HC Deb 04 June 1984 vol 61 cc113-29

Amendment made: No. 51, in page 16, line 4, leave out `section 1(6)'.—[Mr. Norman Lamont.]

Motion made, and Question proposed, That the Bill be now read the Third time.—[Mr. Norman Lamont.]

Mr. Deputy Speaker (Mr. Ernest Armstrong)

I have to inform the House that Mr. Speaker has not selected the amendment in the name of the right hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Steel).

10.55 pm
Mr. Williams

May I set at ease the minds of Conservative Members who have avidly waited to hear the last dying gasps of the debate by saying that there is to be no vote on Third Reading by the Labour Opposition, and please will they not make too much noise on leaving? There is a simple reason for this. We have made it clear that we are bitterly opposed to the principles implicit in the regional section of the Bill. We have made it equally clear that we wish well to the first section of the Bill relating to the Co-operative Development Agency. Since to vote against the regional section would be to vote against the co-operative development agency, we have no intention of forcing a vote. However, this indicates the ridiculous situations in which the Opposition can be placed by the combination of two utterly unrelated Bills in one piece of legislation, as has happened in this case. I know that it is convenient for the business managers of the House, but it is bad legislation, and makes for great difficulties in the House.

The fact that we shall not vote against Third Reading does not erode our conviction that the Government are in error in not building in a provision that intermediate areas can be offered intermediate area grant if at some stage the Government think that desirable. The enabling power could have been put in the Bill. Ministers might not need to activate that power, but it could and should have been given.

The new regime represents a major erosion of the principle of predictability. Great store is placed upon predictability by business men, the CBI and small businesses. Without it incentives are of no account.

Our basic objection remains that to which we have referred at each stage. The Bill is yet another major erosion of regional policy, another attack on the assistance that should be available to alleviate the desperate position of many assisted areas. For those reasons, we think that the Government are wrong in their proposals. Our fears have not been allayed by explanations of possible formats that might be adopted eventually after Ministers have completed their analysis of consultations. All the possibilities are before us. We regard them as dangerous. The principle behind the Bill is penny-pinching arid unrelated to regional policy. It relates to the wish to make economies regardless of how disastrous those economies may prove to be.

10.57 pm
Mr. Philip Oppenheim (Amber Valley)

Regional aid, though conceived with the best intentions, has been a limited success. It has shifted, not solved, problems. The best estimates show that jobs created—if indeed they have been created—have cost about £40,000 each. The system has been geared to financing equipment rather than jobs. Automatic grants have too often created unwanted extra capacity and unviable businesses. Too often the open-ended subsidies for huge capital-intensive projects have created minimal employment in areas with poor communications and unsuitable skills. These are the problems with which British industry is still grappling.

Despite that, regional aid has still a role to play. Improvements in the Bill will be of enormous benefit in getting round the problems. One of the main ways in which regional aid should be used is in helping areas which are undergoing severe, sudden transitions because of the closure of major local industry. My constituency underwent just such a traumatic transition after the war. In 1948 in Amber Valley, 15 mines gave work to 15,000 colliers. By 1969 not one pit was left. More than half had been closed under Labour Governments.

Mr. Williams

On a point of order, Mr. Deputy Speaker. We are glad to see the new-found interest of the hon. Member for Amber Valley (Mr. Oppenheim) in the Bill which we have been considering for many months and we welcome his maiden speech on the subject. I did not think that constituency speeches complied with the rules on Third Reading.

Mr. Deputy Speaker

Comments made during Third Reading debates must be related to the Bill. If the remarks of the hon. Member for Amber Valley (Mr. Oppenheim) are related to the Bill, they will be in order. I am listening carefully to his remarks.

Mr. Oppenheim

Will all due respect to you. Mr. Deputy Speaker, and to the right hon. Member for Swansea, West (Mr. Williams), if he will sit and listen for 30 seconds more, he will understand that my remarks relate to the Bill. If you rule to the contrary, Mr. Deputy Speaker, I must accept that.

Regional aid helped Amber Valley enormously in the 1960s and 1970s, but, just as the area saw the good side of regional aid then, so it has seen the bad side since 1982, when regional aid was withdrawn. Since then, the area has suffered from many of the anomalies of the present system. Amber Valley has an unemployment rate of almost 15 per cent. Two of the main towns, Alfreton and Heanor, come under the Nottingham travel-to-work area, where unemployment is much lower. Those towns no longer qualify for aid, despite the difficulty and expense met by local people when going to Nottingham.

The travel-to-work areas are some of the worst facets of the current system. While Alfreton and Heanor, with high unemployment, cannot get aid under the existing system due to the Nottingham travel-to-work area, the situation is reversed in other towns. Beverley, where unemployment is at only 7.1 per cent., gets aid because it comes under the Hull travel-to-work area. There are many other such anomalies.

I therefore greatly welcome the Bill's introduction of far more flexible methods to delineate areas that will receive aid. I hope that the Minister will use his discretion under the provision to pinpoint areas of particular need, such as Alfreton and Heanor, as marginal areas have recently suffered most from the negative side of regional policies.

We are surrounded to the north and east by assisted areas and it is hard to persuade new industries to come to Amber Valley. Indeed, I have been told by some local business men that only loyalty to the area and the skills of the work force have prevented them from going to Wales or Scotland to collect their massive capital grants.

Amber Valley does not ask for charity or handouts. But, after pulling themselves out of the abyss after the pits closed 20 years ago, the people of Amber Valley ask merely for fair and equitable treatment. Industries in the area can fight the recession and foreign competition, but they find it hard to fight unfair competition for jobs and the beggar-my-neighbour policies of some of the development areas and corporations.

Mr. Millan

I should like to ask one question to which I hope the Minister will reply after this short debate. How will the arrangements be administered at Civil Service and, in particular, ministerial level in relation to Scotland and Wales? Regional development grants remain a Department of Trade and Industry function, even in Scotland and Wales, although the civil servants dealing with the matter work with Scottish Office civil servants who deal with, among other matters, selective assistance under section 7 of the Industry Act 1972, now under the 1982 Act.

The system works perfectly well, for reasons which I shall not relate at length but which the Minister, in his answer during the previous debate, did not seem to appreciate. Regional development grants are given automatically. In a sense it does not matter whether the civil servants dealing with them in Scotland are Department of Trade and Industry civil servants or work for the Scottish Office, because they are dealing with an automatic system, on the basis of the criteria laid down in the legislation.

When we move to a more selective system, and when we are told, as we have been several times today, that some of the deficiencies or gaps in the system can be taken up by the necessary adjustments to regional selective assistance, in Scotland both forms of assistance should be dealt with by the same Department—both the scheme of assistance under the Bill, which is mid-way between automatic and wholly selective, and the selective assistance which is already dealt with by the Scottish Office. It will not be workable as a matter or practice unless both of those functions, which will have a much closer relationship than before, are operated by the same Department. The Department in Scotland should be the Scottish Office.

I assume that the matter has been considered in relation to the Bill. I hope that the Minister will be able to say something about it tonight. However, I understand that he may have some inhibitions. He is not yet the Prime Minister, and the right hon. Lady, not Ministers, makes these dispositions. If the Minister cannot say that a decision has been made, I hope that he can at least say that the matter is under consideration and let us know when the decision will be made.

I stress that I am not talking about increasing the powers of the Scottish Office as distinct from those of the Department of Trade and Industry just for the sake of it. In Scotland, and no doubt similarly in Wales, too, the fact that selective assistance is dealt with by the Scottish Office with civil servants in Scotland, on the spot, without having to refer to London, is considered a tremendous boon by industry there. It is supported by the CBI, chambers of commerce and so on. I am sure that they expect the transfer to be made from the Department to the Scottish Office, and not the other way round. If that has not yet been decided, I hope that the Minister will let us know that it is under consideration and that an announcement may be expected soon.

11.6 pm

Mr. Alan Howarth (Stratford-on-Avon)

At this late stage in the consideration of the Bill, it is still important to advance some general considerations of principle in relation to that part of the Bill that deals with regional policy. I appreciate, applaud and share the Government's concern to find effective policies to alleviate social distress, and particularly to help those areas that are hardest hit by the great evil of unemployment. I also appreciate the Government's concern to eliminate some of the obviously wasteful and unsatisfactory features of regional policy as it has been.

I am, however, concerned that the Bill embodies not a fresh approach to the problems that beset many of the older industrial areas of the country but a diluted and modestly revamped application of the approach that has produced such disappointing results up until now. It is very clear that regional policy has failed to achieve the purposes for which it was intended. Indeed, £20 billion has been spent over the past 20 years, and yet the so-called "assisted" areas have continued to experience relative industrial decline and ever higher unemployment. Industries in those areas have been uncompetitive, with British industry——

Mr. Nicholas Budgen (Wolverhampton, South-West)

Does my hon. Friend agree that one of the purposes of the policy was to disadvantage formerly prosperous areas and, in particular, the west midlands? In that respect it has been quite successful.

Mr. Howarth


Mr. Deputy Speaker

Order. The hon. Gentleman must confine his comments to what is in the Bill.

Mr. Howarth

I shall certainly discuss the central thrust of the policy, as outlined in the Bill. I appreciate the importance that must be attached to that. However, with his customary felicitous irony, my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) has made a point of central importance, and with your permission, Mr. Deputy Speaker, I hope to have an opportunity to return to it shortly.

During the past two decades, industries at the receiving end of policies that are very much those embodied in the Bill, have achieved a very low rate of return on capital. They have lost share in the world market for manufactured goods and have failed—as the Government have rightly pointed out—to be sufficiently innovative. There have, of course, been many reasons for that, but it is clear that regional policy, on a scale more lavish than the Government presumably intend for the future, has failed to counter those other damaging forces, and it is arguable, indeed, that regional policy has perversely contributed to the problem. Ministers have, I think, acknowledged that.

Paragraph 18 of the White Paper points out the added burden of taxation caused by expenditure on regional grants and the incentive that they have created for firms to invest in locations that are not the best for them. Yet the Bill still provides, in clause 4, for development grants to be made on a regional basis, and in schedule 1, for them to be extended to service industries. The policies of the Bill represent differences of degree but hardly of kind, and could be regarded, in the extension to services, as an extension of the old approach, rather than as a retraction of it.

It seems that the sort of approach which the Bill substantially perpetuates was nevery likely to work well and is not likely to do so in the future. The Government are committed to maintaining an effective regional policy, but I doubt whether, under these or any other provisions, they will succeed in doing so.

We have been told that although an economic case for regional industrial policy may still be made, it is not self-evident. The Government believe that the case for continuing the policy is now principally a social one with the aim of reducing, on a stable long-term basis, regional imbalances in employment opportunities. But if jobs are in question, as they rightly are, and if the economic case is not self-evident, then the social case for the policy is not made. Jobs follow from credible economic policies. I should have thought that the economic case was not just not self-evident but was implausible.

We have often heard of the tragic closures of plants that were put down in assisted areas because the Government of the day used taxpayers' money to induce firms to invest where their ordinary business judgment would not have told them to go. In other contexts, the Conservative party takes the view that politicians and bureaucrats do not know better than businessmen how to run their businesses.

No one has a crystal ball, but at least investors and managers take their decisions by reference to criteria that are mainly to do with the success of the firms in question. Governments, in the nature of the political process, are inevitably impressed by political considerations and interest group pressures, and thus find themselves taxing profitable businesses to raise money to induce other businesses to go either where they would not have intended to go or where they would have wanted to go in any case. Under the scheme of selective assistance, they will, I fear, tend to support projects that are endorsed by conventional wisdom, that are championed by the most vigorous lobbies and are of political, rather than economic, value. The presumption must be that in these decisions they siphon capital away from what would have been more productive uses.

One debate that has arisen out of this measure is the balance to be struck in the allocation of grants between automaticity — to use an ugly jargon term — and selectivity. Neither principle is satisfactory. Automaticity means investing taxpayers' money indiscriminately and regardless of the merits of the company or sector in question. Is it a judicious use of public money, for example, to invest in mature industries which may not represent the long-term future of the country? The Government have, understandably, chosen to swing the emphasis towards selectivity. But politicians are not well placed to take invidious decisions as between favouring one firm or group of workers against another, and the judgment of a Government official is a poor substitute for that of an investor on the promise of a business. The CBI has warned against increasing the selective or discretionary element in the dispensation of grants. Neither way are we likely to see national resources most effectively deployed, and to that extent job prospects—at any rate, the prospects for competitive and sustainable jobs—deteriorate rather than improve.

More broadly, there will, I fear, be damaging atmospheric and cultural consequences of the policy for the perpetuation of regional development grants which the Bill contains. Although the total to be distributed may be somewhat less, there will still be a mass of Government bodies—not just the Department of Trade and Industry but the Scottish Development Agency, the Welsh Development Agency, the Department of the Environment, local authorities and new town corporations — engaged in handing out grants. It is unlikely, therefore, that we shall see any alteration in the attitude of mind so damagingly ingrained in our nation to look to the state for direction and help.

Moreover, the emphasis that the Government are placing on the creation of jobs through regional development grants carries with it some danger that firms may, in easier times, revert to the over-manning that has been one of the principal causes of the record unemployment that we are now witnessing.

That approach will do nothing to discourage the trade unions from believing, however wrongly, that in a crunch the Government will put in yet more money rather than face the political difficulties of job losses from inefficient major employers. We have travelled a long way from the ruinous assumptions of the 1970s and we should do nothing to prevent the continuing development of responsible attitudes.

This new version of regional policy strikes me as being really quite old fashioned. My right hon. Friend the Chancellor of the Exchequer has justified his reforms of corporation tax very much on the basis that businessmen have been spending too much time in tax planning and have not been thinking enough about using their capital investment productively. But will not the perpetuation of regional development grants encourage businessmen to continue to think in terms of grant planning rather than trading profitably? A former ministerial colleague of my right hon. Friend, who is now in another place, drew attention in The Times recently to the case of the Hyster Corporation, a multinational manufacturer of fork lift vehicles which is adept at grant-hopping round the world and which traded at a substantial loss last year. The company has recently received a grant from the Scottish Office in direct consequence of which the much better run Lansing Bagnall fork lift truck company in unassisted Basingstoke has had to make 250 of its employees redundant.

That episode brings me to the issue raised by my hon. Friend the Member for Wolverhampton, South-West, which is the crucial criticism of regional policy old and new. The principle of regional discrimination is unfair and damaging. As I have argued, there are strong grounds for doubting whether that sort of assistance in reality helps the regions into which it is channelled. There is no real dispute that it damages unassisted regions. The submission to my right hon. Friend the Secretary of State by the west midlands regional economic consortium makes the case strongly that the west midlands has suffered very much from the incentives that have been provided to businesses to go to other areas. It was regional policy very largely that brought the west midlands to its present predicament because of the powerful incentives that were provided by Governments to locate new business elsewhere rather than in the west midlands. The anticipation now is that the Government will try to make amends by designating part of the west midlands conurbation as an assisted area on the redrawn map. The effect of this will be to apply within the west midlands the same principle of discrimination that previously did so much harm to the area as a whole. Existing businesses in adjoining areas will find themselves in competition with subsidised businesses in assisted areas. People thinking of starting new businesses or expanding present ones will naturally go to the assisted areas, so damaging prosperity and jobs in the unassisted areas.

Local businessmen in my constituency, which is in the west midlands, have put this argument to me in strong terms. I am bound to say that I share their anxieties and I ask Ministers to give due consideration to them. The Government protest that their revised regional policy as set out in the Bill will not merely transfer jobs from one part of the country to another. I am yet to be persuaded how they will avoid that happening.

The White Paper alludes to complementary policies that have existed to stem the depopulation of rural areas. The reality is that underneath an overlay of prosperity deriving from agriculture, retirement homes, second homes and commuters, many rural areas are in economic decline. People born and bred in country villages cannot find jobs. They matter, too. It will no doubt surprise many to learn that unemployment in the Stratford-on-Avon employment exchange area rose between 1973 and 1983 by more than twice the national increase. In south Warwickshire we do not begrudge policies that will genuinely help other areas with desperately high levels of unemployment, but we do not want policies that will be placebos to them and bad medicine for us.

The Government's real task at this stage of our history is to remove the obstacles that their predecessors have put in the way of prosperity. The best thing that the Government can do for the regions that are hardest hit by industrial decline and the recession is to restore sound money and properly functioning markets. We need to reduce inflation. We need to reduce interest rates. We need to reduce taxes, especially so as to encourage the provision of venture capital.

Mr. Deputy Speaker

Order. The hon. Gentleman must relate his remarks to the Bill and to the changes in policy that the Bill will bring into being rather than make general remarks about economic policy.

Mr. Howarth

I hope that, in my next few sentences, I can do precisely what you have urged on me, Mr. Deputy Speaker. I am coming to the point that is immediately pertinent to the Bill.

The way to do these desirable things is to limit public spending more effectively. There will be a massive struggle to hold public expenditure even to its present targets. The policy embodied in this Bill, with its absence of costings, and so much that is left to governmental discretion, will not make control of public expenditure any easier. The £1,000 million to be spent this year by different Departments on varieties of regional aid would indeed be a valuable contribution to the financial policies that would be in the best interests of the country as a whole.

In these debates, the Government have offered as a justification for going on with regional policy the argument that we would not be eligible for grants from the European regional fund if we did not have our own home-grown regional policy — a matter to which paragraph 4(1) of schedule 1 is relevant. Between 1975 and 1983 we received £1,147 million from the European fund. That is rather less than £150 million a year on average and hardly sufficient to justify distorting our economy. The impressive energies of my ministerial Friends are better directed, in the interests of British manufacturing and services in all parts of Britain, towards turning the EEC into a genuine common market.

It is appropriate that what the Bill provides should be looked at in relation to policies that could be put alongside it and would save public expenditure. I have in mind deregulation, reform of the labour market and reform of local government finance. I shall not enlarge on those points, Mr. Deputy Speaker——

Mr. Deputy Speaker

Order. The hon. Member must not persist and trade on the tolerance of the Chair. He must relate his remarks to what is in the Bill.

Mr. Howarth

It is not my intention to abuse your tolerance, Mr. Deputy Speaker. I shall not elaborate on some points that it would be highly desirable to make in this argument. I shall restrain myself from making the points that I wanted to make about how it might be preferable to spend taxpayers' money on improvements of the infrastructure, on research and on alleviating capital taxation.

Ministers have as good as made the case against regional policy on economic grounds, yet they propose in the Bill to maintain it because of an assessment of political necessity that is uncharacteristically timid and short-sighted and because of the political difficulties of implementing some policies that would really help the regions that are afflicted by such high unemployment.

My hon. Friends on the Front Bench find themselves somewhat in the position of St. Augustine who wanted chastity but not yet. Although I am not a puritan or intolerant, I find it difficult to support them in that position.

11.22 pm
Mr. Wrigglesworth

It is regrettable that the hon. Member for Stratford-on-Avon (Mr. Howarth) did not make the same speech on Second Reading and did not follow it through with a vote in the Lobby with the rest of us who are against the Bill if he is so strongly opposed to its provisions. It is an abuse of the conventions, if not the procedures, of the House to speak in that way about the Bill's contents. He and other hon. Members who accept his views have mislead the House about regional policy over the years and the impact that the Bill will have on that policy.

The hon. Gentleman complained that regional policy had led to the closing of factories and had disadvantaged the midlands. [Interruption.] He is supported in that view. I am not sure how the hon. Gentleman can then argue that it has not been a success in the regions. One assumes that if it has been disadvantageous to the midlands it has been an advantage to the regions and has led to factories which would not otherwise have done so going to the regions and to jobs being created there.

The evidence is there for all to see if one considers the factory closures that have taken place in the midlands and, indeed, in the south. Major factories such as those owned by Hoover, Firestone and Dunlop have closed, despite not having regional support, for the same reason as branch factories have closed in the regions. They have closed, not because of the ineffectiveness of regional policy, as outlined in the Bill or in previous legislation, but because of the failure of the Government's economic policies. I do not wish to pursue those arguments at this stage, although I could do at some length. No doubt we shall have other opportunities to do so.

I wish to reiterate some of the remarks which I and my colleagues made during earlier stages of the Bill. There are three features of the Bill to which one objects profoundly. The first and most important is that it is clearly the Government's intention to cut regional aid, as other Opposition Members have said. It is clear that the public expenditure cuts which the Government are seeking will go through in the months and years ahead. One need only look at the public expenditure White Paper to see the scale of the future cut in regional aid. For those reasons, we are opposed to what the Government are doing.

I know that the Government say that the Bill only sets the framework for future policy, but this is the second reason why it should be opposed, because it creates uncertainty. I know that in another election campaign in another part of the world they have been asking one of the candidates, "Where is the meat?" The Bill does not have the meat in it. We do not know what the map looks like or what the grants will be, and therefore we cannot make a final judgment on it. We have had a debate which has been shadow boxing around the issue but which has not dealt with the hard core. That will come in future Government announcements, which I hope we shall be able to debate later this year in the Chamber. It is regrettable that we have not been able to debate the complete package of regional policy which the Government intend to introduce.

I wish to deal with the change in the balance of grants toward jobs instead of capital. My hon. Friends and I have accepted the fact that there is an argument for shifting the balance away from capital expenditure towards jobs, but the hon. Member for Stratford-on-Avon and others have not paid sufficient attention to the benefits achieved by regional policy based on capital grants.

I do not accept, as other hon. Members and those outside this place have, that regional policy has been a failure. However, regional grants have led to features which one can criticise, which is why I support the Government's argument in principle. There have been substantial capital developments on Teesside. Without the regional development support offered under this and previous Administrations, a substantial amount of the industry on Teesside would not have existed. The economy of Teesside is substantially based on the petrochemical industry. ICI's agricultural division is on the north bank of the river, and its petrochemical division on the south bank. Monsanto, BP, Shell, Philips and other firms have also come to the area. As a Member of Parliament for the area for the past decade, as one who has known the area from childhood and as one who has listened to what has been said on the matter, I know that it was regional policy that ensured that some of those industries came to the area—and they are the core of the economy of the area.

It is said on Teesside that those industries are capital-intensive and that they do not directly produce as many jobs as we would like. However, in such an area any jobs are welcome, and the contribution which those industries make to the national economy is also welcome.

I accept in principle the Government's argument for shifting the balance, but I hope that we shall not write off entirely the benefits which capital grants have brought in the past. I hope that in future, in the selective grants which Ministers will be considering, that point will be taken into account.

I welcome Part I. Like other hon. Members, I regret the fact that the two incompatible parts of the Bill have been put together. They have nothing to do with each other and should have appeared as two separate Bills.

We do not wish to vote against the increase in support for the Co-operative Development Agency which the Government propose. As those who study these matters will know, I have been associated with the agency since its inception. I want it to thrive and grow and be even more effective. I hope that as a result of the Government's action the agency will do an even bigger job.

Because we look forward to seeing extra provision made for the agency under the Bill, and because we look forward with optimism to its future role, we shall not vote against the Bill this evening. However, I hope that later in the Session we shall again discuss the subject of Part II and consider the levels of grant and the areas to be covered under the new regional policy. We shall then take a more forceful line than we have been able to take today because of the dual nature of the Bill.

11.33 pm
Mr. Kenneth Hind (Lancashire, West)

It has been disappointing to hear in the debate the moans and groans from hon. Members on both sides of the House about regional policy. What hope can we offer to people in towns such as Skelmersdale, which has 30 per cent. unemployment, if we are not prepared to take positive action to assist them with some form of new industry, whether service industry or some other kind? As the hon. Member for Stockton, South (Mr. Wrigglesworth) grudgingly recognises, the Bill establishes a new criterion for the payment of grant. There is a move from the mandatory, automatic capital grant to the concept of job creation. Many hon. Members will welcome these measures as a tool that will help the worst-hit areas of unemployment to tackle that disastrous problem, giving hope for the creation of jobs in the future.

As the hon. Member for Stockton, South has pointed out, whatever one's views about regional aid it has been of great assistance to the north, the north-west, Scotland and Wales in attracting industry that would not otherwise have gone to those areas. It is all very well for hon. Members representing more prosperous areas to say that we should do nothing about regional policy, but the result would be to create a vast urban sprawl in the south-east in which the vast majority of the population would live while the rest of the country, especialy the north, the north-west and Scotland, developed into an industrial wasteland where very few people live. The Bill comes to terms with that economic reality.

The introduction of grant for service industries is not before time. Writers such as Professor Stonier have made it clear that the trend will be towards service industry jobs and away from manufacturing jobs as high technology takes over in the factories. The Bill recognises the social change that is about to take place in our industries—a change that is recognised by the TUC, many sections of academia, the CBI and many other sections of the community.

The regional development grant scheme itself recognises the relative failure of past attempts at creating new jobs in the regions which have cost £35,000 per job. Emphasis will now be on the vitally important aspect of job creation.

Various ghosts have been laid during the passage of the Bill. First, it has been suggested many times both within and outside the House that there is to be a vast reduction in the amount of aid to the regions. That fear has been expressed by many people in the assisted areas, but they have not considered the discretionary section 7 grants which my hon. Friend the Minister has consistenly emphasised. It has been assumed that there will be less grant to the regions, but the Bill carefully provides for that kind of assistance. Secondly, especially in the north-west, industrialists are concerned that they will no longer be able to benefit from assistance for job preservation. The treaty of Rome and regulations made under it dictate that that is so, but as my hon. Friend the Minister has made clear, modernisation will be a permitted source of grant under the Bill and that may cover a number of things. In effect, we can look forward at least to some—although I say this in a euphemistic sense—preservation of the jobs that have been created in the regions.

The Bill creates greater flexibility. It recognises change both socially and industrially. It recognises the failures of regional development grant and looks forward to the future. Most important of all, if we have a regional development grant we can benefit from the grants from Europe. The point made about home-grown regional policy is valid. The Bill, although limited in movement forward, is a progressive advance against the problems of unemployment and will generate industry in the provinces.

11.40 pm
Mr. Fallon

Whatever criticisms and comments I made in Committee, I have no hesitation in supporting the Bill. Considered as a whole, its provisions embrace two themes. The first is the removal of the various distortions and discriminations that successive Governments have allowed to clog the operation of regional policy, and the re-establishment of neutrality between different types of aid, different recipients of aid and between the different areas that are assisted. If it does nothing else the Bill is to be welcomed for those reasons.

The Bill's second main theme is to make it clear that the Government are determined to make more effective use of the resources that have been committed to regional policy. Earlier today we heard that it is not only the totals that are important in regional aid, but the number of jobs that are created for the amount of money allocated. If more jobs can be created from the same resources, if we can eliminate wasteful use of public money and put to an end the misallocation of resources, no one will cheer louder than the north-east.

The north-east has an industrial structure dominated by large businesses and heavy manufacturing industry. It lacks the service industries, research and development and new technology that the Government want to encourage. The changes proposed in the White Paper and the Bill are welcomed in the north-east—they have certainly been welcomed in the submissions on the White Paper that I have seen. Indeed, the changes were foreshadowed by the report of the North of England County Councils Association. My hon. Friend the Minister earlier prayed in aid the Welsh TUC as favouring a more effective regional policy and a better use of resources. He may as well have quoted from the NECCA report—a report from an association dominated by Labour-controlled county councils that might well have been expected to have been critical of the Government. The report sought limits on the amount of regional assistance given automatically to capital investment. It wants savings from limiting the automatic grants and redeploying resources selectively and more widely. It wants regional policy to contain an increased emphasis on the services sector.

The report went to press even before the White Paper was published. In its conclusions it said that a redirection of policy along these lines need not imply higher costs to the Exchequer than at present but rather the more effective use of resources. That is the view of the north-east, which welcomes the Bill and stands to gain from the fresh emphasis given to regional policy.

There can be no better proof of that direction and of the potential of the changes proposed in the Bill than the selection by Nissan — between the ending of the Committee stage and our debate today—of the north-east for its site. While a number of tributes have been paid to the various agencies and bodies involved, the one body that has not been thanked for attracting Nissan is the Government —who not only put up £112 million of regional aid—almost one third of the capital cost—but created the climate in which Nissan was free not simply to choose this country in preference to other countries—because of the stable economic conditions created by the Government—but to choose the north-east—it was not directed to it as might have happened under other Governments—for the natural advantages of that region, such as its access to the Community markets, the availability of a skilled work force and so on. That has shown the north-east that the region will now be able to pull in the footloose international investment that has escaped it in the past.

Mr. Williams

The hon. Gentleman has made a fascinating point about the success of Government policy. Will he explain why, in the case of Nissan, the Government have made special provision in the Bill because, to make the payments that are necessary to get it into Britain and the north-east, they have had to ensure that Nissan is paid under the old system that is being abandoned as it is not covered by the new system that the hon. Gentleman is welcoming?

Mr. Fallon

The right hon. Gentleman said they were special provisions, but they were transitional provisions. The original decision was taken at the beginning of the year and I imagine that the Government wanted to ensure that they did not fall between the two stools of the old and the new policies.

We should also bear in mind the strategic reason why the Government are changing their regional policy to ensure that employment opportunities are more equal. I wonder whether my hon. Friend will note two points. We need to ensure that the arrangements for attracting the international investment, of which Nissan is an example, continue to be reasonably equal. In Committee, I expressed my anxiety at the perhaps excessive influence of the Industry Departments in Scotland and Wales and other agencies such as Locate in Scotland. We do not have to refrain from ridiculing the Labour party's proposals for a north-east agency, a multi-seat executive in the north-east and a Minister for the north-east to show our anxiety and to ask that the agencies in the north-east are kept up to the mark and are as effective as possible in securing investment.

My second point concerns a matter that was referred to in the White Paper and was hinted at in Committee. There continues to be an imbalance in employment opportunities in new and high technology which the Bill alone will not and cannot correct. I know that the Government, in the light of the submissions that they have received, are considering how they can tilt some of the schemes for innovation that they have pioneered towards assisted areas and whether there might be a closer relationship between the academic and industrial worlds in regions such as the north-east. Such a relationship seems to be going rather better in regions such as Scotland. If my hon. Friend can reassure me that this will not be our last discussion of the other matters that were referred to in the White Paper and which were hinted at in committee, I can vote for the Bill with enthusiasm as well as conviction.

11.47 pm
Mr. David Harris (St. Ives)

I am sure that my hon. Friends from the Whip's office will not begrudge me a few minutes on Third Reading, since I have spent about six hours today travelling in a train from the far west of Cornwall to the House. I mention that simply to illustrate the difficulties that constituencies on the periphery face with regard to regional policy. I ask my hon. Friend the Member for Stratford-on-Avon (Mr. Howarth) to bear that in mind when he gives his opinion on regional policy.

I have always held to the view that an elected representative's attitude to regional policy depends, at least in part, on the nature of his constituency and its geographical position. If I represented part of the west midlands, I might well argue the case advanced by my hon. Friend the Member for Stratford-on-Avon, just as I argued something like that case when I was a member of the Greater London council. Nevertheless, as a west countryman who has moved back to the periphery, I see the other side of the coin.

My plea to the Minister is to consider the problem of distance. It is important, especially when taking decisions on regional policy. I say without hesitation that I should much prefer to see Government money put into good infrastructure than into discretionary grants. I see the difficulties that discretionary grants pose as between those who are lucky enough to get them and those who are not. That is why I think that, when considering far-flung regions, it is better to put the bulk of the available money into good infrastructure.

I make no apology for returning to the theme of the A30, which is a diabolical road. The best use of regional money, whether it be from the Government or from the European Community, would be to provide decent roads to the south-west of England and to other far-flung corners of the United Kingdom. I know that I speak for other hon. Members who represent constituencies in Cornwall, especially my hon. Friend the Member for Cornwall, North (Mr. Neale), when I ask what is the sense of trying to boost tourism when we have completely antiquated sewerage systems in our tourist resorts.

Mr. Deputy Speaker


Mr. Harris

I address my remarks, Mr. Deputy Speaker, to my hon. Friend the Minister for Housing and Construction, whom I see in his place on the Treasury Bench.

Mr. Deputy Speaker

Order. The hon. Gentleman must not take advantage. He must confine his remarks to the content of the Bill.

Mr. Harris

With respect, Mr. Deputy Speaker, I confine myself to what is in the Bill in the sense that it deals with regional policy and the best use of our resources, which I know is of paramount concern to the Treasury Bench. I am trying to emphasise the importance of infrastructure in the context of industrial development. We cannot have industrial development without that basic infrastructure. My hon. Friend the Minister for Housing and Construction will see a good example of what I mean when he visits Cornwall—I think tomorrow—to open the Colliford reservoir. Without that reservoir it will be impossible to have the industrial infrastructure with which the Bill is concerned.

My basic theme is that discretionary grants have a part to play, as has industrial development. But, in respect of regional policy, I should much prefer to see the money going into good infrastructure.

11.53 pm
Mr. Norman Lamont

Everyone seems to approve of the first part of the Bill, so I shall concentrate my comments on part II, which deals with regional development grants.

The right hon. Member for Glasgow, Govan (Mr. Millan) raised a point about the administration of the scheme, especially in Scotland. He tabled an amendment which would have tried to tease out some of these aspects. We are currently considering the organisational implications of the new scheme, but I am afraid that we have not yet reached conclusions on it. Obviously the transfer of responsibility for RDGs in Scotland and Wales to their respective Secretaries of State is an option, but we have not yet made any decisions. We are concerned, above all, to ensure consistency of operation across the country. That is essential in an automatic scheme. I am sure the right hon. Gentleman will understand that at this stage I cannot go further than that. I shall bear in mind what he said.

In general the Opposition have failed to demonstrate that the Bill will have the drastic effects which they predict. Indeed, I venture to suggest that in a couple of years people will be wondering precisely what all the fuss was about. The economies in the Bill and its common sense attempt to obtain value for money should obviously have been made years ago. Many people have suggested that a cost per job limit and reduced spending on capital-intensive projects is needed.

Labour Members vastly overestimate the importance and effectiveness of regional policy. They dub this as yet another erosion of regional policy. They say that we have been conducting an erosion of regional policy all the time that we have been in office. That is an interesting point. Unemployment in the regions has not got worse in relation to national unemployment. Labour Members say that that is simply because unemployment has risen in other regions, but they cannot argue that cutting back on regional policy has had a demonstrable consequence in the regions. The statistics simply do not show that. The relative position of the regions has not been damaged or undermined by the changes that we have made.

The Opposition make dire predictions, just as they utter dire words now about the state of industry and the British economy. Listening to them this afternoon I wondered how we managed to win a general election at all if the state of the country is as they described. I wonder how they explain the fact that the business community, despite all the afflictions that we are alleged to pour upon it, continues to support the Conservative party.

There are obviously different views within the House on regional policy.

In its latter stages the debate changed. For most of it I faced an onslaught from the Opposition Benches because we had been making vicious cuts that were destroying regional policy. Now we move into the last act of the play and a new cast has appeared. I find myself being attacked from behind because we are not cutting it enough. Something that fails to please everybody is not necessarily right, nor is mid-point between two points logically or necessarily the right point. That is to use the logic of the Social Democratic and Liberal parties. But we must try to achieve a balance in this matter, and the balance that we have struck in the Bill is the right one.

My hon. Friends the Members for Amber Valley (Mr. Oppenheim) and for Stratford-on-Avon (Mr. Howarth) put the case of the non-assisted areas and it was right that that should be put, even though late in the proceedings. Those areas of the country feel that they have been damaged and have suffered from the distortions of regional policy. That is why we have wanted to minimise job shuffling in our changes and to lessen the distortions that have occurred through regional policy. My hon. Friend the Member for Stratford-on-Avon was trying to guess a little because, as I stressed in replying to the Opposition, many of the decisions on regional policy have yet to be made. A final judgment on our package cannot be made until all the decisions about the map, rates of grant and qualifying activities have been put together. My hon. Friend says that there has been a modest dilution, while the Opposition say that there has been a savage cut. The answer to both is that we shall have to wait until the decisions are made to see which is the right description.

My hon. Friend picked up the point that was made, echoing the White Paper, that we do not regard the economic case for regional policy as clear cut but that we think there is a social case for it. My hon. Friend sought to disagree with that. If I remember rightly, he said that that cannot be right because the social jobs will only be provided following sound economic conditions and jobs. What my hon. Friend is ignoring, and what I believe to be the situation, is that regional policy has had an effect. The evidence is there that it has had an effect, but the question is at what cost it has had that effect. I do not know whether my hon. Friend has managed to look at the vast volume of evidence and academic studies on regional policy which accompanied the White Paper, but I think he will find there some material of interest, which tabulates some of the effects on regional policy. What it does not establish, of course, is the cost at which that effect has been established.

Mr. Robert Jackson (Wantage)

Does my hon. Friend agree that the question that ought to be asked is how much worse the situation might have been in the regions without the regional benefits?

Mr. Lamont

That is certainly one question, although it is important also to take into account the effect of regional policy on the non-assisted areas. Many of the figures quoted of the cost per job created, or, indeed, of the jobs created, do not always take into account the jobs that may have been destroyed elsewhere, or the jobs that might have come into effect in any case. My hon. Friend has a point, but these questions have also to be considered.

The arguments over selectivity and automaticity were referred to, and it was said that both were unsatisfactory. They may both be unsatisfactory, but we have to choose, whether we like it or not. I do not know of any alternatives to selectivity and automaticity. The model which we will follow will be one in which automatic grants will continue to be the main instrument of regional policy, although a larger part will be played by selective regional assistance. What we are aiming at is a regional policy which is more modest, more streamlined and more effective.

My hon. Friend the Member for Darlington (Mr. Fallon) was right in saying that the measures in the Bill and in the White Paper are more radical than some of my hon. Friends have suggested. We are relating regional policy much more to jobs. We are looking for public expenditure savings. We are not content to go on subsidising the capital-intensive activities which have consumed cash without producing a compensating advantage for the regions. Given that we are to have a regional policy, we think that it is not right to discriminate in favour of manufacturing at the expense of services, and that the policy ought to be more neutral.

These changes are sensible and far-reaching. The Opposition persist in trying to whip up indignation, which usually comes down to the fact that what they object to is that we intend to secure some public expenditure savings. They are content to point to the levels of unemployment in the assisted areas and say it is outrageous that we should attempt to make any savings on regional policy. "Spend more money," they say. That is typical of their approach, and it is why they will stay in opposition. "Is there a problem? Spend more money." That is their approach. It does not matter that they agree with us that some of the proposals which we put forward for limiting the highly capital intensive propositions are sensible. They will agree with that in general, but when it comes to the amendments they will vote against it on every occasion.

Although the details of our policy will have to be announced after the period of consultation is ended and after all the representations have been considered, I believe that we will have struck the right balance between doing something for the regions, minimising the distortions, and doing it much more effectively and with much better value for money. That is the objective that we have set ourselves, and it is the balance that we intend still to strike. For that reason, I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read the Third time, and passed.