Local Employment Bill

– in the House of Commons at 12:00 am on 1st May 1963.

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Order for Second Reading read.

9.27 p.m.

Photo of Sir David Price Sir David Price , Eastleigh

I beg to move, That the Bill be now read a Second time.

The object of the Bill is to implement the proposals made in the Budget that standard grants should be introduced under the Local Employment Act. During the course of the Budget debate, in Committee of Ways and Means, my right hon. Friend the President of the Board of Trade explained at some length the reasons that had led the Government to propose the introduction of standard grants, and how they intend that they should be administered. My task now is to explain the Bill. My right hon. Friend will wind up this debate, if he succeeds in catching your eye, Mr. Speaker, and will then endeavour to reply to any additional points that may be made by hon. Members.

The broad purpose of the Bill is, by the introduction of standard grants, to improve the facilities already available to industrialists under the Local Employment Act, 1960, The House will recall that the purpose of the principal Act is the promotion of employment in localities within Great Britain in which, in the opinion of the Board of Trade, high and persistent unemployment exists or is threatened. To that end, the Board of Trade is empowered to offer assistance to projects that are likely to provide additional employment in such localities which, in the language of the Act, we call "development districts."

This is "the policy of inducement" which is the necessary complement to a tough I.D.C. policy. The latter can prevent firms setting up in over-congested areas, but cannot, of itself, oblige them to establish their factories in areas where they would not normally choose to go. But properly devised inducements can.

Let me remind the House of the various forms of current inducements to an industrialist under the 1960 Act. The Board of Trade may itself build factories either for rent or sale to industrialists—that power is contained in Section 2. It may offer grants to firms that prefer to build their own factories—Section 3—and it can make loans or grants for either case for the general purpose of the undertaking in question—Section 4.

Generally speaking, these provisions have worked well. As my right hon. Friend explained during the Budget debate, the Local Employment Act has achieved considerable success in attracting new industries to development districts and encouraging the expansion of local firms, and thus creating additional employment in the development districts which would not otherwise have been created. During the course of his remarks, my right hon. Friend gave some figures, which I shall not repeat.

Nevertheless, the Government are determined to improve further the inducements to create more employment in the development districts. Furthermore, as my right hon. Friend the Chancellor of the Exchequer pointed out in his Budget statement, it has been suggested that it would help firms considering setting up or considering expanding in development districts if they could be given in advance some more precise indication of the financial assistance that would be available to them. Therefore, the Government have decided to increase the inducements to firms that are prepared either to establish themselves in a development district or to expand in a development district, and also to change the form of the inducements to that of standard grants.

Thus, under the Bill, a new form of assistance is to be offered—a standard grant of 10 per cent. towards the cost of buying and installing plant and machinery, while the basis of calculation of the building grant is to be changed so as to make it a standard proportion of the building costs.

Under the 1960 Act, the grant available to firms providing their own premises is set at 85 per cent. of the difference between the estimated cost of a suitable building of the size required and its current market value. The intention behind this formula, as explained by the then President of the Board of Trade in his speech on Second Reading of the 1960 Act, was to apply the same principle to assisting people to build their own factories as applied to the renting of Government factories, but experience has shown that this provision has two defects.

First, the rate of grant has varied widely according to local values, though overall it has averaged about 17 per cent. Secondly, the basing of the grant on the difference between two estimates has meant that a prospective developer could not be given at the outset any reliable indication of how much assistance he would receive. He has had to wait until his building plans and specifications have been examined by the technical advisers in the Ministry of Public Building and Works and the current market value assessed by the district valuer before he could know the amount of the grant for which he would be eligible.

The fixed rate of grant, of 25 per cent., removes both these disadvantages. It will be on average considerably larger—about 50 per cent.—than the grants at present given and, equally important, it will be known from the start. This predictability will be particularly helpful to all firms, but especially to overseas firms who may be considering setting up in Britain and who at present have no easy way of comparing in advance the assistance which this country could offer with the more precise forms of assistance said to be available in some other European countries. I will not now weary the House with comparisons with other countries.

Since the grant for plant and machinery is also at a fixed rate the standard grants provided by the Bill will go a long way to provide certainty, and at the same time to raise the general level of assistance which will be available by way of grant.

I do not wish to detain the House too long, but I should like to explain the contents of the Bill in a little detail. Clause 1 gives a new power to the Board of Trade to make grants towards the cost of plant and machinery to be installed in industrial undertakings where this will serve the purpose of the principal Act, namely by providing employment for the benefit of the development districts. The grant is fixed at 10 per cent. of the cost to the applicant of acquiring and installing the machinery or plant. Since the grant may be made only for the purpose of providing employment, and conversely for preventing unemployment—and this is an element in the Act which some people forget—it is not available for simple replacement of existing plant and machinery. Unlike the other benefits of the local employment Act which are available to non-industrial undertakings, such as shops, offices and hotels, the plant and machinery grant is limited to industrial undertakings as defined in Section 21 of the 1960 Act.

This avoids the risk of abuse which otherwise might arise, since most kinds of "plant and machinery" required for commercial undertakings are easily moved, for instance, beds, cash registers or typewriters, so that they could be bought for firms in development districts and subsequently moved elsewhere. Also to avoid abuse it is proposed by administrative action to exclude items such as vehicles and office machinery which equally could be moved easily from a development district. Clause 1(2) provides that the Board may make a grant where it considers it expedient to do so, and as a matter of expediency, such items will be excluded. This limitation to industrial undertakings and the exclusion of readily moveable items are in line with the limitations which will apply to the "free depreciation" scheme which was announced by my right hon. Friend the Chancellor of the Exchequer in his Budget statement and which hon. Members can see in the draft Finance Bill. The Bill does not require the Board to consult B.O.T.A.C. before making the plant and machinery grant. The Board will, however, continue to consult B.O.T.A.C. in the larger cases where, and only where, we have no other ready means of ascertaining the standing of the firm and of the particular project. This is a sort of long-stop position.

Moreover, subsection (2) of Clause 1 requires the Board to impose such conditions as it thinks fit for securing that the machinery or plant will continue to serve the purposes of the Act, and these conditions may include conditions for repayment in certain circumstances. There is a similar provision in the 1960 Act in relation to building grants. The conditions imposed in the building grant agreements enable the Board to claim repayment of the grant on a descending scale if the firm should dispose of the building or cease to carry on the undertaking within a period of five years after completion of the building. This is clearly a prudent safeguard to take against a misuse of public moneys, though in the three years for which the Act has been in operation we have only had to invoke this right of recovery on one occasion.

It is intended to include in the agreements relating to grants for plant and machinery certain conditions for the recovery of grant in whole or in part on any items which cease to be used for the purpose for which the grant is paid. This would cover not only cases where the firm ceased to carry on the undertaking but also disposals of plant and machinery on which grant had been paid, or transfers of plant and machinery outside the development district.

The grant will apply to expenditure incurred in the purchase and installation of plant and machinery on or after 3rd April, 1963. This is to avoid the hiatus which would otherwise arise, to the detriment of development districts, from firms delaying their applications until the Bill had received the Royal Assent.

Photo of Sir Harmar Nicholls Sir Harmar Nicholls , Peterborough

On the question of the date 3rd April, is there any significance in the fact that sub-paragraph (b) of the Money Resolution, which has been printed but for which I gather approval is not being sought tonight, states that the grant would not be made if "an offer" was made before 3rd April? I have in mind such a case in which a letter went from the hon. Gentleman's Department on 1st April stating terms which were not necessarily accepted by the firm. Would such a letter constitute an offer which would prevent the firm getting the new grant? If that is so, I hope there would not be any objection to an Amendment being moved in Committee, despite the existence of this Money Resolution.

Photo of Sir David Price Sir David Price , Eastleigh

The hon. Gentleman will appreciate that one would have to go into the case in detail. Broadly speaking, the Money Resolution means what it says. This is exactly the same as any tax change. There is a date from which a tax is reduced, and if an obligation is incurred before that date one pays at the previous rate. Similarly, there is to be a moment of time and all offers made before that time get the benefit of the older financial system, whereas every offer after that time gets the higher one. As to the detail of what constitutes an offer, I am not prepared, in answer to a general question, to give a definite ruling. Indeed, I am always reluctant on a legal point to give a definitive ruling, but if the hon. Gentleman would like to take up this matter in detail I should be happy to answer it.

As I was saying, although it will not be possible to make a firm offer of grant until the Bill becomes law, firms are invited meanwhile to submit provisional applications so that they can be advised as soon as possible as to their eligibility for grant and enabled to proceed with their project without delay. Imported plant and machinery will be eligible for the grant, but where relief of duty is granted under the Import Duties Act, 1958, the grant will be payable on the price exclusive of duty. In submitting claims for payment, applicants will be required to list all items of imported plant and machinery with import particulars and details of applications for refund of duty, or alternatively to declare that the claim does not include any imported plant and machinery.

Photo of Mr Hervey Rhodes Mr Hervey Rhodes , Ashton-under-Lyne

Will second-hand machinery be included?

Photo of Sir David Price Sir David Price , Eastleigh

The hon. Gentleman anticipates me by a minute. That is almost the next thing I was coming to.

Applications may be made in respect of plant and machinery bought on hire purchase, but the cost of credit or hire-purchase charges will be excluded from the cost for the calculation of the grant.

Now, the question asked by the hon. Member for Ashton-under-Lyne (Mr. Rhodes). Second-hand plant and machinery will be eligible for grant, but this is a field in which, as I am sure the hon. Gentleman appreciates, there is much scope for abuse, so we need to establish certain fairly closely defined safeguards to prevent abuse. Grants will be payable on the net cost after taking into account cash discounts or any other debates or allowances. The proper cost of the installation also will be allowed.

In the administration of the new grant, our aim will be to facilitate a project which will improve employment prospects for the development districts but, at the same time, to avoid the reckless expenditure of public money.

Now, Clause 2, building grants. This replaces the formula laid down in Section 3(2) of the 1960 Act, which deals with the calculation of building grant, namely, 85 per cent. of the amount by which the estimated cost of a reasonably suitable building of the size required by the applicant exceeds its current market value. Clause 2 will now provide instead for grants to be made at the fixed rate of 25 per cent. of the actual cost of the building to the applicant.

The House will see that in Clause 2(2) there is provision for the exclusion of expenditure which, in the opinion of the Board of Trade, exceeds that which is reasonably necessary for the purposes for which the building is required. This will enable the Board of Trade to exclude from the calculation for grant any frills or unnecessary extravagances which it would not be right that public funds should meet. For instance, if an applicant wanted a goldfish pond in the entrance hall of his factory, he would not get a grant towards it, or if he wanted a parquet floor where a plain deal floor would suffice, the cost would be limited to the cost of the deal floor. Subject to this, an applicant would know from the start that he would obtain a grant of 25 per cent. of the actual cost of the eligible project.

The Clause provides for grant towards the cost of providing a new building, a new extension to an existing building or the adaptation of an existing building. The Bill does not in any way vary the eligibility for building grant as laid down under the 1960 Act.

Photo of Mr Anthony Bourne-Arton Mr Anthony Bourne-Arton , Darlington

My hon. Friend told the hon. Member for Ashton-under-Lyne (Mr. Rhodes) that Clause 1 applies to second-hand machinery. Does Clause 2 apply to second-hand buildings?

Photo of Mr William Ross Mr William Ross , Kilmarnock

There is adaptation.

Photo of Sir David Price Sir David Price , Eastleigh

Towards the cost of adaptation, yes, but an old building in its old form would not be eligible for grant.

In administering the building grant we do not insist that the industrialist should employ the building contractor as for himself; if he builds through the agency of a local authority, for instance, we should consider him to be providing the building. The question is whether or not the building is to be built to the order of a known occupier. I repeat that this is nothing new. The Bill is not changing in any way Section 3(1) of the 1960 Act which prescribes the circumstances in which grant is available. What the Bill does is to alter and improve the method of ascertaining the amount of grant.

The Board of Trade will also exclude from the cost of providing a building the cost of the site. The cost of the site already reflects the lower market value in a development district. The intention is to include in the cost of providing a building the cost to the firm of site preparation, the installation of equipment for providing essential services such as water, sewerage and electricity, and reasonable amenities such as car parks. Fixtures such as electrical installations, ventilation and heating equipment, which are essentially parts of the building itself, and special foundations for heavy plant will also be regarded as part of the building.

Clause 2(4) provides that offers of building grant made before 3rd April are not affected by the change—this relates to the point made by my hon. Friend the Member for Peterborough (Sir Harmar Nicholls)—but all future offers will be determined in accordance with the new provisions in respect of applications made before as well as after the passing of the Act. This means that industry will not have to hold up its plans until the Bill is passed but will be able to apply immediately and know that if a project is judged eligible for grant it will receive 25 per cent. of the cost if and when the Bill becomes law. It also means that applications made before 3rd April but in respect of which no offer had at that time been made will now be dealt with under the new arrangements.

Photo of Sir Harmar Nicholls Sir Harmar Nicholls , Peterborough

Is an offer likely to constitute a letter from one side only which is not accepted by the recipient of the letter? This is worth bearing in mind, although my hon. Friend may not be able to give an answer now.

Photo of Sir David Price Sir David Price , Eastleigh

Having been at this Box, my hon. Friend knows that I cannot be expected to give an answer off the cuff, but I will write to him about it.

There has to be a dividing line at some stage between the new and the old arrangements. The stage of offer of grant seems to us to be the most equitable. It is relevant to point out that the power of the Board of Trade under Section 4 of the 1960 Act to offer financial assistance as recommended by B.O.T.A.C. for the general purposes of the undertaking will remain available subject to a cost per job consideration. B.O.T.A.C. assistance will be available in addition to the standard grants proposed in the Bill.

I will say a brief word about the cost per job. Under the 1960 Act, the Board of Trade are required to have regard to the employment provided in relation to the expenditure incurred. The expenditure relates to the total assistance offered under the various sections of the Act to an individual project. This requirement of the principal Act remains unaltered by the Bill. The reference is Section 1(3, a).

In administering the Act, we have no hard, precisely-defined figure of cost per job which represents a ceiling on the maximum amount of assistance for any project. What is reasonable must depend upon the facts in each case. It is obviously affected by such factors as the normal ratio of capital to labour in the industry concerned, the remoteness of the area, the difficulty of attracting new industry there, and so on. We must not, and will not, adopt too rigid an attitude to cost per job. Broadly, it is bur intention that with the exception, possibly, of extremely capital-intensive projects—for example, an oil refinery—any ceiling which the Board has to impose in accordance with this provision would be high enough to accommodate the new standard benefits. In the majority of cases, there should also be room for loans and grants under Section 4 of the principal Act, as at present.

Clause 3 extends the provision in the 1960 Act which enables the Board of Trade to complete work in progress at the time when a locality ceased to be a development district. The amendment made by Clause 3 will enable the Board to proceed where work has not yet begun but where agreements have been entered into. The effect will be that factory building by the Board will be put on the same basis as financial assistance. Such assistance can be given after the locality has ceased to be a development district, provided that offers had been made before that time. Clause 4 is a standard form provision enabling expenditure to be defrayed out of the Department's vote and requiring receipts to be paid into the Exchequer. Clauses 3 and 4 are relatively minor.

The main purpose of the Bill is to provide the standard grants. The grant for plant and machinery is, hon. Members will recognise, entirely new. The building grant will be more generous than in the past. Above all, the standard grants will be predictable. In common with the financial inducements provided by the 1960 Act, these new inducements are available for the purpose of assisting employment whether by creating new jobs or, alternatively, avoiding unemployment in existing industry in development districts. Inasmuch as these grants are required to have a direct relationship to the employment created or preserved they differ from the free depreciation concessions introduced by my right hon. Friend the Chancellor of the Exchequer which are available for new plant and machinery in development districts irrespective of the employment created.

We are satisfied that, taken together, these provisions will provide a powerful new incentive both to firms already in development districts and to others which we hope will move into development districts. Indeed, the initial response from industry has been very encouraging. The House, I am sure, will be glad to hear that within the last three weeks the Board of Trade has received sixty applications for loans and building grants and forty provisional applications for building grants or plant and machinery grants or both.

This is double the rate at which we were receiving applications earlier in the year, and it demonstrates in a practical way that the aims of the Bill have already recommended themselves to industry. I feel sure that, likewise, the Bill will recommend itself to the House and that the House will give the Bill its undivided support.

9.51 p.m.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

It is deplorable that it should have needed unemployment at over 900,000 and a great deal of agitation in the House and elsewhere to extract even this rather meagre death-bed repentance from the Government. Let it not be forgotten that there were still 645,000 unemployed in the United Kingdom in April, which is a great many more than there were even last December.

Of course, any action to help the under-employed areas is extremely welcome, and it might, therefore, be said that we should not look any gift horse in the mouth. But it is the job of the House to look even gift horses in the mouth, and I must therefore warn some hon. Members who may not have studied the Bill or the preceding Act very carefully against assuming too readily that the Bill represents anything like the substantial advance which the Government are trying to make out. I am very doubtful, as I shall try to show, whether the Bill gives the Government any substantial powers which they do not already have under existing legislation.

We are becoming rather depressingly familiar with the pattern of the Government's behaviour in this field. First, they fail to use the existing powers on the Statute Book while protesting that no more are necessary. As a result of this, unemployment grows worse. Then, in response to prolonged demands for action, they produce, usually before an election and with a great flourish of publicity, a further Bill which, when carefully examined, does very little more than give the Government again, but in a slightly rehashed form, the powers which they already have and which they have not been using. After the election, of course, we find that the new powers are not used, either. That is substantially the record of the Government's use of both the 1945 and the 1960 Acts up to date, and it therefore makes me a little sceptical in my approach to the Bill.

There is another point which rather adds to that scepticism. The Board of Trade, while preparing the Bill, published its estimates for the public moneys which it proposes to spend on these purposes in the present financial year. Those estimates show a reduction in the total of the expenditure on loans and grants of all kinds from £41 million in the past financial year to £24 million in the financial year now before us. I have three times asked Board of Trade Ministers what this means and whether the present estimates still stand despite the Bill, and so far I have received no intelligible answer. If for the fourth time tonight we are given no information, I am afraid that we shall be compelled to conclude that once again, underneath all this protestation and a slight alteration in legal form the Government's intention is to spend less and not more money than before. If that is not so, may we be told what is the amended estimate, as presumably the Board of Trade attaches some importance to the estimates which it puts before the House?

Another part of the story which makes me a little sceptical is the Government's behaviour over expenditure on clearing derelict sites. The 1945 Act gave the Board of Trade power first to clear derelict sites and, secondly, to offer grants to local authorities. It was always contemplated that the Board of Trade, working through the industrial estate companies, would do the main part of this job, but the Government have tried in every sort of way to smother the very memory that the Board of Trade has power to do this job by suggesting that it was really for the local authorities to do it. Indeed, it needed the worst winter of unemployment since the war, in the past year, to induce the Government to offer slightly higher grants to local authorities to do a job which they had had full power to do themselves already.

I may say in passing that another reason which makes me a bit sceptical is that, in spite of all these arguments and this winter of unemployment, the Government have still not even scheduled the whole of the North-East Coast as a development district.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

I am glad to see the hon. Lady the Member for Tynemouth (Dame Irene Ward) here. We have the extraordinary situation that the north bank of the Tyne is excluded while the south bank of the Tyne is included, so that Parsons on the north bank is ineligible for all the depreciation allowances and so on, while Reyrolle's on the south bank is eligible. I doubt whether this situation can continue much longer.

Let us examine with that amount of scepticism how far the Bill really increases the Board of Trade's powers to make loans and grants to industrial firms. Tonight, the Parliamentary Secretary sounded as though he was not very clear about the powers which have existed hitherto. Let us look first at Section 4 of the Distribution of Industry Act, 1945, the D.A.T.A.C. Section of that Act. In it, the Government were given power to make loans and grants to firms setting up in development areas—not just loans. The Section said: The Treasury may, in accordance with recommendations of an advisory committee appointed by them, agree with any person carrying on … in a development area an … undertaking … to give financial assistance to the carrying on of the undertaking …

  1. (a) by making annual grants to the said person, either towards the cost of paying interest on moneys borrowed … for the purposes of the undertaking or generally for those purposes".
That, incidentally, would have provided the powers which the Government needed for the Wiggins Teape plan without any further legislation.

Quite apart from that, it gave the Government power, without any limit on the amount, to make annual grants—I agree that they were annual—for the general purposes of undertakings in development areas, provided only that D.A.T.A.C. agreed that the purposes of the Act were advanced and that the firm was reasonably solvent. The grants had to be annual, but that need not have been a serious obstacle to giving the assistance needed, and the wording of the original Act could easily have been amended, as it was in the 1960 Act.

Quite apart from Section 3, which introduced the so-called building grants, the 1960 Act also included the amended D.A.T.A.C., now B.O.T.A.C., Section 4, which said that where the purposes of the Act were furthered and the firm had reasonably good prospects, the Board may agree with the person carrying on, or proposing to carry on, the undertaking to make loans or grants for the purposes of the undertaking of such amounts and en such terms and conditions as may be recommended by the advisory committee …". When the Parliamentary Secretary quoted that, he used the word, "For the general purposes of the undertaking." He was not right. The 1960 Act did not include the word "general" but simply the phrase for the purposes of the undertaking". Hardly anything can be wider than that.

This is the law now and it has been the law for the past three years. This provision, as the Parliamentary Secretary rightly said, remains unrepealed in the present Bill, if it goes through in its present form. It gives the Board of Trade power, unless the words do not mean even broadly what they would appear to mean, to make not merely loans, but grants for building, for machinery and for plant, or for just plain subsidies, if it wishes to do so, towards running costs, without limit to the amount, provided that the firm is solvent and likely to be viable and that B.O.T.A.C. approves and that the general purposes of the Act are furthered.

In his speech in the debate on the Budget, the President of the Board of Trade himself got this wrong.

It being Ten o'clock, the debate stood adjourned.

Proceedings on Government Business exempted, at this day's Sitting, from the provisions of Standing Order No. 1 (Sittings of the House).—[Mr. Erroll.]

Question again proposed, That the Bill be now read a Second time.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

We are debating this Bill at a rather unusual hour. I was saying that the President of the Board of Trade on 4th April in the Budget debate, at col. 660, said that hitherto the B.O.T.A.C. loans had been the only means by which we could help with the cost of plant and machinery. He forgot the grants, of course, because the 1960 Act said "grants and loans". This was a direct misrepresentation of the situation, although, rather quaintly, a few minutes later, in the same speech, he said: … B.O.T.A.C. loans and grants under Section 4 of the Act will still be available …"—[OFFICIAL REPORT, 4th April, 1963; Vol. 675, c. 660.] I cannot believe that when the President made that speech he had fully realised what his existing powers were. I do not know whether the Government will argue that all this is necessary because the previous Section 4 was no good on the ground that B.O.T.A.C. had to be consulted. Of course, the D.A.T.A.C. Section in the 1945 Act, continued in the 1960 Act, was intended as a general wide power for the Government to give grants and loans. It was not supposed to be somehow sterilised and paralysed because the Government had to consult its own Advisory Committee. Indeed, it would be an extraordinary state of affairs if the Government, having set up its own Advisory Committee to which it could itself give instructions, then found that it had to legislate in order to get round the obstruction of its own Committee.

The original purpose of the Advisory Committee was to protect the Government against unsound firms and to give a business view whether a particular firm was likely to be successful. In both the 1945 Act and the 1960 Act, we find these words: The advisory committee shall act in accordance with the general direction given to them by the Board with the consent of the Treasury. It was certainly within the power of the Government to tell the Committee, within the limits of the Act, to do whatever they thought right. The only thing that they could not have done would be to recommend insolvent firms, or go outside the purposes of the Act altogether. The President of the Board of Trade will agree that the purposes of the Act, as defined in 1960, thanks, incidentally, to Amendments moved from this side of the House, are in fact very wide and would justify any action which, I think, any of us would wish to take for the sake of these areas.

It is quite true that the Labour Government hardly ever used the powers to make grants under the 1945 Act. That was not because the powers were not legally there; it was because, as a matter of policy where public money was being used, we preferred to employ that money for investment and the creation of publicly-owned assets, rather than simply handing it as a free gift to private firms. Indeed, it is a rather solemn thought that unemployment was reduced by 1951 to far lower figures than those at which it stands today in all the development districts, with virtually no grants of public money having been made at all.

The point that I am making now is that the powers were there under the Act. But I think it very doubtful whether even the power to give building grants under the 1960 Act really added anything, apart, admittedly, from the removal of the word "annually" before grants, to the existing powers, despite all the publicity we had then. Indeed, it might be argued that this change actually limited the Government's power because it introduced a specific limit, that is to say, 85 per cent. of the difference between the cost of the building and the market value of the factory. The Board is still compelled under the 1960 Act to consult B.O.T.A.C., and presumably it would not wish to disregard the recommendations which it gets from B.O.T.A.C.

However that may be, the 1960 Act continued in Section 4 the words which I have quoted, in addition to the section affecting building grants. It continued the powers to make grants and loans. These are now on the Statute Book, and the Board of Trade could make grants and loans under that Section not limited to 25 per cent. for building, or to 10 per cent. for machinery or plant, but up to any amount that it chose. The only limitations are that it must consult B.O.T.A.C., that the firm must be solvent, and that we must remain within the general purposes of the Act.

Presumably that will remain. The viability of the firm has to be proved both in the case of the building grant and the machinery grant. The general purposes of the Act are still included, quite rightly, as a condition in both cases. As to consultation with B.O.T.A.C., the statutory position remains the same, as the President of the Board of Trade and the Parliamentary Secretary have said, in the case of building; and even in the case of machinery and plant, though B.O.T.A.C. disappears formally, the Board can still act only with the consent of the Treasury even under the present Act.

Therefore, if what the Government were doing was substituting this Bill for Section 4 of the 1960 Act it would be arguable that all that they have done is to limit the powers that they previously had and not extend them. But that is not what they are doing. What they are doing is to leave Section 4 standing and to tack on to it the Clauses of the new Bill. In that situation—and I ask this because we have not had it, cleared up—in what respect, bearing in mind that the previous Section 4 continues, does this Bill give the Board any powers which did not exist under the 1960 Act?

The President of the Board of Trade did not answer that question during the Budget debate, nor did the Parliamentary Secretary tonight. One of two things must be true. Either the Bill actually limits the grants that can be given to 25 per cent. for building, and 10 per cent. for machinery and plant, where before there was no limit, or the situation is going to be almost the same as it was before. There seem to be only two minute differences, which I gladly concede are there, that the Treasury, instead of B.O.T.A.C., has to be consulted in the case of machinery and plant, and, secondly, that adaptations to buildings as well as actual new buildings are now, quite rightly, to be eligible for grants.

Photo of Sir Harmar Nicholls Sir Harmar Nicholls , Peterborough

Would it have been possible under the previous Act to fix a definite percentage such as is provided in this Act?

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

I am arguing that under the previous Act—and if I am wrong the Minister can prove it—it was possible to give a grant for the purposes of the undertaking of any percentage which was deemed expedient and necessary in the circumstances. In any case, whatever view we take of Section 4, the 25 per cent. of the building grant for new buildings is nothing more than a replacement at a fixed figure of the previous grant which averaged 17 per cent. under the 1960 Act.

This is a very small change, if indeed it is a change at all, which could perhaps be of advantage in enabling firms to know in advance precisely what they will get, but I wonder whether it may not be a disadvantage in the sense of being too rigid and probably discriminating against the very blackest areas of all where the gap might be expected to be largest between the cost of building and the actual market value of the factory.

If the Government are going to argue that all this new legislation is necessary because B.O.T.A.C. had to be consulted about the previous grants, surely the answer is that the B.O.T.A.C. procedure could and should have been speeded up and streamlined? That could have been done administratively at any time without any need to legislate about it. In any case, B.O.T.A.C. still has to be consulted in a great number of cases under the Bill. There does not seem to be any very great change there.

The Bill also continues a number of limitations contained in the previous Acts. As the Parliamentary Secretary told us tonight, all these grants are to be confined to industry and are to exclude commercial and office employment. Why should that be so? I should have thought that everybody now recognised that the main defect of the previous legislation, including the 1945 Act, was its failure to apply restraint to office employment in the congested areas, or stimulus to office employment as well as industrial employment in the development areas.

We know that office employment is becoming an ever more important part of total employment, and confining the provisions of this legislation to industry alone is to have an outdated and almost Victorian idea of our economy. If the Board of Trade had included office employment in the scope of the Bill it would not have been compelled to make grants in respect of office schemes which were not worthy of support by the Government. But the exclusion of office employment means that the Board of Trade is prohibited from helping office schemes in development districts in cases where it might have thought it wise to do so.

As I understood the Parliamentary Secretary's speech, local authorities are excluded from participating on the same terms as private industry. I understand the position to be that if a local authority was going to erect, say, an abattoir, and was to be a direct employer, it might receive a grant under the Bill, but if it were to build a factory, possibly for letting or for sale to industry it could not get a grant, although it would be able to do so if it lent the money to a firm and that firm built the factory and then put in an application for a Government grant. If that is correct, I am not sure that it is the most logical way of proceeding, and we shall probably have to pursue that matter further in Committee.

Will the President of the Board of Trade also make clear—because if the Parliamentary Secretary did I did not follow him—whether we can assume that publicly-owned industries are eligible on exactly the same terms as are private firms? I assume that that is so, but I should like to have it clarified.

Does the Bill also apply to public utilities such as dock facilities and undertakings of that kind—I believe that the hon. Member for Tynemouth (Dame Irene Ward) has raised this point—which conceivably might not be covered by the other basic services Sections of the 1960 Act? We would wish it to do that. The Parliamentary Secretary made it clear that replacement of machinery and plant will not be eligible for this grant, even in development districts, and that a grant will be made only in respect of new schemes, and presumably in new factories. This is in contradistinction to the free depreciation, which will be available for replacements.

Another defect in the Bill is that it makes no provision for any form of State participation in the schemes which are being encouraged, or for any form of partnership with private firms, in order to bring new ventures into these areas, whether by way of equity shareholdings, joint subsidiaries, or methods of that kind. We are still confining the whole procedure to fixed interest loans or grants, where the State puts up the money but gets no share of the profits and no control of the enterprise.

If these areas are really to be developed, expanded and fully employed, we must experiment with much more positive forms of partnership. It will not be enough for the State simply to hand over the money and then sit back and wait to see what happens. If we have so much public money to spend on this purpose I have a good deal of doubt whether the best way to use it is to hand it out in grants and not to get any public assets in return.

I trust that the Government will not regard the new grants—if they are new—proposed in this Bill, or the free depreciation provisions outlined in the Finance Bill, as an excuse for easing up on other methods necessary to end unemployment in these areas; either by a determined restraint on excessive expansion in the congested areas or positive development of Government financed factories and industrial estates, the clearance of derelict sites, the modernisation of basic services and all the other measures which are urgently needed in the development districts. These latter, it seems to me, are likely to prove better uses for public money than the provision of free grants and subsidies.

If the Government were to regard these measures as a substitute for all the other forms of action which we have advocated, we might end by doing more harm than good to these areas. If they are additional to the other measures which ought to be undertaken, we shall certainly welcome this Bill, provided that the powers in it—unlike those in previous Bills—are really used; but we need more evidence than we have had yet from Ministers before we shall be convinced that there really are additional material powers in this Bill which are not already on the Statute Book and ought to have been used in the last years.

10.16 p.m.

Photo of Mr Henry Brewis Mr Henry Brewis , Galloway

I consider that one should welcome the provisions which have come out of the Budget for improving the grants for industry entering the development districts, but I wish to make one or two points which, in a way, may seem like looking a gift horse in the mouth. The first relates to building grants. Undoubtedly it is a very good thing that the incoming industrialists knows straight away that he will get at least a 25 per cent. grant upon which he can count. But now the grant is to be exactly the same for every part of the British Isles. It is to be the same for Merseyside and for the Highlands. If there is a choice between going to a distant locality or to somewhere like Merseyside, it seems to me that Merseyside will be chosen every time. It will give a great pull to the sort of urban development areas which there are in the South rather than to the more remote districts in Scotland.

I think it is certainly a help that the grant has been increased from, roughly, 17 per cent. to 25 per cent. But it is true that that 17 per cent. had an extension on either side. I believe that the highest grant ever obtained under the provisions of Section 3 of the 1950 Act amounted to 41 per cent. and the lowest grant was nil. The average was 17 per cent. With the great difficulties which we are experiencing in certain parts of the country, particularly in the Highlands, in Northern Ireland and in Stranraer I think that we should not have a grant, which did go up to 41 per cent., reduced to 25 per cent. We need to look at a separate form of development district, which might be described as a critical area, where it is very difficult to get industry to go, and instead of 25 per cent. the grant should go up as high as 40 per cent. in such areas. That would be an earnest of our intention to try to develop remote areas like the Highlands. My right hon. Friend the President of the Board of Trade may think this is a bit far-fetched, but exactly the same thing is done in continental countries, particularly in Italy under the Vannoni Plan for developing the southern undeveloped part of that country.

I pass next to who can receive the building grant. My hon. Friend the Parliamentary Secretary said that it could go to factories built through the agency of local authorities. I think it an open secret that local authorities can build these factories rather better than the Board of Trade can. They can offer better terms because, while the Board of Trade usually asks for amortisation over about fifteen years, the local authority can borrow money over at least thirty and possibly as much as sixty years. The terms, therefore, are much more favourable from a local authority.

Where does the limit come? If a local authority builds a factory such as Starratts in Jedburgh which is amortised over a certain term, it will eventually be owned by the industrialist. I see no harm in a local authority getting grant when the factory will eventually go to the industrialist.

If we are to be too mean in giving help to people occupying factories in development districts which become vacant, we shall have the position in certain areas such as Merseyside in which there are empty factories in one street while in another part of the town people are building factories with a grant. That cannot be economical. My right hon. Friend should look at that again. I could speak much longer on this subject, but I shall sit down now in view of the lateness of the hour.

10.22 p.m.

Photo of Mr Henry Hynd Mr Henry Hynd , Accrington

As my right hon. Friend the Member for Battersea, North (Mr. Jay) said, it is not very attractive to oppose this Bill. He said that it was something like a deathbed repentance, but nevertheless we welcome anything which seems likely to be helpful to the worst-hit parts of the country.

My quarrel with the Bill is that it is confined too rigidly to districts which have been already scheduled as development districts. The country is being divided into black and white areas. I happen to represent a grey area, a marginal area where—I use the word advisedly—we are just the wrong side of the line. It is almost a paradox that it would be of benefit to certain districts to have a little more unemployment than they have at present. There is an arbitrary ruling by the Board of Trade as to what is and what is not a development district. I do not think the ruling has been given officially to the public. I believe it is 4½ per cent. of unemployment over a certain period. Could we know exactly whether it is 4½ per cent. and what the period is? I believe the official ruling is something to the effect that it has to be substantial unemployment for a substantial period, or words to that effect—

Photo of Mr Henry Hynd Mr Henry Hynd , Accrington

My hon. Friend tells me that it is "high and persistent". Could we have a definition showing what that means? Without that definition many districts such as mine will feel a sense of frustration and that they have been much too hardly done by. In a district like mine industry is in a bad way. The cotton industry, in particular, is declining. Unless the surviving industries receive some help, the district will suffer even more and may slide over the line and become a development district. / am sure that the Government do not want that. I have recently had correspondence with the Board of Trade about a firm which wants to set up on a new industrial estate which the town of Accrington has built. The firm is denied the assistance promised in the Budget. This means that there is an attraction to go to another district. Surely this is not what the Government want. It will be a bad thing for the district and for the Government.

I plead for some elasticity to enable the President of the Board of Trade to judge when a district is obviously in a dangerous condition and offer it some help. There should not be this rigid line. At the moment, if they are one side of the line they can be helped, but if they are the other side of the line they cannot be. The Bill goes to the length of providing a certain amount of assistance to districts which have ceased to be scheduled as development districts. Can it not go the other way as well and allow the President of the Board of Trade to give a little assistance to those districts which are in danger of becoming development districts, those which are developing into development districts? If there is elasticity one way, there should be some freedom for the Minister to act in the other direction as well. He should have some discretion to enable him to prevent these grey districts from becoming black. I ask the President of the Board of Trade seriously to consider whether the Bill could be altered and extended in this way.

10.27 p.m.

Photo of Mr Anthony Bourne-Arton Mr Anthony Bourne-Arton , Darlington

This is a well-meaning Bill. I hope that it will in the course of its passage be so altered that I shall be able to wish it well. I cannot at the moment, for in Clause 2 there is an inherent injustice which I regard as intolerable. My right hon. Friend the President of the Board of Trade and my hon. Friend the Parliamentary Secretary know full well the point to which I refer. I asked my hon. Friend just now whether Clause 2 proposes to allow the 25 per cent. grant to apply to second-hand buildings. The answer, as I expected, was "No". This would entail, if the Clause went through in its present form, the most gross injustice by undercutting well-meaning authorities—management corporations and local authorities—which had tried to solve their own problems by buying redundant railway workshops, as in my case, and so on, establishing for themselves trading estates, and then by Act of Parliament having their assets, which they were desperately and expensively, with some success, trying to sell to incoming industry, reduced by a sweep of the Parliamentary pen to 75 per cent. of the value at which they bought it. Further than that, in many cases they would be left with an unsaleable asset.

My hon. Friend the Parliamentary Secretary has visited my constituency, and we are grateful for his interest in it. My right hon. Friend has also visited my constituency, and I pay the most grateful tribute to his interest. They both know very well that in my constituency I have, thank goodness, an enterprising, forward-looking corporation. It was not prepared to be left behind when the sweep of events meant that the railway workshops in Darlington had to be closed. It was not prepared to sit down and do nothing. It went out and bought the workshops, and is prepared to turn them into a new and thriving industrial trading estate. My right hon. Friend proposes in Clause 2 to make that enterprise unsaleable.

If the many firms that are naturally interested in the possibilities, and the privilege, of coming to Darlington, are now to be told, "Oh, if you go up the road somewhere else and build a factory, you'll get a 25 per cent. grant on it, but if you take over this factory you won't." they will go up the road. What is more important, if they do that, it will be a further year before the unemployment situation in our district is relieved. On the face of it, this seems to be such a gross and obvious injustice that I cannot believe that any Government—least of all the Government I profoundly support—could possibly allow Clause 2, as it stands, to get on the Statute Book.

I do not want to be told—I know that nobody would really believe it—that it would not be possible administratively to apply the 25 per cent. grant to buildings in the possession of public corporations because it would be difficult to value them; that there might be a "fiddle." To say that would be absolute bunkum. At the moment, the factories in the possession of my right hon. Friend the President of the Board of Trade can be valued by the district valuer. The sort of factories I am thinking about can be valued by the district valuer. If anybody says that there cannot be a "fiddle" on new buildings, what about the new factory built by the owner on the site—by a firm of constructional engineers, building for itself? Who values that? Obviously, the district valuer must and should value the new factory, and can also perfectly easily value the secondhand factory of which I am thinking.

I do not want to get too "steamed up," because I am sure that my right hon. Friend knows how deeply I feel about this matter, and realises that neither I nor, I should imagine, many other people placed in my situation, could possibly support this Bill if Clause 2 remains in its present form. I therefore beg that he will not hesitate to amend and enlarge the Clause's provisions before there is any question of our being asked to put this well-meaning Bill on the Statute Book.

10.34 p.m.

Photo of Mr Iorwerth Thomas Mr Iorwerth Thomas , Rhondda West

I am sure that at this late hour the House will welcome very short speeches because, despite the Bill's limitations and defects, we welcome it as a step towards doing something constructive in attracting new industries to our development districts and want to put it to work as soon as possible.

I support what has been said about increasing the 25 per cent. fixed grant in Clause 2 to a much higher figure, but I want to speak in the context of the 25 per cent. grant already embodied in the Clause. Whilst this grant may give a certain degree of satisfaction, and be a very strong incentive to industrialists to go to development districts to build their factories on what are considered to be normal sites, certain difficulties will arise if industrialists are attracted to certain special development districts which, by reason of topography, geography, and other factors, are severely handicapped by this Clause.

I refer particularly to those development districts in the old mining districts where the incidence of subsidence is a serious consideration and where the value of the 25 per cent. incentive is considerably diminished by the factors of geology and subsidence. In my constituency, the Rhondda Valley, where the hills slope down to the river or railway and there is very little tableland, we have to depend for our future industrial development on sites which have been created as a result of clearance. These clearances take place on either old colliery tips or old colliery sites. Consequently, an industrialist who was prospecting in our area would be strongly influenced by considerations of the possibility of subsidence and the fact that many of the sites are not virgin land.

This land has been tipped on over the last forty years with the result that 30 feet or 40 feet in depth may be the result of previous tipping. Some surveyors may say that the land has settled after forty years, but there is an element of doubt about that, especially if a firm bed is required by an engineering undertaking to hold blocks of machinery which may weigh from 30 to 50 tons.

The industrialist concerned and the surveyor would insist that there should be boring on a site of that character, and the industrialist would be faced with the extra cost of providing concrete supports as an artificial foundation. This is an expensive procedure which would eat considerably into the 25 per cent. grant. A substantial proportion of the grant would be buried capital, out of sight in the earth, to provide the concrete stanchions to support the factory.

I ask the Minister to consider this point seriously, otherwise we shall be handicapped severely by the doubts which the prospector would feel about coming to an area of that kind. This applies not only to the mining valleys but also probably to mining areas throughout the country which are now classified as development districts. The Minister must not fear that he would be treading new ground. There is a precedent in the financial and miscellaneous provisions of the Housing Act, 1946, which provide that local authorities confronted with the problems of subsidence and non-virgin types of land may receive a subsidy of £2 per house per annum to help them recover the capital expended in providing the artificial foundations required for certain construction work. I trust, therefore, that the Minister will consider this point. If matters are left as they are, the 25 per cent. grant will be considerably devalued. I hope that when the Bill is dealt with in Committee the right hon. Gentleman will give us some information on this point.

10.40 p.m.

Photo of Miss Irene Ward Miss Irene Ward , Tynemouth

My right hon. Friend the President of the Board of Trade must be slightly surprised that this Bill has run into such a large amount of constructive criticism. He must have been absolutely stunned by the speech made by my hon. Friend the Member for Darlington (Mr. Bourne-Arton). I welcome the principle behind the Bill but, with great respect, I have never been very happy at the idea that problems which affect heavy industry and the future of the areas which are dependent largely on heavy industry should be in the hands of the Board of Trade, which is predominantly a Department which deals with general commerce. All the points that my hon. Friend touched on relate to responsibilities which are borne by different Departments in the field of Government administration.

I also intend to be reasonably critical, but I should like to preface my remarks by saying that I understand the purpose behind the Bill, and if by any chance we can manage to get it into a proper shape it will be very welcome. But I think that by the time we have finished with the Bill there will be hardly any part of it which is acceptable to anyone who is dealing with this very difficult problem of trying to create a high stan- dard of employment in some of our most difficult areas.

I agreed very much with the speech of the hon. Member for Accrington (Mr. H. Hynd). I do not think we have had what I might call a general interpretation of how this Bill is going to work. Certainly the old figures on which development areas were based have not been referred to. Little information has been given to us. We are all in the dark and, as far as I can understand, we are all at present rather dissatisfied with the information which has been given to us.

One of the fundamental purposes of the Bill is to deal with persistent unemployment. But before my right hon. Friend introduced the Bill we had from the Ministry of Public Building and Works a Report entitled "Production of Building Components in Shipyards." I should like to read a number of extracts from that Report. Under the heading "Spare Labour Force" the following words appear: Another measure of capacity in shipbuilding is the fact that the current labour force in all yards"— I emphasise "in all yards"— is at present roughly 70 per cent. of what it was two years ago. This percentage is likely to drop later this year. In the yards we visited"— that is, the committee which made the Report— the figure has in fact already dropped to about 50 per cent. I should like to know whether the intention of the Bill is to help to stabilise now and for the future a high level of employment in the areas which are regarded as development districts. If so, we want to know how we are to stabilise a shipbuilding force if part of the area in the North-East Coast—the same applies to Merseyside and Tyneside—is not scheduled as a development district.

That Report was issued, quite recently, after visits had been paid—although they are not named, this is obvious—to a large number of shipyards in this country. The labour force is contracting in the shipyards and has contracted. If this has happened to the extent indicated in that Report, will my right hon. Friend agree that it shows the persistence of a high level of unemployment in one of the major industries which forms the pattern of industrial production in the development districts? I want an answer to that.

Before I read that Report, I was about to write to my right hon. Friend because, on other matters connected with the development districts, the terms of the Bill did not seem to have been very carefully or accurately thought out. Obviously, the hon. Member for Accrington also would be interested to know what my right hon. Friend thinks, since he addressed his question to him tonight. The level of unemployment in Darlington at the present time is very much lower than it is in almost all the other districts in the northern area. Of course, I welcome what is being done in an effort to deal with the situation following the closure of the railway workshops.

I wrote to my right hon. Friend to ask about the scheduling of Darlington, with a comparatively low level of unemployment at present compared with some areas. I asked what was the basis of the unemployment figures on which the development districts were proposed and listed.

Photo of Mr Anthony Bourne-Arton Mr Anthony Bourne-Arton , Darlington

Will not my hon. Friend agree that it is sensible and right for my right hon. Friend to think ahead? This is the simple principle on which not only Darlington but, before that, Seaton Delaval and other places were scheduled. There was some sensible thinking ahead.

Photo of Miss Irene Ward Miss Irene Ward , Tynemouth

I absolutely accept that, but my hon. Friend is not the only person concerned with unemployment, and other people want thinking ahead for their workers just as my hon. Friend wants it for Darlington. Since my hon. Friend has raised this point, I will add that I watch with the greatest interest the Ministers who have the most influence in the Cabinet. Of course, since the railway workshops in Darlington were, unfortunately, closed, or threatened with closure, by Dr. Beeching—

Photo of Miss Irene Ward Miss Irene Ward , Tynemouth

Certainly—with very bad public relations, because he did not consult or go through any of the motions of doing what he ought to have done—

Photo of Miss Irene Ward Miss Irene Ward , Tynemouth

No. I am not giving way. I intend to finish what I am saying. There is no reason why my hon. Friend should think that Darlington is the only place which has anxieties.

Photo of Mr Anthony Bourne-Arton Mr Anthony Bourne-Arton , Darlington

I know that my hon. Friend means us well, but if she wishes to talk about my constituency, she should not misquote the facts. The facts are not as she has given them. I am grateful for her sympathy in our troubles with the closure of the workshops, but when she says that this was done without consultation, she is quite wrong. That is not true. I am the Member for Darlington, and I assert that.

Photo of Miss Irene Ward Miss Irene Ward , Tynemouth

I am very glad to know that, My hon. Friend has taken a view quite different from nearly everyone else. There have been Questions in the House about it, and most of my hon. Friends from the North-East Coast certainly do not think that Dr. Beeching has done what he might have done in the matter of public relations. My hon. Friend may have different views on this.

Photo of Miss Irene Ward Miss Irene Ward , Tynemouth

I have indicated to my hon. Friend that I intended to raise this matter. If he will let me make my speech he will know what I am trying to say.

I have watched with great interest the fact that some hon. Members have greater access to the Cabinet than have other hon. Members. My right hon. Friend the Minister of Transport is very quick and very right to get in quickly, in view of the difficulties arising in Darlington, to ensure that Darlington would get what benefit it could—and I am delighted that it will get benefit from the new Bill.

Photo of Mr Daniel Jones Mr Daniel Jones , Burnley

What benefit there is to get.

Photo of Miss Irene Ward Miss Irene Ward , Tynemouth

I am explaining what is happening on the Tyne and what is happening in Darlington. I was surprised When my hon. Friend attacked my right hon. Friend, but he always takes an independent line, and I admire him for it. At the same time, he must not be surprised if I compare what my right hon. Friend is doing for Darlington and what is happening on Tyneside and Wearside. There are great financial advantages which Tyneside and the Tees Valley are denied. My hon. Friend should examine what is happening to others on the North-East Coast before he feels quite as cross as he did about Darlington.

Photo of Mr Anthony Bourne-Arton Mr Anthony Bourne-Arton , Darlington

I require all my time to try to represent the people who sent me here—the electors of Darlington. Of course I am interested in other areas, but that is my primary consideration, and I make no apology for it.

Photo of Miss Irene Ward Miss Irene Ward , Tynemouth

Dame Irene Ward rose

Photo of Sir William Anstruther-Gray Sir William Anstruther-Gray , Berwickshire and East Lothian

Order. I feel sure that it is time to come back to the Second Reading of the Local Employment Bill.

Photo of Miss Irene Ward Miss Irene Ward , Tynemouth

I agree. Perhaps my hon. Friend will remain in his seat and allow me to get on with my speech.

I want to give the hon. Member for Accrington the information for which he asks from my right hon. Friend the President of the Board of Trade. He was asked about the unemployment figures in Darlington, which are 3·4 per cent. of the insured population, compared with certain parts of the Tyneside, which include North Shields, Whitley Bay and Wallsend-on-Tyne, which have 6·2 per cent., and which have not yet had the benefit of the Bill.

Like the hon. Member for Accrington, I am trying to ascertain the basis on which my right hon. Friend has decided the scheduling. This is the answer which my right hon. Friend gave: In the four groups of areas on Tyneside, including Tyneside South-East"— which is the south end of the Tyne— which is a development district, together with the development districts of Prudhoe and Blaydon, the unemployment percentage for the same period"— as that covered for the Darlington area— averaged 4·4 per cent. In the three unlisted groups of areas on Tyneside"— that is, the north bank of the Tyne— the percentage rate of unemployment was naturally lower (3·8 per cent.) The figures which I obtained from the Ministry of Labour today—and the figures are as up to date as the Ministry of Labour can make them—show that the unemployment figure for the present period is 6·2 per cent. The Minister said: As for the criteria; our original list of development districts announced in March, 1460, was based on the assumption that at that time a rate of 4·5 per cent. or more wholly unemployed should be regarded as high for the purpose of applying the Act. If they consider that 4·5 per cent. was high for the purpose of applying the 1960 Act, I take great exception to the fact that when unemployment rises, as it has, and persists for some time—and I draw attention to the report of the Special Committee which has been looking into the matter—to over 6 per cent., the area is still not scheduled.

I will not read what is said about Darlington, but with regard to Tyneside the letter states: … on the other hand, while we know that shipbuilding generally is going through a difficult period, we do not know of Tyneside firms faced with a threat of immediate closure. The Tyneside firms are doing at any rate as well as others in the industry, and we hope this will continue. But I would point out that we have always tried to say that firms must modernise and keep up to date, and no one could possibly assert that the shipbuilding firms on Tyneside—Swan Hunter, Vickers-Armstrong, Smith's Docks repairing yard, Hawthorns, and so on—have not spent a vast sum of money in modernising their yards in order to be able to compete with the rest of the world. In fact, if it were not for the subsidisation that goes on in other countries, we could sweep the board with competitive tendering.

But the point is that my right hon. Friend dares to say in a letter that none of these yards is threatened by closure. He ought to have said "Thank God for that". But this is a shipbuilding area which is faced with a permanent contraction. One has only to read the speeches made by the chairmen of shipbuilding and shipping companies at annual meetings and the speeches of Ministers of the Crown; they have pointed out that the one basic industry which is facing a decline which may be permanent is the shipbuilding industry.

It is an extraordinary thing that one bank of the River Tyne can be scheduled as a development district and yet the other bank where my right hon. Friend, through another Minister, has put in accelerated naval orders in order to try to maintain employment, should be deprived of some diversification of industry, which, after all, was the objective of the original Act introduced before the war by the Conservative Government under the Premiership of Mr. Stanley Baldwin. Hon. and right hon. Gentlemen opposite always talk about the 1945 and 1960 Acts. They must have forgotten the original Act which established the trading estates which have been of real benefit to the North-East Coast and South Wales. I am always very grateful to the Conservative Party for what it did in this direction.

I want to draw attention to some of the areas which are scheduled, and I want a little more explanation from my right hon. Friend about this. For instance, Consett, which, as a centre of iron and steel, has had its periods of very great difficulty, has spent a vast amount of private capital on modernising its plant. Consett is scheduled, and its unemployment rate, I am glad to say, is only 3·9 per cent. But Gateshead and Felling, situated on Tyneside, with the Team Valley, which was built and developed in order to provide diversification of industry, always one of the necessities on the North-East Coast, has an unemployment rate of 5·1 per cent. This seems to require a good deal of inquiry.

From both sides of the House, the North-East Coast and the North-East Development Council has come a demand to the Prime Minister and the Lord President of the Council—although the latter has been pretty shrewd in not making any observations and merely saying in correspondence that the decision does not rest with him for some reconsideration of the areas which have been scheduled as development districts. It is that demand to which I want an answer.

My hon. Friend the Parliamentary Secretary clearly talked as though these are new provisions, as they are—although I was shattered by the speech of the right hon. Member for Battersea, North (Mr. Jay)—and said that these new decisions had been made by the Chancellor of the Exchequer to help areas of high unemployment. What I want to know is whether the whole basis of the approach to unemployment is being changed without the House of Commons being informed. I dislike that line intensely.

There is a great deal of talk about factories, but factories are static and shipbuilding has different problems which my right hon. Friend does not seem to understand. On the Tyne and Mersey and Wear and on Tees-side, men who work in shipbuilding move from one area to another according to the stage of construction which ships have reached. For instance, electricians will come from all over the river to concentrate on the electrical equipment of a tanker. Unlike the workers in a static factory, shipbuilding workers move from area to area. If I may say so to my hon. Friend the Member for Darlington, shipbuilding is also unlike railway workshops in that respect.

If the north bank of the Tyne houses men who are employed in shipbuilding areas on the south bank, which is scheduled because it is not full of orders, it can make no difference to the labour force if the provisions of the Bill are used to establish factories on the north or south bank of the Tyne. I find it irritating and slightly difficult that I cannot get a proper appreciation of the great problems of shipbuilding from my right hon. Friend the President of the Board of Trade, especially when shipbuilding is the lifeblood not only of our rivers but of our economy.

I hope that we shall not be told that the percentage levels of unemployment criteria have been altered to the point where they do not suit the development districts. When the Conservative Members of Parliament went to see the Prime Minister, who also generously gave half an hour of his time to a member of the Opposition afterwards, which was a very good thing—

Photo of Miss Irene Ward Miss Irene Ward , Tynemouth

He was jolly lucky to have the Prime Minister to himself for half an hour—[An HON. MEMBER.—"An hour"]—an hour then—all the better. We always knew this was the most interested Prime Minister that this country has ever had.

All I want to tell my right hon. Friend is that we northern Conservative Members interviewed the Prime Minister and he agreed with us about the scheduling of our area. I presume that the same applies to other areas, because the President of the Board of Trade is not particularly interested only in our area; he has great responsibilities over a wide field. The Prime Minister told us that he appreciated the point that we had made about the problems, and about the way our area was scheduled.

It will be found that the Ministry of Labour groups Wallsend, North Shields and Whitley Bay together. Whitley Bay does not find employment in the industrial area but mostly in Newcastle-upon-Tyne, and it therefore reduces the unemployment figure in the other two industrial areas. That is not quite playing cricket. My local authority was responsible for establishing the West Kirby trading estate. My town clerk says that North Shields has had a persistent rate of unemployment up to 7 per cent. It is nonsensical that areas with a much lower level of unemployment should be scheduled.

Naturally, when a Bill of this kind comes forward, in the first flush of excitement many people can take advantage of it. I do not think that its value should be restricted to a few areas, picked out by my right hon. Friend without informing the House that he has altered the whole basis upon which areas are scheduled. I wish him luck with the following speeches, because this is an imaginative Bill, and when we get these matters sorted out, and when we get fair treatment for our great rivers—that is to say, when shipbuilding is understood by the President of the Board of Trade—I hope that we shall go forward and make the greatest use we can of the financial benefits which the Chancellor foreshadowed in the Budget not long ago.

11.7 p.m.

Photo of Mr Hervey Rhodes Mr Hervey Rhodes , Ashton-under-Lyne

T welcome the Bill, as implementing the proposals made by the Chancellor during his Budget speech. The chronic nature of unemployment in a few districts throughout. the United King- dom has been evident for quite a long time. We have had mention of the criterion that was laid down in respect of the degree of unemployment qualifying an area for development district status, but when the Measure was originally introduced in 1960 and the criterion was put at 4·5 per cent., it was in a boom year. The chronic nature of unemployment in some areas has persisted right tile way through, and the present situation is worse. That is why the Government have now decided to act.

But these are vast sums of money, and I want to say a little more in the way of a scientific appraisal. Not only has the N.E.D.C. investigated seventeen industries for growth; along with that, it has carried out an investigation into the well-being of industries which are suffering decline.

It would appear that a lot of the Measures that we have passed in the last few years for the relief of unemployment have been brought in very hurriedly and without a tremendous lot of thought behind them. If, for instance, we can make an estimate of the rate of decline of an industry in a development district and replace that industry as it declines in an orderly manner, which, I think, with the scientific thinking that is now going on in some of the Government Departments and their ancillary councils should be possible, we should be better prepared to meet contingencies of this sort.

In the past we have had experience of action taking place in a way which, very often, has created difficulties soon afterwards. I refer to the stop-listing of development districts. I suppose that since about October, 1961, we have taken four areas off the list of development districts and then replaced them within the comparatively short time of a few months, which shows the shallowness of our thinking and that we have not really got to the bottom of the true causes of the chronic nature of the problem.

Every time a development district is stop-listed the administrative difficulties become terrific. This is not generally realised by hon. Members, and it means that the management corporations, which really have the job of being the Government's agents for a variety of purposes in the districts, have to close down. If they are brought into being again they have to open new sets of offices. That is only one of the many points involved, and I will not pursue that one further.

I come now to the matter mentioned by the Parliamentary Secretary of the capital intensive industries. I was extremely pleased tonight when I heard the hon. Gentleman say that the Government were going to adopt a flexible line under the Bill regarding automation of capital intensive industries. May I put this point to him? It seems to me that if we pursue a policy, where it is acceptable to the Treasury, of having a low figure for the creation of employment while the rest of the country is going in for intensive capital equipment on a high basis, we shall set up a new circumstance in the development districts where we are encouraging low cost development and shall perpetuate the problem. I should like the Minister to refer to this when he replies to the debate.

We have a society which is now moving very rapidly towards automation in many of its industries, thereby creating redundancy, which the Government, in turn, have to tackle. Therefore, there is a general acceptance of change, and in the development districts we are likely to perpetuate, through the low cost that we allow in terms of employment created, a divergence of aim which it may be very difficult to get out of in years to come.

We have heard little about the estimate of cost. But on the Estimates Committee we have seen figures showing the small amounts which have been taken up. It is extraordinary that this year was to have been the year when the sum would have been the smallest since the inception of the legislation, but the one when the greatest efforts would be made to create employment in the development districts. That again reveals a lack of forward thinking of the kind which is necessary before we are able to do anything to cure this chronic problem. I realise that it is difficult and that the Board of Trade is anxious to put enough and to spare in the Estimates in order that the facilities may be taken advantage of, but I ask the Minister to give us some idea of Government thinking on this matter.

My last point relates to the question of safeguards. There are anomalies with which it will be difficult to deal. One was mentioned by the hon. Member for Darlington (Mr. Bourne-Arton) and another by the hon. Member for Accrington (Mr. H. Hynd). I can think of one or two. I wish to ask the Minister whether it would be possible for a firm situated outside a development district to set up a subsidiary within the development district and transfer the machinery from the parent company and obtain a grant on the machinery which, on paper, had been sold to the new firm. That type of anomaly would get the scheme a bad name if Ministers are not careful.

I recall the reorganisation of the cotton industry at the time of Sir Stafford Cripps. Many millions were given in grants by the then Labour Government. One firm drew quite a lot of money and within a few months had a fire. It drew the fire insurance but never opened its mills again.

This is the beginning of a new drive to help the areas where unemployment is chronic. I hope that the Government will not be misled by clamour about other areas of the country until something has been done about that, because it is a national scandal that we have not been able to Jo anything about the suffering in these areas.

11.20 p.m.

Photo of Mr Graham Page Mr Graham Page , Crosby

The hon. Member for Ashton-under-Lyne (Mr. Rhodes) has put before the House some interesting and practical comments on the Bill, and I hope to follow his practical points. The value of the Bill arises in this way. Under the 1960 Act, the two main forms of assistance were building grants under Section 3 and general grants and loans under Section 4, but any ordinary industrialist who read that Act and tried to understand what was meant by the formula in Section 3 (2) of how to calculate the building grant that he was likely to get was completely foxed.

To anyone who reads that Section—for example the words eighty-five per cent. of any excess of the cost, as estimated by the Board, of providing an adequate building or extension …" and so on— it is unintelligible. Many people give up trying to work it out before they start any plans. It is much too speculative for the ordinary man to work out what he may get by way of grant, and he gives it up and does not waste time doing it. If he is brave enough to continue and to try to work out plans for development in a development district, he encounters delays in negotiation with the Board of Trade. Those delays have killed many schemes.

Perhaps it is right and proper that my right hon. Friend the President of the Board of Trade should examine all proposals with the greatest care, because he is dealing with the taxpayer's money, but the delays in negotiations and in understanding what a developer is likely to get by way of grant or loan have deterred many developers. Section 4 of the Act, dealing with general grants and loans, is extremely vague.

My hon. Friend the Parliamentary Secretary will know that most of the criticisms of the 1960 Act have been centred around the uncertainty of the amount and nature of grants and the delays in decisions upon them. Now, under the Bill, we get, first, some precision about the building grants, in that they are to be a fixed percentage of 25 per cent., and, secondly, some precision in one respect at least about the general grants and loans; that is, precision about the grant for plant and machinery.

Subsection (3) of Clause 1 of the Bill is a model of clarity. It states: The amount of any grant under this section shall be ten per cent. of the cost of acquiring arid installing the machinery or plant in respect of which it is made. What more simple statement could we have? This is where there will be great benefit from the Bill. On the general grants and loans, there may, perhaps, be other classes of grant which could be set out precisely in that way.

I think in particular of the use of the shipyards for prefabrication of housing units. Could not there be a clear statement of the assistance which could be given to those who will now be going into the shipyards to assist in prefabricated buildings? For applications which cannot have a precise definition, will my hon. Friend the Parliamentary Secretary please consider the procedure for negotiations and endeavour to make it more expeditious?

In connection with the general grants, the new grant for plant and machinery and the building grants, will my hon. Friend see whether his right hon. Friend the President of the Board of Trade can give any assurance about the length of time that a development district is to be a development district? The hon. Member for Ashton-under-Lyne rightly complained about the stop-and-go procedure with a development district. Clause 3 meets that partially. After a development district ceases to be a development district the benefits of the Bill can still continue. But the problem goes much further than just completing work in hand.

Merseyside was a development district some years ago. Firms were attracted there. In fact, the development district status was so successful that it was removed. I would ask the House to remember that development district status does not merely mean building factories there; there are preferences over Government contracts, and so on. The buildings that were encouraged when Merseyside was first a development district were finished, and then, when Merseyside ceased to be a development district, there were not the jobs to fill them. Now, although Merseyside is again a development district, we have many vacant factories. It is not so much new factories that we need built there as the jobs to fill them.

Though many of the factories that are empty there are quite new, some of them are old. In that respect, I am pleased to see Clause 2(3), which deals with the adapting of existing buildings. That will be some help in the case of old factories that need adapting, but I am not sure that it is quite sufficient. To take the whole of Lancashire as an example, rather than just Merseyside, sixty-one cotton mills have been closed since August, 1961, and only nine have been reoccupied since, mainly because the buildings are too old for modern industry and the only thing for them is demolition.

I ask my hon. Friend the Parliamentary Secretary whether demolition is part of the cost of providing a building or an extension of a building, because the only thing to do with some old factories is to demolish them and rebuild. I am not sure whether the cost of demolition comes into the building grant. Incidentally, I am not sure whether providing the building includes the cost of the land—

Photo of Mr Graham Page Mr Graham Page , Crosby

I thought it did not. This is an important matter, especially with the demolition and rebuilding of old factories.

Returning to the topic of the vacant factories, industrialists know what happened on Merseyside last time—this on off development district status—and the memorial is there for them to see. Taking the whole of Lancashire and Merseyside, there are 375 vacant industrial buildings, with 26 million square feet of factory floor space, and industrialists will not come again unless there is some assurance of permanency in the advantages given to the development district.

I do not say that nobody will develop there. In fact, those who are already on Merseyside are developing even before this Measure comes into force. The motor car industries there have announced big developments. Vauxhalls, General Motors, Fords, are all going ahead, but they are already there; they see the advantages of the area because they are there. It is not only the motor car manufacturers; the Plessey Company, the Otis Elevator Company and Reed's tinplating factory are all going ahead with developments. This is happening without this Bill.

I do not think that the right hon. Gentleman the Member for Battersea, North (Mr. Jay) was in any way right in talking about gift horses, death-bed repentance, and so on. To use another simile, this Bill is by no means a life-belt thrown to any drowning man. Merseyside is far from drowning—it is very much in the swim of things. At the moment, however, development is from within, and where this Measure will be of great advantage is that it will smooth the way for others to dome in from outside—and come in without delay.

I am sure, Mr. Speaker, that neither you nor the House would let me try to make the speech I have been trying to make for the last two days during another debate, but I must tell my hon. Friend that this Bill will be completely nullified if his right hon. Friend the Minister of Transport accepts the Bombing Report, and closes down the suburban railways of Liverpool and Merseyside.

One cannot attract industry into Merseyside when it is advertised for all to see that railways such as the Liverpool-Southport line, carrying 100,000 passengers a week, are to be closed. The workers who have to travel to the work which my right hon. Friend is trying to bring to the district will not be able to get there. This seems to be completely farcical and I ask my hon. Friend the Parliamentary Secretary to ask his right hon. Friend the President of the Board of Trade to tell his right hon. Friend the Minister of Transport how absolutely crazy it is for one Department—the Board of Trade—to graft a new arm on to a district while another Department is trying to amputate the legs.

11.31 p.m.

Photo of Mr Emlyn Hooson Mr Emlyn Hooson , Montgomeryshire

I am sure that the hon. Member for Crosby (Mr. Graham Page) will forgive me if I do not follow up his arguments in the debate. My approach to the Bill is rather different from his. In so far as the Bill represents an advance on previous legislation, by providing further Government assistance to firms moving to or expanding in areas of high unemployment, it is to be welcomed, but as this is a Second Reading debate we are entitled to examine the framework within which the provisions of the Bill and of its parent, the Local Employment Act, operate.

I take the view that the whole framework within which the Bill must necessarily operate is entirely inadequate to meet the problems involved, and I am extremely doubtful whether the Bill in itself will make any significant, permanent contribution towards overcoming the many problems which the country faces. After all, the problem with which we are concerned in the Bill is the maldistribution of employment opportunities. This maldistribution is mainly the result of arbitrary movements of population in conditions largely appertaining to the 19th century.

The basic weakness of the Bill, like all its predecessors since the war, is that it is based upon the concept of plugging the holes whenever and wherever they occur. In theory, for example, under the 1960 Act an area can be designated as a development district when a high rate of unemployment is considered likely to exist. In practice, this rarely happens. Usually it is designated as a development district when a high rate of unemployment is actually seen to exist, and then the provisions of the Local Employment Act are brought into operation with a view to reducing the level of unemployment. However, as soon as this is achieved, the area promptly loses its status as a development district even though the deeper causes of unemployment generally remain unaltered. We have already heard examples given in the debate of instances where this has occurred, particularly on Merseyside which changes its colour very frequently and can disappear and reappear as a development district with monotonous regularity.

The weakness of Government policy, as expressed in legislation to deal with regional unemployment, is that it is a policy designed to provide palliatives based on expediency and does not attempt to conform to a distribution of population and a distribution of employment opportunities policy. This was admitted by the noble Lord, Lord Eccles, in another place on 28th November, 1962, when, as reported in col. 1238 of HANSARD, he advocated in relation to this problem the need for something far more radical and long-sighted. Hon. Members may take the view that it is one of the tragedies of this Government that long sight is one of the attributes advocated by Ministers only after they have left office.

When an hon. Member earlier this evening suggested that the President of the Board of Trade was looking ahead, we are entitled to ask how far he intends to look. It seems to me that this Bill is far too limited in scope to tackle the problem. We have been told that by the end of this century our population will have increased by at least 17 million people. Where is this population going to live and how will it live? What the Government ought to do is to lay down the pattern of our country for the years ahead, and there is no sign that this problem has been tackled.

From these benches it has been maintained for many years that there needs to be a concerted drive to create new points of growth on a regional scale, and the Local Employment Act, even with the generous help which will occur with the amendments which this Bill introduces, cannot do this because it is too limited in scope. It tends to cover individual targets rather than whole regions. Far more is required than the provision of financial assistance in the form of grants or loans.

I suggest to the President of the Board of Trade that what is really needed is a concerted drive to provide the necessary infrastructure of basic services and utilities, especially transport. This Bill—and this illustrates a point that the hon. Member for Crosby has already made—has been introduced only a month after Dr. Beeching has proposed to denude many areas in the North and West of railways. This policy, if it were implemented, would run contrary to the whole purpose of this Bill because the remaining railways would be concentrated upon the London, Birmingham and Manchester axis, as are most of the new road schemes, and this would inevitably emphasise the advantages of the Midlands and the southeast of England at the expense of the more peripheral areas such as Scotland, the South-West, Wales and the NorthEast—in fact, the very areas which are now experiencing the highest rates of unemployment.

Photo of Mr Anthony Bourne-Arton Mr Anthony Bourne-Arton , Darlington

The hon. and learned Gentleman talks about the North-East, but it is a travesty of the Report, which I hope he has read, as many of us have done, to suggest that the Report could do other than make the north-east of England nearer, in terms of transport, to other conurbations in the Kingdom than they are at the moment. This is its purpose. There may be parts of the country where people would be adversely affected, but not the North-Feast. The North-East must gain.

Photo of Mr Emlyn Hooson Mr Emlyn Hooson , Montgomeryshire

I do not know that hon. Members from the North-East would agree with the hon. Member. Certainly it is not true of the other areas that I mentioned. I do not claim to have special knowledge of the North-East, but it seems to me that to take away the transport system on the one hand without considering—

Photo of Mr Emlyn Hooson Mr Emlyn Hooson , Montgomeryshire

It is being cut down very considerably.

I should now like to make a special plea on behalf of those areas which are suffering from depopulation—that is, where they have not only actual unemployment but concealed unemployment in the form of depopulation due not to the decline of industry but to the complete absence of industry. We have heard from the hon. Member for Galloway (Mr. Brewis) about the plight of the Scottish Highlands and Islands, and the same applies to Mid-Wales and parts of the south-west of England. It does not appear to me that there exists any intention on the part of the Government to give any real help to our rural areas in trying to arrest depopulation or in attempting to change the haphazard pattern of population resulting from arbitrary movements in the course of our history.

I can cite the example of my area in Mid-Wales. We suffer from high unemployment in some small towns and a continual loss of population as employment facilities become less and less. Successive Governments, whatever their political complexions, since the war have refused to give the kind of financial assistance that has been given to development areas and development districts. The only help from the Government which is available to an area such as Mid-Wales comes from the development fund which was set up under the Development and Road Improvements Fund Act, 1909. Occasionally, out of that fund, the Government provide a factory for letting to incoming industrialists, and, even so, this kind of help is usually reluctantly given.

Such help, even when it is given, is a very modest inducement when compared with the inducements now offered to firms to establish themselves in development districts, and it means that an area such as ours is competing at a complete disadvantage.

I ask the President of the Board of Trade to apply his mind to the eventual pattern of population which he wants to see in this country. Do the Government want to see accentuated and continuing the flow of population from our peripheral areas to the south-east of England, or do they want to see our underdeveloped areas such as the Highlands, the south-west of England and my own area of Mid-Wales also developed? They have many social amenities, and, for the sake of our country as a whole, it is highly desirable that they should be soundly developed.

We are still waiting for a sign of a real policy for regional rejuvenation from the Government, and there is no real sign of their even acknowledging the need for checking the drift to the south-east of England. In truth, there does not exist in the Government an overall policy for the proper distribution of population and employment, involving, of course, a consideration of all the factors such as transport, overpsill and rural development.

If some of our areas are not to become totally depressed, and if the rest of the country is not to become intolerably overcrowded, we shall have to have a sound policy and agree to spend considerable sums of money to establish new magnet areas of attraction and development in each region. In order to do this, it will be necessary to provide at least as high a standard of amenities there as is offered elsewhere.

I give one example. I am not an expert on the north of England, but I understand that in the north of England, although it accounts for only 30 per cent. of the population, there are 60 per cent. of the slums. That is a social problem. If we do not have adequate social investment and amenities, we shall not eventually change the pattern of population distribution.

Our country's needs in future generations demand of any Government now a vigorous radical programme of regional rejuvenation. We cannot afford to continue to neglect our under-developed areas. The Bill helps in the present situation, but it is a short-term Measure and does not begin to tackle the long-term problem facing this country.

11.44 p.m.

Photo of Mr Patrick Wolrige-Gordon Mr Patrick Wolrige-Gordon , Aberdeenshire East

I agree with one point in the carefully prepared speech of the hon. and learned Member for Montgomery (Mr. Hooson), when he spoke of the context of the Bill. There seems to be a depressing unwillingness in the Board of Trade to accept migration as evidence of a persistent high level of unemployment, simply because it is not represented in the figures. Men and women have to leave distant areas to get work in other parts because there is unemployment in the places from which they go. To say that because these movements are not reflected in the figures they are not evidence of unemployment is quite unrealistic.

Otherwise, I welcome the Bill. It is a significant improvement in the Government's policy for assisting and industrialising our more distant areas. This is not an investment which the Government will regret. The grants for building and for the tooling of these factories will be repaid with interest through the quality and soundness of the work done. I hope that there is no feeling that this is an unsound investment in any way by the Government, because although the returns may come slowly, they will come, nonetheless.

There are one or two specific points on which I should appreciate guidance. The first is the question of retooling factories which are already established within a development district. Many of these factories have old plant which are not capable of producing at competitive rates and which, in addition, lose many hours of potential production through mechanical breakdowns of one kind or another. Are the grants under this scheme available for replacing old plant which would not necessarily be instrumental in bringing about immediate expansion but would ensure the position for expansion in the future?

May I illustrate the point from the experience of a firm in my constituency? Two boring mills were replaced by a large modern machine which cost approximately £27,000. The acquisition of that machine reduced substantially the cost of the work previously done on the old machines and allowed manufacture within the factory of components which previously had had to be purchased. in this case the cost of the work done in the factory was only 28 per cent. of the cost of the work purchased.

They proposed to replace an old vertical milling machine by a modern machine at a cost of about £8,000. It has been assessed that increases in productivity over that range of work varying from a minimum of 37 per cent. to a maximum of 108 per cent. can be achieved. This increase in productivity, taking due account of variations in production quantities per annum of components involved, produces an average reduction in manufacturing costs of 41 per cent.

These examples show the benefit to be gained in the use of modern equipment. As the manager of the factory says, it is only by producing the best design in the best quality at a competitive price that we can hope to expand our exports and to ensure employment and prosperity. Is it still, therefore, to be the case that industry will be asked to prove on paper when it buys new plant that such purchases will be instrumental in increasing the labour force?

Clause 2 represents a considerable difference for one or two firms in my constituency. Some of these firms stand to gain less under this Clause than they stood to gain through negotiations conducted under the 1960 Act. Is the figure for the help which they can now receive in respect of building and extensions of buildings a fixed and standard figure or will it be negotiable in the same way as it was under the 1960 Act?

11.49 p.m.

Photo of Mr Ernest Fernyhough Mr Ernest Fernyhough , Jarrow

The hon. Member for Aberdeenshire, East (Mr. Wolrige-Gordon) made a most effective point when he said that unemployment in the areas to which the Bill refers is never truly revealed because of the extent of migration, and that the need to attract new industries, therefore, appears to be less than would be the case if the people by the sheer force of economic circumstances were not compelled to tear themselves up by their roots and transplant themselves to where the jobs are. With that I agree very much.

The reason why we are discussing this Bill is that it has been shown that Conservative freedom does not work. This is a small, puny Bill, and if the Minister denies that, one can only draw attention to the amount he is expecting to spend this year. With the additional powers the Bill gives him, he will spend £24 million M bringing new employment to the areas of high and persistent unemployment—and that is against £41 million last year.

I notice the Parliamentary Secretary shaking his head. Then we ought to know whether a Supplementary Estimate will be introduced. We have barely got rid of the Budget. This is May, and we had the Budget in April, and now we have the Parliamentary Secretary contending that this figure is not the right one. It is obvious that we must have a Supplementary Estimate. But even if one is brought in, what will it do?

We were told recently that to provide 82,000 new jobs it had cost £78 million. If the Parliamentary Secretary doubles the present provision of £24 million and makes it £48 million, that will provide only about 50,000 jobs at the rate at which it has cost to provide jobs over the last 12 or 18 months. We ought therefore to know whether the Board of Trade really thinks it will be able to make a substantial contribution towards reducing the level of unemployment in the North-East, Scotland and other areas with the Bill.

It is only three years since we had the last Measure, and that was supposed to do what this Bill is supposed to do. It was supposed to rescue the areas of high unemployment. It was brought in to provide jobs, and it has not provided them. Unemployment has gone up. To show how sadly out the estimate was, unemployment has risen by more than 50 per cent. since the 1960 Measure was introduced. Much as we should like to think that it would succeed, how can we accept that the Bill, welcome though it may be, will do the job that we want, which is to put into employment those now walking the streets, any more than the previous Measure has?

Under the Bill we shall be making substantial grants of public money to private interests. I do not quarrel with that; if it will provide jobs for those now out of work I welcome it. The Parliamentary Secretary said that this was a Bill to create or maintain employment and that grants would be made for this purpose. Certain railways in the North-East are to be closed down, and if they are, employment will not be maintained. If those railways could be given a grant they would remain open and employment would be maintained. Why cannot a grant be made to keep railway- men in employment when grants can be made to private employers?

Another sore point with us is that the Bill will not allow the Board of Trade to make grants to a nationalised industry. If it did, we could have a new power station in Durham. The difference between siting the new power station in Durham and siting it where the Electricity Board finds it economic to do so is a matter of £3,500,000 spread over ten years, or £350,000 a year. A new power station in Durham would provide jobs for 10,000 miners. If we do not get a new power station in Durham, 10,000 miners will ultimately become unemployed. They can be kept in employment al the price of £35 a year—10,000 miners for £350,000 a year for ten years.

Every job the Government have provided so far under the Local Employment Act has cost about £1,000. I do not quarrel with the spending of the money, but it seems crazy to spend £1,000 a job on trying to attract new industry to give unemployed miners work when 10,000 of them can be kept in work for the very small sum of £35 a year each.

Will any grants be made to firms or contractors which decide to take advantage of the announcement by the Minister of Public Building and Works yesterday about the building of housing components in shipyards? While we welcome that announcement, we hope that it does not mean that the Government are writing off the shipbuilding industry. If there is spare capacity, it should be utilised if that can be done without in any way harming the industry's future. Will firms which are induced to take advantage of the announcement be given the necessary grants and other encouragement?

A Minister for the North-East has been appointed and he has made a very extensive and detailed tour of the area of his domain. We presume that he has seen something of the magnitude of the task which needs to be done. Will not Lord Hailsham's plan, when it is published, require Amendments to this very modest Bill? If the talks which the noble Lord has had with the Cabinet have in any way influenced the Cabinet, and his suggestions have been embraced in the Bill, it is obvious that his appointment has been purposeless, because it will take something much bigger and more serious than this Bill to solve the problems of the North-East and Scotland.

We need a real plan. We need real imagination. Old industries are dying, and new industries, planned in a proper manner, must be taken to these areas. If they cannot be persuaded to go there as a result of appeals by the Government to private enterprise, the Government must take the necessary action. It is because I do not think that the Government have either the foresight or the courage to tackle the job in the manner in which it needs to be tackled that I hope that it will not be long before the British nation is able to pass judgment upon them. When it does I am satisfied that the present Government will no longer occupy the benches opposite, and that the responsibility for dealing with these areas will be put in the hands of people with the necessary courage and imagination to make a much more strenuous and determined attempt to solve the problem.

12.2 a.m.

Photo of Mr Alexander Hendry Mr Alexander Hendry , Aberdeenshire West

I know that the hon. Member for Jarrow (Mr. Fernyhough) will not expect me to elaborate the troubles of the North-East, which have been dealt with at considerable length tonight. At this late hour I will resist the temptation to deal with the very interesting and attractive speech of the hon. and learned Member for Montgomery (Mr. Hooson), except to say that his speech rather reminded me of somebody telling a man with a leaky boat to buy a new boat, when what that man really wants is to stop up the holes in the boat. That is what the Bill seems to do, and I congratulate my right hon. Friend in producing a sound job of work.

The speech of the right hon. Member for Battersea, North (Mr. Jay) typified the approach of hon. Members opposite to this problem. We had a long dissertation about what powers could be made use of under the present legislation, and what the developer could do. That is all very well if one is in the ivory tower of London, where these problems do not exist, but business men cannot afford that. They want a practical solution to the problem. The Bill supplies that.

My right hon. Friend may be interested to know that I have had a letter from a constituent of mine, who says: I cannot let the occasion of the new Budget pass without dropping you a line to express my thanks for the trouble you have taken in connection with my building grant application. The new Budget will simplify our application, or at least the amount of the grant we shall get. You will no doubt be glad to know that we have placed the order for the buildings and we are expecting work to commence next week. That is one instance of the kind which my hon. Friend the Parliamentary Secretary mentioned in his opening speech. There is no doubt that in the minds of developers and potential developers the Bill lets them know where they stand. I am sure that in the development districts the Bill will have the repercussions that my right hon. Friend wants.

At the same time, there are one or two aspects of the Bill about which I should like a little clarification. I was interested to hear from the Parliamentary Secretary that the Bill is designed not only to provide employment but to prevent unemployment. I hope that he will make that fact clear to industrialists in the development districts and potential entrants into the development districts. They should be told that if they are prepared to carry out extensions and renewals for the purpose of preventing unemployment in these areas their applications will be welcomed. I found that there was a great lack of knowledge about this. My hon. Friend and neighbour, the hon. Member for Aberdeenshire, East (Mr. Wolrige-Gordon) has already spoken about dwindling populations and migration from these areas, and anything which my right hon. Friend can do to make it clear that the Bill is intended to prevent that sort of thing will do a great deal of good.

I now come to the building grants, which seem to me to be far too limited in their application. We have had a certain amount of talk tonight about second-hand buildings, and it seems to me that this is a very important subject. There are in the country a great many disused industrial and similar buildings, very largely in the development districts, which are capable of being made usable. But it appears from the Bill that the only grant that can be had is for the adaptation of these buildings in order to make them suitable for use.

It may well be that an industrialist finds that in a development district there are excellent buildings already available. Whether he takes over one of those buildings or builds a completely new one seems to be of the very greatest importance under the Bill as drafted. Of course, if he erects a new building he will get the 25 per cent. grant, but if he buys a building which is rapidly deteriorating it seems to me that under the Bill he will get no grant at all. I ask my right hon. Friend very seriously to consider that point and to see what he can do to make sure that, where possible, such buildings are used.

I agree that safeguards are necessary as, otherwise, there might be "fiddles". It might be possible for an industrialist to "discover" that he had a disused building and to buy it for himself through one of his subsidiaries. This, I suggest, is something which it is perfectly possible to safeguard against and it is equally possible to make sure that if existing buildings are used no dishonesty is involved, and that the developer gets the advantage of using an existing building instead of having to build a new one.

The second matter that we are anxious about concerns the provisions about machinery and plant which are to be excluded under the Bill. In the Explanatory Memorandum we find that certain types of movable plant are definitely to be excluded. I can well understand the reason for that, but in applying the exclusion. the administrative action described in the Explanatory Memorandum, I would ask my right hon. Friend to adopt an understanding attitude.

It is very easy to say that something is a vehicle and that it should not rank for grant. But there are certain items of plant which are movable and which are, strictly speaking, vehicles and essential parts of a manufacturing process. There are such things as fork-lift trucks which are an essential part of a factory's plant. Such vehicles could be put on a lorry and taken elsewhere, but I suggest that adequate safeguards should be provided to make sure that the grant was pulled back in the event of plant being removed elsewhere.

Details of plant in individual factories are, after all, given in the returns made to the Inland Revenue. There is no reason why similar returns should not be made annually, or whenever necessary, to the Board of Trade showing what plant is in a factory. This would prevent any fiddles. Generally speaking, I think that the Bill is an excellent Measure, that a lot of thought will nave to be given to it in detail, and I commend it to the House.

12.10 a.m.

Photo of Dr Dickson Mabon Dr Dickson Mabon , Greenock

I hope that the hon. Member for Aberdeenshire, West (Mr. Hendry) gets answers to some of his questions. But there is one question to which, despite the flexibility of the mind of the President of the Board of Trade, there will be no answer, and that is is the question of migration. In Northern Ireland there is a lesson to be learned by anyone who is worried about this matter. The best thing to do is to encourage people to stay at home so that the level of unemployment is raised. If people are encouraged to migrate from an area, the amount of unemployment will not be sufficient for the area to qualify for assistance. This is the problem which faces many of the Highland areas and Border counties. There is not a sufficient volume of unemployment to bring the areas within the terms of the Local Employment Act.

Unhappily, this is not the case in my constituency. Even with migration we still have a high level of unemployment and we are not dissimilar to other areas in Scotland. We have 3,000 permanently unemployed out of a working force of 53,000 and an annual migration of 1,000 of our best young skilled workers. That is the terrible story of my constituency under the Tories. It was not like that before the Tories came to power, and before a brake was put upon the development programmes which did so much to improve the locality after the war. The tragedy is that the Government have monkeyed about with the Distribution of Industry Acts and replaced them with a series of local employment Measures which have done a lot of damage to the natural flow of development which would have taken place since the end of the war.

To me it seems comical, having been a member of this House during the winter of 1959 and the early months of 1960, during the debates on the Local Employment Act—which is the parent of this Bill—to hear some of the speeches of hon. Gentlemen and indeed hon. Ladies opposite on the subject. One would imagine that we all agreed to the various provisions in the Acts and that only suddenly has the revelation come to us.

Take, for example, the speech of the hon. Lady the Member for Tynemouth (Dame Irene Ward). Through the Northumbrian mists of argument that we heard I managed to perceive several points. One was the argument about development areas as opposed to development districts. Did not we hammer that home during the debates on the Measure until the early hours of the morning, as we are doing now? Did not we argue that it was not possible to have patchwork and pinpointed patterns of development districts; that we had to have regional areas, perhaps not so large as recognised regions in the country, but at least something of that order, rather than little communities dotted about here and there.

But the hon. Lady voted for that Measure. I do not remember the hon. Lady—

Photo of Mr Thomas Fraser Mr Thomas Fraser , Hamilton

And she did not vote for our Amendment.

Photo of Dr Dickson Mabon Dr Dickson Mabon , Greenock

No, she did not vote for our Amendment, which is even more important. She voted for the Measure and I do not remember her objecting, although she had ample opportunity, because we put down a series of Amendments on this matter in order to indicate the appalling anomalies which would arise. In any case, it does not matter, because the Government are still not listening either to our arguments or to the arguments of the hon. Lady. She may try to move an Amendment during the Committee stage and if she does, she will get our support. We shall attempt to move Amendments, in which case the hon. Lady can support us. But I do not think that the Government will budge. The Government take a long time to learn from their errors.

In this Bill we have a replacement for the former Section 3 (2) which might be called the "Eccles Formula" devised by the then President of the Board of Trade before the General Election of 1959. This was the "Charter of Eccles" to solve the unemployment problem with Tory promises. One might have thought that there had been no unemployment until then. In fact, unemployment had reached a serious peak and the Government, faced with a General Election, had to do something to prove to the electorate that they intended to improve the situation. The "Eccles Formula" was a bamboozling formula for any businessman to try to understand. We said during the Committee stage that the formula was too difficult to understand. How many of us have had experience of businessmen asking for advice about the proper way to approach D.A.T.A.C. or B.O.T.A.C. in order to obtain a loan? They found that they did not understand the formula and that it took too long to get an answer from the Board of Trade to help them on their way.

There are firms in my constituency—small firms, which could ill afford even to apply—which, once bitten, are now twice shy about applying to the Board of Trade for further help. The other day, I went to a meeting of directors of a small firm in my constituency which spent £500 in applying to the Board of Trade far aid and did not get it. If only they had known before starting, they would never have spent the money or raised false hopes among their fellow directors and workmen, whom they have faithfully employed during the most difficult times of their working lives in Greenock.

I admit that a number of good suggestions have been made in this three-hour debate, but because of the time at which it is being held, it is a very unsatisfactory debate. Members of the House of Commons are being treated as shabbily as the unemployed in having to have the Second Reading of a Bill of this nature at this time of night. I understand from some of my hon. Friends that we are compelled to follow this procedure because of the Whips and the Government and that had we objected, we might not have got the Bill for many weeks.

I strongly dissent from this procedure. We should be making reasonably sound and, perhaps, long speeches, saying what we consider the legislation should be. In 1967, if, unhappily, the Government are still in power, we shall have to discuss another Local Employment Bill, because the 1960 Act will have expired. That means that we must go through all this process again. Knowing the Government as we do, this is probably the only Bill that we shall have on this subject in the present Parliament, or, indeed, the next three years. Even in the next Parliament, we shall have to wait before we can discuss another Local Employment Bill.

It is wrong that at this time of night we should be making Second Reading speeches on a Bill of this kind. It is not a defence that because the Bill contains few provisions, it is reasonable to take it at this hour, because Second Reading speakers should have the opportunity to make points of amplification, adding to and improving the Bill.

The way that the Government have managed to encumber the House with Bills and Acts is noticeable. Under the old Distribution of Industry Acts, we were able to have large sums of money, such as the £50 million for the Ravenscraig steel mill and, I believe, some money involved with the financing of the graving dock at Greenock. Since the Government have repealed those Acts, we have had to have the North Atlantic Shipping Act and the Fort William Pulp and Paper Mills Bill to dispose of large sums of money for these specific projects. Why cannot it all be administered through a central Act rather than undergo the whole process of discussing these Bills? If the Government are complaining about business clogging their time and this being a reason why we are discussing this critical Bill at this time of night, they should wake themselves up and find a Bill which provides a better vehicle.

Having said that, I will make one or two points about the Bill in detail. I agree very much with what the hon. Member for Galloway (Mr. Brewis) said about old buildings. This applies to many old industrial communities. I hope that we will be given an explanation of what is said in Clause 2 (3) about the adaptation of existing buildings. We may have to be given amplification about whether, in various ways, provision will be given for the cost of acquiring or adapting old buildings. This must be cleared up in Committee.

Another matter that will require clearing up in Committee is the definition of "industrial buildings." I think that the Parliamentary Secretary referred to making allowance for foundations in certain difficult terrains. I wonder whether the definition will involve, not only the work in shipyards mentioned by the hon. Lady the Member for Tynemouth but work in relation to docks. As I understand it, even under Section 271 of the Income Tax Act, 1952, and reading Section 21 of the Local Employment Act, 1960, there is some dubiety whether or not docks can be included in the term "industrial buildings"—

Photo of Miss Irene Ward Miss Irene Ward , Tynemouth

I am glad that the hon. Gentleman has raised this point, because when I raised it in a Question earlier in the week I got the satisfactory reply from the President of the Board of Trade that there was this uncertainty, and he undertook to move an Amendment to the Bill to make quite sure that the structural part of a dock would qualify for grant. If I may say so, I was not at all sure when I put down the Question that it would help my part of the world, because my dockyard does not happen to be in a development district. But I think that the hon. Gentleman's dockyard will get the benefit of the Question I asked.

Photo of Dr Dickson Mabon Dr Dickson Mabon , Greenock

I very much appreciate that information although, until I actually see the Amendment on the Notice Paper, I shall not accept it as satisfactory—nor, I am sure, will the hon. Lady.

It is terribly important that we should get a clear definition. In Section 21, where the word "article" is used, the substitution of "ship" is allowed, so that one is in the peculiar position in that Section of talking about grants that can he made for the … altering repairing … of any article … that is to say, a ship, yet there is no specific reference to docks, and if one reads it in terms of a building one sees that it can be construed as not being a form of dock. This is, perhaps, a matter that affects the shipbuilding and shipping rivers and, therefore, in view of what the hon. Lady has said, it is all the more important that the President of the Board of Trade should make it clear.

There are two points affecting these rivers on which I should appreciate an answer. First, I should like clarification of the position of dry docks. Do they get the advantages of the Bill in being defined as industrial buildings? Secondly, there is the recent suggestion of the Minister of Public Building and Works that some of the capacity of the shipyards might be used for the making of prefabricated houses. These are two important and practical matters on which we should have answers.

I hope that my hon. Friends on the Standing Committee—and I hope to be a member of it, too—will have an opportunity to table Amendments and, by that vehicle, invite hon. Members opposite who have criticised the Bill to join us. It is not fair of them to make complaints on certain scores about their own Government unless they are prepared to carry their protest to the Division Lobby, which seems to be an eminently sound doctrine. I take with a great pinch of salt many of the things that have been said by hon. Members opposite in criticism of their own President of the Board of Trade.

I think that the 1960 Local Employment Act has been a bad one, and it does not fully replace the Distribution of Industry Act. I do not think that this Bill will amend these defects, and I look forward to the day when we will completely recast the distribution of industry policy—but, of course, we will have to await a Labour Government.

12.24 a.m.

Photo of Mr William Rodgers Mr William Rodgers , Stockton-on-Tees

I very much agree with the remarks of my hon. Friend the Member for Greenock (Dr. Dickson Mabon) about the unsuitability of having a debate of this sort at this time of night. I would have hoped that the Government, despite their proper anxiety to get the Measure through, might have found time for a more serious debate than this one has had to be. At this stage, I find myself concerned with endorsing views already expressed, mainly about the whole context in which we are considering the Bill.

One thing that emerged from the extraordinary exchange between the hon. Lady the Member for Tynemouth (Dame Irene Ward) and the hon. Member for Darling. ton (Mr. Bourne-Arton) was that the hon. Lady did not think very much of the development district policy. This is certainly something to which one can return time and time again and it vitiates a great deal of what one might believe is merit in the Bill.

More often than not, attention is drawn to the fact that there are areas which are not in development districts but which nevertheless should qualify for the treatment given to special districts. I am more concerned about areas scheduled as development districts which, because of the nature of this policy, will never be viable and where we are encouraging investment which will lead to false hopes about permanent employment when the main aim should be the encouragement of development in much larger travel-to-work areas. This is the other side of the view that the present policy of development districts leads to important areas being left out which deserve this special treatment.

On the question of stop-go policy in the development districts, I was interested in the remarks of the hon. Member for Crosby (Mr. Graham Page). I asked the President of the Board of Trade yesterday the average continuous periods for which districts scheduled since 1960 under the Act and since descheduled have remained effectively development districts. He replied that the average period was fourteen months before being stop-listed, and on average a further nine months have elapsed before districts have been removed from the lists. In other words, the average period for the districts remaining qualified under the Act has been rather under two years.

In view of this information and of the other things said, I wonder whether it would not be better to decide that an area once scheduled would remain within the Act for a minimum of two years and possibly three years. It seems to me that this would encourage more intelligent and forceful development than we can expect when there is uncertainty about the point when the area is placed on the stop list and then removed altogether from the terms of the Act.

On the broad context of the Bill, I should be much happier if we could see the Government moving towards some more coherent regional planning. The hon. and learned Member for Montgomery (Mr. Hooson) had some interesting things to say on this, and other hon. Members have drawn attention to the importance of linking transport developments to industrial development, I would hope, looking at the criticism in the N.E.D.C. report of the development districts policy, that the Board of Trade is now very seriously thinking of setting up much more ambitious regional development boards which will investigate far more closely than is now done the real needs of particular areas.

There is a great deal to be said for trying to designate, however informally, certain pioneer industries which may be very appropriate to certain parts of the country but not to others. I find that there is still a remarkable failure on the part of the Government to foresee or attempt to foresee the likely industrial needs of any area. By this I do not mean only areas of high unemployment. We need a regional policy which affects the country as a whole, whether areas of high unemployment or areas of comparative prosperity. Even if this Measure is part of a policy towards areas of high unemployment which we can welcome, I have grave doubts whether any measures will be sufficient until we get the machinery right.

Even if in the course of the debate it has not been possible to discuss these broader issues in any detail, and even if the President of the Board of Trade in reply will be unable to give any clear indication of Government intention, I hope nevertheless that the Government will Look at the future of regional planning and attempt to foresee industrial developments as far as ten or fifteen years ahead in a way they do not now.

I am not asking for a dogmatic approach to this. I think we all appreciate the limits of forecasting. We all realise there is an unexpected element which one cannot anticipate in trying to plan the industrial future of the country. I think that this was the experience of my right hon. Friend the Member for Battersea, North (Mr. Jay) during his time at the Board of Trade. Nevertheless, despite these difficulties, a little more thought and imagination and an attempt to look beyond the narrow limitations of one piece of legislation, about which we may have doubts in any case, would give us a little more hope that in the end something substantial will be done to remove not simply a short-term problem, which will probably be eased in the autumn, but the long-term problem of declining areas.

12.31 a.m.

Photo of Mr Reginald Prentice Mr Reginald Prentice , East Ham North

I begin by agreeing that this is a very unsatisfactory time of night at which to hold a debate of this kind. I have a personal reason for saying that, as I was involved in the debate on the previous Bill and I have been on this bench for about nine hours. Apart from that, I think that in general terms a subject of this importance ought to be discussed in an all-day debate, and it is unsatisfactory that that has not been the case.

Despite the lateness of the hour, we have had a series of speeches which have raised an enormous variety of practical points, many of them local and many of general application, and certainly they have given the President of the Board of Trade a number of detailed points on which to reply. I want to add only one detailed point and then to make a general observation on the Bill.

One of my hon. Friend mentioned the fact that the Local Employment Act, 1960, is due to expire in 1967. I would assume—and I should like the President of the Board of Trade to comment on this—that this Bill will also expire at the same time. It is so clearly tied up with the 1960 Act and it uses definitions contained in that Act. It is said that the two Measures may be cited together, so presumably they will expire together, and in that sense we are dealing with something which is intended to be of a four-year duration and nothing more. I hope that that point can be clarified.

Throughout the speechs of hon. Members on both sides of the House there has run what I would describe as a note of healthy scepticism. Hon. Members on both sides have been wondering what effect this Bill will have, and have expressed doubts. I pose the Question, which I do not think has been satisfactorily answered either in the Budget debates or in the Parliamentary Secretary's speech: what impact is this new piece of legislation likely to have on the problem of unemployment? What is the scale of extra help which is proposed by these new formulae? Is this really a major Measure which is going to have any kind of impact on the problem, or is it merely a piece of window-dressing? Our scepticism, our tendency to regard it as a piece of window-dressing, is based on three things. First, as my right hon. Friend the Member for Battersea, North (Mr. Jay) said, the power to do these things seems to be in the Government's hands already. Section 4 of the 1960 Act gives the Board of Trade power to make loans or grants for the purposes of the undertaking of such amounts and on such terms and conditions as may be recommended … In other words, if the Board of Trade wanted to make standard grants of 25 per cent. towards buildings and if it wanted to make grants of 10 per cent. towards plant or machinery, it would seem to us that it only needed to announce this as policy under the terms of Section 4 of the 1960 Act and would not require new legislation for the purpose. This underlines our suspicion that there is some window-dressing in this rather than the development of any major new steps.

The second reason for our scepticism is the date, the fact that we are getting closer to a General Election and passing through a period when the Government like to put certain things in the shop window. I think it was Dr. Johnson who said that the thought that he was about to be hanged concentrated a man's mind wonderfully. Their impending defeat at the General Election certainly tends to make the Government go in for gestures of one sort and another.

The third reason for our scepticism is the obscurity about how much extra financial help will be channelled into helping projects for employment. The grants of 25 per cent. under Clause 2 will replace the old system under which, we are told, the average grant was 17 per cent., and it seems, therefore, that some extra money will flow. To that extent it is welcome. It is welcome also in the sense that it is a clearer and more simple formula which will give a firm a clearer indication of what it is entitled to expect.

Clause 1, which provides for the 10 per cent. grants, is said to be something new which, in many cases, will apply in addition to the B.O.T.A.C. loans or grants which are already available under the old scheme; but here also the scale of the extra help is very much in doubt. In the House on 4th April last the President of the Board of Trade said: We shall have to put a ceiling as we do at present, on the total assistance available under the Act for individual projects where the cost to public funds is too high in relation to the number of jobs to be provided.… In the majority of cases there will also be room for B.O.T.A.C. loans and grants available under Section 4 of the present Act."—[OFFICIAL REPORT, 4th April, 1963; Vol. 92, c. 661.] But it is still suggested that in many cases there will not be both B.O.T.A.C. grants and these grants. The right hon. Gentleman's reference to a ceiling also leaves us feeling that there may not be very much involved. The Parliamentary Secretary used similar words in moving the Second Reading today.

We have to put all this against the fact that the Estimates submitted by the President of the Board of Trade for this current year are much lower than the Estimates for last year, £24 million against £41 million, which does not suggest an expansion of aid under the various headings we are discussing.

Photo of Mr Henry Brewis Mr Henry Brewis , Galloway

Will the hon. Gentleman compare it also with the £500,000 under the Labour Government?

Photo of Mr Reginald Prentice Mr Reginald Prentice , East Ham North

No, I will not. The Labour Government approached this matter by very different methods, which have been described by my hon. Friends, and with a great deal more success in maintaining full employment than has been evidenced in the past twelve months. What we are considering is the relation of this Bill with the situation of unemployment now, and the question whether it will make any difference or not. I thought that the hon. Gentleman himself, among others, was to some extent sceptical, and understandably so, about its effect.

Next, there is the vagueness of the Explanatory Memorandum on the financial effects. It is simply said that these could not be estimated. Of course, in legislation of this kind precise financial effects cannot be estimated. No one knows the number of applications, the exact nature of them, and so on; but the Government must have some idea in their mind in order to produce their Estimates. We should be told more in the reply about the type of estimates they have in mind and the scale of extra help so that we may see whether this Bill is something which will have an impact or is simply changing the formula, putting in a piece of window-dressing, for political purposes.

Photo of Mr Ernest Fernyhough Mr Ernest Fernyhough , Jarrow

The Parliamentary Secretary said that there had been sixty additional applications compared with the previous period. He ought to be able to tell us at least how much extra those sixty applications would cost if they were granted.

Photo of Mr Reginald Prentice Mr Reginald Prentice , East Ham North

I think that my hon. Friend is correct and that we could be told rather more about the practical effects which the Bill is expected to have.

We discuss it against the background of an appalling total of unemployed. The figure of 640,000 is about twice as many unemployed as that which has persisted for a greater part of the period since the end of the war. It is a figure which has been purged completely of the effects of the bad weather. It represents at least 300,000 unnecessary cases of human frustration and misery and economic waste.

It is against the background of the failure of the 1960 Act and all other Government policies that we have to measure the Bill. I repeat what my right hon. Friend said in opening the debate from this side of the House: that whatever the merits of the Bill—and we are not against it, because if there is anything in these proposed new Measures, however modest, we are for them—it must not be regarded as a substitute for those other policies which we have been urging again and again from this side of the House and which the Government have failed to adopt. They include a much more positive use of industrial development certificates. In this connection, the figures for the first quarter of this year are disappointing. They show, for example, that in the London area there has been just as much floor space allowed as in the northern area, and in the Midlands area more has been allowed than in Scotland.

We require a much more definite policy about office development than is contained in the Bill presented by the Minister of Housing and Local Government. We require a regional strategy, as suggested by my hon. Friend the Member for Greenock (Dr. Dickson Mabon). Above all, we require a commitment to growth targets and economic expansion without which all these policies will fail.

We regard the Bill, therefore, as a Measure which on the face of it will not take us very much further towards the full employment policies which ought to be pursued. It is interesting that hon. Members have wondered whether the Bill may become superfluous in view of the legislative authority which the Government already have. Whether it is or is not superfluous, it is no substitute for policies which are still lacking. Every hon. Member who has spoken, from both sides of the House and from local areas of unemployment, has underlined that the Government's policies for many years have failed, and in the last twelve months have failed worse than at any other time since the end of the war, and that something new and much more drastic is required to deal with the situation.

12.43 a.m.

Photo of Mr Frederick Erroll Mr Frederick Erroll , Altrincham and Sale

A number of interesting points have been raised during the debate, some of them applying particularly to the Bill and others going far wider than the Bill. I will try to deal with as many as I can, but I hope that the House will forgive me if at this late hour I do not try to deal fully with every interesting argument which has been raised during the three-hour debate.

I do not pretend that every detail of administration of the Bill has been worked out fully, and that is why I have been particularly interested in what hon. Members have said. But even where the details have been worked out, I shall gladly accept changes where I believe that they will represent improvements. In reply to the hon. Member for East Ham, North (Mr. Prentice), the Bill will expire in 1967, in common with Part I of the parent Act, which is due to expire in that year. I am sorry that the hon. Member suggested that the Bill was perhaps a bit of political window-dressing and that he was sceptical about it. It is a useful little Measure, and I assure hon. Members that we should not waste their time in introducing the Bill merely for window-dressing.

Photo of Mr Frederick Erroll Mr Frederick Erroll , Altrincham and Sale

I am surprised that the hon. Member refers to the 1960 Act. A much better example is the 1958 Act, which was described at the time as window-dressing by hon. Members opposite but which has been much welcomed by the many people who have benefited from it. The 1960 Act was its logical successor, and those who have benefited from the 80,000 new jobs provided as a result of that Act know whether it was window-dressing or a means of producing jobs for people where they were needed.

Photo of Mr Frederick Erroll Mr Frederick Erroll , Altrincham and Sale

I did not interrupt anyone and I think that I should be allowed to make my speech.

Photo of Mr Thomas Fraser Mr Thomas Fraser , Hamilton

I can speak afterwards.

Photo of Mr Frederick Erroll Mr Frederick Erroll , Altrincham and Sale

The right hon. Member for Battersea, North (Mr. Jay) asked whether the new powers are necessary. It is necessary to look rather closely at the 1960 Act, but I assure him that we should not be asking the House for powers if we already had those powers under existing legislation.

It is true that Section 4 of the present Act gives me power to make grants as well as loans on the recommendation—this is the point—of the Advisory Committee; but the size of any grant or loan under that Section is recommended by the Committee and I have no power to vary its recommendation. I can only accept it or reject it.

Section 4 is designed to enable the Advisory Committee to produce recommendations tailor-made to suit the needs of each individual applicant. I know that the right hon. Gentleman may point out that the Board of Trade can, with the consent of the Treasury, give general directions to B.O.T.A.C., but these are only general directions in regard to terms and conditions and not specific to individual applications. The amount of a grant, or, for that matter, a loan, is not a term or condition and, therefore, it would not be possible under the Act to make a direction to B.O.T.A.C. of the sort which it would be necessary to make in order to give effect to the powers we are asking for in the Bill.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

That does not really seem to answer the point. Surely it would be possible under Section 4 of the 1960 Act to give instructions, far instance, to the Advisory Committee normally to offer grants of 25 per cent, for the purposes of building, with perhaps some discretion to go beyond that where it chose. Why should not that be done?

Photo of Mr Frederick Erroll Mr Frederick Erroll , Altrincham and Sale

I am advised that it would be ultra vires and it would not be possible to give a direction of that type. If it had been possible we should have done it in that way, but it would not have been possible to achieve the object we desire. That is why this part of the Bill is necessary. The matter can doubtless be taken up at a later stage of the Bill, but that is what I am advised. The directions can only be general relating to terms and conditions—rates of interest, interest-free periods, the terms and conditions of a loan, and the like. It would not be possible to give a direction of the sort the right hon. Gentleman has suggested. The legal experts have so advised, and that is why has been necessary to have these Clauses in the Bill.

My hon. Friend the Member for Peterborough (Sir Harmar Nicholls) raised an important point. He was concerned about applications for new building grants and whether they would apply to offers which had already been made. The answer to his point is that "an offer made" means "an offer made", and it is immaterial whether the offer has been accepted or not if the offer had been made before 3rd April. There obviously has to be a point where one starts the new arrangements, and in the case of building grants in particular the offer may have been made many months before it is actually taken up, and so if we were not to have a fixed date of 3rd April we should find ourselves faced with an unpredictable and possibly large amount of expenditure in relation to offers made some time ago and not taken up. Those firms which had taken up their offers promptly would to that extent be penalised in relation to firms which had been laggardly, because they would not be able to get the increased benefit.

The subject of dry docks was raised by the right hon. Member for Battersea, North and by my hon. Friend the Member for Tynemouth (Dame Irene Ward). The Board of Trade has already been approached by companies concerned with building dry docks about the possibility of getting the 25 per cent. building grant. In answer to a Question yesterday, my hon. Friend the Parlia- mentary Secretary told my hon. Friend the Member for Tynemouth that I have been advised that there was some doubt about whether under the 1960 Act a dry dock was legally eligible for a building grant. After all, one could argue that it was a hole in the ground and not a building. These are complicated matters of legal definition.

We want to include dry docks and we are therefore making doubly certain by introducing an Amendment to the Bill in Committee on this point in due course. The building grant will apply to the structural part of the dry dock and, in addition, plant and machinery installed in and around the dry dock as part of the installation will be eligible for the 10 per cent. grant introduced by the Bill.

The right hon. Gentleman referred to office buildings. Where they provide additional employment, they will be eligible for the 25 per cent. grant. The point is that the Bill does not in the main change the principle of building grants. It merely alters the method and what was eligible for grant before will be eligible under the Bill.

Photo of Dr Dickson Mabon Dr Dickson Mabon , Greenock

Reverting to dry docks and the allowance for the structural part of dry docks, may I take it that in the Amendment it will be made clear what is meant by the structural part of the dry docks, or holes in the ground?

Photo of Mr Frederick Erroll Mr Frederick Erroll , Altrincham and Sale

I think that we can deal with that more fully when we come to the Committee stage. I appreciate that a large part of the work of building a dry dock is digging out the hole before starting to build the stone and concrete liners around it, but perhaps that aspect of the matter can be discussed more fully in Committee.

The hon. Member for Jarrow (Mr. Fernyhough) asked whether the nationalised industries, like the National Coal Board, British Railways and possibly the Central Electricity Generating Board, would have grants made available. No grants will be made available to them, because all their financial needs are met by separate legislation and it would be a matter of paying part out of one pocket and part out of another. There would be no advantage to the concern in being paid partly through the medium of the Bill.

Several hon. Members referred to the reduction in the Estimates.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

While the right hon. Gentleman is considering the eligibility of different undertakings for grants, will he tell us about public enterprises, the nationalised industries?

Photo of Mr Frederick Erroll Mr Frederick Erroll , Altrincham and Sale

Without wishing to give offence to the right hon. Gentleman, I was dealing with that in reply to his hon. Friend the Member for Jarrow. I think that I have covered it.

Photo of Mr Ernest Fernyhough Mr Ernest Fernyhough , Jarrow

If a branch line is to close and a local authority decides that it wants to buy it, would it get a grant towards maintaining a public service which would not otherwise exist?

Photo of Mr Frederick Erroll Mr Frederick Erroll , Altrincham and Sale

This is becoming rather like "Twenty Questions". I could not answer all these complicated hypothetical questions without longer notice, but at first glance I would say that that case would not be eligible for grant. I do not see that a second-hand branch line could in any way be construed as a building.

Some hon. Members referred to the Estimates having gone down while others said that we did not seem able to make accurate Estimates for the future. To deal with past Estimates first; the reduction from £41 million for 1962–63 to £24 million for 1963–64 does not reflect any reduction in the Government's determination to help the development districts. It reflects something quite different. The actual expenditure in any financial year arises almost entirely from offers made in earlier years. There is a time lag of one, two, or sometimes three years from the date of an offer being made which gives rise to the estimate and the expenditure being incurred.

Thus, the £41 million included a substantial amount in respect of large motor projects to which assistance was offered in 1961, and for which a much lower level of expenditure will arise in 1963–64, as these are coming into operation. Indeed, one is due to be opened tomorrow, or, perhaps I should say, today. It does not follow that there will be another large motor works coming forward in addition to those already created.

The reduction to £24 million reflects a reduction in applications in the last twelve months. Conversely, if we secure an increased rate of expansion and movement to development districts in the pre- sent year, this will be reflected in the Estimates for the year 1964–65. As for the future, we have stated honestly, in the Explanatory and Financial Memorandum, that It is impossible to make a meaningful estimate of the amount of the charge on public funds. If hon. Members will reflect they will see that we cannot tell at this stage how industry will react to the proposals contained in the Bill, particularly as it will be coupled with the system of free depreciation which my right hon. Friend outlined in his Budget speech. We are naturally hopeful that substantial use will be made of these facilities, but, as the Memorandum states, we cannot make a meaningful estimate. To put forward an estimate which could be no more than a guess, with no experience or precise knowledge at this stage, would be to mislead the House, which I do not wish to do.

The hon. Member for Rhondda, West (Mr. Iorwerth Thomas) apologised to me for having to leave before the end of the debate, but I want to put on record the fact that I appreciate the importance of the point he made about special foundations for a building in an area liable to severe mining subsidence. I agree that this is a Committee point, which I should like to go into in more detail in Committee. This problem is one that we have already been studying. It is somewhat complicated, but I think that we will be able to help the hon. Member on this point, administratively, if not in the Bill itself.

Several hon. Members, including my hon. Friend the Member for Darlington (Mr. Bourne-Arton), my hon. Friend the Member for Aberdeenshire, West (Mr. Hendry) and the hon. Member for Greenock (Dr. Dickson Mabon) raised the question of building grants being made available for second-hand buildings. I want to try to explain our attitude towards this matter. If somebody buys a second-hand factory he will be able to receive a building grant in respect of the conversion, modernisation or improvement to that building necessary to make it suitable for the new industrial occupation, so he will to that extent attract the building grant.

The hon. Members to whom I have just referred, however, suggested that in addition the purchaser of an existing second-hand building should get a 25 per cent. grant towards the purchase price. This would not be practicable, for two reasons. First, the very fact that buildings are empty and in areas of high unemployment means that they will have a relatively low sale value, and will probably be cheaper buys than 75 per cent. of the cost of a newly erected building, erected at 1963 or 1964 building prices. An existing building will probably still be a very good bargain, as compared with a new construction.

Again, in view of the way in which the property market operates, if it were known that a purchaser of a second-hand building would automatically get a 25 per cent. grant the vendor would automatically raise his offer price so as to absorb all or part of the 25 per cent. grant that he knew the purchaser would receive. Therefore, it would not achieve any effect of value to the public and certainly not to the unemployed in the district.

Photo of Mr Anthony Bourne-Arton Mr Anthony Bourne-Arton , Darlington

Will my right hon. Friend allow me to apologise for having failed to explain the point that I was trying to make? It is that when a farsighted local authority takes over such factory buildings, it is wrong for there to be legislative undercutting, for Parliament to undercut the value of its assets. This was the simple point that I was making.

Photo of Mr Frederick Erroll Mr Frederick Erroll , Altrincham and Sale

We should not be doing that. The local authority would buy the existing building at a very low price because, as one hon. Member said, it might be a derelict building, and would be able to offer it at a price very much lower than 75 per cent. of the cost of a new construction. I think that when my hon. Friend has studied the several points that I have made on the subject he will be able to agree that what I have suggested is the right and sensible course.

Photo of Mr Frederick Erroll Mr Frederick Erroll , Altrincham and Sale

I cannot give way to the hon. Gentleman. I have given way a great deal and I must get on.

Several hon. Members, in particular the hon. Member for Accrington (Mr. H. Hynd) and my hon. Friend the Member for Tynemouth, raised the question of the revision of the list of development districts. Here I must stress that the Bill does not in any way alter the provisions of the 1960 Act in regard to the definition of development districts. The definition of a development district remains unchanged. It is a district in which, in the opinion of the Board of Trade, there is high and persistent unemployment.

It is said that the selection of these districts is arbitrary, that they constitute, in the words of the hon. Member for Greenock, a patchwork of pinpoints, whereas areas would be more appropriate. But the great feature of the 1960 Act is that we have been able to concentrate on localities where unemployment is greatest. The disadvantage of the former development areas was that in them there were areas of high prosperity and also areas of comparatively severe unemployment. It was not possible under the earlier legislation, good though it was in its day, to deal with the localities of high unemployment because the area had to be treated as a single whole. The reference made by the hon. Member for Stockton-on-Tees (Mr. W. T. Rodgers) to the average length of time of a locality being a development district bears out that point.

The locality is scheduled, and if and when several new projects are set up it is quite properly descheduled, the Act having done its stuff and a high level of employment having been restored. It may have to be scheduled again, but that is the great merit of the Act. It is flexible and deals with the situation of unemployment in the districts concerned. If the right hon. Gentleman opposite thinks that it could be done in a better way, would he say so and tell the unemployed who have benefited from the Act why it is not any good?

Photo of Mr Ernest Fernyhough Mr Ernest Fernyhough , Jarrow

Is not the sole purpose of the noble Lord in another place being Minister for the North-East to look at the entire region and, presumably, to plan it and suggest remedies for its difficulties?

Photo of Mr Frederick Erroll Mr Frederick Erroll , Altrincham and Sale

Improving the entire region means improving it in many other ways than just the unemployment in it. In the north-east region there are areas of considerable prosperity, but my noble Friend is quite properly looking at the region as a whole and the regional opportunities as a whole, and not just the employment opportunities.

My hon. Friend the Member for Galloway suggested that there should be several classes of development districts, but I think that that would add severe administrative complications to the operation of the Act.

I have tried briefly to cover some of the more important points which have been raised by hon. Members in the debate. I should like to reaffirm the success of the 1960 Act. I feel sure that, with the standard benefits proposed in the Bill, the Act will be still further strengthened. I have been considerably encouraged by the initial response from industry which certainly does not regard the Bill as being just a piece of window-dressing. The reception given to it, at least by hon. Members on this side of the House, has encouraged me still further, since it is clear that, subject to one or two minor points, it is a good Bill which is generally welcomed, and I hope that the House will accord it a Second Reading.

Photo of Mr Thomas Fraser Mr Thomas Fraser , Hamilton

I do not rise to fulfil the promise which I made to the right hon. Gentleman that I would make a speech after he did because he was so discourteous in declining to give way. Nor will I even trouble him with the question which I was going to put to him. But I wish to ask whether he will reply to a question which was put several times in the earlier part of the debate: why is it that the building grant will not be made available to local authorities?

The right hon. Gentleman will be aware that a good many local authorities in areas of high unemployment have responded to the request which he had made many times that they should undertake to build factories speculatively and let them to industrial tenants. Some local authorities are in the course of building these factories speculatively. They will not be able to sell them. At best, they will be able to let them to industrial tenants. Their tenants will not be getting subsidised accommodation at all, whereas the tenant of the Board of Trade in those areas will get such accommodation. Owner-occupiers of industrial premises will also get subsidised accommodation. Why does not the right hon. Gentleman extend this grant to local authorities which have responded to his pleas?

Photo of Mr Frederick Erroll Mr Frederick Erroll , Altrincham and Sale

I am sorry that the hon. Gentleman should think that I was discourteous in not giving way to him, but I have given way to hon. Members freely during the debate and, as the hon. Gentleman will appreciate, there has to be a limit if one is to proceed with a reasoned and more or less continuous discourse.

I did not think that the point which he mentioned had been raised much during the debate, and that is why I did not refer to it in passing. This Act does not change the situation. It merely makes grants available in a fixed form, whereas before they were available according to a complicated percentage formula. I am aware of the point, which was put to me before the debate. It is a matter which I am looking into to see what should be done in fairness to all.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

The right hon. Gentleman mentioned the efforts of Lord Hailsham. Can he tell us whether the investigations of Lord Hailsham into the North-East are still proceeding or whether his mission has been terminated?

Photo of Mr Frederick Erroll Mr Frederick Erroll , Altrincham and Sale

That question had better be put to his representative in this House.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 38 (Committal of Bills).