HC Deb 08 August 1980 vol 990 cc974-85

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Jopling.]

9.37 am
Mr. Gavin Strang (Edinburgh, East)

I am sure that all hon. Members wish you, Mr. Speaker, a well-deserved rest during the recess.

I have initiated this debate because the Secretary of State for Industry made a major statement just over a year ago announcing Government changes in regional policy. Those changes sought to reduce the level of expenditure on industry in the regions. There was an announcement in that large package of measures to the effect that the Edinburgh travel-to-work area would be downgraded from a development area to an intermediate area and ultimately to a non-assisted area. The announcement covered not only Edinburgh but also East Lothian and Midlothian, which are in the Edinburgh travel-to-work area. Thus, when I speak about the Edinburgh travel-to-work area I include East Lothian and Midlothian.

The decision was devastating for Edinburgh and the surrounding area. Enormous damage will be done to our prospect of securing the expansion of locally generated industry and to our prospect of attracting industry from outside. An objective analysis of the evidence will show that the changes are not only wrong and indefensible on local grounds but mistaken and unjustifiable in the context of the United Kingdom and regional policy as a whole.

Let us be under no illusions about the impact of that policy. Last Friday—just a week ago, and in that respect the debate is timely—we saw the first stage of the descheduling. From last Friday, industry in Edinburgh is no longer eligible for the 15 per cent. tax-free regional development grants. That in itself is an enormous disadvantage. But there are related considerations. For example, let us consider the special temporary employment programme, from which adult men in Edinburgh have benefited. As a result of the downgrading, there will no longer be a STEP programme in Edinburgh, because the Secretary of State for Employment announced some time ago that the programme no longer applied to non-development areas. We also lose the assistance for the unemployed.

Even more frightening is the fact that, if this position continues, eventually we shall lose all entitlement to grants, even section 7 selective assistance, which is still being used and is of great importance to modern industries in Edinburgh. That will be lost in two years' time if the policy goes ahead. We shall also lose all eligibility for EEC regional development grants. We will even find that assistance to the tourist industry is affected by the decision. Now that the first stage of the downgrading has begun and we are losing grants for our industry, we are seeing the enormity of the decision and the impact that it will have on Edinburgh's employment prospects in future. Only now is that fact being appreciated in our area.

I said earlier that I believed, from looking at the evidence available to the Secretary of State and his Ministers at the time the decision was made a year ago, that that decision was wrong and could not be justified. Unemployment figures tend to be used—and rightly so—as a general indication of an area's need for regional development assistance. I want to be objective, and I do not think that it helps to present highly selective statistics or to make out that the position is more serious than it is in relation to other areas.

However, Edinburgh—and I have had the pleasure and the privilege to represent an Edinburgh constituency for more than 10 years—has a very large service sector and associated with it is a high level of demand for female labour. Traditionally, we have had low levels of female unemployment, but this, too, is changing and it is now much harder for a woman to get a job and female unemployment has risen sharply. As a corollary to that relatively low female unemployment, we have had an overall employment rate which has masked a disproportionately high rate of male unemployment.

I have received various batches of figures from Ministers over the past few months. If we take the figures for June 1979—the latest figures available to the Secretary of State for Industry when he made his decision about Edinburgh—we see that the rate of male unemployment in the Edinburgh travel-to-work area in the 10 years prior to that decision was higher than the rate for the United Kingdom generally. That was not just in June either. For the whole of the 10 years prior to the decision, male unemployment in the Edinburgh travel-to-work area was consistently higher than male unemployment in the United Kingdom generally. The comparison must be with the United Kingdom as a whole, because that is the context in which these decisions are made. Secondly, within that travel-to-work area there are areas of really high unemployment—localities in which there are large numbers of unemployed, some of them in my constituency.

Let us look at the overall level of unemployment between 1965 and 1980. In that period United Kingdom unemployment rose by 280 per cent.—roughly the same. However, in the Portobello area it rose by 671 per cent. The Portobello employment exchange centred on East Edinburgh, the area that I represent. In the adjacent area of Leith, unemployment rose by 344 per cent. For those purposes I have used the February figures. I do not wish to make a meal of statistics. All I am saying is that it is untrue to say that Edinburgh has very low levels of unemployment. Certainly it is untrue that we have low levels of male unemployment.

I concede immediately that there are areas which have higher unemployment. There are areas in Scotland and England with significantly and sharply higher rates of unemployment. That is not in dispute. It is also true that in the past year other parts of Scotland and the United Kingdom as a whole have suffered far more than my area. In the last month, however, unemployment has risen in Edinburgh at an even faster rate than it has risen in the United Kingdom as a whole. But to justify the downgrading the Government must be able to prove that Edinburgh is doing better than the United Kingdom as a whole.

The most important point is that in the Edinburgh area we have the potential to make a great contribution to industrial growth, for the benefit of adjacent areas where unemployment is very high. I urge the Minister to consider the map of the United Kingdom in relation to regional policy and the very high unemployment in the North of England, West-Central Scotland and Fife and Dundee. These areas impinge on the Edinburgh travel-to-work area.

The simple thrust of my argument is that we have modern and advanced industries. Our manufacturing base is disproportionately small in relation to our total employment, but what we have is modern and has the potential to make a significant contribution, both for our benefit and for the benefit of other areas which deserve greater regional development assistance than we do. For example, we have Ferranti, a firm which has figured prominently in our debates recently. Ferranti accounts for a large proportion of our highly advanced and skilled technological teams in the Edinburgh area. We also have ICL and Racal-MESL—companies in the electronics sector in growth areas. In the Lothian region some years ago there was a study of employment in our manufacturing industry which showed that proportionately we had three times as many qualified engineers in manufacturing industry as Scotland as a whole.

Our modern industry should not be declining, because it has the potential to grow. It is wrong for the Government to take away the encouragement to invest. Let us make no bones about it—firms become less competitive when the Government say that they will no longer receive the tax-free regional development grant and then two years later say that they will not even receive any selective assistance. Because of that, we are unable to take full advantage of the area's potential for industrial growth.

I have a strong constituency interest in the issue. For the past 10 years I have had the pleasure to represent Edinburgh, East. It is clear that the major issue in the area is the loss of jobs on the east side of the city during the past two or three decades. Collieries on the outskirts of Edinburgh have closed and breweries have closed, as have a host of factories.

We desperately need new industrial development on the edge of Craigmillar and at Newcraighall, Musselburgh and Leith. After many years of campaigning and fighting, we are now beginning to make progress. Thanks to the previous Labour Government and the Scottish Development Agency, a new industrial estate involving many hundreds of thousands of pounds of investment is under way at Peffermill and a new industrial estate is being developed at Inveresk. They were both derelict sites. A small development is taking place at Newcraighall, which could become a larger development when the coal bing is removed. Our goal is to achieve a thriving industrial estate at Peffermill, a large industrial estate at Newcraighall in place of the existing large coal bing, and a thriving industrial estate in Musselburgh and Inveresk. It is also important that new industrial development should take place at Leith, on the edge of my constituency.

The tragedy is that having achieved investment in a new industrial estate at Peffermill, with advanced factories erected, and having achieved the same progress at Inveresk, with land acquired and investment from the Scottish Development Agency and the East Lothian district council, we find that suddenly the grants are removed. No one will deny that the removal of the grants will make it harder to attract industry to those factories. It is crucial to our campaign that we reverse the job losses on the east side of Edinburgh and that we attract new industrial development, with the help of the city bypass to be built in due course. It is essential that we transform that side of the city.

The Under-Secretary of State for Scotland, who has the privilege of representing the other side of the city, will acknowledge that the east side of the city needs to secure industrial expansion and regeneration. There has been a great deal of industrial development at Sighthill and on the west side of Edinburgh. There is a strong case to encourage the same industrial development on the east side.

I shall touch on one point about which I have corresponded with the Minister. However, I do not wish to go into detail about individual firms. I raised this matter more than a year ago and have raised it at intervals since then. The matter is now urgent. I refer to the position of firms that are in the process of making investment, erecting buildings and installing new equipment but which, through no fault of their own, have failed to install that equipment in advance of the 1 August deadline. The Minister wrote to me at some length. He made it clear that there could be no exceptions to the deadline. Last Friday the hammer came down, and there will be no more regional development grants. It does not matter that the equipment was ordered a year ago. It does not matter that the equipment was delayed because of a strike at a supplier's factory on the other side of the world. There will be no exceptions to the rule.

But there is a way in which the Government can help, namely, through the section 7 selective assistance, for which we are still eligible. The Minister acknowledged that in his letter. I hope that he will give an encouraging response. I hope that the officials of the Scottish Office will take a sympathetic approach to the firms which, through no fault of their own, failed to meet the deadline. In at least one instance investment is threatened, and the work may go to Ireland if we do not obtain some help. There are other examples, but I do not wish to quote them today—not even the one about which I have corresponded with the Minister in the past two weeks.

I wish to make it clear that people in the Edinburgh travel-to-work area—especially those in the east side of the city, which has some significant unemployment black-spots, such as Craigmillar, Musselburgh and even East Lothian—cannot accept this decision.

It is not the first time that Edinburgh has been penalised in that way. When the grant areas were created in 1966, Edinburgh, Leith and Portobello were excluded. That was a mistake. I believed that it was a mistake then, and subsequent evidence has proved that it was a mistake. We campaigned to reverse that decision, and it was reversed. We acquired full development area status for the whole of Edinburgh. But it took us about eight years to achieve the full reversal of that decision. We cannot wait eight years this time. The matter is too serious and the stakes are too high. We are not prepared to accept the downgrading for anything like that number of years.

I know that the Minister will not announce a sudden change today, because it is not within his power to alter the statute book, but I warn him that we shall campaign to secure the reversal of the decision because it is unjustified. Both sides of industry in Edinburgh are opposed to it. They recognise the seriousness of the position. I think that it is fair to say that those in local government—the Labour-controlled Lothian regional council, the Conservative-controlled Edinburgh district council and the Labour controlled East Lothian district council—are opposed to the downgrading. They recognise how damaging it will be to their areas. They will recognise that even more in the months ahead now that it has finally happened and we have the first instalment of the downgrading.

I believe that we shall achieve our objectives. We shall persuade the Government that we cannot wait. I strongly urge the Minister to take on board the fact that we cannot accept this damaging decision. We shall oppose it as vigorously as necessary to secure a complete reversal.

9.57 am
The Under-Secretary of State for Industry (Mr. David Mitchell)

The hon. Member for Edinburgh, East (Mr. Strang) is to be congratulated on having secured this opportunity, on the last day of the Session, for an examination of the problems facing Edinburgh city and its assisted area status—especially that part of the city to which he drew specific attention. He asked me whether I would undertake a reexamination of the map of assisted area status, but, as he rightly said, Edinburgh is not unique. There are many other parts of the country with similar problems.

The hon. Member recognised from our past correspondence that it is difficult to examine a certain area in isolation without recognising the implications of changes for other areas with similar or even worse problems. No doubt that is why, with considerable perception, the hon. Gentleman asked me to look at the whole of the United Kingdom map.

We did that last summer. Our purpose is not to have continual changes of the map. If we were to do that, it would destroy the stability of decision making, which is essential in the planning of forward business decisions. Of course, that does not alter the relevance of the hon. Gentleman's argument that one has to look at a coherent policy affecting the country as a whole. When we came to office, we found that 44 per cent. of the country had assisted area status. More alarming, on the basis of the criteria then in existence, about which I make no comment, virtually the whole of the West Midlands would have been eligible for that status. The thought of the heartland of Midland industry requiring to become an assisted area has a streak of the bizarre about it.

We should have found that the map was encroaching. If we had accepted the position of the Midlands, we should have had to accept the case of almost the whole of the West Country. We should have ended up with only London and the South-East not being assisted areas. Indeed, it was apparent during the Second Reading of the Consolidated Fund Bill on Monday that many Labour Members want London to be an assisted area. That would have left us with only Kent and Sussex.

Any Government considering where a continuance of existing policies would take us would have to regard that as an unacceptable situation. We should be taking money out of everybody's pockets in order to put it back in everybody's pockets, having washed it through a bureaucratic machine with all the overheads involved en route. That would not have been sensible.

My right hon. Friend the Secretary of State decided that the right way to deal with the matter was to look at the need. The whole basis of a policy of assisted area status goes to the heart of the fact that there are areas that have had the most serious structural problems in their industry, giving rise to substantial, sustained and unacceptable levels of unemployment, which have persisted since the 1920s and 1930s. The first inklings of movements towards some form of assistance for such areas—depressed areas, as they were then called—came during that period, yet those are still the areas at the heart of the problems of high and sustained unemployment.

We felt that rather than spread aid so thinly that it would be ineffective we should concentrate it on the areas of greatest need. I am seeking to carry the hon. Member for Edinburgh, East with me in my explanation of the thinking behind our decisions.

The idea was to concentrate on reducing the area of the country that had assisted area status from 44 per cent. to 25 per cent. In carrying out that reduction, we have focused on the parts that have had the longest, most sustained and most worrying levels of unemployment, and meet the other criteria set out in the Industry Act 1972. That is an important basis from which to start. We give assistance to the areas that need it most. After all, we are dealing with taxpayers' money and with money taxed from the business sector.

Our second aim was to give the worst affected parts of the assisted areas that have been retained a much bigger margin of advantage over the other assisted areas. We have helped the special development areas in Scotland—I think particularly of Glasgow, with its 60,000 unemployed—by opening up from 2 per cent. to 7 per cent. the differential between a special development area and a development area. We have sought to concentrate aid on a restricted part of the country and, within that part, to give the greatest assistance to the areas that need it most.

I turn to fit Edinburgh into the scene. The hon. Gentleman asked me to look at the map as a whole. I hope that I have explained our reasons for approaching the problem as we have. Edinburgh is a travel-to-work area. The hon. Gentleman drew attention to Portobello and, by implication, to Leith, but I am sure that he will accept that they are integral parts of Edinburgh and cannot be taken in isolation.

We have to consider the whole travel-to-work area. People do not work at the end of their own road in Edinburgh, any more than in any other major city; they go to work within reasonable travelling distance. Edinburgh had a 7.2 per cent. rate of unemployment in July 1980. The average for Great Britain is 7.7 per cent. The hon. Gentleman is asking me to give assisted area status to a part of the country that is better off for employment than the areas from which money would have to be taken to give that assistance.

How am I to go to the business men of Glasgow or to a region that does not have assisted area status but is worse off than Edinburgh and say "You must give money to help an area that is better off than your area"? That would put me in an intolerable position.

We have tried to look at the matter as a coherent whole, in which we concentrate assistance on the worst areas. Am I to go to areas with 8 per cent. or 9 per cent. unemployment but which do not have assisted area status and say "The business men of this town must contribute towards taxes that will be given to an area with a lower level of unemployment"? I could not do it, and if the hon. Gentleman, who is a fair-minded man, were in my place he could not do it.

The hon. Gentleman referred to the risk of mobile industry going to Glasgow instead of to Edinburgh. That is only to say that our policy is in danger of being effective and that it will attract industry to the areas in most need of it. However, that is not the whole story. There is a message of confidence here. The proportion of mobile industry is a great deal lower than it was. The largest part of the job creation that we may expect in Edinburgh will come not from foot-loose industry, which is scarce these days, but from home-grown industry—from people in Edinburgh who start up businesses there.

That is why I believe that our policies for helping the start-up of business and for helping small business, and especially a provision that we are making for increasing the availability of premises for small businesses by means of tax allowances and in other ways, will be of considerable assistance to cities and towns such as Edinburgh, where there is an incipient very large small business potential which we should encourage to develop and flourish.

Edinburgh is the capital of Scotland and, therefore, it is natural that it should have a smaller manufacturing sector than Scotland as a whole. It has only 16 per cent., compared with the Great Britain average of 32 per cent. A capital city is always heavily weighted towards the service industries. It would be surprising if that were not so in this case.

But, looking at industry, especially at smaller industry, I hope that the hon. Gentleman will not fail to ensure that full recognition is given to the opportunities that section 7 of the Industry Act can provide in the way of assistance during the intermediate phase until 1982 for investment in industrial projects in the city.

I have a feeling that the continuance of that assistance is not sufficiently recognised. I do not intend to be unkind, but it may be that in trying to portray my right hon. Friend the Secretary of State for Industry as a hard-faced man, when we all know that he is not, and in trying to feed that picture to the outside world, some Opposition Members have given the impression that the compassionate approach to concentrating assistance on the areas most in need has not been adopted. They may even have left the impression that no assistance is now available to industry. In the circumstances, the hon. Gentleman could do much good by advertising the fact that at least for another two years there is available to all small firms with new projects the opportunity to apply for section 7 assistance.

I cannot, of course, comment on the specific case referred to by the hon. Gentleman in which the deadline has been passed in respect of a project that should have been completed by 1 August. There are certain limited areas where section 7 assistance can be of use if a project is in jeopardy. I suggest that any firm in such a position contacts the Scottish Office.

There is an additional bright light. I am able to tell the House that I have secured agreement from the European Investment Bank that it will lend money for a suitable manufacturing project at 10 per cent. with a small insurance premium of 2 per cent., which the Department of Industry will provide, against movements in the exchange rate. It will be possible to borrow money in Edinburgh, therefore, at a fixed rate of 12 per cent. for seven years, and that will be for half the value of a project. Another piece of important news that the hon. Gentleman will be glad to hear is that we have managed also to reduce the minimum amount of loan from the European Investment Bank to £15,000. In other words, if a project is for £30,000, £15,000 of it can be borrowed from the bank at 10 per cent.

The hon. Gentleman drew attention to the role of the Scottish Development Agency. This is, of course, a proper way to deal with problems within an area where there are pockets of greater difficulty than there are in other parts of the country.

I listened carefully to the case presented by the hon. Gentleman, and I have read carefully the reports of the earlier discussions that I had with representatives from the area. We are not seeking to make constant swings of areas in and out of assisted area status. That would be damaging. However, we are prepared to continue to look at the assisted area gradings in areas where there is definite evidence that major long-term changes in local circumstances relative to other areas have taken place. We shall continue to watch the hon. Gentleman's area and Edinburgh as a whole in the light of that.

My message to the city of Edinburgh is that it should take courage and pride in its circumstances. Assisted area status is not a virility symbol. The future of industry in the city will depend, as it always has done, on the determination and flair, to say nothing of the energy, of the enterprising people of that city. Large parts of the country do not depend on assisted area status for their prosperity. I am sure that in the future Edinburgh will be able successfully to emulate them.