Paper of March this year. I think everyone will agree also that it produces a golden incentive for firms to go to development and other regional areas.
On regional policy, the White Paper refers to…derelict land, old and obsolete factory buildings and often a relatively low level of amenity.I want to stress how important it is that all over the country old factories, warehouses and other industrial buildings should be removed. I am convinced that the effect of custom-built premises which make the maximum use of space, provide good working conditions for staff and allow them the proper amenities resulting in increased production and more pride in work. I am sure that there will be a favourable response from many workers if obsolete factories are replaced by modern custom-built premises.
All over the country there are a great many factories and other industrial buildings which leave a great deal to be desired. Certainly our standards in this connection are not as good as those of many of our competitors overseas, and I believe they play a considerable part in giving our competitors an industrial edge.
I do not accept that progressive growth companies must of necessity be forced out of the South-East or elsewhere and forced into the development areas or to the grey areas. I do not believe that it is in the national interest to deny them the opportunity to expand their existing factories or even to establish new factories where they are already established. I am convinced that firms just cannot be forced into the development areas.
1098 We have to accept that management and workers in areas of the South-East in which new factories already exist have made friendships and business connections and send their children to school there; this is their way of life. They see no reason why they should uproot to open new factories in other parts of the country perhaps for no greater financial reward and in many cases with considerable problems. If they are given the opportunity to expand in the areas in which they exist, they will do so. What is more, there could well be considerable benefit in the long term filtering through into the development areas.
In that connection, I draw attention to the great advantage in the White Paper and the Bill which has not existed before. As a result of the Bill, it will be possible for owners of old and obsolescent factories in parts of the country other than the development areas to obtain grants for modernisation purposes. This provision will enable firms to expand their factories and increase their labour force. I hope, too, that with the improvements in old factories there will be an opportunity to include office buildings in or near those factories.
In the South-East the unemployment level at the moment is only 2.1 per cent. of the working population. If the slack is taken down to its minimum—and that can only come about by growth in the area—automatically it will spread out and encourage firms there to open subsidiaries or branches in the development areas much more than any pressure exerted by the Government can do.
Paragraph 29 of the White Paper is very important. It says:There are, however, wide areas outside the development and special development areas facing problems, including industrial obsolescence, which merit special consideration.The Government are obviously fully aware of the position. But awareness is not enough. I hope that it will be confirmed that it is the Government's intention to relax both the IDC policy and the ODP policy in areas outside the development areas. Despite the fact that there is very little unemployment in the South-East, I am glad that the Government apparently accept the need for office development there. There is no doubt that South-East England will become increasingly important from the point of 1099 view of office development as well as factory and warehouse development as a result of Britain entering the Common Market.
I have no doubt that it would bring great benefits to the area if the Government could extend an enlightened development policy to the South-East. What happens now? Hundreds of thousands of people travel into London daily on their way to work under the most diabolical conditions. In many instances the firms concerned have to pay exorbitant office rents. If there could be some encouragement for these firms, through a liberal office development policy, they would be able to develop near to their manufacturing or distributive centres, which I am sure would be a great convenience and provide local office the opportunity. I have strong views about this, and I hope that the Minister will give some encouragement.
I would also like to draw my right hon. Friend s attention to the intended development at Maplin. We all know about the intention to build the third London Airport there, and the Port of London Authority intends, if the Government give their support, to build there certainly the most modern deep-water port in the United Kingdom, possibly in Europe. This will inevitably require a highly developed communications network, road and rail. I hope that the Government are thinking about this now. Whatever views we may have about the wisdom of this development, if it does take place it means that the whole of the South-East will see greatly increased industrial and distribution activity. I hope that the Government pay attention to this and are aware of the need for issuing IDCs and ODPs to create the necessary factory, distribution and office facilities.
I turn now to an aspect that has not so far been mentioned. Whatever we may do to improve industry and our competitive standing, there is the added fact that we are entering a great new venture, the Common Market. If we are to compete not only with countries on the Continent but with the rest of the world, one thing we need as much as a constant improvement of our factories is a vast exhibition complex reasonably near London, certainly in the South-East. Who wants to go to Olympia? What a scruffy place it is nowadays, and how 1100 inadequate. Who really believes that Olympia compares with the great exhibition centres of the Continent and the rest of the world? I sincerely hope that my right hon. Friend will realise that this is one of our great needs if we are to project British goods as we should.
Such a concept should compare with the best in the world and become the industrial showplace of Europe. It would be the best showcase for the products of British industry. I support the Bill and am delighted to know that, despite their criticisms, hon. and right hon. Gentlemen opposite also support it. I am convinced that they would not do so unless they felt it represented a great advance on anything conceived in recent years to help the economic recovery and future stability of the country.
§ 8.16 p.m.
§ Dr. Edmund Marshall (Goole)
Like the hon. Member for Gillingham (Mr. Burden), I welcome the Bill, and, although I appreciate the anxieties expressed by my right hon. Friend the Member for Birkenhead (Mr. Dell) about the accountability aspects, I nonetheless realise what a welcome improvement this Bill is on previous Government policy for the regions.
I wish to refer first to the regional development grants and to their varying levels depending on the classification of the areas to be assisted. In the White Paper which superseded the Bill it was announced that the whole of Yorkshire and Humberside was to be designated an intermediate area. As the first hon. Member with a constituency in that region to contribute to the debate, I would say that I welcome the news as a necessary step for the improvement of the region as a whole. However, it tends to delete some of the relative advantages enjoyed hitherto by the areas in the region which had intermediate status.
I refer particularly to part of my own constituency where the unemployment rate is well above the national average, the employment areas of Goole and more especially of Thorne. Last month Thorne had 1,350 people registered as unemployed out of a total work force of fewer than 10,000. Male unemployment there is running at over 19 per cent. Thorne is part of a triangular pocket of South Yorkshire stretching roughly between Goole, Rotherham and Barnsley 1101 which has more severe unemployment than the remainder of the region. Here we have the difficulty of isolated pockets of unemployment which I hope will receive particular attention through the application of this Measure. I suggest that this sub-region should now be designated as a development area, and I know that here I speak for other hon. and right hon. Friends representing constituencies in the area.
Turning to Part II of the Bill, there are the very wide discretionary powers given to the Secretary of State to deal with selective financial assistance. I hope that when he comes to consider assisting new industries in areas of high unemployment he will look at industries which absorb large amounts of manpower. For too long we have laid emphasis within Yorkshire on the growth of capital-intensive industries. They do not absorb the reserves of manpower which have come on to the market as a result of the decline of traditional industries.
Furthermore, there is a need for a flexible approach to provide the right balance between opportunities for male and female employment. The hon. Member for Pembroke (Mr. Nicholas Edwards) stressed the need for opportunities for female employment. In my constituency the need is in the opposite direction. I hope that the need for the right social balance will be kept closely in mind.
I have a number of questions about Part III, particularly construction grants for shipbuilding under Clause 10. In Clause 10(9) I read that the tapering grants for shipbuilding construction will not be paid for ships which will be for the Royal Navy or will be held by any person on or on behalf of or for the benefit of Her Majesty.
Why are ships for the Royal Navy excluded? I understand that for contracts which are assigned by the Ministry of Defence for the construction of ships for the Navy, and ships which can be delivered within two years; the Ministry insists on the maintenance of fixed prices right through the period of construction. In these days of steep inflation and the keen competition in the industry, the commercial risk for builders of Ministry 1102 of Defence vessels is no less than for merchant ships.
Secondly, what is meant by ships held on behalf of or for the benefit of the Crown? Does it mean any vessel for which a Government Department signs a contract? If so, what is meant by Government Department? Are British Rail, which last month ordered three new passenger car ferries, the Post Office, and the Meteorological Office Government Departments? On 15th May the Post Office announced that it was to invite tenders for two new cable ships to speed up the under-sea telephone links. Will that contract, which will be assigned by the Post Office, qualify for the proposed tapering grant?
Finally, I turn to Clause 11 and the laying-down of the minimum qualifying size for ships eligible for help. The qualifying size, which is maintained under the Bill, is 100 gross registered tons. I understand that the normal definition of a ship for purposes of import duty is taken as 80 gross registered tons or more.
I also understand that countries in the European Community which are considering similar aid to the shipbuilding industry are saying there should be such aid for construction of tugs of 500 horsepower or over. I am told by experts that it is possible to build tugs of up to 1,000 horsepower and yet with only 80 gross registered tons weight. This would mean that yards in the Community building tugs would be better placed than yards in this country to attract Government assistance.
This size problem relates to Thorne in my constituency. Two of the large employers at Thorne are shipbuilding yards. That may surprise hon. Members, because Thorne seems to be an inland place, but there on the Stainforth and Keadby canal there are these two shipbuilding yards. The canal allows the construction of vessels with a maximum breadth of 21 ft. 3 ins. It is in exceptional circumstances only that any such vessels can be over 100 gross registered tons.
Looking again at the shipbuilding side of the Bill and also at the need of assistance in the Thorne area, I suggest that the Government should consider that the lower limit for the size of vessels which would attract help for shipbuilding could be reduced to 80 gross registered tons.
1103 I emphasise that I welcome the Bill, and I hope that its passage will be speedy.
§ 8.26 p.m.
§ Mr. John Biffen (Oswestry)
Some 10 years ago when I made my maiden speech I had the happy task of congratulating my right hon. Friend the Minister for Industrial Development on his accession to ministerial responsibility as Under-Secretary of State for Education, as he then was. I understand that my right hon. Friend will be answering this debate. I am delighted to welcome him to his important post and to the discharge of what is undoubtedly one of the most important features of Government policy.
Running through this debate, whether one has been critical or otherwise, is an underlying recognition that the speed and direction of industrial change and the social consequences that flow from it are properly a major concern for hon. Members. I happen to belong to the school which believes that the identification of the individuals affected is probably a more worthwhile and socially acceptable way of handling these affairs than the rather more indiscriminate industry-by-industry approach or region-by-region approach. These are important nuances, but they should not conceal the fact that there is a recognition in contemporary industrial society that this is one of the most important charges laid upon us.
I offer one of those avuncular pieces of advice to my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne). I understand that he will divide the House this evening. I hope he might even now reconsider that course. The Bill is highly controversial and I understand my hon. Friend's view, the scepticism, almost the repugnance, that he feels, and I understand the significance that he attaches to the Bill. But I hope he may feel that the enthusiastic nature of the endorsement with which the Bill has been received by the Opposition will encourage my right hon. Friends to take a more circumspect view as the Bill passes through Committee and that he might defer to Third Reading a final judgment.
My hon. Friend quoted Disraeli and that prompts me to try to cap the quotation. There is no doubt that the way in which the speech of my right hon. 1104 Friend the Secretary of State was eulogised by the right hon. Member for Manchester, Cheetham (Mr. Harold Lever), giving it the full approval of that element in the Labour Party which is committed to the Treaty of Rome, reminded me of the old tag which comes from a Disraeli novel when someone asked "What is Conservatism?" The riposte was "Tory men and Whig measures". What is Common Market Conservatism? It is Tory men and Stechford measures.
I believe that as we begin to proceed with an investigation of the implications of the Bill and the whole approach to a regional policy, we shall see that there is contained therein tremendous scope for enlarging the public sector.
§ Mr. Biffen
Exactly. That is an aspect which appeals to many people, like the hon. Member for Greenock (Dr. Dickson Mahon) and others who think like him and who have deserted their own Front Bench in order that they may conduct this campaign in their own fashion over the coming months.
I should like to comment on two distinctive parts of the Bill which have excited a great deal of comment. The first is the move towards cash grants. There can be no doubt that my hon. Friends and the House at large are entitled to a more compelling explanation than we have so far received of the newfound virtues of cash grants. I do not carry so much ideological baggage that I cannot be convinced, but at this moment I still reflect on the words of my right hon. Friend who is now at Posts and Telecommunications but who was then Minister for Industry, who on Second Reading of the Investment and Building Grants Bill said:…investment grants have proved to be both costly and ineffective.…In addition, the investment grants scheme discriminated against the service industries…".—[OFFICIAL REPORT, 5th May, 1971; Vol. 816, c. 1380.]One does not have to turn to the heartland of the Tory Party to find this scepticism of the virtue of investment grants in the context of regional policy. My hon. Friend referred to the remarks of Dr. Bray. In the debate on 3rd November, 1969, Dr. Bray made a particularly penetrating analysis of the 1105 finances that had been received by ICI and the impact that had had on regional employment in the North-East.
§ Mr. Biffen
I see from the endorsement that has received from the hon. Member for Burnley (Mr. Dan Jones) that I need not prolong my speech by requitingin extensowhat was then said by Dr. Bray.
I come to the second part of the controversial consideration of the Bill, namely, that contained in Clauses 7 and 8, which give my right hon. Friend tremendous powers of entrepreneurial potential, of spotting the winners, of refashioning our economy in a way to prepare us for the challenges that lie ahead. Such skills contained in these narrow political confines! I am immensely impressed. It is a substantial reversal—I am not being pedantically theological about this—and it is a reversal which may he substantiated and which must be substantiated under the close examination of a Committee stage.
Let there be no mistake: my right hon. Friend the Minister for Industrial Development is now the Minister with the cheque book. Everybody knows that. All the industrialists know it. They know that he has drawing rights up to £250 million with two further come-backs of £150 million on each count.
§ Mr. Biffen
My hon. Friend belongs to the rather more sceptical wing of the Tory Party and I move in some innocence in these matters. But these are powers which we should not lightly concede to any Executive and they are powers which require the most careful parliamentary scrutiny. It is a matter of some argument, but broadly I would rather that politically-motivated spending derived directly from the Ministry concerned than through some quasi public agency like the IRC, although I grant that this is a matter for genuine debate between and within the two sides of the House.
But it is not entirely in the context of unemployment that these major decisions have been taken. It cannot be. The unemployment figures have fallen in a welcome, dramatic and, in my view, unforeseen fashion. That places a question 1106 mark over the value of the unemployment figures as an index. My hon. Friend the Member for Norfolk, North (Mr. Ralph Howell) has, with a great deal of courage, challenged the validity of the unemployment figures as an index of those genuinely seeking work and of industrial activity and as an index which in some sense will relate our current circumstances to the kind of demand conditions with which Keynes was familiar in pre-war days. My hon. Friend's scepticism has received fairly substantial and academic reinforcement from the latest work of John Wood published by the Institute of Economic Affairs. Clearly, on the unemployment figures alone a policy change of this character cannot be explained.
That leads me to the consideration of the Common Market which will slightly upset and sadden my lion. Friend the Member for South Angus. We have the authority not merely of practically every speech made today but of the White Paper on Industrial and Regional Development that it is the question of prospective membership of the Community which is persuading the Government that there is a great need to engage in substantial expenditure to pr educe a more satisfactory industrial base. The White Paper states:The successful negotiation of membership of the European Economic Communities provides a necessary and important framework of new opportunities.…The conditions for achieving sustained growth now exist. It is a main purpose of the measures outlined in this White Paper"—and reproduced in the Bill—to help British industry to seize them.There is a general belief that we shall match many of the activities of our prospective Continental neighbours. It was said only last week thatthere will tend to be a levelling-up process, an equalisation, a harmonisation in a whole range of different activities whereby all countries in the EEC will seek to achieve the level of the best".—[OFFICIAL REPORT, 18th May, 1972; Vol. 837. c. 749.]The Parliamentary Private Secretary, my hon. Friend the Member for Bridgwater (Mr. Tom King), knows that those are the words he used in the debate on the National Insurance Bill. But this assumes some heroic degree of optimism. I have an unhapy instinct that we shall find at work a Gresham's law in public financing in the private sector, that the habits of the most profligate will tend to become 1107 the norm and that we shall harmonise to standards which increase public sector involvement in the financing of our industrial base.
One has only to reflect on the experience in Italy where the activities of the Instituto per la Ricostruzione Industriale——
§ Mr. Biffen
We have to get used to this. I warn my hon. Friend that this is the parliamentary terminology we shall use. Look at the Italian economy and the extent to which the IRI has extended its activities in recent years. Look at the extent to which in the recent recession the path was beaten to the door of IRI by companies wishing to receive the preferential finance which the corporation could provide.
We shall find that there will be constant agitation from the business community which prefers to obtain the finance from Whitehall sources rather than to have to face the more critical standards which will be applied by the market. There will be those who will say that in Italy, Germany and France people will go for the highest common factor of politically provided funds. Therefore, in a real sense the right hon. Member for Bristol, South-East (Mr. Benn) was right in saying that this Bill may mark a substantial parting of the ways in the context in which we conduct our debates on this subject. There is no doubt that membership of the Community will have considerable consequences for the regions.
The subject of transport costs has been mentioned. Mr. John Elliott, President of the Freight Transport Association, stated only last month:We do well to remember that geographically, we are on the extreme edge of the Community. We have much further to transport than other members of the Community. So any policy which is likely to put up costs will hit us harder than most.It was in the context of a speech which was devoted to strong criticisms of Community transport regulations. Barclays Bank, hardly the most antagonistic source of comment about Community membership, says in its current review that…much of the EEC's development…can he expected to occur in the already largely industrial areas.1108 That was in the context of the adverse effect which it might have on the Northern Irish economy.
The very locking together of our economies into a stranglehold of a monetary union will have long-term disadvantages for the regions. The consequences will be—and the right hon. Member for Cheetham knows this full well because he says that we must develop all our alternatives to parity changes—a bidding for subventions of one sort of another by the industrial community to offset the rigidities which will come about through monetary union.
Therefore, we may already be seeing the fulfilment of a perceptive comment by Samuel Brittan in the Financial Times on 1st July last year when he said:The real arguments against the Community are not the ones conventionally voiced. They relate rather to the form of State-subsidised capitalism favoured by many in the Brussels Commission and their supporters.
§ Mr. Biffen
I am glad to have the endorsement of my hon. Friend the Member for South Angus on that.
Confronted with that potential danger we should think carefully indeed about this legislation, because it will give no satisfaction to Conservatives. The Bill has been described by the Financial Times in the following terms:Unfortunately straight political considerations appear to have over-ridden economic good sense, and the inevitable result must be that the vast sums which will certainly be spent will not achieve the optimum effect.I can only conclude by saying that I hope that that formidable indictment will not be fulfilled.
§ 8.44 p.m.
§ Mr. Dan Jones (Burnley)
It is a pleasure to be called to speak after the hon. Member for Oswestry (Mr. Biffen) who, if I understood him correctly, was damning the Bill with faint ironical praise. If he had had the sort of experiences I have had as a trade union official, he might be induced to think again.
Any form of Government assistance to industry must of necessity be imperfect. The hon. Gentleman referred to ICI and I should like to refer to Courtaulds. As a result of Government grants, these 1109 companies together have done more to harm the Lancashire textile industry than any imports. I have made that point to both boards, chin to chin, at the same time. I realise that these subventions are imperfect, but the hon. Member must consider the alternative. What are we to do when vast areas, in terms of unemployment, are becoming thoroughly impoverished? Does the hon. Member suggest that we should still allow the market forces in which he believes to dictate the fate of these parts of the country?
The hon. Member must remember that certain areas of the North and of South Wales were responsible for the industrial might of this country. Without them we would not have reached the point we have reached. Those areas having made this contribution, is it now suggested by the hon. Member—who is possessed of good, intelligent thought—that we should say to them "You having done all that you have, we now direct you to an industrial graveyard"? Looked at from that point of view one sees the Bill in an entirely different light and I at any rate commend the Government for bringing it forward. I do not intend to make a partisan speech, but I cannot help saying that I regret that a two years' vacuum has preceded the Bill.
The burden of my brief contribution will be limited to the situation in my constituency and the area in which it is situated—North-East Lancashire, which has a population of 250,000 people who have known industrial insecurity for the best part of half a century. In the interwar years they saw the demise of cotton textiles, with the resultant great impoverishment of the people, and in the post-war years they saw the demise of both the cotton and the coal industries, with the result that Burnley, which once housed 120,000 people, now houses just over 70,000.
Much has been said about the decline that has taken place in other areas which have full development area status a special development area status, but I question very much whether any area has lost population on a scale comparable to that of Burnley. If the population of the town had remained static it would probably have had the highest level of unemployment by now.
1110 The Minister will appreciate that it is always the young people—the insured population—who go first. Indeed in most cases they are the only people to go. I offer these figures to the Minister, and I hope that the hon. Member for Oswestry will listen to what I am saying. During the period from 1951 to 1964, which included the "Set-the-people-free" period, Burnley lost about 15 per cent. of its insured population. The insured population in the country rose by an almost equivalent amount. For an area that has lived for many years with a high degree of industrial insecurity, that is intolerable.
I have tonight the rather unique privilege of speaking on behalf not only of my own political party but of the Conservative Party, because here 1 pay homage to the local authority in Burnley. I do so deliberately. Through the years these people, whatever party has been in power—and there have been the usual political twists and turns; Labour is in power now, having just succeeded in taking over from the Conservatives—have expended imaginative, sometimes costly and, indeed, reasonably fruitful efforts to sustain the economy in that area. It would have been "God help that area" had those people not been there.
I did some six years at the Board of Trade as "chief baggage man"—my own term for PPS. Very often I deputised for the President of the Board of Trade in various places where the deputising was of a very ordinary character not demanding the presence of the President of the Board of Trade. I went to a number of areas for the second and sometimes for the third time, and I always asked "What have you done to help yourselves?" I found some areas, some even in South Wales, that had not done a damn' thing to assist themselves to a form of economic viability. Yet I knew what was being done in Burnley. The Minister is wont to say "We cannot pay out Government money willy-nilly. We want to see evidence that the money is being intelligently and constructively used." I join with him in that view, but surely these people who have demonstrated their capacity to help themselves also have the right to look for some form of Government assistance.
I have said that I welcome the Bill, and I do, yet it has materially harmed 1111 North-East Lancashire. We had intermediate area status, and now almost the whole of the County of Lancaster has become an intermediate area. Just before the Government's announcement that these steps were being taken I was told by our chief development officer that we had 10 firms thinking of coming in, not necessarily to Burnley but into North-East Lancashire—I have in mind the area from Padiham to Barnoldswick. Since the Government's announcement, not one of those 10 firms has followed up its original application to come into the area.
These are some of our difficulties, and I believe that we have the right, when all the circumstances are properly taken into account, to ask the Minister seriously to consider giving the area full development status. I have no doubt that if these facts as I have put them were fully considered we would be entitled to that for which I now ask.
I have asked the Secretary of State at Question Time whether he would agree to visit the area, witness what has been done and look at the outlying parts of the country, which are particularly attractive. If he cannot find the time, he might consider getting his right hon. Friend the Minister for Industrial Development, his number two, to come along. I am aware that he was in Manchester recently discussing Manchester's problems. I accept that in Lancashire we tend to be overshadowed by Manchester and Merseyside, to our detriment. I could easily prove that. Consequently, in order that the accuracy of my words can be checked, I invite the Minister or his number two to pay a visit.
I refer briefly to the Bill. I assure my groaning comrades that I shall be no more than a moment or two. But it is important. I mention briefly Clause 9, under which the Minister is proposing massive assistance for the shipbuilding industry. I raise no objection to that. But why should we not consider the aircraft industry similarly? In case the Minister asks what the aircraft industry has to do with Burnley and north-east Lancashire, I would mention that had the RB211 gone down the sink about 15,000 jobs in northeast Lancashire would have been lost. I am very concerned about the mark 2 version of the RB211. I know the shipbuilding industry reasonably well, par- 1112 ticularly the ship-repair side. If the moneys that have been so generously donated to that industry could be similarly donated to the aircraft industry, in a similar or appreciable amount, and if the kind of revenue that the aircraft industry has earned for Britain was examined, it would be shown that the investment made by the Government would be an investment and not an expenditure, particularly in relation to what is happening now with the TriStar and the RB211 and what I hope will be an even better version of the RB211, the mark 2.
I am pleased to have contributed to the debate. I wish the Bill well, but because it has devalued Burnley and north-east Lancashire, I hope that the Minister will consider seriously helping a part of the country—which has so voluntarily helped itself—by giving it the status of a full development area.
§ 8.57 p.m.
§ Mr. Adam Butler (Bosworth)
In the short time available to me I shall not take issue with the hon. Member for Burnley (Mr. Dan Jones) on the impact of the large fibre companies on the Lancashire textile industry; nor with my hon. Friend the Member for Oswestry (Mr. Biffen) on the IRI, which is no paragon, but I assure my hon. Friend that it accounts for only about 6 per cent. of Italian GDP and, surprisingly, draws 90 per cent. of its funds by self-financing or from the market. But I am no advocate of it.
I welcome the Bill generally. My only hesitation is that one must be careful about the company one keeps. I see it as a successful attempt to regularise what has been the practice of various Governments in the past but which, because of their failure generally to think through and anticipate situations, has generally been one of an irrational display of "ad hoc-ery". But behind the practice very different philosophies have been at work.
The right hon. Member for Bristol, South-East (Mr. Benn) gave us some insight into his attitude to the Bill. He was welcoming it with open arms because of the possibilities that he saw that it gave for a further extention of the public sector, whereas my right hon. Friend the Secretary of State, speaking to the Conservative Party Conference in 1970 about 1113 the Industrial Expansion Act, said that the then Labour Government:…enacted the Industrial Expansion Act to enable them as Government to acquire points of pressure and control within the vitals of British industry itself.That is what we must safeguard against.
The Bill concerns itself, first, with regional policy. I believe that perhaps insufficient attention has been given to the question of the overheating of the economy due to over-congestion in the South-East and other highly industrialised areas. This has led to the premature application of the brake, and, therefore, a more level distribution of industry throughout the regions or throughout the country must be of economic benefit.
There has been a certain amount of sneering at the reconversion of my party to grants. I have been an advocate of grants at the level at which they are now proposed, and I hope to convince my hon. Friend the Member for Oswestry of the importance of grants in this context. There is an important difference. An investment grant at the level of 45 per cent., allowing for careful investment for working capital, is equivalent to about 25 per cent. Government aid, which is sufficient in itself to act as a bribe to companies to move into a region. It also completely distorts the return on capital which is necessary to show a profit. Using the same argument, a 20 per cent. grant is equivalent only to a 10 per cent. financial incentive, which means a 90 per cent. commitment by the investor of his own money, and unless he expects to see a return on that money he will not invest it. This means that a combination of grants at this level plus the allowances which are already in action is profit-oriented. To my hon. Friend the Member for Oswestry I would say that the advantage of grants is to improve cash flow and to make an immediate impact on the industry which expects only a 2 per cent. or 3 per cent. return on its investment.
I will spend my last few minutes on the wider aspects of Clause 8. It is known by the vast majority of industrialists, commercial men and City men that Government expenditure is necessary in the private sector for many reasons. The Bill classifies these under the general heading of "national interest". I join several hon. Members who have asked that 1114 "national interest" should be better defined. It is too wide. Sometime in the distant future when possibly the party to which the right hon. Member for Bristol, South-East belongs gets into power it could find many a good reason for calling on the Clause for an extension of the public sector into the private sector under the auspices of the "national interest".
One feature of the "national interest" is the newer, high technology, high risk, long gestation project. At the moment the City and the money market are not capable of finding sufficient finance for such projects, and the Government, as we have seen in the aircraft industry and many others, have had to be called in. It is essential for advocates of capitalism in the City and in the private money market to develop institutions and an attitude of mind which will allow them to invest and make it possible for them to invest in such projects.
One or two hon. Members have talked about parliamentary control. I will touch briefly on the question of control within the company itself. Too frequently in the past have we seen public expenditure frittered away by private companies. To put a non-executive director on the board representing the Government is not enough. To have monthly accounts is barely enough. I would recommend a much closer form of regular audit on behalf of the taxpayer.
My chief concern is with the form in which the aid may be given. I believe it is right not to exclude the possibility of taking a stake in the equity of private companies. This may be necessary as a rescue operation. It may be necessary for projects such as those which I have highlighted, involving high technology, high gestation and high risk. In that case a State equity holding may be of value in ensuring continuing commitments by Government because the present launching aid policy is not adequate in this respect. But such State holdings must be exceptional, and I welcome Clause 8(1)(c) which says that equity holding must be a measure of last resort.
Although I welcome it, I do not find adequate my right hon. Friend's statement in his opening speech today about the disposing of equity. He said words to the effect that equity holdings would 1115 subsequently be disposed of at the first appropriate opportunity. This is a noble intention which all of us on this side of the House have, but I do not want to sec the road to Labour nationalisation paved with Tory good intentions. I therefore want the Bill given the safeguard that a State holding must always be on offer after a minimum period for buying in by the partner company concerned or put on the open market.
The immediate question to that is: why allow the State to take the risks and the private company to benefit? One answer must be that the public can buy the shares. But also I should like to throw up as an idea to my right hon. Friend that the State might buy its equity at an agreed value discounted by the risk factor. Other things being equal, capital gain would accrue on resale for this reason alone.
I believe that this Bill within the new organisation of the Department of Trade and Industry is an attempt to introduce both effectiveness and reason into Government policy in dealing with the realities of today. It spells out many areas in which Government intervention is considered necessary by the majority of informed industrial opinion. What it must not do is to make possible Government intervention for its own sake in the free and fruitful working of the market economy.
§ 9.9 p.m.
§ Mr. John Smith (Lanarkshire, North)
The hon. Member for Bosworth (Mr. Adam Butler) expressed some of the misgivings which Conservatives must feel about this Bill. He must understand that the reason why the Bill has been introduced is not that his own Front Bench wish to adhere to Conservative principle but that they wish to survive electorally. They understand clearly that they cannot allow the situation which exists in the development areas to continue without causing them severe political damage. This should be understood in considering the Government's policy expressed in this Bill and in the White Paper. They are not converts to the policies of the last Labour Government because they believe profoundly in them. Indeed, they have spent the last 18 months or so deriding and destroying those policies. But they have now found themselves driven to 1116 them as the only way in which they can revive the economy of the development areas.
With that motive at the back of their minds, their conversion has not been well thought out. They have taken powers in the Bill to give almost every form of regional economic assistance yet thought of, but they still do not have a well thought out regional development policy. In the short time at my disposal I shall direct attention to the Government's attitude on the regional employment premium, which I regard as an extremely important part of the structure of assistance given to the development areas. For Scotland alone, £40 million is being paid out to industry in the form of regional employment premium this year.
In 1970 the Government announced in the Budget that the regional employment premium would be discontinued, would come to an abrupt end, from 1974. There has been a re-thinking about that, and the White Paper tells us thatthe regional employment premium will be phased out over a period from September, 1974.We have heard a great deal today, and rightly so, about the need for some constancy in regional development measures so that industrialists may know with some certainty what will be available to them over a reasonable period. What an example the Government have themselves set in their attitude to the regional employment premium! First, industry was told that it would be discontinued, which meant that it would be discounted, as it was in fact discounted, in the calculations of incoming industrialists. Then we were told that that was not so, and that it would be phased out from 1974 onwards.
In the White Paper the Government say:The rate and method of phasing out will be announced in due course in the light of circumstances at the time and after consultation with industry.I deduce from that that we shall not know until 1974 how long the regional employment premium will last, and in what form. This means that as an inducement to attract industry it will have no effect between now and 1974.
I urge the Government to reconsider this matter and decide firmly whether they will have a regional employment 1117 premium, a labour subsidy for the regions. Let them announce it now and stick to it so that industry will have a definite guideline for the ordering of its affairs. It causes nothing but confusion to those who are attempting to attract industry if there is a constant shifting and changing of Government policy in these important matters.
I go further and urge the Government to consider extending the scope of the regional employment premium. Not only should they decide to keep it but they should consider whether to increase the amount of it. Or, if they do not like keeping it, let them have a system for, say, a reduction in national insurance contributions from employers in development areas. There are many ways in which it could be done.
More important, the Government should consider extending the area of the labour inducement to cover service industries. One of the most interesting facts to come to my attention recently on this matter is that over the past 10 years there has been only a I per cent. increase in the number of jobs made available in manufacturing industry whereas over the same period the number of jobs in service industries has risen by 40 per cent. That leads me to the conclusion that if we are seeking a means to solve the employment problems of the development areas it is of the greatest importance that we try to attract more office and service jobs.
The Government have not yet begun to think out a policy for the dispersal and encouragement to the regions of office and service jobs. Here are one or two ideas which I want them to consider seriously. First, they can take action with regard to what is at their own hand. There must be a policy for the dispersal and relocation of Government offices. In the private sector, I suggest, they should consider the building of advance offices. We have had advance factories. Why not build advance offices in the development areas so that we may attract service industries to them in much the same way?
Why not consider giving grants to firms which are willing to move their offices from one area to another'? Why not, for example, give a rent-free period to people who move their offices to development areas just as we do in respect of fac- 1118 tories for manufacturing industry? I do not think these have yet been seriously considered by the Government but they would be a very important part of any policy designed to improve employment prospects in the development areas. But I recognise, representing as I do an area with male unemployment of 9.8 per cent. and average unemployment of 8.7 per cent., that the crucial need is for investment.
In my constituency we already have a suitable infrastructure for the development of industry. We already have a pool of labour. We have settled and happy communities which are available to work for incoming industry. We also have advance factories which, sadly, often lie empty and have lain empty since the last General Election. One was set up on the date of the election and has laid empty ever since. We need investment and we need a new weapon to bring industry to these areas, and I am very much attracted to the notion of a State holding company to provide the means to bring in new industries.
At the moment every time a new industrialist, be he private or foreign, comes anywhere near any of the development areas, there is a mad scramble from every local authority and every interested body all wanting him in their own areas.
The Government are setting up all the conditions for new industry to flourish but are failing because there is no investment coming directly in to start it. When we get to the situation where there is so much public money being put into these industries there is no reason why such a holding company should not be formed and why the State should not come in and set up in the development areas. This has been done by the Italians through the Italian National State Holding Company. I was interested in the observations by the hon. Member for Oswestry (Mr. Biffen) that he sees the Common Market as a dangerous thing for the Tories because of the expansion of public ownership which could come with it. I hope that this will be the position. Certainly the Italians have shown how imaginative public enterprise can solve regional development problems.
These are the things we need done in this country now, but they will not be done by a Government who have 1119 reached the conclusion that this Government have reached, half-heartedly and cynically and principally on the basis of electoral consideration. It will be done by a Government who believe profoundly in the development of the regions for political, economic and social reasons. On this side of the House we believe in equality of treatment of all our citizens, wherever they live. The Bill is one step along the way, but I do not believe that the people in my constituency, and the other people in the development areas, will get complete satisfaction until we have policies which are followed by a Government who believe in them and who follow them consistently throughout their entire period of office.
§ 9.18 p.m.
§ Mr. Eric G. Varley (Chesterfield)
This has been an interesting debate. It is my duty to welcome the Minister for Industrial Development to these debates, and in doing so I would express some regret that his hon. Friend the Member for Harrow, Central (Mr. Anthony Grant) is not taking a leading part in the debate tonight.
I remember almost a year ago on 5th May when we both took part for our respective sides on the Second Reading of the Bill to abolish investment grants. The hon. Member for Harrow, Central said that Bill was "an important element" in the Government's "general strategy" both in that debate and on Third Reading, which went on until (he early hours. The hon. Member and the Minister for Industrial Development marched their hon. Friends up the hill, as my right hon. Friend the Member for Birkenhead (Mr. Dell) said, and they formed up to the right, including the right hon. Member for Wolverhampton, South-West (Mr. Powell), the hon. Member for Oswestry (Mr. Biffin), and the hon. Member for South Angus (Mr. Bruce-Gardyne). I do not know whether the right hon. Gentleman will be marching them down the hill again tonight. If the words of the hon. Member for South Angus are anything to go by, certainly he will maintain some dignity of consistency. But I do not think the hon. Member for Oswestry, and I very much regret to say this, is being consistent on these matters. However, we shall have to see.
1120 The Government inherited from the Labour Administration a range of regional policies which had been making steady headway in reducing the regional differentials in unemployment. In 1963 the unemployment rate in the development areas was more than double the rate for the rest of the country. By 1970 the differential had narrowed slightly to 1.7 times the national rate. It was very slow progress, but it was progress. When the present Government came to power they scrapped crucial ingredients of the Labour Government's policy and put in their place what the Under-Secretary described as a new general strategy.
What have been the fruits of this new general strategy so far? Unemployment is still at 900,000 in mid-May, and the Prime Minister seemed actually to boast last Thursday that it was only that figure. It is not surprising how this state of affairs has come about. One expert has calculated that as a result of the Government's tinkering and meddling the financial incentives for the development areas were slashed by 32 per cent. At one stage in our cross-questioning at Question Time the Secretary of State for Trade and Industry admitted that there had been a diminution for manufacturing industry.
Not only the depressed regions have suffered. They are joined in their misery by the North-West, Yorkshire and Humberside and the West Midlands. It takes a genius to turn the West Midlands into a high unemployment area, but the Government's skill and business acumen have brought that about. How has it worked out? On the basis of IDCs for projects of 10,000 sq. ft. and over, in 1969, the last full year of the Labour Government, job creation was 138,000. In 1971, the first full year of the present Government, it fell to 79,000. The bitter fruits of the Government's policies are there for all to see in the latest unemployment figures.
In the areas of traditional long-term unemployment the number out of work has risen from May, 1970, to May this year as follows: Wales, from 3.8 per cent. to 5 per cent.; Scotland, from 4 per cent. to 6.4 per cent.; the North, from 4.8 per cent. to 6.2 per cent.; the North-West, from 2.6 per cent. to 4.9 per cent.; Yorkshire and Humberside, from 2.7 per cent. to 4.3 per cent.; the West 1121 Midlands, from 2.2 per cent. to 4.1 per cent. This summer there is a higher rate of unemployment in the once-booming West Midlands than there was in the Welsh development area two years ago. These are the fruits of the Government's proudly-proclaimed new general strategy.
This Government, who profess such stern views on public expenditure, have brought before us this panic Measure—[Interruption.] The Secretary of State for Trade and Industry says that it is not a panic measure. We shall see. In the right hon. Gentleman's famous "lame duck" speech of 4th November, 1970, he uttered these moving words:The vast majority lives and thrives in a bracing climate and not in a soft, sodden morass of subsidised incompetence.Now the right hon. Gentleman is the chief sponsor of a Bill, which as the Economist puts it, provides a blank cheque for industry. The Guardian estimates that it will hand out £2,000 million. Yet in that same memorable speech the Secretary of State accused the Labour Party oftrying to put the cream in your coffee by spraying a jugful of cream around the room in the dark."—[OFFICIAL REPORT, 4th November, 1970; Vol. 805, c. 1212–618.]As one of my right hon. Friends who is a journalist has said, the Government have put the jug back in the cupboard and have wheeled out a whole dairy in the form of the Bill. They have set aside all their previous criteria.
The Minister of Posts and Telecommunications, when speaking formerly as Minister for Industry, attacked investment grants because they did not help the service sector. The Bill perpetuates that Labour bias that he attacked in favour of manufacturing industry. That is one criterion.
The Chancellor of the Exchequer referred to another on 4th November, 1970, when he said:…the system of investment grants is administratively complicated. The change which I announced, once the transition is completed, will release about 1,000 civil servants."—[OFFICIAL REPORT, 4th November, 1970; Vol. 805, c. 1098.]Under the headingEffects of the Bill on public service manpowerthe Explanatory Memorandum to the Bill says on page vi thatThe increase in staff as a result of this Bill is estimated to be of the order of 500".
§ The Under-Secretary of State for Trade and Industry (Mr. Anthony Grant)
That is a saving.
§ Mr. Varley
The Under-Secretary says that it is a saving. But he knows that the investment grant office staff has not yet been wound down; there is still a residue there. If the hon. Gentleman wishes to pursue the argument, I am prepared to wager that at the end of this Administration as a result of this Bill the number of civil servants operating regional policy will be greater than under Labour. I am not saying that is bad. But right hon. and hon. Gentlemen opposite have made great play with their intention to cut the number of civil servants. At any rate, if one looks at the creation of jobs, that is probably one guarantee that the Bill will provide some opportunity. But certainly the Bill is a far cry from the pledge contained in the last Conservative manifesto, which said on page 15:We will link expenditure more closely to the creation of new jobs…In his speech announcing the new policies embodied in the Bill the Secretary of State for Trade and Industry boasted thatThe new grants in respect of buildings, unlike those at present available under the Local Employment Act, will not be limited by the provision of employment.…"[OFFICIAL REPORT, 22nd March, 1972; Vol. 833, c. 1541.]The Government go further. In that self-same Local Employment Act and the Industrial Development Act, the cautious Labour Government specifically excluded a whole range of nationalised industries, including coal. I am pleased that coal is now included in this Measure. But the Secretary of State has decided that the nationalised industries should have some of the benefits, and the White Paper specifically includes them. However the Bill does not content itself with giving help to the State sector of industry as it is today. It can bring about an extension of State intervention.
I am sure that right hon. and hon. Gentlemen on the Government side will have a sentimental recollection for another passage in their 1970 General Election manifesto which said firmly:We will repeal the so-called Industrial Expansion Act which gives the Government power to use taxpayer's money to buy its way into private industry.1123 I leave it to the Minister to reconcile that ringing declaration with Clause 7(3), which says:Financial assistance under this section may be given on any terms or conditions, and by any description of investment or lending or guarantee, or by making grants, and may, in particular, be—
- (a) investment by acquisition of loan or share capital in any company, including a new company formed for the purpose of giving the financial assistance,
- (b) investment by the acquisition of any undertaking or of any assets."
§ Mr. Chataway
I am sure that the hon. Gentleman will not overlook the next subsection. I hope he intends to read that to us.
§ Mr. Varley
Of course I know the point to which the right hon. Gentleman refers. But if a company is in difficulty and comes to him or to his right hon. Friend who has the powers vested in him saying "We need Government assistance and we would like you to take equity in our company", is the right hon. Gentleman saying that he will not or cannot do that? Of course he is not saying that. Just as the Industrial Expansion Act enabled the Government to buy equity, so they are similarly enabled under the provisions of the Bill. In the words of Tory Party manifesto there ispower to use the taxpayers' money to buy its way into private industry.The Minister for Industrial Development at his Press conference two weeks ago went out of his way to say that this power would be used only sparingly, if at all. I am a trusting man and probably will take what he says at the face value of the Financial Times of 12th May, but I do not know how his right hon. and hon. Friends will take that declaration when we see how many works the Chancellor of the Exchequer and the Secretary of State for Trade and Industry have swallowed. There is still one meal of words about which they are being over-fastidious and that is to do with the regional employment premium, mentioned by so many of my hon. Friends.
In his 27th October speech the Chancellor categorically announced the abolition of the regional employment premium. In his Budget Statement on 21st March he laid a smokescreen to 1124 cover the possible retreat from that position with these words:The rate and method of phasing out will he announced in due course in the light of circumstances at the time and after consultation with industry."—[OFFICIAL REPORT, 21st March 1972; Vol. 833, c. 1369.]I hope he will have proper consultation with industry and I hope that he will have it urgently. Support for this proposition came, surprisingly I thought, from the hon. Member for South Angus who favoured the extension of the premium. He said it should be higher in certain circumstances.
§ Mr. Bruce-Gardyne
I am sure the hon. Gentleman would not wish to misquote me. What I said was that I would prefer a regionally differentiated payroll tax or congestion tax, but failing that an extension of the regional employment premium would be preferable to the incentives operated in the Rill.
§ Mr. Varley
I am grateful for that clarification. That is what I understood the hon. Gentleman to say and I am sorry if I did not get it right first time. Certainly he is in favour, if he cannot get a regional payroll tax, of an extension of the premium. This view is shared by a good many people and I hope that the Government will have proper consultation about this. The TUC has asked for this. The Prime Minister tells us continually that he wants a new policy of conciliation with the TUC, a new dialogue. Let him accept the advice of the TUC on the regional employment premium. It is a view shared by the Glasgow Chamber of Commerce, Lord Roberthall, a distinguished industrialist and adviser of the Tory Cabinet, by the professor of Political Economy at Aberdeen University and by such distinguished economic consultants as Professor Alan Day and Mr. Samuel Brittan. It is also shared by that well-known expert Mr. Nigel Lawson, who is now a prospective Conservative candidate and who wants not only to retain but to double this economic weapon which The Times of 12th May describes asone of the most elegant and effective approaches to a coherent policy for the regionsand which the Financial Times of 12th May said wasthe most direct incentive to employ men rather than machines.1125 There is a strong case for increasing rather than abolishing our regional employment premium, because since between April, 1968, and August, 1971, its value as a percentage of average wages in manufacturing industry has fallen by more than one-third. The Government surely cannot be reluctant to take this ultimate step out of any sense of shame—they have surely lost that a long time ago.
The Bill attempts to put right the disastrous mistakes made by the Government nearly two years ago in their first dogmatic flush of power. We devoutly hope that it will work. Certainly we shall scrutinise it closely in Committee and seek to improve it. We look forward to joining forces with the right hon. Gentleman when its powers, where the Bill has powers, are attacked by his hon. Friends the Members for Oswestry and South Angus. We will protect him from his hon. Friends if we have to.
The Bill will become law in an economic situation which may already have got out of control. The balance of payments is already vanishing before our eyes. Distinguished economists are already suggesting that there could be devaluation in a matter of months. Mr. Harris in The Guardian only a week ago suggested that devaluation was being talked about within European circles. It is in such a situation that the Government have introduced a Bill to put right extremely serious problems created by their policies of abolishing investment grants and the Industrial Reorganisation Corporation.
Had our warnings been heeded a year ago, we should not be stuffing these words down right hon. Gentlemen's throats. The Opposition will not vote against the Bill tonight. On the contrary we support it, with the reservations I have expressed. However, we hope that as a result of their miscalculations the Government will give the country the opportunity to vote against them as soon as possible.
§ 9.36 p.m.
§ The Minister for Industrial Development (Mr. Christopher Chataway)
The hon. Member for Chesterfield (Mr. Varley) has taken the line that this is a reintroduction of the measures successfully pursued by the Labour Government. He suggests that the Bill is no more than what they have been urging for a long time and exactly the same as they em- 1126 ployed when in power. Taking a broad brush and not bothering to distinguish between national investment incentives on the one hand and regional development grants allied to free depreciation on the other, looking at the provisions under Clauses 7 and 8 and recalling what the IRC was about, one can make something of a go of it.
I appreciate that both the hon. Member and the right hon. Member for Bristol, South-East (Mr. Benn) have enjoyed themselves with that line of argument. As the debate progressed, even as the speech of the right hon. Member for Bristol, South-East progressed, it became clear that it was not really their view that the Bill introduced measures which were the same as they employed. Nor was it their view that they would now want to employ these measures.
The hon. Member for Glasgow, Craig-ton (Mr. Millan), in an interesting speech, argued that the regional development grant we have now allied to free depreciation is too much profit-orientated. The right hon. Member for Birkenhead (Mr. Dell), the right hon. Member for Manchester, Cheetham (Mr. Harold Lever) and the right hon. Member for Bristol, South-East argued that it was extremely important that there should be a reintroduction of the IRC, or some other outside agency. The right hon. Member for Cheetham was arguing for a development bank.
The hon. Member for Bedwelty (Mr. Kinnock) and a number of other hon. Gentlemen appeared to take the line that there never should be any change in the employment pattern. When talking about coal and steel, the hon. Gentleman seemed to be arguing that the numbers employed in the coal industry should be the same as in previous years.
Finally, the right hon. Member for Bristol, South-East and a number of others argued for an alternative strategy. Those who have taken part in the debate—[Interruption.]—which does not include the hon. Member for Bolsover (Mr. Skinner), who has not listened to much of it—probably agree that the burden of the Opposition's case is not that these are measures which are the same as those of a Labour Government. They have argued for an alternative strategy, for a 1127 State holding company and for an extension of public ownership which they do not believe will follow from these measures. I hope that I may be able to deal with a number of those matters.
I turn first to the subject of Europe. The right hon. Member for Bristol, South-East spoke today in dark and fearful terms of the effect of entry into the Common Market upon regional policy in Britain. It was suggested by him and others that we should be seriously inhibited in our efforts for the regions by the bureaucrats in Brussels, who today seem to assume an even larger part in Labour demonology than landlords or bankers once did. In fact, there is no conflict between EEC and United Kingdom regional policies.
When the former Prime Minister, now the Leader of the Opposition, was asked, when Labour was in power, whether there was any danger of the accession to the Common Market having the effect that is now feared, he was quite categoric; and when asked whether the country would be free to continue and intensify existing regional policies under the Treaty of Rome, he said:The answer that we give with confidence is that we are.We are still totally confident, and nothing has changed to alter that position.
It is worth looking for a second or two at the facts of the matter. The principles on which the Community works to redress the social and economic imbalance between its regions are explicitly stated in the Preamble to the Treaty of Rome. There are already existing institutions workings towards that end, such as ECSC, the European Investment Bank and the European Social Fund. The EEC recognises that regional policy is primarily a matter for national Governments and the Commissioner for Regional Policy said last September:It is primarily for national Governments to provide the ideas for dealing with regional problems. It is not within our task to seek to interfere with the ideas of national Governments.The Community is still at the stage of working out a common regional policy and the only step taken so far in this respect is a Council of Ministers resolution in October, 1971, which defined the central areas of the Community, placed 1128 a 20 per cent. limit on regional aid in those areas, and required member States to conform to a set of principles governing aid of that kind.
Article 154 of the Treaty of Accession provides for the principles of that resolution to be applied in the United Kingdom from 1st July, 1973, at the latest, but recognises that there will be a need to supplement the arrangements to take account of the new situation which the Community will face after enlargement. I think that the objectives of that October resolution are entirely acceptable.
My hon. Friend the Member for Oswestry (Mr. Biffen) had the contrary fear to that expressed by the right hon. Member for Bristol, South-East, and thought that the effect of entry into the Common Market would be to create a situation in which countries would be continually outbidding each other in the assistance they gave. I should have thought that this first tentative step by the Community to try to limit that sort of bidding would be regarded as acceptable and highly desirable by the majority in the House.
In the future development of Community regional policies we shall be playing our full part in ensuring that the problems of our own regions are taken fully into account.
§ Mr. Kinnock
In answers that the right hon. Gentleman's Department has given me I have been told that the figure of 20 per cent., which he has mentioned as assistance to industries, even under the Bill, will be more than doubled. How will he make that conform to his European principles and meet with the approval of those with whom he will consort if we go into Europe?
§ Mr. Chataway
The hon. Gentleman is plainly mistaken. It remains to be discussed exactly how the 20 per cent. will be defined in relation to British incentives, and it remains to be discussed and settled what application the central areas concept has to our situation.
The important point is that the whole practice of the Community over the years has not been to override essential national interests, and we have repeatedly made it clear that we regard a strong regional policy as an essential national interest.
A number of hon. Members have taken an interest in the parts of the Bill 1129 referring to the shipbuilding industry. I entirely agree with my hon. Friend the Member for Glasgow, Cathcart (Mr. Edward Taylor) that the essential thing was to try to ensure that we used grants in this industry not simply to stave off crises but to fortify the successful, and that there should be the opportunity to evaluate the industry as a whole. The priority study on which my Department is embarked is intended to do just that.
My hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) asked quite a few questions about the Bill. I will answer a number of them in correspondence. [HON. MEMBERS: "Oh."] I have a large number of questions to answer. My hon. Friend again asked me specifically about the Marathon Company. I know that he and a number of hon. Members have over the past few weeks felt frustrated because the practice of the Local Employment Act is that assistance given under that Act remains a matter of commercial confidence. I am advised that there are no exceptions to that. However, in view of the anxiety of my lion. Friend and others, I have asked the Marathon Company whether it would agree to the terms of the extent of the assistance being made known. It has no objection to that. Since the relevant section of the Local Employment Act is coming to an end, it might well be that no dangerous precedent would be set by doing that.
The assistance which has been offered under the Local Employment Act to the Marathon Company is a loan of £6 million, given according to the criteria normally employed by the Local Employment Act Financial Advisory Committee, and, in addition, the company will be eligible for standard grants; namely, building grant, regional development grant, machinery grant, shipbuilding construction grant and shipbuilders' relief. The amount which the company will receive depends on its performance and how fast it moves, but on its calculation of its operation it expects that those grants will be worth to it between £5 million and £6 million. I emphasise that those are grants to which any company has access.
I turn to a part of the Bill which has proved controversial and has attracted a good deal of comment——
§ Dr. J. Dickson Mahon (Greenock)
I should like to mention a point which has 1130 not been answered, although the Minister touched on it for an instant. The White Paper states that the long-term appraisal required will be handled as a matter of urgency. What is the timing of the conclusion of that appraisal?
§ Mr. Chataway
I cannot give the hon. Gentleman a date yet. But it does not have too direct a relevance to shipbuilding grants, because the grants are absolutely clear. This is a short-term measure introduced for the reasons given by my right hon. Friends the Chancellor of the Exchequer and the Secretary of State for a three-year period on a tapering basis-10 per cent. this year, 4 per cent. the year after and 3 per cent. after that. The review to which the hon. Gentleman has just referred will be more relevant to the provisions for selective assistance under Clauses 7 and 8.
§ Mr. Varley
Will the right hon. Gentleman tell us a little more about the £6 million loan to the Marathon Company under the Local Employment Act? Can he confirm that this was not only done under the existing legislation but was approved by the Advisory Committee?
§ Mr. Chataway
I can. That is exactly the position.
I turn to Clause 8. In preparation for entry into Europe the Government have made it clear that they believe that there is a job of modernisation to be done in various sectors of industry. It is in recognition of this factor that the powers under Clause 8, which enable the Government to assist in the modernisation process, lapse at the end of the transitional period. Most of the work to be done under Clause 8 is rather of a kind undertaken by successive Governments. My hon. Friend the Member for Bosworth (Mr. Adam Butler) made something of a similar point.
The present Government, like their Labour and Conservative predecessors, endeavoured, for example, to achieve an orderly rundown of contracting industries. On occasions it is right to use public funds—as, for example, the Conservative Government did in the case of the cotton industries reorganisation schemes from 1959—in order to help an industry to modernise while reducing to 1131 a viable size and to cushion the impact of individuals and families in face of great economic changes.
Again, British Governments must always recognise that there are some industries—avionics and computers are examples—in which high risks are involved. In such industries as these there is a straight choice to be made.
§ Mr. Dan Jones
Does the right hon. Gentleman consider the rundown of the textile industry to be orderly?
§ Mr. Chataway
I do not want to go into the merits of that episode, but the objectives of achieving an orderly rundown are widely accepted. Where subsidy and Government participation are involved in an industry world wide, we have to decide whether we wish to have a British capability. Sometimes it may be right to opt out and recognise that the stakes are too high and the chances of success too limited. But if we wish to participate in such industries there is bound to be a Government commitment and Government funds are bound to be involved. In this respect the Government are striving to get rid of Government subsidies wherever possible. For example, we are playing an active role in OECD discussions on the subsidisation of the shipbuilding industry. We want to reduce by international agreement the areas in which Governments distort competition, but as a number of hon. Gentlemen suggested, among them the right hon. Member for Manchester, Cheetham, removal of support cannot and should not be done unilaterally.
All this is far from the visions of creeping nationalisation entertained by a number of hon. Gentlemen opposite. I am afraid that I cannot encourage them in the hope that Clause 8 will result in an extension of the public sector. There have been situations, and there may be more, in which Government support is justified and required, but even in those cases—and there will be a minority where equity participation is needed—there is no reason for this to involve long-term control or participation by Government. The successful selling off of the IRC portfolio, which is continuing, has demonstrated that once a certain stage is passed it is possible for the Gov- 1132 ernment to divest themselves of their interest and at the same time to safeguard public funds.
On occasions it will be right—and this point was made by my hon. Friend the Member for Bosworth—to go further and to agree to a sale at valuation to a nominee specified at the time of the original purchase. This is a Measure designed to aid and strengthen, and not to eliminate, private industry. I recognise that this is ground which will not he wholly congenial to some hon. Members opposite.
I pass to the service industries. There has been considerable interest in the extent to which the Bill is of assistance to the service industries. Whether it be the clothing industry or any other, the Bill will do more for the service industries than has any other previous package of regional measures. It is not feasible to give any general grant to the service industries. One has only to consider the range of industries involved to recognise that they are dependent on the general range of activity in an area. It is therefore necessary to employ a practical approach. There may be some mobile service industries—some hon. Members have referred to them—to which it would be right to give assistance. Clause 7 enables us to do that.
I should make it clear that under the Local Employment Acts as they were administered by the party opposite in recent years virtually no assistance was given to the service industries. Only about half a dozen projects a year qualified for assistance of this kind. It is very odd for hon. Members on the Opposition side to champion the claims of the service industries. They may remember that we have halved SET and are on the way to abolishing it. Very few people in the regions would deny that that is as great a measure of assistance to the service industries as can possibly be given them.
§ Mr. Ronald Bray (Rossendale)
In the definition of service industries, would my right hon. Friend include those which provide services for other industries? I am thinking in particular of those which provide contractors' plant, maintenance equipment and the like.
§ Mr. Chataway
So far as they are engaged in qualifying activities those industries will be eligible for regional 1133 development grants. We can consider any of those concerns for selective assistance under Clause 7.
I entirely accept the point made by hon. Members on both sides of the House that the greater part of the expansion of employment in the regions in future will almost certainly come from the service industries. There has been much discussion of the relative merits of dealing with regional policy and the kind of national support that I have described within Government and outside. The right hon. Members for Birkenhead and Cheetham and others clearly hanker after the IRC. Few have argued for the IRC; they have argued for an external agent. There are great administrative arguments in favour of a co-ordinated approach by the Government. If there were a development bank dealing with these problems it would be more difficult to have a coherent co-ordinated strategy by the Government to ensure that economic expansion was matched by improvements in the infrastructure and that the regional development grants policy was pursued consistently with selective assistance.
The overriding and clinching argument for insisting that these matters should be dealt with in the Government is the question of answerability. We saw in the IRC an agency which, with public funds and without full disclosure, was able to take sides in takeover bids and was able to deploy its strength without anything like the answerability that a Minister must accept. The Industrial Development Executive, for which I have a responsibility, will have its funds voted annually. It will be answerable to Parliament for them, to the Public Accounts Committee. As Minister I have answerability for it.
I believe that the regions recognise that there is now a great opportunity. We are seeing the economy move forward and we have ensured that there is a background against which these substantial measures can have a considerable effect.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).