NEW REGIONAL DEVELOPMENT GRANTS

HC Deb 04 June 1984 vol 61 cc65-113

Mr. Williams

I beg to move amendment No. 55, in page 7, line 21, after 'provision', insert 'and preservation'.

Mr. Speaker

With this it will be convenient to take the following amendments:

No. 56, in page 8, line 8, at end insert 'as well as creation of new jobs'.

No. 15, in page 9, line 22, after 'provided', insert `maintained or safeguarded'.

No. 16, in page 9, line 29. leave out from (b) to `aggregate' in line 30.

No. 17, in page 9, line 31, leave out from 'full-time' to end of line 34.

No. 22, in page 10, line 7, after 'provided', insert `maintained or safeguarded'.

No. 25, in page 10, line 26, after 'provided', insert `maintained or safeguarded'.

No. 28, in page 10, line 38, after 'provided', insert `maintained or safeguarded'.

No. 34, in page 11, line 47, after 'provided', insert `maintained or safeguarded'.

Mr. Williams

This group of amendments brings us to the heart of our disagreement with the Government on the strategy underlying their approach to the new regional policy. The Government seem almost to disdain the preservation of jobs. Of course we want to do all that we can to create jobs, but, particularly in a recession, the preservation of jobs is of equal significance, and we have argued consistently that the basic technical decisions taken by the Minister to exclude replacement investment and modernisation investment will make it more difficult to preserve existing jobs. We all know how difficult it is to bring new jobs into an area and to generate new jobs.

In view of the present astronomically high levels of unemployment in the assisted areas, it is astonishing that the Government should contemplate a reduction of £1,000 million in regional grant over the next five years. Moreover, that saving will be on only two headings. The Minister of State said in Committee that of the £150 million to £200 million savings per annum about £105 million was to be saved on modernisation and £70 million on replacement. I appreciate that those are approximate figures. The Minister argued that the savings on replacement were required by the EEC, but we disputed that bitterly. As I made clear in Committee, when similar representations were made by the EEC in 1978–79 I refused to countenance them. For the major saving on modernisation, however, the Minister cannot claim EEC protection. As he admitted in Committee, those savings are required not by Brussels but by the Government. That proposal is a piece of innovative destruction of their own. The cut of £1,000 million over the next five years is just for starters. Here I take up the point made by my right hon. Friend the Member for Glasgow, Govan (Mr. Millan), which the Minister disputed. If the information given to the Committee by the Minister was correct and virtually the whole of the £200 million per year is to come from the elimination of replacement and modernisation investment, the £1,000 million saving in the next five years will be before any changes in dealing with new capital intensive investment, on which the Minister originally argued for savings and for which we all agreed that there might be some case. The £1,000 million is to be taken—or stolen—from the regions before the Government start on that and before any changes in the boundaries. The Government do not even have to cut the total assisted area map. They have only to cut the development and special development areas within it because regional development grants will no longer be available to the intermediate areas in any case — a matter about which we pressed the Government strongly in Committee. The £1,000 million will be taken from the regions before the Government make further savings on capital intensive investment, boundary changes or alterations in the rates of regional development grant.

The true cut in expenditure on regional policy will thus be massively greater than that stated by the Minister. The Minister seems to find that amusing. Perhaps that is because his constituency is not in an assisted area.

Mr. Norman Lamont

Cheap.

Mr. Williams

That is what the Government are trying to get — regional policy, unemployment and loss of industry on the cheap. Let no Conservative Member use that word when we are trying to defend the jobs of people in areas with 20 per cent. unemployment, most of it generated by the stupidities of the Conservatives' first "opportunity" Budget. Let us hear no more comments of that type from Ministers or we shall have to go into even greater detail about the way in which the Government have created the present ludicrous situation.

7.15 pm

In Committee, the Minister said that Labour Members were misty-eyed about manufacturing. The Government have frittered away manufacturing employment far more rapidly than any of our competitors. In a written answer on 27 February the Department of Employment admitted that for every 100 manufacturing jobs when the Government came to office only 77 remained by December last year. The Government had lost 23 out of every 100 jobs. The figure for France and Germany was 90. They had lost only 10. For Sweden it was 92. Only eight jobs per 100 had been lost. In Japan there were 103 jobs for every 100 in 1979. Having squandered the manufacturing base and manufacturing employment of this country in that fashion, the Government have the impudence to say that we are misty-eyed and to preach to us about economies and effectiveness in creating new jobs. We should not need so many new jobs if the Government had been as effective as our European competitors in preserving the jobs that existed when the Conservatives came to office.

The way in which the present situation has been created is clear when one considers what the Government have done to manufacturing investment. No doubt I shall be accused of being misty-eyed when I refer to the fact that at constant 1980 prices new investment in manufacturing in this country was running at £7,468,000 million when the Conservatives came to office. Within a year of their "opportunity" Budget that had been cut by £1,000 million. Within two years, it had been cut by £2,600 million. Within three years, it had been cut by £3,000 million and by the end of their fourth year the Government had cut it by £3,100 million. In other words, manufacturing investment has been cut by almost half since the Conservatives came to power. Yet they now accuse us of being misty-eyed and lecture us about efficiency in creating new jobs. What is the cost of their policies in redundancy payments, lost taxes and benefits paid out? The Government's entire revenue from the North sea has been squandered as a result of their economic stupidity in failing to sustain the employment that existed when they came to office.

The legislation now before us proposes to cut aid to the assisted areas still further just when it is most needed. Moreover, that was put forward before the proposal in the Budget to abandon capital allowances. In addition to the direct savings on regional grant, the Government intend to make massive savings on capital allowances to manufacturing industry in both assisted and non-assisted areas. That cut is beyond the £1,000 million in the next five years, beyond the economies to be made on new capital-intensive investment, beyond the savings to be made by altering boundaries and reducing the rates of assistance and beyond the £500 million that the Government have already cut from regional aid.

What are the prospects for people in the assisted areas? What hope have they of creating new employment or sustaining the employment that now exists when the Government's new regime comes into effect? In Committee, the Minister lectured us on the importance of firms meeting modernisation and replacement investment out of profits and not expecting ongoing subsidies. While I disagree with the Minister, I recognise the genuineness and strength of his opinion. However, I find it difficult to reconcile his fundamental doctrine that it is wrong for replacement and modernisation to be financed by grant and that it should be financed out of pocket with the Government's boast that under section 8 they are bringing in a special Government subsidy scheme for the textile industry to enable it to modernise. Why is it wrong to subsidise regional policy in one instance and right to subsidise it when it suits the Government's political requirements?

If it is so evil to have ongoing subsidies, how on earth can the Government continue with the experiment of enterprise zones? After all, an enterprise zone essentially cuts down the running and overhead costs of businesses operating within the zone. It gives them a preferential advantage over businesses outside the zone — for example, they have their rates reduced. That is an operational subsidy. If it is wrong to have operational subsidies for regional policy in general, why is it right to have them for enterprise zones? There is a lack of integrity or of logic in the way that the Government are groping their way forward in their attempt to rediscover an economic policy.

In Committee the Minister hinted that he had grave doubts, and I took him to task on that. He said that a good case could be made for having no regional policy. I could well understand that he had to protect his shoulder blades — it was the gleam in his eye as he said it that suggested that he believed that. Implicit in what he is saying is that industry should be allowed to go to the south-east and should not be encouraged to go to the assisted areas with their wicked Government grants and subsidies. I ask him to read the speech made by the hon. Member for Berkshire, East (Mr. MacKay) on 17 May during the debate on the Whitsun Adjournment. He spoke for his Berkshire constituency and said that he did not want new jobs and new industry because all the nasty people who would come to work in the new industry would need houses, and that would spoil the green belt. He said: that considerable commercial and residential development in the south-east, which is to the grave detriment of the environment in that area is being encouraged as a result of the Government's current industrial policies. He continued: It is no exaggeration to say that that community is being completely swamped by the new housing needed for the people who man the new businesses being established. He said that his constituents would welcome an end to the nonsense of making it easier for the south-east to attract new industry, which is proving a great inconvenience. It might knock the property values a little.

As I tried to make clear to the Minister during Second Reading — I was singularly unsuccessful — regional policy is not simply assisted area policy; it is a policy for all the regions. If we fail in the assisted areas, there is a movement into the already congested areas of the south-east, leaving social problems and needs behind.

The hon. Member for Berkshire, East gave his view of the successful Conservative industrial policy. He said: if this policy reaches its logical conclusion I can foresee the time when there will be one long urban sprawl from London to Reading and almost to Bristol, there will be no countryside in the south and presumably there will be industrial wastelands in the midlands and in the north."—[Official Report, 17 May 1984; Vol. 60, c. 591–3.] I accept that the hon. Gentleman overstated the case, but there is a germ of truth in it. The logic of the Government's policy in cutting back help to assisted areas, and their refusal to recognise the need to preserve jobs and to modernise industry means that not only will new industry go to the south-east because of its locational advantages—especially in relation to the EEC—but that people will move to where the jobs might be. That will lead to depopulation in the assisted areas and to a concentration of population in areas that are already complaining that they are near to saturation point —especially in the London area that already has excessive strain on its social fabric.

The speech of the hon. Member for Berkshire, East was not unpleasant—he was genuine in expressing concern on behalf of his constituents. He admitted that he had previously represented a seat in the Midlands and said that many of his former constituents would desperately like to have the jobs being steered to the south-east by Government policy. He portrayed the picture of a reluctant south-east receiving new industry, but what is happening elsewhere in the country? What is happening in the areas that will be robbed of £1,000 million during the next five years?

Since the Government took office, Wales has lost 83,000 jobs, which means an additional 83,000 unemployed people, yet it stands to lose £170 million in regional aid. In the north, there are 100,000 additional unemployed people, yet it stands to lose £180 million. In the north-west, 250,000 jobs have been lost, while it stands to lose £140 million. In Yorkshire and Humberside, 162,000 additional people are in the dole queues, while that area stands to lose £50 million. Scotland has 150,000 more unemployed and will lose £400 million. There are two contrasting pictures—the one portrayed by the hon. Member for Berkshire, East of the imposition of additional prosperity on already prosperous areas that are squealing at the burdens which that prosperity will create in social pressures and the picture showing the desperation and lack of hope in the many areas that will now be further deprived of a means to save themselves.

That is why we say to the Government that they are wrong to exclude modernisation and replacement from the proposed regional development grant scheme other than where it creates new jobs. Job preservation matters. If that had been given greater priority, many of the additional unemployed in the regions since the Government took office might not be unemployed today.

We move amendment No. 55 without the slightest hope of the Government seeing the need to respond to it. However, we move it because when the Government drafted the Bill it provided for the preservation of existing jobs. The Minister went out of his way in Committee to say that, although that was written into the Bill and was obviously in the Government's mind when they drafted it, in administrative terms they intend to ensure that the operation of new regional development grants is not what they envisaged. As I said, we have little hope and recognise that the Minister has literally written off prospects for Wales, Scotland, the north, the north-west, Yorkshire and Humberside and possibly even the west of England.

7.30 pm

Mr. Peter Pike (Burnley)

I support amendment No. 55 because my constituency has suffered from the loss of jobs for many years. People there are seriously worried about the Government's proposal to cut regional assistance to industry further. Burnley lost out on assisted area status last year and, in north-east Lancashire, only one constituency—Rossendale and Darwen—has any form of assistance.

At the end of the first world war and in the early 1920s, Burnley was the largest cotton textile weaving town in the world. It was built on two industries—cotton and coal. Coal has gone—our last pit closed two years ago—and the textile industry has almost disappeared. Burnley had a population of well over 100,000 on the old county borough boundary and now, even on an extended boundary, we have a population of only 96,000. More than 40,000 people have left the area through lack of jobs. Indeed, my mother moved from Burnley because of the slump in the 1930s. She eventually moved to London which is why, regrettably, I was born a Londoner and cannot claim to have been born in Burnley.

Burnley has always fought to attract new jobs because without them and the industry to provide them the town cannot survive. In the 1930s the borough council took a bold and illegal initiative. It built a factory which was taken over by the American company, Platers and Stampers, which became the Prestige Group which, in turn, has been taken over by Gallaghers, the tobacco people. It is still a major employer. The council has continued to take such initiatives to create jobs. Most of Burnley's jobs were created during the second world war and just afterwards. The biggest employer is Lucas Electrical and Lucas Aerospace. It moved to Burnley to avoid the bombing in the midlands. Burnley was fortunate in having few bombs dropped on it. Lucas was attracted to Burnley's hard-working people and has remained there. Firms such as Mullards and Michelin were attracted in the 1950s and 1960s.

I can speak from personal experience, as I worked in industry until June last year. I worked on the production line in a factory on continental shifts—changing shifts every three days. When I started working at Mullards 10 years ago it employed 3,500 workers but it now employs just over 1,000. It takes a lot of new industry to create work for those 2,500 people.

We lost assisted area status last year and we now have only an enterprise zone. When I was leader of the council, we decided despite political dogma that we had to take whatever we could get from the Government. We bid for a joint enterprise zone in which Rossendale, Hyndburn and Pendle are also involved. I believe it will prove one of the most successful enterprise zones in the country. It is the only assistance that we receive from the Government. I do not mean any disrespect to the Parliamentary Under-Secretary of State for Trade and Industry who represents the Rossendale and Darwen constituency, which has development area status, but I have always believed that north-east Lancashire is a whole and should work together. He will remember that when we met a previous Minister I argued for north-east Lancashire, not just for Burnley. When we recently relocated a Lucas factory—we did a deal to keep it in the Burnley area—it was surprising that about 30 per cent. of the workers in that factory lived in the Pendle constituency. North-east Lancashire is one and needs assisted area status. The only reason why unemployment in Burnley is no higher than 12.6 per cent.—that is by no means acceptable—is the fight that the borough council, the trade unions and industry in the town have put up. We do not owe any thanks to the Government. We hope that they will change their mind and accept this group of amendments.

Mr. O'Neill

This was one of the subjects that caused us most distress in Committee because we could identify a clear lack of understanding by the Government of the needs of the people who, in many respects, they like to think that they represent.

Business men in my part of Scotland and those in enterprises in which capital investment lies at the heart of industrial success are shaking their heads in disbelief at how the Government are approaching the issue. I was chided or perhaps kidded on by the Minister for moving from the Front Bench to the Back Benches but I shall make a constituency speech in respect of my local authority. Nevertheless, I suspect that I represent the views of most people who are fortunate enough to have some interest in petrochemicals and allied industries.

In central region, coal and petroleum have accounted for some 53–1 per cent. of regional development grant and chemical and allied industries have received some 16–1 per cent. of the grant. Together, they account for about 64 per cent. of the money that was received between 1975 and 1983. The capital stock per employee at 1975 prices is some £45,000. We are therefore dealing with capital-intensive industries and firms such as BP and ICI.

We had the spectacle of the Secretary of State for Scotland coming to the central belt last year and proclaiming in Grangemouth, with some justification, the importance of the role played by the Government—it must be said, cajoled and encouraged by the local Members of Parliament—and the support that was given to those firms so that they might take advantage of North sea oil development. We welcomed what was, apart from Moss Morran, the major investment on the mainland of Scotland in North sea oil.

Although the Scottish Nationalist and separatist element in Scottish politics has been reduced considerably —my main opponent at the last election was a Scottish Nationalist, as was my opponent at the previous election when I unseated the then SNP Member for the constituency—we are conscious of the fallacious claims being made for "Scottish oil". Nevertheless, the political responsibility of people who justify the existence of the United Kingdom must be to see that there are opportunities to be grasped by the United Kingdom Government to support the regions of Scotland and the nation of Scotland, and we have to make it clear that tangible evidence of the support for Scottish industry was given by United Kingdom Governments in the form of investment to oil-related industries in the Grangemouth area, which my constituency abuts.

If these amendments are not accepted, we believe that the prospects for further investment could be greatly undermined. Unless there is some degree of certainty in the minds of companies, they will not look kindly at the United Kingdom and they will choose options elsewhere. Although British Petroleum has a very creditable record in backing and supporting Britain, the company could just as easily be called World Petroleum. What is more, BP Chemicals could be seen to be European Chemicals. It is capable of moving quite freely from the mainland of the United Kingdom to the mainland of Europe.

We are worried, as the company is aware. It gave us some information during the course of the Committee stage. We made representations to the Government then but, frankly, they fell on deaf ears. In the highly competitive international industry that petrochemicals is, it is essential to have a degree of support for programmes of capital investment which go through as smoothly and as quickly as possible.

The nods and winks that Ministers may offer us about selective assistance going through without any measure of selectivity in the case of certain industries does not impress us. We recognise that on occasions there will be pressures within Departments in respect of the Budget. The arguments behind the Government's regional policy are as much as any to save money. If resources are at a premium, they will be subject to the strains that are always present if selectivity is one of the criteria that have to be applied.

In some instances the maintenance of jobs is pitched at the very modest objective of ensuring the minimum loss of jobs. We know that on occasions jobs have to be lost as a result of capital investment projects. I take an example which is far more modest in Scotland than those of BP and ICI. In my constituency there is a brewery that employs some 250 people. The brewery is going through a reorganisation, and part of the reorganisation will involve the re-equipping of the keg-filling operation. I realise, Mr. Deputy Speaker, that you may not be that well acquainted with the consumption of alcohol, but I am sure that you know about the mechanics of its production. It can be a costly business, and the reorganisation is part of a trade-off for a number of redundancies. The sweetener to the local work force is the prospect that there will be capital investment.

There is no guarantee that the capital investment will go forward unless there is a measure of Government support. It is designed to defend a work force which will be reduced by some 25 per cent. Historically, the town of Alloa is one of the brewing centres of the United Kingdom. It produces products that are enjoyed throughout the country. However, a large brewing corporation such as Allied Breweries can pick and choose and in many instances is concerned not so much with the quality of the ale that it sells as with the ease with which it can distribute it to pubs and other licensed premises across the country.

7.45 pm

We are under no illusions that to ensure employment in that area we need more than a vague indication of sympathy from the Department of Trade and Industry or the Scottish Office. The amendment is necessary if only to ensure that capital-intensive industries on which large parts of the country still depend for employment have a future and can be defended in such a way as to give a degree of confidence to the accountants and planners when they are laying their schemes for future investment. It would be unfortunate if chances were lost simply because of bureaucratic delay and the like.

We realise from our discussions earlier today that the Minister claims to have an open mind on the matter and that there are still areas where the consultative process can have some effect. I should like to think that the Parliamentary Under-Secretary of State would say whether he was likely to look sympathetically at particular industries, identify them and then say that they were industries that either were worthy of exemption from the regulations or could be given a special status similar to that of the textile industry. In our view, there are other industries that merit the kind of support that they have enjoyed in the past. They have creditable performance records. They have highly skilled work forces, and it is essential to keep these teams together. The idea that a team of research scientists can collectively get on some enormous bicycle and travel to another part of the country to start working for the benefit of another firm is misguided, to say the least.

We know for a fact that the teams in the petrochemical industry and the like are being subjected to a considerable degree of anxiety. They do not know whether the process of contraction which they have undergone over the past three or four years will continue. If it continues, they are not sure whether it will mean their moving to other parts of the United Kingdom fortunate enough to enjoy some form of development area status or whether they will have to go to other parts of Europe. If that is the result, it will be at great cost to the country in that we have spent considerable sums on their education, training and development. In respect of the younger members of these teams, the nation has never had a return on its investment.

Even if the Minister cannot accept the amendment tonight—we are realistic enough to assume that he will not—he could give us hope for certain industries along with the textile industry. I am not churlish enough to suggest that it is simply because the Minister represents a textile constituency that the Government are honouring such a scheme. There are in Britain companies that have been chided in the past. There have been arguments about whether some of the North sea developments that attracted considerable sums in the past should have received them. We are not talking about punishing firms for taking advantage of previous regional assistance schemes. In many instances firms are completely separate divisions of large corporations, which operate on their own as separate profit centres. In many instances there is little evidence that the benefits derived by one division were necessarily transferred to the divisions that would be penalised if the new regulations were brought to bear.

I ask the Minister to look at the matter again. I hope that he will give some sign tonight that he is prepared to change tack and say that certain categories of industry could be identified and exempted from what is a simplistic and crude measure which, at the end of the day, will be detrimental to a section of British industry that has served the country so well in the past.

Mr. Alton

We on the alliance Benches will support these amendments tonight, for the same reasons as I did so in Committee. It is not right, in the world in which we live today, to follow fashionable trends and suddenly write off whole sections of British industry purely because there has been a lurch from high stack to high tech industries; to write off vast chunks of industry as being sunset industries and, because the pendulum has shifted, to put resources into sunrise industries. British industry has been penalised because of such violent shifts and fashionable trends.

Much of manufacturing industry, the one fifth of it that has been lost over the past few years, could have been saved if action had been taken early enough and resources had been put into firms which might have been able to survive the recession, as has happened in so many other countries. As the right hon. Member for Swansea, West (Mr. Williams) said, the decline in manufacturing industry in other countries has not been as great as in Britain. That is often because preventive action has been taken by Governments to safeguard and protect their manufacturing base.

The right hon. Gentleman also alluded to the knock-on effects that regional development and assisted area policies can have. He mentioned enterprise zones. It is ludicrous for the Minister to imply, as he did earlier—I am not sure whether it is a view shared by the Parliamentary Under-Secretary —that in some way we can dispense with regional policy, that it might now be a luxury which we can afford to do without. The logic of the enterprise zone policy is similar to that of the assisted area and regional development policies. It is discrimination in favour of areas which are particularly disadvantaged. If it is right to try to involve the private sector in hard-bitten parts of Salford or Merseyside, it is certainly right to have public funding through regional development policies.

The right hon. Gentleman also mentioned discrimination in favour of some parts of the country through natural circumstances and advantages of geography. He mentioned Berkshire. It is worth reiterating that "Heseltown"—as it is known in Berkshire—has sprung up because Berkshire has the geographic advantage of being west of London. It is in a good position for airports, trading, markets and everything else, but many people in that part of the world are horrified at the massive developments taking place there and the effect of this discrimination in favour of the south-east. It is not that there are not disadvantaged parts of the south-east, but in that particular area people are genuinely horrified at seeing green belt eaten into and the massive developments in those districts when other parts are becoming deserts. It is clear that the 100,000 people whom the city of Liverpool has lost in the past decade are moving to places which do not need the new developments. Instead of allowing the centres of Liverpool, Manchester and the great conurbations of the north to wither on the vine, it would have been far better to put resources into such areas years ago and prevented that massive shift of population. Successive Governments failed to do that, but it is not too late.

Instead of promoting a nation of Dick Whittingtons, where people are encouraged to go in search of their fortunes to the south-east or the pleasant climes of Berkshire to earn a living, it would be much more advantageous to put resources into areas such as Merseyside and Greater Manchester to ensure that work and people stay in those areas. A failure to do that will result in many other knock-on problems and effects. Liverpool is the classic example. The loss of 100,000 people has meant the loss of ratepayers and subsequently the rate support grant. It has left an ageing population, because inevitably those who leave are white collar and skilled workers. It means that the fastest-growing group in that area is that of the over-80-year-olds. It means that one of the largest groups there is composed of people over retirement age—one quarter of the population. It means that as families leave, schools and the desks in those schools become depopulated, All that happens as a result of the failure to put regional development grants into those areas.

It would be wrong for the Minister to go too far down the road of believing that regional development grants are some sort of luxury which we can dispense with. Just as the logic of enterprise zones, for which he has argued, dictates that disadvantaged areas are discriminated in favour of, surely the logic of regional development grants is that they should do precisely the same. It should not just be about service industries and new high-tech industries, important as they are. It must also be about preserving our industrial base. It should be about preserving our existing manufacturing industry. There is nothing more closed than a closed factory. The chances of getting it reopened are negligible.

If one lives, as I do, in an area where factory after factory has closed, it is extremely disillusioning. It makes one cynical and bitter about the way in which successive Governments have washed their hands of the problems of such areas and allowed deindustrialisation and decline, without putting anything in their place. To see street after street of deserted factories, and to see industries closed down which might have been saved, is a debilitating process. I am convinced that many of those factories could have been saved if resources had been put at their disposal. The cost of leaving people on the dole queue, creating vacant factories and allowing companies to close down is phenomenal.

I spoke earlier about the effects on family life and about the young people who are becoming heroin addicts. In places such as Liverpool the problems have reached epidemic proportions. It is no coincidence that most of those affected are young unemployed people who are hanging around on street corners with nothing to do and nowhere to go. The sad truth is that the devil will always make mischief for idle hands. It is not just the drug pushers who lure those people into drug addiction; it is the criminals as well who lure them into street crimes such as muggings, burglaries, and so on. The cost in economic terms is phenomenal. As I understand it from the Treasury, the cost of keeping people on the dole is more than £17 billion a year. There is the cost of unemployment benefit, social security and the loss of tax which people would otherwise be paying. That is too high a price to pay.

The Government should not neglect the problems of manufacturing industries. The companies which have been closing down throughout the whole of the north-west will be followed by others unless there is a robust regional policy pumping money into the manufacturing industries to keep them buoyant, to help them see out these difficult economic times and to ensure that they can weather the recession. If the Government fail to do that they will simply help to create more urban dereliction and decay, and ensure that more people are added to the dole queues. They will wreck more family lives, create more disillusionment among young people and undoubtedly create the kind of militancy to which I have referred.

8 pm

Mr. Fallon

I apologise to the right hon. Member for Swansea, West (Mr. Williams) for having had to leave the Chamber at the beginning of his speech. A similar debate took place in Committee. It may be that the right hon. Member deployed some of the arguments that are familiar to a number of hon. Members. If not, I will check tomorrow.

There is still a great deal of misunderstanding on the Opposition Benches of the true nature of the Bill, even by Opposition Members who served on the Committee. Talk of a violent shift in emphasis in regional aid money is wide of the mark. What occurred before —and one can observe it clearly in the north-east—was that regional aid resources discriminated heavily in favour of capital-intensive investment. The Bill seeks not to reverse that discrimination, in other words, to discriminate only in favour of labour-intensive investment, but to remove that discrimination so that regional aid, at least in terms of the regional development grants, is broadly neutral in its effect on capital-intensive investment and labour-intensive investment. Labour Members make pretty poor defenders of labour, or jobs, at the best of times, but they make even poorer defenders of capitalism.

In seeking to insert the word "preservation" into the Bill, the Opposition seem to want to perpetuate the discrimination that existed against labour-intensive investment and to exclude the United Kingdom from qualifying for European regional development money, because that is one of the objects of the changes made in the Bill.

Mr. Williams

The hon. Gentleman said that Opposition Members seem not to have understood the nature of the Bill, despite having served on the Committee. I realise that he was absent when I made my opening comments and I understand why. I draw to his attention that I said that the £200 million a year that is being saved under the Bill is before, and not as a result of, any savings that are made in relation to capital-intensive industries. It is purely on replacement and modernisation, according to the figures that the Minister gave in Committee.

Mr. Fallon

I should have thought that that was capital-intensive. Modernisation investment alone does not create new jobs. That is precisely the sort of capital-intensive investment that I should have thought regional aid money wrongly discriminated in favour of in the past.

In seeking to insert the word "preservation" into the Bill, the Opposition seem to want to exclude the United Kingdom from any hope of qualifying for regional development money because there will not be a sufficient element of job creation in the Bill. The Opposition seem to wish to exclude those who are designing or hoping to design projects of purely replacement investment from applying for regional development grant money. By seeking to insert the word "preservation", the Opposition repeat the mistake of the late 1960s and 1970s of trying to preserve jobs at too high a cost to jobs elsewhere.

Mr. Dixon

I assure the hon. Member for Darlington (Mr. Fallon) that no Opposition Member doubts the motive of the Bill, which is primarily to cut regional aid. I believe, like my right hon. Friend the Member for Swansea, West (Mr. Williams), that the preservation of jobs is as essential and important as the creation of jobs.

One of the largest employers in my constituency, NEI Reyrolles, which deals with the power industry, requires work refurbishing power stations. When I met Sir Walter Marshall, the chairman of the Central Electricity Generating Board, he told me that all power stations are due to be refurbished at the end of the century. There is a trough now, and there will be a peak at the end of the century. The only unfortunate will be the power industry when the power stations require refurbishing.

This debate is concerned with trying to preserve jobs. For any hon. Member who comes from the northern region, especially those Members representing constituencies in the northern region, to contemplate a cut in regional grant, bearing in mind the unemployment rate, is nothing short of criminal. We are discussing heavy industry and manufacturing industry in the north of England where 25 per cent. of the male work force in manufacturing industry works in heavy engineering, mining, shipbuilding and so on. The percentage in the rest of the country is 8 per cent. That is one reason why the amendments are important.

As to the unemployment situation, I asked a question of the Minister in December last year. Over 92,000 of the unemployed in the northern region are long-term unemployed, and have been unemployed for over 12 months. I do not know what it is like to be unemployed for over 12 months; indeed, I do not know whether any hon. Member knows what that is like. However, I know what it is like to be unemployed for over four months, because I have been unemployed for over four months.

My right hon.Friend the Member for Swansea, West and the hon. Member for Liverpool, Mossley Hill (Mr. Alton) were right when they referred to breaking up communities. My right hon. Friend said that unless there is a regional policy, and employment is provided where people live, the nation will be turned into a nation of industrial nomads. The young and active members of the community will leave the area to look for work which will result in a disproportionate population made up of the old and infirm in hostels and old people's homes.

This all turns on regional policy. I know a little about regional policy because regional policy was introduced in this country after 1936 when 200 men marched from Jarrow. That is when central Government started taking notice of the regions, and when the people in the south in their ivory towers realised that the people in the northern region were living on the bread line, and 74 per cent. of the population were unemployed. That is when the Government introduced regional policy. We should be improving regional policy, and not cutting it back, which is what has happened since the Government were elected in 1979. This Government introduced the first Industry Act in 1979 when they cut regional aid. On every occasion that they have introduced such a Bill the intention has been primarily to cut aid to the regions. The share of public spending on the regions granted to the north from 1979 to 1982 has dropped from 6.31 per cent. to 6.18 per cent. That is what has happened in the northern region during a period in which unemployment has gone sky-high.

It is nonsense to suggest that a switch from manufacturing industries to service industries will create jobs because service industries are labour-intensive, while at the same time another Department is cutting back on local authorities, which include the largest labour-intensive service industries in the country. It is nonsense for the Government to talk about switching regional aid from manufacturing industries to service industries to create more jobs when the Secretary of State for the Environment is cutting back on local authorities and having to pay off home helps, school caretakers and so on. In the district covered by my constituency the population has fallen from 177,000 in 1971 to 160,000 today. The bulk of that fall is accounted for by the young people who have left the area looking for jobs. The vast majority of them were young and active people who paid rates which helped to look after their families and the old people.

Communities are being broken up. One of the reasons for the current strike in the mining industry is that the mineworkers in the country are not prepared to sell their jobs or break up the communities in which they have lived all their lives. That is what lies behind the amendments. There is no effective regional policy, and that is what the Bill is all about. The preservation of jobs is as important as the creation of jobs. In the northern region we want to preserve jobs in shipbuilding, heavy engineering and other industries.

Mr. Millan

I apologise for missing the start of the debate, but one of the amendments under discussion is in my name. I did not understand what the hon. Member for Darlington (Mr. Fallon) said about amendment No. 55 because it deals with the preservation of jobs and has nothing to do with spending money on capital as distinct from job-creating projects. It relates specifically to the preservation of jobs.

The amendment also relates to the preservation of existing industry. No one believes that every bit of existing industry can be preserved for all time. The Labour party has never made that claim. Everyone wants new and modernised industry to move to the development areas.

Many people in Scotland devote time to modernisation. One swims against the tide if,, in creating a limited number of new jobs, one makes existing employment disappear. The story in Scotland, and in other areas in the last few years, is that jobs are disappearing faster than they are being created. That is why it is essential that as well as creating new jobs we do everything possible to preserve existing jobs. With greater Government effort, that could have been done in many cases in my area over the last few years, but jobs were lost because of misguided economic and industrial policies. The general economic climate has destroyed our industrial and manufacturing industry.

The amendment is specific in that it says that we should be concerned about not only the creation of new jobs, but the preservation of existing jobs. I regret that we are not also discussing amendment No. 11 about the modernisation of existing capacity, but it has not been selected, although I shall make a passing reference to it. I am disturbed about paragraph 19 of the White Paper which refers to replacement investment. We shall deal with the EEC aspect later.

The general proposition is that if replacement investment only is involved no assistance will be given. Little straight replacement investment takes place. Such investment always includes an element of modernisation. It if does not, there is no point in replacement investment. Under the Bill assistance for a project excludes investment in modernisation. Replacement or modernisation does not necessarily create or expand existing productive capacity. However, without replacement and modernisation productive capacity will disappear. Unless a firm keeps up to date with machinery—although that sometimes means fewer jobs—jobs will disappear completely. That choice sometimes has to be made. Such modernisation is excluded from the Bill. If I have misunderstood the Bill, I hope that the Minister will reassure me.

8.15 pm

Those of us who are concerned not only with preserving what we have in manufacturing capacity, but with ensuring that industries become more efficient and modernised, are discouraged by the specific exclusion in the Bill.

My amendment No. 17 deals with another qualification and another power in the Secretary of State's hands—the power to decide that a particular project that might otherwise qualify for assistance may not so qualify because it may have a detrimental effect on some other existing capacity in another development area. For example, a new project in the north of England might have a detrimental effect on existing capacity in the north of Scotland.

If we applied that test to the enterprise zones, there would be no enterprise zones. Studies demonstrate that enterprise zones simply shift expansion from one area to another a few miles down the road. I am sceptical about enterprise zones in general, but the areas which are so designated are attracted by them.

Hardly any project, however admirable, will not have detrimental effects on some other existing project somewhere else. I do not know how Ministers will judge, but they could exclude worthwhile projects. Another element of uncertainty is being added to a system that is already uncertain and will become more so. The new system will be much less effective. All representations from Scotland have made that point. Certainty is important. Under the Bill the Secretary of State is given powers to do this, that and the other. That will lead to massive uncertainty. The prospect of Government assistance will, therefore, be taken less and less into account when investors decide where to invest. That must be bad for regional development.

I understand the thinking behind the words in the Bill, but they are dangerous words. If they mean anything, in practice they will kill off many worthwhile projects. Almost no new project can be said to have no detrimental effect on an existing project. For example, there was controversy a couple of years ago about Caithness Glass which built a new factory near Perth to supplement a factory in the north of Scotland. Existing glass manufacturers in the Perth area argued that that project would damage their ability to operate in that market. I do not believe that that argument was valid, but it demonstrates how a successful project could have been prevented from going ahead by having assistance removed through this sort of provision. I hope that the Minister will say something about that when he replies to the more general points.

Mr. Trippier

When one looks at amendments such as these, one wonders whether the Opposition's concept of job preservation is the engagement of civil servants and possibly Ministers to consider unnecessary changes to legislation. If we consider amendments Nos. 55 and 56, we realise that they do no more than is achieved by the Bill. They make it clear that grant can be paid in respect of safeguarded or maintained employment. The Bill provides for that. Our policy is to pay grant only in respect of job creation. The amendments make no impact at all on that policy.

We do not undervalue the need for modernisation. Many special schemes are designed for that purpose. The right hon. Member for Swansea, West (Mr. Williams) referred to only one of them. We do not intend to exclude modernisation from regional policy. Where it creates jobs it will be eligible for RDG. Where it safeguards or maintains jobs it will be eligible for regional selective assistance. Modernisation projects which do not create jobs will not receive RDG except usually in the case of small firms, although the Bill provides for that if it is desired at some future stage.

Mr. Milian

The Minister says that provision is made somewhere for this to be done if it is necessary. Where is that provision?

Mr. Trippier

It is in both the White Paper and the Bill. I do not want to rehearse the arguments, as we went through them in detail in Standing Committee.

Mr. Milan

If the Parliamentary Under-Secretary went through them in such detail in Standing Committee, no doubt he can put his finger on the provision and tell us where it is.

Mr. Trippier

I shall find it in a moment and give the right hon. Gentleman a detailed reply.

Where modernisation safeguards or maintains jobs it will be eligible for regional selective assistance, but modernisation projects which do not create jobs, except normally for small firms, will not receive RDG, although the Bill provides for it.

Non-job-creating modernisation is to be excluded from RDG, for two reasons. First, our priority is to create jobs and, secondly, the measurement of safeguarded and maintained employment is selective and is inconsistent with an automatic scheme. We are excluding replacement investment completely, but not simply because the European Commission prohibits it. I do not believe that the right hon. Member for Swansea, West could have continued to resist it even had he remained in office. We exclude such investment because it would, by and large, go ahead without assistance and does not create jobs.

The right hon. Gentleman and some of his hon. Friends have already touched on the difficulty already faced by the Government — I am prepared to admit it —over the difference between replacement and modernisation, and how we shall overcome it. I shall try to answer that. None except small firms, which will probably be defined as enterprises employing fewer than 200 people, will receive grant unless they create jobs anyway. That is because the cost-per-job ceiling means, for all but the small firms, that if jobs are not created grant will not be paid. The difficulty of telling replacement and modernisation apart will arise only for small firms. I agree that it will be difficult in their case.

We shall define replacement broadly as the mere piecemeal renewal of assets to carry out the same or similar tasks as before. We shall spell that out in our notes for applicants, making it clear that for a project to be eligible for grant it must create new, or expand existing, productive capacity, or effect a material change in the product or process.

Applicants will be asked to state in their application that they believe their project is eligible on that basis. Officials will examine applications to see whether the project details confirm that. There will also be some follow-up inspections. We shall publish as clear a guide as we can to make it clear to everyone how we will interpret the rules on eligibility, so that applicants know exactly where they stand.

Mr. Geoffrey Robinson

The Parliamentary-Under Secretary must realise that we are still in some difficulty over precisely what he is saying. It is as clear as mud to Opposition Members. Is he saying that if an investment creates productive investment or expands productive capacity, irrespective of the jobs created, lost or maintained, it will be eligible for RDG? That is what he has just said.

Mr. Trippier

I said that it will not be eligible for RDG if it does not create jobs. the hon. Gentleman should listen more careully. I have already explained twice that we are referring only to small firms in relation to this matter. I refer the hon. Gentleman to the White Paper—

Mr. Milan

rose—

Mr. Trippier

May I first refer the right hon. Gentleman to annexe B at page 15, item 5 of the White Paper. [Interruption.] I should like to reply to the right hon. Gentleman.

Mr. Milian

rose—

Mr. Geoffrey Robinson

On a point of order, Mr. Speaker. Is it in order for the Parliamentary Under-Secretary to reply to a debate on a matter which the Minister of State dealt with throughout the Committee proceedings, and to whom he now must refer? Is it in order for the hon. Gentleman to continue to talk about the White Paper when an Opposition Member asks him to quote something which he claims to be in the Bill? We are discussing the Bill, as amended in Committee.

Mr. Deputy Speaker

Order. The hon. Gentleman knows that that is a matter for debate, not a point of order.

Mr. Trippier

When I was referring to small firms and the difficulties which the Government would have in differentiating between replacement and modernisation I said that it would be difficult, but that a project must create new or expand existing productive capacity. That is my answer to the point raised by the right hon. Gentleman. When the firm is not small—we are considering the definition of a small firm for the purposes of this legislation-we would say that modernisation does not arise unless it creates new jobs. The problem does not arise anyway, so there is no argument about the matter. I have already defined the criteria to be applied to small firms employing 200 people or fewer.

Mr. Milian

We must get the point cleared up. The Minister told us that there was a reference in the Bill to modernisation. I asked him to tell me where it was. He has not been able to tell the House. We asked for the reference to small firms in the Bill, but there is none. We are well aware of the reference to small firms in the White Paper. We do not need the Minister to tell us that. Can he tell us how that will be provided for in the Bill? That is all that we are asking of him.

Mr. Trippier

The basic criteria for a project are in new section 3. They do not exclude modernisation.

Mr. Milan

The Minister says that the Bill does not exclude modernisation. That is slightly different from what he was saying a moment ago—that modernisation is included. It might have been much easier, Mr. Deputy Speaker, if the amendment that I tabled to insert the word, "modernisation" had been taken with this group of amendments. I have considered new section 3 on page 8 of the Bill. It does not refer to modernisation. We must assume, therefore, that that is excluded. If that is not so, can the Parliamentary Under-Secretary tell us where the concept of modernisation comes in, given that he has already told us that replacement expenditure will not be eligible? Will he also tell us where the small firms provision will be dealt with?

Mr. Trippier

The small firms provision to which I have referred thus far is for those which are exempt from the cost-per-job-limit and which are involved with the modernisation proposals anyway. That is an important point. The right hon. Gentleman is concerned about small firms. We are aware that the European Commission does not allow replacement investment. It allows modernisation. I have already gone to some trouble to define that. The question of replacement investment does not arise because that is not allowed by the European Commission. [Interruption.] It is not allowed. In any event, that does not arise in the context of these amendments, because there is no problem for companies which employ more than 200 people. If the numbers of jobs increased, there would not be any assistance in the form of regional development grants anyway.

8.30 pm

Mr. Milian

That is all very interesting, but I should like to return to the subject of modernisation. The Minister says that that is included in the Bill, but he is the only person who is able to see it there. However, he is apparently unable to tell us where it appears. I tabled amendment No. 11, which would insert the words "or modernise". It has not been selected, but as the Minister seems to think that it would be a good idea to include that concept in the Bill, will you accept a manuscript amendment, Mr. Deputy Speaker? It would appear that the Minister must be willing to accept such an amendment. It would seem to be an oversight that the concept is not in the Bill, as he obviously intended it to be included.

Mr. Deputy Speaker

I am sorry, but I cannot help the right hon. Gentleman. His amendment was not selected because it was out of order.

Mr. Trippier

I have to say—

Mr. Milian

On a point of order, Mr. Deputy Speaker. Can you explain why my amendment was out of order?

Mr. Deputy Speaker

The right hon. Gentleman knows very well that the selection of amendments is not a matter for debate. I was trying to help him and the House when I explained why his amendment was not selected. However, the right hon. Gentleman knows perfectly well that it is not possible for the Chair to argue the toss over the selection of amendments.

Mr. Milian

Further to that point of order, Mr. Deputy Speaker. I am not arguing about the selection of the amendments. I was just interested to know why my amendment was out of order when, according to the Minister, the concept is already covered in the Bill.

Mr. Deputy Speaker

I allowed the right hon. Gentleman to refer to an amendment that had not been selected because it seemed appropriate given the argument that he was making. However, we cannot argue about those amendments that have been selected and those that have not.

Mr. Trippier

I am anxious to be as helpful as possible to the right hon. Gentleman. We are obviously going to some pains to identify where the matter is mentioned in the Bill. However, the right hon. Gentleman must be right and I shall not argue with him. The word "modernisation" is not in the Bill. However, I understand that it does not need to be in it, as non-job-creating modernisation is to be excluded by the cost per job limit, except for small firms.

Mr. Pike

Perhaps the Minister can let me know whether I have understood the position correctly. Is it true that if modernisation did not create any jobs in an industry that employed more than 200 people, but nevertheless meant that the firm could maintain its competitiveness and its present number of employees, it would not be eligible for any grant or assistance? If so, that industry could collapse as a result of the Government's failure to assist.

Mr. Trippier

That is completely wrong. Those companies that apply for assistance when they are only going to maintain or preserve existing jobs will come under section 7. On Second Reading and in Committee we said that we had moved assistance for preserving jobs away from the automaticity and predictability of regional development grants to section 7 regional selective assistance.

Mr. Williams

A company which employed 198 people and which intended to expand would presumably qualify for modernisation grant, yet if it expanded and employed 210 people it would presumably be too big to qualify for it. Would it get the grant?

Mr. Trippier

At this stage it is rather too early for us to determine whether the figure is to be 200. The right hon. Gentleman must not draw me out too much on that point. If the Government decided that the qualification for a small firm was the figure of 200, the company which the right hon. Gentleman mentioned would be eligible.

It has been said that the amendments strike at the heart of the whole strategy. I have touched on the difference between us, which is quite considerable. However, several Opposition Members obviously did not understand that we were moving the criteria for preserving existing jobs over to section 7 and away from regional development grants. Nevertheless, I cannot see how the right hon. Member for Swansea, West can predict that there will be considerable cuts over and above the references made to between £150 million and £200 million when we do not know what the effect will be of extending assistance to the service sector. We do not yet know what the effect of that will be. That is the truth.

How can the right hon. Gentleman say that the cuts will be considerable when we know that 80 per cent. of all regional assistance claimed is claimed by small firms, using the Bolton definition of 1971, that is, those firms which employ 200 people or fewer? We do not know how the finance will be affected by the exemption which they will enjoy under the cost-per-job-ceiling. Thus, there are two things there that we do not know. The right hon. Gentleman has given the House only pure hypothesis, not fact.

Mr. Williams

The Minister has accused me of hypothesis, which is a terrible allergy for a Member of Parliament to have. How can the hon. Gentleman deny that a considerably larger sum would be "saved" when. according to the Minister, that money is saved by the Bill entirely as a result of excluding modernisation and replacement, and before provision is made for dealing with the capital intensive sectors of the industry, even when it creates new jobs?

Mr. Trippier

How can I possibly deny or agree with it? Two imponderables have to be taken into consideration: the fact that small firms will be exempt from the cost-per-job-ceiling, and the fact that we are extending support to the service sector. Those are both very important factors and at this stage we are not in a position to give finite figures.

Mr. Williams

I accept that, but does the Minister agree that the £200 million results purely from the exclusion of modernisation and replacement, and so does not take account of the savings which the Government boasted on Second Reading would be made by the exclusion of capital-intensive projects? That will therefore make the cutback far greater.

Mr. Trippier

The simple answer is yes. However, I have not mentioned a third factor which we are not yet sure of. Indeed, the right hon. Gentleman and his colleagues are not sure of it either. We are moving regional assistance from regional development grants to section 7 regional selective assistance for those companies which preserve their work forces. At this stage we have no idea how much money will have to be spent under section 7. That is another matter that tends to cloud the issue. However, we are not prepared to accept that the cuts will be considerable at this stage, because we do not know.

The hon. Member for Burnley (Mr. Pike) represents a constituency that borders mine. I had always thought that, like me, he was one of those hon. Members who did not have to change his money at Watford. However, he very courageously told us that today that he was born in London and did not have the privilege, unlike some of us, of being born in the finest county that God ever gave to man. Nevertheless, I welcomed some of his comments, and the fact that the enterprise zone in his area is successful. I suspect that the one in my constituency will also be successful. He mentioned that my constituency was assisted, but the truth is that half of it is assisted. He will probably recall that, having got Darwen as well at the last election. I need hardly remind him that at time development area assistance was given to my constituency, when unemployment stood at about 19.1 per cent. and there was an over-dependence on the two traditional industries of textiles and footwear. I am delighted to say that as a result of the concentration on smaller firms, which has diversified industry away from those two traditional industries, unemployment has dropped by one third, to 12.4 per cent., which represents an enormous success. I am well aware that that unemployment level is below that of the travel-to-work area which covers Burnley. I have no doubt that the hon. Gentleman will be leading a delegation to the Department, and we look forward to seeing him then.

The hon. Member for Clackmannan (Mr. O'Neill) referred to sectoral support. The simple answer to his question—whether there should be exemption for certain industries from some rules in the Bill—is "No, Sir." I was glad that he was not churlish enough to mention that the textile and footwear scheme had been introduced simply because there were textile and footwear interests in my constituency.

The hon. Member for Liverpool, Mossley Hill (Mr. Alton) said that manufacturing would not have diminished in the way that it had if the Government had in the past bolstered it up. His remarks surprised me because in recent times there has been no sub-region of the country more assisted than Liverpool.

Mr. Alton

There are many people in Liverpool who would disagree with that. Given the scale of the problems there, the sort of assistance that the Minister has been arguing has been so effective in Rossendale is precisely the assistance that I should like for parts of my constituency.

Mr. Trippier

I refer the hon. Gentleman to an Adjournment debate initiated by the hon. Member for Liverpool, Riverside (Mr. Parry) about two months ago, to which I replied, on the closure of British American Tobacco plc. On that occasion I gave the figures and proved that Liverpool as a sub-region was the most assisted. How much more assistance can that area be given? The hon. Gentleman must consider what effect all that assistance has had, bearing in mind that it is a special development area.

I may be going back 15, 25 years or more, but if companies had reinvested their profits and modernised perhaps they could have been more competitive and would have survived better than they have. Although that is a rather different point, it is wholly in line with what the Government are trying to do by introducing this legislation, for we are in favour of modernisation in that it creates jobs.

Mr. Alton

Earlier in our proceedings I put to the Minister the fact that a company such as United Biscuits, an organisation making a profit of over £80 million this year, in having to choose between five different factories, decided to close down the one on Merseyside. Another example occurred only last week, when BUPA—a most successful organisation which I am sure the Minister supports—though making phenomenal profits, decided to rationalise, and one of the three offices it decided to close was in Liverpool.

I asked earlier what steps the Government could take to try to persuade successful companies making large profits, whether in the manufacturing or service sectors, to stay in an area such as Merseyside.

8.45 pm

Mr. Trippier

I recall speaking in the debate to which I referred, on the closure of BAT, Liverpool. It was clear that that company had to cut down its operations, not only in Liverpool but elsewhere, because people were smoking less. Nabisco, which has taken over Associated Biscuits in Liverpool, is in the Crosby area. When I spoke recently on that subject I pointed to the fact—this may sound somewhat simplistic — that people were eating fewer biscuits. There are certain difficulties which the Government cannot tackle, and the fact that people are eating fewer biscuits is one of them.

I agreed with

my hon. Friend the Member for Darlington (Mr. Fallon) when he said that hon. Members, including—dare I say it? —the hon. Member for Jarrow (Mr. Dixon), had not listened to what the Government had said about the Bill. That hon. Gentleman may now be in a better position to understand that, in relation to the preservation of jobs, we have moved that aspect over to section 7. I assure him that we are in no way discriminating against manufacturing industry. We are saying that we shall no longer discriminate against the service sector, and that has been widely welcomed on all fronts.

When the Secretary of State announced the publication of the White Paper "Regional Industrial Development" to the House in December last year, he made it clear that we intended to net off jobs lost in any assisted area as a direct result of a project against jobs created. Thus, if a project creates 10 jobs in a development area but that project means the direct loss of 10 jobs in another—or, indeed, in the same development area — the project will be treated as not having created any new jobs. If jobs are merely transferred within a development area, or from one development area to another, or if jobs are created in one development area but are lost: in another, or in the same development area, I cannot see any justification for treating the project in question as creating jobs.

Development areas have roughly the same degree of need as one another. Regional policy is concerned in some sense with transferring jobs, but it does not make any sense to pay grant on jobs which are merely transferred from one area of need to another area of similar need.

Mr. Millan

How will civil servants have the omniscience to know, if an electronics firm sets up, say, in the centre of Scotland and is successful, that that may deprive some other development area of jobs? That type of information is not, and cannot be, available to Government. Such a forecast cannot be made. The whole thing is an absurdity.

Mr. Trippier

It is not an absurdity. We would rigorously apply investigative procedures to ensure that the jobs were not simply moved from one part of the country to another.

Mr. Williams

How would the hon. Gentleman deal with a situation in which a company based, say, in London announced that it would expand in Scotland, obtained a grant from the Government and a week after receiving the grant declared redundancies of an equivalent number in its other main operation? Do the Government propose to claw back such grants? If so, how will industry know where it stands?

Mr. Trippier

If the right hon. Gentleman is referring to assistance sought by a company moving from, say, the south to Scotland, if an increase in jobs took place—there would have to be an increase in jobs to qualify—grant would be given. We have not yet decided how we shall apply the rules and regulations on the cost per job ceiling, nor indeed what that ceiling will be.

The TUC has submitted to the Department its views on the White Paper, and they are interesting. Indeed, the TUC in Wales is quoted by the Select Committee on Welsh Affairs as favouring the removal of eligibility from replacement investment. Even more interesting is the fact that the TUC supports in principle the Government's intentions, first, to make regional policy more selective; secondly, to place more emphasis on job creation; and thirdly, to extend aid to service industries.

I urge my hon. Friends to oppose the amendment.

Question put, That the amendment be made:—

The House divided:: Ayes 86, Noes 160.

Division No. 341]	[8.49 pm
AYES
Adams, Allen (Paisley N)	Cowans, Harry
Alton, David	Craigen, J. M.
Ashton, Joe	Dalyell, Tarn
Bagier, Gordon A. T.	Davies, Rt Hon Denzil (L'lli)
Beith, A. J.	Dixon, Donald
Bennett, A. (Dent'n & Red'sh)	Dormand, Jack
Bermingham, Gerald	Douglas, Dick
Bidwell, Sydney	Dubs, Alfred
Boyes, Roland	Dunwoody, Hon Mrs G.
Bray, Dr Jeremy	Eadie, Alex
Brown, Ron (E'burgh, Leith)	Eastham, Ken
Bruce, Malcolm	Evans, John (St. Helens N)
Callaghan, Jim (Heyw'd & M)	Fatchett, Derek
Clark, Dr David (S Shields)	Field, Frank (Birkenhead)
Clwyd, Ms Ann	Flannery, Martin
Cocks, Rt Hon M. (Bristol S.)	Foulkes, George
Cook, Frank (Stockton North)	George, Bruce
Cook, Robin F. (Livingston)	Godman, Dr Norman
Corbett, Robin	Gould, Bryan

Gourlay, Harry	O'Neill, Martin
Hamilton, W. W. (Central Fife)	Pike, Peter
Hardy, Peter	Powell, Raymond (Ogmore)
Harman, Ms Harriet	Prescott, John
Harrison, Rt Hon Walter	Randall, Stuart
Hogg, N. (C'nauld & Kilsyth)	Redmond, M.
Home Robertson, John	Robinson, G. (Coventry NW)
Hughes, Sean (Knowsley S)	Robinson, P. (Belfast E)
Kaufman, Rt Hon Gerald	Rogers, Allan
Leadbitter, Ted	Ross, Stephen (Isle of Wight)
Leighton, Ronald	Rowlands, Ted
Lewis, Terence (Worsley)	Sheerman, Barry
Litherland, Robert	Shore, Rt Hon Peter
Lofthouse, Geoffrey	Short, Ms Clare (Ladywood)
McCartney, Hugh	Silkin, Rt Hon J.
McCrea, Rev William	Skinner, Dennis
McDonald, Dr Oonagh	Snape, Peter
McKay, Allen (Penistone)	Spearing, Nigel
McKelvey, William	Stewart, Rt Hon D. (W Isles)
Mackenzie, Rt Hon Gregor	Thomas, Dafydd (Merioneth)
McNamara, Kevin	Wallace, James
McTaggart, Robert	Wareing, Robert
McWilliam, John	Welsh, Michael
Madden, Max	Williams, Rt Hon A.
Marek, Dr John	Winnick, David
Marshall, David (Shettleston)	Wrigglesworth, Ian
Mason, Rt Hon Roy	Young, David (Bolton SE)
Maxton, John
Millan, Rt Hon Bruce	Tellers for the Ayes:
Nellist, David	Mr. James Hamilton and Mr. Frank Haynes.
Oakes, Rt Hon Gordon

NOES
Adley, Robert	Franks, Cecil
Amess, David	Fraser, Peter (Angus East)
Ancram, Michael	Freeman, Roger
Ashby, David	Gale, Roger
Atkins, Robert (South Ribble)	Garel-Jones, Tristan
Baker, Nicholas (N Dorset)	Goodlad, Alastair
Baldry, Anthony	Gow, Ian
Beaumont-Dark, Anthony	Gower, Sir Raymond
Bellingham, Henry	Gregory, Conal
Berry, Sir Anthony	Griffiths, Peter (Portsm'th N)
Biggs-Davison, Sir John	Ground, Patrick
Bottomley, Peter	Grylls, Michael
Bottomley, Mrs Virginia	Hamilton, Hon A. (Epsom)
Bowden, Gerald (Dulwich)	Hargreaves, Kenneth
Bright, Graham	Harris, David
Brinton, Tim	Harvey, Robert
Brown, M. (Brigg & Cl'thpes)	Hawkins, C. (High Peak)
Bruinvels, Peter	Hawksley, Warren
Bryan, Sir Paul	Hayhoe, Barney
Buchanan-Smith, Rt Hon A.	Hayward, Robert
Buck, Sir Antony	Heathcoat-Amory, David
Budgen, Nick	Heddle, John
Burt, Alistair	Higgins, Rt Hon Terence L.
Butcher, John	Hind, Kenneth
Carlisle, John (N Luton)	Hirst, Michael
Carttiss, Michael	Hogg, Hon Douglas (Gr'th'm)
Cash, William	Holt, Richard
Channon, Rt Hon Paul	Hooson, Tom
Clark, Hon A. (Plym'th S'n)	Hordern, Peter
Cockeram, Eric	Howard, Michael
Conway, Derek	Howarth, Alan (Stratf'd-on-A)
Coombs, Simon	Howarth, Gerald (Cannock)
Cope, John	Howell, Ralph (N Norfolk)
Dicks, Terry	Hubbard-Miles, Peter
Douglas-Hamilton, Lord J.	Hunt, David (Wirral)
Durant, Tony	Hunt, John (Ravensbourne)
Eggar, Tim	Hunter, Andrew
Evennett, David	Jackson, Robert
Fairbairn, Nicholas	Jessel, Toby
Fallon, Michael	Johnson-Smith, Sir Geoffrey
Favell, Anthony	Kershaw, Sir Anthony
Fenner, Mrs Peggy	Key, Robert
Fookes, Miss Janet	King, Roger (B'ham N'field)
Forman, Nigel	Knight, Gregory (Derby N)
Forth, Eric	Knowles, Michael
Fowler, Rt Hon Norman	Knox, David
Fox, Marcus	Lamont, Norman

Lang, Ian	Nelson, Anthony
Lawler, Geoffrey	Nicholls, Patrick
Lee, John (Pendle)	Norris, Steven
Leigh, Edward (Gainsbor'gh)	Onslow, Cranley
Lennox-Boyd, Hon Mark	Oppenheim, Philip
Lightbown, David	Page, Richard (Herts SW)
Lilley, Peter	Peacock, Mrs Elizabeth
Lloyd, Peter, (Fareham)	Percival, Rt Hon Sir Ian
Luce, Richard	Porter, Barry
Lyell, Nicholas	Powell, William (Corby)
McCrindle, Robert	Powley, John
McCurley, Mrs Anna	Prentice, Rt Hon Reg
Macfarlane, Neil	Proctor, K. Harvey
MacGregor, John	Ridley, Rt Hon Nicholas
MacKay, John (Argyll & Bute)	Ridsdale, Sir Julian
Maclean, David John	Sainsbury, Hon Timothy
McQuarrie, Albert	Skeet, T. H. H.
Malins, Humfrey	Smith, Tim (Beaconsfield)
Malone, Gerald	Steen, Anthony
Mather, Carol	Stevens, Lewis (Nuneaton)
Maude, Hon Francis	Terlezki, Stefan
Maxwell-Hyslop, Robin	Thompson, Donald (Calder V)
Mayhew, Sir Patrick	Thompson, Patrick (N'ich N)
Merchant, Piers	Trippier, David
Meyer, Sir Anthony	Viggers, Peter
Mills, lain (Meriden)	Wakeham, Rt Hon John
Mills, Sir Peter (West Devon)	Wardle, C. (Bexhill)
Moate, Roger	Warren, Kenneth
Montgomery, Fergus	Wells, Bowen (Hertford)
Moore, John	Wheeler, John
Moynihan, Hon C.	Wood, Timothy
Mudd, David
Murphy, Christopher	Tellers for the Noes:
Neale, Gerrard	Mr. John Major and Mr. Michael Neubert.
Needham, Richard

Question accordingly negatived

Mr. Norman Lamont

I beg to move amendment No. 8, in page 7, line 39, leave out `of this Part of this Act' and insert `made by or under Part I or this Part of this Act unaffected (except as provided by any transitional provision of the order) by any changes effected by an order under section 1 above or section 5 below after the date which is for the purposes of section 3 below the qualifying date for the project.'.

Mr. Speaker

With this it will be convenient to take Government amendments Nos. 10, 12, 13, 20, 27, 29, 32, 37, 45, 50 and 51.

9 pm

Mr. Lamont

This group of amendments is lengthy but is concerned with one issue — the circumstances in which changes at a future date in the RDG scheme or in the assisted area map would affect projects that have already begun. When I say "future" changes I am talking not about changes that we would see in the autumn or that would stem from the first orders made under the Bill but about changes once the new legislative basis of the new RDG scheme has been established. I refer to changes in the rate of grant that might be sought by a future Administration. The amendments in no way affect the transitional provisions that, for example, will take us from the present to the revised scheme.

As I explained in Committee, one of the principal changes in the new scheme—this is an important point behind the reasons for the amendments—is the move from an asset-based RDG scheme to a project-based scheme to place assistance on the same basis as that on which industry takes decisions. The changes brought about by this group of amendments relate to projects under the revised scheme. To be eligible for grant every project must satisfy certain conditions on its qualifying date. For projects that start before an application for approval is received by the Department, the qualifying date is the earliest of three dates—first defrayal of expenditure, first asset provided or first job provided, whichever is the earliest. For projects that have not started at the time of an application for approval, it is proposed that the qualifying date is the date on which the application is received by the Department. That aspect is dealt with under amendment No. 14.

An offer of support under the revised scheme will be quasi-contractual. If a company does what it says it will do, the Secretary of State will pay the amount of grant offered. The intention is that projects should normally be unaffected by changes to the RDG scheme after their qualifying date. There is provision for beneficial changes to be applied to such projects. More importantly, however, they will normally be protected from any changes to the scheme after their qualifying date that would reduce or take away their entitlement to grant. There is one circumstance in which there are good reasons why there should be an exception to that rule, and that is what the amendments are about.

I shall refer to a specific example. A variation in the rate of capital grant is subject to the affirmative resolution procedure, which means that there will be a gap between the laying of the draft order and its coming into effect after approval. An applicant would, therefore, learn of an impending change to the scheme when an order was laid or made. He would then have only to defray some minimal expenditure, provide a single asset or job, or even just get his application form in before the change comes into effect, and his project would have its qualifying date before that change and be guaranteed grant at the pre-change date for the lifetime of the project, which could be a number of years. That is why I stress the point that it is necessary to make these changes because we are moving from an asset-based to a project-based scheme.

An anticipatory project is referred to in the amendment and it is a project which has its qualifying date after the change is announced, but before it is implemented. We are not talking about changes that come into effect in the autumn. We are referring only to changes that might be made by a future Government once the scheme is operating.

These amendments introduce changes giving the Secretary of State powers to prevent applicants taking advantage of a period of notice to get round the changes and thus to undermine the scheme. They give the Secretary of State, by order, the power to divide a project and to pay grant at the old rate on that part which precedes the change and, if appropriate, at the new rate after the change. I have for simplicity mentioned only rates of grant, but the power extends to any change in the scheme.

Amendment No. 8 states the general principle which is that other than for the anticipatory projects the projects are protected against adverse changes.

Amendments Nos. 20, 29 and 32 detail the power to deal with anticipatory projects, which are defined in amendment No. 37.

Amendments Nos. 45 and 50 make provision to divide the project into those parts which precede and follow any change and ensure that for projects which fall into that category the Secretary of State can pay grant on at least that part which precedes the change. For example, in any normal project, expenditure will precede the creation of jobs. If, however, no jobs were created before a change and, as a result of the change to the map, the area in which the project was located ceased to be a development area, it is possible because of the cost-per-job limit that no grant would be payable on expenditure before the change. This is plainly an anti-avoidance or anti-abuse of expenditure device. We do not want to go too far and be unfair.

What I have just described would plainly be unjust, and the power to divide the project and allocate jobs to expenditure before the change is fair and reasonable. It would be applied in respect of all changes.

The other amendments relate also to protection and anticipatory projects. Amendment No. 10 deletes the definition of a "current" project, because amendment No. 45 now defines that phrase.

Amendments Nos. 12 and 13 mean that the activities to which a project relates have to be thought to be qualifying when the project is carried out. As presently drafted, the Bill provides that a project must involve qualifying activities only on its qualifying date. It does not look forward.

If we had laid an order introducing new qualifying activities and received an application for a project involving those activities before the order took effect, we could not, as the Bill stands, approve the project. That is clearly nonsense and the amendment ensures that we cart look forward.

Amendment No. 27 deletes a subsection. The powers are more appropriate in new section 5(5A)(b). Amendment No. 50, subsection and amendment No. 51 are merely minor corrections, and consequently have no policy effects.

I stress that these amendments relate to future changes" not the changes in the RDG scheme that we are now considering through the orders to be introduced in the autumn. These are subsequent changes that might be made by a future Government when the scheme is operating. It is essentially because we have moved from an asset to a project basis that one could have circumstances in which a change had been announced but before it had been implemented, a company — because we are now operating on a project basis — would be able to incur minimal expenditure, or just take the first steps and have grant guaranteed for many years until the end of the project.

I have emphasised that people are protected against change. We are trying to prevent people taking advantage of the gap that would occur between the announcement of a change and its implementation. We are not looking for expenditure savings now, or tightening the screw. The proposal is designed to protect against abuse in future years, in the context of changes that might be made. I hope that the Opposition will be able to see it as reasonably sensible and non-controversial.

Mr. Douglas

The Minister of State has introduced a set of fairly complicated amendments and I should be grateful if he could give me some help on them. The amendments refer to anticipatory projects. These seem to be defined only in terms of application. Nowhere in the Bill is there a definition of "project" in legal terms. How does the Minister hope to overcome that difficulty?

Mr. Lamont

I cannot offhand give the exact reference, but I think that there is a definition of "project" in the Bill. Perhaps I may return to that point later on. As the hon. Gentleman knows, the basis of the new scheme is that it should be project-based rather than asset-based.

Mr. Williams

I should like to be able to congratulate the Minister of State on the clarity of his exposition, but honesty denies me the chance to make that pleasantry. We shall read his exposition with interest and confusion tomorrow, and I suspect that it will be read with fascination and confusion for many years ahead by firms trying to interpret the Government's intentions.

My hon. Friend

the Member for Dunfermline, West (Mr. Douglas) touched on a critical point. It is difficult to grasp the difference that the Minister envisages between the asset-based and the project-based schemes. How on earth will the Secretary of State establish that the start of a project is anticipatory? What powers will he or his officials have to enable them to prove that the first moves are anticipatory rather than the normal start of a project—particularly as we understand from the Bill that it is possible for applications to be made after the start of a qualifying project?

I am at a loss to understand the Government's logic—though I can understand their generosity—in saying that they could revise the grants upwards. Both sides of the House would accept that it should not be possible for a grant to be subsequently amended downwards after a firm had embarked on a project, but I do not see why, if the grants for a particular area improve within the lifetime of a project, a company that was happy to go ahead with its project on the original basis should be given a gratuitous handout that it did not need to get that project started. The Bill is supposed to be about efficiency. Where is the efficiency in paying more for a project that has already been started?

9.15 pm

Mr. Norman Lamont

I am greatly dismayed that the right hon. Gentleman did not find my explanation clear. If he thought it unclear, he should have seen the first three drafts. Nevertheless, I shall read it to see whether it falls short of the model of clarity that I thought that I was conveying with such conviction.

I do not think that defining an anticipatory project is a great problem. It will be a project that occurs during the period between the announcement and the implementation of a change. People will be protected before that, but not in the interim.

Mr. Williams

In other words, any project—even one that would have taken place during that time anyway—would be regarded as anticipatory even if it clearly was not so because its timing was entirely unrelated to the subsequent announcement of the Government's decision. Is that correct?

Mr. Lamont

I am afraid so—if it had not started. If its qualifying date was before the announcement of the change, it would be protected. Otherwise, however, the right hon. Gentleman is right. It would not be protected in that circumstance.

Mr. Williams

In that case, will the hon. Gentleman do me the courtesy of explaining the logic of his statement that projects that have already started will be allowed the higher rate of grant, which was not anticipated when they were set up, but that those set up deliberately to avoid a lower rate of grant in the future will not be allowed a similar benefit? Frankly, I do not see the logic of the Government's position.

Mr. Lamont

It applies not just to the rate of grant but to several things. For example, it might apply to the job grant. The hon. Member for Coventry, North-West (Mr. Robinson) constantly suggested in Committee that the job grant might be eroded by inflation. It is to meet precisely that consideration that there is this generosity, as the right hon. Gentleman described it, whereby a project that has already had its qualifying date and has already started before the changes are made will be able to take advantage of the changes. I should have thought that the whole House would welcome that. Most of the time there has been an onslaught on me for cutting things. Now I am told that I am being too generous.

Amendment agreed to.

Mr. Lamont

I beg to move amendment No. 9, in page 7, line 44, at end insert— '"expenditure", in relation to an asset provided by being manufactured, constructed or devised by any person, includes such sum as appears to the Secretary of State to be properly attributable to its provision by that person in that manner, and the sum so attributed shall be treated as having been paid at such time as the Secretary of State may direct;'. The amendment rectifies the accidental exclusion from the Bill of a provision in the 1982 Act concerning self-built assets. RDG is payable on capital expenditure on assets. Normally a company which, for instance, needs plant or machinery that qualifies for grant will buy it and then claim grant on the relevant expenditure. As the House knows, however, companies do not always buy assets in that way. Sometimes the assets are self-constructed. The company may have an engineering department which constructs or part-constructs a tool. That is the purpose of the amendment.

Amendment agreed to.

Amendments made: No. 10, in page 8, leave out lines 21 and 22.

No. 12, in page 8, line 30, after 'are', insert 'to be'.

No. 13, in page 8, line 38, after 'are', insert 'to be'.—[Mr. Norman Lamont.]

Mr. Lamont

I beg to move amendment No. 14, in page 9, line 6 after 'of, insert 'the receipt of

Like Government amendment No. 8 and the rest, this should be categorised perhaps not as an anti-avoidance provision but as an anti-windfall provision. In this case, the intention is to block a possible abuse of a provision. To be eligible for a grant, all projects must satisfy the conditions set out in new section 3(1) of the 1982 Act on a qualifying day.

For projects, the whole of which are still to be carried out by the date of application for approval, the qualifying date under the Bill is as at present—the date on which the application is made. The amendment is designed to avoid the possibility that that provision could be abused when the application is made. When an announcement is made of a change to the scheme that would reduce or take away entitlement to grant—for example, a reduction in the rate of grant—our policy is that applications made before the date for projects that have yet to start will be protected from that change, but applications made after that date for projects that have yet to start will not be so protected. Under the Bill as drafted, a person might dishonestly rush to submit a back-dated application on hearing the announcement of a change. It would be literally impossible to prove deception. The amendment avoids the problem by referring to the date an application is received rather than the date it is made.

Opposition Members may feel that it is a somewhat far-fetched position, but the right hon. Member for Swansea, West (Mr. Williams) will no doubt recall that it has been known to happen in the case of RDGs.

Amendment agreed to.

Mr. Milan

I beg to move amendment No. 18, in page 10, line 1, leave out from beginning to 'the' in line 3.

Mr. Speaker

With this we shall take the following amendments:

No. 19, in page 10, line 1, leave out `Subject to any reduction in' and insert `After consideration of any adjustment of'. No. 21, in page 10, line 4, after 'be', insert `subject to the absolute ceiling fixed above the ceilings expressed in EUA per job created by the initial investment if the project is withing the manufacturing sector, and shall not be so subject if it is within the service sector—'. No. 60, in page 10, line 7, leave out 'higher' and insert `highest'.

No. 23, in page 10, line 10, leave out from `expenditure' to end of line 13.

No. 61, in page 10, line 16, at end insert— `(iii) the amount produced by applying the European Economic Community net grant equivalent limit for the creation of jobs.'. No. 24, in page 10, line 21, leave out from `expenditure' to end of line 24.

No. 62, in page 10, line 26, after 'provided', insert 'the higher of (i)'.

No. 63, in page 10, line 28 at end insert— `(ii) the amount provided by applying the European Economic Community net grant equivalent limit for the creation of jobs.'. No. 30, in page 11, line 33, leave out from 'above' to `shall' in line 35.

No. 31, in page 11, line 33, leave out `with any reduction to give effect to' and insert 'after consideration of'.

No. 35, in page 12, line 1, leave out paragraph (d).

No. 36, in page 12, line 5, leave out from `circumstances' to end of line 8.

No. 44, in page 12, line 44, leave out sub-paragraph

(5).

No. 46, in page 13, line 9, leave out 'or 5(c').

Mr. Milan

Two separate issues are involved in this group of amendments—at least, they were separate in my mind when I tabled them. Unless I have misread the Bill, they are definitely separate issues and I shall deal with them as such.

The first issue involves the EEC, and amendments Nos. 18 and 30 are examples of that. I do not understand why it is necessary to write EEC obligations into the legislation. There is an explanation in the White Paper about replacement assets, but the Bill does not refer—

Mr. Norman Lamont

rose——

Mr. Milan

No, I shall not give way yet.

The Bill does not mention any obligation—it simply states the broad terms.

I am aware that until 1979—and probably up to the present time—there have been certain understandings at Community level about the overall amount of assistance that may be given in any case. There has been a requirement to submit details of schemes to Brussels for vetting and monitoring. I am not sure how honestly that procedure has been followed by the member states—there is certainly a great deal of suspicion that there is not absolute honesty in these matters, as there is not absolute honesty in many Community matters.

The United Kingdom has tried to maintain its levels of grant within the overall levels laid down by the Community. That has been done without any necessity to write anything into legislation. Why is it now necessary to do so, and what exactly does it cover? Something new might be involved. I regret that the Government intend to exclude the obligation on replacement assets from the new scheme. I deplore the need to write such provisions into the Bill. Amendments Nos. 18 and 30 take out those references. My hon. Friend the Member for Coventry, North-West (Mr. Robinson) has tabled amendments that deal with the subject in a different way. He assures me that they are much better than mine. I am happy to take his word for that.

The second group of amendments—Nos. 23, 24, 35, 36, 44 and 46 — deal with the point covered comprehensively in the definition in paragraph 5(1)(d) of schedule 1 concerning the prescribed limit for capital expenditure. This is one bit of the Bill to which I do not object in principle. I understand that it says that there might be large projects to which the normal rules will not apply. If that is the case, the definition is comprehensive and could be applied to a much wider range of circumstances. It is also one of the most clumsy definitions that I have seen. If the Minister is determined to keep the definition he should examine it as it is possible to make nonsense of it. Many restrictions and qualifications flow from the definition. We are entitled to ask for an explanation of what it means, especially as under paragraph 5(5)(a) different amounts for different classes of undertaking can be prescribed.

The Bill tries to cover every eventuality and provides that the Minister can do almost anything that he wants at any time and in any circumstances. The Minister was asked what the definition of a project is and why it was not included in the Bill. To be in the spirit of the Bill, the definition ought to be that a project is whatever the Minister decides it is. Everything else is what the Minister decides it is. It is highly unsatisfactory that everything should be put in such comprehensive terms.

Mr. Norman Lamont

It might be for the convenience of the House if I speak now to answer some of the points raised by the right hon. Member for Glasgow, Govan (Mr. Millan). He must forgive me if I was eager to intervene when he asked whether it was necessary to refer to these EC limits. The answer is that it is not. I chose to write it in because I wanted to be helpful and open to the House. I have bitterly regretted that decision. All that it has done is stir up a hornets' nest, not of penetrating points but of complete irrelevancies and misunderstandings resulting in a total waste of time.

9.30 pm

Seeing that the limits which existed when the Labour party was in office were there, and since we were introducing a new Bill, I felt that it would be a good idea to put them in the legislation so that people were aware of them. Although the limits existed when the Labour party was in office, I have been berated about them. I have been asked why I have tolerated the provision. The hon. Member for Coventry, North-West (Mr. Robinson) asked in an earlier debate what consultation we had had on the EC limits. How he thinks I could have consulted on EC limits set when the Labour party was in office, I fail to see.

The effect of amendments Nos. 18 and 20 is to remove the requirement in the Bill for any grant payable to a project to comply with the EC limits. It has nothing to do with replacement investment. It is concerned with the net grant equivalents and with the amount of money which can be used in regional policy.

Removing the limits from the Bill would not in any way alter the reality. The right hon. Member for Govan can amend the Bill back to its virgin form before it appeared on my desk, but he will not alter the reality of the EC limits. They exist because a foolish, naive Minister established them.

Amendments Nos. 23, 24, 35, 36, 44 and 46 deal with the cost-per-job ceiling, as the right hon. Member for Govan guessed. I am glad that the right hon. Gentleman said that he accepted the principle of the cost-per-job ceiling, although he might argue about the arithmetic or where it bit. He accepts the principle, and that is the purpose of the different parts of schedule 1 that he identifies in his amendments.

I shall look at what the hon. Gentleman said about the drafting and see whether there is any way in which it can be made less broad and more pointed.

Mr. Geoffrey Robinson

Before discussing my own amendment, No. 19, I must congratulate my right hon. Friend the Member for Glasgow, Govan (Mr. Millan) on his most effective intervention in the previous debate. It would have been preferable if the Minister had had the stamina to see through what for him has been a difficult Committee stage and a not altogether happy Report stage.

I am quite sure that the Minister regrets ever, as he thought at the time, coming clean with the Committee on these EC regulations. I am sure that he did it very much against the advice of his officials, who probably told him that he would be opening up Pandora's box. However, he did it, and I could not quite believe it when he did. I thought that there must be some difficulty there that we had not spotted and that the Government had failed to cover. As we got into the EC limits and what the Government proposed to do, it became clear that the Government were not sticking to the limits, which it appears from the Community regulations give an either/or situation—either 5,500 ecus or 40 per cent.

My right hon. Friend the Member for Govan has clearly read the reports of the Committee and other stages of the Bill in considerable detail and has the knowledge of the 1972 legislation. The Government are not sticking to the EEC procedures at all. If we were talking about a net grant of 5,500 ecus or a 40 per cent. prescribed percentage and a prescribed amount of £3,200—which is an operating subsidy in the way that the RDG could never be construed as except by a weak-kneed Tory Government anxious to please the competition directorate—and were it the case that the Government were putting to us that we should formally abide by the EEC limits as defined in Community document C31, we could have left the matter there. However, it is clear from the debate on the European regional development fund on 6 May that the Government were anxious to go ahead of anything that was in the EEC legislation and they have done so effectively. They have also introduced the cost-per-job limit, which is not an EEC legislative requirement. They have made it clear that their purpose in doing that, and indeed their purpose in the Bill, is to reduce RDG both as administered under the Industrial Development Act 1982 and under section 7. It is no good the Parliamentary Under-Secretary in his innocence pretending that that is not the case because it is.

On 8 May the Minister of State made the Government's intention clear. It is no good the Government trying to wriggle out of it. We would have much more respect for them if they came clean. He said: At present regional development grants do not qualify for support from the ERDF, so there can be no question of making up the difference. There is nothing extra there. He went on to say: Furthermore, although regional development grant will be cut, we have made it clear that part of the cut will be replaced by selective assistance. Then came a most telling intervention. I asked the same question myself on numerous occasions, but without a reply. It is obvious that the Minister feels it easier to reply to his side of the House than to this. The hon. Member for Wolverhampton, South-West (Mr. Budgen) asked: Does my hon. Friend agree that the Government's overall aim is to reduce expenditure on these projects?" — [Official Report, 8 May 1984; Vol. 59, c. 854.] By definition "these projects" has to be RDG and selective assistance under section 7. The simple categorical answer, probably the only one during the Committee stage from the Minister, was "Yes".

There can be no further question about any imponderables that may exist in the imponderable mind of the Parliamentary Under-Secretary about what might be made up from grant or services. The Minister directly responsible, who had been through a tortuous period of cross-examination, stated quite categorically that the overall aim is simply to cut.

It is for that reason that I have to say that throughout Committee we have viewed with the gravest misgivings the unnecessary straitjacket into which the Minister wants to put himself. We have made it clear time after time that not only does one not unnecessarily put oneself on a hook, as he did when he proposed this particular amendment early on in the Committee stage, but one does not without good reason put oneself at a disadvantage against other countries when competing for inward investment.

We do not for one second disagree with him about the need to get more jobs and more effective investment. But we do say that all the Minister has done is to remove a degree of automaticity—in his words—or Government flexibility, or a combination of the two. In doing so he has unnecessarily placed himself and the country at a considerable disadvantage. That is the precise point that is made in the amendments. We have tried to make it clear that we should not set the limits so low that there could be any question that the amount of grant that can be given under RDG as limited by the job ceiling would put the country at a disadvantage.

Can we now assume that the position is still as it was when the Bill was amended, that while non-job-creating modernisation does not qualify for RDG, job-creating modernisation would, irrespective of the size? That was not clear from what the Parliamentary Under-Secretary said. [Interruption.] We shall see from Hansard. It may have been clear to the Parliamentary Under-Secretary but it was not clear to Labour Members. There was consternation in the officials' Box and among Labour Members. I felt sorry for him. I have a high regard and respect for him, as he knows. He should not have been replying on that and I made that clear to him. I hope he takes that in the well-meaning spirit in which I put it to him.

I wish to refer briefly to one other amendment. The Under-Secretary gave an undertaking that manufacturing would not be adversely affected by what was now being proposed and would stand at no disadvantage. However, as the Minister well knows, the purpose of amendment No. 21 is to make it clear that investment in manufacturing industry is at a disadvantage in the sense that the amount per head created cannot exceed a given percentage of the RDG. That does not apply in the service sector. I can imagine many small low capital investment projects in manufacturing in which it might be advantageous to take an indefinite amount of the prescribed amount which is the job subsidy. We have put this to the Minister time and again in Committee. We have argued ad nauseam that he is putting himself in progressively more difficult and unnecessarily restrictive circumstances for one purpose only. It is not good enough for him to say that we are going to be good Europeans. As my right hon. Friend the Member for Govan made clear, there is no black and white in the area of regional policy. Each country is out to extend—I will not say bend—the rules to the maximum for its national advantage, and why should it not do so? That is what Governments are for—at least, that is what we used to think, until this legislation was introduced.

I ask the Minister to make clear that the wording in amendment No. 21, while it may not be technically proficient in every respect, is a correct statement of what will be written into the Bill. We shall not push amendment No. 21 to a vote. That is unnecessary. It is merely a probing amendment at this late stage to make sure that we have understood the workings of the Minister's mind, and to make clear the extent to which we regard what is being proposed as disadvantageous to the regional policy, and to the general industrial policy of the country.

I revert to amendment No. 19. I put it to the Minister that, while we might have accepted, even unamended, the foolish preamble that he introduced to schedule 1 had he said something to the effect, "We will abide, upwards or downwards, by whatever the EEC rules," what we find inexplicable is that we should make our policy Subject to any reduction in any of the following amounts. The Minister will doubtless say that it does not really mean that. If it does not mean that, let us use wording that makes that clear. If it is a job limit, we detest the wording of it, but we detest even more the substance of it. If it is the Minister's intention to make clear that we shall abide by the EEC rules, and, in making that clear, he wants to come clean with the House, and make us appear good Europeans, maintaining that the Secretary of State will do everything that he is told, or everything that he is strictly allowed to do, why is it that he finds it so hard to accept amendment No. 19?

I quoted earlier from the March report of the regional directorate, which spoke of the dire plights that it envisaged our regions being plunged into by the Government's policies. There are three specified criteria, the specified amount, the specified percentage, and the specified limit. I still await an answer to whether the specified limit will be treated by way of statutory instrument, or whether it will be subject to an affirmative resolution. That is not covered in the Bill.

9.45 pm

Three criteria will govern the financial impositions. The Government will not object to that description. They intend to impose financial disciplines because they think that they will achieve better value for money. Perhaps that will produce trends which are a threat to the Community. Perhaps the regions will have the upper hand. Perhaps the regional directorates will get the upper hand over the competition directorates. May we have an assurance that the Minister will not stick to his own target, which is far below the EEC's, particularly since he may put himself in one of two silly positions? First, we may not obtain as much as we wish and, secondly, we may put ourselves at a disadvantage in terms of attracting investment.

I suggest that we vote in favour of amendment No. 19, which is a reasoned amendment. It is both reasonable and sensible and would remove a totally negative cost-cutting approach which the Government have made the hallmark of their regional policy. We do not expect any great changes in policy, but if the Minister feels that it is an unnecessary amendment, will he explain where else in the Bill our desires can be catered for? Why does the Bill specify a reduction? We must have a reason for the Bill's wording.

I do not want the Minister to refer to another part of the Bill that we cannot find, to the White Paper which is not relevant, or even to the money resolution, which the Under-Secretary seems to have forgotten in the fluster of the moment. Our amendment is reasoned, understandable, and acceptable.

Mr. Wrigglesworth

We were confused a few minutes ago when the Minister moved the Government amendment and we are even more confused by the speech from the Opposition Front Bench by the hon. Member for Coventry, North-West (Mr. Robinson). I read carefully the Committee proceedings and I am still confused. I cannot see the basis of the Opposition's objections, particularly when I read the comments by the right hon. Member for Swansea, West (Mr. Williams) who —perhaps significantly—is no longer on the Opposition Front Bench. The right hon. Gentleman said: I found the Minister's explanation in relation to the EEC persuasive and important. I understand why certain powers are needed by the Minister to ensure that we do not find ourselves in breach of the established ceilings which, as he said, have operated regardless of Administration. They have been part of the EC system ever since we have been members of it." — [Official Report, Standing Committee J, 28 February 1984; c. 131–2.] The right hon. Member for Swansea, West seemed to be saying much the same as the Minister in the early part of the debate.

Mr. Geoffrey Robinson

The cost-per-job ceiling is the only one that does not exist in the EEC. I take exception to it. Amendments Nos. 18 and 19 seek to remove the cost-per-job ceiling. It is not an easy obligation to carry. Britain accepted it in advance of any other country. We see no need for doing so. There is no difference between my right hon. Friend and myself on that point. Indeed, I would point out that he has been here for much more of the debate that the hon. Gentleman.

Mr. Wrigglesworth

I accept that. I am not trying to make a point about the right hon. Gentleman not being here during the debate, but that he is not present for the debate on what I regard as an important matter. He made a relevant contribution in Committee. I cannot accept why it should be thought so remarkable that the Government accept the point that has been made. The Government seem to be unable to avoid the obligation. As in other amendments before the House, it is legitimate for the hon. Gentleman and his right hon. Friend to criticise the Government for a policy that is central to the Bill, namely one introduced to change the balance of the grant structure so that the automaticity of grants paid on capital projects is brought more into balance with grants given for jobs created. However, it is difficult to sustain and carry to its ultimate conclusion.

A broad spectrum of opinion maintains that the existing grant system needs to be reformed. I share some of the anxieties expressed by the hon. Member for Coventry, North-West and, no doubt, by some Conservative Members with certain constituency interests, about the impact on firms in, say, Teesside—ICI, Shell, Philips, and others — which have received substantial grants. Partly as a result of that they have been able to achieve substantial operations in the regions. Looking at the matter in the round, one must accept nevertheless that the Government's change is right in principle.

The right hon. Member for Glasgow, Govan (Mr. Millan) spoke about the non-specific nature of the subsection. I have much sympathy with his views. However, I hope that the right hon. Gentleman accepts that it is important that Ministers should have some discretion over grants. One of the benefits that has often come from the Industry Act 1972 is the discretion over projects that Ministers are able to exercise. That has worked well in favour of the regions in creating employment. Although one wants to know the Government's clear intentions, one does not wish to remove the flexibility with which Ministers can apply the rules to individual circumstances as they arise.

I need to be much more convinced by the arguments put forward in favour of the amendment by the right hon. Gentleman and his hon. Friends this evening before I could support them. I do not want there to be a Dutch auction, certainly not within the EEC. It is bad enough that it takes place in countries outside the Community. It is not in anyone's interest to have a ratchet effect Dutch auction.

I support what the Minister has done to ensure that the practice ends within the Community. In the past some nonsensical bidding-up of grants has occurred. That has done no good to industry or to taxpayers. Unless I hear a much better explanation of the grounds for supporting the amendments, we shall not support them in the Lobby this evening.

Mr. Norman Lamont

I am grateful to the hon. Member for Stockton, South (Mr. Wrigglesworth). I was beginning to doubt my sanity. The remarks of the hon. Member for Coventry, North-West (Mr. Robinson) did not make much sense. Even usually sensible people such as the hon. Member for Dunfermline, West (Mr. Douglas) and his hon. Friends were going through a vigorous "Hear, hear" exercise. I could not make out whether that was purely tribal or whether it was intentional. Judging by appearances, it would seem that the hon. Gentleman actually believes that there is something proven about the amendments. I find it very difficult to reply to the debate, because I do not know exactly what I am to reply to. Perhaps the most useful thing I can do is to explain the effect of the amendments and then sit down.

Let me explain why the amendments are unnecessary. As has been said, the cost-per-job ceiling is not an EEC requirement. We all agree on that, and have said it many times. The hon. Member for Coventry, North-West is against it, but the right hon. Member for Glasgow, Govan (Mr. Millan) thinks that there is something to be said in favour of it. It is said that the Government are putting the RDG scheme in a European straitjacket, but we are doing nothing of the sort. The hon. Member for Coventry, North-West may object to the cost-per-job limit, but these amendments concern the EEC limits. Consequently, one assumes that the hon. Gentleman's remarks referred to the EEC limits. It cannot be said that including a reference in the legislation to EEC limits is in any way putting the British RDG scheme or British industry in a straitjacket.

I was asked why the legislation referred simply to Subject to any reduction in". The answer is that the grant will have to be reduced if the EEC limits are breached. Limits only work in that way. If the limit is hit, one's national grant has to be reduced. I cannot make it any clearer than that.

Mr. Geoffrey Robinson

That is not the point. The undertaking that I sought in Committee and have asked for again tonight is that if the EEC limits are increased because it is felt that the disparities in the regions are so great that the Community's very cohesion—to use the Euro-fanatic terms of the SDP—may be put at risk, the Minister will reconsider and, indeed, increase his limits in line with the revised upward limits of the EEC.

Mr. Lamont

I was coming to that point, because amendment No. 63 ensures that we would have to increase our grants if the EEC increased its limits. However, I take it that the hon. Gentleman is satisfied with my explanation so far, and that he now understands that grant will have to be reduced if we breach the limits imposed by the EEC. That is why the Bill says "reduction", and that is the only reason why.

Mr. Douglas

We are talking about including in the legislation an explicit commitment to adhere to EEC obligations. From the Minister's comprehensive examination of regional policy legislation among member states of the Community, can he name any other nation that accepts that explicit Community obligation? Are there other nations that do it directly?

Mr. Lamont

I assume that by "do it directly" the hon. Gentleman wants to know whether those countries write that into their legislation. I am afraid that I do not know whether it is written into German legislation, but it makes no legal difference. The provision has direct legal effect in this country, whether or not it is written in the legislation. In a detached, bipartisan way, I have explained the matter to the House. The hon. Member for Stockton, South understands it, even if no other Opposition Member does. Indeed, I shall be grateful to him for ever and a day.

Amendment No. 21 is again entirely unnecessary. In Committee the hon. Member for Coventry, North-West asked for confirmation that the 40 per cent. ceiling would apply to service sector projects. I can confirm that it would not apply to the service sector and that under the EEC limits it applies to manufacturing. That being the case, I cannot see the point of the amendment. It would have no legal effect and would not change what would happen without it.

I was asked—in relation to amendments Nos. 60 to 63—whether, if the EEC increased the maximum limit on grant to companies, we would automatically increase ours. The answer is no. We want a regional policy geared to achieving its objective at reasonable cost. If the Government decided that £X was a sufficient incentive and the EEC maximum level was higher, it is suggested that we should automatically pay a higher level of grant. We might adjust it, but I do not see why we should give an undertaking definitely to adjust it upwards simply because the EEC limit was raised. Not even the most irresponsible——

It being Ten o'clock, the debate stood adjourned.

Ordered,

That, at this day's sitting, the Co-operative Development Agency and Industrial Development Bill may be proceeded with, though opposed, until any hour. —[Mr. Sainsbury.]

Question again proposed, That the amendment be made.

Mr. Lamont

It cannot make sense to pay more than is necessary. Even the Opposition must accept that. Accordingly, I urge my hon. Friends to reject this wholly nonsensical amendment.

Mr. Millan

It is a pity that the Minister did not have second thoughts and remove all the references — that would have been the effect of my amendment—and we might have saved ourselves a lengthy debate. I gather that my Front Bench wishes us to vote on Amendment. No. 19, and accordingly I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: No. 19, in page 10, line 1, leave out 'Subject to any reduction in' and insert 'After consideration of any adjustment of'.—[Mr. O'Neill.]

Question put, That the amendment be made:—

The House divided: Ayes 89, Noes 176.

Division No. 342]	[10.01 pm
AYES
Adams, Allen (Paisley N)	Eastham, Ken
Ashton, Joe	Evans, John (St. Helens N)
Bagier, Gordon A. T.	Fatchett, Derek
Banks, Tony (Newham NW)	Field, Frank (Birkenhead)
Bennett, A. (Dent'n & Red'sh)	Flannery, Martin
Bermingham, Gerald	Foulkes, George
Bidwell, Sydney	George, Bruce
Boyes, Roland	Godman, Dr Norman
Bray, Dr Jeremy	Gourlay, Harry
Callaghan, Jim (Heyw'd & M)	Hardy, Peter
Clark, Dr David (S Shields)	Harman, Ms Harriet
Clwyd, Ms Ann	Harrison, Rt Hon Walter
Cocks, Rt Hon M. (Bristol S.)	Haynes, Frank
Cook, Frank (Stockton North)	Hogg, N. (C'nauld & Kilsyth)
Cook, Robin F. (Livingston)	Home Robertson, John
Corbett, Robin	Hughes, Sean (Knowsley S)
Corbyn, Jeremy	Janner, Hon Greville
Cowans, Harry	Kaufman, Rt Hon Gerald
Craigen, J. M.	Leadbitter, Ted
Crowther, Stan	Leighton, Ronald
Dalyell, Tarn	Lewis, Terence (Worsley)
Davies, Rt Hon Denzil (L'lli)	Litherland, Robert
Dormand, Jack	Lofthouse, Geoffrey
Douglas, Dick	McCartney, Hugh
Dubs, Alfred	McCrea, Rev William
Dunwoody, Hon Mrs G.	McDonald, Dr Oonagh
Eadie, Alex	McKay, Allen (Penistone)

McKelvey, William	Rogers, Allan
Mackenzie, Rt Hon Gregor	Rowlands, Ted
McNamara, Kevin	Sheerman, Barry
McTaggart, Robert	Short, Ms Clare (Ladywood)
McWilliam, John	Silkin, Rt Hon J.
Madden, Max	Skinner, Dennis
Marek, Dr John	Snape, Peter
Marshall, David (Shettleston)	Spearing, Nigel
Maxton, John	Stewart, Rt Hon D. (W Isles)
Millan, Rt Hon Bruce	Thomas, Dr R. (Carmarthen)
Nellist, David	Wareing, Robert
Oakes, Rt Hon Gordon	Welsh, Michael
O'Neill, Martin	Williams, Rt Hon A.
Pike, Peter	Winnick, David
Powell, Raymond (Ogmore)	Young, David (Bolton SE)
Prescott, John
Randall, Stuart	Tellers for the Ayes:
Redmond, M.	Mr. James Hamilton and Mr. Don Dixon.
Robinson, G. (Coventry NW)
Robinson, P. (Belfast E)

NOES
Adley, Robert	Freeman, Roger
Alton, David	Gale, Roger
Amess, David	Garel-Jones, Tristan
Ancram, Michael	Goodhart, Sir Philip
Ashby, David	Goodlad, Alastair
Aspinwall, Jack	Gow, Ian
Atkins, Rt Hon Sir H.	Gower, Sir Raymond
Atkins, Robert (South Ribble)	Gregory, Conal
Baker, Nicholas (N Dorset)	Griffiths, Peter (Portsm'th N)
Baldry, Anthony	Ground, Patrick
Beaumont-Dark, Anthony	Hamilton, Neil (Tatton)
Beith, A. J.	Hanley, Jeremy
Bellingham, Henry	Hargreaves, Kenneth
Berry, Sir Anthony	Harris, David
Biggs-Davison, Sir John	Harvey, Robert
Boscawen, Hon Robert	Hawkins, C. (High Peak)
Bottomley, Peter	Hawksley, Warren
Bottomley, Mrs Virginia	Hayhoe, Barney
Bowden, Gerald (Dulwich)	Hayward, Robert
Bright, Graham	Heathcoat-Amory, David
Brinton, Tim	Heddle, John
Brooke, Hon Peter	Hickmet, Richard
Brown, M. (Brigg & Cl'thpes)	Higgins, Rt Hon Terence L
Bruce, Malcolm	Hind, Kenneth
Bruinvels, Peter	Hirst, Michael
Bryan, Sir Paul	Holt, Richard
Buchanan-Smith, Rt Hon A.	Hooson, Tom
Buck, Sir Antony	Hordern, Peter
Budgen, Nick	Howard, Michael
Burt, Alistair	Howarth, Alan (Stratf'd-on-A)
Butcher, John	Howarth, Gerald (Cannock)
Carlisle, John (N Luton)	Howell, Ralph (N Norfolk)
Carttiss, Michael	Hubbard-Miles, Peter
Cash, William	Hunt, David (Wirral)
Chalker, Mrs Lynda	Hunt, John (Ravensbourne)
Channon, Rt Hon Paul	Hunter, Andrew
Clark, Hon A. (Plym'th S'n)	Jackson, Robert
Cockeram, Eric	Jessel, Toby
Conway, Derek	Johnson-Smith, Sir Geoffrey
Coombs, Simon	Jones, Gwilym (Cardiff N)
Cope, John	Kershaw, Sir Anthony
Dicks, Terry	Key, Robert
Douglas-Hamilton, Lord J.	King, Roger (B'ham N'field)
Dover, Den	Knight, Gregory (Derby N)
Durant, Tony	Knowles, Michael
Eggar, Tim	Knox, David
Evennett, David	Lamont, Norman
Fairbairn, Nicholas	Lang, Ian
Fallon, Michael	Lawler, Geoffrey
Fa veil, Anthony	Lee, John (Pendle)
Fenner, Mrs Peggy	Leigh, Edward (Gainsbor'gh)
Fookes, Miss Janet	Lennox-Boyd, Hon Mark
Forman, Nigel	Lightbown, David
Forth, Eric	Lilley, Peter
Fowler, Rt Hon Norman	Lloyd, Peter, (Fareham)
Fox, Marcus	Luce, Richard
Franks, Cecil	Lyell, Nicholas
Fraser, Peter (Angus East)	McCurley, Mrs Anna

Macfarlane, Neil	Peacock, Mrs Elizabeth
MacGregor, John	Percival, Rt Hon Sir Ian
MacKay, John (Argyll & Bute)	Porter, Barry
Maclean, David John	Powell, William (Corby)
McQuarrie, Albert	Powley, John
Major, John	Prentice, Rt Hon Reg
Malins, Humfrey	Proctor, K. Harvey
Malone, Gerald	Rhys Williams, Sir Brandon
Marlow, Antony	Ridley, Rt Hon Nicholas
Mather, Carol	Ridsdale, Sir Julian
Maude, Hon Francis	Sainsbury, Hon Timothy
Maxwell-Hyslop, Robin	Skeet, T. H. H.
Mayhew, Sir Patrick	Smith, Tim (Beaconsfield)
Mellor, David	Steen, Anthony
Merchant, Piers	Stevens, Lewis (Nuneaton)
Meyer, Sir Anthony	Terlezki, Stefan
Mills, Iain (Meriden)	Thompson, Donald (Calder V)
Mills, Sir Peter (West Devon)	Thompson, Patrick (N'ich N)
Moate, Roger	Trippier, David
Montgomery, Fergus	Viggers, Peter
Moore, John	Wakeham, Rt Hon John
Moynihan, Hon C.	Wallace, James
Mudd, David	Wardle, C. (Bexhill)
Murphy, Christopher	Warren, Kenneth
Neale, Gerrard	Wells, Bowen (Hertford)
Needham, Richard	Wheeler, John
Nelson, Anthony	Wood, Timothy
Neubert, Michael	Wrigglesworth, Ian
Nicholls, Patrick
Norris, Steven	Tellers for the Noes:
Oppenheim, Philip	Mr. Archie Hamilton and Mr. Douglas Hogg.
Page, Richard (Herts SW)

Question accordingly negatived.

Amendment made: No. 20, in page 10, line 1, after 'to', insert 'any transitional provision under section 1 above or section 5 below and to'.—[Mr. Norman Lamont.]

Mr. Norman Lamont

I beg to move amendment No. 26, in page 10, leave out lines 29 to 31.

Mr. Speaker

With this it will be convenient to take Government amendments Nos. 40, 41 and 43.

Mr. Lamont

I said in Committee that I would reconsider whether there should be powers to prescribe nil rates for capital grant and nil amounts of job grants. I tried to assure the Committee that there was nothing sinister in the proposals. I said that the only position in which we might want to have a nil rate of grant was where there was over-provision of a certain class of asset; for instance, a surplus of factories in development areas because of separate programmes to provide factories, in which case we might not wish to pay a grant on factories.

I said that it was extremely unlikely that we should ever want to use the powers and that the measure would give us extra flexibility. Having reconsidered the matter, I have come to the conclusion that, in view of the extreme unlikelihood of the Government wanting to use those powers, they can be removed. That is why we have the amendment. The right hon. Member for Glagow, Govan (Mr. Millan) has tabled an amendment which has exactly that effect. Our amendment and the Opposition amendment are identical, and I commend them to the House.

Amendment agreed to.

Amendments made:

No. 27, in page 10, line 32 leave out subsection (2).

No. 29, in page 11, line 2 leave out 'under subsection

(2) above during the currency of the project' and insert 'to be made by any transitional provision made applicable to current projects'. No. 32, in page 11, line 34 after first 'any', insert 'increase or reduction required by any transitional provision and any'. No. 37, in page 12, line 8 at end insert 'and "anticipatory project", in relation to a variation of the qualifying activities, the prescribed percentage, the prescribed amount or a prescribed limit, means a project whose qualifying date falls in the period beginning with the making or, as the case may be, the laying in draft of the order and ending with the date on which the variation takes effect, with a corresponding meaning in relation to a variation under section 1 above in the areas which are assisted areas of any particular category'. —[Mr. Norman Lamont.]

10.15 pm

Mr. Milan

I beg to move amendment No. 39, in page 12, line 16, at end insert 'and may in particular include the provision of advance factories'. This amendment would make an addition to the provision in the Bill dealing with the specification of qualifying activities. The reason why I tabled it is that it is not clear, from the Bill, what the position on the provision of advance factories might be. Under present legislation the question of grant depends ultimately on the use to which the advance factories are to be put —whether they are used for qualifying activities or not.

Under the Bill we are dealing with a different kind of system where the grant is payable in relation to projects. I am inquiring whether a project for the provision of advance factories might qualify for assistance under the Bill. In Scotland advance factories are most frequently provided by the Scottish Development Agency or local authorities. It might be that whether grant was payable would not be a factor in the decision of those bodies to provide advance factories. However, they could also be provided by private interests. I should not want to inhibit any interest from a private company or development company which was willing to provide advance factories. It is not clear whether they would qualify for assistance under the Bill.

It is a point, among others, which has been brought to my attention in a memorandum from the Institute of Chartered Accountants in Scotland. It is worth exploring, but whether it should be written into the Bill is perhaps another matter. I should be grateful if the Minister could give me an assurance that in suitable circumstances such a project could qualify for assistance under the Bill.

Mr. Trippier

Under the regional development grant scheme, the cost of providing a factory is eligible for grant, as the right hon. Member for Glasgow, Govan (Mr. Milian) has said where, the factory is to be used for qualifying activities. Advance factories qualify for grant when they are sold or let, unused, to companies engaged in qualifying activities but not otherwise.

The right hon. Member has suggested that the provision of advance factories should become a qualifying activity in its own right. Since that is, presumably, irrespective of the uses to which those factories are subsequently put, at first sight the amendment does not seem desirable. I appreciate that, without the certainty that the occupant will be engaged in activities which qualify for grant, there may be a disincentive to construct or convert premises. In contrast, an incentive to provide, unrelated to subsequent use or need, may result in the subsidy of non-qualifying activities or, even worse, a stock of empty factories.

I appreciate that the amendment would not compel us to regard that activity as qualifying, but there would, of course, be a presumption that it would be if it were the only activity to be referred to in the primary legislation, and for the reasons that I have given, I cannot agree to it. However, the right hon. Gentleman is aware that we are consulting on qualifying activities and I will consider whether provision of factory units should be regarded as a qualifying activity. I hope that given this assurance, the right hon. Gentleman will not press his amendment.

Mr. Milan

I am glad that this matter is to be looked at. I have sympathy with what the Minister said about the undesirability of paying grant when one is not clear what, at the end of the day, the units will be used for. However, it is a case of the chicken and the egg. Factories are less likely to be built on a speculative basis—I use the word "speculative" in a non-pejorative sense, referring to someone who is taking a risk and hoping to let units for what might be qualifying activities—if there is doubt as to whether grant is to be paid. However, if the Minister will consider the matter again, I beg to ask leave to withdraw the amendment.

Amendment, by leave withdrawn.

Amendments made:: No. 40, in page 12, line 22, leave out `(including a percentage which is nil)'. No. 41, in page 12, line 25, leave out `(including a percentage which is nil)'. — [Mr. Norman Lamont.]

Mr. Milan

I beg to move amendment No. 42, in page 12, line 28, at end insert 'provided that in the case of development areas the percentages shall be no less than 15 per cent. and in the case of special development areas the percentages shall be no less than 22 per cent.'. The minimal levels in the amendment are the existing levels for the percentage of grant to be paid on qualifying capital expenditure in development and special development areas, the percentage for development areas being 15 per cent. and for special development areas 22 per cent.

One of the difficulties which have been referred to today is that it is difficult to judge the overall effect of the Bill before some of the more important details have been disclosed to us and debated. One of the main areas of uncertainty is the rate at which grant will paid on qualifying expenditure when capital expenditure is the basis for the grant.

We know that there are to be substantial savings—the Government have admitted that. The Government' s main objective in introducing the White Paper and the Bill is to save money. According to paragraph 34 of the White Paper, the overall extent of the savings will depend, first, on the spread of the geographical area—whether there is a change in the assisted areas map—and, secondly, on the rates of grant.

The Minister was anxious to assure me that I was wrong in assuming that there was to be a considerable reduction in the number of assisted areas. I am not sure that I made any such assumption in my earlier speech. My point was that there was considerable apprehension in some areas that they would be removed from the map. If it is true, as the Minister seemed to imply, that there might not be substantial reductions in the assisted area map, it follows that one way in which the Government will reduce expenditure will be by reducing the percentage payable as grant on capital expenditure.

As the representative of a special development area, I fear that the Government may take the apparently less politically contentious line of not removing too many more areas from the assisted areas map — they removed a considerable number in 1979 — and achieving the savings by giving grants at a much lower percentage than at present. Both those paths — reducing the map coverage and reducing the percentage payable as grant—are equally objectionable to the Opposition.

The Industrial Development Act 1982 lays down the percentages payable. The percentages are stated in the legislation, although it is true that they can be altered by order. We have complained about the uncertainty surrounding the Bill, and here is another example of it. No percentages are given in the Bill, and we have been given no indication of the Government's thoughts on the matter.

No doubt the Minister will say that this is one of the matters for consultation under the terms of the White Paper. I do not know how far that consultation is genuine, but if Ministers genuinely intend to listen carefully to representations on the White Paper I should make it clear that all those whom I have seen from Scotland — I cannot believe that they have been different elsewhere—have made the following two points. First, they say that the overall total of regional aid should not be reduced. Everyone in the development areas has said that, as well as the Scottish Council and even the CBI in Scotland, I believe. Secondly, they say that the rates of grant on which the Government are ostensibly consulting—as I have said, I hope that it is genuine consultation—should not be reduced from their present levels. Those levels are needed if there is to be adequate incentive to invest, to expand capacity and so on in the development areas.

A great many new uncertainties will be created by the legislation and the whole assistance scheme will be taken less into account by potential investors than is the present scheme. If lower levels of grant are added to that uncertainty, the whole regional aid scheme will be irretrievably damaged. The amendment therefore seeks to enshrine the present levels of aid in the Bill. They are not especially generous by Common Market standards and are well within the EEC maxima. I hope that my hon. Friends and perhaps some other hon. Members will support the amendment.

Mr. Trippier

I have listened carefully to the right hon. Gentleman, but I am sure that no one would be more surprised than he if I accepted the amendment, except possibly my colleagues at the Treasury. As the right hon. Gentleman knows, we have been consulting about what future rates of grant should be, and he rightly referred to the period of public consultation which ended last week. We have not yet considered all the responses which we have received, and in those circumstances it would be premature to make any decision.

The amendment would prejudge the outcome of the consultations, not just on rates of grant, but on the assisted area map, as it assumes the continuance of a three-tier map with RDG at differential rates within the development areas and special development areas. Another issue on which we have consulted is whether the map should have two tiers, with RDG available only in the inner tier. Again, a decision has yet to be reached on that.

It would be entirely wrong to prejudge the issue by trying our hands in advance in respect of grant rates and the shape of the map. I hope that the right hon. Gentleman will seek leave to withdraw the amendment.

Mr. Williams

If the Minister intended to console anyone, he has done the opposite. He has created great alarm. This is the first time that we have heard the proposition that we may end up not just with only two tiers, but with only one of them receiving regional development grant. That is even worse than we had suspected or feared and there would be a great outcry if any such decision were announced. As for the present levels of grant, I agree with my right hon. Friend the Member for Glasgow, Govan (Mr. Millan). He and I were Opposition spokesmen when the original 1972 legislation was passed and we both subsequently had responsibility for regional policy, he in relation to Scotland and I nationally. I regard the present levels as the basic minimum. There would be little attraction if the 15 per cent. level was reduced—we regard it as a basic figure.

10.30 pm

There is also the problem of continuity and predictability. The present regime has been in operation for only four years. Ministers have trotted abroad speaking to Japanese and American investors, trying to tell them what the system will be. We all know how confused overseas investors become by the various representations from different groups in Britain, and when the Government, on subsequent visits, announce changes in the regime, it hardly helps international understanding of what is being offered.

The Minister will reject the amendment. We understand his sheltering behind the possible slap over the knuckles from the Treasury, but the cloak of consultation was a more respectable protection. My right hon. Friend the Member for Govan was right to move the amendment to establish what we regard as the basic minimum for regional development grant.

Amendment negatived.

Amendments made: No. 43, in page 12, line 35, leave out `(including an amount which is nil)'. No. 45, in page 13, line 7, at end insert— '(5A) Transitional provisions under subsection (2)(b), (3)(c), (4)(b) or (5)(c) may—

1. (a) provide for the attribution of part of an anticipatory project to the period before the variation takes effect and its approval in accordance with the attribution; and
2. (b)apply increases or, in the case of anticipatory projects, reductions in a percentage, amount or limit to current projects, that is to say, projects for which applications for approval for grant have been received or which are in the process of being carried out.'. —[Mr. Norman Lamont.]

Mr. Milian

I beg to move amendment No. 48, in page 13, line 40, at end insert: `(9) Any person aggrieved by a decision or determination of the Secretary of State under Section 3 and 4 above or under this Section may, in the case of a project located in England appeal to the Industrial Development Advisory Board or in the case of a project located in Scotland or Wales to the Scottish Industrial Development Advisory Board or Welsh Industrial Development Advisory Board respectively and in any such case the relevant Board may require the Secretary of State to vary or modify his decision or determination.'. As has been said on numerous occasions, the new scheme is very much subject to the discretion of and determination by the Secretay of State. Although certain limits will be laid down by statutory instrument, even when the outlines of the scheme have been filled in a large element of discretion will be left in the hands of Ministers to determine whether certain assets fall within the categories, whether certain assets should be excluded, to determine job losses in certain parts of the country to be set against job gains in the project under consideration, and so on. Many schemes that will meet the general criteria, even as laid down by statutory instrument, can still be excluded at the discretion of the Secretary of State. That gives immense powers to Ministers—something which, at an earlier time, might have caused Conservative Members concern. Absolute powers are to be given to the Secretary of State for determination and decisions.

There is no appeal against the various determinations. The Secretary of State uses his own judgment, although in practice his officials will do much of the work. Only the larger projects will be dealt with by Ministers. There is no way to dispute the Secretary of State's judgment.

There is a parallel in selective assistance, which will be continued. The various Ministers responsible for selective assistance refer to the industrial development advisory boards, which give independent judgments and provide advice to Ministers. Applicants for selective assistance can feel that their cases are being considered not only by civil servants and Ministers but by an independent body—admittedly appointed by Ministers — which includes people from banking, industry, the trade unions and so on. That system works extremely well. The people who serve on the boards do a considerable and unpaid public service.

That machinery will continue for selective assistance, but the Bill converts automatic regional development grants into a halfway house between those automatic grants and selective assistance. In those circumstances, there should be an opportunity for dissatisfied applicants to take their case to a body that will examine the matter. Such a body exists to deal with selective assistance and we should use it to examine applications that have been turned down.

There is a misprint in my amendment as, towards the end, "require" should be "request". That makes quite a difference to the meaning of the amendment. I noticed the misprint and asked for it to be corrected some weeks ago, but it has not been. I understand that it is not possible to have an advisory board which can simply overturn the Minister's decision. I am not asking for such executive authority, although it might be nice with the present Government. Such a request would be unrealistic. I am merely asking that a dissatisfied applicant should be able to go to an independent body which, if it feels he has a case, can ask the Minister to reconsider. If the amendment is not accepted, I hope that Ministers will consider some way in which to satisfy applicants by having their rejected applications examined outside the ministerial and Civil Service structure. I envisage there being many dissatisfied applicants under the new scheme. My amendment would assure industry that everything was not subject to the determination and decison of Ministers and officials.

Mr. Trippier

I suspect that the right hon. Gentleman is trying to help me and my colleagues by providing an intermediate buffer or tier that would save our having to deliberate on many cases. That is one way in which to interpret the amendment. I am grateful to him for pointing out the misprint as I did not understand the wording when I examined it again this afternoon. The word "request" rather than "require" helps to explain the main thrust of the right hon. Gentleman's amendment.

Nevertheless, there is no escaping the fact that the amendment would create another tier of bureaucracy. Under present arrangements, as the right hon. Gentleman said, applicants who consider a decision to be wrong or harsh can and sometimes do appeal to Ministers or via their Members of Parliament. We all know about that. All such cases are reconsidered centrally to ensure consistency and Ministers have to be satisfied that the decision is correct. These arrangements, which have existed for many years under governments of both parties, have proved satisfactory. I assume that Opposition Members believed that to be the case when they were in office because they did not seek to delegate to an outside body responsibility for the decisions that were taken by their officials.

The Opposition's arguments for yet a further level of bureaucracy have not convinced me of the need to change a system which works and, more importantly, which ensures the consistency vital to the operation of an automatic scheme operated on the basis of statutatory criteria and published rules. What is more, I could not accept that if such a new system of appeals were implemented, its decisions should be binding on the Secretary of State. This would be inconsistent with the accountability of Ministers to Parliament for the scheme. Therefore, I advise the House to reject the amendment.

Mr. Williams

That was a less than adequate response to the argument. It is no good quoting what happened in the past, because the system was much simpler and more straightforward. There is an incredible degree of discretion, and this has led to a reduction in certain of the discretionary powers that Ministers are claiming.

We have seen today the confusion that exists even in the minds of such clear-minded people as the Minister of State in trying to interpret what is meant by this legislation. If, as he assured us, we should have seen the first three drafts, we can understand that there will be a difference of opinion about the interpretation and facts of an individual case.

The amendment is not creating an extra level of bureaucracy. It is using a level that exists already. When it comes to fairness and equity, we have to be ready to accept a marginal inconvenience to Ministers to ensure that there is seen to be even handedness. It is understandable that outside the House people may he less than happy with the judgment of the people who framed the Bill in the first place, and their ability to sit as adjudicators is hardly enhanced by their record in recent months.

Mr. Wrigglesworth

I am grateful to the right hon. Member for Glasgow, Govan (Mr. Millan) for drawing to the amendment to his drafting. It is a pity that we were not made aware of it before the debate began, because it affects fundamentally the terms of his amendment.

I hope that the Minister will reconsider. It is inevitable that anxiety will be felt when such a wide degree of discretion is given to Ministers. I accept what the Minister said about the amendment building in another tier of bureaucracy. No one wants that if it can be avoided. But it may be that the advisory procedure that is adopted on the selective sections of the 1972 Act could be applied to this legislation. That would provide at least a degree of independent view on the discretion being exercised by Ministers. Whether we should go as far as the amendment proposes and provide a right of appeal, I am not sure. But to have some independent voice in the system because of the increased powers being given to Ministers would be welcomed by people in industry who feel that neither civil servants nor Ministers understand industry in the way that they should. To have the voice of industry in the form of the advisory boards would work effectively.

I remember when the right hon. Member for Chesterfield (Mr. Benn) was Secretary of State for Industry and was taking decisions with which the advisory board did not agree. Conservative Members were quick to marshal! the advice being given to the Minister and being turned down by him to demonstrate his doctrinaire and not very sensible views.

There is evidence that these advisory boards play a useful role, and it may be that a provision of the kind suggested by the right hon. Member for Govan could be built into the Bill before completion of its passage through Parliament.

10.45 pm

Mr. Millan

We have heard a ludicrous answer from the Minister. It is ludicrous to compare this system with the present system of regional development grants which are basically almost exclusively completely automatic. At the moment an applicant for a regional development grant has only to prove that he has incurred certain capital expenditure on qualifying activities in a particular location. The number of jobs to be provided has nothing to do with it. That is a matter of judgment. There is a simple test. There is no need for an independent appeal under the present system of regional development grants. That is being replaced by a system with a large element of discretion and judgment. There is no question of deciding on facts which are indisputable. The schedule is riddled with the Secretary of State's discretion to make all the essential decisions as to whether a grant should be payable and on what basis. That is in the hands of the Secretary of State. He or his officials on his behalf will be making judgments all the way through.

Schedule 1, paragraph 3, states that the approval of a project for grant rests with the Secretary of State. Paragraph 3(4) states: In approving a project for grant the Secretary of State shall determine as the basis for the payment of grant what, in his opinion, is—

1. (a) the amount of capital expenditure on assets to be provided by the project;
2. (b) the number of jobs to be provided by the project."

If an applicant says that if a project goes ahead he plans that it will provide an extra 200 jobs or 500 jobs the Secretary of State can say that in his opinion it will provide only 50 or 100 jobs. His judgment will override any other and there will be no appeal against it. The applicant must take it or leave it.

The present scheme is basically not a matter of judgment, but this is. There may be matters of interpretation as to whether a particular activity falls strictly within the qualifying activities laid down and they have sometimes given rise to difficulties. I am in no doubt about that. I have taken cases to Ministers and decided cases myself which have been on the margin. But they have basically depended on physical facts such as particular types of machinery and particular kinds of activity as laid down specifically and precisely in legislation. Here we are dealing with opinion. Paragraph 3(5) says: In making a determination … the Secretary of State may … take account of the provision of assets of some classes or descriptions but not others". The Secretary of State has an unfettered discretion. He can aggregate jobs. Again, he makes his judgment about the number of jobs which will be provided and he can aggregate them in any way he wishes.

Paragraph 3(6) says: the Secretary of State may. … direct that his approval will extend, if he so determines at any time, to such additional assets or jobs as he indicates in the direction. Again, those are matters of judgment which all rest in the hands of the Secretary of State.

I could quote many more examples. Paragraph 4(5) says: grant in respect of any job may be paid at any time after the time when, in his opinion, the job is provided. The approved number of jobs is that approved by the Secretary of State.

Paragraph 5(8) says: The Secretary of State may give directions, which may be general directions or directions concerning a particular case, as respects the determination of — (a) any question as to the classification of an asset as between the following three classes, that is to say— machinery or plant; buildings; works". Many of those are matters of judgment where there may be legitimate differences of opinion. Sometimes the element of judgment about the number of jobs will depend on what will happen in future, not what is happening at the precise time. All that is left in the hands of the Secretary of State.

It is ludicrous to compare all those provisions, taken as a whole, with the present system, which is simple, direct and based on precise facts with certain opportunities for interpretation but which basically are not in dispute between the applicant and officials dealing with his application. That is why there has been no particular difficulty in leaving these matters to the decision of civil servants with the normal business of appealing to the Member of Parliament to talk to Ministers and so on.

We are dealing with a different matter here. One man's judgment, that of the Secretary of State, is set against the judgment of the applicant, and there is no appeal. It has been said that my amendment would create more bureaucracy. I am astonished at the unfettered powers that this is giving to bureaucrats. These decisions in the generality of cases will not be taken by Ministers. They will never pass over a Minister's desk, unless some of the judgments give rise to so many complaints that Ministers will be forced to look at them. These will be decisions of bureaucrats against businessmen. The Government are supposed to be supporting businessmen, but the Bill is a bureaucrat's paradise. Some kind of independent judgment will have to be exercised in cases of dispute, with the ultimate authority resting with the Secretary of State, which I do not dispute. The Minister's reply was extraordinary.

The Minister must look at this again. I hope that he will give the House an assurance that he will look at it again. The machinery that I suggest would, I believe, be the best, because it already exists. One would be dealing with sensible people who have industrial, financial and other experience who are used, in dealing with selective assistance cases, to making judgments about the number of jobs to be provided, and so on. One would be asking them to do an additional job in an area where they are already well experienced. If the Minister objects to this procedure, that is not to condemn the notion out of hand. I believe that some way will have to be found to satisfy dissatisfied applicants that their applications have not been turned down on the diktat of the civil servant acting on behalf of a Minister. Some way must be found in which such applicants can have their cases looked at again with an independent element involved.

I do not like the scheme, as I have made clear, but, if we have to have it, there must be some safeguard for the dissatisfied applicant.

Amendment negatived.

Amendment made:: No. 50, in page 14, leave out lines 27 to 29 and insert— '4. In section 1 of the Industrial Development Act 1982—

1. (a) in subsection (5), for the word "change" there shall be substituted the word "variation" and at the end there shall be added the words "but no provision shall be made having the effect of reducing the amount of grant payable on current projects except in the case of anticipatory projects (as defined in section 5(1) and (5A) below).".
2. (b) for subsection (6) there shall be substituted the following subsection—

"(6) Without prejudice to the generality of subsection (5) above the transitional provisions as respects grant under Part II of this Act may include provision for the attribution of part of an anticipatory project to the period before the variation takes effect and its approval in accordance with the attribution."; and (c) in subsection (8), for the words "section 4(5)(a)" there shall be substituted the words "section 5(7)(b)".'. —[Mr. Norman Lamont.]