Orders of the Day — Regional Development Grants (Termination) Bill

– in the House of Commons at 3:31 pm on 25th January 1988.

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Order for Second Reading read.

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

Before I call the Chancellor of the Duchy of Lancaster, let me repeat that no fewer than 24 right hon. and hon. Members have already indicated their wish to take part in this important debate, many of them with a direct constituency interest. Today is another day on which short contributions would enable the majority of them to be called.

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry) 4:31 pm, 25th January 1988

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

The subject of the Bill is the closure of the regional development grants scheme, which was introduced under the Industrial Development Act 1982, as substituted by the Co-operative Development Agency and Industrial Development Act 1984. The transitional arrangements for running down the earlier RDG scheme are not affected by the Bill.

The current RDG scheme operates in the development areas of Great Britain. It enables grant to be paid automatically to projects that qualify under the rules of the scheme. Subject to certain limits, grant is normally 15 per cent. of the value of an investment project, or £3,000 for each new job created by the project, whichever is the higher.

Clause 1 removes the power to make grants for projects, unless applications are received on or before 31 March 1988. Clause 2 places restrictions on the availability of grants for projects in respect of which applications for approval are received after 12 January 1988, except where applications are in respect of projects started on or before that date.

The restrictions are of two kinds: broadly, time limits on counting jobs and assets for grants, and constraints on variations of the project. First, grants will be payable only on jobs and assets provided, or money spent on assets, within two years of the project's approval date, and for which a claim is received within three years of that date, or any earlier date specified in the approval. Secondly, grants will not exceed the total amount specified in the approval, regardless of subsequent changes in the project.

The Bill is one part only of the package of changes in industrial policy that I announced to the House on 12 January. In introducing these changes, it was the Government's aim to strengthen and modernise regional policy, and to bring it up to date with the economic conditions of 1988. I have always been committed to the idea of a strong regional policy, and I remain so. Any disagreement in the House is therefore about the most effective instruments of policy to continue to improve the economy of the assisted areas. The debate is about how best to create the conditions that will speed up job creation in the north, the west midlands, the south-west, Scotland and Wales. The Government are as determined as ever to see all our people share in the nation's rising prosperity and new-found business confidence.

We are changing our regional policy to make it more effective, and to concentrate all our efforts and resources on encouraging new and lasting business growth. However, another difference between the Government and some of our critics is that we aim to use regional policy to change and modernise the industrial economy of the north, Scotland and Wales. A few of our opponents—I am glad to say that the number is declining—still devote most of their efforts to attempts to conserve the old heavy industrial economy which brought prosperity to past generations in the oldest industrial areas. —[Interruption.]—I said that it was a declining number. I am glad that the reaction on the Opposition Benches shows that the light is spreading ever more widely.

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

I shall give way way in a second. I have only a short time, so shall not give way throughout my speech.

Heavy manufacturing industry can, of course, prosper again nowadays if it becomes more competitive and efficient, as much of our heavy manufacturing industry has done. Look at the success of British Steel, Nissan and Jaguar. However, those industries will never again become mass employers sustaining whole cities, and we need to attract the full range of business activity around them. The north needs businesses as varied and as strong as those that are thriving in great numbers in the south. The north does not want a preserved and subsidised economy, or a weak, branch-line economy. We are creating in the regions an economy that is ever more similar to the thriving economy of the south-east, capable of selling goods and services in today's markets.

Photo of Tony Blair Tony Blair , Sedgefield

If the Minister is telling us that the purpose of the existing scheme of industrial support is simply to conserve the traditional industries, can he tell us which of the firms in, for example, the north, Wales and Scotland that are in receipt of regional development grant are simply traditional industries that have outlived their usefulness?

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

I am describing regional policy as a whole. I was putting forward what I consider the incontrovertible fact that some of our critics in the north and Scotland still devote most of their efforts to trying to conserve the old industrial economy, for understandable reasons. The old industrial economy of the north is being modernised, and the great industries of Scotland and Wales are becoming more competitive. Many of them have shed labour as a result.

The Government's aim in regional policy — I hope that it has the support of the more enlightened Opposition Members is to change the fundamental basis of the northern economy, so that alongside more competitive heavy manufacturing is the full range of service and manufacturing industries, as good and as strong as those in the south.

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

I shall give way only once more. The point that I am being pressed on is this: it is being said that what I am saying is now widely accepted, and that Opposition Members agree with me that the basis of the economy in Scotland and the north must change. If there is not a fundamental difference between us, I shall not dwell on the subject.

Photo of Mr Dale Campbell-Savours Mr Dale Campbell-Savours , Workington

Is the Minister aware that west Cumberland has willingly entered into the exercise that he describes over the past few years? It has seen the rundown of older industries, and the development of new businesses. However, the development authorities for the area now say that in the event that the money is cut off in the way that the Minister suggests, that process of rebirth will come to an end. Why is he doing it now, when we are getting into gear and beginning to develop a new industrial base in the west of the country?

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

If the hon. Gentleman's development authority is under the impression that we are cutting off the money, that is a misconception that I shall be able to correct when I reach the part of my speech that deals with the Government's expenditure.

Photo of Tony Baldry Tony Baldry , Banbury

Does my right hon. and learned Friend agree that the only division in the House and the country on the issue is between those who understand how an enterprise economy works, and those who do not?

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

I agree. However, it is possible that a new realism is dawning among those on the other side. Time was when their main aim was to preserve such industries as steel and shipbuilding exactly as they were. The present more modern and efficient steel industry, and the success of some of the car manufacturers, shows the achievement of our enterprise policy approach, both in manufacturing and in other sections of the economy.

We are changing the nature of our regional policy—while not reducing the emphasis that we give to it — to reflect the changing economic climate in the regions, and in the country as a whole.

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

No, I must get on. If I give way as frequently as this throughout my speech, we shall never fit 24 speakers into the debate, as you, Mr. Speaker, have reminded us.

We are no longer trying to protect the assisted areas against the worst of a recession, because we have emerged from that. Investment is rising very strongly in service and manufacturing industry. The most recent DTI survey of investment intentions in the United Kingdom predicts a further increase of 11 per cent. in manufacturing investment in 1988. The number of jobs is rising. Unemployment is falling particularly rapidly, and I am glad to say that it has been falling faster in Wales, the midlands and the north than elsewhere. In those changed circumstances, regional policy has to change to continue to be effective.

Regional development grant is the direct descendant of the oldest standing approach to regional policy It provided a virtually automatic subsidy to all capital investment in manufacturing or service projects in development areas in England, Scotland and Wales. RDG required no prior assessment about whether a project was viable, or whether it needed the money to go ahead.

The nature of the scheme meant that, inevitably, many grants were paid to companies which would have proceeded with their projects without any Government grant. Decisions about regional location for such companies were often, therefore, not affected by the availability of RDG itself. Sir John Harvey-Jones, ex-chairman of ICI, has made speeches saying that that was the case, for quite a large number of the grants paid to his company using RDG. It clearly does not add up to the best use of public money for the benefit of the regions or the national economy.

The scheme also operates without requiring companies to produce any supporting financial information for their project. We all know that this has meant that some of the projects supported by RDG have been ill-conceived in that either the project, or even the company itself, has not been commercially viable. When companies that received grants subsequently fold and go away from assisted areas, Opposition Members rightly are the first to complain.

Therefore, RDG has been an expensive scheme so far. It would be bound to become even more expensive if we kept it, now that the economy of the regions is expanding so fast. We wish to change the use to which the money is put, and RDG is bound, by its very nature, to absorb an increased proportion of our budget, once investment takes place of its own volition in the regions. That is inevitable with such an automatic scheme. If we use RDG as our main instrument of policy, the better companies do, the more they invest, the more the Government have to spend automatically. In my opinion, we should not be subsidising profitable and successful companies to make investments that they would have made, anyway.

Photo of Malcolm Bruce Malcolm Bruce Shadow Spokesperson (Energy and Climate Change), Shadow Spokesperson (Environment, Food and Rural Affairs)

I understand the Minister's point about the need to ensure that the money is targeted effectively, but the reason for introducing changes to put a limit on the cost per job was to prevent such waste. Does the Minister accept that it is not the time for change yet again, because constant changes depress demand?

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

The last changes that were made put a ceiling on the amount of grant available by linking it to the jobs created, but the automatic element was retained. No defender of automatic grants can deny that investment decisions which would have been taken anyway automatically attracted capital subsidy, when that subsidy made no difference to the decision of the investor. Expansion in the regions has been so rapid, and investment has proceeded so strongly, that more and more money has been drawn automatically to support investments that would have gone ahead anyway.

Photo of Mrs Elaine Kellett Mrs Elaine Kellett , Lancaster

People in Lancaster are delighted with the proposal. We can hold our own, level pegging, but we find it difficult to hold our own if people are bribed to go elsewhere.

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

I am explaining why the Government do not think that people should automatically be subsidised to go elsewhere. I shall come to the way in which we shall make use of resources selectively to subsidise, where a case has been made—

Several Hon. Members:

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Photo of Mr Barry Field Mr Barry Field , Isle of Wight

Regional grants have done considerable damage to my constituency and have enticed one company to Wales. Despite the fact that it received regional grants, there is still not a great deal of technical expertise in Wales, and they still have some of their work done on the island. Is my right hon. and learned Friend able to console constituencies that do not receive regional aid by an assurance that the Bill will make it less likely for companies to be seduced away?

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

I cannot give my hon. Friend the complete assurance that he seeks. It is of the nature of a regional policy that it seeks to attract people to invest in regions where otherwise they may not go. My constituency has never received regional aid, and that causes considerable distress to companies that compete with companies in the regions but do not receive the same grant. I am sure that many companies in the Isle of Wight and in Nottinghamshire will accept that the Government are committed to a regional policy whereby public money must be spent to affect investment decisions and that there is a case for that. Under RDG, competitors with companies in the Isle of Wight are, in any event, investing in the north, because they are doing well in the market, and are able to raise the capital and receive a 15 per cent. subsidy because they happen to be there. That is rightly seen as unfair competition with companies in the south.

If we are to devote public money to sustain the improved economy in the regions, we must do that in a way that can be justified, by ensuring that it is used to make things happen that would not otherwise happen in Scotland, Wales, the north and the south-west.

Photo of Mr Anthony Speller Mr Anthony Speller , North Devon

Does my right hon. and learned Friend consider that there is considerable unfairness, with discrimination across a county? For example, Plymouth is an excellent city, with good roads and rail services, air and sea communications and no unemployment, whereas across the county, at Ilfracombe, there is 28 per cent. unemployment and none of those advantages? We are unintentionally attracting investment away from where it is needed and towards where it already exists.

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

It is of the nature of any regional policy that there are boundaries. Any Minister who has had responsibility for regional policy knows that boundaries give rise to endless disputes and some unfairness to districts that are just outside the assisted areas. Many parts of the south-west benefit from the Government's regional policy, but it is always difficult to know where to draw the line, and it causes rivalries and competition in Devon and elsewhere.

I hope that I have explained that we are ending RDG because the economy has expanded so rapidly that companies in the north and in Scotland are able to raise capital more readily, and there is less need than ever before for the automatic subsidy that the RDG represents. The time has come to bring to an end a system that gives a grant regardless of need and commercial viability and to rely more on selective assistance and the new enterprise initiative that I shall describe.

Before I describe the alternative policy, I shall help the House by describing the detailed arrangements for winding down the RDG scheme. Firms in the constituencies of right hon. and hon. Members will wish to know upon what basis they can apply for RDG and what will happen to RDG applications that are already in the pipeline.

The detailed arrangements for winding down the RDG scheme are, we believe, fair and reasonable. We announced the closure of the scheme on Tuesday 12 January. The closing date for applications is 31 March 1988. Firms therefore have two and half months notice of the closure.

We have taken care to exclude from the restrictions operating after 12 January firms whose project plans were made or being implemented before the announcement of the end of RDG. Firms whose applications have been received on or before the date of the announcement will be unaffected. So will firms whose projects had started on or before that date, provided that their application is received by the closing date of 31 March 1988.

Even in those cases which are affected by those transitional arrangements, the restrictions are unlikely to change the course of the planned project. Firms will have two years from the date of project approval in which to complete their projects. More than 90 per cent. of projects by number which have benefited from the scheme in the past were to be completed within two years, so we believe that two years is the right time.

We shall make use of regional selective assistance to give grants to firms which apply in future for projects which genuinely require grant to make a difference to their location or to make them go ahead at all. Regional selective assistance, unlike the automatic grant system, requires companies to show that they genuinely need public money to proceed with a project. It will continue to be available and the maximum amount payable will continue to be higher in development areas than in intermediate areas, as before.

Projects which up to now have qualified for RDG will be eligible for RSA. Companies — both domestic and foreign — that meet the criteria for the scheme could indeed well receive more by way of RSA for the project to go ahead than they would previously have received from RDG. Let me add that we are making more money available for regional selective assistance to meet the higher demand for it. However, we shall, of course, be applying the criteria rigorously to make sure that the taxpayer gets maximum value for his money.

Photo of Mr Eric Heffer Mr Eric Heffer , Liverpool, Walton

Will the right hon. and learned Gentleman give way?

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

I said that I could not keep giving way.

Regional selective assistance is open to all companies in industry, whether British or foreign. Therefore—this is an important point — we shall continue to attract internationally mobile projects to this country as at present. Let me make it clear—some people have been worried about this — that our policy on inward investment has not changed. The Government welcome inward investment and aim to build on the considerable success that we have had in attracting overseas investment to these shores.

I believe that the availability of grants usually plays only a relatively small part in attracting most of the foreign companies that come to Britain. We are being so successful at the moment because overseas investors are impressed with our good industrial relations, the general economic climate, the good infrastructure and communications and the quality of the staff. I accept completely that grants sometimes come into the equation. We do not want to be put at a disadvantage when compared with other countries that offer grants to attract internationally mobile projects and we shall use RSA and our other grant-giving powers to ensure that we are not.

Judging from some of the comments when I made my statement and some of the comments in the newspapers afterwards, the fact that we are now relying on selectivity has given rise to some of the controversy about what otherwise is just a change in our main instrument of regional policy. I am a little amused and rather amazed that the retention of RSA has suddenly aroused a small debate about how selectivity works. After my statement one of my officials pulled my leg when I returned to the Department by asking about the new powers that we were taking to enable civil servants such as himself to exercise the duty of picking winners again. [Interruption.] I think that my right hon. Friend the Member for Chingford (Mr. Tebbitt) accepts what I am about to say.

We are planning to spend more money on RSA but we are not changing it at all. Regional selective assistance has been in existence since the 1970s. As far as I am aware no one has criticised the way in which is has operated; certainly not for the last year or so. If anyone suddenly wants to criticise it now, I will, of course, listen. However, perhaps critics should first understand exactly how RSA works.

Any company may apply. All applications have to be assessed objectively against published criteria to establish whether the project would go ahead without public money. Private sector expertise plays the key part in this assessment. All offers over £100,000 are submitted to industrial development advisory boards made up of senior, experienced business men. Ministers and our officials do not, sad to say, "play God". We do not even decide whether a project should or should not go ahead. It is our job to judge how much money is necessary to enable a project to go ahead that would otherwise not go ahead. But it is the company that takes the initiative and the final decision whether to go ahead with the project.

Photo of Mr Eric Heffer Mr Eric Heffer , Liverpool, Walton

On the matter of criteria, is it question of viability? Who will determine the viability of a future product? That is the important question. Will the right hon. and learned Gentleman answer? When I was a Minister in the Department of Trade and Industry that gave us more headaches than any other question.

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

The criteria are published. They are clear and, as far as I can recall, no one has raised a question to challenge them; certainly not over the past year or so. When the hon. Gentleman was a Minister in the Department, regional selective assistance was being operated by him. The main difficulty that used to arise in the time of the Labour Government was that the business men used to give their advice and judgment about the validity of the schemes being put forward and Ministers—I do not know whether it applies to the hon Member for Liverpool, Walton (Mr. Heffer) but it applies to his right hon. Friend the Member for Chesterfield (Mr. Benn) who I think was the Secretary of State—were in the habit of overruling the advice of business men and forming their own opinion.

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

It is not absolute twaddle. I shadowed the right hon. Member for Swansea, West (Mr. Williams) who was slightly more respectful towards industrial develop-ment advisory hoards. He understands the system I am describing, which is that operated by the previous; Labour Government. However, when the right hon. Member for Chesterfield was Secretary of State, he did not have the same respect for private sector expertise and neither, I suspect, did the hon. Member for Walton. That is what caused the difficulty for the previous Government. Private sector judgments were overruled by Ministers. That is not usually the case with this Government, certainly not in terms of giving grants to projects that business men say are not viable.

Photo of Alan Williams Alan Williams , Swansea West

Will the right hon. and learned Gentleman bear in mind that he is talking absolute rubbish? I administered regional selective grants for the last three years of the previous Government and I did not once overrule the industrial development advisory boards. Will he also bear in mind that the Government of which I was a member used RSA to help bring in Hoffman La Roche, Hitachi and so on? We used it for inward investment. Since RSA is so marvellous and is a system that the Government support, why is the level of RSA now 37 per cent. lower than it was when I administered it?

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

I accept that the right hon. Gentleman may not have overruled the industrial development advisory boards. However, he was not the only Minister in the Department during the last Labour Government. I will not use the material held by my hon. Friend the Minister of State, Scottish Office. I believe that he is sitting here with quotations concerning the time of the previous Labour Government. One of the then Secretaries of State made a virtue of the fact that he overruled his business advisers when giving out grants. No doubt the hon. Member for Walton approved of that at the time. The difficulty the Labour Government faced was that they gave grants to ill-conceived projects that business men advised against.

When I shadowed the right hon. Member for Swansea, West, I supported some of the bids to which he referred. I remember the Hoffman La Roche case. I did not criticise regional selective assistance. It was used to attract inward investment and it can still be done. For that reason I do not understand why the Opposition are raising doubts about our choice of this instrument now. The cost has gone down because much of the investment in those days was purely capital investment, which sometimes cost jobs and certainly did not create jobs on an adequate scale. The first step the present Government took was to relate the level of grant more closely to the number of jobs created. I would have thought that that was the principal objective of policy. That has had the effect of reducing expenditure compared to a few years ago.

Photo of Hilary Armstrong Hilary Armstrong Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson

The reality is that the people in the north do not trust the Government because in the past 10 years we have lost over half our percentage of national regional aid. It used to be 32 per cent. and it is now 16 per cent. Under selective assistance we have lost £15·5 million since the previous Labour Government were in office. The Government have given no guarantees about what they will do to maintain the level of income to the north, let alone increase it.

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

I am, as ever, seeking to dispel distrust. We have reached the stage in my argument when I am pointing out that we are changing the instruments of regional policy but not changing its essential nature or aims. We are replacing automatic grants because they are becoming steadily more expensive and wasteful as investment takes off of its own volition in the north, Scotland and Wales. We are replacing it with a reliance on regional selective assistance, which, as far as I understand, Opposition Members do not attack as an instrument of policy. I shall return to the quantity of aid.

I have already explained that we have seen a drop in expenditure because we are now relating the grant to the number of jobs created. However, the change in policy of which the Bill is a part is not part of any planned cutback in expenditure. I will make that clear when I reach that part of my speech.

Photo of Tony Blair Tony Blair , Sedgefield

May I remind the Minister that we are not debating whether to continue regional selective assistance —we agree with continuing that—but whether it is right to abolish and terminate regional development grants? Is the Minister saying that when regional development grant ceases to be paid, regional selective assistance will grow sufficiently to take that up?

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

When I reach that part of my speech, which I shall reserve until I have described the entire policy, I shall say that we are increasing planned expenditure for the three years of the White Paper period compared with last year's plans. We expect a higher take-up of regional selective assistance because of the ending of regional development grant. Spending will vary, because, when there is an overlap between commitments on RDG and the new RSA, there will be a sudden surge of spending and it will then decrease again. But the total spending period plan exceeds the one that we published last year.

We are talking about a change in expenditure from automatic grant to selective grant, but it must be seen alongside the other policy changes that we have announced.

An important new feature of our policy is the enterprise initiative. I shall explain the contribution that it will make to strengthening business and industry in the regions. The aim of the enterprise initiative is to encourage and help entrepreneurs and managers to make their businesses stronger and more competitive. Small firms often find it difficult to make the leap to becoming a big business because they lack the management time and experience to tackle their problems and identify their opportunities. That applies across the country, but it is even more crucial in the regions where, more than anywhere, we need to facilitate the growth of new strong businesses, not weak shadows of those in other areas.

We intend to help small and medium-sized firms to improve their performance in marketing, design, quality and advanced manufacturing methods. We are encouraging firms employing up to 500 people to take expert advice in those key areas. We are offering two days' free consultancy and up to 50 per cent. of the subsequent consultancy costs for between five and 15 days.

That will be the position in most areas, but the aim of the initiative, and the need to strengthen the performance of companies, matters even more in the less prosperous areas. Therefore, we will pay two thirds of the consultancy costs in assisted areas and in urban programme areas, compared with one half in the rest of the country. Overall, during the next three years, we shall be providing about £250 million to encourage firms to take advantage of the initiative. The early signs are that they are anxious to do so. So far, 14,500 people have telephoned our enterprise initiative number to ask for more details.

That is an important change, because as an instrument of policy we are considering not just the subsidy to capital investment, which has been the mainstay of regional and most of industrial policy, but the provision of other forms of support to improve the quality of management and the quality of product turned out, especially by small and medium-sized firms.

Development areas will benefit from two new schemes offering grants for investment and innovation to firms employing fewer than 25 people. They will be able to apply for investment grants of 15 per cent. towards the cost of fixed assets, up to a maximum of £15,000, and innovation grants of 50 per cent. for product and process development, up to £50,000. We have targeted those new grants on very small firms in the development areas because those areas are most in need of an additional stimulus to growth. Firms of the size that we have chosen are often at a crucial and vulnerable stage of business development, where they need to strengthen management skills and to find a more secure financial footing.

I trust that I have satisfied the House that we are keeping special regional incentives in place. We are changing and improving them. They will still be based on the existing assisted areas map, with the addition that the higher level of enterprise initiative grant will be paid in the inner cities, too. This is the first time that we have given such a grant in the cities and outside the assisted areas.

To deal with the point made by my hon. Friend the Member for Devon, North (Mr. Speller), I should say that we have made no change to the assisted areas map because a full review of the boundaries would be very complicated and time-consuming. We estimate that a full review of all the boundaries would take up to two years to complete. Any revision of boundaries must obtain the consent of the European Community, for the legitimate reason that some countries may extend their assisted areas to take advantage of other member states in the open European market. It was not feasible for us to embark upon a review so soon after the one conducted about three years ago, and we shall not embark on one until we see how the new policies settle down.

Photo of Mr William Powell Mr William Powell , Corby

I understand what my right hon. and learned Friend says about the general review and the national map, but he will be aware that unemployment in the assisted area in my constituency is several percentage points lower than in any other assisted area and lower than that in many non-assisted areas. Why is it impossible to carry out a limited review which would correct an anomaly that can only increase between now and 1990?

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

My hon. Friend will admit that the problem arises because of the success in attracting new industry to Corby. The moment that those who take advantage of what is on offer in an assisted area are successful, anomalies develop round the borders of the map. My hon. Friend the Under-Secretary of State considers individual cases and receives many deputations. My hon. Friend the Member for Pudsey (Sir G. Shaw), who used to carry out that duty, will remember people coming to see him trying to extend the boundaries of the assisted area. That is not a feasible way of handling the matter, and in due course we shall need another full review. But my hon. Friend the Member for Pudsey carried out a comprehensive review three years ago and it will be some time before we get around to another one.

Photo of Alan Williams Alan Williams , Swansea West

The House will be interested to know how small firms in the development areas will be better off under the new scheme, receiving 15 per cent. of capital costs up to a ceiling of £15,000—that is £600 a job—when under the present scheme they could also get 15 per cent. of capital costs at £3,000 a job. How can it be a better deal for them if they get one fifth as much money as now?

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

The nature of the scheme is different. The 15 per cent. is a straight subsidy to capital investment. The new grants that we shall give small firms retain an element of subsidy to capital investment, but include support for introducing investment in new technology into their production. That is a feature of all our policies. It is no good measuring these things in terms of the subsidy to capital investment. Capital investment alone does not determine success. We must examine how a firm keeps up with modern technology, the quality and design of its products and its general management performance to determine how well it will succeed in the market place.

Before the debate, some hon. Members asked me what assistance is available in different areas, and it might help if I gave a resume of what will be available under the proposals in the Bill and when our new package is put into effect in the assisted areas.

The new arrangements will mean that in development areas firms will be eligible for regional selective assistance, up to a higher maximum than in intermediate areas; for subsidised consultancy of up to two thirds of the cost, compared with up to 50 per cent. outside assisted areas; and, from April, the new innovation and investment grants which will be available to firms employing fewer than 25 people. In the intermediate areas, there will be regional selective assistance and subsidised consultancy of up to two thirds of the cost, again compared with up to 50 per cent. outside the assisted areas. In urban programme areas, there will be subsidised consultancy of up to two thirds of the cost. For non-assisted areas-the rest of the country—there will be subsidised consultancy, under the enterprise initiative, of up to 50 per cent. of the cost. That is the package. It is a sensible change, a response to changing economic circumstances now that the country is doing better and a response to the changed needs in the regions.

Many hon. Members, including the hon. Member for Durham, North-West (Ms. Armstrong), will suspend their judgment until they have heard how much we shall spend in the assisted areas after the changes have been made. I should make the position clear. We want an effective regional policy, so we shall make available the necessary resources. Our plans confirm what I have been saying during the past few months about our review. This is not part of cutting public expenditure.

The public expenditure White Paper published last Wednesday shows that our plans for spending on regional policy schemes will be higher than we planned in last year's White Paper. In England we are planning to spend about £900 million over the next three years, compared with last year's White Paper figure of about £700 million, based on the regional expenditure figure revalued in line with inflation into 1990–91.

Photo of Tony Blair Tony Blair , Sedgefield

Will the right hon. and learned Gentleman give way?

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

The regional programmes of my right hon. and learned Friend the Secretary of State for Scotland and my right hon. Friend the Secretary of State for Wales similarly show an increase over earlier published plans.

Photo of Tony Blair Tony Blair , Sedgefield

Will the right hon. and learned Gentleman accept that the reason why the sums in the White Paper remain constant or rise slightly is that over the next few years considerable amounts of regional development grant will still be paid? Will he not accept that the true comparison will be made when regional development grant ceases to be paid in 1991? Will there be an increase in regional selective assistance to make that up? That is the key question.

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

I have already said that the pattern of spending is affected by the overlap between commitments on RDG and the new increased spending on RSA. I agree that this coming year's spend appears artificially inflated by the overlap between the two. However, it will revert to more normal spend. Nevertheless, compared with previously published plans, the effect is an increase in DTI expenditure in each year.

For 1987–88 we are currently working on an outturn of £254 million compared with the published estimate in the White Paper of £222 million. In 1988–89, DTI spend on regional aid will increase to £330 million compared with last year's White Paper figure of £235 million. The figure for 1989–90 will be £304 million, compared with last year's published figure of £226 million. The figure for 1990–91, in response to the hon. Member for Sedgefield (Mr. Blair), is £264 million. The figure published in last year's White Paper when inflation is taken into account is £232 million. The figures that I have given are higher than those extrapolated from last year's White Paper.

Photo of Mr Kenneth Hind Mr Kenneth Hind , West Lancashire

Will my right hon. and learned Friend make it clear to all, especially to those of us who represent development areas, that provided projects are available and acceptable to his Department, the amount of money going into the development areas — the assisted areas around the country—will increase rather than decrease?

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

Certainly. The White Paper figures that I have given show that the figures are rising when compared with the published and expected figures last year.

Photo of Tony Blair Tony Blair , Sedgefield

Will the right hon. and learned Gentleman give way?

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

I will reply to one hon. Member at a time.

Once we examine the figures that I have described, it is obvious that much of the expenditure depends on the response to the programmes. We are estimating how much we shall spend on regional selective assistance and we have said what we intend to spend. We have estimated what we shall spend on the new enterprise initiative, but we have no idea of the actual take-up. We have only guesstimates about the response to the enterprise initiative in the assisted areas. Hon. Members who have time to watch television will know that we are promoting the enterprise initiative and the availability of grants to the businesses that we intend should benefit in the assisted areas.

We have stated our intention in our spending plans to spend that amount of money if economic circumstances and the response of business men are as we anticipate and if business men come forward for the grants.

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

I want to make it clear that the figures that I have given cover spending on regional selective assistance, the new grants for small firms investment and innovation and regional development grant applications made on or before 31 March 1988. However, the figures that I have given do not include provision for the consultancy grant under the enterprise initiative.

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

Because it is available at a higher rate in the assisted areas. There is an extra provision in those areas. If we provide a higher rate of grant, there must be a regional aspect to the spend and that must be added to any final calculation about regional spend once we know the outturn. Nor do the figures that I have given include the grant-in-aid paid to English Estates for building industrial and commercial premises in the assisted areas in England and the Scottish and Welsh equivalents.

Photo of Tony Blair Tony Blair , Sedgefield

Will the right hon. and learned Gentleman give way?

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

I will not give way now, but I will give way in a minute.

As Opposition Members are pressing me on the figures, I should give the figures for English Estates as they are a key part of the regional policy. I will not intrude on spending in the Welsh Development Agency and the Scottish Development Agency. Those figures are extremely good and my right hon. Friend the Secretary of State for Wales would gladly give the Welsh figures and similarly my hon. Friend the Minister of State, Scottish Office will address the same points with regard to Scotland when he replies later.

We are planning to spend on English Estates—

Mr. Bruce Milian:

Will the right hon. and learned Gentleman give way?

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

No, I do not believe that the right hon. Gentleman is the right man for me to give way to in regard to English Estates. I might have given way to him on other aspects of regional policy, but not on English Estates.

Several Hon. Members:

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Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

No, Madam Deputy Speaker. I want to respond to questions about English spending. I will not give way to a Scottish Member before I have given all the figures.

Photo of Tony Blair Tony Blair , Sedgefield

Will the right hon. and learned Gentleman give way?

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

No. Labour Members are trying to mount opposition to these points on a variety of grounds. They cannot complain about the instruments of policy. They are trying to complain about spending, but they will not listen to the figures.

Photo of Tony Blair Tony Blair , Sedgefield

That is irrelevant.

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

The hon. Gentleman cannot claim that spending on English Estates is irrelevant to his argument. It may destroy his argument, but it is not irrelevant.

Several Hon. Members:

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Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

If the hon. Member for Sedgefield will listen to me, he will understand that the reason why I wanted to refer to English Estates is that I have made it clear that the figures that I gave earlier did not include English Estates. If the hon. Gentleman wants to refer to the amount that we are going to spend in the regions, he must acknowledge the fact that we are increasing spending on English Estates as well. That increase is significant.

In 1987–88, we increased English Estates' planned programme in the assisted areas from £33.5 million to £37 million. As a result of higher asset sales, English Estates is likely to achieve a record programme this year of—[Interruption.] I am sorry if the hon. Member for Glasgow, Garscadden (Mr. Dewar) has not heard of English Estates, but this is relevant to the main argument.

English Estates is reaching a record level of spend this year of £47 million. In 1988–89 we shall ask it to plan for a programme that is £5 million higher than the £37 million planned in 1987–88. In practice, we expect it to exceed that figure and we shall authorise it to spend up to £49 million if it can generate the necessary funds from its own resources. Longer-term spending, about which some hon. Members have expressed concern, is well covered by our revised programmes. Expenditure on regional development grants will naturally decline, as the explanatory and financial memorandum to the Bill makes clear.

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

I will not give way. I have given way repeatedly throughout my speech. The hon. Member for Sedgefield would be wiser to save his interventions on spending until I have given all the figures. He would be well advised to listen to those figures before he rises to criticise them. I have given the hon. Gentleman some figures. I have said that he must take account of increased spending on English Estates, increased spending on the Welsh Development Agency

Photo of Mr Dale Campbell-Savours Mr Dale Campbell-Savours , Workington

On a point of order, Madam Deputy Speaker. Is it in order for a Minister, recognising that one crucial figure remains, to continue to avoid answering questions at the Dispatch Box in this way? Why will he not give way about this one figure?

Photo of Miss Betty Boothroyd Miss Betty Boothroyd Deputy Speaker (Second Deputy Chairman of Ways and Means)

It is perfectly in order for the Minister to express himself as he wishes.

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

I have given way about 10 times. I have given the published White Paper figures showing the increase in our planned expenditure. I have just explained the other increases in expenditure which must be taken into account. No doubt there is one figure which the hon. Member for Workington (Mr. Campbell-Savours) clutches and which he believes will make his point and when he catches your eye, Madam Deputy Speaker, he will have his chance to give that figure.

As I have said, we cannot predict the extent to which our new schemes will be taken up. Take-up will obviously vary from region to region, but we have provided and planned for growing expenditure. The main point is that I do not believe that policy should be judged solely by the quantity of expenditure. It should be judged by its value. However, on quantity I believe that we are on sound ground.

Photo of Miss Betty Boothroyd Miss Betty Boothroyd Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. Only one hon. Member on his feet at a time in the House, please.

Mr. Bruce Milian:

The Minister has given a certain omnibus figure. He said that regional selective assistance is being correspondingly increased to make up for the lack of regional development grant. Will he disentangle these figures and give us specific figures for the section 7 regional selective assistance in 1987–88 and in subsequent years, because the White Paper conspicuously fails to give these figures?

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

I can give the United Kingdom figures for regional selective assistance for the years in question. In 1987–88, we are providing for an outturn of £215 million, compared with a White Paper figure last year of £222 million. As the right hon. Gentleman knows, the figure is demand-led. For 1988–89, last week's White Paper shows a figure of £266 million. The previous year's White Paper provided £245 million, so, again, there is an increase in planned provision. For 1989–90, the figure in this year's White Paper is £256 million. The figure in last year's 'White Paper was £217 million. For 1990–91, the figure is £284 million — a continuing increase, compared with an extrapolation from last year's White Paper of £222 million.

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

I congratulate the right hon. Member for Glasgow, Govan (Mr. Milian) on having got on to the point that our planned provision for RSA is greater than last year's planned provision.

Several Hon. Members:

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Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

Hon. Members must allow me to make my point, as I have been led into it. The figure is higher than last year's planned provision and is a continuing higher provision year-on-year to take account of the increased demand.

Photo of Mr Leon Brittan Mr Leon Brittan , Richmond (Yorks)

My right hon. and learned Friend gave the figures for selective regional assistance and said that they were for the United Kingdom. Will he confirm that that was an error and that they are figures for Great Britain?

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

The hon. Member for Sedgefield will have to make his own speech on the figures. I have given an exhaustive list of figures from this year's and last year's White Papers. The Opposition wish to scratch around for a basis on which they can oppose this sensible change in the nature, not the volume, of regional assistance. I shall listen to the hon. Gentleman's point when he is called.

Several Hon. Members:

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Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

I must get on. More time is now being taken up with attempts by the Opposition to find a figure on which they can base an argument than with anything else.

I accept that there is a change in the nature of regional policy. Ending regional development grant was intended as a significant change in regional policy. It ends a line of policy instruments that we can trace back to Hugh Dalton's regional policies and beyond. This Government have the courage to change the nature of regional policy because we are so much more successful than our predecessors in creating the climate for economic success. The objectives of regional policy — to reduce job disparities and to encourage modern, locally based growth — remain. In that sense, we are building on the framework set out in the Government's last major review of regional policy in 1983. That review had already signposted a move away from automatic grants towards greater selectivity and cost-effectiveness.

It is not surprising that, as some hon. Members have said, expenditure has settled down to a level much lower than it was 10 or 20 years ago because we have put these cost per job links into the grants that we now pay. However, it would be nonsense to carry on blindly with policies which cost a great deal of money when, in some parts of the country, they have manifestly not provided an effective solution to the regional problem. RDG simply no longer fits what the regions need to enhance their economic performance. They need better targeted help for those projects which make an effective and lasting contribution to local economies.

We believe that industry is behind us on these changes. The majority of industrialists in all regions who responded to a recent MORI survey agreed that the Department of Trade and Industry serves industry better when it seeks to maintain an economic climate than when it tries to give specific assistance. Firms have also expressed the strongest support for the Department's policies based on expertise rather than financial aid. The Scottish CBI has welcomed the initiative as a bold shift to keep incentives in line with changing industrial structures". It believes that it creates a straight path for new jobs". That is the essence of our enterprise and industrial package.

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

At the moment, the economy is buoyant. Overall investment is at record levels and the outlook for investment is good. We are maintaining public resources for the regions, but we must use those resources in better ways. We believe that our new schemes and policies will be more effective than regional development grant in strengthening regional economies, in Scotland and Wales as well as in England. That is why we believe that it is a sensible measure to end the automatic RDG scheme and I ask the House to support the Bill.

Photo of Tony Blair Tony Blair , Sedgefield 5:25 pm, 25th January 1988

I suppose that we should pay the Minister of Trade and Industry the compliment of thinking that he did not actually believe the speech that he has just made.

Today we are debating the abolition of regional development grants, which have accounted for almost three quarters of regional aid since 1979. That has created or saved two thirds of the 600,000 or more jobs for which, over the years, regional policy has been responsible. That is the one part of Government finance for the regions which, by being automatic, is certain. That has been shown by every one of the many reports commissioned by the Government to be critical to investment in the regions.

When the Government protest that we should accept their promise of good faith in respect of the Bill and that it is all a part of the reorganisation of resources, not of the reduction of resources, we should tell them that we find their protestations hollow and incredible. For four years, since they found their regional aid budget difficult to cut, precisely because of regional development grant, they told us that with each change, all they were doing was obtaining better use of the same money. Every time they have made such a promise, they have broken it. Now they make it again and expect to be believed.

Whatever the Government say, we have no doubt that the issue today is not some academic or administrative argument about the different forms of regional assistance, not an assessment of how we achieve greater efficiency in the use of money, but whether the concealed agenda of this Bill is not rather a massive reduction of resources to the hard-pressed regions. Indeed, the only frank statement that has been made about regional development grant in recent days is the title given to the Bill—the Regional Development Grants (Termination) Bill. That is the Government's response to the divisions of this country.

It is not easy to piece together all the various figures that come from the White Paper on public expenditure, where England, Scotland and Wales are all differently treated, and where, if the purpose of the White Paper is not to obfuscate, certainly its effect is to make it extremely difficult to know where the various functions fit in and where the various figures given by the Minister in the statement relate. Some appear to relate to England and some relate to Great Britain as a whole.

However, we should begin, when we test the Government's good faith, to recognise that they do not come to this topic with an innocent past. They have a record, with respect, as guilty and as long as their term of office. Let us consider regional preferential assistance from 1979 onwards. In 1979, it stood at almost £1,200 million for Great Britain. By 1986–87, it was down to £726 million and in 1987–88 we expect a further cut of some £300 million. Therefore, whereas the north received over £300 million in 1979, last year it received £135 million. This year it will receive only about £80 million or £90 million. The position is almost exactly the same for the north-west.

Yorkshire and Humberside will see their budgets cut. In 1979, Scotland received £280 million. Last year the figure was down to £241 million. This year already, before the changes, it is down to £123 million. In 1979, the figure for Wales was £207 million. Last year, it was down to £144 million. It is now down to about £88 million. Indeed, since 1979, before the changes have taken effect, about £2·5 billion has been taken out in regional aid. In other words, it is now less than one third of what it was when the Government came to office.

That is the context in which we examine the Government's promise today that the changes in the Bill are designed simply to reorganise existing resources, that it is just an organisational change and that it is all about better value for money.

Photo of Mr Timothy Devlin Mr Timothy Devlin , Stockton South

Would it not be right to say that, in 1979, when the Government came to power, about £1 million a day was being poured into British Steel, partly through regional development grants, and that, as British Steel is now a profitable company and does not need that subsidy, there is no need for the payment to continue?

Photo of Tony Blair Tony Blair , Sedgefield

The money that is going into the hon. Gentleman's region — quite apart from support to industry— by way of the grant, the abolition of which we shall determine today, has been slashed to a third of what it amounted to before. [Interruption.] With great respect, that is the figure. This year, in regional preferential assistance, Wales will receive less than half what it received under the same provisions in 1979.

When he announced these changes in the House, the right hon. and learned Gentleman said: Let me make it clear that we are not proposing any reduction in the Government's total regional spending, but we believe that existing resources can be spent more effectively than hitherto." —[Official Report, 12 January 1988; Vol. 1433, c. 147.] It is against that background that we examine the Government's claim. When he introduced the White Paper, the right hon. and learned Gentleman said that there would be no overall cut in regional spending in the Government's regional aid budget over the next few years. Interestingly, the right hon. and learned Member for Richmond, Yorks (Mr. Brittan) put a specific question to him. He asked whether the Government realised that, above all, they would have to satisfy the country that when all the proposals have been implemented the amount of money being spent on regional policy in real terms is at least as much as it is today?" —[Official Report, 12 January 1988; Vol. 1433, c. 151.] The key to understanding what the Government have done is that they are not comparing like with like when they give their figures for the next few years. It is true that the White Paper figures on public spending show that the budget will remain constant and will then fall only a little, but that is precisely because the Government are not comparing like with like. Built into the White Paper public expenditure figures is a whole section that concerns regional development grants, although, of course, the purpose of the Bill is to abolish them. We are told in the preamble to the Bill that regional development grant, although it cannot be applied for after 31 March 1988, will still continue to be paid right up to 1990–91. Therefore, the true comparison is between the system that exists now and the system that will exist when regional development grant is no longer paid.

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

I assume that the hon. Gentleman will concede that, when he went into the history, he did not compare like with like in comparing RDG2 now with RDG1 back in 1979. A change in policy was made. It appears to have been wholly beneficial to regional economies and has done them no damage at all. In his last sentences, describing the next three years, does he deny that the total level of resources planned to go into the regions is greater than was planned in last year's White Paper? He cannot deny that, yet he is trying to find convoluted ways of taking it apart.

Photo of Tony Blair Tony Blair , Sedgefield

The right hon. and learned Gentleman's case is that the abolition of regional development grants will not affect the overall level of regional spending, and that that is proved by the White Paper. But the White Paper includes a whole section of transitional money that will be paid in regional development grants.

Photo of Mr Rhodri Morgan Mr Rhodri Morgan , Cardiff West

That RDG money is gone, it is committed. New firms cannot apply for any of that.

Photo of Tony Blair Tony Blair , Sedgefield

Exactly.

The true comparison is not between the system as it is now and will be over the next few years, because we are still receiving regional development grants. The true comparison relates to when regional development grant ceases to be paid. The question is whether the right hon. and learned Gentleman's protestation that regional selective assistance will grow to meet the shortfall of regional development grant is correct. He is treating as permanent what is in fact the transitional working through the system of regional development grants being paid now.

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

That is exactly what the total figures that I kept reciting demonstrated. That is the hon. Gentleman's point. I trust that he is not seeking to claim that, in talking about the total regional spend, which he makes the main point of his argument, we should ignore continued expenditure on commitments and RDG.[Interruption.] Yes, of course it is. It is being spent on industry under regional development grant.

If the hon. Gentleman is saying that, over the three White Paper years, we should ignore for Great Britain figures of £279 million, £209 million and £125 million, of course he will show a cut. It is rather daft arithmetic to ignore a total of about £700 million that will be spent in the regions during the year.

Photo of Tony Blair Tony Blair , Sedgefield

With great respect, the right hon. and learned Gentleman has forgotten that the purpose of the Bill is to abolish regional development grant. Therefore, it is ludicrous to compare the system as it obtains at the moment, under which regional development grant is still being paid, with the system that will obtain when the money has worked its way through the system and is no longer available. In other words, the true comparison is between the time when regional development grant is no longer paid and the system that exists at present.

Photo of Tony Blair Tony Blair , Sedgefield

The right hon. and learned Gentleman would not give way to me, but I shall be extremely generous and give way to him. Perhaps he will answer my question. Does he say that, when regional development grant ceases to be paid — in other words, when the transitional provisions come to an end — the same amount of money that currently finds its way into the Budget in regional development grant will be spent in regional selective assistance?

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

Do I gather that the hon. Gentleman's case that, somehow, we are cutting planned regional provision involves my making a guess at this stage about what spending should he in 1992–94? That appears to be the burden of his case. I have never known any Minister in any Government to make such a guess. We have a three-year White Paper that shows that the hon. Gentleman's case is wrong.

Photo of Tony Blair Tony Blair , Sedgefield

With great respect, it is becoming clear that the Minister himself does not believe that, when he abolishes regional development grant, regional selective assistance will fill the gap. When he announced his White Paper, he told us that funding was remaining level. Now he is saying that it will stay level for three years, will drop and then will be cut. That is the truth.

There are only two sources of money that allow the right hon. and learned Gentleman to say that money which will no longer go to industry through regional development grant will be provided in the regional aid budget. The sources are regional selective assistance or the new initiatives.

Photo of Mr Richard Holt Mr Richard Holt , Langbaurgh

In all the bantering so far, no one has mentioned the many millions of pounds that go to Teesside and Tyneside and the urban development corporations. It is regional aid from another Department, but it is far more money for the north of England.

Photo of Tony Blair Tony Blair , Sedgefield

It has been put to the hon. Gentleman on many occasions that the money going to urban development corporations barely matches a fraction of what is being taken out in rate support grant and other matters.

Let me deal with the new initiatives that the Government have launched. I refer to consultancy services. Remember that the Government say that the business development initiative, of which the consultancy service is a part, will mean that new resources go to the regions. They say that £250 million will be spent over the next three years in the business development initiative. I assume that I am right in thinking that the business development initiative comes straight out of the Department of Trade and Industry and is a nationwide scheme covering the whole country; in other words, that that funding includes the funding—this is important—for Scotland and Wales too. We know already that some £25 million a year is already being spent on consultancy services, so we can knock off £75 million over three years straight away.

Photo of Tony Blair Tony Blair , Sedgefield

Because the Minister is saying that this is money over and above what has already been spent, so it is right to subtract what is being spent at present.

The first and critical thing to remember about the consultancy services is that they are to be available over the whole country. In other words, there is no guarantee at all that any proportion of this money will find its way into the development areas or the assisted areas. There is a higher level of grant, but it is fairly marginal.

My hon. Friend the Member for Sheffield, Central (Mr. Caborn) managed to be put on the mailing list of a particular director from the south-east regional office of the Department of Trade and Industry. I want to put this point to the Minister specifically, and I will give way to him if he is prepared to deny it. This is what the director of the south-east regional office said about the consultancy services — the main part of the Government's business development initiative: An important part"— this is, of the enhanced role of the DTIwill be a single advisory service delivered regionally, and we in the south east regional office are to be responsible for some 40 per cent. of this consultancy scheme. In other words, 40 per cent. of the business development initiative is to go to the south east alone, not even counting East Anglia and the south west. How much will actually go to the north, to Scotland, to Wales and to the midlands? The truth of the matter is that it is unlikely that anything other than a small fraction of this money will find its way into the depressed regions of the country.

As to the other grants that the Government are giving, it is all very well to say that in the development areas these small firms will have a regional investment grant available to them—they have it available to them at the moment, under the automatic development grant. The greatest amount of money, even on the Government's own figures, in three years' time that will be spent on this is about £50 million.

If we take the amount of money through the business development initiative—

Photo of Tony Blair Tony Blair , Sedgefield

Those are the figures in the White Paper, with respect. It is £14 million next year, rising to £55 million in 1990–91. That is in regional investment grant and innovation grant—

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

That is not what we are talking about. We are talking about £250 million which, if 40 per cent. goes to the south-east — if the regional director has his ambitions to realise—still leaves a substantial amount of money going to the rest. The DTI south-eastern region does not cover just a little corner south of London; it is a huge tract of the country, including all of London and substantial areas to the north and south of it.

Photo of Tony Blair Tony Blair , Sedgefield

If 40 per cent. goes to the south-east, that is wholly disproportionate. The Minister's case is that this money is in some way in substitution for regional development grant, but the truth is that the bulk of it will go nowhere near where regional development grant goes now.

What I had moved on to was regional investment grant and innovation grant. I want to point out to the Minister that, even at its highest, in three years' time, it amounts to just over £50 million. The figures that he has given today for regional selective assistance indicate that some £215 million is going now in regional selective assistance, rising to £284 million in 1990–91. That is a real rise of about £50 million or £60 million.

There is no conceivable way that the money available under the business development initiative, under the small firms grant or under the extended regional selective assistance, even on the Government's own figures, will anywhere near compensate for the abolition of regional development grant. In fact, there is a substantial cut, which will be running after the transitional period of regional development grant, of about £150 million to £200 million each year.

In justifying this, the Government have attempted rather half-heartedly to disparage regional development grants, to claim that they are paying out when it is not really necessary—even Sullom Voe was wheeled out last time before our eyes.

Photo of Tony Blair Tony Blair , Sedgefield

It may be a good example of what was happening four years ago, but the Government changed the regional development grant system in 1984 and said that they had cured all that. When they changed the scheme in 1984, they told us at the very same time that it was the final change that would need to be made and that the automatic system of regional development grant was a help to the regions. It would have been difficult for them to say otherwise, because the DTI has commissioned no fewer than three major reports on regional development grant and regional incentives.

The first report was called "The effects of Government's regional economic policy", which had this to say: The conclusion that regional policy generated some 450,000 manufacturing jobs in the Development Areas which were still in existence in 1981 leaves out of account any secondary or multiplier effects … this project has not been directly concerned with these multiplier effects but, using a conventional medium term regional multiplier of 1·4, the 450,000 manufacturing jobs would generate a further 180,000 jobs in service industries, making a grand total of surviving regional policy jobs of 630,000 at 1981. This is a real and substantial achievement. Two thirds of those jobs came in with the regional development grant.

Photo of Mr Philip Oppenheim Mr Philip Oppenheim , Amber Valley

The gist of the hon. Gentleman's argument seems to be that the fact that we might supposedly cut the total amount going to the regions is necessarily a bad thing. Does he not accept that it is not just how much one spends but also the cause on which one spends? Does he not also accept that there are some best estimates that the cost per job created by regional aid in the 1960s and 1970s was £50,000 in today's money? Does he not also accept that, however well intentioned, much of the regional aid led to totally unsustainable factories—for example, Speke, Bathgate and Linwood—which were well intentioned but which could not be sustained and did tremendous damage to the car industry in the midlands?

Photo of Tony Blair Tony Blair , Sedgefield

It is correct that one must take a general view when assessing the overall impact of regional development grant. The overwhelming conclusion of the Government's own report, however, is that, whatever the individual cases where grant could be said to have been misused — for example, Sullom Voe—overall and in general terms, which is the sensible way to look at it, the writers of the report found a real and substantial achievement. The criticisms that were most frequently made of the regional development grant system could he most easily applied to the regional development grant system prior to 1984— but what we are talking about now is abolishing even the scheme as it exists at present.

The second report commissioned by the DTI, "Regional incentives and the investment decision of the firm", was by a group of Scottish economists and is even more surprising in what it says about regional development grant: One of the most frequent criticisms of RDG is that, because of its automatic nature, it is awarded in many cases where it is quite unnecessary and can have no influence on the company's investment decision. The evidence of our study suggests that only a minority of companies in general, and a tiny minority of small companies, rate RDG as having no influence on the decision to invest in the project under consideration and over half of the companies rated RDG as important or crucial to the decision…In short, our evidence shows that a mixture of automatic and selective assistance, taken together, provides a powerful package.". That also was a Government report.

Photo of Mr Tim Smith Mr Tim Smith , Beaconsfield

Is it not the case that most of these projects needed the investment to go ahead, as that report apparently claims, so that those projects would in future be able to qualify for regional selective assistance as the Government propose?

Photo of Tony Blair Tony Blair , Sedgefield

I do not think so. Regional selective assistance does not operate under the same criteria as regional development grant. In addition — this was found in the report to which I shall turn in a minute—the automatic nature of the regional development grant had a crucial effect on a company's decision to invest. The report that showed that was again commissioned by the DTI; I am dealing only with reports that it has commissioned.

The report on industry's early reaction to the new regional development grant was carried out by PIEDA, the planning and economic consultants. It said: The new RDG is an important factor in the investment decision-making process. One-third of those interviewed identified RDG as a critical factor in their project appraisal and investment decision. For many more the grant was an important, but not critical factor. Less than one-quarter of the companies surveyed said that the RDG had no influence on their investment decisions. Even the White Paper said that the cost per job of RDG under the second scheme was more cost-effective than regional selective assistance. We know that RDG has created jobs; we know that it is cost-effective; we know that it is a vital component in investment decisions; and we know that it is at its most effective when there is a mix of RDG and selective assistance. Therefore, I ask the Government, on what evidence do they base their assertion that it has no further use?

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

The hon. Gentleman ducked the point that my hon. Friend the Member for Beaconsfield (Mr. Smith) made, then gave my hon. Friend the case that he was making. The figures quoted by the hon. Gentleman show that one quarter of RDG recipients said that it made no difference to their decision. Only one third said that it made a critical difference to their decision. My hon. Friend was correct to say that that one third will now presumably apply for regional selective assistance. The one third that weighed the critical difference will still be eligible for grant. The hon. Gentleman is happy to contemplate one quarter or more of the expenditure being wasted and having no impact on investment decisions to maintain public expenditure at levels that he would like.

Photo of Tony Blair Tony Blair , Sedgefield

It is nonsense, even for the 25 per cent. of firms that would have taken investment decisions anyway, to argue that that investment has no beneficial effect on the regions. The Minister is saying that those firms that would have applied for regional development grant will now receive regional selective assistance, but the other conclusion that the report came to is that many firms applied for both. But there were many circumstances in which they would have been eligible for automatic regional development grant but not eligible for regional selective assistance.

If it were the case that all those firms that were in receipt of regional development grant will now receive regional selective assistance, one would expect a huge burgeoning increase in regional selective assistance expenditure. The figures that the Minister gave do not show that.

I do not know whether the Minister is aware of the numbers of applications this year for regional development grant and regional selective assistance, but in 1987–88, in England, there were 1,600 applications for regional selective assistance and over 6,000 for RDG2 alone. In Scotland, there were 190 applications for selective assistance and 3,050 for regional development grant. In Wales, there were 152 applications for selective assistance and 1,508 for regional development grant. The likelihood of those applications being fed through regional selective assistance is extremely unlikely, and nothing in any of the Government reports suggests that it is likely.

I return to the point that the Minister made earlier—that the automatic nature of regional development grant is no longer necessary. It is extraordinary that every report the Government have commissioned has been unable to justify the abolition of grants because they are no longer needed. There is nothing in any of the White Papers, the glossy brochures or the logos and slogans that decorate the walls of the DTI to re-educate civil servants in the ways of the master, that provides sufficient help to the regions to make up for the abolition of regional grant.

One of the more curious elements of the noble Lord, Lord Young's programme is that he has no doubts as to the massive importance and portentous nature of it. In the Financial Times of 16 January he gave an interview, which says: Last October, Lord Young set out a series of policy objectives for the DTI, which he compared bizarrely to Mein Kampf.—'No one can say that they did not know what was coming."' A more eccentric example of how the noble Lord sees his programme would be hard to find.

Overall, the White Paper, apart from the cut in regional development grant, does not merit any comparison that would exaggerate its significance. The truth is that there is more of the salesman's patter than any substance in the White Paper. It is the language not of industrialists but of advertising executives.

I asked for a copy of "The New Regional Initiative", the guide to regional selective assistance. As you will see, Madam Deputy Speaker, it is a very glossy brochure. I asked for the previous regional selective brochure and I tried to discover, apart from obvious differences and various minor changes that have been made, what the difference was between the two. If hon. Members look at them they will see that the difference between the two is in the covers.

The notion that in this White Paper we have engaged in an awakening of the spirit of enterprise in Britain is fatuous—a piece of classic hype. In his White Papers, Lord Young is becoming increasingly like Jeffrey Archer in his novels—the promotion is infinitely better than the writing.

I should deal with a further point that the Minister made. It was presaged by a rare trip that the Prime Minister made to the northern region. This is the idea that we no longer need the regional development grant, because we are doing so well. In The Independent of 5 January 1988, the Prime Minister was quoted as saying: I notice that people who go to look at the north and north-east go up thinking there are dark satanic mills and it is all grey and unwelcome. They come back saying, 'Do you know what it is really like? The countryside is fabulous, the people are marvellous, there are thriving industries and shopping centres."' We might have known that when the Prime Minister praised us on 5 January she intended to bury us on 12 January.

The idea that we are victims of our own success is so absurd that it beggars belief. Only this Government would have the priceless audacity to present a cut in regional assistance as a compliment to our self-reliance.

The north-south gap, as every objective indicator shows, is not narrowing but widening. In November, the Low Pay Unit showed that incomes in the south were, on average, 50 per cent. higher. With regard to low pay, almost one third of those in the north were on wages below the decency threshold of the Council of Europe. In December, the Central Statistical Office's regional accounts showed that the south-east was 13 per cent. better off than elsewhere and that only two areas—the southeast and East Anglia—enjoyed above-average wealth.

On 6 January, a survey quoted in the Financial Times said: A disparity between the north and south of Britain is confirmed in a survey to be presented at a conference today. The top 35 areas in a league combining 10 economic indicators all lie south-east of a line from the Severn Estuary to Lincolnshire. Towns in north England, Wales and Scotland are concentrated towards the bottom.Social Trends, published more recently still, shows that the north has the highest proportion of children receiving free school meals and the highest proportion of income derived from social security, followed by Wales, the north-west, Scotland, the west midlands, Yorkshire and Humberside. The mortality rate of the north is 20 to 25 per cent. above average. It has the largest percentage of permanently sick, the largest percentage of infant mortality and the largest population loss. It is ludicrous to say that the problems of the north have disappeared and that we do not need the regional assistance that we were receiving before.

The right hon. and learned Gentleman said that, because unemployment is falling, we no longer need an automatic regional development grant, but unemployment is still double what it was in 1979, when four times the amount of money was coming in in regional aid. As for investment, it is still 20 or 30 per cent. below what it was. Therefore, it is again absurd to suggest that regional aid should be cut because we are doing so well.

The truth is that, after four decades of cross-party agreement as to the essential importance of regional policy, we have today to make the case for it anew. This debate is not about value for money or efficiency. It is the culmination of a Government process of disinvestment in our regions. We need regional policy, not just socially but economically, because our regions are our manufacturing base, and in our manufacturing base lies our capacity to create wealth. It is no coincidence that, as manufacturing output and investment declined, so did our regions.

We know, too, that regional policy is necessary just to restore some of the equity in the use of natural resources. It is a common misconception that the south subsidises the north. For example, if we look at where defence contracts go or at the proportion of aid for research and development for fibre optics, or for any of the other Department of Trade and Industry programmes, we see that a disproportionate amount goes to the south. If we look at where the tax perks in the business expansion scheme, or any of the other myriad schemes available under fiscal policy, go, we see that they go to the south. In a real sense, on any rational basis, regional policy is necessary to redress the balance of Government economic policy.

But at the heart of this issue lies a recognition of the importance of maintaining the integrity of this country. It is absurd that, on the one hand, we have falling house prices, migration, acres of empty factory space, land that could be built upon should anyone want to do so, people still fighting for jobs, even on low pay and prospects, in the north; while on the other hand, we have house prices increasing by 30 per cent. or more in a year, congestion, pressure on the environment, skill shortages and rocketing factory rents in the south. A narrowing of the gap between the north and the south is in the interests not only of the north but of the south. It is part of the interests of the whole country. That is why we have to make this case again.

For four decades there was a consensus, not as to the means—it is not a case of being wedded to the old-fashioned traditional ways of doing it and we are perfectly able to take on board and realise the need to change the means of industrial assistance—but as to the end, which was always sacrosanct. That was the notion that it was a critical responsibility of Government to ensure the cohesion of the country or, in other words, the belief that it was a necessary part of our democracy that our living standards and our life experiences were the same. It is to the shame of the modern Conservative party that that consensus has now been broken. It is the Labour party that will rebuild it.

Photo of Mr Leon Brittan Mr Leon Brittan , Richmond (Yorks) 6:02 pm, 25th January 1988

In the concluding part of his speech, the hon. Member for Sedgefield (Mr. Blair) stressed the importance of regional policy. I entirely agree with him and have consistently argued the case for such a policy. Where I disagree with him is in his suggestion, express or implied, that the Government do not support an effective and vigorous regional policy. He may disagree with my right hon. and learned Friend the Chancellor of the Duchy of Lancaster, but, as one who has worked with and known him for a generation, I know that my right hon. and learned Friend's interest in, and support for, regional policy is not skin-deep or short-lived. He would not be party to a policy which he thought repudiated the regional policy that the hon. Member for Sedgefield is right to say is crucial for this country.

Nor do I believe that the hon. Member for Sedgefield does justice to his case by talking simply about disparities between the different regions. Those disparities exist, but the suggestion that the Government have, in some blithe or heedless way, ignored that or do not care about it is quite wrong. The hon. Gentleman must ask himself not just whether there are disparities, but what will most help to end those disparities or at least reduce them substantially. He has to ask himself what is happening in the regions, what is the trend, and what is going on.

The hon. Gentleman's constituency is in Durham, which is very near the county of Cleveland. He will know that the Evening Gazette, a newspaper published in Middlesbrough, has not been slow during the years of recession to criticise this Government and point out the ills —industrial, social and moral—of unemployment in Cleveland, which was the highest for any English county. Last week, the Evening Gazette published a special business supplement, which was headed: We are on our way. Cleveland goes from strength to strength. If that is thought to be just advertising hype, one can read an article by Mr. Michael Morrissey, and those who know him appreciate that he is not always the most cheerful of people as far as business prospects are concerned. It says: We are riding on a tide of optimism. The sweet smell of success is in the air. On the other side, it says: The infectious joy of big ideas. Something seems to be happening.

Photo of Mr Leon Brittan Mr Leon Brittan , Richmond (Yorks)

No, I will not give way, because I would like to develop my speech.

The hon. Member for Sedgefield might know that the principal cause for that is the development corporation on Teesside. Although he can quote figures showing that comparatively small sums of money are being spent, he will also note that the whole point of the development corporation is the gearing effect and the private money that it brings in on a massive scale. If he were to read the Evening Gazette, which, although published in Cleveland, almost certainly circulates in his part of Durham, he would know full well that hardly a day passes without report of some further project that has been engendered by the development corporation.

The Government's policy, as announced in the Bill, has to be seen in the context of the White Paper, "DTI—the Department for Enterprise" which the Government put forward as a whole and which will be particularly beneficial to the region. The idea of bringing education and industry closer together with work experience for both teachers and pupils is valuable. The extra Department of Trade and Industry support for computer-aided design is also valuable, and those who have seen the design department at Teesside polytechnic will appreciate just how valuable that can be.

The concept of business development initiatives with the use of outside consultants for design, marketing, quality management and manufacturing systems is all to the good. I am glad that the quality initiative is to be broadened to advise businesses of what is known as the total quality approach, which has been so successfully adopted by leading companies, and in particular by ICI.

It is against that pattern, which shows the Government's commitment to effective regional policy, that one has to look at the proposal for regional assistance. I readily accept that the existing pattern is not sacrosanct. Changes are certainly worth considering. When 1 went to the Department of Trade and Industry in 1985, I was suspicious of the changes that had been made in 1984 and wondered whether they were consistent with an effective regional policy. However, I was persuaded that those changes resulted not only in a saving of money but in regional assistance being much more closely related to jobs and were therefore fully justified.

However, I cannot say that I am persuaded of the benefit of the proposal to drop the regional development grant. I think that the comparative advantages of certainty and automaticity are real. There always has to be a balance. My right hon. and learned Friend the Chancellor of the Duchy of Lancaster is, of course, right to say that regional selective assistance is not new and that there are other discretionary schemes. Discretionary schemes can and do exist, but the criticism that I make of the proposals in the present legislation is not that they retain a selective element, but that they move over to a totally selective concept, and that is a very different matter.

There are real advantages in grants available as of right. Imagine a company that has to consider whether or not to proceed with a project, particularly in an assisted area. If that company is faced with a proposal from the director who is arguing for the development, the costs will be sought and the finance director in particular will cast a beady eye on them. He will know from the plan put forward by the director advocating the scheme that the costs will definitely be reduced to reflect the 15 per cent. regional development grant. It will be a certainty, and the decision whether to spend scarce resources in that direction or in some other will be made on that footing.

How different it will be when a director, putting forward a project for a development in an assisted area, comes to the board and says, "This is what it will cost and this is what we hope to get out of it, but, in reflecting on whether it is a good or bad prospect, I cannot subtract 15 per cent. for regional assistance. I can only tell you that if we go to the DTI, we may be also to persuade it, after some months, to give us regional selective assistance. Such assistance is discretionary and I cannot tell the board where we shall get it. We have to surmount certain hurdles and show that the project is viable. It is not enough that the board may think that it is viable; we have to satisfy the DTI. Furthermore, to get the money, I have to convince the DTI that we would not otherwise undertake the project — here or anywhere else. God alone knows what questions I shall have to answer to satisfy officials at the DTI that we would not otherwise carry out the project. If the hoard asks whether we shall get selective regional assistance, I can only say that I hope so." It would not take a beady-eyed financial director to say, "Exclude that from our considerations." The effect is sure to be that a project that would have gone ahead on the basis of regional development grant will not go ahead if it is submitted to the uncertainties and delays inherent in the regional selective assistance process. That is the reality, and the Minister is unwise to ignore it.

In answer to such arguments, my right hon. and learned Friend says that much money is wasted because, under the present system, developments go ahead that would go ahead in any event and that they are getting public money unnecessarily. As Chief Secretary to the Treasury, I was never accused of being anxious to spend public money unnecessarily. However, the argument does not really stand up, because large sums of public money are spent in the certain knowledge that a proportion will go to encourage people to do something that they would do in any event.

Let us consider the question of tax reductions. I look forward to the time when, as a result of prudent management of the economy, my right hon. Friend the Chancellor of the Exchequer can announce tax reductions in the Budget. Opposition Members will argue against that, but the case that Conservative Members will mount in favour of tax reductions is that they act as an incentive and that, if they have less tax to pay, people will do things that they would not otherwise have done. Although that is profoundly true and more than an adequate justification for tax reductions, one cannot say that everyone will do something that they would not otherwise have done, because of the tax reductions; some people would do those things in any event.

If that argument is too broad and general to persuade the House, I give as an example the business expansion scheme, which involves not public expenditure but a specific tax concession geared to investment. Are we asked to argue against that because we cannot prove that the investment would not otherwise have taken place? No one has suggested that or argued that there should be a change in the business expansion scheme. We need an element of automaticity to achieve the full incentive effect. Although I would not cast aspersions on the intentions or motives of my right hon. and learned Friend, I am bound to question the wisdom of completely removing regional development grant and relying on selective and discretionary assistance.

I have confidence in the Government's regional development policy, because I know my right hon. and learned Friend and I know that his intentions are sincere. However, it is important that this new policy should carry conviction in the regions among those who do not automatically take what Ministers say on trust and in places where it is the business of the hon. Member for Sedgefield to go around explaining why it should not be taken on trust.

When it comes to persuading those in the regions, money counts. My right hon. and learned Friend did the Government's cause no great service by not answering the specific question about cash that I put to him when we debated the statement. The Government generally are not assisted by the obfuscation in the public expenditure White Paper, which puts regional and general assistance together in a single line. The Government are not assisted by taking three years together and presenting that total. Those are tricks that I learned at the Treasury, and I am glad to see that the right hand has not lost its cunning. They will do for a day, but they will hardly do for a week. They will certainly not do for a month, and beyond that they carry no conviction at all.

The reality is simple. My right hon. and learned Friend is right in saying that the figures that he has announced amount to an increase over and above the plans. However, the plans did not fully take account of the expansion in regional development grants as a result of the effectiveness of the efforts of the Department's regional offices in drumming up business instead of waiting for people to apply for grants —a policy that I applaud. One needs to consider not only whether the Government are spending more money year by year than they thought last year that they would be spending, because the expenditures are demand-related, not cash-limited. The real question concerns the expenditure at the end of the transitional period.

We need to consider what the expenditure will be when we have moved over from the present to the new system. There is no mystery about that. For Great Britain—this is why I checked my right hon. Friend when he inadvertently referred to the United Kingdom — it is expected that the outturn for regional expenditure—in regional development grants, selective regional assistance and the new investment and innovation grants—will be £478 million in 1987–88. The figure for 1988–89 is expected to be £560 million; for 1989–90, £513 million; and for 1990–91, £470 million. A comparison of this year with the last year for which figures are published shows a move from £478 million to £470 million. That is above the planned figure, but if regional development grants had continued, the planned figure would have risen substantially.

The gap between expenditure today and the expenditure expected in 1990–91 is not large. If my right hon. and learned Friend wants people in the regions to believe that the changes are genuinely designed to replace one kind of help with another and not to save money, in his discussions with the Treasury later this year he must say that if the new policy is to achieve credibility in the region, a change is needed in the figures for those last years so that they at least correspond with the sum that is now being spent on regional assistance in real terms. I am sure that my right hon. and learned Friend will pay that visit to the Treasury, and I wish him luck.

Photo of Mr Bruce Millan Mr Bruce Millan , Glasgow Govan 6:19 pm, 25th January 1988

I am not as confident about the last point made by the right hon. and learned Member for Richmond, Yorks (Mr. Brittan) as he obviously was. However, I agree with the bulk of his speech, and especially with what he said about the importance of having an automatic system of grants, whatever the accompanying system of selective assistance. I am also at one with him about the public expenditure White Paper, because the passages dealing with the Department of Trade and Industry are a disgrace. They deliberately obscure the reality of the situation.

First, I should like to set regional policy in a wider context in relation to one issue of considerable importance to Scotland at present. I shall come to regional development grants in a minute or two. The Minister said that that was still part of general policy and that the Government were still generally committed to the regions. One matter that has always been considered of tremendous importance to Scotland — I dare say that the same is true in Wales and in the regions of England — is the need to have real centres of decision-making in the industrial sphere in Scotland, Wales and the regions.

In that context, I want to say something about Britoil, which is an independent oil company. It is the biggest independent oil company operating in the North sea—or, indeed, elsewhere. Previously it was the British National Oil Corporation, but it is now Britoil. Britoil moved to Glasgow and located its head office there. It did so as a deliberate decision of the Labour Government. I should say that those who were involved in the industry did not want to go to Scotland and, more especially, to Glasgow. However, Ministers insisted that they move to Glasgow, and the company has been a great success there. The oil company has a fine and splendid new building as its head office in Glasgow, and that has also been a tremendous success.

Britoil is now so valued and valuable that BP is desperate to take it over. However, if BP does take over Britoil, those important corporate headquarters will no longer be in Scotland. At best, Britoil will simply be a division of BP, and there will be only divisional headquarters in Glasgow instead of an important centre of decision making, employing many highly qualified people, as at present.

The Government can prevent that result through the golden share. Indeed, when the golden share was originally introduced, the Secretary of State for Energy, now the Chancellor of the Exchequer, gave specific pledges that the golden share would be used to prevent an unwelcome acquisition of Britoil. This would be an unwelcome acquisition of Britoil. It would be unwelcome to the staff who work there and to the senior management. I am glad that the senior management have consistently and determinedly expressed their opposition to the takeover. I congratulate Mr. Walker and his colleagues on having done so in circumstances in which, in many cases, senior management would unfortunately have caved in.

The Chancellor's statement on 11 January 1988, in which he said that the Government would use the golden share, was hedged with all sorts of qualifications. He said that they would use it "in present circumstances" and so long as it is in the national interest to do so." —[Official Report, 11 January 1988; Vol. 125, c. 13.] If that was intended to scare off BP, it obviously has not done so. Although there may have been other possible bidders for the company, at the moment the chances are— I hope that it does not happen — that unless the Government take steps now to make it absolutely clear that they will use the golden share to the fullest extent and not allow anybody, specifically BP, to control the company in real terms, BP will not only have control of the company in terms of shareholding but, ultimately, in terms of full decision making. I refer not only to normal commercial decisions but to decisions about corporate headquarters and so on. It would be an absolute scandal if that was allowed.

Photo of Mr Paul Dean Mr Paul Dean , Woodspring

Order. I am finding it a little difficult to relate what the right hon. Gentleman is now saying to the Bill. I am sure that he can relate it to the Bill.

Mr. Milian:

I made the point at the beginning that I was dealing with regional policy generally and it s an important part of regional policy that we should have such important headquarters in the regions, rather than in London, which is what will happen if Britoil is taken over by BP.

There are other aspects to be considered, such as monopoly in the North sea and the Kuwaiti shareholding in BP, but I am speaking specifically of the Scottish interest and of the interest of the staff who are extremely worried about the present position. The Chancellor of the Exchequer is deliberately allowing the position to drift, and, far from discouraging BP, he is encouraging that company not only to go ahead with its bid for Britoil but to believe that, once it has control of the shareholding, the golden share will not be used in any effective way and it will ultimately obtain full control of all the company's operations, including the board of directors. If he does not intend that, he should make that absolutely clear now. I advise the Minister who is to reply to the debate that at present there is no more important question of regional policy in Scotland than the threatened takeover of Britoil. The Government can stop that happening in the way in which it appears to be happening at present.

Turning to the Bill, there is no need for Opposition Members to argue the importance of regional development grants because the last annual report issued by the Department of Trade and Industry under the Industrial Development Act 1982, dealing with regional policy, mentions the results of a survey which was commissioned by the Department in February 1987. It states: the Scheme is an important factor in companies' investment decisions. The "scheme" refers to the RDG scheme. The annual report continued: The take-up of the new Scheme by firms with 200 employees or less has been particularly encouraging". We understood that the Government were especially interested in helping small firms. The annual report states that the take-up by small firms in 1986–87 amounted to about 80 per cent. of the total grant. However, under the Bill the Government are abolishing regional development grants completely. That does not make sense, if there is any real commitment to the regions or, for that matter, to small firms in this country.

As my hon. Friend the Member for Sedgefield (Mr. Blair) said in his extremely effective speech, there are always transitional arrangements when such changes are made. It is only when one considers later what has happened that one can understand the full impact of the changes. That is true of the 1984 changes in regional development grant. They did not look too bad to industry to start with. The Government gave all sorts of assurances about them not being particularly bad news for the regions.

However, looking at what happened, and remembering, incidentally, that the 1984 figures were considerably smaller than the figures that the Government inherited in 1979 because of earlier reductions in regional assistance, we find, in a written answer on 12 May 1987 to my hon. Friend the Member for Dunfermline, East (Mr. Brown), the overall figure for RDG for 1986–87 was £512 million and the figure for 1987–88 was expected to be only £211 million — a reduction of £311 million in one year, because that was the year for which almost the full impact of the 1984 changes began to be effective. Transitional arrangements had applied in earlier years.

The figure for Scotland for 1986–87 was £170 million and for 1987–88 it was expected to be £69 million. Therefore, in Scotland alone there was a reduction of £100 million in a single year. Again, that arose because of the 1984 changes. Therefore, when the Minister says, "Do not worry, because the figures in the future will not be worse than the figures now," we must set that against the background that the figures have now been savagely reduced because of the changes made in 1984.

Of course, it is very difficult — even if the Government were being honest about the figures they present in the White Paper on public expenditure—to disentangle all the various figures and the effect of the changes with RDG1, the system before 29 November 1984, and RDG2, the system from 29 November 1984, and the rest, changes made in 1984, which were modified with regard to small firms with fewer than 200 employees.

As my hon. Friend the Member for Sedgefield pointed out, it will happen again. The transitional arrangements will take us to 1990, or whatever, and it is only then that we shall have the full effect of the changes being made in the Bill.

I therefore turn to the Minister's idea, suggestion, or assertion, that we need not worry about that, because the figures may have been reduced — they are already savagely reduced—but at least they will not be reduced any further and the Government have planned expenditure in the regions which will show an increase.

First, I am extremely suspicious of Ministers when they say that it is not a real increase; the figures are different from what they were in the previous year's White Paper. That does not mean a great deal. It is the reality of the expenditure, of the outturn in the current year and what will happen in the future, that we really have to look at.

The Government are really making the claim about the figures coming down no further on two bases. The first is the new business initiative, or whatever the scheme is now being called—in particular, for firms in the regions with fewer than 25 employees. A new incentive is being introduced for them. That is actually less of an incentive than the existing RDG2, gives for firms with up to 200 employees. The incentive for firms with up to 25 employees, even if it works for them, as I hope it will, will do nothing for them that they could not obtain under the present system. For firms with from 25 to 200 employees it disappears completely, because they are not covered by this scheme at all.

Then there is the whole question of what will happen to regional selective assistance. That, of course, was not dealt with at all. I was going to say that it was treated with obscurity in the public expenditure White Paper, but no figures are given for section 7 in recent years. We have the projected figures only because I asked the Minister during his speech to give them to us.

Let us take those figures at their face value, taking 1988–89. As I understood the right hon. and learned Gentleman — we shall check the details in Hansard tomorrow—section 7 regional selective assistance was estimated in the White Paper published a year ago to be £245 million for 1988–89. That was before any changes were made. In 1988–89, after these massive changes, it is going up to £266 million, a net increase of £21 million in one year, which is supposed to compensate for these vast reductions in regional development grants. It does not make sense.

There are other figures for some of these schemes, for business advisory services and the rest. In my opinion—we shall wait and see what happens—these figures are grossly overestimated. I do not believe for one moment that the kind of figures that the Government have put in the White Paper for some of the schemes will ever be spent. I am not sure that it would be a good idea if they were, because there is a limit to the amount of money one should be spending on consultancy services. Members of the accountancy profession will be delighted at this increasing emphasis on consultancy. It is a very profitable part of their work.

Photo of Dr Mo Mowlam Dr Mo Mowlam , Redcar

Does not my right hon. Friend agree that it would be useful to ask the Minister to clarify whether those consultants will be employed in London or whether, in line with policy, they will be based in the regions and will be paid, in relation to delivering jobs, with a deal whereby money will be paid for the number of jobs created?

Mr. Milian:

I do not want to say too much about consultancy reports. They vary in quality from the good to what in some cases cannot even be called indifferent, depending on the consultants and on the questions asked. What I am saying is that the figures in the White Paper seem to me to be unlikely to be achieved in reality. Even if they are achieved, those figures together cannot possibly make up for the reductions in regional development grants in places such as Scotland. Selective assistance in Scotland is running at about £40 million a year. In 1986–87 it was £36 million. In Scotland, regional development grants were worth £170 million in 1986–87, compared with £36 million for selective assistance. Even with the reduction to £69 million in 1987–88, it is still a more important part of regional assistance than anything that can be done under selective assistance.

There is another consideration with regard to selective assistance. My hon. Friend the Member for Sedgefield gave some figures for the numbers of applications. I do not believe for one minute that the Department of Trade and Industry, the Scottish Office or whoever will handle these matters can deal with anything like that number of claims for selective assistance. Again, I refer to the Scottish figures that my hon. Friend gave: 190 claims for selective assistance; over 3,000 for regional development grants. Is it seriously suggested that the same civil servants can handle over 3,000 claims for selective assistance in Scotland and give them the care and attention, with references to the Industrial Advisory Board and all the rest, at present given to selective assistance? It is absolutely ludicrous. Either some of the claims will go through the early stages just to make the figures look better, or, more likely, many firms at present applying for automatic assistance will, as the right hon. and learned Member for Richmond, Yorks made clear, not apply for the new forms of assistance, or will not take the investment decisions that would have enabled them to apply for regional development grants.

The Bill is extremely bad news for Scotland, Wales and all the regions in England. I find it depressing that the Minister can say that the CBI in Scotland is largely in favour of what is happening there. That is a less robust attitude even than it took with regard to the 1984 changes. At least it was unhappy about them. If it is happy about these changes, all I can say is that it is a very poor indication of its real concern for industry in Scotland, and it is serving Scottish industry very badly, as the Government are and as the House will do if we pass the Bill.

Photo of Mr Giles Shaw Mr Giles Shaw , Pudsey 6:38 pm, 25th January 1988

My hon. Friend the Member for South Ribble (Mr. Atkins), who is the Minister on the Front Bench at present, will not necessarily find that my remarks will give him the cheer that he has been waiting to hear. My right hon. and learned Friend the Chancellor of the Duchy of Lancaster and Minister of Trade and Industry has wisely decided to remove himself for the time being, and I can understand that.

Those of us — I include my hon. Friend the Under-Secretary — who have been involved in regional development policy, whether offering grants or receiving delegations, will know that there are few more important areas of ministerial life in which the incapacity to satisfy customers is at its greatest, and it is therefore not surprising that my right hon. and learned Friend—not one who is short of energy, determination and clout—should have decided that he wants to get shot of part of this operation by the quickest possible means, and therefore proposes to abolish the regional development grant.

I must echo the general view that if we are to have a policy for the regions at all it must, first, be seen to be creative and designed to correct the imbalances so widely recognised to exist between areas which have had a historic decline of basic industries and areas which have not. Secondly, the policy should be attractive. It must seek to attract new types of industry which have not been able, so far, to obtain a footing in the area concerned. Thirdly, it should be competitive.

I welcome a large proportion of the contents of the White Paper "DTI—the department for Enterprise" which my right hon. and learned Friend the Secretary of State for Trade and Industry laid before the House earlier this month. But it is odd that, in the handsome document which has been handed down from the mount, the entry to chapter 7 on regional policy says of the DTI's objectives: In all our work we will take account of the differing circumstances in the regions and of the Inner Cities to enable those who live there to help themselves". That is an extraordinary, gratuitous observation. "We will take account" does not necessarily mean that we will do anything. The suggestion that there are "differing circumstances in the regions" is without doubt the case. There would not be regions if the areas were not different. They are different in culture, tradition, economy and many other ways.

I for one am wholly in favour of the diversity of regions. I do not entirely go along with the classic presentation of the north-south divide. I concede that many of us who are happy and proud to live in the northern areas have a different quality of life in many respects from those who live elsewhere.

Photo of Mr Giles Shaw Mr Giles Shaw , Pudsey

I understand that the hon. Gentleman does not find the balmy air of Pomfret quite as happy as the bracing air of Harrogate, and I have to concede his point.

What underlying philosophy should be the basis of our regional policy? The opening DTI objectives in chapter 7 are pretty inadequate. It says, "take account". Is that really all that is required? It says, "to enable those who live there to help themselves." Is that really all that is involved? Frankly, it is not. One of the huge problems of regional decay is not the fact of the people living there not being able to help themselves, but the fact that people have left the area, that investment has been dissipated and has departed and that the age and condition of the basic economy have changed because the markets and customers have gone. Above all else, the regions need implantation—not the people who live there to help themselves but new people to come there with new ideas and activities and, we hope, to be a catalyst in trying to grow a new regional economy.

I am persuaded—I think that I carry my right hon. and learned Friend the Member for Richmond. Yorks (Mr. Brittan), who is practically a neighbour, with me—that a regional policy is but a small part of the national policy. National economic management is the crucial determinant of regional success. Hon. Members delude themselves if they believe any other general tenet of economics. Even so, we need an understanding of the fact that the parts of the country furthest from the centre of economic generation will be the slowest to respond. Equally, we must take account of the fact that persuading capital to move into those parts furthest from the centre of economic generation is a major and competitive task.

I understand that abolition of the development grant helps to get rid of the appalling problem of having each time to go to the Treasury cap in hand and say, "We have overspent yet again because the applications have come in faster than we expected or have not been triggered in the time we expected." There is a bunching of payments and the DTI goes hairless in relation to its budget controls, so we have that wonderful Roman motto, "Per ardua ad moratorium." In it comes and first we have six months, then another six months, and so on. It is a mess and I agree that there should be reforms in handling it.

The essential objective of regional development grant is to provide to those likely to invest — investing companies—a clear statement of benefit, well in advance of the decision which they seek to make on whether to take investment to the location. Without that, the United Kingdom will be singularly naked when it comes to competing with other Governments for mobile investments within the European Economic Community. Are we to believe that, for example, the Irish are dropping their standard "Give all and take all and we will pay all"? Are we to believe that the French are dropping the way in which they attract investments by making massive grants available not just to new companies but to well-established companies which seek international orders?

If we try to rewrite history, I very much doubt that the Nissan motor company would have come to the north-east on the basis of the absence of regional development grant. I doubt whether Nissan would have taken kindly to being asked to show for the benefit of the DTI officials whether the project was sufficiently viable and whether it would have gone ahead without the Government grant that the company sought.

I believe that the Germans, the French, the Italians and, frankly, practically every other industrial part of Europe would be knocking on the doors of Nissan headquarters in Japan to demonstrate that in other markets they do not offer such restrictive rules. It may be that Nissan represented the last of the giant mobile investments, but equally there have been others, which I well recall from my time at the DTI, which have come to Telford and other places — other large Japanese investments in new technology that cost substantial amounts of capital.

Losing our competitiveness overseas to attract the big mobile investment is a major disadvantage. I do not believe that that is replaced in the present proposals by regional selective assistance. I accept that paragraph 7.10 of the White Paper says: Internationally mobile investment projects will by their nature frequently meet these criteria. But "by their nature" frequently they will not. They will not take kindly to the view that in the United Kingdom one must go through an enormously difficult and complicated procedure compared with the procedure in other parts of Europe. The speed and clarity of decision and the commitment which the United Kingdom Government can show in providing international investment will be seriously damaged by the current proposals.

I welcome many other aspects in the White Paper, which, of course, are not the subject of the Bill but relate to the way in which we must judge it. I look for a catalytic activity for regional investments. That is why I lay stress on competing for new industries, skills, types of people and management to come to an area rather than concentrating purely on the self-help issue for those who live in the regions—crucial though it is that everything is designed to improve the lot of those who live there. Our regional policy should be designed essentially to be outward-looking. I do not think that the decision reached on this measure has come from an outward-looking view of how our regional policy should be developed.

I am especially interested in the fact that the business improvement services schemes are to be expanded and that consultancy schemes for various smaller companies are to be introduced. The White Paper contains much for the smaller developer, the smaller industrialist, and must do more if the enterprise culture is to be transplanted into the regions. I should like a single Government office to represent the whole spectrum of Government assistance and development within the regions. Why is a part of our businesses allocated to the Department of Employment, such as tourism, and a part to the Department of the Environment, such as the urban development corporations and small businesses? Why have we allowed that to happen yet are still required by the Department of Trade and Industry to believe that that Department and it alone is the source of the enterprise culture? It is a great weakness that the DTI does not have within its competence all those other forms of what are clearly investment potential and new activity. If those elements cannot be within the same Department, why cannot the three Departments be represented in one regional office under the same roof, so that there is a shop to deal with all the aspects that make a development project get off the ground?

Why can we not back the smallest of the entrepreneurs by providing regional directors of the DTI with a sum for which they could account entirely themselves, to show that they can provide small portions of capital for those who knock at their doors? It is easier in this country to borrow half a million pounds than to borrow £5,000. If we said to our regional directorate that we were able to provide it with such an incentive, much more could be done much more quickly.

Will someone explain whether the 27 new offices of the DTI are satellites running from the bigger regional offices, or new centres of advice and effort in themselves? I hope that the latter is the case, and that they will all be able to offer a service that will help to stimulate local activity in the towns and cities where they are set up.

It is never a good time to abolish a grant. I am certain that no one would willingly put up his hand and say, "Splendid. Do let us get rid of that portion of Government assistance." I believe, on the other hand, that it is sad that my right hon. and noble Friend and my right hon. and learned Friend have decided that the assisted area map should remain intact for the remainder of this Parliament.

My hon. Friend the Member for Corby (Mr. Powell) made an irrefutable point: when the objectives have been achieved of providing a development area with new industry and a new economy, and the position has become reasonably secure, why should not regional grant and regional selective assistance still be available? The answer is that the area has passed the point at which it is tied to the apron strings of Government assistance.

As I recall from my experience in the Department of Industry, two or three other areas in the United Kingdom are very close to being qualified for regional assistance and grants. Is my right hon. and noble Friend saying that this is for the remainder of this Parliament? It is sad if regional selective assistance is now to be the main generator of new activity, apart from the new consultancy and advisory programmes, and that that too will be limited to the areas now defined. The business improvement schemes, perhaps above all else, have more application to small areas. I am thinking of such areas as Skegness and Thanet, which could be brought into some kind of net to provide some inducement for activity.

I am not entirely persuaded that the measure is a positive demonstration of the new enterprise culture at work, or that those of us who represent regional interests are yet of the opinion that the new policy will bring better results than the old. Secondly, there must be a cash equivalent of what has already been spent on regional development grant before we can be persuaded that the Government are being truly fair.

Let me say without doubt, however, that the political commitment to an effective regional policy is something that I wish the Government Front Bench to reiterate. It is no use looking at it on a haphazard, Treasury-required basis. A regional policy is a policy that brings commitment and important development prospects to most parts of the country — in the north, the midlands, Scotland, Wales and, indeed, Northern Ireland. Surely, therefore, it deserves proper backing to ensure that the resources are available to create new life where there was old.

Photo of Malcolm Bruce Malcolm Bruce Shadow Spokesperson (Energy and Climate Change), Shadow Spokesperson (Environment, Food and Rural Affairs) 6:53 pm, 25th January 1988

The debate has taken a somewhat interesting turn after the opening speeches. Two speeches from Conservative Back Benchers have made it absolutely clear that support is lacking for the Bill, and for the measures behind it. The hon. Member for Pudsey (Sir G. Shaw) and the right hon. and learned Member for Richmond, Yorks (Mr. Brittan) have made their views known. But, when the statement was made, the right hon. Members for Chingford (Mr. Tebbit) and for Henley (Mr. Heseltine) also expressed considerable reservations. I therefore believe that the Government will have to take up very seriously the points raised in the debate.

Some hon. Members may know that, some years ago, I worked for the North-East Scotland development authority, and was therefore involved in trying to attract industry to my area. I can confirm without question that automatic availability of grant, which we then had in our area, was an essential component of even beginning a sensible dialogue with a potential investor. Inability to hold such a discussion will considerably undermine the possibility, first, in some cases of creating a new investment at all, and secondly—this is the point of regional policy — of ensuring that it goes to a specific location.

The Chancellor of the Duchy of Lancaster made it clear there was an element of cost containment behind the proposals. He said that, as the economy recovers and investment takes off, the availability of automatic grants leaves us with the possibility of an unconfirmable expansion of DTI expenditure. If that is really the Government's concern, would it not have been more appropriate simply to change, for example, the cost-perjob grant, while retaining the automatic guarantee, rather than bringing forward legislation to do away with those grants altogether?

A Scottish Minister is to reply to the debate. Is it not true that one of the major consequences of this supposed regional policy has been to dilute the ability of the regions to promote their own economies, and give more power to Central Government officials in the DTI? Having been involved in industrial development promotion, l can tell the House that there is plenty of reason to be suspicious of how those officials might behave. I am not speaking of improper behaviour; I am referring to what might be termed political judgment.

For example, if a development authority or agency identifies a potential investor, it must almost immediately refer that investor, under the new rules, to the DTI. If the DTI likes the look of the investment, but feels that another region might be more appropriate, it immediately takes the chance to try to tempt the investment away. If that happens, it will understandably cause considerable resentment to the initial contact.

I do not believe that the Government, or any Conservative Members, ever supported the industrial development certificates, or would wish them to he reintroduced. Ironically, however, the Government are effectively creating a mechanism that could, in a sense, give the officials just that kind of power. I do not question the sincerity of the Labour party's criticism of the proposals being introduced at this time, but it is nevertheless Labour party policy — developing policy, at any rate — to do away with automatic grants.

Photo of Austin Mitchell Austin Mitchell , Great Grimsby

Hon. Members should not take his word for it.

Photo of Malcolm Bruce Malcolm Bruce Shadow Spokesperson (Energy and Climate Change), Shadow Spokesperson (Environment, Food and Rural Affairs)

Indeed they should not. I have a copy of the New Statesman, which is not known as a Liberal newspaper. It states: 'A New Partnership, A New Britain', the keynote TUC-Labour Party statement of the last parliament, stressed that `it will be important … that industrial assistance is conditional on a business plan agreed between unions and management' ". That is a condition that the Labour party may wish to impose. According to the New Statesman, the TUC states in its policy statement "Regional Development and Planning": The amount of selective assistance … would be progressively increased until all assistance became selective". In a sense, the Government are creating the mechanism, through the abolition of automatic grants, to enable a future Government of some other complexion to use the change to apply political and other qualifications to enable selective assistance to be given. That seems totally contrary to what the Government claim to be their regional policy.

The hon. Member for Sedgefield (Mr. Blair) and the right hon. Member for Glasgow, Govan (Mr. Millan), have already stated that there is substantial evidence within the DTI of the jobs that have been created in the regions because of the availability of grants since regional policy was introduced. Some of those jobs might not have been created at all without a regional policy, but many certainly would not have been in the regions where they are now located.

The recent change is the cause of the growing difference between the south-east and other regions. In the old manufacturing regions, one third of the jobs we re based in manufacturing, but in the south-east, only a quarter of the jobs were based in manufacturing. The consequences of the rapid decline in manufacturing have hit particularly hard all the regions of the United Kingdom except the south-east.

The Secretary of State for Trade and Industry is reported to want industry throughout the United Kingdom to play on a level pitch or field, to use his colourful analogy. However, he ignores the fact that the field is anything but level now. It slopes very sharply from north to south. By removing the regional development grant, the Bill increases the difficulty of scoring goals in the north, and inevitably will accelerate the existing distortion between the south-east of England and the rest of the United Kingdom. I acknowledge, however, that there are differences within regions; I do not accept the over-simple north-south analogy.

Having been involved in industrial development promotion, I believe that changing the rules too often deters people from taking them seriously and that it has a depressing effect on investment. The hon. Member for Pudsey (Sir G. Shaw) has already drawn attention to the fact that competition for mobile international investment could lead to a serious loss to the United Kingdom, to which the Government should pay serious attention.

The argument has been proved that, effectively, the Government will be cutting the overall amount of aid. The Government have failed to satisfy the House that that is not the case. However, I am prepared to acknowledge that the amount of money spent on regional aid is by no means definitive proof that the policy is effective, or that it is reaching the right quarters. I am prepared to consider constructive ways of ensuring that the money is used effectively. However, so far, the Government have not convinced hon. Members that the Bill will achieve that aim.

The debate should be about how we can ensure that the regions take control of promoting their own economies, through regional policy. The Minister of State, Scottish Office, will be replying to the debate. As a Scottish Member, although I am not uncritical of everything done by the Scottish Development Agency, I am glad that we have such an agency and I believe that Scotland would be very much worse off without it. However, I wonder why the regions of England are denied the opportunity to have such agencies, so that, with a global budget, they could determine their own priorities and invest to tackle their regional problems. That would be more effective than DTI officials who, wherever they are located, are under the control of the Department in London. We should be moving forward in that way.

The right hon. Member for Glasgow, Govan (Mr. Millan) made the important point of principle that the ownership and control of businesses and location of their headquarters are crucial to the development of regional economies within the United Kingdom. The regions have suffered because corporate headquarters are concentrated in London and the south-east, to the detriment of all other regions. Indeed, 80 per cent. of investment in the regions of England is carried out by companies based outside those regions, in most cases in the south of England or abroad, to the considerable disadvantage of the regions.

Several consequences flow from that concentration, which have been acknowledged in some recently publicised cases. Scotland suffered because of the row over Guinness, but the location of the corporate headquarters was acknowledged to be an issue. Pilkington was subjected to a takeover, and nobody in St. Helen's could be persuaded that it would not be bad news for them. The shares of the company were substantially undervalued because the parochial, London-based financiers persistently undervalue the assets of companies that are based outside south-east England. We need to find a way to decentralise financial institutions so that they know what is happening in the country, and can find opportunities for backing and investment.

The case of Britoil is another example. There is clear evidence that the BP bid — although it is not undervaluing on the basis of its knowledge—certainly in fact undervalues Britoil. I agree with the right hon. Member for Govan that an important point of principle is at stake.

BP is the largest employer in my constituency. It is a good company in many ways. It is a major operator in the North sea and has brought many highly qualified people to Aberdeen. That has been good for our economy. However, BP is now in the process of transferring 300 highly qualified staff from Aberdeen to the City of London. I do not know why on earth they need so many technical people in the City of London at a cost of tens of millions of pounds to the shareholders. I have tried to persuade BP that it should be moving the other way.

The importance of the North sea in my constituency is such that it could have established an exploration and petroleum division in Aberdeen. BP tells me that it wants to take over Britoil and to move its exploration and production division to Glasgow and Aberdeen. I find that very hard to believe, especially as BP is doing the opposite now. It does not square with its practice and its attitude. I do not trust it and I will not believe a Government assurance that that is true. The Government must use their power to keep Britoil independent, because the regions need such a focus. I shall develop that point, as it is relevant to the Bill.

We have two huge national privatised utilities —British Gas and British Telecommunications. I believe that, in a sense, the chickens have come home to roost, in that the problems of those monopolies are beginning to be recognised by dissatisfied customers. British Gas and British Telecom should be regionalised. As regional corporations, they could inject into the regions of England, Scotland and Wales corporate operations that would buy in services, offer careers, help to retain talent within the regions and start to regenerate regional economies so that people would not believe that the only way to get on was to leave the regions and go to London. Until we change that idea, we will not have a vital, growing regional economy, and the whole of the United Kingdom will suffer.

The Government are wholly unconvincing. I do not wish to denigrate the Chancellor of the Duchy of Lancaster's commitment to a regional policy, but it is on record that he thinks that the market will sort it out and that cheap labour in the north will attract investment. However, that has not been proved and we need something much stronger to ensure efficient distribution.

In a sense all hon. Members — even those who represent the south-east—represent regions, but those of us who live outside London and come here because of our duties in the House are aware that life in the south-east is not always rosy. Property is enormously expensive, travelling is a nightmare and congestion is a problem. The railway system is appalling, yet in the north many facilities are under-utilised and people are still leaving.

It seems that a more vigorous regional policy is needed for the whole of the United Kingdom. I am willing—all hon. Members should be willing — to engage in a constructive debate to ensure that we achieve such a policy. The Bill is not achieving that, and the Government will have to think again. Even if the Bill is enacted, I suggest that the Minister should consider that if the Government go ahead with selective assistance, they should apply a simple criterion so that businesses will know quickly and fairly definitively, whether they will get aid. If the Government do not do that, the United Kingdom economy will suffer and the regions will suffer more than most. I believe that the Government should think deeply about that. This Bill is not the answer to regional problems.

Photo of Mr William Powell Mr William Powell , Corby 7:09 pm, 25th January 1988

You have honoured me, Mr. Deputy Speaker, by calling me as the first speaker in the debate who is not a spokesman for his party or held ministerial responsibility for these matters in the past. However, for the past five years or so I have been up to my neck and beyond in the problems of the major town in my constituency which was devastated by the closure of the industry that was directly and indirectly responsible for 73 per cent. of the employment in that town. The House will recall that the decision to close Corby steelworks was announced on 3 March 1979. The significance of that date will be lost on no hon. Member.

As I have said, for the past five years or so I have been up to my neck in the problems of recovery. It has dominated my thoughts every day of my life and I want to share some of those thoughts with right hon. and hon. Members. I want to talk about what has been involved in the recovery, and what lessons there are for regional policy in our country.

This debate is now opening out into an interesting discussion of issues that are much wider than the contents of the Bill, and that is quite right. The contents of the Bill, although important, are only one small aspect of regional policy. If our regions are to recover, thrive and prosper in the future, one has to consider the whole range of policies and not merely one small part.

Although regional development grants have played a part in the recovery of Corby, many other factors have been more significant, including other Government policies. That perspective should never be overlooked. Although I am putting the issue in a wider perspective, I do not want any hon. Member to imagine that what has happened in Corby has happened for any reason other than major Government sponsorship of the recovery. Without that central Government effort and pump-priming, very few of the things that have happened in Corby would have happened. That is a lesson that no hon. Member should be allowed to forget or ignore. It is a lesson that has to be applied in other areas that are still facing hard and difficult times.

The indicators of what has happened in Corby are awesome. When I became its Member of Parliament, Corby stood at No. 20 in the national league table of parliamentary constituencies for those unemployed and claiming benefit. No. one is the worst and No. 637 is the best. It stood at No. 20 in 1983. In February 1987, when the Library did a survey it stood at 323. By November 1987, the latest survey, it stood at 371. During the course of 1988 and beyond it will drop lower and lower, and thank goodness for that.

A modicum of prosperity — I do not want to exaggerate it—has returned to my constituents. It is returning as a consequence of Government policy, including regional development grants. However, other factors have played a part. Perhaps I may be permitted to outline one or two of those which may be more important than regional development grant policies.

First and foremost, there is not the slightest shadow of doubt that derelict land grant has played a major role. The work of the Department of the Environment in sponsoring derelict land grant is fundamental and crucial. Without that, the steelworks would not have been cleared and the land could not have been prepared for companies to come forward and apply for regional development grants, selective financial assistance or any of the other forms of assistance available. Therefore, as I have said, the role played by derelict land grants in regional policy is crucial. I hope that we will see a quickening of pace in the use of derelict land grants. There is no doubt that the urban development corporations offer a hopeful opportunity and opening in that respect.

The second feature of Corby which is of considerable importance is that everybody in the community has been involved in trying to pull things together. It had been done without any partisan rancour and without any partisan disputes. It has involved Labour people and I pay tribute to them. They have done marvels in trying to promote the industrial regeneration of Corby. It has been done by Conservative people and people of no particular political persuasion. They have made use of the fact that the Government are available and taken advantage of what the Government have had to offer. They have not wasted their time in partisan ideological disputes about whether, if other people had held responsibility, things would be done differently. There is no doubt that, if one wishes to build the reputation of one's town and community, one has to persuade the outside world. The outside world is not impressed if local people are falling over themselves to show how they disagree with one another and how they are setting up a totem pole of resistance to this, that or the other.

I have no doubt that if there had been a different Government in Whitehall, Corby district council would not have behaved in a different way. It is to its credit that it has been prepared to work enthusiastically with Ministers of a different political persuasion. If I may be allowed a modest aside, I pay tribute to the way in which it has worked with me and tried to ensure that I am fully aware of what it wants for the town and that I am prepared to help it in every way I can. If I have managed to do that, I have managed to do something for my constituents.

The record of what has happened is awesome. It is not good enough to say that we will not look at the map again. At this time, unemployment in the Corby assisted area is already several percentage points lower than in any other assisted area in the country. I make a prediction to the House that it will get still lower. In the 1990s, Corby may still be an assisted area and still be able to take advantage of high unemployment when, in reality, it has low unemployment and other areas with high unemployment may have no Government assistance other than the 50 per cent. grant for firms with under 25 employees.

I welcome that grant and I am not criticising it. I am merely saying — I make this point about no other constituency because other hon. Members can make their own points—that people will point to the anomaly of special sponsorship and special incentives available to a place which on any criteria does not need them. The people of Corby agree that. I am not making any point against my constituents. They are grateful for what they have received and they understand that it is no longer necessary for them to receive it. So great and powerful is the economic locomotive that is now gathering speed that it is unnecessary to have Government assistance.

The problem we will face in the future is not that of unemployment but of not having enough people for all the jobs. There is a danger that the problems of surplus jobs will be aggravated by policies that encourage people to set up businesses but then do too little to encourage people to move into the area to meet the jobs on offer. We are not facing that crisis yet, but we will before the end of this Parliament: of that there is no doubt. In 1983, 7,000 people were out of work and claiming benefit. The figure is now down to 2,600 and in all likelihood it will be comfortably under 2,000 by the end of this calendar year.

But of course there are problems for those who remain out of work, and regional policy must concentrate funds on those who have been unemployed for a year or more. A significant number of my constituents have been unemployed for a long time. Indeed, they were unemployed even when the steelworks was going like the clappers, and getting them into work so that they can support their families and have all the things that we naturally wish for them will require considerable investment in training.

I welcome the passages on training in the White Paper, but I add a word of caution to my right hon. and learned Friend the Chancellor of the Duchy of Lancaster and to my right hon. and noble Friend the Secretary of State. They must beware reinventing the wheel with all their schemes. Many schemes which have already been working on the side could be developed into fine instruments to helping training and development. The actions of the Department of Employment, the Department of Trade and Industry and the Manpower Services Commission too frequently give those involved on the ground the impression that the wheel is in danger of being reinvented several times each day. It will be necessary to inject some regional and local experience into the natural enthusiasm of central Government policy-makers and planners.

Since 1981, the assisted area of Corby has received £58 million in regional development grant, and we are grateful for all of it. But it is not enough to say that all the £58 million has helped. Much of it has helped, but if one analyses, as I have, the companies which have received more than £5,000 in regional development grant and selective financial assistance since 1980 — the Department's monthly gazette gives all the figures—one sees some interesting facts.

The three biggest recipients of regional development grant and selective financial assistance have been, first, a nationalised industry — British Steel — which was responsible for the job losses in the first place. That delicate irony never ceases to amuse me. Secondly, two international companies with British headquarters but with enormous assets abroad, neither of which is believed to be short of money, have set up plants in Corby which the taxpayer has subsidised heavily. They are magnificent plants. They are welcome, but they are employing only a few people. It is not enough to ladle out money for capital projects which firms could afford in any event. We must keep our feet on the ground and realise that our policies should be aimed at areas of high unemployment.

Fortunately, in 1984, the Government made a change. If one analyses grants that are made now, one notices the sea change. At first, grants were given to firms of high international profile, such as British Steel, and to other less high-profile companies. The burial ground for the latter is a devastating spectacle. But since 1984 there has been hardly a single failure, because the grant has been so tightly tied to the creation of jobs.

No company which comes to Corby now does so because of a grant. That used not to be the case. They come to Corby because it is a good location with an improving reputation and improving local infrastructure and because some—but by no means all—of their bills are paid for them. That is as it should be, but when the Government hand out too much money to companies, failures will occur because companies will then come for the money rather than to improve their business. If they come when it makes sense in their business to do so, that will improve the regions. But even that must be qualified by several factors.

The right hon. Member for Glasgow, Govan (Mr. Millan) made a powerful point about the headquarters of Britoil, and I was with him every inch of the way when he talked about that. The point was also made by the hon. Member for Gordon (Mr. Bruce). What has gone so badly wrong during the past generation—not only in the past few years, but since the second world war — is the decline of regional influence. Two aspects of our national policy, which must be corrected, have caused the decline more than anything else. The first was nationalisation. It centralised in London and destroyed many regional companies. It was disastrous in terms of decision-making for the regions. Nothing could cause more damage than more nationalisation. It would undermine completely any effective regional decision-making because all the decisions would be made in London, usually by Ministers.

The second factor is capital taxation. There is no escaping the damage caused to regional infrastructure by our system of capital taxation, which means that family companies are one-generation companies. They can fund the inheritance tax, or capital transfer tax as it used to be called, only out of the active assets of the company, and they automatically become extremely vulnerable to takeovers. They have been taken over one after another. Pilkington is the only major company with its headquarters in the north-west, because the structure of capital taxation has destroyed all the others.

If there is one point which I hope my hon. Friend the Minister will pass on to the Chancellor of the Exchequer, it is that, if the Government are serious about a regional policy, the sooner that businesses are relieved of having to pay inheritance tax the better.

My right hon. Friend the Member for Henley (Mr. Heseltine) has often said, rightly, that not only does capital taxation destroy family businesses but, worse, the companies which take them over are subsidised by rollover relief from corporation tax. Those companies are destroyed by capital taxation and the people who take them over are subsidised. Unless those two factors are faced—they are central to regional policy—all the other matters will be at the margin.

The Bill must be put in context. The system of regional development grant improved after the changes made in 1984, which I warmly supported. I share the scepticism and anxiety expressed by my right hon. and learned Friend the Member for Richmond, Yorks (Mr. Brittan) and my hon. Friend the Member for Pudsey (Sir G. Shaw) about the future. Although selective regional assistance is a valuable—weapon it was certainly a valuable tool used by the Government in transforming my constituency—unless it absorbs all the money that is being spent on regional development grant, there will be difficulties in the 1990s.

Opposition Members like to play a game about what the sums will be in the 1990s. They know perfectly well that neither this Government nor any Labour Government have been able to project that far ahead. In the next public expenditure review and thereafter, my right hon. and learned Friend and his colleagues will have to press to ensure that the level of assistance available to the regions remains buoyant because there is a vital gearing and pump-priming role that only the Government can play. If we run away from that, we will make it more difficult for the regions to develop again the kind of prosperity that so many regions had in the past.

Photo of Mr Stanley Crowther Mr Stanley Crowther , Rotherham 7:30 pm, 25th January 1988

I must tell the hon. Member for Corby (Mr. Powell) that the steel industry has got rid of far more jobs in my constituency than in his. The difference is that the jobs in my constituency did not all go at the same time. They went over a longer period, so those job losses did not cause the Government to leap into action. In that respect, Corby was far more fortunate than Rotherham.

In opposing the Bill, I do not want to give the impression that I believe that everything is fine so long as we keep regional development grants. It is not. The blunt truth is that no Government have yet managed to produce a really effective regional policy. I said in my maiden speech nearly 12 years ago—I have said this on many occasions both before and since—that the great need is for massive public sector intervention involving many Government Departments, local authorities and the establishment of regional enterprise boards and development agencies with adequate resources to ensure that they can initiate investment on a very large scale. The important point is the initiative role. While the Government and their agencies have no more than an essentially reactive role, we shall never solve the problem.

I appreciate that this is anathema to Conservative Members, but free market forces have created the problem. It is daft to imagine that free market forces can solve the problem, however much we may tinker around the edge with financial incentives, here and there. That will not produce a solution. The carrots have not worked, and no one wants to use the stick. The Government are offering a change of carrot today, but I suggest that we really need a change of donkey.

The position, after many years of so-called regional policy, is that the regional imbalance that the policy was supposed to correct is worse today than it has ever been in terms of employment opportunities, income levels and—very importantly—investment in the modern sunrise industries to which the Chancellor of the Duchy of Lancaster and Minister of Trade and Industry referred. The gap is wider than ever after all these years of what have been called regional policies, but were not.

There is a fundamental difference between this Government and their predecessors. In the 1960s and 1970s Labour and Conservative Governments at least made a genuine effort to reduce the differences in the levels of economic activity between different pans of the country. I accept entirely that without those efforts the position would have been much worse. My hon. Friend the Member for Sedgefield (Mr. Blair) referred to the 600,000 jobs created or saved as a result of regional development grants. That is a very important fact for us to bear in mind.

However, those 600,000 jobs are nothing like enough to close the gap to remove the enormous imbalance. For the first time, the Government are moving in precisely the opposite direction through their economic, energy, transport and local government finance policies. They are widening the gap year by year. I can only assume that they are doing that deliberately. They could change their policies if they wanted to do so. Even in the limited area covered by the Bill, including the regional development grant and regional selective assistance, the amount of cash available has been reduced dramatically, as my right hon. Friend the Member for Glasgow, Govan (Mr. Milian) said.

In my region of Yorkshire and Humberside, in the last financial year, the total amount of cash available for grant purposes was £37.1 million, compared with £54.2 million only five years before. Allowing for inflation, that means that the figure has been cut by at least 50 per cent. Yet that region has enormous potential for development. The region is working hard through the local authorities and regional development association to help itself and it has had some notable successes. It deserves more recognition from the Government, and it needs more Government support. We are not a begging bowl region. W e are not asking for handouts. We are asking for investment, and the Government are failing to provide it.

Ministers tell us ad nauseam how marvellously strong the economy is now. We hear that every week from the Government Front Bench. Only today the Chancellor of the Duchy of Lancaster used the phrase "the rising prosperity of the nation". Perhaps some people are doing very well. Indeed, when I see fairly ordinary houses offered for sale in London and parts of the south-east at £500,000 or one-bedroom flats at £120,000, I am bound to conclude that somebody must be doing quite nicely, thank you. If all this prosperity exists and if the economy is so strong, why have the benefits not filtered through to south Yorkshire, west Yorkshire and other areas that have suffered such pain and anguish as a result of the collapse of our manufacturing industries under this Government's reign?

Ministers should remember that they have a responsibility for the whole country, not just for those areas that loyally return Conservative Members after every general election to ensure that some people can continue to pay £500,000 for a house while others cannot get one at all. My constituents are not asking for the moon. They are asking for the right to earn an honest living. They are asking for the opportunity to do a proper job. All that the young people want is real jobs with a future. They do not want a cosmetic scheme that keeps them involved in some activity for two years and then throws them on to the dole. Like many of the Yorkshire constituencies, represented by my hon. Friends, mine contains areas in which more than half the people available for work are registered unemployed or actually unemployed but not included in the Government's highly manipulated figures.

The Rotherham and Mexborough travel-to-work area has an official unemployment level of 19 per cent. That is a reduction over the past three years from 21 per cent. However, 19 per cent. is an appalling figure. Will the Bill do anything about that? Will it provide jobs for those people who desperately need them? I cannot see how it will do that. In fact, the position is about to get worse. More jobs will be lost in the steel and coal industries. In the constituency of my hon. Friend the Member for Wentworth (Mr. Hardy) a long-established glass works is about to close, with the loss of more than 400 jobs.

Of course there have been good developments. A number of new, small, well-run businesses have been established, and we welcome them. They have had a lot of assistance from the local authority and the Rotherham enterprise agency. They have also been assisted greatly by the availability of regional development grants. Those grants have played a crucial part in creating what is admittedly a comparatively small number of new jobs, but at least they are new jobs. The Minister assures us that selective assistance will increase to make up for the loss of RDG, but it still means that a company which is thinking about setting up in an assisted area no longer has any assurance that Government aid will be available.

Photo of Mr Terry Patchett Mr Terry Patchett , Barnsley East

Does my hon. Friend agree that the Bill simply shows that, because the Government could not win those regions at the ballot box, they are abandoning them? They could not win the metropolitan counties, so they destroyed them. They cannot win at the ballot box regions which desperately need this grant, and the Bill handicaps any future prospects for those areas.

Photo of Mr Stanley Crowther Mr Stanley Crowther , Rotherham

There is a great deal of merit in what my hon. Friend says. It is no accident that most of the areas which so desperately need public sector backing to bring them up to something approaching the level of prosperity of the south-east, send Labour Members to this House. I do not think that the Government could care less, so long as they are able to keep a large majority without the aid of many people in Scotland and the north of England.

Photo of Kevin Barron Kevin Barron Shadow Spokesperson (Energy and Climate Change)

Any reduction of grant to the areas represented by myself and my hon. Friend will be measured by the number of jobs available to 16-year-old school leavers. I am sure that my hon. Friend is aware that 80 per cent. of those who left school in July in our areas have been unable to find work.

Photo of Mr Stanley Crowther Mr Stanley Crowther , Rotherham

My hon. Friend is right. I referred to that point a few minutes ago. That will be the crucial test. The Bill will do nothing for those thousands of young people who desperately need proper jobs with a future.

I mentioned the difficulty that will be created by uncertainty about the availability of grants. It has always been in the power of Governments to change the criteria. All Governments have changed their criteria from time to time. When a company was able to meet the criteria, it was guaranteed that the cash would be there. That will no longer be the case. The Government are moving the goal posts and saying, "Even if you get the ball between the posts, there is no guarantee that you have scored a goal." That will cause immense problems. It should be borne in mind that automatic grants will continue in assisted areas of France, West Germany and the Netherlands, which compete with us for inward investment from Japan, the United States and elsewhere.

Perhaps the Government have not attended to that point properly. The Chancellor of the Duchy of Lancaster and Minister of Trade and Industry told us that, in such cases, regional development grants are not important in making decisions. I do not believe that. The evidence points the other way. Regional development organisations, such as the Yorkshire and Humberside Development Association which I helped to set up almost 16 years ago, will now face even more difficult circumstances in competing with people from other parts of the Common Market. They are already operating in a highly competitive international environment. Ministers do not appreciate how competitive it is. The Bill will certainly not help those people. It will make life far more difficult for them. It will do nothing to help those areas which are short of jobs and which need new industry. It is a thoroughly bad Bill and it should be defeated.

Photo of Mr Tim Smith Mr Tim Smith , Beaconsfield 7:43 pm, 25th January 1988

There is a marked contrast between the constituency of the hon. Member for Rotherham (Mr. Crowther) and my constituency of Beaconsfield. Given that there is 19 per cent. unemployment in the Rotherham travel-to-work area and that unemployment in my constituency is so low that it does not pose a real problem—we have a shortage of labour — what is the most effective way of tackling this problem? What can the Government most effectively do to help?

Photo of Mr Tim Smith Mr Tim Smith , Beaconsfield

In response to the hon. Gentleman, the Government cannot create jobs.

Photo of Mr Tim Smith Mr Tim Smith , Beaconsfield

I am responding to the hon. Gentleman's sedentary intervention. The Government cannot create jobs, but they can create the conditions in which jobs are more likely to be created.

Photo of Hilary Armstrong Hilary Armstrong Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson

I am grateful to the hon. Gentleman for giving way. The Government create many jobs by the direct aid that they give in such matters as defence contracts and research and development grants. That is one of the main ways in which the Government have been aiding the boom in the south-east and making sure that the north does not get its requisite amount of money. For example, in the past two years, 50 per cent. of Government money for research and development went to the southeast and 3 per cent. to the north.

Photo of Mr Tim Smith Mr Tim Smith , Beaconsfield

Of course, that may be the case, but the Government can spend money on defence only if the wealth is created in the first place and taxes are raised to pay for the defence contracts. We are discussing the wealth creation process, how we can create the wealth which will create the jobs that we all want.

I have listened to today's speeches with great care. The hon. Member for Sedgefield (Mr. Blair) appeared to be saying that the acid test is the quantity of spending, not the quality. The success of Government policies should be assessed not by how much money is spent, but by the success of the policy in practice, and whether it proves cost-effective.

The extracts quoted by the hon. Member for Sedgefield from three Department of Trade and Industry reports, particularly the second extract, could equally well have been used to support the policy promoted by the Government in the Bill. If I remember the figures correctly, one of the reports stated that 25 per cent. of the investment projects under RDG would have gone ahead anyway. That is precisely the point—a large proportion would have gone ahead anyway. Selective assistance will ensure that only those projects which would not otherwise have gone ahead will go ahead with the support of taxpayers' money.

In an editorial of 13 January, The Independent stated: The existing system of automatic regional aid has not been notably successful: it has been exploited by large companies to subsidise investment that would anyway have taken place. Those are not my words. They are the words of The Independent, a newspaper not always noted for supporting Government policies.

I welcome this Bill as part of a package of measures which ensures that regional assistance will, in future, be selective and directed to those projects in most need of it. Applicants for regional selective assistance will have to show that assistance from public funds is needed for a project to go ahead. In other words, the taxpayer will not in future be supporting investment projects that would have gone ahead anyway, without his support.

The National Audit Office has recently conducted a review of regional support. it is unfortunate that that report is not yet available to inform our debate, but I should be surprised if the Comptroller and Auditor General does not question the cost-effectiveness of automatic RDG.

Photo of Malcolm Bruce Malcolm Bruce Shadow Spokesperson (Energy and Climate Change), Shadow Spokesperson (Environment, Food and Rural Affairs)

Is the hon. Gentleman aware that the academic report carried out by the Department of Trade acknowledged that many of those projects would not have gone ahead in assisted areas without the grant? How does he respond to that?

Photo of Mr Tim Smith Mr Tim Smith , Beaconsfield

That may be the case, but my understanding of regional selective assistance is that, if it can be demonstrated to the satisfaction of the Department of Trade and Industry that, if assistance is not given, the project will not go to the regions, regional selective assistance will be available. I may have got that wrong, but it is my understanding that, in those cases, assistance will still be available. That is the point of regional policy—to direct investment to the regions.

Photo of Mr Kenneth Hind Mr Kenneth Hind , West Lancashire

Is there not some misunderstanding on the part of many Opposition Members about the nature of regional selective assistance? My local council and I are helping to obtain a major investment in our area, which is being considered by the Department. About £1.75 million of that investment is RDG, and £14 million of it is regional assistance. Surely there is a clear message to Opposition Members that the majority of effective aid that is required for major development areas must be regional selective assistance.

Photo of Mr Tim Smith Mr Tim Smith , Beaconsfield

My hon. Friend obviously has more experience of such matters than I have. He is right. We must consider the most cost-effective way of combating unemployment in the regions. As I said, there is virtually no unemployment in my constituency today. That is true of many constituencies in the south-east. The latest quarterly survey from the East and South Buckinghamshire chamber of commerce tells me that home and export orders are moving ahead well, businesses are profitable and expanding, and cash flow is positive. The main restraint on growth is a shortage of labour.

To a limited extent in the south-east, it is possible to employ people from areas of high unemployment. The jobcentre network advertises vacancies nationally. The South Buckinghamshire district council can employ a lorry driver from the north because it can offer him a house to go with the job. Some employers offer mortgage subsidies to people from the north whom they particularly want, to combat our high house prices. But, for most people, the lack of reasonably priced housing is an insuperable obstacle. Furthermore, I am constantly pressed by my constituents to support — indeed I do support it — a restrictive planning policy that will preserve the green belt and ensure that we do not become overdeveloped.

We will not solve the problem of regional unemployment in the north by recruiting in the south. Instead, we must make it more attractive for employers who are restrained by a shortage of labour to relocate in their entirety in the regions or invest in new capacity in the regions. We must create a new business climate in inner cities—a climate that is friendly rather than hostile to wealth producers; a climate of incentives rather than disincentives.

We need systematically to look at each of the costs of running a business, over which costs the Government have some influency or control. The two most obvious costs are rates and national insurance contributions. The uniform business rate that is proposed in the Local Government Finance Bill 1987 will have precisely the desired effect of substantially reducing business rates in inner-city areas of the north and increasing them by a corresponding proportion in many areas of the south.

Wage rates are already lower in the north than in the south, but the Chancellor of the Exchequer may wish carefully to examine the proposals that have been made for lower national insurance contribution rates in assisted areas.

There are also the costs that businesses should carry if they are satisfactorily to grow and develop. But such costs may be perceived by small and medium-sized firms as too expensive and just not worth it. Such costs are ro be subsidised by the enterprise initiative. They include the costs associated with achieving better design, improved marketing, superior quality of management and high-tech manufacturing systems. It is right that the enterprise initiative should discriminate in favour of assisted areas and urban programme areas by offering higher rates of grant to businesses that take consultancy advice.

Because the general level of economic activity is lower in the regions than in the south, starting a business from scratch is less easy. Yet, given the traditional dependence of some regions on a few large businesses, the growth of the independent business sector is urgently required. Only then is economic growth more likely to become naturally self-generating. For that reason, the White Paper proposal to offer grants to firms in development areas that employ fewer than 25 employees is especially welcome.

Investment grants for investments and fixed assets of £100,000 or less and innovation grants for investments in product and process developments of £50,000 or less will be a major incentive for small firms. All such measures will be far more cost-effective in stimulating enterprise in the regions than the scatter-gun approach of regional development grants.

Some have said that at least RDG involved an element of certainty and that it is unfair to impose on officials such a subjective decision-making process as is involved in administering selective regional assistance. The RSA scheme is not new. Objective published criteria are already built into it to determine whether public funds are needed for a project to go ahead. Such decisions need to be taken at a local level and with some private sector input. That is precisely what happens at present through the Industrial Development Advisory Board. The Scottish Development Agency, the Welsh Development Agency and the expanded network of local DTI offices in England will be best placed to do that work against the background of nationally set criteria.

Regional selective assistance will be particularly effective in ensuring that the United Kingdom continues to attract mobile inward investment and to qualify for help from the European regional fund. There is no reason to mourn the loss of RGD. Therefore, I commend the Bill to the House.

Photo of Mr Giles Radice Mr Giles Radice Chair, Treasury & Civil Service Sub-Committee 7:55 pm, 25th January 1988

After reading the White Paper, hearing Lord Young in another place, hearing the Minister and the hon. Member for Beaconsfield (Mr. Smith), Opposition Members must make anew the case in principle for regional policy. Put in its simplest terms, the case for regional policy is that unbridled market forces accentuate rather than decrease disparities and differences between regions, particularly between north and south.

According to classical theorists, the existence of unemployment in depressed regions is meant to force down wages. I have often heard the Minister saying things that demonstrate that he would support that idea. Apparently, that will induce employers to hire more workers. The theory is that at the same time as new factories open in depressed regions to take advantage of lower labour costs, workers in the north will migrate south in pursuit of higher wages. In that way, so it is argued, disparities will be ironed out. That is the classical theory, but it is not in fact what happens. Reality does not correspond to the simple market model.

There is a lack of adequate housing in the south—we heard about that from the hon. Member for Beaconsfield —and a lack of so-called job opportunities. I am glad that wages are kept relatively high in the regions by national and multi-plant bargaining. Theoretical economists forget that a fall in wages will mean reduced regional purchasing power, which will mean reduced income and, therefore, reduced employment in depressed regions.

There is the further point that reliance on labour-intensive industry alone, as in the classical model, does not produce the balanced growth that is required in the regions. Of course, more fundamentally, a simple market model ignores some of the underlying causes of regional differences and disparities, such as the crucial geographical distance between the centre and the periphery, which is the key to regional imbalance, the concentration of headquarters and research and development in the south, and the different structures of regional economies and markets. Most important of all, it ignores social needs and overall national economic requirements.

We simply cannot afford to consign any region to the scrapheap. Because Governments, Conservative and Labour, have recognised that simple point, they have supported regional policy. Indeed, a Conservative Government first introduced regional assistance—albeit on a limited basis — in 1934. In the early 1960s, Macmillan's Government first recognised the north-south divide in its modern form. The right hon. Member for Old Bexley and Sidcup (Mr. Heath), the architect of the Industry Act 1972, first introduced regional development grants in their present form.

Hon. Members on the Government Benches forget or ignore what my hon. Friend the Member for Sedgefield (Mr. Blair) has told them: that regional policies have been effective. Department of Trade and Industry economists have shown that, because of regional policies, there had been an increase of between 350,000 and 630,000 jobs by 1981 in the assisted areas, a large number of which were created by regional development grant. Without a regional policy, therefore, the situation would have been far worse than it is.

The truth is, however, that the case for regional policy is even stronger in present conditions—hon. Members representing the north know that the north-south divide exists—because there is no better time to have a strong regional policy than when the economy is expanding. It is precisely when the national economy is expanding generally that firms are more easily encouraged to expand in assisted areas; and, if we want the national economy to go on expanding, we have to prevent the south from overheating. Regional policy which seeks to spread expansion will help not only the north but the south, and so keep national expansion going generally. So it is a very good time to have a strong and active regional policy, but a very bad time to get rid of automatic grants.

The Department of Trade and Industry report has shown that RDG saves and creates jobs, yet in this Bill we are moving right away from automatic grants, and neither we nor the Minister can be certain that selective grants will be as effective in saving or creating jobs, particularly when other countries are continuing to use automatic grant.

We have heard about the problems for larger firms. The right hon. and learned Member for Richmond, Yorks (Mr. Brittan), a former Secretary of State, made the point very effectively when he intervened with a question on the statement two weeks ago. He said: there were real advantages in a system where a business man was aware that, if he satisfied a published criterion he was entitled as of right to regional assistance instead of having to go cap in hand to civil servants". —[Official Report, 12 January 1988; Vol. 125, c. 151.] The right hon. and learned Gentleman might also have pointed out that in that case the business man would not have had to pay tax on automatic grants.

Today, only one third of the money is under the direct control of civil servants; in future, all the power will be in their hands. I do not criticise civil servants. On the whole, I believe that they do a good job, particularly in the northern region. But this Bill represents a major increase in Civil Service power, with all the temptations and possible abuse that that can bring, quite apart from the fact that civil servants will now be able to delay, turn away and squeeze the overall budget as Ministers in Whitehall dictate.

What about small firms? We have heard from the Minister that his scheme will prevent the bad impact of removing automatic grants, but I know from my own constituency experience that small firms do not have the know-how, the time or the back-up to apply for selective grants. The scheme that the Minister is introducing will not be automatic, and he has not said that it would be, despite questions from hon. Members. In any case, it applies only to firms employing 25 people, or fewer, and not to firms which employ 26 or 30, 50 or 60. The fact is that small firms will be hit by the move to selective grants.

It is true that in the White Paper the Minister makes much of the regional aspect of the business development initiative and the fact that there will be help for small firms in the regions, but my hon. Friend the Member for Sedgefield has shown that much of that assistance will be spent in the south. In any case, I am extremely sceptical about the utility of such large resources going to such a scheme. I can see that it is very nice for consultants. Money will pour into the coffers of consultancy firms, and it will pour in irrespective of any ultimate utility or positive achievement. It is not payment by results at all, and it is certainly a bonanza for consultants. I cannot believe that such an expensive scheme will show a good return to the regions.

I am deeply sceptical about the Government's commitment to continue to spend money and resources in the same way as now. The Government invite us to look into the crystal ball, but, to quote a famous Socialist, one does not need to look into the crystal ball when one can read the book. The book says that the Government cut regional aid by £300 million between 1979 and 1986, that they will cut regional aid by £300 million this year and that regional expenditure in the north is only 43 per cent. of what it was in 1978–79. With that kind of record, we are bound to be very sceptical about promises for the future, particularly when the Minister actually showed during his speech—and when he refused to answer the questions from my hon. Friend the Member for Sedgefield—that he has tried to fudge the White Paper figures.

The tragedy is that the present economic expansion could provide an excellent background for an effective, sustained and adequately financed regional policy which would be a real partnership between central Government, local government and industry, a partnership to revitalise the regions.

Photo of Mr Dennis Turner Mr Dennis Turner , Wolverhampton South East

Does my hon. Friend agree that the Government have signally failed to recognise and support a most effective instrument of regional intervention, such as the regional enterprise boards? In my own area, the West Midlands enterprise board has, over the past five years, helped in the creation of 3,500 jobs, invested £40 million and assisted 41 companies in the process.

Photo of Mr Giles Radice Mr Giles Radice Chair, Treasury & Civil Service Sub-Committee

I entirely agree with my hon. Friend. We in the northern region would like to have such a development agency. We have put the case for one to the Government on many occasions, but they have failed to accept it. My hon. Friend has drawn a useful analogy.

Instead of supporting this kind of partnership, instead of expanding regional policy—as they could do with all the money they have — the Government — partly, I suspect, to satisfy Lord Young's vanity—are once again changing regional policies. They are making changes which seem designed not to reduce regional disparities but to decrease the amount of money spent on the regions. This is a thoroughly bad Bill. It is inadequate and irrelevant to the real needs of the regions.

Photo of Mr James Cran Mr James Cran , Beverley 8:07 pm, 25th January 1988

I want to make my contribution to the debate this evening against the background that I too am a Member from the north and not from the south and that, before coming to the House, my experience as northern director and also west midlands director of the Confederation of British Industry has given me a unique insight into how regional policy in this country has worked—or, as I contend, has not worked at all.

I listened very carefully indeed to the extremely eloquent speech of the hon. Member for Sedgefield (Mr. Blair). What he was really telling hon. Members and anyone who reads the record was that regional policy in its classical form would solve the problems of this country. I heard it also from the hon. Member for Durham, North (Mr. Radice), who said that all we need is more resources. What I shall say has already been said but I do not mind mentioning it again because I think that every hon. Member should continue to look at the facts of regional policy. I took the trouble to look at those facts and to find out that, over the past 20 years, between 1964 and 1984, successive Governments of all complexions have spent about £20,000 million on regional policy. So 1 find it extraordinary that we have had the proposition continually put to us from Opposition Members that resources have not been put into regional policy. 'They have been put in with a vengeance.

The record, shows—there is variation in the statistics —that about 500,000 jobs have been created. I would be the first to say that those jobs were valuable, but they were not enough for the money that we put into regional policy in the past 20 years. At a cost of £35,000 or £45,00() per job, it has been a dramatic failure, of the classical form, in regional policy. That does not mean that I do not want a regional policy. The argument between myself and Opposition Members is what sort of regional policy we should have.

With regard to my experience in the north of England, where I spent five years, what did regional policy do of which any of us could be proud? Some 80 per cent. — plus of people employed by companies in the north of England were employed by companies whose headquarters were not in the northern region. The hon. Member for Gordon (Mr. Bruce) made great play of the fact that there are insufficient company headquarters in the regions. However, he did not tell us how to attract them. Regional development grants will not attract them to the north of England or anywhere else; they will lead to a dependent economy. I found a low level of management in the region, with no autonomy to take decisions for the good of the companies or the region.

Photo of Mr James Cran Mr James Cran , Beverley

The hon. Lady has had ample time to make her case. She should listen for a change.

I also found in the northern region—it is the same in the other regions that Labour Members have been talking about — that there was little or no research and development capability. One of the prerequisites of any successful regional policy is such a capability. I know that you do not like to look at unpalatable facts—

Photo of Mr James Cran Mr James Cran , Beverley

I am sorry, Madam Deputy Speaker.

The past 50 years of regional policy, although it has been well-meaning, has been relatively ineffective. All it has produced — if anyone can produce facts to the contrary I would love to see them—are fragile, lopsided, recession-prone, drip-fed regional economies. That is what 50 years of resources being pumped into the regions, in the amounts of which Labour Members approve, has done.

Not only has regional policy been ineffective; it has been positively destructive. During my experience in the north I found that it encouraged the big company job mentality—one gets a job down the end of the road, where everybody has done so for the past 50 years. That is destructive; understandable, but destructive.

At one time, the west midlands — this is a phenomenon of which we are all aware—was one of the most prosperous regions of the United Kingdom. It had no assisted area status. Then it fell on hard times. Why? That is the salient question. There were many reasons. One was that given by the hon. Member for Gordon —interventionism of the Government that we have experienced in regional policy for some time.

There were industrial development certificates. The policy behind them was that the Government operating from the south-east had to redistribute industry throughout the United Kingdom. My goodness, they did that with a vengeance. The automotive industry left the west midlands. Ford went to Halewood, Standard Triumph went to Speke, Rover went to Cardiff and Rootes went to Linwood. Need we go further than to remember what happened to Rootes? The natural home for that investment would have been the west midlands. Unfortunately, what interceded was regional policy of the classical kind that Labour Members want to perpetuate.

Early-day motion 569 says that the House views with alarm the Government's plans for further cuts in support for regional industry under the guise of selectivity. I was present when regional policy for the west midlands was being discussed. At that time it did not want a regional policy because it knew how destructive it could be. It was pulled kicking and screaming into regional policy, and I suspect that it was correct in not wanting that regional policy.

Regional policy has clearly not succeeded according to the standards that I, not Labour Members, set. All it has done is provide a temporary jobs lifeboat. If the standards of Labour Members are as low as that, it is no wonder that it has taken us so long to re-evaluate regional policy. It has attracted only closure-prone production units to the regions of the United Kingdom. I hope that in the next 50 years we shall not experience the sort of regional policy that we have had for the past 50 years.

The ultimate judgment of regional policy is that when I have looked at the assisted area status map of 1934—it would be interesting to know how many people have done this—and compared some of the areas on it with those on the present map, I found that a number of areas on the first map are present on the second. We have been unable to remove some of those assisted areas from the map, which is definitive proof that something has been dramatically wrong with the policy.

I agree with those who have said that regional development grants are wasteful. I shall not desist from reminding the House that we gave £100 million for a capital-intensive project at Sullom Voe, which, at the end of the day, produced very few jobs. I gathered from what was said by Opposition Members that regional policy should be judged by the number of jobs that it produces. That investment produced very little. Many of us believe that that investment would have gone to Sullom Voe anyway. There was probably nowhere else for it to go, so we wasted £100 million that could have been better spent in other regions of the United Kingdom. The tragedy of the matter is that that is not only one such example. There are many.

There are further weaknesses in regional development grants policy. Multinational companies, which, as we all know, are very sophisticated outfits, are extremely adept at using the system of regional development grants to set one country or one region against another. That is not how we should run regional policy. Regional development grants, or regional policy as we know it, have not taken into account how industrialists operate and think. I think every hon. Member will agree that if someone throws money at us, we catch it. It is human nature, and that is what has been happening with regional development grants, for as long as I can remember or for as long as anybody with any knowledge of this system can remember.

As for the PIEDA report sponsored by the DTI in 1987, I must confess that I distrust some of the answers because they are enormously at variance with much that I have heard from the industrial community in the past 10 or 15 years. Before Labour Members smile too much about that, I remind them that that report told me that 71 per cent. of companies said that location was not affected by regional development grants and that is why I am doing as much as I can to support what I think is an enlightened and far-seeing Bill. We need other ways to strengthen the regions of the United Kingdom. I am clear about that. The Government will retain my support only as long as they say that that is their aim. I have heard nothing from the Government to say that that is not their aim. That is why I support the Bill. I only mourn the length of time it has taken for us to get here to talk about it. I strongly support the Bill.

Photo of Mr Geoffrey Lofthouse Mr Geoffrey Lofthouse , Pontefract and Castleford 8:22 pm, 25th January 1988

I was interested in the speeches made by the right hon. and learned Member for Richmond, Yorks (Mr. Brittan) and by the hon. Member for Pudsey (Sir G. Shaw). I recognise that they may be suffering from an incurable disease of this House—"out-of-officeitis"—but I find that when people of experience have something to say that arises out of their experience in office, once their personal ambitions have gone one sometimes gets the truth. I hope that the hon. Member for Pudsey was convinced by some of my visits to him when he was a Minister, because much of what he had to say covered points which I want to make this evening.

In the earlier speeches in the debate made by the Chancellor of the Duchy of Lancaster and my hon. Friend the Member for Sedgefield (Mr. Blair), figures were' thrown across the Floor of the House in disagreement. However, I was certain of one thing—none of them would be coming to my area. 1 think that everyone will agree that regional policy does not mean a thing if it is not effective. If regional policy, White Papers or Bills do not take into consideration parts of the country and areas of the regions with severe unemployment problems, then the Government that have produced the White Paper or the Bill are not facing up to their responsibility.

Paragraph 7.1 of the White Paper called "DTI — a department for Enterprise" says: Regional and inner city problems have often been caused by inflexibility in responding to the decline of traditional industries, the low rate of creation of new firms and inadequate levels of innovation. Paragraph 7.11 says: Regional policy remains based on the existing regional map. The Government have concluded that it is too soon to re-open the definition of the boundaries of the Assisted Areas which were last fixed at the end of 1984. The present intention is that the existing map should remain in place for the lifetime of this Parliament. Areas with coal mining communities, like my own, have been virtually wiped out since 1984, and are suffering severe economic and unemployment problems.

Before 1981, the Castleford travel-to-work area enjoyed assisted area status. I tabled a question to the Chancellor of the Duchy of Lancaster asking if he will list the total value of regional assistance given to companies in the Castleford travel-to-work-area for each year since 1979."—[Official Report, 9 January 1988; Vol. 125, c. 672.] I received a reply showing that in 1979, the area received £275,000. The following year, 1980, that grant increased to £1,173,000. Since that time — bearing in mind the period of the miners' strike in 1984 — assistance has continued to decline. In 1987, the area received not one penny of assistance in any form.

In that period, the area also lost its two staple industries of coal and glass. All hon. Members are aware that the coal industry was run down rapidly, without any effort to help and without any planning to put alternative employment in its place. In that period, my constituency —not throughout the whole of the Castleford travel-to-work-area—lost five pits. That meant, with the spin-off jobs, that something like 10,000 jobs were lost over a short period. We have made persistent representations through correspondence, visits to Ministers and visits by Ministers, in an attempt to persuade them to rezone the Castleford travel-to-work area and make it an assisted area. The Regional Development Grants (Termination) Bill makes it clear that the Government have no intention of doing that.

Concern has been expressed by the hon. Members for Pudsey and for Corby (Mr. Powell) who, in giving examples from their constituencies, have pointed out that constituencies with a low unemployment rate continue, under the Bill, to enjoy assisted area status and the grants that go with it. I hope and expect that the Minister will tonight be able to explain whether there is some assistance within the Bill from which areas like mine could benefit. If not, why not? I hope that he will be able to tell areas like mine why the Government feel that no assistance is required. I hope that he will be able to tell us that they will get special assistance, but I cannot find any in the Bill. I certainly cannot find any in the Bill. At present, unemployment in my constituency costs £5 million a year. Would not that sum be better spent on designating Pontefract and Castleford an assisted area, to facilitate investment in the area and create jobs? Without that, we are a doomed area.

The right hon. and learned Member for Richmond, Yorks (Mr. Brittan) referred to one of his local papers —the Cleveland Express, I think it was.

Photo of Mr Timothy Devlin Mr Timothy Devlin , Stockton South

I think that it was that famous Left-wing magazine, the Middlesbrough Evening Gazette.

Photo of Mr Geoffrey Lofthouse Mr Geoffrey Lofthouse , Pontefract and Castleford

Whatever it was, it pointed to the success of the area and referred to a bright future. My own local paper, the Pontefract and Castleford Express, which is certainly not political, repeatedly points to the problems of the area. Only a fortnight ago it carried a major front-page story drawing attention to the great problems. It is not only that the area lacks jobs. It has become completely rundown, partly because of the Coal Board's callous decision to sell off all its houses in the area, thus creating problems for men who have worked in the coal mining industry all their lives and for their families. The paper published photographs which I have sent to different Departments. I hope that they will influence someone.

When the Select Committee on Energy conducted its investigation of the coal industry in 1986–87, Ian MacGregor, the then chairman of the Coal Board, and the Secretary of State for Wales, who was then the Secretary of State for Energy, informed that Committee that the problems of coal-mining communities savaged by the rapid rundown of the pits were the responsibility not of the Department of Energy, but of the Departments of Employment and of Trade and Industry, which had a responsibility to provide alternative employment. The Select Committee accepted that.

Whatever the inadequacies of the Bill, I hope that it will make special assistance available to areas that need it. I only hope that the Government will be able to dispel the suspicions of those in the mining community who feel that this Government have had it in for the miners and want to continue to crush them. They fear that because the Government have nothing to gain by offering assistance to areas where the mining communities are loyal to Labour and return Labour Members of Parliament, they will let them stop there and rot. I hope that the Government will dispel those fears.

Photo of Mr Timothy Devlin Mr Timothy Devlin , Stockton South 8:34 pm, 25th January 1988

Let me begin by stating the general view held by Conservative Members: we cannot and should not force companies and enterprise to move to locations where they do not want to be. The north-east region, from which I come, has to get up on its own two feet and create its own economic infrastructure, which cannot be grafted on by national Government. We have only to look back at the notable failure of the car plant at Linwood and the aluminium smelter at Invergordon to see that an unnatural market position will collapse if the subsidies are not there to support it.

In most cases, large-scale industry in the region is more widely based internationally and makes investment decisions according to other criteria. Undoubtedly, ICI would have made the investment that it has made over the past few years regardless of regional development grant. As hon. Members have told the House before, capital investment has cost jobs. In answer to my hon. Friend the Member for Pudsey (Mr. Shaw) who is no longer here the mobile investment to which he referred could easily be covered by regional selective assistance. Indeed, I am sure that it will be.

Regional aid should seek to encourage ventures to go ahead that would not otherwise do so. It should fill the gap in cases where the risk is just too wide for banks to make loans but narrow enough to represent a prudent investment. We should look to smaller and medium-sized businesses to increase their output and market.

For far too long, the north-east has relied on the industrial giants to provide employment. Since the 1930s, Socialist persuasion has turned many eyes in the region towards the Government, to create employment. It cannot be stressed too often in the north-east that it is individuals and companies who create jobs. The Government are not the universal provider, and nor should they be.

Enterprise always played a key role in north-eastern culture before the Jarrow March. Middlesbrough was built to accommodate the new industrial classes of the late 19th century, using what was then the very latest technology. Dorman Long, now British Steel, Ashmore, now Davey McKee and Cleveland Bridge—all successful companies —were founded and built up by enterprising individuals who banded together without any regional aid. Some, like Pickerings Lifts in Stockton, are family firms, handed down from enterprising father to entrepreneurial son.

Such enterprise remains and this initiative will bring it back to the surface. Not long ago, I visited St. Peter's enterprise centre in my constituency. The centre runs a youth training scheme, and the occasion of my visit was its open day. Some of the 17-year-olds told me that they would like to open a shop or a small business dealing in aquarium accessories. Another started in printed T-shirts and is now in the rag trade. Ten years ago on Teesside, people of that age were expected to go into ICI, British Steel or British Shipbuilders. Their parents would have discouraged such enterprise in favour of a solid, dependable apprenticeship in a declining industry. There are now 10,000 self-employed people on Teesside and 6,000 new businesses are set up each year in the north-east.

My right hon. Friend the Prime Minister is quite right in saying that talent, initiative and ability are present in the region. This debate is about a measure designed to foster that talent, initiative and ability, and I believe that the targeting proposal will achieve that.

The enterprise in the north-east is proving an attractive feature to outside and inward investors alike. My hon. Friend the Member for Pudsey talked of the need to attract people to the region from outside. He called them the big mobiles. He needs to consider not just regional aid but a range of relevant aspects, such as the skilled work force, the commendability of the location and recommendations from other companies, as well as arrangements for grant.

Nissan is extremely happy with its north-eastern work force. It is now building better Bluebirds in the north-east than in Japan and recently announced an expansion that will bring 1,400 new jobs to the north-east. Mitsumi has confirmed that it is to set up a new electronics manufacturing operation in south Tyneside, expected to employ 400 staff by its third year.

Photo of Mr Timothy Devlin Mr Timothy Devlin , Stockton South

No, I am not giving way.

Tallent Engineering at Darlington has set rolling a new assembly line, installed especially to make parts for Nissan cars. Elta Plastics in my constituency is now making parts, not only for Nissan, but for Ford and Hitachi. All those developments are the result of recommendations made by word of mouth. NEI Power Projects of Gateshead has won a £2 million project to supply lighting and electrical equipment to the port of Rangoon in Burma.

Photo of Frank Cook Frank Cook , Stockton North

Will the hon. Gentleman give way?

Photo of Mr Timothy Devlin Mr Timothy Devlin , Stockton South

Davy McKee has letters of intent to build two steel-making plants in South Korea. Following on from what my hon. Friend the Member for Beverley (Mr. Cran) said, Davy McKee is one of the more interesting firms as it carries out a great deal of research and development in the north-east.

Photo of Mr Timothy Devlin Mr Timothy Devlin , Stockton South

Tetleys at Eaglescliffe is now the largest teabag manufacturer in the world. AL-KO of Consett, County Durham—

Photo of Mr Timothy Devlin Mr Timothy Devlin , Stockton South

I know that Opposition Members do not want to hear about the north-east's successes because they are too used to giving out doom and gloom, but I shall tell them of some of the—

Photo of Mr Timothy Devlin Mr Timothy Devlin , Stockton South

No. The hon. Gentleman can make his own speech.

AL-KO of Consett, County Durham, has launched a comprehensive range of power washers for domestic and industrial use. Silleck Mouldings in Stockton is currently carrying out a £1–3 million expansion programme to recruit extra staff in the next six months to make plastic computer parts.

Photo of Frank Cook Frank Cook , Stockton North

Will the hon. Gentleman give way?

Photo of Mr Timothy Devlin Mr Timothy Devlin , Stockton South

I have already said that I am not giving way.

Armour Plastics of Sunderland is to invest £700,000 over the next three years. The work force is to increase by 30 to 80. It makes a range of baths and sanitary fittings.

Photo of Frank Cook Frank Cook , Stockton North

On a point of order, Madam Deputy Speaker. Is it not a convention in this Chamber that when an hon. Member refers to the constituency of another hon. Member and there is a point at issue, that hon. Member would normally, under reasonable circumstances, give way?

Photo of Miss Betty Boothroyd Miss Betty Boothroyd Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. Let me answer this point of order. Hon. Members must decide for themselves whether it is appropriate to give way. I understand the point that is being made, but I can see the clock and I quite understand the position at this time.

Photo of Mr Timothy Devlin Mr Timothy Devlin , Stockton South

Well, Madam Deputy Speaker, Silleck Mouldings, the last company that I mentioned, happens to be in my constituency. The hon. Member for Stockton, North (Mr. Cook) should have intervened five minutes ago when I mentioned his.

Photo of Frank Cook Frank Cook , Stockton North

On a point of order, Madam Deputy Speaker. For the sake of the record, I tried consistently to intervene but this hon. Member consistently refused to allow me.

Photo of Miss Betty Boothroyd Miss Betty Boothroyd Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. That is hardly a point of order for me. However, I try to keep a close eye on the clock.

Photo of Mr Timothy Devlin Mr Timothy Devlin , Stockton South

If I may continue. There are small companies in starter units, for example, a small company in my constituency makes speedboats. It now wants to expand and to build luxury yachts for use in the West Indies

Photo of Frank Cook Frank Cook , Stockton North

On the issue of speedboats, will the hon. Gentleman give way?

Photo of Mr Timothy Devlin Mr Timothy Devlin , Stockton South

No, I shall not.

A small company—also in my constituency—called Videoscan makes short-range video transmitters—

Photo of Frank Cook Frank Cook , Stockton North

On the issue of video transmitters, will the hon. Gentleman give way?

Photo of Mr Timothy Devlin Mr Timothy Devlin , Stockton South

No.

—so that cabling does not need to be used to project programmes in house. Another small company—also in my constituency — turns over £3 million per year, making lipsticks holders.

Things are improving rapidly. It has been a record year for North-East Investors, the regional capital fund. Profits are up by 34 per cent. In the past three months, 63 per cent. of companies in Teesside chamber of commerce have increased their sales and 34 per cent.—

Photo of Frank Cook Frank Cook , Stockton North

On the issue of the Teesside chamber of commerce, will the hon. Gentleman give way?

Photo of Mr Timothy Devlin Mr Timothy Devlin , Stockton South

No.

—and 34 per cent. have revised their investment plans for plant and equipment upward. It is interesting to note—I know than many hon. Members are anxious to hear good statistics from the north-east — that 79 per cent. believe that turnover will increase and 76 per cent. believe that profitability will increase. Compared with 12 months ago, more report that they have increased sales, more report that they are upgrading their plans for investment and considerably more anticipate increased sales and profitability. Compared with three months ago, export sales have shown a great improvement and the work force is increasing.

Photo of Dr Mo Mowlam Dr Mo Mowlam , Redcar

Will the hon. Gentleman give way?

Photo of Mr Timothy Devlin Mr Timothy Devlin , Stockton South

No. I shall come to the hon. Lady's constituency in due course.

There are several exciting ventures, including seven flagship projects in the Teesside development corporation—£160 million is being spent on them. It was good to hear my right hon. and learned Friend the Member for Richmond, Yorks reading a positive image of our area from the Middlesbrough Evening Gazette. I pay tribute to my hon. Friend the Member for Corby, who stressed the need for a positive self-image and the need to convince other people of the greatness of one's product.

I should add that we must convince ourselves in the north-east of the enterprise culture that is already there. We must see all of Teesside working together. We must learn from Corby, and I hope that before long Teesside will suffer from Corby's difficulty in looking forward to a situation in which we have too many jobs—

Photo of Mr Timothy Devlin Mr Timothy Devlin , Stockton South

No, in fairness to the whole House I do not think that I should give way.

Smiths Dock is to become an offshore supply base. Bowesfield lane is being turned into a high-tech office development. We have an extremely exciting project at Belasis Hall technology park—

Photo of Frank Cook Frank Cook , Stockton North

On the issue of Belasis Hall technology park, will the hon. Gentleman give way?

Photo of Mr Timothy Devlin Mr Timothy Devlin , Stockton South

No, I shall not.

English Estates North is putting up 50,000 sq ft of office and small manufacturing space and there have already been 20 serious inquiries—[Interruption.]

Photo of Mr Timothy Devlin Mr Timothy Devlin , Stockton South

I know that Opposition Members do not want to hear of these successes, but they will have to hear me out.

Cleveland business centre is setting up 56,000 sq ft of small offices and flexible workplaces. In the introduction by my right hon. and learned Friend the Chancellor of the Duchy of Lancaster, we heard of the extra resourcing that will be put into English Estates North. It is already refurbishing 75,000 sq ft of Teesside industrial estate in Thornaby in my constituency.

At present in Middlesbrough only about 41,000 sq ft of prime modern accommodation is available, with only 26,000 sq ft of secondary accommodation and 18,000 sq ft of tertiary accommodation. That total of 85,000 sq ft compares favourably with the position only two years ago, when there was 200,000 sq ft on the market. That accommodation has been taken up by companies as diverse as Albany Life, which has recently announced its move to Teesside, and Legal and General Insurance which is also coming to Teesside.

Demand now primarily exists for between 2,000 and 2,500 sq ft but unfortunately accommodation varies in availability from 5,000 to 15,000 sq ft and 1,500 sq ft at the small end. Therefore, when the Minister replies, I hope that he will stress the role of English Estates and I draw to his attention this need, which English Estates should meet in the years to come.

Prime shopping locations are being snapped up in Middlesbrough and throughout the north-east. Sainsburys, Laura Ashley and The Body Shop are all moving to Middlesbrough. A professional magazine recently quoted a local estate agent as saying: Things are beginning to improve. Now is the time to be buying in Cleveland". There is much to be welcomed in the White Paper, of which the abolition of automatic regional development grants forms part. The objectives of regional policy remain the same as they were in 1983—to reduce the imbalance in employment opportunities on a stable long-term basis and to help develop indigenous potential, leading to self-generating growth. The latter objective must continue to be our central objective.

When I heard earlier in the debate the call for greater co-operation between the Departments of Trade and Industry, of Employment and of the Environment, I thought immediately of the three wise men presiding over the north-east and the closeness of their co-operation. I must commend that to the Minister and hope that it will continue.

I take this opportunity to welcome the setting up of a Middlesbrough office of the DTI. It is absolutely vital to our initiatives in the north-east that we have a one-stop shop, which should be more accessible to the people of Teesside. In addition to the excellent brochure that the Department of enterprise has now produced, we must have a good quality brochure giving a list of all the assistance that is available to companies throughout the region. The brochure that has already been issued is excellent. I have tested it by ringing the numbers and making inquiries, and I am pleased to say that the response was exceptionally good.

English Estates must be encouraged, but I ask my hon. Friend the Minister to consider looking at some of the rents it is charging. The enterprise initiative is particularly welcome in the north-east. It will give higher grants to smaller and medium-size companies, which are the very ones we are short of. It will also give them specific help with design, marketing, quality control, manufacturing strategy, business plans and financial and information systems. That range of help will probably be much more valuable than large dollops of money.

Assistance is already being provided in some areas by, for instance, the Teesside polytechnic new products unit, the Newcastle fashion centre, based on Newcastle polytechnic, and the initiative called higher education support for industry in the North. There are also initiatives by the Northern development corporation and the new urban development corporations.

Photo of Mr Donald Dixon Mr Donald Dixon , Jarrow

Come on. We have had 15 minutes of this drivel.

Photo of Mr Timothy Devlin Mr Timothy Devlin , Stockton South

I am just setting out the vast range of help available to companies in the north-east, all of which is helpful.

There are organisations such as Aycliffe ITEC, providing hardware and software support, which need to be pushed more centrally. They all need to be drawn together in another booklet, and I ask my hon. Friend the Minister to consider that.

The Department is now to offer special assistance, some through independent consultants, some through existing agencies. It needs to be tied together.

I am very pleased with the response that I received when dealing with the regional office of the Department of Trade and Industry.

Our objective in the Bill is to strengthen and modernise regional policy. I welcome the Government's commitment to the north and the other regions, but I look for a more effective way to encourage a new and lasting economy. The economy of the north-east of England is changing. We can no longer prop up yesterday's industries, and the changes need to be sustained by helping small companies which are building the sunrise jobs of tomorrow with development. There is a particular need for investment in small companies with fewer than 25 employees. I very much welcome the investment grant of two thirds for product and process development by those small companies.

It is also extremely important for us to continue to build greater bridges between school and industry, between higher education laboratories and commerce. The recession in 1979–81 hit my region hard. Shipbuilding has gone; 54,000 jobs in steel have been lost. Yet we may see the beginning of a turnaround. Yacht-building may come back to the Tees if shipbuilding does not. Investment is rising. Unemployment has fallen every month for the past 18 months, providing one job for the man who has to revise the figures in Stockton town hall each month.

There has been a 19 per cent. drop in long-term unemployment, and we see in the north of England pay survey recently carried out by Hay Management Consultants that although pay is less in absolute terms in the north than in the south, purchasing power in the north is much greater.

Our policy must not be to seek to distort markets in ways similar to the optimistic move of Rootes to Linwood or that aluminium smelter at Invergordon. I agree wholeheartedly with my hon. Friend the Member for Beverley that our paramount consideration is to build on strength which already exists in the north-east of England. As I have shown, those strengths are there. We must build on them.

Photo of Mr Dafydd Elis Thomas Mr Dafydd Elis Thomas , Meirionnydd Nant Conwy 8:53 pm, 25th January 1988

The hon. Member for Stockton, South (Mr. Devlin) listed a large number of companies. I was not familiar with the names of all of them, but I know that one that he mentioned — Laura Ashley — has received substantial amounts of public expenditure and employs a large number of people in the area in which I live in mid-Wales. Without a regional aid package, that company would have relocated in Holland.

The hon. Gentleman also gave us a caricature of the relationship between regional policy, regional aids and the role of the market, as did other Conservative Members. They must realise that the regional policy was brought about because of the effects of market distortion on existing communities. What we are now seeing from the Government is the withdrawal of even that limited role of intervention in the effect of the market upon communities and work forces.

That dimension is lost on many Conservative Members. I regret that we have a simplistic analysis of the relationship between the economy and society, although it does not surprise me, in view of the attitudes of some Conservative Members and the Government.

The regional policy debate tends to concentrate all the time on what are perceived to be problem regions—that is, us—rather than on the major problem of the United Kingdom, which is, of course, the south-east of England. We have had in this debate — at least from the hon. Member for Gordon (Mr. Bruce) and others—the clear statement that the south-east of England is itself not only a region but very much a problem region. The hon. Member for Sedgefield (Mr. Blair), who opened for the Opposition, stressed that very clearly.

What we need to do when we are talking about regional policy and regional development programmes, such as the one we are considering, is to see them in the context of the real regional policies. It is about time the real regional policy stood up in this Parliament. That means that we should look at the hidden state subsidies—not all that hidden, if we look at the public expenditure White Papers—which go directly to those companies and industries located in the south-east and the south-west of England. The Government's overall macro-economic policy hit the regions that are traditionally most dependent on manufacturing worse than others.

In particular, the cuts in regional spending of over 50 per cent. have obviously most directly affected the areas that were most dependent on that spending —the northern regions of England and the nations of Scotland and Wales, which, for the purpose of this debate, I shall call regions—that is, EEC regions; I am not denying them national status within Britain.

Real regional policy means expenditure on defence, new technology and the procurement budget of the Ministry of Defence, which increased by 40 per cent. in real terms between 1979 and 1987, a period in which there were massive cuts in official regional policy spending. It is now up to £8·2 billion. The main beneficiaries are the aerospace and electronic industries. It is no surprise to us to see them located in the south-west and south-east of England. It is those areas that are benefiting from that aspect of regional policy.

Let us lo006Fk at the extent of Government research and development on defence. Eighty per cent. of all Government expenditure in the electronics industry is accounted for by the Ministry of Defence. That, too, distorts the area in which the spending is carried out and the form of spending. Looking at the overall levels of civilian research and development, we see quite clearly that Britain devotes more of its Government-funded research and development resources to military expenditure than any other major power except the United States.

Fifty-three per cent. of all Government research and development expenditure generally — not just on electronics is absorbed by defence. The result is that public sector spending on research and development, which is a form of indirect regional policy, benefits certain regions and disbenefits others. On an overall picture, the position in the south-east and south-west of England is progressive and positive but elsewhere similar expenditure is not available from public funds.

I do not argue for the diversion of all military expenditure to Wales and Scotland, although we suffer a lot from military expenditure in the form of low-flying training. I ask for recognition of the fact that the state's decisions on research and development, areospace and defence are part of regional policy and should be quantified as such. When we debate regional policy we should debate the regional impact of all public expenditure, not just a limited programme of grants, as we are doing at the moment.

Photo of Malcolm Bruce Malcolm Bruce Shadow Spokesperson (Energy and Climate Change), Shadow Spokesperson (Environment, Food and Rural Affairs)

Will the hon. Gentleman acknowledge that in many cases the receipts to the Exchequer from corporations and companies that invest throughout the United Kingdom are credited as though they are earnings in the south-east, when in fact they are earnings from investments in the regions, for which the regions get no credit? The Government should take account of that fact when quantifying the whole package.

Photo of Mr Dafydd Elis Thomas Mr Dafydd Elis Thomas , Meirionnydd Nant Conwy

The hon. Gentleman is right. Many sectoral patterns of expenditure which are Great Britain-wide are not regionalised in an assessment of public expenditure. At the beginning of this decade, 80 United Kingdom plant locations received Ministry of Defence contracts of more than £50 million. Half of them were in the home counties. Ten of them, including Rolls-Royce and the celebrated Westland, received contracts of more than £100 million and were in the west country. Only nine were in Scotland and there was none in Wales. That shows the way in which that part of public expenditure distorts regional policy.

In looking at regional policy we need to take account of all the spatial consequences of other Government policies. We need a level of regional intervention that is enough to counteract the pull of other spending programmes concentrated in certain locations. This is where the approach to regional policy, which has been depending on the forms of grant aid, is inadequate. I share the Labour party's previous view—not its present one— that the allocation of regional development grant to major multinational companies can be argued to be a waste of public expenditure.

Ministers have not told us how they intend to ensure that the selective package will make up in levels of expenditure what is currently made available. We have not yet had that commitment from the new Secretary of State for Wales or from any Scottish Office Minister. We want such a commitment from the Government if they are seriously saying that they will produce the same level of support, directly or indirectly, through their expenditure programme.

I am not taking part in the filibuster on the Government Benches which has occurred because the Government cannot find enough Conservative Members to speak. I stress that the Bill will not be welcomed by the agencies involved in industrial development in Wales. We welcome the additional funding made available to the Welsh Development Agency, but we can debate that on Thursday evening on the Welsh Development Agency Bill, when I hope to catch your eye again, Madam Deputy Speaker, which is why I am being brief now. I stress that there are other regions in Wales, especially mid-Wales, which have been badly affected by the loss of development area and assisted and intermediate area status from this Government and by the potential loss of status in the European Community. Mid-Wales Development has received a slightly smaller increase in budget than the WDA.

Mid-Wales is the poorest area in Wales. Pay levels are the lowest in Britain. The population density is one sixth the European Community average. One job in four is dependent on agriculture. It is the most remove rural area in England and Wales that I know of, because I have to get up there. The Development Board for Rural Wales, with its small budget, had been doing the particularly important work of social and economic investment in the area.

We want assurances that the Government's regional policy will not contain anything that will affect the operation of the Development Board for Rural Wales or the Highlands and Islands Development Board in Scotland. We want an assurance that the Government, when looking at the SDA and WDA, will look in parallel at those other development agencies which are the real engines of participation between the state and the commercial sector and which are really involved in regional development.

Photo of Mr Kenneth Hind Mr Kenneth Hind , West Lancashire 9:03 pm, 25th January 1988

I am a strong believer in regional development policy and represent a development area in the north-west of England. This is a bit like déjà vu. In March 1984, I sat through a debate on the Co-operative Development Agency and Industrial Development Bill, now an Act, which this Bill amends. The Opposition made the same complaints then about the new system of grants that they have made tonight.

At that time, unemployment was half a million higher than today and the basic rate of income tax was 30p in the pound, compared with today's 27p in the pound. This shows that that legislation worked. After four years, we have a time to review and adjust to the changing circumstances in the economy. In the north and other parts of the country that are regionally aided, we cannot escape the fact that a strong economy is needed for employment to be reduced, and for the regions to prosper.

When I took over a new constituency in 1983, I was appalled at the level of ignorance about what went on in the local factories among Labour representatives on the local council, and at some of the statements made by Labour politicians in the locality about local industry. The truth is that they knew nothing about what was going on in local industry. I am afraid that, listening to tonight's comments, I find myself in the same position.

However, I wholeheartedly endorse the comments of my hon. Friend the Member for Stockton, South (Mr. Devlin), who made a point of putting on record the strength of the local economy and its improvements over the past few years. I took over a constituency in which there was no employers' organisation. I formed one. With the assistance of the Bishop of Liverpool and the aid of all the local parties, I set up a task force to attack the problems of the area. Now we have a full-time director, who was appointed this week.

The message is clear: we must use self-help to tackle the problems in our areas. It is no use crying salt tears and saying that the state will provide, and that we are not prepared to take action to help ourselves. In Skelmersdale —oh, yes, the place that everyone loves to hate—in the past two years, we have created 1,500 new jobs, and 78 new firms have come in during the past two and a half years. In the past three weeks, over 300 new jobs have been announced in three new factories that are coming to the area.

That progress has not been due only to grants. It has also been brought about by attempts by the local council, the Commission for the New Towns and the task force to go out and promote the town. I must say with pride that Skelmersdale, like Chorley, is becoming a success story, and is a booming area in the north of England. I am now in the embarrassing position of telling the House that, in the next three months, we shall not have an empty factory in Skelmersdale. We shall have to start building them. That is a measure of our success.

Photo of Mr William Powell Mr William Powell , Corby

Will my hon. Friend confirm that Skelmersdale took the sensible step of hiring the former director of industry from Corby to take over? Middlesbrough did the same for its urban development corporation.

Photo of Mr Kenneth Hind Mr Kenneth Hind , West Lancashire

My hon. Friend is correct. Skelmersdale employed the economic director from Corby to take on the direction of the town's development.

I have found that the major problem with small firms is that they are not necessarily creating jobs, but they need to buy new machines to keep them up. The limit on grants for 25-employee firms — up to £15,000 for new machinery, or £25,000 for innovation — is very successful, and will meet many of the problems that will be created by the removal of regional development grant.

Regardless of how my right hon. and learned Friend puts the case, regional selective assistance is a process of backing winners. We are trying to create enterprises that will sustain themselves and go on beyond the grant, rather than simply throwing money at projects that will fail. The Bill, and the White Paper that goes with it, by providing the expertise of consultants to provide guidance, will equip those companies far better to take advantage of regional development grants.

Let me tell Opposition Members that where firms fail is in expertise: design expertise, marketing expertise and the basics of business planning. The business development initiative system will provide those advantages and help firms to take advantage of what is available.

Finally, despite all the crowing, the truth is that during the next three years, £900 million will be available for the regions and for towns such as Skelmersdale. There will be no diminution of the amount of money available: far from it—there will be an increase. It is up to industry to use and take advantage of the system that is available. If it does that, there will be no need for any fall in the amount of money it receives or for any fall in prosperity in areas that take advantage of the new system.

I commend my right hon. and learned Friend's proposals. He has hit the right turn in the tide, and places such as Skelmersdale will take advantage of it.

Photo of Mr Rhodri Morgan Mr Rhodri Morgan , Cardiff West 9:10 pm, 25th January 1988

I listened with great care to the speech of the hon. Member for Stockton, South (Mr. Devlin). He demonstrated that, whatever political deficiencies he may suffer from, dyslexia certainly is not one of them. His ability to extract dramatic interest from a rendering of the Middlesbrough area yellow pages telephone directory brought new heights to a discussion of regional policy. Like Conservative Members, I hope that the Minister in winding up will be sympathetic to their appeal for hospitals to be ready to cope with the injuries that will be caused among the rush of industrialists moving to the north, the west, Wales and Scotland, as a result of the initiatives that the Government have announced tonight.

I shall say three things about regional policy, on which I worked for 20 years before entering the House. First, how much do the Goernment know about what they are spending on regional policies and where they are spending it? Second, I should like to say something about the taxation treatment of regional development grants and regional selective assistance. The Government have omitted that from their White Paper. Finally, there is the question of fraud and abuse of regional aid.

Do the Government know what they are spending, and where they are spending it? Let us briefly look at the figures that they gave in their public expenditure White Paper and compare them with the figures for the same year, the same region and the same programme as they gave in last year's public expenditure White Paper. Under the heading, "regional and general industrial support," the DTI gave the figure of £888 million for 1982–83. One year later, it says that, in the same period, it spent £503 million. That is a little matter of £385 million that seems to have gone missing.

The following year the DTI had the same problem. Last year's White Paper gave a figure of £617 million, but this year's White Paper gives a figure of £426 million. In the past three years, the problem was slightly less. This year's White Paper gives a figure for the coming financial year of £463 million and last year's White Paper gave a figure of £300 million.

There are similar enormous discrepancies in the figures for Scotland and Wales. This year, the Government say that they spent £439 million five years ago on regional development in Scotland. Last year, they gave the figure for the same year as £158 million. Has £300 million-worth of regional expenditure jumped across the border in one year? Are they now saying that five years ago the money was spent not in England but in Scotland?

One has to doubt White Papers as an indication of what the Government are spending, on what they are spending it, and where they are spending it. They should assist those who work in industrial development and be completely frank when discussing their regional policies. They should not hide the mess that they made in last year's White Paper; they should tell us about it in the House, quite frankly, so that we can have a sensible, mature discussion of the real priorities for regional policies. It is no good trying to hide the confusion by obfuscation and mixing up regional selective assistance and regional development grants so that we do not know where we are going because the Government do not know where they are going.

The figures show that the Government do not know how much money they are spending, in which regions and on what programmes they are spending it. That is a major problem. If we are to have a higher level of debate, they should give us the figures that are not given in the public expenditure White Paper or this month's enterprise White Paper.

How much are the Government spending on regional development grant next year? How much has already been committed of the money that the Government expect to spend over the next two, three, four or five years in regional development grant contracts that have already been signed? How much have the Government committed themselves to spend on regional selective assistance and how much money is still available for industrialists who have yet to come along and see the Government? That is the figure we want to know.

As we all know, RDG is paid after one has spent the money. The Government are committed to paying the money by the fact that the guidelines have been met. There may be people today who are spending regional development grant for five years from now. Therefore, what is the uncommitted money still left in the regional development budget, and will that money be cash-limited?

Regional development grant had the virtue of not being cash-limited. If there was an upturn in industrial investment in the regions, the Government met the bill because there was more incentive and more investment. Industrialists were confident in the fact that they could, as it were, break the bank if there was an investment boom.

The Minister said that he was worried about the fact that, with an industrial take-off, the regions no longer needed industrial development grants. However, we know that industrial investment is only now returning to the 1979 levels. Therefore, why is there a fear of having to pay incentives to encourage some of that greater flow of investment to go to the regions? The higher the level of investment, the greater the mobility of that investment because it will be hitting the sticking points and obstacles to investment in the south-east. In 1988–89 there may finally be a shift between the regions; from the south-east to the outlying regions, which are more dependent on manufacturing jobs.

There are some faults in the Government's White Paper, which lead to cynicism when industralists look at it to see what guidance it can give them. The same faults affect practitioners who work in regional industrial development, as I did for 20 years before coming to the House. They are looking for some idea of what it really means to the industrialist to have regional selective assistance on offer. We have had no clarification from the Minister on that. All we know is that the Government have tried to pretend that the same amount of money, or more money, will be available, without allowing for inflation in the cost of investment goods. That may be running quite high at the moment, because there is rampant inflation in the building industry, as we all know. That is one of the pinch points for industry. There is a shortage of bricklayers, carpenters, plasterers and so on.

If people are trying to discover how much money the Government intend to make available, they will want to know whether it will be taxed or untaxed. The same money spent on RDG and then switched to RSA actually means 35 per cent. less money because corporation tax will have to be paid on RSA. If, as in Wales, the Government intend to spend £100 million on RDG and switch that to RSA, one would need to be spending £150 million on RSA in order to give industry the same benefits. The Minister has made no reference to the difference in the tax treatment of RDG and RSA. That is the tactic of a cardsharp. In fact, it is a cardsharp's White Paper. It is impossible to work out how much money is left and how much money the Government are committed to spending as distinct from making an allocation that they do not worry about. RDG commitments can run on for five years, and that reduces the amount left. We want to know whether what is left will be cash-limited.

Fraud is a serious issue in regional development, and always has been. If the Government want to say to the House—I do not see why they should not—that RDG2 is difficult to administer and has been prone to fraud and to non-viable companies exploiting it and not producing the jobs, why do they not just say so? That scheme was devised by the right hon. Member for Chingford (Mr. Tebbit) who was Secretary of State for Trade and Industry at the time of the changes in November 1984. The Government should just say, "Our problem is that we cannot monitor the RDG2 scheme. It is difficult for us to handle, and we intend to scrap it altogether." If they said that, we could have a sensible discussion about whether we should change RDG2 in order to get rid of the fraudsters and those who take the money and run, instead of now having to scrap the scheme altogether.

There is another alternative on which I wish to press the Minister. Will he please investigate the possibility of making regional selective assistance tax-free? One attraction of regional development grant was that it was tax-free. Firms which receive regional selective assistance often use it to prettify their balance sheets. After all, a revenue support item that is taxable makes the industrialist look very clever when he presents his balance sheet He seems to have made more profit out of no expenditure. But they could not do that with regional development grant because it was a capital support scheme.

I make three pleas to the Government: first, for a much better quality of public expenditure White Paper next year; secondly, for complete frankness with the House when discussing how much money remains available to industrialists in the regions who want to develop; and, finally, a greater appreciation of the importance of regional aid in giving the regions the confidence that they have a future under this Government.

Photo of Alan Williams Alan Williams , Swansea West 9:20 pm, 25th January 1988

This is one of a series of debates on regional policy, and I am still puzzled why the Conservative Government hate the regions. It is not as though they do not say the right things. They just seem to do things that undermine their protestations. In 1970, the first act of the Conservative Administration—it was lain Macleod's one and only Budget—was to get rid of investment grants. That was a major blow which, within two years, cut the amount of new industry going to the regions by 50 per cent. So devastating was it that, two years later, the Government introduced the Industry Act 1972 which introduced regional development grants. My right hon. Friend the Member for Glasgow, Govan (Mr. Millan) and I served on the Committee which discussed that Bill. It introduced regional development grants, which the Government intend to abolish with this Bill, because of the failure of the previous attempt to abolish capital investment grants.

Let us consider the cumulative effect. It is not as though this is a one-off attempt. There has been a series of attacks on regional policy, including the abolition of the industrial development certificate — I do not suppose that was much mourned—cuts in the boundaries of assisted areas and the abolition of special development areas, which had a great impact on the old industrial, coal mining and steel areas. Most important has been the sustained and varied attack on capital incentives, which is especially important when one remembers how critical manufacturing investment is to effective regional policy.

The Government have calculatedly destroyed incentives to investment. First, they cut regional development grants from 22 per cent. to 15 per cent. and now they wish to abolish them. Despite their claims of wishing to modernise the regions and make them efficient, they have abolished the regional development grants that were available for new machinery and equipment for existing plants.

The Government have destroyed capital allowances. In the 1970s, with capital allowances, regional development grant and regional selective assistance, Britain had the best package of incentives for investment of any European country. But since the Government came to power in 1979, we have lost £11,000 million-worth of manufacturing investment. That is how much lower investment has been under what the Chancellor of the Duchy of Lancaster called the enterprise economy with which his Department wishes to be associated.

As my hon. Friend the Member for Cardiff, West (Mr. Morgan) said, manufacturing investment, which is at the heart of job creation, has not only been bled by £11,000 million but is still, after the so-called growth about which the Minister boasted, 10 per cent. below the level that the Government inherited. Because of that, we have invested less in the regions, and, because we have invested less in our industries, they are less competitive than our international overseas competitors — the OECD countries. We have been losing ground in terms of balance of trade in world markets.

I hope to show that, as a result of the Government's decisions, there has been a £2·5 billion deflation in the assisted areas. It is not even as if the Government's policies are any good for the south. They may not be good for the north, but they are no good for the south either. One of the great illusions is that there is a clash of interests between the south and the north. However, the south has as much interest as the rest of the country in seeing the full deployment of the resources available in the regions, not just because they bring extra productive capacity on stream but because the resources stop the congestion problems that all hon. Members understand take place in the south of England.

During the Minister's statement, the hon. Member for Cambridgeshire, South-West (Sir A. Grant) asked whether the Minister could confirm that the effect of his new regional policy will be to stem the migration of people from the assisted areas into high growth areas such as Cambridgeshire, where the pressures have become intolerable?" —[Official Report, 12 January 1988; Vol. 125, c. 161.] A similar point was made by a Conservative Member who I think represents a constituency in Berkshire, on Third Reading of the Co-operative Development Agency and Industrial Development Act 1984. That hon. Gentleman stressed the pressures on the south as a result of the inevitable movement from the north.

Let us consider the scale of that movement. Cambridge Econometrics predicts that by the turn of the century, the northern region will have lost 1 million people through outward migration. That represents 7 per cent. of its working population. Where will they go? Who will accommodate them? We should not think that that is just a problem for the future. In the past five years the north has lost 187,000 people. Scotland has seen an outflow of 190,000 and Wales an outflow of 169,000. In three years the gross outflow of population from those three regions was 550,000. Where have those people gone? Where are the pressures building up?

That outflow has occurred before this Bill is enacted and before a further weakening in the Government's regional policies. There is a problem for the regions implicit in the Bill. However, there is also an implicit problem for the south and the areas of affluence and prosperity.

I want to consider some of the Minister's arguments. We have heard the value-for-money argument. The right hon. and learned Member for Richmond, Yorks (Mr. Brittan) administered the grant system for somewhat longer than the present Minister. Indeed, my right hon. Friend the Member for Govan and I administered that system for some years. It is well known and incontrovertible that in efficiency terms the regional development grant is far cheaper to administer for the Government and for those firms in receipt of the grant. That is one reason why it is so popular with small firms and why 80 per cent. of the grants go to those small firms. The argument that the grant is not cost-effective is exploded by one of the few pieces of revelation in the White Paper.

The White Paper states that in 1985–86 regional selective assistance cost 46 per cent., or £378, more per job than regional development grant. In 1986–87, it cost £331 more per job than regional development grant. In 1986–87, it cost 28 per cent., or £432, more than regional development grant per job. The figures are even more astonishing if we consider Wales or Scotland.

Ministers claim to be hellbent in pursuit of administrative efficiency and value for money. In the Bill they are asking the House to give them the flexibility to give up the system of grants that provides jobs at £1,500 each, so that they can concentrate on their alternative, preferred system which costs £1,950 per job. These are the people who have the cheek to talk to the Health Service and local authorities about competitive tendering and value for money.

Photo of Kenneth Clarke Kenneth Clarke Chancellor of the Duchy of Lancaster, Minister of State (Department of Trade and Industry)

I have seen such figures reported and they have been misinterpreted. If we compare the jobs provided with RDG and RSA offered, which is the correct comparison, unlike the one made by the hon. Member for Dagenham (Mr. Gould) this morning, we see that the cost per job of RDG is £3,701 and the cost per job of regional selective assistance is £2,760. These are 1987–88 estimated outturn figures. There appears to have been a mistake in the Labour party's research department when comparing the amount spent for grant paid in a year with the jobs created by the offers made in that year.

Photo of Alan Williams Alan Williams , Swansea West

I invite the Minister to sit down with his little calculator and go through the tables in the White Paper. He will find that my figures are correct.

The Government say that we must get rid of regional development grant because it has no relationship to jobs. They get the money even if they do not create jobs. I thought, "That is interesting. Let's see what they have in mind," so I asked the Minister what checks will be made under his proposed new regional investment grant to ensure that firms achieve the promised number of jobs"? On 19 January I received a fascinating reply from the Parliamentary Under-Secretary of State for Trade and Industry, the hon. Member for South Ribble (Mr. Atkins). I see the right hon. and learned Gentleman smiling. The Under-Secretary of State replied: The creation of jobs will not be a condition of the new regional investment grant but the scheme is expected to have a beneficial effect on employment"— here comes administrative prudence— and we shall be setting up arrangements to evaluate this on a sampling basis."—[Official Report, 19 January 1988, Vol. 125, c. 673.] The Minister today described his bold new policy as a straight path to new jobs, except in so far as the new incentive scheme is concerned. How does he reconcile that with value for money? Indeed, I wonder how long the Minister will enjoy the privilege of a ministerial car?

In all these discussions, the Government have overlooked the important point made by the right hon. and learned Member for Richmond, Yorks, particularly in respect of inward investment, about which Ministers protest. Predictability is a critical factor. I could not have put it more effectively than the former Secretary of State and Chief Secretary to the Treasury put it. Predictability is an important factor in determining whether the grant is even taken into account when finance directors and boards are considering their decisions. They must bear in mind that many inward investment projects are phased developments. They are not single projects. They come in intending to build up in the European market and expand, but, before taking any decisions, they consider what sort of incentives they can look to in phases two and three.

The loss of regional development grant robs us of that predictability, but the number of changes in regional policy means that there is no predictability, even about the continued existence of the regional selective grant. Under this Government, nothing about regional policy is predictable.

The Government say that we need indigenous development. Of course we do—no one disputes that fact—but we must bear in mind the limits of indigenous production or development. In a way, it traps us within the limits of the skills of old industries. Therefore, we need cross-fertilisation of inward investment, be it from the south or overseas. We need it to bring in high value-added industries and high-technology industries with their demands for new skills.

The Minister does not appreciate that in the long term, diversity and the industrial mix are as important as the creation of jobs. That is why capital grants are so important. Unless we have diversity, we may have all the north in low-paid jobs and all the south in high-paid jobs, and still have a regional divide. Conservative Members do not seem to want to understand that point. Indeed, they protest that they are committed to regional selective assistance. As I pointed out in an intervention, that protestation—that hand-on-heart commitment to valuefor-money regional selective assistance—would perhaps be more credible if only I had not seen the depth of it during the past year.

The Government were giving regional selective assistance at the rate of £127 million less than the rate at which the Labour Government were giving it when they left office in 1979. In fact, in the intervening period, the regions have lost £685 million of the very incentive that the Government say they favour. They have actually cut by 37 per cent. the very incentive that they say is the most efficient. They say, "You must bear in mind that we are coming forward with a new set of proposals. We have a new investment grant scheme whereby jobs will not be the criteria."

Is it not absurd to try to convince us, and even more absurd to try to convince business men, that small firms are getting a good deal? They are told that, at present, they can get 15 per cent. of capital cost with an alternative of £3,000 a job and up to 200 jobs created. Under the Government's new, brilliant scheme, they will gel 15 per cent on up to 24 jobs, and a maximum of £ 15,000. So lucky small business men will lose grants of £3,000 a job. Of course, they will happily say, "What a good Government we have. They have given us grants of £600 a job instead." What is more, because they are good little Conservatives, they will say, "How happy are we. We shall also help the Chancellor. Not only will we take less, but that less will be taxable. We shall also put some of it back into the Chancellor's pocket."

We have heard hon. Members speak about whether there will be more or less spending. As my right hon. Friend the Member for Govan said, the figures in the White Paper are clearly intended to mislead, or at least to obscure, rather than to reveal. I noticed the dubiety that was expressed by the right hon. and learned Member for Richmond, Yorks, a former Chief Secretary to the Treasury, who referred to the Treasury's tricks of the trade. He implied that he would not be taken in by the figures, even if the Minister thought that everyone should be. We shall examine the figures in future.

We have been over this ground before. The real reason has nothing to do with efficiency; it is all to do with cuts. In 1984, the present Chief Secretary stood at the Dispatch Box, looked us straight in the face — many hon. Members were present—and said, "Of course, this has nothing to do with cuts. Coincidentally, we shall spend £300 million less, but that has nothing to do with our motivation. It is just a coincidental consequence of what we are doing."

Last week, the Minister gave his reason for changing things. He said: we are now changing the nature of the grant because of the change in economic circumstances. Most notably, a huge increase in investment is going ahead in the regions, and unemployment is now falling faster there than in the rest of the United Kingdom."—[Official Report, 12 January 1988; Vol. 1433, c.149.] Is the Minister seriously suggesting that, in redressing 200 years of industrial revolution, a one-year blip on the regional life-support system means that the regions are now all fit and well? What he is saying is that the patient is breathing and that we should turn the electricity off and save a bit on the bill. The idea that one year's growth makes the slightest difference to the positions of Wales, of the north, of the north-west and of Scotland vis-à-vis the south is beyond credibility. What is more, it is an insult to the Minister himself that he has the cheek to put it forward, because we all know that he is too intelligent to believe it.

The Minister's policy is not just foolhardy or shortsighted; it is dangerous. As in our cities we have seen the divide of poverty and affluence generate the politics of envy, desperation and violence, so to allow a continual widening gap of hope and expectation between those who live in the north and those who live in the south is potentially explosive. We cannot, and the Government should not, allow the prolonged widening between degrees of affluence on either a geographical or a social basis. One cannot allow it to be perpetrated on a geographical basis without producing a political and constitutional backlash. I warn the Government that today's economic divide could become tomorrow's constitutional rift.

Photo of Mr Ian Lang Mr Ian Lang , Galloway and Upper Nithsdale 9:41 pm, 25th January 1988

The debate has roamed wide over the provisions of the Bill, and that is understandable and right because it is only one element of the new regional policy which, in its broader setting, is probably the most positive, most comprehensive, most imaginative and most relevant that we have had for quite some time.

But that would not be apparent to anyone listening to the speech that we have just heard from the right hon. Member for Swansea, West (Mr. Williams). One would never have thought from his speech that in the past 18 months in Wales unemployment had fallen faster than anywhere else in the United Kingdom, down by almost 26,000 in 1987 alone. One would never have thought that the Welsh Development Agency was now well on course to let a record amount of factory floor space in this financial year or that one sixth of all foreign investment in the United Kingdom had chosen Wales as its location, and that Wales now employed more people in inward investment companies than it did in coal and steel. These are just some of the many encouraging facts about the present state of the Welsh economy that will come as something of a surprise to the right hon. Member for Swansea, West.

It has been a curious feature of this evening's debate that, despite the changes in the economic circumstances of the country, it has been conducted against a background of the refusal of Opposition Members to acknowledge by even the slightest word or expression that there has been the smallest change in the national economy in the past year or two. It is as if the past two years had never been and as if a fall in unemployment of 600,000 had never happened. Opposition Members are wrapped in some time warp by the imagery of their obsolete rhetoric.

Everything must be characterised as failure, decline or disaster, no matter what the reality is. Every change in Government policy, however sensible or whatever the background, is instantly characterised as, at best, vindictive and, at worst, mad; and the contrast is striking between the demons conjured up by Opposition Members and the examples of what is going on in the real world, of which evidence was given by my hon. Friends the Member for Stockton, South (Mr. Devlin) and the Member for Lancashire, West (Mr. Hind) or my hon. Friend the Member for Corby (Mr. Powell), where unemployment has fallen from 25 per cent. to 12 per cent.

Photo of Hilary Armstrong Hilary Armstrong Shadow Spokesperson (Business, Innovation and Skills), Shadow Spokesperson

The Ministry has in other forums used Consett in my constituency as an example of the massive success of its policy. Does the Minister realise that employment in Consett in the past three years has grown by 0·4 per cent. — less than half of 1 per cent.? Unemployment has fallen but so has the number of people living there; and the Government's figures have been fiddled so that unemployment looks as though it has fallen by about 4 per cent. This is the real position.

Photo of Mr Ian Lang Mr Ian Lang , Galloway and Upper Nithsdale

That is all the more reason for the changes in regional policy. We are proposing to concentrate help in a way that will bring the most assistance to the hon. Lady's constituency and to others.

The debate would have been more constructive if Opposition Members had recognised that these changes are not being forced on us by a crisis, being imposed by the IMF or being turned to in order to fight off any failure. We are changing our regional assistance policies because we want to and because we think that the new arrangements are right for the economic circumstances. Above all, we are doing so against a background of growing economic success.

The Labour party seems unwilling or unable to comprehend that. Almost every speech from Opposition Members was permeated by the view that because we are changing grants we must be cutting them. They think that one can improve a policy only by making vast increases in the amount of money given.

Opposition Members completely overlooked the fact that inflation is below 4 per cent.; that last year manufacturing output increased by 6·5 per cent.; and that manufacturing investment increased by 6 per cent., with the largest increases being experienced in Scotland, Wales and the north. That has been achieved by controlling expenditure as a proportion of GDP, by cutting taxes and by cutting regulation and control. That has given us seven years of sustained growth in manufacturing productivity. Since 1979 it has increased by a remarkable 40 per cent. Britain is at the top of the league table instead of at the bottom.

Photo of Henry McLeish Henry McLeish , Central Fife

As the Minister is outlining his success story, will he reflect on the figures between 1979 and 1986, which show that, in the regions that he is talking about, we lost 1,529,000 jobs, but that the south-east, East Anglia and the south-west lost only 9,000 jobs. Does that not show that there is a north-south divide?

Photo of Mr Ian Lang Mr Ian Lang , Galloway and Upper Nithsdale

No, it does not. Most of those jobs lost in the north were lost in the early years of the period that the hon. Gentleman quoted. Since 1983, employment growth in the midlands has been greater than in the south-east. We approach these changes reinforced by the fact that our policies have succeeded and are succeeding.

The hon. Member for Gordon, (Mr. Bruce), is the industry spokesman of the Liberal party, if you, Mr. Speaker, will pardon the expression. He said, with some justification, that we are changing the rules too often, which diminishes respect for them. I must tell the hon. Gentleman that so does changing one's policies. Over the Christmas period, I had to refer to an article in The Scotsman in which his policy for regional assistance was shown to be slashing business taxation only in Scotland and making Scotland a tax haven. I have no idea what his English colleagues think of that, still less the Liberal shadow Chancellor, but no wonder his party wants to put VAT on everything. No doubt, soon we shall be told that it will put VAT on Trident.

My hon. Friend the Member for Pudsey (Sir G. Shaw), who, like my right hon. and learned Friend the Member for Richmond, Yorks (Mr. Brittan), is a gamekeeper turned poacher, welcomed a large proportion of our proposals but questioned the underlying philosophy of our regional policies. He said that there was a need, not so much for encouragement as for implantation. That statement implies a measure of dirigisme that I would find difficult to support.

With regard to his queries about inward investment, in which he quoted the examples of Germany and France. France is already discretionary in its regional assistance and, like us, the Germans are abolishing automaticity.

I share my hon. Friend's view of the importance of attracting inward investment and revitalising the regions —[Interruption.] — bringing new attitudes and techniques—

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

Order. I ask the House to give a fair hearing to the Minister. This has been a well-natured debate.

Photo of Mr Ian Lang Mr Ian Lang , Galloway and Upper Nithsdale

I do not believe that the changes that we are making, whereby regional selective assistance will still be available for inward investment projects, will diminish the number of companies coming here.

I shall deal with the issue of spending, as I know that Labour Members are obsessed with who can spend most of the taxpayers' money. One would never have thought from the speech of the right hon. Member for Swansea, West, that it has been announced that Wales will receive an increase of 39 per cent. next year from the Welsh Office in total assistance to industry. One would never have thought from the speech of the right hon. Member for Glasgow, Govan (Mr. Millan) that Scottish industry's budget will be increased by more than £25 million next year or that the SDA's budget will be increased by 8 per cent. in real terms.

The Labour Opposition point to the years when they were in power and make the sterile claim that they spent more in regional policy than we are doing, but they overlook the fact that their policy did not actually work. Manufacturing jobs, certainly in Scotland and probably in other areas, were lost at a far faster rate in the late 1970s than they have been in the past few years. Now, by contrast, unemployment is falling in a way that it never did in those years.

What they do not point out is that what they were taking out of the regions at that time through capital taxes, to which my hon. Friends have referred, and corporation tax, far outweighed what they were putting back in. Their corporation tax rate was 52p in the pound, compared with our present rate of 35p. So, quite apart from having to cope with high inflation and industrial unrest in that period, companies all over the country were having more than half of their profits drained off by the Treasury in Whitehall to pay for Labour's follies.

There were follies such as nationalisation, which was another anti-regional policy. Millions of pounds were taken from the hard-pressed taxpayer so that the Labour Government in Whitehall could take over the commanding heights of the economy in the midlands, the north and Scotland. We have reversed that policy and liberated industries such as Jaguar and British Aerospace from the shackles of centralised control and they are now galvanising the regions and enriching both the regions and the nation.

Photo of Mr Ian Lang Mr Ian Lang , Galloway and Upper Nithsdale

No, I will not give way. The hon. Gentleman did not take part in the debate.

If that is one way of pumping blood back into the arteries of regions, another is through the reform of non-domestic rates. It is estimated that this proposal, so bitterly opposed by the Opposition, will pump around £700 million into the economies of the north and the midlands.

Photo of Tony Blair Tony Blair , Sedgefield

The Minister said a moment ago that the industry budget for Scotland was increasing, but it shows a drop in 1978–88 and no real increase over the next few years.

Photo of Mr Ian Lang Mr Ian Lang , Galloway and Upper Nithsdale

If the hon. Gentleman waits until the publication of the Scottish commentary next month, all will be revealed to him.

The Opposition are not even right when they say that we are cutting the cash for regional policy. That is not what this exercise is about. I have already shown the spending trends in Wales and Scotland. In England, the public expenditure White Paper shows that spending is now expected to be up by £200 million over the next three years. However, cash levels are not the point. The point about the proposed changes to policy concerns value for money, not volume. It is not a cost-cutting exercise, but a cost-effective one.

Photo of Mr Leon Brittan Mr Leon Brittan , Richmond (Yorks)

I am interested in what my hon. Friend has said. Does that mean that regional selective assistance for England will not be cash-limited under the new proposals?

Photo of Mr Ian Lang Mr Ian Lang , Galloway and Upper Nithsdale

Regional selective assistance is not cash-limited.

As to value for money, this is a cost-effective exercise and that is why I believe that we are right to move away from a situation where grants are given automatically, regardless of need, to giving grants on a more selective basis. The automaticity remained in our post-1984 changes, and now that our economy has continued to receover and grow, so that many companies have less need of taxpayers' funds to enable their projects to proceed, we should concentrate our resources more intensively where they can do most good, and that means putting them into projects in the assisted areas, which will benefit the economy, but would not go ahead without that help.

Whatever the Opposition may think of such an attitude, it is clearly one which endears itself to the business community—

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

Order. Only the Minister or, if he gives way, one Member should be on his feet at a time.

Photo of Mr Ian Lang Mr Ian Lang , Galloway and Upper Nithsdale

Indeed, the Scottish Council for the Development of Industry, a body not normally regarded as friendly to the Conservative party, has said that it welcomes the recognition that it is more important to make incentives available selectively rather than automatically. The change in tone in favour of enterprise rather than narrowly defined industrial development is also welcomed.

One of the features of the recovery of the economy has been the unity of purpose and understanding that exists between the Government and industry. It is as pleased as we are that investment is rising so fast, because productive investment is the secret of success. Industry is as pleased as we are that the leverage achieved for Government funds invested is now reaching such remarkable levels. For example, every £1 invested in industry by the Scottish Development Agency is now triggering £13 of private investment. In Wales last year £104 million of Government investment triggered £760 million in private investment.

That is the way to get value for money for the taxpayer as well as increasing investment in the regions.

Several Hon. Members:

rose

Photo of Malcolm Bruce Malcolm Bruce Shadow Spokesperson (Energy and Climate Change), Shadow Spokesperson (Environment, Food and Rural Affairs)

The Minister is aware that his reply was wholly unsatisfactory. I am not concerned that he is not replying to Opposition Members' questions, but he should at least address points made by Conservative Members. They are not happy with his reply, and he is not acknowledging the criticisms even of former Cabinet Ministers.

Photo of Mr Ian Lang Mr Ian Lang , Galloway and Upper Nithsdale

Clearly, the hon. Gentleman was not listening to my replies—

Hon. Members:

Give way.

Photo of Mr Giles Shaw Mr Giles Shaw , Pudsey

If the Minister will permit a dirigiste gamekeeper, may I ask him the question again? Can we please have a straight answer to the question? Will grants under the regional selective assistance scheme not be cash-limited in future?

Photo of Mr Ian Lang Mr Ian Lang , Galloway and Upper Nithsdale

I can only tell my hon. Friend the policy as it exists at the moment. He has seen the proposals and the figures in the White Paper. Demand for selective assistance cannot be anticipated. It will be essentially demand-driven and it is our purpose to ensure that sufficient proposals come forward.

There is now a new slogan in the Labour party, we are told. That slogan is "Labour Listens". It is a pity that it did not listen a bit earlier; it might have avoided some of the damage tht it inflicted on Britain's regions in the 1960s and 1970s. The hon. Member for Sedgefield (Mr. Blair) said that there had been 40 years of consensus on regional assistance. There was no consensus on selective employment tax—the particularly destructive instrument introduced by the Labour Government in the 1960s. That was Labour's idea of selectivity—not selective help but selective handicaps.

We are selective in distributing assistance to industry, but Labour was selective in the industries that it chose to clobber. Because Opposition Members had some primeval instinct that the only job worth having was bashing a bit of metal and developing industrial deafness, they decided to tax jobs in the service industries. They chose to attack the one part of the economy that had the best growth prospects and thus destroyed thousands of jobs.

In the 1970s Labour did a bit more listening and realised that it was not fair to attack only one section of the industrial community, so they brought in the national insurance surcharge and clobbered all industries, destroying thousands more jobs — especially labour-intensive jobs in the regions. As an added refinement, they thought, "How can we concentrate these remarkably beneficial policies on the regions?" So they listened a bit more and came up with the answer—scrap the regional employment premium, overnight with no warning. That meant 40 per cent. off all regional spending in Scotland and similar amounts in other parts of Britain as well as the loss of thousands more jobs. That shows the consistency of Opposition Members when in government and demonstrates their affection for the regions. For good measure, Labour slashed the roads programme by 20 per cent. to leave the regions more remote from their markets.

Labour listened all right; Labour Members listen with their mouths and talk through their hats. If I can persuade them to listen I would like to offer them some advice. They should drop their policies of high tax, high spend and high borrow, because they would destroy jobs. They should drop their policy to scrap nuclear electricity because that would increase electricity prices and destroy manufacturing jobs in the regions. They should drop their plans for a tax-raising assembly in Scotland because that would destroy jobs in Scotland.

The Opposition cannot bear the fact that we are introducing these proposals against a background of growing success. They are so attuned to failure —because in government they experienced nothing else—that they cannot even recognise success. They do not like our enterprise initiative because they do not understand enterprise and they do not trust initiative. Conservative Members recognise that to support a regional policy we first need a successful national economic policy. That we have achieved and will sustain — by bringing down inflation, controlling public expenditure and reducing the public sector borrowing requirement and by introducing better training, better industrial relations and now a better, more relevant, regional assistance policy.

The provisions in the Bill, together with the other changes that we have announced in our policies, will reinforce that success and carry it forward on a broad front to all the country. I commend the Bill to the House.

Question put, That the Bill be now read a Second time.

The House divided: Ayes 282, Noes 212.

Division No. 152][10 pm
AYES
Adley, RobertCurrie, Mrs Edwina
Aitken, JonathanCurry, David
Alexander, RichardDavies, Q. (Stamf'd & Spald'g)
Alison, Rt Hon MichaelDavis, David (Boothferry)
Allason, RupertDay, Stephen
Amess, DavidDevlin, Tim
Amos, AlanDickens, Geoffrey
Arbuthnot, JamesDicks, Terry
Arnold, Jacques (Gravesham)Dorrell, Stephen
Arnold, Tom (Hazel Grove)Douglas-Hamilton, Lord James
Ashby, DavidDover, Den
Aspinwall, JackDunn, Bob
Baker, Rt Hon K. (Mole Valley)Durant, Tony
Baker, Nicholas (Dorset N)Eggar, Tim
Baldry, TonyEmery, Sir Peter
Banks, Robert (Harrogate)Evans, David (Welwyn Hatf'd)
Batiste, SpencerEvennett, David
Beaumont-Dark, AnthonyFairbairn, Nicholas
Bellingham, HenryFallon, Michael
Bendall. VivianFarr, Sir John
Bennett, Nicholas (Pembroke)Favell, Tony
Benyon, W.Field, Barry (Isle of Wight)
Bevan, David GilroyFookes, Miss Janet
Biffen, Rt Hon JohnForman, Nigel
Biggs-Davison, Sir JohnForsyth, Michael (Stirling)
Blackburn, Dr John G.Forth, Eric
Blaker, Rt Hon Sir PeterFowler, Rt Hon Norman
Body, Sir RichardFox, Sir Marcus
Bonsor, Sir NicholasFranks, Cecil
Boscawen, Hon RobertFreeman, Roger
Boswell, TimFrench, Douglas
Bottomley, PeterGardiner, George
Bottomley, Mrs VirginiaGarel-Jones, Tristan
Bowden, Gerald (Dulwich)Gill, Christopher
Bowis, JohnGlyn, Dr Alan
Boyson, Rt Hon Dr Sir RhodesGoodhart, Sir Philip
Braine, Rt Hon Sir BernardGoodlad, Alastair
Brandon-Bravo, MartinGoodson-Wickes, Dr Charles
Brazier, JulianGorman, Mrs Teresa
Bright, GrahamGow, Ian
Brown, Michael (Brigg & Cl't's)Gower, Sir Raymond
Browne, John (Winchester)Grant, Sir Anthony (CambsSW)
Bruce, Ian (Dorset South)Greenway, Harry (Baling N)
Buchanan-Smith, Rt Hon AlickGreenway, John (Rydale)
Buck, Sir AntonyGregory, Conal
Budgen, NicholasGriffiths, Peter (Portsmouth N)
Burns, SimonGrist, Ian
Burt, AlistairGround, Patrick
Butler, ChrisHamilton, Neil (Tatton)
Butterfill, JohnHampson, Dr Keith
Carlisle, John, (Luton N)Hanley, Jeremy
Carlisle, Kenneth (Lincoln)Hannam, John
Carrington, MatthewHargreaves, A. (B'ham H'll Gr')
Carttiss, MichaelHargreaves, Ken (Hyndburn)
Cash, WilliamHarris, David
Channon, Rt Hon PaulHaselhurst, Alan
Chapman, SydneyHawkins, Christopher
Chope, ChristopherHayes, Jerry
Churchill, MrHayhoe, Rt Hon Sir Barney
Clark, Dr Michael (Rochford)Hayward, Robert
Clark, Sir W. (Croydon S)Heathcoat-Amory, David
Clarke, Rt Hon K. (Rushcliffe)Heddle, John
Colvin, MichaelHicks, Mrs Maureen (Wolv' NE)
Conway, DerekHicks, Robert (Cornwall SE)
Coombs, Anthony (Wyre F'rest)Higgins, Rt Hon Terence L.
Coombs, Simon (Swindon)Hind, Kenneth
Cope, JohnHogg, Hon Douglas (Gr'th'm)
Cormack, PatrickHolt, Richard
Couchman, JamesHordern, Sir Peter
Cran, JamesHoward, Michael
Howarth, G. (Cannock & B'wd)Rifkind, Rt Hon Malcolm
Howell, Rt Hon David (G'dford)Roberts, Wyn (Conwy)
Howell, Ralph (North Norfolk)Roe, Mrs Marion
Hughes, Robert G. (Harrow W)Rossi, Sir Hugh
Hunt, David (Wirral W)Rost, Peter
Hunt, John (Ravensbourne)Rowe, Andrew
Hunter, AndrewRumbold, Mrs Angela
Hurd, Rt Hon DouglasRyder, Richard
Irvine, MichaelSackville, Hon Tom
Irving, CharlesSainsbury, Hon Tim
Jack, MichaelScott, Nicholas
Jackson, RobertShaw, David (Dover)
Janman, TimothyShaw, Sir Michael (Scarb')
Jones, Gwilym (Cardiff N)Shephard, Mrs G. (Norfolk SW)
Jones, Robert B (Herts W)Shepherd, Colin (Hereford)
Jopling, Rt Hon MichaelShepherd, Richard (Aldridge)
Kellett-Bowman, Dame ElaineShersby, Michael
Key, RobertSims, Roger
King, Roger (B'ham N'thfield)Skeet, Sir Trevor
Kirkhope, TimothySmith, Tim (Beaconsfield)
Knapman, RogerSoames, Hon Nicholas
Knowles, MichaelSpicer, Sir Jim (Dorset W)
Lang, IanSpicer, Michael (S Worcs)
Lawrence, IvanStanbrook, Ivor
Lawson, Rt Hon NigelStanley, Rt Hon John
Lennox-Boyd, Hon MarkStern, Michael
Lightbown, DavidStevens, Lewis
Lilley, PeterStewart, Andrew (Sherwood)
Lloyd, Sir Ian (Havant)Stradling Thomas, Sir John
Lloyd, Peter (Fareham)Sumberg, David
McNair-Wilson, M. (Newbury)Summerson, Hugo
Madel, DavidTapsell, Sir Peter
Major, Rt Hon JohnTaylor, Ian (Esher)
Marland, PaulTaylor, John M (Solihull)
Maxwell-Hyslop, RobinTaylor, Teddy (S'end E)
Meyer, Sir AnthonyTebbit, Rt Hon Norman
Miller, HalTemple-Morris, Peter
Mills, IainThompson, D. (Calder Valley)
Miscampbell, NormanThompson, Patrick (Norwich N)
Mitchell, Andrew (Gedling)Thorne, Neil
Mitchell, David (Hants NW)Thornton, Malcolm
Moate, RogerThurnham, Peter
Montgomery, Sir FergusTownend, John (Bridlington)
Morrison, Hon Sir CharlesTracey, Richard
Morrison, Hon P (Chester)Tredinnick, David
Moss, MalcolmTrippier, David
Neale, GerrardTrotter, Neville
Needham, RichardTwinn, Dr Ian
Nelson, AnthonyVaughan, Sir Gerard
Neubert, MichaelViggers, Peter
Nicholson, David (Taunton)Waddington, Rt Hon David
Nicholson, Miss E. (Devon W)Waldegrave, Hon William
Onslow, Rt Hon CranleyWalden, George
Oppenheim, PhillipWalker, Bill (T'side North)
Page, RichardWalker, Rt Hon P. (W'cester)
Parkinson, Rt Hon CecilWaller, Gary
Patnick, IrvineWard, John
Patten, John (Oxford W)Warren, Kenneth
Pattie, Rt Hon Sir GeoffreyWatts, John
Peacock, Mrs ElizabethWells, Bowen
Porter, Barry (Wirral S)Wheeler, John
Porter, David (Waveney)Whitney, Ray
Portillo, MichaelWiddecombe, Miss Ann
Powell, William (Corby)Wolfson, Mark
Price, Sir DavidWood, Timothy
Raison, Rt Hon TimothyWoodcock, Mike
Redwood, JohnYeo, Tim
Renton, TimYoung, Sir George (Acton)
Rhodes James, RobertYounger, Rt Hon George
Rhys Williams, Sir Brandon
Riddick, GrahamTellers for the Ayes:
Ridley, Rt Hon NicholasMr. Alan Howarth and
Ridsdale, Sir JulianMr. David Maclean.
NOES
Abbott, Ms DianeArmstrong, Ms Hilary
Adams, Allen (Paisley N)Ashley, Rt Hon Jack
Alton, DavidAshton, Joe
Anderson, DonaldBanks, Tony (Newham NW)
Archer, Rt Hon PeterBarnes, Harry (Derbyshire NE)
Barron, KevinFearn, Ronald
Beckett, MargaretField, Frank (Birkenhead)
Bell, StuartFields, Terry (L'pool B G'n)
Benn, Rt Hon TonyFisher, Mark
Bennett, A. F. (D'nt'n & R'dish)Flannery, Martin
Bermingham, GeraldFlynn, Paul
Bidwell, SydneyFoot, Rt Hon Michael
Blair, TonyFoster, Derek
Blunkett, DavidFoulkes, George
Boateng, PaulFraser, John
Boyes, RolandFyfe, Mrs Maria
Bradley, KeithGalbraith, Samuel
Bray, Dr JeremyGarrett, John (Norwich South)
Brown, Gordon (D'mline E)George, Bruce
Brown, Nicholas (Newcastle E)Gilbert, Rt Hon Dr John
Brown, Ron (Edinburgh Leith)Gordon, Ms Mildred
Bruce, Malcolm (Gordon)Grant, Bernie (Tottenham)
Buchan, NormanGriffiths, Nigel (Edinburgh S)
Buckley, GeorgeGriffiths, Win (Bridgend)
Caborn, RichardHarman, Ms Harriet
Callaghan, JimHattersley, Rt Hon Roy
Campbell, Ron (Blyth Valley)Haynes, Frank
Campbell-Savours, D. N.Healey, Rt Hon Denis
Canavan, DennisHeffer, Eric S.
Clark, Dr David (S Shields)Henderson, Douglas
Clarke, Tom (Monklands W)Hinchliffe, David
Clay, BobHolland, Stuart
Clelland, DavidHome Robertson, John
Clwyd, Mrs AnnHood, James
Cohen, HarryHowarth, George (Knowsley N)
Cook, Robin (Livingston)Howell, Rt Hon D. (S'heath)
Corbett, RobinHoyle, Doug
Corbyn, JeremyHughes, John (Coventry NE)
Cousins, JimHughes, Robert (Aberdeen N)
Crowther, StanHughes, Roy (Newport E)
Cryer, BobHughes, Sean (Knowsley S)
Cummings, J.Hughes, Simon (Southwark)
Cunliffe, LawrenceIngram, Adam
Cunningham, Dr JohnJanner, Greville
Dalyell, TamJohn, Brynmor
Darling, AlastairJones, Barry (Alyn & Deeside)
Davies, Rt Hon Denzil (Llanelli)Jones, Ieuan (Ynys Môn)
Davies, Ron (Caerphilly)Jones, Martyn (Clwyd S W)
Davis, Terry (B'ham Hodge H'l)Kaufman, Rt Hon Gerald
Dewar, DonaldKilfedder, James
Dixon, DonKinnock, Rt Hon Neil
Dobson, FrankLambie, David
Doran, FrankLeadbitter, Ted
Douglas, DickLeighton, Ron
Dunwoody, Hon Mrs GwynethLestor, Miss Joan (Eccles)
Eadie, AlexanderLewis, Terry
Eastham, KenLivsey, Richard
Evans, John (St Helens N)Lloyd, Tony (Stretford)
Fatchett, DerekLofthouse, Geoffrey
Faulds, AndrewLoyden, Eddie
McAllion, JohnRees, Rt Hon Merlyn
McAvoy, TomReid, John
McCartney, IanRichardson, Ms Jo
Macdonald, CalumRoberts, Allan (Bootle)
McFall, JohnRobertson, George
McKay, Allen (Penistone)Robinson, Geoffrey
McKelvey, WilliamRogers, Allan
McLeish, HenryRooker, Jeff
Maclennan, RobertRoss, Ernie (Dundee W)
McNamara, KevinRowlands, Ted
McTaggart, BobSedgemore, Brian
McWilliam, JohnSheerman, Barry
Madden, MaxSheldon, Rt Hon Robert
Mahon, Mrs AliceShore, Rt Hon Peter
Marek, Dr JohnShort, Clare
Marshall, Jim (Leicester S)Skinner, Dennis
Martin, Michael (Springburn)Smith, Andrew (Oxford E)
Martlew, EricSmith, C. (Isl'ton & F'bury)
Maxton, JohnSmith, Rt Hon J. (Monk'ds E)
Meacher, MichaelSnape, Peter
Meale, AlanSoley, Clive
Michael, AlunSpearing, Nigel
Michie, Bill (Sheffield Heeley)Speller, Tony
Michie, Mrs Ray (Arg'l & Bute)Steinberg, Gerald
Millan, Rt Hon BruceStott, Roger
Mitchell, Austin (G'f Grimsby)Strang, Gavin
Moonie, Dr LewisStraw, Jack
Morgan, RhodriTaylor, Mrs Ann (Dewsbury)
Morley, ElliottThomas, Dafydd Elis
Morris, Rt Hon A (W'shawe)Turner, Dennis
Morris, Rt Hon J (Aberavon)Vaz, Keith
Mowlam, MarjorieWall, Pat
Mullin, ChrisWalley, Ms Joan
Murphy, PaulWarden, Gareth (Gower)
Nellist, DaveWareing, Robert N.
Oakes, Rt Hon GordonWelsh, Michael (Doncaster N)
O'Brien, WilliamWigley, Dafydd
O'Neill, MartinWilliams, Rt Hon A. J.
Orme, Rt Hon StanleyWilliams, Alan W. (Carm'then)
Patchett, TerryWilson, Brian
Pendry, TomWinnick, David
Pike, PeterWise, Mrs Audrey
Powell, Ray (Ogmore)Worthington, Anthony
Prescott, JohnYoung, David (Bolton SE)
Primarolo, Ms Dawn
Quin, Ms JoyceTellers for the Noes:
Radice, GilesMrs. Llin Golding and
Randall, StuartMr. Frank Cook.

Question accordingly agreed to.

Bill accordingly read a Second time, and committed to a Standing Committee pursuant to Standing Order No. 61 (Committal of Bills).