§ Order for Second Reading read.10.15 pm
§ The Minister of State, Department of Industry (Mr. Norman Lamont)
I beg to move, That the Bill be now read a Second time.
The Bill has two purposes. First, it increases the cumulative limit on selective financial assistance which may be provided under section 8 of the Industry Act 1972. Section 8 is part of the Act that enables the Secretary of State, at his discretion, to give financial assistance to industry when he considers that to do so would be in the national interest. Secondly, the Bill increases the threshold at which individual offers of assistance under section 8 are subject to the approval of the House of Commons from £5 million to £10 million.
To deal with the threshold first, it has so far remained unchanged since the original legislation in 1972. In that time project costs have increased substantially. Parliamentary time is now required to approve individual cases which, in real terms, are a lot smaller than was envisaged at the time of the 1972 Act. It seems sensible to take some account of the increase in costs and the rate of inflation. Therefore, we propose to raise the threshold to £10 million, which is considerably less than the rate of inflation in the intervening period.
The second and main purpose of the Bill is to increase the cumulative statutory limit that applies to all sums paid under section 8 since 1972, including both grants and loans, as well as to sterling guarantees which remain outstanding. Guarantees in foreign currency have since 1980 been subject to a separate limit. The original Act contained a limit of £150 million, with provision for up to four increases by statutory order of up to £100 million each. The statutory limit was raised to £600 million in the Industry (Amendment) Act 1976, again with provision for up to four increases by order of up to £250 million each. Four orders have been made, so the limit now stands at £1,600 million.
To understand fully the need to increase the limit would require my delving back into history and detailing all the expenditure which has been made under section 8 since 1972. The House, I think, will be relieved to hear that I do not intend to refer to all the past schemes in detail. I shall concentrate most of my remarks on the forms of assistance that are available today.
The essential feature of the Government's policy is to create an environment in which industry can flourish and prosper. This means tackling the root causes of our poor competitiveness and, above all, controlling inflation which is vital for an exporting nation. This is not a new aim. What is new is that, while other Governments have set their sights on it, they have shied away when the going got tough. We have not, and there are now clear signs that our policy is taking effect. Through a combination of economic measures and by direct financial support to industry, we are encouraging and assisting industry to become more efficient and more innovative and to face up to problems that have been avoided for years.
My right hon. and learned Friend the Chancellor of the Exchequer in his Budget speech, dwelt on the general 368 economic measures that we have taken and the improvement in manufacturing output and productivity last year which show clearly that this policy is producing benefits. The Budget measures, worth over £1 billion to industry in 1982–83, are designed to maintain the momentum of the Government's industrial policy and to be a springboard for further recovery in 1983.
The House will not need to be reminded that over the past few years the great bulk of Government spending in industry has taken the form of support for nationalised industries and public sector companies. Roughly speaking, about two-thirds of the total Department of Industry budget of £3 billion in 1981–82 was used in this way. This is not a satisfactory situation. As my right hon. Friend the Secretary of State said last month, we are deliberately setting out to shift the emphasis of departmental spending away from traditional industries and towards advanced technology sectors. We seek to reduce the need to subsidise the public sector and instead to devote special attention to three areas, which are of crucial importance for the competitiveness of our industry.
The first is the promotion of new technology across a range of industrial sectors. We are concentrating particularly on microelectronics, optoelectronics, robotics, flexible manufacturing and advance office systems.
The second area is research and development. In a recession, investment in this area is often the first economy made by companies seeking to preserve their cash resources, but it is essential for the long-term health of our industry that companies continue to innovate and modernise. We are helping them to do so with schemes such as the product and process development scheme.
Thirdly, we shall continue to promote the small business sector. Our small firms loan guarantee scheme has had a strong and good response.
Section 8 of the Industry Act is not the only instrument for furthering technology and modernising industry. Many of the schemes in the development of new technology—for example, the microprocessor applications project and the product and process development scheme—are funded under the Science and Technology Act. Equally, the major regional incentives are provided under sections of the Industry Act other than section 8. To put the point into perspective, annual expenditure under section 8 is currently running at £80 million, compared with expenditure on regional assistance of £425 million or on support under the Science and Technology Act of £220 million. But section 8 is important as a means of improving the competitiveness of our industry by supporting high quality investment projects. Often it is closely connected with assistance provided under other powers.
I undertook not to delve too much into history, but let me explain briefly how the current limit has been reached over the last 10 years.
Three main forms of expenditure can be distinguished in the past. First, especially in the early years, a number of payments were made to individual companies outside any general scheme of assistance. These include contributions to several rescue operations, such as Chrysler, Alfred Herbert and BL. Of course, BL has not been helped generally under section 8 of the Industry Act. Under the previous Administration, most of the money 369 was advanced through the National Enterprise Board. Under this Administration, it has been advanced under the Industry Act 1980.
Secondly, assistance has been provided through specific schemes, usually aimed at particular sectors of industry. In the 1970s, 18 schemes of this type were introduced to support projects concerned with modernisation and rationalisation in several sectors.
Thirdly, use has been made of section 8 to provide assistance for investment projects across the whole range of manufacturing industry according to general criteria. Two schemes of this sort were set up by the previous Government—the accelerated projects scheme and the selective investment scheme.
When the present Government took office, we reviewed all the schemes of assistance existing at that time. We decided to let the schemes under section 8 which remained open for applications run their course and to process applications under those schemes and the remaining applications under other schemes which had already closed. Of the schemes open at that time, the energy conservation scheme, the redmeat slaughterhouse industry scheme, the offshore supplies interest relief grant, the footwear manufacturing industry scheme and the selective investment scheme have since closed for applications. Payments are, of course, still being made for projects under these schemes, since the final instalment of grant is not normally made until the project has been completed.
Not all schemes operated by previous Governments have been closed. For example, the microelectronics industry support programme, which assists the development and expansion of the microelectronics industry in the United Kingdom, particularly in the manufacture of integrated circuits, was started by the previous Government, but we have reviewed and altered its objectives and extended its time scale. I include this as a section 8 scheme, but part of the expenditure under the scheme is funded under the Science and Technology Act.
We have also introduced new schemes to meet specific industrial needs. We have introduced a scheme to encourage industry to switch from oil and gas to coal-fired boilers to improve energy efficiency and increase the use of indigenous coal resources. More recently we introduced two measures affecting the steel industry. One is a scheme to help with rationalisation and restructuring costs in the private steel sector. Grants are given towards the costs of statutory redundancy payments if they are part of a restructuring programme, and money is also given towards the costs of closure or restructuring projects. The other is a contribution to self-help schemes devised by the high-alloy steel castings industry to enable closures to take place in an orderly way. We have also announced a new scheme to help small engineering firms—those employing 200 people or fewer—to invest in the latest engineering technology.
Another area of assistance under section 8 is that provided for small firms. Small firms are vital for our industrial future. Small is successful. The Government have not only recognised the importance of small firms to the future growth of our economy but have put public money to work for this purpose. We now have a battery of incentives for small companies which are probably unequalled anywhere in the world. On 1 June last year we 370 introduced the small firms loan guarantee scheme. The aim of the scheme is to back by guarantee the sort of marginal proposition that a bank judges to be potentially viable but turns down, either because of lack of adequate security or because the individual business or business man does not have an established track record. The original intention was to provide for a three-year pilot scheme which would cover £150 million of borrowing, for which the Government's guarantee, covering 80 per cent. of the risk, would be £120 million. Such has been the response from industry that we have now doubled the scheme to £300 million, of which the guaranteed portion will be £240 million.
We have also continued to offer assistance according to general criteria to major investment projects in all parts of manufacturing industry. We have altered the criteria to ensure that assistance is used where it is most needed and is concentrated on investments which will do most to improve industry's competitiveness. Assistance is offered on a selective basis for inward investment and other large projects which involve substantial improvements in performance or the introduction of new products, and which either produce a substantial net contribution to United Kingdom output or introduce a significant degree of innovation.
I have explained the broad purposes for which money has been advanced in the past. Before putting figures on them, perhaps I should emphasise that in fixing a limit under the Bill we need to ensure that statutory cover exists for offers of assistance which form commitments to make payments. Because of the time between approval and project completion, payments tend to lag some way behind commitments. there are also a number of potential commitments represented by the amounts within the sums allocated to the various schemes which, although as yet uncommitted, can reasonably be expected to be taken up by future offers of assistance.
I shall summarise the amounts of money which have been paid out under the various headings. Under section 8, £296 million was paid out to individual rescue schemes in the 1970s. A further £660 million is accounted for by schemes introduced by previous Governments and which no longer exist, and £45 million is committed under schemes introduced by previous Governments and continued by the present Government. New schemes introduced by the Government up to the time of the Budget involved an allocation of £295 million. Taken together with the £200 million guarantee for ICL, which the House approved last year, payments, commitments and guarantees amount to £1,500 million, compared with the existing limit of £1,600 million. Hon. Members may think that that is close enough to the existing limit, but in addition, it was announced in the Budget that the small firms loan guarantee scheme would be doubled in size and that a new scheme for small engineering firms would be introduced.
The £140 million that has been allocated to those two measures will clearly take us beyond the existing limit. In addition, other new schemes are being considered as part of the £130 million innovation package announced by my right hon. and learned Friend in his Budget, some of which will fall under the Science and Technology Act and some under section 8, depending on the precise form of the scheme.
I hope that that explains why the Government are now seeking new powers. The Bill will increase the immediate 371 limit by £300 million to £1,900 million, and provide for up to four further increases by order of up to £200 million each. I do not claim that these amounts represent precise estimates of expenditure over any specific period. They follow the pattern of previous Acts in providing room for continued expenditure over a period of years, subject to approval by the House as the intermediate points are reached.
Taken by itself, the Bill will not have any immediate impact upon Government spending or the public sector borrowing requirement. The sums mentioned in the Bill do not add to Government spending until a decision is taken to allocate them to the various forms of assistance, and those decisions will take full account of our policies on public expenditure. In no sense do we believe that indiscriminate spending by the Government on industry is the way to create viable industries and secure employment. The Government's role is to shape the economic environment in such a way as to encourage initiative and enterprise.
§ Mr. D. N. Campbell-Savours (Workington)
The Minister said that the Government intend to shape the economic environment. He has listed what he called a battery of incentives for small and other industries. What does he say to manufacturers who tell him that, more than incentives, they want an inflation of the economy? Surely that is how they will be able to generate the wealth that is necessary to fund the social wage.
§ Mr. Lamont
I do not know the business men to whom the hon. Gentleman talks, but the overwhelming majority of business men to whom I talk say that it is important for their businesses that we get on top of inflation. They say that low inflation is important for competitiveness. They point out that only when we have a low rate of inflation—lower than that of our competitors—will our economy begin to expand. Furthermore, most of the business men to whom I talk do not want a sudden upturn. They want a gradual emergence from the recession. They recognise the importance of getting on top of inflation.
Within the framework of the measures to which I have referred we shall continue to offer support for industries in selected areas, especially those concerned with innovation and the introduction of new technologies, because they will improve efficiency and increase competitiveness.
§ Dr. John Cunningham (Whitehaven)
I welcome the debate because it gives us an opportunity to comment on the industrial scene. As the Bill will become law it is an opportunity to welcome the Government's apparent determination to continue to intervene in industry and provide assistance, albeit in a small way.
The Minister's speech was strange. I hope that he is not offended by that remark. It was a detailed description, mainly of past events. There was no mention of the effect of Government policies on British industry. The Minister did not say anything about output, investment or capacity as a result of three years of Conservative policies. A sum of money appeared in almost every line of his speech. Millions of pounds were thrown about like confetti. Most of the sums have already been committed. For the casual observer, myself and many other hon. Members it was difficult to discern what, if anything, new was being said.
372 I am not surprised that the Minister made such a speech because the industrial scene in Britain after three years is grim and appalling. It is, perhaps, no surprise that the Minister glossed over that.
It is uncharacteristic of the Minister to treat the House to such a speech because in the past he has not lacked guts in facing up to situations. His speech did not face up to what has happened to British industry after three years of Thatcherism.
There was a notable lack of design in the Minister's remarks about the Government's views on the future of British industry, with two exceptions. I refer to his remarks about information technology and the associated industries, when he made a semblance at attempting a strategy for British industry.
We welcome the small firms loans guarantee scheme. It is a success and we hope that it will continue. I smiled when the Minister said that the Government had made industry face up to the problems. That is true, whichever way they face the problems of three years of the present Administration. They have no option. Many major industries are beset by massive and severe problems which little or no sign of being able to solve them. Nothing that has been said tonight will bring much encouragement to firms.
Comments that I hear from people in industry—I have spent some time this week talking to senior managers and trade unionists—belie the claims reiterated tonight by the Minister, and often from the Dispatch Box by the Secretary of State for Industry and the Chancellor of the Exchequer, that we are on the brink of a sustained and significant industrial recovery. There is little or no sign of that in views that are expressed to me by people in the manufacturng industry.
My right hon. Friend the Member for Salford, West (Mr. Orme) and I today met a delegation of shop stewards from the aerospace industry. As a result of the Government's defence policies and their stupid adherence to Trident, at a time when we are apparently close to hostilities, we are closing down that industry 's maintenance and repair capacity. There is no sign of any recovery or upturn for the workers and managers there.
§ Mr. Hal Miller (Bromsgrove and Redditch)
What about British Aerospace?
§ Dr. Cunningham
British Aerospace is privatised, which is yet another failure of the Government's approach.
The Minister talked about an environment for industry. His right hon. Friend the Secretary of State for Education and Science used to talk about a climate for enterprise when the Government first came to office. What has happened as a result of the attempt to create an environment for industrial progress? Output and investment are significantly down. Unemployment has scandalously increased. Bankruptcies and company closures are at all-time record levels. This year there has been an increase in the number of companies folding up as a result of the Government's policies.
The present Leader of the House, when he first became Secretary of State for Industry, deliberately legislated to reduce his ability to intervene in industry. That was one of his first acts. He reduced his flexibility to respond to the difficulties, which he must have known existed, by changing section 8 of the 1972 Act, by reducing resources to the Scottish and Welsh Development Agencies and by 373 reducing the effectiveness, role and scope of the National Enterprise Board. The resources to the development agencies were soon increased, if not completely restored. That decision was rapidly reversed, but as for the remainder, the Government were almost guilty of hamstringing themselves because of those measures.
Far from a climate for enterprise, Thatcherism has caused an economic blizzard for the British manufacturing industry. Many firms, good and bad, have perished in the blizzard. Many of those that have survived, far from being leaner and fitter, as is claimed, are skinny and weak. They are hanging on by the skin of their teeth with low, if any, profits, and low output, capacity utilisation and market demand, as my hon. Friend the Member for Workington (Mr. Campbell-Savours) said in his intervention. Inevitably, they have a low chance of survival.
That is where the Government have brought British industry. In the process, they have created much human misery, from the board room down to apprentices. People with great experience and considerable skills have been swept away. This has been the worst industrial decline on record. It is certainly as bad as anything that happened earlier this century. So it is not surprising that the Minister's speech was purely descriptive. I imagine that, for once, his courage failed him. The Minister says "Tut, tut", but he did not mention any of this in his speech. It could not be said that anyone was pressing him to be brief, or that the House was short of time. The process of deindustrialisation has massively accelerated as a result of three years of this Government's policies.
I shall mention a few brief comments about expectations—not from the Labour Party or from me, but from the CBI. It said on 9 April, under the headline "Manufacturing output 'slowly improving"'However, and as the chart shows,"—this is a chart about the economy—there is still no sign yet of any marked recovery in production levels".That is what the CBI says about the situation.
The director-general of NEDO said something very similar in recent press statements. Barclays Bank, in its "U.K. Economic Survey", said:Although the Treasury's forecast for growth in 1982 has been revised upwards, it is neither sufficient to alter the broad view of a modest, fragile recovery, nor do more than check the upward pressures on unemployment. A stronger recovery would demand a more robust world upturn than can currently be forecast".That is saying that the Government's policies will not bring an upturn, and that without a major world upturn there is little prospect of any significant change. That is the implication there. There is not much comfort for the Government in those comments. The Government cannot claim that those people are motivated by a desire to support Opposition speeches or the Labour Party when they make their assessments of the industrial and economic prospects.
I shall mention a couple of industries. The chemical industry was hitherto a relatively successful industry, with a good investment record, a good productivity record, and a good record in industrial relations. Major companies in the industry which are household names have been making massive losses in the past two or three years—ICI and BP Chemicals, to name but a couple of the most obvious ones.
374 The textile industry, too, has been devastated. The British Textile Confederation's "Review of 1981–82 and Annual Report 1981" says:In common with the rest of British industry, but to a greater extent than most of it, the textile industry has suffered grievously from recession. High interest rates and the expectation of a decline in consumer demand led to sharp destocking, the major contributor to a further 10 per cent. fall in the industry's output in 1981, leaving it 26 per cent. below the level of output achieved in 1979.It goes on to say that employment in the textile industry fell again last year, from 384,000 in December 1980 to 358,000, 12 months later, and it had been at 458,000 in December 1979.
Those are the real results of what has been happening in British industry. It is a devastatingly bad record. that is the reality for British business. I shall quote what the Government's own House magazine British Business says in its issue of 16 April on page 689 about investment:For 1981 as a whole, manufacturing investment was almost 18 per cent. lower than in 1980 … When manufacturing industries investment is augmented with leasing from the service industries, 1979"—the last year of a Labour Administration—is the highest recorded level of investment and the 1981 figure shows a reduction of nearly 19 per cent. from that peak.Those are the figures from the Government's publication. So much for the claim, often repeated erroneously by the Secretary of State, that investment is holding up well. He has said that from the Dispatch Box on at least two occasions when I have been in the Chamber. The Government's figures show that statement to be manifestly untrue. There has been virtually a 20 per cent. fall in investment in the last three years of the Government's term of office.
The Bill, such as it is, is welcome. It will provide extra resources that are desperately needed by many sections of British industry. It implies intervention. At least that should bring a small glow, if not a smile, to the face of the right hon. Member for Sidcup (Mr. Heath), if he knows that one small aspect of his Government's work is recognised as worthwhile and is accepted by this Administration.
Even the Government's record to date under section 8 of the 1972 Act does not stand comparison with the record of the Labour Government. In 1978–79, offers under section 8 of the Act totalled £162.8 million—almost £163 million. By 1979–80, they had fallen to £71 million, down by more than 50 per cent. in the first year of the Government's period of office. By 1980–81 they hadfallen to just under £37 million, down another 50 per cent. on the previous year. By August 1981 they had fallen again—down another 60 per cent. in that 12 months.
Therefore, in reality, the value of offers currently made under that section of the Act, as a result of the Government's approach, is about one-sixth, or 17 per cent., of what it was the year before the Government came into office. That is the reality of what the Government have been doing, even under that section of the Act, which the Minister of State has said will play an important part. The Government's record, even with section 8, is poor.
The Government's own publication said recently, with regard to the formation of small firms, that more than 35 per cent. of companies set up in 1980 were based in the South-East, whereas poorer areas such as Northern Ireland, East Anglia and the North of England had only 3 per cent. of the new firms that were being created. We share some of the Government's enthusiasm for 375 development in that sector, if not all of it. Although that policy may be claimed to be a great success in the worst affected regions, the Government figures show that not to be so. There is little hope of future employment for the thousands of people in the regions as a result of those policies if such an outturn is repeated. I do not have the latest figures. If the Minister has them, perhaps he will give them to me.
§ The Secretary of State for Wales (Mr. Nicholas Edwards)
Wales has some of the worst unemployment levels of all the regions. I can report a record level of formation of new and small businesses and a record level of enquiries on the same subject.
§ Dr. Cunningham
No doubt a record number of failures, too.
I am pleased that at least I have provoked the Secretary of State for Wales into defending the Government's record. He is wrong to say that Wales has the worst unemployment. The worst is in the Northern region. I am pleased to hear that Wales is making progress on small business creation. The people of Wales have suffered grievously from the policies of the right hon. Gentleman and his colleagues.
§ Mr. Norman Lamont
I do not accept that one can judge a Government's policy simply by their spending. The hon. Gentleman has quoted figures for selective assistance. The Government have spent more than their predecessors under the science and technology legislation. They have also spent more on the advanced technology centres. Then there are the schemes that my hon. Friend the Minister for Industry and Information Technology has promoted. The Government have spent substantially more than the Labour Administration on all that and on the small business sector.
§ Dr. Cunningham
It is perhaps as well that the hon. Member for Knutsford (Mr. Bruce-Gardyne) is now a member of the Government and a prisoner in the Treasury. Had he been in his former place below the Gangway he would have frothed at the mouth at the claims about what the Government have done.
I do not deny what the Minister says, but the outcome has been a major deterioration in British industry. There is a 20 per cent. drop in investment in industry as a result of the Government's policies. There is no escaping the fact. The Government's own figures are on the record. It is no good the Minister saying that the Government are spending more and therefore are getting it right. The figures prove that that is no argument. The Government are increasingly getting it badly wrong.
We need a much more coherent approach to our industrial difficulties than the Government show any sign of introducing. Like our competitor countries and our partners in Europe, we need to plan our industrial recovery and the development of our industries and trade. Japan, West Germany, France and America increasingly plan them in a far more sophisticated way than we do. That comment also applies to previous Labour Administrations.
All the evidence shows that if we are to avoid a continuing slide into de-industrialisation in Britain we must plan our industrial development, investment and trade in a coherent and strategic way, with our eye on the goals that we wish to achieve. That is the lesson to be learnt from the approach of this Government and the 376 Labour Government. When the Labour Party returns to office, we are determined to show that we have learnt it. Without a coherent set of policies for investment, growth, rationalisation and the introduction of new technology, our industrial base will continue to decline.
The Government offer no hope. There is no evidence of a sustainable recovery in our industrial situation. They stand condemned by the figures published from their record. That is the reality of our industrial situation as a result of three years of Conservative administration.
§ 11 pm
§ Mr. Hal Miller (Bromsgrove and Redditch)
The only common ground that I can find with the hon. Member for Whitehaven (Dr. Cunningham) is his insistence on the need for a more coherent approach to our industrial policy. I have been trying to set out my ideas on that policy inside the House and elsewhere for a number of months.
I am not known for my partisan approach to the se debates, but I cannot understand the hon. Gentleman's purpose in peddling doom and gloom, which cannot help those in his region, my constituents, or the country generally. There was nothing positive in his remarks. The hon. Gentleman has experience in these matters and he is well aware that the state in which the last Labour Government, of which he was a member, left British industry made it unable to face the world recession that hit us.
The hon. Gentleman talks of the need for inflated demand, but there is perfect evidence of adequacy of demand for cars, washing machines, tape recorders and computers. He knows that the problem lies with the policies of the Labour Government, who flattered and deceived. They pretended that jobs could be propped up in declining and dying industries by the spending of taxpayers' money, that customers would be found for their products, and that the new products that the market needed would be evolved. The present state of our industry is directly the responsibility of the hon. Gentleman's Government. It was his Government who propagated myths and illusions and he has sought again to put them before the House.
It is not good enough to pretend that this Administration's policies, especially for small businesses, have failed or are confined to the South-East. Last week there were frequent press reports about Corby, for example. Small business has taken up the whole of the lost 5,000 jobs from the Corby steelworks.
§ Mr. Campbell-Savours
No, 1,600 jobs, not 5,000.
§ Mr. Miller
I have referred to facts that are On the record. I pay tribute to my hon. Friend the Member for Norfolk, South (Mr. MacGregor), the Under-Secretary of State for Industry, for his small machinery scheme.
I shall return to the tenor of the remarks that I had intended to make before I was provoked by the attempt made by the hon. Member for Whitehaven to depress the country and to sell it short so that there will be no confidence that we are able and willing to produce the goods.
I agree with the hon. Gentleman about the need for a more coherent approach. It is interesting that there has recently been a call from his party's supporters in the West Midlands to support policies that I have been advocating for a number of months relating to an industrial strategy 377 for the West Midlands. I welcome and support the philosophy that my hon. Friend the Minister of State, Department of Industry set out when introducing the Bill. The object is to establish a climate in which industry can flourish and prosper. As a West Midlands Member, I second that.
I am grateful to my hon. Friend for introducing the Bill. I only wish that he had not been so coy about it. I urge him to go further down this road. We are still spending £425 million a year on the blanket regional distribution of cash irrespective of the prospects of success. That spending depends merely on the location of the enterprise. On my hon. Friend's figures we are spending only £80 million a year on selective assistance, apart from the spending on science and technology.
I have been urging the Government to get away from this blanket approach to regional policy. We need to consider individual industries on a sectoral basis. That is why I welcome the start that my hon. Friend has made in this direction in high technology with microcomputers. I welcome the start that he has made on the restructuring of the private steel industry. In justice, that was delayed far too long. It was put out of business by the British Steel Corporation, whose competition and restructuring was subsidised by the taxpayer. I particularly welcome the scheme to enable smaller industries to buy the higher technology numerically-controlled computer machine tools.
My hon. Friends in the Administration are edging along the path that I have been urging for so long. We need a sectoral approach. It is not just a question of spending. The hon. Member for Whitehaven referred to the amount that was spent by his Administration under section 8. However, a lot of it was misspent. We need only think of the ferrous foundry scheme where money was invested—the need for which the hon. Member harped on about—quite regardless of the capacity of the industry. We need to restructure the industry. That is the path that my hon. Friend has been pursuing, and I should like to congratulate him on it. I wish him to extend it.
My hon. Friend referred to the self-help scheme for steel castings. I wish him to extend that to the open die steel forging industry. With the expiry of the British Steel and Firth Brown agreement on this type of forging, which was confirmed by the chairman of BSC, and the statement about ingot sizes below which there will or will not be competition from BSC, there is now the real prospect that in this industry, too, we shall see subsidised competition from BSC putting private firms out of business. The restructuring should be extended. The scope of my hon. Friend's scheme—for which I have already thanked him on more than one occasion—was too narrowly drawn to exclude the open die steel forges.
§ Mr. Ian Wrigglesworth (Thornaby)
In view of the hon. Gentleman's comments. I am a little surprised at his criticism of the ferrous foundry scheme. My impression is that that has had a considerable beneficial impact in helping to modernise and restructure that industry.
§ Mr. Miller
It introduced some more modern capacity but did nothing to take out the old and out-dated capacity. That is what I was arguing. I was just about to make the point that I hope my hon. Friend, apart from considering the open die forges, will also look at the plight of the 378 foundry industry. He has referred only to the steel and alloy foundries. I wish him also to consider the position of the iron foundries.
That is all part of a more considered approach, at which point I join the hon. Member for Whitehaven. In the context of the West Midlands, I have been urging that we need this sectoral approach. We need to concentrate on the higher technologies and on the introduction of the new processes. My hon. Friend and his right hon. and hon. Friends in the Administration have made strides with his product and process development scheme and with the assistance given to science and technology. We need another element—what I call a competition policy. I again join with the hon. Member for Whitehaven in saying that that should include our trading policy. It is ridiculous that, for instance, the tariff against our cars going into Spain is nine times that on their cars coming to Britain. That means that we are unable to sell our Metros in Spain, but the Fiestas come in from Spain. In addition, there will be the new General Motors S car coming from Spain. The same situation applies to castings and forgings from Spain. There are problems in other markets upon which I must not spend too much time. We need a competition policy to ensure that there is free and fair competition and to give our industries an equal chance to compete with other suppliers.
I am sorry if I was provoked into prolonging my remarks by the doom and misery peddled by the hon. Member for Whitehaven.[Interruption.] I hope that he will not provoke me again.
However, I congratulate the Minister on the start that he has made in that direction. I hope that he will continue and extend it. Again, I stress that the Labour Party in the West Midlands has also adopted that criterion for future industrial development in the region. At long last the West Midlands is speaking with a united voice, determined to regain its rightful place in our manufacturing economy.
§ Mr. Ian Wrigglesworth (Thornaby)
I am pleased to follow the hon. Member for Bromsgrove and Redditch (Mr. Miller), because I very much agree with the general approach that he outlined. That is one of the reasons for my party's support of the Bill.
The Bill is an archetypal example of selective Government assistance and should lie at the core of their industrial strategy. The difficulty is that it is almost impossible any longer to ascertain their strategy. If the Bill had been introduced against the background of a comprehensive strategy or a sectoral approach, I should have been much happier. The Government's policy is evolving and developing and I welcome that. It is moving in just the direction that my hon. Friends and I welcome. However, until there is a more whole hearted and comprehensive strategy than at present, it will not be satisfactory.
I regret the fact that the Bill is being debated at such a late hour, although I assume that discussions have taken place through the usual channels. The Government's industrial strategy should be the central part of their policies. Against the background outlined by the hon. Member for Whitehaven (Dr. Cunningham), I should have thought that there would be a consensus in the House that the Government's industry policy was the most important aspect of all their policies. Given the decline in output and the increase in unemployment, such a policy must be the 379 kernel of any Government's strategy. If our industries are uncompetitive and unsuccessful, we shall not have the wealth, the employment, or the resources to spend on our social services and we shall be unable to achieve what many of us wish to achieve both nationally and internationally.
To discuss such an important Bill at an hour approaching midnight relegates it to a second division position that is neither wise nor justified in the present climate. I am surprised that the Government should decide to debate the Bill now. I do not wish to take up the remarks made by the hon. Member for Whitehaven, because, although I agreed with the general thrust of his criticisms of the Government's policy, he was predominantly concerned with their economic policies. It is those policies that have led to the high unemployment, bankruptcies and the industrial decay found in the Northern region and in many other parts of the country.
Some very important speeches on industrial policy will probably not be made tonight. We may hear a speech from the hon. Member for Surrey, North-West (Mr. Grylls), who represents a partial strand of thinking. I shall be interested to hear exactly which strand he represents. There are two strands of thinking in the Labour Party and the Conservative Party that have wrought havoc on our industrial scene. Unfortunately, I suspect that they will not be represented in the debate.
Those strands are represented most clearly in the public mind—certainly in the mind of industry—by the right hon. Member for Bristol, South-East (Mr. Benn) for the Labour Party and by the right hon. Member for Leeds, North-East (Sir K. Joseph) for the Conservative Party. What was most striking about the Minister's speech was the way he announced with pride the assistance that was being given to industry. It is inconceivable that such a speech would have been made from the Treasury Bench two years ago under the then Secretary of State for Industry. That is what is wrong with industrial policy in Britain. We had two years of the policies of the right hon. Member for Leeds, North-East, and in the previous Administration we had two years of the right hon. Member for Bristol, South-East. After two years of the policies of the right hon. Member for Leeds, North-East, we have now a reversal to the type of policies promulgated by the Treasury Bench today.
§ Mr. Campbell-Savours
The hon. Member has spent part of his speech drawing attention to the policies of my right hon. Friend the Member for Bristol, South-East (Mr. Benn) and the right hon. Member for Leeds, North-East (Sir K. Joseph). What many of us are unable to understand is how, with a formula for a £3 billion reflation of the economy when the Labour Party is promoting an objective of £9 billion, it is possible to reflate the economy in such a way that demand is restored. What proportion of that £3 billion would the hon. Gentleman allocate as increased support to the industrial budget of another Government?
§ Mr. Wrigglesworth
We have limited time this evening. I should be delighted to take another hour repeating the speeches by my right hon. Friends the Members for Glasgow, Hillhead (Mr. Jenkins) and for Crosby (Mrs. Williams), or, indeed, many of speeches that my right hon. Friend the Member for Crosby made during the election campaign in Crosby. The hon. 380 Gentleman knows the SDP view on the reflation of the economy. However, I wish to examine industial policy and not the overall economic policies of the Government.
It is inconceivable that the claims of aid to industry which were outlined by the Minister would have been made two years ago—£11 ½ billion total support for British industry. I welcome what the Minister said and the record that he has described. I also welcome his desire to extend aid for industry in the way that he has outlined. The choice of support for new technologies that his Department is pursuing is the right policy for the country. My only regret is that it is coming two years too late, and that a great opportunity was missed during that period when it was vital that industry should have the support and the cooperation of Government in order to resist and live with the consequences of the international recession.
If selective assistance to industry is to succeed, it must be within an overall strategy for industry, and, indeed, a partnership with industry. One of the most depressing aspects for many industries—the hon. Member for Bromsgrove and Redditch will understand this as well as anyone as he comes from an area that is dominated by the motor industry—was the way in which industries vital to the future of Britain were told that they were standing alone, that they were expected to stand on their feet not only without assistance but without any type of friendship or co-operation from the Department of Industry. Fortunately, that position has changed, and industry overall is getting much greater co-operation and assistance from the Department of Industry than it was at that time.
That is the right approach. We on the Social Democratic Party Bench want to see partnership between the Government and industry. We want to see the Government providing the environment which will improve the competitive edge of British industry, which it can succeed in doing. There are many examples of sectors of British industry that have succeeded and can still succeed in the world today. But they need Government cooperation and assistance if that success is to be forthcoming. They do not want the Government planning urged by the hon. Member for Whitehaven. The Government must follow a strategy, but the last thing that industry wants is big brother in Whitehall—which usually means civil servants and not Ministers—telling it what it should be doing. That is why the sort of assistance under section 8 of the Industry Act is the best from of assistance that can be given to British industry.
I say once again how much we welcome the new approach of the Department of Industry under its new Secretary of State and its new Ministers. They will get every support from my party in the policies that they are pursuing now and in the passage of the Bill. It can be of great assistance to British industry, and I hope that the House will give it its full support so that it can be put on the statute book as soon as possible.
§ Mr. Michael Grylls (Surrey, North-West)
I began to think that I should have to ask for your protection, Mr. Deputy Speaker. I was sitting here listening quietly and attentively to the hon. Member for Thornaby (Mr. Wrigglesworth) and trying to follow his speech carefully when suddenly he launched into a trailer of the speech which even then I was not sure that I should make at all. I suppose that it is the hon. Gentleman who has prompted me to intervene in the debate.
381 In almost every other debate on an Industry Bill over the years I have spoken against the Government's proposals simply because on the whole the pumping of taxpayers' money into industry by the Government has not helped very much and has not seemed to create jobs, either. I do not believe in the largesse of taxpayers' money being the right policy for industry or even the policy that industry wants, although my hon. Friend the Minister of State was right to say that throughout their three years in office the Government have been concentrating on getting the framework right—trying to get the economy and inflation right—and then letting industry get on with its job.
The hon. Member for Whitehaven (Dr. Cunningham) made a very partisan speech underlining what he saw as the disasters, but he knows the pluses and successes there have been in productivity and the more realistic manning levels that had to come some time. Generally, industry is now in very much better shape and, when we come out of the recession, there will be enormous gains, in addition to a great many new jobs.
I support the new slant adopted by my hon. Friend. He said that the Department of Industry was determined to direct more of its aid to helping and encouraging new industries than propping up old ones. I am certain that is right. It is not a partisan point. Over many years, Governments of both major parties have tried, perhaps understandably, to keep older industries going by pumping money into them, but they have failed to concentrate sufficiently on new industries. We now have a Minister responsible for information technology. We are beginning to see procurement policies and to recognise that the Government have a role—an interventionist role—in procurement and helping new industries to start. I have always supported such an approach. I hope that more procurement can go to smaller firms. It has been a mistake for too much procurement to go to big industry. It is right that we should be looking to the new firms rather than propping up the old.
My main reason for welcoming the Bill—unlike the attitude I have taken to most Industry Bills—is that it is aimed principally at giving financial powers to the Government to continue the successful loan guarantee scheme. The Government are to be congratulated on introducing the scheme against the advice, the opinion, and even the wishes, of the greater part of the political establishment, the Whitehall establishment, and even the City establishment, which initially thought it unnecessary. It has, in fact, been very successful. More than 2,000 loans have been made to small firms that would not otherwise have received them. Without such loans, one must assume that half of those firms, the new firms, would never have started, while the other half, those already established, would not have been able to expand.
I believe that the hon. Member for Whitehaven recognises that the measures to help small firms have been constructive. I would go further, again not in a partisan sense, and say that the climate for capital and for loans for small businesses is better than ever. That may not be a high compliment. The climate in the past has been very bad. There is now a much better climate for new and small businesses and for the important sector of expanding 382 businesses. A firm, in its second and third stages of development, will create even more jobs than the start-up business.
We can be glad that the loan guarantee scheme has been so successful. It has enabled small firms that could not give personal security to the banks to obtain loans. I hope that Ministers within the Department of Industry will consider raising the upper limit of the loan guarantee scheme. This, at £75,000, is very low. The scheme provides loans for the very tiny firms. The fact that it has been successful should give the Government confidence that the limit could be safely raised to £250,000, or even £500,000 in areas of high unemployment. I should certainly like to see it raised to £250,000. For the firm that is increasing the number of employees from 50 to 100 or from 100 to 150, the sum of £75,000 gets it nowhere in terms of buying new plant or setting up a new factory. It is suitable only for the start-up or very tiny firm.
We should be bold enough to say that the upper limit will be raised. We must not fall into the trap of saying that it is a pilot scheme only and that it must continue to be reviewed. One can go on taking its pulse for ever. Sometimes it is better to be bold, which would be the case if the upper limit were raised. The money is there. If the Bill becomes law, it will be possible under the Industry Act to provide these loans.
I favour this form of intervention. It is not throwing money at industry and it is not increasing the PSBR, so it is not damaging economic policy. It is not increasing public expenditure. The only increase in public expenditure arises from bad debts, but I understand that the bad debts under the loan guarantee scheme are very small. The money is genuinely for loans which, of course, will be repaid. We are not punting the taxpayers' money. The hon. Member for Thornaby is right when he supposes that I disapprove of that. On the other hand, I approve thoroughly of the loan guarantee scheme for the reasons that I have given.
I welcome the Bill. I hope that there will be a response about the expansion of the loan guarantee scheme in the very near future.
§ Mr. K. J. Woolmer (Batley and Morley)
I sought some measure of judging the usefulness of the Bill. I support the Bill as it stands, but I wish to draw the attention of the House to the reality of the industrial policy or lack of industrial policy of the Government not only in their administrative and policy actions, but in terms of finance.
The Bill will hardly lead to an increase in the finance available. It really adjusts the limits to keep pace with inflation. That needs to be kept in perspective.
Conservative Members have claimed that there will be an increase in spending on industry or a concentration on new technology industries. I remind the House that, as the Treasury and Civil Service Select Committee pointed out in a recent report on the public expenditure White Paper, Government assistance to industry will suffer severely. Following the disasters being imposed on the housing programme, real spending on industry by the Government will fall by 13 per cent. over the three years to 1985. In this financial year it is due to fall in real terms by 3 per cent. to 4 per cent.
Table 2.4 on page 12 of volume 2 of the public expenditure White Paper spells out what has happened to Government spending on scientific and technological 383 assistance in the year that has just ended. We see that it was reduced by about 50 per cent. Although Ministers make great public play about certain new aid schemes, the total of Government aid to industry is diminishing rapidly. We should not accept the argument that the spectacular and highly publicised announcement of one grant of assistance is any substitute for a real industrial policy or willingness on the part of the Government to aid industry.
If I may supplement the remarks of my hon. Friend the Member for Whitehaven (Dr. Cunningham), we should consider what is happening to small businesses. Despite all the trumpeting about assistance to small businesses, bankruptcies and insolvencies are at record levels. For every firm that is helped into existence by the Government, one or two are throttled out of existence?
The most recent information available is inBritish Business for 16–22 April. Seasonally adjusted, bankruptcy figures increased in 1981, and in March this year they increased on last year's high figure. Insolvencies rose by virtually 100 per cent. between March 1980 and March this year. So in the past two years, let alone three years, of Conservative Government, liquidations have doubled.
Therefore, while individual pieces of assistance to small firms may seem convincing to Conservative Members, and while there may be the occasional small business man who is pleased with particular pieces of legislation, small firms are being massacred, along with many of our medium-sized and even some very large firms.
I do not pretend for one moment that an industrial policy can substitute for, or make good, the overwhelming effects of economic policies that are plainly wrong. No amount of industry aid schemes can make up for the interest rate levels that have been imposed on business, nor for the problems caused by the value of sterling. In the industries that I can help to represent because of constituency concerns—the textile and clothing industries—the effects of high interest rates and the value of sterling far outweigh any assistance that could be given through sectin 8 schemes. Those two problems of Government policy are having serious effects.
We have experience of three section 8 schemes introduced by the last Labour Government, two in the wool textile industry and one in the clothing industry. In their own way, on a modest scale, they were extremely successful. Over their lifetime they brought to the industries aid of almost £40 million. Yorkshire and Humberside, in my own region, benefited by about half of that assistance.
Those schemes enabled capital investment to be made in the textile and clothing industries to stop their decline and start them rising again. One of the beneficial consequences was that the fall in employment in those industries levelled out, but since this Government came to office there has been a catastrophic decline in production, jobs and investment. Since 1979, capital expenditure in the textile and clothing industries has approximately halved. Production and jobs have fallen by massive amounts, as have export markets.
If the Government are prepared to reconsider selective industry schemes, I hope that they will look again at industries such as textiles and clothing. I differ from the hon. Member for Bromsgrove and Redditch (Mr. Miller), who said that all the emphasis should be on new industries and not on old ones. That shows a misunderstanding of industry.
384 Most major industries include many good firms with a substantial future. To write off major industries, such as textiles and clothing as if they were old industries and to say that all the money must be put into whizz-bang modern technological industries shows a complete misunderstanding. Most technological progress is put into place in existing industries through new processes, designs and products.
In Yorkshire and Humberside people in textile and clothing would take it extremely amiss if it were suggested that industries employing more than 600,000 workers were old industries to be written off on the basis that any Government that wanted to put money into industry should put it into new industries with a future. The textile and clothing industries have a real future. That is evidenced by the willingness of the French, Belgian and Italian Governments to produce industrial schemes for textiles and clothing. I press the Minister, as I have pressed him before, despite the Government's past reluctance, to get involved in industrial schemes. In the textile and clothing industries employers and unions work closely together. They are willing to work closely together to produce coherent industrial policies. The Government should work with them to produce policies that will raise investment from the present disastrously low level of £100 million a year.
We write off old traditional industries, which employ hundreds of thousands of workers, at our peril. The textile and clothing industries will employ large numbers of workers long into the future. I urge the Minister to reconsider whether section 8 schemes could include textiles and clothing. The three schemes that we have had so far have demonstrated the potential.
A great deal more than money is needed. We need a positive industrial policy. We need a trade and industrial policy with teeth. We need back-up from a Department that is willing to combine trade, planning and industrial policies. I look forward to the return of a Labour Government pledged to an industrial and trade policy that will once again offer real hope for the clothing and textile industries of Yorkshire.
§ Mr. D. N. Campbell-Savours (Workington)
My hon. Friend the Member for Batley and Morley (Mr. Woolmer) has clearly laid out the Opposition's commitment to planning. He will note that the Social Democratic Party's contributor to the debate, the hon. Member for Thornaby (Mr. Wrigglesworth), rejected that policy. That will be of great interest to many people outside the House. It is remarkable that he ventured to give unqualified support to the Bill yet failed to mention that, according to "The Government's Expenditure Plans 1982–83 to 1984–85" at table 2.4, "Industry, Energy, Trade and Employment", the Department of Industry's allocation to regional and general industrial support is to be reduced in 1982–83 to £534 million as against £807 million for the previous year.
Although the Government insist that the Bill will aid manufacturing industry, there is no evidence to support that view. The Bill in no way extends the amount of money that is to be given. It only raises the limits. I am sure that the hon. Member for Thornaby wishes to qualify his statement. His unreserved support will not be well received in the Northern region, where he and I have constituencies that are in difficulties because of the Government's policies.
385 There is nothing new for any of us in the Bill. No amount of massaging of the statistics will help any of us. Following the Government's decision to re-draw the assisted area status map and to exclude from that map many parts of the country that are desperately in need of support, regional assistance has become less important to many of us. The effect of regional support in my constituency now is minimal. Competition from other parts of the United Kingdom with a greater level of regional assistance is so intense that we can no longer attract the industry necessary to generate employment. It is deplorable that the Government have failed to respond to the real needs of the parts of the country that repeatedly in the last three years have made representations about their problems.
The great and famous halcyon days for our regions under Labour Governments have gone. I can remember the period under a Labour Administration when footloose industry was available, when there was full employment in the South, and when manufacturing industry and the industrialists of the South took decisions that had a direct and real benefit for regions such as that which I represent because they recognised the value of the regional assistance, which no longer exists.
It is deplorable that the Government have removed from us that right and incentives. The effect of the Government's strategy is to reinforce the attraction of areas in the South. The hon. Member for Surrey, North-West (Mr. Grylls) should note that the article in British Business based on research by the Department of Industry's own researcher, Mr. Ganguly, clearly states that in the year 1980 the South-East attracted 35 per cent. of all new business starts and the Northern region 3 per cent.
That statistic is a key indicator of what is happening in the national economy. I hope that the hon. Member for Surrey, North-West will take the point made by my hon. Friend the Member for Whitehaven (Dr. Cunningham) and agree that the statistics should be updated.
The statistics are based on VAT registration returns. Customs and Excise should be able to furnish the up-to-date position so that we can measure the effectiveness of the Government's policy in the regions and the incidence of small business starts.
The article says:The biggest proportionate loss in the year"—in terms of deaths of industries—was in the northern region, covering Tees-side, Durham, Northumberland and Cumbria. With 5,500 deaths and 4,200 births, this region had a net loss of 1,300, about 2 per cent. of its total stock.I do not suggest that the numbers of company deaths is a measure of the effectiveness of the Government's policy. I do not believe that that is so, particularly in relation to small businesses. I believe—and Mr. Ganguly puts it well—thatIf risk-taking is indeed the norm, then arguably a region declines over the time not because of a higher rate of business failure, but because it is not sharing in the concomitant, growth … On this hypothesis, the higher the rates of innovation the greater chances of success and the more active the small firm section, the greater the chances of achieving the higher rates of innovation.386 We should concern ourselves not with the number of small business deaths, but with the number of small business births. In the Northern region we are not getting our fair share of these births.
I extended the research by Mr. Ganguly to try to calculate the number of company births per head of population. In the South-East, with the lowest level of unemployment, in 1980 there was one company birth for every 415 people. In the South-West the figure was 447, in East Anglia 522, in the East-Midlands, 524, in the West Midlands, 525, in Yorkshire and Humberside 574, in the North-West 575 and in Wales 603, which answers the intervention by the Secretary of State for Wales. From the Government's statistics, based on 1980 figures, it is clear that Wales is not getting its share of small business in the same way as other parts of Britain.
If I were to produce a more damaging statistic, it would be to compare the number of unemployed persons per company birth in each region. The Northern region has one of the lowest numbers of company births per head of population. There are 751 people for every company birth, yet it has some of the highest unemployment in the United Kingdom. Built into the Government's strategy on small business start-ups must be the fact that the incidence of starts in the Northern region as a percentage of the population is the third lowest, apart from Scotland, which is marginally less, and Northern Ireland. I hope that the Government will take the opportunity to answer the point tonight, because their industrial strategy, we are told, is to put right the economy and to make small business responsible for reacting in the conditions for growth that they tell us they will create. It is not working in that way.
A meeting was convened some weeks ago by the Department of Industry in Manchester at the Westlands hotel in my constituency. The Minister will recall that the objective of that meeting has been exercised in many parts of Britain—to consult, to find out what the problems are and perhaps to modify Government policy to help small businesses. A representative of my office attended the meeting to take notes of the submissions made by representatives of business in my constituency. I do not claim that this is a factor peculiar to Workington. The comments made at that meeting would be similar to comments made anywhere in Britain where small business people are asked to comment on Government policy.
I do not wish to attribute any of the comments, for obvious reasons. An ex-managing director of a company said:When I ran into financial difficulties and discussed the matter with CoSIRA and others, they could not understand the bank's attitude. I had been told to reduce my overdraft within 1 week—this was an amount of £10,000. This was impossible, therefore, I had to look for a buyer for the company. The bank eventually brought the receivers in and it was sold … Immediately the overdraft was increased three times at interest rate ¾ per cent. over base rate. The attitude of bankers to small businesses is wrong.The Minister will know that this is just one comment from one regional consultation. I have many more. I accept that notable advances have been made with small businesses, but there is great reservation among small business men about the attitude of the banks, certainly in the regions. Instead of holding consultations on the wide issue of Government policy as it affects small business, the Minister would do well to identify banking as a problem and to set up some regional consultations to deal with the problems.
387 The Minister will find that every hon. Member has heard business men complaining about the attitude of banks and the way in which they favour businesses that do not operate in the national interest because they do not generate wealth. They may be funding businesses that have no effect upon wealth production because they do not produce goods. The contribution of the regions should be in the form of an expanding manufacturing sector. That is how this country will generate wealth to fund the social wage that we spend so much time in this House talking about and which we have spent most of today debating in the form of the public expenditure programmes for the current year.
My own view is that the reflation of the economy is the only way in which we can resolve the problems that confront us. I referred to the innumerable small business incentive measures that have been introduced by this Government, but there is a feeling in industry that unless the Government reflate in a sensible way—not in the moderate and conservative way that is proposed by Social Democratic Members—that will create demand within the economy, there is little chance of people getting back to work.
The Treasury and Civil Service Committee report, which was published only two or three weeks ago, within the contraints of public expenditure currently being pursued by the Government, said that the 2½ per cent. economic growth forecast that the Treasury has made are based on precarious assumptions. It said that unemployment would not fall if the Government were to pursue the strategy that they are currently pursuing. Of course, that strategy has led to closures in my constituency. Last week there were heavy redundancies at Spillers in Maryport, a town where unemployment is nearing 30 per cent. At that firm half the jobs were lost. Out of 310, 150 jobs were lost last week. The effect on Maryport will be devastating, because people there have nowhere to go to find work. I quoted previously statistics for the relative abilities of different parts of the country to generate small business enterprises. If the Government do not react in the way that I suggested to the statistics that I gave, there is little hope for the people of Maryport in the coming months and years. The Government should pay special attention to reflating the economy by way of public expenditure, and certainly in the construction industry, because of the high unemployment among building workers.
I end with one small measure that the Government can take, and it is related to this debate. For all the incentives that the Government believe that they retain for those of us with development area status in West Cumberland and other parts of the country, we are now competing, as a steel closure area, with other parts of the country that can offer rate relief to the little, footloose industry that is available, and to the small businesses that wish to start up. In the absence of adequate rate support grant to enable the funding of rate relief to industry, we are finding it difficult to compete with other regions and other communities that have money for rate relief. I ask the Government to consider including in the RSG allocations in the coming year a component that would provide rate relief for small business start-up enterprises. That would act as an additional incentive. Although it is not a substitute for a reflation of the economy, it would allow us to compete with other parts of the country on a more favourable basis.
I have tried briefly to outline the problems, as I see them. I only hope that this Government do something. 388 There are people in my area who believe that, unless this Government act swiftly, there will be no work for many of them for years. I cannot believe that the Government would wish to leave behind them a legacy similar to that left behind by a Conservative Government in the 1930s.
§ 12 midnight
§ The Under-Secretary of State for Industry (Mr. John MacGregor)
I shall endeavour to be brief in summarising and closing the debate, first because the hour is late and we shall have plenty of opportunity in Committee to go into the details of some of the schemes and other points that have been raised, and, secondly, because the Bill concerns only section 8 of the Industry Act. Therefore, it concentrates on specific areas. Now is not the time for a large-scale review of economic and industrial policy. After all, we have done that endlessly over recent weeks in connection with the Budget debates, public expenditure debates and so on.
However, I hope that you will allow me, Mr. Deputy Speaker, to make one or two comments on the remarks of the hon. Member for Whitehaven (Dr. Cunningham), who spoke widely on the subject. It was noticeable that the hon. Gentleman did not address himself to any of the underlying problems facing the economy. He quoted a range of statistics, but he did not address himself to the reasons why we have had to grapple with great problems in the economy over the past two or thee years.
The hon. Gentleman did not take into account the impact of the world-wide recession. I have spent two days in Stockholm at a meeting of OECD Ministers that was concerned with regional policy. The American, Japanese, Australian, New Zealand and many European Governments were represented. One of the most distinctive things about our discussions, which were informal, was that everyone commented on the impact of the world-wide recession on regional and traditional policies and on the general difficulties of countries in dealing with their industries. That was a universal view.
The hon. Member for Workington (Mr. Campbell-Savours) referred to the halcyon days when there were many footloose industries. I do not think that he has taken into account the impact upon all economies of the two major oil crises and the enormous increases in oil prices during the 1970s that have occurred since those days to which he referred that have made a big difference to the overall economic situation.
§ Dr. John Cunningham
Whether there is a world recession is not in dispute. We acknowledge that there is a world recession. There is all the more reason, therefore, to have an industrial strategy that helps us to counteract its impact.
§ Mr. MacGregor
I shall happily come to that question. When the hon. Gentleman quotes figures of increasing bankruptcies and of lower levels of investment, he should realise that they are occurring all over the world.
We are having to deal with those situations after years of economic and industrial decline. The prescriptions that the hon. Gentleman put forward were the prescriptions that have failed in the past. The increasing uncompetitiveness of British industry throughout most of the 1970s has been caused by the enormous increase in unit labour costs compared with our major competitors overseas. The increase in unit labour costs which is a major cause of our 389 increasing uncompetitiveness, and with which we have had to deal, was most apparent from 1975 to 1980, for most of which period the Labour Government were in power. Unfortunately, dealing with overmanning has caused rising unemployment, but on the other hand it has enabled many of our uncompetitive industries to become competitive again and leaner and fitter. High wage costs unrelated to increased production are also responsible for some of the difficulties that we have had to face. Over the past 12 months the signs are that many of them are beginning to come right. That must be the way in which we should tackle our economic future.
The declining profitability and lower return on capital over many years have caused the situation to which the hon. Gentleman drew attention. I shall refer later to the small engineering firms investment scheme. Something that has struck me as I have looked at the need for that scheme is that in the earlier years many engineering firms throughout the country, including the West Midlands, have not been investing in the way that they need to invest to remain competitive. One reason has been the decline of our car industry during precisely the years when the hon. Gentleman's Government were in power.
Many Opposition Members have mentioned the need for planning and heavy reflation. The Government are having to deal with many past mistakes in planning and in major Government intervention. Our constantly higher levels of inflation than those of our major competitors was the other major factor in our economic decline.
The hon. Gentleman talks of the need for an overall strategy. The strategy of our general economic policies which are tackling all those problems must be right. Section 8 schemes play only a small part in the general strategy.
§ Mr. Woolmer
The Minister referred to mistakes from previous planning exercises. Under a Labour Government the two selective section 8 schemes in the wool industry were most successful. Why will the Minister not consider a further scheme for the wool textile industry?
§ Mr. MacGregor
I shall come to that.
The hon. Members for Whitehaven and for Workington and others called for reflation. The hon. Member for Batley and Morley (Mr. Woolmer) referred to the damaging effect of high interest rates on the textile industry. High interest rates have had a major impact on many industries. With the massive reflation that the Opposition call for, interest rates would go through the roof.
I talk a great deal to people in industry all over the country. There is much greater support from industry for our overall strategies than for anything that the Opposition have called for. Industry most wants to see success in our policies in dealing with inflation and interest rates. Reflation on the scale that the Opposition call for would put us in precisely the reverse direction.
I agree with the criticism of my hon. Friends the Members for Bromsgrove and Redditch (Mr. Miller) and for Surrey, North-West (Mr. Grylls) of the speech of the hon. Member for Whitehaven. I am grateful to my hon. Friend the Member for Surrey, North-West for saying that we are getting the framework right and letting industry get on with the job. In overall strategic terms, that is the appropriate answer.
390 My hon. Friend the Member for Bromsgrove and Redditch referred to the small engineering firms investment scheme. I shall not go into the reasons why we introduced it; he knows them well. The intention, as in all section 8 schemes, is to draw out investment that would not otherwise be made. I am conscious of the low level of investment in the engineering industry in the past two years, particularly among small firms.
§ Mr. Stanley Orme (Salford, West)
For the past 20 years.
§ Mr. MacGregor
That is exactly the problem that we are trying to deal with.
§ Mr. MacGregor
That certainly is not the case.
In view of those levels of investment and the difficulties for small engineering firms at a time of recession in affording the investment, we believe that the scheme is cost-effective and generous to create additional investment.
I asked this afternoon for the figures for applications. The scheme was announced only three weeks ago. We are operating it from the West Midlands regional office, as we recognise the scheme's importance to the West Midlands. As of today, we have had 335 applications from small engineering firms. Just under one-third have come from the West Midlands. That shows that the scheme is in demand, will be widely supported and will do a great deal of good.
§ Dr. John Cunningham
Did the Minister say "applications" or "inquiries"?
§ Mr. MacGregor
Applications. That shows how well targeted the scheme is.
My hon. Friend the Member for Bromsgrove and Redditch talked about total expenditure under section 8 and on the regional development front compared with expenditure in other areas in which we are trying to create additional investment, such as science and technology. Some of the figures that my hon. Friend the Minister of State quoted in respect of regional development come within section 7 expenditure and will therefore be more selective than the blanket regional development grants about which my hon. Friend was talking. It is worth considering the various ways in which the Government are encouraging new investment expenditure nationally. About £220 million is being spent under the Science and Technology Act 1965 this year, and that has been an expanding programme under the Government. We believe that that is the correct direction in which to expand.
The small engineering firms' investment scheme is not included in the figure of £80 million. Last year well over £6,000 million went on encouraging investment through capital allowances under the tax system. In considering grant figures, we tend to forget that much of our investment is encouraged through tax reliefs and capital allowances. The tax forgone is well over £6,000 million. That is a significant sum nationally as well as for the regions that are assisted by regional development grants.
I noted that the hon. Member for Thornaby (Mr. Wrigglesworth) concentrated on the need to get industries competitive and to bring down inflation and interest rates. That is precisely the policy that we are pursuing. I hope that he will agree that much of the work that must be done to get industry competitive must be done by industries and 391 work forces working together and not, as his erstwhile colleagues seem to think, by Government. The export performance of many industries at a time of serious world recession is a success story. They are working successfully to regain a creative competitiveness.
My hon. Friend the Member for Surrey, North-West explained what he would like to see done in enabling small firms to take greater advantage of public sector procurement. I am examining what more we can do to help in that direction. I shall be happy to discuss with my hon. Friend on other occasions anything further that can be done in that respect.
§ Mr. Wrigglesworth
Does that include the defence procurement budget? The hon. Gentleman will be aware that proposals have been made by industry with a view to helping small firms in a number of ways. Does he have any input from the Department of Industry on that?
§ Mr. MacGregor
From the Department of Industry? Does the hon. Gentleman mean from the Ministry of Defence? We are examining public sector purchasing generally in relation to small firms. It is rather early for me to say anything positive.
§ Mr. Wrigglesworth
As the hon. Gentleman knows, the Ministry of Defence procurement budget is substantial and has a major impact across broad sections of industry. I am anxious about the apparent lack of input in the past on the part of the Department of Industry into the thinking of the Ministry of Defence on the procurement budget.
§ Mr. MacGregor
I have noted what the hon. Gentleman says. These matters are discussed with Ministry of Defence Ministers.
My hon. Friend the Member for Surrey, North-West talked about the loan guarantee scheme. I can give him the latest figures, which were announced yesterday. They are well up on the figures that my hon. Friend has. At the end of March there were 3,351 loans under the scheme, which means that in the past month another 650 loans have been added to the scheme, which has now reached a total value of £113.7 million. As my hon. Friend rightly says, that is additional bank lending going to small business start-ups and existing businesses who would not otherwise have got that additional lending. I am grateful for his continued support for the scheme.
It is interesting that just over half of the loans are now going to existing businesses, and just under half to new businesses. Again, just over half goes to manufacturing, with the remainder to construction, retail and other service industries. The scheme is continuing to provide a useful service for small businesses. I shall have a word to say about the role of the banks later in response to the hon. Member for Workington.
I do not think that there is any case whatever for the statement of the hon. Member for Batley and Morley that the Government are neglecting the textile and clothing industries. This is not the occasion to be talking about the tough stance that we have taken over the multi-fibre arrangement, but that is undoubtedly one of the ways in which the Government have been doing all that they can to secure the best interests of that industry. We have no proposals for any new schemes in this direction. It is important to look at any proposal for a scheme to ensure that taxpayer's money is spent thoroughly cost effectively. I believe that we shall achieve that under the small engineering firms investment scheme.
§ Mr. Woolmer
The clothing industry, which employs over 300,000 workers, had in total only just over £13 million under this scheme. I urge the Minister to say that, if those industries were to put forward sensible schemes, he would be willing to consider them. I suggest that £13 million for over 300,000 workers in that industry is a small and modest scheme and was unproductive.
§ Mr. MacGregor
There are several other schemes to encourage new technology, new products and processes in industry as a whole, which are open equally to the textile and clothing industries.
The hon. Member for Workington spoke about the statistics of small businesses. It is important to get the whole argument into the correct perspective. First, the figures to which he drew attention, which we were keen to see published in British Business, are the first real attempt to try to analyse exactly what is happening among the self-employed and small businesses in terms of births and deaths. So far there are only one year's figures to go on. They relate to 1980.
It is difficult to say that one can build up a complete picture at this stage out of that. However, I can assure the hon. Gentleman that it is our intention to go on with that work. Later figures are not available to enable the 1980 analysis to be repeated. The hon. Gentleman cannot use the 1980 figures to attempt to assess the impact of the Government measures on small businesses. The 1980 figures must, after all, demonstrate what happened in the years previous to 1980. The main range of measures which we have introduced have been introduced since that period.
Inevitably, the effect of the measures to encourage small businesses will take time to build up. We are trying to reverse the trend in what many of hon. Members feel is a sector which has been neglected for some considerable time. I do not expect dramatic and immediate results. We shall see a gradual build-up. Already, as one goes round the country, one can see a greater entrepreneurial spirit beginning to develop among many people who are now contemplating setting up on their own. Management buyouts are another interesting example of the change that is coming about because of the climate that we are trying to induce. I certainly would not try to draw any conclusions from the 1980 figures.
§ Mr. Campbell-Savours
Will the hon. Gentleman tell us why it is impossible to update those figures? If they are based on VAT registrations, surely the Treasury must have updated figures on the number of additional firms that are registered as being liable to VAT, because VAT operates on three-monthly accounts.
§ Mr. MacGregor
A proper analysis of the figures must be made when they are all in. However, I remind the hon. Gentleman that the Civil Service went on strike in 1981 and, therefore, not all the VAT figures are in. There clearly is difficulty in trying to update the figures very quickly, but we intend to do so. A picture can be built up only over a period of years.
I hope that the hon. Gentleman will forgive me if I do not go into the details now, but perhaps we can discuss them in Committee. However, the hon. Gentleman compared the number of small businesses being set up in the North with the number being set up in the South and South-East. I hope that he will forgive me for saying that he betrayed the attitude of a typical planner and statistician 393 in looking at figures and calling on the Government somehow to reverse that position. He must recognise that we are discussing small businesses that depend on an entrepreneurial spirit, and on the ideas, efforts and enterprise of individuals. I do not know the hon. Gentleman's area as well as he does, but in areas that contain the heavy traditional industries that are in decline it takes time to build up the entrepreneurial spirit that has existed for many years in other parts of the country. That may be a major challenge in regions such as his. I pay tribute to organisations such as the Tees-side Small Business Club, which is endeavouring, with increasing success and great effort, to build up that spirit. Therefore, the hon. Gentleman must take that underlying factor into account.
Many people criticise the banking system, but the hon. Member for Workington overdid it. I know nothing about the case that he raised, but it is easy to pick examples and to draw the wrong conclusions. There must be many cases in which applications for bank loans are correctly turned down. Therefore, we must look much more carefully at the proposition before drawing any conclusions. However, both generally and in relation to small businesses, there have been enormous improvements in the attitudes of the banks in the recent past. That is beginning to show in the number of schemes that they are introducing and in the substantial number of loans that they are directing to the small business sector. The loan guarantee scheme has played a very helpful part in creating that new climate.
The hon. Member for Workington made an extraordinary comment when he criticised the banks for making loans to service the service sector because it did not create wealth. Throughout the United Kingdom and in all advanced economies the service sector will play an increasingly important part in creating jobs. I refer the hon. Gentleman to tourism in his area. Many people in Merseyside say that they would like more effort to be directed to a resurgence of the service sector, instead of concentrating purely on the manufacturing sector. Therefore, the hon. Gentleman made an astonishing comment, and I hope that on reflection he will realise that it was not a fair criticism of the banks.
Above all, in his closing remarks, the hon. Gentleman reflected his misunderstanding of what is required if we are 394 to achieve an economic recovery when he called for a very substantial reflation. That is not what industry is calling for. It wants a modest recovery so that there is not the overheating that has so often occurred in the past. Above all, it wants to see success in reducing Britain's inflation to a level below that of the average level of our competitors. It also wants a reduction in interest rates. The hon. Gentleman's prescription would have the opposite effect. Of course, anyone could produce unlimited schemes for more expenditure by the taxpayer. However, industry is not calling for that. We must consider the effect of such an approach on industry as a whole and especially on successful industries.
The Bill gives us the opportunity to undertake the expenditure on a number of the schemes that my hon. Friend the Minister outlined. The hon. Member for Whitehaven asked what was new about the approach. My hon. Friend the Member for Surrey, North-West answered him fully when he spoke of the new slant. The emphasis in our schemes is on new technology and the Bill's emphasis is on small businesses. I am glad that my hon. Friend the Member for Surrey, North-West supports the Bill, because without it we should be unable to continue with the schemes for small businesses that are so successful. Therefore, I hope that the Bill will gain the support of the House.
§ Question put and agreed to.
§ Bill accordingly read a Second time and committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).