HC Deb 19 March 1984 vol 56 cc883-90

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Garel-Jones.]

1.15 am
Mr. Roland Boyes (Houghton and Washington)

I am fortunate to have an opportunity to take part in an adjournment debate on such an important topic as the high rate of unemployment in Tyne and Wear. The problems of that economy are longstanding and deep-seated. They are rooted in past developments, and the county shares its problems with many other parts of the northern region. These problems are well documented in the "Strategic Plan for the Northern Region" of 1977, and the annual state of the region reports published by North of England County Councils Association.

In summary, the nature of the problems are low investment, particularly in manufacturing industries, a weak private sector, a high proportion of branch plants, a lack of local control over local industry, continuing losses in traditional industries such as shipbuilding, heavy engineering, iron and steel and coal mining, under representation of small manufacturing firms, a low formation rate of new firms, lack of research and development, marketing and other high level white collar activities, and under representation of service industries. These problems have been reflected in continued migration, low economic activity rates, and unemployment that is significantly higher than the national levels.

I shall look particularly at the changes in the Tyne and Wear since 1979, for obvious reasons. The scale of the problem has increased dramatically since mid-1979. Employment levels in Tyne and Wear fell by over 13 per cent., with a loss of 67,000 jobs between mid-1979 and mid-1983. In manufacturing, the level declined by 31 per cent., which is 50,000 jobs. Key industries such as engineering were the ones worst affected, with the loss of over 34 per cent., or over 30,000 Jobs. As a result, the employment base of the county has been severely undermined, and regrettably, the decline has continued into 1984.

We have experienced many redundancies. The scale and severity of the impact on existing industries has been reflected in these redundancy statistics. Over 60,000 redundancies have been noted to the Manpower Services Commission since 1979, and, although the levels are now lower than in 1980–81, they are still substantially higher than before the recession. The redundancy statistics show how the decline has been most severe in shipbuilding, with 12,000 redundancies since 1979, and in mechanical engineering, with 12,000 redundancies. Key firms, such as Vickers, NEI and British Shipbuilders have been the worst affected.

Is this scale of decline necessary for a leaner and fitter economy? The Government reassure us that the economy is recovering, but there are few signs of that in Tyne and Wear. In January and February alone, over 3,000 redundancies were announced in the press, including, to pick a few out at random, those at Clelands of Wallsend, which lost 400 jobs, Press Production Systems at Wallsend, which lost 160 jobs, and Plessey, which lost 600 jobs.

One side-effect is the increasing levels of derelict land resulting from the closure and rationalisation of firms. The problem is concentrated within the inner areas, and along the river corridors, and often includes the particular problem of contaminated land. The county council estimates that at existing rates of reclamation it will take 25 years to treat this problem.

The unemployment levels in the Tyne and Wear have almost doubled since 1979. In February 1984, there were more than 95,000 people out of work—that is 18 per cent. of the work force—and there is no sign of a sustained fall in that level. More than one in five of all males are out of work, and more regrettable and worrying is the fact that 43 per cent.—almost 41,000—have been out of work for more than a year. Moreover, 40 per cent. of the unemployed are under 25. Almost one third of that age group are currently out of work, with others on YTS and special schemes.

Unfortunately, the vacancies to set against that unemployment number only 2,749, which is a ratio of 33 unemployed per unfilled vacancy. I want to stress the youth problem. The February report of the principal careers office to the borough of Sunderland showed that 1,582 youngsters were registered at the careers office as needing jobs, while there were 18 vacancies in Sunderland, and 13 in my constituency of Houghton and Washington, making a total of 31. In addition, 2,532 youngsters are on special schemes. It is anticipated, following fifth-year interviews by careers officers, that about 3,700 youngsters will register with the careers office in the period April to July 1984.

It is in the county's inner urban areas that the effects of unemployment are the most severe. For example, half of the county's unemployed live within the Government's urban programme and partnership areas. In those areas, almost half of the unemployed have been out of work for over a year, and two thirds have been out of work for over six months. While unemployment is high throughout the county, concentrations of unemployment exist in particular parts of Newcastle and Sunderland. There, many communities are experiencing unemployment of more than 30 or 40 per cent., and almost 60 per cent. of the unemployed in the areas of East End, Elswick Park and Newcastle have been out of work for more than a year.

What about the Government's response? The Government are currently spending about £500 million a year on unemployment in Tyne and Wear, but this is the only area where there is any real growth in Government spending. Even then, they are dealing only with the symptoms, not the causes, of the problems. The latest NECCA state of the region report showed that spending on regional aid in the North in 1982–83 was at its lowest for 10 years, and as a share of the national total was at its lowest on record—18 per cent., compared with 30 per cent. in the mid-1970s. It also showed that regional policy was now weaker than at any time in the past 20 years.

Within Tyne and Wear, spending on regional aid during 1983 was at almost its lowest for 10 years. It was estimated at £25 million. It is inevitable that the amount of regional aid to the North—and, consequently, to Tyne and Wear—will reduce further with the Government's proposed cuts in regional spending by about £200 million during 1984–85. Spending on enterprise zones by the public sector has so far totalled £133 million—£20.5 million on direct development costs in Tyne and Wear, with the creation of a few new jobs.

The urban programme and inner city partnership has been worthwhile, but Government spending on "economic development" services in 1982–83 totalled only £9.2 million, and was largely dependent on local authorities to develop and implement schemes.

I turn briefly to the response of the local authorities. Faced with these problems, and with a lack of any real commitment by the Government to deal with them, local authorities in Tyne and Wear have predictably responded by giving a high priority to economic development. However, with limited resources, they have had to be realistic about what they can achieve, and have sensibly developed packages of measures designed to "pump prime" the private sector. They have also concentrated on stimulating small and new firms and helping existing firms—in particular, by building nursery factory units and workshops, preparing industrial sites, and offering financial assistance and business support. They have been highly successful and cost-effective and have proven the value of local initiatives in this part of economic development.

In 1982, a Department of the Environment-sponsored study showed that local authority policies in Tyne and Wear had created permanent jobs for as little as £7,000 compared with an average of £35,000 per job created by Government regional policies and probably upward of £35,000 per job created by enterprise zones. The information suggests that other local authorities' policies, for example, county council wage subsidy schemes, may be substantially cheaper.

The resources available to local authorities in Tyne and Wear are being increasingly constrained. Tyne and Wear county council especially has been highly effective in stimulating and supporting the local economy. It has rightly concentrated on its county-wide and strategic role, for example, by preparing strategic industrial sites for industry, encouraging high technology industries and providing county-wide business support facilities. It has provided specialist business support services to local entrepreneurs and mobile firms—for example, a special package of land and support has recently been put together with the Washington development corporation in response to the inquiry by the Nissan car firm. It has responded to minimise job losses where firms are threatened with closure and assisting with management buy-outs and takeovers; ensured that local authorities in the county make full use of EEC funds; and maintained a major drive to reclaim derelict land and upgrade the county's environment through its specialist teams.

The Tyne and Wear county council pioneered the concept of industrial improvement areas and enacted legislation—the Tyne and Wear Act 1976—which formed the basis for the Inner Urban Areas Act 1978.

The Under-Secretary of State might rightly ask whether I have any proposals to help the position. Obviously, in the limited time available, I cannot explain in detail the Socialist alternative economic strategy, but I can point out a growing demand by the people in the north for a greater say in their destiny. I know that if the Labour party had won the last election it would have created a northern development agency. One of the first parliamentary questions I tabled in the House was to ask the Prime Minister to create one, and I received a strong and emphatic, "No" in reply.

It is essential that local authorities and central Government work closely together. In the past week or so, I was reading a biography of Keir Hardie. In 1903, at an unemployment conference he moved: that the responsibility for finding work for the unemployed should be undertaken jointly by the local authorities and central government, and such legislation should be introduced as would empower both central and local authorities to deal adequately with the problem. We can be more up-to-date with the "Report of an Inquiry into Regional Problems in the United Kingdom", produced by the Regional Studies Association. It said: At a regional level the association is talking about the north an elected regional assembly should be created with strong financial, advisory and executive powers (or failing political acceptance of this, a development agency). Within the region a unified pressure group to secure greater awareness of the region's problems and greater coherence and consistency in policy delivery was called for. Jeremy Beecham, the leader of Newcastle city council, sums up the difficulties in an introduction to "High Unemployment in the Inner City". He says: Coping with the consequences of unemployment, in terms both of the increased need and demand for leisure facilities and the pressures on social services, housing and education departments, has been made much more difficult by central government policies. These effectively penalise the Council and its ratepayers for expenditure calculated to sustain the community in the face of the harshest economic climate in half a century. More recently, two important discussion documents have been prepared—one by the northern TUC, "A Response for a Stronger North", and the other by the northern regional Labour party, which is preparing a further discussion document. Each document is aimed at involving the people of the north in the problems in that area.

I have painted a gloomy picture. The forecasts for the future are not helpful. The Cambridge Economic Policy Review, prepared in December 1982, said: The north has consistently had a high level of unemployment and will have a high one in 1990. According to the CEPR, the north will have caught Northern Ireland by 1990, with the north having an unemployment rate of 23.2 per cent. and Northern Ireland 24.5 per cent.

No one can describe our society as democratic, free, fair and equitable when 20 per cent. of the people in Tyne and Wear are out of work. Some parts have unemployment as high as 30, 40 and 50 per cent.

I should like to end by asking the Minister some specific questions. In January, the Minister of State, Department of Trade and Industry, the hon. Member for Kingston upon Thames (Mr. Lamont), gave an assurance that the Government would continue to see that the north-east had a major share of regional aid. Will the Minister give an assurance that the level of regional aid to the north will not decline in view of the proposed cuts in the regional aid budget?

In view of the severity of the unemployment problems in Tyne and Wear, and in recognition of the valuable role played by local authorities in stimulating economic development, will the Minister arrange to relax constraints on local authority spending for that type of activity? In recognition of the severe derelict land problems in Tyne and Wear, will the Minister consider increasing, rather then decreasing, the levels of assistance available to Tyne and Wear under the derelict land grant scheme?

The county council has been highly successful in stimulating economic development and has concentrated on providing countrywide and specialist services for industry. Will the Minister acknowledge that the abolition of the Tyne and Wear county council is likely to result in lower support for industry and higher unemployment in Tyne and Wear?

1.31 pm
The Under-Secretary of State for Employment (Mr. Alan Clark)

I congratulate the hon. Member for Houghton and Washington (Mr. Boyes) on his good fortune in the ballot and on the cogent and lucid manner in which he has presented his argument. I welcome the absence of party political content which might have distorted his presentation of what I am sure the House recognises is a tragic and depressingly persistent problem. The hon. Member made a number of points about the seriousness of the unemployment position in Tyne and Wear and I shall try to answer as many of them as possible.

I am very much aware of the problems of the area. Only last week, with colleagues, I met a delegation from the North of England County Councils' Association. I was impressed by its constructive approach to what is a longterm structural problem. The hon. Member validly emphasised the need for co-operation between central Government and local authorities; and central Government are as aware of that as the local authorities. I was impressed by the discussions that we had on that occasion.

As the hon. Member said, the difficulty with which the people of Tyne and Wear are faced is that they are at the heart of a region that has depended traditionally for its economic health on the fortunes of heavy engineering, mining and shipbuilding. It is the decline of those industries, with the effects of the recession, that has had the serious economic and social consequences to which he has drawn our attention. No one would deny that, nor would he deny that the people of the north-east may feel themselves neglected compared with other regions in the country.

Yet the whole of Tyne and Wear has special development area status and is, therefore, eligible for the highest possible level of Government regional assistance. Between May 1979 and November 1983 nearly £42 million has been made available to firms in Tyne and Wear under sections 7 and 8 of the Industrial Development Act 1982. Regional development grants worth some £83 million were paid to firms in the county between May 1979 and December 1983. In addition, the Newcastle-Gateshead inner city partnership and the Sunderland and north and south Tyneside programme authorities have benefited to the tune of £28 million under the urban programme.

Of course, it takes time for all that aid to begin to have a clear effect on the unemployment situation, but, in spite of the figures that the hon. Gentleman gave, jobs are being found. Since April 1983, the employment service has placed almost 33,000 people in employment in Tyne and Wear. There have been new business expansions—such enterprises as the new DIY hypermarket in Washington, where recruitment for 175 jobs has begun. Also in Washington, the American sports firm, Nike, is hoping to treble its work force from 96 to 300 when it opens its new warehouse. At Killingworth, up to £7 million is to be spent on expanding the new town centre, providing 400 temporary construction jobs and, when it opens in March 1985, 300 permanent retail jobs.

New technology is also making its mark in the area. The microelectronic applications research institute at Newcastle is planning a £200,000 expansion programme, and Anzone at Wallsend has produced an important new strong, hard and light industrial ceramic, which may have substantial markets and multi-million pound orders in the near future.

There is also plenty of evidence of a healthy growth in small firms in this part of the world. The recent Budget announcement on the reduction of corporation tax from 38 per cent. to 30 per cent. for small companies, as well as the abolition of the national insurance surcharge, will in particular help small firms to expand and recruit labour. The flow of funds to small firms under the loan guarantee and the business expansion schemes continues to be a significant help.

We are continuing to reduce the administrative and legislative burdens on small firms and to encourage private sector initiatives such as local enterprise agencies. The Tyne and Wear enterprise trust is a well-established agency with six offices throughout the area, as the hon. Gentleman will know.

One of our special employment measures—the enterprise allowance scheme—is already playing a useful part in stimulating the growth of small finns. The scheme, designed to help unemployed people who want to set up in business on their own, is currently supporting almost 800 in this region. The scheme helps such people as the lady who last September began a business—Paxton Jack Ltd—in the Birtley area, designing and installing fitted kitchens. She now employs five people, and hopes to open a showroom shortly. A small enterprise in Washington, also set up last September, manufactures workwear garments and now employs 14 people.

The hon. Gentleman may say that those are but drops in the ocean of the problem to which he drew our attention. However, the enterprise allowance scheme is proving itself to be job-generative. With 800 applicants receiving allowances in his area, I think that he will admit that the prospects over the passage of time are likely to be beneficial and hopeful. These examples help to show how unemployed people are using the opportunity provided by the scheme to apply their entrepreneurial skill to set up their own businesses.

Of course, conditions remain difficult, and I am well aware of the fact that there have been major redundancies in this part of the world in shipbuilding. But, as the hon. Gentleman will admit, we have provided substantial support to help the industry with orders and to ease contraction. Since taking office in 1979 the Government have spent nearly £900 million on the industry—£200 million of that in direct subsidies to ship prices through the intervention fund; and £100 million through the shipbuilding redundancy payments scheme to help those leaving the industry. We have made it clear that we shall continue to support the shipbuilding industry but equally that, while additional support may be justifiable during a manifest crisis, as at present, in the longer term we want to see support for the industry resume a diminishing trend.

Approved industrial and infrastructure projects in the area have also received £11.2 million from the quota section of the European regional development fund. Further assistance will be available under the non-quota section of the ERDF for areas affected by closures in the shipbuilding industry.

There has also been some good news amidst the gloom on the shipbuilding front in the area. Orders for the Stena ships, diving support vessels, one of which I went on when I was in the Falklands in October 1982—a most impressive and modern vessel with special capabilities for holding a position in heavy seas while divers are operating from it—have gone to Sunderland Shipbuilders and will provide work there until the end of 1986. The two type 22 destroyers for Swan Hunter announced at the end of 1982 will provide continuing naval work for the yard. On the ship repair side, Tyne Ship Repairers, which British Shipbuilders was to close if it could not find a buyer, was bought out by its management and now has a healthy order book.

Even against that background, though, I recognise that the unemployment rate in the area remains high. To have almost 100,000 people unemployed in Tyne and Wear is, I fully admit, a terrible waste of the skills and abilities of Tyneside workers. New jobs have to be created as quickly as possible but the fact remains that a situation that was not created overnight cannot be transformed overnight. Only as other firms respond successfully to the pressures of international competition will a lasting and real reduction in unemployment begin to take place.

The Government have made a substantial contribution to creating the right climate for recovery. There are plenty of signs that we are succeeding, with a continuation of 3 per cent. growth and inflation down to around 5 per cent. As the hon. Gentleman will have heard the Chancellor say earlier today, he anticipates a 3 per cent. inflation rate over the ensuing years. Last week's reforming Budget will further help business expansion and stimulate enterprise. Such measures as the abolition of the national insurance surcharge, the so-called tax on jobs, should particularly help employment.

In addition, my Department is playing a major role in creating the right environment for jobs to be created by doing everything it can to encourage training for specific job opportunities. Under the recently announced adult training strategy we have responded imaginatively to the need to create a better educated, better trained and more adaptable work force. We must pay at least as much attention to training as our competitors do. That means that there must be a co-ordinated strategy for dealing with the training needs of both young people and adults. Under the strategy, we shall maintain the overall level of support for adult training, but we shall be putting much more emphasis on training for specific job opportunities, particularly in new technologies. Adult training will be more closely linked to individual employers' needs. More people will be helped more effectively by training that is much more flexible and cost effective within the same total level of resources.

Alas, it is no good training people for jobs that no longer exist and so resources must be diverted from training in traditional skills to meeting the skill needs of today. That means that the Manpower Services Commission will be making important changes to the training opportunities programme in the Tyne and Wear area. For example, in the south Tyne area the MSC is planning an increase of 40 per cent. on those being trained in science and technology over the numbers trained last year. It is increasing the numbers to train in electrical and electronic trades by 50 per cent. In the Newcastle area, the MSC will be training 535 more people in 1984–85 than last year, roughly trebling the numbers to be trained in electric and electronic skills and those helped by small business and self-employment courses.

I know that to come, as the hon. Gentleman has, with a clear statement of the position and a number of requests, and to be greeted with ministerial assurances that things are not so bad or are likely to get better, can be somewhat frustrating. All the more so when, as in this case, the hon. Gentleman has presented his case in a constructive and non-partisan manner. I hope that he will allow me to pay him that compliment because his reputation for forceful and partisan interjection when the House is fully assembled is well known.

I undertake to write to the hon. Gentleman about the various points that he has raised. Many of them are related to the responsibilities of my right hon. and hon. Friends in other Departments, but they represent a strategic approach and should be regarded as a whole. I hope that the hon. Gentleman will accept the fact that my response is made in the same constructive spirit as that in which he raised the debate.

Question put and agreed to.

Adjourned accordingly at fifteen minutes to Two o' clock.