INDUSTRY (FINANCIAL ASSISTANCE)

HC Deb 27 June 1977 vol 934 cc149-201

8.35 p.m.

The Minister of State, Department of Industry (Mr. Alan Williams)

I beg to move, That the Financial Assistance for Industry (Increase of Limit) Order 1977, a draft of which was laid before this House on 16th June, be approved. I shall be brief in my introduction, although I shall want to provide some up-to-date informal ion to the House since it is a little while since we debated this legislation.

The order will serve to increase the financial limit which currently exists in terms of assistance provided under Section 8 of the Industry Act 1972. The House will recollect that under amending legislation carried into force last year the initial limit on the first stage was raised to £600 million. We provided for increases of up to £250 million to be made on four separate occasions by order.

The purpose of this order is to obtain the first tranche of those four £250 million elements. I remind the House that by Section 8(6) of the Industry Act the total to be counted against these limits consists of money that has been paid, plus liabilities under guarantees, from which we deduct repayments of loans and of principal paid against guarantees where the firm has recovered sufficiently to recompense the Government. We felt that to be an inadequate adjustment. Indeed, we feel that the adjustment should be higher. The important point is that payments do not necessarily take place at the same time as commitment. The payments can be spread over a lengthy period.

In the debates that took place earlier this month on the offshore scheme, my right hon. Friend the Minister of State, Department of Energy made the point that in some of the schemes payments would be phased over an eight-year period. The Government believe that we should count the total commitment rather than the payment because we think that this provides more appropriate parliamentary scrutiny and control of the level of Government expenditure under this legislation. This is best demonstrated by pointing out that at present total payments which count against the £600 million limit are only £170 million, but the actual firm commitments are £520 million. Therefore, only £80 million of the initial tranche remains.

Before I explain why the increase is needed, I shall seek to explain why the commitment of £520 million is about £200 million higher than at the time of Second Reading of the amending legislation in April last year. The commitments have risen by approximately £200 million in the space of one year. This has been primarily because of the existence of the accelerated projects scheme, individual industrial sectoral schemes, offshore schemes and a payment to Leyland.

Of the present figure of £520 million so far committed, £245 million has been committed to individual companies, but the largest element—£162.5 million—has been committed to Chrysler. A figure of £275 million—over half the money—has been committed under Section 8 schemes under various industrial aid schemes.

I should like to examine particular schemes because their development is the justification for me to come to the House to ask for these extra resources. I suggest to the Opposition that if, when they have heard what has been achieved under these schemes, they still feel that they should vote against the order, those outside the House will find that judgment difficult to understand.

If we first examine the accelerated projects scheme, we see that this year it has been incredibly successful. The applications had to be completed last year and the expenditure had to be initiated by the end of November last. When the scheme was finalised, for £84 million of Government expenditure we generated £640 million of new investment. Conservative Ministers constantly ask us what we are doing to secure new investment. The accelerated projects scheme secured £640 million worth of it.

Mr. Michael Marshall (Arundel)

On what basis does the right hon. Gentleman form the judgment that £640 million worth of new investment arose as a result of Government action? Much of that was likely to come forward in any case. Can he substantiate his claim?

Mr. Williams

I thought that the hon. Gentleman was aware of this. What happens is that when a firm submits a proposal it is assessed by specialists within the Department. They look into company records, into decisions taken at board meetings and so on, to establish that the project had not been intended to take place prior to 30th November last. There is the most detailed scrutiny before we approve projects, and many have been turned down. The hon. Gentleman shakes his head, but I can tell him that many projects were turned down because they could not meet the criteria under the scheme.

I should like to indicate the impact of this £640 million worth of new investment because it is highly relevant to issues that are disturbing the country. The spread of the new investment under the accelerated projects scheme has been quite wide across manufacturing industry. About one-third of it has gone to clear potential shortages and potential bottlenecks identified by the sector working parties under the industrial strategy.

This investment has led to the creation of £400 million worth of orders for the British construction industry and for plant and machinery suppliers in this country. Under the £640 million that will arise from this scheme, £400 million will be placed in orders with the construction industry and with the plant and machinery suppliers in this country, thereby generating extra employment in those sectors. Although job creation was not the objective of the exercise, it was a counter-cyclical operation and it will create 13,000 permanent jobs. That, again, is a highly desirable attainment in the heart of a recession, deep in the trough, when it has been difficult to obtain new investment and new jobs.

Not only will there be £400 million of extra domestic orders and 13,000 new jobs as a result of the scheme but by 1980 the projects that will have been financed by this money will be contributing £500 million a year towards the balance of payments. All this is for the expenditure of £84 million worth of Government money, yet Tory Members will have the effrontery to vote against the order later this evening.

In addition, there are 12 sectoral schemes related to individual industries. These are sometimes called industry schemes. Commitments there total £70 million.

Let us again see what it is that Conservative Members will vote against tonight. We are seeing a repeat performance of their antics last week on prices. Hon. Gentlemen opposite are to vote against legislation that will enable us to have the ferrous foundry scheme. A short while ago I attended an exhibition at the National Exhibition Centre of the ferrous foundry industry. This industry, although in a recession, was in an astonishing state of optimism. It was seeing expansion and development such as it could not recollect having seen before—all as a result of this scheme. The industry is a critical supplier to many other industries. It is a critical supplier to the engineering steel and construction industries.

We have received 513 applications under the ferrous foundry scheme from an industry which in the past has been noted for its unwillingness to invest.

Those 513 applications have already resulted in offers amounting to £35 million for 200 projects that will generate £165 million worth of investment in an industry that is noted for its lack of investment. We are still considering other applications under the scheme. It has now closed, but it was so successful that we have a backlog of applications.

The machine tools scheme was slower to get started and proved an interesting demonstration of the value of the relationships that have been built up under the industrial strategy through the sector working parties. Industry convinced us that one of the reasons why the scheme did not get off the ground was that the initial threshold for projects was too high. With this scheme, as with the clothing scheme, we readily agreed to a lower threshold to see whether that would attract more applications. The result is that we have 50 projects in hand. For £6 million of Government assistance, we shall be obtaining £30 million worth of investment in an industry that has caused concern to successive Governments because of its inability to invest at the right time. We are getting this investment at the time when economists and Governments have always told the machine tool industry that it should invest—namely, during a recession—in anticipation of an upturn.

A total of 175 companies are taking advantage of the scheme in the clothing industry. More than half are engaged in consultancy projects. They are making expertise, rather than hardware, available to the industry, and it should benefit from this outside advice.

Mr. Max Madden (Sowerby)

Has my right hon. Friend had any intimation from companies participating in the clothing industry scheme about its effect on their labour requirements? A significant number of redundancies are pending at Burton's. Has that company had discussions with my right hon. Friend's Department to see whether the redundancies could be averted?

Mr. Williams

The company undertook the normal procedures and notified the Government of its likely intentions. It will be aware of all the assistance available. I shall have to write to my hon. Friend about whether detailed discussions took place. I cannot answer offhand about an individual case. Assistance is available if it is relevant to the company's needs, though I suspect from what I have read of its problems that the scheme would not be able to save many, if any, of the jobs involved. I know of my hon. Friend's long-standing interest and concern for the problems of this sector.

The rest of the schemes are newer than those to which I have referred. We are as yet unable to indicate the likely eventual uptake, but the initial response is quite encouraging.

The offshore supplies scheme was discussed in detail in the House recently and commitments totalling £115 million have already been given. It is unnecessary for me to duplicate our recent lengthy discussion.

We still have £80 million of the existing £600 million limit available to us, but projects under the existing schemes and any Section 8 schemes will exceed this limit and it is sensible now to have this extra tranche available. For example, the selective investment scheme which was announced by the Chancellor of the Exchequer only in December has £100 million available for investment. That is an indicator of what; is happening in the economy to those who doubt that there is the start of the upturn. By the end of the first three months of operation, the scheme had received more applications than were received for its predecessor, the accelerated projects scheme. This suggests that there is a growing impetus in the will to invest in industry.

It is a new scheme and most of the projects are still being processed. A total of nine have been approved. For £4 million of Government assistance, we shall obtain £43 million of investment. That is literally in the first couple of months. A further 80 applications are under consideration. I must stress that some of them probably will be rejected if they do not meet the criteria, but there is a long time to go for further applications to be made. Should those 80 applications be approved, they would generate another £414 million of investment. That is what the Opposition intend to vote against tonight.

We need the funds in order to continue that scheme and the industry schemes. We are in a situation where £520 million of the £600 million is committed. There is the possibility of another £150 million of commitments arising under the existing sectoral industry schemes. There is the possibility of another £96 million of commitments arising under the selective investment scheme. There is the certainty of further commitments arising under the offshore scheme which the Conservatives introduced. There is the possibility—but we hope that it will not arise—of assistance to some other individual companies. That is the potential of further commitment which already amounts to £250 million. Since we have only £80 million of the initial tranche left, there is a clear need to raise the limit. I therefore commend the draft order to the House.

8.58 p.m.

Mr. Kenneth Clarke (Rushcliffe)

The Minister of State has courteously given a detailed exposition of the purposes for which he asks for £250 million and the schemes to which he intends to devote that money. With respect to his careful and conscientious delivery to the House, I thought that he seemed remarkably complacent about the contribution that these funds are making to the industrial strategy. It is a bland way of asking the House to approve the expenditure of a further £250 million of taxpayers' money. It will not come as a surprise to the Minister to hear that we intend to resist this attempt to increase expenditure under Section 8 at this time. We are not satisfied with his explanation.

Our reasons are, first that we believe that the Government are grossly overspending taxpayers' money on this part of the Industry Act. That does not mean that we are against the use of public funds to assist industry at all times and in all circumstances. We believe that public funds should be injected into industry in exceptional circumstances and when finance from the private market is not available. The Government are spending excessive sums in a way far beyond that which is justifiable and which is not plugging large gaps in the market which, in our opinion, do not exist.

This means, above all, that Section 8 of the Industry Act is an area of policy where, as the Minister has just said, the Government still measure success in terms of the amount of public money actually spent or the number of applicants coming forward and queueing up for taxpayers' money—£X million for this sectoral scheme and £Y million for that. It is a shopping list for taxpayers' money. In our judgment, this is not an adequate measure of the success of any industrial policy. The Government in our view are grossly and unnecessarily overspending taxpayers' money on these projects.

We believe that a policy is needed to stimulate investment in this country, so long as proper use is made of that investment by industry when it is made. But the principal policy for investment that the Government ought to adopt is to create a climate in which industrialists are encouraged to contemplate investment in new projects, using the private markets in almost all cases for their investment funds. We are in no way denying the need greatly to increase investment in manufacturing industry in the United Kingdom, but the Government are having to spend taxpayers' money on a vast scale and, in substitution for a policy of encouraging private investment from the market. They are asking to be allowed to spend more money because they have failed to create the right atmosphere in which investment would take place in any event.

If industrialists are confident in their growing markets, in a stable economy and in a stable currency, and, in particular, if they can see a proper level of profitability on any investment that they make, they will come forward and seek to invest without any injection of public money on the scale contemplated by the Minister.

Where there are schemes for investment in industry which can demonstrate the prospect of adequate profitability, finance is readily available from the private market on a suitable scale. There is more money available at the moment in the City of London than there are industrialists with good projects coming forward to seek it. That is our second objection. The Government are overspending, and they are also failing in the proper policy for investment, which is to so manage the economy as to create a climate in which investment is self-generating and largely privately financed.

Our different approach is not one of a slight difference of degree about the amount of money being spent under our original Industry Act 1972. It is a difference in kind about the circumstances in which public funds should be used. These differences are so great as to present a complete difference in style, a difference which the Conservative Government, who passed the 1972 Act, contemplated just as much as we do when in opposition now. I have no doubt that the Minister of State will try to suggest that we are repudiating our 1972 Act. That is not so at all. I have no sense of guilt whatever about the fact that I was a supporter of the Act then and remain one now. There is no question of repudiating the essential powers which any Government need in present circumstances to enable them to intervene with funds occasionally and for limited purposes.

When the Act was passed in 1972 by the Conservative Government, the financial limits were exceedingly circumscribed. There was an initial limit of £150 million, with four further tranches available of £100 million each. The present Government had to change that by legislation in 1976 to new limits of £600 million in the first place and four further tranches of £250 million each time. It is the first tranche that we are discussing this evening. Thus the total limit contemplated in 1972 of £550 million has been transformed by this Government to a total of £1,600 million, but the way in which the limit is being eaten up by this Government is proceeding at a pace which is somewhat frightening to anyone genuinely concerned about the level of public expenditure.

When in office, we gave grants under Section 8 of the Act as follows. In 1972–3, there were 30 individual applications from companies for Section 8 assistance, and the then Conservative Government made grants to two companies only. In 1973–74 there were 17 individual applications, and the then Government made no grants to any company. However, we began two schemes under the Industry Act. The wool textile scheme was intended to rationalise an industry which was in great difficulties, and the scheme which we initiated has been of great assistance to the areas involved, in Yorkshire and elsewhere. Secondly, we introduced the offshore supplies interest relief grant scheme, to which the Minister has referred.

When we left office in 1974 we had expended £63 million under Section 8 of the Industry Act. As soon as this Government took office they inherited commitments greater than that, I accept, but the way in which they have transformed the Section 8 schemes and the way in which they have poured out money changed the policy under that Act out of all recognition.

The Minister has just said that there are no fewer than 12 sectoral schemes that he has on hand. There were £271 million worth of commitments entered into in 1976 alone. Another £200 million worth have been entered into since the Second Reading of the Act last year, so the £550 million total limit has been changed to £1,600 million, and it is being used up at a very great rate of knots by the present Government. Not only have this Government transformed expenditure under Section 8 but they have the budget of the National Enterprise Board and a variety of other ways of pouring public money into industry which they have introduced.

The idea, therefore, that somehow we are now going back on a policy that we pursued or that the Government are pursuing basically the same approach as that of the latter years of the Conservative Government is a myth that is growing in current politics but it belies the fact that the Government, particularly in this field, but in others as well, have transformed our policy into one which expends a vast and growing amount of taxpayers' money on a scale which not only we can not afford but which would be unnecessary if the right kind of climate for investment were created in other ways.

Mr. Madden

The hon. Gentleman is making clear his position and that of his party on the allocation of financial assistance. But is he aware that in the constituency represented by his right hon. Friend sitting next to him on the Opposition Front Bench, the right hon. Member for Leeds, North-East (Sir K. Joseph), some 40 companies have successfully applied for financial assistance under the 1972 Act? Has the right hon. Gentleman protested against the allocation of those funds to the companies in his constituency?

Mr. Clarke

I do not make my right hon. Friend's constituency speeches. But if 40 companies had successfully applied under the Act—I am not sure under what scheme that would be—and had sound projects with good prospects of a commercial rate of return on capital employed, we suspect that they would have been able to raise their capital on the market without having to have recourse to Industry Act funds.

Let us suppose that those firms have applied under the accelerated projects scheme. A great deal of public money has been expended on projects which supposedly were to be accelerated, but which in fact—particularly in the case of the best of them, where they could show a good rate of return—would have gone ahead anyway without the taxpayer's money being expended.

Mr. Madden

But on either count would not one expect the hon. Gentleman's right hon. Friend to have protested about the allocation of funds to such companies in his own constituency?

Mr. Clarke

I do not think that my right hon. Friend is known in Leeds or elsewhere as the greatest exponent of spending public money on unnecessary assistance for investment in private industry. If there is a misunderstanding of his views in his constituency, I would be startled to hear it.

The Minister's answer is that the Government are careful and selective. He tried to reassure us that there was a most detailed study to ensure that money was only given to accelerate projects that would not otherwise have gone ahead. The feedback that one gets from industry is that the Government were led into expending money by those skilled in applying for grants in a way that the Minister now denies. But, because they measure success in this field in terms of money that they can spend and financial statistics of grants given, the Government are touting for business and inviting applications for Section 8 funds by potential investors.

Some schemes, when the money has been on offer, have not always been taken up, despite the fact that generous funds have been available. People have not come forward to make use of those funds until the Minister has gone out of his way to encourage them.

The Minister referred to the machine tool industry scheme and the clothing industry scheme, both of which were failures by the time their initial closing date was reached—failures, that is, in the Minister's terms, because the money made available under the schemes was not taken up. What both schemes illustrated was that if markets are depressed and firms are not competitive no amount of public money will ever reverse such a trend. That was particularly so in the case of the machine tool industry, where markets were depressed and uncertain and there was no clear possibility of proper levels of profitability being maintained by many companies.

In other areas the Government have not been selective in the sectors in which they applied their schemes. We had the accelerated projects scheme, the first real breakaway from any selectivity by sector. They spent £77 million on that scheme, which I have already criticised. In the selective investment scheme since December 1976 they have been eating up a potential budget of £100 million. The selective investment scheme is not regionally or sectorally oriented. Anybody who can sell a project to the Department, who can persuade it that the project comes within the criteria laid down by the Department, can obtain large sums of public money to assist with the investment.

I have before me a Press statement issued only a day or two ago about the Minister of State appealing to the chemical industry to put forward projects and speaking of the amounts of money available under the selective investment scheme and various design schemes. In those industries where there are perfectly proper investment projects which can be financed in the market this is touting for ways of spending public money which can produce an impressive speech, if one chooses to count something as impressive in terms of the spending of public money.

One matter that the Minister has not mentioned is that a few large schemes have taken very large sums. The grants to Chrysler have exhausted a large amount of the previous Industry Act limits. The agreement with Chrysler involved a contingent liability of no less than £162.5 million to the British taxpayer. The company is still losing money. I pay tribute to the efforts it is making and I wish the company's success. I realise that it has transformed a great deal of its operations.

However, we should look at the matter from the taxpayer's point of view. That is what Ministers and Parliament should do. In its first year since the agreement the company lost more money than it told the Government it expected to lose. That cost the taxpayer £41.5 million. The company has now entered into a planning agreement, because it undertook to the Government that it would. It is losing more money already than the targets in the agreement indicate. Therefore, the contingent liability of more than £160 million does not look to us a sound commercial way of devoting such large sums of other people's money.

That is the criterion that the Minister and Parliament should have in mind when we look at the amounts of money already expended and the extra sums being sought. The overriding consideration must be that it is other people's money, taxpayers' money, that is going, through the sectoral and selective schemes, to those firms which can sell a project to the Department. The money is coming out of the pockets of those working in other industries which are not at present obtaining any part of the bounty.

Therefore, the effect of such expenditure has a direct bearing on the levels of taxation paid by other industries. What happens when expenditure is undertaken to save jobs in particular industries, as the hon. Member for Sowerby (Mr. Madden) wishes his right hon. Friend to do for the clothing industry? The money given to firms to save jobs in them often improves their competitive position compared with other firms in other parts of the country and merely results in the loss of somebody else's job.

I shall not dwell in detail on a recent case. I had an exchange with the Under-secretary about the money expended on the Kirkby co-operative, contrary to all advice and despite the fact that it could demonstrate no commercial viability. That project was to save 400 jobs in Kirkby in the boiler and radiator section of the company. At the same time we have recently seen Penrad, which also made boilers and radiators, going bankrupt in Wales, partly as a result of the competition from Kirkby, and 200 jobs have been lost there.

The Secretary of State for Wales was putting public money into Penrad to try to save jobs in the suburbs of Cardiff. The situation arose in which the big guns of the Department of Industry were putting their money into 400 jobs on Merseyside and outgunned the Welsh Office which was trying to say 200 jobs in Cardiff. One subsidises a firm which is loss-making on the scale of the Kirkby organisation in a declining market and a competitive sector such as radiators and boilers only at the expense of other and potentially more competitive firms in the same sphere.

I think that I have probably given an adequate review of our reasons for being sceptical about the expenditure of Industry Act funds on this scale or anything like it. I emphasise that we certainly fully recognise the need for more investment in industry and the need to stimulate manufacturing investment. I certainly accept that it cannot be taken for granted that the private market can cover every project, although the cases must be exceptional in which it cannot. One must look to Finance for Industry the new Equity Bank, and the ways in which the market is trying to cover the gaps which industry insists are there in the provision of funds.

If one needs a real policy for investment it must primarily be a policy to generate private investment, and that investment will take place once industrialists are stimulated to look for funds and to bring forward projects because they have confidence in the market, in the economy, in the currency and in the Government, which they do not have at the moment. That investment will take place when lower interest rates can be achieved and maintained by the Government so that industrialists can afford the rate of interest they are expected to pay on the money they invest. In particular, investment will come forward when a real shift is made towards greater profitability in industry so that the anticipated level of profits from projects can safely exceed any rates of interest which the industrialists and investors might be expected to pay.

The Government have a bad record on profitability, and it is a record which does not improve. The Minister reminds us of the Price Commission Bill which went through the House last week With its threats to the level of profitability in industry, but I do not think that he can point with pride to that Bill as being any part of an industrial strategy to stimulate investment, and we certainly do not see it that way.

Mr. John Ryman (Blyth)

Will the hon. Gentleman explain how he reconciles the present argument he is developing on the Price Commission Bill with the concession that the Government made in the Committee stage of that Bill, namely, to lift all control of dividends within a period of 12 months?

Mr. Clarke

We would certainly welcome the end of dividend control when it came, but let us consider the powers that the Government have taken in the Bill to intervene selectively and unpredictably in various sectors and to investigate sectors chosen by themselves and by popular or Socialist demand. They can impose a price freeze while the investigation continues, but they are unable to satisfy industry that there will be a guaranteed and adequate rate of profitability either during or after the investigations. That does not seem to me to be designed to stimulate profitability on investment and thereby to stimulate investment.

To stimulate capital investment from the private market is a prime duty of Government. The Government are using our 1972 Industry Act as a substitute for their failure to do that. One would never guess from the Minister's speech that the level of investment in this country dropped last year. The Department's forecast of the increase in the level of investment keeps being revised to ever more distant horizons and lights at the end of the tunnel when the big breakthrough in investment is supposed to come.

We do not believe that our Act should be used in this way, and we do not believe that just pumping in money is any substitute for a real public policy which will stimulate the investment. We shall be voting against the £250 million for which the Minister is asking, therefore.

I saw the hon. Member for Colne Valley (Mr. Wainwright) in his place a short time ago and I wondered whether we should be voting alone. He spoke on the 1976 Act and the Liberals voted with us against increases in expenditure of the kind the Government are now proposing under the Industry Act. It may be because the hon. Member does not wish to go back on his earlier speeches and commitments that he has decided that the Lib-Lab pact would be best preserved this evening by the Liberals leaving the Chamber, as is frequently the case.

Mr. Michael McGuire (Ince)

The hon. Gentleman has seen the light at the end of the tunnel.

Mr. Clarke

I do not believe that the light he has seen will be any great help to industry. The hon. Member for Colne Valley has simply seen the hope of survival by keeping the Lib-Lab pact together. In terms of a sensible industrial strategy he would do well to come back and vote with us against this proposal.

9.20 p.m.

Mr. Michael McGuire (Ince)

In listening to the hon. Member for Rushcliffe (Mr. Clarke), one would never imagine that there was any problem about investment. He said that, given the right climate for industrialists, if pro- fits are right there will be no investment problem. I remind him that the then Prime Minister, the right hon. Member for Sidcup (Mr. Heath), said in 1973 when speaking to industrialists "We did everything you wanted. Profits were right. We had no restraint. Everything was as you demanded. But you still did not invest." I remind the hon. Gentleman, too, that when I sit on these Benches listening to Question Time I do not get the impression that the Opposition are asking the Government not to do anything. My impression is that they are asking what the Government intend to do about investment. When they join in lobbies, Tory Members, like Labour Members, say that they want the Government to do more of this or that.

Like most other hon. Members, I am concerned about my constituency. In my constituency we have the highest male unemployment rate of any town in England. That has to be set against the fact that I am speaking of the new town of Skelmersdale, which has the highest form of grant aid, yet the male unemployment rate is in excess of 20 per cent. We want more investment, not less.

I led a deputation of industrialists today to see the Secretary of State. We had a very fruitful discussion and he gave us a bit of "injury time". Certainly we had longer than we are accustomed to get from Ministers. But we needed it. The deputation was to some extent anticipating this debate. I am not concerned with the political complexion of the industrialists—I take it that there will be Liberal, Conservative and Labour supporters—but they are managers of factories who are putting up practical suggestions to my right hon. Friend, suggesting how the Government can help them. I hope that Skelmersdale will receive some of this £250 million to help overcome our difficulties.

I am particularly interested in the accelerated projects scheme, which we discussed at great length with my right hon. Friend. He told us that for a modest investment of £84 million the Government had generated about £640 million worth of new investment. He instanced another modest investment scheme where, for about £70 million, there was a return in excess of £500 million. This is expected to be a continuing operation.

My constituency has problems in that there are factories there which do not qualify for these schemes. The Government have laid down qualifications in terms of the number of new jobs which will be created or the amount of investment needed. I impress upon my right hon. Friend that there is a need to view with deep sympathy areas such as mine which have special problems. Whatever the criteria that are laid down on a national scale, they should not be rigidly adhered to in areas such as Skelmersdale. I am not saying that it is the only area in the country with special problems, but there is 20 per cent. male unemployment. If investment schemes to expand existing factories in Skelmersdale are put forward and they do not meet the guidelines laid down by the Government in terms of the jobs that will be created or in terms of new investment, I want the Government, through my right hon. Friend, to give me an assurance that they will be considered sympathetically.

One of the problems that we have on Merseyside—I see with us my hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk), who is always putting these arguments to the Government—is that people fight shy of coming into our area. The Government, through my right hon. Friend, did all that they could about 12 months ago to induce a certain employer to come to Skelmersdale, but in the end he would not come. I and the industrialists in Skelmersdale say that they should be given some small but special help to expand their factories rather than that the Government should go out of their way to give special inducements over and above the special development grant to try to attract industrialists who at the end of the day are not really interested, for a variety of reasons, in coming to Skelmersdale.

If we have well-established factories which want to expand and their expansion schemes do not come within the criteria laid down by the Government, I ask the Government not to reject them merely on that basis. I want to ensure that a large enough portion of the £250 million goes to Skelmersdale so that we can get some of the expansion schemes put into effect that the industrialists put forward today.

I hope that we shall have an announcement from the Government that they mean what they say when they declare that they will give all the help they can to those in Skelmersdale. I look forward to my right hon. Friend's reply on the criteria for firms within Skelmersdale.

9.28 p.m.

Mr. Michael Grylls (Surrey, North-West)

The hon. Member for Ince (Mr. McGuire) rightly talked about his constituency and the severe problems of Skelmersdale. Everyone will know something of the difficulties in that area. The strange thing about industrial policy is that many of us who are worried about certain areas are on the same side, for we want to see successful industry. We are arguing about the means to achieve that end.

The Minister went through the same ritual in opening as he did in October 1976. The right hon. Gentleman tried to frighten off the Opposition. In October last year he warned Conservative hon. Members what would happen if they voted against the Industry (Amendment) Bill. That debate took place shortly before the Walsall by-election. The right hon. Gentleman asked us to consider what would happen at Walsall if we voted against the Bill. He said: What will happen in Walsall and the West Midlands if hon. Members carry the vote tonight?"—[Official Report, 28th October 1976; Vol. 917, c. 830.] The right hon. Gentleman was not a very good forecaster. We won the Working-ton and Walsall by-elections.

We should not be frightened of standing up for what we believe. Many of the things that we said when debating the Industry (Amendment) Bill and before that were right. The comments that we made when the previous two tranches brought in by the Government under the 1972 Act were fully justified. We were right to vote against the Industry (Amendment) Bill.

The hon. Gentleman has given the House a large amount of detail about the amount of money expended on different schemes such as the accelerated project scheme and the various investment schemes. However, I must say to the right hon. Gentleman that I am critical of his bringing forward this tranche before we have had the latest report under the Industry Act 1972. We had a very full report last year. It was laid in the House in July 1976. Presumably the report for the current year up to March 1977 will shortly be available. When it comes before us, we shall have all the details on which to base a debate such as this.

It was a slight affront, although the Minister tried to give as much detail as possible, not to have waited until the document was published when we could have seen in far more detail than could be covered in a debate how many firms were concerned, which category they came under, and so on. I hope that if the Minister thinks it necessary to bring forward further tranches at this time of the year—perhaps he will not be in office next year—he will make sure that we have a proper report on which we can discuss these matters.

I wish to look shortly but critically at the sectoral industry schemes. The wool textile scheme, which was started under the Conservative Government, was a modest scheme, but it was well founded. What has happened while the present Government have been in office? Schemes have proliferated. The worse the economy has become, the more difficulties the Chancellor of the Exchequer has got into. In direct proportion almost to the Government's economic failures, we have had schemes floating round like confetti.

It is rather like a cook putting herbs into a dish. Whenever the right hon. Gentleman cannot think of anything else to do, he announces in a Budget Statement that he proposes to bring forward another industry or sectoral scheme, so he pops in the odd scheme or two. Why? I suppose that it has been done as a sop to Government Members below the Gangway and to the TUC, but it has been a conjuring trick, because the schemes bear no relation to the creation of fresh employment.

Sectoral schemes have nothing to do with employment. In most instances they are helping industries to contract. That may be right or wrong. That is not the point of what I am saying. To produce such schemes simply as a conjuring trick, or, indeed, as a confidence trick, is totally irrelevant to the country's industrial problems. Such schemes have nothing to do with job creation.

I am very critical of the schemes, with the exception of the wool textile scheme. [An HON. MEMBER: "I wonder why."] I shall tell the hon. Gentleman. The wool textile scheme was based on the Economic Development Committee's detailed study of the industry. It was well founded. Under the scheme, 102 applications have been approved. But I would not pretend that the scheme has been an overwhelming success. Probably it has helped some wool textile companies. I am, however, sceptical about most of the other schemes which have been introduced. Under the wool textile scheme, £1.3 million has been paid to eliminate marginal capacity. Therefore, it has nothing to do with job creation.

Mr. Alan Williams

Does the hon. Gentleman believe that the £640 million of investment under the accelerated projects scheme is a failure? I do not understand the hon. Gentleman's point about jobs. The hon. Gentleman decried the assistance we gave for a cracker development at Lindsey because it was capital intensive and did not create jobs. The hon. Gentleman cannot have it both ways.

Mr. Grylls

On the accelerated projects scheme, there was no proof that the investment would not have come forward. I remember that the scheme was described in the Investors' Chronicle as the biggest rip-off of all time. The Minister tried to frighten us by saying that the officials in his Department would go around looking at minutes and files. I do not believe that that happens. The officials in the Department behave properly and do their job in carrying out the Minister's instructions, but they must take the word of industrialists who may say, "We are not keen on this scheme, but if you give us a bit of money, we might bring it forward."

I do not want to digress any further because I do not want to talk about accelerated project schemes. I want to deal with the sectoral industry schemes. This is where the biggest mistake of all has been made. I believe that no proper strategy was established before the machine tool industry scheme was introduced. No one did a proper market survey of competition from abroad, what type of machine tools were required, or the new designs for the next generation of machine tools in the 1980s. No one looked at the competition to be expected abroad, or the best export markets to aim at.

The Minister said that he looks at schemes in order to decide whether to approve them and that he turns some of them down. I am sure that he does, but I believe that the whole strategy of the schemes has been ill thought out. We have not concentrated, as have many of our European competitors and the Japanese, on one particular market or area and on the very best firms.

With regard to the ferrous foundry schemes, I accept that many of the old firms were lacking in modernisation and in meeting the legislative requirements concerning health, safety and clean air. Many of them in any case could not find the money to do it. I accept that the environmental aspect of that sort of industry is very important, but no one really sat down, before deciding whether there should be a ferrous foundry scheme, to establish what was needed, if anything, for that industry. In the ferrous foundry industry there is no particular international trade and it is mostly a national business.

The lack of strategy in these schemes is perhaps the most serious criticism that can be made of them. It seems to me to be the wrong approach to announce a scheme before establishing a suitable strategy for it as a result of discussion with those concerned.

There is now a non-ferrous foundry scheme coming forward. The Minister has not said much about it, because it is in its early days, and I accept that. These foundry schemes have been announced and started, but we have not yet heard a single word about what British Leyland is doing. I understand that it is going into the foundry business, perhaps quite rightly. Many motor car manufacturers go in for their own foundries, but is it sensible in Britain to pretend that we can set up a proper ferrous or non-ferrous foundry scheme when it is probable that the biggest single purchaser of the products of these foundries is setting up its own scheme?

Details have not yet been announced, and if the Minister is unable to say something about it in reply, I hope that he will write to me letting me know how much British Leyland is to spend on setting up a British Leyland foundry. Again, if such a foundry is to be set up, what will be the effect on Birmid Qualcast, which is a very big foundry?

These schemes have been only very superficially planned by the party of planning. What has emerged from the Minister's opening speech is that they have been based on a quantitative rather than a qualitative assessment. No one has asked where these industries are going. The Minister said that £80 million has been put in under the accelerated project scheme and that this had created £400 million worth of investment. He has not told us whether it is the right investment. We ought to be concerned with that rather than with the quantity of investment involved.

The situation for foundries is serious. It is no use pretending that there is a scheme when there is not a strategy. Perhaps after all British Leyland will not go into the foundry business, but if it does in a big way, the scheme will be absolute nonsense.

Since we debated the subject last October, when the Industry (Amendment) Bill had its Third Reading, we have had further schemes concerned with such industries as paper and board, printing machinery, poultry meat processing, and so on. Is there a strategy for these schemes? I do not know. Is there a strategy for the textile industry? The Minister has not told us what is the Government's strategy in these industries.

If the Government are to have this proliferation of schemes—which we do not, on the whole, think that they should have, because we do not believe that the schemes are really worth while—for different industries, they should tell us what the strategy is. They should not merely come here and tell us how much money has been paid out. Let the Minister tell us what the results have been, what new export markets have been achieved, what limitations there are on excess production, for example. On the details of all these schemes there has been a deafening silence broken only by other industries asking for their own schemes.

There is no ground for believing that sectoral schemes are either well conceived or well planned, and there is no strategy for them. The majority should be brought to an end. We should first establish what the strategy is and take a long, hard look before allowing any further schemes to be established, because under the present system money is being taken from successful firms and poured in an unselective way into generalised schemes for one industry or another.

That is the wrong way to spend the taxpayers' money and in the end it will not achieve the Government's hopes and will not make matters any better. The only way is to get the economic strategy and framework right, and then industry once again will prosper.

9.42 p.m.

Mr. Robert Kilroy-Silk (Ormskirk)

The hon. Member for Surrey, North-West (Mr. Grylls) made disparaging comments about Government assistance to industry. He frequently used the words "lunatic" and "lunacy". He said it was lunatic for the Government to support industry with financial assistance as they are doing. But what could be more lunatic than the private enterprise system, which is so woefully inefficient and inadequate that 1½ million people within it are condemned to unemployment and the economy is condemned to the absence of their resources? It is utter lunacy that someone should try to defend a system which is so grossly unfair and incompetent.

I wholeheartedly defend Government assistance to industry. Without it, a great number of firms in my constituency and on Merseyside in general would not now be in existence. The temporary employment subsidy, for example, has been responsible for saving 63,000 jobs in the North-West. That may be lunacy to the Opposition, but it is not lunacy for the workers involved. It is not regarded as lunatic by their families who depend on them. That is but one example. There are ment assistance, hidden or covert, to industry and over which we have no control or authority in this House.

Hundreds of thousands of people in the country owe their jobs in private industry to taxpayers' money, to handouts from the Department of Industry to the ever-rapacious private entrepreneurs.

On Merseyside we have suffered tremendous job loss in the last three or four years. We had the loss of jobs at Thorn's, in Skelmersdale; we have had the loss of jobs at Courtaulds. There has been the further loss of 1,400 at Plessey's in the last couple of weeks. More jobs have been lost at Albright and Wilson's in my constituency. There have been the 400 redundancies at GEC-AEI and those at Hygena. We have lost in all about 80,000 jobs on Merseyside in the last 10 years.

Yet the Opposition have the temerity to talk about the "lunacy" of Government assistance to industry. In particular, the hon. Member for Rushcliffe (Mr. Clarke) has been conducting a tawdry, small-minded vendetta against the Kirkby co-operative, where 800 people are employed who would not have jobs there but for Government assistance to the co-operative. There are 800 men with wives and families dependent on them who are in jobs and who feel useful to themselves, to the company and to the economy solely because this Government had the decency, common sense and, let us say it, the heart to give financial assistance to the company. Yet, all that the hon. Member for Rushcliffe can do is constantly deride it, constantly bemoan it and constantly try to find fault with that enterprising co-operative.

What more can the Opposition ask? They want something called "self-help". They are the apostles of self-help. Here we have a company which has found all the cold winds of private enterprise blowing through it. Constantly it has experienced the vicissitudes of private enterprise closing the doors to the work force. For the first time in their lives, the members of that work force said "No. We intend to keep our jobs. We are not prepared to allow irresponsible individuals to take decisions about our future in private. We are not prepared to do that any more. We shall fight for our jobs."

When those people fought for their jobs and got the backing of my right hon. Friend's predecessor in 1974, when that backing was continued throughout the life of this Government and when the members of that work force worked tremendously hard in terms of entrepreneurial skills and changed their working methods to make a success of that co-operative, all that the hon. Member for Rushcliffe could do, as we have seen again today, was parade around the country in his blighted ignorance searching for easy headlines constantly to bemoan the facts.

I ask the hon. Member for Rushcliffe to come to Kirkby, to walk on to the shop floor and to tell those 800 men and women that he wants to see them on the dole. The hon. Gentleman does not want to see them getting an income in productive employment. He prefers to see them queueing outside the office of the Department of Employment in Kirkby.

Mr. Kenneth Clarke

Will the hon. Gentleman accept that I am by no means indifferent to the fate of the people of Kirkby? I am concerned, as I explained, about the effect of giving almost £5 million to a company in Kirkby which remains incurably loss-making to save 400 jobs in the radiator and boiler sector example which I chose, thus putting others out of work with similar consequences elsewhere. I quoted the case of Penrad getting assistance down in Cardiff. Continuing subsidies a little longer for loss-making jobs in Kirkby is not giving these people long-term job security. If we wish to give people long-term job security on Merseyside and elsewhere, we have to make sure that investment goes where it is competitive.

Let me read a short passage from the Government's own criteria for assistance to industry under the Act: more and not less emphasis will be required on competitiveness in home and export markets. Failure to achieve this would in the end be the enemy of job security. Those criteria have been ignored in the case of Kirkby because of the political pressure of the hon. Member for Ormskirk (Mr. Kilroy-Silk).

Mr. Kilroy-Silk

I am grateful to the hon. Member for Rushcliffe for paying tribute to my political pressure. He says constantly that the Government bowed to political pressure. I am over-flattered to think that my pressure alone could get the Government to give this amount to KME. But it was not as a result of political pressure. It was because the Government recognise that in Kirkby there is unemployment which is unmatched in any part of Western Europe and that it requires special attention. That is why the money was given. It was also given in recognition of the fact that the workers there have contributed enormously to making a success of the co-operative.

The hon. Member can turn round and say that the money should go elsewhere. One can always say that about every single aspect of Government industrial and social services policy. We can talk about money for the disabled being better used in industry or on a variety of other things. But that is not the point. The Government always must take account of the overall strategy and judge each case on its merits.

The Conservatives have not yet admitted that this particular case has merits in the social and unemployment context. This case demands and warrants the special treatment that it has received. The hon. Member for Rushcliffe has not answered my question. Is he prepared to see 800 men and women unemployed? That is what he has said in effect, although he does not have the guts to say it in practice. But the answer to my question obviously is an unequivocal "Yes," and I see that the hon. Member is not taking this opportunity to deny it.

Mr. Kenneth Clarke

So far it has been the case that almost £5 million has been spent to keep 700 people temporarily in employment in Kirkby. If that sort of money is paid on that scale to keep jobs going for a year or two, in the long run others will be made unemployed elsewhere, and at the same time, by incurring public expenditure, it will threaten everyone's job security.

Mr. Kilroy-Silk

Very well. Will the hon. Member therefore condemn the £6 million given to Courtaulds, or is this an example of his double standards? Is it wrong to give money to KME because it is a workers' co-operative and there is something strange, ugly and bemusing about workers' co-operatives yet it is perfectly respectable and proper to give £6 million to Courtaulds when that company is making record profits and announcing 1,000 redundancies on Merseyside? If that is the Opposition's attitude, it is indefensible.

Also, this money is not supporting jobs temporarily, as the hon. Member keeps insisting. The more that he pours scorn on Kirkby, the more he hopes that this will lead to wish fulfilment and he will bring about the demise of the company that he talks about. But this is not temporary maintenance of jobs. That was being claimed by his predecessors in 1974. Now, three years later, the company is still in existence, is still viable and is winning export orders. A lot of other companies receive a great deal more money without the special merit of KME.

If the hon. Member is so concerned about viability and is so sincere, as he claims, about the future prosperity of Kirkby and its workers, he should keep his big mouth shut and get off their backs. In that way they could properly pursue their proper interests and bring prosperity both to the company and to Kirkby.

I turn to the situation on Merseyside as a whole. While we are grateful for the degree of Government assistance that the area has received—and it has received a great deal—it is still not sufficient and it will not be sufficient until the Government have a far more vigorous and dynamic look at the problems of Merseyside.

In a sense, this has been promised in the National Enterprise Board's report which has been forwarded to the Prime Minister. What we really need is a close examination of Merseyside's industrial and economic problems, resources diverted to the region that are tailor-made to meet its needs, and investment. We shall not get that while we continue to have the gross discrimination between the way in which Merseyside and the North-West are treated on the one hand and the way in which the North of England is treated on the other hand.

For example, I understand from answers given to me that in terms of the amount of regional assistance in various forms given by the Department of Industry in 1975–76 the North-West received £71.3 million, of which Merseyside received £43 million. On the other hand, the Northern Region received £121.2 million. Given the great discrepancy in those figures, what makes the situation worse is that whereas in the North-West the unemployment figure is 191,876, the unemployment figure in the Northern Region, which received considerably more in terms of grants from the Govern- ment, is by comparison a mere 100,822. Furthermore, Scotland received £53 million more than the North-West was allocated, although Scotland has 27,000 fewer unemployed than the North-West.

There is an even greater imbalance between the resources given to Wales compared with those allotted to Merseyside. Although Merseyside has more unemployed than the whole of Wales, we received a mere £43 million compared with £64.4 million given to Wales. The Welsh figure does not take account of other industrial assistance given by the Welsh Office. Similar discrepancy applies to Scotland and to grants given to various development organisations with responsibility for promoting investment in the regions.

It seems strange that that kind of money should have gone to Scotland and to Wales—we know how vociferous those countries are about certain aspects of self-government—and that it also should have gone to the Northern Region, which is one region in which a large number of hon. Members have caused the greatest fuss about devolution and the kind of benefits that will be received if devolution is carried out for Wales and Scotland.

Mr. Alan Williams

What my hon. Friend says will be read in the North-West, and it is appropriate that the situation should be clearly set out. The figures per head for regional preferential expenditure in Merseyside amount to £47, in Scotland £43 and in Wales £37. Therefore, Merseyside receives more money per head than do the other two areas.

Mr. Kilroy-Silk

But Merseyside still has more unemployed than other areas. The North-West has 27,000 more unemployed than is the case in the length and breadth of Scotland. It is no good trotting out these figures unless one relates them not only to expenditure per head but to the degree and severity of the problems with which one is trying to cope. One factor—and there are many others—which shows the kind of problems with which we are dealing relates to the total number of unemployed.

Mr. Robert Hughes (Aberdeen, North)

I would not seek to deny my hon. Friend his case or to counter his argument about the largest number of unemployed, nor would I seek to deny that money should be spent to try to cure that unemployment. However, he should take account of the fact that in Scotland we have had endemic unemployment for decades and a long period of industrial decline. It does my hon. Friend's case no good by posing comparisons, by seeking to set one region against another or by making the point that it has something to do with devolution. The fact is that an unemployed man is an unemployed man. Surely we should be sticking together and trying to cure unemployment problems instead of seeking to play one area against another, which is what the SNP is doing. My hon. Friend should not fall into that trap.

Mr. Kilroy-Silk

My hon. Friend makes an important point, and I agree with him. I am asking for fair shares for Merseyside and the North-West. I submit that we have not been given our fair share. I do not want any more for Merseyside than it deserves or is equitable. I do not want to take away from Scotland or Wales or from the Northern Region that which they need and which we do not need. Unfortunately, Merseyside has a higher rate of unemployment than is experienced in other areas—areas which, for one reason or another which has never been adequately justified, appear to obtain far more resources than we do.

My hon. Friend says that unemployment is endemic in Scotland, and I accept that. Many social problems in Scotland are similar to those on Merseyside, but unemployment, too, has been endemic on Merseyside for generations. It is not a new phenomenon. The best unemployment figure on Merseyside is the figure about which the West Midlands is screaming as a calamity. An unemployment figure of 4.6 per cent. is prosperity for Merseyside. That is our normal figure.

I am asking not that dog eats dog but that there should be a proper Socialist distribution of resources. I am arguing that limited and scarce resources should go to the areas where they are needed most. They are needed most in the North, and in Merseyside and the North-West, but for one reason or another Merseyside and the North-West do not appear to be getting their fair share of the available resources.

Perhaps my hon. Friend could answer another question. I hope that he will be able to answer it. Why is it that when a group of United States industrialists come to this country looking for places to invest they are taken everywhere but Merseyside? They are taken to Wales, Scotland and to the Northern Region, but for some reason they have to be kept away from Merseyside. Why is no attempt made to steer far more companies to Merseyside than to the Northern Region? The Minister's figures reveal that many companies are shown the delights of Washington—and this has to do with Government assistance because they are subsidising the firms—and new towns in the North, but none comes to Skelmersdale. Few, if any, come to Kirkby, and fewer still come to Merseyside or the North-West.

Mr. Kenneth Lomas (Huddersfield, West)

I think that far too much has been made of Merseyside. Yorkshire has suffered considerably. I take the view that we are not getting a sufficient supply of the resources that the Government could provide. We are sick and tired of hearing Merseyside mentioned in every debate. Yorkshire is almost as big as Scotland and has a population of almost the same size, and we are entitled to similar resources. I ask my hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk) to stop playing the game about Merseyside and to deal with the British counties in particular.

Mr. Speaker

Order. I hope that nobody else will interrupt the hon. Member for Ormskirk (Mr. Kilroy-Silk), who has already been speaking for 20 minutes. The debate ends at 11.30 p.m.

Mr. Kilroy-Silk

I take your gentle hint, Mr. Speaker.

I say to my hon. Friend the Member for Huddersfield, West (Mr. Lomas) that people on Merseyside who are unemployed, and have been unemployed for a long time, are sick and tired not of hearing their Members of Parliament champion their case and asking for more resources but of the kind of attitude exhibited by the hon. Member for Rushcliffe. They are sick of waiting for more positive Government action than they have seen so far.

Why is it that new companies such as Hitachi, Sony and Toyota go to places other than Merseyside? We had a good case for the headquarters of British Shipbuilders to come to Merseyside, but it went to the Northern Region. We did not even catch a whiff of Jimmy Carter on Merseyside. This kind of discrimination has been exhibited throughout.

We on this side of the House do not object to Government assistance to industry. What we object to is that that assistance is often sought from the Government and from Members of Parliament by a method that is tantamount to blackmail. On many occasions employers in my constituency—employers who are proud of showing the flag of private enterprise and private industry—have said "We want Government grants. We want Government assistance. We want Government subsidies. If we do not get them, X number of men will be unemployed next week." They want all the grants and subsidies, but without strings and without control by the Government.

We are forced to assist industry in order to save jobs, but that assistance would be more productive if it led to more ownership and control over industry. We shall not get a more rational distribution of resources or be able to allocate them more fairly between, as well as within, regions or be able to plan and control investment and growth until the Government stop giving handouts to private industry and start taking a stake in the industry and ultimately controlling it.

10.5 p.m.

Mr. Robert Taylor (Croydon North-West)

The hon. Member for Orms-kirk (Mr. Kilroy-Silk) started his speech with some vitriolic remarks about the avarice of private enterprise and ended in the same vein by slating private industry. It is time he realised that most of those involved in private industry are not avaricious for Government help. They pay the taxes through which the Government can find money to subsidise the Kirkby co-operative ad infinitum. It is the revenue from these firms that allows the Industry Act, the Industry (Amendment) Act and this order to come before the House.

In his opening remarks, the Minister of State referred only briefly to applications by individual companies for Government funds. This is the area to which I wish to pay attention. There is nothing more calculated to annoy the directors of private companies than to find that, through taxes, they are paying for one of their competitors to be subsidised. There is nothing more annoying than to pay taxes out of profits and find that they are being used to prop up inefficient companies. This is happening under the Industry Act and will happen under the Industry (Amendment) Act.

On Second Reading of the amending Act, the Minister of State said that the Government intended to use it as a proper job-creating and investment-inducing measure. It is not easy for hon. Members to find out quickly who is responsible for the Government largesse under that Act. We have to await the annual report on the operation of the legislation.

I should like to refer to an example quoted by my hon. Friend the Member for Rushcliffe (Mr. Clarke). I have asked 10 Questions about this company since March last year. It is a typical example of the Government handing out money that is totally unjustified, and it greatly angers the business community. The firm is Penrad Ltd., a radiator manufacturing company in Cardiff. In the year ended 31st December 1975, the Government invested £300,000 under the Industry Act through a loan to the company. It was on the basis of two years free of interest, which means that interest is just about to become payable.

In March and April 1976—one year after the £300,000 loan—the company made a rights issue, and the offer document contained the following statement: Your Directors are also most encouraged by the offer from the Secretary of State for Wales who has conditionally agreed to subscribe for 100,000 First Preference Shares of £1. The terms of the original loan agreement from the Secretary of State for £300,000 remain unchanged. By this offer the Secretary of State for Wales has shown that he is prepared to give further support to a company which has invested heavily in modern equipment, and where the private sector is also ready to advance funds. Your Directors are hopeful that these arrangements may herald the beginning of a new era in this country where Government and private enterprise combine in a successful partnership to building profitable and sound companies. That means that from that date £400,000 of taxpayers' money was involved in this small enterprise. Presumably that statement induced many other shareholders to invest in the company.

On 25th May—only four weeks ago—I asked the Secretary of State for his estimate of the current value of that investment. In a Written Answer he estimated the value to be £533,000. That sounds a nice profit for the taxpayer. It sounds a good investment. In one year it had risen from £400,000 to £533,000. That sounds as if it is the type of project for which the Industry Act was intended.

However, the reply also reflected a complete lack of interest and control over that investment. Two days before the reply, a receiver had been appointed to the company. I gave the Secretary of State the benefit of the doubt and, wishing to be charitable, I tabled a further Question asking him on what date he was informed of the appointment of a receiver. To my astonishment, he said that the receiver was appointed by him. This shows the inability of Ministers to control investments which they make. It shows the folly of investing in second-rate companies. It shows the folly of putting taxpayers' money into concerns that cannot turn to the private sector for finance. It is a disgrace that other shareholders were induced to put forward money on the basis of the Secretary of State's support.

There are other examples involving similar circumstances. It is not easy for Back Benchers to obtain details quickly. Recently the Financial Times, reporting that British Steel Constructions had made a deficit of about £1,415,000, quietly noted that one of the firm's subsidiaries, a Merseyside company called Barry Staines, had received a loan from the Department of Industry. I do not know the details, but this group of companies has been in trouble for a long time. It cannot turn to the private sector, so it turns to the Government. The result will be similar to that at Penrad.

I regret that I did not oppose the Industry Act 1972. It is a pity that it came on to the statute book. It has certainly been used by this Government to cause great harm to the taxpayer. I took forward to the Division, when we shall be able to show our opposition to these new proposals.

10.14 p.m.

Mr. John Ryman (Blyth)

I intervene to make one or two points on matters that have already been raised. I deplore the partisan and parochial approach in the speeches of some hon. Members on both sides of the House. Although hon. Members naturally push their constituency problems, there has been irresponsible criticism of both public and private industry. The correct criteria to be used should be the safeguarding of jobs and the cure for unemployment. In my constituency, and in other areas of the North-East, Government expenditure to create fresh jobs has been welcomed.

A legitimate criticism of Government policy by private industry can be made. There has not been a sufficiently close monitoring of Government funds once they have been allocated. As a taxpayer, I deplore any waste of Government money. The Government have not been sufficiently careful once grants have been made to specific industries. They have not taken care to ensure that the grants have been used for the purposes for which they were originally earmarked. They have not controlled extravagances and excesses.

The case of Brentford Nylons in my constituency last year was a success story. It was a company in the textile business that had been grossly mismanaged before its collapse. A receiver was appointed in February 1976, but because the work force was loyal, the Department of Industry provided £5 million, and a private company—a wholly-owned subsidiary of Lonrho—bought the company as a viable proposition as a going concern, it has gone from strength to strength. Instead of there being about 1,600 men and women losing their jobs, the company is expanding, creating fresh jobs and contributing substantially to the export drive.

That is one example, and by no means the only example, of a company which fared badly before intervention with Government aid occurred, but that intervention was coupled with great effort on the part of private industry and great loyalty on the part of the work force, creating a success story.

I was involved with the trade unions in the negotiations with the Government Department concerned, however, and I was struck when I met the civil servants and Ministers by their nonchalant attitude towards the spending of public money. When I spoke, for example, not to my right hon. Friend the Minister of State but to the Minister then dealing with the matter, a Member of the other place, I was appalled by his nonchalant attitude to the expenditure of public money in the North-East. I told him, for instance, that Courtaulds was interested in making a bid for Brentford Nylons but only a few weeks earlier it had closed a factory immediately adjacent—that is, the Exquisite Knitwear factory—and it was now opening up factories in Ireland.

I was appalled when the Minister and the senior civil servants said "What do you expect us to do? Do you expect us to sit at the end of the M1 to see whether firms in the North-East are shifting machinery out from Cramlington in the North-East and taking it elsewhere?"

The point I make now, which I made also during those negotiations, is serious. I am sure that there are cases in which Government money is wasted, in which a company which gets money for a particular purpose—the creation of jobs in the North-East and the purchase of machinery—but uses that money for different purposes, such as buying machinery in the North-East and then transporting it to factories in the South-East.

I gave the Minister and his civil servants many examples, and I was somewhat appalled by their nonchalant attitude. I gave the example of Courtaulds and Exquisite Knitwear. I gave the example of English Numbering Machines in Shire-moor. I gave the example of Magnatex in Blyth, a company dealing in car components. There were three companies which received substantial Government aid, and rightly so, to create jobs, yet when those grants expired the money was pumped into the internal system of the companies, which had factories elsewhere in England. I respectfully suggest, therefore, that the money was not used on a long-term basis for the purpose for which it was originally intended.

Nevertheless, I welcome the Government's moves to spend public money for investment, provided that it is worth while. But the Government must recognise that private industry makes legitimate criticisms when it sees that they are not creating a sufficiently favourable climate to encourage private investment. I recently met a substantial group of industrialists in Cramlington, in my constituency. It was not a party political occasion of any kind. They were simply people trying to run their businesses successfully, trying to create fuller employment and trying as hard as they could to contribute to the export drive. I was given example after example of situations in which the Government were just not making it sufficiently attractive for private industry to invest in the North-East. Whilst I strongly support our Labour Government's policy on public investment, it should be coupled with a sensible and constructive approach to encourage private investment as well.

This applies particularly to foreign-based companies. American business men have told me that they are thinking very seriously—I hope they can be dissuaded of discontinuing investment in the North-East because they can, on a comparable basis, operate more efficiently and profitably if they manufacture their particular goods in factories in, for example, Belgium or back in the States. I am referring to factories in the chemical industries and in other industries in the North-East. The Government must understand that if they wish, as part of the industrial strategy, to encourage foreign companies to invest in this country, they must make it sufficiently attractive for those companies or we shall lose their custom.

The warning signs are all there. I know of several companies in the North-East which are seriously thinking of reorganising their companies in such a way in the not too distant future that the principal producers of their goods will be either in Europe or elsewhere abroad. I am sure that the Government wish to avoid this at all costs.

This should not be a partisan debate, and I deplore the partisan note which has been injected into it by a number of speakers. The Government should be supported by all Members to cure the terrible question of unemployment by the use of public funds. The Government must recognise their own shortcomings, not only in the lack of supervision of public funds which I have demonstrated, but to some extent in a lack of firm decision and of prevarication in making important commercial judgments. I deplore the attitude of the Department of Industry in sometimes not being able to make sensible commercial judgments quickly enough.

I should like to give two short examples. The first is the preremptory and sudden abolition of the regional employment premium in the Chancellor's statement before Christmas of last year. There is a strong case for not having that type of regional aid, I recognise. But there is no case at all for withdrawing it at three weeks' notice, thereby increasing unemployment in the North-East and bringing about a cut-back in industrial training.

The other example—I do not want to take up much time on this, because it is a complicated question—is the disgraceful behaviour of the Department of Industry on the question of Parsons and the award of the Drax B contracts, the negotiations for which have now been conducted for weeks and weeks on end. There, although the negotiations are complicated, the issue is simple. The Government—my right hon. Friend the Prime Minister has personally taken responsibility for this decision—simply cannot make up their mind as to what form the restructuring of the industry should take, given a substantial contribution of public money through the National Enterprise Board. There have been endless meetings between representatives of the unions, management, the Government and so on, and it has been made abundantly clear to the Government that the work force at Parsons, one-seventh of whom live in my constituency, will not accept a takeover of Parsons by GEC, led by Sir Arnold Weinstock.

That was made clear to the Government many weeks ago. Having had it made perfectly clear to them, the Government said that in principle the Drax B contracts would definitely be awarded. They know perfectly well that already 1,600 redundancy notices have been issued, yet here we are in the summer, the discussion having begun last year, still waiting for a Government decision. That is unfortunately a perfect example of Government procrastination, indecision and lack of commercial judgment in an urgent case requiring decisive action.

One has to recognise the force of criticisms when an objective observer from private industry asks how one can have confidence in a policy of investment of public money when one sees this sort of thing going on. The right approach is that there should be—this is why I support the Government on this—a strong injection of public money. But that must be accompanied by a sensible and competent display of policy by Government Ministers and their civil servants. The waffling, shilly-shallying and general incompetence that we have seen over the Parsons business and the power stations are deplorable.

There was a reference, in a somewhat partisan speech by one of my hon. Friends, to the visit of President Carter to the North-East. My right hon. Friend the Prime Minister, who accompanied President Carter, told demonstrators from Parsons—it was not at all funny—"I suppose you think I have a power station in my pocket for you." Not surprisingly, President Carter was cheered to the echo and my right hon. Friend's welcome was somewhat less enthusiastic.

Unemployment in the North-East is a tragic problem. Here is a specific example of how the Government, by competent use of public resources and a display of good commercial judgment, could save the jobs not only of 1,600 men at Parsons but of many other people throughout the country whose orders depend on the success of Parsons. The Government must look at Parsons not in isolation but as part of the whole future of the industry. I strongly support the Government in their general policy on this matter, but I strongly criticise them for a display of prevarication and indecision in these respects.

It is wholly irresponsible for Conservative Members to complain of Government policy and the injection of public funds when companies in the private sector are only too pleased to grab those funds and use them for their own purposes. In the past two years many private industrialists have asked me whether they could obtain this or that grant from public funds. They are only too glad to grab public money, but many companies have not sufficient integrity and foresight, having accepted public money, to act responsibly when economic difficulties arise and they are under pressure of one form or another.

It is immoral for a company in the North-East to accept a large amount of money from a Government Department on the basis that it is creating new jobs and then, when times are difficult, to sack the people for whose jobs it obtained the grant and then disappear from the district—

Mr. Ray Mawby (Totnes) roseߞ

Mr. Ryman

I shall give way in a moment.

It is wrong to accept money on the pretext of creating jobs and then, when things are difficult, to close down the factory, as Courtaulds did in Cramlington with Exquisite Knitwear. I now give way to the hon. Gentleman.

Mr. Mawby

I was only going to ask the hon. Gentleman to name the company about which he was talking, and he has now done so.

Mr. Ryman

Courtaulds behaved disgracefully. I saw some of the members of the management who were involved. They had a factory that made some garment for women. I cannot remember what it was—skirts, trousers, or something like that. The company spent a vast sum of Government money buying the machines, but then, apparently, the fashion changed and women no longer wore those garments. Those very expensive machines in a factory in Cramlington were no longer of any use to the company, so Courtaulds closed the Exquisite Knitwear factory there. I asked why and was told by members of the management "We have an enormous number of Exquisite Knitwear factories all over the country. There is one in Ashington, quite near by, and there are others in the Midlands. We decided to close the one in Cramlington for purely financial reasons, because women no longer want these garments." As a result, 200 of my constituents lost their jobs.

That is the tragedy of the failure by private industry. The only criterion for Courtaulds was that it was losing money at the factory in question. The company took no account of social need or responsibility. It had no thought for the work force. In fairness to Courtaulds, however, I must explain that the management was very decent to the workers in terms of redundancy pay and in trying to find alternative work. It was irresponsible, however, in putting all its eggs in one basket and in failing to diversify. There are other examples.

Mr. Ian Gow (Eastbourne)

Is the hon. Gentleman suggesting that Courtaulds should have continued to make those skirts or trousers for which he readily concedes there was no longer any market?

Mr. Ryman

Courtaulds should have diversified in sufficient time to avoid being wholly dependent on the production of a single article. The Conservatives blame the Government quite wrongly and unfairly for falling to exercise sufficiently good commercial judgment in these matters, but here is a perfect example of a large public company failing to anticipate the changing trends in a market and putting all its eggs in one basket because it knew that the Government would foot the bill. All those beautiful machines that I saw were bought with public money. They are still there. As a taxpayer, I complain that it is a disgraceful waste of public money.

Mr. Gow

The hon. Gentleman is making the most perfect case for not agreeing to the order and for not making further public money available for this purpose. I think that he could almost be described as my hon. Friend in this matter, so powerful is his case against the order.

Mr. Ryman

The hon. Gentleman misunderstands me. I believe that the Government are right in putting forward the order and I strongly support them. They are absolutely right on both economic and moral grounds. That expenditure of public money, however, must be accompanied by the exercise of sound commercial judgment, and that has been lacking in both public and private industry.

The hon. Member for Eastbourne (Mr. Gow) is one of the few Conservatives for whom I have any respect in matters of fairness, and so I know that he will consider this point fairly and will see that substantial errors have been made by both private and public industry. I hope that the Government will learn from their failures in the past. They cannot go on spending vast sums in this way without exercising competent commercial judgment.

It is imperative that the North-East gets more Government aid in the form of public expenditure. The rise in nationalism in Scotland and Wales has led to increased public expenditure in those two countries. One of the reasons behind the revolt by North-Eastern MPs on the devolution Bill, with their refusal to support the guillotine, was undoubtedly related to the feeling in the North-East that the Government were neglecting the North-East as a area for industrial expansion through the medium of public expenditure.

We do not have a development agency as Scotland and Wales do. The Government must take this warning seriously. The Minister of State is well aware of these problems because he has been good enough to attend our meetings with the subject. We have had meetings with the Prime Minister and with other Ministers. The Minister of State must be aware of the strength of feeling which exists in the North-East on this matter. The Government must not rely indefinitely on the loyalty of the North-East. They must display competent commercial judgment and they must increase public expenditure in order to encourage industrial expansion in the North-East and do something about the terrible unemployment there.

10.35 p.m.

Mr. Michael Marshall (Arundel)

As this debate has gone on it has become a fascinating exercise. As the criticisms have come from all parts of the House I have reached the stage when I am beginning to have some sympathy with the Minister of State. My sympathy arises only because I recognise that the claims being pressed upon him go far beyond his departmental responsibilities in some cases, and the task of satisfying all parts of the United Kingdom is clearly a taxing one.

The Minister of State did himself no good in the way he opened the debate. The claims which he made for the present legislation and for the need for the order were sweeping and grandiose and they have been totally destroyed by the speeches of the hon. Member for Blyth (Mr. Ryman), the hon. Member for Orms-kirk (Mr. Kilroy-Silk) and many of my hon. Friends. In laying claim to the amount of investment being drawn in by Sections 7 and 8 of the Industry Act 1972, the Minister has not been able to find support in any part of the House, whereas criticism of the way in which this help has been working in practice has come from all quarters.

I single out what is, to me, a crucial element of Government strategy that is totally wrong. The criticism of detail that has been made is in many cases valid. I agree with much of what the hon. Member for Blyth said. The broad argument, the problem that the Government are failing to recognise, is that they are consistently falling for the idea of subsidising each side of a competitive equation. They seem to feel that if money is put into a competitive situation, in which one company operates against another, great good will somehow result. The examples quoted are revealing. We have heard of the position as between Penrad the Kirkby Co-operative. What that is now coming down to is an ongoing battle between the Secretary of State for Wales and the Secretary of State for Industry, with no apparent benefit in either direction.

It is significant that the one area to which the Minister of State did not refer was Chrysler. As my hon. Friend the Member for Rushcliffe (Mr. Clarke) pointed out, we are still in Chrysler with a commitment of £162 million. It is still making a loss. What is the background of Chrysler's future intentions? It is surely that it is engaged in a vigorous battle with British Leyland, to which the taxpayer is committed, this time up to a possible £3,000 million. Once more we have the Department of Industry effectively competing with the National Enterprise Board. This notion requires the most vigorous and careful examination, otherwise we shall be in an impossible situation with the Government's industrial strategy.

The criticisms that have come from Government Back Benchers about where aid has gone and the effect that it has had on unemployment are honest reflections of the fact that the Government's industrial strategy is in many ways a window-dressing performance. If the Minister of State could say that he took this point in he would find that many of us were more sympathetic towards him. It was his right hon. Friend the Secretary of State for Industry who, when we debated British Leyland, was in no doubt that he was in favour of British Leyland in preference to Chrysler. It is well known that his right hon. Friend the Chancellor of the Duchy of Lancaster was brought in at the last moment, and from that day on there has been this unhealthy, indeed, counter-productive process of saying that provided money is pumped in and the pressures are great enough something good will result. I fear that all the evidence is now moving very much to the contrary.

The Minister of State tried to argue that the accelerated project scheme is bringing in £640 million of new investment for £84 million-worth of Government loan. That argument has been countered again and again. For those of us who try to get around and talk to industrialists, it is difficult to accept sweeping assertions about the attraction of new investment. It is not difficult for industry that is seeking to attract Government money to put up a good case. At what stage does a new project become a gleam in someone's eye. When it is known that there is a scheme available, surely it is not difficult to put up a set of effective criteria. Many of the arguments advanced on both sides of the House demonstrate the real disquiet about the way in which Government funds are put into parts of industry when funds could well have been provided from the market.

I turn to sectoral schemes and the ferrous foundry scheme in particular. I had some experience in the ferrous foundry sector, and in talking to a number of people in the industry I am bound to say that the Minister's claim that 513 applications are a mark of the Government's success is one of the most worrying aspects. Anyone who examined the industry before the sectoral schemes knew that there were too many foundries. A number were out of date, while there were some good ones with modern equipment. There was a need for rationalisation and for the industry to get together. The need for more mergers was there for all to see.

That whole process has now been put in aspic. Every part of the industry has felt free to apply for Government money for further investment. Anyone offered a new lease of life will take it. The Government's prime task, as the Minister said, should have been to get the right sort of products at the right price to supply to other parts of the engineering industry. The Government have not backed a winner and they have not done their homework anything like well enough.

In some of his remarks the hon. Member for Blyth touched on an important aspect of the argument. There is no doubt that the country is ripe for a good deal more foreign investment, and it could be attracted. In many ways it would ease the Government's problems. Indeed, it would ease the nation's problems. If we consider the North-East, about which the hon. Gentleman spoke, there is no doubt that the IBM development, with which he is familiar, is the largest computer centre of technology anywhere in the Western world outside the United States. That sort of investment should be attracted to this country and should be actively sought. But it will not be attracted in the present climate of opinion and by the economic policies followed by the Government. It requires some imagination. It requires some courage and some major tax incentives.

Why should we see people putting their savings into Liechtenstein or the Cayman Islands when we have not only the City of London but major parts of our industrial hinterland that are still capable of substantial expansion by pros- perous companies? Sadly, we do not have enough prosperous companies. That is largely because of the Government's own action, but there is still scope to bring in foreign investment.

The Minister of State overstated his case and tried to bully us. He said that unless we went along with him we should be damaging employment. The right hon. Gentleman must admit the employment effects of the order and all the assistance put in so far are relatively modest. That modesty has been brought out by his hon. Friends with their complaints about the Government's overall policy to tackle unemployment. I agree with my hon. Friend the Member for Rushcliffe. We cannot rule out the possibility that at some place and at some time there will be Government help for a particular purpose where the case is made, but so long as the Minister and his colleagues continue to make their sweeping assertions they must expect us to try to get them down to detail. Tonight the right hon. Gentleman has not given us enough detail to support him on a Division.

10.39 p.m.

Mr. Alan Williams

The hon. Member for Arundel (Mr. Marshall) referred to schemes that are a gleam in someone's eye. If we have managed to turn a gleam in someone's eye into a practical investment project we have done something worth while. In the post-war period we have had too many gleams and too few projects. If the indictment is that we have turned the gleams into projects, I am happy to accept it.

The hon. Gentleman also said that the country is ripe for foreign investment. I spend a lot of time speaking to foreign business men who are considering investing in this country, and to them the Section 8 assistance, which we are talking of tonight, is of considerable importance, because they are well aware of the levels of assistance available to them in other possible export centres. We have considerable discussion with them on the range of investment incentives available.

There was reference to the opportunities in computers. I accept this. I give the assurance that there will be considerable investment in computers by foreign firms in Britain in the foreseeable future. On Sunday night I was with the Cummins Engines people. They have just undertaken a major expansion project in Britain. This is an American firm, and we now produce about a quarter of its worldwide production.

I understand the need for foreign investment and welcome it. Twenty per cent. of our manufacturing industry is overseas-owned. We want the investment, the managerial ability and the technological know-how, and the type of assistance I am asking the House to provide is a type that is often talked about.

Mr. Michael Marshall

The Minister has just given an important assurance, and I am sure it is very important to have it on the record. Will he say whether he is satisfied that enough is being done by his colleagues on the Treasury Bench to take it further, for surely fiscal policy has to come into this?

Mr. Williams

Yes, but any company that now has a meaningful investment programme is not paying corporation tax; therefore the Treasury is already making important concessions in that regard. The Chancellor of the Exchequer has indicated his willingness, as circumstances permit, to move further along this route.

My hon. Friend the Member for Blyth (Mr. Ryman) referred to the need for monitoring. Yes, we do monitor. Indeed, I announced at this Dispatch Box, during a debate on closures initiated by my hon. Friend the Member for Ince (Mr. McGuire), that I was reclaiming a regional development grant from Courtaulds in relation to its terminating investment. We claimed back that money.

The important point is that the Government grant follows the expenditure. We do not give them the money and say "Go away and spend it as we told you". We say "Spend it and then we shall provide the balance". There is that degree of monitoring.

My hon. Friend the Member for Blyth referred to firms moving equipment from a factory in an assisted area to a factory outside the assisted area. I receive a great many letters and also some deputations from hon. Members on both sides asking me to reconsider our decision to reclaim original development grants from firms which move their assets within the first four years. That is the requirement. They must keep the asset in use in approved premises in the assisted areas in the first four years. After the four years the obligation disappears.

Mr. Ryman

That may well be Government policy, but does not the Minister appreciate that the problem is one of enforceability? It is all very well to promulgate this policy, but how is it enforced in practice when a company in an assisted area closes the factory, as has happened in my constituency again and again, and physically moves that machinery, within the four-year period, from an assisted area to a factory which it has in, say, the South-East of England or elsewhere? It is no use having these fine policies unless the Minister's Department has the effective means of imposing them in practice

In the Brentford Nylons negotiations, when I raised this question with the Department, the Minister's civil servants did not take my suggestion seriously and made the vexatious comments to which I have already referred: "Do you expect us to sit on the end of the M1 watching machinery come from the North-East to the South?" There is a flagrant abuse of taxpayers' money. It is no use giving these companies money unless there is—

Mr. Deputy Speaker (Sir Myer Galpern)

Order. I remind the hon. Member for Blyth (Mr. Ryman) that he spoke just a little while ago. Mr. Williams.

Mr. Williams

I congratulate my hon. Friend on his succinct second speech. A considerable degree of monitoring does take place. If officials said what they did to him perhaps it was remiss of them, but I am not sure of the circumstances. I hope that my hon. Friend will be reassured that we have four regional grant offices, one of them not far from his constituency. They carry out follow-up visits to factories that have received grants, to ensure that the assets are still in the use for which they were originally intended and have not been removed. We withdraw grants for quite limited removals of these assets from the approved premises.

The hon. Member for Surrey, North-West (Mr. Grylls) was easier to understand. He lives in a simple world, where all Conservative industry schemes are good and all Labour industry schemes are bad. It may be short on economic analysis, but it is clear in its destructive dogma. He got it wrong when he said that the industry schemes were a sop to the TUC. Many of the industry schemes in operation or under consideration arose from the tripartite discussions of the sector working parties in the industrial strategy, and have been the result of collective recommendations by the Government, the unions and managements operating together.

My hon. Friend the Member for Ince, in a telling speech, referred to the deputation that he led to see me today. I was grateful not just to him but to the industrialists with him for the constructive approach that they took to the problems. I wish that hon. Members on the Opposition Benches had heard them. They were talking about Section 8 schemes and trying to think of ways in which they could be made even more relevant to the circumstances operating in Skelmersdale, particularly, perhaps, for the smaller firms that may feel somewhat limited by their thresholds.

I promised my hon. Friend that I would look at the points put to me today, and I know that he will accept my assurance. I also assure him that we would still consider any project in Skelmersdale, even if it fell outside a Section 8 scheme, if it offered employment opportunities under Section 7. We do not want to lose employment there. We understand the severity of the situation.

The speech of the hon. Member for Rushcliffe (Mr. Clarke) was fascinating. Indeed, it was incredible. I find it strange that the Conservative Party, which reorganised local Government, should feel able to talk about efficiency. The hon. Gentleman accused the Government of being complacent in the way in which we deal with these industry schemes. I do not, I repeat, understand how the Opposition can seriously go into the Division Lobby tonight against this measure when they know that they are voting against such things as the accelerated projects scheme, which produced £640 million of investment, which is creating 13,000 jobs and which will give a balance of payments advantage of £500 million a year—all in return for £84 mil- lion investment. They say that it was not a good decision on our part. I have given the figures for the ferrous foundry scheme, which is equally important to an industry that could not find enough private investment.

Mr. Kenneth Clarke

There is no way of closing the gulf between us, but I make one last effort. It is not the case that we accept so uncritically that the Minister's contribution has generated the investment and employment which he describes. His figures could equally be used—and, in our opinion, could accurately be used—for saying that there had been investment of £4 million, of which the taxpayer had chosen to contribute a proportion, but it is our view that most of that investment and most of those new jobs would have come about in any event So long as it is in projects with a sound prospect of profitability, there is plenty of finance in the market for it.

Mr. Williams

The hon. Gentleman knows that that is not the case. He knows the record of the ferrous foundry industry. The industry did not exist as a coherent industry until the scheme was used. More than 700 units operating in the ferrous foundry sector surfaced and are now beginning to develop into a coherent industry. Many were submerged in other industries. The hon. Gentleman knows that the scheme has generated that employment. Let him ask the people who have already had the money and are in a position to cock a snook if they choose. There is no doubt in industry. There is no doubt in other industries. The only doubt is on the Opposition Front Bench. The previous record of investment in that industry supports what I am saying.

If the Opposition had had their way we would have lost not only Leyland and Chrysler but many of the 3,000 firms that supply goods and services from all over Britain to those car producers. With their right hon. Friend the Member for Leeds, North-East (Sir K. Joseph), they would stand in the ashes of British industry, patting themselves on their backs and saying "This is Conservative industrial policy."

The Tories say that we need investment. Of course we do. But look how impressive they are in the eyes of the Stock Exchange when it looks as though they have a chance of becoming the Government. The Stock Exchange quakes at the thought of their being able to implement some of the inanities that we hear from them.

The Opposition say that we are failing to encourage investment from the market. As one of my hon. Friends pointed out, their own Prime Minister, when they were last in office, indicated that they, too, were unable to generate investment from the market.

We are now beginning to get the increase in investment that we want. In the fourth quarter of last year it was up 5 per cent. on the first quarter. I do not pretend that it was a marvellous year for investment, but it was the start of the upturn. This year, according to our own assessment, we shall see a 6 per cent. to 10 per cent. increase in investment and, next year, a 20 per cent. increase. That is our assessment. If that takes place, by the end of next year we shall be back to the level of investment that was attained in 1970. That was an achievement that the Conservative Government, despite all the waffle that we hear from them about their understanding of business and their creating the right circumstances, were never able to equal. We

Division No. 186]	AYES	[11.0 p.m.
Armstrong, Ernest	Grant, George (Morpeth)	Molloy, William
Ashton, Joe	Hamilton, James (Bothwell)	Morris, Charles R. (Openshaw)
Atkinson, Norman	Hardy, Peter	Oakes, Gordon
Barnett, Guy (Greenwich)	Harrison. Rt Hon Walter	Orme, Rt Hon Stanley
Bates, Alf	Hatton, Frank	Ovenden, John
Blenkinsop, Arthur	Hayman, Mrs Helene	Pavitt, Laurie
Booth, Rt Hon Albert	Hooley, Frank	Penhaligon, David
Bray, Dr Jeremy	Horam, John	Perry, Ernest
Brown, Ronald (Hackney S)	Howells, Geraint (Cardigan)	Phipps, Or Colin
Callaghan, Jim (Middleton & P)	Hoyle, Doug (Nelson)	Price, C. (Lewisham W)
Canavan, Dennis	Huckfield, Les	Roberts, Albert (Normanton)
Cocks, Rt Hon Michael	Hughes, Robert (Aberdeen N)	Robinson, Geoffrey
Coleman, Donald	Hunter, Adam	Rose, Paul B.
Cook, Robin F. (Edin C)	Jackson, Miss Margaret (Lincoln)	Ross, Stephen (Isle of Wight)
Cowans, Harry	John, Brynmor	Rowlands, Ted
Cox, Thomas (Tooting)	Johnson, James (Hull West)	Silverman, Julius
Crowther, Stan (Rotherham)	Jones, Alec (Rhondda)	Skinner, Dennis
Cryer, Bob	Jones, Dan (Burnley)	Smith, Cyril (Rochdale)
Cunningham, Dr J. (Whiteh)	Kaufman, Gerald	Smith, John (N Lanarkshire)
Dalyell, Tarn	Kerr, Russell	Snape, Peter
Davis, Clinton (Hackney C)	Kilroy-Silk, Robert	Spriggs, Leslie
Deakins Eric	Lambie, David	Stallard, A. W.
Dean, Joseph (Leeds West)	Lamborn, Harry	Steel, Rt Hon David
Dempsey James	Lamond, James	Stoddart, David
Doig Peter	Latham, Arthur (Paddington)	Taylor, Mrs Ann (Bolton W)
Dormand J D.	Lestor, Miss Joan (Eton & Slough)	Thomas, Ron (Bristol NW)
Dunwoody, Mrs Gwyneth	Loyden, Eddie	Tierney, Sydney
Eadie Alex	Luard, Evan	Tinn, James
Ellis, Tom (Wrexham)	Lyons, Edward (Bradford W)	Torney, Tom
Evans loan (Aberdare)	McDonald, Dr Oonagh	Varley, Rt Hon Eric G.
Evans, John (Newton)	McGuire, Michael (lnce)	Wainwright, Edwin (Dearne V)
Ewing, Harry (Stirling)	Maclennan, Robert	Wainwright, Richard (Colne V)
Fernyhough Rt Hon E.	McMillan, Tom (Glasgow C)	Walker, Harold (Doncaster)
Flannery, Martin	Madden, Max	Walker, Terry (Kingswood)
Fletcher, Ted (Darlington)	Maynard, Miss Joan	Ward, Michael
Freeson, Reginald	Miller, Dr M. S. (E Kilbride)	Watkinson, John

shall be at that level in real terms by the end of next year—and those findings are endorsed by the CBI's analysis of the future.

We are told that the Conservatives know how to create investment. Within weeks of coming to office in 1970, with the country free of balance of payments constraints, they abandoned investment grants and put investment on a downward path from which it is only just beginning to recover. Within six months, industrial development certificates in the development areas fell to one-third of what they had been previously. That was the attainment of Conservative understanding of the operation of our economy.

I understand that the Tories intend to vote against the order. I hope that those who do so will not also come to the doors of my Department asking me to assist firms in their constituencies. I am fed up with the arrant hypocrisy of right hon. and hon. Members who know that what they are saying they could never hope to be able to implement in the unfortunate eventuality of their ever coming back to office.

Question put:—

The House divided: Ayes, 117, Noes 94

White, Frank R. (Bury)	Wise, Mrs Audrey
Williams, Rt Hon Alan (Swansea W)	Woodall, Alec	TELLERS FOR THE AYES:
Williams, Sir Thomas (Warrington)	Woof, Robert	Mr. Joseph Harper and
Wilson, Alexander (Hamilton)	Wrigglesworth, Ian	Mr. Ted Graham.
Wilson, William (Coventry SE)

NOES
Bennett, Sir Frederic (Torbay)	Hunt, John (Bromley)	Normanton, Tom
Berry, Hon Anthony	James, David	Osborn, John
Biffen, John	Jenkin, Rt Hon P. (Wanst'd & W'df'd)	Page, Richard (Workington)
Boscawen, Hon Robert	Johnson Smith, G. (E Grinstead)	Powell, Rt Hon J. Enoch
Brocklebank-Fowler, C.	Joseph, Rt Hon Sir Keith	Raison, Timothy
Brooke, Peter	King, Evelyn (South Dorset)	Renton, Tim (Mid-Sussex)
Buck, Antony	King, Tom (Bridgwater)	Rhodes James, R.
Butler, Adam (Bosworth)	Kitson, Sir Timothy	Roberts, Michael (Cardiff NW)
Carlisle, Mark	Knox, David	Shaw, Michael (Scarborough)
Chalker, Mrs Lynda	Lamont, Norman	She-lion, William (Streatham)
Clark, Alan (Plymouth, Sutton)	Lawrence, Ivan	Shepherd, Colin
Clarke, Kenneth (Rushcliffe)	Lawson, Nigel	Silvester, Fred
Clegg, Walter	Le Merchant, Spencer	Speed, Keith
Cope, John	Lester, Jim (Beeston)	Spicer, Jim (W Dorset)
Dean, Paul (N Somerset)	Macfarlane, Neil	Spicer, Michael (S Worcester)
Dodsworth, Geoffrey	MacGregor, John	Sproat, lain
Durant, Tony	MacKay, Andrew James	Stanbrook, Ivor
Dykes, Hugh	McNair-Wilson, M. (Newbury)	Stradling Thomas, J.
Emery, Peter	McNair-Wilson, P. (New Forest)	Taylor, R. (Croydon NW)
Fletcher-Cooke, Charles	Marshall, Michael (Arundel)	Taylor, Teddy (Cathcart)
Forman, Nigel	Mather, Carol	Tebbit, Norman
Fowler, Norman (Sutton C'f'd)	Mawby, Ray	Temple-Morris, Peter
Fry, Peter	Maxwell-Hyslop, Robin	Wakeham, John
Gardiner, George (Reigate)	Meyer, Sir Anthony	Walder, David (Clitheroe)
Goodhew, Victor	Miscampbell, Norman	Wall, Patrick
Gow, Ian (Eastbourne)	Mitchell, David (Basingstoke)	Warren, Kenneth
Grylls, Michael	Molyneaux, James	Weatherill, Bernard
Hamilton, Michael (Salisbury)	Monro, Hector	Younger, Hon George
Hannam, John	More, Jasper (Ludlow)
Hawkins, Paul	Morgan, Geraint	TELLERS FOR THE NOES:
Higgins, Terence L.	Morris, Michael (Northampton S)	Sir George Young and
Holland, Philip	Nelson, Anthony	Lord James Douglas-Hamilton.
Howell, Ralph (North Norfolk)	Newton, Tony

Question accordingly agreed to.

Resolved, That the Financial Assistance for Industry (Increase of Limit) Order 1977, a draft of which was laid before this House on 16th June, be approved.