Investment Incentives and Industrial Reorganisation Corporation

Part of the debate – in the House of Commons at 12:00 am on 15 February 1966.

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Photo of Mr Jo Grimond Mr Jo Grimond , Orkney and Shetland 12:00, 15 February 1966

I appreciate that, but parallel measures will have to be brought in, otherwise some of the old areas will suffer.

I want to deal with the time and method of payment. I understand that it is hoped that the new grants will be paid within six months. This will be of considerable help to industry. Furthermore, it will be a more simple system. Does this mean that the Board of Trade does not envisage examining each application with any greater care? We have not heard about the way in which certain classes of production are to be excluded. We should be grateful to hear a little more as to the sort of discrimination that the Board of Trade will have to use.

Has the Board of Trade considered the case for making the grants negotiable and able to be claimed, so to speak, by the supplier of machinery? The right hon. Gentleman is aware of the scheme. It would mean that the buyer would buy free of the grant, and the seller would be entitled to dispose of the claim, which then would become negotiable, to pass from hand to hand. Many people in industry, impressed by the need for quicker payment of grants, believe that this would be the simplest way. No doubt the Government have examined it. What was the result?

In considering the proposed Industrial Reorganisation Corporation, most people would agree with many of the objectives set out in the White Paper. A great deal will depend on the personnel of the Corporation and how they envisage their task. I believe that too much stress has been put on the provision of finance. I was interested to hear what the hon. Member for Cheetham said about the gap in medium-term finance, but the right hon. Gentleman seemed to envisage a gap in long-term finance. Surely the most important job of the Corporation will be to find, pick out and isolate those areas of the economy which are lagging. Then there may be all sorts of remedies for their poor performance. Finance may be only one of the many reasons why such areas of the economy are lagging behind.

In support of the proposal I would quote the remarks of Sir Denning Pearson in his Fawley Lecture when he said that for some time he had held the view that the small size of units in parts of our industry was one of our greatest handicaps, both in endeavours to increase our general engineering exports and to improve productivity.

A similar comment is made by Richard Fry in The Guardian of this morning. Although I have deep respect for Richard Fry, as for all who write in that great paper, he has not generally been regarded as a Left-wing economist, but he sums up the matter by saying: the proposal to fill some of the gaps by intelligent intervention is a good deal better than the alternative of leaving well alone. Of course, it is possible to do more harm than good by intervention, but I would have thought that there was a gap and that it was rather a gap of finding out what was wrong with certain parts of the economy and that finance might be one of several remedies which should be applied.

I should like to ask a little further why it is not possible to expand the functions of the F.C.I. or the I.C.F.C. for instance, to cover the gap in so far as it is a financial gap. I accept that they cannot as constituted but I am averse to the piling up of committees, but if the F.C.I. and the I.C.F.C. are not covering the gap adequately, why should they not be merged with the new Corporation? Should we not then save some manpower which is very valuable and experienced, and also, make for a more efficient job?

I have one further word of warning. Of late, many of the mergers which are taking place seem to be designed to get round the findings of the Restrictive Practices Court. Where price agreements and so on have been held to be against the public interest, there has been a tendency for the firms engaged to merge. This Corporation should have power to stop mergers—or rather, as it will not have power to stop anything, I hope that it will be able to recommend against mergers as well as in favour of them, and that the Monopolies Commission will still be the ultimate determining factor in the public interest if mergers do not seem to be in accordance with it.

I want to conclude with a few remarks about the next stage of regional development. More than ever it is necessary for the proper management of our economy to try to iron out the discrepancy between the constantly high demand for labour and the over-used resources of the South-East and the lower demand for labour and under-used resources in other parts of the country. Liberals, of course, believe that the Government have not gone far enough in striking at the root cause of this imbalance, which we believe to be the centralisation of power, and all the top jobs which go with power, in and around London.

Therefore, we would like the new Corporation to be set up on a regional basis and, just as the merchant banks are now setting up regional offices, we believe that the Corporation should operate regional offices and not carry on all its business in the centre of London. As one of its tasks is to be to assist regional development, let it go to the regions to do its task. We also feel that the Government should allow greater participation by the people of the regions in running their own affairs.

The whole new course charted by these investment allowances of the I.R.C. will surely require a new look at the present policies towards regionalism. For instance, if mergers are effectively encouraged and nothing else is done, there is a very good chance that there will be an even greater concentration of head offices, research departments and high level employment in London. Anyone coming from Scotland or Wales or the North will confirm that very often when provincial firms are merged the head office moves to London. This concentration of high level employment is one of the most serious aspects of the problem, and I hope that steps will be taken to counteract it.

I suggest that the Government should balance these proposals with a more vigorous policy for raising the services in areas to which they want employment to move, or where they want to hold population. Housing, schools and roads policies should all have the emphasis on development areas. It is mentioned in the papers this morning that some firms going to Scotland claim to have been misled about the amount of labour available. I have often tried to draw attention to the root of this difficulty. The unemployment statistics in Scotland sometimes show that gross unemployment is very high, but even so they conceal depopulation. One of the main problems is to find jobs for school-leavers. Secondly, they conceal a great scatter of unemployment of people who find it difficult to move from one home district to another.

Further, they conceal a lack of variety of employment. Whether we like it or not, people want to have a variety of employment. In some districts which were entirely dependent on agriculture, or whatever it happened to be, many boys and girls coming from school simply would not stay in the district. All sorts of things like training and superior services and deliberate attempts through the I.R.C. to set up particular firms to work new industries—it is to have the power to do that—in particular areas where there is a gross lack of variety of employment are needed, and I would like those things to be done in parallel with the aims set out in these White Papers.

I hope that the I.R.C. will not become obsessed with the idea that only big businesses are worth encouraging, although I fully agree that they make a big contribution in the export trade. For instance, would it not be worth considering whether small businesses employing small numbers of people should not be deliberately directed away from the big urban areas, where they now tend to concentrate, into the smaller towns to which they are particularly suitable? Along with the proposals in the White Papers we want all sorts of other parallel action.

I return to where I started—that the House is asked to approve the general principle of these Measures, but that there are obviously many detailed questions to which hon. Members would like answers and that there are criticisms to be made of the White Papers Nevertheless, I would have thought that this was an attempt to attack two of the principal faults of our economy—first, its lack of productivity and, secondly, its regional imbalance, and in so far as the White Papers are an attempt to attack those two faults, they deserve support.