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

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

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Photo of Mr Reginald Maudling Mr Reginald Maudling , Barnet 12:00, 21 May 1963

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.