Clause 38. — (Annual Allowances for New Machinery and Plant in Development Districts.)

Orders of the Day — Finance Bill – in the House of Commons at 12:00 am on 21st May 1963.

Alert me about debates like this

Photo of Mr William Clark Mr William Clark , Nottingham South 12:00 am, 21st May 1963

I beg to move, in page 38, line 12, to leave out "by a person".

Photo of Mr George Thomas Mr George Thomas , Cardiff West

I think that it would be convenient if we discussed this Amendment with the Amendment in page 38, line 14, leave out "by him".

Photo of Mr William Clark Mr William Clark , Nottingham South

The present wording of the Clause creates an anomaly for industrialists who use leased equipment, and I would remind the Committee that leased equipment or plant on lease, is being more and more widely used in industry. Not only is it anomalous, but it is uneconomic to have a position where, if one buys machinery one get free depreciation, and, if one leases it, one does not get free depreciation. I hope that I shall have a little more success on this Amendment than on a previous one. I trust that my hon. Friend will look at this sympathetically.

Photo of Mr Anthony Barber Mr Anthony Barber , Doncaster

As my hon. Friend the Member for Nottingham, South (Mr. W. Clark) says, these Amendments go together. Their purpose is to ensure that free depreciation will be available to a person who provides new plant and machinery which he then leases out to industrialists to be used in a development district.

The Clause as drafted provides free depreciation only for capital expenditure incurred by a person on the provision of new plant or machinery for use by him in a development district. It therefore cuts out the case where a lessor hires out machinery or plant for use by someone else. If a lessor is given free depreciation on items leased to a trader in a development district, he will be more inclined, I should have thought, to hire it out there than elsewhere and might perhaps reduce the rent. It would be in accordance with the object of the Clause to extend the free depreciation to cases of hiring.

These Amendments are satisfactory to achieve the object, and, strange though it may seem, I advise the Committee to accept them.

Amendment agreed to.

Further Amendment made: In page 38, line 14, leave out "by him".—[Mr. W. Clark.]

Photo of Mr Gilbert Mitchison Mr Gilbert Mitchison , Kettering

I beg to move, in page 38, line 26, at the end to insert: Provided that this subsection shall apply to the provision of a new fishing boat (within the meaning attributed to that phrase by section 370 of the Merchant Shipping Act 1894) entered in the fishing boat register at any port in a development district and habitually working from that port or in waters adjacent to a development district and to the provision of new engines or new equipment for such a fishing boat as it applies to the provision of new machinery or plant (not being mobile equipment) for use in a development district for industrial purposes.

Photo of Mr George Thomas Mr George Thomas , Cardiff West

With this Amendment may be discussed the Amendment in line 37, at end insert: or a fishing boat is not habitually working from her port of registry or in waters adjacent to a development district.", and that in line 39, after "plant", insert: or, as the case may be, in respect of the fishing boat, her engines or equipment".

Photo of Mr Gilbert Mitchison Mr Gilbert Mitchison , Kettering

The two last-mentioned Amendments are consequential in the strictest sense of the word, and all I need invite the Committee to do is to look at the Amendment which I have moved. It is a short and simple Amendment, and I am much encouraged by the welcome which the Government gave to the last Amendment.

The present position is that the provisions of the Clause—which amount to being able to write off the whole of capital expenditure as one likes; in one lump, if necessary—apply only to: the provision of new machinery or plant (not being mobile equipment) for use in a development district…". I quite understand the omission of mobile equipment in general, for if one did not do that the man who had a motor car derived from some Scottish factory might have a plausible claim to say that he would receive the benefit from the Clause. But there is one particular case, and that is what I desire to raise.

In some development districts, particularly perhaps in the Scottish ones, there are real fishing industries, very often on a small scale, and there are some in the south of England. Though they are not all based on development districts, a considerable proportion of them are. These fishermen, the owners of the boats, who may often be the actual people working in the boats, are using something which to them is a means of livelihood and is really a floating workshop in the sense that they get the fish out of the sea and themselves are employed in converting the yield of the sea into human food. They are in that sense using machinery just as anyone might be who was using a factory on the ground which provided food or clothes.

On the merits of the matter, I should have thought that there was very little doubt that the benefit intended to be given by the Clause in development districts ought to be extended to these people. It is no great point to say that these people are usually very badly off. They usually are, but, unfortunately, they have a particularly chancy trade. The results of fishing from one season to another are, on the whole, outside their control and may vary considerably; one year may be a very hard one and the next may be a very good one.

Therefore, provisions of this sort may be of real value to them and appropriate to what they are doing. They will prevent the whole of the results, or a considerable part of them, of the good year being absorbed in taxes while only a small part of the cost of the boats and the engines comes under existing legislation to be written off.

9.0 p.m.

They comprise, therefore, a case to which the provisions of the Clause could very properly and usefully be applied. In addition, the inhabitants of these places represent very often a substantial part, and sometimes almost the whole, of their communities—for instance, on the coast of Scotland. These are men who have put their money into this kind of enterprise, leading lives not entirely free from danger. They are men who serve their country with great distinction during war —and I hope we shall never have that kind of thing again—as well as making a really valuable and necessary contribution not only to our food supply, but also, since we do not necessarily eat all they catch in a good haul, to the agricultural industry through the manure from fish.

They are producers of basic products, using the boats and the engines they have to buy themselves. These things are quite expensive. I should admit that I share with my hon. Friend the Member for South Ayrshire (Mr. Emrys Hughes) the distinction of being an honorary officer of the Clyde Fishermen's Association. I say that with some pride.

Photo of Mr Ellis Smith Mr Ellis Smith , Stoke-on-Trent South

Are there any fish in the Clyde?

Photo of Mr Gilbert Mitchison Mr Gilbert Mitchison , Kettering

Yes. My hon. Friend may well have eaten quite a lot of herring from the Clyde, caught rather more south than Glasgow but still from the Clyde.

As I was saying, these folk serve a very useful purpose and, therefore, if we can possibly arrange to include them in these benefits we should be carrying out the general intention of the Local Employment Act. The fishing industry in these places is having a hard time. If there is a succession of bad seasons, the number of fishing boats becomes reduced and many of the men leave the sea and look for work elsewhere.

In Scotland, all that means is a man trying to find a house and job in Glasgow. No one ought to be driven, if, by legislation, we can make provision to avoid it, to leave fishing off the West Coast of Scotland in order to try and find a house and a job in Glasgow, because, although the one may be difficult in one way, the other is just as difficult in another way. It does not help the employment position of Scotland as a whole if people have to give up fishing and go to large towns for work.

Photo of Captain Walter Elliot Captain Walter Elliot , Carshalton

I agree with the arguments used by the hon. and learned Member, but would not he agree that they apply equally to fishing boats from whatever port they come and not necessarily only to ports in development districts?

Photo of Mr Gilbert Mitchison Mr Gilbert Mitchison , Kettering

Of course, they apply to all fishing boats, but this Clause is intended to give special help to development districts. I am trying to apply it to the case of the fishing industry in those districts. No doubt there is a case for saying that fishing boats all over the country should have something of the sort, but that does not arise under this Clause. In a helpful spirit, the Clyde Fishermen's Association put the hon. and gallant Gentleman's suggestion to the Treasury, but my feeling was that in a Clause intended to help development districts particularly, a general extension of benefits to fishing boats all over the country was hardly appropriate. Therefore, what I have tried to do is confined to benefiting the development districts.

In a case of this kind, if there is a ground for including a group of people on the merits of the case, one ought to be extremely critical of administrative difficulties and rather critical of people who want to do something of this sort but cannot manage somehow or other to put it into intelligible language. I say at once that it is not an easy thing to do. The port of registry is not enough, because, if one wishes, one can register a fishing boat in any port in the Kingdom. There is nothing to prevent a man from Dover from registering his boat at Campbelltown, in Scotland.

On the other hand, it is the practice in the fishing industry either to work from a port, if one is going on rather long voyages, or, if one is working from a port in that sense, to practise, if I may use the word, coastal fishing and work round the coasts, often of a development district. That seems to provide a sufficient definition, and that is what is in the Amendment, of the kind of local help which one wants to give to these people in development districts, that is to say, to require the double test of local registry and then, to avoid what I will not call fraudulent but lake registries, a requirement that the boat should either be based on a port in a development district, or should work in waters adjacent to a development district.

If one is told that this is not easy to carry out and is not easy in practice, my answer is that in practice it is probably rather easier than it appears to be on paper, because this is a much supervised trade and the fishery officers know a great deal about what boats are doing, where they are working, and what their actual earning radius, as it were, is. Therefore, even if the Government say that this drafting will not do, I would say that I think that I have put down what is required and that it would work in this way, but that if the Government know of a better way, they should follow it.

I hope that the Government will accept the Amendment. After all, the Amendment last accepted was quite an extension. It was arguable, on grounds very different from these, but this is a very human case. The people who work in these boats have had and do have a very hard and uncertain life. They are people who call for any concessions we can make to more wealthy and propertied persons, be they companies or individuals, to be extended to them. They really deserve it and I hope that the Government will give them what we ask.

Photo of Mr Anthony Barber Mr Anthony Barber , Doncaster

The hon. and learned Member for Kettering (Mr. Mitchison) said a great deal about the fishing industry and its work and all it does for the country, and with most of what he had to say on that score I agree. I do not propose to make any comment on the drafting of the Amendment, because the object is quite clear to anyone who reads it. If it were not, the hon. and learned Member has made the object clear in his speech.

The purpose is simply to provide that free depreciation should be available for new fishing boats, their engines and their equipment, which are entered in the fishing boat register in a port in a development district and which habitually operate from that port, or in waters adjacent to a development district.

Fishing boats are excluded from free depreciation because—and I should like to elaborate this in a moment—they cannot be said to be provided for use in development districts, and in any event are, as I think the hon. and learned Gentleman admitted, mobile equipment which is generally excluded, although no doubt he would say that, be that as it may, a special exception should be made for fishing boats.

As I understand it the suggestion is that free depreciation ought to be allowed because it would stimulate activity and employment in this trade which it is said is essentially bound up with development districts and whose fortunes effect in some measure the prosperity of development districts. This I think is true, but in framing his proposals for a powerful discriminatory instrument designed to benefit particular areas of the United Kingdom my right hon. Friend thought that it was of outstanding importance to benefit plant and machinery rooted in the area concerned for its enduring benefit. It was not his purpose to benefit plant or machinery which was used outside the areas. Mobile equipment is, by its very nature, likely to be used anywhere, and it would be practically impossible to police its use to ensure the withdrawal of relief, once it was given, if it were in fact used outside a development district.

The hon. and learned Gentleman said that he thought his proposal was in accordance with the principle behind this new idea of free depreciation. The claim is, in effect, that the relief ought to have regard to the centre from which the industry is controlled, but, with respect, this is not the principle on which the relief has been framed, and to adopt it would involve either treating fishing vessels, or other ships, in a special way, or extending the relief to cover mobile plant of any description provided for use in a qualifying industry from a centre of operations in a development district.

As the hon. and learned Gentleman will have seen, transport undertakings are included in subsection (7) as trades which qualify for free depreciation in respect of their fixed plant and machinery, and I suppose it could be said that the relief ought to extend to private and transport concerns in respect of such of their rolling stock or buses or coaches as are operated from centres in development districts.

In short, the exclusion of fishing vessels, as of other ships and mobile items, follows not from any lack of sympathy with the problems of such industries, but from the necessity of settling a coherent basis for a novel kind of relief tied to activities in particular areas. I have every sympathy with the difficulties which certain sections of the fishing industry are experiencing, but I believe that to do as the hon. and learned Gentleman suggests would run counter to the objective of my right hon. Friend, and if it is necessary or desirable to assist the fishing industry to a greater extent than it is assisted at the present time, I think that there are other and better ways of doing so.

Photo of Mr Emrys Hughes Mr Emrys Hughes , South Ayrshire

Has the Financial Secretary any estimate of the cost of this concession?

Photo of Mr Anthony Barber Mr Anthony Barber , Doncaster

I am sorry to say that I have not, although I would not have thought, in relation to some of the sums that we have been considering today, that it would be particularly large.

Photo of Mr Harold Lever Mr Harold Lever , Manchester Cheetham

I listened from a basis of impartial ignorance to the proposal of the Amendment and the answer given by the Minister. The cogent arguments of my hon. and learned Friend the Member for Kettering (Mr. Mitchison) have been totally unanswered by the generalisations of one of the more intelligent Ministers of the Treasury.

The Minister defends his refusal of this concession by saying that the Clause must be coherent. What is coherent in a relief which restricts the tax advantages granted by the Clause as a whole to immobile equipment? Are the Government against mobility? Have they been metaphorically standing still for so long that they have a prejudice against mobility? Why should a development district be singled out for this selective treatment? If, for some reason, it is dangerous to give a tax concession by way of depreciation allowance to a special kind of mobile plant in a development district, why should not we maintain the same hostility in respect of other areas? I do not see where the coherence comes in.

9.15 p.m.

The Government have not explained why they are against giving this concession mobile plants. The Minister says that the Government to intend to provide help in respect of plant rooted in the area, and that is why they exclude mobile plant. I am not aware that an omnibus of a transport undertaking is rooted in such an area. If anything so little rooted as an omnibus can, by legislative ingenuity, be brought within the Clause, and if the Clause can still be regarded as coherent by the Treasury, I cannot see why equal coherence cannot be achieved for our hard-pressed fishermen.

We understand that the object of the Clause is to help these areas. Let us, for the sake of argument, assume that the Clause does encourage development in these areas. In those circumstances, why should not we encourage prosperity among the fishermen in these areas? They are given employment just as much if they go to sea in a subsidised boat as if they stay at home and work in a non-mobile factory which is subsidised by the Government. I cannot see why there should be this prejudice in favour of the stationary.

I cannot see why my hon. Friend so readily accepted that there was something wrong with subsidising a motor car by means of a depreciation allowance. I know that it is a very evil thing to own a motor car, and that it excites envy on the part of those who do not own a motor car, but it is a fairly well accepted thing, in 1963, to own a motor car. I am not suggesting that my hon. and learned Friend falls into the category either of those who own a motor car or those who are envious of others who do, but I cannot understand why anybody, in 1963, should insist that a motor car is such a despicable object that it should be excluded from any concessions. It is a necessary cog in the industrial machine. Why should a man with a motor car not receive a depreciation allowance if that car is essential for his business, when a man who has something which is satisfactorily rooted in the ground receives the allowance?

It is the lack of coherence in the Clause which bemuses me, and makes me feel that we are entitled to a better reply. We may be told that there will be a certain amount of evasion if we subsidise cars or ships, but that argument does not impress me. Any form of Income Tax can be evaded if a person wants to be dishonest and fraudulent, and can get away with it. I cannot for the life of me see why we should not devise a form of wording to provide that where a ship is habitually or normally centred on a port in a development district which would be adequate to prevent fraud, unless the Minister has locked in his breast some secret aesthetic delight in some plant that is immobile, in contrast to ships and motor cars, which are apt to move.

The House should insist on a little common sense, coherence and logic in this Clause, and I hope that my hon. and learned Friend will not be satisfied with the answer that has been given, which has not rebutted a single one of his arguments. If it is necessary, I hope that he will register his protest in the Division Lobby.

Photo of Mr Emrys Hughes Mr Emrys Hughes , South Ayrshire

The Minister's reply has been the most unsatisfactory one that we have had in the course of our debates on this Bill. The usual reply from a Minister is that the proposed concession would cost the Treasury £1 million, £5 million, or f10 million. In this case, however, the Minister has no such argument. If he is to satisfy the fishermen he must show in what respects the case made by the hon. and learned Member for Kettering (Mr. Mitchison) is unreasonable. Instead of that we have had a jumble of platitudes in which the word "coherence" has been mentioned several times. But we have had no definite, specific argument advanced in terms of pounds shillings and pence.

The fishermen in my constituency would understand if the argument were advanced that this would in some way ruin the Treasury. But that is not the argument. The fishermen see large concessions given to industry and agriculture—especially agriculture. Fishermen to whom my hon. Friend has referred are very critical of the considerable concessions given to the farmers. They say that if the farmers can get concessions what about the fishermen? They have never been able to understand the attitude that fishermen who take all the risks of weather and the hazards of fishing in the Clyde—which have been considerable, including the shortage of fish in the last few years—should not get the same concessions.

One of my hon. Friends who has left the Chamber asked whether there were any fish in the Clyde. The Clyde Fishermen's Association, of which my hon. and learned Friend and I share the honorary presidency, covers a considerable area and the fishermen go out to the Western Isles. When they see concessions given to industrialists and others for depreciation of plant, they ask, "What about the small fishing boats?"

Photo of Sir Barnett Stross Sir Barnett Stross , Stoke-on-Trent Central

I wish to correct the hon. Member. He said that the hon. Member who made that observation had left the Chamber. As it was my hon. Friend the Member for Stoke-on-Trent, South (Mr. Ellis Smith), and as he is still present, perhaps the hon. Gentleman would correct his remark.

Photo of Mr Emrys Hughes Mr Emrys Hughes , South Ayrshire

I apologise, because I have a great respect for my hon. Friend the Member for Stoke-on-Trent, South (Mr. Ellis Smith). I greatly appreciate his advice about the economics of Stoke-on-Trent, but I do not think that his knowledge extends to the fishing industry in the Clyde. Had his remarks been confined to the River Clyde it would have been different, but the hon. Member must realise that the Clyde is a big geographical area with fishing villages stretching from Ayr, Dunure, Girvan and Campbeltown. If my hon. Friend objects to the Clyde geographically, I will say that it also affects the Western Isles and, therefore, his argument, although meant to be helpful, was not coherent in respect of its relevance to this particular Clause.

Photo of Mr Emrys Hughes Mr Emrys Hughes , South Ayrshire

That is the best that I can do for my hon. Friend.

I ask the Committee not to believe that we are asking for an imaginary concession, in view of the fact that the River Clyde has been so polluted that fishing is no longer carried on in that area. Here we have a reasonable and coherent case for justice to be done to the fishermen. They are mobile. They would not catch any fish if they were not. They are members of an industry which is just as much productive as the Imperial Chemical Industry, or Unilever, or the motor car industry, or any other industry. The fishermen ask for fair play. Our fishermen, who did so well in two world wars to help the nation in its difficulties, are just as much entitled to a concession as the agriculturalists and industrialists.

Photo of Mr Douglas Houghton Mr Douglas Houghton , Sowerby

My hon. and learned Friend the Member for Kettering (Mr. Mitchison) is too disconsolate to reply. He was buoyed up by the hope that what was good for the hon. Member for Nottingham, South (Mr. W. Clark) would be good enough for him, but of course he was disappointed. Ministers have a habit of accepting Amendments moved by their hon. Friends and rejecting Amendments moved from this side of the Committee. Had my hon. and learned Friend been able to reply he would have found that he was between the devil and the deep blue sea, having been sympathised with in front and not entirely supported from behind.

Of course, the purpose of this Amendment was clear and, of course, we do not propose to include motor cars. This Amendment is not intended to open the gates to all mobile plant and machinery. It is designed to deal only with the fishing industry. For the life of me I cannot see any real difficulty in extending the concessions in Clause 38 to fishing boats whose normal home is a port in a development district. We shall have the opportunity in a few moments of striking a blow for the men who go down to the sea in ships, or at least for some of them.

It is true that a fishing boat, after qualifying for this concession, might move off elsewhere, but on the whole these boats have a home port and stick to it. The families concerned are ashore in their home port and they are part and parcel of the life of the community in the area in which they live. I do not think there is any difficulty of administration or real possibility of avoidance. I suppose there will be moderate opportunities for getting the benefit of this concession without full justification in other directions, but we have to look broadly at what it is we are intending to do. If as a result of this concession there were more fishing boats and if there were more fish, more people would be employed in the industry. This would help those particular areas and do nothing but good.

We shall have to register our dissatisfaction with the reply by the Financial Secretary. My hon. Friend the Member for South Ayrshire (Mr. Emrys Hughes) said that it was the most disappointing reply given so far in the course of debates on the Finance Bill. I perhaps have rather better reasons than my hon. Friend for confirming the fact, having heard most of the debates. I can assure my hon. Friend that he is quite right. If he had heard them all he could not have been

more emphatically right than he was a few moments ago.

The Financial Secretary said that this would run counter to the framework of the Clause—good heavens above, we have been running counter to something for the last two years. There is not a Clause in the Bill which has not run counter to something in Government policy when we proposed it. Never has there been a Bill so full of proposals moved by the Opposition at different times and so consistently rejected by the Government. They all are now in the Bill. Now we want to make them a little better we are told that they would run counter to the whole framework of the Clause.

Photo of Mr Douglas Houghton Mr Douglas Houghton , Sowerby

We shall not trouble about the General Election that will he a foregone conclusion. In the face of all the evidence, how can hon. Members opposite buoy themselves up with this frothy optimism?

Getting back to the ships, if the Financial Secretary has nothing more satisfactory to say, I must advise my hon. and right hon. Friends to go more emphatically into the Division Lobby than is usual on the Finance Bill.

Question put, That those words be there inserted:․

The Committee divided: Ayes 164, Noes 224.

Division No. 118.]AYES[9.30 p.m.
Ainsley, WilliamCulien, Mrs. AliceHannan, William
Albu, AustenDalyell, TamHarper, Joseph
Allaun, Frank (Salford, E.)Davies, G. Elfed (Rhondda, E.)Hayman, F. H.
Allen, Scholefield (Crewe)Davies, Harold (Leek)Herbison, Miss Margaret
Awbery, Stan (Bristol, Central)Davies, Ifor (Gower)Hill, J. (Midlothian)
Bacon, Miss AliceDavies, S. O. (Merthyr)Hilton, A. V.
Baxter, William (Stirlingshire, W.)Deer, GeorgeHolman, Percy
Beaney, AlanDelargy, HughHooson, H. E.
Bence, CyrilDempsey, JamesHoughton, Douglas
Bennett, J. (Glasgow, Bridgeton)Diamond, JohnHoy, James H.
Benson, Sir GeorgeEdwards, Rt. Hon. Ness (Caerphilly)Hughes, Cledwyn (Anglesey)
Blackburn, F.Edwards, Robert (Bilston)Hughes, Emrys (S. Ayrshire)
Blyton, WilliamFinch, HaroldHunter, A. E.
Boardman, H.Fitch, AlanHynd, H. (Accrington)
Bowden, Rt. Hn. H. W. (Leics, S.W.)Fletcher, EricHynd, John (Attercliffe)
Bowen, Roderic (Cardigan)Foot, Dingle (Ipswich)Irvine, A. J. (Edge Hill
Braddock, Mrs. E. M.Foot, Michael (Ebbw Vale)Janner, Sir Barnett
Bray, Dr. JeremyForman, J. C.Jeger, George
Broughton, Dr. A. D. D.Fraser, Thomas (Hamilton)Johnson, Carol (Lewisham, S.)
Butler, Herbert (Hackney, C.)Galpern, Sir MyerJones, Dan (Burnley)
Carmichael, NeilGeorge, LadyMeganLloyd (Crmrthn)Jones, Elwyn (West Ham, S.)
Castle, Mrs. BarbaraGinsburg, DavidJones, J. Idwal (Wrexham)
Chapman, DonaldGrey, CharlesJones, T. w. (Merioneth)
Collick, PercyGriffiths, David (Rother Valley)Kelley, Richard
Craddock, George (Bradford, S.)Griffiths, Rt. Hon. James (Lianelly)King, Dr. Horace
Cronin, JohnGriffiths, W. (Exchange)Lawson, George
Crosland, AnthonyHale, Leslie (Oldham, W.)Ledger, Ron
Crossman, R. H. S.Hamilton, William (West Fife)Lee, miss Jennie (Cannock)
Lever, Harold (Cheetham)Pearson, Arthur (Pontypridd)Swain, Thomas
Lewis, Arthur (West Ham, N.)Peart, FrederickSwinger, Stephen
Lubbock, EricPentland, NormanTaylor, Bernard (Mansfield)
Mabon, Dr. J. DicksonPopplewell, ErnestThomas, Iorwerth (Rhondda, W.)
McBride, N.Prentice, R. E.Thompson, Dr. Alan (Dunfermline)
MacColl, JamesPrice, J. T. (Weathoughton)Thornton, Ernest
MacDermot, NiallProbert, ArthurTimmons, John
McInnes, JamesRandall, HarryTomney, Frank
McKay, John (Wallsend)Rankin, JohnWade, Donald
MacPherson, Malcolm (Stirling)Redhead, E. C.Wainwright, Edwin
Mallalieu, J.P.W.(Huddersfield, E.)Rhodes, H.Warbey, William
Mason, RoyRoberts, Albert (Normanton)Watkins, Tudor
Mellish, R. J.Roberts, Goronwy (Caernarvon)Wells, William (Walsall, N.)
Mendelson, J. J.Robertson, John (Paisley)White, Mrs. Eirene
Millan, BruceRobinson, Kenneth (St. Pancras, N.)Wigg, George
Milne, EdwardRodgers, W. T. (Stockton)Wilkins, W. A.
Mitchison, G. R.Ross, WilliamWilley, Frederick
Monslow, WalterShort, EdwardWilliams, LI. (Abertillery)
Moody, A. S.Silverman, Julius (Aston)Williams, W. R. (Openshaw)
Morris, JohnSilverman, Sydney (Nelson)Williams, W. T. (Warrington)
Neal, HaroldSkeffington, ArthurWillis, E. G. (Edinburgh, E.)
Noel-Baker, Francis (Swindon)Slater, Joseph (Sedgefield)Wilson, Rt. Hon Harold (Huyton)
Noel-Baker, Rt. Hn. Philip(Derby,S.)Small, WilliamWinterbottom, R. E.
O'Malley, B. K.Smith, Ellis (Stoke, S.)Wyatt, Woodrow
Oram, A. E.Spriggs, Leslie
Oswald, ThomasSteele, ThomasTELLERS FOR THE AYES:
Pannell, Charles (Leeds, W.)Stones, WilliamMr. Charles A. Howell and
Parker, JohnStross, Dr. Barnett(Stoke-on-Trent, C.)Mr. Sydney Irving.
NOES
Agnew, Sir PeterEden, Sir JohnJennings, J. C.
Allason, JamesElliot, Capt. Walter (Carshalton)Johnson, Dr. Donald (Carlisle)
Ashton, Sir HubertElliott, R. W. (Newc' le-upon-Tyne, N.)Johnson, Eric (Blackley)
Atkins, HumphreyEmery, PeterJones, Arthur (Northants, S.)
Awdry, Daniel (Chippenham)Emmet, Hon. Mrs. EvelynKerans, Cdr. J. S.
Bainlel, LordErrington, Sir EricKerby, Capt. Henry
Barber, AnthonyFarr, JohnKerr, Sir Hamilton
Barter, JohnFinlay, GraemeKershaw, Anthony
Batsford, BrianFletcher-Cooke, CharlesKitson, Timothy
Bennett, Dr. Reginald (Gos & Fhm)Forrest, GeorgeLagden, Godfrey
Berkeley, HumphryFraser, Rt. Hn. Hugh (Stafford&Stone)Langford-Holt, Sir John
Bingham, R. M.Fraser, Ian (Plymouth, Sutton)Leather, Sir Edwin
Birch, Rt. Hon. NigelFreeth, DenzilLegge-Bourke, Sir Harry
Bishop, F. P.Galbraith, Hon. T. G. D.Lewis, Kenneth (Rutland)
Black, Sir CyrilGammans, LadyLilley, F. J. P.
Bourne-Arton, A.Gardner, EdwardLloyd, Rt. Hn. Geoffrey(Sut'nC'defield)
Box, DonaldGeorge, Sir John (Pollok)Lloyd, Rt. Hon. Selwyn (Wirral)
Boyd-Carpenter, Rt. Hon. JohnGibson-Watt, DavidLongden, Gilbert
Boyle, Rt. Hon. Sir EdwardGilmour, Sir John (East Fife)Loveys, Walter H.
Brewis, JohnGlyn, Dr. Alan (Clapham)Lucas-Tooth, Sir Hugh
Bromley-Davenport, Lt.-Col. SirWalterGoodhew, VictorMcAdden, Sir Stephen
Brown, Alan (Tottenham)Gower, RaymondMcLaren, Martin
Buck, AnthonyGresham Cooke, R.McLaughlin, Mrs. Patricia
Bullard, DenysGrosvenor, Lt.-Col. R. G.Maclay, Rt. Hon. John
Builus, Wing Commander EricGurden, HaroldMaclean, SirFltzroy(Bute& N.Ayrs)
Campbell, Gordon (Moray & Nairn)Hall, John (Wycombe)Maginnis, John E.
Carr, Robert (Mitcham)Hamilton, Michael (Wellingborough)Markham, Major Sir Frank
Cary, Sir RobertHarris, Frederic (Croydon, N.W.)Marshall, Douglas
Channon, H. P. G.Harris, Reader (Heston)Marten, Neil
Chataway, ChristopherHarrison, Col. Sir Harwood (Eye)Matthews, Gordon (Meriden)
Chichester-Clark, R.Harvey, Sir Arthur Vere (Macclest'd)Maudling, Rt. Hon. Reginald
Clark, Henry (Antrim, N.)Harvey, John (Walthamstow, E.)Mawby, Ray
Clark, William (Nottingham, S.)Harvie Anderson, MissMaxwell-Hyslop, R. J.
Clarke, Brig. Terence (Portsmth, W.)Hay, JohnMaydon, Lt.-Cmdr. S. L. C.
Cole, NormanHeald, Rt. Hon. Sir LionelMills, Stratton
Cooke, RobertHiley, JosephMiscampbeil, Norman
Cordeaux, Lt.-Col. J. K.Hill, Dr. Rt. Hon. Charles (Luton)Montgomery, Fergus
Corfield, F. V.Hill, Mrs. Eveline (Wythenshawe)Moore, Sir Thomas (Ayr)
Costain, A. P.Hill, J. E. B. (S. Norfolk)More, Jasper (Ludlow)
Courtney, Cdr. AnthonyHirst, GeoffreyMorgan, William
Craddock, Sir Beresford (Spelthorne)Hobson, sir JohnMorrison, John
Crawley, AidanHocking, Philip N.Nabarro, Sir Gerald
Crosthwaite-Eyre, Col. Sir OliverHolland, PhilipNicholson, Sir Godfrey
Crowder, F. P.Hollingworth, JohnOakshott, Sir Hendrie
Curran, CharlesHope, Rt. Hon. Lord JohnOsborn, John (Hallam)
Dance, JamesHopkins, AlanOsborne, Sir Cyril (Louth)
d'Avigdor-Goldsmid, Sir HenryHornsby-Smith, Rt. Hon. Dame P.Page, Graham (Crosby)
Deedes, Rt. Hon. W. F.Howard, John (Southampton, Test)Pannell, Norman (Kirkdale)
Donaldson, Cmdr. C. E. M.Hughes Hallett, Vice-Admiral JohnPartridge, E.
Doughty, CharlesHughes-Young, MichaelPearson, Frank (Clitheroe)
Drayson, G. B.Hulbert, Sir NormanPercival, Ian
du Cann, EdwardHutchison, Michael ClarkPeyton, John
Duncan, Sir JamesIremonger, T. L.Pickthorn, Sir Kenneth
Pilkington, Sir RichardShepherd, WilliamTweedsmuir, Lady
Pitt, Dame EdithSkeet, T. H. H.van Straubenzee, W. R.
Pott, PercivallSmith, Dudley (Br'ntl'd & Chiswick)Vane, W. M. F.
Powell, Rt. Hon. J. EnochSmithers, PeterVaughan-Morgan, Rt. Hon. Sir John
Price, David (Eastleigh)Spearman, Sir AlexanderWalder, David
Prior, J. M. L.Spelr, RupertWalker, Peter
Prior-Paltner, Brig. Sir OthoStanley, Hon. RichardWalker-Smith, Rt. Hon. Sir Derek
Profumo, Rt. Hon. JohnSteward, Harold (Stockport, S.)Wall, Patrick
Pym, FrancisStoddart-Scott, Col. Sir MalcolmWebster, David
Quennell, Miss J. M.Storey, Sir SamuelWhitelaw, William
Rawlinson, Sir PeterStudholme, Sir HenryWilliams, Dudley (Exeter)
Redmayne, Rt. Hon. MartinSummers, Sir SpencerWilliams, Paul (Sunderland, S.)
Rees, HughTapsell, PeterWills, Sir Gerald (Bridgwater)
Renton, Rt. Hon. DavidTaylor, Sir Charles (Eastbourne)Wilson, Geoffrey (Truro)
Ridsdale, JulianTaylor, Frank (M'ch'st'r, Moss Side)Wise, A. R.
Roberts, Sir Peter (Heeley)Taylor, Sir William (Bradford, N.)Wolrige-Gordon, Patrick
Roots, WilliamTemple, John M.Wood, Rt. Hon. Richard
Ropner, Col. Sir LeonardThatcher, Mrs. MargaretWoollam, John
Russell, RonaldThompson, SirRichard(Croydon,S.)Worsley, Marcus
Scott-Hopkins, JamesThornton-Kemsley, Sir Colin
Seymour, LeslieTiley, Arthur (Bradford, W.)TELLERS FOR THE NOES:
Sharples, RichardTouche, Rt. Hon. Sir GordonMr. Peel and Mr. MacArthur.
Shaw, M.Turner, Colin

Photo of Mr Donald Wade Mr Donald Wade , Huddersfield West

I beg to move, in page 39, to leave out lines 17 to 20 and to insert: (a) if and so long as, being within Great Britain, it is for the purposes of this Act a development district which is any locality designated by the Board of Trade as being a growth point for a region of high unemployment, or.

Photo of Sir Harry Hylton-Foster Sir Harry Hylton-Foster , Cities of London and Westminster

I think that it would be convenient for the Committee to discuss with this Amendment the Amendments in line 21, at end insert: or(c) if it is a county borough, borough or urban district in which or in part of which there is a substantial number of unemployed people and in line 21, at end insert: or(c) if it is certified by the President of the Board: of Trade to be in a district in which the average level of wages is below the national average and which is suitable for light industry but has difficulty in attracting it".

Photo of Mr Donald Wade Mr Donald Wade , Huddersfield West

This Amendment is designed to alter the definition of the areas to which the allowances under the Clause will apply. As the Bill stands, the free depreciation is limited to development districts as defined in the Local Employment Act, 1960, and before giving my reasons for moving this Amendment I should like to make what I consider to be two important points.

First, I accept the principle that some tax inducement for new investment in certain areas where there is underemployment is desirable. In fact, my colleagues and I have been saying this for some time. In 1961, the Liberal Assembly called upon the Government to introduce a scheme of taxation inducement for new investment in regions of high unemployment, and on 16th November, 1962, in a speech at Glasgow, my right hon. Friend the Member for Orkney and Shetland (Mr. Grimond) called on the Government to introduce more favourable rates of write-off in areas of high unemployment. We have been pressing for this and, indeed, did so when the Chancellor introduced his proposals for bigger investment allowances for industry as a whole. We are, therefore, not discussing the principle but how that principle should be applied.

Next, I accept the view that I know the Chancellor holds—he made this point on Second Reading—that there is need for a clear definition of boundaries. The only question is what those boundaries should be, and whether the Clause's proposals should be restricted to development districts under the Local Employment Act, 1960.

There are certain objections to development districts as defined in that Act, which is intended to remedy high unemployment. In theory, the designation of a district could be applied to an area where there is likely to be considerable or high unemployment but, in practice, this procedure is applied only where there has been a high rate of unemployment—in other words, where unemployment has for some time been considerably above the national average.

That being so, I think that the procedure under this Clause will tend to be one of plugging up holes. The provisions of the Local Employment Act are brought into operation with a view to reducing the level of unemployment but, as soon as this is achieved, the area promptly loses its status as a development district, even though the deeper causes of the unemployment may remain unaltered, as has happened in several cases—for example, on Merseyside. An area can appear on and disappear from the list of development districts, and that seems to be the flaw in the proposal to rely on development districts for the purposes of this Clause.

The definition would be a fluctuating one. We all agree that the boundary should be clearly defined, but the areas to which these provisions may be applied will be constantly changing. Businessmen like to make their long-term plans, and the Clause as it stands would mean that the business community would be in some uncertainty. On the whole subject of the need for regional development, Lord Eccles' speech in another place on 28th November, 1962, has been referred to on other occasions, and I should be out of order to quote from it, but I can give the gist of his remarks.

He said that he had a confession to make in that he had changed his mind since he had had to do with the Local Employment Act at the Board of Trade. At that time, apparently, he regarded the whole operation as a kind of rescue service, but he now recognised that the time had passed for minor developments and he felt that something much more radical and long-sighted was needed. I should have thought that that was very true, because what is needed is a more balanced pattern of economic growth for Britain.

9.45 p.m.

We must ask ourselves whether this is likely to be achieved if we are tied to the Local Employment Act. This is quite an important issue and I am restraining myself in being very brief, but the proposal in the Amendment is that the district designated as a region should be one where the encouragement of economic growth is required in an area which may be larger than a development district. It does not follow that boundaries need not be clearly defined. Indeed, it is important that they should be, but I do not think that there would be the changing and chopping about that is probable under the provisions in the Bill. It would accord with overall development planning, and it is essential that we should have a properly thought out regional development.

This is not only my own view. There are many authorities in favour of it and I would quote from the National Economic Development Council's publication "Conditions Favourable to Faster Growth", in which after referring to the narrow definition of development districts in the Local Employment Act, the Council states in paragraph 95: But it is arguable that better results might be secured for the slowly expanding regions as a whole by identifying their natural growth points and seeking to attract industry to them. Within the bigger areas a wider choice of location than at present would be available to incoming firms. This would increase the likelihood of attracting a larger number and a greater variety of firms, and of stimulating the development of industrial complexes. Firms would then benefit from the presence of kindred industry. These complexes and other places especially attractive to industry could be developed into growth points within the less prosperous regions. It could be expected that the benefit of new growth in any part would repercuss fairly quickly throughout the region. I should have thought that in applying this new concept of free depreciation it would have been helpful, and certainly would have resulted in more far-reaching benefits, if a wider area, as suggested in the N.E.D.C. Report were designated rather than that we should be tied to the Local Employment Act. This, briefly, is the object of the Amendment.

Photo of Mr Simon Digby Mr Simon Digby , West Dorset

The effect of my Amendment in page 39, line 21 can be explained fairly briefly. It is to extend this fairly generous allowance, which might be said to be to the point of abandonment if it were not a curious thing to say in connection with the Treasury, to other deserving areas, namely, those with a very low wage level.

Under the Bill as it stands, the only test, as I understand it, is the level of unemployment. There are not taken into account other considerations such as the location of industry, rural depopulation, or the size of the average wage packet, which has a very big effect on the general life of an area and the choice of jobs open to young people when they leave school.

I should be the last to dispute the great need of areas of heavy unemployment, and I am thankful that my con- stituency is not one of them. No one would grudge a great deal of help to them. However, we have seen in Bridport the closing of the Brit Engineering Works and the closing of a fishmeal and fertiliser factory, a new factory recently set up there. These closures cause unemployment, but I am well aware that there is no chance of my constituency becoming a development district within the meaning of the Act. Indeed, there seems to be no time when a constituency like mine is likely to get help. When there is full employment, we benefit to a certain extent from holidaymakers coming from the industrial areas, but we do not gain exceptional help.

In answer to a Question the other day, the Parliamentary Secretary to the Board of Trade said that £607 was being spent per new job in the development districts. This is substantial help. A very small proportion of it would be welcome in many of the rural areas of Dorset and elsewhere. We need more light industries, but to attract them there, without very much encouragement from the Board of Trade, if I may say so, we need inducements to the firms which we wish to bring in. These inducements are not available yet.

But there is the further danger now, as I see it, having regard to the generous allowances being applied in other parts of the country, that firms which we seek to attract to areas like mine will now wish to go to the North-East or elsewhere. Once again, therefore, we shall not profit.

Our younger people leaving school will have a very limited choice of jobs open to them. There are few jobs carrying very good wages. It would be a sad reflection if we had to wait until we were struck down by serious unemployment and became a development district before we could have assistance to the better balance of industry which we greatly need in many rural areas. I hope that, if my right hon. Friend is unable to accept this Amendment, he will bear in mind the needs of constituencies such as mine. Although we appreciate the greater needs of the industrial areas today, we hope that our turn will come.

Photo of Mr Ellis Smith Mr Ellis Smith , Stoke-on-Trent South

On behalf of my hon. Friends, I now put to the Committee the case for the Amendment, in page 39, line 21, at the end to insert: or(c) if it is a county borough, borough or urban district in which or in part of which there is a substantial number of unemployed people". I shall make as reasoned a case as I can, supported by concrete evidence and official statistical information. I shall call in aid the Local Employment Act, but, at the same time, complain about the lack of uniformity in its administration. All these matters are involved in the Clause which we now seek to amend.

The Government have recently announced many concessions to certain regions of the United Kingdom. These concessions are superimposed on the preferential treatment which some of these areas are already receiving. The purpose of the Amendment is to bring about equality of treatment and uniformity in other similar areas.

May I give some official statistical evidence in support of the Amendment. According to HANSARD, on 8th April, 37,936 people were unemployed in Wales. Wales receives the benefit of all the concessions and will now receive the benefits of the Clause. On the same day, 114,199 people were unemployed in the whole of Scotland, which receives all of the concessions and preferential treatment and will now receive the benefits of the Clause. There were 62,809 unemployed people in the north-east region, which receives all these concessions and preferences plus special Cabinet attention. According to yesterday's Observer, there will be superimposed on that further preferential treatment which a noble Lord in another place proposed to introduce.

Photo of Mr John Ainsley Mr John Ainsley , North West Durham

Out of five districts in my constituency, one is not vet scheduled, and it is the worst hit in the whole constitutency. But, because it comes in the Durham area, which is the administrative centre, the miners in that area are not taken into consideration. Therefore, that area gets no financial assistance. That is the problem which we face in the North-East.

Photo of Mr Ellis Smith Mr Ellis Smith , Stoke-on-Trent South

That provides further evidence of the correctness of the reasoned case which I am presenting.

Photo of Mr Jo Grimond Mr Jo Grimond , Orkney and Shetland

I have listened with great interest to what the hon. Member has been saying and do not dissent from it. However, I am sure that he does not wish to mislead the Committee. He said that the whole of Scotland was getting benefits under the recent legislation, but that applies only to development districts in Scotland, which do not make up the whole country.

Photo of Sir Raymond Gower Sir Raymond Gower , Barry

The hon. Gentleman also gave the impression that the whole of Wales was receiving these benefits. He must be aware that only a very small part of Wales gets them.

Photo of Mr Ellis Smith Mr Ellis Smith , Stoke-on-Trent South

I welcome these interventions, because it is most important that in stating our case we should be as accurate as we possibly can. In my view, our case is so strong and so unanswerable that the more corrections of that kind that we have the better. I should have thought that it was obvious that, when I mentioned Scotland, I was referring to those parts to which the Local Employment Act applies. I should have thought that when I mentioned Wales it was obvious to students of affairs that I was speaking about where the Act applies there.

I ask all hon. Members who have been good enough to listen to these statistics to compare them with the figures which I shall now give. On the same day, 8th April, there were 139,713 unemployed within a 50-mile radius of where I live. There were 5,000 unemployed in the area of Stoke-on-Trent, 2,900 unemployed in Salford and 12,500 unemployed in Manchester. Relatively speaking, Britain obtains more output and exports more from these areas than from any other area. The density of population in these areas is probably the greatest in the world. All the other areas to which I referred a few moments ago receive these preferences, but these areas, in the main, receive no concessions at all.

10.0 p.m.

We want equality of treatment for similar areas suffering in this way. We want to replace the regional administration of the Local Employment Act by national administration. That is one of the purposes of the Amendment. At the same time, we want the Chancellor—there is no one better informed than he is on this matter, because he introduced the Bill which is now an Act—to provide uniformity of administration of the Act. We want to encourage the export trade areas and not discourage them. We want to encourage our industrial towns and cities and not discourage them. We want to keep down the costs of production and at the same time keep down the price of exports. All this is involved in the Amendment.

The towns and cities for which we are speaking have poured out for generations mountains of production and exports. We have lived all our lives in the most polluted area in the world. We live near tips and pit heaps. Our houses and buildings suffer from mining subsidence and our land has been spoiled and blighted industrially for generations. Unless the Amendment is accepted, we shall now suffer because of the density of our population.

Never was a stronger case made during consideration of a Finance Bill than that which we are now presenting. I give an example of the kind of thing that has given rise to the need for this Amendment. A crying child gets most attention, and in certain parts of England we have not cried enough. In 1927, Stoke-on-Trent wanted greater diversification of industry within the city. It gave concessions and facilities before ever the Government thought about them, and I am not speaking of this Government. It encouraged the Michelin Tyre Company, by granting it facilities and concessions, to come to our city. We have ever been grateful for that because it has provided employment for thousands of people. The management was French. I have cause to remember that management because after years of struggle and sacrifice by the workers in the area, with the special support of three aldermen in particular and Ernest Bevin, the industrial relations there now bear favourable comparison with the best in the country.

The Michelin Company looks upon the area with pride. It takes pride in its output. It wanted to build a large new extension within the city. The city council welcomed the proposal. The organised workers wanted it. The Board of Trade resisted it and insisted that the extension should not be made in the city, not even in North Staffordshire. The extension had to be stopped and the new factory was built at Burnley.

We looked on that with great sympathy. As a resuit of research and enterprise and good output and very fine industrial relations, another new extension was proposed by the Michelin Company in our city. The Corporation was delighted, and my hon. Friends and I were pleased because at that time we had 5,000 unemployed. But the Board of Trade would not allow a brick to be built. It upset the Michelin Company and it upset the Corporation; and the second extension is now being built in Belfast. This would have provided employment for 3,000 of our 5,000 unemployed.

I ask the Chancellor whether that is fair to our city. Have we to suffer through the Michelin Company's enterprises being taken elsewhere when we have 5,000 unemployed of our own? Is it good business? Is it encouraging exports? Extensions have been allowed to take place all over the country. There have been extensions in Uttoxeter, Trafford Park, Leicester and many places in the south of England. I have documentary evidence to prove this if anyone doubts it. But not a brick has been allowed to be built in the City of Stoke-on-Trent.

This is the reasoned case for my Amendment. I hope that the Chancellor, who has been good enough to listen to the case as it has been presented, will look upon the Amendment now more sympathetically and consider whether he will accept it. I now beg to move it.

Photo of Sir Harry Hylton-Foster Sir Harry Hylton-Foster , Cities of London and Westminster

The hon. Member for Stoke-on-Trent, South (Mr. Ellis Smith) has just said that he was moving his Amendment. I want to avoid there being any misunderstanding. I think that it is understood by the Committee that I called the Amendment to line 39, to leave out lines 17 to 20 and insert the words on the Notice Paper when we began this debate, and I also said that it would be possible to discuss at the same time two Amendments to line 21, but neither of those Amendments will, in fact, be moved.

Photo of Sir Raymond Gower Sir Raymond Gower , Barry

As several hon. Members have stated, the benefits which are now to be given to the development districts are exceptional. The term "exceptional" has been used by several speakers, including my hon. Friend the Member for Dorset, West (Mr. Wingfield Digby). For that reason the Chancellor has deemed exceptional incentives of this nature to be essential to solve the problems of the areas which are most in need of special help.

I should have thought that the danger which we must avoid is that if we spread these real benefits too widely we may arrive at a position where we shall not bring the help to the areas where it is really needed. The more these benefits are increased and improved, the more will the areas which are outside the development districts covet similar assistance. That is human and natural. But there is a serious risk that if we extend the areas too far we may fall into the other danger.

The hon. Member for Stoke-on-Trent, South (Mr. Ellis Smith), for example, referred to a county borough or urban district in which there is a substantial number of unemployed people. I respectfully suggest to him that one may have a large county borough with a substantial number of unemployed, but that that number may, nevertheless, be a very small proportion of the total population there; and I should say that it would be a rather inept formula merely to judge by number in such an area. I think that the proportion formula which is used at present is much more appropriate.

Photo of Mr Harold Davies Mr Harold Davies , Leek

This is the pathetic belief that human beings are merely figures on a multiplication table rather than flesh and blood. If 384 people are 5 per cent. of population X or 384 are only 0·5 per cent of population Y, they are still 384 people who need help.

Photo of Sir Raymond Gower Sir Raymond Gower , Barry

I accept that point, but 384 people in a large population are much more likely to be absorbed into existing industry, whereas 384 people in a sparsely populated area may be a very large proportion of the existing population and, therefore, the difficulty of absorbing them will be all the greater.

Photo of Mr Harold Davies Mr Harold Davies , Leek

I grant that, but I am tired to death of the Treasury and everybody else treating human beings as statistics or little dots on a piece of paper.

Photo of Sir Raymond Gower Sir Raymond Gower , Barry

If the hon. Gentleman had his way the people who need help most would not receive it.

The hon. Member for Huddersfield, West (Mr. Wade) rightly pointed to the importance of consideration for probable growth trends. My recollection is that in the Local Employment Act it was laid down that trends would be part of the formula by which development districts would be assessed. Probable trends in unemployment are among the things the Board of Trade can take into account.

Photo of Sir Raymond Gower Sir Raymond Gower , Barry

Then the hon. Gentleman is claiming that when we enact something it is not being carried out. That is not so. Probable trends are taken into account.

Photo of Mr William Ross Mr William Ross , Kilmarnock

It is much more than a trend which is taken into account. I believe that the words used in the Statute are "imminent, high and persistent".

Photo of Sir Raymond Gower Sir Raymond Gower , Barry

Some degree of persistency is surely necessary to merit the exceptional assistance provided by the Act, otherwise it might go to an area where there was purely transitory unemployment.

Photo of Mr Eustace Willis Mr Eustace Willis , Edinburgh East

I can give the hon. Gentleman a specific example. It is the notorious case of the situation in Bathgate, Scotland. Bathgate was scheduled and then got a factory. It was then deschcduled. Another industry closed and the district was scheduled once more. That is the kind of "watching" by the Board of Trade which the hon. Gentleman is talking about. It is lunacy. It is not planning.

Photo of Sir Raymond Gower Sir Raymond Gower , Barry

The hon. Gentleman is strengthening my case. The effect of what he says is that even under the Act it is difficult enough to provide this help to the areas which need it most, but that if we extend such areas and make them more and more ill-defined help will be longer delayed.

Photo of Mr Stephen Swingler Mr Stephen Swingler , Newcastle-under-Lyme

There is nothing in our Amendments which would subtract from the help given to development districts. Our purpose is to suggest that these concessions be granted on a bigger scale, more widely and in a more discriminating way. The question we are raising is whether the concessions in the Clause are merely a sop at the moment to areas of particularly high unemployment—a short, sharp shot in the arm—or whether they are really a part of a policy for a more efficient deployment of British industry throughout the country. It appears at the moment, however, that the concessions are something of a sop in the year before the General Election.

What we are concerned about is that the concessions with which we agree, should be provided together with a policy of economic planning in a redistribution of British industry, and should be operated more flexibly both by the Treasury and the Board of Trade in order to deal not merely with areas which now have high unemployment but also with those which, unless something is done, will inevitably become the development districts or distressed areas of the future.

10.15 p.m.

One can easily shift unemployment about the country. That can be done through present-day economic policy. In North Staffordshire we have experienced and are experiencing part of this problem. Miners in the expanding coal mining industry of the West Midlands have agreed to accept an increasing number of incoming miners from other districts, many of whom have settled in ray constituency and other parts of the West Midlands, and they have done this to assist their comrades from Scotland, South Wales and other areas where pits are being closed. One of the things which that has inevitably meant is a stoppage of local recruitment for coal mining. There are not the jobs which would otherwise be available at the employment exchange for people in the locality.

In an area like North Staffordshire, where the other principal industry, pottery, has been steadily contracting for many years, a contraction which has been somewhat accelerated by the Government in the last few years, this has been a serious problem, and in parts of the area which my colleagues and I represent the proportion of unemployment has been brought very near to the figure which would qualify the area for inclusion in the list of development districts.

If this policy continues, by shifting the population from one part of the country to another because of the closure of industry in one area, the unemployment problem could easily be thrown up in another area which in a few years, because of the stoppage of local employment prospects, would belly-ache to the Board of Trade to be scheduled as a development district. Is that a sensible policy?

What we are saying is that there should be some discrimination in the distribution of these concessions, just as we have been pleading with the Board of Trade for some discrimination in the granting of industrial development certificates in order to foresee the unemployment problem before it occurs and before the redundancies arise and there is a succession of factory closures. When it: is known that in certain parts of the country over a number of years certain important industries will contract for technical reasons, or because of change in overseas markets, there should be a policy of attracting new industry and diversifying that in the areas.

Such a policy would be sensible fiscally and economically, because it would prevent the unemployment problem from arising in two or three or five years. If these concessions are applied merely to areas which now have high unemployment, while they may well be assisted—and we hope that they will be—the only result may be, especially with the continuation of present policies, that other areas of high unemployment will appear because the policy has not been applied with sufficient discrimination and foresight.

Photo of Sir Barnett Stross Sir Barnett Stross , Stoke-on-Trent Central

It is natural for hon. Members to think specifically in terms of the problems of their own constituencies, or the parts of the country in which they five, but we recognise that the Government must think in terms of the country as a whole.

When my hon. Friend the Member for Stoke-on-Trent, South (Mr. Ellis Smith) spoke specifically of the grievances of the City of Stoke-on-Trent and the way it has been treated, it did not mean for a moment that he or I or any of us in North Staffordshire would not accept the principle that it is right for the strong to help the weak and for the Government, wherever possible, to ensure that industry moves into those areas where the Government believe it to be most needed.

None the less, having said that, I illu- strate my belief in it by saying that I would not have lifted a finger to keep the Michelin extension from Burnley and in Stoke-on-Trent, knowing what was happening in Burnley at the time, how many factories were closing, how high was the unemployment rate, and how necessary a plant of this type was to Burnley. The Michelin Company did not want to go because it would have been much more convenient to extend on the site where it had had a great factory for many years.

When the time came to make a second extension, this was done in Belfast. Everybody knows that Belfast needs new industries, but at that time one of the greatest aluminium producing factories in Stoke-on-Trent, the first of its kind in the country, although still making handsome profits, decided to close, and as a result hundreds of men were due to lose their jobs.

The Chancellor of the Exchequer has been President of the Board of Trade and he knows more about this kind of thing than we do. He has to make the decisions and think about these problems, but someone who has been both President of the Board of Trade and Chancellor of the Exchequer does not always know the special circumstances which exist in individual areas, cities, towns, county boroughs, or districts.

I shall not keep the Committee long, but I wish to point out why the manufacturers of pottery should have the benefits referred to in the Amendment. In the pottery industry machinery is needed to make the pottery, but there must also be machinery, which must be continuously improved and kept up to date to protect the health of the workers. I am speaking now of the dust extraction plant that is necessary to prevent pneumoconiosis. Despite all that we have done, some factories have not done all that they could to protect the health of their workers.

Out of the 20,000 workers in the dusty part of this industry, between 80 and 100 die from pneumoconiosis every year. This is an abominable state of affairs and it is strange that, while we can put a man into space and enable him to circle this planet 22 limes and bring him safely back to earth, we cannot ensure that the air in our factories is clean enough to prevent people dying before their time.

There is appreciable unemployment in Staffordshire, and the plant and machinery used in the pottery industry is expensive. I therefore make a plea for these benefits to be given to manufacturers as an incentive to ensure that machinery is provided to protect the workers, and that there is never any breach of the pottery regulations. Perhaps my argument is not as good as it should be, but we who live and work in the district and represent the people there are very sympathetic to those who work in dusty, hazardous occupations. This includes not only the potters, but the miners.

Photo of Mr Harold Davies Mr Harold Davies , Leek

I do not wish to detain the Committee for very long, but let us consider what we are asking the Government to grant, and why the Government are not prepared to concede it.

The Clause is headed: Annual allowances for new machinery and plant in development districts. Subsection (5) says: A district shall be treated as being a development district within the meaning of this section—

  1. (a) if and so long as, being within Great Britain, it is for the purposes of the Local Employment Act, 1960, a development district as defined by section 1(2) of that Act,or
  2. (b) if it is within Northern Ireland,"
and we propose to add: or(c) if it is a county borough, borough or urban district in which or in part of which there i3 a substantial number of unemployed people". We think that this is a constructive Amendment because, as my hon. Friend the Member for Newcastle-under-Lyme (Mr. Swingler) said, it is looking to the future.

Anybody who read The Times publication on science and technology last month would see that the old traditional crafts, like the enamel industry, are de-dining. This is not just empire-building for north Staffordshire; this refers to the whole country where, instead of a whole area being taken as a development district where there is incipient unemployment, small areas, as in the case of Milton in Stoke-on-Trent, where an aluminium factory is closing down and going to Scotland, should be accepted. We are glad that it is going to help Scotland, but with a little planning foresight this factory could be used for the plastics industry, or something else, if machinery development allowances were made under the Bill for a small area, or city or borough, just as for a development district. That could be made to apply to the whole country before unemployment spread lo larger areas.

When we know that unemployment is coming, as in the case of Milton, why cannot we make this provision apply to smaller units of population? Local authorities in my area, in the urban dis- tricts of Kidsgrove, Cheadle, Leek and Biddulph, are trying to encourage new industries to come in. Although some of the old mines are being closed in our area, new ones are being developed. We welcome the miners who have come from Durham, Scotland and south Wales to the prosperous west Midlands coalfield area, but there is now less employment in the local pits for the young people who traditionally go into them. Now there is also contraction in the pottery industry.

Last week I asked the Minister of Agriculture to give me the comparable figures of small farms of 30 acres or less in north Staffordshire in 1952 and 1962. I do not want to weary the Committee by reading the table which the Minister gave me, but it showed that there are now 300 fewer small farms in the rural areas contiguous to and embracing Stoke-on-Trent than there were in 1952.

According to Barclays Bank Economic Review for May, for every two people working on the land three subsidiary people are employed. In the agricultural area surrounding Stoke-on-Trent there is a dwindling rural population. The Government ought to use their foresight in order to prevent this happening.

We think that the Minister could find a satisfactory formula. Very soon in my area we are opening a reservoir, and we are taking electricity to rural areas. All this could be done by nationalised industry. The development that is going on in The Peak planning area should get the benefit of this allowance because it would help some of the unemployed farm workers and small farmers. The National Park project prevents some of the farmers in my area from taking electricity, because it is said that the poles carrying the current would destroy the beauty of the countryside, and that the electricity supply must be taken underground, by cables.

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

The hon. Member is straying a little from the terms of the Amendment.

Photo of Mr Harold Davies Mr Harold Davies , Leek

I consider that electricity is concerned with power and with plant. If the cable is taken underground to the farmer or to the industrialist for the purpose of operating machinery, if an allowance is provided in The Peak planning area we might still be able to get electricity into areas which cannot take it at the moment because people who never go there except on Sundays say that it destroys the beauty of the countryside.

I hope that the Minister will examine some of these arguments and will find a formula to allow the Treasury to look favourably on the granting of concessions to these areas which need expanding industry in small units.

10.30 p.m.

Photo of Mr Willie Hamilton Mr Willie Hamilton , Fife West

The basic point of the Amendment is to try to spread the jam a little more thinly.

Photo of Mr Harold Davies Mr Harold Davies , Leek

And get more of it.

Photo of Mr Willie Hamilton Mr Willie Hamilton , Fife West

It will not be accepted because it runs contrary to the original purpose of the 1960 Act, which was designed to spread the jam less thinly. Currently the percentage of the insured population covered by the Act is 13 per cent. against a figure of 20 per cent. before the Act was passed. It was the declared purpose of the Government to restrict their assistance in order to make it more effective. That has been a dismal failure.

The figures for Scotland show that the percentage rate of unemployment in the development districts in April, 1960, was 7·1 per cent. Today it is 7·4 per cent. In other words, after three years and after the estimated expenditure of £45 million in Scotland, we have a worse unemployment position in the development districts than at the outset. That is why there has been no great outcry from areas which were not development districts. We speak from bitter experience. In Scotland we have lost as many jobs as we have gained under the 1960 Act.

The reason why the concessions are now being made in the Finance Bill and the reason why new employment legislation is under way in the House of Commons is that the Government have belatedly recognised the complete failure of the provisions in the 1960 Act. As the date of the General Election gets nearer, they are introducing more incentives to drive industry into the development districts. And it will work—make no mistake about it. That is why there are squabbles going on, because it is vitally important to get on this wretchedly unscientific list of development districts. That is why my hon. Friends are manoeuvring to find a form of words in order that their areas may be scheduled as development districts. But the Board of Trade has said "No. We have this figure of 41 per cent. We do not know where we got it, but it happens to give the right answer to the question which we put to ourselves, which was, ' How can we reduce the coverage from 13 per cent. of the insured population?' And the figure we arrived at was 4½ per cent." The Parliamentary Secretary did not know that at Question Time a few weeks ago, but he must know it now. This is the figure administratively. It is not in the legislation, but the Board of Trade work on that figure administratively.

Photo of Mr Willie Hamilton Mr Willie Hamilton , Fife West

Does the hon. Gentleman contradict that? I see that he is shaking his head.

Photo of Sir David Price Sir David Price , Eastleigh

The hon. Member for Fife, West (Mr. W. Hamilton) is, as usual, misinformed. I ought to know what I am trying to run.

Photo of Mr Willie Hamilton Mr Willie Hamilton , Fife West

The hon. Gentleman will see next week that he is wrong.

Photo of Mr Eric Lubbock Mr Eric Lubbock , Orpington

Why does not the hon. Gentleman ask him to name a district where the unemployment rate is less than 4½ per cent. and which is scheduled?

Photo of Mr Willie Hamilton Mr Willie Hamilton , Fife West

I did not say that. The hon. Gentleman cannot get out of this. Administratively the Board of Trade works to a figure of 4½ per cent. He denied that at the Box several weeks ago, but that is the figure.

Photo of Sir David Price Sir David Price , Eastleigh

The hon. Member must not talk as if he were a Board of Trade Minister. I do know what happens at the Board of Trade.

Photo of Mr Willie Hamilton Mr Willie Hamilton , Fife West

I doubt whether the hon. Member does; it is clear that he does not. He will see next week. I say no more than that.

Now that we are getting these quite considerable concessions for the development districts it is increasingly vital for my hon. Friends who are perturbed about the numbers of unemployed in their areas to try to get this help. They have sought to get a form of words which will include their areas. This is not the answer to the problem; the answer is overall expansion. So long as we get limited investment opportunities and lack of optimism and confidence in industry as a whole, whatever incentive is given we shall not have enough to go round. That is why we should use the N.E.D.C. much more.

The N.E.D.C. has produced two valuable Reports which have concentrated on growth industries. Why does the Board of Trade not use N.E.D.C. to take a look at areas with declining industries? If it can forecast for growth industries and what percentage of growth there will be over the years, why can it not estimate the decline in areas which are troubled with this problem, instead of choosing an arbitrary figure of 4½per cent. and then scheduling and descheduling?

An hon. Friend has mentioned Bath-gate. We could mention Llanelly and a whole number of places where people do not know where they are because of all these changes. A firm builds a factory with assistance and, when it decides to build an extension, it finds that the district has been descheduled. All these problems show the limitations of the Act. The right hon. Gentleman should have foreseen these things instead of going round the map and making it look as if it had measles with so many little development districts. Of course, my hon. Friends will exert pressure. The right hon. Gentleman should have foreseen that pressure would be exerted. His is not the answer. It is to be found in a policy of expansion which the right hon. Gentleman has been afraid to follow until far too late.

Photo of Mr Reginald Maudling Mr Reginald Maudling , Barnet

This, of course, is one of the most important features of the whole Finance Bill and I think it was right that the Committee should have a thorough discussion, because it is both touching on a very important matter and also introducing a quite novel principle in our taxation system.

I agree with the hon. Member for Fife, West (Mr. W. Hamilton) that basically the problem of unemployment, both in the development districts and elsewhere, depends upon the general expansion of the economy. I am sure, therefore, that he will welcome the production index figures for March which appeared on the tape this afternoon, before any of the effects of the Budget has taken place, and I hope that he will be encouraged when the next unemployment figures appear.

Leaving aside that general principle, the simple fact is that we are in this Measure, as in previous Measures—I think with the support of the House in the past—deliberately favouring certain areas at the expense of others. This is a deliberate policy of discrimination just as all policies designed to encourage development in one district rather than in another are policies of discrimination. Of course, if we make a discrimination greatly to increase a benefit going to certain districts, other people who are left out feel worse done by. As I said in my Budget speech, that cannot be avoided. We are making a very big increase, by the free depreciation, new standard benefits and other measures, in the help which we are giving to areas of high unemployment. I am glad that the hon. Member for Fife, West recognised that these would be effective, and I am sure that for once he is right.

As I said in the Budget speech, the introduction of these new and powerful incentives to investment in the development districts is bound to create problems of demarcation, to increase the obvious disparity between one district and another and to emphasise the importance of drawing a clear line. They are attempts, as are all policies of distribution of industry, to influence the location of industry contrary to what would be normally determined on purely commercial considerations.

The hon. Member for Stoke-on-Trent, South (Mr. Ellis Smith) was right to call attention to the importance of the export trade, because there must be limits to the extent to which we can properly and sensibly distort the normal commercial pattern of the distribution of investment in the country. We must have very strong and clear reasons for discriminating in this way between one district and another.

Several criteria have been advanced, for example by my hon. Friend the Member for Dorset, West (Mr. Wingfield Digby), but the only practical criterion is the percentage of unemployment in an area. The hon. Member for Leek (Mr. Harold Davies) rightly said that if a man is unemployed it means the same to him wherever he is, but if he went on that principle there would be no discrimination, no development districts and no policy—and no progress.

The hon. Member for Stoke-on-Trent, South referred to the number of unemployed in absolute terms within 50 miles of his constituency. Within 50 miles of the Palace of Westminster there would be an even greater number of unemployed in absolute terms simply because of the vast population. This cannot be considered on the basis of the absolute number in any area but must be considered on the basis of the percentage of the working population unemployed in an area. I think that both for social and for economic reasons this is right.

Photo of Mr Thomas Price Mr Thomas Price , Westhoughton

I and my hon. Friends have for some time been trying to get a coherent picture of the criteria which are required for this discrimination about which the right hon. Gentleman is speaking, There are parts of my division in which the unemployment level has been persistently about 6 per cent. of the insured population, and the Board of Trade and his Department have refused to do anything about it. I refer to the township of Hindley in Lancashire and parts of the Wigan rural area, where unemployment has been persistently at a high level and to which none of the steps to which the right hon. Gentleman has referred have been applied. What has he to say about that?

Photo of Mr Reginald Maudling Mr Reginald Maudling , Barnet

I was coming to this point by saying that for both social and economic reasons the percentage of unemployment in an area is clearly what matters, socially because it is the percentage of unemployment which affects the whole structure, fabric and life of the area, and economically because we cannot have a fully expanding economy in circumstances in which full employ- ment in one area leads to a shortage of labour in another. We must have greater uniformity of the percentage of unemployment.

The criterion is clearly set out in the Local Employment Act. It is "a high rate of unemployment" which exists "or is to be expected"—and the hon. Member overlooked this point— within such a period that it is expedient to exercise the said powers and … is likely to persist, whether seasonally or generally". I think that the Committee will find that this says in rather more precise terms what is said in the Amendment which was not moved by the hon. Member for Stoke-on-Trent, South. In other words, it is the criterion of unemployment. In the 1960 Act we said in precise words the criteria which should be applied. I know that in the administration of a Statute there are often problems which arise and arguments which take place, but we are concerned at the moment with the wording of a Bill and not with its administration, and nothing has been advanced this evening in the way of altering the present law and improving the administration of that law. I think that it is administered fairly, impartially and effectively. As my hon. Friend the Member for Barry (Mr. Gower) pointed out, the law as it stands is quite clear as to what criteria should be applied.

10.45 p.m.

Photo of Mr Donald Wade Mr Donald Wade , Huddersfield West

On the point of the law as it stands, would not the Chancellor agree that, in practice, development districts have been designated as a result of high levels of unemployment, but not in anticipation of those levels? Even if it were true that one could consider the possibility or risk of the level of unemployment rising, within the terms of the Local Employment Act the Chancellor would surely not be entitled to designate the sort of area referred to in the N.E.D.C. Report as having a wider choice of location and as a growth point, for does not that go beyond the terms of the Act?

Photo of Mr Reginald Maudling Mr Reginald Maudling , Barnet

It has been my experience of the Board of Trade and subsequently that, in fact, the designation of areas as development districts has taken place in advance of high unemployment because it has been apparent that that was going to happen.

I think that there is a certain misunderstanding here. I do not think that there is the conflict between the growth point concept and the development district concept that is sometimes supposed. There are, of course, arguments on both sides, but we must be prepared to develop our ideas as the thing evolves. It is sensible to encourage industries to go to places which are attractive to them from the point of view of transport, and so on. On the other hand, if they are a long way from the places of unemployment that will not solve our unemployment problem.

In our development of these policies we must think of the growth concept and of helping existing towns which are threatened with decline unless their unemployment problems are tackled. If hon. Members look at the areas which are laid down as development districts they will see that they are wide areas. In this connection, the hon. Member for Fife, West spoke of "measles areas", but would he regard the Scottish development districts as "measles areas", or the whole of Northern Ireland? The whole of Northern Ireland is treated under the Bill as a development district. Wide areas are covered, including, for example, Glasgow, and the new town of Livingston.

If the Committee will consider the practical problems it will see that there is not, in practice, a conflict between the growth point concept and the concept of providing employment for people in those areas where unemployment exists.

Photo of Mr John Ainsley Mr John Ainsley , North West Durham

Why did the President of the Board of Trade, in consultation with the Minister of Labour, put the whole Tyneside area into one employment exchange area for benefit under the Local Employmnt Act, leaving out one special part of the North-East—the Brandon Urban District Council area in mid-Durham—which forms the blackest spot for unemployment in the North-East?

Photo of Mr Reginald Maudling Mr Reginald Maudling , Barnet

The administration of the Act is a matter for the President of the Board of Trade, but the change in Newcastle was based on the facts concerning travelling to work in that area. The facts were that, in modern conditions, it was sensible to treat the area as one unit. It is obvious that it is on a local employment exchange basis that the Act must be administered.

Photo of Mr William Ross Mr William Ross , Kilmarnock

Will the right hon. Gentleman apply that thinking in future to Kilmarnock and Ayrshire, for example, particularly when within a travel-to work area one gets more unemployed people outside the scheduled development district than inside it? Will the right hon. Gentleman remember that many of the people registered as unemployed inside the scheduled district became unemployed because of events in an area which was not a scheduled district?

Photo of Mr Reginald Maudling Mr Reginald Maudling , Barnet

I am certain that my right hon. Friend will bear these points in mind. My hon. Friend the Parliamentary Secretary is here and will, I am sure, have taken note of what the hon. Member has said so eloquently.

To sum up on the Amendments, these are obviously very important points. I admit that introducing the principle of free depreciation, which is an entirely novel and powerful incentive, clearly creates new problems of administration as it goes along. I shall watch this in practice, but one must stick to the point that if it is to be effective then, as my hon. Friend the Member for Barry said, we must not spread it too widely. We must concentrate those plans where help is most definitely needed and for administrative purposes must have clear lines drawn. The Committee therefore would be wise to accept the Clause as it stands. If in development and experience we find that changes are needed we shall make them.

Photo of Mr Douglas Houghton Mr Douglas Houghton , Sowerby

I know that the Committee will not wish to be delayed unduly, although by general assent the Committee realises how important the Amendments are against the background of one of the most important Clauses in the Bill. We are, of course, discussing taxation and, as the Chancellor of the Exchequer has said, we are establishing a new principle in our system of taxation. Although in the past we have given special inducements to industry to go into local employment areas, this is the first time that the Government have proposed to add to existing concessions by giving special taxation facilities for those who go into those areas.

We have maintained for a very long time the principle of equity in our system of taxation as between one taxpayer and another in similar circumstances and in different parts of the country. We are now proposing to introduce an element of discrimination in a form which we have not had before. We on this side of the Committee do not dissent from that. We have supported it in the past. We were pressing it on the Government while they were still sticking to the traditional old principles of taxation. Therefore, we are wholly in accord with any discrimination in taxation to assist economic purposes. We do not object to discrimination but we have to consider the method and efficacy of doing it.

I am surprised that the chairman of the National Economic Development Council has said so little about the Report of his Council, and in the debate so far too little attention has been given to the background of the Amendment moved by the hon. Member for Huddersfield, West (Mr. Wade). What the Liberal Amendment does is to put forward the N.E.D.C. concept. The Chancellor says there is little difference between the growth point concept and the local employment area concept. I submit that there is a big difference between them and that the N.E.D.C. favours the growth point concept and not the local employment area concept.

It is worth while dwelling for a moment upon the differences. I am sorry that under the stress of time the hon. Member for Huddersfield, West did not read more of the N.E.D.C. Report, because he will find there the whole case for the Liberal Amendment and the criticisms of the course which the Chancellor has chosen to take. It should be said in this Committee that if this august body, the National Economic Development Council, is to justify its place in economic thinking and planning some attention must be paid to what it says. It is composed of distinguished members of the trade union movement, distinguished members of the employers' organisations, economists and Ministers and is presided over by the Chancellor of the Exchequer. There is not one word in paragraphs 94 to 97 of the latest Report of the Council which supports the step that the Chancellor proposes in the Clause.

Photo of Mr Reginald Maudling Mr Reginald Maudling , Barnet

On the other hand, it is fair to say that the Budget as a whole was greatly influenced and widely welcomed by the Council.

Photo of Mr Douglas Houghton Mr Douglas Houghton , Sowerby

This is one of the most important features of what the Budget proposes. In this important respect, the Report of the National Economic Development Council runs counter to what the Chancellor is proposing.

I hope that my hon. Friends who have spoken so movingly on behalf of Stoke-on-Trent and north Staffordshire will forgive me if I concentrate on what I think is the main issue. Many of us have constituency anxieties. I certainly have. It would be unfair of me to use the position which I occupy tonight to stress them particularly. What we are concerned about is the stimulation of industrial and economic growth generally. That is the point that was stressed in the Report of N.E.D.C.

In paragraph 94—I am sorry to have to quote it, but it helps me to make my point—it states: Present policy, embodied in the Local Employment Act, is closely geared to the relief of high local unemployment in development districts designated by the Board of Trade, rather than to the promotion of growth more generally in regions. Following the paragraph read by the hon. Member for Huddersfield, West, it develops the idea that to foster the growth point concept would probably be best in the long run.

My view is that the N.E.D.C. concept is the more intelligent way and could be the more effective way if it were employed with imagination, vigour and drive. The Government, however, shrink from the implications of the N.E.D.C. Report in the direction of planning and of a survey of the country's industrial potential. The Chancellor has taken what he may regard as the more practical line of using local employment areas for this purpose, thinking, perhaps, that that removes many of the problems of administration, without fully appreciating that this course may not promote the purpose which he has in mind. He has adopted a rule-of-thumb method for applying the concessions of the Clause.

Local employment areas do not by themselves offer the flexibility of industrial location which is needed in their own interests as well as in the interests of economic growth. That is the nub of the problem. The choice before the Committee in the Amendment moved by the hon. Member for Huddersfield, West and the Clause is this difference of application of the principle of discriminaton.

The Chancellor may argue, "Yes, but local employment areas are at hand. They are prescribed. They are there. The Inland Revenue can tell what and where they are. We do not have to wait for further surveys or further estimates of possible points of economic and industrial growth. We can get on." The point is, will the Chancellor get on in the best way? Will the giving of these concessions in these areas alone necessarily provide the economic growth which we have in mind? Already, as my hon. Friend the Member for Fife, West (Mr. W. Hamilton) has pointed out, the concessions given in the local employment areas have failed to achieve their purpose. How, then, will these additional fiscal concessions change so dramatically the disappointing experience that we have had of them already?

This Clause, in contrast to the Report of the National Economic Development Council, represents on the part of the Chancellor lack of courage and lack of bold intention to get the whole country moving to greater economic activity. Important as it is in certain areas, it is not necessarily—and I doubt whether it will be—the prescription for the national

good as a whole. Therefore, I ask my hon. Friends to support the Amendment when it is put to the vote.

11.0 p.m.

Photo of Mr Ellis Smith Mr Ellis Smith , Stoke-on-Trent South

Relatively, we who speak for north Staffordshire are very satisfied with the contribution that we have been able to make and especially with the undertaking given by the Chancellor that he will watch the developments and consider what has been said.

But it would have been wrong of me to have allowed the debate to go by without putting another part of the criteria on record. The Chancellor has already dealt with 95 per cent. of the criteria, but he omitted a part which we have special reason for asking to be considered. The Local Employment Act provides that the employment should be appropriate to the needs of the locality and refers to places where there is a high proportion of disabled men.

That is the point that I want to make. In north Staffordshire we have relatively a higher proportion of disabled men than any other part of the country. We have miners. The statistics speak for themselves, and are on record in the Library. Besides the miners suffering from pneumoconiosis and other industrial diseases, there are the pottery workers. I hope that when the Act is being administered in future these facts will be considered.

Question put, That the words proposed to be left out stand part of the Clause:—

The Committee divided: Ayes 204, Noes 134.

Division No. 119.]AYES[11.2 p.m.
Agnew, Sir PeterCampbell, Gordon (Moray & Nairn)Drayson, C. B.
Allason, JamesCarr, Robert (Mitcham)du Cann, Edward
Ashton, Sir HubertCary, Sir RobertDuncan, Sir James
Atkins, HumphreyChannon, H. P. G.Eden, Sir John
Awdry, Daniel (Chippenham)Chataway, ChristopherElliot, Capt. Walter (Carshalton)
Balniel, LordChichester-Clark, R.Elliott, R.W.(Nwc'tle-upon-Tyne, N.)
Barber, AnthonyClark, Henry (Antrim, N.)Emery, Peter
Barter, JohnClark, William (Nottingham, S.)Emmet, Hon. Mrs. Evelyn
Batsford, BrianClarke, Brig. Terence(Portsmth, W.)Errington, Sir Eric
Bennett, Dr. Reginald (Gos & Fhm)Cooke, RobertFarr, John
Biggs-Davison, JohnCooper-Key, Sir NeillFletcher-Cooke, Charles
Bingham, R. M.Cordeaux, Lt.-Col. J. K.Fraser, Rt. Hn. Hugh(Stafford&Stone)
Birch, Rt. Hon. NigelGarfield, F. V.Fraser, Ian (Plymouth, Sutton)
Bishop, F. P.Costain, A. P.Freeth, Denzil
Black, Sir CyrilCourtney, Cdr. AnthonyGalbraith, Hon. T. G. D.
Bourne-Arton, A.Craddock, Sir Beresford (Spelthorne)Gammans, Lady
Box, DonaldCrawley, AidanGardner, Edward
Boyd-Carpenter, Rt. Hon. JohnCrowder, F. P.Gibson-Watt, David
Boyle, Rt. Hon. Sir EdwardCurrie, G. B. H.Gilmour, Sir John (East Fife)
Brewis, JohnDance, JamesGlyn, Dr. Alan (Clapham)
Bromley-Davenport, Lt.-Col. SirWalterd'Avigdor-Goldsmid, Sir HenryGoodhew, Victor
Brown, Alan (Tottenham)Deedes, Rt. Hon. W. F,Gower, Raymond
Buck, AntonyDonaldson, Cmdr. C. E. M.Gresham Cooke, R.
Bullard, DenysDoughty, CharlesGrosvenor, Lt.-Col. R. G.
Gurden, HaroldMcLaughlin, Mrs. PatriciaSandys, Rt. Hon. Duncan
Hall, John (Wycombe)Maclay, Rt. Hon. JohnScott-Hopkins, James
Hamilton, Michael (Wellingborough)Maclean, SirFitzroy (Bute& N. Ayrs)Seymour, Leslie
Harris, Reader (Heston)Macleod, Rt. Hn. lain (Enfield, W.)Sharples, Richard
Harvey, Sir Arthur Vere(Macclesf'd)McMaster, Stanley R.Shaw, M.
Harvey, John (Walthamstow, E.)Macpherson, Rt. Hn. Niall(Dumfries)Shepherd, William
Harvie Anderson, MissMaginnis, John E.Skeet, T. H. H.
Hay, JohnMarkham, Major Sir FrankSmith, Dudley (Br'tnf'd & Chiswick)
Heald, Rt. Hon. Sir LionelMatthews, Gordon (Meriden)Smithers, Peter
Hiley, JosephMaudling, Rt. Hon. ReginaldSpearman, Sir Alexander
Hill, Dr. Rt. Hon. Charles (Luton)Mawby, RaySpeir, Rupert
Hill, Mrs. Eveilne (Wythenshawe)Maxwell-Hyslop, R. J.Steward, Harold (Stockport, S.)
Hill, J. E. B. (S. Norfolk)Maydon, Lt.-Cmdr. S. L. C.Stoddart-Scott, Col. Sir Malcolm
Hirst, GeoffreyMills, StrattonStorey, Sir Samuel
Hobson, Sir JohnMiscampbell, NormanStudholme, Sir Henry
Hocking, Philip N.Montgomery, FergusSummers, Sir Spencer
Holland, PhilipMore, Jasper (Ludlow)Tapsell, Peter
Hollingworth, JohnMorgan, WilliamTemple, John M.
Hope, Rt. Hon. Lord JohnMorrison, JohnThatcher, Mrs. Margaret
Hopkins, AlanNabarro, Sir GeraldThompson, Sir Richard (Croydon, S.)
Hornby, R. P.Osborn, John (Hallam)Thornton-Kemsley, Sir Colin
Hornsby-Smith, Rt. Hon. Dame P.Page, Graham (Crosby)Tiley, Arthur (Bradford, W.)
Howard, John (Southampton, Test)Pannell, Norman (Kirkdale)Touche, Rt. Hon. Sir Gordon
Hughes-Young, MichaelPartridge, E.Turner, Colin
Hulbert, Sir NormanPeel, Johnvan Straubenzee, W. R.
Hutchison, Michael ClarkPercival, IanVaughan-Morgan, Rt. Hon. Sir John
Iremonger, T. L.Peyton, JohnVickers, Miss Joan
Jennings, J. C.Plekthorn, Sir KennethWalder, David
Johnson, Dr. Donald (Carlisle)Pilkington, Sir RichardWalker, Peter
Johnson, Eric (Blackley)Pott, PercivallWalker-Smith, Rt. Hon. Sir Derek
Johnson Smith, GeoffreyPowell, Rt. Hon. J. EnochWall, Patrick
Jones, Arthur (Northants, S.)Price, David (Eastleigh)Ward, Dame Irene
Kerans, Cdr. J. S.Prior, J. M. L.Webster, David
Kerr, Sir HamiltonPrior-Palmer, Brig. Sir OthoWhitelaw, William
Kitson, TimothyProfumo, Rt. Hon. JohnWilliams, Paul (Sunderland, S.)
Langford-Holt, Sir JohnPym, FrancisWills, Sir Gerald (Bridgwater)
Leather, Sir EdwinRawlinson, Sir PeterWilson, Geoffrey (Truro)
Legge-Bourke, Sir HarryRedmayne, Rt. Hon. MartinWise, A. R.
Lewis, Kenneth (Rutland)Rees, HughWolrige-Gordon, Patrick
Litchfield, Capt. JohnRees-Davies, W. R.Wood, Rt. Hon. Richard
Longden, GilbertRenton, Rt. Hon. DavidWoollam, John
Loveys, Walter H.Roberts, Sir Peter (Heeley)Worsley, Marcus
Lucas-Tooth, Sir HughRoots, WilliamTELLERS FOR THE AYES:
MacArthur, IanRopner, Col. Sir LeonardMr. Finlay and
McLaren, MartinRussell, RonaldMr. Frank Pearson
NOES
Ainsley, WilliamFoot, Michael (Ebbw Vale)Mahon, Dr. J. Dickson
Albu, AustenForman, J. C.McBride, N.
Allaun, Frank (Salford, E.)Galpern, Sir MyerMacColl, James
Allen, Scholefieid (Crewe)George, LadyMeganLloyd(Crmrthn)MacDermot, Niall
Awbery, Stan (Bristol, Central)Ginsburg, DavidMacPherson, Malcolm (Stirling)
Baxter, William (Stirlingahire, W.)Grey, CharlesManuel, Archie
Bennett, J. (Glasgow, Bridgeton)Grimond, Rt. Hon. J.Mellish, R. J.
Benson, Sir GeorgeHale, Leslie (Oldham, W.)Mendelson, J. J.
Blackburn, F.Hamilton, William (West Fife)Millan, Bruce
Blyton, WilliamHannan, WilliamMilne, Edward
Boardman, H.Harper, JosephMitchison, G. R.
Bowden, Rt. Hn. H.W. (Leics.,S.W.)Hayman, F. H.Morris, John
Bowen, Roderic (Cardigan)Hill, J. (Midlothian)Neal, Harold
Braddock, Mrs. E. M.Holman, PercyNoel-Baker, Francis (Swindon)
Bray, Dr. JeremyHooson, H. E.Noel-Baker, Rt. Hn. Philip(Derby, S.)
Broughton, Dr. A. D. D.Houghton, DouglasO'Malley, B. K.
Brown, Rt. Hon. George (Belper)
Howell, Charles A. (Perry Barr)Oran', A. E.
Butler, Herbert (Hackney, C.)
Carmichael, NellHoy, James H.Oswald, Thomas
Castle, Mrs. BarbaraHughes, Cledwyn (Anglesey)Pannell, Charles (Leeds, W.)
Corbet, Mrs. FredaHughes, Emrys (S. Ayrshire)Parker, John
Craddock, George (Bradford, S.)Hunter, A. E.Pearson, Arthur (Pontypridd)
Cronin, JohnHynd, John (Attercliffe)Pentland, Norman
Crosland, AnthonyIrvine, A. J. (Edge Hill)Popplewell, Ernest
Crossman, R. H. S.Irving, Sydney (Dartford)Price, J. T. (Westhoughton)
Cullen, Mrs. AliceJanner, Sir BarnettProbert, Arthur
Dalyell, TamJeger, GeorgeRedhead, E. C.
Davies, G. Elfed (Rhondda, E.)Jenkins, Roy (Stechford)Rhodes, H.
Davies, Harold (Leek)Jones, Dan (Burnley)Roberts, Albert (Normanton)
Davies, Ifor (Gower)Jones, Elwyn (West Ham, S.)Roberts, Goronwy (Caernarvon)
Diamond, JohnJones, J. Idwal (Wrexham)Robertson, John (Paisley)
Edwards, Rt. Hon. Ness (Caerphilly)Jones, T. W. (Merloneth)Robinson, Kenneth (St. Pancras, N.)
Edwards, Robert (Bilston)King, Dr. HoraceSilverman, Sydney (Nelson)
Finch, HaroldLee, Miss Jennie (Cannock)Rodgers, W. T. (Stockton)
Fitch, AlanLever, Harold (Cheetham)Ross, William
Foot, Dingle (Ipswich)Lewis, Arthur (West Ham, N.)Short, Edward
Stater, Joseph (sedgefield)Thompson Dr. Alan (Dunfermiline)Williams, LI (Abertillery)
Small, WilliamThornton ErnestWilliams, W. R. (Openshaw)
Smith, Ellis (Stoke, S.)Tomney, FrankWilliams, W. T. (Warrington)
Soskice, Rt. Hon. Sir FrankWainwright, EdwinWillis, E. G. (Edinburgh, E.)
Spriggs, LeslieWarbey, WilliamWilson, Rt. Hon. Harold (Huyton)
Stones, WilliamWatkins, TudorWinterbottom, R, E
Storess, Dr, Barnett(Stoke-on-Trent, C.)Wells William (Walsall, N.)Wyatt, Woddrow
Swingler, StephenWigg, GeorgeYates, Victor (Ladywood)
Taylor, Bernard (Mansfield)Wilkins, W. A.)TELLERS FOR THE NOES:
Thomas, Iorwerth (Rhondda, W.)Willey, FrederickMr. Wade and Mr. Lubbock

Question proposed, That the Clause, as amended, stand part of the Bill.

Photo of Mr Harold Lever Mr Harold Lever , Manchester Cheetham

It is extraordinary that a matter of fundamental principle of our taxation law should be breached and that the Government should not propose at any stage, so far as we know, to make out a cogent argument for breaching the principle enunciated by my hon. Friend the Member for Sowerby (Mr. Houghton) against discrimination between one taxpayer and another.

The Chancellor of the Exchequer has vouchsafed to us a few clouded generalisations on the subject and has told us that we ought to support the Clause which is generally discriminatory in favour of several districts and consequently discriminatory against others which have to foot the bill for the concessions which are to be made. He relies on the generalised sentiment of good will which we all have for the development districts and on the clouded concept of the richer areas helping the poorer. Without real argument, he is urging us to breach a fundamental principle in our tax law and to give massive concessions to persons carrying on profitable businesses in development districts on the ground that this is the rich of the country helping the poor.

This attractive but utterly irrelevant metaphor ought to be examined. We ought to be quite clear that in so far as Government policy simply discriminates financially in favour of one area at the cost of another, that is not the rich persons of the country helping the unemployed of the development districts, but, if the scheme works, it has the consequence that the employed man in one area will lose his job in order to provide a job for someone else in a development district, a person for whom we sympathise, but to whose problems the solution will not be provided by putting out of work someone else in some other part of the country.

11.15 p.m.

If we put somebody out of work in some other part of the country by discriminatory legislation of this kind to provide employment in the development districts, it will not be the rich helping the poor, but on the contrary the poor of one part of the country suffering to mitigate the lot of the poor in another part of the country.

The mere act of fiscal discrimination, apart from being an improper act unless justified by a cogent, comprehensive, argument to which we have not been treated, is simply to shunt unemployment from one part of the country to another, and it cannot be any solution to the problem of the development districts to inflict, without logic or argument, on other parts of the country, discriminatory taxation provisions of this kind.

The next point which has never been made by the Government is that even if we were to accept that there was some advantage in moving unemployment of this kind as a consequence of discriminatory fiscal provisions, the Chancellor has to make it clear that this is occurring as a result of the substantial fiscal concessions that we are invited to make by this Clause. Nobody has given any logical argument which leads me to believe that every time we give away £1 million of the revenue of the country in this discriminatory tax holiday to those who have profitable business in development districts this will in any way relieve the depressed areas in the development districts.

Even in an area where 19 businesses out of 20 are run profitably, and the twentieth is not run at all because it is unprofitable and providing 5 per cent. of the incidence of unemployment, the effect of relieving the Income Tax on profits in this discriminatory way is simply to relieve the taxation of the profitable segments of the industry in those areas. It does not do anything for the people who are not working because their industries will not work at a profit in those areas, so for every £1 million of the taxpayer's money that we are invited to give away in this clouded, sentimental, and illogical way, the greater part will go straight to the pockets of people conducting profitable businesses in the development districts who do not need any additional incentive to remain there, and it will not do anything to bring people into those areas.

A little consideration should have told the Chancellor that if we say that in a given geographical area we shall relieve Income Tax, because that is what we are doing—the Minister boasted that he was practically providing a tax holiday in these areas—it stands to common sense that the main beneficiaries will not be the people out of work, or the industries at a standstill, but the industries that are working profitably, and quite irrelevantly they will be given a subsidy.

The trouble with development districts or places with a high incidence of unemployment is that it is hard to run an industry profitably there, and the offer to pay 65 per cent, of a man's losses is not a source of excitement to industrialists. It is not likely to cause great excitement in the bosoms of industrialists who see no inducement to go to these unprofitable areas, but the Government are prepared to pay 65 per cent. of their Income Tax, and they will have to pay only one-third of their losses if they go to these hopeless areas where they cannot make profits.

If one is in favour, which I am not, of discrimination to bring people into the development districts by fiscal concessions, the kind of concession that will bring them there is not a relief on profits. The real problem is to make profitable what is unprofitable by relieving the percentage of tax. If we do not make profitable what is unprofitable we shall not induce anybody to go to these areas.

The most that can be said about this concession is that it will impinge on the fractionally and marginally profitable firms, who will say, If we went into the area on the normal terms we would show only 3 per cent, on our capital, but if we go in with these concessions we will show 3 per cent. tax-free." It is theoretically conceivable, if one is conducting a seminar in economics, to say that there are a few firms that would move, but as is the case with most Government concessions, we shall not improve the basic situation in these areas. We cannot do that until we make them into areas where profitable activities can be carried on. We shall not do any good simply by making this unprincipled concession, which will result in the relief of taxation only in respect of already profitable industries in these areas.

The Chancellor said there was a social case to be made out for spreading unemployment more thinly over the country. If there is an area where the unemployment level is 5 per cent., he says that that unemployment should be relieved by this form of discrimination, even though it means creating some unployment in the more profitable areas. Hon. Members must decide whether that social case has been made out.

But the Chancellor went on to say, more remarkably, that the economic case was very powerful, and was really at the back of this—as he described it—most important Clause in the Bill. He said that there was a great demand for labour in some areas, and that by these discriminatory measures we would be able to relieve that pressure and increase the demand in the under-employed areas, thereby producing a nice equation. We shall do nothing of the kind. If we create 10,000 jobs in development districts by using this form of discrimination we will not ease the demand for labour in Birmingham or London; we shall merely move unemployment into the marginal areas which are already struggling with the more prosperous areas.

My hon. Friend the Member for Westhoughton (Mr. J. T. Price) asked the Chancellor what this concession did for his area. I can tell my hon. Friend that he is being less than just in saying that the Chancellor is doing nothing for him; the Chancellor is going to increase unemployment in Westhoughton.

The economic case was incompletely made out by the right hon. Gentleman, and this was appalling to me, because it appeared to have no logic or common sense. If this measure results in a few thousand jobs being drawn from one part of the country to another those jobs will not be drawn from areas which are attractive and profitable to employers, but from areas which are already precariously battling to maintain themselves, and are able to do so at present only a little better than the areas of very high unemployment. The Chancellor will tip the balance against those precariously balanced areas in favour of the hard-hit areas, and shift the unemployment a little from the development districts into the marginally economically attractive areas.

The economic case is pure bunkum, and intellectually beneath contempt. The Chancellor did not put the case forward with seriousness. The only admiration I have for him in relation to this Clause is that he managed to keep a straight face while he urged the Committee to accept it. It is an extraordinary departure from normal fiscal policy, and no serious attempt has been made to show that it has any logic behind it, or that it will confer any benefit.

The boundaries provisions are ludicrous, and the Chancellor recognises this. He says, "I agree that it is difficult to justify supporting one area more than another." He is saying to his hon. Friends, "This whole Clause is illogical beyond words, and so do not press me to make it logical by including in it areas which are clearly entitled to benefit as much as those which are already in".

My hon. Friend has made the case against the Clause and I will not repeat it except to say that the Clause has a standard which has no common sense and makes no economic sense and is not moral. It does not take the percentage of unemployment in a town but in a geographical area. The Committee should understand that if we discriminate in favour of one taxpayer we shall discriminate to the same extent against another. If we discriminate in favour of a county suffering a high percentage of unemployment and not in favour of a town, we shall be discriminating against the town. If it is true that the fiscal advantages are in favour of increasing employment in larger geographical areas, correspondingly they attack the position of those who do not benefit, like the areas mentioned by my hon. Friend.

All this makes me conclude that this Clause ought to be opposed. Those who save tax as the result of these provisions will be those who are already making profits. If I am wrong in saying that this is no inducement for the reasons I have given—because we should make industry profitable in areas and not just relieve tax on profits which people cannot make—mathematically the tax concessions must go to nineteen-twentieths of industry in an area which is already profitable.

In drawing off the unemployment to support the moral or the economic case of the Chancellor, it will not be drawing unemployment from the highly profitable areas like London and Birmingham, but from the marginal and precarious areas. No social economic or moral advantage will be secured by reason of the tax discriminations we are urged to make. The whole thing is based on nonsense and riddled with illogicality. This has appeared in more than one Amendment. The Economic Secretary had to defend the relief of taxation for undeserving persons on immobile plant and equipment, but not on the mobile plant and equipment of deserving persons. This is characteristic of the unprincipled, illogical character of the tax concessions in this Clause. I urge the Committee to reject it. I wish to voice my protest against it. The wrong people will benefit and the purpose which is intended will not be achieved.

If the Clause is to be effective it must be part of a plan to improve the general prosperity and economic development of the country as a whole. We cannot do that piecemeal and we cannot hope to get any result from this except the kind of self-congratulation to which we have been treated by the Chancellor in his brief encomiums of himself and his Clause. Unfortunately they are unwarranted in logic or results from the Clause. I urge the Committee not to allow it to stand part of the Bill, but to reject it.

11.30 p.m.

Mr. Milan:

I agree with my hon. Friend the Member for Manchester, Cheetham (Mr. H. Lever) that this is a very important Clause. I cannot say that I agree with very much else that he said, but I shall return to that. Perhaps I might make a detailed point before doing so.

Will the Financial Secretary look at subsection (7,c)? He will know that a great deal of interest has been expressed recently, partly as a result of the initiative taken by the Minister of Public Building and Works, in the possibility of using spare shipyard capacity for the industrial building of houses. So far as I see from reading subsection (7,c), any capital expenditure on equipping a shipyard to do this kind of work would be excluded. I should have thought there was a very strong case for saying that it should be included in this Clause. No Amendment about it has been put down, but perhaps the Financial Secretary could look at the point and, if necessary, it could be put right on Report if he agrees that there is an anomaly here.

Returning to the main subject of the Clause, although I have a number of critical things to say about it, I welcome it very much. I say that the more especially as my constituency happens to be in a development district and naturally one is very glad to see the Government taking any action to provide additional incentives to attract industry to those areas. There is a sense in which one can say that the necessity the Government have felt to introduce this Clause, along with other improvements they are making in standard grants for building, machinery and a number of other things, simply gives point to the complaint we have been making about the Government's general economic policy—that it is because their policy has so disastrously failed that the situation in these development districts is so extremely serious.

The basic need for the development districts is an expanding economy for the country as a whole. I do not think that if we failed to get an expanding economy for the country as a whole we could possibly solve the problems of the development districts even by adding considerably to the financial incentives to industrialists to move to those areas. Without general economic expansion, those areas will suffer very considerably and no amount of adding to special provisions for those areas can solve the problem.

On the other hand—there is where I disagree fundamentally with my hon. Friend the Member for Cheetham—I do not think it follows conversely that if we got general economic expansion in the country as a whole we should by that and that alone solve the problems of the development districts. If we could manage to do that without any special Government intervention we should be doing something quite contrary to the experience of every other highly industrialised country. The problems we have in certain areas are repeated in the countris of the Common Market. The south of Italy is an obvious example, but the same happens in France, in Scandinavia and in the United States. It does not follow that if we get general economic prosperity every part of the country will share in it.

Photo of Mr John Mendelson Mr John Mendelson , Penistone

My hon. Friend the Member for Manchester, Cheetham (Mr. H. Lever) never made that point.

Photo of Mr Bruce Millan Mr Bruce Millan , Glasgow Craigton

I know that my hon. Friend did not in those terms, but, if my hon. Friend the Member for Penistone (Mr. Mendelson) will contain himself in patience I shall come to the point where I think that this is absolutely relevant to what my hon. Friend the Member for Cheetham said. If the argument I have been putting is correct, it follows that some sort of discriminatory attention has to be given to certain areas of the country. My hon. Friend was making a purist case in principle against discrimination whether by taxation measures or any other kind of measure.

Photo of Mr Harold Lever Mr Harold Lever , Manchester Cheetham

I hope that I did not make my case so badly. Not only did I not say that, but my previous speeches in the House have been very much in the contrary sense. I remember being almost alone on these benches and vigorously supporting the Government when they brought in a scheme to give financial help to Colvilles to build a sheet steel mill in Scotland. The Government were discriminating in favour of Colvilles, but I supported them. I am in favour of help being given to these areas provided that it fits into sensible and logical plans which will produce the results intended by the House.

Photo of Mr Bruce Millan Mr Bruce Millan , Glasgow Craigton

I cannot answer the speeches which my hon. Friend made about Colvilles. I was dealing with the speech which he made this evening. He said that he was not in favour of discriminatory taxation treatment, and the point which I make is that if we are to solve the problem of these development districts, discriminatory treatment is required. It seems to me that it is being unduly purist to rule out in that context discriminatory taxation treatment. There is a strong case for discriminatory taxation treatment, and I am glad that the Government have accepted it, because it has been pressed on them from this side of the Committee in previous Finance Bill debates.

It would be possible to discriminate in favour of the development districts in a negative way by imposing taxation penalties against firms in overcrowded areas, where there is great pressure on resources and labour, and when I see the large sums of money which are being paid under the Local Employment Act and now by taxation incentives, I feel that we should look carefully at the possibility of giving incentives by providing a negative incentive in areas where there is a great pressure on resources. Obviously one could do that only if the economy were expanding as a whole, otherwise there would be from the Midlands and the South-East the kind of complaints which we have heard from some of my hon. Friends today that certain areas which at present do not get assistance nevertheless have considerable difficulties.

Nevertheless, the whole tendency of the Government's policy continually to add financial incentives and to provide for a greater and greater expenditure of Government money to encourage industry to go into development districts requires very serious consideration, such as we cannot give adquately on this Clause.

Because, as I stated earlier, I have a constituency interest, I very much hope that the Clause will be successful, but I have some doubt about the effectiveness of the methods proposed in the Clause. Without using the term, it provides a tax holiday in development districts, and this tax holiday is given even if the firms are not providing any additional employment. That introduces a considerable change in principle. It is a tax holiday in the form of an interest-free loan. It is only a question of changing the incidence of the depreciation allowances, for the total depreciation allowances are not altered and therefore in a sense the advantage to be gained under the Clause is temporary. The advantage lies in the interest which is saved in the first year during which the Clause operates. If the Clause continued to operate, the temporary advantage would be converted into a permanent advantage because one continually adds to one's capital expenditure, thus getting the advantage. Although one is losing the advantage on the previous capital expenditure, the new capital expenditure gives a greater advantage, and the gain has a certain permanency.

Two conditions must be fulfilled for that to continue to apply. First, it is obvious that the capital replacement must continue and, secondly, the district concerned must remain a scheduled one under the Local Employment Act. There is a serious disadvantage in this free depreciation provision, for when an area is descheduled there will be a loss to the firm. It is not just a question of cutting off an advantage which a firm has been getting, but of the firm having to some extent to pay back the advantage it had previously got.

This introduces an element of uncertainty into this method of financial incentives. It is an undesirable element which must make businessmen hesitate before taking full advantage of the Clause. Had the Chancellor decided to give the additional incentives in development districts simply by increasing the investment allowances, this disadvantage of uncertainty would not have arisen. An investment allowance can be given for a particular item of expenditure in a particular area at a particular time. Once an investment allowance has been given it cannot be retrieved by the Inland Revenue. It is given permanently.

Had the Government adopted that method of approach—and I should have preferred it—there would have been less advantage to industry in the development districts in the earlier years, but in the long term the advantages could have been exactly the same, depending on the discriminatory investment allowances applied, and this element of uncertainty which will, I believe, prejudice the operation of the Clause, would have been removed.

At the time of the Budget the Government produced examples to show what industrialists could obtain under the free depreciation provisions. I will not go into the details of these examples, except to give one instance and to point out that they were drawn in the most favourable, in some cases absurdly favourable, terms; the kind of terms which in practice are not likely to apply in many cases. To illustrate what I mean, in one example the capital expenditure in the development district was to be £1 million, including working capital. To get the advantages of the scheme it would be necessary for a firm to make at least £571,000 in profits in the first year. Obviously no firm will make profits of that kind in a development district from the investment of £1 million unless it is already an established firm which is already making substantial profits. Alternatively, this can happen only to a firm which is making big profits from outside the development district but is using the district to get a tax holiday on its profits earned outside the area.

In view of these uncertainties, it must be extremely difficult for the Government to calculate what this provision is likely to cost. However, the Financial Statement said that in a full year it will cost £45 million. I should like to know how the Government arrived at that calculation. In any case, I believe that the Government have been too optimistic about the operation of the Clause. I accept the principle of discrimination and I am glad that the Government have accepted this principle for the development districts.

11.45 p.m.

I am not so happy about the method which the Chancellor has adopted. Perhaps the biggest advantage in this method, as compared with an increase in investment allowances, is the psychological advantage. This method is completely new. The Chancellor may have reasoned that if he increased investment allowances for development districts industrialists would not pay much attention because the allowances are familiar and they would see nothing new or exciting in the proposal. That argument may be perfectly valid, but on the whole I would give industrialists more credit for working out what the proposal in the Clause will mean in practice. If they do that they will find that, although it is superficially and indeed actually attractive in many circumstances, it may not be as attractive to as many industrialists as the Chancellor hopes.

I wish the Clause well and I hope that, despite my criticisms it will work, if only because my constituency is in a development district. I am glad to see some new ideas coming into the Finance Bill. I am particularly glad that the principle of discrimination has been accepted but I still feel that this kind of approach requires a long hard look directed at it.

Photo of Mr Simon Mahon Mr Simon Mahon , Bootle

agree with very much of what my hon. Friend the Member for Glasgow, Craigton (Mr. Millan) has said. The Government reply should prove extremely interesting because the arguments advanced, and particularly my two hon. Friends' criticisms of the Clause, are not our arguments. They are arguments which the Government used in rejecting a somewhat similar Clause which we on this side of the Committee moved last year. It is entertaining to go over the record of the debate on 5th June, 1962, and to notice how the Government have stood on their heads and will now have to advance our arguments then whilst we in turn have today advanced at least two of their arguments on that occasion.

The then Financial Secretary to the Treasury said in that debate: One point which strikes me straight away is that investment allowances confer their full benefit only where there are profits sufficient for them to be set against, and that is often not the case with new or small firms. I think that it is generally recognised in the Committee that, where there is depopulation, it is a multiplicity of small projects rather than one very large project which are the most important. Do not let us forget that the cash benefit from the investment allowances follows the investment, so that it cannot usually help to finance it. The difficulty in a development area, to use a familiar phrase these days, is the difficulty of securing take-off. I am very doubtful whether the use of the investment allowance could ever be a good way of securing take-off in a development area".—[OFFICIAL REPORT, 5th June, 1962; Vol. 661, c. 288–9.] I shall be interested to hear whether the Government have changed their mind on this strong argument. We were impressed by it last year.

This was the first of four arguments. Another was what happened when an area was delisted, and the then Financial Secretary advanced that argument on that occasion. My hon. Friend the Member for Craigton has questioned the meaning of subsection (6). I take it that the contracts entered into would be continued and that there would not be the same upset as one would expect from my hon. Friend's criticism, but I am disturbed about this.

Photo of Mr Bruce Millan Mr Bruce Millan , Glasgow Craigton

The point is that the method of free depreciation gives an initial advantage which is gradually paid off to a certain extent, but once de-scheduling takes place there is no further advantage to come, because the payment back continues for a number of years, and that is a great disadvantage.

Photo of Dr Dickson Mabon Dr Dickson Mabon , Greenock

That is why I am concerned, and the Government's record in speedy d elisting is alarming. When the Ford arrangement was made, Merseyside was listed and then delisted. I think that I am right in saying that. Certainly this is what happened at Bathgate. It was scheduled as a development district, the B.M.C. came, it was descheduled and ultimately it was rescheduled. The curious thing in that case is that the unemployment percentage has gone up since the arrival of the Bathgate factory. I do not for one ludicrous moment suggest that that is cause and effect, but it is sadly interesting that it has happened.

While the alacrity with which the Board of Trade has been able to make these decisions may be commendable in some ways, in the context of the Clause it would be most unfortunate. In arguing the case for the Clause, the Treasury Ministers must say, "Yes, we know. We have thought about this and will advise the Board of Trade not to deschedule areas quite so quickly."

Photo of Mr Tam Dalyell Mr Tam Dalyell , West Lothian

Would my hon. Friend accept that had there been constancy in the beginning of the B.M.C. project, the ancillary motor industries might have come, whereas they have not?

Photo of Mr Simon Mahon Mr Simon Mahon , Bootle

I accept that readily. The point made by my hon. Friend the Member for Manchester, Cheetham (Mr. H. Lever) is, in a way, a kind of second cousin of this one. In addition to the criticism against the Government of de-scheduling too quickly, there is the point of the failure to recognise in their own Act the meaning of the word "imminent". I wonder whether any Treasury or Board of Trade Minister can tell us when they have scheduled an area which was going to suffer high unemployment imminently but not actually. I cannot think of one. We know that there have been areas in which there has been chronic, high, persistent unemployment, but I cannot think of an area which has not had chronic, high or persistent unemployment but which has had merely imminent unemployment. That is the word used in the Act. We were told that this was to be government by anticipation. It has never operated.

There is a great deal of substance in the argument of my hon. Friend the Member for Cheetham and the basic grievance about the restricted operation of these concessions omitting areas such as he represents. It followed from my hon. Friend's closing remarks that if the operation of the Local Employment Act were much wider and more sensible, the Clause in a certain form might have validity.

Photo of Mr Simon Mahon Mr Simon Mahon , Bootle

I ask my hon. Friend to read his closing remarks. Perhaps he was carried away, but he will see that my comment is not unreasonable.

Photo of Mr Harold Lever Mr Harold Lever , Manchester Cheetham

I hope I made it clear that I should welcome some such intervention on behalf of difficult areas if it was part of an overall economic plan for the expansion of the economic welfare of the country as a whole.

Photo of Dr Dickson Mabon Dr Dickson Mabon , Greenock

I accept that. My hon. Friend certainly said it in his speech. I am talking about what would happen if the Local Employment Act were operated properly with the word "imminent" properly applied. Areas such as my hon. Friend's and those, such as Stoke-on-Trent and North Staffordshire, which were dealt with in the speeches on the earlier Amendment are good examples of what I am saying.

We have made the point from time to time that having a pinpointed pattern of development districts as distinct from an area of regional development is another great criticism of the Local Employment Act. It makes a false distinction between one area and another where people reside in one area and work in another and yet the employment statistics are such that one area is scheduled but not the other and no contribution is made to the welfare of both areas.

These were three of the arguments advanced against us by the Government last year. They said that it was difficult for the Inland Revenue to ascertain the definite areas to which this arrangement would apply. That was an administrative argument. Now the Government are identifying the areas for us and saying that they are development districts, just as we argued last year. Part of my hon. Friend's criticism against that is that this is too narrow a definition.

The Government's second argument was on the question of delisting, on which I have made my comments. They are particularly valid. I hope that the Financial Secretary will tell us what the Governnment policy will be in relation to this.

The third argument was based on the quotation which I have made from the Financial Secretary's speech last year. It is a particularly cogent one which I hope the Government have thought about, and I hope they will admit that they have changed their mind.

The fourth was based on the question of how discriminatory investment allowances might be adverse in areas of high unemployment where such allowances were for labour-saving investment. I did not know whether this was only a simple debating point that the Financial Secretary was making last year. He said that he did not wish it to be misunderstood as that. But if there is some substance in it, the Government have, clearly, thought about it and have an answer to give.

Like my hon. Friend the Member for Craigton, I am very much in favour of the Clause, as I was last year. The Labour Party takes a great deal of credit for having put the idea into the Government's mind, and it would be ungrateful of us not to acknowledge that the Government have changed their mind and are willing to incorporate this in the Finance Bill.

I am sorry that the hon. Member for Esher (Sir W. Robson Brown) is not here. During the Budget debate when the Chancellor mentioned that he was going to introduce this Clause into the Finance Bill, the hon. Member cried out "Brilliant" and said later that it was also thoroughly original. I challenged him on that. It is a good idea, but I would not call it brilliant because I believe that it is fraught with difficulties and perhaps even dangers in some ways. But, basically, I accept that it is a good idea. However, it is going a little far to say that it is original, and I hope that, with modesty, the Financial Secretary will admit that some of our arguments last year have helped him along the way. Certainly his Clause is much bolder than the one we put forward last year and look forward to hearing his justification of it.

Photo of Mr John Mendelson Mr John Mendelson , Penistone

The Clause contains a number of policies which might marginally benefit some of the areas which are particularly depressed. As the Chancellor knows, it is, therefore, the common desire of all hon. Members that those benefits should accrue. He knows well that there will be general agreement when he introduces a Clause of this kind, with its tone and with its general purpose. But that does not absolve him or hon. Members from submitting to some economic analysis whether by such a programme and Clause he is advancing the major purposes of our economic policy in any significant manner.

We have faced this difficulty time and again under this Government. A policy is pursued for a number of years which inevitably leads to the growth of short-time working and unemployment in many parts of the country and at the same time aggravates the unemployment problems of certain industrial areas where there are other more permanent reasons already leading towards higher unemployment. This is particularly so in areas where some of the older industries are centred and where one can see that a certain amount of decline will take place.

When the Chancellor was at the Board of Trade and introduced the Local Employment Act he completely ignored all the pleas made and all the Amendments put forward by the Opposition on the points the House was then considering, asking him to do something towards the greater diversification of industry in some of the older industrial areas. He said then in justification of his attitude that at any given moment there is only a very limited amount of capital and public money available and, therefore, if one were to use that money at all, one must concentrate it in a very limited number of areas already suffering very badly.

12 m.

It was suggested from these benches that the right hon. Gentleman should look not only to tomorrow but to the day after tomorrow. He accepted the slogan but did not act on it. Now he pursues the same very limited and shortsighted course. We will not oppose this provision because no one wants to destroy the hope of even some marginal and limited improvement which might come from it to hard-hit areas.

Photo of Mr Harold Lever Mr Harold Lever , Manchester Cheetham

Should not the Committee have regard to the relationship between the benefit and the fiscal cost? If £45 million in one year produces about £1 million of benefit, we should surely think carefully before granting it.

Photo of Mr John Mendelson Mr John Mendelson , Penistone

I agree, and that in itself is justification for the debate, and my hon..Friend did a service in initiating it. At the same time, however, while we must consider the cost to the taxpayers in other areas, most of my right hon. and hon. Friends will agree that we could not find it in our hearts to destroy the hopes of areas already depressed and hard hit that some marginal benefit might come to them from this Clause.

By intellectual sleight-of-hand, the right hon. Gentleman tells us again and again that we must be reasonable and understand that if there is only a limited amount to be spent it must be concentrated on these areas. The gravamen of our charge is that he uses that policy as a substitute for what a responsible Government should be doing—initiating long-term planning to assist in the diversification of industry in a large number of our older industrial areas alongside aid for hard hit areas.

The Government have no real contact with firms helped under various schemes in the past. There is the serious case of Fords at Doncaster. No answer has come from the Government about that problem. The Financial Secretary has a special position in relation to this but I do not want to provoke him unduly because I know he cannot speak tonight particularly for his constituents. Nevertheless, we have never had a reasonable answer about the situation in Doncaster.

The Ford Company was helped to go to Merseyside and soon afterwards announced that it would close the factory at Doncaster, dismissing 2,000 people and thereby, in effect, moving unemployment from one part of the country to another. The Minister of Labour, when questioned in the House, said no final decision had been reached, but on that very day the notices of dismissal for 800 persons were being typed in the offices at Doncaster. The Minister was trying to mollify the House and lull the people of Doncaster into a false sense of security.

It was proved when the Minister of Labour was questioned the following week that he had not had this information. He said in reply to supplementary questions from this side of the House that hon. Members had now given him this information and he would now put his industrial relations officers on to it. The significance of this is that the Government had no contact with, let alone control of, this firm's actions, and the firm did not even feel it incumbent upon it to inform the Government about what it intended to do at its Doncaster plant.

It follows from that that this policy does not look far enough ahead. It concentrates on the so-called crash programme, but gives no guarantee, in spite of the considerable expenditure involved, that it will make any permanent contribution to the future economic reorganisation of the older industrial areas. I know that in what is probably an election year the Chancellor knows that he can secure a Clause which gives some economic aid, however marginal, to the most depressed areas and thereby absolve himself from the necessity of presenting a coherent economic argument in its justification, but it is obvious that this is a continuing argument.

There are a number of areas which have industries which are bound to decline not mainly because there will be less need for their products, but because there might be some technical reorganisation and modification and because they have had vast programmes of expansion in recent years and will produce at a very high technical level and therefore need less labour.

I fully support these expansion schemes. I fully supported the expansionist policy of the steel industry in modernising and developing its plant and I shall continue to do so. It is a policy which hon. Members on both sides of the Committee have urged on the industry which we have criticised for being backward and which has sometimes led us into the sort of situation which we had in the middle 1950s when we had to import steel from the United States of America and pay for it in dollar currency, which was an idiotic situation for one of the major steel producing countries.

I therefore support modernisation and expansion, but it must be accepted that if plant is modernised, less labour is needed in future. There is nothing wrong with that, provided that the Government see the situation developing and make sense of their economic policy and encourage new industries to move into the area affected, so that when people cannot find jobs in the industries in which they have been working for some years, there are other industries to absorb them.

The whole policy of introducing retraining centres will not make sense unless hand in hand with that policy is the provision and the encouragement of the provision of new industries in the areas where the training centres are to be located. It does not make sense to have a training centre to which the unions are asked to encourage people to go to be retrained unless they can look forward to a new job in a new factory in a new industry after they have been trained in a new skill.

We cannot develop this argument in too much detail on this Clause, but the Government would be mistaken if they thought that there were not many people in industry, both on the management and the trade union side, who fully realised that this is a very limited attempt at a very late hour to bring some relief at great cost to some of the areas very hard hit. Many people realise that this programme adds nothing to the general policy that is needed for greater diversification of industry in the older industrial areas.

It will not help the Government if they put forward the general plea that there is limited aid which can be given and that it must be concentrated on a few small areas. All the criticisms of my hon. and right hon. Friends, who basically agree with the purposes of the Clause, are those which are being discussed up and down the country. As the Financial Secretary must know, there are many industrialists who have very grave doubts about whether this policy will make any long-term contribution to the solution of our problems.

We ought to have from the Government a much better and more coherent analysis of the situation instead of a propagandist reply. No one would wish to oppose some of the provisions of the Clause, but we have grave doubts about some of its objects being achieved. We hope that some good will come out of it, but we reject it as a substitute for a policy of greater industrial diversification which, in the long term, is the only policy which will make sense in the sort of situation with which we are faced now.

Photo of Mr William Baxter Mr William Baxter , West Stirlingshire

I have listened with great interest to the speeches on this Clause and to many speeches on other Clauses.

I wonder why the Government have introduced a Clause which they have rejected on previous occasions. On numerous occasions the Government have maintained that to introduce different fiscal policies for different parts of the country was bad in practice. From time to time many of us have said that the only way to cure the continuing problem of unemployment in Scotland is to have a different fiscal policy for Scotland. This may seem rather far-fetched, but it is now becoming an accepted part of the Government's policy that certain parts of the country should be treated differently from others.

I do not think, however, that this policy will cure the trouble, because cheek by jowl with areas designated under the Local Employment Act there are areas which are not to receive the benefits of the fiscal measures proposed for the development districts, and even in the development districts themselves the uncertainty about whether they will continue to be designated as development districts is causing many industrialists to decide against going to those areas. As my hon. Friend the Member for Glasgow, Craigton (Mr. Millan) said, the benefits that can accrue in the first instance while an area is scheduled under the Local Employment Act can be removed when the area is no longer so scheduled.

I am not saying that I am not glad that these steps are being taken, because half a loaf is better than nothing, but these provisions are bound to give rise to difficulties. Suppose an industry has many factories, and may interests, and let us assume that one of its factories is in a development district. How will the Government's financial advisers decide the margin of profit to be allowed for tax purposes under this Clause?

An undertaking may decide to move part of its business into an area designated under the Local Employment Act. It may also decide to move its head office to that area. How do the Government propose to define what part of the profit is made in the development district, and what part is made outwith it? This is a complicated problem, and I think that it will give rise to certain difficulties in the future.

The latter part of the Clause defines "mobile equipment" for the purposes of the Clause. There is a reference to machinery or plant suitable for use only in or about a building or structure…. This can give rise to difficulties of definition. There are many types of equipment that an industrial establishment can bring into its factory, and which it can use in other areas or sites. If a builder wants to move his place of business into a development district he can easily do so, finding subsequently that his profits are being made not in the development district but outside it.

12.15 a.m.

In my considered opinion this provision will not fundamentally change the unfortunate state of affairs that exists in Scotland, and which has existed since before I was born. I am not saying that this problem has been created by this Government, but it is the responsibility of whatever Government are in power to try to devise ways and means of improving the situation. The Clause will not help in any great degree to remedy the present unfortunate position that Scotland finds herself in, because between 25,000 and 30,000 people are still leaving Scotland every year—and not only from the development districts; they are leaving Scotland as a whole.

Many people take the view that the only way to cure our problem is to alter the fiscal system in such a way that greater emphasis will be placed on industrial activities and advancement, where the roots of industry would be bred in the soil and become part of the fiscal policy of the nation. We shall never provide the prosperity that is necessary for our country's future advancement if we act only in a piecemeal manner, such as is proposed in this Clause. We must reconsider our attitude to industrial development, and place it on a national basis.

There is a great deal of truth in what my hon. Friend the Member for Manchester, Cheetham (Mr. H. Lever) has said, namely, that the greatest benefit from the Clause will accrue to businesses which are well-established in the local areas designated under the Act, and which are now making fairly substantial profits. They will undoubtedly get considerable advantages while they are covered by the provisions of the Local Employment Act.

The Government are making a stick to break their own back. I agree with the provision to some extent, but its repercussions are not fully realised by the Government. I can only think that the reason for the introduction of this provision and many other provisions in this Bill is that the Government are trying to pull the teeth of the Opposition. If they had not introduced such a provision as this they would have been attacked right, left and centre for their inactivity, and this would have had a bad effect on their election prospects in the near future. Like other parts of the Bill, this is a political manoeuvre. It is not based on common sense or logic. It is fundamentally wrong that a fiscal policy should be altered for small areas such as are designated in the Clause and in the Local Employment Act.

If the Government really want to do something they might consider altering the fiscal policy so as to give impetus to natural growth within our economy.

Photo of Dr Jeremy Bray Dr Jeremy Bray , Middlesbrough West

I wish to follow up what was said by my hon. Friend the Member for Glasgow, Craigton (Mr. Millan). The point about reducing unemployment is an economic or basic point. In my constituency, which is scheduled as a development district, the first reaction to the Chancellor's Budget speech was the closing of a steel works which had employed 1,600 men. Already 10,000 men in the area were unemployed. We hope that new industry will be attracted by the change in the allowances. But the matter should be considered in detail district by district throughout the country.

The change in the allowances will make development districts dependent on the construction phase of new industry. A low level of unemployment will be shown because of the investment going on. But when that phase is concluded and the investment dependent on it has stopped, the areas will sink back to the former level of unemployment.

1 should like to think that someone at the Board of Trade or the Ministry of Labour had taken notice of the local figures, but the questions which would elicit the information have not been asked. The local statistics of the Treasury are totally inadequate. An indication of the sincerity behind the policy of the Government would be a blitz on the local economic statistics upon which the whole machinery of the Clause and the Finance Bill depends for its administration.

Photo of Mr Anthony Barber Mr Anthony Barber , Doncaster

The hon. Member for Glasgow, Craigton (Mr. Millan) asked a number of questions which I shall try to answer briefly, but I hope in a manner which will be satisfactory to the hon. Member. He asked whether shipyards engaged in the building of prefabricated parts for houses would come within the ambit of the Bill. It is our intention that they should, but I take the point that he made about subsection (7, c) when he quoted the phrase: … not being a process in the construction or erection or a building or structure … I think that the wording will enable shipyards building prefabricated houses to be covered by the Clause.

The hon. Member went on to deal with the position which arises when a development district is descheduled. This point was referred to by the hon. Member for Greenock (Dr. Dickson Mahon). The hon. Member for Craig-ton said that he thought that, because of the possibility of descheduling, industrialists would hesitate to take advantage of the provisions to the extent that was hoped. I am not sure that I understood exactly the point the hon. Member was making. I take it that he appreciates that there are provisions to meet the possibility that a district may wish to cease to be a development district provided that, when it so wishes, the benefit of free depreciation will continue to run in respect of plant and machinery installed while it was a development district, and there are also other provisions. I should have thought that, if anything, the fact that these provisions are there to take care of that particular situation would encourage an industrialist, if he were contemplating going to a development district, to go there while it was a development district. He would buy plant and place orders for plant and so on because after the district had been descheduled, unless he had contracted to buy his plant before that change he would not get the advantage.

Photo of Mr Bruce Millan Mr Bruce Millan , Glasgow Craigton

If an industrialist installs plant which he is to write off in 10 years, because of this provision he can get 100 per cent. written off in his computation in the first year. Therefore, he has a big advantage comparing his accounts position with his taxation liability, but he loses that advantage in the next year if the area is immediately descheduled, and there will be a charge in his accounts for the next nine years for which he will have no benefit in his computation. This involves uncertainty when descheduling takes place. To keep the advantage he gets in the first year, which is a big advantage, he has to keep expending money on capital investment and the area has to keep being a scheduled area.

Photo of Mr Anthony Barber Mr Anthony Barber , Doncaster

I should have thought that anyone who goes to a development district either buys plant while it is scheduled or contracts to do so and he cannot lose by the fact that it was a development district while he was there. I am beginning to see the point made by the hon. Member, but I should have thought that the industrialist would have gained.

The hon. Member's third point was a criticism of the financial advantage to a company which set up in a development district. He thought that in the example given by the President of the Board of Trade it was strange that the company could set off free depreciation against profits in the first year. He pointed out that this would apply only to a company making profits within the district or a company out of the district extending within the development district. That is true, but this would provide some incentive to a company in, say, the south of England to go north and that is an advantage.

Prior to that, we had a different type of speech from the hon. Member for Manchester, Cheetham (Mr. H. Lever). He complained that the novel principle contained in the Clause had not been fully discussed and that was why he raised it again. I remind him that it was discussed at length during the four days debate on the Budget and it was referred to again by several hon. Members during Second Reading of the Finance Bill. Again the main principle involved in this Clause which concerned the areas and their extent, whether they should consist of development districts or wider areas, was referred to by the hon. Member for West Stirlingshire (Mr. W. Baxter). This was dealt with by my right hon. Friend on the Amendment we considered immediately prior to this debate.

The hon. Members for Cheetham and Penistone (Mr. Mendelson) tend to forget that this is one, and a very important one, of the several measures undertaken by the Government to attack the problem of unemployment in certain parts of the United Kingdom. Another major proposal is the Local Employment Bill which provides for standard grants of 25 per cent. for new industrial buildings and 10 per cent. for new plant and machinery. Then there has been the increased investment by Government action.

The hon. Member for Cheetham asks why this discrimination? Why breach this fundamental tax principle? I can only reply that for some years we in this country have been bedevilled by high and persistent unemployment in a limited number of areas. This has had two consequencies, first the unhappy personal consequences for those individuals who were directly concerned in those areas, and secondly, we—I mean not only this Government but the Labour Government before us—have been hamstrung in any action we wanted to take because in general we had to act in such a way as would affect the economy as a whole.

Photo of Mr Douglas Houghton Mr Douglas Houghton , Sowerby

I hope that the hon. Gentleman will not link the name of the Labour Party with the Government's own misfortunes.

12.30 a.m.

Photo of Mr Anthony Barber Mr Anthony Barber , Doncaster

I was only pointing out that the problem with which we have had to deal was one which has confronted Governments before us. I agree with the hon. Member for Craigton, who pointed out that any action which one takes to deal with the country as a whole will not in itself deal adequately with these difficult areas.

The hon. Member for Cheetham described the proposal at one moment as "sentimental", at another moment as "illogical", and at another moment as "irrelevant". That is not the view of the overwhelming majority of those who have commented on the proposal in speeches in the House or outside or in the Press, and it is certainly not the view of those who live in development districts or Northern Ireland. The popular view is that this a bold and sensible proposal which is being enthusiastically welcomed.

The hon. Member for Penistone referred to the fact that the Ford Motor Company is to cease car assembly at Doncaster in my constituency and complained that he had heard no statement from me about this matter. He seemed to think that this was in some way odd.

Photo of Mr John Mendelson Mr John Mendelson , Penistone

I said deliberately—I do not want to provoke the hon. Gentleman, who is sitting on the Treasury Bench where he cannot speak only for the people of Doncaster—that the Minister of Labour failed to know the facts at the time and that we have had no statement from the Treasury Bench telling us about it. The Minister of Labour did not know what the company intended to do before it announced the dismissal of 2,000 people and a redundancy of 800 on 28th June.

Photo of Mr Anthony Barber Mr Anthony Barber , Doncaster

If the hon. Gentleman wishes any further information about Doncaster, may I inform him that I have been in touch with the Minister of Labour, the President of the Board of Trade and Sir Patrick Hennessy. Perhaps he would like to write to me if he wants further information, or, alternatively, I could send him some of my local newspapers, from which he will get all the information which he wants.

Photo of Mr Douglas Houghton Mr Douglas Houghton , Sowerby

It might appear a little discourteous if I did not say a few sentences before we approve the Clause, as I hope we shall. This is the time of night when it is easier to make up one's mind to go on to breakfast time than it is to endure the next hour. I do not think there is any need to go to breakfast time but there may be a need to endure the next hour, and I am anxious that it should be no longer than is absolutely necessary.

We have had two debates, one in the stress of circumstances and one in a more relaxed atmosphere. It is in the second debate that some of the more critical comments on the Clause have emerged, notably in the original, courageous and typical speech of my hon. Friend the Member for Manchester, Cheetham (Mr. H. Lever). There was a great deal in what he said. The difficulty is that so many hon. Members want what the Clause gives that it is not easy to look at it in a detached and rational way and to consider whether it will do the job which it sets out to do. One's point of view on the Clause is highly coloured, one is bound to admit, by whether one's constituency is within a local employment area or whether it is not.

Those who are within local employment areas are so desperate about the situation that they clutch at any straw, however slender and transient, and they are clutching at the straw of Clause 38. We hope that it will prove to be stronger than some of my hon. Friends believe. It is too early to say whether this method of inducing developing industries to go to these areas will be markedly more successful than those methods which have already been adopted.

Those whose areas are outside the local employment areas but in which there are, nevertheless, difficulties and fears about the level of unemployment, are, naturally, looking with great anxiety at the possibility of considerable tax reliefs being given to other areas—reliefs which, they fear, may not yield the results which are hoped for them but which might, if diverted elsewhere, produce greater results.

The Chancellor said that the working of the Clause would be kept under close review. I was glad to hear him say that and I hope that he will stick by what he said. He should not hesitate to question the course he has adopted if it appears not to be yielding the desired results. One must face that fact that the so-called twilight areas—a distasteful phrase; grey areas might be better—will be looking with envious eyes on the special facilities which are being offered and added to in the local employment areas. They feel, and rightly, that help that might have been given to them to save them from further decay will be diverted into other areas and may, as my hon. Friend the Member for Cheetham said, merely alter the pattern of unemployment without eradicating it throughout the land. It will be more than they can stand if they see that they are suffering from the diversion of prospective additions to their own economies and industrial advance and, at the same time, see no strong and favourable trend towards curing our unemployment problems.

I hope that, in parting with the Clause, we will welcome it for what it does for the areas it is intended to serve. We profoundly hope that it will bring about the results which the Chancellor wants, because we all want to see those results achieved. Anything that will help to cure our unemployment problem must receive our support. At the same time, there are other areas which may be prejudiced in their own efforts towards survival as viable urban and economic units, and we must not overlook their position. We hope that good results will come out of this and other measures the Chancellor is taking and that renewed confidence will spread throughout the country. We hope that the anxieties which have weighed so heavily over some areas, and over the country as a whole, will now be removed so that we can move into a period of greater confidence and prosperity.

Photo of Mr Tam Dalyell Mr Tam Dalyell , West Lothian

I hesitated to interrupt the Financial Secretary when he was speaking a few moments ago because I thought that he had taken the point raised by my hon. Friend the Member for Glasgow, Craigton (Mr. Millan) about descheduling.

I accept what the Financial Secretary said about one having businessmen making rational decisions in a calm atmosphere. When one is dealing with people with highly volatile expectations, is it not possible, in the light of the volatility of their expectations, to have a time scale of, say, six months or a year before descheduling comes into force? A great deal more confidence would be engendered if such a time scale existed.

Question put and agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clause 39 ordered to stand part of the Bill.