Abolition of Investment Grants

Investment and Building Grants Bill – in the House of Commons at 12:00 am on 22nd June 1971.

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10.14 p.m.

Photo of Mr Anthony Grant Mr Anthony Grant , Harrow Central

I beg to move Amendment No. 1, in page 1, line 18, after 'that', insert: ' there shall be disregarded for the purposes of paragraph (6) above—

  1. (a) any transfer of the benefit of a contract to a member of a group by any other member of that group, and
  2. (b):
Perhaps it would be convenient to the House if we discussed at the same time Amendments Nos. 2, 5, 6 and 8, which are consequential.

This group of Amendments is of a technical nature. It is designed to remove a difficulty which certain companies have pointed out to us since the Bill was published. It has been pointed out that under the present terms of the Bill, a group, one of whose companies entered into a contract before 27th October, 1970, may not receive grant on sums payable under a contract laid before 27th October, if the company is subsequently involved in a group reorganisation.

At present subsection (2) provides that grant may be made on expenditure incurred on or after 27th October, 1970, provided the Secretary of State is satisfied that it consists of a sum falling due under a contract made before that date and also that the applicant did not incur the expenditure by reason of anything done or any transaction entered into by the applicant on or after that date. The effect of the latter provision is to preclude the payment of grant if the benefit of a contract is transferred between companies after 26th October, 1970.

Group reorganisations raise special problems. In such cases, assets may have been contracted for before 27th October, 1970, but not delivered at the time the merger or reorganisation took place. On delivery, items will still be used for the purposes for which they were ordered; they will still be installed in the same factory as was originally intended. The only difference is that the contract was placed by one company in the group and, as a result of the re-organisation, the asset is delivered to a company with a different legal identity, but within the same group.

The Amendments enable the benefit of a contract made before 27th October, 1970, to be transferred to a member of a group of companies by any other member of that group without loss of eligibility for grant and permits grant to be paid to the transferee company in respect of expenditure incurred as a result of the transfer.

The Amendments will also cover the case, which I understand represents a fairly common practice in some groups, where contracts are placed on behalf of the group by a holding company, prior to a final decision to which operations subsidiary the assets should be delivered. The Amendments do not permit contracts to be transferred to "successor" companies which are not members of the same group as defined in the Companies Act, 1948, to qualify for grant. I would regard such a concession as constituting a breach in the principle underlying the Bill rather than removing a technical difficulty, as do the Government Amendments. These will, however, be of assistance in quite a large number of cases.

Amendment agreed to.

Amendment made: No. 2, in page 1, line 20, leave out: ' shall be disregarded for the purposes of paragraph (b) above'.—[Mr. Anthony Grant.]

Photo of Mr Piers Dixon Mr Piers Dixon , Truro

I beg to move Amendment No. 3, in page 1, line 20, at end insert: (2A) (a) Subsection (1) of this section shall not prevent the making of a grant under the said Part I in respect of any qualifying expenditure incurred before 27th October 1972 by any person in relation to the provision of any machinery or plant or any asset, where—

  1. (i) the machinery or plant or the asset is provided by being manufactured, assembled or constructed by that person; and
  2. (ii) the expenditure had begun before 27th October 1970.
  3. (b) In this subsection—
  4. (i) the expressions 'asset' and 'machinery or plant' have the same respective meanings as in the said Part I; and
  5. (ii) the expression ' qualifying expenditure' means expenditure which if this Act had not been enacted would have qualified for approval for a grant under the said Part I,
I welcome the terms of the Bill in genera] but, as the Government have recognised, by changing from a system of investment grants to the new form of investment incentives, a number of unfairnesses arise. They have, therefore, introduced various measures to tide over companies which contracted in legal terms to spend money on building up their investments. But incongruously, in the process, they have left out of account many fine British companies which, for very good reasons usually, decide that the best thing to do is to do their own investment through their own labour force and, therefore, not to be specifically contracted in a legal sense. It is with this in mind that I submit the Amendment.

There are many companies which, for reasons of confidentiality and commercial security, feel bound, when investing in new plant, to embark on this exercise through the mechanics of their internal organisation. But even if it could be argued that there are cases in which those companies should not feel that they should use their internal labour force, they find that in purely practical terms it would be completely impossible to find outside contractors who in practice would be able to supply the highly technical plant they require. Therefore, the companies which are not embraced by the measures which the Treasury Bench have decided to introduce are frequently the very companies which we are trying to encourage—companies with high technology, companies which show that they are adventurous and are prepared to go to great lengths within their organisation to build up new investment along modern and technological lines.

Just such a company is English China Clays, the largest company in my constituency. I think that all hon. Members would agree that this company has been in the forefront of technology for many decades. It has been in the forefront of the export trade Its exports account for more than 75 per cent. of its total production. Year by year, English China Clays has won the Queen's Award for Industry. But now we have a situation in which, on the one hand, a company such as this one is being congratulated on receiving the Queen's Award for Industry and, on the other hand, suddenly, for no reason, is hit on the head to the extent, in this case, of £1,200,000—purely through a capricious element in the Bill.

Therefore, I strongly urge my right hon. and hon. Friends on the Front Bench to harken to companies of this sort which are in this anomalous position. Unless something is done for such companies the message will go out throughout the country that the adventurous companies, which can do things for themselves and which are resourceful, will be forgotten by the Government.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

I should like to say a few words in support of my hon. Friend the Member for Truro (Mr. Dixon). It is an anomalous situation when an extremely enterprising company, doing its own work and, therefore, not bringing in sub-contractors, finds that by the terminal date of 27th October, 1970, it will lose the cash grant entirely. I should have thought that some formula was possible to find a way round this problem. If it was conceivable that the company could give an order to itself and then present that fact to the Minister, it would get its cash grant. If it cannot do that, its only alternative is to spend a lot of money and go to an outside contractor; in which case, provided that it is inside the terminal date, it is safeguarded.

As has been correctly interpreted, not merely in connection with English China Clays but also in connection with machine tools and in connection with the chemical industry, it is found most advantageous for these firms to do some of their own research and build their own machinery. By so doing they fall victim to these provisions which were not drafted so as to cater for such a problem.

I ask the Minister to reconsider the matter and see whether a formula can be found to get round this problem. This is an anomaly which should be removed.

Photo of Sir Harmar Nicholls Sir Harmar Nicholls , Peterborough

I have been convinced by argument, not having done any homework. I rather suspect that the reason for some possible reluctance on the Treasury Bench to accept the Amendment is the difficulty in administration of identifying the cost. I can well understand that the cost of doing extra work merged within the normal operations of a company is not so easily identified as is work done under separate contract entered into at arm's length with a separate firm.

If it is the administrative difficulty which makes my hon. Friend the Minister reluctant to accept the Amendment, would an accountant's certificate that the money had been spent be acceptable? If the Government are not prepared to accept the certificate of the accountant who represents the firm for the normal audit, would the Government accept the certificate of an outside inquiring accountant provided that the firm met the necessary expense?

If it can be shown that the work in question would in normal circumstances have been put out to an outside contractor but, for reasons of greater efficiency or technical know-how, was performed within the firm itself, it should be dealt with on exactly the same basis as though it had been performed by an outside contractor.

As I have some knowledge of how Departments react to intricate difficulties, I suspect that it is the administrative difficulty which inhibits the Government from accepting the Amendment. If this is so, I ask the Minister to consider the Amendment with sympathy, on the understanding that the firm in question, either through its own accountant or through an outside inquiring accountant, can produce a certificate that the money has been properly spent for the purpose in question.

Photo of Mr Robin Maxwell-Hyslop Mr Robin Maxwell-Hyslop , Tiverton

I think that my hon. Friend the Member for Peterborough (Sir Harmar Nicholls) is correct in surmising that it is a slightly reticence because of administrative problems rather than any objection in principle that inhibits the Government from accepting the Amendment.

A chartered accountant's certificate is an appropriate way of getting over the difficulty. As Government Departments like precedents, I suggest a precedent which is relevant. Recently the Government decided to change the system of payment of cereal deficiency grant to avoid the ludicrous charade of a farmer growing grain, then selling it to a grain dealer to qualify for subsidy, and then having to buy it back from the dealer. We moved instead to a system of acreage payment. That system is analogous to a firm which produces within itself capital equipment that it needs. It is a more sensible and efficient way of dealing with it.

The smaller the enterprise the less likely it is to go through the unnecessary work of signing a contract with itself or even placing an order on itself. It is done by word of mouth or at most by internal memo, which is not a contract, instructing some part of its own works to produce items of capital equipment which it will need. It is bona fide, and it results generally in a more appropriate article being produced than the stock one, at less cost. This is tending towards an efficient industry. The anomalies created by the Bill are so great as to warrant the amendment of the Bill. We should not let the matter go by just because the total number of firms involved is probably quite small. A thing is unjust even if it affects only one person.

Therefore, I ask my hon. Friend the Minister not just to look at the Amendment sympathetically but to ensure that remedial action is taken. I am certain that if there is enough pressure from these benches it will be taken.

10.30 p.m.

Photo of Mr Evelyn King Mr Evelyn King , South Dorset

My hon. Friends have described the problem so cogently and put forward a remedy so sensible that there is not much left to say. But I think that one point has not been made sufficiently strongly. English China Clays also has operations proceeding in my constituency, and therefore I entirely share the views of my hon. Friend the Member for Truro (Mr. Dixon).

Above all, I would make the point that for English China Clays it is not a matter of choice. It and other firms have skilled engineers and technicians, and for many years they have made their own equipment. They also make their own tools with which to make that equipment. They have no choice, in that I am advised that there is no other firm in Great Britain, or even overseas, which can produce the equipment it needs to carry on its business as efficiently as it does. Therefore, it cannot go elsewhere and have the advantage of grants if it desires.

I hope that my hon. Friend the Minister will be able to offer us the sympathy that these arguments deserve.

Photo of Mr Anthony Grant Mr Anthony Grant , Harrow Central

My hon. Friend the Member for Truro (Mr. Dixon) has explained very clearly the purpose of his Amendment. I much appreciate the remarks made, commendably briefly, by my other hon. Friends.

In particular, my hon. Friend the Member for Truro has referred to the position of English China Clays, which tends to make investments through its own labour resources, and thus not a great deal of its expenditure after 26th October, 1970, will be payable under contracts made with other firms, and the amount of investment grant it will be able to receive under the transitional arrangements will be limited.

I recognise the company's excellent record. It has a first-class export record, and I appreciate the case my hon. Friend has made for the firm. But this in itself cannot be a reason for treating it differently from other firms under the Bill. No doubt the method of investment the company has chosen may help it to preserve its competitive position in international trade.

When the Government decided to restrict the transitional arrangements to expenditure incurred under a contract with a third party, it was fully recognised that this would lead to firms which build their own assets receiving less in investment grants than firms which conducted their business in another way. But the arrangements will not prevent such firms altogether from receiving investment grant. Whether they can show that a part of machinery or plant has been purchased under a contract made before 27th October, 1970, and this part is at once appropriated to an asset used in a qualifying process, grant will be payable.

I have had the advantage—as has my hon. Friend the Minister for Industry, I believe—of a very helpful discussion with members of the English China Clays company along these lines to see whether there is any way in which they can be helped in this direction. Given our desire to end investment grants quickly, we think that the basic principle embodied in the Bill is sound. There is a clear distinction between expenditure to which a firm is legally bound and other expenditure.

In agreeing to pay grant on expenditure of the former type, we have gone as far as is reasonable in meeting industry's needs. We must remember that the arrangements are designed to cover transition from one form of investment to another which we think is a better form, and not the ending of investment incentives in toto. They were not designed to maintain the status quo in all respects during the transitional period.

My hon. Friend the Member for Peterborough (Sir Harmar Nicholls) queried whether this was just an administrative point. It is not just an administrative point which I am taking on this Amendment, but there is a slight administrative difficulty to which I should draw attention. The computation of expenditure, for investment grant purposes, on self-built assets is already a more complex matter than the more straightforward case where an asset is bought outright. The cost of self-built assets includes notional sums attributable to the provision of the asset, representing material taken from stock, labour costs, overheads, etc., as well as actual payments of money. But so far it has not always been necessary to decide in particular cases what constitutes a unit of plant or machinery or an asset in respect of which expenditure must have been begun by a given date before grant can be paid. For example, is it a pump or a tank which forms part of a large complex, or is it the whole complex itself? In this sense, contrary to the suggestion in the Amendment, there is no definition of "plant or machinery" or "an asset" in the 1966 Act.

If the Amendment were to be accepted, firms would argue in favour of the widest interpretation of the terms. If this were accepted, all firms which had incurred any expenditure at all by 27th October 1970 on a development which was to continue for a number of years could claim that expenditure incurred thereafter was in respect of the same asset and they would have carte blanche to receive investment grant on expenditure incurred for a full two years afterwards on the continuing development. They would thus be placed in a more favourable position than most firms buying assets under contract with other parties. The cost to public funds would be very great.

If, to avoid this large increase in cost, the Department was to try to insist on a narrow interpretation of these terms, it would be forced to devise new administrative rules with all the distinctions and discriminations which these inevitably involve. Our objection to such discrimination, as my hon. Friends will recall, was one of the important reasons which led the Government to decide in the first place to replace investment grants with allowances and reductions.

It is important to get the matter in perspective. This Bill is concerned essentially with transitional periods. There are countervailing advantages of which sight is sometimes lost. Firms building their own assets will benefit, in the same way as will every other firm, from two reductions in corporation tax in future. Those in the development areas, including English China Clays, will be able to claim free depreciation on the relevant capital expenditure incurred after 26th October, 1970.

Photo of Mr Evelyn King Mr Evelyn King , South Dorset

When my hon. Friend refers to English China Clays as being in a development area, he will be aware that the company has branches in a number of areas. Will he deal with the situation of its outside branches?

Photo of Mr Anthony Grant Mr Anthony Grant , Harrow Central

Part of the company is in a development area, and I have referred to the advantages it would receive from free depreciation, but if firms are elsewhere they could benefit from the new 60 per cent. first-year capital allowance against tax.

In the case of an efficient company like English China Clays it seems that there are countervailing advantages which can be claimed and which may be open to them. I ask the House to consider the overall picture. The arguments I have advanced against the Amendment, so eloquently moved by my hon. Friend, are based on principle, cost and administration. I regret to say that I must advise the House to reject the Amendment.

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

We on this side of the House have no real desire to get hon. Gentlemen opposite out of their difficulties. We recall on Second Reading that they practically all voted with relish for this Bill, particularly Clause 1, which ends investment grants. We find it rather strange that now they should be wanting special treatment. We have heard the debates about transition in Committee and we are not happy about the transitional arrangements.

We were told in the White Paper on investment incentives published in October of last year that the Government's view was that the investment grants scheme involved a high public expenditure cost without achieving its objectives, that there was investment leading to a waste of resources, and so on. Now we hear hon. Gentlemen opposite pleading for exemptions and we have formed the conclusion that hon. Gentlemen are in favour of the Bill in general but against it in particular.

They are right to complain in some respects because the Conservative Party, in opposition and in its election manifesto, gave the impression to the country and those firms considering this matter that there would be proper transitional arrangements. Page 14 of the Conservative election manifesto said: These changes will be subject to transitional arrangements and will not in any way be retrospective. The Secretary of State for Social Services, when he was Opposition spokesman on trade and industry matters, in a Spectator article before the election, gave the impression to firms that they would in no way be worse off as a consequence of changing from cash grants to allowances. I am sure hon. Gentlemen will regard the answer they have received as totally unsatisfactory but since most of them supported this Measure on Second Reading I do not think that we can support the Amendment.

Photo of Mr David Waddington Mr David Waddington , Nelson and Colne

Surely all that the hon. Member for Chesterfield (Mr. Varley) has said in the last five minutes is that if a particularly stupid system is established there are bound to be anomalies in abolishing the system?

Photo of Mr Piers Dixon Mr Piers Dixon , Truro

I could not conceal from the House the strength of feeling that exists in Cornwall and elsewhere about this matter. One remark by my hon. Friend which seemed to have a familiar ring came when he said that we were merely discussing transitional arrangements. In many cases it is the transitional arrangements which are as important as the substantive arrangements in the final analysis. We feel strongly about this. On the other hand, I am aware that Ministers have discussed this matter for many hours with English China Clays and other companies. They have given sympathetic consideration to this and, in view of this, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

10.45 p.m.

Photo of Mr John Sutcliffe Mr John Sutcliffe , Middlesbrough West

I beg to move Amendment No. 4, in page 1, line 20, at end insert: (3) Subsection (1) above shall not prevent the making of a grant under the said Part I where the Secretary of State is satisfied that a person has commenced the working of a mine within the meaning of section 182(3) of the Mines and Quarries Act 1954 before the said 27th October and that that person has incurred expenditure under a contract made on or within two years after that date in providing works, or as the case may be, new machinery or plant which is required for the further working of that mine or part thereof. This is not the first occasion on which deep mining has been raised in the context of the Bill. My hon. Friend the Minister has questioned whether an Amendment such as this will achieve the specific object intended. He does not agree that deep mining is in any special situation or that it is affected to an extreme degree by his proposals. He does not accept the contention that an agreement to develop a mine in its totality constitutes a legally binding commitment within the terms of the Bill. Finally, he has affirmed throughout the progress of the Bill the unblemishable purity of the principle which it enshrines. I shall try to avoid going over well-trodden ground, but I shall deal in turn with the points of disagreement.

The Amendment is directed to one particular type of operation, namely, deep mining. There is, furthermore, only one deep mine in this country significantly affected by the Bill, namely, Cleveland Potash, and the Amendment seeks to make proper and equitable transitional arrangements for that mine. If there is any doubt about the limited objective being sufficiently defined by the Amendment, it is quite simply resolved by inserting in line 3 after "Mines and Quarries Act 1954" the words: which is to be served by a vertical shaft of a depth of not less than 1,000 feet

I think the Amendment clearly defines its objective. The Amendment refers to the working of a mine, and "working" is deemed to include the operation of driving a shaft or outlet for it.

The Minister has said that other land-based projects, large-scale, long duration, development projects, will be encouraged. I understand his fears, but I can see no grounds for them. He has failed so far to tell me how such projects will be encouraged, and to what effect they will be encouraged, by the acceptance of the Amendment, since the Amendment is in no way related to them. The examples he gave were the construction of an oil refinery or a petro-chemical plant, a kind of construction which is not an integrated unit in the way that a mine is.

If I may give an example, Cleveland Potash has to see its way through an expenditure of £40 million just to produce one product—potash. For a petrochemical project it is quite different. Investment can be cut off at any number of different stages and there is still a product to sell. After the cracking, reforming and extraction stages there is a wide variety of products—ethylene, propylene and benzine, to name just a few, and there are many different plants which use these products. They are only primary petro-chemicals. If the process is taken to further stages, at each stage a new investment is being made in new plant. Subsidiary products are grouped under intermediates, chemical end products and polymers, which are even more numerous. From the point of view of a cut-off date, the argument that such land-based investments can be compared with a one-product mine is simply untenable.

I have argued previously that special factors make deep mining unique in degree to an extent that it is different altogether from other large-scale projects. I have emphasised the scale of the development and construction risk, the possibility of a not partial and not even substantial but total loss if, for any reason, the product fails. I have also emphasised the length of the construction period, the amount of capital required and inordinate length of time which must ensue before there can be any return on capital or an advantage from allowances.

My hon. Friend has resisted these arguments. He has resisted the contention that these factors apply to an extreme degree in deep mining and in deep mining alone and that the combined effect puts this sector of industry in a category all its own. But, significantly, he has made no attempt to refute these arguments beyond saying that he does not accept them. By implication, however, the arguments are already accepted. On Second Reading he said, referring to deep mining: ' We understand its difficulties, particularly the high risks involved in searching for and proving mineral deposits, and the long time which may elapse before expenditure on successful exploration can be recovered."—[OFFICIAL REPORT, 5th May, 1971; Vol. 816, c. 1496.]

My hon. Friend the Minister for Industry said in Committee: It is in recognition of these facts that we have already had extensive talks with the industry, and we are considering what we can do to help.

In all logic, one would think that he meant now. But, no! He went on: These discussions will continue … from the point of view of new projects in the long-term future …"[OFFICIAL REPORT, Standing Committee E, 25th May, 1971, c. 85.]

Is it really good enough to talk of the need for help in the long-term future while jeopardising a new project in the short-term by the abrupt removal of the only real measure of encouragement that new mining has had? I refer to the 1966 Act. The introduction of investment grants, which is immediate cash aid as opposed to deferred tax relief, undoubtedly brought about a resurgence in new mining activity. My hon. Friend the Under-Secretary of State has said that it was right to draw a distinction between those who, by acting on their own decisions, have committed themselves at law to incurring expenditure and those who have not. In the case of deep mining, I am sure it was right, but one can dispute that it was ever right to follow slavishly the precedent set by the 1966 Act in so far as transitional arrangements given under the Act changed the incentive system from allowances to grants—and, of course, by a change in that direction everybody was bound to benefit. It is a very difficult thing to change the other way and still to follow the transitional pattern of the 1966 Act, and quite impossible to avoid the harsh element of retrospective legislation which has inevitably crept in.

Under the 1966 Act, how logical and sensible it was to set up a separate single project mining company and to budget, as did Cleveland Potash, for considerable cash grant incentives of £13½ million. But how foolish it looks in 1971, when the Minister denies any contractual commitment to develop in its totality a single project mine on the part of a single project company, as though such a denial makes sense.

In 1971, the £13½ million in Government finance becomes £6 million, the 1971 Finance Bill substitutes taxation allowances, the effective value of which is very much less than the value of development area investment grant plus taxation allowances on the remaining expenditure. But more serious still than this, a six-year construction and development period precludes short-term relief on expenditure, since there will be no profits and the consortium relief is of no avail either to I.C.I, and Charter Consolidated until potash is won and sold, until there are some profits. So whichever way they turn, they are hamstrung by what is tantamount to no proper transitional arrangements.

The Minister has used the argument that the corporation tax cut is some compensation, but it is no more compensation than allowances to a company which will not make any profit for six years. And let us be under no illusions: the greater flexibility which has been given under the Local Employment Acts will alleviate this great loss of liquidity to Cleveland Potash, but it will alleviate it by no more than £1 million, and that will be by way of loan, not grant. The Minister's power to compensate is strictly limited under these Acts.

On Second Reading, the Minister said: I am sure it is right to stick to the principle I have already defined. Just before that he said: … although it is possible to make out a case, careful study of any case at once shows that the principle is opened wide and destroys the whole basis of the proposals …"— [OFFICIAL REPORT, 5th May, 1971; Vol. 816, c, 1389.]

But he has already conceded the principle. He assured my hon. Friend the Member for Tynemouth (Dame Irene Ward) that he would devise, with the Chamber of Shipping, a form of words which would meet the substance of her arguments, but without opening the door, he said, too widely. So the door is wide but not too wide.

The shipping concession has been made for two reasons, in the Minister's own words. First, the shipping industry has made a unique contribution to the economy, and, second, it trades in unusually difficult conditions. On the first point he mentioned a contribution to our invisible balance of payments account of £298 million. This is not the contribution of a single shipping company or project, nor is it the prospective contribution of those ships which will benefit from all the extras which the transitional arrangements have been or will be extended to cover on the basis of the hulls which have been legally contracted for before 27th October. The £298 million is the contribution of the shipping industry as a whole, but that is to be set against not that of the mining industry as a whole, but the contribution of a single mine to the balance of payments. The contribution of Cleveland Potash will be £14 million rising to £30 million, the biggest single contribution of any import-saving project in the United Kingdom.

11.0 p.m.

We may compare the loss of expected grant of £9 million for shipping spread over a number of committed hulls with a loss of £6 million concentrated on a single mining project. This is a Government withdrawal of a cash contribution from Cleveland Potash representing 15 per cent. of the total cost of the project. What ship owner suffers to that extent? What ship owner can complain of deferred benefit from allowance or tax relief by reason of a construction and development period of six years? In no other case is benefit so deferred.

Apart from his understandable preference for bouquets rather than bricks from my hon. Friend the Member for Tynemouth, the other factor inducing my hon. Friend to breach his rigid principle is the peculiar international trading conditions in which the shipping industry has to operate, and he mentioned lack of any tariff protection in face of unrestricted international competition. Has he ever considered that potash mining may require some assistance in the long development stage in order to offset its total lack of tariff protection and its lack of other forms of assistance available to the shipping industry? When the potash mine is in production, it will have to fight hard to offset the advantage of well-established and government-supported overseas competitors in France, West Germany, supported by investment grants, and, in Eastern Europe, in East Germany and Russia, and in Canada where there is a subsidy by tax exemption and special freight rates. Is my hon. Friend aware that between 30 per cent. and 50 per cent. of potash production will have to be in competition with European and North American producers at a time of world over capacity?

Shipping has been favoured over other forms of transport; why cannot deep mining be favoured over other sectors of industry? One of the arguments in favour of special dispensation for shipping is that traditionally it has been helped, but it is this very lack of traditional help which has inhibited the exploitation of minerals in deep mining in this country. I understand that the Government accept that there is a special case in the long-term future for action to help new projects in deep mining, but that in the immediate future nothing will be done to alleviate the effect of retrospective legislation on a unique mining project of immense significance to the North-East and of untold potential advantage to the United Kingdom, not least the potential strategic advantage which we shall have with the production of two of the three major plant nutrients, nitrogen and potash, located in the United Kingdom.

Photo of Mr Frederick Willey Mr Frederick Willey , Sunderland North

I earnestly appeal to the Government to accept the Amendment. If they do not, then I speak by way of obituary. There is such feeling on Teesside about this matter that the hon. Member for Middlesbrough, West (Mr. Sutcliffe) knows that his seat will be forfeited as an expression of lack of confidence in the North-East. I wish the hon. Gentleman no personal harm. However, the Government should recognise the consequences of not accepting the Amendment.

People in the North-East believe that they are subject to severe political prejudice. I heard today, in answer to a Question, that the value-added tax office is to go to Southend. [HON. MEMBERS: "Disgraceful."] This is a decision of political discrimination which goes in the face of any development area policy.

Photo of Mr Frederick Willey Mr Frederick Willey , Sunderland North

The North-East has already lost two Government Department headquarters. Now it is to lose the prospect of getting some compensation for that loss.

The hon. Member for Middlesbrough, West spoke about the ill effects, the disastrous consequences, of the abruptness of this decision. I will illustrate this point by way of example. Just before the election I was approached by the representative of a trans-Atlantic company, with a subsidiary in this country, which has invested in the North-East. He wanted an assurance from me that there would be no immediate change of policy if there should be a change of Government. I was unable to give that assurance. But I expressed myself in what I thought was a sensible way by saying that I did not believe that a Conservative Government could or would seek to change development policy drastically overnight. Unfortunately, I was wrong. The company which sought my advice, which had made an investment in the North-East, was better informed about Conservative headquarters policy, because it has made no further investment there.

I am sure that this has happened in scores of cases. Whenever there is any question of a big development, there has to be some guarantee over a reasonable time about future policy. Because that trans-Atlantic company could not have the assurance for which it asked, it decided not to develop in the North-East or, indeed, in this country. These are the consequences from which we are suffering because of this flippant, politically hostile attitude to the development areas.

The hon. Member for Middlesbrough, West has raised a matter not only of particular political significance to Fees-side, but of general interest to the North-East. This development has been discussed and proposed for a considerable time. At last it seems that hopes which seemed likely to be frustrated years ago will now be fulfilled; but we are getting this serious rebuff from the Government. This is clearly a clear breach of a moral undertaking. Anyone now considering development in the North-East, or in any other development area, knows that this is a sign of lack of confidence in and of political obligation to the development of these difficult regions. This is of significance not only to the North-East, but to the development areas as a whole.

The Government have a moral obligation to accept the Amendment. It clearly refers to one particular development only. Although this is of exceptional importance to Teesside, it is of general importance to the North-East development area as a whole. The matter has significance as a mark of the Government's integrity and the sincerity of their development area policy.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

I think that the Government will have to look again at this, because they are wrong, and the sooner they face the facts the better.

Looking back at the world's fertiliser market, I.C.I., if it came to consider the question again, would probably not go ahead with Cleveland Potash. There are immense risks involved, and the actuating factor was the promise of immense investment grants. It had to take into account not merely competitors in Canada, but in East Germany and West Germany, such as Wintershall A.G. and others. It also had to take into account the risks of deep mining, and the fact that it would be 8 years before profitability would be able to commence. But I think the most important considerations of all are the environmental conditions which have been laid down by the Conservative Government and their predecessors. These have involved hefty financial obligations.

The whole project was conceived and started in, I think, 1969, and it was worked out over a long period on the assumption that there would be a continuous flow of grant aid from the Government. One is not going to assume that after laying out the finances this would be cut back. I give no relish to hon. Gentlemen opposite. The new allowances are infinitely superior in 9 out of 10 contexts, but in this one they are unsatisfactory.

Looking ahead, I.C.I. and Charter Consolidated, the two people involved, considered that they were looking ahead with some sort of security, and they have not got it. I think that I can evidence that by quoting from the Chairman of Charter Consolidated, Mr. S. Spiro, who said in the 1971 Report: Although the partners, Charter and Imperial Chemical Industries Limited, have been committed to the completion of the project from the beginning and the various contracts are inter-dependent, all detailed contract items could not be settled in advance. The withdrawal of investment grants would amount to a loss of about £6 million for which alternative means of financing would have to be found. The substitution of taxation allowances would not provide compensation owing to the long period before the profit earning stage is reached. It is reasonable to expect that benefits applicable at the inception of a project will be maintained in respect of commitments and that any changes introduced subsequently will not be made retrospective. I think that that clearly itemises the argument, but perhaps it could be linked with paragraph 5 of the White Paper issued in October, in which the Government said: In deciding to end the investment grants scheme the Government are conscious of the need to avoid any sudden reduction in companies' cash flow and the profitability of their investment. Surely, if I.C.I. and Charter Consolidated are to lose £6 million in investment grants, they will have to do all their assessing again, and it could make this job quite unprofitable.

If the economists throughout the country are suggesting that the Government must look forward to export potential, this is not a unique way of encouraging it, particularly when this company will be providing as much as £30 million to the balance of payments in 1990. Perhaps I should refer to one condition which may appeal to the Minister. This refers to an effluent pipeline which had to be built one mile offshore for the purpose of removing brine. When I went round the facility some time ago, I saw the route of it, and it surprised me that one should find stringent conditions laid down by the Ministry simply to pour brine back into the sea.

11.15 p.m.

The application was made in April, 1968. A public inquiry was held in August of the same year. Outline planning permission was granted in November, 1968. However, I remind hon. Members that, according to this Bill, the cut-off date is 26th October, 1970. Had planning permission been granted prior to the cut-off date, all the contracts could well have been placed and they would have qualified. But, no. The Government Department did not decide to grant planning permission under February, 1971, after a lapse of 10 or 12 months. It means that the consortium is precluded from laying its contracts. Then, because of delay in the Government Department, it is precluded from taking advantage of the investment allowances available.

It is not the consortiums fault. It is that of the Government and their Departments. Therefore, one must look at some of the conditions to which the consortium is obligated. First, it must lay the pipeline one mile offshore. It must monitor the system both in the initial stages of the operation of the plant and after production commences. Further, it must go back to the Department for further planning permission at the end of a five-year period, and it has agreed not to claim compensation if the planning permission is withdrawn completely. That means that, if it is found that the sea is being contaminated with salt coming from the mine, the loss of the entire project is to be sustained by I.C.I. and Charter Consolidated.

The cut-off date has been settled on 20th October, 1970, and the companies are to be deprived of something like £6 million, plus all the additional costs which have been created by the delay and the inflationary process. Surely here is a cast-iron case on which the Minister should be prepared to give way. I appreciate the remarkable work of my hon. Friend the Member for Tynemouth (Dame Irene Ward) in getting a concession for the shipping industry. But it takes 6 to 8 years to get a mine into operation, and I think that this is a case in which a similar concession should be made.

I put it even higher. In the case of an integrated contract in which some of the orders can be placed early but others will flow from a single date in 1969, it is incumbent upon the Government to give some assistance to those involved in the project.

There is a third reason. Where, as a result of delay in a Government Department, there is no decision until after the crucial date of cut-off and the company concerned cannot place it contracts, it is incumbent upon the Government to see that the company is not put at a disadvantage.

I cannot support the Minister on this matter, and I ask him to look at it again. If he cannot give a decision tonight, I shall be prepared to accept his assurance that he will reconsider it and perhaps table a suitable Amendment in the other place. But surely he should reconsider a case where there is such an outstanding anomaly.

Photo of Mr James Tinn Mr James Tinn , Cleveland

As the Member in whose constituency the potash mine is to be situated, I am extremely grateful for the support for this Amendment from both sides of the House, and I hope it will be repeated in the Division Lobbies if necessary. I particularly thank the hon. Member for Middlesbrough, West (Mr. Sutcliffe) for his tremendous assistance in this connection, not only at this stage but in Standing Committee, and I pay the warmest tribute to the effectiveness of his contribution. His arguments have made my task much lighter.

The right hon. Member for Sunderland, North (Mr. Willey) said that this might cost the hon. Member his seat. I cannot pretend to wish him a long tenure in that constituency, and he would not expect me to, but I should hate this to do him damage after his sterling work.

As has already been said, the decision to develop this mine was taken a considerable time before the cut-off period. The original consultations were as long ago as 1967, when the decision to proceed was made after surveys. That decision took account of investment incentives then available and, prior to the 1966 Act, there had been remarkably little, if any, investment in deep mining development in this country. Interest in the development came only after the passing of the Act, and this is one of the earliest and most important results. It is being called in question and gravely prejudiced and damaged as a result of the Government's action in withdrawing these benefits.

The hon. Member for Middlesbrough, West has drawn attention to the tremendous contribution this mine, when fully operational, will make to the balance of payments, rising to something in excess of £30 million a year. No other similar projects are making such a contribution to our balance of payments and that makes it seem even more churlish that the calculations on which development was planned should have been so jeopardised by what was, in effect, a retrospective decision.

The hon. Member for Scarborough and Whitby (Mr. Michael Shaw) will tell the Government of the serious unemployment in his area. This mine is only just inside my constituency and just outside his. He will confirm the unemployment position and the fact that employment is so heavily dependent on the Skinnin-grove Iron Company, part of which is being phased out with no alternative employer of size or substance coming in.

This is another aspect of the matter. The unemployment on Teesside and in the Whitby area is serious and this project will give employment to 600 people in production and to 1,000 in the construction phase.

Surely, where developers have to deal with an integrated potash mine, with all the surface treatment facilities which require to be provided, they have a right that the project should be regarded as a complete, one-up, single project. The fact that it is impossible to place all contracts to a single date should not be allowed by the Government to penalise these developers, as at present seems to be the case. Precise details, such as the specifications of the treatment plan on the surface, cannot be determined on the basis of initial survey drillings. Not until larger samples are available to the specialists as the sinking of the shaft proceeds can this information be gained. Any mining project contains massive elements of uncertainty which preclude the placing of contracts and the designing of the entire project at any stage in advance of the commencement of the work.

The shareholders of the Cleveland potash mine found themselves committed in 1969 to financing the project right through to completion, the alternative being to write off the whole development. We are talking of 1 million tons of potash a year. Enough has been said about the total cost that will fall on the company if the Government do not make a concession. It will be about £6 million, which represents a substantial proportion of the total development cost—this falling on a project which could make a massive contribution to the balance of payments.

The Minister might have resisted this request had he not already made a concession. Had the door been shut on all claims, however justified, he might resist this one, but the door was given a tremendous push open by the concession to the shipping industry, and as the hon. Member for Middlesbrough, West pointed out, there is no reason to distinguish here between shipping and this mining project.

Indeed, this highly speculative undertaking is unlike a ship or factory, where something can be regained or sold off if all fails. One cannot sell a mine shaft or treatment works. Almost a total loss is suffered when a mine project fails. The contribution which this project can make to the balance of payments demands both sympathy and action from the Government.

11.30 p.m.

Photo of Mr David Crouch Mr David Crouch , Canterbury

This Amendment has been extremely well argued by my hon. Friend the Member for Middlesbrough, West (Mr. Sutcliffe), my hon. Friend the Member for Bedford (Mr. Skeet) and the hon. Member for Cleveland (Mr. Tinn). I have seen the beginnings of the Cleveland potash mine and it is a remarkable industrial development. It is a showplace. I was there in September of last year, in company with my hon. Friend the Member for Bedford (Mr. Skeet) and a number of hon. Members from both sides of the House. We were shown this mine because it is a showplace. I was impressed then by two things. Firstly, it was obvious that very, very high cost was involved. It has been mentioned that some land scaping is necessary for this mine, but there has never been such a landscaping for an industrial project as one can see there now. The consulting architect advising on this project is none other than Lord Holford. It is not just a question of planting a few fir trees which will grow into a screen after a time but of literally creating a hill to screen what could be thought to be the unsightly surface development of this mine in what is part of our national park in that area.

The other thing which impressed me was that, in September last year, the Cleveland Potash Company had not received permission for the long sea outfall for the disposal of the effluent. But the company was not deterred. It asked us, as Members of Parliament, to help the achievement of this decision by persuading the Government and other authorities that this should go through so that the Company would not be held up in this establishment and development. Nevertheless, one could not help but be impressed by the enormous cost involved.

When the company made this decision in 1969, a decision involving a £40 million investment, it knew that it was embarking on a six to eight year construction before it would have any adequate earnings or profits from this vast investment. But the company believed that the opportunity was a great one—an opportunity to reduce imports of potash.

For the first time in Britain we could have a potash source of our own. This potash source is not directly under the land but out to sea. As a non-mining person and not being an engineer, I was also particularly impressed by the confidence of the mining engineers in their surveys before embarking on such massive expenditure.

The company was sustained in this £40 million investment then by the availability of investment grant. There is no question but that the availability of investment grant was a very important factor in its decision. It was to give the company some compensation for the high risks involved in sinking a mine.

I do not wish to go into the other details which have been so well covered, but it must be emphasised again that there will be a great saving on our balance of payments in not a great many years from now if this venture is successful. I have been quoted a figure of £30 million a year, and this would be reached certainly by 1990.

As I see it, Cleveland Potash is to be unfairly penalised. This legislation does not recognise this project's unique situation. That is all I seek to argue tonight. I hope that my hon. Friend will recognise the sincerity of the arguments from both sides of the House. Of course we do not like to say that there is any exception that proves the rule, but neither do we ever suppose that Governments of any colour are always infallible and can recognise every contingency. Here is a contingency that must make the Government pause and look at the very important argument that this massive investment, with no return for six or eight years, was dependent in large measure in that development period on the availability of investment grants.

I make no excuse for making a special plea for special consideration. The Government should not be intractable. I hope that they will recognise the special claim of this exceptional development.

Photo of Mr William Rodgers Mr William Rodgers , Stockton-on-Tees

I support the thoughtful and convincing case made by the hon. Member for Middlesbrough, West (Mr. Sutcliffe). Anybody who entered the House this evening prepared to listen to what the hon. Gentleman was saying must have been convinced that the case was overwhelming. My right hon. Friend the Member for Sunderland, North (Mr. Willey) said that it would be a clear breach of a moral obligation if the Government did not accept the Amendment. The hon. Member for Bedford (Mr. Skeet) said simply that it would be wrong if the Amendment was not accepted. That fairly sums up the position if the Minister is unable to make this concession.

My right hon. Friend the Member for Sunderland, North referred to the total situation on Teesside. I shall not develop that point now, except to say that there is a crisis of confidence. I shall not attempt to describe why it has arisen. I ask the Minister to believe that it exists. It is within his capacity to play a part in remedying it.

The Minister and his right hon. Friends should change many of their policies. Tonight he should make one small concession in answer to one of his hon. Friends. The case is powerful and overwhelming. Those of us who have served in government have been in the Minister's position. We have been told by our officials, or more often by the Treasury, that there can be no concession. When I was at the Treasury I played some part in telling other Ministers that there could be no concession.

The test of a Minister is whether he says "No" to the Treasury and to his officials. I hope that this Minister will say "No" to the Treasury and to his officials tonight and say "Yes" to the House.

Photo of Mr Thomas Boardman Mr Thomas Boardman , Leicester South West

In the debate on the previous Amendment the hon. Member for Chesterfield (Mr. Varley) commented with some surprise on the fact that hon Members on this side had tabled an Amendment to a Bill which we so enthusiastically supported. I and my hon. Friends have not lost any of our enthusiasm for the Bill. It would be wrong if on a Bill of this nature we on this side were not free to move Amendments on particular cases.

Amongst the whole range of the many tens of thousands of firms and the many industries affected by the Bill the debate is concentrated on one company. It is a measure of comfort to my hon. Friend the Minister that such is the success of the Bill and such is the welcome that it has been accorded that it is the one case of the Cleveland Potash Company that gives rise to this criticism.

I will not rehearse the arguments or repeat the facts about the Cleveland potash venture. The greatness of the venture, the enterprise being shown, the risks being taken, the vision of the landscaping and other developments, are common ground and hon. Members on both sides support and encourage them.

Nothing being done by private enterprise or supported by the Government would justify some of the remarks of the right hon. Member for Sunderland, North (Mr. Willey). I refer particularly to his criticism about the lack of will to bring into development areas the industry which is needed.

The Cleveland Potash Company is being unfairly treated. It is getting a raw deal. However, I wonder whether we are directing our bullets at the right target. I wonder whether my hon. Friend the Minister for Industry and the Government are the cause of the disadvantage from which the company is suffering. The company has an unusual capital structure, one which perhaps is not very usual. It is a fifty-fifty company. It is 50 per cent. owned by Chartered Consolidated and 50 per cent. by I.C.I. If the company were not in that form but were a subsidiary company of one or other of those organisations, no doubt the switch to investment allowances from investment grants would not give rise to the disadvantage that it is now suffering. There would be within that group of companies profits against which the investment allowances could be set off. If it were not a new company with a one-purpose job, a company set up to carry out that operation; if it had been carrying on business and had generated profits over a long period, and had profits from its other ventures, it would not suffer this disadvantage. But, because of these things, for six to eight years it is deprived of the benefit of the capital allowances from this very large and worthwhile investment.

I realise that my hon. Friend the Minister does not wish to create precedents or breach of principle which I fully support. But here perhaps he could make a distinction. If he feels that he cannot accept the Amendment or give an undertaking to reconsider the point, he may nevertheless feel that the cause can still be met by our right hon. Friend the Chancellor of the Exchequer making an Amendment enabling the investment allowances accruing over the six to eight years' development to get the relief, and restore the cash flow of which the company is otherwise being deprived.

It is clear that hon. Members on both sides wish to support the venture, and I am sure that the Government will share that enthusiasm for it.

Photo of Mr Eric Cockeram Mr Eric Cockeram , Bebington

I support the pleas made by my hon. Friend the Member for Middlesbrough, West (Mr. Sutcliffe). I wish only to emphasise his final point about the element of retrospection involved in the Bill. Un questionably, had the two parent companies been aware of the way in which the wind would blow in tax legislation they would have set up the company in an entirely different manner. They have been caught in an unfortunate situation. Because of that, and the element of retrospection, I add my plea for the Amendment.

Photo of Mr John Nott Mr John Nott , St Ives

I support my hon. Friend the Member for Middlesbrough, West (Mr. Sutcliffe).

While in Opposition, we moved new Clauses on successive Finance Bills which recognised the special position of deep mining. So far only one mine has been mentioned in the debate, but many tin mines are opening up in Cornwall, and they are also affected by the Amendment.

We do not have to be supporters of the cash giant system to support the Amendment. What is being said is that a judgment was made on the basis of existing legislation. While I do not regard it as retrospective legislation, there is clearly a moral obligation on the Government to ensure that business judgments made in the circumstances that then prevailed are at least met by them in sympathy with the Amendment.

There is nothing unique about shipping, except that the Government happen to be rather more frightened on that score than they are on mining. Unless we can get a concession from them on this important point tonight, we will show that we feel just as concerned on the principle for other industries as the Government may feel about the shipping industry.

11.45 p.m.

Photo of Mr John Eden Mr John Eden , Bournemouth West

Every hon. Member who has spoken on this Amendment has paid tribute to my hon. Friend the Member for Middlesbrough, West (Mr. Sutcliffe). I paid my tribute to him in Committee. He has made out a forceful case for the particular company.

I am afraid that I must go back to the basic principle which lies behind the preparation of the Bill. Unless this is fully accepted, it is possible to find ways of introducing a number of Amendments which would lead to the Bill itself becoming totally different from what it is now attempting to be.

The principle enshrined in the Bill is that grant should be paid on expenditure incurred after the cut-off date of 26th October, 1970, only to the extent that the applicant was under a contractual obligation on that date to make payments to another person. The same principle was adopted by the Labour Government in 1966 to cover the transitional arrangements which were then imported.

The only difference in this case is that we have not set any time limit within which the assets contracted for must be brought into use if grant is paid. My hon. Friend's Amendment would cut right across that principle by allowing grant to be paid on plant and machinery and mining works contracted for before 27th October, 1972, in certain circumstances where the relevant section of the Mines and Quarries Act 1954 operated, namely where the sinking of a shaft had begun.

In this respect it goes wider than the Amendment put forward by my hon. Friend in Committee, under which my right hon. Friend the Secretary of State would at least have had to be satisfied that the contract for a substantial proportion of assets required for the development of the mine had been made before 27th October, 1970. This Amendment would cut across that principle, and this has been recognised by every hon. Member who has spoken; there has been no attempt by anybody to conceal that fact.

The effect of the Amendment on these mines would virtually be to postpone for two years the ending of investment grants. Since on Second Reading we brought forward a Bill which did not seek to do that but sought to do something different, it is self-evident that it is impossible for me to accept the Amendment.

The Amendment will do more than this since it would be possible, given this notice, for firms to forestall the cut-off date of 27th October, 1972, by, from now on, placing a number of contracts to be delivered and paid for a long time afterwards. From the point of view of the impact of the Bill, the situation of mines is no different from that of other industries and firms investing in new developments.

If the Amendment was accepted I have no doubt but that there would be strong pressure to extend it to other sectors of industry, possibly even to industry as a whole. This would defeat the whole purpose of the Bill, which is to end investment grants quickly to make way for a better system of investment incentives.

Those who have spoken so far have concentrated on the special position, not just of mining but possibly of deep mining and it is to that which I now want to turn—

Photo of Mr John Sutcliffe Mr John Sutcliffe , Middlesbrough West

Before my hon. Friend does so, may I put a point to him. He has based his case on the sanctity of a principle which I would have thought had already been damaged by his shipping Amendment. He has also referred to his fear that there will be an avalanche of firms wanting to get in on the act. He has mentioned, earlier, petro-chemicals and oil refineries. Could he state explicitly to what his fears relate?

Photo of Mr John Eden Mr John Eden , Bournemouth West

I will come to those points. The case made by my hon. Friend and other hon. Members is that mining is a special operation, justifying some form of special attention or assistance. If we are to pick out mining for special assistance then it must be related in some way directly to those problems which are special to mining. The main difficulties in mining which are special in this sense are primarily connected with exploration, as opposed to development. It was to exploration that I was referring in Committee, and to which my hon. Friend the Under-Secretary was referring on Second Reading when we said that we were seeking to do all that we could to meet these special difficulties. My hon. Friend has emphasised the special position, not just of mining, but uniquely of Cleveland Potash in its operations which are of enormous interest to the Government. It is a development which we very much wish to see proceeding. I have given careful thought to this and have held discussions with the chairmen of the two companies who are the joint owners of Cleveland Potash. However, for the purposes of the Bill, the circumstances of this development are similar in essence to the circumstances of the development of a number of other industrial projects.

In virtually all sectors of industry there are firms, large and small, undertaking new projects with the same sort of long-lead time and with little prospect of making early profits against which they can set off capital allowances. Those are some of the features which hon. Members brought into their arguments to justify special treatment for Cleveland Potash. I am sure that in those respects they will apply to many other operations throughout industry.

The risk element has been mentioned and maybe the risk is greater in mining and deep mining transactions. It is certainly true that no matter how careful the research and development preparation has been, substantial risk is inevitable when companies embark on major new projects. I have received requests for exceptional treatment under the transitional arrangements provided for in the Bill from a number of sectors of industry. They have ranged from the large-scale chemical works to the small specialised engineering projects. Many of these companies are faced with the same situation that faces deep mining projects and Cleveland Potash. The change which my hon. Friend proposes could not be restricted to mining, nor could it, in equity, be extended selectively to meet the problems of individual firms. If the principle of the Amendment were accepted, the arrangements would have to be general, and, if they were general, it follows that they would be costly and there would be subsequent delay in the ending of investment grants over this two-year period.

My hon. Friend has suggested that there is as much reason for making special arrangements for the mining industry as there is for shipping. I do not agree with that. United Kingdom shipping still has to face unrestricted international competition without any tariff protection, often with "flag of convenience" fleets whose profits are not subject to tax so long as they are not remitted to other countries where taxes are levied. In contrast to this unrestricted competition, over half the minerals covered by the Amendment have the benefit of tariff protection.

My hon. Friend the Member for St. Ives (Mr. Nott) referred to the other mining operations which would be covered by the Amendment, and this is one reason why it is impossible for me to accept it. I do not wish to rest my case on the general point, or on the fact that this is a breach in the principle of the Bill, but on the fact that the case for making special and unique alterations in this one company's interest should not be met in a Bill which is designed to bring investment grants to an end over a limited period.

My hon. Friend the Member for Middlesbrough, West said that this is not like other construction industry. It is an integrated unit in a special and unique way. It is not like other land-based investment but is particular to deep mining. It has a particular scale of development, it has special construction risks and there is a long lapse of time before there is likelihood of a return. Those things apply to many other sectors of industries. To accept an Amendment, or to try to devise an Amendment, which would meet the points put forward would go a long way to importing a totally new principle into the Bill, which would at once open out applications from a much wider range of industries than just deep mining operations.

For that reason I cannot advise the House to accept the Amendment. I beg my hon. Friend to recognise that this is no sign of lack of confidence in Teesside, and has nothing to do with regional issues. It is simply that a decision has been taken to bring to an end investment grants, in itself a wasteful and uneconomic procedure, and to introduce a new system which will be much better—

Photo of Mr John Nott Mr John Nott , St Ives

My hon. Friend called in aid the state of international competition when he gave his reasons for excluding shipping. Is he not aware that in practically every other country in the world mining is treated as being the exploitation of a wasting asset and that is its particular speciality? It is involved in exactly the same kind of international competition as shipping.

Photo of Mr John Eden Mr John Eden , Bournemouth West

It is to the particular problems of exploration in mining and the difficulties associated with it that we have been turning our attention, and it was to that that I referred in my earlier comments. We must proceed with the discussions which are taking place in that regard. I am dealing here with limited transitional arrangements to convert a system of investment grants to a new system, and I cannot see any way of bringing in by way of an Amendment along the lines proposed special assistance to Cleveland Potash.

12 midnight

Photo of Mr Michael Foot Mr Michael Foot , Ebbw Vale

I do not propose to argue the merits of this matter with the Minister for Industry. I do not think that it is necessary to do so, since the case has been put so overwhelmingly by the hon. Member for Middlesbrough, West (Mr. Sutcliffe) and by several of my hon. Friends. I do not believe that anyone listening to the debate could doubt that the case for the Amendment has been made up to the hilt. Some of us attempted to put part of this case on Second Reading. We were told then by the Minister that discussions would take place with the mining industry in order to see whether provision could be made for it in some general terms. That was the formula also used in Committee. The Minister has not even repeated that formula today. He has merely relied on the arguments which have been repudiated and refuted time and again in the debate.

Not just one firm is involved. On Second Reading, I mentioned the Tredegar Mining Company, in my constituency. It is a small firm, but it has as much right to justice as the big firms. Both Cleveland Potash and Tredegar Mining and the third company, in Cornwall, have been treated with injustice. They have been misled and now they have to suffer for it. It is no use the right hon. Gentleman saying that we cannot make exceptions. We think there are exceptional grounds on which this can be done for deep mining, as it was done for shipping, where there were also overwhelming grounds. The hon. Gentleman says that we would have to let in so many exceptions if we were to do justice. Some of us believe that that in itself is a condemnation of the Bill.
The case for the Amendment has been made overwhelmingly by hon. Members opposite and by my hon. Friends, and I suggest that the proper place for us to decide the matter is in the Lobby. If hon. Members opposite press the Amendment, we will be glad to support them.

Question put, That the Amendment be made:—

The House divided: Ayes 68, Noes 160.

Division No. 387.]AYES[12.3 a.m.
Armstrong, ErnestHughes, Mark (Durham)O'Malley, Brian
Atkinson, NormanJones, Barry (Flint, E.)Orme, Stanley
Bagier, Gordon A. T.Jones, Gwynoro (Carmarthen)Owen, Dr. David (Plymouth, Sutton
Blenkinsop, ArthurKaufman, GeraldParry, Robert (Liverpool, Exchange)
Campbell, l. (Dunbartonshire, W.)Kinnock, NeilPavitt, Laurie
Carmichael, NeilLamond, JamesRhodes, Geoffrey
Clark, David (Colne Valley)Latham, ArthurRodgers, William (Stockton-on-Tees
Cohen, StanleyLawson, GeorgeRoss, Rt. Hn. William (Kilmarnock)
Concannon, J. D.McBride, NeilSandelson, Neville
Cox, Thomas (Wandsworth, C.)Mackenzie, GregorSmith, John (Lanarkshire, N.)
Davies, G. Elfed (Rhondda, E.)Mackie, JohnSpriggs, Leslie
Dell, Rt. Hn. EdmundMcMillan, Tom (Glasgow, C.)Stallard, A. W.
Douglas, Dick (Stirlingshire, E.)McNamara, J. KevinSutcliffe, John
Duffy, A. E. P.Mahon, Simon (Bootle)Tinn, James
Evans, FredMason, Rt. Hn. RoyUrwin, T. W.
Foot, MichaelMeacher, MichaelVarley, Eric G.
Ford, BenMellish, Rt. Hn. RobertWainwright, Edwin
Grant, George (Morpeth)Millan, BruceWeitzman, David
Grant, John D. (Islington, E.)Miller, Dr. M. S.White, James (Glasgow, Pollok)
Hamilton, William (Fife, W.)Milne, Edward (Blyth)Wilson, William (Coventry, S.)
Hardy, PeterMulley, Rt. Hn. Federick
Harrison, Walter (Wakefield)Nott, JohnTELLERS FOR THE AYES:
Horam, JohnOgden, EricMr. Joseph Harper and
Howell, Denis (Small Heath)O'Halloran, MichaelMr. James Hamilton.
Adley, RobertBowden, AndrewChataway, Rt. Hn. Christopher
Allason, James (Hemel Hempstead)Bray, RonaldChichester-Clark, R.
Archer, Jeffrey (Louth)Brewis, JohnClegg, Walter
Atkins, HumphreyBrinton, Sir TattonCockeram, Eric
Awdry, DanielBrocklebank-Fowler, ChristopherCorfletd, Rt. Hn. Frederick
Benyon, W.Bryan, PaulCormack, Patrick
Biffen, JohnButler, Adam (Bosworth)Crouch, David
Blaker, PeterCarlisle, MarkCurran, Charles
Boardman, Tom (Leicester, S. W.)Channon, PaulDean, Paul
Boscawen, RobertChapman, SydneyDeedes, Rt. Hn. W. F.
Digby, Simon WingfieldKing, Evelyn (Dorset, S.)Raison, Timothy
Dixon, PiersKing, Tom (Bridgwater)Redmond, Robert
Drayson, G. B.Kinsey, J. R.Reed, Laurance (Bolton, E.)
Dykes, HughKitson, TimothyRees-Davies, W. R.
Eden, Sir JohnKnight, Mrs. JillRenton, Rt. Hn. Sir David
Edwards, Nicholas (Pembroke)Knox, DavidRidley, Hn. Nicholas
Elliott, R. W. (N'c'tle-upon-Tyne, N.)Lane, DavidRoberts, Michael (Cardiff, N.)
Emery, PeterLegge-Bourke, Sir HarryRoberts, Wyn (Conway)
Eyre, ReginaldLe Marchant, SpencerRussell, Sir Ronald
Farr, JohnLongden, GilbertScott, Nicholas
Fenner, Mrs. PeggyLoveridge, JohnShaw, Michael (Sc'b'gh & Whitby)
Fidler, MichaelLuce, R. N.Sheiton, William (Clapham)
Finsberg, Geoffrey (Hampstead)MacArthur, IanSoref, Harold
Fortescue, TimMcCrindle, R. A.Spence, John
Fowler, NormanMcLaren, MartinStanbrook, Ivor
Fox, MarcusMaginnis, John E.Stuttaford, Dr. Tom
Gibson-Watt, DavidMarten, NeilTaylor, Sir Charles (Eastbourne)
Goodhart, PhilipMather, CarolTaylor, Edward M.(G'gow, Cathcart)
Goodhew, VictorMawby, RayTaylor, Frank (Moss Side)
Cower, RaymondMaxwell-Hyslop, R. J.Taylor, Robert (Croydon, N. W.)
Grant, Anthony (Harrow, C.)Meyer, Sir AnthonyThatcher, Rt. Hn. Mrs. Margaret
Green, AlanMills, Stratton (Belfast, N.)Thomas, John Stradling (Monmounth)
Grylls, MichaelMitchell, Lt.-Col. C.(Aberdeenshire, W)Thompson, Sir Richard (Croydon, S.)
Gummer, SelwynMolyneaux, JamesTrafford, Dr. Anthony
Gurden, HaroldMonks, Mrs. ConnieTrew, Peter
Hall, Miss Joan (Keighley)Monro, HectorTugendhat, Christopher
Hall-Davis, A. G. F.More, JasperTurton, Rt. Hn. Sir Robin
Hannam, John (Exeter)Morgan, Geraint (Denbigh)van Straubenzee, W. R.
Harrison, Col. Sir Harwood (Eye)Morison, Charles (Devizes)Vaughan, Dr. Gerard
Haselhurst, AlanMudd, DavidWaddington, David
Hawkins, PaulMurton, OscarWalder, David (Clitheroe)
Hicks, RobertNabarro, Sir GeraldWalker, Rt. Hn. Peter (Worcester)
Hill, John E. B. (Norfolk, S.)Neave, AireyWard, Dame Irene
Hill, James (Southampton, Test)Normanton, TomWarren, Kenneth
Holt, Miss MaryOnslow, CranleyWeathertill, Bernard
Hornby, RichardOsborn, JohnWells, John (Maidstone)
Howe, Hn. Sir Geoffrey (Reigate)Owen, Idris (Stockport, N.)White, Roger (Gravesend)
Howell, David (Guildford)Page, Graham (Crosby)Wilkinson, John
Howell, Ralph (Norfolk, N.)Parkinson, Cecil (Enfield, W.)Worsley, Marcus
Hunt, JohnPink, R. BonnerWylie, Rt. Hn. N. R.
Hutchison, Michael ClarkPounder, Rafton
James, DavidPowell, Rt. Hn. J. EnochTELLERS FOR THE NOES:
Kaberry, Sir DonaldProudfoot, WilfredMr. Keith Speed and
Kellett, Mrs. ElainePym, Rt. Hn. FrancisMr. Hugh Rossi.

Further Amendments made: No. 5, in page 2, line 8, after 'him', insert: 'or, if he is a member of a group, to any other member of that group'.

Amendment No. 6, in page 2, line 11, after 'he', insert: 'or, as the case may be, the other member of the group'. [Sir J. Eden.]

Photo of Mr John Eden Mr John Eden , Bournemouth West

I beg to move Amendment No. 7, in page 2, line 13, at end insert: (3A) Where a person was on 26th October 1970 entitled to the benefit of a contract for the construction of a new ship, subsection (1) above shall not prevent the making of a grant under the said Part I in respect of expenditure incurred by that person or, if he is a member of a group, by any other member of the group in the provision of the ship, or of any ship appearing to the Secretary of State to be of the same or substantially similar description thereto and supplied in substitution therefor, so far as that expenditure either consists of a sum or sums falling due under a contract made before the said 27th October or is in respect of goods or services supplied on or before the date on which the ship is delivered. In Standing Committee, I said that I would have detailed discussions with the Chamber of Shipping with a view to devising a form of words which would meet the substance of arguments deployed by my hon. Friend the Member for Tynemouth (Dame Irene Ward). Without agreeing with her completely and without opening the door too wide, we have had those discussions and the Amendment is the outcome.

In order that grant may be payable, the expenditure must relate to goods or services supplied on or before the date on which the ship itself is delivered. I understand that the date of a ship's delivery is one which may be readily determined in every case. The parts need not actually be delivered to the ship on or before this date, but they must be delivered to the ship or the ship owner, for example, to his warehouse, on or before that date. The Chamber of Shipping agrees that that is a sensible and reasonable limitation.

There are four other points. First, if a ship's extras or parts were the subject of a contract made before 27th October 1970, that is to say, if they were included in the main shipbuilding contract, or subject to a separate contract made before that, this limitation as to the delivery date does not apply. Secondly, the Amendment allows, as do Amendments Nos. 5 and 6, grant to be paid where one member of a group incurs expenditure as a result of the transfer to it by another member of the group of the benefit of a contract made before 27th October.

Thirdly, where a contract made before 27th October has, since that date, been varied or replaced by a new contract, grant will only be paid if my right hon. Friend is satisfied that the ship to be supplied under the varied or new contract is in substitution of the ship as contracted for on 26th October and is of the same or a substantially similar class or description. If he is not so satisfied, it follows that no grant will be payable.

Lastly, expenditure to attract grant will still have to qualify as "approved capital expenditure" as defined in Section 13(1) of the Industrial Development Act, 1966. It has to appear to the Secretary of State to be of a capital nature and to be approved by him for the purposes of grant". He does not intend to approve expenditure which is not directly related to the provision of a ship or its extras or expenditure which seems to him to be unreasonable in relation to the type of ship provided.

I also remind the House that the provisions of the Industrial Development (Ships) Act, 1970, will continue to apply and in that way protect our balance of payments.

This is a useful step forward, recognising the points which were raised in Committee. I hope that it will commend itself to the House.

12.15 a.m.

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

We are obliged to the Minister for his explanation. We think that this is a sensible approach to the matter, although we would much prefer to see investment grants continue indefinitely for the shipping industry. However, in the context of the Bill, this is a reasonable concession. I understand that the Chamber of Shipping has expressed satisfaction with the arrangements.

On behalf of the Opposition, I must claim some credit for getting the Government to look at the matter again. Had it not been for a united Opposition in Committee, the suggestion by the hon. Member for Tynemouth (Dame Irene Ward) would not have been accepted. I am only sorry that a similar concession was not given to the hon. Member for Middlesbrough, West (Mr. Sutcliffe) on the matter which we discussed previously.

As I said, this is a sensible approach to the matter. However, I am surprised that the Minister has not taken the opportunity to explain to the House how he sees the shipping industry developing over the next few years. It would have been wholly appropriate, because in Committee the hon. Gentleman said that he could possibly make the concession which he has just announced—I do not think that he used these words—to the hotch-potch of subsidies to shipping which exist throughout the world, because tonight he has referred to the special considerations given to and the special position of shipping throughout the world.

I should like to support my point by referring to The Times of last Tuesday, which, in a lead article headed "Tragedy of the Clyde" directly relating to this matter, stated: There is a world-wide boom in ship construction, but with the removal of investment grants the British industry is now at a marked disadvantage in competing for orders, compared with almost all its overseas competitors. That is the case. We all know of yards which are in difficulties. It may be that we shall have something to say about that on Third Reading.

I should like to probe the Government on the O.E.C.D. meeting which started today. I understand there are to be three days of discussions in Paris where they are trying to align all the varying subsidies and measures so that the world shipping industry can make some sense and get on a better basis.

I should like some information from the Minister about this conference, or these talks as they are called in this article. It says that the United Kingdom is represented. Is the United Kingdom represented by officials, or by a Minister? Do the British proposals cover the Amendment? I should be grateful if the Minister would answer those questions, because these issues are of considerable interest to those who work in the shipping industry.

The Amendment has our support. It does not go far enough, but it is a concession, and we recognise it as such.

Photo of Mr Dick Douglas Mr Dick Douglas , Clackmannan and East Stirlingshire

I, too, welcome the Amendment, because, while acknowledging the pressure exerted by the hon. Lady the Member for Tynemouth (Dame Irene Ward), I think I can say that during the Second Reading debate we referred to the serious plight of the shipping industry in relation to the cut-off date for investment grants.

I must press the Minister to give us some information about the relationship between his Department and the industry in the processing of these grants. Will the Department ascertain when the ship and the parts were contracted for before 26th October, 1970? What machinery is there in the Department for liaising between the Department, the shipping company, and the shipyard?

I raise this matter because during the past week certain doubts have arisen about the efficiency of the Department in liaising with the shipping companies and shipyards involved. We are grateful that parliamentary pressure can be brought to bear on the Minister, and for the fact that the Ministerial mind can be changed—and the hon. Gentleman deserves credit for introducing the Amendment—but I do not think that the previous association between his Department and the shipping companies earns the same credit.

I have in mind the fact that shipping companies were in consultation either with the hon. Gentleman's Department, or with the Shipbuilding Industry Board, to obtain credits for ships that were being built by U.C.S. last October. The credits were held up from October until February, with the resulting crucial damage to U.C.S. If that could happen, what guarantee has the House of this favourable provision in the Amendment reaching the shipping companies concerned?

Because of the ending of the Shipbuilding Industry Board, we are con cerned about the processing of investments and building grants between the industry and the shipyards. Am I correct in thinking that if ships building at U.C.S., which have investment grant sanction, are transferred because of difficulties in the restructuring of that company, provided that the order was placed before 26th October, the new company taking on the order will be entitled to an investment grant for the ship, or will the guillotine fall on 26th October?

I am concerned at the apparent mishandling of credits. As I understood it, the process was that the Shipbuilding Industry Board looked at the viability of the shipping company, while the ship mortgage finance corporation looked at the shipyard. In the case of the U.C.S., the process seems to have been reversed. As I understand it, we had the S.I.B. examining the viability of the shipyard and pronouncing upon it.

I am concerned to ensure that this Amendment contains a provision which is favourable to the shipping industry and, indirectly, to the shipbuilding industry. However, previous experience of Government mishandling of the industry has sapped the confidence of our shipowners and shipbuilders. I do not want to cross swords with those of my right hon. and hon. Friends who spoke in the debate on the previous Amendment, but they have given the impression that the shipping industry has been treated extremely favourably in this Amendment. The Amendment gives the industry no more than its due.

In view of the events of the past week, serious damage has been done to the industry's confidence, and I think that the Government owe the House an explanation of their conduct in this affair.

Photo of Mr John Eden Mr John Eden , Bournemouth West

With the leave of the House, perhaps I might reply briefly and deal first with one or two of the points made by the hon. Member for East Stirlingshire (Mr. Douglas).

The instances that I gave earlier were intended to indicate that, when the transfer of a contract takes place between members of a group, the provisions of the Amendment will still apply. In the case of U.C.S., if a shipowner had a contract before 27th October and it is taken over by another shipyard, the grant under the Bill will still be payable to the shipowner who made the original contract, provided that the ship remains of a substantially similar class or description. That is the essential point there.

The hon. Gentleman then went a little wider and brought in a number of other points which are probably better discussed in a general debate on the shipping industry. But I assure the hon. Member for Chesterfield (Mr. Varley) that we are keeping closely in mind the developments at the O.E.C.D., and we are watching what is taking place there. At this stage, I cannot add anything further about the arrangements in this country.

Amendment agreed to.

Further Amendment made: No. 8, in page 2, line 38, at end insert: 'and for the purposes of this section, a group consists of a body corporate together with all other bodies corporate which are its subsidiaries within the meaning of section 154 of the Companies Act 1948'.—[Sir J. Eden.]

12.30 a.m.

Photo of Mr John Eden Mr John Eden , Bournemouth West

I beg to move, That the Bill be now read the Third time.

The main object of this Bill is to put an end to the system of investment grants as quickly as possible, to pave the way for a different and better system of investment incentives.

Clause 1, Subsection (1), achieves this in a simple way by prohibiting payment of investment grants on expenditure incurred after 26th October, 1970; and after that date the new and improved capital allowances will apply. This provision, in itself, avoids retrospection, since all expenditure incurred up to the date when we announced the change will qualify. But we have gone even further to avoid retrospection in our readiness to continue investment grant on expenditure to which a firm was legally committed on 26th October.

Obviously, some firms will not receive all the investment grant that they would have done had the system remained; and that they might at one time have expected, but if the Clause were to have this effect we should really not be making transitional arrangements so much as postponing the change altogether. We have adopted the same principle of transitional arrangements as did the previous administration in 1966, except that in ours there is no time limit within which the assets must be brought into use to qualify for grant.

The Clause has been amended in two respects since it was introduced. Under the first Amendment a new ship is looked at as an entity and grant can be made on all approved capital expenditure on it, provided a contract for its construction has been made before the cut-off date and provided the "extras" are delivered at the same time, as or before, the ship itself is delivered. This is in recognition of the shipping industry's special international trading position.

The second Amendment is somewhat technical, but none the less important, and removes a particular difficulty encountered by some groups of companies. It is generally agreed that this is right.

We have also set a time limit within which applications for investment grant must be made. This is a sensible move and I am sure that no hon. Member would wish applications to drag on indefinitely. We have sought to give plenty of notice before the first limits come into force, and we shall continue to do so.

Clause 1 has attracted most attention in debates so far and as a result, Clause 2 has somewhat gone by unnoticed, but it makes important provision for improving assistance to industry by way of building grants in the Local Employment Acts. These improvements have been approved by the House without alteration and almost without attention, and certainly without objection.

I do not want to comment on them in detail, but the increase in the rates of building grant in development areas means that industrialists building or extending their premises and thereby creating new employment in those areas, can look to receive a substantial contribution of 35 per cent. in some cases or 45 per cent. towards their costs.

This increase, together with the other extensive improvements which we have already made in the assistance available under these Acts in development and intermediate areas, the continuation of the 40 per cent. initial allowance for industrial building, and the new system of capital allowances for plant and machinery, make up a most substantial and relevant package of incentives for industrial investment in areas of greatest need.

Photo of Mr Michael Foot Mr Michael Foot , Ebbw Vale

Will the Minister answer a question which is relevant, but which I have not earlier had an opportunity of putting? It is about building grant. What would happen if someone in charge of deep mining applied for a building grant to carry out his tunnelling?

Photo of Mr John Eden Mr John Eden , Bournemouth West

There is no reason why mining operations, as well as any other operations, should not qualify for the provisions of the Local Employment Acts. If they do so, and insofar as it can help, it would be of some significance for them.

In relation to the previous discussion, this was recognised by my hon. Friend the Member for Middlesbrough, West (Mr. Sutcliffe), although he pointed out, as I now do, that it would not go so far as to compensate for the loss of grant expectation which resulted from the changeover in their case. There is no reason why they should not qualify for the same provisions as anybody else in development areas under the Local Employment Acts.

These are the two parts of this important Bill, which will make a substantial and relevant contribution to the investment plans of industry, and particularly of the needs of development and intermediate areas.

12.35 a.m.

Photo of Mr Eric Varley Mr Eric Varley , Chesterfield

The Minister is right in saying that this is a two-part Bill. Governments have the capacity for putting good and bad together, which is what they have done in this case.

It will come as no surprise to those who have followed our debates on this Measure that we take the most serious objection to Clause 1 because of the consequences that will result from it. It has been made clear that the transitional arrangements are not satisfactory and that industry, and particularly employment prospects, in the weaker regions of Britain have been plunged into a certain amount of confusion by the manner and method in which the Government have introduced the Bill in general and Clause 1 in particular.

It is clear to all concerned that the Government have in many respects let industry down. That was made plain in the earlier remarks of hon. Gentlemen opposite. In view of the Conservative manifesto and what the Secretary of State for Social Services said when in opposition, one cannot blame industry for feeling it has been let down badly, particularly by the transitional arrangements.

After 27th October of last year the chemical industry was thrown into complete confusion over the changes. The Shell-Carrington project was postponed, though I have been pleased to learn that Shell is now going ahead with the project; but valuable time was lost because of the change-over.

We have heard how mining has been badly affected when one would have thought that assistance would have been given to mining undertakings. A lot was said about only one project, the I.C.I. one, being affected, but it has been made plain that others have been involved. We have heard about the Tredegar Mining Company and the mining firm Wheal Jane in Cornwall. Mining generally, and not only in the sense mentioned by the hon. Member for Middlesbrough, West (Mr. Sutcliffe), has been hit.

The N.C.B. has been affected, not in its deep mining operations but in its peripheral activities, which attracted investment grants. For example, the Abernant plant, a £5½ million scheme, was due to be set up to produce smokeless fuel. It would have attracted £2 million in grant, but it was abandoned. The country having suffered a winter without adequate supplies of smokeless fuel, it was a tragedy that this project was abandoned and is not now going ahead—this in South Wales in a development area.

Clause 1 will also create problems for the shipping industry. We all know about the difficulties of Upper Clyde Shipbuilders. I do not know to what extent the withdrawal of grants on future projects has affected U.C.S. I will not go into that because I have mentioned it once this evening. Other shipping yards will be seriously affected. Swann Hunter returned very bad results last week. Only last year Sir John Hunter said that the company would not have made a profit had it not been for R.E.P. Goodness knows what will be the effect when the withdrawal of grants takes place.

Every time I see the hon. Member for Belfast, South (Mr. Pounder) I am reminded that at least Harland and Wolff will continue to receive investment grants. Within the United Kingdom framework we have the difficulty of the very confused situation. The degree of protection in the policies of governments throughout the world makes shipbuilding and the shipping industry a complete jungle. I hope that at the O.E.C.D. meeting Britain will make a realistic contribution to the discussions and see whether some of these matters can be sorted out.

I must mention the British Steel Corporation and the effect of the withdrawal of grants on the steel industry. It is calculated that the ending of investment grants means a loss of about £100 million to the Corporation. When we have the Government boasting, as they do, that they have held down the price of steel, which means effectively that the industry will show substantial losses, at the same time as the Under-Secretary said in Committee that all would be well with the British Steel Corporation because once it started to make profits it would be able to take advantage of the tax allowances, that is a nonsense, because the price of steel is being held artificially low, the Corporation will never benefit and as a result valuable projects will not go ahead.

The biggest indictment of all is the impact that Clause 1 will have on Britain's weaker regions. There is no doubt that the ending of grants has done a great deal to increase unemployment in the development areas. The number of inquiries by industrialists about investment in development areas has fallen dramatically. The Secretary of State for Trade and Industry confirmed this in his statement to the House on 10th May, when he said that, taking the first quarter of 1970 and comparing it with the first quarter of 1971, inquiries had gone down dramatically. The reduction was about 60 per cent.

Only last Thursday The Times reported about many companies cancelling projects in Wales. There was a summary of a survey in The Times, which said: ' Fifty-two firms which had planned to invest in new projects in Wales have cancelled them in recent months, it is revealed in a survey carried out by the Confederation of British Industry.

I want to be absolutely fair about this. The ending of grant is not the only matter. The report goes on: The survey, which was carried out immediately at the time of the Budget in March, drew replies from 196 firms, almost exactly half of which had been intending to go ahead with new schemes.The most important reason given for the cancellation is reduced demand. The switch away from investment grants to tax allowances, the cost of external finance, lower profitability and extended credit taken by customers resulting in liquidity problems are also mentioned as significant factors.

It is quite obvious that the withdrawal of investment grants has meant cancellation of some of these projects. It is interesting that the article also says But comparatively few firms mentioned fear of the effects of rising wages or labour disputes as their main reason for dropping projects.

We are constantly told that all the problems in industry and the downturn of investment are the result of greed on the part of avaricious trade unionists. The survey makes the position clear.

It is not only Wales. The Confederation of British Industry conducted a survey in Scotland. The report in The Times of 14th May said this: The Confederation of British Industry now argue that, in a situation of chronically low investment, it might have been wiser to retain Labour's cash grants.

So again there is ample evidence that the prospects for the development areas are very serious, and the unemployment trends show clearly that the differential is widening. Those with experience of promoting job opportunities in the development areas have all shown over the past few months what a bad effect the ending of grants has had.

Mr. Fred Dawson, the Director of the North-East Development Council, has been extremely critical. Alderman Arthur Grey, the Leader of the Newcastle Tories, has been very critical. I hesitate to mention Viscount Ridley again. He is the brother of one of the Under-Secretaries in the Department and he is very critical. The T.U.C. in its Economic Review has expressed concern. Even the C.B.I. in its annual report said that a more flexible approach should be taken. The Minister for Industry knows that the C.B.I. has said that it would have been better to have allowed grants to have continued for industries such as mining, because grants would have been more effective. There has been no flexible approach.

We explained on Second Reading that five out of six members of the European Economic Community, to say nothing of Ulster, had direct investment grants for industry. If the House agrees to take Britain into the Common Market, no doubt harmonisation policies will require to British Government to restore what they are now taking away by Clause 1. Again, we showed on Second Reading how the ending of grants could be directly related to the weakening of investment generally. This was shown in an article in yesterday's Financial Times by Mr. Samuel Brittan in which he said some very powerful things directly relating to this point; he said that the flexibility of the investment grants as they were used in 1967 and 1968 could have been used in an effort to reflate the economy, in a manner which would stimulate longer-term growth and not so as to suck in a lot of imports and put our balance of payments in chronic disequilibrium.

Even this Government has already used investment grants to help industry in a flexible manner. A few months ago the Secretary of State for Trade and Industry announced that he had brought forward the payment of grants on expenditure already incurred to help firms with liquidity problems. That was a once and for all operation. Never again will investment grants be used in that way. The Secretary of State was quite proud when he was able to tell the House that he could bring forward the payment to ease the problems of firms, but he will not be able to do that again. Before the General Election we were told that if the Tories were returned to power there would be a thorough-going study of the regional incentives for industry. No such study has taken place. The grants were ended at a stroke, creating all the confusion about which we have heard tonight in mining and chemicals and within the development areas. Investment levels, which grants helped, have all taken a dramatic dip and business confidence is at an all-time low.

The Government will regret introducing Clause 1 to end investment grants. Even at this late stage they would be best advised to drop it.

12.51 a.m.

Photo of Mr Neil Kinnock Mr Neil Kinnock , Bedwellty

I will not detain the House long. [HON. MEMBERS: "Hear, hear."]—I am glad to have the acclaim of hon. Members opposite. I hope that I shall have a similar reception when I sit down.— [HON. MEMBERS: "Hear, hear."]—for the right reasons.

I want to take up two points made by my hon. Friend the Member for Chesterfield (Mr. Varley), referring specifically to the report recently published by the Confederation of British Industry in Wales on the survey of investment intentions. The figures produced by the C.B.I. put the matter of investment grants versus investment allowances into its true perspective. They are the product of the researches of people with no axe to grind, other than the entirely objective one of industrial potential. On that basis, we can afford to lift ourselves above the simple party squabble to consider the most efficacious way to encourage job-provision in the regions, and get down to cases.

I have here a copy of the questionnaire sent out to firms in Wales and returned to the C.B.I. by 194 firms. It gives a breakdown of the first reasons selected by each firm for cancelling its plans for new investment. This is a grave document. The findings of the questionnaire have the most serious implications for the development of all the regions. I and some of my hon. Friends are most closely concerned because we are talking about the constituencies and workers that we represent.

Asked whether they had recently cancelled plans for new projects, 52 of the firms answered "Yes", and 16 said that this was because of reduced demand for their products. That is a reflection of the stagnation and the drop in demand throughout the economy.

In Committee the Under-Secretary correctly told us that much of the difficulty encountered by British industry was of a general economic nature. But he said it in a way that would lead us to believe that the Government have little or no responsibility for the way in which the economic affairs of the country are conducted. Nothing could be further from the truth.

Photo of Gerald Kaufman Gerald Kaufman , Manchester Ardwick

It is true that the Government have little or no control.

Photo of Mr Neil Kinnock Mr Neil Kinnock , Bedwellty

That is through their clumsiness, not design. They cannot wash their hands of responsibility for creating demand.

We have made continual appeals from this side of the House, and appeals have been made from both sides of industry, not least from the C.B.I., the National Institute of Economic and Social Research, the T.U.C. and individual trade union conferences, for the Government to reflate the economy and start talking seriously about meeting the problem of unemployment and the drop in demand. That is the most important reason given by the C.B.I. for the cancellation of new investment. I ask the Government to take the problem most seriously.

In the context of the Bill, which in the short term will mean less cash available to firms for development in the regions, this is a sad measure in a time of capacity cancellations and employment despair.

Nine of the firms gave lower profitability as their reason for cancellation of new projects. Again, this is linked with a drop in demand, and the Government must take partial responsibility. Ten of the firms said they had difficulties in regard to the extended credit required by customers. Customers obviously require extended credit because they have not the cash. In some respects this is due to inefficiency, and in most respects it is the Government's fault for not creating a climate in which there is enough business confidence to encourage firms to pay up on time. The loss and the availability of external finance was used by 15 of the firms as a reason for cancelling projects. This is a direct argument for saying that cash grants are required to provide a cheap method of financing new projects.

The effect of rising wages was taken by only four out of 52 firms as a reason for not embarking on new projects. So much for the great wage explosion about which we are always being told by right hon. and hon. Members opposite. It is complete nonsense to adduce wage inflation as a reason for the cancellation of investment. Of course wages and prices have inflated. I said a year ago that this would happen all over the world. We were told that the Conservative Government would reduce them at a stroke, but nothing has been done about the situation, except that a vicious and dogmatic stand has been taken against the weakest section of the community.

The change in investment incentives, announced on 27th October, was given first priority as a reason for the cancellation of projects by nine firms, some 11 per cent. of the answers. It might be said that this is not a significant proportion, but added to that a further five firms said they had cancelled projects because of uncertainty generated by the change and by the lack of decision by the Government about the future of regional policy.

This adds up to a substantial total of 17 per cent. of firms who said they were cancelling projects because of the kind of measure we are debating tonight. [Interruption.] Hon. Gentlemen opposite are buzzing among themselves. That is just about the busiest thing they will do; they are talking up their sleeves.

The fact remains that a significant proportion of firms which have cancelled projects have done so as a result of current Government policy. [HON. MEMBERS: "No."] Hon. Members who interrupt from a sedentary position show some lack of courage, as they do in many other respects. Two out of the 52 firms gave a high priority to labour disputes as a cause for cancelling projects. So much for the effectiveness of the Industrial Relations Bill.

I quote from the article by Samuel Brittan in the Financial Times, which has already been mentioned by my hon. Friend the Member for Chesterfield: Whitehall has undoubtedly been shocked by the latest investment intentions surveys and will try to find some way of encouraging capital spending in industry…. The one proven method of doing this is a strictly temporary financial concession ending on an announced date. This is the principle behind the Swedish anti-cyclical tax concession …

Photo of Miss Betty Harvie Anderson Miss Betty Harvie Anderson , Renfrewshire East

Order. The hon. Gentleman has been allowed a very wide range. I hope he will not take advantage of it.

Photo of Mr Neil Kinnock Mr Neil Kinnock , Bedwellty

I am not entirely sure what you mean by "wide range", Mr. Deputy Speaker. I am quoting something which is strictly relevant to this Bill on the matter of investment and building grants.

What Mr. Brittan went on to say was: There is no reason why there should not be a similar temporary increase in the investment allowances which are to replace grants, or even why free depreciation for investment undertaken in a limited period should not be introduced. Mr. Brittan was saying that to counteract the stagnation in industry, the rise of unemployment and the increasing lack of confidence generated by the Government's policies, we should in some way adopt a policy which would speedily generate new investment.

I maintain, along with my constituents and the majority of the population in the regions, the strongest possible criticism of this Bill and I look forward to the day when a Labour Government will reverse in toto this dogmatic measure.

1.0 a.m.

Photo of Mr Peter Hardy Mr Peter Hardy , Rother Valley

If we, unfortunately, go into the Common Market, it may be that we shall have to comply with the Common Market financial practice and reintroduce the grants system. If we have to put up with a value-added tax, we should certainly be expected to put up with something which offered a great deal more.

I do not intend to speak for long, but I make no apology for detaining the House at this hour since I believe that this Bill will most adversely affect my constituents. I regard it as a Bill to be deplored. I was not on the Committee but I read the proceedings with interest and I spoke on Second Reading.

On Second Reading the House was under the impression, later corrected by the Secretary of State, that since the Bill had been introduced there had been a dramatic rise in the number of inquiries for the development and intermediate areas of the country. The Secretary of State had to apologise and correct this erroneous impression. He suggested that there had been a dramatic increase, but we find that there has been a reduction of 55 per cent. in the number of inquiries relating to the development of industry in the areas of Britain where industrial development is so necessary.

Since the House was then under the impression that the proposals in the Bill had so dramatically improved the situation, one would have thought that when the justification for the Bill was removed it would be reasonable and even honourable for the Bill to be removed, too.

There are some points that are worthy of re-emphasis. In the Sunday Times last Sunday the Prime Minister listed 79 promises which the Conservative Government had already redeemed. One promise was that there would be a thoroughgoing study followed by the swift removal of the industrial incentives available until this Bill is made law. I wonder whether the Prime Minister regards the thoroughgoing study as having been completed, and whether he regards that as one of the promises which he kept? The Confederation of British Industry has said that it does not like this Bill because it will bring about a decline in the value of the incentives offered to industry. It suggests that it is not sufficiently flexible in that it does not allow exceptions to be made so that grants can be provided where these are vital. That is an important point. It is perhaps one of the few occasions on which we can find words uttered by the C.B.I. worthy of attention on this side of the House.

My hon. Friend the Member for Flint, East (Mr. Barry Jones) made an important contribution in Committee when he gave a brief historical appraisal of the development of regional and industrial incentives in this country. He showed how improvements have been made since the Special Areas (Development and Improvement) Act, 1934, and the Special Areas (Amendment) Act 1936, and we can see from that time the gradual improvement in the provision of aid to the areas which most need it. That improvement has been, perhaps, spasmodic but there was improvement in those areas until 26th October, 1970. That was an extremely black day for Wales, Scotland and the north of England.

In Committee a Conservative Member stressed that unemployment grew during the years of Labour Government. His interpretation was rather superficial. He, like so many members of the Conservative Party, overlooked the great change that was taking place in British industry, the decline of the traditional industries, and the tremendous development of automation, with its inevitable redundancies and changes in employment. Between 1965 and 1970, although many thousands of people lost their jobs and unemployment rose, thousands of new jobs were created, most of them as a result of the Labour Government's policy of investment allowances. If there is to be the continuing development of automation and technology which is essential if we are to make our way in the world, and if we are to compensate for the change by providing new jobs and encouraging industrialists to develop, there must be no deterioration in the prospects which are afforded.

The Minister is entirely wrong in assuming that the previous system was wasteful. He said on Report that we should wind up investment allowances quickly so as to introduce a better system. Those words will prove to be a misinterpretation of a serious situation, and I hope that within the next twelve months, as unemployment continues to increase, the Government will have another look at this.

In March I asked the Secretary of State for Employment about unemployment in my constituency. The rather complacent answer was that unemployment in March, 1971, was lower than in March, 1970. This was true. The unemployment rate in March, 1970, was lower than in March, 1969, by virtue of the Labour Government's assistance to intermediate areas such as mine. But, since March, 1971, there has been a serious increase in unemployment, which is already worse than at any time since 1940–45. The advantages we were given under the intermediate area provision are eroded, and the situation in my constituency gives grounds for concern.

I hope that the Government will reconsider the situation within twelve months before so much harm is done that decades will have to elapse before it can be made good.

1.9 a.m.

Photo of Gerald Kaufman Gerald Kaufman , Manchester Ardwick

If one thought about party rather than about the country, one could view the Bill with a great deal of satisfaction because it is another example of the way in which the Government are relentlessly destroying themselves by dogma. Just as in the Budget—which was in March, not in April, as the Prime Minister pretended in the interview published in the Sunday Times—the Government gravely damaged their fight against inflation by cutting S.E.T., as they had promised to do, rather than cutting purchase tax which would have had a far greater immediate effect on inflation and the wage /price spiral, so the abolition of investment grants has deprived the Government of a major weapon of reflation.

It is generally agreed among all economic commentators at the moment—although not, of course, in the Treasury, which always lags behind all economic commentators and has been the destruction of Governments of both parties and will be the destruction of this Government as it was of the last—that substantial and immediate reflation is necessary if the Government and the country are to survive this recession, get out of it and get on to the growth which the rapidly-waning balance of payments surplus which the Labour Government bequeathed permits.

Yet what kind of reflation can we have? Two kinds are possible. One is, as my hon. Friend the Member for Chesterfield (Mr. Varley) pointed out, a consumer-led reflation which causes growth and employment but sucks in proportionately far more imports and is therefore damaging to the balance of payments and damaging to the long-term future of the country. The other is an export-led and investment-led reflation, and investment grants are an ideal way of spurring this kind of reflation because they pump money into industry. Unlike selective employment tax, they pump money into productive industry; because they are selective, and have been regionally selective, they pump money into the regions which need it most and therefore provide a non-consumer-led reflation of precisely the kind the country requires.

Yet this lunatic Government are depriving the country of this weapon, which could get us back on to growth and save this lost production and unemployment we are suffering. If one simply looked with satisfaction on the prospect of the destruction of this Government, one could be satisfied by the fact that the Bill will shortly become law. But if one believes that the destruction of the Government is less preferable than saving the country, one can only bemoan the fact that the blindness of the Government is causing them to proceed with this extremely damaging Bill, which takes away from the Government a major weapon for reflation and for expanding opportunities of employment and therefore for putting this country back on the path of economic growth once again.

1.13 a.m.

Photo of Mr Gwynoro Jones Mr Gwynoro Jones , Carmarthen

This Bill is of great concern to development areas such as Wales, Scotland and the North of England. With the abolition of investment grants, the Government have passed judgment on a system which had only been in operation for three years. For many years previous to that, we had a system very similar in many respects to investment allowances. So it is only right and proper that we should make a comparison of what investment allowances achieved and what investment grants achieved in their very short period of existence.

From 1960 to 1964, the investment allowances meant that 63 new manufacturing firms came to the Principality of Wales; under investment grants, from 1967 to 1970, a total of 196 new manufacturing firms came to the Principality and well over 30,000 new manufacturing jobs were created. I concede that the jobs lost in the declining industries such as mining were greater in number, but without the investment grants there would not have been this influx of new jobs into development areas such as Wales.

One of the reasons given for the abolition of the investment grant system is that industrialists were throwing money away. Hon. Members opposite have a very low opinion of their colleagues and friends in industry if they think that. The reverse is true. Anyone could have predicted the results of the C.B.I. survey.

A Parliamentary reply to my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) showed that the new policy will reduce the advantage of development areas over non-development areas. The Minister referred to the discounted cash flow method and gave as an example an investment of £100 and an asset life of ten years. Under investment grants, an industrialist would benefit to the tune of £52 in a development area and £39 outside, a differential of £13. Under the new system, the figures would be £36 in a development area and £32 outside, a differential of £4. So the new system is to the benefit of the non-development areas. This is one of the reasons why the C.B.I. on Wales is finding it most difficult to accept this change.

In the development areas over the last few years, the small firms in the initial stages of development have not been making a profit. Hundreds of these firms are coming to Wales, but, under investment allowances, not one will be able to benefit until the day it makes a profit. Most of these firms want money to meet the teething troubles of the first few years. The abolition of investment grants denies them this.

With the announcement of the Government's intention last October began a steady decline in job opportunities and industrial inquiries. In early 1970, most responsible economic correspondents and professors in the University of Wales were confident of a bright future for the Welsh economy. The Times and the Financial Times carried articles to this effect.

Now, those same commentators and professors are predicting a different situation. Industrial inquiries are now at an all-time low since the development area policy of the mid-1960s came into being. Unemployment in Wales has increased since June by 30 per cent., a total of 11,000 people. It is no use hon. Members opposite saying that this was an increasing trend: it was not. In the early part of 1970. the trend was certainly downwards. It had stabilised and was not increasing.

When the Labour Government left office, the number of jobs in prospect in the Principality over the four years 1970–74 was more than 30,000, but in a Parliamentary Answer the other day the Minister for Employment said that the figure was now 25,000. What has happened to the other 5,000 jobs in that short period of 10 or 11 months? It is suggested that 11,000 jobs have been taken by Southend, but it would be a terrible condemnation of the Government's hypocrisy and their pretence to care about regional development if 11,000 jobs were found to have gone to Southend because of the transfer of Government offices there, for by one such move they would have taken employment opportunities from the development areas.

The Opposition ought to make their protest about the abolition of investment grants. This is a sorry day, a day which will be long remembered by many in the development areas. They have known the Tory Party well for many years and they do not need speeches from my hon. Friends and me to tell them how cavalierly Tories treat their election promises. But there are some hon. Members opposite tonight who will not stand the test of the next election.

1.22 a.m.

Photo of Mr Thomas Urwin Mr Thomas Urwin , Houghton-le-Spring

I address myself immediately to the most contentious aspect of the Bill, which is undoubtedly the proposed abolition of investment grants. Earlier tonight, hon. Members opposite eloquently argued the justice of the case made on behalf of Cleveland Potash, although they did not carry their support into the Lobby.

My hon. Friend the Member for Chesterfield (Mr. Varley) went to some lengths to demonstrate the decline of confidence among industrialists in the development areas as a result of the Government's policy, especially the withdrawal of investment grants. No one, certainly not on this side of the House, will overstate the situation which has developed over the last few months, but the forecasts of the C.B.I. and the T.U.C. have been well justified.

There have been criticisms from people in the development areas, from those who are at the centre of these policies, people who had looked forward to the possibility of being able to resume employment as a result of the policies of the Labour Government. But it is undeniable that over the past few months the confidence of those most directly involved has markedly waned.

Since last June, some of us have questioned Ministers, especially those from the Department of Trade and Industry, about the efficacy of their policies and about the prospects resulting from a withdrawal of investment grants and the general package which the Government are now operating under the guise of a regional policy.

It is a gross understatment to say that that policy is not succeeding. Month after month, quite distinct and apart from the success achieved by the Labour Government, not only is the number of inquiries by industrialists decreasing, but, at the other end of the scale, in terms of jobs being produced for people hungrily awaiting them, the news is extremely disheartening.

Despite the limited time at my disposal, I cannot refrain from drawing attention, as did my hon. Friends from Scotland and Wales, to the serious situation in the Northern Region. My right hon. Friend the Member for Sunderland, North (Mr. Willey) spoke briefly, but nevertheless movingly, about the crisis of confidence on Teesside. The House should know that there is a crisis of confidence throughout the Northern Region. I have no doubt, from what has been said in this debate and on Report, that this will be reflected in Scotland and Wales, on Merseyside and, indeed, in the South-West and all the other development areas.

Today my confidence has been further undermined as a result of the evidence which has been presented by the Minister for Industry. Under the Labour Government's policies the Northern Region in 1968—this may have had some connection with the fact that since 1967 we had a Minister with special responsibility for the North—after being some way down the league table in terms of job procurement, through the medium of I.D.C.'s, leapt to the top of that table and held that position until 1970. The figures for April and May in the years 1968, 1969 and 1970 show an all-time record of 5,003 jobs estimated to have accrued as a result of industrial development certificates which had been approved.

Against that we have the appalling figures, released today, for the same two months of this year of 410 jobs in a region where over 70,000 men are unemployed and waiting for jobs. The new jobs expected to accrue in those two months, against an average over the previous three years of 4,518, are a miserable, squalid 410. This is the measure of the slackening of confidence in the policies applied by this Government.

I am on record on previous occasions in this Chamber and in Committee as saying that the investment grant system was the linchpin of the Labour Government's policies in terms of procurement of new industry and the disbursement of industry throughout the development areas. Its removal is having drastic consequences in these regions.

I want to sound a serious warning note to right hon. and hon. Gentlemen opposite, from the Prime Minister down. If they read this morning's Newcastle Journal they will see the justification for what I am saying. Deep and serious concern is being expressed by journalists, industrialists, local authority representatives, and many other people who have any interest in the relief of the dreadful problem of unemployment. They will read that the T.U.C. is to organise demonstrations in the areas of highest unemployment—and it need not go outside the Northern Region to find those areas. Sunderland is quoted as a ready-made centre for such a demonstration. There is talk about demonstrations in other parts of the country and organising a march on London.

I shall never forget the Jarrow march of 1936. Some of my friends who are still alive were among the organisers and leaders of that march. Without wishing to appear pessimistic, I warn right hon. and hon. Gentlemen opposite that there is a fear in the Northern Region today that a repetition of the Jarrow march of 1936 is under way. This is largely due to the situation which has been allowed to develop under the Government's callous policies which completely disregard the needs and requirements of people to work for their living. In this context the Bill is a nonsense and should be withdrawn.

1.30 a.m.

Photo of Mr Michael Foot Mr Michael Foot , Ebbw Vale

I shall speak very briefly, but I think that everyone who has listened to the debate must recognise how strongly we on this side of the House feel about this Measure and about the evil consequences which we think it has already had, and which it is likely to have in the future.

I should first make one further comment on the debate on the question of the mining industry, and the particular position referred to by the hon. Member for Middlesbrough, West (Mr. Sutcliffe) and others who have mentioned this matter. The Minister, in replying to the debate, seemed to talk as though only a few firms were involved. The Amendment referred to the circumstance that might alleviate the position of the few firms concerned, but the fact is that investment grants altered the whole prospect of deep mining in this country. It was one of the imaginative measures which helped those who were thinking of engaging in projects of this kind to realise that they had a proper prospect of capital ahead. It is therefore not only a question of remote firms that may be involved. The abolition of investment grants is a way of setting back the whole possibility of the much wider use of deep mining in different kinds of industry, as I sought to illustrate on Second Reading, and as others have shown since.

My hon. Friends the Members for Bedwellty (Mr. Kinnock), Carmarthen (Mr. Gwynoro Jones), and Houghton-le-Spring (Mr. Urwin), and all those who come from development areas, believe that the withdrawal of investment grants is having a most serious effect on our constituencies. We worked for one of the major firms to come to Ebbw Vale. We struggled for, argued for, and made every effort that we could, to encourage the firm to go there, and when we obtained its agreement to come we thought that that signalled a change in our fortunes, because it is a struggle to get new industries to go to these areas. That new industry is not now going to my area, not necessarily solely as a result of the withdrawal of investment grants—we are not claiming that—but obviously it is one of the factors that has led to the decision.

If the hon. Gentleman does not think that many of the firms are affected, he should ask them, and give us a full report of what the 52 firms say. My hon. Friend the Member for Bedwellty has told us their view, but let the Minister find out for himself. Nobody will be able to estimate how many firms will be deterred. We bitterly resent this Measure.

We believe that it is scandalous that the Government should have gone ahead with a Measure of this character, without the deep study which they had promised, solely on the basis of the previous undertakings they had given. It is even worse, perhaps, that they have pressed the Measure through the House in almost exactly its original form, except for the one major concession about the shipping industry, without any recognition of the representations that have been made by hon. Members who have had direct experience of how the withdrawal of these grants has injured the prospect of employment in their areas.

There is, of course, one difference since the moment when the Bill was originally introduced. The recession has become deeper. The fear that the recession may change into something which could be described as a slump has grown in every area of the country, particularly in Wales, Scotland and the North-East, but not only there, in the City columns, too; and the Government have thrown away the weapon which they could have used in such a situation. The result is that they have had to press the Bill through the House, even though they know that measures must be taken very soon to try to prevent a situation where we would be heading for a full, major recession. That is what confronts the country at present, and, if recession sweeps the whole country, the development areas will be plunged back into the kind of situation described by my hon. Friend the Member for Houghton-le-Spring. That is the fear throughout the development areas, and what the Government have done, in ignorance or maybe in malice against what had been done by a Labour Government, is to push through this Measure.

We should prefer not to see our prophecies fulfilled. If there is anything worse than the cruelty of unemployment or the wastefulness of it, it is that unemployment makes more difficult the solution of every other industrial problem facing the country. If we are to be plunged into a situation in which we have a million or more unemployed, it will be infinitely more difficult to solve all the technological and industrial problems that the nation has to face.

This Measure, introduced when it was, was one of the contributory factors in producing the recession with which this Government show themselves so utterly incapable of dealing. For that reason,

we say that the Measure fits the pattern of what they are doing. It is a weapon which is deepening the fear of unemployment from one end of the country to the other. Therefore, we shall vote against the Bill, as we shall against the other measures that this Government have produced.

Right hon. and hon. Gentlemen opposite have claimed—it is almost the only argument of the Prime Minister—that it is the pressure for high wages which causes unemployment. This Bill is the proof that it is Government measures which produce unemployment. It is one Government measure after another and one Government failure after another which is producing unemployment. That is what people know in the country.

It was the withdrawal of investment grants which had the direct effect of kicking people out of jobs, and I refer again to the case of the Tredegar Mining Company in my constituency. It was not pressure for high wages which produced that unemployment. There are hundreds of cases in the country where this Measure has already thrown people out of work and where, if it is persisted in, hundreds more will follow in its wake.

We shall vote against this Measure. It is part of the policy of this Government of not merely failing to deal with the problem of unemployment but of taking positive measures to make it worse still.

Question put, That the Bill be now read the Third time:—

The House divided: Ayes 150, Noes 92.

Division No. 388.]AYES[1.38 a.m.
Adley, RobertCrouch, DavidGrylls, Michael
Allason, James (Hemel Hempstead)Curran, CharlesGummer, Sefwyn
Atkins, HumphreyDean, PaulGarden, Harold
Benyon, W.Deedes, Rt. Hn. W. F.Hall, Miss Joan (Keighley)
Biffen, JohnDigby, Simon WingfieldHall-Davis, A. G. F.
Blaker, PeterDixon, PiersHannam, John (Exeter)
Boardman, Tom (Leicester, S. W.)Drayson, G. B.Harrison, Col. Sir Harwood (Eye)
Boscawen, RobertEden, Sir JohnHaselhurst, Alan
Bowden, AndrewEdwards, Nicholas (Pembroke)Hawkins, John
Bray, RonaldElliott, R. W. (N'c'tle-upon-Tyne, N.)Hicks, Robert
Brewis, JohnEmery, PeterHill, John E. B. (Norfolk, S.)
Brinton, Sir TattonFarr, JohnHill, James (Southampton, Test)
Brocklebank-Fowler, ChristopherFenner, Mrs. PeggyHolt, Miss Mary
Bryan, PaulFidler, MichaelHornby, Richard
Butler, Adam (Bosworth)Finsberg, Geoffrey (Hampstead)Howell, David (Guildford)
Carlisle, MarkFowler, NormanHowell, Ralph (Norfolk, N.)
Channon, PaulFox, MarcusHunt, John
Chapman, SydneyGibson-Watt, DavidJames, David
Chataway, Rt. Hn. ChristopherGoodhart, PhilipKing, Evelyn (Dorset, S.)
Chichester-Clark, R.Goodhew, VictorKing, Tom (Bridgwater)
Clegg, WalterGower, RaymondKinsey, J. R.
Cockeram, EricGrant, Anthony (Harrow, C.)Kitson, Timothy
Cormack, PatrickGreen, AlanKnight, Mrs. Jill
Knox, DavidNormanton, TomStuttaford, Dr. Tom
Lane, DavidOnslow, CranleySutcliffe, John
Legge-Bourke, Sir HarryOsborn, JohnTaylor, Sir Charles (Eastbourne)
Le Marchant, SpencerOwen, Idris (Stockport, N.)Taylor, Edward M.(G'gow, Cathcart)
Longden, GilbertPage, Graham (Crosby)Taylor, Frank (Moss Side)
Loveridge, JohnParkinson, Cecil (Enfield, W.)Taylor, Robert (Croydon, N. W.)
Luce, R. N.Pink, R. BonnerThomas, John Stradling (Monmouth)
MacArthur, IanPounder, RaftonThompson, Sir Richard (Croydon, S.)
McCrindle, B. A.Powell, Rt. Hn. J. EnochTrafford, Dr. Anthony
McLaren, MartinPym, Rt. Hn. FrancisTrew, Peter
Maginnis, John E.Raison, TimothyTugendhat, Christopher
Mather, CarolRedmond, RobertTurton, Rt. Hn. Sir Robin
Mawby, RayReed, Laurance (Bolton, E.)van Straubenzee, W. R.
Maxwell-Hyslop, R. J.Rees-Davies, W. R.Vaughan, Dr. Gerard
Mills, Stratton (Belfast, N.)Renton, Rt. Hn. Sir DavidWaddington, David
Mitchell, Lt.-Col. C.(Aberdeenshire, W)Ridley, Hn. NicholasWalder, David (Clitheroe)
Moate, RogerRoberts, Michael (Cardiff, N.)Walker, Rt. Hn. Peter (Worcester)
Molyneaux, JamesRoberts, Wyn (Conway)Ward, Dame Irene
Monks, Mrs. ConnieRossi, Hugh (Hornsey)Warren, Kenneth
Monro, HectorRussell, Sir RonaldWeatherill, Bernard
More, JasperScott, NicholasWells, John (Maidstone)
Morgan, Geraint (Denbigh)Sharpies, RichardWhite, Roger (Gravesend)
Morrison, Charles (Devizes)Shaw, Michael (Sc'b'gh & Whitby)Wilkinson, John
Mudd, DavidShelton, William (Clapham)Worsley, Marcus
Murton, OscarSkeet, T. H. H.Wylie, Rt. Hn. N. R.
Nabarro, Sir GeraldSoref, HaroldTELLERS FOR THE AYES:
Neave, AireySpence, JohnMr. Tim Fortescue and
Nicholls, Sir HarmarStanbrook, IvorMr. Keith Speed.
Allaun, Frank (Salford, E.)Heffer, Eric S.O'Malley, Brian
Ashton, JoeHoram, JohnOrme, Stanley
Atkinson, NormanHowell, Denis (Small Heath)Owen, Dr. David (Plymouth, Sutton)
Benn, Rt. Hn. Anthony WedgwoodHughes, Mark (Durham)Parry, Robert (Liverpool, Exchange)
Booth, AlbertJones, Barry (Flint, E.)Pavitt, Laurie
Brown, Bob (N'c'tle-upon-Tyne, W.)Jones, Gwynoro (Carmarthen)Pendry, Tom
Brown, Ronald (Shoreditch & F'bury)Jones, T. Alec (Rhondda, W.)Perry, Ernest G.
Carmichael, NeilJudd, FrankPrescott, John
Carter, Ray (Birmingh'm, Northfield)Kaufman, GeraldReed, D. (Sedgefield)
Clark, David (Colne Valley)Kerr, RussellRoderick, Caerwyn E.(Br'c'n&R'dnor)
Concannon, J. D.Kinnock, NeilRodgers, William (Stockton-on-Tees)
Cox, Thomas (Wandsworth, c.)Lambie, DavidRoper, John
Davies, Ifor (Gower)Lamond, JamesRoss, Rt. Hn. William (Kilmarnock)
Davis, Clinton (Hackney, C.)Latham, ArthurSandelson, Neville
Davis, Terry (Bromsgrove)Lestor, Miss JoanSillars, James
Deakins, EricMackenzie, GregorSilverman, Julius
Dell, Rt. Hn. EdmundMackie, JohnSkinner, Dennis
Douglas, Dick (Stirlingshire, E.)Mackintosh, John P.Smith, John (Lanarkshire, N.)
Dunn, James A.Maclennan, RobertSpearing, Nigel
Eadie, AlexMahon, Simon (Bootle)Spriggs, Leslie
Evans, FredMarquand, DavidStallard, A. W.
Fletcher, Ted (Darlington)Marsden, F.Stoddart, David (Swindon)
Foot, MichaelMarshall, Or. EdmundUrwin, T. W.
Fraser, John (Norwood)Mason, Rt. Hn. RoyVarley, Eric G.
Freeson, ReginaldMeacher, MichaelWainwright, Edwin
Golding, JohnMellish, Rt. Hn. RobertWallace, George
Grant, John D. (Islington, E.)Mendelson, JohnWeitzman, David
Hamilton, William (Fife, W.)Mikardo, IanWellbeloved, James
Hamling, WilliamMitchell, R. C. (S'hampton, Itchen)Whitehead, Phillip
Hardy, PeterMulley, Rt. Hn. FrederickTELLERS FOR THE NOES:
Harper, JosephOgden, EricMr. Ernest Armstrong and
Harrison, Walter (Wakefield)O'Halloran, MichaelMr. James Hamilton.

Bill accordingly read the Third time, and passed.