HL Deb 26 July 1979 vol 401 cc2073-109

4.43 p.m.

The MINISTER of STATE, DEPARTMENT of INDUSTRY (Viscount Trench ard) rose to move, That the draft order, laid before the House on 25th July, be approved. The noble Viscount said: My Lords, in rising to move the acceptance of this order, I am also rather tardily—for which I have already apologised—giving this House the opportunity to debate before the Recess the whole regional package which was announced in an oral Statement and supplemented by a written Statement last week. So, first, it is my duty to beg to move that the draft Regional Development Grants (Variation of Prescribed Percentages) Order 1979, laid before the House on 25th July, be approved.

The purpose of the order is to reduce the rate of grant specified in the Industry Act for the Development Areas from 20 per cent. to 15 per cent. on buildings, works, machinery and plant provided on qualifying premises in those areas. The necessity for the order arises from the provisions of Sections 3(1) and 5(6) of the Industry Act 1972, which require that changes in percentage rates of grant shall be made by an order which requires approval by a Resolution of each House of Parliament.

I mentioned last week that the package was effected by this order, and by two orders subject to Negative Resolution on I DCs and one subject to Negative Resolution in relation to the change of the Assisted Area boundaries. Before coming to the main reasons for the regional policy changes, which I promised last week I would develop, I should like once again to set out our policy in its national context.

In my view, but for the common sense of the British people in electing a Conservative Government, historians might have recorded that, as " HMS British Industry " finally slipped beneath the waves, the right honourable gentleman Captain Callaghan was heard to exclaim, " But we had such a wonderful regional policy! " I shall come in a moment to the truth of that claim. All his officers would, no doubt, have been similarly bemoaning the fact that the bankruptcy of the nation made it impossible to maintain the social services, defence, aid or any other of the desirable features of life which for this nation depend on the success of our industry.

Although before the election leading spokesmen from the party opposite claimed that things were improving, all such pretence seems now to have been dropped as the noble Lords, Lord Melchett, Lord Balogh and Lord Kaldor, have competed with us to describe the continuing decline of British industry, which, but for North Sea oil, would by now have produced the absolute decline of this country. They, however, seem to see the remedy in paying out more and more taxpayers' money in ways which they deem to be helpful to parts of industry of their particular choosing. In my view, they seem oblivious of the failure of these policies. Some suggest that the failure of these policies should be disguised by import controls, as though this country, which depends on exports and on trade to maintain the standard of life of our 50 million people, could afford the retaliation. I suppose that, while North Sea oil lasts, there is a temptation—I believe an illusory temptation—to adopt this road to what I think would prove ultimate certain national suicide. But for North Sea oil and gas, the plausibility of those advocating more of the same medicine would have been totally eroded. As it is, it is clear that we still need to convince many of the need for change.

Our regional and industrial policy, which, despite the premature remarks of noble Lords opposite, has the support of virtually all those responsible for British industry and its management, is a realistically humble one. We believe, in the main, that those running industry are right to welcome conditions in which real encouragement and the greatest freedom is given to all the brains and all the skills of those engaged in industry. What do the party opposite do? They encourage jealousy and opposition to these changes even though they know full well that, after our Budget, this country is still as, or more, egalitarian than our main competitors. Do they believe that British human nature is so superior that a more egalitarian society will work here, when palpably it has been shown to fail? Clearly, they do not, or they would not have maintained so many controls on companies and individuals, particularly the years of incomes controls. Extreme egalitarianism is not the friend, but the enemy of the low-paid.

So, my Lords, we believe in the need for using the very slender resources left to us in the context of regional policy not to try to help 43 per cent. by population of this country but to help 25 per cent., and particularly the 13 per cent. in the Special Development Areas of highest unemployment. We believe that this, taken together with a policy for national industrial recovery, will be as effective now, and more effective as time goes by, than the situation that we have inherited.

As I came green to Government, I feared that we would be looking at a straight need to transfer slender resources in the interests of national recovery; the kind of need that faced the last Administration when they cut REP in 1976. We hoped of course that one could do better than that and find some waste to eliminate, but the problem proved less difficult than I dared to hope. Let us take the changes we are making one by one in order to illustrate our claim that the new regional policy will be more cost-effective than the old one.

We are cutting the RDG grant out of the IAs, which formed 19 per cent. of the travel-to-work areas in the country. Their average unemployment figure in 1978 was 6 per cent. compared with a national average of 6 per cent. or, for the United Kingdom, as a whole, 6.2 per cent. It was precisely the same figure, which shows only too clearly what I was acquainted with very early in our studies—that there were very many non-assisted areas with worse unemployment than the unemployment in a great number of the Assisted Areas. One of the SDAs—that is, the top grade—had unemployment only just above the national average at 6.7 per cent. (Haltwhistle), and 20 of the SDAs and DAs had unemployment levels below the average of the IAs.

Then, as noble Lords are aware, there is the fact that RDGs, where the biggest expenditure lies, are automatic in nature, and this meant that replacement capital of large as well as small companies—including not only batches of typewriters but even a single expensive typewriter—was eligible for grant. Did that increase the number of jobs? We have not found a way of making these grants more directly employment-related, and have concluded that in the SDAs any capital investment with resultant and downstream employment is welcome. It is vital to help maintain existing investment in these worst affected and stricken areas. How- ever, the cut in RDGs elsewhere will in very many cases not affect replacement expenditure.

Even in new project expenditure, those with business experience will, I am certain, share my view that most industrialists considering the location of new projects will first examine the logistic requirements of the project, secondly examine whether they will be able to build up a team of employees of all the skills they require—a team that will co-operate in a high productivity, good profit, good wage business—and only then will they look at whether there is grant available. How many industrialists could say that 10 per cent. of grant had swayed their investment decision? I suggest very few.

This leads me logically to the criteria for the selective assistance. Let me tell your Lordships of the first time that I sat in to educate myself on the workings of a regional hoard awarding selective assistance under Section 7. I listened in the morning to four cases. I then asked the whole board one by one—a board of able and conscientious people—whether what I had heard was in any way untypical, as experience told me how easy it was to reach wrong conclusions on slender evidence. I was assured that it was typical, and in later review and analysis I found it to be so. In two of those cases out of the four it had been stated and accepted by the board quite openly and in accordance with the criteria that the investment would have proceeded whether grant had been paid or not. In one case, the investment was quite clearly going to result—and this was one of the other two cases—in the straight substitution of jobs elsewhere in the country. It was a case of making the same product in an assisted region as was already being made by the same methods in a non-assisted area. No import saving, no addition to GDP was even suggested.

Let me make clear once again that the board awarded grant exactly according to criteria which they checked conscientiously. The new criteria will not be perfect but they will be better, and there will be less waste of taxpayers' money. Although the criteria for Section 8 have included an element of judgment as to whether grant was necessary to secure the project, we aim to sharpen that and to consider—a horrible word—additionality more closely. Viability has always been and will be, if anything, more acutely the prerequisite of all selective assistance cases. Will it be a profitable business in the long term is the question that must be asked. But we shall be looking in future at whether it is likely to add anything to GDP rather than, in present conditions, being a straight substitute; at whether it is going to introduce new and better methods—the noble Lord, Lord Rochester, asked me questions in this area when we announced the statement—in short, at whether it adds something new to this country rather than being a straight substitution.

My right honourable friend the Secretary of State for Industry has sometimes been accused of being theoretical and, as a mere practical industrialist by background, I will confess to having experienced at moments irritation at his theories. But my irritation has been because the theories proved on examination to be irritatingly accurate. Money collected from taxpayers which would otherwise have been spent on other goods and services and thus would have generated employment, has been spent in a number of these cases on projects which would have gone ahead without grant and on projects which have simply increased the already not insignificant unemployment elsewhere. For instance, what sense does it make to spend—this is a case with which I am familiar—£20,000 of taxpayers' money (this includes RDGs, as well as selective assistance) per job, for a job that is neither created nor preserved as Parliament understood those words, and that has been on quite frequent occasions a straight substitution from a non-assisted area for similar activity in an assisted area? Then, on top of it, there is the cost of a job or part of a job elsewhere which is lost by taking that considerable sum of taxpayers' money and preventing it from being spent on other goods and services which would have generated other employment. That is my right honourable friend's point.

I turn to the suggestion that we are depriving industry of vital cash flow before our policies have time to create growth, improve profitability and reverse industrial decline. This is where the transition period comes in because the full saving does not come until 1982–83, although a large part will be effective by 1981–82. The only parts of the package to have immediate effect are the upgradings and the lifting of the threshold.

I do not pretend for one moment that industry with the absurdly low profitability to which it had been reduced by previous policies, is not currently and perhaps more so later this year financially squeezed. This is due to the very strong pound influenced by North Sea oil, the high interest rates and the high inflation, which in the main are inherited, but to which, although offset by tax concessions, we have temporarily added on a once only basis. These inflation rates and the interest rates are costly to industry at a time when the strong pound makes our goods more expensive in relation to those of other nations. We believe we shall come through this period, and that the strong pound will help to reduce inflation. The Government are watching this position closely, but it is an overall national problem of different timing and it can in no way be regarded as a reason for not moving at a gradual pace to eliminate waste and make our regional policy more cost effective. This action will dovetail well with our national policies.

I do not wish to give the impression that the next few years are not going to be tough for industry and extremely unpleasant for those who are unemployed, whose numbers, I regret, are increasing on any long-term trend and will increase before recovery gets under way. What I do say is that without a change of direction to encourage wealth creation, there will be no end to rising unemployment, hardship and industrial oblivion in the regions and nationally.

Finally I come to the charge levied at us here and in the other place that we are increasing unemployment in the regions in direct proportion to the saving of one-third of our regional industrial expenditure. The calculation seems to start on an assumption that the number of jobs created or preserved by regional expenditure in the past are 300,000 created, 300,000 preserved, or that was postulated by the noble Lord, Lord Melchett, last week. The assessment discussed in the other place and mentioned by my right honourable friend the Secretary of State—that of Moore, Rhodes and Tyler—suggested that somewhere between 10,000 and 20,000 total jobs per annum may have been created or preserved in the regions at a loss of jobs elsewhere which is unknown.

I use the word " may " not only because of the many assumptions which have to be made in all these surveys, but because no one knows what would have happened anyway with availability of labour and resources beckoning. Nor are we yet clear how important is the latest evidence suggesting that we have attracted a number of doubtful propositions to the regions and that the failure rate of business in the regions has been greater than elsewhere in the country. I quote from an article in the Financial Times of 6th June: Scotland emerges from the study with a particularly bad record. From 1966 to 1971, companies moving to Scotland had a closure rate 50 per cent. higher than the national average, compared with 10 per cent. for the other regions. New ventures suffered an even higher casualty rate. The failure rate in the Midlands and the South-East was 18 per cent. below the national average. The gap widened further from 1972 to 1975, when companies moving to Scotland had a 70 per cent. higher failure rate than the United Kingdom average. In the rest of the regions the rate rose 46 per cent. above the average ". So although Scotland is the worst example illustrated in that article, in general there is apparently a higher failure rate. We do not fully accept the figures in that article, but there is no question but that there seems to be a rising failure rate and it could well be that that is due to the attraction of a certain percentage of projects where viability has not been examined closely enough.

How can the claims of the last Administration be true when unemployment in the regions, despite population outflow, has moved like the percentages I will give now, which are 1974 to 1978 as a whole: Merseyside, 6 to 11.5; Northern Region, 4.6 to 8.8; Cornwall, 7.4 to 10.2, a better one relatively; Glasgow, 5.2 to 9.3; and Cardiff, 3 to 8.2. Taking all these things into account, I am quite clear that our national and regional policy, taken together, will be far better in our very difficult circumstances for employment within and without the regions, but decline is still continuing and with the de-manning which is necessary in a number of areas in the short-term unemployment will, I regret, rise further before it starts to decline as recovery gets underway. I beg to move.

Moved, That the draft Order laid before the House on 25th July, be approved. —(Viscount Trenchard.)

5.8 p.m.

Lord ROCHESTER

My Lords, I am sure the whole House will be glad of this opportunity to debate the Government's regional aid policy generally, and we are grateful for the additional information that the noble Viscount, Lord Trenchard, has given, concerning the Government's thinking on this matter.

When the Minister repeated in this House the Statement made in another place on Tuesday of last week, I asked him whether this was the time to be making cuts in regional aid of as much as £233 million out of a total of £609 million over a period as short as three years, and I suggested then that it might have been wiser to adopt a more gradualist approach, not simply to limit the extent of disagreement between the political parties on this sensitive subject but to give the Government time to see what effect the policies they were adopting were having on profitability, and particularly to maintain the stability which would enable large-scale manufacturing industry to plan with confidence its investment programme over periods of up to 10 or 15 years, as nowadays it has to.

In response the noble Viscount very properly suggested that before today's debate we should all consider carefully the transitional nature of the arrangements—as he called it then, and as he has called it again this afternoon—proposed by the Government, since the bulk of the savings to be achieved would not take effect until the years 1981–82 and 1982–83. I have done as the noble Viscount suggested, and I see the force of the point that he was then making and has made again this afternoon: that it is the cash flow of industry in the regions in two or three years' time which is a crucial factor. Up to a point that seems to me to be a fair test to apply, and we must all hope that the Government's faith in the liberating effects of the reductions in direct taxation that they propose will have the desired result. If, unfortunately, those policies do not result in the creation of the more productive job opportunities that we all agree are required, at least it will then be open to them to cancel the cuts that they now have in mind for the future.

In the last week or two, however, other Government Statements have been made on the future of the National Enterprise Board and the steel and shipbuilding industries. I recognise the need for these industries to be restructured, and indeed for the nation generally to cut its coat more according to its cloth. But now there are rumours that the Government have decided in principle to make even more cuts in public expenditure in the next financial year, and in a Statement made yesterday in another place, and repeated in your Lordships' House, nothing was said to dispel those rumours—at least not to my satisfaction. If they were to come about, these cuts could not but have serious implications for education, housing, social services, and even health.

Last week the Minister was honest enough to acknowledge that unemployment would get worse, and he has confirmed that this afternoon—at least worse in the short term. However, the loss of jobs will not be confined to Merseyside, Glasgow and the North-East, but will be of more general application. I am not at all clear as to the test that the Government have applied in determining the changes to be made over the next three years in the status of the various areas. I understand, and even sympathise with, the intention to give some financial assistance to areas which have the most intractable problems of unemployment. But for the rest it is said that different parts of the country are to be treated more consistently and fairly. Some are to be up-graded and others down-graded to take account of their changed circumstances.

What are the criteria which determine consistency, fairness, and changed circumstances for this purpose? In asking that question I am not seeking to be pernickety—if that is a parliamentary expression. Rather, I ask it because in my experience of industry—and I fancy in the experience of the noble Viscount, too—the more openly such criteria can be exposed to scrutiny, the more likely they are to be generally accepted. How far is the test the current level of unemployment, the prospective unemployment level, the potential of an area to attract industry, or perhaps some other criteria? Can the test vary from place to place? I should be grateful if, when he replies, the noble Viscount will endeavour, if possible, to enlighten us a little more on that particular point.

I still find it difficult to reconcile the raising of the minimum qualifying values of £100 for plant and £1,000 for buildings to figures as high as £500 and £5,000 respectively with the need to encourage the establishment and development of small enterprises. Last week the Minister told us that we should be thinking in terms of projects rather than businesses, and that a study of small projects showed that many of them stemmed from big businesses, and that the Government had concluded that the reductions in regional development grant that they had in mind would not affect such small businesses adversely. I wonder whether the noble Viscount is now in a position to say a little more on that subject, and in particular to answer the question I then asked by quantifying for us a little more precisely the effect of the changes proposed by the Government on the setting up of such enterprises.

Last week I asked one further question. I sought information as to the criteria that the Government proposed to adopt in identifying for purposes of support under Section 8 of the 1972 Industry Act the projects that would lead to substantial improvement in productivity or to the introduction of new products. I feel that I should acknowledge what I understood the noble Viscount to say in his opening statement this afternoon: that the test would be such factors as contributions to profitability, additions to GDP, new and better methods, innovation, and so on. It seems to me that those factors are perhaps still capable of a good deal of subjective judgment, rather than being more objective tests of performance; but I thank the noble Viscount for what he has been able to say on that matter, and if, now or later, he is able to add anything to it I shall be grateful.

Our main concern is this. As the Chancellor of the Exchequer made plain earlier this week, the cuts in public expenditure that he has in mind will not be a one-off exercise, but will be of a continuing nature, and I do not doubt that they will extend into 1982 and 1983. On this particular item of regional aid I should have thought that there was at least a strong case for more, not less, aid to encourage the development of new jobs in, for example, service industries, particularly when account is taken, as it must be, of the general world recession which now appears to be upon us. It is with that reason particularly in mind, as well as having regard to the other doubts that I have expressed, that I am sorry to say that we on these Benches do not feel able to support the Government in this particular matter.

5.17 p.m.

Lord RAGLAN

My Lords, I feel it is a great tragedy that we are debating this order at the end of the day, at the very end of the Session. This is because I believe that the decisions on regional policy are probably the most important national decisions which this, or any, Government can make. Generally speaking, Governments are in fact less able to alter economic circumstances than either they are wont to claim or many people would wish to hope, but regional industrial policy is one area where Government help and guidance can make a considerable difference, if it is well thought out. Those of us who, like myself, believe that they have something important to say in this matter should say it now rather than take a chance that next Session there might be a debate on regional policy.

Setting aside for a moment the human distress, which is considerable, in my view it is absolutely essential that the Government get themselves involved more positively than hitherto in Regional policy, because our large and relatively impoverished regions are a great brake upon the economic well-being of the whole country. While there are huge areas like the North or the South-West, and large parts of Scotland and Wales, suffering economically, we all suffer. So helping them to prosperity helps everybody in the country, and helps people outside this country, too.

For that reason, I am sorry that the new policies on grants, which will directly or indirectly affect the livelihoods of millions of people, are being discussed by Parliament after, rather than before, they have been decided. The EEC Commission, as the noble Viscount knows, arrives at decisions in a different way. The way the policy has been announced has not helped, either. Under our system, the Minister has to claim that he knows everything, or almost everything, while the Opposition has to claim that the Minister knows nothing, or very little; and it is as if it has all been staged to generate the maximum of heat and the minimum of light. There must be better ways of arriving at regional policies, and perhaps one of the new Select Committees in the other place will help in this respect. So it is that I hope the Government, recognising the defects of the system, will encourage the debate to continue and will keep their minds wide open to suggestions and to new ideas. It is vitally important that they should, because I do not think that under either party the regional policy has worked nearly as well as it could have worked.

My Lords, we all know what the problem is, or a large part of it. Industries of a kind which were often mass employers of labour have declined because of changes in demand and in techniques. The work is there no longer. So I think it is important to recognise that, in areas which have suffered large losses of traditional employment, morale is very low; and this lowering of morale encourages a kind of vicious downward spiral of decline. It is not for nothing that they used to be called depressed areas; and the depression breeds a kind of militancy which itself militates against potential employers coming to the area, for they fear they are going to start with bad labour relations. Firms may in fact avoid going to special development areas, in spite of the offerings of large grants, because these areas have an aura of failure about them. So it is important for the sake of helping morale and confidence that where it is very difficult to get work the Government should try, anyway, to give the impression that the powers that be have not abandoned the people.

That is why, with due allowances for the undoubted fact that RDG areas have to be revised from time to time and trimmed around a bit, I think it probable that the money saved does not justify the wholesale revision which we have seen taking place; the alarm and despondency it creates, as well as the number of business investment plans which have to be hurriedly altered, are not justified by the saving. Besides, the Government have not managed (on the face of it, at any rate) to be any less arbitrary in their designations than was the case before; and I shall be very interested to hear what the noble Viscount has to say in reply to the questions posed by the noble Lord, Lord Rochester, about the criteria upon which these designations are based. I therefore do not think that this order is a very wonderful effort—and I do not say that in any personally offensive way to the noble Viscount. By good fortune I know that he is too thoughtful to take it in that way in any case.

What I think is needed is radical new thinking. First, I am sure it is not just a question of providing money. There is a widespread belief that, if you have a problem, all you have to do is to spend a lot of money and everything will be all right. Nothing could be further from the truth. You can get to the moon, I agree, on that kind of thinking, but you will not lay the foundations of prosperity in an area just by spending money, especially when it is of the order of the quantity which is available. Generating prosperity entails literally millions of individual human decisions and adjustments made over a long period of years. A thousand men can be put out of work at the stroke of a pen. Finding them alternative work—and by " work " I mean constructive, economic activity, not just employment—can take years of hard graft. I know this from first-hand experience, and I want to ask the tolerance of your Lordships, in what I hope will be not too long a speech, to say from my own experience the kind of thing that I think needs to be done.

For nine years I have been the chairman of a new town development corporation, which I think I can fairly say has been successful in generating industry. At least, we are proud of what we have done, and we hope to do more of it—that is, if the taking away of our intermediate building grants is not going to cripple us. I do not know what the effect of that will be. Stopping the grants could prove an expensive experiment, or it may be that, with their aid, we have managed to prime the pump well enough for things to go on all right without them. We shall have to wait and see, so it seems. Until the early 'seventies my corporation had mainly been engaged in house building. There were already a few large factories in the area, around which the town revolved. Then, in 1971, a foundry which had been established in the town for over 170 years was closed down, and some 850 men lost their jobs. That is a large number in a town of only 40,000.

There was a great deal of pressure on the corporation to try to attract to the town a large and possibly glamorous factory which would replace all these jobs, and more. But it seemed to us that a factory of that kind was really just what the town could do without. Large employers could close or retrench at any time, with the same consequences as we had already seen—and witness Corby and Shotton now. So we made the deliberate decision, based on the success of a couple of terraces of small factories which the corporation had already built, to build up some estates of small factories. The largest factories, which we have built speculatively—and they were comparatively difficult to let—have been 16,000 square feet, which is quite small by industrial standards. The smallest factories we have built are only 500 square feet—hardly larger than a double garage—and ten out of a dozen of these were let before they were completed. So we uncovered a demand there, and we are building more like them. In all—and I am sorry to produce figures, but they are material to my theme—we have now built 185 factories. Of these, 179 are let; and we are rapidly running out of industrial land on which to build more. I may say that, amost poetically, the largest and latest industrial estate is on the site of the old foundry, and is very thriving.

Here are some important figures: 62 of our factories have been occupied by firms from the East, that is, from outside South Wales; 30 have been occupied by firms from other parts of South Wales; no fewer than 71 factories are taken by totally new companies from within our area; and 16 firms have already expanded within the last five years. In all, these firms employ, at our best estimate, about 1,800 people and are taking on more as they settle in. In addition, we have leased land to 32 more firms, 22 of which have come from outside, but 10 of which have come from within our area. We have, incidentally, converted our building grant to a rent-free period, and in a few years' time we shall be getting our money back, which will please the taxpayer and the noble Viscount.

What we have been able to do is, first, to widen the economic base of the town which is now more proof against recession. It must be so. Secondly, there is now available a much wider choice of jobs and skills which must help towards a better kind of life. One is not condemned to work in the only factory in the town. Thirdly, and I think this is of tremendous importance in the context of this debate, we have demonstrated (beyond, I think, reasonable doubt) that regional policy need not be and should not be just a matter of re-location of industry.

I read the debate which took place in the other place the day before yesterday and it seems to me that, mistakenly, almost every speaker believed that regional policy was a matter of re-location of industry. I am of the conviction that if regional policy is only seen as a picture of a number of relatively poor areas vying with each other for a limited amount of cake bribed away from rich areas, it will not succeed; for there is not enough cake to go round and a firm economic base can never be built up. Development areas must be encouraged, so to speak, to bake their own cake. To attempt this with the giving out of grants (while it is an essential ingredient) is not enough. It is not realistic to expect that private or public enterprise will somehow fill the vacuum over any reasonable time scale; nor is it reasonable to expect that areas in decline will pull themselves up by their own boot-straps. There needs to be a positive approach by the Government. The question is, what? I may be unpopular in some quarters if I say that I agree with my right honourable friend, Mr. Alan Williams in the debate the day before yesterday in the Commons, when he said that it is not the job of local authorities to take this in hand. They have enough to do; but, anyway, they are not really equipped in the right way for what is needed.

The Scottish and Welsh Development Agencies are constituted along the right lines; but, even so, the area which each has to cover is far too large for what is essentially a sub-regional and local operation. I would, for example, split the Welsh Development Agency area into at least three—north, south-west, and southeast—leaving the Development Board for Rural Wales to carry on its good work in what is a just manageably-small-enough area. I envisage that England should have 15 or 20 development agencies.

The Government, if they choose to do so—and I hope they will—can analyse what the new town corporations have been doing, examine closely the ingredients of success and use that knowledge to build on. I may say to the noble Viscount that all that knowledge is there if there is a willingness to use it.

My Lords, I am sorry this has been a long speech, although I have rationed myself severely in what I wanted to say. But there is one thing more that I should like to say because it is also important and it pertains to one of the points which the noble Lord, Lord Rochester, has raised. In deciding which economic activities should attract grant and which should not, the Government's present criteria are too narrow. For instance, warehousing and the so-called service industries are just as important to prosperity as manufacturing even though their output may not be exportable. We want to prime the infrastructure to make it prosperous and we should not be too choosy in the means we take to do it. Finally, because I think I detected something of this in the speech of the noble Viscount, I would ask the Government not to believe those moralising, political economists who claim that making steel, for instance, is more virtuous than making candy floss. If it is legal and it will sell, let us make it! I am certain that to understand that is the beginning of economic wisdom and the foundation of a prosperous and free society.

5.37 p.m.

Lord BALFOUR of INCHRYE

My Lords, I feel grateful, as I am sure do other noble Lords, for the clear exposition of my noble friend Lord Trenchard, who painted broadly the picture of the policy of the present Government in relation to regional aid. Let us remember that regional aid was started by a Conservative Government in 1972. But undoubtedly regional aid has almost run away over recent years when one remembers that the regional aid policy of the last Government was running at £700 million a year and that no less than £3½ billion has been poured into these special regional aid areas.

The questions we must ask ourselves—and they were put by my noble friend Lord Trenchard—are these. Are we, as a nation, getting value for money expended? Are there better ways of spending than the policy of the last Government? I submit to your Lordships that there are. The last Government, I think, spread aid too widely, and here and there too thinly, and certainly there was seen to be a tendency in some directions to give regional aid in particular areas which, it so happened, were very marginal for members of the Labour Party who had to fight their elections in the not too distant future. I have in mind—and this has been hotly denied—how Grimsby was made a special area, just on the eve of an election.

Lord PEART

My Lords, I hope that the noble Lord will withdraw that statement, otherwise I will pursue it. The noble Lord has made a terrible accusation. He is simply wrong.

Lord BALFOUR of INCHRYE

My Lords, I am only repeating what was said in another place, and of course it has been denied. I ask the noble Lord, Lord Peart, not to take a remark such as that too seriously.

Lord PEART

But it will be printed.

Lord BALFOUR of INCHRYE

My Lords, undoubtedly it has been said on both sides. On one side it has been said, and on the other side it has been denied, in another place.

The spreading of aid too thinly has tempted many firms to what I call " have a go " with taxpayers' money on enterprises which from the very beginning have not been viable. Money is not unlimited, as we know, and surely the policy of Her Majesty's Government is a better policy: to concentrate on viable growth with fair prospects rather than to create artificial jobs which will not give growth but may give temporary employment although in the long run they are not of great national value.

What the noble Viscount, Lord Trenchard, said, and what I feel we want to obtain, is an atmosphere of success, initiative and adventure, and to use our money in the best way to achieve those objectives. The egalitarian ideal does not create an atmosphere for the growth and creation of new wealth. To become a millionaire is something very difficult these days; but, nevertheless, Britain's industrial past has been very largely based upon the individual, outstanding man. For example, Lord Leverhulme and Lord Nuffield: I could name many more and your Lordships know them as well as I do. Today, in the egalitarian world —preached, I regret to say, by the extreme Left Wing—to make great material success is something rather derogatory. I would be so bold as to say that what we want is more millionaires. We take most of what they make and then the rest when they die. If they have been successful they will have created wealth, which is what is required in this country.

The Earl of LONGFORD

My Lords, 1 am sorry to disturb the noble Lord. To say the least, even from his own point of view, it depends on what sort of millionaire he is. Is he an industrialist, somebody who has produced something, as Lord Nuffield, or just a financier or property tycoon?

Lord BALFOUR of INCHRYE

My Lords, I am talking about the creation of wealth by industrial success. All cuts are unpleasant, and we are going to have a lot more unpleasantness in every direction. That is largely because we inherited from the party opposite an economic position which, intensified by the world depression, requires drastic treatment.

Let me conclude by saying that the Labour record on regional aid and cutting regional aid is not as white as driven snow. The Labour Party alleged that the Conservative Government would in 1967 remove the regional employment premium. The Labour Government abolished it themselves in 1976, very soon after they had announced doubling it and giving it a prolonged life with no termination. Shortly afterwards they themselves had to cut it. Mr. Healey said that it would be phased out in a matter of months. That cut £266 million in one year. This Government are proposing a cut of £233 million phased over three years. I believe that we have to accept the horrid medicine of cuts, and I believe that our Government are on the right lines of a policy which I hope many noble Lords will support tonight.

5.45 p.m.

Lord HATCH of LUSBY

My Lords, I should like to take the noble Viscount at his word in the statement which he made last week which introduced this order, when he said that the statement was couched in the framework of our national policy, mentioned in the statement and epitomised in the Budget and in other steps proposed both at present and for consideration in the future. Indeed, considering that we have had over the past two weeks a constant stream of orders, statements and announcements of cuts in public expenditure of one kind or another, this is indeed within the framework of a national policy. So we should debate it as such, particularly in view of what I consider to be the disgraceful behaviour of passing the Finance Bill through this House without a word of explanation from the Government, and without any form of debate upon it.

Why was there ever considered to be a need for a regional policy in this country? I suggest that the following figures answer that question: today, in 1979, the capital investment in productive industry in this country is 8.2 per cent. lower than it was in 1970. Secondly, the domestic capital formation within this country was 4.2 per cent. of gross domestic product in 1970; it is now 3.2 per cent. Thirdly, during the past five years private investment overseas has almost trebled. I suggest that that shows the accurate picture of the industrial state of this country. But within that picture are special very wide areas which have particularly suffered. As I come from the North I can speak with some personal knowledge of where those areas are; in the North, in South Wales, in Scotland and in Northern Ireland. Indeed, it is not only election results that tempt some of us to build a bridge across the Trent.

The regional policy that is being followed by this Government is claimed by the noble Viscount to meet both the industrial state that I have described and the particular areas within that state which are suffering from high unemployment, low productivity and declining industries, and it should do so. They are suffering from those ills because of the fact which has been so frequently explained to us by my noble friends Lord Kaldor and Lord Balogh: that there has been an industrial decline in this country over the past 100 years, and that industrial decline is largely due to the fact that the industries on which the prosperity of this country have traditionally been based have been under competition from the new industries of the same kind in other countries and have not been replaced, as they should have been, by the highest technology which has been available to us. That is the reason for the necessity of regional policy.

What do the Government say about this, and what do they intend to do, faced with this situation? As I understand it—and I shall he corrected if I am wrong—the philosophy of the noble Viscount opposite, and his friend Sir Keith Joseph in the other place, is based very generally as follows: first, we will encourage enterprise and risk taking; and, secondly, that is essential if we are going to get prosperity, high employment and economic help. In other words, there will be incentives to success and penalties for failure. And yet what do they actually do? What have they been doing over the last three months? First, they have increased the cost of borrowing for productive business, so making inevitable bankruptcies, further unemployment and a lower rate of industrial growth—I understand the Treasury believes there will be no growth at all over the next 12 months. Secondly, they have been decreasing government support for the promotion of industry; thirdly, they have been relaxing exchange controls.

How do any of these matters encourage enterprise? Surely on one side they are saying, " We must make free our economy for private enterprise ", and on the other side they are creating conditions which make that enterprise impossible. Talk to any businessmen today, particularly in the export industry, with the high pound and the fiscal measures which have been taken, along with the relaxation of exchange controls, and they will tell you what is going to happen. What is going to happen over the next two years is what happened between 1970 and 1972, when they applied broadly the same policies. I want to ask the noble Viscount, as I have asked his right honourable friend the Minister for Employment: What reason has he to believe that the policies he is now responsible for recommending to this House will have results any different from the almost identical policies that were followed between 1970 and 1972?

What happened between 1970 and 1972? The capital that was released by reductions in taxation went—where? It went abroad five times as often as it remained in this country. What is going to prevent the relaxation of exchange controls, already announced by this Government, from encouraging exactly the same drift of such released capital overseas? I would add a matter which he may not consider to be very important. I do, and I believe that a lot of British businessmen all over the world do. I refer to the squalid, meagre, little reduction of £50 million a year in overseas aid. Overseas aid is an investment for Britain and British industry. It is a supplier of the infrastructure which can attract British business overseas; and when you put together a reduction in overseas aid, plus the relaxation of exchange controls, plus the strong pound and the fiscal measures which have been taken, you find a complete disincentive to the export industry of this country.

In some ways I am pleased, and I have before congratulated the Government on putting their philosophy into practice: it makes our task much easier. The best advocates for public expenditure are the present members of Her Majesty's Government. They are teaching the people just what cutting public expenditure means in practice. I do not accuse the noble Viscount of not getting down to detail, but this is a very human matter. This concerns people. When you are talking about cutting public expenditure I want to ask two questions: first, how does your cutting of public expenditure encourage enterprise and greater production?— because the Government have never tried to answer this question. They have assumed that cutting public expenditure automatically increases enterprise. I have not seen any signs of that. Secondly, I want to ask: when you are cutting public expenditure, what are you doing? You are throwing old people out of their homes. I was watching a programme just this week about the closing down of an old people's home. A woman of 99 was going to be thrown out of that home because of the cutting of public expenditure by Her Majesty's Government. You arc cutting nursery schools; you are cutting the education of children; you are reducing the milk supply; and—an even more squalid measure—you are even reducing the value of the food in school meals.

Really, how can any Government justify measures of this kind and then say: " We are looking after the poor and at the same time encouraging enterprise "? Is closing down old people's homes, closing nursery schools, reducing school milk and the value of school meals encouraging enterprise? If so, will the noble Viscount tell us how, tonight? Also, in regard to the very order that he is introducing tonight these new development areas will themselves, as my noble friend Lord Lee of Newton pointed out last week, produce new distressed areas. Why? Because when you draw a line round the areas which are going to be eligible for development aid immediately outside those areas—probably within a radius of 50 miles outside—you are creating at least potential new distressed areas. If a firm knows that if it moves a few miles further it will be eligible for aid, then it will not be established in the area immediately outside. The whole of this argument really comes down to what the noble Viscount's right honourable friend in another place, Mr. James Prior, talks of as the " two nations we must not create ".

Those two nations are there. Thirty per cent. of the Budget relief in the present Government's Budget went to 5 per cent. of the richest people in this country. Ten per cent. of the people in this country own 60 per cent. of the private wealth of the country. At the same time, as I have already pointed out, there is a growing gap between the North and the South, and that gap will be widened by this measure because there will be a pull towards the richer areas and a push out of those areas which previously have been classified as development areas.

What I want to suggest to the House is that the kind of picture I have painted requires a radical restructuring of industry and regional aid has an important part to play in that, as my noble friend Lord Raglan pointed out so clearly in the instance he gave from his own personal experience. But it must be restructuring of industry. You cannot just leave this to the whims of the market forces. If you are going to restructure the industry of this country you must replace the declining industries with new industries, and those new industries, if we are to consider the health of the country as a whole, have to be encouraged to site themselves in areas of high unemployment and where our old industries are declining.

My noble friend Lord Lee of Newton referred to this order when it was first mentioned in the Statement last week as " the work of vandals ". I notice this did not appear in the Official Report. I think he was being too complimentary. This is not the work of vandals, because vandals have some purpose. They see where they are going. But I cannot for the life of me believe that any member of Her Majesty's Government, either in this House or in the other House, can see where he is going so far as industrial restructuring and industrial revival are concerned. This is really a psychotic Government. They are cutting and cutting, but they never tell us how any one of those cuts will create the very conditions which they say they are trying to create—the conditions for increased enterprise, wider production and greater employment.

Finally, may I ask the noble Viscount not to rely upon the platitudes upon which his noble friend Lord Gowrie relied, when I last asked this question in the debate on the Budget? I asked him what reason he had to argue that the measures now being put forward by the Government to cut public expenditure would have any result different from the results between 1970 and 1972? I asked him to explain why what failed between 1970 and 1972 could succeed in 1979–80. His answer was: —we are going to follow the same essential policies, the same thrust, but with greater knowledge and greater caution ".—[Official Report, 19/6/79; col. 955] That will not do, my Lords. We are talking about the future of the people of this country, and we cannot just say " We learned our lesson but we shall follow the same policies, although the results will be different ". Will the noble Viscount be so kind as to explain how his Government's policy, of cutting regional aid by around 40 per cent., will help the revival of the industrial arm of our nation?

Viscount MASSEREENE and FERRARD

My Lords, before the noble Lord sits down, may I point to something that he said? I understood him to say that 5 per cent. of the population would get 10 per cent. of the tax cuts. But he has left out the fact, which I am sure he knows, that millions and millions of people in this country do not pay any tax at all. Therefore, tax cuts cannot affect them. With the greatest respect, a lot of what the noble Lord said was rather nonsense. Overseas aid is all right, if it goes to the right people and into the right pockets. But, as I am sure many of your Lordships know, a lot of overseas aid ends up in Switzerland, if it is paid in money, and it does not find its way to the right sources. I shall not go on speaking, because I could really tear the noble Lord's speech to bits.

Lord HATCH of LUSBY

My Lords, I am very sorry that the noble Viscount is not going to continue to tear me to bits. I should welcome the opportunity. But he has asked me a specific question and I shall answer very briefly. The figures that I gave were not those that he gave, and 30 per cent. of the tax cuts went to 5 per cent. of the richest of this country. Overseas aid must be administered according to principles, and that has been done over the past five years, particularly by the last Minister, Dame Judith Hart. But it is estimated that for every £50 that is spent in overseas aid, this country gains between £100 and £150 and, at the same time, new employment is created in this country. I shall simply leave the noble Viscount with that thought.

6.4 p.m.

Lord GRANVILLE of EYE

My Lords, if I may intervene in this private argument that is going on, I should like to say that I listened with great interest to the exposition which the Minister gave us today on this order. Day after day, we are now getting many orders and Statements—it was oil again today. It was Harold MacMillan who referred to the wind of change, but with the many Statements that we are now getting it has become something of a gale before the Summer Recess.

When this order was first introduced, the Minister said that it was estimated that 20,000 jobs were created under the existing arrangements and that the changes might mean a net loss in the regions of 6,000, while there would be a saving of £213 million spread over a period. The order states that the amount of grant is reduced from 20 to 15 per cent. of the expenditure incurred, and that expenditure will remain eligible for regional development grant at the old rate, if it is incurred in respect of assets provided before 1st August, 1980, or if it is defrayed before the new date of 18th July. I think that that is a moderation of what had been suggested in the media.

Of course, the object of this exercise was to attract successful businesses into areas where they were most needed, and the 22 per cent. was an attractive proposition in those areas where labour is available. That was the great attraction of this policy. But I should like to join the noble Lord, Lord Hatch, in asking: What about the older industries? What about steel, shipbuilding and the considerable overmanning? What about the many factories in this country today which are obsolete—and have been obsolete for 50 years—in plant, in equipment and in buildings? This, as the Minister now knows, and as his predecessors knew, is the enormous problem that industry in this country has to face sooner or later, but which has not yet been faced. But many of our competitors have faced it.

What we have to consider is: What will take the place of these run-down larger industries which employ a very large number of people? Is it to be consumer durables? We have an adverse balance of trade with the European Economic Community of £2,500 million, at the moment, so what do we do? Do we take in each other's washing to take up the slack? I credit the Government with believing that their policy, which sounds harsh and hurtful, will mean that enterprise is created to fill the gap. But if our competitors in the Economic Community import into this country and get the market, what do we do? Do we continue to subsidise 40 per cent. of industry? This is the major problem which no Government have faced since the war. I should also like to ask the Minister whether there are other institututions which are helping to finance the development areas. I would mention the Eurobank in Luxembourg, which I believe made some arrangement with the Department of Industry, under the noble Viscount's predecessor, which I believe is a good arrangement. Is this continuing? Are there other opportunities which are being offered? Is there any assistance at all for the development areas from the European Economic Community? Is any assistance coming from them for the development areas?

Just as this problem of industry—which is obsolete in terms of its plant and buildings, and has been so since the end of the war—is of vital importance, so is that little thing on the horizon which is called the silicon chip. I think that the Government, the TUC and the CBI should plan ahead to avoid large-scale unemployment when that long-term policy arrives on our doorstep. However, as one noble Lord said earlier in the debate, that is another ball game.

I believe that we are facing an entirely new, almost revolutionary situation. We can forget yesterday's policies—and, maybe, yesterday's men—and perhaps we shall have to forget the International Monetary Fund. And it may be that we shall also have to forget that we cannot go on living beyond our means, as we have been doing.

I have listened to a number of debates in this House on these problems, and I feel that we cannot promote an industrial policy which is based on fear. Nor can we promote a foreign policy which is based on fear. And we certainly cannot run a domestic policy which is based on fear. It was fear which last winter destroyed the Government of this country. We cannot treat the great industries of this country as ideological footballs.

A great deal was said quite recently in your Lordships' House about the aerospace industry. There never has been purely private enterprise in the aerospace industry—never, certainly since the last war. The aerospace industry has always been more or less government controlled. So far as orders are concerned, those are for the Government and the Ministry. Technical research and development is carried on at Farnborough. If we want to sell civilian aircaft in the United States, it is Washington who will approve the currency to buy British rather than American aircraft. This industry has been more or less Government controlled for the last 50 years. I hope, as I have said, that we are not going to turn it into an ideological football, to be kicked about in the coming session. I am sure that the Government will get their order, despite the " hiccup " that they have had about it, but when we come back in October I believe that we shall have to face realities.

6.13 p.m.

Lord PEART

My Lords, we have had another important and interesting debate on regional policy, and I welcome it. May I say to the noble Viscount, Lord Trenchard, that I wish him well. He has had a good baptism in this House. He does well at the Box. I know him from the old days. He and I were thrown together a lot in the agriculture industry. However, I think that he is on the wrong path now, and I regret it; so it is more in sorrow than in anger that I say these words.

Some of his statements in this debate were outrageous. After all, £233 million has been chopped off industrial aid; 200 areas lose all support; 100 areas lose special help. I want to ask the noble Viscount whether special provision is to be made for steel closure areas which already are IAs, DAs, or SDAs. I should be grateful if the noble Viscount could say at the end of the debate whether special provision is to be made for those areas which will be hit by steel closures.

The noble Viscount said that we failed in our policies, and he spoke about import control. We advocated import control. However, that has got nothing whatever to do with what we are talking about today. The noble Lord also spoke about jealousy and said that we were always seeking to move towards a more egalitarian society. Probably we were, in some directions. That is why we had that important debate the other day on comprehensive education. Sensible egalitarianism is all right. We are not envious; we just believe in and want a more just society. I thought that his attitude regarding what he thought we believed in was a caricature. The noble Viscount was so naive, and I was surprised that he should say this.

The noble Viscount also said that we were not interested in wealth creation. This point was also taken up by another noble Lord. I am not going to take up too much of the time of the House because I want to set a good example by making a short speech. However, I, too, will speak about my own experience. The noble Lord did so, and it was very interesting and he did it well. However, the main political issues are what matter now and that is why we, as an Opposition, oppose this order.

For a long period I was Member of Parliament for a region in West Cumberland, and my own constituency had to have regional help. However, the industries in that constituency in West Cumberland have produced wealth. The steel industry in Workington is still famous all over the world for its steel billets. I am glad to say that Workington is still a viable entity and that all over the world—in Hong Kong, South America and elsewhere—British Rail billets, which are produced in Workington, are to be found. The men and women whom I used to represent are very proud of their industry. My old constituency also contained several pits, but they all had to be closed. West Cumberland then had to have aid. It was essential. It was not because the people of West Cumberland shirked work, or because businessmen were inefficient. It was because there was a malaise at that period.

The noble Lord, Lord Drumalbyn, who knows the area well, confirms what I have said; I saw him nod. So please do not let us use the argument that we are trying to give aid for special reasons. The men and women in those areas where aid is needed want it because I believe that British men and women want to work—and want to work hard. We have got to give good leadership by means of good management and the leadership which is necessary in industry. The result of my own experience, therefore, in a development area leads me to believe that there will be a measure of sadness when they hear about what is happening.

Only today was I given a newspaper from the North-East which states that A brief and bitter telephone conversation between a Government Minister and a Cleveland councillor put an end to the 14-year-old Northern Economic Planning Council.". This was Sir Maurice Sutherland. I do not know whether he is a Socialist, a Liberal, or what, but he has protested. Are we going to treat people who have been involved in planning in the regions like this? Is this the attitude of the Tory Party? I know that they call be arrogant at times. Is that what the noble Viscount wants? I think that this is really disgraceful.

The noble Lord, Lord Balfour of Inchrye, talked about regional aid and special assistance as though it was something which began only in 1972. We had regional aid long before that in West Cumberland. Even Harold Macmillan —a brave, independent spirit when he represented Stockton years ago—both in his book The Middle Way and in his speeches always defended the existence of aid and the provision of aid for the northern areas. So it is not a party matter. Indeed, when I first appeared in the House of Commons and heard a Budget Speech—it was the Budget of Dr. Dalton—I remember that in that famous speech he said, " I will give money and finance with a song in my heart for the development areas." It was under a Labour Government that we built up the regions, and now we have come to this.

In my own area—I am speaking about the North because that is really my area, although the problems are similar to those in other parts of the country—we have had the traumatic experience of pit closures. We needed grants for many other activities. In my own constituency we had grants recently for Thames Board Mills which is one of the finest paper mills in Western Europe. We also have grants to encourage factories like the new Leyland Bus Company, which has been a success and along with the new Leyland Bus Company we were able to get a new road, the A.66, which has opened up West Cumberland and made us a much more prosperous area.

We also got from the European Community special aid at Lillyhall. Another question that I wish to ask is a question which was raised by the noble Baroness, Lady Fisher of Rednal, in a previous debate, or perhaps when I questioned the noble Viscount, after he had made his Statement. The European Community are anxious that we should have regional aid because they feel that we must have increased efforts in regional policy; in other words, Europe is going to prod us now. They want more regional policy while we ourselves are going back as we are now doing. I have a list of some of the proposals which they want us to put into effect. They are worried about the decline in rural population in Europe and other problems which affect large industrial concentrations. They want to have a readaptation in the declining regions. This is Europe; the Europe that we are committed to. Yet this Government are going back on all that and creating dismay in the areas that matter.

We have had another Statement today about the Civil Service, which formerly was my responsibility. I had to deal with dispersal and I am shocked by what has happened. Again there is the property agency, which we had planned to go to Middlesbrough, where the site had been picked, but now the people of Teesside will be denied that. They will be dismayed and that applies to other parts of the country and even to Scotland. Although dispersal of defence is going to Glasgow there will still be criticism because it is not enough. Here again the axe is falling.

Noble Lords must really think again about their policies. I have also asked about Quangos—when are we going to get the report on Quangos? That is very important. Noble Lords opposite supported a Motion on the subject by the noble Baroness, Lady Young, when they were in Opposition. The noble Baroness raised the question of Quangos and I think the Conservative Party believed it was a good stick with which to beat the Government. What are they going to do with Quangos? I ask the noble Lord who is responsible for policy. Are there going to be more cuts? Are the Government going to cut, for example, the Forestry Commission, which has been mentioned? That is a Quango. What about ACARD? A long time ago I asked the noble Lord the Leader of the House what was the Government's plan with regard to ACARD. As noble Lords who are interested in science will know, ACARD is the Advisory Council for Applied Research and Development. I happened to be its chairman. I hope the noble Lord the Leader of the House is now the chairman. We have produced many important documents, not written by politicians or scientists but by businessmen —the applications of semi-conductor technologies. What are we going to do about the silicon chip revolution? Microtechnology—there we shall have great problems in relation to manpower. There will be a major upheaval because of the adoption of policies which inevitably must come.

These are matters on which we want answers. So far we have had absolutely nothing except a moan against people and a moan against the previous Government, which really believed in a regional policy. So I say to the noble Viscount, we will watch this carefully and day after day when we return. Let noble Lords make no mistake. We hope that the noble Viscount will be able to inform us of what is happening arid of the progress—or the lack of progress—that is being made.

I wish to add only this. I regret what the Government are doing. I believe this will be another sad period for the regions and it will need a lot of work on the part of Government Ministers and a lot of energy to help to restore morale, which is so important because, after all, that is where the wealth is produced. I wanted to ask another question, but I must do it quickly. What about agriculture? Are we going to have cuts there as well? Are the Government going to cut down there also the Quangos which provide an agricultural service? I should like to know, and I think the country would like to know. On this side of the House we condemn these policies; we believe that the Government are going along a wrong path. We are sorry about it, and we believe that it will be bad for Britain and bad for the areas that I have mentioned.

6.26 p.m.

Viscount TRENCHARD

My Lords, a great number of questions have been asked which I shall not refer to tonight, but I have pages of notes on them and a number of them are serious questions and I will write to the noble Lords concerned and give them detailed answers; otherwise I shall be speaking for an unacceptable length of time, having already made a long opening statement.

Lord RAGLAN

My Lords, presumably the noble Viscount will be writing to the noble Lord, Lord Rochester, on the criteria. Will he please send me a copy of that letter?

Viscount TRENCHARD

My Lords, the first thing I want to make clear is that nobody on these Benches is against the regions. The talk of " two nations " and all that kind of thing really is not worthy of noble Lords opposite, if I may say so.

A Noble Lord

Jim Prior said so!

Viscount TRENCHARD

My Lords, I have mentioned before that noble Lords on the opposite side of the House cut a bigger sum off the regional employment premium at two weeks' notice. Noble Lords opposite did it because they were forced to do it, because reality dawned for a moment. That is the first point that I want to make: the total lack of reality in many of the comments made by noble Lords opposite in terms of the current situation. The suggestion is that the position in the regions is the only thing to have declined to tragic proportions. I have visited them all, and I agree the tragic proportions, but do not let us forget the national position with a rise of unemployment during the trusteeship of noble Lords opposite from 600,000 to 1,300,000. Do not let us forget that this nation industrially is on the brink of the precipice, and what we are trying to do is to prevent the nation from taking one step forward. We must change direction and here I say to the noble Lord, Lord Hatch of Lusby, cuts of themselves do not of course force growth. We have tried to create conditions which have been found here and elsewhere across the globe as being capable of lifting standards of living nationally well beyond our present level, which, but for oil, would have sunk beyond belief. Therefore, we have to take our national policy and our regional policy together.

I do not think there has been much serious comment, with the exception of the noble Lord, Lord Rochester, and my noble friend Lord Balfour of Inchrye, in terms of the findings that we found on a very thorough review of the amount of waste that lay in the existing policy. Two-thirds of the catchment areas or travel to work areas were treated as special cases, and I have given statistics to support the fact that in the other one-third the unemployment situation was much worse.

I will deal with the criteria very quickly but I will write also. The criteria are not only based on unemployment starting well above the national level; they are based on prospects, they are based on migration of populations, on the likelihood of industrial investment being attracted or not; they are based on the number of retired around the seaside towns and prematurely retired people who may be living there. I will write to the noble Lord further on this question of the effectiveness of the national statistics.

Lord ROCHESTER

My Lords, I am sorry to interrupt and I thank the noble Viscount for giving way. Does he accept the general point I was trying to make, that the more open the criteria are made to scrutiny, the more likely they are to be accepted; and will he further accept that, although I shall be very glad to receive the letter from him, it would serve a much more useful purpose for the nation as a whole if these criteria could be made more widely available?

Viscount TRENCHARD

My Lords, there is a subjective element in this and there are many factors which have to be taken into account in each area. The previous Administration found, and we agree with them completely on this point, that they really are not capable of publication without an enormous amount of argument about each and every area. What one tries to do here is to make sure that the criteria which a very efficient Civil Service are working on are objective overall, and having done that one must leave it to them and, in order to interpret it as fairly as possible, keep all political decision out of it.

My Lords, various speakers have mentioned the problem of the declining older industries, which is indeed the real problem, and the fact that the build-up of the new, nationally and in the regions, is far too slow. This, primarily, and most importantly, depends upon a turnround of the national decline position which I have spelled out. Investment has been mentioned and blamed, as though this were the main reason for the problems in the regions. The investment situation is a mixed one; the situation is totally different from 1970–72 with regard to the demand that exists today. But in total the evidence is that our investment in industry in this country is about of the same age as that of our main industrial competitors. This does not mean that there is not a great deal to be done in some areas.

I would just say once again that the timing of these measures in relation to cash flow requirements really has been thought about, and this amount of money in the regions—although the noble Lord, Lord Rochester, spoke about many other things which we are not debating—is not correlated with the national problems which I mentioned in my opening statement. Small businesses really will not, in our view, be affected. RDGs are not project orientated. I was talking of them in terms of capital replacements. The threshold increase would go up to £300 and £3,000, or a little more than that, in relation to inflation alone. So the majority of the increase is a straight reflection of inflation since introduction. I hope noble Lords heard my point that every typewriter replaced, even in a large company, if it is an expensive typewriter, has until now been eligible for grant, and that really does not create more jobs.

With regard to Europe, we get much help—and I will send details to the noble Lords concerned—from the European Investment Bank, from the ERDF, which is the Regional Fund, and from the Social Fund. As I said when the Statement was made, I have taken particular care to test the minds and intentions of European Commissioners both on the competition policy and in relation to regional aid.

I have found, most importantly, that the Commissioner responsible for regional aid was thinking exactly along our lines of the need to concentrate regional aid and not spread it all over the place too thinly.

The noble Lord, Lord Raglan, particularly asked about investment in the rural areas and he instanced some areas he had in mind. I would point out that the selective assistance will continue in the intermediate areas and over the next three years in all areas which were intermediate areas; that is to say, Section 7 is available to support projects in these scattered rural areas, where there are not so many projects; where there is a really good project which fits the criteria the selective assistance is still available. I would say to the noble Lord, Lord Rochester, that we have to consider the rival problems of waste and arbitrary decisions. The economic condition being what it is, with the pot of gold empty, we have gone for waste and kept selective assistance; even though the selective decisions will not always be right, they will be better on the new criteria.

6.36 p.m.

On Question, Whether the said Motion shall be agreed to?

Their Lordships divided:

Contents, 97; Not-Contents, 55.

CONTENTS
Adrian, L. Dundee, E. Mancroft, L.
Aldington, L. Eccles, V. Mansfield, E.
Alexander of Tunis, E. Effingham, E. Marley, L.
Amherst of Hackney, L. Elliot of Harwood, B. Massereene and Ferrard, V.
Amory, V. Ferrers, E. Merrivale, L.
Ampthill, L. Ferrier, L. Monck, V.
Auckland, L. Fortescue, E. Morris, L.
Avon, E. Fraser of Kilmorack, L. Mottistone, L.
Balfour of Inchrye, L. Gainford, L. Mowbray and Stourton, L.
Barnby, L. Garner, L. Newall, L.
Bellwin, L. Gowrie, E. Northchurch, B.
Belstead, L. Greenway, L. O'Hagan, L.
Boyd-Carpenter, L. Gridley, L. Orr-Ewing, L.
Boyle of Handsworth, L. Halisham of Saint Marylebone, L. (L. Chancellor.) Polwarth, L.
Brookes, L. Powis, E.
Carr of Hadley, L. Hanworth, L. Rankeillour, L.
Carrington, L. Harmar-Nicholls, L. Rawlinson of Ewell, L.
Cathcart, E. Henley, L. Robbins, L.
Cockfield, L. Home of the Hirsel, L. Rochdale, V.
Colville of Culross, V. Hornsby-Smith, B. Romney, E.
Colwyn, L. Hylton-Foster, B. St. Davids, V.
Craigavon, V. Kemsley, V. Sandys, L. [Teller.]
Craigton, L. Killearn, L. Selkirk, E.
Crathorne, L. Kimberley, E. Sempill, Ly.
Cullen of Ashbourne, L. Linlithgow, M. Slim, V.
de Clifford, L. Long, V. Somers, L.
Denham, L. [Teller.] Lucas of Chilworth, L. Spens, L.
Denman, L. Lyell, L. Strathspey, L.
Drumalbyn, L. Mackay of Clashfern, L. Stuart of Findborn, V.
Torphichen, L. Vaux of Harrowden, L. Westbury, L.
Trefgarne, L. Wakefield of Kendal, L. Willoughby de Broke, L.
Trenchard, V. Ward of North Tyneside, B. Young, B.
Tweedsmuir, L. Ward of Witley, V.
NOT-CONTENTS
Ardwick, L. Hall, V. Raglan, L.
Aylestone, L. Hatch of Lusby, L. Rochester, L.
Banks, L. Henderson, L. Sefton of Garston, L.
Blyton, L. Houghton of Sowerby, L. Segal, L.
Brockway, L. Howie of Troon, L. Shinwell, L.
Brookes of Tremorfa, L. Jeger, B. Stedman, B.
Collison, L. Janner, L. Stewart of Alvechurch, B.
Cooper of Stockton Heath, L. Leatherland, L. Stewart of Fulham, L.
David, B. Llewelyn-Davies of Hastoe, B. [Teller.] Stone, L.
Davies of Leek, L. Strabolgi, L.
Dowding, L. Lloyd of Kilgerran, L. Taylor of Mansfield, L.
Galpern, L. McGregor of Durris, L. Underhill, L.
Gaitskell, B. Mishcon, L. Wallace of Coslany, L.
Gardiner, L. Murray of Gravesend, L. Wells-Pestell, L. [Teller.]
Gordon-Walker, L. Peart, L. Whaddon, L.
Goronwy-Roberts, L. Phillips, B. White, B.
Greenwood of Rossendale, L. Pitt of Hampstead, L. Wigoder, L.
Gregson, L. Plant, L. Wynne-Jones, L.
Hale, L. Ponsonby of Shulbrede, L.

Resolved in the affirmative, and Motion agreed to accordingly.