INDUSTRY ACT ASSISTANCE

HC Deb 01 August 1978 vol 955 cc671-92

10.22 a.m.

Mr. Tom Litterick (Birmingham, Selly Oak)

I should like to examine the subject of financial assistance to industry under sections 7 and 8 of the Industry Act. My hon. Friend the Member for Sowerby (Mr. Madden) will give the matter his own emphasis; I should like to discuss it with particular reference to the West Midlands economy.

The assistance to the West Midlands under the Act comes principally through section 8. Section 7 applies only to the development areas, as which the West Midlands area is not yet classified. No one has yet recognised that it is as much an economic crisis area as the rest of the country, despite the fact that unemployment is not as high as it is in many other areas. But one of the striking features is not so much the absolute or even the relative level of unemployment as the rate of its growth, which has been faster than that of many other regions, although not of all. For that reason, there has been growing anxiety in the West Midlands that the fate of its economy will be the same as the fate of the older industrialised areas—that is, that it might become a depressed area.

Although it is not regarded as an assisted or development area, much direct Government assistance has been given to the West Midlands economy. Some of the more prominent firms which have benefited are Lucas Industries, which has already received more than £4 million, GEC Machines, which is part of the larger GEC organisation, Accles and Pollock, Stafford Potteris, NVT, Meriden Motorcycles and—most famous of all—Alfred Herbert, Chrysler and Leyland, as well as a significant number of smaller firms.

Although I am sure that the Minister will give us the most up-to-date and precise figure, it seems that the amount funnelled into the West Midlands from the Government during the last five years has been much more than £120 million.

This mechanism of the Industry Act, by which State aid can be made available to the private sector, is an area of policy and strategy where the philosophies of the social democrats on both sides of the House meet. It would appear to be a shared wisdom. When the social democrats dominated the Tory Party they embarked upon an interventionist strategy of which the Industry Act is a feature. That Act was subsequently amended by the Labour Government. The present Labour Government are dominated by the Labour Party's social democrats. There is some doubt about whether the social democrats still dominate the Tory Party, but with a bit of luck we may never find out.

Despite the apparent generosity of the assistance given to it, the West Midlands economy is still in a state of crisis. Those of us who observe the West Midlands economy at close quarters find the outlook rather less than encouraging. The heart of the matter is fairly simple and is not unfamiliar to those of us who scrutinise the entrails of the British economy as a whole.

In its most recent report, the steering group of the West Midlands Economic Council says that since 1971 a relatively small group of industries has been responsible for the lion's share of job losses in the West Midlands economy. These industries are the car manufacturing and related industries, the metal-based industries and engineering, which are related to the fabrication and assembly of motor vehicles. These industries have lost 70,000 jobs between 1971 and 1975, and those 70,000 jobs represented about 85 per cent. of the total job loss in the West Midlands economy.

In addition, the West Midlands Economic Council cannot see any encouraging potential for job growth in other industries in the West Midlands region. The House will recollect that the basic policy document that the Government used to announce their strategy was the White Paper entitled "The Regeneration of British Industry". It was written in terms of creating new manufacturing industries or rejigging existing ones with different technologies and different structures. That is not quite the same thing as ensuring that such a regenerated economy would be one in which the number of jobs would be larger than before the economy was regenerated. I may have put that in a rather awkward way, but I intended to. We have tended to think too narrowly of regenerating—in physical and technological terms rather than in employment terms.

We are beginning to discover that by regenerating British Leyland, for example, we would bring about a net job loss of between 12,000 and 25,000, depending upon how far we carry out the transformation of that organisation. That pattern repeats itself in industry after industry. We all know that Alfred Herbert was the subject of restructuring. That industry has shed labour and has gained in technological capability. In future it may shed more labour and still gain in productive potentiality.

As the authors of the report emphasise in chapter after chapter of the document, it would appear that the concentration on existing industries which had hitherto been very successful in the West Midlands and made it prosperous would be a mistake. If we are thinking in terms of employing the people of the West Midlands or creating an economy in which people can live, it certainly is a mistake.

If people cannot work in an economy, there is little possibility that they can live in it either. If the economic system cannot employ its people, it cannot pay them. If they are not being paid for employment, by definition they cannot be customers for whatever is being produced. If there are no customers, there is no reason for the industry to produce anything at all. Having gone full circle, it is obvious that unless we are prepared to put large numbers of people on doles of one kind or another there will be nobody to buy the products of the technologically rejigged West Midlands industries or the newly created ones. The only potential customers would be those abroad. That would put us in the absurd position of making products to sell outside this country while inside we have a half-starved subsistence population.

The trouble is that we still have hang-ups which are part of the primitive revolutionary philosophy of the Bolsheviks—he who does no work shall not be paid. As many people on social security benefits in this country have discovered to their shock, horror and pain, it is often regarded as a crime to be on social security. It is quite widely seen as being parasitic. The general attitude is that a person who does not work should be penalised. That is a primitive view.

People who live in an economic system of some sophistication must realise that their potential productive power goes far beyond the ability of that system to employ everyone in production. We must recognise the need for a growing service economy, and that applies as much to the West Midlands as it does to the rest of the country.

The strategy that appears to be followed by the existing institutions set up as a result of the Industry Act does not appear to be coherent. Much of the resources of those institutions has gone to organisations which are mature, even decaying—some people may even call them lame ducks—or certainly in trouble. I refer to Alfred Herbert, British Leyland and others. Little attention was paid until recently, when changes were made at the NEB, to the possibility of devoting more careful attention to other productive enterprises which were not in trouble but which needed the stimulus of addiditional capital resources.

So far as I can make out, the investment strategy followed by the NEB has been opportunistic. It does not appear to be a consistent strategy at all. I find it difficult to blame the members of the Board for that. Indeed, the West Midlands Economic Council makes the point that one of the reasons for the difficulties of the West Midlands region is that the source of investment funds for the region lies outside the region in both public and private hands. I am suggesting that knowledge of a region is an important factor in knowing a region's requirements, as is an understanding of a region's potential. Remotely controlled investment is bound to be less satisfactory than investment based on familiarity within an area.

I suggest to the Minister that, based on the precedents of the existence of the northern and north-western offices of the National Enterprise Board, we should now be moving towards the creation of either a West Midlands NEB or a Midlands NEB. I do not doubt that the ability to staff such a board is already in the West Midlands. The Secretary of State for Industry or the chairman of the NEB would not have to look beyond the Midlands for the necessary ability and experience. This would lend strength to the NEB in its efforts to arrive at a coherent and consistent national investment strategy. I hope that, based on the kind of expertise that can be offered in the West Midlands, there will be a new departure in NEB strategy. It would suggest that the NEB could devote more of its attention to non-manufacturing enterprises, in contrast to the emphasis which has characterised the board's strategy, namely, the emphasis on manufacturing enterprises.

It is my personal opinion, and the opinion of many informed people in the West Midlands, that we must strive in that part of Britain for the development of a new service economy to give more hope than will existing investment strategy in manufacturing. We know that the return on investment in service industries in respect of jobs is very much higher than it is in manufacturing industry, but —and I wish to stress this point—if we do not create something very much like a West Midlands or Midlands NEB, or something on the lines of the Scottish Development Agency we are unlikely to succeed in developing a convincing and effective economic strategy for the West Midlands.

10.45 a.m.

Mr. Max Madden (Sowerby)

I wish to thank my hon. Friend the Member for Birmingham, Selly Oak (Mr. Litterick) for joining me in initiating this debate. I find it distressing, having waited nearly 16 hours for this debate, to see that innumerable Members during the night, who did not have the wit or foresight to seek to promote a subject, nevertheless saw fit to participate. They caused this debate to come on very late, which means that a number of other debates will not even take place, although there are many people, both inside the House and outside it, who are most interested in hearing what is said on those subjects.

I wish to join my hon. Friend in drawing attention to public financial assistance —taxpayers' money—going to private industry which, by any standard, is considerable. In a recent parliamentary answer from the Department of Industry, I was told that since 1974 more than £1,338 million had been paid in regional development grants and more than £1,275 million under other sections of the 1972 Industry Act. More than £444 million was paid under section 7 of that Act and more than £813 million under section 8. Taxpayers' money—public money —is underpinning a massive slice of British industry and is assisting firms of every size and type in many areas of the country. The total public subsidy is very much larger and indeed the latest estimates show that about £12 million per day of taxpayers' money is going to private industry.

Although the right hon. Member for Leeds, North-East (Sir K. Joseph) huffs and puffs about the evils of such public support and talks to the gallery about all subsidies and grants doing great harm, we know that companies in his own constituency, and in many other Tory constituencies, are lining up outside the Department of Industry eager for all the support they can get.

Mr. Nick Budgen (Wolverhampton, South-West)

rose—

Mr. Madden

They do not protest about all the other subsidies, grants and reliefs they receive. Therefore, we should be vigilant against hypocrisy from Tory politicians and members of firms who support the Tory Party financially with one hand while dipping into the public purse with the other.

There should be no misunderstanding that the prime vehicle for this public support has been the Industry Act 1972, introduced by the right hon. Member for Sidcup (Mr. Heath) as one of the range of inducements which he introduced in an attempt—largely unsuccessful—to persuade British industrialists to invest in British industry, British products and jobs.

The amount of public financial support since 1974 has been cranked up in the same hope. Although it is clear that several major British companies would be closed today—including Ferranti, British Leyland, Chrysler and Alfred Herbert—with thousands of redundancies, if that public assistance had not been afforded, nobody can be satisfied or complacent about the position.

The Labour movement has always insisted that no public money should be made available without effective public accountability. Before coming to power, we talked in exciting terms about how planning agreements would achieve this aim. We spoke about how workers, management and Government, in enterprises supported by public money, would enter systematic agreements in which there would be joint agreement on major policy issues, where investment would be channelled, where expansion would occur and where there would be product design and development. All this would take place against an even more exciting backdrop of real industrial democracy. Fresh air, fresh ideas, fresh men would be sucked into manufacturing industry and a new dynamic set off. However, the industrial crisis, rooted in the upsurge of oil prices, rapid increases in commodity prices, unpredictable exchange rates and a substantial fall in world trade had a major industrial impact.

But in a way the fact that we endured that major national and international crisis—from which we have not yet escaped entirely—without achieving many of the objectives of our industrial strategy, is all the more sad. Even now we have only one planning agreement. It is tragic that we are giving more and more public money to private industry without much more effective accountability than we had in 1974. I regret that we are still a long way from transforming the way in which important decisions are taken in many of our companies.

Britain's industrial crisis has shown, and will continue to show, that only with public intervention, public money, public enterprise and public planning can we hope to protect our manufacturing base in the years ahead, thereby creating the wealth which is necessary to support a more exciting leisure society, in which work can be shared out. It will be a society in which our young have a chance of a satisfying job and we do not kill off our older workers because they cannot afford to retire. It will be a society with attractive social policies in which people, with the aid of technology and automation, live in reasonable fulfilment and comfort in a world in which the stark and brutal divisions between rich and the poor are no more.

Public intervention must become the spearhead of our regional policy. It is intolerable that large sums of public money are spent to persuade firms to maintain limited employment in Britain at a time when the same firms are expanding employment abroad. Public money must be used to maintain employment where the people are. It is unacceptable when people who have lived happily in small communities and want to stay there are forced to leave to search for a reasonable job—or any job at all.

That is what is happening in my constituency and in other parts of West Yorkshire. My constituency has a proud manufacturing tradition. People like to live near their work and they enjoy being near their relatives and friends. Good neighbour policies have been practised in these areas for generations.

Such people do not agree with the economic planners in Leeds who say that in future there should be a limited number of growth points based on the large cities and that my constituency and others like it should become dormitory areas for Leeds and Manchester. Such a policy encourages more and more younger people to leave and that creates more community and social difficulties.

Public financial assistance has an important role to play in stemming such undesirable regional developments, which are the inevitable consequence of free market forces which in future will attract more investment to the most profitable areas of Britain and, increasingly, to the most profitable areas of the Common Market.

The wool textile reorganisation scheme is an example. Under the first scheme £18 million was available and under the second scheme £5 million. Another £15 million is available under the clothing scheme. These schemes have involved modernisation and reorganisation. They have helped the industry to become more competitive. But they have also involved substantial redundancies. Not enough has been done, using public financial assistance, to provide alternative employment in the Yorkshire woollen areas for those who have been made redundant. If planning is about anything it should be about having enough foresight to take account of the redundancies that flow inevitably from such developments.

The effects and benefits of the scheme were discussed in a perceptive article by Victor Keegan in The Guardian on 25th July. He said that one Bradford company, which had taken advantage of the scheme, expected exports to rise to 50 per cent. of turnover by the second half of the year but employment to drop by 42 per cent. as a result of re-equipment.

In the woollen industry employment has dropped from 103,000 in 1968 to about 78,000 between 1975 and 1977. About 90 mills have closed. Hilary Rose, professor of applied social studies at Bradford University, summed up the concern about the future of the North in an article entitled "Bradford: a de-skilled town" in New Society on 20th July. She said: The distribution side remains profitable, so the message is to get out of production, abandon British factories and import from abroad. Bradford and its fate are not unique. This is the story of many other of our greater and smaller northern cities, thrown up in the floodtide of the first industrial revolution and now left stranded as the tide ebbs. What are the solutions? In principle, if one listens to the siren voices of the multinationals and the hardnosed economic realists in search of ever greater productivity, it doesn't matter. One could concentrate all production and innovative industry in south east England to operate at high efficiency and leave a welfare desert behind. She argues for skills to be retained in the North and for new industries to be established, if the new trading estates that are being built in our part of the world are not to be turned into anything better than distribution warehouses at the end of motorway spurs.

She concludes: If the finance for this new investment has to be at the national level, who is to invest, develop and manage the new technologies? Existing management in industry has proved itself inadequate. Industry's profitability is protected by government purchasing, government consumer policy and both direct and indirect government subsidy. It is not unreasonable to ask what does the state get for its money. The individual who claims welfare benefits in all their complexity is quick to feel the array of controls imposed to make sure he or she is not "scrounging" off the state. But who controls our industries and our public investment in their activities? Some local economies in the north east may already have declined to a level where massive investment will be needed to regenerate them—Sunderland is one example. Others, like Bradford, wobble on the brink. Is anybody listening in Whitehall?

Many of us are often moved to ask the same question. Confronted with our immense problems and immense opportunities, we know that now is the time for a new industrial era based on bold new initiatives, sensible and socially responsible planning, more public accountability and involvement, better public and community services, more jobs, more job satisfaction and more compassion and understanding.

This debate is about how we employ our resources. I hope that the Minister will indicate that new responsibilities are emerging from the Department of Industry and, most important, that we are to return to those proposals on which we were elected and which appeal to the mass of working people because they offer hope for the future and effective control over that future.

10.58 a.m.

Mr. Hal Miller (Bromsgrove and Redditch)

The hon. Members for Birmingham, Selly Oak (Mr. Litterick) and Sowerby (Mr. Madden) have done the House a service by raising the matter of grants under sections 7 and 8 of the Industry Act. They have done a wider service by revealing to us so clearly the society that they hope to see in these islands. I was particularly interested in the exciting prospect that people should be proud to be on a planned form of social security.

The hon. Members were correct to stress the need for a better underpinning and strategy for Government distribution of grants, particularly under section 8. They mentioned the effect that the strategy has had on the economy of the West Midlands in particular. In the West Midlands we can see all the symptoms of the decline which has affected many other local economies with declining industries.

The whole thrust of Government policy in the West Midlands has been to reinforce the decline, despite the huge amounts of public investment poured in—

Mr. Bugden

Perhaps because of public investment.

Mr. Miller

I do not think that that case has been proven. I am saying that the decline has continued precisely because the grants continue to prop up firms which are having to undergo severe structural change but they militate against new firms coming into the area with a prospect of bringing new blood and new life to the West Midlands.

Thus, not only do we have existing firms prevented from expanding but there is a positive bar on new industries coming into the area.

Mr. Budgen

Will my hon. Friend comment upon the disgraceful remarks of the hon. Member for Sowerby (Mr. Madden), who said that it was hypocrisy for Tories to encourage their constituents to apply for any grants under the Industry Act? Will my hon. Friend confirm that when the loyal Opposition agree to accept the operation of laws with which they do not agree, just as our constituents are obliged to obey laws with which they may not agree, so on occasion they are entitled to take advantage of laws with which they do not agree?

Mr. Miller

I had not intended to delay the House by dissecting the speech of the hon. Member for Sowerby, large parts of which, no doubt, will appear in his election address. In fact, it sounded almost like a maiden speech, and we hope that he will not have occasion to make a speech again.

The Government's economic policy has reduced British industry in so many ways that firms are bound to clutch at whatever straws are available to them.

Mr. Budgen

They are entitled to.

Mr. Miller

I wish to move on briefly to what underlies Government policy in making grants available. Under both Governments, these grants have always gone to declining industries. This offers no hope for the future and, in particular, it does nothing to bring about the change in attitudes which is essential if this country is to make any progress. The speeches on economic affairs made in the House last week contributed nothing to bringing about the change in attitude which we need if we are successfully to fight our way out of our present difficulties.

The hon. Member for Sowerby spoke of the exciting prospect of more public accountability and planning agreements. The only planning agreement which we have had so far is that with Chrysler, which is hardly an exciting prospect, and public participation or industrial democracy in the Post Office does not seem to have done much for the consumer either in prices or in protecting him or our public services from the go-slow operations of Post Office engineers.

What we are looking for from the Government, from our country's leadership, is a positive lead which will encourage people to change their attitudes so that from our existing capacity we can get the output necessary for us to withstand imports and build up our exports. Without that commitment and that realisation there is no prospect of the British people developing the confidence which alone will sustain them in their efforts. We in this place shall not save the country. We shall not transform the economy. Only people outside the House will bring about the necessary change, and for them to adopt the attitudes necessary for that to come about and to give their commitment they will need a far larger measure of confidence in the nation's leadership and in the industrial policy than they can have at present.

11.3 a.m.

Mr. Gerry Fowler (The Wrekin)

I wish briefly to revert to the theme with which my hon. Friend the Member for Birmingham, Selly Oak (Mr. Litterick) introduced the debate and upon which the hon. Member for Bromsgrove and Redditch (Mr. Miller) touched, namely, the West Midlands economy and what might be done to aid that economy.

As the hon. Member for Bromsgrove and Redditch rightly said, the West Midlands economy needs an infusion of new industry from outside. I remember the time when I was, in effect, doing the job which my hon. friend the Under-Secretary of State for Industry is doing—this was 10 years ago—when I was Joint Parliamentary Secretary to the Ministry of Technology. I made a speech in the West Midlands in which I pointed out that the excessive dependence of the West Midlands economy on one type of industry, namely, metal working, was in the long run exceedingly dangerous. What I then saw in prospect for industrial decline has come to pass, and in the West Midlands now we need above all diversification of the industrial structure and greater growth in the service sector.

I feel that I have a right to say that not least because I represent a constituency in which unemployment is running at a level much higher than it is in many of the assisted areas. Only one tiny part of the West Midlands region is an assisted are—Oswestry, I believe—and in my constituency unemployment is far higher than it is in many of the intermediate areas and in some of the development areas.

Moreover, in my constituency I have a new town, as does the hon. Member for Bromsgrove and Redditch. One part of the Government is building houses there or encouraging the building of houses, and another part of the Government—represented on the Front Bench today by my hon. Friend the Under-Secretary of State for Industry—says "You cannot have IDCs and you cannot have assistance under section 7 because you are not a development area." We are restricted in terms of IDCs to the West Midlands conurbation, now minus the inner city areas, which does not leave very much, and even if it did leave very much the only industry which we could attract from that area would be precisely the sort of industry which the West Midlands has always had. As I say, what we want in my constituency is diversification to provide a sound base for industrial growth in the future, and we want access to section 7, too.

I hope that my hon. Friend the Under-Secretary of State will recognise that we cannot go on sweeping the problems of the West Midlands under the carpet for ever and, equally, will recognise that it makes no sense to have a strategy advanced by the Department of the Environment for the transfer of population and industry from one part of the region to another and a strategy implemented by the Department of Industry which prevents the transfer of industry from one part of the region to another and, above all, prevents the infusion of new industry from outside into growth points in the West Midlands.

11.7 a.m.

The Under-Secretary of State for Industry (Mr. Bob Cryer)

I am grateful to my hon. Friends the Members for Birmingham, Selly Oak (Mr. Litterick), for Sowerby (Mr. Madden) and for The Wrekin (Mr. Fowler) for raising these issues, which they have expressed in cogent terms.

I say at the outset that, of course, regional policy involves interference or intervention in the economy. It means that, as a Government, we say that market forces cannot provide the jobs and cannot direct or persuade industry to go to those areas where the level of unemployment is such that some action needs to be taken. I am pleased that my hon. Friends recognise this and they recognise also the danger inherent in the policy expressed by many Conservative spokesmen for total abolition or at least significant reduction of support for industry and allowing market forces to prevail. Unquestionably, this would lead to widespread unemployment.

Intervention in the market place is essential if we are to develop our economy to its full potential, and the intervention in the market place which we undertake is in fact generous intervention, as my hon. Friends have pointed out. Section 7 assistance for the regions and section 8 assistance nationally under sectoral schemes is accompanied by 100 per cent. tax allowance on investment in plant and machinery, which is the most generous in western Europe. When the Opposition complain about the tax burden which, so they claim, this Government are imposing, they never admit that the Government are giving the most generous tax concessions for investment in plant and machinery in the whole of western Europe. This is a very important inducement to investment.

My hon. Friend the Member for Selly Oak made a number of points about the West Midlands, and I assure him—indeed, he accepts this—that under section 8 of the Industry Act there has been significant assistance to the West Midlands. Under the ferrous foundry and machine tools schemes, for example, which, as my hon. Friend the Member for The Wrekin recognises, would have a significant effect on the West Midlands because the area is predominantly dependent on metal working industries, over the past two years there has been assistance under section 8 to a total of over £34 million which has safeguarded and developed a number of jobs.

Out of those two schemes particularly, as one might expect, the West Midlands region has done particularly well. Indeed, under the ferrous foundry scheme, which has been very successful, the West Midlands has received the greatest number of grants and approvals. The proportion of section 8 assistance in the West Midlands has been significant. I want to emphasise that, because a feeling is sometimes expressed, certainly not by my hon. Friends, that a great deal of assistance goes to the regions, but very little goes to the non-assisted areas such as the West Midlands.

Of course, we have adjusted our regional policy to the extent that the regional employment premium was abolished. In fact, the general sectoral schemes, the selective investment scheme and the accelerated projects scheme were given an additional amount of finance and were applied nation wide. Temporary employment subsidy is a more selective form of assistance and applies to the West Midlands as well as to the regions. It has helped to maintain many thousands of jobs. Currently, about 200,000 jobs are being supported nation wide by TES.

There is that important element. Certainly, when I addressed a CSEU meeting in Birmingham, the generous spirit and understanding of the trade union representatives was a great pleasure for me to hear, in that they said "We recognise the important difficulties of trade unionists and fellow workers in regions which are hardest hit, such as Merseyside and the Northern region".

I was asked about the National Enterprise Board in the Midlands. Of course, the NEB has a regional role and has assisted in the regions on a number of occasions. Whether the NEB should have a Midlands regional board is a moot point. Certainly such a development would in any case be a matter for decision by the NEB.

The NEB has already assisted the Midlands significantly through its assistance to companies such as Alfred Herbert. For example, in December 1975, £26.2 million equity was provided for a new holding company in a capital reconstruction to wards resolving Alfred Herbert's problems. The shares were vested in the NEB in February 1976. Of course, the NEB is responsible for monitoring Alfred Herbert's performance. In April 1978, the NEB provided £10 million of new equity in the context of Alfred Herbert's corporate plan with the intention of investing in product development and machinery.

I am sure that all sections of the machine tool industry recognise what an important contribution Alfred Herbert makes and what an important move it was for the Labour Government to rescue Alfred Herbert. If one takes away Alfred Herbert, one takes away a significant proportion of the machine tool industry, thereby weakening the British machine tool industry as a whole. The action taken by the Government was subsequently expanded by the NEB.

British Leyland is the most notable cause of assistance by the NEB. In 1977, a total of £150 million in loans was provided, all from the NEB, except £30 million under section 8 of the Industry Act 1972 which was approved by the House on 3rd August 1976. In 1978, capital reconstruction of British Leyland will involve the injection of new equity of £450 million. Therefore, the NEB is certainly making a significant contribution to the retention and development of jobs in the Midlands.

The Conservative Opposition criticise NEB assistance to British Leyland, but one must remember that in their document "The Right Approach" they state specifically that they will close down the NEB. That is a threat to jobs throughout the country. When the NEB takes action to assist British Leyland, and when the Government take action to assist Chrysler, also with very much a West Midlands centre, it must be remembered that not only are these two car firms involved but also about 10,000 small firms which supply services and components to those two car giants. It is not just a question of money going into two gigantic concerns; it is very much a question of money going to support small enterprises which to a significant degree depend for their existence on supplying components to those two large corporations.

It is as well to be reminded of that fact when the Conservative Opposition talk about pouring money into big concerns. In fact, small concerns benefit very much by this financial assistance.

Mr. Brute George (Walsall, South)

I apologise for intervening, not having heard my hon. Friend's original statement. However, in my constituency the town of Walsall does not make one car, yet if British Leyland or Chrysler were left to go to the wall the ripple or tidal effect would be absolutely catastrophic.

Mr. Cryer

I am grateful to my hon. Friend for his concern about this matter and for the important point which he has expressed.

My hon. Friend the Member for Selly Oak said that assistance produces greater efficiency but that it may produce a reduction in jobs. On balance, investment produces a greater number of jobs, even though they may not be concentrated in the industry which is the recipient of the investment. For example, the machine tool industry has benefited from the investment in British Leyland and Chrysler. I well remember meeting representatives of the Machine Tool Trades Association some years ago when it made very strong representations that British Leyland and Chrysler should develop their programmes for investment in the machine tool industry in order to keep that industry buoyant.

My hon. Friend mentioned the difficulty of people on the dole. That is real and understood. The level of unemployment is far too high and we must take action to reduce it in every way that we can. I have mentioned some of the ways. I do not want to indicate complacency, because the Government are not complacent. We have to take further action. It is interesting that about two to two and a half years ago a prominent Conservative Back Bencher was claiming, without any evidence whatever, that half the people on the dole were on the fiddle. Not one Conservative Member has said that part of this number was actually in his constituency. Conservative Members are now expressing very great concern about the unemployed, yet none has repudiated the slanderous attack by the hon. Member for Aberdeen, South (Mr. Sproat) on the unemployed at that time. Conservative Members should look to their background before they start making assertions about the level of unemployment. because if their policies were ever put into effect unemployment would be significantly greater than it is today.

Nevertheless, in spite of the point that I made about investment, the Government understand that very often large sums of investment—for example, in oil cracking plant—can produce a relatively small number of jobs. Therefore, we have given greater emphasis to the development of small firms. For example, we have done that by giving a cash grant from 1st July—the small firm employment subsidy. For 26 weeks, a small firm with fewer than 200 employees in manufacturing industry can receive £20 for each additional employee it takes on. This operates in all the assisted areas and also in the partnerships area of Birmingham, so the West Midlands directly benefits from it.

We have also given considerable tax concessions, worth in a full year at least £200 million. Of course, small firms also benefit from some of the sectoral schemes and also from the 100 per cent. allowance for investment in plant and machinery. In the West Midlands we have started a small firms' counselling service which will help small firms expand, and also get them over any difficulties which they may face, by drawing on the experiences of counsellors who can assist them. The counselling service has produced a strong welcome from the small firms.

My hon. Friend the Member for Sowerby quoted a figure of about £12 million a day in grants and tax concessions which goes mostly to private industry. I am sure that he is not far wide of the mark when he quotes that figure. We are giving massive support which is safeguarding and creating jobs. Between 1976 and 1978, we safeguarded and created just under 150,000 jobs under section 7 of the Industry Act. If anyone were to cut down that level of assistance the number of jobs created or safeguarded would be consequently diminished. I have mentioned that the support that is given to large firms such as Alfred Herbert, British Leyland and Chrysler also helps small firms. That is an important aspect.

My hon. Friend referred to the wool textile scheme specifically and said that under it jobs had been lost. As a Yorkshire Member, I am concerned with the effects of the scheme. I have some specific information. I believe that the scheme has stabilised the industry and helped it to meet the competition that it faces from abroad.

Under the first stage scheme, projects had to be completed by 31st December 1977. The Department of Employment, which monitored the scheme on behalf of the Wool Textile EDC, recorded 3,563 redundancies up to 31st January 1977, by which date the manpower effects were virtually completed and monitoring ceased. Of those made redundant 1,241, or 35 per cent., were known to have resettled in textiles. A further 840, or 24 per cent, were known to have found jobs in other industries. Of the remainder, 141, or 4 per cent., were still on the unemployment register on 31st January 1977.

According to the Wool Industry Bureau of Statistics, from 31st December 1973 to 31st December 1977, a period which coincided with the duration of the first stage scheme, there was a net reduction of 17,348 in the number of production personnel employed in the industry. That compares with the figure of 3,563 to which I have referred, which arose because of the scheme.

Under the second stage scheme, on the assumption that all the projects will go ahead, the estimated net loss in employment is only 69. Therefore, the second stage scheme introduced by the Government—the first stage was introduced by the previous Conservative Government—saw a significantly lower net loss. It is interesting to note that the number of production personnel in the industry at 31st December 1975 was 57,490—the bottom of the trough. On 31st May 1978, the latest date for which figures are available, the number was 58,084. That compares favourably with the losses of 17,348 between 31st December 1973 and 31st December 1975.

The scheme has helped to stabilise the industry. That is borne out by the figures and the fact that there has been a slight increase in the employment level of the industry. That is a sign of hope. Without that support, the wool textile industry would be in a much worse state.

As my hon. Friend the Member for Sowerby knows, the Government have taken strong action under the renegotiation of the Multi-Fibre Arrangement. He and I were not the most enthusiastic supporters of the Common Market. Indeed, we were among its opponents and critics. However, we are in the Common Market and that is a reality that we must face. That is an element that the Government had to overcome when negotiating the arrangement. We toughened up the arrangement and produced a greater degree of protection for the textile industry than has ever operated before. That is important in giving the industry confidence and ensuring that the wool textile industry scheme is brought to bear effectively.

My hon. Friend mentioned Bradford, which is a town dear to my heart. He referred to the article by Hilary Rose in which she said that there had been a loss of jobs. That is right. We have a policy, which we still maintain, but we have found it difficult to implement it because of the intransigence of the CBI and the determined opposition by the Conservative Party to the implementation of planning agreements. I consider planning agreements to be extremely important because they give those who earn their livelihoods by their labour, as opposed to the ownership of capital, an involvement in decision-making.

It is appalling that members of the executive suite at Thorn's are able to sack 2,300 work people in spite of the representations of the trade unions and the duly elected Government. They arbitrarily sacked 2,300 people although in the previous year the company had made a profit of £57 million, although it owns 75 per cent. of the television rental market and although it imports considerable quantities of consumer goods for sale in Britain.

When my hon. Friend expresses concern about that sort of action, I share his concern and I want to see some development of policy to ensure that decisions of that type are taken not only in the interests of a Thorn balance sheet, or whatever multinational balance sheet is involved, but in the interests of the work-people and of the nation as a whole.

Planning agreements are essential to prevent arbitrary decisions by those who have the power of executive decision-making. People's lives are more important than the ownership of capital. Too often the ownership of capital has a decision-making power that is exclusive.

My hon. Friend talked about expenditure. The Department of Industry goes to great lengths to ensure that money that is given to industry under the various schemes is spent properly and applied to the purposes of the scheme under the application. We sometimes receive representations from Members of Parliament about the use of such money. We receive pleas for exemptions where, for instance, machinery is supplied for use in a development area and it is used subsequently outside. That use invalidates the grant aid. Often we receive representations asking for exemption, but we apply the rule rigorously and seek to obtain a refund if outside use takes place. There are stringent conditions and we apply them to the best of our ability.

The hon. Member for Bromsgrove and Redditch (Mr. Miller) said that he thought that there should be a better strategy for distribution of the grants. In the White Paper entitled "The Regeneration of British Industry" we suggested that the application of money, of support, could be best effected through planning agreements. We suggested that they would provide a better framework. If the hon. Gentleman is now coming round to the view that planning agreements make sense, we welcome that conversion. We hope that he will be able to persuade his hon. Friends to take that view.

However, there are 40 sector working parties which are analysing industry and producing means of improving British manufacturing industry. The sector working parties are producing, in some instances, valuable reports and schemes for action. Many of the sectoral schemes have come about as a result of consultations with the industry concerned. The sector working parties are tripartite since the trade unions are represented as well as the Government and the industry concerned. The sectoral schemes are not dreamed up in the abstract. They are developed only after consultation with the industry.

The sector working parties want the information on sectoral schemes to be understood at company level. We are now back at full circle because planning agreements were to be with the large and important companies—for example, the top 100 industrial companies in Britain. The working parties are recognising the importance of examining individual companies as opposed to sectors.

My hon. Friend the Member for The Wrekin pointed out a need for diversification in the West Midlands. Diversification is important in many areas so that a local economy may be more flexible and in a position to meet more readily changes in demand. Diversification is not confined to the West Midlands. My hon. Friend said that his area has a higher level of unemployment than some intermediate areas. We are always examining the boundaries of the assisted areas. Clearly, changes can be made only after the closest scrutiny. We try to take into account all the factors in our continuous review of the boundaries.

As for IDCs, we cannot identify mobile projects and explain the virtues of moving to one of the assisted areas unless we have some element of IDC control. IDCs are given extremely readily. However, the only other way in which we could identify mobile projects would be for civil servants to read through the newspapers to try to pick up the items that are mobile. That would be an absurdity.

The Government have increased exemption limits to 15,000 sq. ft. For smaller areas an IDC is not required. If we have any pretensions of planning the economy, it is necessary to have some information. IDCs are one way of obtaining information. We are generous in granting IDCs in all parts of the country.

I am grateful to my hon. Friend the Member for Selly Oak for initiating the debate. I hope that I have satisfied him, in part, that the Government are determined to see the regeneration of British manufacturing industry because that is the basis on which all our social and educational services are built. It is only with a Government who are determined to plan the economy and to see a high level of investment that we shall succeed in this aim.

The one thing that we should not allow is a reversal to market forces and a cutting down of public expenditure, because that will mean hundreds, if not thousands, of firms going to the wall, with a catastrophic increase in the level of unemployment. That is what Conservative Party policy represents.