Lords amendment: No. 6, after clause 3, insert the following new clause:
C.—(1) At the end of paragraph 27(1) of Schedule 32 to the Local Government, Planning and Land Act 1980 (exemption from rates of certain hereditaments situated in areas designated as enterprise zones) there shall be added the words "or in respect of any part of an exempt hereditament as regards any period during which the area in which that part is situated is so designated.
§ (2) In paragraph 28 of the said Schedule 32 (mixed hereditaments)—
- (a) in sub-paragraph (2) (mixed hereditament to be rated as a dwelling of the appropriate rateable value), for the word "dwelling" there shall be substituted the word "dwelling-house"; and
- (b) for sub-paragraph (3)(b) (extension of power to make regulations about appeals) there shall be substituted—
(b) the reference to the occupier or person treated as occupier of the hereditament being dissatisfied by the view taken by the rating authority included a reference to the occupier, the person aforesaid or the rating authority being dissatisfied by the view taken by the valuation officer; and".
§ (3) After the said paragraph 28 there shall be inserted— "Hereditaments partially within enterprise zones
§ 28A.—(1) As regards any period during which part only of an exempt hereditament (within the meaning of paragraph 27 above) is situated in an area designated as an enterprise 913 zone, the valuation officer shall determine the portion of the rateable value of the hereditament attributable to the part of the hereditament situated outside the enterprise zone.
§ (2) Where a determination in respect of a hereditament has been made under sub-paragraph (1) above, the amount of any rates payable in respect of the hereditament shall (subject to sub-paragraph (3)(b) below) be the amount which would be payable in respect of it if its rateable value were equal to the portion of the rateable value which was determined under sub-paragraph (1) above.
§ (3) Where the hereditament in respect of which a determination has been so made is a mixed hereditament—
- (a) the valuation officer shall also determine the portion of the rateable value of the hereditament attributable to any part of it which is used for the purposes of a private dwelling or private dwellings and is situated within the enterprise zone; and
- (b) if such a determination is made, the amount of any rates payable in respect of the hereditament shall be the aggregate of the following amounts, namely—
- (i) the amount payable under sub-paragraph (2) above, and
- (ii) the amount which would be payable in respect of it if it were a dwelling-house of a rateable value equal to the portion of the rateable value determined under paragraph (a) above.
§ (4) Section 48(6) of the 1967 Act shall, with modifications corresponding to those contained in paragraph 28(3) above, apply also in relation to questions as to the portions mentioned in sub-paragraphs (1) and (3)(a) above.""
§ The Minister for Local Government and Environmental Services (Mr. Tom King)
I beg to move, That this House doth agree with the Lords in the said amendment.
§ Mr. Deputy Speaker (Mr. Ernest Armstrong)
Amendment No. 6 involves privilege.
With this we may take Lords amendment No. 31.
§ Mr. Cowans
The Minister says that the point is simple. It is so simple that it did not arise in our Committee proceedings.
Let us examine this second afterthought—we may have many more. Setting up the enterprise zones has created many anomalies. The amendment will create yet another. Parts of a site or factory within an enterprise zone will qualify for a drastic reduction in rates. That will create serious difficulties. I am speaking for myself and my right hon. and hon. Friends may not agree, but I believe that it is nonsense to give only part of a site the advantage. The whole site should be included.
There are many examples of sites straddling enterprise zone boundaries in my constituency and a number in the constituency of my hon. Friend the Member for Blaydon (Mr. McWilliam).
§ Mr. Cowans
Team Valley, part of Blaydon, down to the Tyne and nearly as far as Walker and all the shipyards.
A problem arises if part of a site for a factory is on derelict land which comes just inside the enterprise zone. With my long experience of local government, I appreciate that difficulties are always created when lines are drawn on a map, but they can be got over. The firm may wish 914 to develop the whole site. The land that comes inside the enterprise zone may not be developable, but it will get rate relief. If the whole site were included, it might encourage the firm to go ahead and thus create extra jobs, which is the aim of enterprise zones.
The Minister will be creating more anomalies than already exist with enterprise zones. Why not go the whole way?
§ Mr. John McWilliam (Blaydon)
I support my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cowans). We share representation of the largest chunk of the biggest enterprise zone.
Let me give examples of the anomalies that occur. I well recall when the boundaries of the enterprise zone were set. I pointed out that they stopped at the wall of the existing building of T. I. Churchill Ltd. in Blaydon. When I protested about it, I received a letter from the Minister concerned, Lord Bellwin, saying that T. I. Churchill Ltd had the land beyond the factory within the enterprise zone and could develop it for the furtherance of its business. That letter did not go down at all well, because at that time T. I. Churchill Ltd was on a two-day week. In those circumstances, how on earth could it develop the land for the furtherance of its business?
I could enumerate other problems. For example, GKN Galloway is not in the enterprise zone, although it is further in towards the zone than George Johnstone and Company. Both firms are steel stockholders, with plants of identical size, and they compete for the same customers. They are 500 yards apart, but one is in and the other is out.
The problems with the enterprise zones are appalling and ought to be sorted out. I have a letter from Lord Bellwin's office in the Department of the Environment, signed by his private secretary. It says thatconsultants commissioned by the Department to monitor the progress of the EZ experiment … will be conducting further interviews with a sample of firms in these areas and … there may well be a limited number of firms in your constituency … The results of the research undertaken last year have recently been published in the Year One Report of the Enterprise Zone Monitoring Study, a copy of which is available in the House of Commons Library".A copy is not available in the House of Commons Library. It is not in the catalogue of the House of Commons Library.
I wrote to the Vote Office saying that I required a copy for my constituency interest, and I received a note eventually from the Stationery Office which said:Dear Mr. McWilliam,On your demand dated 16 June you have asked for a copy of Year One Report of the Enterprise Zone Monitoring Study. This book is not available from Her Majesty's Stationery Office but is published by Roger Tym and Partners, price £31.57, and is available from 26 Craven Street".I do not have £31.57 to spare to pay for a study undertaken by the Government. Copies of it should be available for hon. Members so that they can make up their minds on the success or otherwise of the policy. I am fairly certain that most other hon. Members—particularly those on the Opposition Benches—do not have £31.57 to spare to pay for a copy of the study. Yet it is impossible to evaluate the Lords amendment or the subject under consideration unless one has taken the trouble to read the study.
I do not wish to mislead the House, so it is right that I should say that I have tracked down a copy of the report. There is one in the economic research section of the 915 Library. A copy was bought by it, but it is not available to hon. Members on the same basis as other publications. I could go to that section of the Library and read the report. Unfortunately, I discovered that fact only five minutes before the debate. Therefore, the fact that there is a copy of the report in a section of the Library does not seem to be of great relevance or benefit to hon. Members.
I protest most strongly that the Minister's own Department is misleading hon. Members in saying that information is available when it is not. I also protest because we are having to consider amendments to the Bill, inviting us to do things which may or may not be sensible, when we have no basis on which to judge them. I ask the Minister to go back to his Department and make inquiries about how in future relevant information may be made available to hon. Members. I do not approve of privatisation which deprives hon. Members of the necessary information on which to base the crucial decisions which must be made now and in the future about enterprise zones.
§ Mr. Allan Roberts (Bootle)
The amendment demonstrates not only that in the past the Government have made a mess of their legislation and have not anticipated problems that might arise, but the inadequate nature of enterprise zones. If the amendment is an attempt to rectify the problems that exist on the boundaries of enterprise zones, it will not succeed.
It enables firms, factories and concerns that straddle the boundary of an enterprise zone to receive, at least to some extent, the benefits of the enterprise zone that are now received by factories, concerns or firms that are inside the enterprise zone. That will not solve the problems that exist for firms that fall inside and outside enterprise zones. It will not rectify the anomalies that exist in the areas where enterprise zones have been established, as I hope to illustrate.
There are two enterprise zones of which I have some knowledge—those in Manchester and Liverpool. When the enterprise zone concept was being proposed and the zones were established, Labour Members told the Government that the zones would not work and would create more problems than they would solve. That was said not only by Labour Members and by members of the Labour Party. Amazingly, most entrepreneurs, business men and industrialists in areas where the zones were to be established also made the point very strongly to the Government.
I have a letter that was sent to me on 29 June 1981 by a body calling itself the Enterprise Zone Action Group. It is based in Manchester and consists of business men, industrialists and people who own enterprises in warehousing, retailing and wholesaling. They wrote to me objecting to the concept of the enterprise zones.
The first of the "principal objections" outlined in the letter was "unfair competition". The letter says thatIn the Service sector, rates amount to a substantial proportion of total costs; the ten years rates 'holiday' therefore enables the beneficiary to significantly undercut the charges of established businesses.The second "principal objection" put forward by the group related to property values, and the letter says thatThere is already clear evidence that the capital values of properties outside the Zone have been dramatically reduced as a direct consequence of the proposed Enterprise Zone.916 The letter then deals with the crux of the matter—employment prospects. It questions whether enterprise zones—spending initially £1.4 billion—would do anything for employment prospects in the areas where they are to be situated. The letter says thatExisting firms are closing their operation in one location and moving into the Enterprise Zone, throwing people out of work in areas of already high unemployment.That is interesting, because many firms have moved only a few hundred yards or a mile within the same area. The amendment would clear up only a small part of the boundary problem. The letter goes on to say thatTrafford Park already has an abundant supply of Service industries; newcomers can only trade at the expense of existing businesses. In consequence, we do not believe that Enterprise Zones are any answer to the problem of unemployment and suggest that the concept be abandoned.That is what the group said on 29 June 1981.
The Manchester enterprise zone has been in existence for a considerable time. I spoke to people in the area, asking them what progress has been made with the enterprise zone and what exactly is happening in Manchester. The people there tell me that the zone is beginning to attract companies, but that the vast majority are local moves, due to boundary problems. No new employment seems to be being created. Most of the companies moving in are warehouses or wholesalers, not manufacturing industries.
I spoke to the city estates officer and the director of industrial development in the city of Manchester. They say that they have attended recent meetings where leases from the council for advance factories and other premises outside the zone are being surrendered by firms so that they can move into the zone. What is happening is a redistribution of employment, not a creation of employment, and the Government are subsidising that redistribution.
§ Mr. Gerald Kaufman (Manchester, Ardwick)
Surely it is not redistribution of employment, but redistribution of lack of employment. Is that not particularly insulting, in view of the Government's disgraceful decision this week not to allow Manchester to continue with its intermediate area status, which has clearly been a party political decision?
§ Mr. Roberts
I entirely agree wih my right hon. Friend, who has a greater vested interest in Manchester than I. My concern for the people there stems from the fact that I was born and bred there, and I hate to see my fellow Mancunians unemployed and suffering as a result of this Government's policies.
Let us consider what the Government have done to justify their enterprise zone policy. They have set up a national study of enterprise zones, and commissioned Roger Tym and Partners, consultants, but they have made sure that the efforts of those consultants will produce a self-fulfilling prophesy by giving them narrow terms of reference. The consultants can judge only what happens inside the enterprise zone, how many jobs come there, and how many are created there. They have not been given terms of reference whereby they could consider the effect of the enterprise zone on the areas in which it is situated. They will not be in a position to produce a report which will prove—if they could—that no new jobs are being generated, or that the number of jobs in general has not been increased by the enterprise zones.
917 Let us take another enterprise zone, in which I am directly concerned as a Merseyside Member, and that is the enterprise zone in Liverpool, which was established at Speke and which probably covers the largest area of land of any of the enterprise zones. Again, it was not only I and other Merseyside Members who told the Government that it would not work, that it was a peripheral palliative, and that it would not create jobs.
Surprisingly, business men and industrialists in Merseyside were also opposed to the Government's proposals. I received a letter at the time when the enterprise zones were being established from McGregor Cory Warehousing, which has an industrial complex on Dunnings Bridge Road in Bootle in my constituency. The letter was written by a Mr. Singleton, the Liverpool area manager, and it said:The Public Warehousing Industry is under a serious threat by reason of its inclusion in the Enterprise Zone concept which, amongst other attractions, allows ten years rates free tenure of property. This leaves established businesses outside the Zones at a serious disadvantage.Local Authority Rates are increasing well beyond general inflation levels … Public Warehouses are affected by the Enterprise Zones legislation more than most other industries because:—Rates account for some 23 per cent. of total costs or just under £5,000 per employee.Detailed representations have been made to the Minister who has simply brushed aside our arguments despite our having proved quite conclusively that his Officials made serious errors of judgement and fact when they looked into the costs of Public Warehousing.We do not believe"—this is what the amendment is about—that arbitrary lines drawn on maps by Officials in any Government or Public Department should determine the success or failure of an established business. We believe in fair competition"—the Labour Party believes that; apparently, the Conservative Party does not——we thought that a Government which introduced the Competition Act did also, but we have a Minister who believes we should 'wait and see' what the effect will be 'after' the Zones have been started".Let us look at the Liverpool enterprise zone. I spoke to the Merseyside county council, the Liverpool district council, and others involved in the Merseyside Speke enterprise zone. I was told that, in general terms, the enterprise zone seems to have had no impact on Liverpool. At a meeting of the AMA on 2 April, the Liverpool city council wrote a report which said:There have been no lettings to report".To give the Minister his due, the zone is a strange area. It should never have been declared in Speke. It is in the wrong place, because it is away from the problems of the inner city and the docklands. It is out near the airport. If it works at all, it will detract considerably from the work that is being done in partnership schemes and by the Merseyside development corporation.
As well as being in the wrong area, the make-up of the enterprise zone is strange. It consists of three main parcels of land in three different ownerships. First, there are the closed British Leyland factories—which, if the Government's policies had been different, might not have closed in the first place. Secondly, there are the closed Dunlop factories—which Dunlop, as a multinational company, took away so as to manufacture tyres in Europe as a result of the Common Market's proposals for free movement of capital. Thirdly, there is the airport land.
918 There is also the English Industrial Estates Corporation which was there before the enterprise zone was declared and is still there. It builds advance factories and tries to let them. Some of the advance factories have been let—some of them were let before the enterprise zone was declared—but many of them are still empty and unlet. Since the declaration of the enterprise zone, there has been a deafening silence. There have been a few rumours. There has been a rumour of a bid for the British Leyland plant, but that is merely a rumour. I hope that the Minister will confirm or deny it. Does he know what is happening to that plant? Part of the site of the Dunlop factory has been cleared, and other parts have been made available for the storage of containers—that is hardly likely to produce many jobs—used on the docks.
§ Mr. Cowans
My constituency suffers the same problems. What has exercised my mind, and will no doubt exercise that of my hon. Friend, is that outside an enterprise zone even empty buildings are rated, but, as I understand the arrangement, within an enterprise zone a saving in rates can be made by emptying the building and doing away with the jobs. Is that not counterproductive, or is it one way in which the Government help unemployment by increasing unemployment?
§ Mr. Roberts
I am interested to hear what my hon. Friend says. Although I have evidence of much inactivity in the Speke enterprise zone, I have no evidence of factories being emptied to avoid payment of rates because they are exempt from the empty property levy. That is something that I should investigate.
Some activities in the Speke enterprise zone do not need a planning application to the local planning authority, but some do. There has been only one planning applicaton to the local planning authority, and that was for shops on the frontage of the British Leyland plant.
The success of the Liverpool enterprise zone can be judged by the fact that a Mr. Jackson was appointed as the man in charge of the enterprise zone. I believe that he came from Littlewoods. He was straight out of the Heseltine task force, a Whiz kid, appointed to run the enterprise zone. My information is that Mr. Jackson is thoroughly disillusioned and has given up his job, because he has seen that the project has had no impact. It has been an absolute shambles and a waste of time. At least we have some palliatives, which appear to be doing something, in the Government's other initiatives.
The Government should withdraw the amendment and abandon the whole idea of enterprise zones before they waste more taxpayers' and ratepayers' money. It was an exercise that did not provide jobs, and it detracts from the work that other agencies are trying to do in the areas where they are situated in trying to create jobs and improve the environment.
Britain and Merseyside should be one vast enterprise zone. Enterprise zones would not be needed if we had the right economic and industrial policies. Merseyside does not need an enterprise zone out at Speke. It needs action in the dock and inner city areas. There is need for more money to be given to the urban development corporation which should have a bigger area, especially in my constituency of Bootle, to look after. We want development area grants for dock and dock related activities now denied because those areas are not involved 919 in manufacturing. There is also need for the Stanley district plan area of Sefton, which has the same problems as the inner cities, to be brought within the inner city area partnership.
The whole attitude of Merseysiders to the enterprise zone, the garden festival and other palliatives of the Secretary of State that do not solve any problems is summarised in a poem sent to me by a constituent. My constituent writes:'No crock of gold', the city's told,But plants and shrubs and trees;To help assuage the people's rageAnd social conflict ease.What shall we do with violets blue,My dearest Heseltine?Shall Merseyside regain her prideWith creeping columbine?Love-in-a-mist from monetaristShall not relieve our pain,Nor blaze of green espouse the sceneOf all your party's shame.It's work we quest, not dogma dres'tTo ambush and waylay;With Antoinette—'twas cake they ate,With you, 'tis blossoms gay!
§ Mr. Ted Graham (Edmonton)
The Minister has been left in no doubt that among Opposition Members there are many caustic critics of the concept of the enterprise zone. I believe that the hon. Member for Ripon (Dr. Hampson) and the hon. Member for Hornchurch (Mr. Squire), who has the scars, are the only Conservative Members present who served on the Local Government, Planning and Land (No. 2) Bill. I understand that the hon. Member for Hornchurch intends later in our proceedings to seek success where he has so far failed. My right hon. Friend the Member for Widnes (Mr. Oakes) and myself also served on that Bill.
As the Minister has pointed out, the issue before the House is not perhaps of massive importance, but the issue of enterprise zones is important. I hope that the Minister will take the opportunity not only to answer some of the questions that have been asked but to expand upon the standing of enterprise zones in the armoury of weapons that the Government have fashioned to carry forward their brand of entrepreneurial philosophy.
My right hon. Friend the Member for Manchester, Ardwick (Mr. Kaufman) was right to point out that this Government's local government and local government finance legislation has been one of the saddest and shabbiest attempts to change the face of local government since the war and probably over an even longer period. My right hon. Friend referred to the shambles of the Local Government, Planning and Land (No. 2) Bill. The hon. Member for Woolwich, East (Mr. Cartwright) may have served on the Committee which considered that Bill.
§ Mr. Graham
It is significant that the concept of the enterprise zone reached the Local Government, Planning and Land (No. 2) Bill only at the thirty-ninth Committee sitting. It was not contained in the Bill as drafted. This was not one of those Bills that was added to, chopped about or mucked about in the other place. The enterprise zone, when it saw the light of day, appeared as amendment No. 831 but amounted, in fact, to a schedule of six pages that covered six pages of Hansard. It was a massive injection into the Bill.
920 The Opposition had already taken the view that the Local Government, Planning and Land (No. 2) Bill was not merely one Bill but a number of Bills. There was sufficient material in the Bill relating to direct labour organisations to merit separate legislation. It also dealt with the whole concept of local government finance, particularly rates reform. That would also have merited a separate Bill. The Bill's provisions relating to planning legislation and the responsibilities to be allocated to districts and counties would also have merited separate legislation. If my hon. Friend the Member for Newham, South (Mr. Spearing) had been in his place, he would have argued that the part of the Bill relating to urban development areas would have merited a separate measure. Another example was the section of the Bill that related to new towns.
Miscellaneous aspects of the Bill related to caravans, derelict land, allotments, allowances and the publication of information. In all, there was sufficient in the Local Government, Planning and Land (No. 2) Bill to merit six or seven separate Bills. This was the state into which the Government's legislation and thinking on local government had stumbled in 1979 and 1980.
It was not the Chancellor of the Exchequer who conceived the idea of the enterprise zone. The concept already existed in a number of countries. It is possible that the name of Professor Hall will be mentioned. The name was pleaded in aid by the Minister in Committee. There is, however, no doubt that the Government were seeking to find initiatives that might cost some money but also portray the Government as an enterprising, energising and galvanising Administration full of good intentions. Two years later, having heard the experiences related to the House by my hon. Friends the Members for Newcastle upon Tyne, Central (Mr. Cowans), for Blaydon (Mr. McWilliam) and for Bootle (Mr. Roberts), the Opposition are entitled to examine what the amendment that we are asked to approve means.
There is no doubt that the enterprise zone concept was seen by some as providing opportunities to many people to build and to take on extra responsibilities. It emerges that activities have not moved from one part of the country to another but from one local area to another or even from one street to another. I hope that the Minister will respond sensibly to the difficulty revealed in the document to which reference has been made.
I remind the Minister that we are discussing the first report of the enterprise zone monitoring study. My hon. Friends the Members for Bootle and Blaydon rightly pointed out that if helpful experience is available they would like to be able to read it. I understand that copies are available but they cost more than £30. If the Minister wishes to educate hon. Members and the public, he should ensure that that document is available in the normal green form system. We should ensure that relevant experience is well known. If hon. Members are to carry out their duties efficiently and effectively with regard to enterprise zones, we must have the latest information.
Will the Minister spend a little more time than his colleague when he was recently invited to answer questions about rent levels and their relationship to rates in enterprise zones? No doubt the Minister will tell us that people were induced to take their business, money and skill to enterprise zones because it would be cheaper to operate there because of allowances, relief, speed with regard to planning, a reduction in bureaucracy and, above 921 all, because they would not have to pay rates. I am sure that the Minister is aware of that. The hon. Member for Essex, South-East (Sir B. Braine) askedhow many enterprise zones have been designated; how many are operative; and how many representations he has received in respect of all zones, whether designated or operational, for firms located just outside zone borders about the difference in rate burden borne by them and by firms within the zones.
§ Mr. McWilliam
I am grateful to my hon. Friend for giving way. I know that the Minister has received representations, both from me on behalf of most firms that are just outside enterprise zones and directly from GKN Galloway, T.I. Churchill Ltd. and the Federation brewery whose products occasion some delight among hon. Members. I know also that he has received representations through party political affiliations. GKN used to make a large contribution to Conservative Party funds. It has stopped doing so and has made strong representations.
§ Mr. Graham
I am grateful to my hon. Friend. I am sure that the Minister will not deny that he has received representations. It is a question of the weight that the Minister is prepared to attach to those representations and whether he is prepared to acknowledge the problem.
In his reply on 11 June to the hon. Member for Essex, South-East, the Minister of State said:An exact figure for the number of representations about the rates exemption cannot be given, but we are well aware of the concern which has been expressed, particularly by the public warehousing industry."—[Official Report, 11 June 1982; Vol. 25, c. 165.]I do not suggest that the Minister is unaware of the anxieties or that he suggested that problems would not arise when the matter went through Committee two years ago. Now that the Minister's foresight has been borne out and the problems are obvious to the affected firms, what does he intend to do?
Only last week the hon. Member for Ealing, North (Mr. Greenway) said:It is senseless that people should be encouraged to move out of one area into an enterprise zone thereby causing the loss of jobs in one area and the creation of jobs in another. Is that not silly?The Under-Secretary replied:That inference cannot yet be drawn."—[Official Report, 23 June 1982; Vol. 25, c. 286.]It may not be silly if the Government's economic management results in that type of circumstance but we are entitled to some explanations.
§ Mr. Cowans
The Under-Secretary said that that inference could not be drawn. It can, as there are two firms in my area that wish to expand. However, they have discovered that because of the enterprise zone, a national concern that trades in the same type of commodity has moved into that enterprise zone and looks set to cause the closure of existing local businesses because it enjoys the advantages of being in the enterprise zone. The Minister freely admitted that there were problems. Not only could he have accepted that the entire site should have its rates reduced; he could also have insisted that the rates of firms in the same line of business, whether inside or on the outskirts of an enterprise zone, should be reduced to equalise competition. I understood that to be his policy.
§ Mr. Graham
Although the matter has been expressed in a partisan way, the Minister should be aware that the 922 Opposition recognise that there are Labour-controlled authorities that, in their desperate search for jobs, have been willing to grasp at almost any straw. The enterprise zone concept appeared two years ago to give them an advantage. They wanted that advantage. It should be borne in mind that many zones have not been operating for two years—many have been in existence for only a matter of months. The Minister should say something helpful about the problem.
There remains the vexed question of the possibility of landlords and developers, recognising the attraction of enterprise zones because companies must pay no rates, increasing rent. For example, if the rent for a factory is £50,000 a year and the rates that must normally be paid are £20,000 a year, the combined cost to the entrepreneur is £70,000. Because rates are not paid the cost is only £50,000. It is only human nature that the landlord may ask for more—say £60,000 or £65,000—as that is still less than would otherwise be the case.
I hope that the Minister will say that there is no evidence—although I believe that there is—that taxpayers' money in the form of rate relief is being exploited in that way. The Under-Secretary said that £10 million was likely to be given to local authorities in England in compensation for gainsaid rates in 1982–83. I hope that that sum will encourage people to move into enterprise zones and that it will not merely be a hidden subsidy to developers or landlords who rake in money in the way that I have outlined.
The Minister may well say that evidence is being sought. I picked up in The Economist earlier this year a piece of evidence from the Trafford Park zone, showing that property values inside the zone had risen by 30 per cent. while those outside had fallen by 25 per cent. in the 12 months just ended. Perhaps it is facile to argue that property values are depressed outside and inflated inside the zone—and rents will reflect those values—because there are so many inducements, but we are certainly entitled to an answer from the Minister on that.
The Minister should also give us some idea of the job situation. To be fair to the Minister, in Standing Committee he told us what he hoped would happen and in the past two years a great deal has happened in the economy that he perhaps could not have anticipated. Nevertheless, he should tell us not only how many jobs it was hoped would be created but whether the jobs created by the factories that were opened were merely transfers from factories outside to factories inside an enterprise zone because it was cheaper to operate there. Secondly, how many firms went into the enterprise zones but have now either gone out of existence or moved out of the enterprise zones because they have not turned out to be so attractive as was hoped? In this short debate, the Minister has the opportunity to set our minds at rest on that.
I attended a conference recently at which representatives of the new towns of the North-East were greatly concerned that Government money was simply chasing itself all over the place. The public are investing money in new towns, in enterprise zones and in special development areas, all of which are advertising and trying to attract business to themselves. The new towns were seriously asking what was the point of the Government encouraging, for instance, an enterprise zone in Hartlepool with inducements to industrialists to go there when they would be tapping the same source of firms which might bring jobs to the new towns. I had not noticed my hon.
923 Friend the Member for Hartlepool (Mr. Leadbitter) sitting behind me, but I am delighted to see him as he has taken a keen interest in the concept of enterprise zones. Nevertheless, a dilemma that the history of enterprise zones has now revealed is that, however good may be the Government's intentions in trying to find an answer to some of the regional problems, other people within the regions, if they are not actually looking upon them with a jaundiced eye, are certainly wondering what is the point of one area benefiting if it is to the disbenefit of another.
As has been mentioned, the concept of enterprise zones comes from Hong Kong and the Far East. It was believed that if the climate in which successful enterprises had flourished in the Far East could be translated to some of our regions they, too, would succeed. That completely misses the point. Our argument is that if resources are available to sustain industry there is a massive job for the Government to do throughout the economy. That means not merely shifting a few hundred jobs around some part of the North-East, the North-West or Scotland, but an economic and employment initiative that will really solve the problems. We do not believe that the Government's efforts with enterprise zones are anything like what is required. We shall not oppose the amendment as it attempts to deal with an anomaly, but the Minister will have to give some very satisfactory answers to the other problems that have been exposed in the debate.
§ Mr. King
With the leave of the House, I wish to reply briefly to the points raised. I think that the House will have some sympathy with the last example chosen by the hon. Member for Edmonton (Mr. Graham). He was no doubt quoting when he asked what was the point of helping Hartlepool, only to turn around and find his hon. Friend the Member for Hartlepool (Mr. Leadbitter) sitting behind him, no doubt well able to deliver a short, sharp answer to that. I think that some of the points that I shall develop will make the situation clear.
The hon. Member for Edmonton is always extremely fair and it was honourable of him to accept partial responsibility for the need for the amendment. He acknowledged that he was a member of the Standing Committee on the Local Government, Planning and Land Bill and we all failed to spot a point that should have been covered and which could have been raised by any member of the Committee.
§ Mr. Graham
The Minister must recognise that the problem now is where the line was drawn on the map. The designations were not known to the Committee. If proper care had been taken with the precise designation of the area, the problem would have been foreseen.
§ Mr. King
I think that the hon. Gentleman has answered his own point. In designating enterprise zones, lines must be drawn somewhere. That is inevitable. One then runs into the problems that we now see. Any hon. Member could have spotted the difficulty, but none of us did. I fully accept, of course, that the Government have the ultimate responsibility. We are now seeking to put this right and to overcome this small technical point.
I could take exception and say that this is a very narrow debate concerned merely with the straddling of boundaries, but if the House is to consider this narrow point properly, it is perfectly fair to ask certain questions 924 about enterprise zones. Therefore, so long as I do not stray outside your tolerance, Mr. Deputy Speaker, I shall seek to reply to some of the points that have been raised.
It was clear that the hon. Members for Newcastle upon Tyne, Central (Mr. Cowans) and Blaydon (Mr. McWilliam) felt considerable hostility towards the enterprise zones and that they regret them. That is interesting. No doubt it would interest the workers of Scotswood at the new Vickers factory in Newcastle which I had the pleasure of visiting. That will now be the largest enclosed manufacturing construction in Europe. Vickers faced a very difficult situation at its old, awkward, rundown site at Elswick, and the whole future of the plant was very much in doubt. I have it on very good authority that the project might never have gone ahead and that it was the introduction of the enterprise zone as much as any other factor which resulted not in the loss of all those jobs but in their re-establishment in the most modem new facility which is the best hope for the future of those people. I am sure that those people, whether or not they are the hon. Gentleman's constituents, will note with interest his condemnation of the enterprise zone and the criticism and hostility that he has expressed.
§ Mr. Cowans
The Minister must not mislead the House and people outside, as he now seeks to do. As Hansard will show—if he had listened, he might not be making such statements now—I was pointing out the anomalies that had been created, and I asked three specific questions because the Minister now has the opportunity to clear up some of the anomalies. Of course I welcome Elswick, but the Minister must also remember another aspect.
This may be new knowledge to him. When Scotswood closed, Vickers intended to develop the Elswick site. Since the establishment of the enterprise zone, Vickers has moved back to Scotswood. I welcome that, but it leaves a vacant site inside the enterprise zone.
The Minister must not mislead the House. He knows that there are anomalies. He has an opportunity to put them right. No one suggests that the enterprise zones should be washed out, but the Minister must inform the House of exactly what is said, and not his interpretation of it.
§ Mr. King
I listened to the hon. Gentleman's speech, but by the time he had finished with the anomalies one was left with the feeling that he has a strong distaste for the whole experiment. That was certainly my impression, and why I made my comments. If he is now saying that he supports the enterprise zones, I welcome that.
I agree that there are anomalies. I told the Committee on the Local Government, Planning and Land Bill that there would be difficulties. The country is in economic difficulty and, as a Minister, I am endeavouring to get things going. But, here we go again. We have the "do nothing" brigade who advocate doing nothing because to do something will mean problems, difficulties and anomalies. There always will be such problems, but for some that is a reason for doing nothing.
I do not know whether the hon. Gentleman supports regional policy. Regional policy in the North-East is based on the whole concept that there will be discrimination. Some areas will receive benefits and advantages. That is accepted. My constituency is next door to an assisted area. Ever since I came into the House I have lived with exactly those criticisms. Just over the boundary there are 925 advantages in benefits, investment grants and regional development grants, all enjoyed by companies. There was also the regional employment premium, although that has now gone. I have lost employment for my constituents because firms could go elsewhere and get greater benefits.
I have the problem of firms being set up in the hon. Gentleman's constituency, or close to it, in competition with firms in my constituency and enjoying regional development grants for the full capital investment of new plant. Those grants are not available to my constituents. That bias, if one can call it that, has always been built in to regional policy. With enterprise zones that same concept and approach is heightened because the areas are that much closer. The disparity is all the more visible.
Enterprise zones are an experiment to tackle some of the most deep-seated problems in the areas that need such zones. One need only look at some of the problems in the sites contained in the enterprise zones. I have had the pleasure of visiting Hartlepool, as the hon. Member for Hartlepool knows, and seeing the enterprise zone and the possibilities that exist there.
One of the most difficult tasks that I have had to undertake as a Minister is to traverse the Trafford Park enterprise zone in Manchester to find fair boundaries. It is arbitrary and difficult. We tried to find the fairest possible basis. I accept that the scheme is not perfect, but it is a determined attempt to achieve a fair balance in a difficult area.
§ Mr. Kenneth Lewis (Rutland and Stamford)
My constituency is in exactly the same position as my right hon. Friend's. We have competition from new towns and areas receiving special grants, and so on. An enterprise zone is not too far away. I agree that the Government must have a range of options in seeking to help the worst areas. However, as unemployment has spread throughout the country there are some areas, and parts of some areas, where unemployment was low but is now increasing. In some of the good areas certain parts have an unemployment rate approaching 12 or 13 per cent. Does my right hon. Friend agree that his Department, and the Government as a whole, must now look at the rating system and the possibility of derating the parts of industry that even in the good areas may be feeling the draught? Should they receive a reduction in rates to help them to compete with the assisted areas?
§ Mr. King
If we take on the whole subject of industrial derating I am sure that we shall go sharply out of order.
The phrase "fair competition" has been used. I accept that it is not fair competition in the sense that regional policy has not been fair competition. There is a deliberate tilt. The view has been taken by Governments of both parties that there is a need deliberately to distort the basis to encourage particular areas.
§ Mr. McWilliam
Before the Minister dismisses that point so sharply, does he accept that, although there is an argument for a regional distortion in competition, there is no argument for two factories—GKN Galloway and George Johnstone—that are 500 yards apart and producing the same product when one enjoys the advantages of regional policy and the other does not? That has happened.
§ Mr. King
That is the point I have made. It has accentuated a state of affairs that exists under regional 926 policy. For example, there is a company in my constituency making central heating pumps. It is competing with a company making the same product—a foreign company at that—that has been set in a new town in the North East that received regional development aid. It would not matter whether those companies were 500 yards apart or 300 miles apart. That distortion of competition is keenly felt by the company in my constituency. It is unable to get the subsidy on its investment that is available to its competitor.
The hon. Member for Blaydon made a very serious allegation against the Library that has caused me some confusion. I understand that a copy of the report was deposited in the Library. The hon. Gentleman said that someone in the economic affairs section has a copy for which he paid. There appears to be something curious that must be investigated. This is the first time that I have heard that if a document is owned by the economic affairs unit in the Library it is not available to Members—that it is a private copy. However, I am assured that a copy of the report was deposited with the Library.
This is the first report. It does not deal with the progress of enterprise zones. It records what happened before the enterprise zones came into operation. The subsequent monitoring reports, the first of which will be produced in the autumn, will show what changes have occurred. The reports will not be limited to the enterprise zones. We are also looking at what is happening outside them. That is important. That is one of the obvious aspects to consider and it has not come as a blinding revelation. We want to know whether firms are moving in from elsewhere or whether new firms are being set up. A rough check has been kept for the Clydebank enterprise zone. It shows that half the firms are new firms.
We are in the early stages. I remind the House that the most recent enterprise zone to be set up is on the Isle of Dogs. That was opened by the Chancellor of the Exchequer as recently as 21 May. My hon. Friend the Member for Rutland and Stamford (Mr. Lewis) said that his constituency was close to an enterprise zone. The enterprise zone at Corby was one of the first to get under way and it has moved extremely fast. We do not have detailed monitored results at this stage, but we are trying to keep a rough idea of progress. The results vary in different parts of the country. Corby is probably in the lead at the moment, but there are encouraging signs of activity in a number of enterprise zones. The Isle of Dogs zone, being the most recent, has hardly got under way.
I understand that things are afoot with regard to the Leyland factory at Speke. It is possible that contracts will shortly be exchanged with the developer who proposes to split the factory into smaller units that can be brought back into more effective use.
Rents present a difficult problem. In a sense, one could say that that is sufficient objection not to do this at all. We cannot prevent some leakage or slippage of enhancing rents in such areas. A gentleman much involved in an enterprise zone told me that it was not a bad thing if some of the rents did rise, thereby encouraging more construction and activity by making these areas economically more viable. That is a slightly circular argument. The point is that there is a time pressure on developers and owners to get these enterprise zones into development. If they hike the prices too high and do not attract people to take advantage of these benefits, time will slip away. We must remember that this is a 10-year 927 exemption benefit. Therefore, the longer it takes to being these areas into development, the more people will lose some of the benefit that flows from them. That is the principle upon which the rate concession has been established.
§ Mr. Graham
The Minister referred to Corby. My information is that the rental values in the Corby zone have gone up from £1.80 to £2.20, an increase of about 25 per cent. I appreciate that the problem is complex. However, if we are trying to induce people to come into such zones and the total package of non-rates and grants equates with what exists outside the zones, what incentive is there if the rents eat up the benefit of not paying the rates?
§ Mr. King
I am not sure whether the hon. Gentleman understood the point that I made. Property owners in the enterprise zones have a diminishing asset. They must attract people fast, otherwise the assets steadily become worthless. Independent market forces will, therefore, drive people to let the properties and get them occupied, because that is where the benefit lies, otherwise they will lose the benefit of their rates exemption. That is a judgment that they will have to make.
In certain areas, the rents went up but have now come down simply because of the failure to attract tenants. It is for the developers to worry about whether they attract the tenants. If they do not, they will not get the rents and it is very much in their interests to do so.
It is still too early to give a clear picture about the enterprise zones, but there are some encouraging signs. My visit to the new Vickers factory was one of the most encouraging that I have made. Developments in respect of a number of enterprise zones hold real prospects.
The House will understand that this is an experiment that the Government believe was well worth trying. It is an alternative approach for precisely the reasons that I am sure the hon. Member for Hartlepool would have given had he intervened. New towns have enjoyed considerable benefits over the years. That has been a form of incentive attraction. Some of the old towns that want help to revive their inner city or derelict areas are entitled to these enterprise zones. The Government believe that this is a further sensible weapon in the armoury of assistance to help tackle some very difficult problems.
I have strayed wide of the amendment, but I hope that my comments have been of interest and I hope that the House will support the Lords amendment.
§ Mr. Ted Leadbitter (Hartlepool)
The Minister has coaxed me to say a few words, but I shall not be critical of any attempt to attract employment to areas where work is badly needed. All Governments have suffered the dilemma of finding an adequate solution to this problem. It has been a very costly business ever since the war, beginning with the Hailsham report, to obtain work in the depressed areas.
I made a personal approach to the Prime Minister about private enterprise zones and received an immediate answer within 24 hours. It pleased the county council and the Hartlepool district council when an enterprise zone for that area was added to the list. I have also received co-operation from the Minister with regard to boundaries. Although I was not successful in persuading him of my case, I accepted the strength of his argument. The potent 928 factor was that this was a high-cost job provision. That must be borne in mind when we consider the armoury of aids to the regions.
I apologise for intervening, but I do so only because my constituency has been mentioned. There is understandable and reasoned anxiety about existing industries in the enterprise zone areas. I do not intend to name companies, because that is not the way that I wish to proceed. I deal merely with the principles and the general evidence and urge the Minister to give some indication, which he has more than partly given, that monitoring must accompany a new idea such as this.
My experience is that even in the short term there are fly-by-night developers, such as the high-risk entrepreneurs, who love to play with other people's money and who attempt to produce employment in constituencies such as mine where there is 25 per cent. male unemployment and 2,000 young people without a full-time job. To me, such people are more nauseating than muggers or drug pushers because they deliberately throw a spanner into the efforts and work of Ministers.
I know from experience that certain people have talked glibly of developments worth millions of pounds and that within months they have skived off and left a trail of company debris behind, not to mention £1½ million of unsecured loans. Small companies have been crippled by such action.
I know of a company that moved only eight or nine miles into an enterprise zone and told the workers "Unless you travel here, you are finished." That has been followed by a change in the rate for the job. As a result, low income workers with transport problems are in understandable difficulty.
An employer can move only a short distance and enjoy the benefits of the rent moratorium, the rate rebates and all the rest that goes with the frills of the enterprise zone initiative.
A company in my constituency closed with £1 million worth of engineering orders. A nationalised industry closed it, yet another company was given £¼ million of public money from British Steel Industries Ltd., from the National Westminster Bank, from the English Industrial Estates Corporation and the county authority. I shall not identify the company in the House, but I shall write to the Minister about it because what I have to say is serious. The company received more than £200,000 without any examination of the entrepreneur's previous background, or where he had been in the past five years.
The House might think that incredible, but it happened because I have had the officers of the lending bodies before me and they have had to admit it.
§ Mr. Kenneth Lewis
The hon. Gentleman gave a list of names of the institutions which supported the company, including a bank and a county council. Is he saying that the representatives of the bank and the county council did not examine the facts, or were not able to ask the kind of questions that would give them an impression of the status of this man?
§ Mr. Deputy Speaker
Order. The hon. Member for Hartlepool (Mr. Leadbitter) should not be led astray. If we go down that road we shall be led far away from the Lords amendment.
§ Mr. Leadbitter
I say no more than I have said, Mr. Deputy Speaker, because I shall be writing to the Minister.
929 I can confirm that there was no knowledge of the past professional background over a period of five years of the person who benefited. It is important to bear that in mind.
I say this with some feeling because in the House there are hon. Members on both sides who have spent much of their public lives trying to solve the problem of unemployment in depressed areas. The examples that I have given are but a few. They emphasise the need for the Government to say to those responsible for enterprise zones that it is now time to monitor and to set down guidelines. Existing industries must not be put at risk.
Companies should not be allowed to move short distances, discarding employees and taking on others at less cost because of the benefit of a new deal. Many of us are anxious to help the Government. Harsher criticisms could have been offered to the Minister on the subject on enterprise zones than those that I have offered.
However, we have the enterprise zones and it is our job to try to make them work. Therefore, the Minister will have the full support of hon. Members so that together we can make the enterprise zones more viable and less of a worry to other industries.
§ Question put and agreed to.—[Special Entry.]
§ Lords amendment No. 31 agreed to.