HC Deb 11 December 1985 vol 88 cc1039-46

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Peter Lloyd.]

12.32 am
Mr. Matthew Parris (Derbyshire, West)

With your permission, Mr. Deputy Speaker, I should like to finish my remarks a little early to allow my hon. Friend the Member for Amber Valley (Mr. Oppenheim) to intervene before my hon. Friend the Under-Secretary replies.

Mr. Deputy Speaker (Mr. Harold Walker)

Is that convenient to the Minister?

The Parliamentary Under-Secretary of State for Trade and Industry (Mr. John Butcher)

Yes, Mr. Deputy Speaker.

Mr. Parris

I am grateful to you, Mr. Speaker, for allowing me this debate. For my constituents in Belper and Milford the matter is of the utmost importance and something of an emergency. I am also grateful to my hon. Friend the Minister for two reasons. The first is that I am aware that he has just returned from a tiring tour of the north-east and has spent this evening preparing for the debate. We appreciate that.

Secondly, earlier this evening my hon. Friend saw a delegation of my constituents made up of members of the work force, trade unionists and the leader and members of the county council. They had come to London to talk to him urgently about the problems at East Mill and Milford. My hon. Friend the Member for Amber Valley and I appreciate the way in which our constituents made that trip. They left the shift at work this afternoon and came to London. They have to return immediately and go on to the morning shift tomorrow. That shows us and my hon. Friend the Minister just how strongly they feel. They feel strongly because it seems to them and to me that there has been a serious blunder. English Sewing Ltd., a subsidiary of Tootal, is a company with a number of textile mills in my constituency. It also has a dyeworks. It has been in the Derwent valley for many years. It is a profitable, going concern with an excellent record of industrial relations. It intends to modernise its dyeworks. It can either adapt an existing building at Newton Mearns near Glasgow or build an entirely new dyehouse in Derbyshire.

The managing director has told me that it would be cheaper for them to adapt the building in Newton Mearns and the Scottish Office has offered a grant of £1 million to do that because it is in a development area and because the company would be employing an extra 300 people in Newton Mearns. However, it would be putting slightly more than 300 people out of work in my constituency. That seems to be simply transferring unemployment from one part of the United Kingdom to another and does not seem to be creating a single new job.

My hon. Friends and I support the broad thrust of regional policy. If the intention of the policy is to create new jobs it is right that the money should be channelled towards regions of the country in special need. If the effect of the policy is simply to create unemployment in some areas and employment in others the policy seems to serve no useful purpose. If that is the effect of regional policy I do not support it. I have asked my right hon. and learned Friend the Secretary of State for Trade and Industry, my right hon. and learned Friend the Paymaster General and this afternoon I asked my right hon. Friend the Secretary of State for Scotland, whether that was the intention of regional policy; and they all replied that it was not.

At the end of the debate I should like to leave one question in the mind of my hon. Friend the Minister. I am aware that it is better not to burden Ministers with too many. It is a simple question to which I should like the answer. What undertakings were given by English Sewing Ltd. as to the net creation of jobs that would result from the works for which it was applying for a £1 million grant? I fully understand that much that the company tell the Government must be commercially confidential. I am not expecting the details of the negotiating hand of the company to be revealed. I think it is right for the Minister to know and for Parliament to demand to know, what undertakings the company has made as to the creation of new jobs if it is applying for Government funds, the purpose of which is to create new jobs.

I spoke to the managing director of English Sewing Ltd. and he told me a remarkable thing. He said that I was not to worry about the £1 million grant because the company would have moved to Scotland anyway, with or without the grant. If that is so the Government's money has been wasted. If the Government's money has caused the company to move it has been misused. The managing director also hinted at one further reason, which I think may be at the back of the Department's mind—it was at the back of his—why the money might be thought to be appropriate. He said that the company was considering transferring all its textile operations out of the United Kingdom and that without the Government funding it might have to consider leaving not only Belper but Scotland.

I should like to deal with that argument head-on because I think that it is an important one and I hope that it will not be prayed in aid by my hon. Friend the Minister. The proper function of regional policy should not be to provide structural subsidy to sectors of industry facing long-term difficulties that arise from high labour costs relative to labour costs overseas. The tests that I believe applicants should have to satisfy to qualify for regional aid are not and should not be designed to evaluate such problems nor to recommend their solutions. If an area of industry is in structural difficulty it is an industrial structural policy that is needed, not the application of regional policy.

I want to give my hon. Friend the Member for Amber Valley a little time so I shall say one thing about the work force in Belper in Milford. The British working man and the British trade union movement come in for many knocks in the press, from the House and from the Conservative party, of which I am proud to be a member. Throughout this long, sad episode, however, I have seen one of the best faces of trade unionism and of an English work force. In the Derwent valley we have a strike-free record and a loyal and industrious work force with excellent productivity. The conveners advised the work force that there was no point in taking industrial action but that they should remain loyal to the company to the end. It is a happy work force, and has served the company well for many decades. The trade union has behaved responsibly in bringing the matter to my attention and to that of my hon. Friend the Minister.

I appreciate that the company has to take commercial considerations into account, but it is important for large companies as well as small companies to look to the proven loyalty of their work force. If a company chooses to look the other way, as English Sewing appears to be doing, it may find that it has made a grievous error.

12.40 am
Mr. Phillip Oppenheim (Amber Valley)

I am grateful to my hon. Friend the Member for Derbyshire, West (Mr. Parris) for allowing me to take part in the debate, and I echo my hon. Friend's gratitude to my hon. Friend the Minister concerning the meeting earlier today. I wish to take part in the debate because although the mills in question are just outside my constituency just over half the work force lives in it. Most people probably agree with the principle of regional assistance as an acceptable form of public expenditure if the money is properly spent, but today we must question whether the money is being properly spent.

I visit many companies in my constituency and I see many hopeful signs such as new factories and some companies expanding quite rapidly. Unfailingly, however, companies ask me whether they should not go elsewhere to take advantage of the grants on offer. I am told about Department of Trade and Industry regional assistance, the Scottish and Welsh Development Agencies and a plethora of local authority incentives, often in mutual competition.

That might be all very well if Amber Valley were in the south, but it is not and it has an unemployment problem. The overall rate is 12 per cent. and although in Belper there is slightly less than 10 per cent. unemployment, half the work force at English Sewing comes from my constituency, in parts of which unemployment is more than 16 per cent. I do not blame the Government for that high unemployment as there are many reasons for it, not least the huge growth in the work force in the past three or four years. Moreover, the area is still trying to recover from the loss of 15,000 jobs due to the closure of so many pits by the Labour Government in the 1960s. More recently, new technology has led to job losses in the textile sector and it is clear that there are substantial structural problems.

All this is made worse and, indeed, almost unbearable by the fact that we are surrounded by areas receiving substantial regional aid—south Yorkshire to the north, Gainsborough to the east, Corby to the south and the west midlands, which qualify for EEC assistance, to the west, all beavering away trying to entice jobs away from the east midlands. It is thus especially galling to see such a blatant case of poaching as English Sewing. The work force has been sold down the river helped on its way by Department of Trade and Industry regional assistance grants. The situation is all the worse in that the work force has been noted for its loyalty. It is a good work force which for many years accepted low wage rises and gave high productivity in return. Moreover, the work force was backed by a responsible trade union which was more interested in the success of the company than in changing the face of society. In return for that loyalty and good service, their jobs are simply being shunted to areas where there is a tradition of militancy. What makes this all the more stupid is that, as a result of this Government expenditure, there will be no net increase in the numbers employed.

The decision may surprise hon. Members, but it must come as a surprise to my right hon. and learned Friend the Secretary of State for Trade and Industry who, two weeks ago, told my hon. Friend the Member for Derbyshire, West in Trade and Industry Questions: my hon. Friend will be aware that the policy is normally to give assistance only where there is a net increase in jobs. —[Official Report, 27 November 1985; Vol. 87, c. 871.] That is precisely what is not happening with English Sewing Ltd. The pack is merely being reshuffled at the taxpayers' expense —£1 million of regional assistance grants to be precise. To make matters worse, only a couple of years ago, English Sewing Ltd. was given £300,000 in grants to modernise its mill. On top of all of that, the Government will have to contribute £100,000 towards redundancy costs. How can such expenditure—well in excess of £1 million of taxpayers' money—be justified, and what is the benefit?

The area has the advantage of one of the best and most loyal work forces in the country. What assurance can they have that this type of nonsense will not happen again? I blame the last Labour Government to some extent for the anomalies in the legislation, but I have to blame the present Government for not repealing the worst of those anomalies. Local people and taxpayers have got a rotten deal. When the subject was debated one and a half years ago, Ministers assured the House that such nonsense would not be allowed again. Well, it is happening. People in Amber Valley can probably survive fairly well without Government grants and handouts, but when their taxes are wasted by financing other areas to take away what jobs we have, they have a right to be extremely angry. I suspect that, in his heart of hearts. my hon. Friend the Minister realises that his Department's position is untenable and wrong. I therefore urge him to prevent this misdemeanour.

12.46 am
The Parliamentary Under-Secretary of State for Trade and Industry (Mr. John Butcher)

I thank my hon. Friends the Members for Derbyshire, West (Mr. Parris) and for Amber Valley (Mr. Oppenheim) for raising this subject. This is the fourth time that this issue has been raised on the Floor of the House. Congratulating my hon. Friends on their tenacity and persistence is very much in order.

I shall try to deal with the issues that my hon. Friends have raised in the context of regional policy as amended by our review of 12 months ago. I shall go as far as I can within the bounds of commercial confidentiality. This issue has always posed excruciating dilemmas for successive Governments during the past 25 years. My hon. Friend the Member for Derbyshire, West mentioned the strategic industrial point about what a Government do when they are posed with a choice between losing a facility from the United Kingdom entirely by not giving support and using regional policy lo retain work in the United Kingdom. I would welcome a discussion of that, perhaps on the Floor of the House, depending on what my right hon. Friend the Leader of the House does for us soon. The issue preoccupies the Department of Trade and Industry.

I am grateful to my hon. Friends for providing this opportunity to reply to what they said about assistance to English Sewing Ltd. Perhaps I should start by setting out the facts in so far as I am able within the bounds of commercial confidentiality.

The basis of the company's application has been that it has made a commercial decision that it must rationalize its activities in England and Scotland and move to a purpose-built factory if it is to retain its operation within the United Kingdom. I listened carefully to my hon. Friend's explanation of the company's view that it was a serious proposition. After long deliberation, the company decided that the most efficient solution would be to extend and improve its existing operations at Newton Mearns and Neilston in Scotland.

The net effect of the project on employment would be to safeguard a substantial number of the jobs of the company's employees. My hon. Friends voiced their concern that we in the Department may not have been fully in tune with the workings of the application vis-a-vis our criteria and the subsequent measures adopted by our colleagues in the Scottish Office in their attempt to safeguard jobs within the United Kingdom — but, of course, meaning within Scotland. I can assure my hon. Friends that my Department was consulted throughout the discussions with the company and it may be helpful if I give some further details of the sequence of events.

The company had approached that Department, having already made a commercial decision that, if it was to retain its operation in the United Kingdom, it would have to rationalise its activities in England and Scotland and move to a purpose-built factory. In fact, at the time when those discussions took place, the United Kingdom's textile industry as a whole was facing severe difficulties. The British Textile Confederation announced in its annual report for 1982 that the industry's performance that year, together with that of the previous year, was very depressed. The industry's production was down by a further 6 per cent. from 1981 levels, and employment fell by 21,000, bringing the cumulative fall in the textile industry alone, excluding clothing, since 1979 to 163,000.

Many options were seriously considered by the company. After long deliberation, it decided that the most efficient solution would be to extend and improve its existing operations at Newton Mearns and Neilston in Scotland, taking advantage of a building already available in the group close to existing facilities and ideally suited to the project. That decision was not taken lightly by the company, which has an excellent industrial relations record in Derbyshire and a low labour turnover.

I agree entirely with my hon. Friends in that, having met their constituents only briefly, they gave a clear impression of a work force that was reasonable and highly motivated to do its best for the company and, therefore, for the well-being of the local community. Like my hon. Friends, I was very impressed by the motivation of the representatives of the company who we met this afternoon.

The company judged it essential, in a fiercely competitive market, to remain cost-competitive if it was to compete effectively with rising imports. The Department of Trade and Industry accepted the company's view that the project was an industrially and commercially viable solution. To achieve the rationalisation, the company requested financial assistance towards the costs. Without the rationalisation, there was judged to be a very real danger that all the jobs in the company throughout the country would ultimately be lost abroad.

The application — as are all applications for assistance, but especially those where redundancies are involved—was subjected to the closest scrutiny of its merits, including its contribution to regional development and the national economy. Because of the English job losses involved, my Department was consulted at each stage of the proceedings.

An offer was made—not as much as the company had asked for, but was negotiated as the minimum necessary for the project to go ahead. I should stress that the decision to offer assistance was considered by the Scottish Industrial Development Board, an advisory body composed of senior industrialists with wide commercial experience, with the specific task of considering, among other things, whether the assistance proposed was necessary to safeguard jobs.

As my hon. Friends are aware, the Government are committed to maintaining an effective regional policy and a more cost-effective policy to ease the process of change in areas of particularly high unemployment and to encourage new businesses in those areas. In fact, my hon. Friend the Member for Amber Valley recently argued that his constituency should be designated as an assisted area. It is perhaps to his constituency's advantage that it does not have high enough long-term unemployment to qualify for that form of assistance. I am sure that he would share my rather mixed feelings if it did.

Unfortunately, and despite my hon. Friend's admirable advocacy, his representations of that time were not successful. However, I assure him that the most careful consideration went into the decision as to which parts of the country should benefit from regional incentives, the main criterion being the relative annual average unemployment rate.

Inevitably, the existence of special incentives in the assisted areas means that other areas will be at a comparative disadvantage in the availability of Government assistance. But, as I said earlier, we judged that without the assistance which was offered, those same jobs in Derbyshire would still have been lost. In addition, jobs would ultimately have been lost in several other areas, including special development areas. The company believes that the project was in the best long-term interests of its United Kingdom work force, safeguarding a total of 1,400 jobs.

It is not the Government's policy to use public funds simply to shuffle job opportunities round the country, with one area gaining at another's expense. But especially in areas such as textiles, which must adjust to new circumstances, multi-plant enterprises will inevitably at times carry out rationalisation programmes to enable them to survive in the longer term. It is the task of regional assistance, if it can, to mitigate the effects of such rationalisations on the assisted areas and the country as a whole. The precise scale of plant rationalistation has been and remains a matter for decision by the company. I assure my hon. Friends that I shall ensure that the points they raised in the debate are brought immediately to the attention of English Sewing Ltd.

It is for the company, having received an offer, to decide whether, if there are new circumstances, it wishes to proceed with the project as originally conceived; but the offer has been made and evaluated. On balance, those who evaluated the offer came to the view that there was a threat that all the jobs available in the company may have been lost to the United Kingdom.

My hon. Friend the Member for Derbyshire, West asked whether the company might have moved anyway. The advice that I have been given is that the Scottish Industrial Development Board accepted the advice of officials in the Industry Department in Scotland that assistance was needed to make the investment proceed in the United Kingdom rather than overseas.

My hon. Friend also asked about the net creation of new jobs. I have done my best to extract as much information as I can within the restraints of commercial confidentiality, but the company has undertaken to provide a substantial number of new jobs at the new plant in Scotland and to safeguard more jobs. I cannot reveal the exact number. It is believed that jobs in England are at risk whether or not the new Scottish jobs are created. The information that is in the public domain was printed in the magazine British Business on 29 November, and that information on the grant and the company is all that I can reveal tonight.

I hope that my hon. Friends, having fulfilled their obligations to their constituents, will at least be reassured that we have considered the matter thoroughly. I repeat my acceptance of their invitation to spend some time in Derbyshire to take a close look at the local economy and to see whether any of the Department's national schemes can be deployed to tackle some of the economic difficulties of a below average number of unemployed constituents, but which nonetheless are worth an airing in their constituencies.

Question put and agreed to.

Adjourned accordingly at one minute to One o'clock.