HC Deb 26 January 1993 vol 217 cc974-94 10.14 pm
The Minister for Industry (Mr. Tim Sainsbury)

I beg to move,

That this House authorises the Secretary of State to pay, or undertake to pay, by way of financial assistance under section 8 of the Industrial Development Act 1982, in respect of the installation of new and the refurbishment of existing machinery to manufacture newsprint from recycled fibre at Aylesford, Kent by SCA Aylesford Ltd, sums exceeding £ l0,000,000 but not exceeding £20,000,000. As the House knows, last March my right hon. Friend the then Secretary of State announced our intention to provide a grant of not more than £20 million to SCA Aylesford Ltd towards the cost of an investment in a project to manufacture newsprint from recycled fibre at Aylesford, near Maidstone in Kent. The project is estimated to cost no less than £260 million.

We propose to provide the financial support through the Department's assistance-for-exceptional-projects facility. That is funded under section 8 of the Industrial Development Act 1982, under which the approval of the House is required before assistance of more than £10 million can be granted to any single project.

The purpose of the AEP facility is to assist a small number of investment projects and research and development projects that are likely to yield exceptional national benefits. Applicants must also show that the project is commercially viable and that, despite its exceptional merits, assistance is necessary to enable the project to go ahead as planned. Assistance is provided on a selective basis, usually as a grant. The amount is negotiated as the minimum necessary for the project to go ahead and is subject to a maximum of 25 per cent. of eligible costs. In SCA's case, the exceptional national benefits are environmental and the project has the strong support of my right hon. and learned Friend the Secretary of State for the Environment.

SCA currently operates a single newsprint machine at Aylesford, which manufactures 80,000 tonnes of newsprint annually from 100 per cent. recycled fibre. Indeed, it is the only company in Europe presently manufacturing newsprint wholly from that source of raw material.

The project is to install an additional machine, together with the associated de-inking, water treatment and other facilities required to manufacture a further 250,000 tonnes of newsprint a year wholly from recycled fibre. The existing 80,000-tonne machine will also be refurbished to improve the quality of its output and increase it by 26,000 tonnes a year.

In all, the plant will consume some 430,000 tonnes of waste paper a year, much of it from household waste. The developments will enable the feedstock to consist of 80 per cent. post-consumer waste—that is, old newspapers and magazines—and only 20 per cent. pre-consumer waste. That would reverse the proportions used by the present machine.

The project will thus make a major contribution to our target for recycling 25 per cent. of domestic waste by the end of the century. To help to meet that target, British newspaper publishers have also agreed that they will use 40 per cent. of recycled fibre in their publications by the year 2000. A new accessible source of wastepaper-based newsprint is vital if publishers are to fulfil the undertaking from United Kingdom sources.

In due course, the project will create an additional 100 permanent jobs. It would be uneconomic simply to refurbish the current machine unless the new machine is installed. The project will therefore also safeguard almost 300 existing jobs at the Aylesford site. Construction work will give rise at a peak to about 1,000 additional temporary jobs.

A detailed assessment of the project has been carried out by my Department in conjunction with the Department of the Environment. That has established that all the criteria of the AEP facility have been satisfied and that an offer of £20 million would be justified. The independent Industrial Development Advisory Board, which advises the Department on the provision of selective financial assistance, has also recommended that support of £20 million should be offered.

We have also notified the European Commission of our intention to assist SCA Aylesford. It has recently informed us that it considers that the project is of demonstrable environmental interest to the European Community, that the aid is necessary for the project to take place, and that the level of aid is sufficiently modest to make it unlikely that it will distort trading conditions between member states.

I should like to pay tribute to my right hon. Friend the Member for Tonbridge and Mailing (Sir J. Stanley), who first brought this environmentally significant project to the Government's attention in 1991, and whose support has been invaluable. We have greatly valued his continuing and energetic support, particularly during our discussions with the European Commission.

I believe that SCA's project will make a valuable contribution to the infrastructure for recycling household waste in this country. In asking the House to approve the proposed assistance, I therefore particularly commend the project's potential for recycling waste material and for raising awareness of the commercial benefits of recycling.

As I have said, this scheme was devised for very exceptional cases. That is why the criteria are deliberately very tightly drawn and difficult to satisfy. Of the many inquiries received by my Department during the five years the scheme has been in existence, only 55 projects justified further consideration. We accepted fewer than 10 for a time-consuming full appraisal process. Of these, only two have succeeded in meeting the criteria and have been offered grant.

I have therefore concluded that we should suspend this scheme for the present. The extreme difficulty of qualifying for grant means delay and uncertainty for companies. This complicates the often difficult decisions that they have to make on potentially eligible projects. The lengthy grant approval process involves an investment of resources by both the company and my Department.

Mr. Rhodri Morgan (Cardiff, West)

Would the Minister take time to explain this matter in the context of the motion before the House? My understanding was that we should be discussing simply a grant to SCA Aylesford, but the Minister has announced the suspension of the scheme, shutting the stable door after the horse—the grant to SCA Aylesford—has bolted. Is it not a matter requiring a separate statement if the Minister thinks that there should be no more grants of this type? Surely, out of courtesy, he should make a separate announcement.

Mr. Sainsbury

My feeling was that the House would like to be told of the suspension of the scheme at the time of the announcement of this grant as the two matters are very closely related. Obviously this is a very substantial grant.

Mr. Morgan

Will the right hon. Gentleman give way?

Mr. Sainsbury

Perhaps the hon. Gentleman will allow me to give an explanation that should meet his point.

As I have already pointed out, in the case of most applicants, this investment does not produce a return by way of grant. In addition, the scheme requires that Government funds be earmarked for possible successful applicants. I am sure that the hon. Gentleman will understand that. Often these funds have not been spent, as there have not been any successful applicants. It is clear that the funds might more effectively have been used for other schemes. That is inefficiency that we cannot afford, particularly with the very heavy current pressure on public expenditure, of which the House is aware.

Relaxing the criteria and making more grant offers is not a practical possibility, as we—like Opposition Members, I hope—attach great importance to the existence of a level playing field in Europe. The Commission has required member states to phase out general investment support schemes outside assisted areas. We strongly support its efforts to limit such schemes as they can so easily distort competition. We should not want to detract from the Commission's efforts, and thus undermine the achievement of the objective of a level playing field throughout the Community, by operating our scheme less rigorously than at present. I should, however, emphasise most strongly that regional assistance will continue to be available in the assisted areas.

In those circumstances, and in the light of the substantial grant that I am asking the House to approve and of the demand on funds that that represents, I intend to suspend the operation of the assistance-for-exceptional-projects facility with effect from the end of February for the next financial year. No further applications will therefore be accepted from the end of February, and the scheme will be suspended until April 1994.

I stress that I shall keep the position under review and make a further announcement in due course. Applications which have already been received, or which are received by the end of February and which are adequately prepared and sufficiently developed to enable appraisal to go forward, will be fully considered against the criteria of the scheme. I can confirm that we shall consider against those criteria the application currently being pursued by North British Newsprint in respect of the Gartcosh project.

I repeat my thanks to my right hon. Friend the Member for Tonbridge and Mailing for bringing SCA Aylesford's project to the attention of the Government. I emphasise the exceptional environmental advantage of the project that we are considering today and I ask the House to agree the motion.

10.24 pm
Mr. Derek Fatchett (Leeds, Central)

I had thought that we would have a broadly consensual debate on the application for money and the agreement by Government to make money available to SCA, but I must say that the Minister's announcement at the end of his speech was, in my view, a discourtesy to the House. It is, Madam Speaker, as you fully realise, a very tight motion which relates to the Industrial Development Act 1982, to section 8 of that Act and to a particular project. For the Minister to come to the House and announce the suspension of the scheme in this way is discourteous. It should have been announced in a different way. There should have been a statement in prime time to give other hon. Members the opportunity of asking questions of the Minister.

The Government did not even have the courtesy or the courage to put this on the Order Paper. It is a substantial change in policy dictated by one of two reasons. Either it has been dictated by financial concerns, which is a further indication that the Government are in difficulty with their trade and industry budget—perhaps the Minister will confirm that—or it has been dictated to the Government by the European Commission. The Minister talked about a level playing field. Perhaps he could make it clear to us whether this is a result of the intervention of the European Commission. If so, the House has a right to know.

The Minister's statement is cursory and unreasonable, having regard to hon. Members' right to know about important statements of this sort. I am sure that, as a courtesy to yourself, Madam Speaker, and to the House it would have made some sense if the Government had put down a motion related not just to SCA but to the broader issue. I realise, Madam Speaker, that in many respects I am out of order in making these general comments, but I think that it is appropriate in the circumstances when the Minister has taken the opportunity to make a wider statement.

Madam Speaker

May I make the point that the Minister of State has opened it up, and the hon. Gentleman is perfectly in order, once the Minister has done so.

Mr. Fatchett

I realise that, Madam Speaker. I meant that it may have been discourteous to you and the House for the Minister to make the statement in this way.

The statement raises a number of points which also relate to the more general issues. Why this particular scheme? The criteria are set out in the Government's documentation under the Industrial Development Act 1982—the annual report for the year ending 31 March 1992. We welcome this scheme. We believe that it has environmental advantages. We are also delighted to hear that the Department of the Environment agrees with the Department of Trade and Industry on this project. It may be almost unique at the moment for the Secretary of State for the Environment to agree with the President of the Board of Trade, so the SCA scheme has brought together two members of a warring Cabinet and it may reflect further credit on the right hon. Member for Tonbridge and Mailing (Sir J. Stanley). He must have healing tendencies.

The Minister said that the scheme may need to be looked at because of the number of projects that have been approved, but, as my hon. Friend the Member for Cardiff, West (Mr. Morgan) said, it is not because of the lack of projects. It is interesting to look through the number of applications received in the year to 31 March 1992. All but two of the 44 applications were turned down. All the way across the country, project after project was turned down because, according to the Department of Trade and Industry, it did not meet the requirements set out. Two projects for Wales gained approval and expenditure of £4.2 million.

Mr. Sainsbury

One project.

Mr. Fatchett

I only read the documents that the Department of Trade and Industry pushes out. It is difficult to conclude other than that two projects received offers. Perhaps the Minister is suggesting that only one of those offers was taken up.

Mr. Sainsbury

It may be a little confusing. Perhaps I can help. Two separate companies were involved, each receiving a grant in respect of the same project. Therefore, it was effectively one project.

Mr. Fatchett

We seem to have resolved that small matter. Two companies, one project, 44 applications, only two approved.

The Minister says that it would be unreasonable to change the criteria, so the scheme is stopped altogether. If various companies have expressed an interest in relation to 44 projects, would it not also have been sensible, instead of announcing the suspension of the scheme without consultation, for the Government to have consulted so that people could comment on the nature of the scheme, its success, whether the criteria need to be changed or whether schemes could fall within the criteria? But the Government do not even bother to consider consultation on that basis.

The Minister has given reasons for this particular scheme. He also commented on the Gartcosh scheme, which has many similarities to the SCA scheme. Will the Gartcosh scheme now gain Government approval? I understand that if section 8 money had been made available to that scheme in 1991, when it was short of only £15 million out of £250 million, it would now be on stream. Perhaps the Minister will give us the details of the Gartcosh scheme, and where it now stands. When there is such difficulty in finding successful applicants for the scheme, will he explain why, in 1991, when Gartcosh was so close to achieving all the criteria, the Government did not make the necessary money available?

As with any scheme of this sort, a number of issues are raised. We are told that the scheme qualifies only if the capital investment is guaranteed by the scheme and will not be available in any other form. The Minister provided no evidence that that condition has been met in relation to this scheme. Why has the Minister come to the conclusion that this scheme, and this scheme alone, will be in a difficult position and not attract the capital investment other than by means of the grant?

The Minister skated over the job implications of the scheme. As I understand it, he said that the SCA scheme would protect an existing 300 jobs. We welcome that. He also said that there would be 1,000 temporary construction jobs. But in the long term the scheme will not create one new job. It will simply protect existing jobs. I hope that the Minister will confirm that that is the case.

The National Audit Office report in relation to Wales, not necessarily the Department of Trade and Industry, entitled "Creating and safeguarding jobs in Wales", published in October 1991, criticised the Government for not always having effective forecasts and estimates of the job creation implications of particular schemes. It said: From the point of view of jobs alone, the National Audit Office believe that the bodies have been slow to make forecasts for and assess the achievements of the initiatives by measuring and verifying actual jobs achieved and by undertaking more regular and communally devised evaluation studies. That may apply to this scheme as well.

The Minister will be aware that SCA has not just had an interest in the constituency of the right hon. Member for Tonbridge and Mailing in Aylesford in Kent, but also has or had an interest in Blackburn. SCA bought out the Reed paper organisation, and, on that basis, inherited the Sun paper mill in Blackburn, which employed 180 people and was closed last July. Other buyers were interested, but the impression given is that SCA was not concerned about the possibility of selling the land to any buyer; it was keen to close the mill, and to concentrate its activities on Aylesford.

In the Minister's calculation of jobs and his discussions with the company, has he taken any account of the 180 jobs that have been lost in Blackburn as a result of SCA's decision to close the Sun paper mill? If he has not, the equation changes dramatically.

Finally, I should like the Minister to say more about the details of the scheme. I am relying solely on what the Financial Times said on 12 January about the construction contracts. The Minister may well have more information; if so, I defer to his greater knowledge.

According to the Financial Times, John Brown, a member of the engineering division of Trafalgar House, is to construct a … gas turbine based heat and power … plant at … SCA … papermaking site in Kent. The company was awarded the Aylesford contract by National Power who will own the plant and supply the electrical power and heat to meet SCA's current energy and process needs on site. Will the Minister tell us whether that gas-driven scheme, however small it may be, was taken into account in some of the broader energy discussions? Were the energy implications noted?

I welcome the grant, and the support for the plant. I have raised a number of detailed questions. We are keen to know about the future of Gartcosh, the implications of the job losses for Blackburn and the evidence that capital investment would not be made available by other means; but the most disappointing feature of the Minister's statement is the decision to suspend the scheme. That, I think, will disappoint British industry. It will certainly disappoint the House that the Minister has sneaked out the statement so late at night.

If the Government want industrial partnership with British industry, they should recognise that making such an announcement at this time of night is not a good way of setting up the new relationship. The Opposition will support the measure, but we shall want to return to the broader issues at a later stage.

10.37 pm
Sir John Stanley (Tonbridge and Mailling)

I am glad that we have the support of the Opposition Front Bench. Obviously it is for my right hon. Friend the Minister to respond to the questions raised by the hon. Member for Leeds, Central (Mr. Fatchett), but it may assist the House if I briefly sketch the history of paper making at the Aylesford site as it bears directly on the rationale for the grant.

Paper making began in the 1920s at Aylesford, which was a perfect site for the purpose. The River Medway runs through the site, providing the all-important water supply, and also river access from the Thames estuary for the key raw materials pulp, china clay and, at that time, coal. The site prospered until the second world war, and after 1945. Paper making continued to expand on the site until the end of the 1950s. At that point, there were no fewer than 13 paper-making machines on the site, which was the largest single paper-making complex in Europe. Since then, the story of the site has been one of sedate but remorseless contraction. In 1959, there were 13 paper-making machines, but now there are three.

Sadly, under the management of successive British companies, it has not proved possible to find the finance for the major investment necessary to render the site competitive in the long term. An opportunity to change that occurred in 1990 when the Swedish SCA group took over the site. SCA's strategic plan was to establish within the confines of the EC area a major newsprint manufacturing operation using only recycled paper. It was far from certain that SCA would locate the new £260 million investment in this country at Aylesford, and it reflects credit on the Government that we are holding this debate today and that this important strategic national investment has been secured for this country.

I should like to pay a personal tribute to two members of the Cabinet and one former member of the Cabinet who were instrumental in retaining this investment in the United Kingdom. I first took the chairman of SCA to my right hon. Friend the Member for St. Albans (Mr. Lilley), then Secretary of State for Trade and Industry, in August 1991. The chairman eloquently and persuasively set out the case for the major investment at Aylesford. He developed the environmental case, the significant balance of payments case and the employment case. He pointed out, very reasonably, that other countries were anxious to secure SCA's investment, in particular Germany and the Netherlands, both of which were offering substantial capital grants running to tens of millions of pounds to attract investment. He told my right hon. Friend that, unless the British Government were able to match to some degree the financial assistance being offered by other countries, SCA would inevitably have to locate the investment elsewhere. The hon. Member for Leeds, Central may wish to note that because it directly addresses one of the points that he made.

Against that background, it was clear that unless a degree of financial assistance was offered by the Government the project would be lost to this country. The initial response of my right hon. Friend the Member for St. Albans was not particularly encouraging. He told us that it was not Government policy to subsidise private companies, that private companies were expected to stand on their own feet and that the Government were not sympathetic to the suggestion that they should intervene in industry.

The meeting ended cordially and, to his credit, my right hon. Friend reflected closely on the detailed case for the project submitted to the Department and moved from a position of scepticism to one of support and strong backing. He was Secretary of State for Trade and Industry when the £20 million grant was announced at the end of the last Parliament.

Secondly, I pay tribute to my right hon. and learned Friend the Member for Putney (Mr. Mellor). I well remember that on the key day—Monday 16 March, the last day of the last Parliament—the Department of Trade and Industry was ready to go ahead with the announcement of the grant. All that was necessary was Treasury approval in the form of the agreement of the Chief Secretary. I went in search of him and found him discharging his duties in the House. I was able to have a discussion with him behind the Speaker's Chair. With his usual energy, my right hon. and learned Friend managed to produce Treasury approval in a matter of hours. It is wondrous what can happen on the last working day of a Parliament when Ministers and officials are desperate to clear ministerial desks for whatever may lie ahead.

Thirdly, I pay tribute to my right hon. Friend the Member for Henley (Mr. Heseltine), who was Secretary of State for the Environment in the previous Parliament. Since he has become President of the Board of Trade he has played a crucial role in ensuring that the Government's intention to give the go-ahead to the project with the assistance of the £20 million grant was not torpedoed by the European Community. The House may want to know that that was a real possibility at one point, and we are indebted to the determination, skill and persuasiveness of the President of the Board of Trade and his extremely diligent officials in ensuring that the EC did not manage to wreck the project in the United Kingdom. I am grateful to my three right hon. and right hon. and learned Friends.

I mention one policy point which is important to me as I have lived with the project for some two and a half years. I know that what I am going to say will not please hon. Members with constituencies in assisted areas. My experience of the project is that it has now become almost impossible to gain major manufacturing investment in a non-assisted area in the United Kingdom because of a double handicap faced by such areas. The geographical extent of non-assisted areas in the United Kingdom covers the greater part of England.

The double handicap applies, first, in the United Kingdom itself. In the non-assisted areas, there is no help with development grants for new manufacturing investment. That is in contrast with the substantial assistance available to assisted areas and it can have some grotesque effects. The hon. Member for Leeds, Central referred to the SCA closure in Blackburn. I do not know the background to that, but I offer an illustration of what has happened as a result of a major discrimination against non-assisted areas in the United Kingdom.

On the Aylesford site, alongside SCA, there is another paper-making company called Kimberly-Clark. If hon. Members have not heard of that company, they will at least have heard of its major product—the excellent Kleenex tissue range. A few years ago, Kimberly-Clark managed to secure a major new plant investment in Wales —I know that the hon. Member for Cardiff, West (Mr. Morgan) will be glad to hear that—with development grant assistance. As a result, in October last year Kimberly-Clark at Aylesford announced 300 redundancies. The new plant that it had established in Wales with Government assistance meant that it was transferring products from Kent. It does not seem to make sense to use taxpayers' money to create notional employment in one part of the United Kingdom while producing redundancies in another. That is a serious issue which the Government need to address.

The second handicap relates to the EC's competition policy. My right hon. Friend the Minister sought to justify his suspension announcement today in terms of helping the EC to maintain a level playing field. Although the EC notionally seeks to establish a level playing field for manufacturing industry, there is no level playing field in practice—for the simple reason that any assisted area in the EC can obtain any amount of subsidy that the national Government can produce and not run any risk of having that investment torpedoed by the EC. Inside a non-assisted area, such as Kent generally and Aylesford in particular, the moment any form of Government subsidy is used one runs the gauntlet of the EC and is likely to have one's investment torpedoed

There is no level playing field. The real issue is whether it is possible to have genuine and fair competition when one geographical section of the EC—the assisted areas —has limitless amounts of Government subsidy open to it while the rest of the EC has no such access to subsidy and faces the possibility of its manufacturing investment being torpedoed by the EC if any Government subsidy is used. There is no such thing as a level playing field at present, and until the issue is addressed there will be no fair competition. I ask my right hon. and hon. Friends on the Treasury Bench to take my point seriously and to look for some sensible answers to it so that we can have genuine and fair competition in manufacturing investment in the EC.

Mr. Fatchett

The right hon. Gentleman is making an important point. May I push him a stage further? He said at the beginning of his speech that what was important to the company was the assistance, which is supported in the motion, under section 8 of the Industrial Development Act 1982. Is it not the case, in terms of the right hon. Gentleman's argument about the level playing field, that Governments in other countries, regardless of regional policy, find ways to support such projects? The danger with SCA and other similar companies is that if the money had not been forthcoming from the United Kingdom they would have taken the jobs and the investment elsewhere.

Sir John Stanley

The hon. Gentleman is correct and precisely describes the position. He has explained the central rationale for the grant, as I see it. If the Government had not made the grant available, the £260 million project, with the environmental and employment benefits to which hon. Members have referred, would have gone either to Germany or to the Netherlands. Other countries understand that the wider they draw the boundaries of the assisted areas, the greater the ability they have to play the subsidy system free from EC interference. That is a lesson that other countries understand. Ministers should reflect on that point.

Mr. Roy Beggs (Antrim, East)

Does the right hon. Gentleman agree that there is no possibility of other EC countries diminishing the level of state aid that they provide until we provide the same level of aid? We should then be able, as one sovereign country with another, to negotiate within the EC for overall reductions in state aid, thus providing a genuine level playing field.

Sir John Stanley

I do not see the position as the hon. Gentleman describes it. My experience, deriving essentially from this project, is that each Government will try to work the existing EC rules to their own national advantage. That does not affect the aggregate amount of subsidy. Each Government will try to work the system to help their own national interest.

I suggest that the Aylesford paper-making site has been a microcosm of British manufacturing industry and the way in which it has ebbed and flowed in the post-war period. It prospered through to the end of the 1950s and since then has experienced a slow but steady contraction, although the site is still effective and has done pretty well through the severe recession that we have recently experienced.

With the assistance of the grant—if the House approves it today—we shall see ushered in at Aylesford another significant period of manufacturing investment and benefit to manufacturing industry at Aylesford. Although the debate has inevitably focused narrowly on my constituency—I am grateful to the House for its time—it is my fervent wish that the strengthening of manufacturing in Aylesford in the 1990s will be accompanied through the 1990s by a general widening and strengthening of manufacturing investment in Britain as a whole.

10.55 pm
Mr. Bob Cryer (Bradford, South)

I am grateful for the opportunity to make a few comments on the remarkable statement that the Minister made. He is bound to make a statement to the House under the Industrial Development Act 1982 when a grant of more than £10 million is made. It is a matter of great regret that the Minister slipped in a significant change of policy while he was making a statement about an individual grant. He was bound to make such a statement under the terms of the legislation.

The Minister's change of policy means that all the claims of advantage made by the right hon. Member for Tonbridge and Mailing (Sir J. Stanley), that industry would be secured in his constituency which would have gone to either Germany or Holland without that inducement, are now scattered to the winds. Any Member of Parliament who makes a similar approach to a Department of Trade and Industry Minister will get naught for his or her pains. Investment of a major nature for special projects cannot now be induced to come to the United Kingdom in spite of the Government's proud boasts that they attract inward investment.

Assistance cannot be sought for a similar project which, on the admission of the constituency Member of Parliament, required a £20 million inducement—the same as the amount of grant in the motion before the House. We can no longer encourage investment in manufacturing industry in that way. That is a major change of policy. It is a matter of great regret that the Minister chose this underhand method. It is a way of withholding information from Parliament.

There is a great difference between tabling a motion about a single payment to a factory at Aylesford in Kent and announcing at just before 1 pm on the annunciator throughout the Palace of Westminster that a Minister will make a statement. A statement would have given everyone the opportunity to come to the Chamber. Members could not possibly anticipate from the narrow motion on the Order Paper that it contained a major change of policy.

Everyone would agree with the criteria in section 8. They are that any grant must benefit the economy; it must be in the national interest; and there must be no alternatives available to the Secretary of State than to pay grant assistance. Those three criteria are reasonable and straightforward. It is madness for the Government to say that they will no longer apply those criteria. Even if a project is in the national interest and will benefit the economy and even if there are no alternative ways of financing it, such a project will go out of the window for the United Kingdom by virtue of what the Minister has announced tonight. That is a matter of great regret.

The Minister said that the project will have environmental benefits. His statement confirmed that, and it supports the investment to recycle used paper to provide fresh paper. Other industries can provide environmental benefits in exactly the same way. As the Minister knows, the textile industry has had many concerns about the use of water, of which the paper industry is also a major user. If the textile industry had a plan to introduce carbonising and scouring, which involved significant capital expenditure—which I assure the Minister the textile industry could not reasonably afford—it would require grant assistance. However, it would be denied such assistance. That is extremely unfair.

Madam Deputy Speaker (Dame Janet Fookes)

Order. I understand the hon. Gentleman's line, but it is going rather wide of the motion. It is one thing to make a passing reference, but the hon. Gentleman is beginning to develop a theme that falls outside the scope of the order.

Mr. Cryer

You were not in the Chair, Madam Deputy Speaker, when that very point was raised with Madam Speaker. Because the Minister had referred to the suspension of the scheme, Madam Speaker agreed that it was no longer simply a debate on the narrow issue of this grant to SCA Aylesford but could go wider. I am speaking about the suspension of the scheme.

Madam Deputy Speaker

It is a matter of degree. What I have described as a passing reference is one thing, but we cannot widen the debate so that the original issue becomes lost in the other issues of whether the scheme continues. I must draw the line there and I hope that the hon. Gentleman will understand that. He has made his point cogently but should not continue with it.

Mr. Fatchett

On a point of order, Madam Deputy Speaker. When I responded to the Minister I was conscious of the fact that the motion referred only to SCA Aylesford. I asked Madam Speaker for guidance and she made it clear that we could comment on the Minister's announcement and its implications. [Interruption.] Despite the laboured French from the Conservative Benches, it was not en passant. Madam Speaker was clear that we could draw substantial attention to the Minister's announcement, and in his speech the right hon. Member for Tonbridge and Mailing (Sir J. Stanley) said that the scheme relates to projects that are of national importance. I think that Madam Speaker intended to allow a much more general debate.

Madam Deputy Speaker

That is not my understanding.

Mr. Cryer

Perhaps I could extend the debate to consider the question of jobs. The Minister made it clear that 300 jobs would be safeguarded and that there would be 100 additional jobs, plus construction jobs on the project to which the grant relates. By virtue of the avoidance of payment of unemployment benefit and the tax revenue that the jobs will yield, surely the cost of the grant will be recouped over time. Has the Minister calculated over how many years the tax revenue and the unemployment benefit would be equivalent to the £20 million grant?

The right hon. Member for Tonbridge and Mailing said that if the grant were not available the paper-making capacity at Aylesford would be extinguished. Therefore, there is a possibility that jobs will be lost if the grant is not forthcoming. My question is therefore valid. The Minister's announcement of the suspension of the scheme means that the Government will pay more money than grant aid through the payment of unemployment benefit and the loss of tax revenue. That potential loss can be set against the amount of grant which would preserve jobs.

The Minister also mentioned suspension of the scheme, due to a desire to conform to the EC's much-vaunted but highly inaccurate claim of providing what is generally termed a level playing field, because state aids, he said, distort competition.

I find the statement from the Minister extraordinary, because the reality is that competition inside the EEC is distorted and until the EEC Commission makes it clear beyond peradventure that other state aids in other countries are also to be completely removed, we are tying an economic hand behind our back without any economic advantage being provided.

It does not make sense. What, for example, has the Minister done in the textile industry? This is said by way of example and explanation, Madam Deputy Speaker.

Madam Deputy Speaker

Order. The explanation is getting very full and lengthy so I remind the hon. Member again of the point I made earlier.

Mr. Cryer

The explanation is one that the Minister made in his statement, when he said that the scheme was suspended because, in his view, it helped to distort competition. I am commenting on the Minister's statement.

I am saying that, in the EEC, nothing was done about the Lana Rossi scandal in which £4 million was given to a private company, in the Prato region of Italy. There was a 10 per cent. competitive advantage because there were no insurance payments.

That is what I am saying in comparison and explanation. The Minister is giving away, by suspending it, a scheme which could have been of benefit to British manufacturing industry. It is being scattered to the winds for no advantage.

Why did the right hon. Gentleman not go to the Common Market and say that if they made certain concessions about schemes which are giving advantage to other EEC countries he would suspend this scheme? Nothing like that happened. He came simply to the House and made this announcement without so much as a by-your-leave statement or anything of that nature. He tried to creep it past Parliament without any concentration on it.

This scheme is administered under section 8 of the Act and there is provision for advice and guidance from the Industrial Development Advisory Board. Has that board approved suspension of the scheme? Did the board consider all the 44 or so applications before the Minister, which, he said, were not successful? Did the Industrial Development Advisory Board reject them, or did they never reach the position of the board providing advice and guidance?

Lastly, because the board involves manufacturers, industrialists, merchant bankers, and so on, did any of the board members dealing with this scheme have any financial interest involved, and did any withdraw when the matter was under consideration?

I can recall, as a former Minister at the Department of Industry, that that policy was scrupulously followed: when members of the Industrial Development Advisory Board had financial investment, it was important that they should withdraw so that independent advice was seen to be continuous and clear for all.

I hope that, although the Minister was not listening, he will make some acknowledgement of the questions that I raised.

I conclude by saying that it has been very confusing for you, Madam Deputy Speaker. You came into the House and went into the Chair with a straightforward motion, not realising that the Minister had slipped through a much wider announcement. The confusion for you, Madam Deputy Speaker, is confusion for hon. Members on both sides of the House. We are faced with a typical example of the underhand way in which the Government treat Parliament. They tried to slip through a change of policy late at night when hardly anyone would be in the Chamber.


Mr. Michael Ancram (Devizes)

My right hon. Friend the Minister for Industry knows of my interest in the Gartcosh plant, but I do not intend to talk about that plant this evening. Instead, I want to ask some questions about the recycling of paper. Earlier, I asked my hon. Friend the Minister for the Environment and Countryside, who is sitting next to my right hon. Friend on the Government Front Bench, about the Government's target of ensuring that 40 per cent. of waste paper is recycled by the year 2000. I asked also what the Government were doing to encourage outlets to ensure that the target is met. I was told that SCA Aylesford Ltd's plant was an example of the encouragement that was being given to the recycling of paper. I am sure that the Government will accept that if the target of 40 per cent. is to be met, SCA will not be able to produce a sufficient market to ensure that the necessary uptake will be achieved.

I was glad to hear what my hon. Friend the Minister said about Gartcosh this evening, but what further encouragement will the Government give to ensure that in the south of England, the north and in Scotland there is a sufficient uptake of waste paper and a proper manufacturing outlet so that we can be sure that the Government's sound environmental target is achieved?


Mr. Rhodri Morgan (Cardiff, West)

We are here because we want to extend our congratulations to SCA Aylesford and to the right hon. Member for Tonbridge and Mailing (Sir J. Stanley), who has fought hard to get the project grant-aided. Our congratulations and our acceptance of the part that the right hon. Gentleman has played are tinged with regret and annoyance because the Minister has chosen to abuse and confuse the House and do untold damage to relationships with industry. The motion refers to SCA Aylesford and nothing but SCA Aylesford, but it has been announced that section 8 of the Industrial Development Act 1982 is being scrapped. That section has been on the statute book for 20 years. It is not some fly-by-night, temporary provision. It is—[Interruption.] If the Minister is telling me that it is only part of section 8 that is being scrapped, perhaps he will elucidate now. Is that why he is shaking his head?

Mr. Sainsbury

It may be of assistance to the hon. Gentleman and to the House generally if I explain that what I announced was the temporary suspension of a scheme that is operated under the provisions of section 8. That has no effect on section 8 itself.

Mr. Morgan

I hope that the Minister will be able to say more about that.

What proportion of total section 8 money is being removed by the suspension of this particular AEP—assistance for exceptional projects to the national economy? Hon. Members on both sides of the House are confused—no doubt industry is similarly confused—in the absence of a proper democratic procedure. There is nothing before us save the motion, and we have not been given proper notice. The Government wish sneakily to slip the motion through the House. If the Minister's family grocery store, of which he is a proud scion, tried to sell an SCA Aylesford order while suspending part of section 8, the local trading standards department would be down on it like a ton of bricks. Such behaviour is not acceptable in an advanced and civilised western democracy.

I am pleased that some of us have been in the Chamber this evening to see what the Government are up to. If their behaviour is any indication of the chiselling that they intend to do to regional aid when section 7 is finally reviewed—several months late—by the President of the Board of Trade, there is a pretty poor outlook for those of us who represent constituencies in the assisted areas.

The Minister's excuse is extremely thin. The scheme was being suspended, he said, because it did not get sufficient use and there was always money left over at the end of the year. He is forgetting that those of us who have worked in the field and have tried to obtain section 7 and section 8 assistance for projects in our areas—in my case, before and since coming to this place—know that section 7 and section 8 budgeting is almost impossible. It is the most difficult area of prediction for any Government to say how much industrial demand there will be in the next budget year for section 7 assistance, if it is under the regional aid budget, or for section 8 assistance, if it is under the non-regional aspects of industrial assistance.

It is always pitched high because of the problems that can arise if one needs to return to the House three quarters of the way through the financial year. So an over-estimate is nearly always done because it is demand-led from industry. If there is a great deal of industrial investment, there tends to be a high level of demand, and one tries to allow for that when setting the budget for the following year. In my experience, section 7 is always wildly over-estimated in the Department of Trade and Industry budget and is rarely used. The same probably applies to section 8.

But that is no reason for suspending—I call it scrubbing —the scheme because the chances of it being revived are slim in the light of the £44 billion public sector borrowing requirement and the Government's attempts to save money here, there and everywhere. We regret that it is happening without proper discussion. Almost by accident—simply because some of us take an interest in the paper industry, since we have paper mills in our constituencies —the matter is being raised. We regret that the Government should be making such an important announcement in a behind-the-hand manner. In his reply, the Minister should apologise to the House and explain the matter in more detail.

In relation to section 7, particularly during a recession when there is less industrial investment, it is inevitable that the target of the previous year will be undershot. After all, the budget of the year before, particularly in an election year, will have been set in the hope that industrial investment will pick up. In the event, it has not, so there is less call for grant. The same is true of many other industrial aid schemes, but that is no reason for closing them down.

The Minister's behaviour tonight has been appalling and discourteous to the Chair, to hon. Members and to industry as a whole. If this is part of a new spirit of partnership, I fear that, until the Government are removed, we shall continue to have the problem of Ministers announcing unpopular news late at night without making proper provision for the matter to be discussed. It represents an abuse of the House. It may be on a small matter, but in terms of the grossness of the abuse, it is the worst that I have witnessed in my five and a half years' membership of the House. I appeal to the Chair to protect our rights in the future.


Mr. Michael Connarty (Falkirk, East)

I echo the remarks of the hon. Member for Devizes (Mr. Ancram) and the concerns that have been expressed about Gartcosh. I took part in the vigil when the rolling mill at Gartcosh was closed. I know well the people—I come from there—I lived within a mile of that plant. They have been looking forward to some activity in the paper recycling business.

I regret that I was not in my place for the Minister's opening remarks. I gather that he announced the suspension of the scheme but that the scheme will still be in existence and could be applied to Gartcosh. That is a non sequitur, in terms of grant availability, if ever I heard one. Is it not a fact that if a scheme is suspended, nothing can be available under it? How can a scheme that is being suspended temporarily still be available for one project? The people of Scotland will be confused when they read about it in tomorrow's newspapers.

It would have been better if the Minister had made a special announcement about the decision to suspend the scheme, explaining precisely which applications would be processed, how the procedure would apply and when the suspension would come into being. The people of Scotland will not be satisfied about what is proposed until a full explanation is given.


Mr. Sainsbury

First, may I thank my right hon. Friend the Member for Tonbridge and Mailing (Sir J. Stanley) for his kind remarks. He was modest about his own contribution to the success of SCA Aylesford. Some of his remarks about major manufacturing investment in non-assisted areas were perhaps a little wide of the mark. Two projects currently coming on stream and greatly to the benefit of the areas involved and the country are the Toyota factory in Derbyshire and the Honda factory in Swindon—[Interruption.] Perhaps the hon. Member for Cardiff, West (Mr. Morgan) will contain his sedentary remarks for a moment and allow me to develop my point.

My right hon. Friend was suggesting that it was not possible to get major manufacturing investment outside a non-assisted area and I was pointing out that there are a number of major investments.

The hon. Member for Bradford, South (Mr. Cryer) was decrying our ability to get inward investment and suggesting that somehow a modest change to one scheme which has assisted only two projects in five years would mean that any prospect of attracting inward investment was for ever destroyed. As we might expect from the hon. Gentleman, that is a gross exaggeration, because, after all, Britain gets a larger share of investment from the United States of America and from Japan than any other country in the European Community—something like 40 per cent. of that investment.

Mr. Cryer

Will the Minister give way?

Mr. Sainsbury

I shall just finish one point arising from the remarks of my right hon. Friend.

We support the European Community in its efforts to create a level playing field; those efforts include monitoring the schemes that are available in assisted areas. My right hon. Friend made some valid points about what occurs, but we are hopeful that the situation is being improved. His rather splendid suggestion that any amount of grants were available in some countries is not precisely the position and I think that matters are improving.

Mr. Cryer

The Minister, in turn, is exaggerating my remarks about inward investment procedures. Will he confirm that no other SCA Aylesford-type investment projects will be induced to come to Britain because of the suspension of the current scheme?

Mr. Sainsbury

That scheme has helped only two projects—this being the second one—in five years. A great deal of money has been made available over the years. Since 1972, more than £1.7 billion has been paid out under section 8 and, including the £20 million that we hope the House will approve this evening, only £30 million has been paid out under the AEP scheme. I hope that puts matters in perspective.

Mr. Peter Thurnham (Bolton, North-East)

Is my right hon. Friend aware of how important the project is to two companies in an assisted area in my constituency? The first is Davidson Ratcliffe Ltd., a leading waste paper collector and merchant, and the second is Beloit Walmsley Ltd., a very large manufacturer of paper-making machinery, which I understand is in contention to win orders under this project. I welcome the motion.

Mr. Sainsbury

I am not familiar with the firms to which my hon. Friend refers, but I know how energetically he pursues the interests of his constituent companies and we hope that one, if not both, of them will be successful in gaining work from this project.

I began to regret what I had hoped was a courtesy to the House. Let us be realistic and recognise that the normal arrangement for announcing the suspension for one year of a scheme which has produced two grants in five years would have been for a written answer to appear on the Order Paper. If Opposition Front-Bench Members were honest with themselves, they would recognise that. I thought that it was a courtesy to the House, given that we had the opportunity to debate the grant, to announce its temporary suspension in a debate rather than a written question so that right hon. and hon. Members would have the opportunity to comment on it. The Opposition's reaction is more than a little unrealistic.

Mr. Fatchett

Does not the Minister realise that that is a specious argument? If the response had been through an answer to a written question, it would have been on the Order Paper. My right hon. and hon. Friends would have had the opportunity to study it and to make whatever comments they wished about local schemes. The simple fact is that the announcement was not on the Order Paper —and in that sense it is a gross discourtesy to the House and to the Chair.

The Minister has taken the opportunity of this debate to sneak through an announcement without having a word with the Chair and getting its support and permission. Out of courtesy to every Member of the House, the right hon.

Gentleman should have made his announcemenmt at some other time. He should apologise rather than make a specious argument.

Mr. Sainsbury

I refute the hon. Gentleman's suggestion. All that he has succeeded in doing is to encourage the Government to proceed on such matters by means of a written answer. If the next time that happens we get protests from the Opposition, I shall know to what to draw attention.

Mr. Mark Robinson (Somerton and Frome)

Does my right hon. Friend agree that if he had made his announcement by written answer, the Opposition would have complained equally vociferously?

Mr. Sainsbury

I am not too sure about that. The comments of Labour Members this evening suggest that they would rather have such matters dealt with by means of a written answer—[Interruption.] Their suggestion that this matter merits a statement is, as I said earlier, quite absurd. Labour Members—[Interruption]

Madam Deputy Speaker

Order. Many allegations of discourtesy are flying about. I remind hon. Members that it is an elementary courtesy that when someone is speaking he should not have to do so with a chorus of seated interventions.

Mr. Sainsbury

Thank you, Madam Deputy Speaker. I shall move on to one or two of the more important observations that were made.

The point about the AEP scheme is that it is for projects that carry exceptional national benefits. As I emphasised in my opening remarks, there are exceptional national benefits relating to this scheme relating to environmental policy objectives. I stress that it is not like the regional selective assistance scheme, which is job related. That point was made by several Opposition Members. The number of jobs actually created or safeguarded, or those created during the construction process, is not in itself one of the objectives of the scheme. The exceptional national benefits have to be something beyond merely job creation. In this case, it is the use of a new technology in de-inking that meets those important environmental policy objectives.

A point was made about energy consumption. The energy generation on the site is small compared with national energy consumption. The existing mill takes its electricity from the national grid and is derived from coal and oil. One could say that moving to a combined heat and power gas-fired plant would result in lower CO2 emissions, which would meet another environmental objective.

My hon. Friend the Member for Devizes (Mr. Ancram) referred to the further encouragement of the collection of waste paper. We certainly intend to meet the targets and we will consider all measures that ensure that market mechanisms achieve that work.

Points were raised about the Gartcosh scheme. The hon. Member for Falkirk, East (Mr. Connarty) was not in the Chamber when I made my opening remarks. For his benefit and that of others who may not have been listening as closely as they might have done, I shall repeat what I said. I said: I can confirm that we shall consider against those criteria the application currently being pursued by North British Newsprint in respect of the Gartcosh project. Now that I have announced that AEP is to be suspended, the company will need to develop its application by the end of February so that the appraisal may go forward.

Mr. Fatchett

The Minister has omitted an important point. Several hon. Members asked whether the European Commission had indicated its objection to this scheme and whether that was why the Government were suspending it. Can the Minister clarify the position in respect of that matter?

Mr. Sainsbury

We did not discuss the scheme as a whole with the European Commission. We share the Commission's desire to keep firm control of all schemes that can distort competition in the Community. Such schemes can, of course, be outside or inside assisted areas. In referring to this matter, my right hon. Friend the Member for Tonbridge and Mailing talked about any amount of money being available. Schemes within assisted areas are also subject to the scrutiny of the European Commission. That is something which we welcome, as we believe that distortion of competition does not benefit either this country or any other part of the Community.

Mr. Fatchett

Am I right in construing the Minister as saying that he thinks that this scheme distorts competition and that its suspension has, therefore, been volunteered to the European Commission?

Mr. Sainsbury

I believe that in my remarks there was a reference to relaxation of the criteria for this scheme. Such relaxation might result in success for more applicants. As I pointed out, in five years only two applicants have been successful. This would be a move towards more overtly flexible schemes—schemes of just the sort that can be used by others to distort competition and might, therefore, understandably, find disfavour in the Commission. There have been several alleged instances of aid in other countries giving rise to complaints from British industry.

Mr. Alex Salmond (Banff and Buchan)

The Minister has said that the scheme at Gartcosh will now have to be developed before the end of February if it is to go forward. Why the end of February? Does the Minister know that that will give the company sufficient time to develop its application? Or is it a purely arbitrary date that the Minister has conjured up out of thin air?

Mr. Sainsbury

The hon. Gentleman may not have been in the House when I made my introductory remarks and, therefore, may not have heard my reference to the suspension of the scheme from the end of February until April 1994. I said that North British Newsprint ought to get its scheme registered before the end of February so that it might be subjected to the appraisal process.

Mr. Connarty

This matter continues to worry me. What notice of the Minister's announcement was the company given? Is it to get its information from tomorrow's papers?

Mr. Sainsbury

The company has been in contact with the Department for a considerable time. Since July we have been waiting to hear from it. We do not know whether it will come back to us. [Interruption.] The hon. Gentleman was not in the House when I dealt with this point. We have discussed it at length.

This scheme will bring considerable benefits.

Mr. James Wallace (Orkney and Shetland)

Will the Minister give way?

Mr. Sainsbury

As the hon. Gentleman, unlike some hon. Members, has been in the House for the debate, I shall give way to him.

Mr. Wallace

Can the Minister be more explicit? When is it intended that those putting in the application for Gartcosh will be told about the suspension and informed that the application will have to be received by the end of February? Have they been informed already, or will this come as news to them? Has the Minister any indication that what he is asking of them is feasible?

Mr. Sainsbury

To the best of my knowledge, it is entirely feasible. Whether they will actually do so, I do not know. We will, of course, communicate with the company.

It is occasionally suggested—not infrequently, I suggest, by hon. Members on the Opposition Benches—that it is a courtesy to come and tell Parliament things first, and that I have done. I have provided an opportunity for debate, and all I have received in exchange is brickbats. Perhaps we can draw a conclusion from that.

Mr. Salmond

On a point of order, Madam Speaker. There is considerable noise in the House. As you will recollect, a few seconds ago the Minister started a sentence about the company being unable to bring the scheme forward by the end of February; in the noise I lost the second half of that sentence. Perhaps the Minister could complete it for us now.

Mr. Sainsbury

I may have to read Hansard, which is not immediately available, to find out what I said. Perhaps I could recommend that the hon. Gentleman read Hansard himself. It may be that the sentence to which he referred was when I said that the company would need to develop its application by the end of February so that the appraisal could go forward. Perhaps it was those words that he did not hear clearly; I hope that it was and that we will have it doubly on the record.

The motion is to approve a grant to a project which I think has exceptional national benefits. It enables environmental policy objectives to be met. It maintains and improves the operation of a company which, as my right hon. Friend the Member for Tonbridge and Malling has said, has operated with distinction in his constituency for a long time. I hope that the House will approve the motion.

Question put and agreed to.

Resolved, That this House authorises the Secretary of State to pay, or undertake to pay, by way of financial assistance under section 8 of the Industrial Development Act 1982, in respect of the installation of new and the refurbishment of existing machinery to manufacture newsprint from recycled fibre at Aylesford, Kent by SCA Aylesford Ltd., sums exceeding £10,000,000 but not exceeding£20,000,000.

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