Corby (Hansard, 20 February 1981)

§ Mr. Bill Homewood (Kettering)
Through this Adjournment debate, I wish to argue that Corby, in my constituency, should be granted special area development status. The Government should agree to that on rational grounds. They have accorded enterprise zone status to Corby—which, as I understand it, is the ultimate in aid to depressed or distressed areas, or whatever else one calls areas of high unemployment.
From my correspondence with Ministers, I understand that the Government are not prepared to grant Corby the intermediate stage between assisted area status and enterprise zone status, namely, special area development status. I shall not say that that is nonsense, but it is irrational. I shall listen carefully to the Minister to find the rationale of that decision.
We must hinge our claim on the employment levels. Corby suffers from an unemployment rate of 21.1 percent. Even that figure is disputed by many. I heard the leader of the local council only last Friday claiming that a more accurate figure would be 27 per cent. Lord Trenchard, a former Minister in the Department of Industry, admitted that that is the highest unemployment rate in any travel-to-work area in Britain.
Corby and Kettering lie fairly close together, being only about 10 miles apart. In Kettering, 11.2 per cent. of the work force is out of work. That is astounding. I remember that area in the 1930s. I do not boast about it, but I am old enough to remember it at that time. I lived in Market Harborough. All the A6 towns were reasonably immune from the effects of the 1930s depression. They had a diversified industrial system that enabled them to escape the worst effects of the 1930s. At 11.2 per cent., Kettering's unemployment is above the national average for the first time on record.
Added to the position that has arisen from the closure of the iron and steel works in Corby is the effects of the cuts in local government expenditure. These are also adding to the unemployment level. We are attempting to retrieve that position against the background of the most massive industrial recession since the war—not only in Britain but, I am prepared to admit, possibly in the Western industrialised world.
I received a letter this morning that indicates the extent of the recession. An employer who is seeking to set up his business in Corby has complained to me bitterly that, while everyone admits that he has a business that could become viable, he is finding it inordinately difficult to raise and borrow the necessary money. I am seeking to help him as much as I can. Local committees are struggling to assist and the district council and the Commission for the New Towns are giving all the help that they can. However, they are struggling against the tide in the current recession.
There is an enormous spin-off within the town from the closure of the iron and steel works. Small traders and retail outlets are going out of business and there is the loss of the small measure of employment that they provided. I have corresponded with the Minister to tell him that in my belief the Government owe something to Corby. A previous Government created the town in conjunction with 627 the steel industry. I hope that the Government will put as much pressure as possible on Datsun to bring that commitment to the town.
I had a shock recently when I received a document—I mentioned it during the debate on Wednesday evening—from British Steel Corporation (Industry) Ltd. That organisation has decided that it has reached the limit of the funds that it can put into Corby. If it has reached that decision for a town that continues to have over 20 per cent. unemployment, I rule out much hope for other towns similarly affected by cutbacks in the iron and steel industry or any other industry.
I have not given the Minister notice of this point, but I am told that British Steel Corporation (Industry) Ltd. is to cut its special consideration towards Corby. I ask him to refer to that when he replies.
We do not know much about the social consequences of unemployment. There has not been sufficient investigation to enable us to be fully aware of the consequences. There is considerable evidence in Corby that it is having an enormous effect on the social fabric of the town. I am currently being inundated with letters from constituents in Corby. They are pouring out their hearts to me and telling me what has happened to them since being cast on the dole after many years of regular employment.
Families are under strain. It seems from the letters that I have received that families will break up. There is evidence of increased glue-sniffing and vandalism among youngsters. I suppose that that is to be expected in the circumstances.
There is no doubt that the large sums in severance pay meted out to the iron and steel workers are having a beneficial effect on the social consequences arising from the employment at the iron and steel works.
It desperately worries me that in a short time the effects of the severance pay will run out. There is not much inducement for people to conserve the severance pay when one considers the Government's stricture that there should be £2,000 in the bank, if one counts social security, after unemployment pay runs out. That will become a feature in Corby within about 12 to 15 months. Once that happens, I should not like to estimate what the effect would be on the social fabric of the town.
The Government have admitted that Corby has the worst unemployment level in the United Kingdom for a travel-to-work area. I do not believe that there is any logic in the Minister refusing to grant Corby the special development area status for which I am asking.

§ Mr. John G. Blackburn (Dudley, West)
I have listened with great interest to the remarks of the hon. Member for Kettering (Mr. Homewood). I shall take the opportunity of making a few comments to the Minister, because the position at Corby is identical to that in my authority in Dudley. I hope that he will take the hon. Gentleman's views and mine as being the same voice looking for the same answers.

§ Mr. Deputy Speaker (Mr. Bernard Weatherill)
Order. The hon. Member for Dudley, West (Mr. Blackburn) must know that this debate concerns the constituency of the hon. Member for Kettering (Mr. Homewood), not Dudley.

§ The Under-Secretary of State for Industry (Mr. John MacGregor)
I welcome this opportunity to discuss the problems of Corby and the difficult question of its assisted area status. I fully understand and sympathise with the plight of the people in Corby. The hon. Member for Kettering (Mr. Homewood) has put their case fairly and appropriately. The Government are deeply concerned, as is obvious from the actions that we have taken so far.
We have always recognised that the end of steelmaking meant that the area would have tremendous problems. It was obvious from the start that in a town such as Corby, which is so heavily dependent on one industry, jobs lost from that industry would be hard to replace. What is needed is a complete rebuilding of the town's industrial base. Only through new and successful industries—the industries of the future—can Corby hope to find again the jobs it needs.
It may help to put the situation in its context, if I briefly remind the House of what has already been done. In December 1979, as soon as the end of steel-making was confirmed, the Government made Corby a development area. The Commission for the New Towns undertook a substantial site development and advance factory building programme, which it has sensibly augmented with private sector investment. Along with the sites and the factories, the commission is developing the necessary access and other roads. BSC (Industry) Limited to which the hon. Gentleman referred, has adopted an active role in Corby, giving advice to firms, carrying out promotional work and developing redundant BSC buildings for small firms' uses.
The hon. Member raised his query in the debate on Wednesday. I am assured by BSC (Industry) Limited that it has no plans to cease operating in Corby. The hon. Member will appreciate that it must review its activities in any area on a continuing basis, and in the light of the circumstances there. On 29 October 1980, the Secretary of State for the Environment announced that part of Corby would become an enterprise zone.
As well as this extensive programme of national aid, Corby has benefited substantially from European assistance. As an assisted area, it is eligible for assistance with industrial and infrastructure projects from the European Regional Development Fund. Corby has also been designated a "steel closure area" by the European Coal and Steel Community. Projects there thus have access to ECSC loans, and we have enabled firms to take full advantage of these by providing exchange risk cover on foreign currency loans. I shall return to this matter.
That is a pretty impressive list of aid already available to Corby from various sources. The only further step the Government can take would be to make Corby a special development area, as the hon. Member has argued. Let me therefore examine the case for so doing.
First, we must place Corby's unemployment problems—which are the nub of the hon. Member's argument for SDA status—in the national context. No one disputes that Corby is suffering from exceptionally high unemployment. It is not quite the highest, as the hon. Gentleman suggested. There are places with worse problems, such as Consett, which I recently visited, but they are few.
But we have also to recognise that, because of the impact of the economic situation—caused in large part by the world-wide recession, as the hon. Gentleman fairly 629 recognised—all parts of the country have been experiencing increases in unemployment levels. Regional policy must take account of longer-term trends and of the relative shift in unemployment figures as between one area and another over a period much longer than just a few months.
Secondly, we must evaluate the benefit of Corby's first year as a development area. A good initial measure of the value of development area status is the number of firm inquiries about selective financial assistance that we have received so far. We have had to date 69 such inquiries. Sixty-nine companies in just over a year sufficiently interested in setting up or expanding in Corby to approach the Department is no little achievement in a time of recession. Of these inquiries 10 have gone ahead with £1.9 million of assistance from the Department. That is not a huge number but, as the hon. Member will appreciate, investment plans take a long time to evaluate before a decision is reached, and Corby will see more—I hope many more—of these inquiries become firm projects in the next few months.
Corby's record for firm inquiries is certainly encouraging when compared with other parts of the country. We might compare it, for example, with the record of another steel closure area which in addition has SDA status. Corby had 69 firm inquiries, but Hartlepool, with its SDA status but also with its relative geographical disadvantages, had only 15 over the last year.
Particularly impressive, too, has been progress in obtaining ECSC loans for firms locating or expanding in Corby. Since Corby became elegible for such aid, nine loans have been arranged through ICFC, totalling £885,000, and a further six, worth £1 million, are currently under consideration. These 15 projects are expected to provide at least 350 new jobs. I say "at least" because these are the jobs related to ex-steel workers and therefore subject to the special rebates under the ECSC scheme. All the companies involved are subsidiaries of overseas companies attracted to Corby by its development area benefits. Moreover, five larger loans have been arranged directly with ECSC, altogether a further £8 million and providing a further 750 jobs.
The combination of ECSC money and full exchange risk cover is highly attractive to firms considering new investment. I hope that the hon. Member will publicise it widely, as I am sure he will, and encourage local industrialists, particularly small business men—because there is a special small firms factor in ECSC loans—interested in expanding an existing operation or starting a new business, to think seriously about an ECSC loan as a source of project finance. I hope very shortly to announce a further substantial extension of this ECSC scheme.
Not all of this success should be attributed solely to the benefits of development area status. A great deal is undoubtedly due to the effective and committed industrial development team that Corby has built up and how the team has built up the base of development area status to project Corby's image and to make potential investors aware of Corby and the advantages it can offer.
I pay tribute to the efforts of the community to help itself. Indeed, I believe that the creation of such an image of successful self-help is, at the end of the day, every bit as important as the regional development incentives 630 offered in attracting the potential employer when he comes to compare the relative benefits to himself of different parts of the country.
Thirdly, before we consider upgrading any area we must recall both the basic nature of regional policy and its instruments and the criteria that we must use in defining the assisted area. This is a particularly important matter. Regional policy is a set of long-term instruments designed as long-term solutions to long-term problems. They work by creating an attractive climate for investment through incentives not available outside the assisted areas. However, for these incentives to have a real effection investment intentions they must be stable and predictable.
We must not indulge in fine tuning of regional policy. By so doing we should deter the very investment that we seek for the assisted areas. Only when a major change occurs in the fortunes of any areas—as happened in Corby when the steel works closed—should we consider any change in assisted area grade. But even when we see significant changes in the relative position of an area we must always beware of concentrating on only one or two indicators of its problems.
We tend to look first at unemployment levels because they are the reflection of the immediate state of the local economy and because they are an easily quantifiable indicator. But we must take into account other factors—and I stress this point to the hon. Member because he did not dwell on it in his speech. The Industry Act 1972 requires the Government, in deciding upon area gradings, to take into account other factors also.
Let us do just that for Corby. There is no question but that unemployment in Corby is currently severe; but when we gave it development area status we knew that it would be. We took the view then that other factors working in Corby's favour would ensure a much more acceptable situation in the longer term.
Let me turn to those other factors and see whether our judgment remains valid. To see the advantages that Corby has to offer the potential investor we can do no better than turn to the good advertisements that the Corby joint industrial development committee has lately placed in the national press as part of its intensive promotional effort. I quote: A unique development area—unlike other development areas, Corby is situated in the most popular and economically buoyant region of the United Kindom. It boasts a market of 30 million people within 100 miles, is strategically located just 80 miles north of London and 50 miles east of Birmingham, with excellent access by rail, road, sea and air". That is actually true. Corby has these natural advantages.
Above all, it has its location. The next nearest development area to London—Corby being 80 miles from London—is Pontypool, 150 miles away. Corby has good communications to the large and relatively prosperous markets. It is these tremendous advantages over all other assisted areas—so that Corby already has other advantages over the other assisted areas without firm financial incentives—that we must weigh in the balance against its immediate employment problem, however great that might be. It is a difficult judgment, but I say to the hon. Member that to some extent, therefore, the issue is not competition with other special development areas but competition with the area surrounding Corby itself. Here, it has the financial incentives of development area status which they do not have.
The fourth question which we must ask ourselves is what has changed since the Corby joint industrial 631 development committee sought SDA status in November 1980. On that occasion, Ministers felt that the case for that status was not proved, for the reasons I have given. What has changed in the intervening four months? Unemployment has risen sharply. But, in part, this has been a result of the last redundant workers from the steel closure signing on, and it was foreseen. In part, as I indicated earlier, it reflects national trends. Certainly, the last few months have seen no unexpected deterioration relative to the rest of the country.
Meanwhile, there have been several very positive developments. Let me list some of them. Since November, we have got on speedily with the enterprise zone. After preliminary consultations, my right hon. Friend the Secretary of State for the Environment issued a formal invitation to Corby to promote an enterprise zone on 30 March. If all goes well, it should prove possible to go through all the statutory hoops to formal designation by the Summer Recess. I know that those concerned in Corby will do everything they can to smooth the birth of the zone.
Of great importance to Corby was the announcement on 14 January by my right hon. Friend the Secretary of State for the Environment of a scheme to compensate local authorities which are losing a substantial amount of their rateable value as a result of major industrial closures. In recognition of the hardship that this might bring to communities suffering substantial loss of rate income, as arises from the closure of a steelworks, my right hon. Friend has introduced this special scheme. I understand that under its provisions Corby will be compensated completely for the rate loss resulting from the closure.
When the Corby joint industrial development committee came to see my noble Friend Lord Trenchard last November, it was concerned that it was losing out on promotion to its more wealthy new town competitors, particularly Northampton and Peterborough. My noble Friend looked into the question and suggested that the district council should approach the Commission for the New Towns, which already funds roughly half of Corby's promotional budget—roughly £150,000 in 1979–80—for further assistance. I understand that the committee now plans to raise its 1981–82 budget from £250,000 to £450,000 and that the commission is prepared to find £350,000 of this. I welcome this close co-operation between the agencies involved, which should ensure that Corby's promotional efforts are well up with those of its competitors.
I am also able to tell the House that only this week the European Commission approved grants from the European regional development fund for seven projects in the Corby area—the provision of services and roads at the Oakley Way, Earlstrees and Weldon industrial estates and other road improvement schemes—totalling nearly £2.5 million. This, I think, is a vivid demonstration of the effective way in which we in Government are working with the relevant European institutions to secure the maximum help for Corby.
These, then, are the facts, the policies and the developments which form the context of the hon. Member's argument for SDA status for Corby. He has argued essentially that, because Corby is suffering from a 632 very high rate of unemployment at present, SDA status should automatically follow. That, I suggest, is not quite the only way to look at the question. The extra advantage to investors of SDA status is essentially an extra 7 per cent. in automatic regional development grant.
But the proper approach is surely to ask two questions. The first is whether that extra 7 per cent. will have a significant effect on the level of investment and, hence, the creation of the new jobs in Corby. I am not convinced that it would. Obviously, there may be the odd marginal case where the few per cent. would make a difference—there are always such rare cases at the margin of any scheme. But could we expect Corby to do significantly better as a result? It already has a remarkable record of success in its first year as a development area in perhaps the most difficult economic circumstances of the decade. And some of the other advantages and benefits from other schemes which Corby is getting will undoubtedly have contributed to that. I think that the extent of this was shown earlier when I compared Corby's record for selective financial assistance inquiries with that of Hartlepool. Of Corby's 69 firm inquiries, 19 became full applications. The hon. Member can compare this with the 38 full applications received last year for the whole of the Northern region.
The second question, however, is whether, if Corby were granted SDA status, that would not lead also to a strong demand from other areas for a regrading of their status, with a consequent weakening effect upon benefit which Corby itself gains from the present position. I think that that is very likely, because a number of other areas have changed in their levels of unemployment compared with when the assisted development area status was last established. Many of them would argue that if, for the reasons that the hon. Member has put forward, Corby should be changed, they should be changed also. Indeed, the constituency of my hon. Friend the Member for Dudley, West (Mr. Blackburn), who sympathised with the hon. Member's plight in view of the enterprise zone point, is a case in point. Dudley is an enterprise zone but, as I understand it, has no assisted area status of any sort. The hon. Member will therefore understand that there are a whole variety of situations here and that there is a real danger that if a change were made now it could lead to a strong demand from other areas, which ultimately could weaken Corby's relative position.
For all these reasons, therefore, while I understand why the hon. Gentleman has put the case that he has made today, I cannot accept his request that Corby should now be made an SDA, and I hope that he will understand the reasons. The Government will continue to watch the position in Corby, as elsewhere, closely. I shall always be ready to consider new evidence of substantial changes in the longer term in Corby's fortunes relative to those of the rest of the country and in particular of the other assisted areas.
I hope that it will be clear from what I have said that I and my colleagues are well aware of the difficulties that Corby faces. Indeed, as the hon. Member will recall, no fewer than three Ministers visited Corby on separate occasions towards the end of last year to see the situation for themselves. All of them were, I know, deeply 633 impressed by the efforts the community, through the joint industrial development committee, and all the agencies involved are making to secure the future of the town. It is primarily through these efforts, already supported by all the national and European help I have outlined today, that Corby's industrial base will be rebuilt. It is the hope of all of us that this combination of local, national and European 634 efforts to help Corby will be justly rewarded with the investment and, hence, jobs that the town needs to secure its long-term future.