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I beg to move, That the Bill be now read a Second time.
This Bill is a major instrument for speeding up industrial advance in this country. It includes a number of highly desirable reforms. It extends and greatly strengthens the Government's powers to accelerate industrial expansion in the development areas and restrain it in congested areas, powers which were weakened and hampered by the Local Employment Act introduced by the party opposite in 1960.
One of the most foolish Sections of that 1960 Act, which we opposed at the time, was the provision that it should terminate, with all the powers embodied in it, in March, 1967. The Bill which I am now moving extends these powers, and extends them indefinitely without time limit. If the Bill is not passed, all these powers, and with them the ability of the Government to achieve the revival which has now so promisingly begun in Scotland, the North-East, the North-West, Wales and the South-West, will expire next March. Anyone, therefore, who votes against this Bill is voting for the extinction of those powers within the next 12 months.
Secondly, the Bill greatly extends the boundaries of the development areas, which were absurdly confined and restricted, in my opinion, not merely by the Local Employment Act, but by the timid and niggardly spirit in which the party opposite carried it out. That Act was based on the idea of small, often isolated development districts strewn about in strips and salients rather than major industrial areas or regions to be developed as a whole. This mistake did great harm. It was partly responsible for the severity of the 1962–63 depression both on the North-East Coast and in Wales.
It did most harm of all in South Wales, where the greater part of the coal mining areas were excluded altogether, including the main industrial estates; and the boundaries of the development area had become quite irrational and haphazard by the time this Government took office. Though we have already extended these areas so far as was possible under the present law and have included all the industrial estates and all the vulnerable coal areas, the previous delay cost South Wales dear, and was largely responsible for the lag in recovery there up to a few months ago. Now, I am happy to say, unemployment there, too, has begun to fall.
In the Bill, we have, therefore, swept away entirely the misguided notion of small isolated development districts, and substituted the principle of major continuous areas, to be developed as a whole in terms of industry, employment, transport, and all other essential services. The new development areas will include the whole Northern region, nearly the whole of Scotland, most of Wales, Cornwall and North Devon, and an enlarged Merseyside.
The Bill accordingly greatly widens the criteria according to which the Board of Trade may schedule any part of the country as a development area. Under the old Local Employment Act, nothing but unemployment could be counted. Under the Bill, we shall be able in future to count, not only actual and prospective unemployment but population changes, migration, employment growth and the aim of regional balance over the whole country. This is another major and too long delayed modernisation of our powers.
The Bill also provides that the choice of areas shall be decided by the House of Commons, by Order from time to time, and not simply by administrative decision of the Board of Trade as was done by the previous Tory Government. I believe that it is right that these decisions should be taken by the House; and there will, therefore, be power to vary the areas from time to time by Orders of this kind.
The new principle of large continuous areas implies, naturally, that the Board of Trade must have power of greater selection in steering new industry within them. We shall have to ensure, both by a selective use of grants other than investment grants, in some cases, and by giving or refusing industrial development certificates as necessary, that major industrial projects are located in the areas which need them and have the necessary facilities for them.
I believe that, if Parliament approves the Bill, and we use these powers boldly, the whole of this problem can be overcome once and for all within a few years. But it would be the greatest folly again to set a time limit after which all the powers expire. The real analogy for this enterprise is the classical one of pushing a rock up a hill. It is a long and laborious job, but it can be done. When one has done it, however, one must hold the rock there and not let it go, or it will very rapidly slide down the hill again.
All experience shows that the tendency of modern industry and population to drift towards the metropolis is a permanent and not a temporary one, and is by no means confined to this country but is operating all over the world. Therefore, even when the job has been done powers must be held ready to ensure that it is not undone again.
Therefore, the Bill prolongs indefinitely all the main positive powers introduced in the first Distribution of Industry Act in 1945, and extended—most of them—within restricted limits in the 1960 Act. The Bill continues the most essential power of all; that of the Board of Trade, through the management corporations, to finance, build and own factories and industrial estates in the areas needing them. We are developing these publicly-owned factories and estates now on a large scale; and the Bill gives the Corporations some new and wider powers. The total of Board of Trade owned industrial land and property is already worth more than £100 million; the area of buildings totals 56 million sq. ft. (of which over 99 per cent. is occupied now); and the number employed is now over 260,000 people. Anyone who votes against the Bill is voting for the extinction of all these powers next March.
The Bill also extends our powers to make grants for basic services in these areas like transport, power, water, and so forth, and also to finance the clearance of derelict sites, whether by the Board of Trade directly or through local authorities. We are widening the criterion here for clearance of sites, and under the Bill shall be able to recommend a grant when we are satisfied that it will contribute directly or indirectly to the development of industry in the area and not just to the creation of employment. Industry for this purpose means, of course, not just manufacture, but all the service trades, including, for instance, tourism.
Those who vote against the Bill will be voting also for the extinction of these powers throughout the development areas. They will also be voting for the extinction of B.O.T.A.C.—the Board of Trade Advisory Committee—and its valuable power to make loans and grants for industrial development in these areas, which has contributed so much to the whole policy ever since 1945. B.O.T.A.C. is highly important, not just because it provides capital, but because it often ensures that projects are sounder by the time they actually go ahead. It has certainly safeguarded the public money thus invested in industry over the 20 years of its life.
While I appreciate the work done by B.O.T.A.C., may I ask my right hon. Friend whether he can take some steps to speed up the procedure by which B.O.T.A.C. comes to its decisions?
We are constantly looking into this. I hope that my hon. Friend will agree that a good deal has been done already. If further progress is possible, we will certainly ensure that it is achieved.
Meanwhile, I am most grateful for the hard work done by the Committee, and particularly to Mr. Slimmings, who is shortly to retire after having been chairman since 1957 of the old D.A.T.A.C. and then of B.O.T.A.C. for his long and exceptionally valuable service. I am pleased that Sir William Lawson has agreed to become his successor.
Here again, we are improving as well as extending. B.O.T.A.C. will not in future be obliged to confine its loan for an industrialist developing in these areas to fixed interest capital; but where a firm does not wish to be saddled with too much fixed interest, but asks for a slice of equity, B.O.T.A.C. will no longer be forced to refuse it. If the hon. Members opposite are really going to discover in this small but useful provision a sinister plot, I must say that the country will think them even more childish than might have been expected from the Tory Party even in its present demoralised state.
Next, in addition, to the powers which we are extending and which I have described, the Bill substantially improves a number of other services to industry in the development areas. We shall be able to make building grants of 25 per cent. for new projects in development as now, but shall also be able to increase these to 35 per cent. where the project is in a substantial sense "new" to the area. This distinction is not capable of being sharply defined, but must be left to Board of Trade discretion. The 25 per cent. grant will be normal; but 35 per cent. will be paid where a firm is moving or extending to an area far away, for example, to Scotland from the South East. Similarly, where the factory is not privately financed but is Board of Trade-owned, equivalent help will be given in the form of a two year rent-free period. That is a new power.
The Bill also removes the bar which has prevented a building grant being given in the case of a capital intensive scheme; where instead of scaling it down, we were compelled to give no help at all because of the so-called "cost per job" rule. The Bill will enable us to give a scaled-down grant in such cases—for instance, a new petrochemical plant in a development area.
All these building grants, including the improvements, will also, of course, be available not just to manufacturing industry but to service trades also in development areas, including offices, hotels and the tourist trades generally, provided only that they contribute to employment in the area. This applies to all the services offered in the Bill by way of building grants, and general loans and grants; and this will be of a great value to the tourist trade and the growth of non-industrial employment in these areas.
But what I have said so far is not, of course, the end of the improvements offered. The Bill also provides for 40 per cent. direct grants for qualifying plant and machinery in the whole range of manufacturing and extractive industry in the development areas, as compared with the 20 per cent. grant for the rest of the country which I will describe in a moment. This 40 per cent. replaces, of course, the 30 per cent. investment allowance, free depreciation and 10 per cent. machinery grant previously available; but it extends unlike the old machinery grant to straightforward replacement.
The new grant will no longer depend, as did the old, on whether or not the investment provides new employment. There is no doubt, therefore, that the new 40 per cent. development area grant will cover a much broader area of plant and machinery, as well as wider geographical areas than the old grants; and will be a powerful stimulus to development in the parts of the country where they apply.
Quite apart from the higher coverage, however, the new grants system will give greater help to a firm than the old. Since this has been questioned, I gave the full figures in a Written Answer which is in HANSARD for 1st March, in columns 278–280. This shows that, with Corporation Tax at 40 per cent., a development area firm will get a greater return over the life of a given item of plant under the new system than the old, either on the basis of cash recoveries not discounted, or alternatively cash recoveries discounted at 7 per cent. per annum; and this is even on the assumption that a firm was previously both entitled to the old machinery grant and was earning enough taxable profits to take full advantage of the old system.
This would probably in many cases not be so. For instance, there is the common case of a new firm building up a project in one of these areas for the first time. Such a firm is bound, of course, to be far better off under the new system. With the much wider development areas, there are likely to be much fewer overspill towns needing help outside the areas which would, nevertheless, draw workers from them. We propose that the 40 per cent. investment grant and other kinds of development area help shall be available for such overspill towns if their population is being substantially increased and the new inhabitants are coming from a development area. The two places to which we expect to apply this policy at present are Skelmersdale and Winsford, both in the north-western region.
Finally, so far as distribution of industry is concerned, the Bill tightens up one or two yawning loopholes in our I.D.C. system, which has weakened control in the congested areas in recent years. It has been possible under present law for an I.D.C. to become attached not to a project, but to a piece of land, and for projects suddenly to go ahead in quite unsuitable places because an I.D.C. was given to an entirely different project, perhaps as much as 10 years before.
This explains some glaring cases of large unwanted expansions in the South East recently, and we are putting it right in Clause 22 by ensuring, in effect, that the I.D.C. applies, as it should, to the project and not the land. Clause 20 corrects another loophole dependent on retrospective planning permission.
I am sure that the House will agree that all these improvements and extensions are highly necessary if we are to carry through to a finish the revival of the Northern and Western areas of these islands and that anyone who votes against them will carry a heavy responsibility in the eyes of all those who live in those areas. I am sure that the right hon. Member for Altrincham and Sale (Mr. Barber) will agree with me.
I apologise for the complexity, if not the length, of the Bill, but this is by no means the whole or even perhaps the main part of this streamlined but nevertheless far-reaching Measure. As the Government announced in the White Paper on 17th January, we are also reshaping the whole system of Income Tax incentives by way of capital allowances designed to stimulate more rapid industrial investment and technological advance. I need not summarise the consensus of so many speeches in the House over the last 15 years and even longer—quite a number of which I have heard—that the British economy has suffered from too slow a rate of investment and too small a share of it in the manufacturing and exporting industries. Our competitors have moved faster.
Private investment in British industry has increased lately but not yet nearly fast enough, and it has been notably too low in manufacturing industry, with a resulting lack of capacity precisely where our export opportunity is greatest. The National Plan requires that investment in manufacture shall rise by 7 per cent. a year in real terms from 1964–70 compared with 2·4 per cent. in 1960–64. The new system we propose should be a major stimulus not merely to modernisation, but to exporting capacity.
It is worth briefly recalling, because this is a continuing story, the efforts of Governments since 1945 to improve our system of capital allowances for Income Tax, which extend back about a hundred years. In 1945, the then Chancellor, Sir John Anderson, in order to speed up post-war industrial development, introduced the initial allowances as a supplement to the old historic wear and tear allowance. Inadvertently, I suspect, it was extended much too widely, because the Inland Revenue—and it could not do otherwise—applied automatically its hallowed definition of plant and machinery.
Not merely businessmen and the public, but even some Chancellors, were surprised to find that the initial allowance applied not merely to automatic looms and mechanised foundries and automation equipment, as had been intended, but also to so-called business motor cars. My hon. Friend the Member for Westhoughton (Mr. J. T. Price) was one of those who drew attention to this. The use of public money—in effect, interest-free loans—for this purpose became something of a public scandal. It was a Tory Chancellor, Lord Butler, who recognised this by excluding passenger cars in moving nearer to outright grants when he introduced the investment allowance in 1954. I am not sure whether the right hon. Member for Altrincham and Sale was at the Treasury then.
This move by Lord Butler was an improvement, but, again, experience has shown that, even with the exclusion of cars, the traditional definition carried the tax concession much further than Parliament intended. The investment allowance which, let us remember, is additional to the ordinary wear and tear allowance, again extends not just to basic productive equipment but for furniture, carpets and curtains in the managing director's office, to cups and saucers in the canteen and to office furniture and the like.
All these things are desirable and necessary, and I am sure that it is right that they should get both the normal depreciation allowance and the initial allowance as well. But to add to them the special privilege of an investment allowance or grant is really to waste public money and to pervert the objective of technical advance in British industry.
The investment allowance was even automatically extended to television sets rented by the public and this meant that public money intended by Parliament for stimulating industrial investment was being used to finance consumer spending. Clearly, this should now stop.
If, therefore, we are to follow the trail blazed by the exclusion of cars when in vestment allowances were introduced in 1954, and use public money more selectively, we have to have the courage to face the practical difficulties involved. That the Government are prepared to do.
A good deal of evidence has also accumulated that many firms were taking little heed of the investment allowance in making their investment decisions because it was not simple or certain enough in its incidence. In the useful inquiry conducted by the C.B.I. last year into industry's own views about the best system of capital allowances, the majority favoured free depreciation—naturally, because this would provide industry with the greatest cash return. Unfortunately, that would be far too costly to the Exchequer.
But as high a proportion as 24 per cent. of firms answering opted for investment grants even though the figure offered to them in the questionnaire was 15 per cent., whereas the Government are now proposing 40 per cent. in development areas and 20 per cent. over the rest of the country. Even so, almost as many firms voted for investment grants in the inquiry as for investment allowances.
Therefore, to avoid past mistakes and to concentrate the use of public money where it will most stimulate technical advance and growth of import saving and exporting capacity, we have decided to substitute direct grants for widely diffused investment allowances. These grants will be more simple, certain and directly calculable and more quickly collected by firms as soon as the new scheme is fully working.
The grants will be more simply calculable because they will not depend on future rates of tax or the vagaries of future Chancellors—who can say who they will be?—or on future rates of profit of the firm. They will also provide a quicker cash flow for investment by firms, because the cash will be received within six months of making a claim as soon as the scheme is in full operation.
This only has to be delayed now because, for a time, firms will be receiving payment from the old investment allowances and therefore will not be acutely in need of funds. It would also be unnecessarily costly to the Exchequer to pay both at once. But I confirm the Government's intention to bring the period down as soon as circumstances permit.
It depends on both. It will be reduced as soon as administratively possible subject only to the economic situation; and I do not think that the right hon. Gentleman would argue that we should ignore the current economic situation altogether.
The new grants will also be selective. They will be concentrated on plant and machinery in manufacturing, extractive and construction industries. They will apply, without discrimination between firms, to all qualifying processes in those industries. I am sorry to be a little technical, but we ought to get this clear. To be eligible for grant, an asset must satisfy four tests: it must be new, that is to say, not second-hand; it must be for use in Great Britain; it must be acquired by someone carrying on business in Great Britain; and it must be used for a qualifying process of manufacture, including ship repair or extraction.
Can the right hon. Gentleman make clear whether the grant will be available for plant which, if owned by a manufacturer would qualify, but which is owned by a firm performing that service under contract to the manufacturer?
That is one of those questions which we had better discuss in Committee, when I will give the hon. Gentleman a considered answer.
I am not absolutely sure what the right hon. Gentleman has in mind, but if the plant is being used for manufacture, it will certainly qualify. There are certain special forms of capital asset which contribute markedly to modernisation or the balance of payments, and these will be eligible as such whatever the process, provided always that they are used for business purposes. These are computers, ships and hovercraft.
Secondly, as I have already said, we shall be selective in putting the grant at 40 per cent. throughout the development areas as against 20 per cent. for the rest of the country. In the straight case of a 20 per cent. grant for an item of plant for manufacture—quite apart from the certainty and speed of payment—with Corporation Tax at 40 per cent., which is now a very reasonable assumption, a firm will receive more than under the old allowance in terms of cash recoveries in the first 18 months of a plant's life, the same amount over its whole life, and more in cash recoveries discounted at 7 per cent.
That, again, assumes that the firm was earning enough profits under the old system to claim full investment allowance as soon as possible, which might not have been the case; and if that was not so, it would be much better off under the new system. If the right hon. Gentleman wants the figures, he will find them in my Answer of 1st March in HANSARD. I see that Sir Maurice Bridgeman, Chairman of British Petroleum, has already welcomed the new scheme as beneficial to the British oil industry. Usually, one hears rather less from those who gain from these changes than those who do not.
These 20 per cent. or 40 per cent. investment grants will be special, exceptional incentives to encourage rapid progress where it is most needed, but I am sure that hon. Members will not fall into the delusion of thinking that non-qualifying processes and industries get no sort of capital allowance. All other business equipment in the service and other trades will of course be eligible, not merely for the ordinary depreciation allowance, but for initial allowance, which we are raising from 10 per cent. to 30 per cent. for plant and machinery.
All industries, therefore—and I say this to get it all in perspective—will he better off in terms of capital allowances than they were at any time up to the end of the war. Those who get the initial allowance rather than the grant will be well provided for, although not so exceptionally generously as actual industrial plant.
This new system of selective grants administered by the Board of Trade not merely implies a form of obligation on us to protect public money, but also involves, I fully agree, some new problems of administration. In our view, the old Inland Revenue system led to a too hit-and-miss dispersal of public money, such as investment allowances for rented T.V. sets, but if Board of Trade discretion, within the basic Statute, is to be substituted for this, safeguards are clearly necessary both for the Exchequer and the claimant.
Tax reliefs in our system have always been a matter for the courts in the last resort, but public expenditure, which is what this is, is for parliamentary and departmental control. I therefore propose to set up a new advisory committee to advise the Board of Trade on the main lines of the administration of the scheme. In addition to that, as with all our present distribution of industry grants and loans and, incidentally, I.D.C. decisions, appeals can be made to Ministers and Ministers' decisions questioned in Parliament in the normal way. If we were to try to be more rigid than this and to define absolutely by Statute the boundaries of the grants, industry itself would suffer, because we would be forced to exclude cases which future experience showed it sensible to include.
Can the right hon. Gentleman confirm that the new advisory committee will be included in the vast bill of £3 million in the administration of the Bill, or is the cost to be over and above that £3 million?
I think that the hon. Gentleman will find that the expenditure involved in this committee is negligible. I shall be very disappointed if that is not so.
In addition, at the time of the publication of the White Paper I invited the C.B.I. to co-operate with the Board of Trade in a regular working group in formulating the main details of the scheme and I am most grateful to it for its extremely valuable co-operation over the last six months, even though, of course, it is not committed to the scheme and is free to criticise or defend it if it chooses.
I have, however, accepted the C.B.I. proposal that the building industry should be included in eligibility for grants, because, although it does not contribute so directly to the balance of payments as manufacture or extraction, it is nevertheless an industry which requires new equipment in a special degree in order to achieve the substantial rise in output proposed for it by the National Plan. I therefore propose to amend the Bill to bring in building.
Secondly, we have been successful in working out with the C.B.I. a procedure convenient to industry for handling leased assets and computers. Thirdly, we have also agreed—and this may help the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin)—to expand the concept of processes incidental to production so as to bring within the scope of the grants equipment used in certain repair, storage and packing work, and we have extended the grants for scientific research equipment so as to cover certain prototypes. Further, we have accepted the C.B.I.'s suggestion that if an area ceases to be a development area industrialists will not be debarred from assistance to complete a project undertaken when it was a development area.
Further, to meet the wishes of industry and the accountancy profession, we have decided on one change in the running of the scheme—this is additional to the White Paper. We originally intended that applications for grants should be based on particulars of "payments actually made" by firms. Professional experts have convinced us that it would be better to base them not on payments made but on the concept of "expenditure incurred", in the sense used by the Inland Revenue up to now. The Bill will also be amended, therefore, to achieve that improvement. However, since the formula of "payments made" after 17th January was used in the White Paper of that date, we must clearly honour that undertaking as governing the operative date for the introduction of the grants scheme. The other formula will be used in future.
I have also decided, after consultation with industry, that the minimum value for exclusion of small or short-lived items mentioned in the White Paper shall be placed lower than we originally intended. I have decided to fix it as low as £25, below which items will not be eligible. Also, we shall not accept a quarterly claim for equipment costing less than £500, though firms will be entitled, to submit at least one claim a year if their total investment is less than £500. These improvements are necessary so as to simplify the administration of the scheme.
I have already explained that computers, ships and hovercraft will qualify for the 20 per cent. grant, with whatever industry they are linked, or wherever they are situated, provided always that they are used for business purposes. Computers, because their precise location is normally irrelevant, will ordinarily attract 20 per cent. grants, but where they are fully integrated in a development area plant—I believe that "on line" is the technical term—they will qualify for the 40 per cent. In all these cases, to safeguard public money there will have to be provision, like the balancing charges for ordinary capital allowances, because assets may be later moved or sold.
Clause 7 gives powers to the Board of Trade—and this applies to all grants—to impose conditions when making grants, including possible repayment in special circumstances. It will be a standard condition for all grants that the recipient must notify the Board of Trade, if within three years after acquiring an asset, he ceases to use it for the original purpose or in the place required by the grant. In the special case of ships, which are apt to move about, grants will have to be repaid if a ship is sold or demise-chartered within five years to an ineligible person.
Nationalised industries are excluded from the main grants, except where they are engaged in ancilliary manufacturing processes directly in competition with private industry. This is not because we regard nationalised industries, any more than service industries, as less essential to the national economy, but simply as being less in need of this form of help. The grants are a stimulus to more rapid investment and the programmes of nationalised industries are determined by Government policy and do not need further financial stimulus.
Exploration for oil and gas on the Continental Shelf—not merely in the North Sea—will, as the White Paper makes clear, be eligible for the 20 per cent. grant. Under the Bill as it stands, such grants will apply to plant and machinery used in searching for and extracting minerals, brine, oil and natural gas. Further consultation has shown that if grants are here confined to plant and machinery only, and costs of exploration work are excluded, much capital expenditure on such exploration would be left out. I do not think that the House would wish to withhold any reasonable incentive from the search for gas and oil around these shores, and I now propose to amend the Bill so as to pay grants for approved capital expenditure on such exploration.
Since anxieties have been felt in the hotel and tourist industry because the special investment grants have not been extended to them, I would like to make clear that the assistance available to these industries will be much greater than some hon. Members seem to have realised. First, throughout the country, the initial allowance will be raised from 10 per cent. to 30 per cent. for plant and machinery, for all service industries, including hotels and catering. Secondly, throughout the development areas, which now extend much more widely, over Scotland, Wales, the North of England and Devon and Cornwall, the special development area building grant of 25 per cent. will be available, and will be raised to 35 per cent. in the conditions that I have described.
In addition to all this, the tourist industry, through the British Travel Association, is receiving an annual Government grant of about £2 million, a grant not available for most other industries. This threefold assistance now offered to the tourist industry is proof of the Government's recognition of its importance to the balance of payments, even though in total hotels, for instance, only receive about 7 per cent. of their total earnings in foreign exchange, compared with 25 per cent. or 30 per cent. for manufacturing industry.
The Bill gives power to the Board of Trade not merely to alter the development area boundaries from time to time, but to vary rates of investment grant or to add new assets to the eligible list. I am sure that this is right. As experience grows, and circumstances alter, it may be necessary to vary the boundary of the area, to add new assets, or to alter rates of grant. But I am sure that we should only do so by an Order approved by this House, and in the case of new assets, or altered rates of grant, an affirmative Order. That secures the essential principle of parliamentary control. Now that the Government have power to vary rates of indirect taxation by Order, it would be foolish to tie ourselves down by legislation not to be able to do this.
That rather depends upon whether it is an Order varying the areas, the rates of grant, or the assets. If it is an Order varying the rates of grant I would imagine, and this is subject to confirmation, that it would operate from the publication of the Order, as is normal with taxation. But I am sure that this can be discussed during the weeks ahead.
It is our intention, as a matter of policy, that the present broad areas, and other main features of the scheme, should stand for a reasonable period of time, so that industry throughout the country, and the people of the development areas in particular, should feel the necessary assurance about their future. There has been too much chopping and changing over recent years; and a steady and planned development of the whole policy is now necessary. That is what we intend to ensure.
Anyone who does not wish to speed up the modernisation of British industry, or anyone who wishes to see all our development area powers expire in March, 1967, is quite entitled to vote against the Bill. But any hon. Member who wishes to see the revival and redevelopment of our once grievously under-employed areas carried right through—as it can be—to final success, and industrial investment in the economy speeded up to a rate more comparable with our competitors, will give the Bill his whole-hearted support.
I beg to move, to leave out from "That" to the end of the Question and to add instead thereof:
this House, while welcoming practical encouragement of profitable investment, declines to give a Second Reading to a Bill which discriminates against the distributive and service industries, which will lessen the incentive for industry to move to development districts, and which empowers the Board of Trade to extend the area of State control and ownership of industry.
Those are the issues on which we shall vote this evening. I would have thought that it would have been a little more courteous to the House if the right hon. Gentleman had devoted at least part of his speech to the criticisms which we make in this Amendment—
—and which we have made in the past when we debated the previous White Paper.
We are grateful to the right hon. Gentleman for explaining to us certain provisions of the Bill. What he has told us will no doubt help us to decide our approach to the various detailed matters in the Bill when we come to consider them in Committee?
For the past 18 months, until the publication of the Bill, no one in British industry has been able to work out in terms of hard cash the taxation consequences of an investment decision. The fact is that, ever since the Chancellor of the Exchequer made his premature and ill-considered statement about a switch to Corporation Tax, a statement which, it will be remembered, was made within a few weeks of the Labour Government taking over in October 1964, the whole question of investment incentives has been in the melting pot.
I mention that not because I want to go over the ground which we debated on the White Paper, when I made some points about the uncertainty which had been engendered, but because, whatever may be the final form of the Bill when ultimately it receives the Royal Assent, it is of the utmost importance that the taxation treatment of investment expenditure should be settled. When we come to debate the Bill in Committee and on Report, our only purpose from these benches will be to make the Bill a better one.
Somewhat surprisingly, the right hon. Gentleman referred to the proposal in the National Plan, to increase manufacturing investment at an annual rate of 7 per cent. over the period between 1964 and 1970. That is what he told us. He said that that was in the National Plan, and it is right. He then went on to say, "But look at what happened in the previous four years, 1960 to 1964, when", he said, "the increase in industrial investment was only 2·4 per cent" Has the right hon. Gentleman not read again the speech of his right hon. Friend the Chancellor of the Exchequer when he wound up the Budget debate? The Chancellor told us that this year he did not expect manufacturing investment to be any higher than in the previous year—no increase at all. The exact words that he used were: that it will be
… much the same in 1966 as in 1965."—[OFFICIAL REPORT, 9th May, 1966; Vol. 728, c. 165.]
So much for the National Plan's idea of increasing industrial investment at 7 per cent. a year. At least, when we were in office, with a rate of 2½ per cent. a year, we did a little better than the Chancellor is now forecasting for this year.
Of course; because it was rising very fast in 1964, and that was carried into 1965. However, I will not dwell on the point. If the right hon. Gentleman is really satisfied with the prospect of virtually no increase in industrial investment this year over last year, all I can say is that none of us on this side is as complacent as that.
When we come to debate the Bill in Committee and on Report, as I was saying, our only purpose will be to improve the Bill. But I must warn the right hon. Gentleman that the most cursory glance at the Bill reveals innumerable points of detail which are vague and unexplained but which, nevertheless, are of the utmost importance to particular sections of industry, and obviously we cannot let these matters pass. Furthermore, the Bill provides for the implementation of principles which are at best of doubtful validity and which in some cases we believe will act counter to efficiency and modernisation.
For the reasons which we have set out in our Amendment, we believe that it is a bad Bill and that the Government have missed a great opportunity to improve and build on the system that they inherited from the previous Administration. I agree with the right hon. Gentleman that there were defects in the existing system, and, I am pleased that in some respects he has extended the assistance to be given to development districts although, in others, development districts or new development areas will not be so well off.
In the old system, there was considerable room for improvement. The right hon. Gentleman referred to the fact that rented television sets qualified for investment allowances. But those are defects which could quite easily have been removed without the changeover which is proposed in the Bill. Therefore, with all respect, I say that that part of his speech where he referred to defects and matters which needed to be improved was really irrelevant to the main issue that we have to consider.
Broadly speaking, the Bill is concerned with two matters. It is concerned with the general question of investment incentives and with the Government's regional policy. On the first, the general question of investment incentives, we believe that the Government's proposals in the Bill are unsound for six main reasons with which I want to deal in some detail; but it may be helpful if, at the outset, I enumerate the objections that we have to the new system.
Firstly, it is deliberately designed to discriminate against the distributive and service industries. That, to our minds, is both inequitable and economic nonsense and, when the impact of this policy is considered together with the new Selective Employment Tax, the Government's policy adds up to the most vicious swipe that any Government has taken against the shopkeepers and service industries of this country.
Secondly, we are opposed to the system because, in the majority of cases, the Government are actually cutting the cash benefit to industry of capital investment. The right hon. Gentleman shakes his head. I will come back to that point and, once again, I will give him some specific figures. I hope that when his hon. Friend comes to wind up, if he disagrees with my figures, he will give his own. It is no good simply denying these statements unless we are given an alternative answer.
The third objection that we have is that the proposal is to pay cash grants in respect of investment regardless of its profitability.
Fourthly, the administrative system selected by the Government is about the most cumbersome and costly which could have been devised.
Fifthly, the Government have decided on the one system which was least favoured by industry and commerce.
Sixthly, it is wrong that it should be left to the absolute discretion of officials of the Board of Trade to distribute £250 million of public money every year without even the semblance of a right of appeal.
I will deal now with each of these objections seriatim. The first of them is discrimination. Obviously, there is nothing wrong in principle in a Government selecting priorities and implementing them with a policy of discrimination. Indeed, the previous Conservative Administration introduced the principle of fiscal discrimination in favour of the development districts. We brought in the proposal for free depreciation, which was welcomed by the development districts and by industry which moved to those districts.
Right hon. and hon. Gentlemen opposite, when in Opposition, year after year went into the Lobbies in support of special taxation incentives in the development districts for the distributive trades, for the service industries and for hotels. That was said to be their policy. Now, as we know, with the cynicism which is becoming common form, that pledge has been abandoned. Year after year, we were told that it was the policy of the Labour Party. Now, it has been quietly forgotten, and nothing is to be done in that respect. But what we object to is the way in which this scheme discriminates against particular industries.
Consider, for instance, the transport industry, to which the right hon. Gentleman did not even refer. It is the case that road haulage in this country is responsible for 80 per cent. of the freight tonnage which moves around the country to the docks for export, and so on, yet the right hon. Gentleman did not trouble to tell us what the effect would be. Under the Bill road haulage is no longer to be entitled to investment allowances, and it is to be excluded from the new system of investment grants, yet every manufacturer knows that from the point of his customers road haulage is, for all practical purposes, part of the production line. The consequence of withdrawing the investment allowances from road haulage will be either to reduce efficiency or to increase prices, or both. To pretend otherwise is to fly in the face of reality.
Precisely the same considerations apply to the distributive trades, both wholesalers and retailers. It is less than eight months since the National Plan was published and referred to
measures to encourage further investment in distribution".
Now, under this scheme, the existing investment incentive is to be withdrawn. What is really incredible is the philosophy behind the scheme, which is based on the theory that it is right to provide a cash incentive for manufacturing industries to install labour saving equipment, but it is wrong to do so in the case of shops, supermarkets, hotels, and so on.
Would not the right hon. Gentleman agree that both under the old system and the new one, when a shopkeeper—or a large group—modernises his shop, neither the initial allowance nor the annual allowance is paid?
I have a good deal to say. I hope that the hon. Gentleman will get an opportunity later on to take part in the debate. The old system is being abandoned, and no new cash grant is being put in its place.
What about office machinery? I would have thought that most right hon. and hon. Gentlemen would agree that there were great savings to be made in clerical staff through the introduction of more sophisticated office machinery, and yet the Government are proposing that, unless an enterprise is big enough to use a computer or to share time on a computer, the cash incentive to invest in up-to-date office equipment is to be withdrawn. The principle of discrimination which the scheme makes between manufacturing and service industries is the same, broadly speaking, as that which is made for the Selective Employment Tax. In our view, it is outdated, inequitable, and fallacious.
Our second objection to the scheme is that as a cash incentive to modernise it is worth less in total than the system left by the last Conservative Government, and it is also worth less for most individual items of new plant and machinery. I am pleased that the Chief Secretary is here, because I have weighed my words very carefully, and I have also taken advice on this matter. If anybody is still in doubt as to the total value of the scheme being worth less than the scheme which was operating when the Conservatives went out of office in 1964, I would remind the House that the First Secretary, with that endearing facility which he has of from time to time inadvertently telling the truth, stated quite clearly on the B.B.C. that the cost would be
roughly what we are spending at the moment".
That is what the right hon. Gentleman said, but of course the amount which we are spending "at the moment", as he put it, has already been reduced by the devaluation of the investment allowances consequent on the introduction of Corporation Tax.
That is the case, and when we debated the White Paper I gave specific examples of individual items of plant and machinery which would be affected. I shall not go into detail again, but I cited to the House the case of a goods vehicle costing £2,000, where, under this scheme, the actual cash benefit in the first year of purchase would be £259 less than in 1964, and I stated that in each successive year the cash benefit would be less than under the old system. I also cited the case of a double decker bus which cost £6,500, where the cut in the first year under this scheme would be £841, and again the cash benefit in each successive year would be less than it was under the old system. I challenged the First Secretary if he denied my figures to get up and say so. He did not, neither did the President of the Board of Trade when he wound up the debate, and he has not done so today, so the figures stand.
In view of the right hon. Gentleman's reaction when we last debated this matter, I have been in touch with a leading tax advisor to one of the biggest companies in the United Kingdom, and I have here the figures which he has produced. The fact is that outside development areas, to which I shall come later—and, after all, development areas account for only one-fifth of manufacturing industry in the country—in every case the cash value of the investment incentives under this scheme will be much less than under the scheme which the Labour Government inherited. I shall give some specific examples because, first, I want to get them on the record, and, secondly, because I want the Minister of State who is to reply to the debate to deal with them if he wishes to do so.
In the case of normal plant and machinery—and I have the figures and the calculations here—under the old system the discounted present value of the reliefs over the lifetime of the asset was 61 per cent. of the cost of the asset. Under the new scheme it will be cut to 44 per cent. For mobile equipment, such as a fork-lift truck, the relief is cut from 64 per cent. of the cost of the asset to 46 per cent. Even in the case of a computer, the cut is from 61 per cent. to 44 per cent. For commercial vehicles, it is cut from 64 per cent. to 36 per cent. The hard fact is that the Government are deliberating cutting the cash incentive to modernise.
Our third objection to the scheme is that, unlike the existing system of investment allowances, the new cash grants are to be paid regardless of the profitability of the investment. I do not want to labour this point because it was mentioned by my hon. Friends when we last debated these matters, but I make no apology for quoting once again the sentence from the White Paper which seeks to explain this remarkable policy. It says:
Investment involves risks, and grants reduce the risks in a way in which an allowance dependent on the success of an investment does not.
As Wilfred Pickles would say, "Give them the money, Barney. It does not matter two hoots whether or not the machine will be a success." This is really what the right hon. Gentleman is saying in his White Paper.
Our fourth objection is to the extraordinary cumbersome administrative machinery which has been evolved. To put it quite briefly, the position is that to pay out less money than under the old system which existed in 1964 it will cost the taxpayer an additional £2 million a year, and not a man will be saved by the Inland Revenue. I am told that there are about one million taxpayers who are likely to be eligible to claim these grants. If they want their grants quickly, on the basis of what the right hon. Gentleman said this afternoon—and he said that the quick return will be one of the merits of the scheme when it is ultimately in full operation—it is not unreasonable to suppose that there will be about two and a half million claims a year. But for each separate item of plant the Board of Trade has said that it will want full documentation, invoices and receipts, or their equivalent. On a modest estimate this means that every year at least 50 million bits of paper will have to be sent to the Board of Trade, and it is little wonder that the President of the Board of Trade has already admitted that he will require more than an extra 1,000 civil servants to cope with this new scheme.
That is all very well. I, too, have been worried about these bits of paper. The right hon. Gentleman refers to 50 million, rhetorically, but on his own quotation a few months ago the Treasury would disgorge 250 million bits of paper, in £notes, to subsidise private industry. There should be proper accountability in the House. We do not want money to be dished out without proper accountability. I shall have more to say about this if I catch Mr. Speaker's eye, and I shall be even more critical than the right hon. Gentleman has been—but for a different reason.
The point that I am making is quite a simple one. We are changing from a system administered by the Inland Revenue, with proper accountability, to a system administered by the Board of Trade, without a single man being saved in the Inland Revenue and with 1,000 extra civil servants in the Board of Trade. I am sure that I carry the hon. Member with me on that point.
The fifth objection is that although this is designed to help industry the system chosen by the Government is that which was least favoured by industry itself. The advice of those who actually make investment decisions was ignored. This afternoon the right hon. Gentleman referred once again to the C.B.I. I wonder whether he read his morning paper on Friday? In it was a report of a speech made only last Thursday by the Director-General of the C.B.I., Mr. John Davies, in which he referred to the "clamour and complaint" of industry against the scheme. If the right hon. Gentleman is going to pray in aid the C.B.I. on these occasions he might give the full story. Why did not he quote the reaction of the Association of British Chambers of Commerce which said:
We regret that the Government has chosen a method which was clearly not favoured by commerce and industry?
The sixth and last objection to the scheme, concerned specifically with investment grants, is a very serious one. The Government have substituted for a system of Inland Revenue reliefs to which the taxpayer was entitled by law
and where he had the right of appeal to the courts, a new system under which grants are paid entirely at the discretion of officials, with no right of appeal whatsoever. I must remind the House that we are here concerned with £250 million a year of public money. Let me be a little more specific. The existing system of investment allowances, which is to be scrapped, was laid down in the Finance Act, 1964. The operative part, which is Section 16, reads as follows:
In the cases provided for by this section, an allowance (in this Act referred to as an 'investment allowance') shall"—
I ask the House to note that word—
be made in respect of capital expenditure on new assets incurred after the sixth day of April, nineteen hundred and fifty-four.
The House will note the word "shall". It is mandatory. The taxpayer is entitled as of right, and no Minister or civil servant can deny him his entitlement, provided for by Parliament.
Now let us see what the new scheme is in the Bill. Clause I provides that:
Subject to the provisions of this section, the Board of Trade (hereinafter in this Act referred to as 'the Board' may make … a grant
and it may make it, in the words of the Clause,
towards approved capital expenditure …
What is "approved capital expenditure"? If we turn to Clause 12 we find it defined in this way:
'approved capital expenditure' in relation to any grant means the expenditure appearing to the Board to be of a capital nature and approved by them for the purposes of the grant".
There again, the discretion of the Board of Trade is absolute.
And who, in practice, is to exercise this discretion? What is meant by the Board of Trade—the repository of this new discretionary power? The answer is contained in Clause 12(3) which provides that:
Anything required or authorised by or under this Part of this Act to be done by, to or before the Board may be done by, to or before the President of the Board, any Minister of State with duties concerning the affairs of the Board, any Secretary, Under Secretary or Assistant Secretary of the Board, or any person authorised in that behalf by the President.
There we have it. The sum of £250 million of public money is to be paid
to industry at the complete discretion of the bureaucracy, and the decision of an Assistant Secretary or a more junior civil servant is to be final and conclusive.
But there is more to it than that. One can search the Bill from beginning to end, but one will find in it nowhere any reference to a right of appeal. This is indeed Socialism with a vengeance. Under the original system which this is replacing the taxpayer who had a grievance against the Inland Revenue had a right to appeal to the Commissioners if he disagreed, and from there he could go to the High Court and to the Court of Appeal and, if necessary, to the House of Lords.
All this may be Socialism with a vengeance, but it is equally and identically true of all the grants made under the Local Employment Act, which the right hon. Gentleman's Government introduced in 1960.
Yes, but here we are not talking about grants under the Local Employment Act. We are talking about payments made to industry as an investment incentive. The right hon. Gentleman's own White Paper said that the new system was to replace the investment allowances perviously made by the Inland Revenue. We are dealing with £250 million a year, and we shall certainly need far more justification from the right hon. Gentleman in Committee for the fact that there is no right of appeal whatsoever.
The right of appeal which the taxpayer had when he differed with the Inland Revenue was his ultimate safeguard. All that is now to be swept away. Why could not the right hon. Gentleman have included in the Bill some such provision as now exists in the case where an industrialist wishes to appeal against the decision of the Inland Revenue? The Bill gives the Executive absolute discretion to dispense money to individual companies to the extent of £250 million a year without a vestige of any right of appeal. It was the President of the Board of Trade himself who first coined the phrase, "the gentleman in Whitehall knows best". That is the philosophy behind the Bill.
It is well known that one of the tasks of the Law Officers in any Administration is to peruse every Government Bill before it is introduced into the House and it has hitherto always been part of his duty, regardless of the convenience of the Executive, to safeguard the rights of individual citizens. I hope that the Government examine this question again.
The right hon. Gentleman talked about some sort of advisory committee which he hoped to set up, but under the terms of the Bill he is not under an obligation to accept the advice of such a committee. All that we ask is that there will be a right of appeal for the person who makes a claim, in the event of his disagreeing with an official who turns it down.
That is a question of great practical consequence for industry. Let me give one example. In the case of Hinton v. Maden and Ireland Ltd. the issue was whether certain essential equipment in the shoe making industry could be classified as "machinery or plant", and whether the expenditure was capital or revenue. The Inland Revenue refused an investment allowance. The company took the case to the House of Lords and it won, but under this Bill that company would have had no such right if an official at the Board of Trade had declined to pay the grant. I cannot believe that this is right. I cannot believe that the right hon. Gentleman cannot evolve some simple method of appeal, even if only in the first instance, which could apply to these provisions.
I said that there were two broad aspects of the Bill—the general question of investment incentives and the Government's regional policies. We on this side, are, of course, in full support of a policy of helping the development districts. If, as a result of the Bill, it turns out that they are to be enlarged to development areas, then of course we hope that that policy will be successful, although we believe—for reasons which we have put forward in the past—that the policy of growth points is more likely to be successful. But of course, the question at issue is not whether the Government are trying to help industry in development areas, but whether they are setting about it the right way.
Apart from one aspect, I shall leave the matter of regional policy for my right hon. Friend the Member for Argyll (Mr. Noble) to deal with in winding up. As for all the right hon. Gentleman's talk at the outset about the dire consequences for anybody who votes against the Bill, he knows perfectly well that the reasons that we take issue with him and his colleagues are very clearly set out in our reasoned Amendment. I pointed out when we debated the White Paper in February that the policy which is now enshrined in the Bill—of withdrawing investment allowances from the tourist and service industries—would deal a savage blow in many parts of the development areas. I explained why I regretted the policy of the Government in abandoning the concept of growth points. I am sure that this is a retrograde step, but I shall leave these matters to my right hon. Friend, because I know that many other hon. Members wish to speak in the debate and we have had a very late start.
In Part II of the Bill, which deals with development areas, I want to refer only to Clause 16. Whether one thinks that it is right or represents the wrong approach, that Clause empowers the State, with no reference to Parliament, to take shares in any company of any kind anywhere in the development areas, which, as the right hon. Gentleman indicated, now cover about half the country. The powers in the Bill enable the State to acquire a majority holding in any company and so to acquire control. No doubt we shall be told later on something of the way in which it is proposed to administer the powers sought by this Clause. But these are the facts. This is what we know from reading Clause 16.
Of course, this proposal will be nectar to the Left Wing of the Labour Party, but I would ask the right hon. Gentleman, will he or his right hon. Friend please tell the House why this was not disclosed before the election? We were given a White Paper before the election, which was rushed out, headed "Investment Incentives", which covered the whole of the new regional policy, but the one proposal which was left out was the proposal in Clause 16. Why was this so? Can the right hon. Gentleman put his hand on his heart and say that he did not have this in mind at all on 31st March? Why was it not in the White Paper? Why was it left out? The answer's perfectly simple—the Government deliberately held it back for electoral reasons, because they know— [HON. MEMBERS: "Oh!"] I have given him a chance, and if he tells me, on his honour, that this was not in his mind before the election, of course I will accept it—
I am sure that the right hon. Gentleman realises that no money will be lent to a firm in this way unless the firm wishes it and agrees to it. How he can object to that, I cannot imagine.
To say that a Clause which empowers the State, without any reference to Parliament, to take a majority holding in any company throughout half of the area of Great Britain is not a matter of great significance and importance is absolute nonsense, and the right hon. Gentleman knows that it is nonsense.
The superficial explanation given this afternoon by the right hon. Gentleman, I say with great respect—because I have a great regard and affection for him—was a feeble and very unconvincing one. There are a host of questions about this new proposal which need answering. If the Government take a minority holding in a company and the company acts in a manner which the Government consider to be undesirable, do the Government propose to intervene? If the Government take a majority holding in a company, does the right hon. Gentleman really think that the Government machine is suited to exercise control? The Government will have control. Are Government directors to be appointed to the Board, for instance—
No. This is an open-ended proposal which applies over half the area of Great Britain.
What will be the effect on other companies? Does the right hon. Gentleman really think that they will move to a development area in the face of what they regard as unfair competition from an enterprise in which the Government have a controlling interest? Does he really think that a Government shareholding in a company is more likely to encourage that company to move to a development area than the present financial incentives, even if improved?
The right hon. Gentleman said in an intervention that nobody is forced to put himself in a position where the Government have a holding of their shares. This is true, but if the right hon. Gentleman wants to encourage people to go to the development areas, surely the right thing to do is to provide incentives which will be attractive to industry. Since the Bill was published, I have not heard from a single industrialist, I have not read in any newspaper or journal, any suggestion that anyone in industry thinks that this is an attractive proposition or that this is what they want—
In the event of a suggestion being made by the Board of Trade that the Government should take an equity interest in a company and the company saying, "No, we will not do this; we would prefer to have an ordinary cash loan or grant", may I take it that the company's view will always prevail?
The situation is perfectly clear. All the previous facilities are available, as they have been up to now. If the firm agrees and if B.O.T.A.C. recommends either a fixed interest loan or equity capital, it would be open to the Government to agree and the previous facilities would be open. This is provided for.
This is true, but is it not also the case that, if the right hon. Gentleman in his wisdom cares to say to a company, "No, we will not give you a loan or a grant but will assist you by means of taking up part of the equity", he or his successors are entitled under the Bill to say just that? Therefore, there will be cases where the only assistance which can be given to a company will be assistance provided in the way of taking up an equity. This is clear from Clause 16, which could not be wider, and this is the sort of thing which we are afraid of.
If, in Committee, the right hon. Gentleman intends to write in all kinds of qualifications and conditions, then we shall obviously be only too happy to assist him, but at the moment he is seeking for himself an open-ended power.
The truth is that this is but one more Socialist proposal to enable the Government, by a process of infiltration, to extend the area of State ownership and control of industry—and without any reference to Parliament—[HON. MEMBERS: "No."] This is, of course, all part of the Socialist package—[HON. Members: "No."] But it is. It comes on top of the proposals to extend the manufacturing powers of the nationalised industries. It comes on top of the proposal to set up the Industrial Reorganisation Corporation, which even the First Secretary agrees will empower the Government to acquire ownership and control of existing businesses, as well as the power to set up entirely new businesses. It comes on top of the proposal to nationalise steel. The First Secretary was indeed being frank when he said in the debate on the White Paper on the Industrial Reorganisation Corporation:
… the boundary between public and private enterprise will change".—[OFFICIAL REPORT, 15th February, 1966; Vol. 724, c. 1130.]
I am pleased to see all the members of the Government Front Bench nodding
their heads. This is what they want. However, I can assure the House that—[Interruption.] It is good to know that right hon. and hon. Members opposite agree with me that this is what they intend, because one thing which is certain is that the boundary will change only in one direction, and that is towards more and more state control and state ownership.
We on this side of the House are wholly in favour of more assistance being given to development districts, and, as we say in our Amendment, we welcome practical encouragement of profitable industrial investment. But, in its present form, this is a typically Socialist Bill. It is administravely incompetent, it is grossly unfair, and it is economically unsound, and for the reasons which we have set out in our Amendment we shall go into the Lobby against it tonight.
I heartily support this Bill. As a new Member rising to speak for the first time, I ask for the indulgence of the House.
Conway constituency, which I have the honour to represent, has in the past been most fortunate in its representatives. I should like to pay particular tribute to the right hon. Peter Thomas, the previous Member for the constituency, who was highly esteemed in the House and in the constituency. He and I are very close friends, and I am happy to say that our political conflict has in no way marred the warmth and sincerity of our friendship.
The constituency in its present form was created after the war, and there are still many in the House, who remember with great affection the presence here of Mr. Elwyn Jones, who was the first Member for the Conway constituency. Part of the constituency—the part incorporated in the then Caernarvon Boroughs—was represented by David Lloyd George, and, as the first Welshman to speak today, I should like to pay my tribute, and I know that of everyone in Wales and in the House, to the memory of that great and dear lady, Megan Lloyd George.
The Bill carries with it great promise for my constituency and for the whole of North Wales. Conway constituency is diverse and varied. Certain areas are almost completely Welsh speaking. Other areas are completely Anglicised—in language if not in sentiment and outlook. The most striking feature of the constituency is its startling scenic beauty—the Menai Straits, the coastal resort towns, the Great Orme promontory, the rich and fertile Conway Valley and the rough grandeur of the Snowdonia mountain range.
But North Wales, in spite of its beauty, has, and has had in the past, its hidden wounds. Industries on which it has relied heavily in the past have declined. I hope the Bill will do much to offset the effects of past trends.
The House will have frequently heard my hon. Friend who shares the representation of Caernarvon county with me, the Minister of State at the Department of Education and Science, draw attention to the problems of the slate quarrying industry in North Wales. The slate industry is a highly localised industry. In Britain, slate is quarried on any scale only in certain parts of North Wales and in Cornwall. Indeed, in Cornwall most of the workers in the slate quarries are Welsh in origin. In North Wales—in Bethesda and Llanberis, in Blaenau Ffestiniog and Penmachno—it has been accepted as one of the sad facts of life that the process of contraction which has taken place cannot be reversed. Where previously thousands were employed now hundreds are employed.
But a point of stability had been reached and it looked as though the slate industry had a restricted but none the less prosperous future. The Bill was welcomed in the slate quarrying areas and in the granite quarries of Penmaenmawr. The investment incentive grant of 40 per cent. would enormously help the North Wales quarries and would be of assistance to new industries which have been, and will be, established in those areas.
But there is a danger of bitter setback. What was to be given in the Bill may be taken away, unless we are very careful, by the absurd anomaly, due, I am sure, to an oversight which can be rectified during the Committee stage of the Finance Bill whereby slate quarrying, which needs so much encouragement is classified as a service industry for the purposes of the new Selective Employment Tax whereas its direct competitor, the roofing tile industry, qualifies for rebate. Unless this anomaly is removed, no steps taken as a result of this Bill can save the slate industry. I hope that the President of the Board of Trade will make representations to the Chancellor of the Exchequer on this matter.
I hope also that the President of the Board of Trade is looking into possible new uses for slate and slate waste of which we have thousands of millions of tons in Wales. Ground and powdered slate waste can be used as an inorganic base for cosmetics, but the most optimistic forecast of increases in the demand for cosmetics will hardly run to thousands of millions of tons. The industry has been very enterprising in its search for new uses for slate. One encouraging possibility is connected with the construction of airfield runways used by jet aircraft. The vibration on certain parts of the runways where jets are used is such that the foundations tend to break up, and there is reason to believe that slate is more resistant in this respect and less prone to disintegration than any other material.
I mentioned earlier that Conway is a very beautiful constituency. All along the coast and in the Conway Valley the climate is mild, with exceptional sunshine figures. This is confirmed by the fact that vines were at one time grown on the slopes of the valley. In the correspondence of the Gwydir family, there is a letter written to John Wynne of Gwydir in 1602 by Richard Barker, the second justice of North Wales, thanking him for a gift of wine produced on the Gwydir estate. The wine is described as
more excellent than the grapes of France, or the wine of Greece or Spain"—
probably more indicative of the tactful diplomacy of the recipient than the true merit of the wine.
The climate, the scenic beauty, the Edwardian castle at Conway and the suspension bridge—now to be taken over by the National Trust, a great tribute to the efforts of local people in Conway to preserve their bridge—the seaside resorts of Llanfairfechan, Penmaenmawr, Conway, Deganwy and Llandudno, the beautiful university at Bangor, the mountain lakes and passes—all these have made the area enormously attractive to tourists.
I want to direct my closing remarks to tourism in relation to the Bill, not just as it affects my constituency but as it affects Wales generally and the whole of Britain.
In spite of the enormous benefits that will result from this Measure—and this I do not in any way underestimate—unless we are very careful, the tourist industry may suffer two serious setbacks. This is an industry of great potential and promise. In Britain as a whole—and I cite the last Report of the British Travel Association—tourism rates as the fourth most important export industry and it is predicted that by 1970 it will be earning £500 million a year from overseas visitors and will be the biggest single export earner. In Wales the tourist industry has a turnover of upward of £50 million a year and is the fourth most important industry, and well might become the third.
The House will recollect that the reorganised Welsh Tourist Association, under a Government grant of £40,000, is carrying out a three-year research programme, examining tourism in Wales. One year has already elapsed and an interim report will be published in the near future. While it is impossible to anticipate the findings of that report, I gather that what has emerged most clearly is that the research has been invaluable.
This is an industry and, consequently, it has to know and understand its market. Answers have been found to questions which could only previously be guessed at. The industry undoubtedly will grow and tourism will have to change. The demand is no longer for bed and breakfast for a fortnight. Most tourists are now mobile and they want independence. Particularly what they are looking for is the holiday chalet and motel. Over the next 10 years there will have to be enormous investment in the industry.
The prospects have looked very good for tourism, but now I come to the double misfortune which may befall the industry. It is a service industry and unless, as in the case of agriculture, a change is made, it will be affected by the new Selective Employment Tax—this in spite of the fact, both that it is already understaffed as an industry and, consequently, there is nothing to be said in favour of moving its employment resources from that industry into manufacturing, and also, that it is a seasonal industry which means that its overheads must be paid throughout the year and the staff must often be kept on at a loss during the winter to ensure and guarantee their presence during the summer. In Committee of the Finance Bill I trust that my right hon. Friend the Chancellor will give the same treatment to tourism as has now been agreed should be given to agriculture.
The second blow that might befall the industry is that it does not qualify for industrial incentive grants under the Industrial Development Bill in its present form. I strongly argue that the tourist industry should be included, and I do so for three reasons. The first is that it is a proper industry in the sense that the whole economy of certain areas is entirely dependent upon it. In many areas in my constituency it is the sole and basic industry, and this is true of many parts of Britain.
Secondly, tourism is an important foreign currency earner, much more so than some industries which will receive formidable assistance under the Bill. It can provide the most valuable contributions to our balance of payments.
Thirdly, this industry is at a critical point of development because the nature of the tourist trade is changing and to adapt itself to these changes there will have to be enormous investment; the improvement of amenities, new equipment and catering facilities and new types of accommodation. The industry must be redesigned and reorganised.
If tourism is to meet this challenge and is to make the contribution which it can to the national economy, it will have to be assisted on a considerable scale and I implore my right hon. Friend the President of the Board of Trade to reconsider this whole question and look into the possibility of including the tourist industry within the scope of the Bill. With that one reservation, I have the highest regard for the terms of the Bill.
I have the pleasant task of congratulating the new hon. Member for Conway (Mr. Ednyfed Hudson Davies) on his maiden speech and upon entering Parliament. The oratory of the Welsh is not only musical, but invariably persuasive. The hon. Gentleman has shown us that his persuasiveness is no exception to that of many of his fellow countrymen. I am sure that he will persuade the Minister of Aviation to put down slate runways and I sincerely hope that the President of the Board of Trade will listen to his persuasive remarks about the need to encourage the tourist industry.
I feel that the hon. Gentleman's oratory excuses me from embarking on that aspect of the Bill and I will, therefore, deal with other matters. It is a matter of regret to my hon. Friends that Peter Thomas, his predecessor, is no longer in the House. I am sure that the hon. Gentleman will understand our view.
Having attended the debate on 15th February on the White Paper on Investment Incentives, and bearing in mind that I was the last hon. Member to move an Amendment to the Motion "That. Mr. Speaker do now leave the Chair", on 26th April, 1960, on capital investment in industry, my first observation is to examine my own attitude some six years later—first, on the problem of capital investment in industry and, secondly, on the extent to which the Industrial Development Bill is relevant to this problem.
As I said six years ago, and as I say now, I would support any scheme to modernise industry, encourage new technological development and those factors which provide, to use the words of the Resolution of six years ago,
… an essential prerequisite for effective capital investment
I have read the report of that debate and would remind the House of various points which I raised then. The first issue was that of scale, particularly in research and development. A particular issue then was that of continuous casting. It is interesting to note that the percentage of continuous cast steel produced in Britain last year, compared with other countries, was the highest of any country. This is a remarkable development in six years.
The second issue that was relevant then was that of risk, and I cited my practical experience as a young manager who had embarked on a manufacturing venture requiring new plant and buildings. Naturally, it was necessary to meet the criteria which ultimately is all important, namely, that those investing in these new processes, in my case the company with which I was associated, should enjoy an adequate return on capital.
I had then set for this project a target for 10 years before I anticipated that operations would be sufficiently profitable to give a good return on capital. I am convinced that the time scale in many new technological industries is nearer 10 years before investment will begin to pay off than the two or three years which was cited, in contrast, by the Chancellor of the Exchequer when dealing with investment overseas about a week ago.
To digress, since I first made my remarks we have had the 1960 and 1963 Local Employment Acts. I listened to the debate two months ago and was aware that much of the language of that debate was in terminology with which I was not as familiar as I would like to have been. Financiers, accountants and some economists dominated much of the debate. So I approach this Bill from the point of view of a manager in industry, remembering that the decision about whether or not to make an investment must obviously rest with the board of the company concerned.
Part of the pattern of management expertise is to have greater knowledge of the economic and technological factors when making an investment decision. It must be on the judgment of these people that the decision is made. Many such people, particularly those in the medium and smaller sized businesses, will not be familiar with the terminology used by the larger companies and with which some of the experts in Parliament are familiar.
That is why I believe that we in this House must watch because much of the subject matter of this and future debates will go above the heads of many of those who will make the key investment decisions for their factories. I say that because I have the greatest respect for the expertise of the technological managers, their "know-how" and judgment, particularly those in the medium and smaller businesses. Any scheme that would encourage capital investment must be to them simple and consistent.
What has been the pattern of capital investment in industry? In 1963, public and private sector investment was £4,588 million, and in 1964 it was £5,320 million—an increase of £732 million. In 1965, there was a slight increase to £5,533 million—a further increase of £213 million. This brings us to the interchange that took place between the Front Benches. The figure for the fourth quarter of 1965 is only slightly above that for that period of 1964, and it is also true that investment in the private sector has decreased in those five quarters but investment in the public sector has considerably increased.
Why, therefore, should capital investment have been so static in the private sector, and more static than the Government would have wished? During the debate in April, 1960, I stressed that a decision to embark on new technology and invest in new production processes meant risk, and I have already illustrated this point from my own experience.
One answer is that in a society which is highly taxed, where the individual as well as the company is highly taxed, the reward for taking risks is not sufficiently great. The Bill does not touch that problem, and successive Finance Acts and the Corporation Tax have not helped. Another answer is that leading industrial organisations have impressed on the Government the need to see that whatever allowances and incentives are used should be consistent, and should not vary from year to year—an issue brought home to me in 1960; there was stability for a time.
The uncertainty, which the President of the Board of Trade admitted, has undoubtedly been another factor in slowing down private investment. If one factor has been lacking in the last eighteen months it has been that of consistency, and in my view the Bill will not in any way improve the situation. The fewer uncertainties there are the easier it is for industry to plan decisively, so it is regrettable that Clause I makes the entire system dependent on the discretion of the President of the Board of Trade and the civil servants.
That brings me to the sixth point put by my right hon. Friend the Member
for Altrincham and Sale (Mr. Barber)—what to read into the permissive tone of these words in Clause 1:
… the Board of Trade … may make to any person carrying on a business in Great Britain a grant towards approved capital expenditure …
If the scheme is to be discretionary, it is essential that it should not only be equitable but should be seen to be equitable.
Clause 10(1) states:
The Board shall arrange for the appointment of one or more committees for the purpose of advising the Board on the administration of this Part of this Act.
It certainly seems to me that the investment grants advisory committee does not provide adequate safeguards, and if we are to have the permissive nature of Clause 1 we should incorporate an effective appeals procedure and provision for publication of appeals decisions. After the assurances given by the President of the Board of Trade we would want further thought about this, but we have to face what is said in subsection (3) of Clause 12. This is something that we on this side of the House must probe in Committee.
But just as it was important in 1960 that there should be consistency, so I see it as important that there should be consistency now. That is why I view the powers in Clause 6 to vary rates of grant and add further assets eligible for grant as being dangerous, and bound to bring about an element of uncertainty where certainty, above all, is essential. It is my sincere hope that the President of the Board of Trade will give an assurance that these powers will be used only occasionally.
But even such an assurance will not be enough for businessmen. I suggest that the procedure used by the Minister of Agriculture with the National Farmers' Union over the Annual Price Review might provide a precedent which the President of the Board of Trade could look into. The position would then be that if there are powers to vary a grant those powers would be limited to, say, not more than a 2½ per cent. or 5 per cent. variation in any one year. The Bill would then have the consistency for which industry would ask. I therefore ask the right hon. Gentleman to look into this very carefully, particularly as any Order seems to be operative from the date of its publication.
The third point I wish to raise relates to the merits and demerits of the cash grant system. Some in industry will welcome this provision. This matter, of course, was debated last February, but it will be the boards of the smaller forms who have not yet cultivated the more sophisticated techniques so necessary for major investment decisions who will most value it.
I believe that I am not divulging any particular confidence when I say that two years ago the Sheffield Junior Chamber of Commerce put up a paper, the contents of which I sent to the then Chancellor of the Exchequer, my right hon Friend the Member for Barnet (Mr. Maudling). The paper outlined a scheme for incentives for investment by way of cash certificates or demands. The subject was discussed within the Chamber of Commerce movement, but we know its ultimate conclusion, which was released to the Press a short time ago.
There is, however, some merit in the observations made by the Leader of the Liberal Party, in the February debate, that these cash allowances should be deducted from the cost of the asset supplied to the customer, and that the manufacturer of the capital asset should make the appropriate claim. This makes the grant much more palatable to the person in a small business buying capital goods. I believe that if this were done, the smaller company would have a much better idea of the net outlay which would be incurred when capital plant is purchased.
Would the hon. Gentleman then proceed to argue logically from that premise that the original grant be passed from the manufacturer of capital goods to the purchaser of such goods, and that, ultimately, the consumer goods coming from that process enjoy the benefit of the grant at the point at which the goods are bought in the retail market?
Not for consumer goods, but it is reasonable for the small firm, which can see at once that the capital cost of the plant it is buying is not the capital cost of the quotation that comes in from the supplier but the quotation less the appropriate allowance.
The important thing is that the directors of a small company making the key decision should know the real cost. With the bigger company, of course, cash flow, cash flow requirements and return on capital are studied. Technical directors have financial advisers to show whether or not a project is viable. This is done on a collective basis.
The purpose of my observation is to confirm that many small firms welcome, and have welcomed, the concept of investment grant, but what they do not welcome is the fact that the new system of taxation will in fact give them less money than would have been the case in the old system by way of investment and initial allowances and because of the Corporation Tax. My right hon. Friend the Member for Altrincham and Sale was involved in an exchange on this point, and the figures of 1st March have been quoted, but the accountants' view, and the view of many others, is that this new scheme of grants is a swindle which it will take many years to prove or disprove. The view of industry, and particularly industry in the non-development areas, is that, at the end of the day, it will get considerably less money than it did under the old scheme. There has been no categorical denial that this will not be the case.
I wish now to raise two Committee stage issues. There is some debate about whether the differential between 20 per cent. and 40 per cent. is fair on some manufacturing areas, particularly an area such as mine, in Sheffield, which is not far from many of the coalfields which are declining. South Yorkshire will very much feel the effect of the area being in a 20 per cent. grouping, and not subject to the 40 per cent. allowance.
A second issue relates to the iron and steel industries, let alone many of the metal-using industries, which, to meet their requirements for health and safety, must install equipment to meet the regulations of the Factories Acts and particularly the Clean Air Act. The extraction of dust and fumes is essential in the grinding shop, the fettling shop, and in the major melting furnaces. This presents many expensive technical problems which require closer consideration.
I ask the President of the Board of Trade to give consideration to a 40 per cent. grant for all equipment required to meet the provisions of the Clean Air Act. In the steel industry expenditure during the last five years has been £20 million, excluding blast furnaces, and in iron foundry it has been £13 million. Capital equipment to meet the provisions of the Clean Air Act, let alone the many factory and safety regulations, which is another matter, should qualify for a higher rate of grant, namely, 40 per cent. I ask the President of the Board of Trade to give that further consideration.
I now wish to turn to other details in the Bill. Clause 21 gives the Government and the Board power to attach conditions to industrial development certificates. I should like to have clarification of this from the Minister. Clause 7 includes a number of undesirable features, one being that the Board of Trade shall impose such conditions as it thinks fit for securing that the asset will be used as required by the provision under which the grant is made. There is apparently no limitation to the conditions which the Board of Trade may make. This appears to be unsatisfactory.
There is the question of making grants for capital investment irrespective of whether that investment leads to a profitable outcome or not. This was debated when we discussed the White Paper. Three months ago I would have put forward a solution which combined a form of investment allowance and a grant, the allowance depending on a profitable outcome of ventures. This would lead to administrative difficulties, but there would be the satisfactory position that some proportion of the allowance would be dependent on an ultimate profitable outcome. Without that there would be a field for abuse. There are some anomalies with which I have no dispute, particularly concerning capital allowances for cars and television sets. I recognise that the President of the Board of Trade has made many reasonable concessions.
But my final point concerns Clause 16. It is well known that it is the policy of the Government to implement Clause 4 of the Labour Party's programme, "ownership of the means of production, distribution and exchange." It is, therefore, no surprise to me to see Clause 16 of the Bill, which gives the Board of Trade power to make a loan to an undertaking in a development area repayable by the issue to the Board of shares in the company concerned and power to subscribe to shares in the company instead of, or as well as, giving assistance to it. There is need for clarification of the first Front Bench exchanges we had on this.
If a company specifically wishes to avoid repaying the loan by the issue to the Board of shares in the company concerned, will the loan or grant be then withheld? It could well be that certain small companies have very good reasons for not wishing to have the Government or the Board of Trade as their shareholders. A clear understanding should be written into the Bill that a firm can choose either method. As it now stands, this particular Clause makes what might have been otherwise a palatable if somewhat deceptive measure which might well have been acceptable to industry, thoroughly unacceptable. It is for this reason that I support the Amendment of my right hon. Friends, and will oppose the Bill in the Division Lobby.
I welcome the Bill most sincerely, because it is a Measure to organise the resources of the country and to bring some hope to the older industrial areas.
When I listened to the right hon. Member for Altrincham and Sale (Mr. Barber) I was sorry that I did not hear very much about development areas. We heard the usual clichés about profitability and that sort of thing. We on these benches are out to maximise the use of economic and manpower resources of our country. A Measure such as this should have been introduced in the early 'fifties because it is the logical development of the 1947 Distribution of Industry Act, which brought such a change in the older industrial areas of Wales and the North of England.
We are not apologising because we believe in planning. I shall not apologise because we have been returned as Socialists. We are not afraid when we are accused of Socialism. We believe in planning because we believe that it will bring real prosperity to the people of the country. The party opposite, of course, has never believed in planning. It has always believed in the free play of economic and geographical forces. The result is obvious to us tonight. There is the industrial area of the Manchester-London axis which is affluent and cluttered, while, at the same time, older industrial areas which have served the nation so well in the past, and which are rich in community life, are declining.
The ports of those areas, Liverpool, Newcastle and Glasgow, have been allowed to decline because this problem has been ignored by the party opposite for 13 years. They believe in the free play of economic forces and have relied on monetary controls. There was no imaginative policy to control the pattern of industrial localisation, and when monetary controls were applied it was the declining areas which suffered in each instance. There was enough economic and commercial confidence in the Midlands and the South to stand the monetary pressure, but in the North and in North and South Wales we suffered. It is only right that we should say tonight that we have heard a great deal about inflation in the past, but the point which I wish to make is that the policy adopted from 1951 to 1963, of ignoring the problem of controlling the localisation, has been most responsible for inflation.
We shall see whether it is nonsense.
There were movements of people into the Midlands. That meant the finding of new social capital for new offices, schools, houses, market places, and petrol stations. Social capital had to be built, but social capital which was in the older areas was not allowed to be used to the full capacity. Our resources were used to build new social capital at a time when the country could not afford it. That has been one of the most powerful inflationary forces of the last 20 years.
We have been told all along that the inflation was due to the wages-prices spiral. Indeed, wages were a factor, but again the lack of policy by the previous Government was responsible for they allowed population to move to the congested areas. The result was competition for manpower resulting in overtime and double time, all of which was inflationary. In the Midlands as late as 1960–61 there were three vacancies for each person employed. In the North of England it was quite the reverse: there were four men available to fill each vacancy.
We reached the paradoxical situation of overspill. Because of the Tories' failure to plan, the Midlands and the South acted as a magnet drawing people in. When people were drawn in, local authorities had to face the problem of overspill. When the history of this period comes to be written, it will be a most fantastic story.
The prosperity which was achieved in the Midlands at the expense of the North meant that there was a market on the doorstep which discouraged exports. Tory Governments applied monetary controls—Purchase Tax, and so on. These did not have any effect in regions of prosperity. They had effect only in regions where industrial confidence was lacking.
This Bill should have been introduced years ago. I am a great supporter of it. I have had experience in living in one of the older industrial areas. I live in the Wrexham division. I have lived there all my life. Now we are faced with pit closures. There is a lack of confidence in the future of coal mining in my area. It is virtually impossible to persuade people in my division that there is a future for it, for this reason. There are five large collieries. One closed last March. Of the remaining four, only one has a future. The other three are doubtful. So the industrial area has a gloomy future from the point of view of coal-mining. This is an area with a population of 100,000 and with a basic industry—coalmining; but coalmining in my area has a very dim future. It is no use waiting for the mines to close. That is why I welcome the Bill. It meets the situation that we are facing in my area. It will encourage firms to come to areas such as Wrexham.
One of the coalmines in my area is Llay Main. It was the last colliery to be sunk. It was sunk after the First World War. A village grew around that mine. That colliery closed last March. There are workshops near by. I hope that this Bill goes through Parliament very quickly, because I want those workshops to be taken over by another firm so that prosperity can be brought to this village, which is such an important village in my division, namely, the village of Llay.
Then we have in the Wrexham area the industrial estate. There is plenty of land. The right hon. Member for Altrincham and Sale said nothing about the development of areas, of which Wrexham is an example. However, the Bill in concerned with this and that is what matters. I want advance factories to be built on the industrial estate in my division so as to be ready for any eventuality.
Old industrial areas have left behind their dereliction. My hon. Friend the Member for Conway (Mr. Ednyfed Hudson Davies) knows about the situation in Caernarvon. I know the situation in my division. Collieries which were closed over 100 years ago have left their scrap heaps behind them. There we have industrial villages with populations ranging from between 6,000 and 11,000. The whole area is scarred with dereliction. It is unfair for the country to expect us to live along with such ugliness in 1966. We have suffered this ugliness throughout the years. It is squalor. It is not dignified and is unworthy.
Because of this situation, there are far too many unadopted roads in villages. I am glad that this Bill will provide grants to local authorities to clear these derelict areas. In Denbighshire there are 1,642 acres of them, most of which are in the Wrexham division. We do not want them to be cleared merely for the sake of clearing. We know that when they are cleared they can be very attractive sites for small firms which can come and establish themselves in the villages. This will be the answer to our problem.
Yes, at pinpoints in the country, provided that there was a small deep pocket of unemployment.
That was why Wrexham could not get the grants. It is now a development area. Because it is a development area, it will be able to get a grant under this Measure. Small factories will be able to come to the villages. We shall have large factories as well. As a result, there will be diversification of two types. There will he diversification of industry in production and diversification of industry in size. If we can get that, we can have a properous area and it will open a new chapter in the history of our industrial area. It is because the Bill promises that that I have very great pleasure in supporting it.
There are many points on which the Bill can be criticised, a number of which have already been mentioned by my right hon. Friend the Member for Altrincham and Sale (Mr. Barber). One of the greatest defects of the Bill in comparison with the previous legislation is that no account of the profitability of firms is to be taken in making grants. Under the old system a firm had to show that it was viable by making a profit before it got a grant.
I am well aware that the profit motive is not looked on with favour by the Labour Party. However, we are looking for an expanding and efficient country as a whole. If there is not efficiency in the basic firm which is producing, there will not be overall efficiency and we shall not get value for money. It is said that under the old system it took far too long for allowances and the cash payments to be made. I cannot see that any payments to be made under the Bill will be made in under 18 months at the very least.
The Bill leaves out of account the so-called service industries. In my constituency about 74 per cent. of the population is employed in service industries. To take but one example, I will mention the transport industry. In a scattered community with rather poor communications, it is essential that we have good road transport. It is possible that some of the railway lines in the area will come under the axe. Without grants to the transport industry, we shall be even more isolated than we are at present.
I want to mention what Cmnd. 2864—The Scottish Economy, 1965 to 1970, a Plan for Expansion—has to say about these service industries. I am quoting from page 36 paragraph 143 and I think this is very pertinent to the question at issue. It says:
The Government is conscious of the rôle which the service industries have to play in the expansion of the Scottish economy. In addition to the contribution which certain of them make directly to economic growth, they help provide the basic prerequisites for industry as well as providing the facilities and opportunities which go with a rising standard of living. They also play an important part in influencing both the capacity
to restrain migration and the ability to attract new industry.
In my constituency, and in many more like it, in the North and North-East of Scotland the restraining of migration and the ability to attract new industry is the key problem with which we are faced. I think that the whole country, and certainly the House, would agree that one of the rôles of the more prosperous areas is to help those which are not as well off, and unless we have a viable economy this cannot come about. The whole Bill and what we are trying to do must be viewed in the context of national development. One of the chief problems we have to face is the divergency between the incomes of people who migrate from these areas and those who stay at home. The only way in which we can bring up the incomes of those who have enough faith to stay at home is by the introduction of new industry.
Viewed in the context of the Bill, the overall National Plan makes me rather suspicious of the Government's intentions. The National Plan, on page 85, paragraph 5, states that
Regional policies will not be concerned with bolstering up small areas which have no economic future.
Where do we go from here? The point is: are we looking at the country as a whole or are we neglecting small areas—small areas which, according to the National Plan, "have no economic future"? I would, however, draw attention to the fact that people live there and they are the problem people whom we have to look after.
What is the yardstick for help? We are told that unemployment is one of the yardsticks and now, thank goodness, depopulation is also a yardstick. The latest unemployment figures that I have seen show that on the North-East Coast of Scotland the present rate of unemployment among the male population is 6·6 per cent. So unemployment is still a pressing problem in the North-East of Scotland. I would agree wholeheartedly that depopulation, too, must count. Ever since I came into this House in October, 1964, I have been pressing that the other part of my constituency should become a development district, and now that we have got this vastly increased area for the whole of Scotland, it does.
I would welcome that if I thought that we were to get the full benefits from the old system and not from the new. What now are the incentives for firms to go further afield than the central belt of Scotland where, thanks to the Tory plan, we have got very good infrastructure and very good communications with the South? I cannot see that these new proposals will induce firms to move further north, where the brawn and brain drain is really at work.
Intervening in the debate on investment incentives on 15th February the First Secretary said:
It was becoming clear, particularly in Scotland, that we could not act effectively in this way unless we set out to repopulate and, in some cases, to redevelop, in order to bring about economic prosperity and a good social life, much wider areas.
Later in that same debate the President of the Board of Trade said:
We are determined to overcome the handicap which the nation has suffered so long of under-employed areas at one end of the country and congested areas at the other."—[OFFICIAL REPORT, 15th February, 1966; Vol. 724, c. 1162, 1238.]
I think that rather than remembering his own words, the President of the Board of Trade last week, when he announced more advance factories in Scotland, was thinking of the National Plan. He was neglecting the outer or peripheral areas and was thinking of central Scotland. We are grateful in Scotland for these advance factories, but we would like to see them disseminated about a little more and taking into account what the Government say they are taking into account, namely depopulation.
But—and it is a big but—I see one great danger in the Bill. Not only is the jam spread a good deal thinner than it was before, but there is an even bigger concentration in central Scotland and the developed areas than before. In other words, the Bill, if pushed to its logical conclusion, could make central Scotland, as opposed to the other parts of Scotland, another South-East of England. It is time that consideration was given—indeed, there are provisions in the Bill for this—for taking developed districts out of the development areas and concentrating, as I say, on the periphery.
In the past we on this side of the House have been critical of the lack of action by the Government. Here in the Bill I think the action has come too quickly. In a sense, we have got the cart before the horse. Development is dependent on infrastructure, and the responsibility for infrastructure rests with local authorities. Therefore, I think it most important that we get reorganisation of the local authority put first. I ask the Government to press on with this, in spite of the fact that they appointed a Royal Commission on Local Government, because it has a weakness. We have had the setting up of regional planning councils and boards. There is no contact between the local authority and these boards. This is essential.
For instance, the development officer of a county council may be drawing up plans for development, but he has no relation whatever with the planning councils and boards, and that should be looked into. Whitehall and town hall must be on the same wavelength. In the case of Scotland, St. Andrew's House and St. Andrew's must be on the same wavelength. Likewise, Ross County and the Secretary of State for Scotland. They must see eye to eye on such problems as population drift and decentralisation. I contend that Scotland will be worse off under this Bill than we were under the previous Local Employment Act. Not only is there a change in substance of the incentives, but the effect of Corporation Tax, as one of my hon. Friends has already mentioned, comes into the picture.
If I may take but one example for a development district as it is at the present moment, under the old incentives as they stood at October, 1964, when Income Tax, I would remind the House, was at the rate of 7s. 9d. in the £, Profits Tax at 15 per cent. and a grant available of 10 per cent. on the initial cost of a machine of 100 units, the company putting in that machine had to bear only 27 per cent. of the cost. Under the Bill, if the development areas are set up, the same machine will cost the firm 36 units. In other words, the extra burden falling on the firm is 9 per cent. This is no incentive for firms to expand and get on as we want them to do.
As one of my hon. Friends said it is a great pity that the Government have lost sight of the growth points concept. That, as the House will remember, was first stressed in the Toothill Report of 1961, and it formed the basis of the splendid plans which we adopted for central Scotland. Now we have the blanket proposals in this Bill which cover vast areas, something like 55 per cent. of the total land area of the United Kingdom.
I put several suggestions to the Government at this stage. First, they should get back to the growth point concept. Second, they should be prepared to give greater grants to industries in depopulating areas if they utilise natural resources. I am thinking particularly of forestry, agriculture and fisheries. If a firm says that it will set itself up and utilise those resources, then a 45 per cent. grant should be available for it. Third—and this is, perhaps, somewhat unorthodox—I suggest that a new Minister be appointed, a Joint Under-Secretary at the Board of Trade who has the suffix "Scotland" after his name. It is essential that we have a Minister who can deal solely with development in Scotland. There is in my remarks no disparagement of the present Under-Secretary of State for Scotland, but he has far too much to do—[HON. MEMBERS: "Where is he?"]—adequately to cover this very large and important field.
There is one provision of the Bill to which I give my unqualified support, that is, Clause 26, the Clause making increased grants for fishing vessels. But, in view of the Government's actions last summer in relation to the industry, it is only just that they have put it in, and I am very glad to see it.
I ask the Minister of State two specific questions. Under the de minimis announcement today, will he take into account the fact that whisky casks which are used for maturing whisky cost very much less than £25 each? Will they qualify for this grant? Second, will effluent plants for distilleries qualify for capital grant?
The measure of the task that this Bill has to face is to be seen in the following figures. In 1964, the population of the Highlands of Scotland was about 200,000. In 1964, the population of the Highlands was about 120,000. In my own constituency the population dropped by 6,000 between 1951 and 1961, a drop of 12 per cent., and since then the trend has continued. In contrast, the population of Northern Norway in 1864 was 100,000 and in 1964 was 400,000, a fourfold increase. The Norwegians can do it. I am quite certain that we can do it.
In conclusion, I quote again from the First Secretary in the same debate on 15th February:
We are trying to bring the wider areas up to the level aimed for in the case of the old development districts."—[OFFICIAL REPORT, 15th February, 1966: Vol. 724. c. 1162.]
That is splendid. It can be done, but this Bill is not the way in which it can or will be done. I shall join my hon. and right hon. Friends in voting against the Bill at the end of the debate tonight.
I am prompted to intervene briefly for two simple reasons. First, I think that I can prove that I have displayed a genuine interest in industrial development, and particularly the distribution of industry, in this House over many years.
Casting my mind back, I recall that, when I eventually conjured up sufficient courage to make my maiden speech in this Chamber, a good many years ago, I did not take the usual precaution of advising Mr. Speaker that I wanted to do so, and I dived into a debate of this kind—it was a quite spontaneous effort on my part—and proceeded to air my views, with the result that I was called to order three times as a maiden speaker.
That is something which I remember with a certain amount of pleasure, though on this occasion, Mr. Speaker, I shall not seek to repeat such a transgression, since you have occupied the Chair with such distinction.
The second reason why I thought that I might speak for 10 minutes or so is that I listened to the opening speeches delivered by the President of the Board of Trade and his opposite number, the right hon. Member for Altrincham and Sale (Mr. Barber), with whom I am in a special relationship as he happens to be my own Member of Parliament, though this does not alter the fact that I often strongly disagree with all kinds of pronouncements which he makes on economic matters. Tonight, I have heard heresies from both Front Benches.
I stand here, as most hon. Members who have been here for any length of time know, as very definitely a Socialist in philosophy and outlook and one who will always be prepared to defend his wicket in rational debate in moderate terms. I heard the right hon. Member for Altrincham and Sale say that the Left wing were relishing something in this Bill, implying that it was nationalisation by the back door. I thought that he was rather off the beam. In my view, it is nothing of the kind.
Over many years, irrespective of the colour of the Government, whether Tory Governments, our recent Labour Governments, or the remains of the old Labour Government in the 1950s under the leadership of "Clem" Attlee—[Interruption.] I do not require instruction of that kind. I am dealing historically with what has taken place. I was pointing out that, over the years, we have all tended to agree in this House, in a certain measure, that, if we were to have a sensible distribution of industry, avoiding the gross distortions of our economy by cluttering up the country with too much industry in certain spots, we had to take exceptional and original measures to that end.
We have pottered along over 10 or 15 years with all kinds of expedients, nostrums and half-hearted semi-Socialist measures, if one likes to call them that, to try to induce British industry in the private sector to be as efficient, as forward-looking and as progressive as some hon. Members opposite believe it to be.
I have said that I heard heresy tonight, and I take my first example from the speech of the right hon. Member for Altrincham and Sale, who, I am sorry to say, is not at the moment in his place. He has an extraordinary notion of what the Bill does. After all, it will distribute £250 million of public money to subsidise private industry and to encourage it to do things which it ought to have done of its own volition if it had been real private enterprise. I feel a little annoyed as a Socialist when I hear some of the things said by Members opposite whose opinions I respect.
I do not in any way deny them the right to claim that private enterprise is the best system, if they think so. I have no reason to think so. Not only have I formed my opinions as a result of reading the theoretical side of the debate on Socialism and capitalism, but I have also spent most of my life in observing the results of undiluted capitalism in different parts of the country. When the right hon. Gentleman says that this is a backdoor approach, I wonder how long the leaders of Conservative opinion can go on holding out their cap and welcoming large injections of public money—without any proper public accountability and any public sharing in the value of the equities created.
Even when my right hon. Friends tell me that it is a good thing to deploy public money of this magnitude to these purposes, I begin to doubt whether we are justified in doing so on this scale without claiming a share of public control commensurate to the investment that we have made.
I would point out that much of the public money about which the hon. Gentleman is talking is money which has already been drawn from industry itself, and that this represents the changed conditions under which we are living compared with the conditions which existed a long time ago.
The hon. Gentleman is entitled to draw what conclusions he likes about where the money comes from, but he has not to give an account to his wife at the end of the week of where he got the money that is in his pocket—if he is married. The fact is that the money which is being administered by the Treasury on Votes of Supply in this House is public money. Let us not beat about the bush.
A great deal of controversy has gone on in this country within the last 12 months, particularly that generated by the right hon. Member for Wolverhampton, South-West (Mr. Powell), who believes that all State intervention is bad per se, who says that philosophically, economically and in every other sense it is a bad thing. He is entitled to his opinion, but he is rather a troglodyte in saying that in terms of modern society. Not many of his hon. Friends agree with him, but he has, at any rate, had the courage to say it.
We in this House are embarking on the process of following up our experiment in agriculture. I have never vocally opposed many of the things that we have done for the good of farming. I have, however, often had grave doubts about the policy. I speak here not as a pure industrial man. I have hundreds of farmers in my constituency, and I am willing to argue with them about this at any time. But I challenge the doctrine under which we are dispensing to the agricultural industry £400 million a year without any degree of public control, and it is all ploughed back into the assets and value of the undertaking. Any young man who wants to buy a farm knows the tremendously inflated figure that he has to pay because farmsteads have been injected with thousands of millions of public money without any public control. That is a statement of fact and not a statement of opinion. I am saying this as temperately as I can, without becoming emotional.
However, here we are embarking on a process as a result of which by degrees—it is by leaps and bounds at certain stages—increasingly large sums of public money are being used to prop up private industry without the country taking a share in the control which I as a Socialist think it should have. I am not a crude nationaliser. I am not one of those who go round with a shopping list and say, "Nationalise this, and nationalise that." I want to see industry efficient, whether it is in the public or in the private sector. I want it to answer certain criteria which will convey to the public whether or not it is efficient.
Here I want to refer to Lancashire. I do not want to be parochial. At any rate, I shall try not to be. What I have spoken about so far have been, I hope, matters of general principle which cause me to doubt some of the aspects of this Bill. I support it in general terms, but I have reservations. It is my right as a Member of Parliament to have reservations about these things and not to give carte blanche to anybody, whether they are my political friends or my political opponents.
I represent a Lancashire constituency, most of which is in one of the old industrial areas. The two basic industries there have been dying for the last 20 years. All the coalmines are closed. It is an area where all the dross of industry referred to by my hon. Friend the Member for Wrexham (Mr. J. Idwal Jones) disfigures the countryside to an alarming extent. The cotton industry, a companion in distress, has disappeared in large sectors. One can go into some of the old cotton areas and find the spectres of the buildings still standing, but they are incapable of being used for anything else. Fortunately, some of them are now being demolished.
When the President of the Board of Trade was making a statement in the House the other day, I asked what Lancashire had done to be left out of it. I have not looked this up in HANSARD, but I understood him to say that the unemployment there was not significant, that it was only 1·4 or 1·6 per cent. I believe that that doctrine still lingers on in the Board of Trade. In his speech today, the President of the Board of Trade said that the Government would not make unemployment the only criterion on which industrial areas would be assisted. He said that there would be other tests as well. I welcome the broadening of the scope of the tests.
I would particularly point out that in many towns in Lancashire, in particular—I speak of Lancashire with the greatest amount of authority because I know it best—the population is static. Local authorities are unable to develop some of those old towns as they would wish to do because there has been a drift of population, and that drift of population is not reflected in growing unemployment figures in those areas. Therefore, I want the Government, when deciding to apply these sums of money and measures to certain areas, to avoid creating a situation in which some of the old industrial towns, which have been the cornerstone of the production of wealth for generations, are allowed to fall in population, as many of them are doing now.
There are many small townships in my constituency where the population is either static or falling. These places have much too high a percentage of old people in them. If the Government allow that situation to develop they may create just the opposite evil to the one that they are trying to cure. In small towns one finds a real community of people with all the local services, local traditions, in-built fellowship and neighbourliness. If one disperses that into what Spengler called a megalopolitan world of formless communities, society is not enriched but is impoverished.
I hope that during the further stages of the Bill my right hon. Friends will pay serious attention to what I have tried to say in a rather clumsy way. In Lancashire, we are not satisfied that sufficient attention is being paid to the fact that the population is falling in some areas which are unable to qualify for assistance because the unemployment is not very high in statistical terms, where communities are saddled with the cost of public services, where houses are often untenanted and where there is not a housing shortage. Indeed, in some of the East Lancashire towns there is a housing surplus.
These are facts of life about which civil servants in Whitehall and the Minister whom they instruct ought to know more than they do. If they do not know, I will take them on a tour whenever convenient and point out to them certain things which are continually brought to my attention.
I promised you, Mr. Speaker, that I would be brief. Perhaps I have gone on longer than I thought I would. But the hon. Member for Banff (Mr. Baker) drew attention to the fact that, under the old dispensation of investment allowances, some manufacturers in his part of the country paid only 27 per cent. of the total cost of a new machine. Is that correct?
Under the Bill, they will pay 36 per cent.—9 per cent. more. Is not this a strange world? It is an almost "Alice in Wonderland" world in which the State treasurer, the Chancellor of the Exchequer, pays for two-thirds of a machine bought by a private manufacturer who extols the virtues of private enterprise. This is something that you cannot get away from. I am sorry, Mr. Speaker. I can see that if I allow myself to develop this line of thought I shall be in trouble with the Chair before long.
I have had the pleasure of attending many similar debates over the years and I felt that in this case there is a serious departure involving £250 million in one year and that I should like to offer a few spontaneous thoughts to the House. In general, the Bill, with the important reservations I have made, has my support, but I hope that we shall not go much further down this road without considering first principles and whether we are to be a Socialist State or a private bastard enterprise—that is not too strong a term, Mr. Speaker—in which public money is used on a large scale without proper control. I think that, as a Socialist, we ought to have a bit more of both.
The hon. Member for Scarborough and Whitby (Mr. Michael Shaw) reminded the hon. Member for Westhoughton (Mr. J. T. Price) that the money we are talking about has come in the first place, from industry. I take that point further. As and when these grants succeed, and begin to yield a profit, the Exchequer will lose no time in taking a very large share of the results. It is against the present unfortunate background of very heavy taxation on earnings, both business and personal, that I welcome most proposals in the Bill, providing as they do a much more precise and sensitive tool for deciding where to soften the blow on efficiency, enterprise and risk-taking.
I am not greatly moved by the figures, which have been tossed to and fro in the debate, as to the relative values of different sets of investment incentives under different systems and rates of taxation. In each case the answer must be based upon the overall taxation position of the individual business concerned, whether it be a closed company ploughing everything back and allowed to do so, or a high distribution public company which takes probably the taxation on dividends into account in its calculations.
Does not the hon. Gentleman agree that, whatever the merits of the argument—and I take the point completely—there are no merits whatever in attempting to compare, as the President of the Board of Trade did in his answer on 1st March, the present figures for the value of investment allowances, assuming a Corporation Tax rate of 40 per cent., with the old investment allowance system—what one might call the apocryphal system between the Old Testament and the New?
I agree. But I said that I do not much care for the figures being tossed about in this debate. I am only anxious lest arguments from the Conservative benches may tempt the Government to push Corporation Tax up to 80 per cent. to show what magnificent incentives they are providing. In that case, they would be only arithmetically sound.
We on the Liberal bench would like to welcome the end of the crude test of mere visible unemployment in deciding whether an area is to receive development treatment. Many areas which are anxious about migration and regional plans will welcome the fact that it is no longer necessary to exhibit, as it were, a visible cancer of unemployment so as to get treatment. Certain parts of the West Riding and of South-East Lancashire will hope that the new criterion in the Bill will be used very quickly in deciding whether to extend development area treatment.
But there is one severe blemish in the Bill as it stands which, if not removed, will prevent us from giving the Bill our wholehearted support. We are a little disturbed that on this point there was silence in the White Paper of 7th January, silence in the debate of 15th February, silence in the Budget debate—although the matter was raised in connection with the passing of the investment allowances—and silence from the President of the Board of Trade today.
The point concerns the treatment of industrial buildings outside the development areas which, if the Finance Bill implements Budget Resolution No. 17, will lose their investment allowances and, according to the Bill, will receive no investment grants by way of putting the matter right. A simple example is that of a new industrial building outside a development area and excluding the cost of land on which it stands. If it cost £100,000 to build, then, under the investment allowance system and using the rates at which companies said goodbye to Income Tax and Profits Tax, there would be a permanent cash benefit, to any company which had the profits to take advantage of the allowance, of £8,100 and there would also be an initial allowance providing tax on a temporary loan of 5 per cent. of the cost. Now the £8,100 has gone and nothing is provided in its place. Under the Bill there will be an initial allowance of 15 per cent., which, admittedly steps up the temporary loan, but no more than that.
I am reluctant to believe that hon. Members opposite, particularly those coming from older industrial areas, are willing in this way to write a charter, as it were, for the old monuments of the Industrial Revolution and support a provision which will provide a positive disincentive to the replacement of the very type of old mill buildings that they or their forebears have been so eloquent in condemning. If they do support it, they will be perpetuating a state of affairs in which new machinery—fast running machinery—will he installed in old buildings quite unsuitable to take it. We shall have the dismal spectacle, which can already be seen in the older industrial areas, of new machinery being run at less than optimum speed because the second, third and fourth storeys of old buildings will not stand the pace.
I hope that if the Minister of State is able to take up this point he will not fall back on Clause 6, which allows the Board of Trade to introduce new assets for grant in due course, because the one thing essential to provide real incentive to industrialists is some certainty about the whole scheme. They should know not only what the incentives are to be, but also the reasoning behind them. I hope that we shall have a reasoned exposition of the thinking which has led the Government to bring the Bill forward in this form.
This is a very important Bill in many respects and it contains some provisions offering great value and incentive to industry invited to come to development areas. It is the third Measure of its kind which has come before the House in the past six years to deal with the stubborn problem of the development areas. I hope that this effort will succeed where the others have failed.
I listened with great interest to my right hon. Friend the President of the Board of Trade outlining the Bill's objectives. It is easy to will the end but far more difficult to will the means. My reading of the Bill, so far as I can comprehend its jargon, leads me to conclude that it contains nothing new in principle, apart from the matters of high finance mentioned by hon. Members opposite. It is otherwise almost exactly the same as the 1960 and 1963 legislation, the only difference being that there are more carrots and that the carrots are bigger. There are too many carrots and too few sticks. As the Bill was formulated in the minds of the Establishment months ago, and in the light of the recent gas strikes on the North Sea bed and the present revolution in energy, the Bill in its present form is inadequate for meeting the contingencies which are bound to arise in the high cost areas of the British coalfields.
The success or failure of the Bill will depend not so much on the objectives as on the machinery at hand to implement its proposals. In 1963, the Estimates Committee presented its Seventh Report for the Session 1962–63 after having examined the working of the Local Employment Act, 1960, and its successor, the 1963 Act. As a result of that exhaustive inquiry the Estimates Committee found that the legislation of 1960 and 1963 contained fundamental weaknesses and it made certain recommendations.
Why has the President of the Board of Trade not accepted any of those recommendations for inclusion in the Bill? For example, it was recommended that industrial estates corporations should have more power and should be able to use their initiative, borne of long experience, by advertising or other methods to attract industries to their areas. Why has my right hon. Friend refused to accept that firm recommendation? By decentralising some of the functions of the London headquarters of the Board of Trade, that recommendation could have been implemented and these corporations could have been allowed to proceed under their own steam to do what they could for their respective areas.
Another important part of the machinery which has been neglected is the local authorities. I can quote examples of the initiative taken by the local authority in my constituency which more than once has succeeded in negotiating with ground landlords for the acquisition of sites for factories. For instance, to quote a case in point so that it can be confirmed, this local authority built a factory in record time equal to, if not better than, most of the factories built by the Board of Trade in the whole of South Wales. This is a factory at Llwnypia near Tonypandy, and it is occupied by Vacmobile.
When local authorities require land to build houses or improve the social environment, they are able to acquire it compulsorily, but when it comes to acquiring other sites, such as those of old collieries in my valley, there are months of negotiations, which often fall through so that the local authority finishes back where it started. The Bill should give local authorities power to acquire sites compulsorily in order to build factories. In my constituency the local authority negotiated to acquire a site and if the industrialist concerned, who wanted the site, had been able to move to it, he could have vacated two other factories which could have been let to other industrialists. If the local authority had had power to acquire the site compulsorily, the factory would have been built by now, but the authority has had to work on the principle of free negotiation and mutual agreement because of the lack of such powers. I hope that in Committee my right hon. Friend will consider giving local authorities compulsory powers to acquire land for these purposes as they have for building houses.
The tragic and fundamental weakness of the Bill, as with the two previous Measures, is connected with the power being granted to the Board of Trade Advisory Committee, which is responsible for recommending whether an application from an industrialist should be accepted or rejected. In the past seven or eight years or more, hundreds of applications from industrialists for loans and grants to build factories in the development areas, or the old development districts, have been turned down by B.O.T.A.C. This is farcical as well as tragic. B.O.T.A.C. is a sub-committee appointed by the Board of Trade. It is made up of outsiders, not from members of the Civil Service. It does not belong to any Government Department but comprises five or six men, appointed because of their experience in the world of commerce. It is they who decide the fate of Rhondda Valley and other development areas in the country. According to the evidence submitted to the Estimates Committee, these men work only part-time, 30 hours a month. Most of the work is done individually in their own parlours, probably on a Sunday morning or afternoon.
This sub-committee can decide to reject applications by hundreds of industrialists and having made the decision no one has the right to question it. Listen to the evidence as given in the Estimates Committee Report for the 1962–63 Sesion. The Chairman of B.O.T.A.C. was asked:
… you talk about the Board of Trade making loans and grants in accordance with recommendations of the Advisory Committee. Is the Board of Trade in a position to accept those recommendations in part or in whole? Can it omit or refuse to recognise some of the recommendations of B.O.T.A.C.? (Mr. Slimmings.) The position, as I understand it, is that if we reject an application, that is the end of it as far as the Board of Trade is concerned. They have no power to do anything.
Even the representative of the Board of Trade came along later with his evidence and said:
As we understand it, and as we administer it, we have no power to amend or vary a B.O.T.A.C. recommendation.
How can we expect all of the good intentions and objectives outlined in this Bill to materialise under such circumstances? I have read the speeches by the First Secretary and other members of this Government, saying, with the best intention in the world, that what Britain requires in 1966 is the dynamism and drive to take us on to the new technical and industrial revolution of the sixties. The whole success of this Bill, which promises so much to so many, depends upon a few part-time outsiders, not the President of the Board of Trade. Not even the First Secretary, the Prime Minister, or the Cabinet, have the right to ask B.O.T.A.C. what are the reasons for its rejection of hundreds of applications. It it farcical in these days of modern, dynamic Government that the Government are helpless in the face of B.O.T.A.C. which is as firmly entrenched in this Bill as it was in the Bills of 1960 and 1963.
I suggest to the Government that they should abolish B.O.T.A.C. in its present form and, build into the administration an inter-departmental committee which would not make its decisions strictly upon commercial grounds. It should also be a condition that the Department responsible for those decisions, as to the rejection or otherwise of applications, shall be answerable to this House and not be allowed to paralyse the House, leaving it helpless in the face of the statutory powers that are being vested in B.O.T.A.C. through this Bill. However, despite all that criticism, I welcome the Bill and hope that it will speed through this House and be placed upon the Statute Book as soon as possible.
I hope that the hon. Member for Rhondda, West (Mr. Iorwerth Thomas) will forgive me if I do not follow him on his rather specialised point. I look forward to hearing comments on it from the Front Bench.
The most remarkable thing about this debate is that since the Bill was published we have had a number of major amendments proposed by the Government. There was one announced the other day by the Chancellor of the Exchequer, reintroducing the building industry to the benefits of investment grants. We have had a suggestion from the President of the Board of Trade that something similar may be in mind for the packaging industry. I thought that he had rather a bad conscience about tourism, and I hope that some of the comments I intend to make may help to make his conscience a little worse on that subject.
What has been said encourages us to press for further amendments to the Bill. Why is it that these major amendments have already been put forward by the Government? Surely it is because this Bill cannot be considered in isolation and without taking into account the Government's other financial and economic policies. Because the Government introduced a White Paper in January on this subject, they should not be blind to the other aspects of their policies which have developed since, and which have a bearing on this situation.
This Bill makes two major changes in the former system of investment allowances. It abolishes the old investment allowances and introduces investment grants. It does not introduce investment grants for the whole range of trades and industries formerly enjoying investment allowances. It restricts the investment grants in the country generally to manufacturing and qualifying processes. These are very narrowly defined in the Bill and the result is that this year three depressing impositions have been laid by the Government upon a wide sector of British industry.
The first of these three depressing impositions is Corporation Tax at a rate of 40 per cent. I welcome the opportunity of saying something that I have been wanting to say for well over a year on this subject. It is that people say, quite rightly, that the effect of Corporation Tax is to introduce a high-gearing element on retained profits in relation to profits before tax. This is true and self-evident. What is not so clear about Corporation Tax is that it is very highly geared indeed in the effect it has upon investment decisions in the light of small variations in the rate of the tax itself. If this tax is to continue for some years in its present form—and this, on the present political prospects, might appear likely—we shall find very small variations in the rate of Corporation Tax producing very large variations in the level of industrial investment and in the attitudes of Boards to industrial investment.
Then we have had the second depressing imposition in the withdrawal of investment allowances from these companies, and then the proposals for a Selective Employment Tax. I am sure that the effect of these measures will be to depress confidence in these industries, to depress their ability to provide cash for renewal and modernisation from their own resources, and to depress their ability to raise capital or loans from the market and, because of that, to depress their level of investment.
What has been happening in the last four months is that the Government have sorted trade and industry into two groups, the haves and have-nots. One group, the haves, will receive investment grants and a premium from the Selective Employment Tax. The other group, the have-nots, will receive no investment grants and pay a substantial levy under the Selective Employment Tax.
It can be argued that any policy of differentiation is wrong and damaging to the economy. I am convinced that the kind of differentiation now being established by the Government is wrong. It is on an unsound basis. I believe that it results from muddled thinking and will have rapid and severely harmful effects on the robustness of the economy and on the balance of payments.
I never like people putting words into my own mouth, but I will try to be fair and summarise the Government's argument as put forward by the President of the Board of Trade. It is that the greater part of our export earnings are gained by manufacturing industry, and we must concentrate financial encouragement on manufacturing industry.
I am sure that there is a fundamental flaw in the thinking involved in that conclusion. If it were the case that all manufacturing industry exported the same proportion of its production, and if the export record of every firm in every sector of manufacturing industry was the same, the Government would have a strong case. However, the exact opposite is the truth. There was a survey by the F.B.I. in 1964 the conclusion of which was that 70 firms provided 35 per cent. of our manufactured exports. The obverse of that coin is that there are thousands of manufacturing firms which make no export sales at all, and, of those, many do not supply exporting firms with components; yet those firms will qualify for investment grants which will be denied to service industries that serve exporting companies and which, if they are efficient, can directly influence the cost and smooth delivery of exports.
If the Government want to see the type of thing that I have in mind, the interesting Report of the Transport Holding Company indicates the type of scheme which, as the Bill is originally drafted, will be left out of the ambit of investment grants, and some of the reports of the Prices and Incomes Board also draw attention to action that could he taken which would not qualify for investment grants.
If investment grants cannot be channelled to manufacturers of goods for export—and, for various reasons, we can assume that they cannot and will not be, as I am sure the President of the Board of Trade will agree—surely they should be linked to categories of equipment of which increased use would strengthen competitive efficiency, rather than to broad unselective categories of industry. In Section 6(2) of Part I of the Bill there is provision for that to be done if the Government should decide to make variations under the Bill. That again indicates that they are not entirely convinced of the logic of their approach, and I should like to see that the criterion, rather than the much more general unselective application to manufacturing industry.
From what the President of the Board of Trade said, it may be that the Government are coming to realise that. Certainly his reference to packaging and specialist shipping and forwarding services was helpful. But it is just as illogical to withdraw the benefits of investment allowances from a hotel, which is a major earner of foreign currency, while giving the investment grants to a non-exporting manufacturer.
The President of the Board of Trade referred to the fact that 7 per cent. of the turnover of hotels was represented by earnings in foreign exchange. I should like to ask the Minister of State for Economic Affairs if he could give the basis on which those figures are arrived at. Is he giving hotels credit for the total of £190 million spent in 1964 by foreign and Commonwealth visitors, or is he restricting it to the strict proportion spent in hotels? Does he take into account the £118 million spent on fares by people coming to say in British hotels? That is important to the argument as well, because the case of the hotel industry is that if it fails to attract the visitor, all the other spending falls as well.
I want now to say a few words about the effect on confidence in the hotel industry of the Government's proposals that it should be left out of the range of investment grants and come within the have-nots. Here I should declare a personal interest, as well as a constituency one. As a director of a number of small hotel companies, I hope my interest is enough to allow me to speak with some experience without swaying my judgment.
It is not generally realised that the movement towards the provision of new hotel accommodation has occurred comparatively recently in the post-war period. In the late 1950s, I was myself connected with the building of a 50-bedroom hotel—in a development area, the President of the Board of Trade will be glad to know. When that hotel was opened in 1960, it was only the third hotel to be opened in the United Kingdom since the war. There had been one in London and one in Coventry. The one with which I was concerned was the third. Since then, aided by the active interest of some local authorities, a number of new hotels have been opened outside London, as well as a number in London.
However, the Government need be in no doubt that the combination of a 40 per cent. Corporation Tax, Selective Employment Tax and the ending of investment allowances will cause a severe check to the provision of new hotels and the modernisation of existing ones.
I should like to comment on what the President of the Board of Trade said about building grants being available for the tourist industry in development areas. It is not only a case of new buildings being required. I would be interested to know whether the building grants would be available for the modernisation of existing buildings in development areas, because much of the work to improve amenities and services in hotels has to be done not by completely new buildings but by the modernisation of existing ones. It will not be of much assistance in development areas if building grants are available for new hotels but denied for the modernisation of existing ones.
The hotel and catering business has one extra tax burden to carry which most industries are spared. It pays Purchase Tax on almost all the equipment and tools of its trade, and the effect of the old investment allowances was only to do a little more than offset Purchase Tax. It was a simple way of doing it, because in the administration of Purchase Tax, one cannot differentiate between purchases by hotels and catering establishments and purchases by the general public.
I have already referred to the comment by the President of the Board of Trade that 7 per cent. of hotel turnover was a contribution to the earnings of foreign exchange. In the debate on the White Paper in February, having talked about hotels, he went on to say immediately that incentives were to be concentrated on the main exporting and import saving industries. Yet, in one important sense, almost every hotel in the country is an import saver, in that by its success and customer-appeal it reduces the level of spending on holidays abroad.
Today, literally millions of people can afford to take a holiday abroad. The Chancellor of the Exchequer has expressed reluctance to place any hindrance in the way of them doing so, and I am sure he is right, but if spending on foreign holidays is not to soar, and I believe that it could rise very rapidly indeed, British hostels must be able to compete in terms of price and amenity with hotel industries abroad. I am talking with some fervour on this subject, having declared an interest, but I believe that what I am saying is of considerable importance to our balance of payments.
I should like the Government to realise that the holiday industry stands or falls by word-of-mouth recommendation. As soon as Christmas is over people start talking about where they are going for their holidays. They exchange views on the treatment they have received, where they went, whether the food was good, whether the beds were comfortable, and whether there was plenty of hot water. Naturally, of course, they talk about the weather, which is something that we must bear in mind as an almost permanent disadvantage for the holiday industry in this country.
If our hotel industry were to falter in its present attempts to improve standards, this would very quickly be known abroad as well as in this country, and the worst possible word-of-mouth comment on the British hotel industry would be that the Government were not only placing new tax burdens on it, but were withdrawing incentives for modernisation and re-equipment. It is desperately important not to give the impression abroad that the Government are withdrawing support from the hotel and catering industries in this country.
I hope that the Government will think again before withdrawing investment allowances from all categories—and I repeat all categories—of spending on hotel modernisation. I hope that in the wider field they will decide to link investment grants with the nature of the expenditure, rather than confine them to manufacturing industry and processes carried out in conjunction with manufacturing. I am sure that efficiency should be the criterion, and not the nature of the firm, whether it happens to be a manufacturing concern, or whether it carries out a qualifying process as a manufacturing concern.
I think that the Bill provides a greater beneficial effect for my constituency, Sutton Plymouth, than any Measure which has been introduced in this House in the last decade, and it is therefore with great pleasure that I rise to welcome it.
When paying tribute to one's constituency, one does it with a sense of humility, and also with a sense of gratitude. I was born a few miles outside the boundaries of Plymouth, so to me, in a very real sense, this is my home city. I ask the House to remember that Plymouth has contributed to this nation in many ways. It has many great traditions, one of which is beauty. From Dartmoor in the North stretching down to Plymouth Sound, it is one of the most beautiful ports in the whole of Europe.
When someone makes his maiden speech, he likes to claim something unique for his constituency. I think that I can claim for my constituency something which is unique to this House, for it was Sutton, Plymouth, which returned the first-ever woman Member of Parliament, Nancy Astor, that effervescent, feminine character who did so much, not just for Plymouth, but for the emancipation of women.
Plymouth maintained that feminine tradition by sending to this House as the Member for Sutton, Lucy Middleton, who was loved and respected on this side of the House and, I am sure, on the other side, too, for many years, and feminine tradition has been maintained by the return to Parliament of the hon. Lady the Member for Plymouth, Devonport (Dame Joan Vickers). I pay tribute to my predecessor, who broke this feminine tradition, for his conscientious work for his constituency.
But Plymouth can justly lay claim to another more famous and lasting tradition. I am referring now to the radical spirit which has run through Plymouth for generations. This is the city from which the Pilgrim Fathers embarked on their voyage to the New World. This is the city which welcomed the Reform Act with peals of bells. It has a great radical tradition. It is a Crom-Country, and here I must pay tribute wellian city. It stood firm in the West to a family which has added lustre to that radical tradition.
Isaac Foot fought Sutton on many occasions. He brought up his family within the Division, and we on this side of the House are grateful to the contribution which three members of his family have made to this party, from Michael who represented Devonport with fiery independence, to Hugh for his international contributions to this country, and to Dingle for his legalistic skill. But one brother remains in Plymouth and serves the city, and for this, too, the citizens are grateful. I hope, in the years to come, in some measure to represent a radical tradition in this House, for I believe that this is important.
For many years we in the South-West have felt that we have been deserted. Year in and year out unemployment figures have run at above the national average. Wages have been held down and are lower than the national average. We have experienced depopulation. Our children have grown up and moved out of the West Country, and this has been a severe nagging ache on the conscience of everyone who has lived there, but now, at last, I feel that the problem is being tackled. No one believes that it has been solved, but for the first time regional planning and regional development are beginning to mean something.
There is, however, considerable anxiety in the peninsular over Bristol having been chosen as the regional centre, for we regard Bristol as being as far away from us as Bristol is from London, but we are prepared to see how it works. We have at least got regional planning councils. We have at least got regional development councils, and they are beginning to take effect and to bite. The Bill represents the other side of the coin, the enlargement of development areas. This is something which we welcome and for which we have pressed for many years.
When it was my great pleasure and privilege to fight Torrington—as one might say a slightly hopeless candidate—I remember seeing what regional planning meant when it was not linked with national policy. I got some idea of the chaos that can occur. I remember Bide-ford being designated as a development district and hearing only a few days later that its railway was to be closed. It is this sort of hotch potch planning, which has gone on for years, from which the West Country has suffered. Now, at last, with the help of the Department of Economic Affairs and of the Board of Trade, the West Country can look forward to planned growth and a planned future, and the Bill represents something which we all welcome.
I must, however, sound a note of caution. There is one great omission from the Bill. Though the development area is large, Plymouth has deliberately been excluded. There are no doubt good reasons for this. The Government may point to the unemployment figures, but the point has already been made that these development areas have been designed not to be dependent on the old classification of unemployment. Plymouth is the natural centre of the peninsular which it serves, and to which it distributes. To take the benefit of a development area away from Plymouth is to strike a blow at the whole South-West Region. The Government must face this fact honestly.
Although the Selective Employment Tax is a very welcome one, we must remember that it will tend to discriminate against the South-West. A recent survey has shown that we will be paying about 10 per cent. more than the national average. This is a heavy blow to an area which has already been designated in large part a development area, and which must expand. I therefore ask the Government to reconsider the exclusion of Plymouth from the development area.
I also believe that this Bill will help overspill towns. I ask the House to consider with me the economy of Plymouth. It is a little precarious, for one-third of the male working population is employed by one employer—the Admiralty. It is a good employer, and Plymouth is grateful to it, but it must also be said that Plymouth has suffered. It was devastated by World War II, and has had to rebuild itself against great odds. While the war went on Plymouth planned for the future, in accordance with the needs of the new world that it was hoped would greater come afterwards.
Plymouth has valiantly striven to attract industry, and has shown what it can do. Nevertheless, it needs greater diversification of industry. It is too dependent on one employer. In some respects that employer has caused Plymouth to be unable to develop the commercial aspects of its port. Plymouth has only recently had another great blow, in that it has not been allowed to build an airport on one of the few available suitable sites, for the understandable reason that the Admiralty Gunnery School would conflict with such a development. Plymouth can accept this, provided it knows that the dockyard and its future attachment to the Navy is secure and will remain secure, not just for a decade but for two or three decades.
Plymouth wants industry. It has the necessary labour force and it has the necessary skills. If it could be designated as a development area it could attract industry, but it cannot do so effectively at the moment. What we need is more population. Plymouth's potential contribution would be greatly helped by an overspill town, and the Bill could provide some aid in that direction. Such an overspill town would draw a large part of its population from a development area. If I understand my right hon. Friend the President of the Board of Trade correctly, it would then be eligible for the 40 per cent. grant and such other benefits as accrue to development areas. I therefore press the Government to examine this possibility of overspill, in order to assure Plymouth's future.
If Plymouth takes in the area which it is due to take in a year's time it will have a population of 250,000. Plymouth stands or falls on its becoming a thriving industrial city. I also suggest that the whole of the West Peninsula stands or falls on the question of whether Plymouth's economy is strong. If it is strong, so will be the economy of the whole of the South-West.
This is a great Bill. It brings to the South-West something for which we have been aching for many years. We realise that adaptations will have to be made, and no one in the House will strive for those adaptations more than I shall. In broad terms, however, we are at last being considered by Whitehall. We no longer feel that we are 220 miles away from London. We feel that it is possible that Plymouth will begin to play a real part in the industrial expansion of the nation.
So, for all the criticism that one may hear in the West Country, there is a true welcome for the Bill and a welcome for the regional planning policy that lies behind it. We hope that Plymouth's case will be reconsidered in respect of a possible adjustment in the development area.
This is the first occasion on which I have had the privilege of following a maiden speaker, and it is with great sincerity and pleasure that I congratulate the hon. Member for Plymouth, Sutton (Dr. David Owen). It is clear that he is already fully at home in the atmosphere of the House. When I made my maiden speech I felt that the atmosphere of the House was one of the most difficult to get acclimatised to.
The hon. Member not only recollected previous Members of Parliament and, in particular, his immediate predecessor—whom hon. Members on this side of the House are, naturally, sorry not to see with us still—but he also put forward with feeling the merit and virtues of the case for Plymouth. He pointed out that the strength of Plymouth was the strength of the West Country. That is not unnatural, historically. In the past, Plymouth has laid claim to be the strength not only of the West but of the whole country.
Hearing the hon. Member talk about the precariousness of employment in Plymouth I was reminded of the only occasion on which I have been there. I sailed a racing dinghy on the Sound for a whole week, and during all that time the wind chose to be in the west, and my employment was decidely precarious. Before I leave the hon. Member's speech I should like to express the hope that his plea will have a friendly hearing from his right hon. Friend. He made out his case with great force.
We all have the same objectives this afternoon. Much of the legislation of the past, especially in the last few years—Conservative legislation—has been bent on encouraging the re-equipment of our industry and the moving into declining areas of new and expanding industries. It is not our objectives about which we need to argue today; it is the means by which we should bring those objectives about and, to a large extent, the philosophy which inspires them.
Part I of the Bill deals with investment grants. The investment allowances which were introduced by the Conservatives were a great move forward in the process of encouraging industry to re-equip itself, but there are very distinct limits to the extent to which we can define which section of industry should receive these benefits and which should not. The scope of benefits such as these should be as wide as possible, because at the centre it is difficult to gauge accurately which industries, or which sectors of industry, should be encouraged. It is up to the people who are taking the risk of going into an industry to decide where the best opportunity lies. Furthermore, the various sectors of industry—manufacturing, service, transport and construction—are so intertwined, one with another, that it is very difficult and often very dangerous to try to separate them and to give different rewards to different sectors.
The Government have already had to make changes in their set provisions, which will have an effect on the grants to be paid. I will not dwell today on the needs of the hotel industry. I believe that earlier speakers, particularly from this side of the House, dealt with that more eloquently and even more knowledgeably than I could.
I fall out with the Government on two main points connected with industrial grants: first, the question of simplicity; and, secondly, the effectiveness of the grants themselves. Under the old system of allowances there was absolute certainty. I do not believe that industry in general paid scant regard to these allowances. Certainly, whenever any client of mine was considering purchasing new plant or machinery, I was rung up and asked what would be the effect if he did this or that. They paid great regard to it.
I admit that, in the earlier stages, there was not as full a recognition of the real benefits of the investment allowances as there should have been, but over the years people in industry grew to recognise their true benefit. I believe that, by the time the allowances system ended, there was a true realisation of the benefits and they were taken very much into account in the planning of investment programmes.
On the question of simplicity, it was a procedure which was certain. If one made the profit on which one would otherwise have to pay a tax, one received relief, by a system which involved the use of not one single member of staff in the Inland Revenue or one single extra member of staff in the accountant's office. It was automatic and simple and was included in the calculation of Income Tax.
We understand that over 1,000 people will be required by the Ministry to man this new scheme. I should like to know where they will come from. There is already a great shortage of skilled men to deal with such matters. Will they come from other departments in the same Ministry or other departments in other Ministries, or will they be drawn from industry itself? I should like to know whether civil servants, either at the Board of Trade or in other Departments, will be allowed to apply for these new appointments. Will they be barred from them? If they are, it means that the drain will be on manpower in industry. I do not see why, if there is to be a fresh demand for skilled manpower, civil servants generally should not be as much at risk as industry.
Secondly, under the old scheme, once the profit was made, the benefit was received. Under the new scheme, we are told that the Board "may" pay, if the expenditure is approved. As I understand, the new advisory committee which will be set up will examine every list of expenditure which is put to it. I can foresee that, in the early stages, there will be uncertainty in many cases about whether that expenditure will or will not be allowed. I therefore hope that firms will be able to apply to the new advisory committee when they are thinking of making new expenditure and inquire from it whether or not that expenditure will be eligible for a grant, so that, before the money is spent, the firm will know that it will get the grant.
Pursuing a point which my right hon. Friend the Member for Altrincham and Sale (Mr. Barber) made earlier, this will mean far more forms going to the advisory committee than the number which he suggested. Not only will the receipts go when the expenditure has been incurred, but there will have been a great deal of correspondence before the expenditure has been decided upon, as this may be the key to whether or not the expenditure is to be incurred.
The President of the Board of Trade gave four criteria on which the payment of grant will be based. There was one criterion which I did not hear—that of whether or not there was any prospect of a firm ever making a profit after it had spent the money on new machinery. Although the right hon. Gentleman did not say so today, I believe that when a claim for the grant is made a letter will be sent back to the firm asking it to produce its balance sheet to show whether or not it is viable, and there is some hope of its making a profit.
That is, in many ways, right, because if the firm "goes broke" in about six months the country may have wasted a good deal of money. On the other hand, the advisory committee may decide that it will not make a grant to that company because it does not believe that the company is viable or that there is any future for it. Suppose that company says, "We think that your judgment is right, but we are taking the risk", and goes ahead and is then successful. If the grant has been turned down in year one, this unfortunate company, which has proved the judgment of the advisory committee to be wrong by going ahead and being successful, might in about three years say, "We have proved it and are now running at a profit. Where is our investment grant?", but will not then be entitled to the grant.
Perhaps we could hear something on this point, as these are real practical details which will crop up in a number of cases for the advisory committee—
I should like to pursue the hon. Gentleman's mention of a fifth criterion, so that the argument might be right. Assuming that what he says has some truth in it, is he suggesting that, under the system of the previous Conservative Government, of incentive allowances, that fifth criterion existed? Is he suggesting that profitability was taken into account and that there were no examples under the previous Government of firms packing in shortly after they have received allowances?
That was automatically taken care of, because, under the old system, the allowances were set off against Income Tax and Profits Tax. It was included in the computation. Therefore, they received no advantage from the allowances unless they made profits upon which they would have to pay tax. This was dealt with automatically.
I should like to raise one small constituency matter on which I am not clear. I should be very grateful if the hon. Gentleman could clear it up. Clause 26 refers to allowances for boats used for white fishing and for herring fishing. Nothing is said about boats built and used for shell fishing. It seems to me that there is no good, logical reason, that such fishermen should not be just as entitled to these grants as other sorts of fishermen. I should be grateful for clarification on that point.
I wish to say a few words about Clause 16. We have heard from the Minister that when a firm seeks fresh capital on moving into a development area there will be the opportunity not only for it to seek loan capital with the terms to be made by the advisory committee, but for the Government to invest in shares in it if they are invited so to do. I look on this with a good deal of suspicion.
If a company wants a certain amount of capital to help it to move and get established in a development district—and moving into development districts is very costly and nearly always far more expensive than people think when they begin the operation—if it is confident of success, the last thing which the proprietors want is somebody other than themselves to have shares in their enterprise. All that they want is a loan to carry them over which will be repaid as soon as profits are made. If, on the other hand, it is a hare-brained scheme and it looks to them very chancy, they will be delighted to have the Government investing money in the venture, and the more the better.
Therefore, if the situation is exactly as it was described by the Minister, it seems to me that we are bound as a nation to come off worse every time because we shall get the "dud 'uns" and not the "good 'uns" I have, therefore, real doubt about whether this is how it will work. There will be a tendency for it to be suggested, "This is a very good scheme. If we were to lend you so many thousands of pounds it might be advisable"—and they will hasten to say that this system has proved very successful in other cases—"if a certain proportion of it were to be taken up in the form of equity".
Once one or two precedents had been established it would be customary for this sort of thing to happen. Once it began to happen, there would come a time when somebody manufacturing, for example, motor cars in a certain area would find that another motor car manufacturer sought aid from the Government to build another motor car plant close by. It might well be said, "We have a large stake in equity shareholding in the first company". It would be very easy to argue from the Government's point of view that there was sufficient of that type of employment in that area and, in order to protect their own interests, to turn down the request for assistance from the second motor car manufacturer.
I view Clause 16, certainly that part of it dealing with the option to invest in shares, with the greatest possible suspicion, and I hope that it will come out.
On the question of credit, if the Bill is passed, there will be the opportunity to borrow money from the Board of Trade. There will be the opportunity to allow the Board of Trade to invest in shares. In each of these cases there is an expense and a risk to the Exchequer. But there is a new feature of developing industries, namely, a permanent credit squeeze.
There is a third possibility which I should like the Minister to consider to help industry in the development districts. It is to give to suitable firms a certificate of credit when the advisory committee has come to the conclusion that they have a worth-while case and deserve additional credit rather than lend the money itself. If it were to give a certificate of credit to the company as it moved into the development district, the company could take it to its bank which would be enabled to lend, on commercial terms and only if the bank was satisfied that it was businesslike, the additional sum without the bank counting that money within the limits placed on it by the credit squeeze. In this way increased capital would go into the expanding company and at the same time the Exchequer would not be burdened with additional debt.
It is curious that, while a firm which has been set up in a development district can go to the bank and say that it needs additional working capital, to which the bank can reply that it is up to its limit, it could go to the Board of Trade and seek additional temporary facilities for working capital. It would be far better to have special facilities made available to that firm to borrow the money directly from the bank on production of a certificate from the Board of Trade rather than that it should be borrowed from the Board of Trade itself.
We all hope that the objectives outlined in the Bill will succeed. But, like other right hon. and hon. Members, I doubt whether many of the provisions in it are a real improvement on previous legislation and whether they are the best means of bringing about the attainment of those objectives.
I know that one or two of my right hon. and hon. Friends wish to speak, so, contrary to the habits of my fellow countrymen, I shall be extremely brief.
An hon. Member opposite said that this debate reminded him of Alice in Wonderland. We have had a picture of a make-believe world from some right hon. and hon. Members opposite. There has been talk of a junior civil servant lending £250 million. We have heard of surreptitious nationalisation and all sorts of nebulous ideas of that type. I will not ramble round in this way with the Opposition. I want to talk about some real advantages and one or two problems which the Bill puts before us.
All of us on this side of the House welcome the aim of the Bill. The basic aim is to stimulate capital expenditure on plant and machinery, because the key to Britain's economic future is industrial re-equipment. The Bill, whatever its deficiencies, will go some way towards achieving this aim.
There are, however, certain practical difficulties in the Bill which I want to bring to the attention of my hon. Friends and particularly my right hon. Friends on the Front Bench. To some extent, the Bill reflects the product of a theoretical economist rather than an industrial economist. There is a definition difficulty in the Bill. It is extremely important that industry gets from the Board of Trade specific details about the exact types of equipment that will be eligible for incentive allowances. When one thinks of, for example, computers, one realises the many types of filter systems that are used. Will these qualify for allowances? Many problems of this type arise in industry and a degree of uncertainty is bound to be caused when industrialists must consider whether or not these items will qualify.
There is the extra difficulty that we have two Government Departments, the Inland Revenue and the Board of Trade, involved in this matter. If, on an item, one can claim an incentive allowance, that item must be netted down to establish the basis on which to arrive at the initial and value allowance. If, for example, an item costs £100 and it is getting a 20 per cent. grant, its net cost in terms of initial and value allowances is £80. However, the Board of Trade might subsequently decide that that item will no longer be eligible for allowance, and that would involve the grossing up of the item back to the £100 mark.
We therefore not only have a technical problem—which probably could be overcome if decisions about eligibility were made early enough—but, in addition, there are in the Bill difficulties of definition and a conflict between the two Government Departments involved; the Board of Trade and the Inland Revenue. This is causing some anxiety to industry.
I know of one large industrial organisation which is anxious about some of the problems which might arise from the Bill. This firm is using a computer to store data about certain items. Because it is uncertain about which commodities will and which will not qualify, the firm may be using unecessary storage space for this purpose, solely because it is uncertain about the exact implications of the Bill.
There are other minor technical difficulties, such as the completion factors. There are items in industry which are never completed but which are continuous. In this connection, there are additional problems this year because of the cut off period. The date of 16th January was introduced this year and this has added additional complexity. I am sure that this could be sorted out in Committee if the Government were willing to do so.
I am more concerned with another difficulty associated with the Bill. It is the difficulty of the Measure's limitations. Under the investment allowance arrangements the situation was that a firm which provided welfare facilities received investment allowances against that provision. A great deal of social and welfare activities were immediately covered by those allowances. Under the present system, however, there will be two types of allowance and certain welfare facilities may get less—the fear has been expressed that they will get nothing at all—of an allowance compared with other facilities which firms provide.
There may be a real danger here and we must watch it closely. It is that the Bill could act as a disincentive against the provision of certain welfare facilities, and my hon. Friends will be anxious to ensure that industry provides for its employees the maximum of social and welfare facilities.
It is necessary for us to think in terms of modernising and re-equipping industry throughout the countryside. Most of my hon. Friends who have spoken represent development districts, but those areas will do extremely well by the Bill and there is no doubt that firms in the development districts will benefit considerably from the investment allowances. The benefits will be far less in the non-development areas.
It is difficult to calculate the figures for this and while it is probably a doubtful estimate, I suggest that the relative improvement will be about 2 per cent. to 4 per cent. in the non-development districts compared with the more favoured parts of the country from the point of view of these allowances.
As someone who was born and bred in what is now a development district, I appreciate the very real need which exists to further those areas and to ensure a high level of employment in them. However, as the representative of a non-development area—the southern half of Bedfordshire, with its motoring industry of Dunstable, Luton, and so on—I assure hon. Members that there is a need to give real incentives for modernisation in the non-development areas as well.
At present, these areas are closely tied to the economic prosperity of the country, particularly to our export drive. I urge the Government to make sure that, in the introduction of incentives, they take account of the need to modernise British industry generally, and so to make the incentives benefit the whole country and the whole economy. I believe that in the non-development and the development areas as well we could get further advantages in terms of depreciation allowances, or something of the sort. There is a very real need for selective types of equipment—such as computers—to give the actual and specific depreciation allowances, but this would be a general benefit.
My final plea is that we should realise that the key to our economic future lies in the modernisation and re-equipment of the whole of British industry.
The hon. Member for Bedfordshire, South (Mr. Gwilym Roberts) has made some extremely eloquent and telling points, but they seem, in effect, to add up to a plea to his own Front Bench to throw the Bill out of the window and go back to the non-discriminating system, with a universal application and a more positive basis in the profits of the industries in which the money is to be invested.
I want to continue the hon. Gentleman's argument a little, as I see it—
I certainly did not suggest that my Front Bench should throw out the Bill. I welcome the Bill as probably one of the most considerable steps that have been taken to further the modernisation of British industry. Personally, I do not regard profitability as the only criterion by which industry should be judged.
I accept the hon. Gentleman's intervention, but I thought that his point about the Board of Trade and the Inland Revenue and the talk of discrimination between non-development and development areas amounted to a fairly fundamental attack on the Bill.
I want to go further in his argument that this is one of the most important Measures to give a real incentive to modernisation in terms of capital equipment, to British industry. I believe that if we look at the detailed provisions of the Bill, and at some of the things that have been said on other occasions by right hon. Gentlemen opposite, we shall see a somewhat different story.
I refer particularly to the whole question of the expected scale of the assistance for capital investment. One of the important points made by the Government in "selling" the new proposals is this idea of prompt reimbursement, but I would draw attention to the important point—made in the White Paper but not brought out so clearly in the Bill—that there is to be a very substantial delay before any of these new benefits accrue.
We were told that one of the faults in the old system of investment incentives was the lapse of 18 months or so, which very often made it difficult for firms with little access to ready capital to take the plunge and invest. But this same scale of delay—albeit temporary, but at a very crucial moment in the history of British industry—is being perpetuated. The White Paper says that the new benefits are not to come in for another 18 months. Any investment made after the appointed day—17th January, 1966, I think—will not get the benefit of prompt reimbursement which is one of the things we are told is to be expected under the new proposals. It will have to wait for the full 18 months or so that had to pass under the old arrangements.
That point needs stressing, because this is a depressing and uncomfortable time for British industry for capital investment. There is at present a great question mark over the economy. We know that the Government expect capital investment in the current year, 1966, to rise by perhaps 2½ per cent. at the very most. At this time—when confidence is lacking in British industry, when we have the Selective Employment Tax provisions, Corporation Tax and the squeeze on profits, all these other measures that are putting a shadow over the prospects of British industry—the Government produce a Measure which perpetuates the same delays in making ready cash available as occurred with the methods which are to be discarded.
It is not only that aspect I want to stress, but the actual scale of hard cash that is to be available to industry, over which a genuine question mark hangs. I point out to the President of the Board of Trade and his Front Bench colleagues that the Explanatory and Financial Memorandum to the Bill refers to an anticipated expenditure in the current 12 months, 1966, on the basis of Corporation Tax at a rate of 40 per cent., of about £250 million, which is likely to be incurred on behalf of the Government in private industry investment. If we look ahead a little, the curious thing is that the Government's public or projected figures anticipate a lower rate of Government support for industry.
I hope that the Treasury Bench has taken in the surprising Written Answer given by the President of the Board of Trade on 10th February of this year. When he was asked what the estimated value of the new investment grant system would be in 1967–68, he replied:
… I expect Board of Trade expenditure on investment grants in 1967–68 to be of the order of £200 million. This will relate to eligible investment in the first nine months of 1966."—[OFFICIAL REPORT, 10th February, 1966; Vol. 724, c. 120.]
I agree with the right hon. Gentleman's proviso.
If we look at anticipated expenditure for this year of £250 million, and look ahead to 1967–68, we see that the Government are expecting to fork out only £200 million in the first nine months. What has happened to the rest? By 1967–68 we know that prices will have risen and capital investment will cost more. We would expect it to be at a very much higher level than the 2½ per cent. increase this year. Yet the Government are suggesting that they will be called upon to make only a fraction of the present disbursement.
Is the hon. Member arguing that the private sector of British industry should be a permanent pensioner on the public purse, that figures should not tail off once the initial injection has caused it to be more enterprising than it was and to deserve the title of enterprise, which at present it does not? Does he want it to continue as a pension for private industry?
I am glad that the hon. Member for Westhoughton (Mr. J. T. Price) has made that rather telling intervention. He seems to have missed the point that all this money has come from industry in the first place and is being given back.
The C.B.I. was approached by the Government on the basis that industry would get more back but it will not. No wonder the C.B.I. did not like what the Government are to do in order to save the Exchequer more money in other directions. The Government are attempting to contract out of giving back to industry money they have taken from industry. The anticipated support of British industry at a time when one would expect the rate to be doubled, is to be appreciably less. I hope that the Minister will deal with the question of whether they expect British industry to be the loser in terms of cash by these proposals.
Another aspect which is important is whether or not the money to be channelled through the Board of Trade instead of through the Treasury in terms of tax rebate will contribute to economic efficiency. I think it unnecessary to point out to any hon. Member that a lot of damage can be done by misapplied capital investment. If £1 million is spent on a new factory or new plant and in recruiting labour locally, the whole thing may turn out to be a flop. That can happen. This is the risk in private enterprise to have locked up assets permanently and wastefully.
A very important and critical decision has to be made and often it is best made by those who have to take into account losses as well as profits. Unfortunately, the measures proposed in this Bill seem to have dropped the profitability criterion and that seems a crazy thing to do. Profitability is the mark of sound management, good labour relations, intelligent and economic use of resources. All these are the hallmarks of profitability.
The Monopolies Commission has its criterion for a monopoly, that of a 33⅓ per cent. control of the market. Would that British Railways were content with 33⅓ per cent.! Profitability must and should be the criterion of the intelligent and economic use of our resources, but it is thrown overboard by this Bill. I agree that if the Government are proposing to throw over the profitability criterion it would be wise to give less money to British industry. All things being equal, the profitability criterion was the best aspect of the old system.
My third criticism of these proposals is that in an unintelligible and unintelligent way they mix up the two distinct goals, of economic efficiency, to which I have referred, and social aims for which the hon. Member for Westhoughton made such an eloquent plea. I would be the last person to want in any way to detract from the prospects of raising standards, diversifying the economy, and improving social and other conditions in those parts of the country where these are well below the national minimum.
I draw attention to this sombre and historic fact. One of the greatest and most powerful attractions to industry and management, and to men who have to consider finance, investment, etc., is being near to the bureaucracy where the decisions are made. For example, France has a very centralised form of government, planning and administration. The effect of this is to draw all industry to Paris and the surrounding regions.
It is no accident that historically the great industrial birth of this country was in areas in the North, in the South and in Wales before the days of bureaucracy. It is only since the days of bureaucracy—the growth of government—that there has been the pull towards the Metropolis. I fear that the Government are going in exactly the opposite way to decentralise industry from the South and from the South-West by increasing the bureaucracy by over 1,000, with an expenditure of £3 million a year. This will pull industrialists to the South and bring them nearer to the Metropolis and have exactly the opposite effect to that which is desired.
I now draw the Government's attention to some of the many difficulties they will have in the details of the Bill. Now that they have gone into the business of selection and discrimination, they will come up against many anomalies. I want to mention the oil industry. I have no interest to declare, other than the fact that I have visited some of the B.P. installations in the Arabian Gulf and elsewhere. The hon. Member for Bedfordshire, South, and I believe the Government, would be shocked to discover what it is necessary to provide in the way of welfare amenities on an oil rig so as to make life tolerable there. Television is singled out for criticism in the White Paper, but it is a positive and necessary form of capital equipment if people are to be persuaded to live under some of the conditions that oil men live under.
Let the Government contemplate some of the difficulties which they will be faced with on oil. Is refining a manufacturing process? This is not clearly spelled out in the Bill. If it is a manufacturing process, is the transportation of unrefined oil in tanker cars on British Railways or through pipelines part of the manufacturing process, or is it distribution? If it is distribution, it is ludicrous to believe that the British oil industry—one of the most thrusting, dynamic and go-ahead sectors of the economy—will be encouraged to invest capital. As hon. Members know, these people have recently developed a modern fleet of bogie tanker cars for use on British Railways. These cars are quite revolutionary in their concept. They are certainly new on British Railways. They will provide an export potential. As so often happens when an industry is boosted, the export prospects are increased. On the face of it, this is distribution and it will be discriminated against in the Bill.
There is the double anomaly of the tanker going in one direction carrying crude being part of the manufacturing industry and the same tanker going in another direction carrying refined oil to a consumer being part of the distribution industry. These are the type of difficulties the Government will be faced with. The same with pipelines—one for crude, one for refined. The pipeline carrying the crude oil will be part of manufacturing. That carrying refined oil will be part of distribution.
These anomalies will be sorted out by 1,000 civil servants costing £3 million a year. The whole thing was done automatically under the old system. These are the problems which will arise. They will make the machine gum up instead of boosting it forward.
Many sectors of industry which are being discriminated against, both in the Bill and by the Selective Employment Tax, are themselves potential sources of enormous export prospects. We need only look at British agriculture. I am sure that the President of the Board of Trade is only too delighted at the good mark that, for example, tractors have made in the export figures this year. Where would the tractor exports be if it was not for British agriculture? It is our agriculture which has thrown up tractors as a powerful force in British exports.
It may be public finance, but it has certainly had the effect of boosting a sector of British industry which is in no way subsidised, the tractor manufacturing industry.
The same applies to commercial vehicles. Commercial vehicles have saved the export of vehicle figures this year, and yet here we are discriminating against road transport, the womb of commercial vehicles, and doing so, theoretically, in order to promote the prospects of manufacturing industry in the export sector. We shall soon find that the exports of commercial vehicles will go down as rapidly as commercial aircraft if the Government interfere as they are.
I well appreciate that I am only one of a substantial number of Welshmen who have already taken part in this debate. I am sure that the House does not expect me, either on my own or on their behalf, to tender an apology in that respect. It would be wrong and uncharacteristic.
I am sure that the House appreciates that so many Welshmen have spoken in this debate not merely on account of the Cymric impulse to rhetoric, but because the nation of Wales forms one of those peripheral areas of Britain which fall into a category rather different from the mass of Britain that has been spoken of by other hon. Members in relation to the Bill.
I welcome the Bill because I believe its aims to be ambitious and its scope to be redical. It seeks to broaden the criterion of central Government assistance. At one time the basis of that criterion was unemployment—the overt, manifest problem of unemployment. But the Bill now includes as well other conditions that are not so obvious, and the condition that comes to mind, to myself as the representative of Cardigan, a mid-Wales county, is the question of depopulation. I appreciate the aim of the Bill. It is an attack upon the old complacency of laissez faire—the system, the jungle law that allowed one area to become fat, rich and powerful at the expense of the other areas of Britain. It is a concentrated attack upon this imbalance that has been the curse of our economic development for so many decades.
I welcome the remarks of the right hon. Member for Altrincham and Sale (Mr. Barber), who moved the Amendment, that his party gave full support to the regional policies of the present Government. Such remarks would, indeed, be in contrast to the declarations from time to time of the right hon. Member for Wolverhampton, South-West (Mr. Powell) who, with all his classical grandeur, is able to denigrate any real attempt at planning and replanning the industrial development of this country. If, indeed, the party opposite seek to divide the House tonight on this matter, they will be voting for the dismantling of the structure and system of the development areas. If they do that, I am quite certain that they will be rightly condemned by the people of Britain for that attempt.
I would rather not give way. My time is limited.
I shall confine my remarks to this one point in relation to my constituency and the surrounding area. We appreciate the aims of the Bill. Let us see whether they can meet the situation in mid-Wales, where the problems are those of a declining population. The population now is about 25 per cent. less than it was in 1871. The rate of decline from 1871 to 1961 was 2·7 per cent. per decade, from 1900 to 1961 it was 3 per cent. per decade, and from 1951 to 1961 it was over 4 per cent. per decade. This process of decay is accelerating.
The population is an ageing one. The proportion of people over the age of 44 in the five counties of mid-Wales is 5 per cent. higher than that for England and Wales as a whole and the proportion of people over the age of 65 is 20 per cent. higher than that for England and Wales as a whole. The young leave these areas. We remember Dr. Johnson's exhortation to Boswell about the best prospect for the Scotsman being the high road leading down to England. The best prospect for young people in the counties of Cardigan, Merioneth, Montgomery and Radnor at this very time is the high road leading to the towns and cities of England.
We ask ourselves what the Bill can do to change that basic situation. The Chancellor's efforts have not greatly helped in this connection. In Cardiganshire, 83 per cent. of the insured population are engaged in service industries, 11 per cent. in agriculture and extractive industry, and only 6 per cent. in manufacturing industry. In other words, little over one-twentieth of the insured population of my constituency will draw any subsidy at all from these proposals.
There is here a tremendous imbalance, probably a greater imbalance in this respect than in any other constituency in the British Isles. I believe that it would be proper for the President of the Board of Trade to consider that special circumstances of this nature demand special remedies. I am suggesting not that my constituency should be allowed, for all its independence, to contract out of these Measures but that we should examine special forms of Governmental assistance which could be given to such areas as these.
I am well conscious, despite all the efforts under the Bill, that there are grave problems in mid-Wales that cannot be answered by its provisions. The idea of directing industry—for that is what the Bill does, directing it not by edict but by incentive—to such areas is excellent, but cash incentives alone are not enough. The main problem in these counties is that there is no reserve of labour which will attract industrialists to establish industries there.
I believe that the clue to the whole situation I came before the House about 13 years ago when it discussed the Report on Rural Wales which had been prepared by the Welsh Advisory Council. The recommendation of the Committee responsible for that Report was that a Welsh development board should be established, that that board should be allowed a wide jurisdiction and should have broad terms of reference in tackling the problems of roads, housing, forestry, services and all manner of amenities in rural areas, and that it should receive over a period of 12 years an annual grant of £5 million. That idea, although it commended itself to many hon. Members representing such areas, was not accepted by the House.
I believe that the time has come when we must consider that, despite all the efforts such as those included in the Bill, it will not be possible to resuscitate the life of mid-Wales unless we have something which can be described as an act of faith. It is necessary to build houses in order to attract people in the first instance and have a reserve of labour. It is necessary to plan and construct services. All these matters cannot be tackled piecemeal. They are the various faces of the one central problem. I believe that such a development corporation, given adequate finance, could be responsible for this tremendous task. I believe, too, that it would be proper for this development corporation to include within its activities the colossal project of a new town in central Wales. I feel certain that with bold, imaginative and comprehensive planning this task can be successfully tackled.
In the very short time left before I must sit down and allow my right hon. Friend the Member for Argyll (Mr. Noble) to speak, I should like to make three very short points in relation to some of the arguments which have been addressed to the House on the Bill.
First, the hon. Member for Westhoughton (Mr. J. T. Price) made the point that this is a great free hand-out for industry, and other hon. Members have echoed this. The implication seems to be that industry should be grateful and go cap in hand to the Government. A more sinister implication is that this gives the Government the right to push industry around. I deny this myth. The Bill amounts to replacing by a system of cash grants a system of tax allowances to a substantially greater value than the new system of cash grants. I hope there will be no suggestion that swapping a system of tax reliefs for investment grants somehow gives the Government a greater right to push industry around.
As to my second point, there is no doubt that for most industries and most projects the value of the cash grants is very substantially less than the value of the tax allowances which they have replaced. It is possible—I have examples which could quote to the House if there was time—by carrying out the calculations in the most sophisticated way, using discounted cash flow, net present worth and other techniques, to show exactly how much less valuable the new system is compared with the old.
If the Government seriously believe, as the President of the Board of Trade appeared to be trying to tell the House today, that industry is better off, they are under a very considerable delusion. To refer, as the President did, to his answer of 1st March is sheer nonsense. The figures that he was using then were the figures for the interim period between the introduction of Corporation Tax and the replacement of the investment allowances in January.
My third point is about regional development. Whenever Ministers quote figures showing the success of their regional policy they compare figures for the last 12 months or longer with the average for the last five years. They choose the average for the last five years for the very good reason that if they gave the five-year figures individually they would tell an entirely different story. The break in the figures did not occur on 15th October, 1964; it occurred two years or 18 months earlier, when the Budget introduced by my right hon. Friend the Member for Barnet (Mr. Maudling), with its provision for free depreciation of development districts, began to take effect. I have no time to quote the figures now, but the impact of both measures on the figures for industrial development certificates granted and for employment in the various regions was marked and dramatic. I would not like the House or the country to be deluded by the five year average figure. It is utterly meaningless. From 1960 to 1963, the figures were roughly static. From 1963, there was a great resurgence of employment in the development areas.
I am extremely glad to be able to take part in the debate and to deal rather largely with the development side of the problem, as my right hon. Friend the Member for Altrincham and Sale (Mr. Barber) promised I would, because I, together with my right hon. Friend the Leader of the Opposition, my right hon. Friend the Member for Barnet (Mr. Maudling) and my right hon. and learned Friend the Member for St. Marylebone (Mr. Hogg), have, over the last three or four years, spent a great deal of time, with some considerable success, in developing some of these policies.
It has been a most remarkable debate. No fewer than six hon. Members from Wales on the benches opposite have spoken. For once I almost felt that I had got into the wrong Grand Committee. So admirable were their speeches and so critical were they—all except one—of parts of the Bill, that I find it difficult to understand the naive assumption by the President of the Board of Trade, and repeated by the hon. Member for Cardigan (Mr. Elystan Morgan), that anybody who votes against the Bill is doing something awful.
Indeed, it is clear from all the speeches made that every hon. Member who has spoken, with one exception, has very severe reservations about some parts of the Bill. This is a perfectly fair criticism. The only difference between us is that we on these benches have stated our reservations and intend to vote on them. The Board of Trade will have to answer a great number of questions, although clearly not all of them can be answered tonight. But there will be some weeks in Committee.
At this stage, I want to congratulate the two hon. Members who made their maiden speeches—though I cannot see either in his place. I was fortunate enough to hear the hon. Member for Conway (Mr. Ednyfed Hudson Davies) who made a speech of great brilliance with simplicity and great charm. In talking of the slate industry he was a little incorrect, however. He thought that Welsh slates were the only ones being produced in the country. The hon. Gentleman also talked with great charm about the tourism and the attractions of Conway, which I happen to know extremely well. I congratulate him, as I know the House does, and I hope that we shall hear him often and will often be in his constituency to enjoy Its many delights. It is clear that the hon. Gentleman is unhappy about a good deal of what the Bill says, in spite of his determination to support it. Some of the charm he has demonstrated is surely sufficient to ward off any trouble from the Whips if he decides to abstain tonight or to vote with us.
I was less fortunate in that I did not hear the hon. Member for Plymouth, Sutton (Dr. David Owen) making his maiden speech. I am, however, assured by my right hon. Friend the Member for Altrincham and Sale that his also was charming, elegant and effective. But exactly the same point came out. The hon. Member complained that Plymouth has been left off the list of development areas. He said that this would be a disaster for the South-West. He also brought out the point about the Selective Employment Tax and its effects on the area.
Inevitably, I shall speak a certain amount about Scotland and will have to use Scotland as a reference for a number of statistics because, although we have had the promise of many surveys of different regions of England and Wales, it is only in Scotland at the moment that we have up-to-date statistics of a good many things going on today. I hope that the Minister of State will be able to tell us how soon we may expect the same sort of statistics for other parts of the country and how soon the surveys are to be completed.
We know from everything said in the debate today and from other things that one of the major industries which will be affected as the Bill is working will be tourism. We know, too, that both South-West England and Scotland rely much more on the service industries than does any other part of the country, and even the President of the Board of Trade has not attempted to suggest that service industries will be better treated by the Bill. The problems of tourism were most clearly brought out by my hon. Friend the Member for Morecambe and Lonsdale (Mr. Hall-Davis), who has a great deal of experience of this matter and who stressed the difficulties in the industry which would certainly ensue. The point was also mentioned by the hon. Member for Conway who pointed out that the tourist industry was already short of people to work in it, so that there was no question of trying to force labour out of an over-manned industry to somewhere else.
The other point, which I am certain the Board of Trade has considered and about which, I hope, it has made representations to the Chancellor of the Exchequer, is that by the combination of this policy and the Selective Employment Tax—and it is impossible to consider these two separately, because over and over again as one looks at the effects on different industries one has to balance both actions—there is no doubt that costs are bound to rise in the tourist industry. If that happens, many citizens who in the past have had their holidays at home will find it cheaper to go abroad, so that not only will we have tourists from abroad unwilling to come to Britain because of increased costs, but Britons going abroad and spending money there because our own industry has become too expensive.
I want now to turn to some of the problems of a distribution of industry policy. Personally, I dislike talking about a regional policy, because Scotland is not a region and I hope that it will never be considered by the House to be a region. In Scotland we have a number of regional problems, but that is a different matter. I agree at once with the President of the Board of Trade that after the experience of a number of years of the Local Employment Act, there were changes which should have been made, and he mentioned a number of them. I agree with the hon. Member for Westhoughton (Mr. J. T. Price), who spoke with speed and accuracy, even if I did not agree with all he said, that there are some new factors which are becoming more urgent than just crude unemployment. It is also true that whereas he was complaining that crude unemployment in his area represented 1·4 per cent., in Scotland we still have over double that figure. Even on the crude unemployment figure, the Scottish position is considerably worse than that in many areas on whose behalf hon. Members have been making impassioned speeches today.
I agree with the President of the Board of Trade that the problem of growth industries is so often the creation of successful industries which are not labour-intensive. Therefore, to adjust the amount to be given strictly to the number of jobs to be created often distorts the picture of the economy as a whole. I agree with him about the flexibility of areas and the ability to move money from one place to another if it should seem sensible, but I will return to that later.
As he and I remember, there is the problem of the pulp mill type of operation and its difficulties. I agree that there is certainly an attraction for those who want to sell Scotland in being able to state that firms will get a certain specific cash grant. I can remember persuading my right hon. Friends to do this on behalf of the Scottish Council when they wanted a standard grant. It was easier to sell things. I can understand that.
As my hon. Friend the Member for Banff (Mr. Baker) has said, the problem of migration is largely, if not entirely, a question of the level of incomes in the areas from which migration takes place. If this is true, what are the barriers to industry moving into some of these areas? What are some of the incentives which will draw them there? There is really only one effective incentive to the whole of industry, and that is the lowest possible level of company taxation. This is an incentive which the Government, in their wisdom or folly over the last 18 months have been totally unable to provide, because company taxation has gone up by very large amounts.
The second major incentive, and this is based on experience gained through talking to many firms, is that of transport. For some firms it is the cost, and for others it is the speed of transport. Both factors are of very considerable importance if one wants the development of industry to be accelerated. In the last few months, neither in this Bill nor in any other Government measure has any appropriate action been taken to help the transport industries. They are discriminated against in this Bill; they are very heavily hit by the Selective Employment Tax; they have been hit by the petrol tax and the road and rail policy.
It is very difficult for hon. Gentlemen on either side of the House to believe that the Government are seriously interested in regional development when we are asked to provide a sum of about £10 million in a Bill this week, to give cheaper transport to people living in the London Passenger Transport Board area. This is not for any new capital development but is just a subsidy so that these people can get from one part of London to another more cheaply. This is the absolute negation of regional policy, and I hope that the right hon. Gentleman will pass this on to other members of the Government. I am very surprised that the Secretary of State for Scotland allowed it to get through. Essentially the problem here is that the London Passenger Transport Board is over-manned and everyone knows it. If it put its own house in order this subsidy would not be needed and the money could be used much better in Wales or Scotland.
The right hon. Gentleman is making some wide criticisms of the Government, some of which are justified. We are waiting to hear why he, as Leader of the Scottish Conservatives, should see fit to vote against this Bill, which for the first time introduces measures which he refused to introduce while in office, to help areas of Scotland such as the Border, the South-West, the North-East and so on?
It is rather difficult for the hon. Gentleman. I know that he loves talking. He will remember that the Liberal Party voted with the Government for the disincentives for all service industries, which apply in almost all Liberal constituencies.
The second incentive, which is probably more important than any other if we are to get industry to move to these new areas—and this is presumably one of the main purposes of the Bill—is that we should have good and speedy housing, for workpeople, executives and so on.
What is the position of the building industry? I know that the Secretary of State for Scotland must regret bitterly the fact that his White Paper on the Scottish Economy came out a day or so before or after the White Paper on Investment Incentives. Clearly, no one attempted to read one against the other.
Chapter 15 of the Scottish Plan for Expansion says clearly, on page 83:
The size of the contribution of the construction industry to the development of Scotland is perhaps not sufficiently recognised. With nearly 200,000 workers and an annual output of over £350 million it is a major component of the Scottish economy.
It certainly has not been very clearly recognised by the right hon. Gentleman and his colleagues, because, although the President of the Board of Trade has told us that the construction industry is now to get the new investment grants, which in itself is a change of mind from the White Paper, under the Selective Employment Tax, it will have to pay about an extra £250,000 a week in Scotland on those figures. Is that likely to improve the building of houses, which the right hon. Gentleman knows is rather a disaster at the moment? Is it likely to reduce their cost? The only thing that is rising in Scotland in terms of house building is its cost, as the right hon. Gentleman knows very well.
The fourth aspect which is necessary if we are to get industries to come to Wales, the South-West, Scotland and other development areas, is that, if possible, they have to be pleasant places for people to come and work in.
It is a pity that the Secretary of State for Scotland could not spare a minute to attend the debate. There was one Scottish Minister present for about 10 minutes, but that was all. The hon. Member for Banff (Mr. Baker)—
It would be pleasant if right hon and hon. Gentlemen opposite would listen for a moment. The hon. Member for Banff quoted one passage from the Plan for Expansion which I had myself marked. [Interruption.] It would help the course of the debate if the Scottish Ministers did not talk the whole time.
That paragraph in the Plan for Expansion—[Interruption.]
That paragraph showed the importance of the service industries in providing for sport, the arts, the theatre, restaurants and all the things which go to make an area attractive to incoming industry. Those amenities are all supplied by the service industries, which are discriminated against both in the Bill and also in the Selective Employment Tax.
I agree wholeheartedly with many hon. Members on both sides about the importance of some continuity in investment incentive. The President of the Board of Trade made the same point. Continual change is bad. If that is to be so, there are a number of points which we must discuss during the Committee stage because, as the Bill stands, there are almost unlimited opportunities for the President of the Board of Trade to change areas from one category to another.
We have to guarantee continuity for the industrialists who go there; otherwise they will not be attracted. That is brought out most clearly in the case of Bridlington, which used to be in the development area but which is now left out of the development districts.
This continuity of investment is important, but it is also important—and this was the point made by my hon. Friend the Member for Barkston Ash (Mr. Alison)—that the speed and certainty of the payments to industry should be improved, or at least maintained. I think that the President of the Board of Trade did his best, under rather difficult conditions, to try to assure industry that it would get some money from time to time, but, with the present extremely tough credit squeeze, and because over the months from September onwards industry will have to make an interest-free loan to the Government of about £100 million a month, it will not be easy for industry to find the money for new investment unless the President of the Board of Trade makes special efforts to help it.
I turn now to what I think is another major difference between the present approach and the approach which we had to this problem of the distribution of industry. The Government have decided that in future the incentives available under this Bill will go to very much wider areas—the development district concept instead of the development area concept. As I listened to the various speeches from hon. Members on both sides of the House, I could almost feel the excitement growing, "We were not in a development area before, but we are in a development district now, and wonderful factories will spring up all over our areas".
But I think the President of the Board of Trade knows—and it certainly has been all the experience of his Department, and of my old Department, the Scottish Office—that if we want to make effective use of any money which the Government are likely to have available, we have to concentrate it in the most likely places. It has been the concentration of Government money in the infrastructure, in housing, in schools, and so on, particularly in the new towns, and in the industrial estates, which has attracted industry and brought it in quantity to Scotland, and, I expect, to other areas of the United Kingdom which I do not know so well.
If, as the President of the Board of Trade told the House, the economic situation is difficult and serious, and if the intention is to expand areas, to cover vastly bigger areas of the country and vastly greater proportions of the working population, how will the Government maintain that concentration of effort particularly when, as one of my hon. Friends said, we see that the forecast of money to be spent under this Bill is not rising, but going down, and particularly when we see even in the Scottish Plan that in real terms the trend of Government expenditure is not on a rising curve but on a flattening out one?
If there is not going to be enough money to service all the hopes of the hon. Members who have spoken to-day, I think that the Government are presenting the House with a sham, because the hon. Member for Rhondda, West (Mr. Iorwerth Thomas), who, alas, is not here, made some telling points. He said that there were too many carrots and too few sticks, and he is right. He said that so much was being given to so many. He might have concluded by saying, "so seldom".
I appreciate that the hon. Member for Edmonton (Mr. Albu) is winding up the debate. I am a little sorry that the debate is not being wound up by the hon. Member for Sheffield, Hillsborough (Mr. Darling), as I understand it was to be until a short while ago, because the hon. Gentleman spoke so feelingly about the problems of Edinburgh and Leith. He told us, if he was correctly reported in the Press, which is often a difficult thing to assume, that his heart was not at all in the problem of explaining to Leith and Edinburgh why one should lose £6 million worth of work, and the other £7 million. [Interruption.] It may be, as the right hon. Gentleman says, that it is starting in Sheffield.
I hope that the hon. Member will say a word or two about the future of B.O.T.A.C., because there have been some criticisms and worries about how best that could be reorganised in such a way as the hon. Member for Rhondda West said, as to provide an effective means of dealing with this problem. I do not want to cast any sorrow over the departure of the late Chairman, and I wish the new one success, but there are many things which those who have to work with it know are not right, and I very much hope that we shall hear something about them.
When we debated the White Paper the President of the Board of Trade wound up. He gave us a great rash of figures telling us what wonderful things were going to happen in Scotland. He talked about advance factories being built, and the jobs that were arriving. I have had a quick look at the position of advance factories in Scotland. Although we are grateful for the 425,000 square feet announced over the last 15 months it is significant that of that very large amount only four factories—two of which are very small—are outside what is generally regarded as the central belt. One is in Stranraer, one in Campbeltown, one in Inverness and one in Aberdeen. I hope that hon. Members will forgive me for concentrating on Scotland. There is no point in putting all the advance factories in the centre of Scotland when we know quite well, as the Government are continually pointing out, that it is important to develop the Highlands, the Borders and other areas.
I will tell him this: in the Highlands alone, and in two projects alone, nearly 4,000 new jobs were provided. When his Government get above the 4,000 mark in respect of new jobs in the Highlands alone I will give them the credit they deserve.
At the time of the election, the Prime Minister, speaking in Glasgow, said that his team was the best team that the Scottish Office had ever had. I wonder whether that team were fools or knaves, because the figures that have come out since the election—and I am sure that the right hon. Gentleman knew them—indicate that in the last year there were 6,000 fewer jobs in Scotland than in 1964. The right hon. Gentleman did not tell that to the people of Scotland; nor did the President of the Board of Trade. In a debate that I had on television with the right hon. Gentleman he denied the validity of the figures showing the emigrants from Scotland. They came out just after the election, and showed that there had been an extra 9,000. If I have the figures correctly, it is a little interesting to discover that whereas the number of people leaving Scotland for England was about the same as the year before, an extra 9,000 went abroad. Is this what the Socialist Government are intending to do to Scotland?
At the same time, we have built fewer houses in Scotland, and we are cutting back on the school building programme. Did the right hon. Gentleman know the truth and fail to deliver it to Scotland, or was he just joking when he said that Scotland should stop whining about the Selective Employment Tax?
Can he explain to us why the Chairman and the Vice-Chairman of the Highlands Development Board, people whom he has continually rated in public as knowing a great deal about the Highlands and development, should have come out quite clearly—the Vice-Chairman only the other day—saying that twice within five months their feet had been kicked from under them by the action of the Government? Do this Bill and the Selective Employment Tax represent the sort of action which the Secretary of State can justify to Scotland? If he thinks he can, he should go to Scotland, where he will not hear a whine: he will hear a roar.
—that the views which he holds do not seem to be held by the Liberal hon. Members for Scottish constituencies who have spoken in the debate.
I should like to start by offering my congratulations to my two hon. Friends who have made maiden speeches. My hon. Friend the Member for Conway (Mr. Ednyfed Hudson Davies) made a lyrical speech, including a very moving reference to the loss of Lady Megan Lloyd George, who will be so very badly missed here. It is true that his support for the Bill was qualified. I can say only that his points will be considered. My hon. Friend the Member for Plymouth, Sutton (Dr. David Owen), whose speech I regret to say I did not hear, naturally spoke as many others did about the interests of his own constituency and there is nothing wrong with that. We shall take into account everything he said, but we are aware of the situation in Plymouth.
Listening to both right hon. Gentlemen from the Opposition Front Bench—particularly the right hon. Member for Altrincham and Sale (Mr. Barber)—I had the feeling that this has been a very muffled attack to support a vote against the Bill. The real substance of the Bill has hardly been attacked by the Opposition at all. There has been a good deal of discussion of detail. The right hon. Member for Altrincham and Sale reserved his fire mainly for something which he thought he had discovered—a sinister power which would be exercised for the first time by the Board of Trade—and spent an inordinate amount of time dealing with a very small Clause, dealing with a very minor matter, namely, the possibility of the Board of Trade, when assisting firms to establish in these areas, owning equity shares. I shall be dealing with both these points.
The difficulty of the right hon. Gentleman and of his hon. Friends is that they left an economy of inadequate investment and insufficient growth and one with a recurring and ever-worsening balance of payments crisis. Against this background, their criticisms of the measures which we are taking to change the situation are completely negative. Of course, whatever we do in their eyes is wrong—we are accustomed to this—but I must say that we should have rather more respect for their opinions if they were to produce any vestige of a new or constructive approach to our economic problems.
The Bill is intended to do two things. The first is to make more direct and selective the assistance given by the Exchequer to industry. The second is to bring up to date our system of assisting those areas where there is not only a higher rate of unemployment than in the rest of the country but also a slower rate of general economic growth and a high rate of emigration or depopulation. All changes in taxation allowances or grants are unpopular with those who do not receive them and we naturally expected to hear those views expressed by hon. Members from the constituencies which are most affected or who represent interests which are most affected.
But, of course, any change is bound to involve some disadvantages, some risks and uncertainties. If we are unable to take action, the level of investment in the key sectors of our economy, will, of course, remain inadequate—
I have hardly started yet.
Nobody who has looked at the figures can have failed to notice the serious rise in manufacturing imports which has taken place in recent years. The latest figures show clearly that there is an unsatisfied demand at home for manufactured goods, including some kinds of plant and machinery which we ought to be able to supply ourselves.
It is irresponsible nonsense of hon. Gentlemen opposite to suggest that, because we believe that in the last few years the comparative rates of expansion of our manufacturing and of our service industries has been wrong, this is because we are puritanical Socialists. If it is to be a puritanical Socialist to want to pay one's way in the world, then I proudly accept the description, and so I am sure do my right hon. and hon. Friends.
Of course, we recognise that in an expanding economy some rise in imports is inevitable, but we are convinced that the present balance between our imports and our exports is wrong, and we all know that if we are to correct it this can only be done from an expansion and greater competitiveness of our manufacturing industry. Much of this will, of course, be in our engineering industries because on these we depend not only for our exports but also for the increased investment itself.
It is extraordinary how much our ability to produce the plant and machinery that we require in this country is held back by particular bottlenecks of capacity which we are only just beginning to discover, thanks partly to the excellent work done by the Economic Development Committees.
What we intend to do by the change in the incentive system which we are introducing and by deliberate discrimination is to bring about a lasting change both in the rate of industrial investment and in its distribution as between manufacturing, extraction, and construction, on the one hand, and services, on the other.
If this can be done, all sectors of the economy will benefit. If we fail in the task, the resulting constraints on economic growth will adversely affect all parts of the economy, not merely the rate of growth in commerce and industry but also the rate of growth in social services as well.
Other countries have achieved much better rates of investment in manufacturing industry than we have, particularly our competitors in Europe. For instance, in 1963 the latest figures which I have, the ratio of investment to output in manufacturing industry in Belgium was 19·4 per cent., in France 15·2 per cent., in Germany 16·5 per cent., and in the United Kingdom 10·8 per cent. Furthermore, in the United Kingdom there is a striking contrast between the annual rate of investment in manufacturing between 1960 and 1964 and the rate of investment in distribution.
Manufacturing investment went up at a rate of about 2½ per cent. a year while investment in distribution went up by nearly 9 per cent. a year.
We are introducing the Bill because we are not satisfied with the rate of increase in industrial investment.
I think that this very well illustrates the disadvantages of a generally unselective system of investment incentives which was costing the Exchequer a very large sum every year. We have got to change this pattern to give priority to the key sectors for the next few years.
As my right hon. Friend has announced, since the Bill was published we have decided to include the construction industry among those qualifying for grant. One inevitable consequence of this late decision is that the Board of Trade has not had the opportunity for detailed consultations with the industry as it has with manufacturing and extractive industry. It proposes to have such discussions as soon as they can be arranged, but the House will appreciate that it is rather difficult to do this just now.
There is one particular point which will have to be discussed with the industry, and that is the treatment of leasing. As already explained by my right hon. Friend the President of the Board of Trade, it is proposed, in general, to confine grants on leased assets to equipment leased for three years or longer. We know, however, that short-term leasing is very common in the building industry and we are therefore conscious of the need to see how far we can adapt the general leasing arrangements to cope with it.
The Bill leaves the matter quite open and in no way prevents the Board of Trade from giving grants on assets leased for short periods. The problem is to devise arrangements to prevent abuse. This is a question which the Board will discuss with the construction industry with a view to finding a satisfactory solution.
The right hon. Gentleman did not, as I rather expected he would, attack the Bill on the ground that it was discriminatory. Of course, he would not have been in a very strong position to do so. The whole idea of a discriminatory system has been used ever since the introduction of the Distribution of Industry Act and subsequently the Local Employment Act—and my right hon. Friend pointed out that the system of investment allowances was discriminatory when Lord Butler introduced it in 1954, and it has become increasingly so ever since. In fact, the scheme for free depreciation which the right hon. Member for Barnet (Mr. Maudling) introduced in 1963 discriminated in favour of the development districts—against commercial activities and services and in favour of the industrial activities within those areas.
Of course, we did not complain about it being discriminatory, but we did complain, and do complain, considerably because it is not discriminatory enough. If one considers the Highland problem—and I am sure that the hon. Gentleman has been briefed about that—we see that we have 90 per cent. of the people in agriculture and the service industries, and they are discriminated against in the Bill. They are also discriminated against in the Selective Employment Tax. Nothing has been done for them.
The right hon. Gentleman is grossly exaggerating his case. The whole object of allowances from industrial taxation or of grants is, of course, to achieve certain economic purposes and without the tool of discrimination the administration of economic policy would be impossible. We believe, therefore, that the case for a change of system has been made out and we consider that the system we have chosen has clear advantages over the old, which my right hon. Friend the President of the Board of Trade described.
There has been some argument about the size of benefit to industry under the new scheme in comparison with the old. I am inclined to agree with the hon. Member for Colne Valley (Mr. Richard Wainwright) on this because it seems that one can get whatever figures one likes according to the accountant one has. My right hon. Friend gave some figures for comparative benefits in answer to a Question on 1st March and I do not think that I want to go further tonight.
I have given way sufficiently already.
We are convinced that industry will get advantages from the change when the whole of the tax effect is taken into account. But the case for the change does not rest only on the increase of benefit to those who receive it. It is the directness of the new incentive, the psychological factor which cannot be quantified, that must be taken into account.
The hon. Member for Sheffield, Hallam (Mr. J. H. Osborn) said that the incentives should be simple, easily understood, and particularly so for the smaller and medium-sized firms. I thought that his view of the Bill, like the view of so many hon. Gentlemen opposite, rather ambivalent. Indeed, I wonder whether he intends to vote against it on this matter of simplicity, because I suggest that nothing could be simpler than these proposals.
It is not so much a question of simplicity as the fact that industry does not know whether or not it will get more out of it—and I suggest that, in the non-development districts, many people will be at a considerable disadvantage.
That will not be the case. Certainly, I should have thought that a great part of the sort of equipment that is affected is clearly covered by the Bill. For example, a manager can put up a proposal to his firm and he is more likely to have the project accepted if the cost to the company is clearly 80 per cent.—or even 60 per cent. of its true cost. That is the situation under the Bill, and what someone told me the other day in one of these areas confirmed it. That is why I say that it will be of considerable advantage. We should not under-estimate the incentive effect of this clear and definite relationship between investment and cash return, especially when, after the phasing out period, we have reduced the period to six months.
Of course, it can be said that the changeover must create some uncertainty about what investment will be eligible for grant, as was said by the hon. Gentleman. It is very easy to exaggerate this aspect. There will be some borderlines: this is inevitable with any discriminatory scheme. Under the old system, too, there were uncertainties in particular cases, and if the question had to be settled it had to be resolved by the courts, in which case it might take much longer.
For the great mass of industrial investment in plant and machinery, or in computers, or ships or hovercraft, there will be no real doubt under the new system. Wherever possible, the Board of Trade will follow the same borderlines in distinguishing what is plant and machinery from what is to be regarded as buildings, as the Inland Revenue has done for tax allowances. The main difference will be that some assets will be excluded specifically, and all plant and machinery will have to be related to certain broadly defined industrial processes.
The Bill gives the Board of Trade wide latitude to bring in certain incidental processes, and I can assure the House that the Board has no intention of exercising its powers in a narrow, legalistic or restrictive manner. Several public statements have already been made to clarify the treatment proposed for such items as computers and leased assets, and others will follow from time to time. When the Bill becomes law, it is the Board's intention to prepare and issue notes for the guidance of industry which will, I think, remove most of the remaining uncertainties. I should be very surprised if, when the scheme has been in operation for a short time, industry does not feel just as certain about what proportion of its investment will qualify for grants as it is now about investment allowances.
Part of the right hon. Gentleman's attack was on the ground that this was a system giving great powers to the Board of Trade. It would have been nice to have had a mandatory system, but this would have meant that there would have to be a system specifying the eligible assets in a comprehensive list issued either as a Schedule to the Bill or as a Statutory Instrument. We considered this idea, but rejected it because it would have obliged us to draw the list much more narrowly than we would have wished. I am interested to see that the French Government, who have just introduced legislation to bring in their own discriminatory investment incentive scheme, have come to the same conclusion, and have abandoned their original intention to publish a comprehensive list.
It can be argued that under the Finance Act, 1954, there was mandatory provision in regard to investment allowances, with right of appeal to the courts. The result of this system and the right of appeal to the Courts has been very considerably to widen the interpretation of the Act, so that its intentions have become completely destroyed. The right hon. Gentleman quoted a case of Hinton v. Madden and Ireland. This was the case in which, on appeal, investment allowances were granted for a number of items—mostly minor short-lived items—which had previously been disallowed.
This is exactly the precedent that opened the floodgates that have caused the trouble, which made the previous system so completely non-discriminatory, and spread—and hon. Gentlemen opposite keep asking us to concentrate our efforts—the finance available under the system much too widely. So we get these extraordinarily trivial cases of raspberry canes, ash trays—even foundation garments, and goodness knows what—all coming through the gates opened by that case. It is exactly that case that started the whole process which made a nonsense of the investment allowances system, and made it imperative for us to introduce a system which was far more discriminatory, and this we are doing.
The right hon. Gentleman made some grossly exaggerated statements about the administration of the Bill. He suggested that there would be about 2½ million claims a year from 1 million firms. I am sure that he will be pleased to know that the estimated figure is 300,000 claims a year. I am sure that he will also be pleased to know that it is not the intention of the Board of Trade to ask for individual vouchers in every case—not as a rule, though it may from time to time check up in general. What it will ask for will be schedules of allowed items, qualifying items, authenticated by the accountants.
I turn now to the point about the holding of equities which seemed to frighten the right hon. Member—
Perhaps the hon. Gentleman will deal with probably the most important matter of all, the financial consequences for industry in respect of plant and machinery. I mention this because three times I have given figures to the House and each time I have asked if my figures are not true that we should be given alternative figures.
One must take the present system into account. With the Corporation Tax it is possible for those companies which retain a large proportion of their profits to get a greater benefit. On this basis, we still claim that there is a considerabe advantage, particularly in development areas.
I deal now with the point which appeared to terrify the right hon. Gentleman, the question of the Board of Trade having power to take shares in companies under certain circumstances when giving assistance in development areas. I make it clear that the Board is not to buy shares in any company if the company does not agree. The company has to apply for assistance and the Advisory Committee of the Board of Trade, about which he asked—and he must not exaggerate the part which the Committee plays in these matters—is consulted. It is a completely independent body of businessmen. On its advice the Board of Trade will decide the terms on which it offers a loan or takes equity shares.
I must get on. I am answering a question asked by the right hon. Member for Altrincham and Sale.
The right hon. Member for Argyll did not put the point which I am now answering. There is nothing very startling or terrifying about this proposal and in any case it will probably be used in a very small number of cases. There is, in fact, already power to take shares as part of a rescue operation where a company which has received a loan is getting into deep water. There is power to appoint directors which forms part of the agreement at present. It is prudent, if the Government are providing money for equity, that it should put in a director to look after its interests. I have no doctrinaire views about the balance between public and private investment, but I doubt whether this Clause will do much to change that.
The new concept of development areas is a natural development of the policies on distribution of industry in which we owe so much to the late Hugh Dalton and my right hon. Friend the President of the Board of Trade. It is all very fine to argue about the actual proportion of factories and new employment provided in the last few years. There would have been none of this legislation but for the foresightedness of my right hon. Friend when he was working with Hugh Dalton just before and immediately after the war.
I was extremely moved when, a few months ago, I was asked to open a factory for a firm of which I was a works manager in its premises near London in 1930. When I was there almost every worker I took on had come from a closed-down mill in Accrington. Later they came from Durham, Scotland. South Wales, or Lancashire. How enormously well the work was done by my right hon. Friend and Hugh Dalton after the war is shown by the fact that the new factory for the same company, thanks to the incentives and assistance it received from the Board of Trade, was in an area which at that time was a development district.
Do not let us forget that this policy was a policy of a Labour Government after the war. It may be that the Conservative Party followed up with it afterwards, but now we are now developing it still further. What we now have is not just a problem of unemployment. That is not any longer the basic problem. What we are now concerned with is altering the balance in these older industrial areas where there is a higher proportion of traditional and old and contracting industries and a smaller proportion of expanding new and modern industries. We intend to use the new system of investment grants at the 40 per cent. rate to assist us in changing the whole pattern in these older areas. This will itself provide assistance and help in areas where there is particularly high unemployment.
There is nothing to prevent the Board of Trade from continuing to use the Local Employment Act provisions, which are being continued by this legislation, within the development areas themselves to ensure that account is taken of areas where there is a shortage of employment or where unemployment is likely to take place, and so on. It will give the Board of Trade the opportunity to plan within the areas themselves.
We are engaged in a struggle to reverse the trends in our economy which have their origins I believe many years ago. It is no good pretending that the reversal of these trends will take place by itself. The habits and opinions which they reflect are too deeply rooted for that to happen. For too long we have neglected our manufacturing industries. For too long we have lived within the protected and relatively closed market of the Commonwealth. There is no other source than that of our manufacturing industries from which we can receive a sufficient increase in overseas earnings to balance our overseas account. It is not an impossible task and the change in the balance between imports and exports that we require is statistically a very small one.
Many of our manufacturing firms are doing a splendid job overseas, and I am encouraged by the young, better educated, better trained men who are now coming up the managerial ladder. They at least understand what we are trying to do. As one of them said to me the other day, "I do not support you politically, but at least I and my friends feel that you are trying out some new ideas". No doubt that is the reason why they are less and less supporting hon. Members opposite.
I have listened to the debate right through. I must say, having listened to it, that I found it extremely difficult to understand why right hon. and hon. Members opposite intend to vote for their Amendment. They have used no argument in principle against the general principles of the Bill. They have made many criticisms in detail. They have made many attempts to show by figures—rather "phoney" figures—that this or that area will be affected adversely, that
By voting against the Bill, as my right hon. Friend pointed out, what they would do, as we have now passed the Resolutions connected with the Finance Bill, would be to abolish, if they were to succeed in getting a majority in the Lobbies, any investment incentive to industries, to abolish any local employment incentive, any assistance by the Board of Trade or anybody else, and leave the whole situation where it is. No doubt that is what they want. Perhaps they would like to go back—I am sure that the hon. Member for Oswestry (Mr. Biffen) would like to go back—to a situation where there were no incentives, to an entirely laissez faire situation. That might be a very interesting experiment, but I do not see anybody trying it.
|Division No. 11.]||AYES||[10.0 p.m.|
|Albu, Austen||Buchanan, Richard (G'gow, Sp'burn)||Eadie, Alex|
|Allaun, Frank (Salford, E.)||Butler, Mrs. Joyce (Wood Green)||Edelman, Maurice|
|Anderson, Donald||Carmichael, Neil||Edwards, Robert (Bilston)|
|Archer, Peter||Carter-Jones, Lewis||Edwards, William (Merioneth)|
|Armstrong, Ernest||Coe, Denis||Ellis, John|
|Ashley, Jack||Coleman, Donald||Ennals, David|
|Atkins, Ronald (Preston, N.)||Concannon, J. D.||Ensor, David|
|Atkinson, Norman (Tottenham)||Conlan, Bernard||Evans, Albert (Islington, S. W.)|
|Bagier, Gordon A. T.||Craddock, George (Bradford, S.)||Evans, Ioan L. (Birm'h'm, Yardley)|
|Barnett, Joel||Cronin, John||Faulds, Andrew|
|Baxter, William||Cullen, Mrs. Alice||Fernyhough, E.|
|Bence, Cyril||Dalyell, Tam||Fitch, Alan (Wigan)|
|Benn, Rt. Hn. Anthony Wedgwood||Darling, George||Fitt, Gerald (Belfast, W.)|
|Bennett, James (G'gow, Bridgeton)||Davidson, Arthur (Accrington)||Fletcher, Raymond (llkeston)|
|Bidwell, Sydney||Davidson, James (Aberdeenshire, W.)||Fletcher, Ted (Darlington)|
|Binns, John||Davies, Dr. Ernest (Stretford)||Floud, Bernard|
|Bishop, E. S.||Davies, G. Elfed (Rhondda, E.)||Foley, Maurice|
|Blackburn, F.||Davies, Ednyfed Hudson (Conway)||Forrester, John|
|Blenkinsop, Arthur||Davies, Harold (Leek)||Fowler, Gerry|
|Boardman, H.||Davies, Robert (Cambridge)||Fraser, John (Norwood)|
|Booth, Albert||Davies, S. O. (Merthyr)||Fraser, Rt. Hn. Tom (Hamilton)|
|Bowden, Rt. Hn. Herbert||de Freitas, Sir Geoffrey||Galpern, Sir Myer|
|Boyden, James||Dell, Edmund||Gardner, A. J.|
|Braddock, Mrs. E. M.||Dempsey, James||Garrow, Alex|
|Brooks, Edwin||Dewar, Donald||Ginsburg, David|
|Broughton, Dr. A. D. D.||Diamond, Rt. Hn. John||Gray, Dr. Hugh|
|Brown, Rt. Hn. George (Belper)||Dickens, James||Greenwood, Rt. Hn. Anthony|
|Brown, Hugh D. (G'gow, Provan)||Dobson, Ray||Gregory, Arnold|
|Brown, Bob (N'c'tle-upon-Tyne, W)||Doig, Peter||Grey, Charles|
|Brown, R. W. (Shoreditch & F'bury)||Dunwoody, Mrs. Gwyneth (Exeter)||Griffiths, Rt. Hn. James (Llanelly)|
|Buchan, Norman||Dunwoody, Dr. John (F'th & C'b'e)||Grimond, Rt. Hn. J.|
|Hale, Leslie (Oldham, W.)||Mackintosh, John P.||Rodgers, William (Stockton)|
|Hamilton, James (Bothwell)||Maclennan, Robert||Rose, Paul|
|Hamilton, William (Fife, W.)||McMillan, Tom (Glasgow, C.)||Ross, Rt. Hn. William|
|Hamling, William||McNamara, J. Kevin||Rowland, Christopher (Meriden)|
|Hannan, William||MacPherson, Malcolm||Rowlands, E. (Cardiff, N.)|
|Hart, Mrs. Judith||Mahon, Peter (Preston, S.)||Ryan, John|
|Hattersley, Roy||Mahon, Simon (Bootle)||Shaw, Arnold (Ilford, S.)|
|Hazell, Bert||Mallalieu, J. P. W. (Huddersfield, E.)||Sheldon, Robert|
|Heffer, Eric S.||Manuel, Archie||Shore, Peter (Stepney)|
|Henig, Stanley||Marquand, David||Short, Rt. Hn. Edward (N'c'tle-u-Tyne)|
|Herbison, Rt. Hn. Margaret||Mason, Roy||Short, Mrs. Renée (W'hampton, N. E.)|
|Hooley, Frank||Mellish, Robert||Silkin, John (Deptford)|
|Houghton, Rt. Hn. Douglas||Mendelson, J. J.||Silverman, Julius (Aston)|
|Howarth, Robert (Bolton, E.)||Millan, Bruce||Slater, Joseph|
|Howie, W.||Miller, Dr. M. S.||Small, William|
|Hoy, James||Mitchell, R. C. (S'th'pton, Test)||Snow, Julian|
|Hughes, Rt. Hn. Cledwyn (Anglesey)||Molloy, William||Spriggs, Leslie|
|Hughes, Emrys (Ayrshire, S.)||Morgan, Elystan (Cardiganshire)||Steel, David (Roxburgh)|
|Hughes, Hector (Aberdeen, N.)||Morris, Alfred (Wythenshawe)||Steele, Thomas (Dunbartonshire, W.)|
|Hughes, Roy (Newport)||Morris, Charles R. (Openshaw)||Summerskill, Hn. Dr. Shirley|
|Hunter, Adam||Morris, John (Aberavon)||Symonds, J. B.|
|Hynd, John||Moyle, Roland||Taverne, Dick|
|Jackson, Colin (B'h'se & Spenb'gh)||Murray, Albert||Thomas, George (Cardiff, W.)|
|Jackson, Peter M. (High Peak)||Noel-Baker, Francis (Swindon)||Thomas, Iorwerth (Rhondda, W.)|
|Jay, Rt. Hn. Douglas||Noel-Baker, Rt. Hn. Philip (Derby, S.)||Thorpe, Jeremy|
|Jeger, George (Goole)||Norwood, Christopher||Tinn, James|
|Johnson, James (K'ston-on-Hull, W.)||Oakes, Gordon||Urwin, T. W.|
|Jones, Dan (Burnley)||Ogden, Eric||Varley, Eric G.|
|Jones, J. Idwal (Wrexham)||O'Malley, Brian||Wainwright, Edwin (Dearne Valley)|
|Judd, Frank||Oram, Albert E.||Wainwright, Richard (Colne Valley)|
|Kelley, Richard||Orbach, Maurice||Walker, Harold (Doncaster)|
|Kenyon, Clifford||Orme, Stanley||Wallace, George|
|Kerr, Dr. David (W'worth, Central)||Oswald, Thomas||Watkins, David (Consett)|
|Kerr, Russell (Feltham)||Owen, Dr. David (Plymouth, S'tn)||Watkins, Tudor (Brecon & Radnor)|
|Lawson, George||Page, Derek (King's Lynn)||Wells, William (Walsall, N.)|
|Leadbitter, Ted||Pannell, Rt. Hn. Charles||Whitaker, Ben|
|Pardoe, J.||White, Mrs. Eirene|
|Lee, Rt. Hn. Frederick (Newton)||Park, Trevor||Whitlock, William|
|Lee, John (Reading)||Parkyn, Brian (Bedford)||Wigg, Rt. Hn. George|
|Lewis, Ron (Carlisle)||Pavitt, Laurence||Willey, Rt. Hn. Frederick|
|Lomas, Kenneth||Pearson, Arthur (Pontypridd)||Williams, Alan (Swansea, W.)|
|Loughlin, Charles||Perry, George H. (Nottingham, S.)||Williams, Alan Lee (Hornchurch)|
|Luard, Evan||Prentice, Rt. Hn. R. E.||Williams, Clifford (Abertillery)|
|Lubbock, Eric||Price, Christopher (Perry Barr)||Williams, W. T. (Warrington)|
|Lyon, Alexander W. (York)||Price, Thomas (Westhoughton)||Wilson, Rt. Hn. Harold (Huyton)|
|Mabon, Dr. J. Dickson||Price, William (Rugby)||Wilson, William (Coventry, S.)|
|McBride, Neil||Probert, Arthur||Winnick, David|
|McCann, John||Pursey, Cmdr. Harry||Winstanley, Dr. M. P.|
|MacColl, James||Redhead, Edward||Winterbottom, R. E.|
|MacDermot, Niall||Rhodes, Geoffrey||Woodburn, Rt. Hn. A.|
|Macdonald, A. H.||Richard, Ivor||Woof, Robert|
|McGuire, Michael||Roberts, Albert (Normanton)|
|McKay, Mrs. Margaret||Roberts, Goronwy (Caernarvon)||TELLERS FOR THE AYES:|
|Mackenzie, Alasdair (Ross & Crom'ty)||Roberts, Gwilym (Bedfordshire, S.)||Mr. Joseph Harper and|
|Mackenzie, Gregor (Rutherglen)||Robertson, John (Paisley)||Mr. Walter Harrison.|
|Mackie, John||Robinson, W. O. J. (Walth'stow, E.)|
|Alison, Michael (Barkston Ash)||Carlisle, Mark||Gilmour, Sir John (Fife, E.)|
|Allason, James (Hemel Hempstead)||Chichester-Clark, R.||Glover, Sir Douglas|
|Astor, John||Clark, Henry||Godber, Rt. Hn. J. B.|
|Awdry, Daniel||Clegg, Walter||Goodhart, Philip|
|Baker, W. H. K.||Cooke, Robert||Goodhew, Victor|
|Balniel, Lord||Cooper-Key, Sir Neill||Grant, Anthony|
|Barber, Rt. Hn. Anthony||Crouch, David||Grant-Ferris, R.|
|Batsford, Brian||Crowder, F. P.||Gurden, Harold|
|Bennett, Sir Frederic (Torquay)||Dalkeith, Earl of||Hall-Davis, A. G. F.|
|Berry, Hn. Anthony||Dance, James||Hamilton, Marquess of (Fermanagh)|
|Biffen, John||Dean, Paul (Somerset, N.)||Harris, Frederic (Croydon, N. W.)|
|Biggs-Davison, John||Deedes, Rt. Hn. W. F. (Ashford)||Harrison, Brian (Maldon)|
|Birch, Rn. Hn. Nigel||Dodds-Parker, Douglas||Harrison, Col. Sir Harwood (Eye)|
|Black, Sir Cyril||Doughty, Charles||Harvey, Sir Arthur Vere|
|Blaker, Peter||Eden, Sir John||Hawkins, Paul|
|Body, R.||Elliot, Capt. Walter (Carshalton)||Heald, Rt. Hn. Sir Lionel|
|Bossom, Sir Clive||Errington, Sir Eric||Heseltine, Michael|
|Boyd-Carpenter, Rt. Hn. J.||Eyre, Reginald||Higgins, Terence L.|
|Boyle, Rt. Hn. Sir Edward||Fisher, Nigel||Hiley, Joseph|
|Brinton, Sir Tatton||Fletcher-Cooke, Charles||Hill, J. E. B.|
|Bromley-Davenport, Lt. Col. Sir Walter||Forrest, George||Hirst, Geoffrey|
|Brown, Sir Edward (Bath)||Foster, Sir John||Hogg, Rt. Hn. Quintin|
|Bruce-Gardyne, J.||Galbraith, Hn. T. G.||Holland, Philip|
|Burden, F. A.||Gibson-Watt, David||Hordern, Peter|
|Bullus, Sir Eric||Gilmour, Ian (Norfolk, C.)||Hornby, Richard|
|Howell, David (Guildford)||Munro-Lucas-Tooth, Sir Hugh||Summers, Sir Spencer|
|Hunt, John||Murton, Oscar||Talbot, John E.|
|Hutchison, Michael Clark||Nabarro, Sir Gerald||Tapsell, Peter|
|Iremonger, T. L.||Noble, Rt. Hn. Michael||Taylor, Edward M. (G'gow, Cathcart)|
|Jenkin, Patrick (Woodford)||Nott, John||Taylor, Frank (Moss Side)|
|Jennings, J. C. (Burton)||Onslow, Cranley||Teeling, Sir William|
|Jopling, Michael||Orr-Ewing, Sir Ian||Thatcher, Mrs. Margaret|
|Kershaw, Anthony||Osborn, John (Hallam)||Turton, Rt. Hn. R. H.|
|Kirk, Peter||Osborne, Sir Cyril (Louth)||van Straubenzee, W. R.|
|Kitson, Timothy||Page, Graham (Crosby)||Vaughan-Morgan, Rt. Hn. Sir John|
|Knight, Mrs. Jill||Peel, John||Walker, Peter (Worcester)|
|Langford-Holt, Sir John||Percival, Ian||Wall, Patrick|
|Legge-Bourke, Sir Harry||Peyton, John||Ward, Dame Irene|
|McAdden, Sir Stephen||Pink, R. Bonner||Weatherill, Bernard|
|MacArthur, Ian||Pounder, Rafton||Webster, David|
|Maclean, Sir Fitzroy||Price, David (Eastleigh)||Wells, John (Maidstone)|
|McMaster, Stanley||Prior, J. M. L.||Whitelaw, William|
|Maddan, Martin||Ramsden, Rt. Hn. James||Wilson, Geoffrey (Truro)|
|Maginnis, John E.||Renton, Rt. Hn. Sir David||Wolrige-Gordon, Patrick|
|Marten, Neil||Ridsdale, Julian||Wood, Rt. Hn. Richard|
|Mawby, Ray||Rippon, Rt. Hn. Geoffrey||Woodnutt, Mark|
|Maxwell-Hyslop, R. J.||Rossi, Hugh (Hornsey)||Worsley, Marcus|
|Maydon, Lt.-Cmdr. S. L. C.||Royle, Anthony||Wylie, N. R.|
|Mills, Peter (Torrington)||Russell, Sir Ronald||Younger, Hn. George|
|Mills, Stratton (Belfast, N.)||Scott, Nicholas|
|Miscampbell, Norman||Sharples, Richard||TELLERS FOR THE NOES:|
|Mitchell, David (Basingstoke)||Shaw, Michael (Sc'b'gh & Whitby)||Mr. Francis Pym and|
|More, Jasper||Sinclair, Sir George||Mr. R. W. Elliott.|
|Morrison, Charles (Devizes)||Stodart, Anthony|