Regional Employment Premium (Hansard, 10 July 1973)

§ 4. Mr. Willey
asked the Secretary of State for Employment what was the total of regional employment premiums paid to firms in the Northern Region in 1972.

§ The Secretary of State for Employment (Mr. Maurice Macmillan)
The estimated payments made in respect of regional employment premium for the Northern Development Area in 1972 were £29 million.

§ Mr. Willey
Does the right hon. Gentleman accept that the Northern Region is dependent on this aid, that its withdrawal would be a disaster and that even the threat of withdrawal is harmful to the region?

§ Mr. Macmillan
I do not accept the right hon. Gentleman's premise. The evidence is that the effect of regional employment premium differs as between different regions and may well differ within a region. I recently visited the North-East, and it was clear that the problems of Tyneside are different from those of Teesside. On Teesside, the problem in the near future may well be shortages not only of special skills but of semi-skilled labour. Discussion with the unions and industry about the phasing out of REP should take account of such factors and the question of the most effective way of giving help, including training help, to the regions concerned.

§ Mr. Michael Shaw
Does my right hon. Friend agree that experience shows that general expansion of the economy is far more effective than such means as regional employment premium in providing additional work? Furthermore, does not experience show that if the money were spent more selectively it might provide a good deal more help than it has done?

§ Mr. Macmillan
I agree. The most important aim is to maintain a continuous and steady rate of expansion. One factor which is a prerequisite of successful development in the Northern Region is confidence in the continued growth of the economy. Given that, there is a great deal to be said for applying central Government help in a more selective way, and in a way which Government policies have already begun to develop, in order to achieve the greatest possible effect.

§ Mr. Fernyhough
Does not the Minister appreciate that certain large companies in the North-East, employing many men, would not have been viable in the last two or three years had they not received regional employment premium'? Is he aware that the evidence given to the Select Committee indicated that the withdrawal of regional employment premium might mean the loss of between 20,000 and 40,000 jobs? If some of those jobs are lost in the North-East, it will be a disaster. Will not the right hon. Gentleman review this decision?

§ Mr. Macmillan
No. My right hon. Friends the Prime Minister and the Chancellor of the Exchequer have made it clear that the phasing out of regional employment premium from the end of 1974 will be discussed. It was introduced in September 1967 for seven years. The evidence is that in the circumstances at that time and for a few years afterwards it was effective. However, during a phase when the economy is successfully expanding and massive investments are being made in parts of the Northern Development Area, it is not necessarily the most efficient way of spending equivalent sums of money.

§ Dame Irene Ward
Before coming to a decision, will my right hon. Friend kindly have an analysis made of the firms that, last year or this year, would have been in the red if it had not been for the regional employment premium? If I may say so with great respect, I have not committed myself because I want to know a great deal more about the matter. I hope that my right hon. Friend will have an analysis made. because it is no good putting small firms out of work—

§ Mr. Speaker
Order. This is not committal time; it is Question Time.

§ Mr. Macmillan
I think that I can reassure my hon. Friend. The point of having discussions with industry on the phasing out of regional employment premiums is to provide the sort of information my hon. Friend is quite properly seeking

§ Dame Irene Ward
I thank my right hon. Friend.

§ 6. Mr. John Smith
asked the Secretary of State for Employment if he will make a statement on the implications, in employment terms, for the special development areas on the phasing out of the regional employment premium in the light of the latest employment figures.

§ Mr. Maurice Macmillan
Discussions have been taking place with both sides of industry on the phasing out of the regional employment premium and it would be premature to make a statement until the outcome of these discussions has been considered. The possible effect on employment in these areas is one of the factors being taken into account.

§ Mr. Smith
In these discussions with the TUC and the CBI, will the Minister take into account that the Government are the only people who want to phase out REP? The TUC and the CBI, which are recent converts, want to continue REP. What must be done to persuade the Government to withdraw this silly proposal?

§ Mr. Macmillan
I do not accept that it is a silly proposal. The unemployment rate for Great Britain generally is 2.6 per cent. this year, compared with 3.7 per cent. in May 1972. In the special development areas unemployment is still too high, but it has fallen by 24.5 per cent. over the year and the percentage rate has dropped from 7.4 to 5.6. It is the expansion of the economy that is necessary for the development of the areas. The academic research which was undertaken indicated that the regional employment premium could have been responsible for the creation of between 20,000 and 50,000 jobs by 1970, but that was in the conditions which obtained in the years up to 1970. We are now dealing with the different situation of an expanding economy.
Our discussions with the TUC and the CBI will centre not only on the effect which they assume could flow from the continuation of REP, but also on other measures which are now being undertaken and developed by Government policy for bringing more selective help to the areas concerned.

§ Mr. Waddington
Has the Department any evidence that specific firms would leave the special development areas if REP were ended tomorrow? Is not it 1239 obvious that the Industry Act provides far more specific and relevant aid and far fewer indiscriminate handouts to industry?

§ Mr. Macmillan
That is true, and the Industry Act, unlike REP, does not give a subsidy to firms which have been in the region for the whole of their history, which have no intention of moving out and which have been doing very well.