HC Deb 28 November 1984 vol 68 cc936-54

4.0 pm

The Minister of State, Department of Trade and Industry (Mr. Norman Lamont)

With permission, Mr. Speaker, I should like to make a statement on the Government's review of regional policy. I have today made four orders to bring into force the new regional development grant scheme and the new map of assisted areas. The orders, including that specifying the new assisted areas, are available in the Vote Office.

Our decisions have been taken after very full consultation, including consideration of almost 500 submissions. I have placed in the Library a list and a summary of the submissions received. The submissions received show considerable support for the Government's proposals as outlined in the White Paper. While the majority support the continuation of regional policy, many are critical of the waste inherent in the present system and consider it possible to make the policy more cost-effective.

To achieve greater cost-effectiveness we have concluded that the new map should have two tiers instead of three, and that the inner tier, which will qualify for automatic grants as well as regional selective assistance, will be restricted to 15 per cent. of the working population. This compares with 22 per cent. for the present development and special development areas. The outer tier of the map, which will qualify for regional selective assistance, will cover a further 20 per cent. of the working population. We have included in the new map several areas, most notably parts of the west midlands, that have previously been denied regional assistance. Both tiers will be eligible for support from the European regional development fund.

In redrawing the map we considered the present and future employment patterns of each area, along with other factors, including the risk of distortions where non-assisted areas are adjacent to assisted areas. Some such effects are inevitable in any regional policy. For the new RDG scheme we have set the rate of capital grant at 15 per cent. In our view, the new rate is high enough to ensure that grants are an effective incentive to investment.

For too long regional policy has unduly discriminated against service industries even when such industries offer the prospect of increased employment. We have, therefore, decided to make some service activities eligible for regional development grant. These are listed in the relevant order.

Since unemployment is such an important concern today, it is also right that any policy as expensive as regional policy should be tied more closely to jobs. We have already announced our intention to make two changes to give effect to that aim. First, capital grant will be subject to a cost-per-job limit. Too much money has been spent in support of capital-intensive projects that create few jobs and do little for the economies of the regions. The cost-per-job limit will be £10,000. However, we wish to minimise the burdens placed on small firms and this limit will not normally be applied to firms employing fewer than 200.

Secondly, we also announced that in future firms should be able to receive a job grant as an alternative to capital grant. The job grant will be set at a level of £3,000 for each new job created. Firms will not have to choose between job grant and capital grant: they will automatically receive whichever is the greater.

The Government also intend to continue to give selective assistance to projects that protect existing employment but which otherwise would not go ahead. With the increase in the outer tier of the map, this will mean an increase in selective assistance. Overall, the balance between automatic grants and selective assistance will shift considerably towards the latter.

After the working through of the transitional provisions, we expect the new regional policy to cost nearly £300 million per year less than if present policy were to be continued. This will be a considerable lightening of the public expenditure burden of the policy. Even so, we shall still be spending nearly £400 million on regional policy in 1987–88 to improve job prospects in the worst hit areas.

The most important feature of our policy is that money will now be spent in the areas with the worst problems and that, in terms of new jobs per pound of expenditure, the new policy will be far more effective than the old.

Mr. John Smith (Monklands, East)

Before I ask the Minister about the content of his statement, may I ask him what arrangements the Government propose to make to debate this important statement? Is he aware that, for hon. Members on both sides of the House, the detail in the orders will be the most important information that they can obtain, but they will not be able to comment on it today? Therefore, it is important to have an early debate on the principle and on the orders, and I hope that we can have more than one day.

Is the Minister aware that the truth behind his glib references to flexibility and cost-effectiveness is that the statement announces the end of effective regional assistance? Is it not disgraceful, at a time when unemployment in the regions has never been higher, that the Government have made a slashing reduction of £300 million a year, which represents £1.5 billion during five years, in the regional development budget? Is it not appalling that, although unemployment is much higher than it was when special development areas had to be created, the reduction in the regional development grant to 15 per cent. plus the other limits will mean that, effectively, special development areas will be abolished completely?

Does the Minister realise that this is the second major attack on the regional development system since the cuts of 1979 and 1982? There has already been a major reduction in assistance. Can he confirm that expenditure between 1974 and 1979 was £6.4 billion, which was reduced to £4.1 billion between 1979 and 1984, which is a reduction of 35 per cent. even before the changes that he has just announced? Why does the regional development programme have to shoulder further reductions that will go to the heart of its effectiveness?

Are not the limits of £10,000 a job on capital grants and the miserly £3,000 on job grants completely unrealistic, when it costs the Government £6,000 a year for every person who is unemployed? Do not the Government demonstrate that the so-called emphasis on job-oriented assistance is completely bogus? Are not the levels well below the permitted EC levels, and do they not put our regions at a serious disadvantage within the Community, where we already have 10 of the 25 most disadvantaged regions?

Is it not the case that areas moving from special development area status and development area status to the outer tier will face a sharp and severe cut in the assistance that can be offered, which is bound to be a major blow to their hopes for industrial development and a major accelerator of local unemployment? Can the Minister state—the House will listen with care to his answer to this—the expected increase in unemployment as a result of the changes announced today?

Although the Opposition welcome the inclusion of parts of the west midlands within the ambit of the outer tier assistance, is it not sad that the collapse of manufacturing industry and the huge increase in unemployment in the west midlands, as a result of the Government's policies, are such that the west midlands must now be helped in this way? Although the core of Birmingham has 30 per cent. unemployment, why is not a single ward in the west midlands made a development area?

Is it not quite deplorable that the help to be given to areas now included in the outer zone of minimal assistance has to be at the expense of other areas which have had their help reduced? Is it not a case not only of cutting the jam but of insisting that the vastly reduced amount be spread as thinly as possible?

Much is made by the Government of the capital expenditure on the Sullom Voe oil terminal and some chemical projects. Could not a limit have been put on certain categories of expenditure by a simple exercise in reclassification without having to downgrade the whole system of regional development?

Why does the inclusion of services, which we welcome as an addition to the existing help for services, have to be at the expense of major cuts in support for main line manufacturing by the withdrawal of grants for replacement and much of the modernisation programme? Will tourists and hotels be covered in the service assistance? Whatever is the extension of services or of the map, surely it in no way makes up for the massive reductions elsewhere.

Is it not extremely foolish to compound the folly of the withdrawal by the Chancellor in his Budget of capital allowances through the withdrawal of grants for replacement and modernisation, which will have a major disincentive effect on industrial modernisation?

Do not the Government realise that the massive drop in investment in manufacturing industries since 1979 is at the heart of our troubles? Why are they encouraging it?

Mr. Kenneth Hind (Lancashire, West)

On a point of order, Mr. Speaker. Is it appropriate, in a matter as important as this, when there are many Back Benchers who have an interest, for the right hon. and learned Member for Monklands, East (Mr. Smith) to take all our time in this way?

Mr. Speaker

This is a matter that affects a great many right hon. and hon. Members. When I call Back Benchers, I must take into account the amount of time taken by the Opposition Front Bench spokesman.

Mr. Smith

The House will realise that, however bland and short the Minister's statement might be, this is of tremendous importance to many areas that are suffering very high unemployment.

Is not the reality that the Government are signalling the end of regional development policies that have been pursued by Governments of all parties? How long are people in the regions to be condemned to high unemployment and low value added jobs because of the Government's obsessive determination to slash public expenditure to levels which will ruin the country?

Mr. Lamont

There will be a full debate on what I have announced today, though obviously the precise details of it will have to be arranged through the usual channels.

This is not the end of effective regional policy. It is the beginning of job-related and effective regional policy. The right hon. and learned Gentleman conceded that there had been a lot of waste in regional policy. He conceded, in relation to Sullom Voe, the expenditure of £130,000 for each job created. That is the problem that we have to tackle. We have tackled it by the cost per job limit and the requirement to create jobs. The cost per job limit and the requirement to create jobs account for half the saving that I have announced. Is the right hon. and learned Gentleman against that?

Mr. Smith


Mr. Lamont

In that case the right hon. and learned Gentleman is not in favour of the economies that he professed to want. He is in favour of £130,000 for each job at Sullom Voe.

There is room for economies when regional policy created new jobs in the 1970s at a cost of £35,000 each. Many of those jobs would have come into existence anyway.

The right hon. and learned Gentleman referred to the cost per job limit of £10,000 and suggested that that was too niggardly. It is about twice the level of the average capital intensity of investment in British industry. It will not deny the capital-intensive sector access to regional development grants.

As for the job grant, which has been fixed at a limit of £3,000, it is true that that could be slightly higher under the EC limit, at £3,150. We felt it prudent to be somewhat below that. The fluctuations of exchange rates could place us in a difficult position. But it is not a significant amount below the maximum.

The right hon. and learned Gentleman spoke of an abrupt cut-off. He should know that there are transitional provisions and that in the inner tier where people qualify for regional development grants, provided those assets are made available in the next 12 months, they will still qualify for them. There are generous transitional provisions.

As for what the right hon. and learned Gentleman said about Birmingham—I am sure that other right hon. and hon. Members will be referring to it—our review of the map has been based on the same principles as the map of the Labour Government. That was based on travel-to-work areas, and that is what we have done as well.

The right hon. and learned Gentleman condemned the taking out of replacement investment. That again is common throughout the EC. We are required to do it, and it was announced in the House before today.

The right hon. and learned Gentleman asked whether hotels and tourism would be included in the service activities. Obviously we gave this matter considerable thought. After consulting the industry, we decided that we would not include them. It was made clear to us that most of them preferred to benefit from the national scheme under section 4 of the Development of Tourism Act 1969, where they have their own money available for the development of tourism.

The right hon. and learned Gentleman ought to get his facts right when he says that the decline in investment makes the timing of my announcement inopportune. Precisely the opposite is true. Investment in manufacturing is rising so strongly that we are able to make these savings. It is rising this year by some 14 per cent. or 15 per cent., which is the best rate seen for many years.

Several Hon. Members


Mr. Speaker

Order. In relation to what I said a few moments ago, I would normally allow about half an hour for a statement and questions to the Minister making it. In view of the importance of this one I propose to allow questions to go on until five o'clock. I hope in that time to be able to call every right hon. and hon. Member seeking to catch my eye, but I ask for brief questions, please.

Mr. David Mudd (Falmouth and Camborne)

As a west country Member of Parliament, I listened with delight to my hon. Friend's statement. However, it seems that in tidying up the problems of west Cornwall he has created a far greater anomaly in the Truro travel-to-work area. One area, United Downs, which has encouraged massive input from the Department of the Environment and the Manpower Services Commission, is to be discouraged as a focal point for industrial development because it has fallen foul of a line on the map. I hope that I shall have my hon. Friend's assurance that these lines on the map are not mandatory and will be negotiable in the light of local circumstances.

Mr. Lamont

Much as I would like to oblige my hon. Friend, I fear that I am unable to give him that assurance. He will know that our building block for the assisted area map is, as it has always been, the travel-to-work area. That is based on common sense. People may argue about the formation of an individual travel-to-work area, but it makes sense, when the policy is aimed at reducing imbalances in unemployment throughout the country, to look at it in terms of areas where people, as statistically measured, travel to and from work. That is the basis of the travel-to-work areas, and that must be the only basis upon which a policy designed to iron out levels of unemployment can be established. Therefore, I am afraid that what my hon. Friend says about Department of the Environment money going into a smaller area does not undermine the basis of the policy. We have to stick to the basic building block of the system.

Mr. A. J. Beith (Berwick-upon-Tweed)

Does the Minister not understand that, by his announcement today, he is excluding, not only from British but from European regional aid, some of the areas with the highest unemployment? Why did he stick to the travel-to-work area as a building block, when that has led to the inclusion within aid of some areas with low unemployment to the exclusion of areas such as Amble in my constituency, with the highest unemployment? Does he realise that this slap-dash map, drawn by somebody sitting behind a desk in London, demonstrates that not only does he not care about the levels of unemployment, but that he does not even know where they are.

Mr. Lamont

The hon. Gentleman is wrong in what he says about the European regional development fund. As a result of our changes, far larger parts of the country will qualify for access to the ERDF. The total map has been enlarged from some 27.5 per cent. to 35 per cent. The outer tier is now 20 per cent., compared with 5 per cent. before. Many areas will now qualify for ERDF assistance. That was one of our main motives in enlarging the outer tier.

Sir Raymond Gower (Vale of Glamorgan)

In pursuing that matter, has full account been taken of the fact that the regional development status of an area governs the likelihood of it obtaining EEC aid? What will be the impact of these changes on areas such as Wales?

Mr. Lamont

The position as I have just explained to the hon. Member for Berwick-upon-Tweed (Mr. Beith), is that many more areas will qualify for ERDF assistance. Of course, it depends on those individual areas being able to generate the projects themselves. As regards the effects on Wales, we had to make difficult decisions based on impartial criteria, and Wales has been treated fairly. Half the total savings are coming from England, one third from Scotland, and one fifth from Wales.

Mr. Alfred Morris (Manchester, Wythenshawe)

Is there not a case for more help for many more parts of Greater Manchester than is proposed? Taking its population as a percentage of the north-west as a whole, should not Greater Manchester have higher priority? Is the Minister aware that in many parts of the city in Manchester there are male unemployment rates of over 50 per cent., and in some localities over 66 per cent. of young people under 25 on the dole? Does that not just speak but shout of the need for more help for Greater Manchester?

Mr. Lamont

The right hon. Gentleman says that inner Manchester has high levels of unemployment, which it has. He then goes on to say — I do not follow the "therefore" in his argument—that Greater Manchester should have assisted area status. The right hon. Gentleman should be grateful that Manchester has been partially included. I know what Labour Members are interested in. This is the only travel-to-work area that has been split. It is on the borderline of the 35 per cent. maximum coverage that we could have. We had to negotiate that with the EEC and we could not go beyond 35 per cent. To be frank, we are lucky that we have part of Manchester in, and there is not a strong case for saying that the whole of the Manchester area should be included.

Sir Peter Emery (Honiton)

Does my hon. Friend realise that many people, who have never been included in development or assisted areas but who live in pockets of considerable unemployment, will be pleased to see that they will now be treated in the same way as most of the rest of the country? Therefore, from their point of view, this is an excellent statement. Will he make it clear that the intermediate areas that are not shown on the map and therefore are not clear will benefit from the European grants?

Mr. Lamont

The intermediate areas are listed in the order, and will qualify for ERDF. I am grateful for my hon. Friend's first remarks, and he is quite right. Today we have done something that will lead to fewer anomalies, less job shuffling and fewer distortions

Mr. Michael Foot (Blaenau Gwent)

How much of the alleged £300 million saving is attributable to the abolition of the special development areas? How much is attributable to Wales? What is the calculation in employment? Does the hon. Gentleman not understand that if this means any cut at all, he is hitting the areas that have already been hit hardest by the Government?

Mr. Lamont

I explained that half of the saving will come from the taking out of replacement investment and the requirement to create jobs. The rest of it comes from changes in the map and in the rate of grant. The right hon. Gentleman will understand that there are many changes in what I have announced today, compared with the previous map and system, and therefore it is extremely difficult to say precisely which saving is attributable to which particular thing. It is like comparing apples and oranges. They are different.

I do not accept that this will lead to more unemployment. The reverse is true. We are getting better value for money in terms of creating jobs. When we are spending so much money on regional policy, it must make sense to tie it more closely to the creation of jobs. What is the purpose of regional policy otherwise?

Sir Hector Monro (Dumfries)

How are we to get regional infrastructure forestry grants if most of the United Kingdom afforestation is outwith the assisted areas?

Mr. Lamont

As my hon. Friend knows, only those areas that are assisted areas will qualify. As regards the European dimension, I have said repeatedly that it will be much easier for people to qualify because the map of the assisted areas is larger.

Mr. Gordon Wilson (Dundee, East)

The Minister has obviously been able to treat the Secretary of State for Scotland with the contempt that he deserved, with a cut of £100 million in the Scottish budget. However, does he not understand that the Scots will bitterly resent this despoliation and rape of their country, and being treated as a Third world colony? Furthermore, will the Minister take on board the fact that unemployment in Scotland is still increasing? Scotland has so far donated about £30 billion in oil revenues to the United Kingdom. How can he justify to the Scottish people this transfer of jobs and money to the English west midlands?

Mr. Lamont

The hon. Gentleman has an 18th-century attitude to these things. He thinks that money should be doled out on the basis of political pork barrelling and nothing else. [HON. MEMBERS: "Oh."] I shall wait with interest to hear hon. Members' opinions, but the map has been drawn on the basis of objective criteria, and unemployment, long-term unemployment, job opportunities, industrial structure and peripherality, have all been taken into account. It is nonsense to say that Scotland has been badly treated. It is increasing its share of the inner tier, and maintaining its share of the outer tier.

Mr. Anthony Beaumont-Dark (Birmingham, Selly Oak)

Will my hon. Friend accept that the fact that at long last some recognition has been paid to the problems of the west midlands by the application of schedule 2 of the order published today will cause some small cheer? We have tried to hammer home to the Government over the past year or so that we have the highest long-term unemployment in Britain. Therefore, we think that the core of Birmingham, where we have lost 190,000 jobs, should be looked upon as schedule 1. How will the increased selective assistance be judged and by whom, because it will be important that Birmingham does not find itself losing business to Stratford and the more lush areas because they are also covered by schedule 2? Will he guarantee that he will not pay firms to move within the area so that people will get grants at Birmingham's expense yet again?

Mr. Lamont

My hon. Friend is right. In the past, regional policy has done great harm to the west midlands and has directed industry away from the west midlands and Birmingham. Even when Labour Governments were in power, unemployment in Birmingham was for many years higher than the national average, but they did nothing about giving it assisted area status. Although Birmingham has higher than the national average unemployment, this is the first time that it has been given any assisted area status.

We have also taken measures to prevent mere job shuffling within the assisted areas. That will mean that people will not be able to get grants merely for moving an operation from one assisted area to another, from one part of the Birmingham travel-to-work area to another, or from the inner tier to the outer tier. Mere job shuffling will not be possible.

Selective assistance will be determined by the West Midlands Industrial Development Advisory Board. It will take into account the special needs of the inner area of Birmingham. That is also properly the objective of the urban programme. Birmingham has a partnership area. No city in the United Kingdom receives more urban aid than Birmingham, which is receiving £24.5 million.

Mr. Jeff Rooker (Birmingham, Perry Barr)

It is bigger.

Mr. Lamont

All right—it is bigger, it has needs and it gets the largest amount.

Mr. Jack Dormand (Easington)

Will the Minister confirm that this policy will almost certainly mean a reduction in assistance for the northern region? As the north has the highest rate of unemployment outside Northern Ireland, what possible justification can there be for this action? Is this not the best example we have yet had of so-called consultation being an utter sham? Is not the real reason for this action the desire for a reduction in public expenditure at any price in human terms?

Mr. Lamont

That is emphatically not the case. In fact, the northern region has done relatively well in this review of regional policy. Of course, there are savings coming from the northern region, but they are savings from the heavy, capital-intensive industries. Even the right hon. and learned Member for Monklands, East (Mr. Smith) admitted that there was a case for making those savings. His answer seems to be to exclude the chemical industry completely from regional development grants—to exclude the industry from the standard industrial classification. I do not believe that the chemical industry will like being completely excluded from obtaining access to regional assistance. We have applied the policy fairly and objectively to all areas. Obviously, the northern region will have to have selective assistance rather than automatic assistance for the most capital-intensive projects. The region has been treated fairly.

Sir Paul Bryan (Boothferry)

Is my hon. Friend aware that he has given some good criteria as the basis for his decisions? It is apparent that the only reason why Goole is not assisted is that it has been put into a travel-to-work area—as has Selby recently—which means that average unemployment has been reduced. Unemployment in Goole was just as high as in Scunthorpe and other places. I brought a delegation to my hon. Friend the Minister to explain to his Ministry that this is exactly what has happened.

Mr. Lamont

I appreciate my hon. Friend's concern. Obviously, many hon. Members are worried about the composition of individual travel-to-work areas. The travel-to-work areas are compiled by the Department of Employment on the basis of observed facts — how people travel and work. I know that sometimes people find it difficult to accept reclassifications, but they are conducted on the basis of objective criteria. They are based on how people work and live. The minimum requirement is that 70 per cent. of the people who work in an area should live in it and 70 per cent. of those who live in an area should work in it. The reclassification has been done objectively.

Mr. Bruce Milian (Glasgow, Govan)

Is the Minister aware that every representative of Scottish organisations who has commented on the White Paper has said that the total of regional aid should not be reduced. That fact has been ignored, and the Minister has come here today with a statement that will cost £100 million in Scotland. Is he aware that this action will be devastating to Scotland? Given our record levels of unemployment, his statement is deeply offensive and an insult to the unemployed.

Mr. Lamont

That is very dramatic language — [HON. MEMBERS: "It is true."] Smaller amounts of money can be equally effective in creating jobs. Much of the money that was deployed previously was doing nothing to create employment. Sometimes, by subsidising the most capital-intensive projects, that money was doing the opposite and creating problems within areas. Many of the representations that we received stated that there was ample room for savings in regional policy.

Mr. John Corrie (Cunninghame, North)

I thank my hon. Friend for including my entire constituency in the special development area. Is he aware that, when he drew up this report last week, unemployment in my constituency was 31 per cent. and that a further 200 men at the steel works had been made redundant, pushing that level beyond 31 per cent.? Does he agree that the maximum amount of finance should be spent in such areas to reduce unemployment?

Mr. Lamont

I am grateful to my hon. Friend for his comments. Obviously, if a project in my hon. Friend's constituency qualifies for and is deserving of selective assistance, we shall consider it.

Mr. Roy Mason (Barnsley, Central)

Is the Minister aware that, during the past five years, there has been much investment in the coal industry in Barnsley and south Yorkshire, resulting in major technological changes underground and thousands of redundancies and lost job opportunities? In these small, mono-economy coal-mining towns, it is obvious that the Minister has not taken that technological factor into account. He has not considered also the fact that, after the strike is over, the unemployment trends in those coal-mining towns will increase. There is an urgent need for a re-examination of his statement to give those towns the development status they will require to offset job losses in the pits and lost job opportunities

Mr. Lamont

I appreciate what the right hon. Gentleman says. He must realise that we have to look at this matter overall. We must look in terms of not only of the unemployment throughout an area but where that unemployment has come from and the industries that have caused it. Decisions which have applied to the travel-to-work area in the right hon. Gentleman's constituency have been based on those statistics and the material available.

The right hon. Gentleman may know that my right hon. Friend the Secretary of State for Energy today announced a further increase in the money available for NCB industries to help alleviate the difficult problems caused by closures in these areas.

Mr. Kenneth Warren (Hastings and Rye)

Although I welcome my hon. Friend's step forward, I had hoped for a much more radical approach. As unemployment is, unfortunately, a characteristic of the whole country, did my hon. Friend look at the benefits that could arise by decreasing industrial taxation as a method of creating jobs rather than leaving us with what is becoming an antiquated regional policy support system?

Mr. Lamont

I am interested in what my hon. Friend has to say. We are attacked from one side of the House for having made far too savage cuts, but some hon. Members feel that we could have gone further and been a bit more radical. I noticed that a writer in The Times this morning —I hasten to say that I had nothing to do with the article—in a rather accurate guess about what would be announced today, thought that we could have had a much more radical policy and gone further. My hon. Friend is right to believe that many of the jobs that have come into existence through regional policy would have done so anyway. Much of the policy has involved just shuffling jobs around from one part of the country to another. By lessening or stopping that we are benefiting the whole country.

Mr. Ian Wrigglesworth (Stockton, South)

Is this statement not the final confirmation, if it were needed, of the fact that the Conservative party has completely abandoned its commitment to the one-nation philosophy? Is not the bottom line of the Minister's statement the £300 million that will now not go to the regions? Does the Minister recall that during the debates on the Co-operative Development Agency and Industrial Development Bill I and other Opposition Members demanded that the Minister tell us the scale of cuts that would occur under that legislation? Despite denying it then, only weeks and months ago, the hon. Gentleman has delivered a statement cutting £300 million from the regions. That action will further polarise and divide the country. Is it not a scandal that this is a further hammer blow on the unemployed and poorer regions?

Mr. Lamont

At no time did I deny that there would be cuts in regional policy. The measure has been expected. The hon. Gentleman is not paying attention to the proposals. We are making this policy much more job-related. In the past, the policy has not created jobs. About 500,000 jobs over 20 years at a price in excess of £30,000 per job is not many jobs to have created with this policy. During the past 12 years, £4 billion has been spent on RDGs. What do we have to show for it? Nothing. We cannot solve the unemployment problem by regional policy. We can solve it only through general economic policy—by getting interest rates and inflation down—and that is what this policy is designed to help.

Mrs. Elaine Kellett-Bowman (Lancaster)

My hon. Friend will appreciate that this news comes as a great disappointment to my constituents and to those of my hon. Friend the Member for Morecambe and Lunesdale (Mr. Lennox-Boyd). We find it difficult to know how my hon. Friend has interpreted the criteria he gave, particularly that of peripherality. In his statement my hon. Friend said that he would have to rely on areas to generate applications for European funds. By cutting from this scheme those who have great experience of the system and are able to do that, we could well be depriving the United Kingdom of substantial funds, particularly from the European Investment Bank, as we pointed out when we came to see him.

Mr. Lamont

I appreciate my hon. Friend's anxiety. She has fought hard for her constituency. However, with the criteria that we used—unemployment is only one of the criteria that come into play — it was difficulty to justify intermediate area status for the travel-to-work areas within her constituency. Her constituency will not be eligible for ERDF, but it is not right to say that the country generally will miss out on ERDF.

Mrs. Kellett-Bowman

And EIB.

Mr. Lamont

And EIB. The extension of the map and the changes we have made in the structure of the grant—the removal of replacement investment—will make it possible for us to obtain more money out of Europe not less. That was one of the considerations in our mind.

Mr. Laurence Cunliffe (Leigh)

How can the Minister justify the phoney and biased policy measures that he has announced today, which will result in cuts of £140 million over the next five years in the north-west region? Because of this Government's senseless economic policies, it is a region that has already lost 250,000 jobs since the Government came into power. Will he further confirm that the criteria mean that many skillcentres within the affected areas will have to close, thus confirming that the Government are not interested in producing potential technologists for the future growth industries of this country? Does he further agree that the criteria on which he bases the policy discriminate, because it is a financial imposition, against mostly working class and distressed areas?

Mr. Lamont

I do not accept that it will have the draconian and the drastic effect on the north-west that the hon. Gentleman suggests. One of the ways that the north-west could benefit from these changes is through the fact that we are extending the grants to services. That change should be welcomed in the House. It means that many activities where there is a prospect of a real growth in employment and which have never had encouragement or benefited from regional policy in the past will now receive it.

Mr. Fred Silvester (Manchester, Withington)

May I congratulate my hon. Friend on walking carefully though this minefield? Although the north-west wants more public expenditure, it does not want ineffective public expenditure. I thank him for breaking away from the tyranny of travel-to-work areas in Manchester. However, is not the £10,000 capital limit rather low in terms of the number of jobs that can be provided by capital-intensive industries?

Mr. Lamont

I do not know whether I have tiptoed through the minefield. I think that I have hit one or two mines. But I am grateful for my hon. Friend's comments. I agree that we do not want ineffective public expenditure. I am grateful for what my hon. Friend says about the treatment of Manchester. Manchester was the only TTWA to be treated in that way, for the special reason that I explained earlier. I said that the £10,000 will enable us to give automatic grants to projects that are double the rate of the average capital intensity in British industry. I do not believe that it is niggardly, but even if it were, it is still open to us to assist those projects with selective assistance in addition to automatic assistance. We are increasing selective assistance. There will be an increase of some 35 per cent. in selective assistance so, when the new scheme is fully operational, that will be available in addition to automatic grants. We shall have the discretion to aid projects when we believe that it is right to do so.

Mr. Andrew F. Bennett (Denton and Reddish)

Will the Minister accept that great resentment will be felt in my constituency about the fact that less money is being spent, although it is tempered by a little relief in Tameside and Denton that some of the assistance that they had under a Labour Government is being restored to them? The Stockport part of my constituency will be completely bewildered. It has the highest level of unemployment in my constituency. The Brinnington area has over 25 per cent. unemployment. Those areas have not been included. Will he study the boundaries, because it is crazy that the people who live in Denton will have the best chance to look for jobs in some of the development sites which are available in Stockport?

Mr. Lamont

As I have explained to many hon. Members already, the policy has inevitably been based on the travel-to-work area concept. As regards the hon. Gentleman's first point, I am sure that he will do his best to ensure that the maximum resentment is felt about the fact that less money is being spent on his constituency. I wonder whether he ever asks his constituents to consider whether money could be better spent rather than that more should be spent.

Mr. Jonathan Sayeed (Bristol, East)

My hon. Friend's statement will be welcomed by my constituents in Bristol, because they are fed up with jobs being poached from Bristol, with Government assistance, and taken over the Bristol channel into Wales, and with the destruction of industry in Bristol by industry in Wales, again with Government assistance. Can we hope that in time we shall see an end to all the economic distortions that are caused by this type of assistance?

Mr. Lamont

I cannot go as far as my hon. Friend, but there will be less distortion. I know that there have been very strong feelings in Bristol about the effect of assisted area status and the poaching of industry and jobs. Bristol will plainly not be so badly affected in future.

Mr. Stephen Ross (Isle of Wight)

Did the Minister even consider the case of the Isle of Wight? Does he appreciate the problems of an offshore island? Does he know that in some parts of the constituency male unemployment is over 30 per cent.? [Interruption] I lost a tooth this morning, that is the reason for that. Is the Minister aware that further redundancies are in the pipeline? What help can he offer, because we desperately need some assistance from the Government to restore our economy?

Mr. Lamont

Of course we studied the hon. Gentleman's constituency, but I am afraid that the blunt truth is that on the objective criteria his constituency does not merit assisted area status.

Mr. Jeff Rooker (Birmingham, Perry Barr)

Does the Minister accept that the figures he gave of saving £300 million and leaving a budget, as I understand it, of £400 million, represent a cut of virtually 50 per cent. in regional aid? That was never forecast. Why is the Minister so rigidly tied to travel-to-work areas for Birmingham, whose travel-to-work area now includes Stratford-on-Avon, which dilutes the unemployment figures? Has the Minister reneged on the commitment that he gave last week to visit Birmingham and see for himself the inner core area where 300,000 people live? On his Department's figures, that is now the largest centre of concentrated urban deprivation in this country — bar none. His statement completely ignores the position in Birmingham, and if I were a Tory Back Bencher, I should resign the Whip tonight because the Government have failed to help Birmingham.

Mr. Lamont

The hon. Gentleman might be trying to convey a message to someone. The figures that the hon. Gentleman gives about the cuts are correct. The figure will be cut from £670 million to £400 million in 1987–88. We believe that that cut is justified and sensible. As regards the problems of the inner city of Birmingham, I have already explained that the area has partnership status, and the urban aid programme is designed specifically to deal with those inner city problems. Birmingham is receiving over £24.5 million to deal with it. The Birmingham area as a whole does not qualify for inner tier status on the basis of unemployment; 21 per cent. of the country has worse unemployment than the Birmingham travel-to-work area. It is a fact that 21 per cent. of the country has unemployment worse than the whole Birmingham travel-to-work area, and we cannot, any more than the previous Labour Government did, depart from the travel-to-work area principle.

Mr. Roger Gale (Thanet, North)

Will my hon. Friend recognise that in Thanet, in the south-east, I represent the travel-to-work area with the highest unemployment rate not included in an assisted status area? We believe that in that area we can create employment through private enterprise and private investment, but we cannot do it with one hand tied behind our back.

Will my hon. Friend accept that many Conservative Members believe that in thanking him for what he has done today we must take the opportunity to remind him that he has gone nowhere near far enough? Instead of regional aid, we should like to see sectoral aid, which would help industry nationwide.

Mr. Lamont

I note what my hon. Friend said. He will appreciate that we have moved a long way from the principle of giving automatic assistance. We have moved towards meeting the suggestion made by many of my hon. Friends that we should have not sectoral aid but more discretionary aid, rather than automatic aid. We have moved a long way in that direction.

At present, 65 to 70 per cent. of regional aid is automatic and the rest is discretionary. When the new scheme is established, the proportions of automatic and discretionary aid will be about fifty-fifty.

My hon. Friend's constituency can also be helped by section 4 money for tourism. We shall do all we can to see whether there are projects in his constituency worthy of support.

Mr. Robert N. Wareing (Liverpool, West Derby)

Is the Minister aware that on Merseyside and no doubt elsewhere there will be deep disappointment in the construction industry? If the Minister is serious in wanting to apply aid to the creation of jobs, he can do no better than encourage the construction industry.

Will the Minister speak to his right hon. Friend the Secretary of State for the Environment about the utter failure of partnership policies in the inner city of Liverpool, which has been deprived of most of the regional aid so far given to Merseyside?

Will the Minister look again at the boundaries of the new Merseyside development area, which takes in large parts of rural north Wales and Cheshire?

Mr. Lamont

The hon. Gentleman is being somewhat unfair. Merseyside emerges relatively well from the changes that have been announced. Liverpool retains its SDA status and the partnership—[Interruption.] I mean its DA status—its inner tier status. It will also qualify for selective assistance. Merseyside and the adjoining areas have done relatively well out of the package.

Mr. Tony Speller (Devon, North)

Will my hon. Friend accept, as I have always done, that development status in its various forms has depended first on employment and secondly on location? If so, why has he permitted the Department of Employment to massage figures so that areas in the west country and in places such as Ilfracombe, with 35 per cent. unemployment, are merged with larger areas, and all of them losing their status?

Can my hon. Friend give any reasoned explanation why those areas on the periphery of Britain which do not have the rateable values to finance their own infrastructure are to be left wholly destitute of Government funds, in aid of I know not what—except perhaps the game of pass the parcel?

Mr. Lamont

I appreciate my hon. Friend's disappointment, but 35 per cent. of the country will still be covered by assisted area status. I do not think that it would make any sense to raise that percentage to 40 or 45 per cent. It would be nonsense to have almost half the country covered by assisted area status. Even taking account of its location and of peripherality, it is difficult to make out a case for the travel-to-work area which covers my hon. Friend's constituency.

I appreciate my hon. Friend's feelings about the composition of the travel-to-work area. [Interruption.] Of course it was not a fiddle. He will appreciate that some changes in travel-to-work areas are of benefit to people in qualifying for assisted area status, and some are not. Inevitably, there are both winners and losers.

Mr. D. N. Campbell-Savours (Workington)

How can the Minister say that jobs will not be lost as a result of the cuts when British industry is to lose £300 million out of its budget each year?

Mr. Lamont

It will not be lost, because the policy will be aimed much more specifically at the creation of jobs. British industry will benefit from the strengthening of our financial and economic policies which results from the package.

Mr. Churchill (Davyhulme)

Is my hon. Friend aware that his statement will be warmly welcomed in Greater Manchester, specifically in regard to ending the unfair and discriminatory system which previously operated?

I thank my hon. Friend and his colleagues for having listened to the representations made to them by industry, trade unions and the local authority concerning Trafford Park. His help is much appreciated.

Mr. Lamont

I am grateful to my hon. Friend. As he knows, the inner area will also continue to qualify for support from the Department of the Environment.

Mr. Bernard Conlan (Gateshead, East)

Will the Minister tell the House how he will ensure that the £10,000 capital grants will lead to what the Prime Minister used to describe as real or permanent jobs, as against transient jobs? Will he abandon the nauseating charade that the exercise has anything to do with jobs? It is related to cuts in public expenditure.

Mr. Lamont

The hon. Gentleman is not quite right in speaking of a £10,000 capital grant. It is a capital grant on which there is a £10,000 cost per job limit.

The hon. Gentleman asked how we shall ensure that the jobs last. The normal provisions that applied previously to regional development grants in regard to the recovery of grants will apply.

I cannot accept the hon. Gentleman's assertion that it is a charade and nothing to do with creating jobs. We made it clear in our White Paper that we felt that it made no sense that the large sums of money employed on regional policy — and they are large sums — were not related specifically to the creation of employment. What else is the purpose of the policy?

Mr. Keith Raffan (Delyn)

Will my hon. Friend confirm that 90 per cent. of the Welsh people will be covered by some form of assisted area status? Will he also confirm that, contrary to the Opposition's assertions, the levels of grant will still be quite sufficient to attract internationally mobile investment?

Mr. Lamont

Taking account of the activities of the Board for the Development of Rural Wales, a large part of Wales will be covered and eligible for assistance of one kind or another.

We shall be able not only to give automatic regional development grants for inward investment. We shall be able to award selective assistance on top of those to attract the internationally mobile projects that we want here.

Mr. Geoffrey Lofthouse (Pontefract and Castleford)

Is the Minister aware that there is such an area as west Yorkshire? Apart from Bradford, he seems to think that it does not exist. Is he aware that in the past three years there have been eight colliery closures in west Yorkshire?

Is the Minister aware of the very serious situation that has developed in the Castleford travel-to-work area? I think that he must be, because I have frequently drawn it to his attention. There appears to have been a complete fiddle on the reassessment of the boundaries, because the rural areas have been included to cover up the black spots in the travel-to-work areas. That has happened in Castleford. We enjoyed intermediate area status prior to 1981. As the situation is now much worse than it was then, why have we not qualified?

Mr. Lamont

Both the travel-to-work area and our decision on it were based on objective criteria, taking into account occupational structure, long-term unemployment and industrial change.

The hon. Gentleman says that the travel-to-work area is too large, but it is related to where people live, where work is available, and where they travel to work. That was the building block used by the previous Labour Government for regional policy.

Mr. David Gilroy Bevan (Birmingham, Yardley)

I deeply regret that my hon. Friend has not paid more heed to the devastation caused in Birmingham by unemployment. In dealing with Manchester, why has he used a different basis of adjudication? Does he realise that the policy of including the travel-to-work areas in the west midlands' will mean including Stratford-upon-Avon, Sutton Coldfield, Solihull, Redditch and other areas where equal external investment can be drawn from abroad into Birmingham?

What does my hon. Friend propose to do to overcome the problem? Unemployment in the area has risen in the past 13 years by twice as much as in Wales and Scotland put together. What instructions will he give to the industrial advisory body that he mentioned to look particularly at the inner areas of Birmingham and other large cities?

Mr. Lamont

The case of Manchester raises a different question from that of Birmingham. The question about Manchester was simply whether part of it could qualify for outer tier status. As I explained, we were absolutely on the margin of the 35 per cent. that would have been approved by the European Commission and we had the prospect of getting only part of Manchester in. It was a question only of whether part of it could qualify for outer tier status, whereas what has been said in respect of Birmingham is that a large part of the central core should have qualified for inner tier status, which would be a different matter. With regard to what we shall do to try to secure inward investment, I shall ensure that the West Midlands Industrial Development Advisory Board takes account of the special problems of the inner core of Birmingham. I shall ensure that there is the closest possible co-operation between my Department and the Department of the Environment. Of course, the strong support from the Department of the Environment in dealing with the problems of inner Birmingham will continue.

Mr. Geoffrey Robinson (Coventry, North-West)

This is a black day for the regions of the United Kingdom—

Mr. Beith

On a point of order, Mr. Speaker

Mr. Speaker

What is the point of order?

Mr. Beith

I should like to ask you humbly, Mr. Speaker—with no vested interest—on behalf of many hon. Members, whether you agree, given that the business to follow the statement is open-ended and can go on to any hour, that there should be further time for questions on the statement.

Mr. Speaker

I fully realise the importance of this matter. The House has heard the Minister say that there will be a debate on it. Motions have already been tabled in respect of several of the orders and there will be further opportunities to discuss the matter. I shall bear in mind the right hon. and hon. Members whom I have not been able to call during questions on the statement. I have given slightly over an hour to it, which is more than double the normal time. I think that in fairness to the succeeding business we should move on.

Mr. A. E. P. Duffy (Sheffield, Attercliffe)

Further to that point of order, Mr. Speaker.

Mr. Speaker


Mr. Alan Williams (Swansea, West)

Further to that point of order, Mr. Speaker.

Several Hon. Members


Mr. Speaker

Order. I am taking the point of order from the Opposition Front Bench.

Mr. Williams

Will you confirm my impression, Mr. Speaker, that towards the end of the statement over 40 Members were still trying to catch your eye? If you confirm that, may I, through you, draw that fact to the attention of the Leader of the House and ask whether it is regarded as confirming our request that more than one day should be given to a debate on this subject?

Several Hon. Members


Mr. Speaker

All right. Let us have all the points of order together.

Mr. Andrew Faulds (Warley, East)

Further to that point of order, Mr. Speaker. Unfortunately, you did not manage to call any Member from the black country. This is an area that suffers the most serious social deprivation imaginable and I must express my surprise that not a single black country Member was called.

Mr. Duffy

Further to that point of order, Mr. Speaker. May I remind you that not one Member from Sheffield was called? It is a great city, and it is covered by the statement. We know that the Government are exercising a policy of political vengeance against Sheffield. I know that you would not risk being thought a party to that policy, but the overlooking of Sheffield is a repeated occurrence on such occasions in the House.

Mr. Dennis Skinner (Bolsover)

Further to that point of order, Mr. Speaker. In view of the fact that after questions and answers on the statement have finished we shall move on to the Elections (Northern Ireland) Bill, and that the chances are that, if Second Reading is anything to go by, the House will be occupied by 20 Members at the most and that for the votes there will be about 120 against 14, and that the Bill itself is nothing more than a dog's dinner, would it not make sense—just a little sense — to give another half an hour to allow hon. Members to make their points? I have not been rising in my place because I have been to another meeting, exercising some influence there—[interruption.]—rather successfully. I may add. Therefore, it does not really matter whether we lose half an hour from the Committee stage of the Elections (Northern Ireland) Bill. Let us get on with this very important matter.

Mr. Jack Ashley (Stoke-on-Trent, South)

Further to that point of order, Mr. Speaker. I appreciate your difficulty on such an occasion. It is exceedingly difficult. I never question whom you call, and I do not mind not being called, but today several Members from Liverpool, Birmingham and Manchester were called, but hon. Members representing Stoke-on-Trent, the most neglected and deprived industrial city in Great Britain, have not been called. I submit to you with all respect, Mr. Speaker, that an opportunity should have been offered to Members representing Stoke-on-Trent to express their point of view.

Mr. James Wallace (Orkney and Shetland)

Further to that point of order, Mr. Speaker. I appreciate your difficulty but there is a particular point that Members from the north of Scotland wish to put to the Minister about the Highlands and Islands Development Board area. I appreciate that perhaps you were not to know that there might be a peculiarity in that, but if the time for questions were extended, that point might be elucidated by the Minister.

Mr. Robert C. Brown (Newcastle upon Tyne, North)

Further to that point of order, Mr. Speaker. My hon. Friend the Member for Warley, East (Mr. Faulds) said that no one from the black country had been invited by you to take part in questioning the Minister. Is it not a fact that every hon. Member who has been called represents part of a very black country today?

Mr. Michael Meadowcroft (Leeds, West)

Further to that point of order, Mr. Speaker. It would also be helpful if you called members from the city of Leeds. No one from Leeds has been called, and there are points that we should like to raise. It seems that hon. Members on both sides of the House would welcome the opportunity of a few more minutes on the statement, so that they could question the Minister.

Mr. Speaker

I fully appreciate the feelings of hon. Members who have not been called. There are about 650 hon. Members in the House. If we take away 100 members of the Government, that leaves 550, and it is literally impossible to call every hon. Member. With regard to the succeeding business, I must say in fairness to Northern Ireland Members that they are as much Members of the House as anyone else.

Mr. Skinner

They do not want the Bill.

Mr. Speaker

Order. It is rare for Northern Ireland Members to have the opportunity of debating early in the day. I think that the House should take that into account.

Mr. Geoffrey Robinson

This is a black day for the regions of the United Kingdom. Is the Minister aware that nothing that was said today changes the simple fact that the Government have dealt a mortal blow to regional policy? Not satisfied with the reduction in regional assistance of 35 per cent. compared to assistance under Labour Administration, the Government have today chopped a further £300 million per annum from regional assistance. Will the Minister confirm that that is a 42 per cent. cut in the present reduced level of regional assistance and an enormous reduction of 77 per cent. since the Government came to office?

Is the Minister aware that behind the beguiling and specious propositions of cost-effectiveness and a greater link to jobs lies the stark truth, the harsh reality. that all that the Government are interested in is a reduction of public expenditure? The map of the outer tier areas has been widely drawn to enable eligibility for European funds. We welcome that. However, other areas have been downgraded and the Minister will be under no illusion about how deeply that will be resented in the House and the country.

Does the Minister not realise that European funds are no E1 Dorado for the United Kingdom regions? The ERDF will account for only 5.6 per cent. of the EC budget this year while the United Kingdom's net contribution to the EC budget this year is equivalent to the total ERDF regional assistance.

Some areas are to be designated which were not designated before. The west midlands is a welcome, if limited example. Nevertheless the inner core of Birmingham, with 230,000 people—

Mr. Speaker

Order. I hope that the hon. Gentleman is about to ask a question. This not a debate.

Mr. Robinson

I am asking the Minister why the inner area of Birmingham with 230,000 people and 30 per cent. unemployment is not included in the inner core.

Is the Minister aware that his statement marks the end of regional policy as developed by successive Governments but that a Labour Government will renew regional policy and rebuild the regions of this nation?

Mr. Lamont

In Committee on the Bill which put in place the structure for the detailed announcements made today, the Opposition admitted that many worthwhile savings could be made, especially on heavily capital-intensive projects. Those form a large part of the savings that we now intend to achieve.

The ERDF is significant for regional policy and we hope to get about £300 million per year out of it.

This is not the end of regional policy. It is the start of a more cost-effective, more job-oriented regional policy. We believe that, pound for pound, we can get more jobs and better value for money.

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