INDUSTRIAL DEVELOPMENT BILL

HL Deb 25 July 1966 vol 276 cc606-76

2.57 p.m.

Order of the Day for the Second Reading read.

LORD RHODES

My Lords, I beg to move that the Bill standing in my name on the Order Paper be read a second time. Before I come to the Bill I should like to apologise for the length of the speech that I am about to make. It is not what I would have wished. I have gone through it about six times, but I cannot find a great deal to leave out; it is full of factual information. I should also like to make one or two comments of my own leading up to the Bill.

Investment is a subject in which manufacturers are interested during the whole of their working lives, and those of us who have created businesses, especially pre-war businesses, burnt a lot of midnight oil in coming to decisions on how and in what to invest, because in those days, perhaps, it was a little trickier than it is now, and a wrong decision meant that you were "out". In modern days there is all the assistance that we have from one source and another, with the methods of assessing investment that we are advised to use, like the discounted cash flows of this world and everything else, which were not available then. Now, besides all the modern assets and aids in coming to a proper conclusion about investment and its profitability, I consider that there has been a new shift and sense of direction throughout the world on the thinking of investment, especially in manufacturing industries. I have had the opportunity of going to many places throughout the world during these last nine months, and in previous years, and I can say without any fear of contradiction that there is a new discrimination in investment. I would put it at no less than an international phenomenon in the modern world.

I have mentioned many times in another place, and I believe once in this—and I shall continue to do so—the highly successful discrimination that the Japanese have been able to employ, and the effect that it has had upon their competitive ability. In this sense, they go to the length of a scientific appraisal of world trade in three groups: one, industry where world trade is increasing; two, industry where world trade is stationary; and, three, industry where world trade is going "back'ards way about". Investment is channelled accordingly—and it works. Anybody who has been to America in the last few months knows full well of the anxieties caused in my own particular industry, for instance, and of the danger of action being taken which may affect it. Here in this Bill there is discrimination, perhaps of the same sort; but in comparison with what Japan is doing it is modest. But it is a tremendous step forward for us. As there is so much to explain in this Bill, and I believe that the House is entitled to a description and an explanation of the Bill, I will now come to the Bill itself.

The Bill is based on proposals that were in the White Paper, Investment Incentives (Cmnd. 2874), published in January. It has two main purposes. First of all, it introduces a system of cash grants in lieu of investment allowances; secondly, it extends and amends the powers under the Local Employment Acts to give assistance to undertakings in new and wider development areas. Let me deal first of all with the system of investment grants, which is provided for in the first Part of the Bill, the most important provisions being in Clause 1.What we have decided to do is to change both the form and the direction of the incentive so as to make it more effective in relation to our economic needs. We have made a change in the form by going over to cash grants; and we have made a change in direction by deliberating discriminately between industries and between areas of the country.

Let me take these changes in turn. First, the change from tax allowances to grants. Cash grants have three main advantages in comparison with investment allowances. First, they can readily be taken into account when the investor or manufacturer is weighing up the decisions he has to come to. The cash value is directly related to the size of the investment and does not depend on future tax rates. Secondly, the business concerned can be sure that it will get its money after the appropriate interval whether or not it is by then making sufficient profits. Thirdly, the aim of the scheme is to provide a quicker cash flow in relation to investment. Once the scheme is in full operation a company will get the cash grant within about six months of acquiring the new asset. This compares with the average time-lag of eighteen months under the old system of investment allowances.

Then we decided to concentrate the main benefit of Government assistance to investment on what we regard as the key sectors of the economy. This is the approach I was trying to illustrate and lead up to in my preliminary remarks. This does not mean that we do not want investments in the other sectors in other parts of the economy; not a bit; we consider them important and valuable. It is a matter of priorities. So we are going to have two levels of investment incentives for new equipment. The top level will get investment grants plus annual tax allowances, and the rest will get 30 per cent. initial allowances plus annual tax allowances. We are putting on the top level those sectors of industry which can make the greatest contribution to strengthening our economy and especially our balance of payments. These key sectors are manufacturing, extraction, and construction. In recent years, the rate of investment in some of these sectors has been too low in comparison with investment in distribution and services. We must do our utmost to remedy these structural defects in our economy.

Finally, we are going to discriminate in favour of large new development areas.

In these areas, investment grants will be paid at twice the rate elsewhere. They will replace investment allowances, free depreciation and the 10 per cent. plant and machinery grants available under the Local Employment Acts. The new 40 per cent. cash grants will be given for all investment incurred by plant and machinery for use in a development area, including equipment required simply as replacement. There will be no need to prove that extra employment is created to get the 40 per cent.

The provisions relating to investment grants are contained in Part I of the Bill. Of these, by far the most important, in terms of the volume of investment covered, are those relating to plant and machinery, which are in Clause 1. To be eligible for grant, an item of plant or machinery must satisfy three tests. It must be for use in Great Britain; it must be provided by a person carrying on a business in Great Britain; and it must be used for carrying on a qualifying industrial process of manufacturing, including ship repair, of extraction or of construction. The definition of the qualifying processes is in broad terms, and it does not confine grants to directly productive machinery, such as machine tools. Equipment used for certain kinds of repair, storage and packing activities by a manufacturing, mining or quarrying, or construction undertaking will also qualify. A manufacturer would not, however, get a grant on equipment which he used purely in connection with the storage, packing or repair of somebody else's goods.

A firm carrying on a qualifying process will also be eligible in respect of certain ancillary equipment used at the manufacturing premises, such as steam-raising plant or general heating and lighting equipment. There is special provision for fire and safety equipment used at factories and other places where qualifying processes are carried on. There will be some exclusions. The most important one is vehicles, apart from mobile machinery such as, for example, a bulldozer used in a quarry or on a building site, and works vehicles, such as fork-lift trucks. This exclusion is explicitly stated in the Bill, in Clause 13.

Finally, we indicated in the White Paper that small or short-lived items and items below a minimum value would be excluded. After full discussions with industry we have decided to fix this minimum level for individual items at £25. Again, this will be dealt with under the discretion: we do not want to fix the limit in the Bill, as experience may well show that it ought to be changed in the course of practice. The plant or machinery must be for use in Great Britain but there is no discrimination against imported equipment which will qualify for investment grants. A foreign company carrying on business in Great Britain will be eligible. Plant or machinery used in connection with the extraction of oil or gas on the Continental Shelf will also be eligible. If a company makes plant or machinery for its own use in a qualifying process, we shall pay grant on the approved cost incurred in making it. In addition, Clause 1 covers plant or machinery and certain kinds of prototypes used for scientific research related to a qualifying process. The standard rate of grant for plant and machinery will be 20 per cent., but when it is for use in a development area it will attract a 40 per cent. grant.

There are three kinds of assets which are eligible for grant without reference to the qualifying processes—computers, hovercraft and ships; and I will deal briefly with each in turn. Computers are dealt with in Clause 2, under which a grant can be made for any computer for business purposes in Great Britain. This means that grants can be paid to service undertakings, including banks or insurance companies; but, as with plant and machinery generally, grants cannot be paid to local authorities, universities or schools. Nationalised industries and the Post Office will be eligible for grants on their computers, but other Government undertakings will be excluded. The rate of grant will normally be 20 per cent., whether or not the computer is in a development area but there will be two exceptions to this. An on-line computer which is integrated with eligible plant or machinery in a development area will get 40 per cent., and so will a computer used primarily on scientific research in a development area.

Hovercraft, which are covered by Clause 3, and ships, dealt with in Clause 5, may conveniently be referred to together. In both cases there are certain restrictions as to the persons who can get grants which are not applied to other assets. These are needed because of the mobility of hovercraft and ships, and because, for obvious reasons, grants cannot be confined to assets of this kind solely for use in Great Britain. In both cases, grants will be at 20 per cent., and nationalised industries will be eligible.

Clause 4 covers grants to lessors of eligible plant or machinery, computers and hovercraft. Apart from certain special provisions for contractors' plant in the construction industry, the general rule is that if the lessee would have been eligible for a grant if he had bought the asset outright, the lessor may claim a grant on the cost of the asset. As an administrative rule, the Board of Trade intend to confine grants on plants and machinery to cases where an asset is hired out for a period of at least three years. This corresponds to the period during which we shall retain some control over the disposal of any asset on which a grant has been paid. No grants will be given for assets leased for use overseas.

Clause 6 makes provision for grants to be paid on the capital cost of mining works. Under the tax-allowance system special provision was made for certain types of expenditure on the construction of mining works, and the rate of investment allowance on such expenditure was in fact the same as on plant and machinery. I would emphasise that this clause has deliberately been drawn in very wide terms, but that we have still to decide on the precise coverage of the works on which grants will be given. There is particular difficulty in relation to the operations in the North Sea where there is very little past experience to guide us. The Board of Trade are to have full discussions with the industry to determine just what kinds of mining works should be covered. Once the coverage has been determined, guidance notes for industry will be made available.

The remaining clauses in Part I are largely technical. Clause 7 provides for variations in the rate of grant on the addition of new assets to be made by Order subject to Affirmative Resolution. We regard this as providing the necessary degree of flexibility to make changes in the scheme in the light of experience, but we have no intention of making frequent or sweeping changes. Clause 8 allows the Board of Trade to impose conditions when making grants to ensure that an asset will be used in the place or for the purpose in relation to which the grant is given and to require repayment in specified circumstances. In general, the Board will seek to ensure that an asset continues to be used in the appropriate way for a period of three years after purchase. If there is a change of use within that period the recipient of grant will have to notify the Board, and we shall then decide whether any repayment of grant is called for. For ships, the period will be five years, and the Board will have power to consider and restrict the terms of charters if they think it necessary to prevent abuses. Clause 11 provides for advisory committees. The Board of Trade have received a great deal of advice and assistance from industry since the publication of the White Paper in January, and we thank them for it. We want to be able to call on such advice on the administration of the scheme and these committees will enable us to do so. They will not be concerned with individual cases but with general issues arising out of the scheme.

Part II of the Bill deals with the various incentives to encourage the growth of industry in development areas. The present legislation dealing with these problems is the Local Employment Act, 1960, as amended by the 1963 Act. Part I of this Act has a limited life of seven years, and so, in default of legislation, the Government's powers to give financial assistance would expire next March. The first provision in Clause 15 of the Bill is to extend these powers without time limit, so as to avoid the uncertainty which is created towards the end of any fixed period of time. But we are not simply extending these powers as they stand. The rest of Part II of the Bill makes considerable changes in them.

The first is that the old development districts are to be superseded by new wider development areas. They are wider, not only geographically but in the criteria and the objectives which underlie their choice. The old small development districts were chosen solely on the grounds of high unemployment. But the problem of unemployment must be seen in perspective as only one factor in the wider problem of regional imbalance. We should take account of the fact that some parts of the country do not have their fair share of new industries, and the prosperity which they bring. Unemployment statistics may be low only because the young people leave for the more prosperous and congested parts of the country. Therefore, in choosing the new development areas the Board of Trade will take account of all the economic circumstances, including not only actual and expected unemployment, but also the growth of employment opportunities, the growth in population, the amount and direction of migration, and the objectives of regional policies.

We have shown our interpretation of these criteria by stating in the White Paper last January the extent of the five large development areas which we intend to list on the basis of present economic circumstances. This list will be established by Order, subject to the Negative Resolution procedure, immediately after the passing of the Bill, and future changes will be made in the same way. This is a long-term policy to build the basis for economic development in broad contiguous areas rather than to have short-term emergency action to deal with small pockets of high unemployment. Firms in these development areas will be eligible for assistance under the Local Employment Acts: they will also get the higher 40 per cent. rate of investment grant on plant and machinery, certain kinds of computer, and mining works. The conditions for getting the 40 per cent. grants on these assets are set out in Schedule 1. This Schedule also lays down what will happen if an area ceases to be a development area. Broadly speaking, a firm which is already committed to a project in such an area will get the development area rate of grant on the assets which it needs to buy to complete the project.

The new development areas will provide firms with a wider range of choice than before in selecting sites for development for which the maximum financial assistance is available. But such development should not be so concentrated as to cause serious strains in particular places —for example, severe shortages of labour, or of certain types of labour—while the special needs of other places in development areas go unsatisfied. To avoid this, the Government will ensure, both by a flexible use of financial assistance in some cases, and by giving or refusing industrial development certificates as necessary, that major industrial projects are located in the areas which need them and have the necessary facilities for them. Under the present legislation, places which take overspill population from development districts enjoy Local Employment Act assistance. Some get free depreciation as well. The definitions are different. In Clause 15(6) a new single definition is set out which will be used both for the 40 per cent. investment grant and for the other kinds of assistance.

The early New Towns were usually based on existing centres which were relatively small, and involved increasing the population by several times the original number. Free depreciation, which was introduced in 1963, was confined to New Towns. Now, however, it is becoming increasingly necessary to expand existing centres of population to deal with overspill, and we are therefore including receiving districts under the Town Development Act within the categories which may be eligible for development area treatment. But, since any of the 40 per cent. grant given which benefits original population is failing to fulfil its purpose of helping the development area proper, we would not expect to give it to a place unless something like two-thirds of the final population is likely to have originated in the development area. This will mean that the population will normally have to be roughly trebled. The two places to which this policy will apply initially are Skelmersdale and Winsford. All the other places which have been getting assistance as overspill are within the new development areas.

The present 10 per cent. plant and machinery grant, which was introduced by the Local Employment Act 1963, is brought to an end by Clause 16, as it is superseded by the new 40 per cent. grants. Here I should explain that the new investment grants will not depend on whether the assets will provide employment. But the remaining forms of Local Employment Act assistance—building grants, general loans and grants recommended by BOTAC, and the provision of factories—will continue to be subject to this criterion. These forms of assistance which depend on the provision of employment are not confined to manufacturing industry, but will continue to be available also for service industries—for example, hotels, shops, offices and garages.

An important improvement in building grants is introduced in Clause 17, in that it provides for grants to be made at 35 per cent., instead of the usual 25 per cent. rate, in the case of certain new projects in a development area, as opposed to expansions of existing undertakings. The clause gives considerable descretion to the Board of Trade. An obvious case is when a firm in the Midlands or the South-East closes its factory and moves a considerable distance to a development area. Such moves are exceptional. More often a firm establishes a new branch factory when its business is expanding. Where this is at such a distance from any of its existing plants that an entirely new labour force and a new unit of management have to be set up, there are considerably more difficulties than when the expansion is close by. It is in such cases as these, including cases where a foreign firm is setting up a British subsidiary, that the special assistance might well be justified. Where such a firm is not applying for building grant, but is proposing to rent a Board of Trade factory, the equivalent assistance, under Clause 19(4), will be an initial rent-free period which we propose should be two years.

Clause 17 also includes some other technical improvements in the powers to give building grants. In some capital-intensive cases we have hitherto been unable to give an assistance at all, because a 25 per cent. grant would exceed the usual limits of the cost per job provided. The new power will enable us to give a scaled-down grant in such cases. This will be a useful liberalisation of our powers, and will not detract from the standard nature of these grants.

The power to give tailor-made loans and grants on the recommendation of the Board of Trade Advisory Committee will continue. BOTAC performs a very valuable function. In checking on the viability of each project it protects the workers in the area; it often makes a project much sounder than when it was first put to the committee, and of course is also avoids waste of public money. Under Clause 17 BOTAC will have a new power, in that it will be able to recommend giving assistance in the form of equity shares, or loans with an option to convert into equity shares, as well as continuing to recommend loans and grants as hitherto. There has been some exaggeration of the scope of this new power. I assure your Lordships that I do not expect that it will be used very often, but it may be that equity participation would on occasions be an appropriate form of assistance. Some firms may prefer assistance in this form, in order to keep the burden of interest charges low. I must emphasise that there is no intention whatever to coerce firms to issue equity shares to the Board of Trade against their will. This is an additional power which can be exercised only with the agreement of the company and on the recommendation of BOTAC. BOTAC will, of course, continue to recommend loans and grants under Section 4 of the Local Employment Act as hitherto.

Clause 19 removes some minor legal impediments to the activities of the Industrial Estates Corporations.

Clause 20 re-enacts the powers to deal with derelict land in development areas. The rate of grant to local authorities for this purpose is 85 per cent. The question whether the clearance of some derelict land fulfils the purpose of the 1960 Act, in providing employment for the benefit of a development district, has sometimes given rise to difficulties. We are therefore substituting a new criterion, and the Board of Trade will be able to recommend a grant when they are satisfied that the clearance of the land will contribute directly or indirectly to the development of industry in the area. Industry in this context is not confined to manufacturing industry, but can include, for example, service industries which would profit from the encouragement of tourism in the area. If any cases should fail to pass this criterion they may still be eligible for grant for the clearance of derelict land throughout the country for which powers are being sought under Clause 9 of the Local Government Bill, which is at present before Parliament.

LORD POPPLEWELL

My Lords, did I understand my noble friend to say 60 per cent.?

LORD RHODES

No, my Lords, it is the new 50 per cent. grant.

Whereas Part II of the Bill deals with the financial inducements to industries to expand in development areas, Part III deals with the necessary powers to control their development elsewhere. It strengthens the industrial development certificate control, which is part of the planning law set out in the Town and Country Planning Acts, by closing certain loopholes which exist at present—for example, where, for some reason, the planning permission was not obtained in advance. For instance, if for some reason the planning permission was not obtained in advance it is not at present necessary to obtain the I.D.C. when the time comes to put the matter in order. There is thus an undesirable incentive to act first and ask afterwards. Clause 22 of the Bill corrects this anomaly.

Clauses 23 and 24 deal with another gap in the control, and should help to ensure that when an I.D.C. is issued it is used only for the project which the Board of Trade meant it to be used for. The I.D.C. can be issued subject to conditions which the local authority will be obliged to carry through into the planning permission. This will enable the Board of Trade, for example, to specify how much of the development is to be used for particular purposes, such as processes of manufacture.

Clause 25 resolves any doubts which might exist about the position where an extension or a separate building within the curtilage is put up to provide ancillary services for an industrial building. These will in future require an I.D.C. Apart from the usual supplementary provisions in Part IV, it includes for convenience Clause 28 which increases the rates of grant which may be made for fishing vessels to take account of the withdrawal of investment allowances.

If I have taken noble Lords through the Bill at rather a high speed. I apologise, but I have been through my speech, as I said, six times to try to shorten it so that I should not bore noble Lords or put them into sleeping postures. I hope that what I have tried to do is acceptable, and I am sure that during the time the Bill is in this House during subsequent proceedings it will, as usual, be improved.

LORD REA

My Lords, before the noble Lords sits down, I should like to ask him (I do not intend to make a speech) to comment on one point on which I do not think he touched, which might help our coming debate. He mentioned these grants of 20 per cent. and 50 per cent. Could he possibly say within any range of approximation what the minimum and maximum expenditure per annum might be in these years of great difficulty?

LORD RHODES

I think it is round about £270 million, but my noble friend Lord Shepherd will be able to correct this figure if it is wrong.

Moved, That the Bill be now read 2^a.—(Lord Rhodes.)

3.32 p.m.

LORD ERROLL OF HALE

My Lords, I am sure the whole House will be grateful to the noble Lord for taking us through the Bill at such a brisk pace, and making its extremely complicated provisions seem apparently simple to us. He confined himself largely to the Bill itself, but dealt very little with the philosophy, good or bad, which lies behind it. Although the noble Lord made the usual nodding references to a greater progress being made in other countries, notably the United States and Japan, for once he left out Sweden. Is Sweden no longer fashionable in the eyes of Socialist Ministers? I am surprised that Sweden was not mentioned on this occasion. However attractive it may be to confine oneself to the mere technicalities of the Bill, I think it important that we should see this Bill we are discussing in the light of the serious economic Statement made by the Prime Minister in another place on Wednesday of last week.

We must consider this Bill in the light of the Government's new go-stop economic policy and their declared intention of creating half a million unemployed. It is going to be interesting to see in which of the development areas the unemployment will arise, or whether it will arise in areas not so fortunate as the present development areas. It was plain (if I may reply to a sedentary interruption by the noble Lord, Lord Bowles) in questioning after the Statement in another place that the figure came out at about half a million.

The Bill divides itself, as the noble Lord pointed out, into three main parts. I should like, if noble Lords agree with me, to deal first with Part I, concerning the investment grants that affect industrial and other undertakings throughout the country, and not to concern myself at the moment with any higher rate directed to development areas.

LORD ROYLE

My Lords, I hope the noble Lord will forgive me for interrupting. He did use the term "a declared half a million unemployed", and then he went on to say that it came out in the course of questioning that it might be something like that. Is not a declaration rather different? Is "declaration" the right term. Was a declaration of half a million unemployed made?

LORD ERROLL OF HALE

Without wishing to take up too much time of the House, I would point out that the Prime Minister in another place referred to a percentage, and when one multiplies the percentage up into the actual totals it comes to about half a million. Of course, we know that a percentage was referred to to conceal the magnitude of the figure.

The noble Lord, Lord Rhodes, referred to the Government having received cooperation from industry in regard to investment allowances after the White Paper had been published. I think he did this House less than justice by omitting to refer to the very strong body of opposition which developed against the whole scheme of investment grants. But I think that noble Lords, if they are not already aware of it, should be made aware of the strong opposition which was felt to the introduction of this scheme. It was not—I repeat, not—what industry wanted.

I have a number of quotations here, and I should like to mention one or two. Sir Donald Stokes, deputy chairman of the Leyland Motor Corporation said: If the recently announced investment allowances had been handed out by a commercial firm and not by the Government they would savour of sharp practice. Then Sir Frank Kearton, who has been good enough to take up an important assignment as Chairman of the Government's new Industrial Reorganisation Corporation, was very critical. One of the "little Neddies", the one for distribution, the members of which include the noble Lord, Lord Sainsbury, Sir Leonard Cooke and the Union of Shop, Distributive and Allied Workers general secretary, Mr. Alfred Allen, felt so strongly against this system that they took what I believe to be the unprecedented step of making an appeal to Mr. George Brown, the Deputy Prime Minister.

The Institute of Directors, commenting on the scheme, said: British businessmen will find it difficult to support the Government's new investment incentives scheme, which will increase the built-in risks of bureaucratic intervention. Sir Paul Chambers, one of the country's leading industrialists, was highly critical, and said that his main objection lay in the "element of discrimination" which puts far greater power into the hands of a Government Department than do our tax laws. Then Mr. John Davies, the excellent Director-General of the Confederation of British Industry, said in April, in relation to the new system, that it had caused an avalanche of protests to arrive at the Confederation's offices". He went on: The body of abuse has become quite overwhelming. My Lords, this is the measure of objection which responsible industry feels towards the Government's new proposals, and, as I say, I think that noble Lords in all parts of the House should be made fully aware of its strength. There was no prior consultation with industry on this matter. They had expressed a view as to what they would prefer; namely, a system of free depreciation, or depreciation at will. They recognised that this could not have been brought into operation immediately, but it could have been brought in by stages. The added irony of the situation is that industry will now receive less than it did under the old system. Formerly industry received, quite properly, as a return on its taxed profits, something like£320 million a year, but under the new system industry as a whole will receive only about £250 million.

One of the important objections to the new system is that the grants are payable regardless of the profitability of the investment. Where the investment is in a development area and the grant is 40 per cent. of the total, it encourages people to invest less wisely than they would otherwise do, because they know they will have only 60 per cent. of their own money at stake; whereas under the old system one had to consider the potential profitability of a new investment, because it was only if it was profitable that one could get back the old investment allowance.

Another great disadvantage of investment allowances is the savage discrimination which the system perpetuates. The noble Lord tried to make a virtue of this, but there is no service in discriminating between manufacture and transport. Most noble Lords will remember the old saying: …than merely moves things about and nature does the rest. To discriminate between a firm in which all the processes are made in one factory perimeter and another firm which has two factories situated some miles apart making a similar product, and to say that it is not to be allowed to get investment allowances on its transport system does not make industrial sense to me.

In any case, the Government are talking a great deal about the need to modernise our transport industry; to improve the efficiency of moving goods to the docks. But all these forms of transport are denied the benefit of the investment allowances. Under the old system, which was clearly understood by industry, there was an equally clear right of appeal. There were the tax laws which, although complicated, were known and understood by the experts. If a firm did not agree with the assessment of the inspector, they had the right of appeal to the Commissioners and, again, failing that to the courts and, finally, if necessary, to this noble House itself.

Now there is to be no right of appeal. We are told that the Board of Trade will administer the scheme, that they will do so sympathetically, but that from the decision of a relatively minor Board of Trade official there is to be no means of appeal at all. Nor is the system going to be economical to administer. The old system was administered by the Inland Revenue, and now with no reduction in the staff of the Inland Revenue there are to be no fewer than an extra 1,100 civil servants recruited by the Board of Trade in order to handle the administrative complexities of the new system. The administrative cost has been estimated by the Government at no less than £2 million a year, largely, I suppose, in salaries for those civil servants, who of course, admittedly, will become easier to find out of the 500,000 unemployed which are to be created.

The system will not necessarily lead to prompt payment. It is stated in the White Paper that no grants will be payable for at least eighteen months, and that the period will not be shortened until the economic situation improves. That looks like being still further away than it was at the time when the White Paper was being written. Nor will there be great certainty of payment. Even under the system of making payments for plant and machinery under the 1963 legislation severe delays were bound to arise from time to time. I have knowledge of a particular case, regarding a very large piece of equipment, where the whole amount of the grant has been outstanding while there has been detailed argument over small matters which could have been settled easily.

Finally, there is considerable area of doubt as to what qualifies and what does not. I am sorry to learn that the advisory committees are not to concern themselves with individual cases, or individual classes of plant and machinery. How, therefore, is industry to know which plant and machinery qualifies and which does not? I should like to say in passing that I very much appreciated the noble Lord's explanation of some items which qualified where it was not at all clear from the Bill that they did so qualify.

To turn from Part I to Part II, the new development areas are to be big, very big indeed, embracing nearly all Scotland, the North of England, Wales, parts of Devon and most of Cornwall. Some criticism was made in another place, more so by the President of the Board of Trade than by the noble Lord opposite, of the former system. But the former system had the great advantage of directing resources to those localities where help was really needed, and then quite properly switching it off when it was no longer required. This new development in Part II is a very wasteful and extravagant use of the taxpayers' money, because there are many prosperous areas within the new boundaries which do not require this assistance. But they will be getting the taxpayers' money when they do not need it. Correspondingly, given the same global total, there will not be so much available as there would otherwise have been for those localities in much greater need.

In the new concept the growth point principle, which was much welcomed during the life of the last Parliament, is to be swallowed up or abandoned. Although all the areas have apparently been expanded, there are one or two places which were development districts which have been mysteriously left out. The most glaring example of this is the dirty trick which has been played on Bridlington. That was made a development district because the need was great. One or two firms were persuaded to move there, and have been doing quite well, and now suddenly, almost at a moment's notice, they are to be cut off from the benefits which were supposed to be their's for a considerable period to come. The situation has not been improved by the cooking of the unemployment figures by the Board of Trade—

SEVERAL NOBLE LORDS: Oh!

LORD SHEPHERD

My Lords, could the noble Lord substantiate the remark that the Ministry has cooked the books? It is a very serious statement, and if he wishes to make it I think he should provide the information.

LORD ERROLL OF HALE

I was going to do so on Committee stage.

SEVERAL NOBLE LORDS: No!

A NOBLE LORD: Withdraw!

LORD ERROLL OF HALE

But I should be glad to do so now. The unemployment figures for 1958–59, which were quoted as being high, of the order of 6.8 per cent., are figures which include the temporarily stopped, of which in a coastal resort like Bridlington there are always quite a large number; whereas the figures for last year, quoted in justification for removing Bridlington from the development area concept, were quoted at, I think, 3.8 per cent. but they did not include the temporarily stopped. So it was a case of not comparing like with like. Although the Minister of State in another place apologised, and said it was an inadvertent omission, I was surprised that it took so long for this to be discovered—and discovered it was by the town clerk of Bridlington, not by the Government Department itself. The noble Lord will have an opportunity of countering this when he comes to wind up. I think it is singularly unfortunate that, when the Government are extending the areas over such a wide field, they should take it out of poor little Bridlington. But we shall have more of this, I hope, when we come to discuss this Bill on Committee stage.

To turn to the inducements in the development areas, as the noble Lord has pointed out investment grants will go up to 40 per cent. instead of the old machinery grants under the previous Act of 10 per cent. As I have already mentioned, I think it is a mistake for the grant to be so high without any regard to the profitability of an investment, and over a very much wider area than under the previous legislation. These grants are going to be extremely expensive. A figure was mentioned to the noble Lord, Lord Rea. This means in effect that it will be the Midlands, the North-West and the South which are having to subsidise their competitors in Scotland, Wales and Northern England, who have become, in a sense, permanent or semi-permanent pensioners on the rest of the country. The noble Lord referred to BOTAC and referred to the power to take a share in the equity of a company. He was at pains to point out that this was only a very small matter, and that it would apply in only a relatively small number of cases. For this assurance we are grateful, but I hope the noble Lord will consider an Amendment which we hope to table which will enable the company to accept the offer of equity only after full agreement with the shareholders of the company in a general meeting, otherwise the shareholders' capital will be watered down without any opportunity for them to have a say.

I do not like this development. Having seen the administration of BOTAC at close quarters for a number of years, I do not see that there is any case for this extension of powers by the Board of Trade. It is, however small, the start of a creeping takeover by the State of certain firms and businesses. Furthermore, where there are some firms in development areas in which there is a considerable element of Government capital, or Board of Trade capital, there will be a temptation—I hope it will be resisted—for the Board of Trade and other Government Departments to favour firms in which they have a large shareholding with Government orders and assistance of other sorts. There will also be a considerable temptation on the part of the Board of Trade to keep out incoming competitors, on the grounds that they already have a substantial equity stake in the firm—there is quite enough business of this type in the locality; there is no need to grant an industrial development certificate to make life tougher for the companies in which the Board of Trade have invested equity capital.

A NOBLE LORD: It has already been done.

LORD ERROLL OF HALE

There is of course an important point of principle, apart from what I have already said, why it is inadvisable for the Government to invest capital in this way. It is far better to do it by loan, because if the money is invested in the form of purchasing the equity, or part of the equity, that money is virtually lost for ever, whereas under the old system, and under the system as it will continue to be, if only a loan is made that loan is repaid in due course and thus becomes available for lending elsewhere to another firm in need. That is why I firmly believe that in this case it would be much better to stick to loans.

The noble Lord referred to amenity spending, with which we can all agree, and he pointed out that one or two loopholes in regard to I.D.Cs. were to be removed. With that I think we can probably agree, although the control is now so severe that it is hard to see how anybody will be able to get any I.D.C. However, here is one of the aspects of the Bill which perhaps noble Lords might like to consider in connection with another Bill that will be coming here shortly. The real disadvantages are that in the development areas such benefits as there are will be largely neutralised by the selective employment tax, which will operate with full severity on service and amenity interests in those areas; and it is often in the development areas that attention to these interests is most urgently required.

The noble Lord talked about fair shares to industry—whatever that might mean—but one thing on which we can all agree is that perhaps in the past there have not been fair shares of amenities in the older industrial areas. We hope now to see that rectified. Indeed, it is often said that until there are pleasant shops, restaurants, hotel facilities, and so on in certain towns in the North of England, it will be impossible to get bright new industries to go to them. But all this will be hit by the selective employment tax, and a better way to help these towns would be to exempt them from the operation of the selective employment tax. It would be better for the Government, and better for the areas concerned; and it could be easily administered because the repayments of this tax are to be handled by the Ministry of Labour, and the whole of the development areas consist of a mosaic of local labour employment exchanges. This would be a much more satisfactory way to do things than the rather clumsy, wasteful and extravagant procedures outlined in this Bill. It represents nothing less than an indiscriminate pouring out of public money. The Bill is badly worked out and we shall give it a good "roasting" in Committee.

3.52 p.m.

LORD REDMAYNE

My Lords, I would face this occasion with more confidence if it had not been that for thirteen of my sixteen years in another place I was bound by those monastic vows of silence which afflict Whips in a Conservative Government. I do not doubt that this rule is for the common good. What I fear is that in a few moments your Lordships will not doubt it either! Nor am I comforted by the thought that if I lack skill in speaking I could put at your Lordships' service those other arts which I have learned during those years, because my professional association with the noble Earl, Lord St. Aldwyn, taught me very early the salient difference between our respective duties: mine, in those years, to command the presence of my flock; his to beseeech them—or some of them—to stay away!

If I may say so, without being controversial, I thought the noble Lord, Lord Rhodes very much changed the Government's ground in his speech. From the emphasis that is put in Part II of the Bill on the relationship between Board of Trade expenditure and levels of employment (three times in the Bill and most explicitly in the Explanatory Memorandum), it seemed to me, before I heard the noble Lord, Lord Rhodes, speak, that employment was to be the prime factor for consideration. But perhaps (again if I may say it without being controversial) the changing circumstances of the economic scene during these last few days and weeks has meant that the Government have had to change their minds about that.

Be that as it may, there is a point about the Bill which I think is new in economic policies in this country. In this Bill, as in the past, those prepared to move into depressed areas are given solid benefits. They have been advantaged. But I believe this is the first time that those engaged in equally productive activity elsewhere have been specifically and intentionally disadvantaged, and I cannot believe that that is a good principle. Of course it is possible to argue that such a policy of encouraging Peter by discouraging Paul achieves a certain saving to the taxpayer. Indeed, I think that that has been argued by the Chancellor in another place. It could even be acceptable in certain conditions of national prosperity, but it cannot surely be acceptable in this country to-day, when the crying need is for an expansion of productive modernisation throughout the whole nation, wherever it can be found.

There is another aspect of the whole principle behind this Bill which I should like briefly to discuss, and it is this. We have all concerned ourselves with what is called the drift to the South; that is, the drift away from these areas which are to be called development areas. We have made tentative efforts to lessen it, particularly in regard to the lessening of the congestion of London, but without much success. In these later years we have always regarded the growing activity of the South as a menace which must be fought, and I wonder very much whether, in this day and age, that attitude is right. We confidently expect to argue ourselves into Europe in a reasonably short time, and it may be that the news we read this morning will make that time shorter. I wonder, then, whether it is sensible to fight too parochially against a natural tendency for the centre of national activity to drift more into the focus of Europe. Given entry into the Common Market, the South-East of England will have a new significance as being nearest to the hub of a common circle embracing the industrial heart of Europe.

I believe, therefore, that our first thought to-day should be the efficiency and productivity of London and the South-East, and at least nothing should be done to halt its growth and reorganisation. As I said earlier, it should not be disadvantaged as compared to these other areas. Of course the development areas have their part to play, and I am not arguing that progress there, on the right lines, should not be stimulated but the more prosperous parts of England have got to change enormously in the next five to 15 years, and it may well be that it is to them that the greatest expansion of capital expenditure must fall. The ability of London and the South-East to play its part: the services which they provide, and I specifically say "services" because it will be the services that will be the most valuable: the communications which entry into Europe will demand—these may be our chief preoccupation in the near future.

But of course in this Bill the discrimination is not only between area and area; there is also, as my noble friend has said, discrimination between activity and activity. If I may, I should like to turn for a moment to one aspect of that. It is, of course, part of the dogma of Socialism that only manufacturing is virtuous, and indeed the noble Lord, Lord Rhodes, must be counted among the most virtuous of all in that respect. Distribution in all its forms is held to batten on the economy: and perhaps, my Lords, I had better declare an interest in this part of my speech, because my family has been engaged in retail trade in various forms, in London and elsewhere, for the best part of two centuries, and so have I—but not for the best part of two centuries. The beaten path to the door of the better mousetrap-maker may have seemed a happy basis for an epigram in the nineteenth century, but of course the better mousetrap maker can make them quite uselessly until he is blue in the face unless he has an adequate and an efficient system of distribution.

Today it is fashionable to proclaim the efficiency of the multiple store because they are cheap; and very good they are, in their own lines. It is a field which they limit very much to their own advantage. But to the tourist—and this is where I think the case really begins to tell—the department stores, many of which have a reputation spreading far beyond these islands, are part of the magic of London and of the major provincial cities. They offer a range of goods and a degree of services which the multiples do not attempt, and, being unable to provide such services without large and skilled staffs, they find themselves today hit by Government policy at every turn.

The selective employment tax, for example, hits them harder than any other industry or indeed any other part of the retail trade, and that particularly because they are driven by the present labour shortage to employ an enormous number of part-time workers on a variety of different terms of engagements, each and all of whom count for tax as full-time workers. I hope very much that we shall have an opportunity of returning to this question if that Bill comes before your Lordships' House as it should. And this Industrial Development Bill, adhering, as I have said and the noble Lord has admitted, to the same dogmas of Socialism, reduces by a punishing degree the ability of the department stores to make those capital improvements which they must constantly seek if they are to retain their reputation in this country and abroad.

I want to put these arguments to the noble Lord because I feel they are arguments which the Government ought to have taken into account and ought to take into account, and I believe he will sympathise with them in his heart. The department stores are in fact the manufacturers' showcase throughout the country; they are the showcase and trial ground, and most especially for that class of luxury consumer goods (and fashion goods) which are the product of the smaller manufacturer who is not capable of organising his own export effort. As the noble Lord will know, the buying agents of foreign stores, whether they are established here or whether in fact they are visiting this country to buy, turn first to the stores for fresh ideas of British manufactures. The stores are the shop window of exports in that respect.

There is another aspect, too. I do not think this is nearly well enough known. The individual tourist in Britain is himself, by what he buys here, the salesman of British goods in his own country, and his purchases (the over-the-counter export sales of the department stores) amount to many millions of pounds in direct relief of the balance of trade. I believe these are things which ought to have been considered very carefully and which ought to be taken into account before the Government decide to adhere to this discrimination wholly against the distributive trades.

My third and last point is this, and I will deal with it as briefly as I can because my noble friend has already dealt with it more capably than I can. It is in respect of the provisions of Clause 18 which enable the indebtedness for loans made to a company to be discharged by the issue of shares. In point of fact, the history of Governmental participation in industry is not happy. There have been companies where it has gone well enough, but these are largely companies where the natural growth is such that interference by Government has been obviously unnecessary. But all too often where Government have participated in industrial enterprise, possibly arising from the needs of war production or from attempts to maintain employment in distressed areas, embarrassment and difficulty for future Governments, of whatever colour, have arisen. My noble friends who have held office know how true that is. All is well so long as the company prospers, but so soon as it falters, either through its own fault or simply as a result of economic circumstances, then comes the dilemma of deciding whether to throw good money after bad. That dilemma is hard enough in industry, as the noble Lord will know, but when it is a dilemma of Government, when there are faces to save and previous decisions to justify, then commercial judgment can be quickly warped by political expediency.

My noble friend suggested that it is not beyond imagination that if there is an increase in Treasury and Board of Trade shareholdings in private companies that money might be backed by special favour in the granting of Government contracts. Ministers have said in another place, and indeed the noble Lord himself has said, that there will be no coercion of companies. But, none the less, if a proposition is put by the Board of Trade it is perhaps wiser not to turn it down. I would ask, even with the best will in the world, what will be the position of a company that applies for a loan and will not accept the condition that it will issue shares in discharge of its liability. Is it then blacklisted? I know that Ministers at once, whether in your Lordships' House or elsewhere, will say, "No that would be quite impossible; that is not our intention at all". And yet, human nature being what it is and Departments being what they are, I find it hard to believe that a company who turned down that proposition would be regarded with much favour when any fresh application was made. And indeed in respect of the whole Bill one cannot be wholly confident that schemes such as this, entrusted to a whole army of officials (and many of them by the very nature of things must be junior officials) empowered to make decisions of vital importance to a company—far more important to the company than to the nation, in many cases—will in those circumstances always be administered with precise impartiality.

In past history it was always considered wise to have a friend at court, and in our generation we who are in any form of business enterprise know it is wise to know your way about the Board of Trade or any other Department. In that I make no suggestion of impropriety and certainly none of dishonesty, but none could deny that in these bureaucratic days it is as well to know the ins and outs of the Whitehall maze or the town hall maze or the county council maze. And here in this Bill is a whole new maze of which the astute will find the centre more quickly and easily than the stupid; and the stupid are often the more transparently honest.

The Government have not yet conceded any system of appeal in respect of any part of this Bill. Ministers have claimed that it will work well enough and the intention is good. Of course it is, but they cannot speak for those who follow. It is said again that the citizen always has recourse to Ministers through Parliament. Those of us who have sat as elected Members in another place know that although it is true in theory, it is sometimes hard to make it true in fact. I wonder whether these protestations by Ministers are quite good enough. They certainly differ greatly from the previous Labour clamour about the need for a Parliamentary Ombudsman.

The fact is that we claim to live in a democracy, and yet we subscribe—and will subscribe increasingly under a Socialist Government—to a system which is the negation of it. In this Bill we have a system which, after a few formalities in Parliament—and I mean no disrespect by that—a few formalities in the name of democracy, gives too many powers to too many officials who, innocently and dutifully, can do untold harm to the structure of industry. I believe that Parliament owes it to itself and to the nation to keep some practical check upon them. I trust that in saying these things I have not trespassed upon your Lordships' good will towards maiden speakers, but I speak with conviction and without malice, and for that I may be forgiven my trespasses.

May I finally say that I am preceded in this House by two distinguished ex-Members of Parliament for the Rushcliffe Division of Nottinghamshire, by the noble Lord, Lord Clitheroe, and by the late Lord Rushcliffe, both of whom did yeoman service as elected Members of Parliament, both of whom in their time must have shared my personal regret that I can no longer have the same close association with those who elected me five times and rejected me on the sixth. But in the wider and more peaceful field of your Lordships' House I shall not forget them, and indeed, in my small way, from these Benches, I seek to bring them back to the paths of political righteousness, as and when your Lordships will permit.

4.12 p.m.

LORD BALFOUR OF INCHRYE

My Lords, I am sure I echo the feelings of noble Lords on all sides of the House in congratulating the noble Lord, Lord Redmayne, on his remarkable and effective maiden speech. It was effective and knowledgeable, and I could not help feeling that the silence of years which is imposed upon the Chief Whip, certainly in another place, has resulted in an accumulation of knowledge and debating power which your Lordships are glad to receive, and look forward to receiving on many future occasions.

Also, to comment upon the speech of the noble Lord, Lord Rhodes, gives me a chance of saying what splendid work he has done personally in many parts of the world. Our paths chanced to cross earlier this year in Hong Kong. They chanced to cross later in Bangkok. In each of those places, as indeed in other places, I heard tributes by the business community paid to the personality and to the work of Lord Rhodes, and of the pleasure it gave all these business communities to meet him in person.

I thank the noble Lord for his full and detailed explanation of this Bill. Nevertheless, it is a dated Bill. This Bill was produced before the economic crisis of world confidence which certainly took Her Majesty's Government by surprise. We debate the proposals in this Bill to-day, but they cannot be of great consequence, and indeed may be irrelevant unless on a far higher level the Government have the courage to persist before all resistance in carrying out the proposals which the Prime Minister outlined last Wednesday, and then beyond that have the courage to go further in several directions. I believe that, unless we now lay the foundations for a far greater productive effort, the few bricks in this Bill will go nowhere towards rebuilding our national economy on sound and lasting lines.

I know your Lordships are to have an economic debate on Thursday, and on that occasion past Chancellors of the Exchequer will doubtless shower their wisdom and experience upon your Lordships and debate the details of the Government's proposals. But I make no apology nor do I believe that any is needed, for touching on these larger issues, because essentially they are co-related to the proposals in this Bill. We consider to-day industrial development. But I think there will be no development and precious little industry if the Government waver in their courage or scope of action in the weeks, it may be only days, which are left to us. So far all the crisis measures are negative and restrictive, yet we need far more than this for a production success. Our need is expansion, not contraction. This Bill has in it the seeds of expansion, but in itself can do little without far more extensive measures by Her Majesty's Government.

I would ask your Lordships, what good is an increase of capital grant for machinery and plant from 20 to 40 per cent. if, in a development area, restrictive practices on all sides, management and unions, are not outlawed? What is the good of giving capital grants for machinery when every day we read in the paper of resistance, based I think on the old Luddite idea, to the use of new machinery and to the use of new plant? In a letter to The Times last week the noble Lord, Lord Byers, said: We need anti-monopoly and anti-restriction laws with teeth if we are to be competitive in the world's markets. I think the noble Lord, Lord Byers, was there writing wisely.

Next, if liner trains (which I believe in public opinion are a test case) are to he shunted into sidings away from the open terminals, what good is a 20 per cent. grant for hovercraft? If leaders of great unions openly defy the call for the "freeze", or if the Government under pressure whittles away the "freeze", what good is a 20 per cent. grant for a computer? If Government expenditure at home continues on the present vast scale, including such things as subsidies for rich council tenants, and a bill of some £55 million for free medicines given to many who can well afford them and have no need for receipt of Government subsidies; if Governments pending overseas is to be cut by only a derisory, totally inadequate £100 million, and overseas aid is to continue on a scale which we cannot afford, what is the sense of thinking in a competitive world that we shall gain any real economic heights from the £275 million grant in 1966 under this Bill?

If the Government persist in the nationalisation of steel at this time and hundreds of millions of bonds are issued and added to the public debt, we shall be perpetuating, for Socialist doctrinaire reasons, an act of folly which can only be reflected in reduced confidence in Britain's sense of economic responsibility by the rest of the world. Any good this Bill may do will be overwhelmed by the injury inflicted on our economy. By all means let us pass this Bill, but surely we can at the same time ask for action on a wider front in the economic struggle for survival. Parliament is soon to adjourn for the Long Recess, but I believe that Parliament and the country are entitled to expect legislative steps before the adjournment such as will firmly ward off immediate dangers and lay the foundations for an expanding future on a firm basis of reality and sense.

I would that, instead of this Bill to-day, we were receiving, first, assurances from Her Majesty's Government for a firm implementation of the Prime Minister's proposals last Wednesday, irrespective of any resistance he may meet in any quarter; secondly, notice of real reductions of great magnitude in Government spending; and, thirdly, notification of the postponement, for the present, of the nationalisation of steel. Then, and only then, will the little help in this Bill we are discussing to-day be of real value to the nation's economy.

4.20 p.m.

LORD ABERDARE

My Lords, I follow as the fourth speaker in this barrage of criticism from this side of the House about the Bill before us, but the case has been put with such clarity by my noble friends who have already spoken that I shall not be following them in general terms. My noble friend Lord Erroll of Hale spoke with his usual clarity and conviction on the Bill as a whole, and his speech was followed by a brilliant maiden speech from my noble friend Lord Redmayne. The noble Lord, Lord Balfour of Inchrye, followed with a comprehensive review of our economic situation and the Government measures to meet it. I feel that the case has been so adequately put from this side of the House that I shall confine myself to underlining only one small point and one particular area of the Bill. This, as your Lordships may have guessed, is in reference to Wales.

I am particularly concerned with Clause 15 of the Bill, which substitutes development areas for development districts. The White Paper of January last, with its map of the development areas, shows that Wales almost wholly is to be one of these new areas, excluding only a small area in the South East around Cardiff and Newport and another area on the North-East coast. At first sight this would seem to be a magnanimous, and even magnificent, gesture on the part of the Government, and I am sure it must have pleased a great many Welsh Members who sit in another place—but certainly it did not appeal to the electors of Carmarthen. However, as I see it, there are some serious drawbacks to making Wales one whole development area. The fact is that it is too large and that within the area there are too many districts where there is relative prosperity in one part and relative depression in another.

Under the previous scheme it was possible to bring help where help was most needed. Under this scheme it seems to me there is a lack of discrimination between the districts where help and industry is required and others where it is not. It it not by any means easy to persuade industrialists to go where one wants them to go. In spite of the stick of industrial development certificates and the carrot of financial incentives, it still requires a great deal of hard work; and it becomes even more necessary that when we do persuade them to go somewhere they go where they are most needed. This is what I find to be lacking in this Bill.

I am sorry the noble Lord, Lord Champion, is no longer in the Chamber, for I was going to mention that in Pontypridd, where Lord Champion lives (which is not far from where my home is), the percentage unemployment rate is 1.5. This must be taken in relation to the percentage rate for Great Britain as a whole, which is 1.2 per cent. It is very near the average for the country as a whole, but it is considerably under the average for Wales as a whole, which I believe is 2.4 per cent. (I quote these figures from the Ministry of Labour Gazette for June, 1966), whereas Milford Haven has an unemployment percentage figure of 10.1 and the Rhondda Valley, which is only a stone's throw from Pontypridd, has a figure of 4.8. Surely it is in areas such as Milford Haven and the Rhondda where we need help and where industry should be induced to go, rather than that it should go to the relatively better-off areas, such as Pontypridd. I feel that the Bill fails in this respect in not using public money to the best advantage. I wonder whether it is really the right way to go about the matter, and whether it was not easier under the old system to bring help more quickly to the right place at the right time.

I should like to mention one other matter in the Bill, which particularly affects Wales, although, of course, it affects the rest of the country as well. I refer to its effect on the tourist industry by removing investment allowances from the hotel industry. In Wales in particular, and I am sure in other parts of the country, the tourist industry is an industry of great growth potential. I would go even further and say that it might well be part of the solution of the problem of depopulation of mid-Wales if one were to do more to stimulate the tourist industry. This, to my mind, would be preferable to the idea of having a new town there. I feel that the tourist industry is very hard done by. The British Hotels and Restaurants Association has estimated that the investment allowances saved the industry 13.6 per cent. of the cost of re-equipment. This is now to be removed, and on top of this the hotel industry is liable to pay the selective employment tax.

The noble Lord, Lord Rhodes, as my noble friend Lord Erroll of Hale said, made a virtue of discrimination, and was discriminating in favour of exporting industries and manufacturing industries. Surely the hotel industry can claim in a large way to be an export industry, for it earns an immense amount of foreign currency; and I believe it is deserving of further consideration. The Prime Minister in his speech last Wednesday on the economic situation mentioned some ill-defined scheme of loans to the hotel industry, but I doubt very much whether this can possibly remedy the damage which has been done, both by the removal of investment allowances and by the imposition of the selective employment tax. On these two grounds I doubt whether this Bill is in the best interests of Wales.

4.30 p.m.

LORD SILKIN

My Lords, I must apologise to the House for daring to speak without having heard any of the speeches which preceded mine, except the last. Normally, I would not have done so, and I do not think I have ever done it before. Unfortunately, I was detained, and I wanted to speak, if only to congratulate the maiden speaker, the noble Lord, Lord Redmayne, on what I understand was an excellent speech. I have a vested interest in his former employment, and it is interesting to me to see what happens to former Chief Whips. I am very glad to see that they do very well and they come here, and I shall look forward with great interest to his progress.

There are only two points which I want to make about this Bill. One is that it puts right (I do not know whether this has been said before) an anomaly in previous legislation, because the grants have been related to the amount of employment provided. In their administration there has been a rough and ready test as to how much employment was actually provided and what would be the cost of it, and if, in fact, it turned out that the amount of employment in the development districts fell short of what was thought to be the right number, then there was no grant at all. In other words, either one got the whole grant or one got nothing. I thought that anomalous.

If an industrialist went to a development district, and the amount of employment which he created fell short by two or three of what was thought to he the right number, he lost all opportunity of getting a grant. I had a case in point where an industrialist went to a development district and took the opportunity of installing automation. From every point of view that was most desirable, but one of the effects was to reduce the amount of employment that he could provide, and therefore, under existing legislation, he failed to qualify for a grant. I am glad to find that this has been put right in the present Bill, and that such an industrialist will get a grant proportionate to the amount of employment which he is able to provide.

The noble Lord, Lord Aberdare, has referred to the hotel industry and he regrets, as I do, that it is not able to benefit from this legislation. On the whole, I think that hotels are having a difficult time at present. We are very short of hotel accommodation in this country, as anyone who has tried to book a room in Manchester, or any other populous place, will know. But if a grant is to be made on the basis of assistance to the export trade or to the tourist trade, it is very difficult to assess how much assistance any particular hotel is going to provide. No hotel proprietor can guarantee which type of visitors he is going to get.

I was in Manchester the other day, and I thought that a hotel of the kind at which I stayed would be eminently appropriate for a grant. But I took the trouble to make some inquiries, and I found that, apart from people who came on business in the normal way, there was hardly anybody there. So the hotel would not qualify for a grant if the benefit to our tourist industry had to be assessed. I hope that, as the Government have stated, they will find ways of benefiting the hotel industry, other than on the ground that it is an advantage to the tourist trade. As I say, we are very short of hotel accommodation, even for holiday traffic. In these days so many people go abroad for their holidays, and I am sure that one of the reasons for this is that hotel accommodation in this country is very difficult to obtain. Therefore, I hope that the Government will have in mind the possibility of giving assistance in the development of new hotels.

There are a number of matters in this Bill which I think should be examined in Committee, though I do not propose to trouble the House about them at this stage. In my view, this is a Bill which we should all welcome. It certainly extends the benefits which industrialists will get from going to the new development areas, and I do not feel nearly so apprehensive as the noble Lord, Lord Aberdare, about the fact that the development districts have been somewhat extended. There have been certain anomalies, on which I will not dwell now, in the fact that certain parts were accepted as areas where one might build a factory but where. if it was to qualify, the employment had to come from fifteen or twenty miles away. That was quite undesirable, and it is more appropriate to include in the Bill development areas where factories are encouraged to be built. So I hope that this Bill will have a good passage, and I welcome it very much.

4.37 p.m.

LORD ROYLE

My Lords, I wonder whether I might begin by offering my congratulations to the noble Lord, Lord Redmayne, on his maiden speech. He and I had something in common in the days gone by, when I was one of his opposite numbers in the Whips' Office in another place. He and I were treated rather differently. He was rejected, or sacked, by his constituents. I was sacked by my own Front Bench from my position as a Whip, for having voted in a Lobby in the House in opposition to the desires of the Labour Front Bench at that time. But during the period when the noble Lord, Lord Redmayne, and I were in the Whips' Office we worked very closely together, and it is a great joy for me to see him on the opposite Benches and hear him make such an effective speech.

He and I have something else in common, and because of this I have a great deal of sympathy with one part of his speech. He referred to distribution as against manufacturing. I was engaged in manufacturing industry, as were my forbears for a very similar period of 200 years, so I appreciate that the distribution side of British industry has been rather neglected in the days gone by, and looks like continuing in that way. It seems to me that it is never fully realised what an important and essential part the distribution side of industry plays in our country's economy, and the fact that it is constantly neglected leaves me with a certain amount of concern.

The noble Lord, Lord Aberdare, concentrated in his speech on Wales. I do not blame him for that. He was not being parochial at all. All of us have our special interests, so far as development districts are concerned. Therefore, in what I have to say this afternoon, I shall be thinking in terms of another part of the United Kingdom—Lancashire. It is true to say that geographical and constituency interests die hard, even, one finds, among your Lordships. This is a Second Reading debate, and therefore it is in order to discuss what one thinks might be in the Bill, as against what is actually in the Bill.

Parts of the North-West, in the days gone by, have benefited from Government control over the location of industry, but little priority has been given to the special needs of the region. Since I put that down in my notes, after reading most of the Report of the debate in another place, we have had a speech from my noble friend Lord Rhodes, and I must say that, to me, my noble friend threw a completely different light on the problem which is facing me this afternoon. It seemed to me that he was much more forthcoming than were his colleagues in another place. The North-West has had a rate of economic growth well below what has been envisaged in legislation in the past, yet the Government's proposals to stimulate industrial investment have so far, I claim, ignored the needs of many areas in the North-West of England.

My Lords, if I were to take a text for what I want to talk about this afternoon it would be the latter part of subsection (3) of Clause 15, which reads: …and in exercising their powers under that subsection the Board shall have regard to all the circumstances actual and expected, including the state of employment and unemployment, population changes, migration and the objectives of regional policies. Large parts of North-East Lancashire, the Rossendale Valley, the area around Wigan, the Westhoughton districts and other traditional cotton and coal districts, and even my old constituency of Salford, have suffered decline, loss of population, an inadequate range of employment opportunity, excessive travel to work and a large stock of obsolete social and industrial capital. It seems to me that under this Bill as it is written, and to some extent ignoring what my noble friend said in his opening speech, these areas remain, in terms of incentive investment, in exactly the same category as London, the South and the Midlands. To me, and to many people in the North-West of England, this is just not good enough. All the main economic indicators show that this region's performance has been poor in relation to other regions of the country. The need is for more growth industry and growth firms with a high level of investment in new buildings, plant and machinery.

In my view it is a mistake to make unemployment the sole criterion for industrial development aid, and I hope it is not going to be so. I hope the words in that subsection mean that this is not going to be the criterion. Low employ- ment in the places to which I have referred is due to loss of population by outward migration, and to some extent to new industry coming into old mills and other vacant buildings. But, my Lords, new factories are required to achieve the maximum efficiency and productivity. Restrictions on the issue of industrial development certificates are hindering efforts to strengthen and modernise the economy of these areas. Many of the old industrial towns of Lancashire—and I know them so well—with urgent need for urban and industrial renewal do not qualify for grants to clear derelict land, industrial spoil heaps, empty and falling-down factories, and even empty churches. Slag heaps abound throughout the area, be spoiling the landscape. Indeed, even limited progress in this respect is seriously retarded by Government restrictions applied outside the development areas on local authority and private spending on capital projects.

The four advance factory building programmes which have been launched by the Government during the past two years have included only five factories for the North-West, out of 82. My Lords, 8,000 miners at thirteen Lancashire colleries are affected by the Coal Board's pit-closure programme as at present outlined. Advance factories are to be built in other areas to offset the loss of jobs, but none has been announced for Lancashire. Already there are many signs of the population drifting to other parts, despite the fact that each Government have in turn expressed their desire to stop this drift to the South-East. The noble Lord, Lord Redmayne, referred to this matter, and rather suggested that, because there was a chance of our going into Europe, it would be a good thing to have most of our industry in the South-East of England. What on earth is going to happen to the other parts of the country? Are we to have devastated, derelict areas all over the country while the wealth and development all goes to the South-East, which is already in a much more advantageous position than other parts of the country, particularly those to which I have referred? I take umbrage at the suggestion made by the noble Lord, in his non-controversial maiden speech, with regard to these matters. I feel that this is completely neglecting the claims of those parts of the country from whence I come.

My Lords, in the Rossendale area, bus loads of women every day go thirty miles to work. I know of a large industrial firm—I will name it; it is Marley Tiles—which was refused a certificate to build a factory in Haslingden, although the Haslingden Council approved. The firm was prepared to build houses to bring in, if necessary, additional operatives. It went South, and is now advertising in the local Lancashire papers for workers to travel South. What a ridiculous situation! Another example: a Hemel Hempstead firm is advertising in a Burnley newspaper for weavers. At Bacup, also in the Rossendale Valley area, a development company is ready to help build a new centre for the town if Her Majesty's Government will lend a sympathetic ear and grant development certificates. It is a side issue—a sidekick, almost—to the problem that local authorities are losing rates because no one has the authority to pull down the derelict factories, some of them more than a hundred years old.

The crude division of the country into high priority development areas and "the rest should, in my opinion, be replaced by a policy related to the varying needs of individual areas within the regions. The general position of unemployment now makes it possible to adopt measures taking full account of all relevant and social considerations. My feeling is that there are parts of the country—because Lancashire is not alone in this—outside the development areas where a grant larger than the 20 per cent. envisaged would be justified, particularly if the gap left by the reduction in coal and cotton production is to be filled.

My noble friend Lord Rhodes rather indicated—and the Bill does, too—that we have not seen the end of what the development areas will be. I hope I am not interpreting him wrongly, but I got some hope when he was making his speech that the present development areas are not the last word: that there is a chance that they will be extended to other districts—and, obviously, I think particularly in terms of the districts I have mentioned, although there are many others in other parts of the country. Much of my strong feeling about this would be dissipated if I felt that there were this chance of an extension in the number of development areas.

If, however, that does not prove to be possible, I suggest that, while retaining the provisions relating to the 20 per cent. and the 40 per cent. grants, provision might be made for a new investment grant of, say, 30 per cent. which would be payable when the circumstances in particular areas justified it. And I feel that in what I have to say my words will not fall on deaf ears, so far as my noble friend Lord Rhodes is concerned. His standing in this field, both as a representative of an industrial constituency in Lancashire and as a manufacturer of great knowledge and experience, puts him in a very favoured position in your Lordships' House. He knows the district so well—and I am throwing myself on his mercy that some of these things may be accomplished—that he will agree with me that these areas are in serious risk of more depopulation and may become areas of complete devastation.

May I ask my noble friend who is to wind-up one question? And I declare an interest. In the course of my noble friend's opening speech today he referred to the grants which would be made for the installation of computers. May I ask him a straight question, hoping I may get a straight answer? Does this apply to the building societies? Will they, like other people who are having the 20 per cent. assistance, get that grant? I put this question in passing; but I should like to have the answer. The problem is a very serious one, and I hope that as the Bill proceeds, the areas to which I have referred may receive a lot more open encouragement than they have received so far.

4.51 p.m.

LORD HAIRE OF WHITEABBEY

My Lords, as my noble friend Lord Silkin suggests we should, I do give a warm welcome to this Bill—the more so after having heard the clear outline given by my noble friend Lord Rhodes and the speech of my noble friend Lord Royle, who took us to an area which has a long history of depression and need of development. In these days when our economy is ha gridden it is pleasant to have before us a Bill which, I hope, is not subject to the "slings and arrows of outrageous fortune"; although the noble Lord, Lord Erroll of Hale, promised us it would have a roasting or a pasting when it gets to the Committee stage. This, noble Lords will understand, is one of the Government's major attempts to re-vamp industry—and the economy has never had more need of this than now, with the economic crisis upon us. It releases a new and dynamic incentive to increased industrial investment. It will revitalise industry on a regional basis by injecting capital where it is most needed. The incentives promised by this Bill give extra benefits of up to 40 per cent. and, as we have been told, in certain cases which interest my noble friend Lord Royle up to 50 per cent.

Even the last Tory Government, of which the noble Lord, Lord Erroll of Hale, was a distinguished member, realised that one of industry's main weaknesses was its refusal to plough back sufficient profits to ensure growth of the kind that this country needs. He knows that the tax allowances for investments, when introduced, had little impact. They benefited, for example, those companies paying the highest rate of tax, whether they needed most encouragement to invest or not.

Until recently, Great Britain was spending only £16 out of every £100 of the national income on investment and industry, while France was investing £20 out of every £100, Germany was investing £25 and Japan reached the height of £33 out of every £100 of national income. We were in fact at the bottom of the list.

This Bill, instead of tax allowances, as under the Tory Government, will introduce direct payments. These direct payments will have greater flexibility. They will be easily adjusted between industries where the effort needs to be most concentrated and where variation between regions is needed. Five regions will have 40 per cent. incentive and the rest will have 20 per cent.; but the Board of Trade will have the power to modify. Thus they will complement the work of the Regional Councils.

These incentives are, I hope, easier to understand and are more quickly available. It is, nevertheless, a complicated Bill, and noble Lords opposite will have difficulty in giving it a roasting on Committee. There is no need for them to try to make it more complicated by calling in aid the abstruse calculations of some accountants.

Even without this Bill in the first sixteen months in office, the Government under my right honourable friend the Prime Minister and my right honourable friend the President of the Board of Trade have achieved substantial success in steering new industry and employment to previously underemployed regions. Public investment has led to the building of Government-owned factories on a large scale and many more are coming along in the development areas. Much assistance also was given to private industrial enterprise in these areas. In 1965 a much larger share of the nation's new factory building went, for the first time, to regions of the North and West and not to the South and East. Scotland, Wales, the North and the North-West got 50 per cent. of the new factory approvals in 1965, as compared with only 39 per cent. on average for the five years 1960–64. Yet they have only one-third of the population. This shows a new attitude to development areas. The noble Lord, Lord Redmayne, whom I also should like to congratulate on his maiden speech, though I did not know him so intimately as my noble friend Lord Royle, mentioned that his attitude would be towards developing again in London. This I do not agree with and cannot accept.

In the same period the share of London and the South-East, the Eastern counties and the Midlands fell to 30 per cent. of the national total; so the trend, as introduced by this Government, is in the right direction in both cases. The increase in 1965 in new factory building in Scotland and in Wales, where it is most needed, was most dramatic. New factory approvals went up from 6 million square feet in 1964 (under the last Government) to 11 million square feet in 1965, a rise of 80 per cent. In Wales, there was a rise of 50 per cent. in square footage between 1964 and 1965. This is worth mentioning and it is worthy of applause. In the Northern region a rise of 17 per cent. in factory approvals took place in 1965 compared with the average of the previous five years. Noble Lords have quoted figures and facts from their own particular regions. My noble friend Lord Royle spoke of the North-West region, the noble Lord, Lord Aberdare, spoke of Wales, and I understand that my noble friend Lord Popplewell will make reference to the area he knows well and has lately come from, the North-East. I am happy to follow suit.

If I may, I would quote from the worst hit area of all. It does not normally fall within legislation in this House but in this Bill it is included in a small clause for the first time. I refer to Northern Ireland, a region which I know well, and which in recent years has been one of the hardest hit in the whole United Kingdom. It had an unemployment figure of 10 per cent. In the last year this figure may have dropped to below 6 per cent., but this is a very high figure and one which I make no apology for concentrating upon, especially at a time when we can claim an unemployment figure for the whole of the country of something like 1.2 per cent. That, compared with 6 per cent., indicates the dreadful burden which Northern Ireland still has to carry.

My Lords, Northern Ireland has suffered much adverse publicity in recent weeks, but the bigoted faction there might well spend their time and energy, and national fiestas, in applauding the greatly improved employment figures and the rapidly growing prosperity, because that is the trend in Northern Ireland. Those are achievements for which they may well thank their God, if no one else—certainly the Reverend Paisley can claim no part of it.

Only last week the foundation stone was laid for a vast new factory which is being built to produce rubber belting in Northern Ireland. This is the new Goodyear factory which has been located in the new city of Craigavon and is of particular interest to me as it will rise on the fields surrounding Port down where I was born and where my family have lived and worked and died. Port down is a town which I know well. It has suffered hardship and depression over many years, but it will grow, together with its neighbour, Lurgan, in the next ten years to form Craigavon, and will, we hope, grow in hope and prosperity, with no sign of bigotry or discrimination. Why should there be bigotry or discrimination when this one factory will shortly be employing over 2,000 people? Full employment, a thing not known for years in Portadown, may well destroy bigotry and discrimination. That is an interesting and welcome by-product which noble Lords may well think of. It is an interesting Ulster by-product of new factories and new industrial incentives.

Northern Ireland has now completed 10 million square feet of factory space, and in the current programme they have a 2½ million footage of factory space in hand. They have built almost 250 State-aided factories in an area with a population of 1½ million, and these have established themselves and helped to beat back the depression. This great firm of Goodyear, with its 90 factories scattered throughout the world, has decided to link Craigavon in Northern Ireland with one of the largest of the factories in Wolverhampton from where it will draw its key men. For me that, too, is a coincidence, for the headquarters of my firm is at Wolverhampton. I was impressed with one thing said by the managing director of Goodyear at the foundation-laying ceremony a week ago, and if I may I will quote from the Portadown Times of Friday last, July 22. He said: In Wolverhampton, where they built a factory in 1927, they had many people who joined them at that time and brought a wealth of experience to their common endeavour. Many had progressed to high positions within the company and in a number of cases their sons and daughters, and even their grandchildren, were now a welcome part of the Goodyear family. 'I am telling you about this', he explained, 'because I feel it is most relevant to our constant company policy and because this long record of employee service is the living evidence of our belief that success must come through people. But we are also a company of the young, too, with their ambition and enthusiasm, and they will keep us moving into the future to new expansions and even greater success'. Well, my Lords, there can be nothing wrong with a firm which shows such understanding for its employees and such humanitarianism, and perhaps more than anything else, in these dark days, such a sense of faith and hope in the future.

Such quotations as I have just read are perhaps worth more than all the figures and references to factories which I could quote. Nevertheless, let me say that the Ulster Ministry of Commerce—this is the important point and indicates the relevance of what I have been discussing—working with our own Board of Trade, has been highly successful in attracting new industry to a derelict area. My noble friend who is to reply may look at all the inducements offered to attract industry there and consider whether we are maximising them in every respect; for example, with regard to rate remission and remission for transport, et cetera. Certainly Northern Ireland has now a diversified industry such as I never knew when I was a boy living there. It is no longer linen and shipbuilding which are the mainstays. Many new industries have been created for the manufacture of manmade fibres and electronic equipment; and many other industries imported from the United Kingdom and elsewhere are giving employment to this too-long depressed and under-developed area.

Finally, there is one aspect to which I should like my noble friend and Her Majesty's Government to give more thought; it has already been mentioned by my noble friend Lord Silkin and by the noble Lord, Lord Aberdare. I refer to the problem of the tourist industry. Perhaps in the light of the Prime Minister's one hopeful comment in his statement of last Wednesday it may no longer he necessary to discuss this problem. Perhaps the Prime Minister has already heard my plea made in this House several months ago. I wish to draw attention to the needs of the hotel industry as a whole. In the past it has been denied any inducement to build, expand, modernise, redesign and redevelop. Hitherto what the industry has done it has done from its own resources—apart from a few small investment incentives which have now been withdrawn. It has been denied even tax relief. Repairs are chargeable to the capital account and cannot be allowed for tax purposes against the revenue account. There is no rates remission, as in Eire, where they enjoy two-thirds exemption for the first seven years.

Yet, my Lords, in the new situation regarding tourism, arising from our economic crisis, we shall need to spend more to provide accommodation for the tourists coming here with, we hope, their foreign currency, and in order to keep our own people at home. We shall need more accommodation in the form of cheap, middle-grade hotels. Tourism, as was said by the noble Lord opposite, is one of our most successful industries. In a year or two it may well be our top dollar-earner, judged by its earning of foreign currency. It has broken records again this year. The figure of 3 million foreign tourists who came here last year has already been surpassed in this 1966 season. From tourists we earned £360 million last year, and the 1970 estimates give us figures of some 4 million tourists and £500 million worth of foreign currency earnings. I think that figure will be much surpassed. So, my Lords, the tourist industry is worth encouraging, and this Bill is lacking in encouragment; it does not offer worthy investment incentives. In the hope that this Bill may yet be amended to include the hotel industry, I will rest my case. But in every other respect I support the Bill.

5.10 p.m.

LORD POPPLEWELL

My Lords, I should like first to join in the congratulations to the noble Lord, Lord Redmayne, on his maiden speech. I am sure that he will not think me in any way patronising if I recall the many years when he and I worked together in another place, the noble Lord as Deputy Chief Whip for the Tory Party and I as Deputy Chief Whip for the Labour Party, and the times when we used to go to Germany to talk to our German colleagues and try to inculcate some form of democracy into the new political situation there. These associations were always very pleasant, and I am delighted to be able to join in congratulating the noble Lord on his forthright—I would not say that it was quite non-controversial—speech. Having said that. I must add that I cannot agree with what the noble Lord said—indeed, I would say that it was damned awful. I shall be referring to some of his arguments during my remarks.

I wholeheartedly welcome this Bill. I think it provides more positive methods to ensure a more evenly balanced industrial expansion in this country. There is a legacy attached to this. The noble Lord, Lord Redmayne, who I hope will forgive me for referring to his maiden speech, appeared to take the view, shared by many people outside, that the drift of population from the North and West, from Wales and Scotland, towards the Midlands, the South-East and London was a natural thing and nothing could stop it. This drift commenced just before the First World War and it was accentuated during the inter-war years. Towards the end of that period, the Government of the day, which did not accept the argument that the drift could not be stopped, began to talk about regulating the distribution of industry. We know that many of the establishments they then set up, particularly the new trading estates, were minor attempts to arrest this drift. The Coalition Government of the war years agreed that something more drastic was required in the changeover from wartime conditions to peace to ensure that vast parts of the country were not going to be denuded of their population by concentration in the Midlands and the South.

In 1945, the Distribution of Industry Act was passed. I think that that Act was one of the finest put on the Statute Book by the Government of the time. The operation of that Act achieved much more tangible results in arresting the migration of people towards the Midlands and the South. In the North-East and in Newcastle-upon-Tyne—I had the privilege of being one of its Members of Parliament for over 21 years—a wonderful job of work was done under the 1945 Act. There are now more people employed in the diversity of industrial undertakings there than there are in many of our traditional basic industries, such as steel. What would have happened had that Act not been placed on the Statute Book and if the then Government had followed the argument of the noble Lord, Lord Redmayne, to-day that we could do nothing and must let the drift continue? We should have found many more acres in the North-East handed over to grouse moors or becoming derelict.

The Tory Government of the 1960 vintage changed the terms of the 1945 Act very definitely for the worse. Instead of broadening the scope of the growth areas, they narrowed the concept to that of the growth of unemployment. Those of us who have served in a development area know the adverse effect that has had, and to-day I am delighted that the Government are introducing this Bill to replace the 1960 Act, though in any case that Act would have ended in March, 1967. The speeches we have had from the other side of the House indicate their different line of approach. When I think of the 12,500 people, on an average, who have been forced to leave their homes in the North-East every year over many years past, when I think of all the human and social misery involved in the compulsory direction of labour over many decades, I am delighted that this measure is going to give the Government much wider scope to arrest this drift.

The main line of argument against the Bill seems to be that there is a discrimination against service and distributive industries. I agree that these are not going to qualify for the 40 per cent. grant. But I feel a little nauseated when I hear noble Lords on the other side of the House and Opposition Members in another place criticising the Bill in this respect, because what has done more to destroy service and distributive undertakings in the development areas than the policy followed up by the previous Tory Government? They closed down branch lines, railway stations and goods depots, deliberately transferring goods to the already overcrowded road network which could not possibly deal with them without a tremendous expansion. And then they say that this Bill is going to harm the service and distributive services. Really, there must be a little more thinking than this.

To take the cash grants, one would think that nothing was being done for the hotels and the catering side. But remember that this Government have already given some £2 million in grants to the British Tourist Association. They have increased the allowances covering hotels and the catering trade from 10 to 30 per cent. Surely this is something to be taken into consideration. Arguments have been advanced from the other side that more ought to be done for hotels and catering. I agree that there is a tremendous need for an upsurge in our hotels and catering. They really are a disgrace to us as a nation, particularly so in some of our development areas. We must have better hotel accommodation to attract more visitors. But let us get this in its correct perspective. In so far as hotels and catering services are concerned, do not let us minimise what they are doing as one of our greatest foreign exchange earners. They are doing a good job of work, and they ought to do much better. But to put those services in their correct perspective, only 7 per cent. of their turnover is derived from foreign exchanges, compared with the 25 to 30 per cent. in manufacturing industries.

Therefore, in this urge to balance our payments, we have to seek a freer and a better interchange of trade between this country and Europe and the rest of the world. The question of priorities has to operate, and we have to see that our manufacturing industry is brought to a higher state of efficiency. I suggest that this Bill is one of the contributory factors that will assist in this, because, instead of the manufacturing industries coming to the Midlands and to the South, where there is already a shortage of labour and where labour difficulties are developing (employers pay over the odds to attract labour) they may go to the development areas in South Wales, the North-East, the North-West and Scotland where there is more labour available than in the other areas. Therefore, it is in our interests to encourage our manufacturing industries to be guided in that direction.

Another argument used against this Bill is that it is an insidious way of establishing State control. I am always intrigued with this argument from noble Lordson the other side, and from the Tory Party as a whole, when there is no objection to the taxpayers' money being given in subsidy or other forms to private industry, such as farming, shipbuilding and for research, of which private enterprise gets the full benefit. But if it is a question of helping industry to develop and investing Government money in that direction where the Government and the nation will possibly have some return, it is a different story; objection to this is taken all the time. One finds this particularly interesting.

In this connection, while I am on the manufacturing side—I do not want to deal with too many of the clauses of the Bill—something that has not been mentioned but which I welcome is the additional assistance that is being given to the building and equipment of fishing vessels. Here in this Bill I see that the 1962 Act limits the help to the fishing industry to some £17 million. This Bill increases the grants from three-tenths to two-fifths for small fishing vessels of under 80 ft. to be built, and lifts the grant from one-quarter to seven-twentieths for vessels over 80 ft. I know that my friends in the Amble area and in the small shipbuilding areas, particularly those in the fishing fleets, will very much welcome this additional assistance that is being given to the fishing industry in this particular direction.

A very good step forward is taken by Clause 15 of the Bill. The noble Lord, Lord Aberdare, appeared to think that this Bill was still dealing with the question of unemployed in a given area, and he compared Pontypridd with the rest of South Wales. This Bill in its wider scope has taken into consideration all the circumstances of actual and expected development of the area, including the state of employment and unemployment, population changes, migration and the objectives of regional policy. Here I suggest is one of the kingpins of the whole Bill. We often hear from the Liberal Party their ideas about regional policy and regional development. Here we are doing something that will enable the Board of Trade to take into full cognisance the opinions of the various regional boards that have been established up and down the country, which are able to look at all the problems involved—transport problems, health, welfare, education, hospitals and suchlike—and plan for growth. Here in this Bill there is a foundation-stone on which the Board of Trade can give material assistance. I congratulate the Government on this particular clause.

On a minor point, I also congratulate the Board of Trade on changing the title of the Industrial Estates Management Corporation of England, which is the cumbersome name now given to the trading estates under the 1960 Bill, to the English industrial Estates Corporation. I know that in all the arguments I used to have with Sadler Forster, the chairman of this undertaking, I tried to get my tongue round the trading name of this organisation and always failed miserably. This simplification is a step forward.

In conclusion—I do not want to speak for too long, but I have been interested in this question during the whole of my political career—I should like to refer to Clause 20 which continues the power, to deal with derelict land. Visitors, particularly those from Scandinavia, who come to this country and sail up the Tyne to the Tyne Commissioners Quay, or wherever it be that they land, are appalled at the derelict state of the Tyne banks. What applies to the River Tyne applies to many other parts of the country, both in the approaches to our rivers and elsewhere, particularly if we are going to Northumberland, Yorkshire, Durham or South Wales. We find how the countryside has been spoilt by the ravages of private enterprise—the slap heaps, the pitheaps, that have been turned up. The same applies if we go to the Peterborough area, although I am delighted that steps are now being taken to restore the dereliction caused by taking clay for bricks and just leaving the morass for many years, and I compliment the London Brick Company on what they are doing in that particular direction.

The Bill also gives local authorities power to deal with derelict land. Their present powers end on March 31, 1967, and I am delighted that they are being extended. I should hope that the financial assistance given to local authorities in this respect might even be up to 100 per cent. of the cost involved, because in many instances it is they who are clearing up something for someone else. It is a national responsibility, and although I know it is always easy to seek a grant from the National Exchequer, I believe that this is a very worthy cause indeed.

Our new industries and the technical know-how must not continue to be centred into given areas such as the Midlands and the South. A diversity of industry is required and talking with my friend in the North-East I said "Why have you not got a computer production scheme up here? Look at the trouble we have if we want to use computers." This situation can be exemplified in many ways. But I see this Bill as a further step forward in the right direction. I think that in the follow-up—because this is only one measure: there are many more coming from the Government—we must ensure the maximum use of all forms of transport, and I look forward to seeing the Ministry of Transport White Paper which I hope will help to achieve this end and in influencing firms to settle into these development areas.

5.32 p.m.

LORD DRUMALBYN

My Lords, the noble Lord, Lord Popplewell, has referred sympathetically to the speech made by my noble friend Lord Redmayne; and we also were very pleased to welcome him in this House. Then, having made his sympathetic reference, the noble Lord opposite went on to say that he did not agree with a word my noble friend had said. I feel sure that my noble friend would return the compliment. My noble friend made a most robust and humorous speech, replete with the experience and common sense that we expect from him, and I know that the House will be waiting avidly for his future contributions.

I think it was inevitable, in the circumstances in which we are debating this Bill, that the debate should go pretty wide—and it has done so. My noble friend Lord Balfour of Inchrye asked: what is the point of giving grants on new machines designed to save labour, if agreement cannot be reached that the labour will be saved, whether or not labour is displaced? That is the kind of question that it is difficult to separate from a Bill of this kind. But, side by side with the wider implications, we have also seen contributions from a wide range of areas, many different types of area, all over the country. This is the sort of debate that one wants to have when reconsidering the type of assistance that ought to be given to industry.

The original purpose of this Bill—the reason why a Bill was needed at all—was to renew, with modifications, the Local Employment Act 1960, which replaces the Distribution of Industry Act 1945. The noble Lord, Lord Popplewell, referred to that Act as the late Lord Dalton's Act; and, of course, it is remarkable what a mellowing effect membership of a Coalition Government can have on a Labour Minister. In point of fact, it is as well to remind your Lordships that the 1945 Act was not passed by the Coalition Government but, having been introduced by Lord Dalton, it was actually passed by the caretaker Government before the Election in 1945. I mention that merely to show the contribution that has been made by all sides on distribution of industry policy, and as I develop my speech I hope I shall be able to illustrate how the contributions have been made.

Part I of the Local Employment Act was to expire after seven years unless Parliament otherwise determined. No power of renewal was given in the Act itself. It was thought right that Parliament should thoroughly re-examine the situation in the light of experience after seven years. I looked back at the proceedings in another place, and I found that, in the course of four full days' debate on the Committee stage, the rightness of such periodic examination of distribution of industry policy was not challenged. The attitude of the Government of the day showed an agreeable modesty and humility and a proper respect for Parliament in the future. What a contrast with this Bill! There is no automatic opportunity for Parliament to re-examine; no necessity for Parliament to re-examine after a further period of experience.

The Bill makes some useful minor changes which the experience of the last seven years has indicated as desirable: for example, in the powers of the Industrial Estates Corporations (and I do not agree with the noble Lord about the change of name) as well as a perfectly useless and misleading change in the name. It also makes changes in the scope of the industrial development certificates, though I think we shall have to look rather closely in Committee to see that these changes do not go a little too far. It is very difficult to hold a balance all the time between the rights of the person receiving the industrial development certificate and the interests of the Board of Trade and the public. This is what we shall have to look to. What has to be re-examined periodically is not just the detail, but the essence of distribution of industry policy. That lies, I would suggest, in the purposes for which discrimination in favour of some parts of the country over others is to be exercised; in the criteria for deciding which parts of the country should benefit from the discriminations; and in the means of discrimination to be applied.

As the noble Lord, Lord Rhodes, in his very full and able exposition of the Act said, under the Local Employment Act the purpose is the provision of employment appropriate to the needs of the district having regard to the circumstances of the district generally and of any particular description of persons therein and also to the proper diversification of industry. The criterion, as the noble Lord said, is that a high rate of unemployment exists, or is to be expected, and is likely to persist. These were the changes that were made in the 1960 Act. Previously, one looked only to the existence of a high rate of unemployment, but at the present time that high rate of unemployment must be likely to persist; and it is also possible to give assistance where a high rate of unemployment is to be expected and is likely to persist.

It is fair to add that the Act also allows the powers to be exercised, not only in the development district itself, but in other localities for their benefit, including districts receiving population from development districts. It is also fair to say that the Board of Trade did not apply a rigid figure of unemployment for their criterion, but were reasonably flexible in their approach. Criticisms have been made that the districts were too small. But the districts were seldon isolated. With few exceptions, districts were contiguous, forming recognisable groups.

In deciding how great the total area eligible for local employment grants should be, I think we must always bear in mind three considerations: first of all, and very important, however strictly and sternly the industrial development certificate policy may be applied in congested areas, at any given time there will always be a limit to the amount of industry on the move. What industry there is should therefore be steered to the areas that need it most. As I said, the limit varies at different times, and it may well be that with the measures just imposed we shall find that in the coming year there is less industry on the move than there has been in the past. One has to bear this in mind and make certain that what industry is on the move is steered to those areas which need it most. The greater the total area and population to which discrimination is applied, the smaller is the chance of the remoter areas (and they are usually the areas which need it most) getting a new industry.

The second consideration is that the effect of the incentives is that industries setting up in the favoured areas, or expanding there, as I think the noble Lord, Lord Redmayne, said, are given a competitive advantage over industries in the rest of the country. Thirdly, it is important that the choice of where to go should rest ultimately on the industry itself, so that it will feel responsibility for its own success or failure. In general it has been the policy of the Government in the past to say, "We should like you to go either to this, that, or the next development district, and if you do, you will get the benefits under the Act. You can go to one of the grey areas, if you insist, but if you do you will get no help from us under the Act". I must ask the Government, because it is one of the most crucial matters in considering a redistribution policy, are firms free to go where they choose within the five development areas, provided always that they are likely to succeed in the place that they choose? This is the crucial question to which I think industry will want to know the answer.

I do not quarrel with the view that unemployment should not be the sole criterion, as the noble Lord, Lord Royle, said, and that that policy did not help those areas which were suffering, not from unemployment but from loss of population and from failure to improve their amenities, and soon. I do not quarrel with the view that something should be done for them, too. But the fact is that such areas may be reasonably prosperous, so one is bound to ask, does it follow that the same should be done for them as for the areas of high unemployment? Most of the areas losing population suffer from inadequate diversification of industry. It might be better to encourage new types of industry to go there without giving the same inducements to those industries already established there or to industries of the same type as those established there, because experience shows that where there is no choice one tends to get emigration. It seems to me there are really two aspects to the distribution of industry policy. First of all, there are the steps to encourage industry to go and set up in a particular place; and secondly, there are the steps to enable firms already established there to prosper and grow, and in general to stimulate growth in the area.

It is, of course, right to try to stimulate growth in areas where growth will not take place of itself—for example, because of emigration. Equally it is possible for growth to take place in an area and yet for a high level of unemployment to continue. It follows, I think, that there still remains an overriding need for a special degree of discrimination in those areas with a high level of unemployment, over and above the discrimination given in favour of areas where there is little unemployment but where growth needs stimulation. At a moment when we are envisaging the possibility of the growth of unemployment in the country as a whole it is well to remember that at that kind of time unemployment seems to grow most rapidly in the areas of high unemployment and less rapidly elsewhere, and, in any case, the relativity between the two seldom changes in favour of the areas of high unemployment.

I do not believe that Part II of this Bill provides a final solution to these difficulties, and I am convinced that Parliament ought to look at distribution of industry legislation at regular intervals. It is not just a question of altering the development areas by order from time to time, but of Government and Parliament reconsidering the purpose, the criteria and the means of discrimination every so often. The last Bill said seven years: that is not necessarily the right period, but every so often we should certainly have the necessity to do this. Another point is this, which really leads me on to what I have to say in the next part. It gives the opportunity, an opportunity which is very hard to come by in legislative time, to make those necessary alterations of detail—the kind of alterations that we have in the Bill and some of which are badly needed. So it is a good thing to give a period to a Bill of this kind, and I propose to move an Amendment at Committee stage to limit the duration of Part II to seven years, as before.

LORD SILKIN

My Lords, would not that apply to all legislation?

LORD DRUMALBYN

No, my Lords, I think experience at the Board of Trade has shown (and several others have this experience) that this kind of legislation, where you are giving discrimination in certain areas and you have to consider which areas should have the discrimination, what sort of discrimination should be given and the criteria on which you are going to give it, that you need to change from time to time, and I see no reason to think that we have now reached finality in the form in which that should be given.

This brings me to Part I of the Bill dealing with investment allowances for the whole country. We really have two Bills in one here. I do not know whether it is a sort of "bargain offer" from the Government, but this part of the Bill has been tacked on to the measure needed to review distribution of industry policy and really has nothing to do with it except in so far as it applies higher rates of grant to certain types of investment in development areas. If we had had two Bills, that would have been given in the distribution policy Bill and not in the investment grants Bill. So we are really dealing with two Bills and not one.

I do not propose to go over the overwhelming arguments that have been advanced from this side of the House against the sort of discrimination contained in Part I between different sectors of industry. It is wholly different in kind from discrimination between one area and another. That is a form of discrimination designed to enable the population in certain handicapped areas to overcome their handicaps. Part I represents discrimination in favour of one part of the process of production—the actual making of goods or shops or buildings or the extraction of minerals—over all other parts. It also discriminates in an entirely haphazard and, I think, quite unfair way between different firms which happen to be differently organised. The Government recognise this (they recognised it in another place) but all they can say in the White Paper is that the vital task is to accelerate the process of modernization…of production". That is quite true; but should you create lack of confidence in one part of industry while at the same time trying to stimulate it in another? For example, the Government have admitted that it is unfair that a firm which maintains and repairs its own machinery should get a grant on new plant for the purpose while a firm which contracts with another firm specialising in repairs and maintenance does not. In another place the Minister of State, Board of Trade, actually conceded that textile engineers were a case in point. There is also the discrimination against road haulage vehicles, including those used for transporting goods to and from factories which export a high proportion of their production. The only exceptions are vehicles constructed or adapted for the conveyance or haulage of goods in or about private premises". This can only add to the cost of exports. We shall have to examine very carefully this provision in the Bill.

The area in the country which particularly needs help, I think everybody agrees, is the Highlands of Scotland—and I say this with great deference to the noble Lord, Lord Aberdare, who spoke up so well for Wales. For the Highlands the Bill does nothing except permit a differential building grant of 35 per cent., as against 25 per cent., in cases justifying special assistance. I might add that special assistance could be given under the Highlands Development Act, but this Bill does nothing. Apart from agriculture, the main industries are tourism and forestry. The grants for machinery and plant in hotels under the 1963 Local Employment Act are being entirely withdrawn. So is free depreciation. The noble Lord, Lord Popplewell, said that the initial allowance is being increased from 10 per cent. to 30 per cent. But, as the White Paper says, that is a form of loan. What the White Paper says is that the form of grant, the investment allowance, is being withdrawn altogether: so that the hotel industry is very much worse off. And nothing is to be put in place of these allowances—apart from a vague promise in the Prime Minister's Statement last Wednesday of a system of development loan assistance for hotels which can show that this will result in a significant increase in their earnings from overseas visitors. I doubt whether the Highland hotels will be able to show that.

As to forestry, it is not clear whether plant and machinery for the extraction of timber is, in fact, covered by the Bill. I shall move an Amendment to ensure that it is. I do not know whether timber extraction is making logs, or extracting timber or part of the construction industry. Perhaps it is all three; it is certainly one of them. In one way or another, forestry cannot logically be left out of the Bill.

In my view, investment grants are wrong in principle, for two reasons: one theoretical, one practical. The theoretical reason is that financial assistance can and should be given in needy cases—whether it is in the form of National Assistance to persons in need, or in the form of special inducements to industry in needy areas, or to enable a hard-pressed industry to reorganise, as in the case of the cotton industry. I can imagine that in the official view there is no fundamental difference between investment allowances and investment grants: both cost the Treasury money. In the one case the Treasury has to forgo money it would otherwise get, and in the other it pays out money it has already collected. Even the Treasury would have at least to admit that forgoing money it would otherwise get costs less in administration than collecting money and then paying it out again. But to the ordinary industrialist, the ordinary trader or the man in the street, there is a very wide difference indeed. In the one case, a person is allowed to keep more of his own money; in the other he receives somebody else's money, the taxpayers' money. To argue that the two things are the same is to assume that the State has a right to all that every citizen possesses and graciously allows him some of it to spend for himself—a heresy to which the man in Whitehall is particularly prone.

The second point is the practical one. In my view, it is wrong in principle that money should be handed out to firms who buy new machinery and plant without regard to the ability of the firm to make good use of it. It is, in fact, a cardinal principle of the Local Employment Acts that financial assistance should be given only where there are good prospects that the undertaking will ultimately be able to be carried on successfully without further assistance. Noble Lords will find that in Section 4(1)(a) of the 1960 Act.

In another place, the President claimed to find a precedent for the investment grants in the grants payable under the Local Employment Acts. He is, in fact, quite wrong, because no conditions such as I have just quoted are attached to the investment grants in the Bill. These grants are in no way dependent, as the investment allowances were dependent, on the recipients' succeeding in making a profit, or as the Local Employment Act grants and loans were dependent on the likelihood that the recipient would make a success of the undertaking.

Finally, we object to the proposed administration of the grants. Investment allowances are governed by law. A person has a right to them—a right which he can vindicate in the courts. He can plan his business with certainty, knowing that he will get them. But under this Bill nobody has any such certainty. The White Paper says: The Board of Trade intend to publish more detailed guidance about the criteria that they will use in dealing with claims, including such matters as the qualifying processes, the eligibility of various kinds of assets… and so on. Then it goes on: This guidance, which will be revised from time to time, will not be in the form of a legal instrument but it will be valuable in helping industry to know in advance of submitting claims how their investment in plant and machinery is likely to be treated. What certainty, my Lords, does that kind of thing give to industry? The wretched industrialist will not know for certain before he lays out his money on a machine worth £100 whether the goods will cost him £100 or £80, or, if he is in a development area £60. And the Board of Trade can change their mind at any time they like about the criteria.

I believe—and I think noble Lords on this side will share this view—that unless the Board of Trade can tell an industrialist for certain whether he will get the grant, and tell him before he makes his purchase, and unless there is some kind of appeal to an independent body against refusal, this will not be a scheme but a lottery. Last week we were dealing with financial assistance to the needy—supplementary pensions and allowances. Surely, if it is possible to provide for appeals to a tribunal there, it is possible to do so in the case of investment grants, where each year the applications will number only about one-sixth of the applications for welfare benefit. But perhaps the President is not aware of that precedent or does not approve of it.

What I dislike most of all is the precedent that this Bill sets. We always knew the Party opposite preferred arbitrary government to the rule of law. This Bill not only enables the Government by Order to vary the rates at which grant is payable, subject to the agreement of their supporters in another place, but allows the President absolute discretion to define as he will what goods are entitled to grant and to refuse grant even when the goods come within the definition. It simply is not good enough to say that, of course, the Board of Trade will not behave like that. We should be ruled by law, not by faith in the good behaviour of a Government Department.

In so far as this Bill continues and modifies the Local Employment Act, we support it. But we strongly disapprove of Part I. The Government said in another place, "If you vote against this Bill you are voting against the renewal of the powers in the Local Employment Act." That is quite untrue. Noble Lords know full well that these powers could be renewed by a Bill consisting of one sentence which would get through Parliament easily before we rise for the Summer Recess, let alone by the end of the year. But the Government have been very sly. They have not only tacked Part I, dealing with investment grants, on to the Bill; in the Finance Bill they have repealed the provisions for investment allowances and free depreciation. In consequence, if we defeat this Bill nobody will get anything except the initial allowances.

Of course, many who play a large part in our industrial affairs and in earning foreign exchange for this country, the bankers, the insurance companies, the tourist and catering industries, and a host of companies rendering services to industry and the public, will get nothing out of it anyway. Some manufacturing or construction companies may do a little better than at present, others a good deal worse. But all of them will have their confidence shaken through the wanton removal of the certainty of the present arrangements and the substitution of an arbitrary and discriminating system, which we can only hope will not survive in its proposed form for nearly as long as seven years. We shall not divide against this Bill, but we shall certainly seek to improve it in the remaining stages.

6 p.m.

LORD SHEPHERD

My Lords, on two occasions this afternoon I have found myself under some strain. The first occasion was when I and the House were confronted by the forceful maiden speech of the noble Lord, Lord Redmayne. I agree with all that has been said about that speech. We all enjoyed it. I am not quite sure what his following-up speech will be like. If it is any stronger than the one he has delivered this afternoon I am quite sure that we shall have to provide the noble Lord, Lord Byers, as some form of competition for him. I hope that the noble Lord will speak on many occasions. I could not help but reflect that we have in this House a Bishops' Bench, and there is what is known as a Privy Council Bench. When I see the number of ex-Chief Whips who are coming into this House I think there is a good case for a Bench of ex-Chief Whips. It remains to be seen whether the House would wish it to be in front of the Chamber or in one of the far distant corners.

My second moment of strain was when the noble Lord, Lord Erroll of Hale, trailed his coat quite forcefully across this Front Bench. My task, which in some ways is not a happy one as I cannot play tit for tat with him, with my noble friend Lord Rhodes is to see this Bill through, and therefore it is more likely to be sugar that must come from my mouth than perhaps the points that I should have liked to make in reply to the noble Lord. Therefore this is an occasion when, I am afraid, duty and discretion have got to come together.

Before I deal with a number of the points that have been made this afternoon, may I inform the House that, through the usual channels, it has been agreed that we should take the Committee stage next Monday, and if it is necessary—and I gather it is, from what the noble Lord, Lord Erroll of Hale, has said—that we should have a second day, then we will continue on the Tuesday. In spite of what noble Lords have said, I think there has been a general understanding that, for the benefit of industry, this Bill should be on the Statute Book before we go to our summer holidays. When that may be I am not sure, but it is recognised that we should do it before then. In those circumstances, I understand that the usual channels have agreed that we should take the Report stage and Third Reading on Thursday week.

In all these circumstances, it is quite clear that we should have as much consultation as possible, to see whether we cannot find some agreement, or perhaps set at rest some of the fears that have been expressed to-day. I repeat what I said on the occasion of the previous Bill, the Building Control Bill, that my noble friend Lord Rhodes and I will be only too willing to meet not only noble Lords who speak from the Front Bench opposite, but any noble Lord from any quarter of the House who has a point which he wishes to discuss with us before the Committee stage. If any noble Lord would like to get in touch with me through my office, or through my noble friend Lord Rhodes at the Board of Trade, certainly we will make ourselves available to him.

There has been some discussion here as to whether the new type of grant is as acceptable to industry as the previous one of initial allowances and investment allowances. There are many views as to how industry should be treated with the investment policy in mind. There are some who would say, though I must admit that in this House to-day no one has put it forward, that it would be far better to have no allowances and no grants, and to lower company and corporation tax. I think experience shows that that would not be the right policy; that there must be some form of incentive to those companies who are prepared to put their money back into their works.

It was, therefore, a question of whether we had the old style, or whether we had what the noble Lord, Lord Erroll of Hale, mentioned that industry would have liked to see, free depreciation. In that particular case there was consultation and considerable thought was given to the matter, but, as the noble Lord knows, it was ruled out on grounds of cost. The present scheme will in fact cost about £275 million. This is a sizeable figure. I personally wish we could do more, but if we were to put more money into investment grants, particularly at this present stage, I think we should increase the overheating which undoubtedly exists in this country. So if you have a limited amount you have therefore got to decide how you are going to use it to the best advantage of the country.

The noble Lord, Lord Redmayne, made a case for the service and the distributive industries. The Government recognises the part these industries play in the economy of this country. I have dragged this out from the back of my memory, but I think I am right in saying that manufacturing investment has been growing in recent years at about 2½ per cent.; yet the investment increase to the distributing industries has been 9 per cent. We all recognise that, if we are to get out of our balance-of-payments difficulties, the manufacturing industries and organisations can do it for us and no one else. The whole purpose of Government policy, both through this particular Bill and through the selective employment tax and other aspects of our policy, has been directed to stimulating manufacturing industry.

I agree with the noble Lord, Lord Balfour of Inchrye, that this Bill alone will not save this country or save industry. It has to be part and parcel of a massive effort by all workers and all management throughout the country. This Bill, as I see it, is rather like a singpost which, if the horse could read, would show it where the water lay. You can lead a horse to the water, but you cannot make it drink. As I see it this is one of the basic difficulties in this type of legislation: while you can hold out a carrot, while you can show people that this Bill or that Act is of help not only to themselves but to the country, it is a case of inducing them to use them. I agree one hundred per cent. with the attitude of the noble Lord, Lord Balfour of Inchrye, that this country has got to make a massive effort. It is no good putting blame on one side of the House, or on one political Party or another. If the truth be known, perhaps we all share some form of blame.

It is now for the country to react: the N.U.R. with their liner trains; manufacturers, by investment and modern approach to management; and, if I may say so to the distributing trades, to some of the manufacturers who resist an Act of Parliament such as the noble Lord, Lord Drumalbyn, steered through this House, the Resale Prices Act, this has not been an easy matter. There has been resistance. But I would agree with the noble Lord, Lord Balfour of Inchrye, that we have got to sweep away all these restrictive practices.

There was one point I would take up with the noble Lord, Lord Erroll of Hale, in regard to Bridlington. He used a phrase that really made me slightly angry; I hope it did not show. It was that the Government or the Board of Trade had "cooked the books". I said I would look into the matter, and perhaps the noble Lord would like this explanation. It is that the President of the Board of Trade held a private meeting with a deputation from Bridlington in February. During the course of conversation some figures were produced by the President of the Board of Trade in regard to 1958, 1959 and 1961 and these, as the noble Lord indicated, included the temporarily stopped, but those for 1960 and 1962 and for later years excluded these figures. The Minister of State for the Board of Trade, his attention having been drawn to this by the delegation, immediately wrote and apologised. This is quite a different inference from the one which the noble Lord, Lord Erroll of Hale, deliberately tried to make in this House. There is no point or purpose in public life in trying to "cook the books", because sooner or later you are going to be found out, as the noble Lord, Lord Erroll of Hale, perhaps knows from his own political public experience.

Bridlington is in a rather strange position. It has 3.7 per cent. unemployed, but it is an area which in recent years has had a net migration inwards. More people are now moving into Bridlington because of the industries which have been provided there, and on top of that there is a very large proportion of elderly and semi-retired persons who may be on the unemployed list but would not normally be regarded as possible labour for new industry being brought into the area. I would make it quite clear that while Bridlington has been excluded merely because the facts are what they are, the Bill in itself has some flexibility, in that if this area was ever to arrive at the position when it needed to be treated as a development area, then it could be so treated.

The noble Lord, Lord Erroll of Hale, said that the Bill was wasteful and expensive, and he also called for the right of appeal. I must put this to the noble Lord —and I am quite sure he knows it, but I think the House should be aware of the situation. If one has a mandatory scheme like the investment allowances, one has to have a Bill which is watertight in every respect. One either has an inclusion or one has an exclusion; one has no degree of flexibility. We found a very strange situation as to those items on which claims could be made for capital investment. The noble Lord is well aware that the "one-armed bandit" could obtain the old investment grant and the initial grant; the television set if it is rented; the gambling equipment—shall we say at Crockfords?—could come within the category of capital and be subject to the investment grant; I am even advised that the dresses, though I am not quite sure of the tails, of the girls in the "Bunny clubs" could be treated as coming under the previous legislation. Perhaps I am exaggerating slightly on this, but it shows that where one has a mandatory scheme matters which clearly should not be included appear to be included, yet it may well be that things which clearly should be in are in fact left out, and there is nothing one can do about it.

LORD ERROLL of HALE

My Lords, it is perfectly easy to do something about it, and that is to put the necessary Amendments in the ensuing Finance Bill.

LORD SHEPHERD

It is not always as simple as that. I do not see any of the noble and learned Law Lords here, but they will know that this has been one of the difficulties in dealing with the mandatory provisions in the Finance Act; it depends on the interpretation put upon them by the courts. In fact, one can say that the discretion of the Board of Trade did not at one time exist. It was the noble and learned Lords who sit as Appellate Judges in your Lordships' House who provided the discretion in their interpretation of the law.

The Government took the view, I say quite frankly, that we should have a degree of flexibility, in that we should be able to judge borderline cases on their merits. There are bound to be borderline cases, and therefore we have this flexibility, particularly in Clause 7. In regard to a right of appeal, it will not lie, as the noble Lord, Lord Erroll of Hale, suggested, with a junior civil servant. These decisions are taken, and there is proper machinery for them to be taken, but in the end the responsibility lies with the President of the Board of Trade. The noble Lord, Lord Erroll of Hale, knows the weight of consideration which high office gives to these forms of difficulty.

LORD DRUMALBYN

My Lords, is the noble Lord confusing two things—namely, decisions on particular cases and the ability to vary the types of machinery or plant, whichever it may be, for which grant can be given? These are two separate things. The Bill as it is provides for variation in Clause 7.

LORD SHEPHERD

I was dealing with the problems in which there is an appeal or a claim by a particular company for inclusion within this Bill. In regard to making further adjustments, if that is what the noble Lord has in mind, shall we say: inclusions into this Bill (as I understand Clause 7 so provides) subject to an Affirmative Order being made in this House?

In regard to Clause 18, which appears to give noble Lords opposite some reason for doubt, this clause would permit the Government to take equity in companies which seek a loan. I think that noble Lords opposite really are exaggerating many of the fears. May I explain what is the form of such a loan? As I understand it, the Board of Trade Advisory Committee would suggest a loan to the Board of Trade and the loan can be for any purpose. It is for the Advisory Committee to suggest the terms to the Board of Trade, and it is then up to the Board of Trade to accept or reject them. They are in no position to negotiate or to revise the offer. If the Advisory Committee were to suggest that the loan should be made and that the Government should take equity as a form of insurance, it is then for the Government to decide. If the Government do not wish to take it, that is all right; but if the company does not wish the Government to take it up, that is the end of the matter. But if the company still wishes to proceed for a loan it can make a fresh application to the Board of Trade. I should not have thought that that was back-door nationalisation. Surely it is common sense to have a degree of flexibility between the Government and companies in the matter of loans. In the end, it is entirely a matter for the company to decide whether it wishes to take the loan on the terms suggested by the advisory committee.

In regard to the payment of grants the noble Lord, Lord Erroll of Hale, suggested that one of the reasons for the first grants not being paid for eighteen months was the present economic situation. The noble Lord knows—and if he does not I will remind him—that the reason for this period of eighteen months is due to the fact that the existing investment allowances will continue to be paid. The Treasury would be in an intolerable position if they had to continue making those payments and at the same time had to make what would be immediate grants. It is the intention of the Government and the Board of Trade to reduce this eighteen months to six months within the shortest possible time.

I am not quite sure how far the noble friends of the noble Lord, Lord Redmayne, would agree with him in regard to the drift to the South. I thought it was a generally accepted policy of this House that we should do all we could to stimulate what we now call the development areas. Undoubtedly it is the development areas which are providing most of our exports. The South-East is, in fact, contributing only marginally in comparison with the development areas, and the tremendous pressure which we have here is undoubtedly causing very heavy rises in the cost of our services.

LORD ERROLL OF HALE

That is utterly untrue.

LORD SHEPHERD

The noble Lord says that it is utterly untrue. We have a debate on Thursday, and if the noble Earl disagrees with me perhaps he will tell the noble Lord, Lord Carrington, who can attack me—

LORD ERROLL OF HALE

Perhaps it will assist the noble Lord if I make it clear what I described as "utterly untrue". I was referring to his remark that the bulk of British exports came from the development areas. That is utterly untrue.

LORD SHEPHERD

I did not mean it in terms of the development areas. But certainly the Midlands and the North provide the bulk of our exports in comparison with the South-East.

I appreciate the views which have been expressed in regard to hotels. I do not know what will come out of the Statement about hotels which was made by my right honourable friend the Prime Minister. I hope that something will be done. I am going to Scotland shortly, and if the hotels there were improved that would make a significant advance in the economy of Scotland.

In regard to the question asked by my noble friend Lord Royle about computers and building societies, I will, if I may, refer him to subsection (1) of Clause 2 which uses the words "a business". I should have thought that that was quite sufficient for the building societies.

LORD ROYLE

That is what I thought.

LORD SHEPHERD

I am happy to confirm that the building societies will receive the 20 per cent. grant for their computers. My noble friend Lord Royle also drew our attention to the areas which may not be covered by this Bill, but which are in a state of flux and are not moving forward as we should like them to do. He mentioned, in particular, Rossendale. These areas have no major unemployment, and the area which my noble friend Lord Royle mentioned has an unemployment figure of less than 1 per cent. As I understand it, their basic difficulty is a decay of amenities. There is an outward migration. Perhaps the local amenities, which young people particularly want, are not there. But there is very little point in persuading industry to go to areas where there is very little likelihood of labour being available. The area which my noble friend has in mind will be covered by the Local Government Bill, which will shortly come before your Lordships' House. That Bill will give the Government and local authorities power to purchase land for many purposes, such as recreation; and, above all, for the reclamation of derelict land. I believe that for that type of area that Bill will do more than the noble Lord suggested would be desirable in this Bill.

LORD ROYLE

My Lords, there is the other problem of the semi-derelict buildings which are to-day being used in active industry. Is it not right to say that one needs new factories, in order to be more efficient and to aid the economy in general?

LORD SHEPHERD

Yes, my Lords. I would certainly agree. I believe that there are existing powers to deal with old buildings, and to help in the construction of new buildings to replace them. But perhaps the noble Lord will deploy that point in Committee. I think his basic point will be covered by the Bill which I have just mentioned.

The noble Lord, Lord Drumalbyn, made a plea that Part II of the Bill should come before Parliament at regular intervals, and I gather that he had seven years in mind. I pray in aid, if I may, the noble Lord, Lord Redmayne, who was a Chief Whip in the House of Commons, who will appreciate the increasing pressure on Business time. One of the lessons I have learned in two years is that there are many things which should be done, and which most people want to be done; but when one presents them to the Legislation Committee and looks at the time available one realises how impossible it is. This is an increasing problem, because more and more of our legislation provides for matters to be dealt with by Order, and if an Affirmative Resolution is involved even more time is required for debate. But this is a matter which is not for us this evening. I think I will agree, in principle, that there is a great deal to be said in favour of having this Part of the Bill looked at from time to time. But I could not give an undertaking on this, and I think that the Government, with their programme and with the pressures on time, would be very reluctant to be under an obligation to bring back that Part of the Bill in seven years, unless there was a very clear case for it. However, we will look at this point.

There are a number of other points, most of which can be brought up satisfactorily in Committee. I would deal only with one last point, which was raised by the noble Lord, Lord Drumalbyn, in regard to a "lottery"—in the sense of a manufacturer buying equipment and finding that, while he is in the course of acquiring it, the article has been removed from the compass of the Bill. I would assure the noble Lord (I am pretty sure this point is covered in the Bill, but I will certainly look for it) that in that case the manufacturer would not lose his right to the grant.

As I say, there are a number of points which we intend to discuss in Committee, and I repeat the offer which my noble friend Lord Rhodes made: that we are very willing to discuss during the next week any points on this Bill to see whether we can improve it. I hope that with those remarks the House will now agree to give this Bill a Second Reading.

On Question, Bill read 2^a, and committed to a Committee of the Whole House.

House adjourned at twenty-nine minutes past six o'clock.