HC Deb 16 May 2000 vol 350 cc23-30WH 11.30 am
Dr. Peter Brand (Isle of Wight)

I am grateful for the opportunity to have this debate. I am pleased that the Under-Secretary of State for the Environment, Transport and the Regions, the hon. Member for Streatham (Mr. Hill), is here to respond, as I believe that he has responsibility for shipping, which is, of course, uniquely relevant to my constituency.

In recent months and years, I have led delegations to the Department of Trade and Industry and have met successive Ministers. The case for the Isle of Wight has been well made to the Department, but, unfortunately, there has been no response. I was disappointed that the Minister for Trade refused to meet a delegation. He obviously felt that we were becoming repetitive.

I shall try not to be repetitive, but I want to make a case for my constituency, which is a wonderful place. It is an excellent area to live in and can provide a great quality of life. I would like it also to be an excellent place to work. As the Economic Secretary to the Treasury said in the previous debate, welfare, opportunity and the reduction of inequality are about jobs. The Isle of Wight still has one of the lowest gross domestic products in the country. It is the lowest in the south-east, at 74 per cent. of the European Union average, although that is a great improvement on the position a few years ago, when it was 64 per cent. of that average.

Through hard work and creative use of Government grants, the situation on the Isle of Wight has improved dramatically, but we have an extremely vulnerable base. We rely very much on agriculture, tourism and the care sector. There is also a little bit of manufacturing, although in the past two years we have lost 800 jobs manufacturing jobs as a result of the strength of the pound and the decisions of multinationals—another matter covered in the previous debate.

Employment is not only low, but fragile. Seasonal employment often means that twice as many people are unemployed in winter as in summer. The latest figures show that, among local authority areas, only Brighton's unemployment rate is higher than that in the Isle of Wight. We also have some of the lowest wages in the south-east and a high level of benefit dependency, which creates its own social exclusion, despite the fact that the island is such a splendid place to live. Indeed, when we try to explain our economic plight to Ministers who occasionally come to see the Isle of Wight, they ask us what we are worrying about. They say, "The sun is shining and everybody is smiling, so there can't be a problem." There are problems, however, as I am sure that the Minister will realise.

Restricted labour mobility is another problem on the island. The travel-to-work area and the constituency are effectively the same. One has to be extremely well off to afford a job on the mainland, as it costs £112 a month to commute on the ferry between Cowes and Southampton. That has created a population imbalance. We have above-average out-migration among 18 to 29-year-olds, while we retain and attract a higher proportion of retired people—27 per cent. It is great to have those retired people, but we firmly believe that we should have a mixed community of all ages, not depending only on the care sector.

I am not standing here to whinge on the island's behalf, which has been a tendency in the past. Living on an island is not just a geographical problem—it creates a mindset. The insularity argument and the cost of the ferries have often been used as excuses for not getting on with things. There has been a sea change, however, in the past few years. We have established a joint body—the island regeneration partnership, now called the island partnership—which brings together politicians at local government level. I am honoured to be a director of the board. It also includes the chamber of commerce, the training and enterprise council, business link, the voluntary sector—that is important—the Rural Development Commission, and representatives of the tourism, manufacturing and commercial sectors. The partnership approach has done extremely well for the island.

I am sure that the Minister will tell me how magnificently the island has been treated with regard to grants. We are grateful for the £10 million of single regeneration money that we have had. The rural development programme has been extremely imaginatively used, but we make a plea for more of the island to be included in that programme. There is an anomaly by which three of our small towns in the Sandown-Shanklin bay area are lumped together for analytical purposes and are therefore deemed to be urban rather than rural. Much business advice has been given, 17 new companies have been attracted and we have done well in the past few years, after a slow start, from intermediate assisted area status. Grants worth £5 million were attracted, levering in £20 million-worth of private money and creating or retaining about 1,000 jobs.

We have good and innovative employers on the island, not only in high-technology fields such as electronics and aerospace, but in exciting new developments in intelligent laminates, the production of wind turbine blades and related areas. There are great opportunities on the island.

I ask the Government to consider a basket of prospects. There is no magic solution. Had they stuck to their guns against the European statisticians, we would have qualified as an objective status NUTS2—nomenclature of units of territorial statistics—area. We were obviously disappointed about that. The European ombudsman has backed us on the issue but, unfortunately, we are probably too late.

We are also disappointed at being awarded tier 3 assisted area status. It sounded exciting at the start, but only £900,000 is available for the whole south-east, and grants are likely to go to areas receiving other grants. We heard biblical quotes in the previous debate, and it seems that to those who have shall be given, while those who get squeezed out shall find it difficult to plug into existing systems of support.

Tier 3 money should be made available to firms involved with the tourist industry and commerce, where there is growth. The improvement of the tourism product can do much to extend the season, to improve wages and to make jobs more secure. We would love to have tier 1 or tier 2 assisted area status, but we have missed the boat. The Government can do much by being more flexible about tier 3. I hope that our single regeneration budget bid will be successful. It would do much to revitalise Ryde, one of our main coastal towns.

The RDP can support a wonderful range of projects, small and large, which have a tremendous effect on local people. Opening a little shop or factory somewhere does not cause a great economic surge, but the fact that such places exist has a tremendous effect on morale and improves the situation elsewhere. It would be helpful if funds were available for investment in building for industry and commerce. Land with planning permission is available, but we do not have the seed money to attract people who are offered ready-made and serviced premises in other areas of the country—indeed, abroad—with which we must compete.

Above all, I hope that the Government will support the regional development agencies. We strongly supported their establishment. They are a bit short on democratic accountability, but it is good to have a more collective area. In the past, we suffered from being lumped in with Hampshire, although it had no responsibility for our economic welfare, which was clearly nonsensical. We are now grouped with the southeast, and the south-east England development agency accepts responsibility for the economic welfare of predominantly coastal areas in the south-east where deprivation is on a par with that in the Isle of Wight. It will be disastrous for the Government's policy on development areas if they do not take note of the representations made by SEEDA. It will be disastrous if agencies do not have funds available to them, because flexibility to use funds would enable agencies to help—not just with advice but with real support—where investment opportunities exist in a particular area.

Another reason why I am so pleased that a DETR Minister is present today is because it would be splendid if the Government would recognise that there is an island factor. Because the Isle of Wight is the only English constituency that is an island, none of the Government formulae for distributing grants recognises that an island creates its own costs. Between them, the Isle of Wight ferries have a turnover of just over £50 million. That money comes out of an economy that serves 150,000 people, so it is an enormous burden. The ferries are effective and efficient, but they are extremely expensive. For the distance travelled, they are said to be the most expensive in the world.

The ferry companies were privatised one privatisation too soon. The railways and all sorts of other public services that have been privatised received large subsidies. The Scottish islands receive travel subsidies and Scottish road bridge tolls are subsidised by the Government. I am not suggesting that the Government should give money directly to ferry companies, because that would be a recipe for inefficiency and complacency, but it would be helpful if the Government were to allow local authorities to use their existing powers to subsidise travel. For example, we subsidise a chain ferry across the River Medina. It would be helpful if, as a result of our island status, some funding were available to enable the local council to subsidise the fares of jobseekers or people in training who have to cross the Solent. The fare is extremely expensive. An ordinary return fare for a car carrying two adults and two children costs £76.40 in low season and £90.80 at bank holiday weekends. That is a stiff amount for the tourist industry to absorb, given that the Isle of Wight must compete with other areas that do not have that extra cost.

To allow the Minister plenty of time to respond, and so that I have time to ask clarifying questions, I end by quoting article 158 of the treaty of Amsterdam—bed-time reading for us all. It states: In order to promote its overall harmonious development, the Community shall develop and pursue its actions leading to a strengthening of its economic and social cohesion. In particular, the Community shall aim at reducing disparities between the levels of development of the various regions and the backwardness of the least favoured regions or islands. That could have been written for the Isle of Wight. The Government have signed up to the treaty of Amsterdam but, to our enormous frustration, they do not seem prepared to take action to correct what many islanders feel to be an injustice. We are not asking for handouts; we want a little help to overcome a physical barrier that acts as a great financial disincentive.

The Isle of Wight is unique. We should stop moaning about its being an island; that is its unique selling point. However, we need some help to overcome some of the social deprivation that the island suffers.

11.46 am
The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Mr. Keith Hill)

I congratulate the hon. Member for Isle of Wight (Dr. Brand) on securing this debate. As ever, he is most assiduous on behalf of his constituents on that beautiful island. It has been valuable and informative to hear from him. Some of the issues that he raised are unique to an island economy, but they also form part of the wider picture of the general management of the economy.

The Government's first priority on coming to office was to secure long-term economic stability and to leave behind the boom and bust of the late 1980s and early 1990s. During the past three years, we have been building a platform for economic stability. On that foundation, we are promoting competition, encouraging enterprise and innovation, raising the skills base, creating the right conditions for investment and improving public-sector productivity.

The hon. Gentleman is properly concerned about the economic development of the Isle of Wight. However, the island is part of the United Kingdom economy, and it is important to take a broader view to ensure that business, social and environmental needs transcend administrative boundaries—and, in this instance, a short stretch of water.

The rationale for setting up regional development agencies, which the hon. Gentleman supports, was that they would develop a strategy to support and enhance national policies, while addressing the particular needs of the regions. A framework for economic development, skills and regeneration will ensure a better strategic focus for, and co-ordination of, activity in the region, whether by the development agency or by other regional, sub-regional or local organisations. I understand that, in recognition of the island's particular needs, the South-East England development agency has set up an area office on the island. However, it is important that the island should be seen as an integral part of the region.

The arrangements for the new Small Business Service and the Learning Skills Council reflect the need to include the island as part of a larger area. That should bring benefits to the island and to Hampshire and the region. There will be benefits from economies of scale and from a more concentrated focus on the island. The new services will bring together all available business enterprise support. They will utilise the full range of skills experience available to organisations that share that vision. That should ensure universal access to consistently high-quality support services for all individuals and businesses on the island and throughout the wider area.

In the recent Budget, the Government announced a number of measures to stimulate competitiveness throughout the British economy, many of which should benefit businesses on the island. The Budget announced cuts in capital gains tax to create the most favourable environment that Britain has ever seen to encourage entrepreneurs. It will create an environment that will reward risk taking and promote wider share ownership among employees. It introduced permanent first-year capital allowances, to encourage investment, so that small and medium firms will be able plan their investments with certainty, knowing that they will receive the cash-flow help provided by first-year allowances.

The Budget also announced 100 per cent. first-year capital allowances for small enterprises investing in information technology equipment and a £60 million package to help more small firms to go online and to deliver more services online so that they can share in the opportunities offered by e-commerce. In addition, the Budget made provision for a new all-employee share ownership plan and enterprise management initiative, giving employee share ownership its biggest ever boost and helping small companies recruit and retain the key staff that they need in order to succeed.

Under the Budget, the research and development tax credit for small to medium enterprises has been increased from the present 100 per cent. relief on spending on research and development to 150 per cent. That will encourage SMEs to invest in R and D, and is available to companies not yet in profit, reducing the cash cost of their R and D by 24 per cent. compared with the present tax treatment.

Two further measures in the Budget should be of benefit to business in the Isle of Wight. First, tax relief is being introduced to promote corporate venturing, encouraging large and small companies to work together for their mutual benefit. Secondly, there will be an extra £100 million for a new £001 billion target umbrella fund for enterprise growth across the regions during the next three to five years, and a new fund for clusters to co-finance business incubators. RDAs will play a key role in both initiatives, and I mentioned earlier that SEEDA has already set up an office on the island in recognition of its specific needs.

In the south-east and London, an initial target of £250 million has been set for providing new venture capital; the national target is £450 million, for the development of clusters; and there is £10 million to boost information technology through continued support of the information society initiative. Decisions have yet to be made about the continuance of the provision currently provided through the training and enterprise councils for economic development partnerships. I understand that it is likely that support will continue even though it might be on a reduced scale.

As the hon. Gentleman knows, the Government have carried out a comprehensive review of the assisted areas, taking into account responses to the consultation document issued last July. In order to carry out the review, a wide variety of criteria was proposed for determining the new assisted areas. I understand that labour market indicators, especially unemployment, received the most support. Additionally, wards were the most widely supported unit of geography to form the basis of the map.

The review of the assisted areas has been conducted under the European Commission guidelines on regional aid published in the Official Journal of the European Communities on 10 March 1998. The aim of the guidelines is to introduce a transparent and comparable regional aid system across member states. They are part of the drive to reduce the overall level of aid to industry in the Community. The Government support that, and, following discussions with the Commission, are due to submit revised proposals for the assisted areas map. We shall take into account the Commission's concerns about population coverage and the geographical units used.

Regional industrial policy has a key role to play in the Government's commitment to creating a modern, competitive economy. It brings underutilised resources back into the economy, enhances employment opportunities and improves competitiveness. In the competition White Paper, the Government made two commitments on regional industrial policy. We said that we would support the policy of developing forward-looking regions in two ways: by focusing support on high-quality, knowledge-based projects, which provide skilled jobs, and by introducing a new assisted areas map, taking into account the response to the public consultation.

Dr. Brand

I am grateful to the Minister for telling us about the various measures that have improved the national economies. So far, however, he has said nothing about improving the welfare of the Isle of Wight, which continues to languish behind the rest of the country, and the rest of the region. I am disappointed that, in skating over the assisted areas status map, he has not acknowledged that the Isle of Wight has worse indicators—or better ones, depending on how one looks at them—than several areas that have been put on the map. Unemployment in Barking and Dagenham, for instance, is lower than it is on the Isle of Wight.

Mr. Hill

As they say, I was coming on to the issues about which the hon. Gentleman is, naturally, concerned.

In accordance with the guidelines, the Government are proposing four areas for assisted area status under the treaty—Cornwall, Merseyside, South Yorkshire and west Wales. Measured at purchasing power parities and averaged over the period 1994 to 1996, those areas had a GDP per capita of less than 75 per cent. of the EU average, and are, under Eurostat's nomenclature of units for territorial statistics, NUTS2 areas. The regional aid guidelines allow higher maximum grant levels in those areas. In drawing up the proposals, the Government aimed to combine areas of need with major opportunities for employment creation, investment and regeneration. As the hon. Gentleman is aware, the consultation period is now closed. The Government will consider the representations carefully and, in the light of those considerations and discussions with the Commission, seek approval of the new assisted areas map.

The Government have introduced plans in England for a new third tier of enterprise grant areas under which assistance will be available to businesses employing up to 250 people. The Isle of Wight will qualify for that grant. Small businesses have a crucial role to play in regional development and in tackling need. The introduction of the enterprise grant areas, which will extend outside tiers 1 and 2, complements the measures to support and encourage the development of small businesses that have already been announced—namely, the establishment of the Small Business Service and the creation of the enterprise fund.

I am aware of the hon. Gentleman's concern that the third tier will not be sufficient for the needs of the Isle of Wight. However, it is intended to be a flexible measure to aid regional development and respond to local economic difficulties. Therefore, after an initial period of 12 months, the areas will be reviewed in conjunction with regional partners, including the RDAs.

The inclusion of the Isle of Wight in the new third tier of enterprise grant is a recognition of the needs of the island and the role that can be played by support for small and medium enterprises. The island's request to be included in the new map for assisted areas is currently with the European Union, and we are awaiting its decision. The Government are prepared to provided positive support, provided that it is not at the expense of other areas in the south-east.

Transport is a key issue for the Isle of Wight: its cross-Solent links are vital to its economic and social well-being. However, the fare levels are a commercial matter to be determined by the operating companies. In 1995, the Office of Fair Trading carried out a review and found out that fares had increased overall by less than the rate of inflation. Although the Government recognise that ferries provide the only realistic public access to and from the island, services are able to operate on a fully commercial basis, and we take the view that a subsidy is not justified. That is demonstrated by the ferry companies' arrangements with tourist service providers and other regular users who benefit from special rates. However, the Government accept, in the context of our social inclusion agenda, that the cost of getting to the mainland could prevent some people from taking advantage of improvement opportunities. We are therefore willing to encourage initiatives that help such groups through specific targeting. I hope that that offer will be of interest to the hon. Gentleman.

Finally, I turn to rural development. The island benefits from several other initiatives, such as rural priority areas, which provide eligibility for a variety of grant aid for supporting industrial development and similar projects. Those initiatives are valued by the island's community. I understand that SEEDA, on behalf of the island, has undertaken discussions with the Government Office for the South East and my Department about proposed amendments to the boundaries. The case has yet to be made, so it is too early to comment.

I am sure that hon. Members are grateful to the hon. Gentleman for having raised the important matter of the economic development of the Isle of Wight.