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Clause 1. — (Machinery and Plant.)

Part of Orders of the Day — Industrial Development Bill – in the House of Commons at 12:00 am on 11th August 1966.

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Photo of Mr Alfred Hall-Davis Mr Alfred Hall-Davis , Morecambe and Lonsdale 12:00 am, 11th August 1966

That is quite true and I think the right hon. Gentleman will agree that the proportion is roughly three-to-two of spending in this country and on fares generally, but fares spent with British carriers benefit our balance of payments. In the light of these figures the Government only make themselves ridiculous when they go on repeating the statement about only 10 per cent. of the hotels and catering trade turnover being concerned with overseas visitors. This was said by their spokesman in another place and it has been reiterated by the President of the Board of Trade this evening. It is absolute figures and the rate of growth which should be looked at in assessing the industry's contribution to balance of payments.

According to the Government spokesman in another place, investment expenditure by the hotel and catering industry on plant and equipment in 1964 was of the order of £16 million. I calculate that the cost of the new investment grant, if it were applied to this expenditure and allowing for some increase in the level of costs since 1964 and the higher rate in development areas would have been of the order of £4 million a year. When this £4 million is set against the £35 million increase in overseas earnings in a single year and the total spending by overseas visitors, including that spent with British carriers, is it any wonder that the hotel and catering industry feels that it has been harshly and foolishly treated by the Government?

This is one aspect of the background to our discussion of this Amendment. I turn to another aspect of the background, one which again was referred to by the right hon. Gentleman. That is the Government's promised scheme of assistance to the hotel industry by means of loans. I hope that the House will bear with me while I make a few brief comments on this scheme in the hope that they will be helpful in due course to the Government and to the industry. The Government's proposals to help the industry by means of loans shows every sign of hasty preparation and considerable lack of understanding of the circumstances and needs of the hotel industry.

Basically, the proposals are on too small a scale to encourage the construction of large hotels. The qualifying figure is set too high to be of assistance to small hotels in addition to which the scheme is full of defects of detail. It is certainly no substitute for the benefits which the Amendments we are discussing would bring to the industry. I shall enlarge the criticism that the proposals are on too small a scale. I have seen estimates by those well qualified to make them that to cater for 4 million overseas visitors in 1970 compared with this year's 3 million an extra 10,000 hotel bedrooms will be required. Assuming that 7,500 are provided in new hotels at an average cost of £7,000 and 2,500 in extensions to existing hotels at a cost of £3,000 the total expenditure required is £60 million.

It is against this scale of required investment that we must view the right hon. Gentleman's proposals to advance £5 million for a trial period of one year. Hotel planning is a long-term process involving years of preparation. Unless the President of the Board of Trade can assure the industry that any scheme of assistance will be maintained at least for five years it will be of little value. The right hon. Gentleman's scheme has many other unsatisfactory features. To set a minimum level of loan of £10,000 combined with a maximum rate of 50 per cent. of the cost will make it impossible to qualify for a loan in respect of almost every project costing under £25,000. I remind the right hon. Gentleman that in the case of almost every project of this kind the cost of furniture, furnishings and other items and equipment amounts to 25 per cent. of the cost of the structural work. So even where loans are made at the maximum rate they would meet 40 per cent., not 50 per cent. of the total cost.

There are a great many small hotels in areas visited by tourists which could not contemplate and indeed could not justify expenditure of £25,000 so the scheme will not help them at all. Then there is the question of repayment. If it is the intention of the Government that there should be an annual repayment inclusive of principal and interest then a borrowing at 6 per cent. repayable over 15 years would require an annual repayment of principal and interest of approximately 10·3 per cent. with a net cost in the first year of 7·9 per cent. reaching virtually 10 per cent. in the last year.

Few hotel undertakings could rely on new projects generating in their early years a sufficient cash flow to provide for such repayments and at the same time to service the other capital invested in the project. In considering the relative advantages of the Government's proposals with those in the Amendment there is the question of security for the loan to be considered. If security is needed and it is to take the form of a first charge on the property I am certain that many reputable companies will be unable to start projects if they have to give the Government a first charge.

I trust that these are points which the right hon. Gentleman will consider as indicating the weaknesses of his proposals and that he will discuss them with the "Little Neddy" for the industry at an early date.

So far I have been engaged in the field of argument, opinion and conjecture. I now turn to the concrete evidence we have available of the effect which Government policy is having upon the provision of new hotel accommodation. The wisdom of our decision on this Amendment will be judged by whether the construction, extension and improvement of hotel accommodation continues or is checked. All the evidence is pointing in one direction and the Government surely cannot disregard it.

The annual statement of the Chairman of Scottish and Newcastle Breweries Ltd. appeared in the Press yesterday. At the end of a long section dealing with the effect of the Government's policy on the hotel and tourist industry—a section which I commend to the President of the Board of Trade—Sir William McEwan Younger stated: In particular, so long as these conditions prevail, we will only in quite exceptional circumstances embark on new construction or costly modernisation of major hotels. Another of the country's largest hotel groups—I shall give the right hon. Gentleman the name afterwards if he wishes—had in hand a programme of investment in expansion and improvement of hotel accommodation involving an outlay of £2 million a year. It has now decided to call a halt for the time being to the sanctioning of all new projects under its development programme. This is what is actually happening and has a direct bearing on the Amendment.

I want finally to quote some words of Sir Geoffrey Crowther, Chairman of Trust Houses, which appeared in the Daily Mail on 29th July: I do not believe that the Government has taken a deliberate dead set against hotels. It simply did not realise what it was doing to an industry which is one of the country's chief earners of foreign currency. I share Sir Geoffrey Crowther's views. I am obliged, however, to add the words of the popular song: When will they ever learn,When will they ever learn? If the Government intend to reject the Amendment, I hope that they will make it clear—and this is a plea to the right hon. Gentleman—that they do not regard themselves as irrevocably committed to the proposals announced by the right hon. Gentleman the President of the Board of Trade on 26th July. I am sure that something more beneficial can be worked out between the industry and the Government which embraces grants as well as loans and which worthily recognises the whole industry's valuable contribution to our balance of payments.