HL Deb 21 January 1985 vol 459 cc69-81

7.4 p.m.

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth) rose to move, That the order laid before the House on 28th November 1984 be approved. [7th Report from the Joint Committee.]

The noble Lord said: My Lords, your Lordships will recall that I explained the key features of the Government's new regional industrial policy on 28th November, when I repeated the Statement on the subject made in another place by my honourable friend the Minister of State for Industry. I should now like to explain in more detail the Prescribed Percentage, Amount and Limit Order.

The House will be aware that Section 5 of the Co-operative Development Agency and Industrial Development Act provided that on the first occasion only that the rate of capital grant, the amount of job grant and the limit on capital grant are set by order, the order comes into force without needing an affirmative resolution before it is made, but will lapse after 40 days unless it is approved by affirmative resolution. The reason for this was to ensure that all the orders relating to the new regional development grant scheme came into force on the same day and with effect from the announcement. The result of this is that the order before us this evening came into force on 29th November, but it will lapse after tomorrow unless this House signifies its approval of it.

I explained in our earlier debates on the Co-operative Development Agency and Industrial Development Act the Government's reasons for changing the regional development grant scheme in the way embodied in that Act. In order for the scheme to work, certain key features have to be set by statutory instrument. The percentage rate of capital grant is set by this order at 15 per cent. This is the same rate as in the case of development areas under the old RDG scheme. As the assisted areas order no longer provides for there to be a separate category of special development area, there is no special rate of regional development grant for such areas as there was in the past.

In arriving at the rate of capital grant for the regional development grant scheme, which we intend to continue to be as automatic and predictable as possible, we needed to avoid on the one hand setting too high a rate of grant—which of course would benefit those who would undertake the investment in any case—and, on the other hand, setting a, rate of grant which is too low, so that it is in general not to be taken into account by companies at an early stage of investment decisions.

We also announced in the White Paper which was published in December 1983 that we would make provision for a limit to be set on capital grant under the new scheme, and that the limit would be calculated by reference to net new jobs created. Article 5 of the order sets that limit at £10,000.

In arriving at the figure of £ 10,000, the Government considered that too high a figure would involve wasteful expenditure. On the other hand, a lower figure would adversely affect the predictability of regional development grant and so undermine its effectiveness. We consider that a grant per job limit of £10,000 would not in practice have the effect of restricting grant in the case of the majority of projects of large undertakings which create jobs, since it will bite only on projects where the investment is more than £65,000 for each job created; that is, above average capital intensity for projects which create jobs. Many projects will therefore not be affected by the limit, but where it does bite it will have the effect of reducing what in our view has been excessive expenditure.

We said in the White Paper of December 1983 that the limit would not normally be applied to small firms. The order has the effect that a small firm project involving capital expenditure of £500,000 or less is not affected at all by the limit. For expenditure in excess of £500,000, the limit will apply; but I stress that this will be only on expenditure above that level. In all cases, small firms spending more than £500,000 on a project will receive as a minimum 15 per cent. of the first £500,000. This provision will, we expect, completely exempt over 90 per cent. of small firms projects from the grant per job limit.

Article 5 of the order also states that the limit on capital grant in the case of a project of a large undertaking which does not provide jobs is £500. The reason for this is that without some such limit we would be required to pay at a 15 per cent. rate on projects which did not create jobs. The policy will not normally be to approve projects of large undertakings where they are not expected to involve net job creation, but if such a case were approved, then we think that only a small amount of grant would be appropriate, since no jobs are being created. We consider that £500 is a reasonable figure for any such case.

One of the features of the new regional development grant scheme is that grant is calulated by reference both to eligible capital expenditure (subject to the limit, if applicable), and also to the number of net new jobs created, and grant is paid on whichever basis is the more favourable to the applicant. The House will recall that we have introduced the concept of a job grant to reduce the bias against labour intensive projects inherent in the previous scheme. The order sets the job grant at £3,000. The European Commission communication on regional aid states that in the case of development areas in Great Britain the maximum amount of grant denominated by reference to new jobs created is 5,000 European units of account per job, which was about £3,150 when last notified by the Commission. The last rate was notified by the Commission in January 1984.

A materially higher figure for a grant based on new jobs created would involve therefore a breach of our obligation to the European Community. The grant level could not be set at the EC ceiling because currency fluctuations of course affect the relationship between EUAs and sterling. It was therefore necessary to allow some head room.

It is the Government's view that the rates of capital and job grant, together with the limit specified in the order, provide a sufficient incentive for both capital and labour intensive projects and go some way to ending the bias in favour of capital. The scheme retains a high degree of predictability, and of course regional development grant will continue to be automatically payable. At the same time we believe we have curbed the worst excesses of previous policies which led to large sums being paid where there was little justification for so doing. The end result is, we believe, a scheme which will be cost-effective in achieving its policy intentions, thereby freeing resources which can be used for the benefit of the country as a whole. I commend the order to the House.

Moved, That the order laid before the House on 28th November 1984 be approved. [7th Report from the Joint Committee.]—(Lord Lucas of Chilworth.)

Lord Bruce of Donington

My Lords, the House will be grateful to the noble Lord for having given a brief statement of the working and implications of this particular order which, as he correctly pointed out, illuminates the relevant portions of the Act of 1982, as amended by the Act of 1984, which we recently discussed. Now that we have had further information, and now that we have had in front of us the maps and the various intentions of the Government, it also affords us the opportunity to review the implications of the whole scheme.

Before I proceed to the implications from our standpoint on this side of the House, I should like to ask the noble Lord a question, which he need not answer just now but which I would hope in his reply he will be able to answer authoritatively. In the course of his remarks the noble Lord said that the advantage of the scheme as now proposed was the high degree of predictability. I am not quite sure whether that was predictability in the minds of those who made application for the grant, or predictability from the Government's standpoint. I would hope that before a scheme of this kind was put together, before a radical departure, which this purports to be, from the previous scheme of regional development grants, the implications would have been studied very carefully and calculations would have been made.

The noble Lord has produced his ideas (expressed in two alternatives) about the relationship of the grants to jobs actually created. We know quite well from the speech of his right honourable friend Mr. Tebbit in another place only two or three days ago that the financial limits are fixed somewhere around £600 million, and in 1985–86 they are hoped not to exceed £500 million on regional development.

The question I have to ask the noble Lord is this. On the basis of the scheme laid before the House and on the basis of the financial limits that the Government have already set themselves, how many jobs do they predict are going to be created? How many? The estimates quite clearly will vary. There will be between two and perhaps several assumptions on the basis that some grants are determined by reference to the £3,000 per job created, and others on the basis of the £10,000 to which the noble Lord referred. But the Government must have had some idea in their mind as to how jobs would be created in the United Kingdom if the scheme were followed.

The noble Lord will hardly need reminding that since his Government came to office unemployment in the United Kingdom has increased by 2 million, and that that is even after doctoring the figures at one stage by removing people from the register. Under the Government's scheme on regional development expenditure in the year 1980–81 was £716 million. The figures differ slightly (but only marginally) according to which document one reads—the document published by the Department of Trade and Industry or the document published by the Department of Employment. But the differences are marginal. If inflation were to be taken into account, it would need nearly £1,000 million spent during the next year, on the basis of the expenditure of 1980–81, to stand still. Yet by 1985–86, under this scheme, in real terms the Government propose to expend a half of that amount. So, expressed in cash expenditure in real terms, we are halving the amount while at the same time unemployment has doubled during that period.

The noble Lord is of course on a point when he says that the way we are doing it now is a much better way of doing it; that we intend to make economies; and that we do not believe that the old scheme was a good scheme in that money was paid where no jobs were created. It was stated in the debate in another place that multinationals may have taken advantage of the large capital grants available without the employment effects being discernible. I do not concede that that is necessarily the case, because it is very difficult to determine what employment is created.

There are always the secondary effects. For example, one can have a very large company settling in a special development area and, without employing many more people, receiving subventions on quite a large scale. But its output may have increased considerably. Its demands on subordinate sections of industry may have increased considerably. Its effect on the environment in which it was established may have improved considerably. And even though employment directly within the firm may not have increased by anything like the amount anticipated in the application originally submitted by the company, the effects on the immediate area may have been very considerable and the multiplier effect in terms of subcontractors in the same locality or generally may have been beneficial. It is not always safe to say that, by relating the extra employment directly to the grantee itself, one is of necessity doing the right thing. That is far from proven.

After all, before the publication of the White Paper in December 1983, this zippy, efficient, enthusiastic and enterprising Government had been in office for four years. Is it to be assumed that throughout those four years the Government tolerated such inefficiency in expenditure on the regional front? That may well be so. If the noble Lord is prepred to say, "Mea culpa, mea culpa. We were all wrong and four years later we found that out", then I am prepared to accept that. But, frankly, I do not believe that that is the case.

I believe that the reason why the scheme has been oriented in the way it has—specifically linking the expenditure to actual job creation—is so that the amount thus spent can be restricted by the EEC. Thus, when the Government are reproached for being too niggardly and too mean, they can immediately shelter behind the EEC requirements and say, "Now that we have decided to make the whole regional development scheme specifically job-related, there is nothing more we can do about. It is really not our fault". I do not think that will wash.

I hope that the figures which the noble Lord will provide about the extra jobs created as a result of this new scheme can be compared with what has happened in the year ending 31st March 1984 under the administration of the Government. Indeed, the Department of Trade and Industry has been kind enough to publish the Industrial Development Act report to 31st March 1984. At Appendix 7, I find that the new jobs created in Great Britain, and anticipated on the basis of the offers and payments made up until that time, numbered some 36,888. This is very good indeed, but one must remember that unemployment is steadily rising now.

The new jobs created number 36,888 and correspond, strangely enough, with the decrease in unemployment during that short period—a figure of 36,800. So, oddly enough, if one looks at this matter in its arithmetical totality, one could say that the jobs created through the regional development fund in the year to March 1984 were responsible for the decrease in unemployment. Perhaps the mathematical part is, as it most certainly is, entirely fortuitous But what does it indicate? It indicates that with all the expenditure of money in the year ending 31st March 1984, we were still marking time. We were not really reducing the total volume of unemployment at all.

The Government have in this scheme not only fixed these particular rates (and I believe that my reasoning is right when I say that they like to be under the shelter of the EEC regulations which say that they cannot do any more) but they also in their White Paper and in debates on the Act itself indicated that they were going to be fairer to the service industries. In other words, they were going to shift the emphasis away from manufacturing industry and on to the service industries. I believe that this is a complete disaster. The service industries have shown themselves so far to be very well able to look after themselves and to function very much better if manufacturing industry begins to recover.

On previous occasions I have told your Lordships—but this does not seem to have sunk in with the Government—that one of the reasons why the industrial products of the United Kingdom are not so competitive as they ought to be is because of our massive under-investment in manufacturing industry ever since the year 1950. I have frequently given figures which have not been challenged by the Government's Front Bench. I should have thought that, after going over them three or four times, the penny might have dropped and a stage been reached where the Government might have challenged me. But in general, since the war, we have invested (expressed as a percentage of the gross national product) to a level of 60 per cent. lower than in Japan; 40 per cent. lower than in Germany; and 30 per cent. lower than in France.

Fortunately, the figures can now be verified and do not rely on my say-so, which the Government can challenge. The OECD working report No. 17, published only 10 days ago, reveals the latest per capita figures. It expresses them in dollars after all adjustments for exchange rates, and after all other adjustments needed to make the figures comparable—as the noble Lord will see. The latest figures show that, in respect of machines and equipment we are investing per capita at a rate 47 per cent. below the level in Japan; 23 per cent. below that in France; 30 per cent. below that in Germany; and 47 per cent. below the figure operating in the United States.

In those circumstances, there can be no excuse for the Government not to take a more active part in securing investment in manufacturing industry in the United Kingdom—no excuse whatever. The party opposite have claimed for a long time that, left to private enterprise, private enterprise would do the trick. The former Prime Minister, Mr. Heath, found that, on the contrary, no matter what inducements to capital were offered, it still would not invest because the labour rates in the United Kingdom compared with those in Germany and elsewhere were very much lower and it therefore paid to employ British labour at lower wage rates than to go for capital investment.

There is nothing in the existing proposals. They do not go as far as inviting state investment in manufacturing industry even though that was envisaged in the coalition White Paper which, we are given to understand, is securely held in the Prime Minister's handbag wherever she goes. That most certainly envisaged it. We are not asking to go as far as that, because that would be anathema to the party opposite, particularly on top of its U-turn last week over the exchange rate; we know it could not stomach it.

There can be no excuse for not devoting at least double the amount of expenditure that is projected to regional development aid because during the years the noble Lord's party has been in office there have arisen new distressed areas. The West Midlands was not a distressed area when the noble Lord's party came into office. It is now. The fate of the distressed areas, particularly in the manufacturing areas, has progressively worsened and the areas have even doubled since the noble Lord's party came into office. Therefore, we are entitled to ask that, at the minimum, the expenditure should be increased.

The Government have placed a further restriction on expenditure on regional development, in the same way as they did shortly after they came into office in June 1979, when they had a moratorium on regional development grant payments for four months; and that continued way into 1982. I observe Mr. Tebbit's latest announcement, made in another place on 17th January, that the Government are to have another moratorium. Mr. Tebbit was kind enough to explain that the regions will not lose the money. No, it means that payment will be postponed. The impertinence of laying proposals of this kind, and in the original Act, before both Houses is so great as to be almost feasible. How a Government dare make proposals of this kind with unemployment at its present level, passeth all imagination.

It is not as though the moneys available in the economic sense are not there. It would have been quite easy, for example, to have devoted at any rate part of the amount realised by the sale of public assets to this purpose in the year that has just passed. About £2,000 million has been raised by the sale of public assets, mostly at prices considerably below their value, as we well know. According to Mr. Tebbit's recent announcement, the Government expect to raise a further £2,000 million to £2,500 million in the forthcoming financial year. The Government are busy flogging off the nation's assets. Why cannot they have the decency, not to say the honour, instead of treating that cash capital realisation as income in their hands—no doubt shortly to be devoted to the relief of the richer sections of the community—to devote at least £500 million of that money to extra assistance to investment in manufacturing industry, particularly in the regions?

Here we have the contrast. On the one hand, the Government in their general economic policy outlook—for example, in the field of energy—throw up their hands and dig in their heels (with guts, no doubt, as the Prime Minister would put it) about the closure of uneconomic pits. But they do not do that when they come to the closing of uneconomic banks such as Johnson Matthey. They pump £100 million into that bank with the greatest alacrity. There is, apparently, a difference in the Government's moral approach towards the desirability of saving an uneconomic bank and saving whole communities on the basis of their concept of what is an uneconomic pit.

I do not for one moment expect that the Government will change their mind; but in the meantime they ought to be aware of the current trend and measure the figures that the noble Lord will, I trust, be able to give me in his reply as to the expected jobs—genuine jobs, I hope, from the noble Lord's standpoint, and I have his definition before me of what constitutes a genuine job—that will be created in the next year as a result of the application of those policies. Broad estimates will do. The officials' box can undoubtedly supply the noble Lord with broad parameters of the expectations that we should anticipate with so much relish.

In the meantime, as the noble Lord will note from The Times of 11th January, 5,750 jobs were lost in three days. He will be noting, I take it, from the Financial Times of 11th January that the number of fourth quarter business failures is the highest since 1966. Again, he will note from The Times of 19th January that so generous are the Government towards small firms that they are going to cut ECGD cover. Then, perhaps—concerning another place and not this House—he will note The Times report of 18th January about jobless trends still rising in Tory seats; thus again sending those same ominous shudders that have been evident in another place through the Benches of restive Tory MPs who are now beginning to worry about their political skins.

The Government are, of course, in trouble about this because they delude themselves. The Government do not believe that there is a recession. For the past four years we have been hearing about nothing but the recession as though it was some god-sent hurricane on the face of the earth, and that the recession has certainly been there; indeed, that the state of United States and world trade has been based upon this recession. Therefore, imagine what we are to think about Her Majesty's Government when, on 17th January 1985, according to a report in the Financial Times, the noble Lord, Lord Young, Minister Without Portfolio, announced to a seminar in London that it was a myth to suggest that Britain was still in recession. A statement of that kind is of the degree of stupidity with which I debited the noble and learned Lord the Lord Chancellor when he made the equally ridiculous and silly statement that there was no gap between rich and poor in this country.

The whole structure of this order, based as it is upon the Act itself, shows that the Government do not learn; but, more than that, in terms of the people of the country as a whole, particularly those in the distressed areas, it shows that the Government do not care.

7.40 p.m.

Lord Taylor of Gryfe

My Lords, the conventions of the House provide that on these occasions we cannot or do not vote against the order. However, the terms of the order are such that I am sorely tempted to defy the conventions, but I will not do so. As the Minister said, we have been over this ground before and the statement which was made tonight is consistent with the original statement and the justification. To that extent we are not going to vote against the order but we are permitted to express our regret and deplore the content of this statement.

In my view, in a sense we are attending the last rites of an effective regional policy. It is appropriate to that occasion that we express our sincere regrets in a mood of great sadness. I am sorry that the television lights are not here tonight. I can think of no other experience that would create more enthusiasm for the Scottish nationalists than the content of this paper and the discussion that we are going to have.

I notice that the noble Lord, Lord Polwarth, is in his place. I hope that he will be tempted to contribute in the light of his experience as a financier and industrialist concerned with the welfare of our native country. Even before the full implications of this order are felt, if one turns to the annual report of the Industrial Development Board for last year, one sees that the total amount of regional aid spent by the Government in this country has been cut by one third—before this order.

Regional aid to Scotland was cut by 50 per cent. last year. I am not making a specific case for Scotland. I am using Scotland because it is within my experience and because it is typical of what will happen in other areas. Scotland will suffer even more under the new provisions. If one looks at the map, the total amount of money to be spent on regional aid will be more widely spread. The order provides that more than £300 million will be taken out of regional aid in this year, and the total amount to be spent will be spread over a much larger area. It means that the effect of regional aid will be substantially diminished in areas of great need, and that is happening in a period of high unemployment.

There is an assumption that the old system has not worked and therefore it must be replaced. May I say that in the light of my personal experience that is not justified? We are carrying a cross in regional aid for Sullom Voe. I agree that Sullom Voe was the development of a large oil port—the biggest in Europe—and the companies that developed it collected their appropriate grant which at that time was 22 per cent. in a special development area. It is now reduced to 15 per cent. Because we had that anomaly of building an oil terminal at Sullom Voe, that is no justification for revising the whole structure of regional aid.

Is regional aid working? I can speak only from my experience. When the last Conservative Government were in operation I was invited by them to assist in the development of inward investment as a non-paid consultant. The present Secretary of State for Scotland and I travelled the highways and byways of Europe, talking to companies, influencing boards and arranging lunches and presentations in which we demonstrated to them that if they invested in our part of the world the incentives were at least as attractive as those in Southern Ireland or many other parts of the world. As a result, we had a substantial flow of inward investment, and it is working and changing the face of our economy.

The old industries are dying and we must get the new industries in, but I am not sure that we shall attract them on the basis of this reduced package. Say what one likes, the boys—the finance directors and the board-room—make their calculations of what assistance they will get for inward investment. If we direct regional policy specifically at labour-intensive industries, I am not sure that we shall attract the high technology industries which are not necessarily labour-intensive but on which the growth of our GNP depends. The success of this country depends on producing more wealth. But if we simply insist that high technology industries can be discouraged under this scheme, the necessary change in the face of Scotland and of other areas where we have declining traditional industries will not be generated.

Like the noble Lord, Lord Bruce of Donington, I find it difficult to measure the magic figure of the amount of money per job created. On my doorstep is a very large factory being built by Hoffman Laroche, the Swiss chemical company. It is a very big investment and would not come within these terms. I know because I was lobbying on that investment to get it to Scotland, and it was touch and go at the last moment. However, we got it. What has happened? McAlpine—and I am sorry that the noble Lord, Lord McAlpine, is not here—is building that vast industrial complex, and as a contractor is creating jobs. There is 30 per cent. unemployment in the area. That in turn is changing. Local shopkeepers and other local suppliers are all part of the revived industrial complex. But the specific project would not necessarily have qualified under the provisions of this legislation.

I suggest to the Minister that he should keep an eye on the impact of this. I seriously believe that it is sad for our country that we are departing from what has been a successful scheme of regional aid in a period when we require investment and we require to do something about massive unemployment. The Prime Minister in fact said during her last election campaign: We are committed to the maintenance of a strong and effective regional policy". I suggest that the statement tonight is not consistent with that expression of view.

Lord Polwarth

My Lords, since we have exhausted more than three-quarters of the customary dinner hour reserved for this kind of business, I have no intention of following the noble Lord, Lord Bruce of Donington, in such a wide-ranging review of the economy, which, with the greatest respect to him, I think he rather wasted on the small handful of us here in the House today. I suggest that he might have done better to reserve it for the bright lights of next Wednesday; although, for all I know, he may be going to give us an equal performance on that occasion.

I shall speak very briefly, having been concerned for a number of years in regional development at a time when a lot of it was a matter of private enterprise pushing Government to get on and do something about it. Things have changed a lot since those days. I have seen a variety of regional development policies in that time. They nearly always have been changed too soon, before industry became fully used to knowing what they were going to get. At the same time there are times when they must be changed.

We always regret it when funds are reduced for the support of some cause in which we deeply believe—and I deeply believe in regional development. I am not one of those who say that regional development money has been wasted. I have seen the results in Scotland too well to believe that. It has done very great things for that country of mine. I would simply say that there is no doubt that in its more recent forms, as others have said, regional development policy has spent large sums of money on projects which would have come into being whether or not it had been spent—not merely Sullom Voe, but many other oil-related projects in Scotland. I should not be saying this because we welcomed them; but they would have gone there because they could have gone nowhere else.

I think the great strength of regional development policy is not just related to numbers of jobs. I agree that you have to have a criterion of some kind by which you judge it, and that the number of jobs is probably the main one to which you relate it; but its main objective is to cause the growth of industry which otherwise would have gone, not necessarily to another part of this country but, probably, to another country altogether. I think that in this we have had quite considerable success. I am sorry that the total funds have been reduced. At the same time, I believe that, with the new arrangements and the saving of the unnecessary grants, the policy proposed now can have a continuing successful impact. I should like to think simply that the Government would keep an open mind as to the figures that are included in this order, review them regularly and not regard them as a target for all time; and that they will reconsider the question of support for the service industries.

Here I find myself with the noble Lord, Lord Bruce of Donington. We are all for the service industries, but, as he has said, most of them seem able to get along pretty well without assistance and many of them will inevitably follow the industry which they serve. Our major problem at the moment is to try to staunch the drain on the base of our manufacturing industry and hence our exporting industry—a subject to which noble Lords are giving attention in our Select Committee at the present time.

All I would say is that I do not take as gloomy a view of the proposals put forward in this order and under this measure as do some other noble Lords. I believe that they can still have a considerable effect; but I ask the Government to watch them closely, to watch the results, and to be ready to review them from time to time as necessary.

7.55 p.m.

Lord Lucas of Chilworth

My Lords, perhaps I may start by thanking the noble Lords, Lord Bruce of Donington and Lord Taylor of Gryfe, and my noble friend Lord Polwarth, for their contributions to this rather short debate this evening. I would endorse very much what my noble friend Lord Polwarth said in the early part of his remarks in consideration of what the noble Lord, Lord Bruce of Donington, had to say. I am going to resist (as he will not be surprised to hear, and neither, I think, will the House be surprised to hear) following the noble Lord down a number of the paths, avenues, waterways, riverways and quotes from innumerable newspapers that he tacitly invited me to do.

Let me start by saying that, as on all other occasions when I have taken part in debates on regional policy, I have been at some pains to stress that the current policy that we have debated and of which this order is part is a radical departure. It is a departure in that it concentrates its grant-making process on the creation of jobs, not to the total exclusion of, but certainly in preference to, that of capital-only projects. This must be a good thing. Noble Lords will recall that the regional policies that have been followed for the past two decades, if not three, have failed to achieve their objectives.

I am not suggesting for one moment that the policy being put before your Lordships in these last few months will necessarily be any better. But it certainly cannot be worse, and we believe quite sincerely that it is better. That there is a lower sum of money is not as germane to that argument in principle as some noble Lords would make out. The object is to make that lesser amount of money that is being made available a good deal more effective than the thousands upon thousands of pounds that we have thrown at the problem in previous years. Certainly, this Government are not in that business. I think that that probably contains all the remarks I would wish to make on the general principle.

Lord Molloy

My Lords, I am grateful to the noble Lord for giving way. Is he really trying to convince us that the policies which produced three-quarters of a million to one million unemployed are not as good as the policies which are producing between 4 million and 5 million unemployed? In other words, why is he in favour of massive unemployment?

Lord Lucas of Chilworth

My Lords, I could not possibly persuade the noble Lord, Lord Molloy, of anything on which he does not wish to be persuaded. In fact, he has turned the argument completely round the wrong way to suit his own particular question. I am resisting the temptation to debate that with him.

The noble Lord, Lord Bruce, asked a number of questions. One of the suggestions he made was that we were hiding beneath the EEC requirements. He will know full well because he was a member of the European Parliament, and he will recall from his own knowledge, that those requirements were introduced long before this Government took office. He will also remember, as will the noble Lord, Lord Molloy, that regional policy has been subject to extensive reviews and that the White Paper that presaged this policy was the result of nearly two years' work.

The noble Lord, Lord Bruce, asked in a variety of ways specifically whether I would tell him the expected number of jobs that are going to be created under the new regional development grants scheme. He knew full well when he asked his question that it was virtually rhetorical. I cannot tell him: nor, indeed, could he tell me, were he standing on this side of the House. It is far too early to say. The answer depends absolutely and entirely upon how companies react to the new incentives to create employment in the assisted areas. Let me say that all the indications are that the present Government's policies have shown quite decisively, through the provisional 1984 figures, that not only is profitability up but productivity is up and investment in our manufacturing industries is also at a higher level than it has been for some time. That cannot be a bad thing. I am equally optimistic that the regional policies will have some further effect upon this.

The noble Lord, Lord Taylor, and my noble friend Lord Polwarth, spoke about the service sector. The Government's policies are certainly being changed in modest areas to try to ensure that the differentiation that has existed between the manufacturing and the service industries is not maintained. We know that both the manufacturing and the service industries have great job creative potential. Both make significant contributions to the economic wealth and wellbeing of the country. The qualifying activities order reduces that discrimination.

The noble Lord, Lord Taylor, spoke about the inward investment opportunities. I do not hold the same views as those expressed by the noble Lord when we discussed this matter in November. I have attended, with my honourable friend the Minister of State, discussions with people who have made inquiries about inward investment opportunities. I am encouraged that there are those who see inward investment opportunities in this country. That we have changed the basis of regional development grant to one more closely allied to job creation does not prevent other companies seeking support through regional selective assistance policies that apply to both areas. There is no denial of that.

I would ask the noble Lord, Lord Taylor, what he wants. Does he want great capital projects, such as the one he quoted, or does he want projects utilising taxpayers' money, not Government money, designed to help the creation of jobs? I suggest that he might say that he would like both, but that perhaps he cannot have both.

Lord Taylor of Gryfe

My Lords, I am sorry to interrupt, but the noble Lord has invited me to comment. The taxpayers' money is also used for unemployment benefit and social security payments. I prefer taxpayers' money to be used to encourage investment in productivity, rather than to have it dissipated in unemployment relief.

Lord Lucas of Chilworth

My Lords, I do not think that anyone would quarrel with that. My question, perhaps a rhetorical one, was rather more narrowly drawn. The noble Lord, Lord Taylor, said that if the convention did not apply, he might seek to change the course of events this evening. He said, however, that he was sorry. I give the noble Lord, as I give my noble friend Lord Polwarth, the asurance that we shall certainly continue to monitor the regional policies. We shall also monitor the effectiveness of the policies. As soon as an assessment can be made, it will be made. But the House will recognise that some little time has to elapse before we can make a proper assessment.

We are confident that the policies as outlined in the Act that we discussed earlier are the right policies. We are sure that changing the old regional policy to one more allied to job creation and the figures that we have set to this are, on balance, the right way forward. I commend the Motion.

On Question, Motion agreed to.