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

– in the House of Commons at 4:08 pm on 10th March 1988.

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Not amended (in the Standing Committee), considered.

Bill reported, without amendment.

Order for Third Reading read.

Photo of Mr Ian Lang Mr Ian Lang , Galloway and Upper Nithsdale 4:10 pm, 10th March 1988

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

The subject of the Bill is the closure of the regional development grant scheme, which was introduced under the Industrial Development Act 1982, as substituted by the Co-operative Development Agency and Industrial Development Act 1984. Hon. Members have extensively and, if I may say so, thoughtfully and usefully, debated aspects of the Bill in Committee. Nevertheless, it returns unamended to the Floor of the House.

The Bill is a short one. It has two substantive clauses. Clause 1 removes the power to make grants for projects, unless applications are received on or before 31 March 1988. Clause 2 establishes transitional arrangements concerning the availability of grants for projects in respect of which applications are received after 12 January 1988, except where applications are in respect of projects started on or before that date. As the House will recall, 12 January is the date upon which our intentions in that regard were announced to the House by my right hon. and learned Friend the Chancellor of the Duchy of Lancaster.

The ending of the regional development grant scheme is part of a group of measures by which the Government aim to strengthen regional policy and to make it more cost-effective. At present regional development grant is available for a wide range of projects in development areas. The scheme involves virtually automatic grant payments at standard rates. This mechanistic nature of the scheme make it unsatisfactory in a number of respects. The grant is available to companies of any size and there is no assessment made at the time of application of whether a project really needs to be grant-aided before it can proceed or whether it is based on a viable business plan. A large number of projects therefore receive aid which would have gone ahead in the same location in any case.

The waste of scarce public resources that arises cannot be justified. A less automatic approach to regional assistance is necessary. In this way we shall ensure that projects are properly evaluated in advance and that only those where need is demonstrated receive assistance. That is the basis on which regional assistance will be administered in future.

Photo of Mr Dafydd Wigley Mr Dafydd Wigley , Caernarfon

The Minister stressed the importance of flexibility in the payment of grant, yet the Government show no flexibility over boundaries. The Minister appears to be standing by the statement that the boundaries will remain for the duration of this Parliament. Will he give us an assurance that, if there were an industrial catastrophe, leading to massive unemployment in an area outside those boundaries, the Government would be flexible and would seek to bring forward changes if necessary?

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

The hon. Gentleman will be aware that there are a number of weapons in the Government's armoury which we can use to help particular areas, but there is no need to change the development area maps in the context of the changes that we are now debating. The assisted areas will remain, and there will still be advantages of one kind or another under the overall regional aid package that will continue to be enforced. Any regular review of the boundaries involving changes on a rapid, regular and repeated basis would undermine the stability that is an important underlying feature of regional assistance. It is the relative need of different areas that is important, rather than the absolute need.

Photo of Alan Beith Alan Beith Shadow Spokesperson (Treasury)

Is the Minister refusing to recognise that the original decisions may have been wrong, or that the pattern may change, so that far greater need may exist outside an assisted area than inside it? If, as he now argues, the policy works even with a selective system, the effect would be to direct industry away from an area of great need to an area of lesser need.

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

None of these policies is absolutely set in concrete for all time, but my right hon. and learned Friend thought it appropriate to say that there would be no further changes before the end of the lifetime of this Parliament. It is important to give an underlying measure of stability, as I said earlier, and we have other weapons at our disposal to bring help where it is seen to be necessary.

The House has, of course, been concerned about the effects of the ending of RDG on spending on regional assistance, but I can say that planned spending on regional assistance is not being cut. Some hon. Members have persisted in raising the question of what will happen after 1991, but they know that it is impossible to give expenditure figures as far ahead as that. Indeed, it would be irresponsible to try to do so. The position is that, looking as far ahead as we can, our spending is being refined and redirected; it is not being cut. More funds are being made available for regional selective assistance. It is now up to companies to come forward with good quality projects to support.

Photo of Austin Mitchell Austin Mitchell , Great Grimsby

When the Minister says that spending will not be cut, he includes in that spending the money still in the pipeline from regional development grant. That is a point that arose frequently in Committee. Will he guarantee that when that money has gone through the pipeline, regional spending will stay as high as it is now?

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

The hon Gentleman presses questions which have already been fully explored in Committee. As he knows, the expenditure budget for the Department of Trade and Industry is expected to rise from £700 million, as stated in last year's White Paper on public expenditure, to about £900 million, as stated in this year's White Paper. Over and above that, there is further substantial help under the consultancy services, totalling about £274 million over three years. I think that if the hon. Gentleman sets that against the declining input of RDG 1, which he rightly identifies, he will realise that there is no question of a cut and that in many areas there are substantial increases.

Hon. Members have also been concerned about the position of smaller companies following the ending of regional development grant, but I can assure the House that that concern is misplaced. The Government have done a great deal to stimulate the growth of small companies, because we recognise that the future prosperity of assisted areas depends to a considerable extent on the further spread of the enterprise culture into those parts of the country which historically depended on a few large employers, often in heavy industry. Our regional policy fits naturally into that wider policy framework.

Regional selective assistance is available to companies of all sizes. Making an application is not at all the bureaucratic of onerous procedure that some would suggest. A discretionary grants system that aims to direct assistance where it is needed will necessarily require more detailed financial information than would be the case with an automatic grant scheme. However, we are fully aware that, in order not to place undue burdens on industry and not to discourage companies from seeking assistance, such requirements must be kept to a minimum.

As far as RSA is concerned, we have been keen to ensure that small companies make full use of what is available and for that reason, we recently introduced significantly simplified procedures for those applying for a grant of under £25,000. Companies with fewer than 25 employees in development areas will, of course, also be able to benefit from the new investment and innovation grants that are being introduced from 1 April. I can assure hon. Members that in drawing up the guidelines for the operation of the new grants, we have been mindful of the need to keep procedures as simple as possible. For all schemes, officials are always ready to discuss applications and to give guidance to companies.

I am glad to see that the hon. Member for Fife, Central (Mr. McLeish) in his place. Most of us, if we are fortunate, have small parts of our speeches reported by the press in some newspapers the next day, but the hon. Gentleman has managed to achieve what some of us regard as impossible—extensive reporting of the speech to which he will treat the House later this afternoon. Perhaps I can help the hon. Gentleman and shorten the debate by answering in advance the remarks that he contemplates making.

Today's edition of The Scotsman tell us: A Labour MP will today use the last Commons debate on the scrapping of the Regional Development Grant to call for a broad-based campaign aimed at helping Scottish industry and business to take advantage of the Government's Enterprise Initiative. I could not agree more with the hon. Gentleman, and I am happy to join him in that broad-based campaign.

According to The Scotsman, the hon. Gentleman said yesterday that the row over cuts in regional aid was now a bogus issue". I entirely agree with him on that, too.

In the same article, the Scottish Council (Development and Industry) is quoted as having submitted to my right hon. and learned Friend the Secretary of State for Scotland a three-point programme, urging more flexibility in the new selective grant system, more emphasis on innovation, and a Scottish promotional campaign. In this happy harmony that we appear to have struck this afternoon, I accept and commend all three points made by the Scottish Council (Development and Industry), whose support for our overall programme we warmly welcomed when the announcement was made.

At various stages of the progress of the Bill, a number of hon. Members have referred to inward investment and expressed concern about what might happen to it as a result of the proposals in the Bill. I do not believe that inward investment will be undermined by the changes that we are making. I wish to share with the House the experience that I enjoyed last Monday, and I think that hon. Members may well then agree with me. On that day I presided at a press conference in Edinburgh at which the Bankers Trust, the seventh largest bank in the United States, with assets of more than $50 billion, announced that it was setting up an international administration project in Edinburgh. When asked what financial assistance it had been offered, it replied, "None."

On the same day I attended a seminar promoted by the Compaq Computer Corporation, the fastest-growing personal computer manufacturer in the world, to mark the start of production, ahead of schedule, of its manufacturing plant at Erskine in Scotland. In its case regional assistance was offered and accepted, but the company, quoted in The Scotsman on 8 March, said that Compaq chose to locate in Scotland although other European countries had offered it more lucrative financial packages … the other major European countries, including France and Germany … had put forward financial packages which matched each other but those packages had not been the key factor in the decision to relocate in Renfrewshire … Mr. Francois said that the company had been given no special tax treatment to set up on the greenfield site. One element, however, which obviously had been important was corporate income tax. I believe that regional assistance has a part to play in attracting inward investment — in some cases an important part — but regional assistance will still be available in selective form and can thus be tailored to the needs of specific projects—

Photo of Mr Timothy Devlin Mr Timothy Devlin , Stockton South

I am sorry to interrupt my hon. Friend, but there are a number of English Members in the Chamber, as well as Scottish ones. It might be helpful if I pointed out that we are enjoying the same increased level of inward investment in the northeast without the need for regional development grant. As a result of the advertising by the Teesside development corporation, a great deal of interest has been shown in sites in the TDC area and in the whole north-east of England. We are now in a position to say that there will be a severe shortage of factory and office space throughout the northeast, as reported in the Financial Times only three days ago. We look forward to a time in the near future when the north-east will be building, with the help of regional selection assistance, on the strength of its small firms, but we will not need the same RDG as we have in the past.

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

I am sure that my hon. Friend is right. He brings to the debate a close knowledge of what is happening in the north-east. It is clear that there, as in other parts of the country, the economy is reviving—

Photo of Tony Blair Tony Blair , Sedgefield

The hon. Member for Stockton, South (Mr. Devlin) is wrong. The story on the front page of the Financial Times did not say that there was a shortage of sites in the north-east—there is not. There is a plethora of them. There is, however, a shortage of factory buildings. One of the main reasons for that is that the Government have wound up the Aycliffe and Peterlee development corporation and are not putting the money into English Estates to build new factory buildings.

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

English Estates' budget is being considerably increased. I take the view that most sensible people would take — that a shortage of factory space is a sign of success rather than of failure.

Photo of Sir Nicholas Fairbairn Sir Nicholas Fairbairn , Perth and Kinross

Will my hon. Friend remind the hon. Member for Sedgefield (Mr. Blair) that when he speaks of the north-east, he presumably means the north-east of England? I regard the north-east as Aberdeenshire.

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

My hon. and learned Friend is right. The north, the north-east and north-west are parts of the United Kingdom that we Scots go south to reach.

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

Will the Minister advise his hon. Friend the Member for Stockton. South (Mr. Devlin) that although he may have too much in his area, 100 miles down the A1 mining communities are being wiped out and given no assistance by the Bill? No factories are being encouraged to come in to replace miners' lost jobs. As recently as yesterday, three more major pits were wiped out in the area. What will the Government do for those mining communities?

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

The hon. Gentleman is tempting me to stray far from the confines of the Bill, to which we are giving a Third Reading. From his knowledge of the mining industry, he will know of the substantial financial resources that are being brought to bear on the problems of mining areas by British Coal Enterprise initiatives.

Photo of Dennis Skinner Dennis Skinner Member, Labour Party National Executive Committee, Vice-Chair, Labour Party

It is being bandied about by Ministers that British Coal Enterprise is providing jobs in coalfields where pits have closed. It has £30 million of taxpayers' money, but it is not providing such jobs. It is a front. It is laying claim to jobs that are being created in some cases by development areas and in others by regional grants, of which they will now be robbed. Merrik Spanton, who runs British Coal Enterprise, should be brought before an appropriate Committee of the House to explain where that £30 million of taxpayers' money has gone. If a Labour local authority had spent that money on gravy trains and junkets, it would have been surcharged. It is important that this matter be investigated.

Photo of Mr Paul Dean Mr Paul Dean , Woodspring

Order. I hope the Minister will bear in mind, when dealing with these points, that we are now on Third Reading, and that it is in order to deal only with what is in the Bill.

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

I knew that it would be a mistake to give way to the hon. Gentleman. It is important to ensure that the transition from the present policy framework to the new one is fairly and equitably achieved. Clause 2 is designed to that end. Its purpose is to set out the restrictions that will apply on payment of grant to projects that were the subject of applications for approval received after 12 January 1988 and on or before 31 March 1988, and which commenced after 12 January 1988. The restrictions do not apply to any other projects. Projects that started on or before 12 January, provided that an application is submitted by 31 March, and applications that were received on or before 12 January, will be unaffected by the closure arrangements.

The Bill signifies no reduction in our commitment to an effective regional policy, contrary to what some hon. Members have suggested. In Committee they proposed that various parts of the country should be excluded from the provisions of the Bill, but that would be unworkable given the bewildering pattern of assistance across the country. More important, such suggestions exhibit a failure to understand our proposals. They appear to equate regional policy with regional development grant, which shows a lack of willingness to accept that policy must be adapted to the circumstances of today.

Our objective has not changed. It continues to be the reduction of disparities in job prospects between different parts of the country, and the encouragement of the development of local potential for self-generating growth. The means of achieving that objective must always be subject to critical examination. We believe that the time is now right for a change. The economy has been showing considerable improvement, and unemployment in the United Kingdom has fallen by almost 650,000 since July 1986 and is expected to continue to fall in 1988. Manufacturing productivity has improved markedly and business confidence is high.

We want to ensure that the improvements that have taken place throughout Great Britain continue. The best way to do that in the assisted areas is to ensure that our regional policy is as effective as possible. No longer can a case be made for handing out grant in a general and automatic fashion. That is neither necessary nor effective. The greatest progress will be achieved by all individuals and businesses taking responsibility for their own future.

That does not mean a simple sink-or-swim philosophy. It means that assistance is best given, not in an undirected manner or in such a way that dependence on assistance is created, but by relating patterns of assistance to need. Our general regional policy objectives continue to be those of stimulating local self-generating growth and reducing inequalities of employment opportunity.

Photo of Mr William Powell Mr William Powell , Corby

My constituency has been a substantial recipient of RDG over the past years, to its great benefit. The single most important factor that has caused the remarkable industrial turn around in my constituency has been the provision of derelict land grant, which has enabled sites to be cleared and new businesses to come in.

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

My hon. Friend's constituency is a remarkable tribute to the development of enterprise in an area which previously depended on one major industry and in which employment opportunities had substantially diminished. Unemployment in my hon. Friend's constituency has fallen from about 25 per cent. to about 12 per cent., which is a remarkable achievement.

Photo of Mr Timothy Devlin Mr Timothy Devlin , Stockton South

Does my hon. Friend agree that the structural problem of the north-east is heavy overdependence on large industries, with large employment probabilities? The need now is to restructure the local economy so that many more people can be employed, and encouraged to be employed, in small and medium-sized businesses and encouraged into self-employment. That will be the special value to the north-east of England of the enterprise initiative proposed in the Bill.

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

My hon. Friend is right. The general thrust of our policies in the Bill and alongside it emphasise the importance of assisting small companies, which are the more likely generators of future jobs, and of encouraging enterprise and the growth of self-employment.

The changes that we are making are positive. Regional selective assistance continues, and funding provision for it has increased. New grants to assist small firms in development areas to pursue investment and innovation projects will come into effect on 1 April. Firms in assisted areas now benefit from a higher rate of support under the new consultancy schemes, such as the business development initiative. These policies show our determination to use public funds wisely and effectively to strike at the root of the problem of regional disadvantage. No longer will money be thrown at companies in a wasteful and unnecessary attempt to ensure that they do what they had all along intended to do.

The proposals enshrined in the Bill and the other regional assistance policies that accompany it build on, and flow from, the changes that we introduced in 1984. They update our approach against the background of the continuing sustained growth of the economy, which is responding to the broad thrust of our economic policies. We intend that success to continue.

In 1984 we tightened the operation of RDG, notably with the introduction of job creation criteria. This achieved better value for money for the taxpayer and a more effective operation of regional policy, as the continuing revival of regional economies demonstrates. Now we perceive that it is right to go further. The changes that we propose will apply our resources—which are not being reduced—more cost-effectively, more flexibly and more selectively, the better to achieve our objective of helping the disadvantaged parts of Britain to rise above these historic disadvantages. This will enable us to stimulate in all parts of the country the self-sustaining spread of enterprise on which jobs and prosperity depend. I commend the Bill to the House.

Photo of Austin Mitchell Austin Mitchell , Great Grimsby 4:32 pm, 10th March 1988

If the Regional Development Grants (Termination) Bill sounds like an abortion, that is almost certainly because that is what it is. Although it is only a short, two-clause Bill, its malevolence is in inverse ratio to its size. It has all the hallmarks of the Government's new radical loony phase that began when Saatchi and Saatchi took over the Conservative party conference with the theme "The next move forward". That theme gave the Prime Minister her head, and the Bill is one of the consequences.

It is a vicious Bill because it hits hardest those areas that are most in need and favours the richest areas. It is a mean Bill and exhibits a further petty economy. It will lead to a reduction in spending on the regions—which is what we are talking about — by a Government who are already spending only £1 on regional assistance for every £4 that the Labour Government spent when they were in power.

It is a shabby Bill because it is justified with figures that the Minister is still fiddling. We cannot make this point frequently enough. The money that is in the pipeline for regional development grants is being counted in the Government's total for regional assistance. Also being counted are the consultancy grants and arrangements, 40 per cent. of which will go to the prosperous south-east. That is being counted as if it were going to the regions that are losing money.

The Bill is also cynical. It is typical of the new approach of the Department of Trade and Industry under Lord Young of Graffham, Saatchi and Thompson, which is advertising worse as being better. The Minister told us that the Government's approach is not to throw money at problems, but the approach is clearly to throw advertising agencies and advertising budgets at them. The advertising expenditure of the DTI is in exactly adverse ratio to its powers. As those powers contract, the advertising budget goes up. That budget is going up pari passu with the gaping trade deficit. The only benefit of the Department's policy is to the advertising industry.

When I say that the Bill is vicious, mean, shabby and cynical, I am saying that it is not exactly untypical of the Government and their approach to the regions. The Bill is based—the Minister repeated the point—on a hype, a distortion. He says that the economy is picking up, and for that reason we can seize this window of opportunity to abolish regional development grants that have been the mainstay of regional policy. That is what the Minister said, and if he wants to contradict it I shall be happy to sit down and let him do so.

The Minister said that the economy is picking up and this is the moment at which we can get rid of regional development grants. The economy is picking up largely because in 1986 the value of the pound fell and that encouraged exports. The dollar has been falling only slowly and exports to the United States have been helped enormously. That has caused an economic recovery. The Chancellor has since been attempting to kill the goose that has laid his golden eggs and the Prime Minister has now taken the axe from his hands and has rushed in to uncap sterling, which is now rising. It is now up 18 per cent. in real terms against the deutschmark on the February 1987 figure.

Photo of Mr Robert Atkins Mr Robert Atkins , South Ribble

This is the speech that the hon. Gentleman made this morning.

Photo of Austin Mitchell Austin Mitchell , Great Grimsby

My speech certainly has similarities to the speech that I made this morning, but that is because made such a good speech. I am glad that the Minister remembers it and enjoyed it.

The Prime Minister has seized power from the Chancellor of the Exchequer. She has uncapped sterling and the exchange rate has now risen in a way that will be directly harmful to the manufacturing industry that is so crucial to the areas of Britain that will be hit by the Bill.

Photo of Mr Richard Holt Mr Richard Holt , Langbaurgh

What exchange rate would the hon. Gentleman like to see, bearing in mind that three and a half years ago, when the pound was nearly at parity with the dollar, the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) said that it was not high enough?

Photo of Austin Mitchell Austin Mitchell , Great Grimsby

The pound should be slimmed down, and so should the hon. Gentleman.

Yesterday's editorial in The Sun was headed "Three cheers for rising pound". It said: Foreigners are squabbling to buy our currency. Investors want to set up factories here. The pound is proud again. And that is no cause for tears.We should be cheering from the roof tops. That is The Sun in its well-known capacity as the toilet paper of the Tory body politic praising Government policy. The exchange rate that The Sun praises so lavishly will be harmful to manufacturing industry which makes a major contribution to the areas that will be hit by the Bill.

The Government tell us that they are using the opportunity of a recovery to cut regional development grants. That is going up the well-known creek without a paddle. They cannot get interest rates down because they have unleashed such a credit explosion, and because interest rates are so high, the pound is kept high to strangle manufacturing industry.

What is happening to the exchange rate and to interest rates bodes ill for the manufacturing heartlands of Britain, and we shall again suffer job losses. When there is contraction, those are the areas that will be hit by the Bill and they will suffer worst.

It cannot be emphasised enough that a high exchange rate is a transfer of power from the north, the manufacturing area, to the south and to people who have money. Those who have much money are taking it away from those who have very little. The window of opportunity which the Government say is their justification for introducing the Bill is rapidly closing.

A point that we emphasise constantly in Committee but which we still have not got across to Ministers is that the great advantage of regional development grants is that they are automatic. They are given automatically to firms going to development areas. Firms know that the grant is there and can take it into account. Firms pay less tax because of the automatic nature of those grants than they would pay under regional selective assistance. Because the grants are automatic it is easier to attract foreign firms. My hon. Friend the Member for Sheffield, Central (Mr. Caborn) will deal with how competitive are many of the regional incentives given in other Common Market countries compared to ours. Surely it must be easier to attract footloose international industry if we can offer it the automatic guarantee of a regional development grant.

There is always a lot of pleasure in meeting officials from the DTI and even more pleasure in meeting Ministers from the DTI, but there is no money in it, like the automatic money that comes from regional development grants.

Photo of Mr Bob Cryer Mr Bob Cryer , Bradford South

Is there not also the important element that, if a grant is automatic, it keeps the civil servants at arm's length and all square with every applicant? Judging by our past experience, is there not a danger, with the exodus of civil servants from the Department of Trade and Industry to the boards of concerns as industrial advisers and the entry into the DTI of many business people, that there could be under this sort of legislation the invidious business of civil servants being able to hand out money on a somewhat arbitrary basis, which would lead to a form of corruption?

Photo of Austin Mitchell Austin Mitchell , Great Grimsby

That is a further and important point which I am willing to acknowledge. On knowledge of trade and industry, I defer to my hon. Friend, who knows so much about it. It is a point which it is worth emphasising constantly. It is another advantage of the automatic grant, which is similar to a regional devaluation. An area of the country that is not competitive needs the opportunity to have some extra incentive, such as a regional devaluation and an automatic grant to industry going to the area.

The Government are cutting the grant without consultation—nobody was consulted about the Bill; the Government produce straws of evidence, but there has been no consultation—and all the evidence that we have is that industry resents this cut and does not like it and that all the regional authorities are strongly opposed to it. The Government are doing this against all the evidence of their own research documents, the "Regional Incentives" and the "Investment Decision of the Firm" studies, which showed the importance and effectiveness of regional development grants. They are contradicting their own evidence, and they are also doing it against the evidence from the National Audit Office report which came out on 26 February.

Photo of Mr William Powell Mr William Powell , Corby

I am very interested in what the hon. Gentleman has to say about the advantages of the automatic system of grants. I wonder whether he can deal with the following point. The largest single recipient of automatic regional assistance in my constituency has been the British Steel Corporation, which has, of course, been the largest destroyer of jobs in my constituency.

Photo of Austin Mitchell Austin Mitchell , Great Grimsby

The information is four years out of date, in the sense that we are talking about RGD 2, not the RGD system about which the hon. Member is complaining. If he has a complaint on that count, he should address it to Ministers.

The report from the National Audit Office is a commendation of the grants which are being abolished. It makes several important points. It says that failures in RDG projects, which the Ministers complained of in Committee, are no higher than for businesses generally. It also says: studies by external consultants showed that a third of assisted firms that were interviewed considered that RDG II had been a critical factor in their investment decisions … Between 75 and 80 per cent. of respondents said the incentives had had some influence on their decisions. It is working. It is attracting industry to the regions, which is what it is meant to do. Yet the Government are abolishing it.

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

It is also pointed out that a rather higher proportion of beneficiaries of regional selective assistance regard it as important and critical to their investment decisions. So is not regional selective assistance working rather better?

Photo of Austin Mitchell Austin Mitchell , Great Grimsby

No, because the report gives the cost per job of employment attracted by regional selective assistance and by regional development grants and shows that, in the year 1986–87, the cost per job of regional selective assistance was £3,341, while the cost per job or regional development grants was only £3,155.

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

I am most grateful to the hon. Gentleman. He has quoted extensively from the Moore, Rhodes and Tyler report at various stages. That report and the Robinson, Wren and Goddard report, which have tried to assess the cost of net additional jobs created by regional incentives, have both confirmed what common sense would suggest, which is that selective schemes are more cost-effective per new job created than are automatic ones.

Photo of Austin Mitchell Austin Mitchell , Great Grimsby

That is just not true. This report is more up to date, in any case.

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

I apologise for repeatedly intervening, but the report is not adducing any new evidence. It is using evidence that was published some considerable time ago.

Photo of Austin Mitchell Austin Mitchell , Great Grimsby

It seems difficult to get over to the Minister the basic essence of the argument that if we are to attract industry to the regions we need a panoply of weapons, and both regional development grants which are automatic, and regional selective assistance, which is based on consultation, have a part to play. There cannot be a one-legged approach. There must be two legs to the strategy. That is why we are defending regional development grants.

Photo of Mr Timothy Devlin Mr Timothy Devlin , Stockton South

Will the hon. Member accept that a certain number of businesses are going to move into regions for reasons totally unconnected with regional selective assistance or even regional development grants? A whole range of investment decisions are taken without any form of regional assistance in mind.

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

And there are others which are not.

Photo of Austin Mitchell Austin Mitchell , Great Grimsby

Of course; the Minister is giving us a platitude there. They might even go to the north-east because they like the hon. Member's face, although I think that it is somewhat unlikely. But, among the reasons that firms give, regional development grants are cited as a major one. It stands to reason that if they can get a grant for going there they are more likely to go than if they cannot get a grant. It is chop logic to say that, because some firms go to regions without grants, they will all go to regions without grants. That just does not make any sense at all.

Photo of Austin Mitchell Austin Mitchell , Great Grimsby

I am sorry, but I am going to pursue my argument. I have given way a number of times.

It is the automatic nature of these grants that is their strength, but it is also the reason why the Government object to these grants. They do not like the automatic nature. Specifically, the Treasury does not like anything that is demand-led, as this is, because, if a firm goes to a region, it gets the grant. That is what rankles with the Treasury. It wants the power to control those grants. it can cut regional selective assistance or impose cash limits on it. The Department's budget can be cut by decisions over which it has no control. That cannot happen with demand-led grants such as regional development grants.

Photo of Sir Nicholas Fairbairn Sir Nicholas Fairbairn , Perth and Kinross

If we take a very simple situation such as that in my constituency in Perthshire, a person can move along the road to Dundee and collect some of the grants under the old system. But that does not make new jobs. It just robs my constituency of the jobs and moves them along the road, where some of the sort of people of whom the hon. Gentleman disapproves will collect the grant. Perhaps the hon. Gentleman would answer this question: at what price does he think that the pound should be to get the Elysium that he wants?

Photo of Austin Mitchell Austin Mitchell , Great Grimsby

I always enjoy the hon. and learned Gentleman's contributions, but there was as much cock in that as there was in his speech last night on clause 29, because that is an argument against regional assistance or designated areas altogether. The Government are retaining the regional assistance structure. Our argument is about the array of weapons that the Government need to have within that structure. His is a criticism of the structure altogether, which is irrelevant to this argument.

Photo of Mr Bob Cryer Mr Bob Cryer , Bradford South

Would not the argument just advanced by the hon. and learned Member for Perth and Kinross (Mr. Fairbairn) apply with equal force to the Government's enterprise zones, of which he is, one supposes, a fervent advocate? And is not the argument that we have always advanced against them that they just move people into another immediately adjacent area?

Photo of Austin Mitchell Austin Mitchell , Great Grimsby

I am most grateful to my hon. Friend. With his usual perspicacity, he has picked on another important point which I should have included in my argument but did not.

One would have thought that any Ministers, given the strength that the grants give them against the Treasury, would have fought to save those grants. The fact that they have given way shows how little guts they have for fighting against the Treasury for the interests of industry, the regions and their Department.

Regional strategies, economic policies and incentives to attract industry to the regions are not only a matter of social justice and fairness between regions but make economic sense. This is a Government of the country by the south-east, for the south-east. The south-east is better off, yet it is the area that is producing the pressures and the inflation which the Government are using as an excuse to damp down economic expansion. Where does the pressure of skill shortages come? It comes in the southeast. Where is the pressure of rising house prices, which has an effect on inflation? It is in the south-east. Where are house prices being used as a lever to get more and more credit to spend more and more? It is in the south-east, not in the north.

In other words, all those pressures of inflation from London are being used as an excuse to damp down the economy in a way that hits the rest of the country quite disproportionately. It hits the areas of the country that are represented by Labour Members, and the Minister is compounding that with this legislation. It is no good telling people in the north that there will be a trickle-down effect from the prosperity of the south-east. I do not know whether we are supposed to buy their secondhand Porsches or Gucci shoes or whether we are supposed to have the wetback economy of people travelling down the M1 to obtain work in the building trade because no jobs are available in their own areas.

It makes sense to use the social capital and facilities of the north by attracting industry to the area. To do so we need weapons such as automatic regional development grants.

The position will be made worse by the introduction of the single market in 1992. The tendency in an open market is not for development to be focused on the peripheries—which is what Britain will become in a single market—but on the growing centre. The single market will pose a threat to the north, yet the Government are removing one of our ways to attract development. That poses the danger of turning the United Kingdom into the Northern Ireland of Europe. It will drain off development from this country.

The Minister has been unable to justify a decision that is irrational and which will harm economic and regional—policy. He did not—nor did any Ministers in Committee —have the decency to distance himself from the lunatic nostrums and the crank economics advanced by Conservative Members.

Photo of Austin Mitchell Austin Mitchell , Great Grimsby

I have heard enough crank economics; I do not want to hear any more from the hon. Gentleman. He may be an expert on piggy banking, but he knows nothing about regional development.

Labour Members represent the north, Scotland, Wales and the areas that have been hard hit by the Government. That may be a political disadvantage, but it gives us a firmer grasp of economic realities and of the realities of manufacturing industry and of making things to sell to the world. We are talking about the real world, not the hypothetical money world about which Conservative Members talk.

We have a passionate concern to ensure that those vulnerable areas of the country are not done down by this measure, which will be opposed to the end.

Photo of Mr John Farr Mr John Farr , Harborough 4:52 pm, 10th March 1988

I welcome this short Bill. I hope that the hon. Member for Great Grimsby (Mr. Mitchell) will forgive me if I do not follow him too closely, but he seemed to ramble out of order by talking about exchange rates and the cost to jobs. I always thought that a high exchange rate would make the cost of raw materials imported by our industry less expensive and that it would therefore have certain advantages. However, it would be out of order to talk further about that subject in this debate.

I should like to raise an important matter that has cropped up in my constituency during the past week. It involves a company in which 200 jobs are at stake. I shall give the House this specific example of the evils of the present regional development grant system.

At present, the RDG system is causing gross distortions. There is a company in Logan street in Market Harborough that makes a very sophisticated type of valve. It has been there for 100 years and some of the grandfathers of the workers, who are highly skilled, also worked there. They are anxious to stay in Market Harborough and redevelop the town. [Interruption.] I wish the that hon. Member for Great Grimsby would listen, because I am trying to point out a matter of which he may not be aware.

In many parts of the country, the RDG system is a gross waste of Government money. Crosby Valve has been tempted to go to the east of Corby, which is nine or ten miles away, despite the fact that in Corby — I am pleased to see my hon. Friend the Member for Corby (Mr. Powell) sitting beside me in the Chamber—there are no skilled engineering workers available.

We have the ludicrous position that the company—which has been in Market Harborough since the turn of the century and which is doing a skilled engineering job —and its workers desperately want to stay in Market Harborough, yet simply because of the RDG system, and because of a grant of about £3,000 per job, the company can redeploy in Corby at no cost whatsoever.

If the company is attracted to Corby by this distortion, the workers, who have remained loyal to the company for many years, will have to bus in and out every day. How stupid can outdated legislation become? The sooner the Bill is on the statute book, the better.

I have been in touch with my hon. Friend the Minister, who is always helpful in these matters. I pointed out that, although an alternative site was available in Market Harborough, with planning consent for engineering purposes, the difference to the company between relocating in Corby or to the new site that is available in Market Harborough would be over £500,000. In this competitive world, companies must do the right thing for their shareholders. Directors are responsible to shareholders for how they handle financial matters. There is no way in which an independent director, acting in the best interests of his shareholders, could do other than recommend that the company redeploy in Corby.

I wrote to my hon. Friend the Under-Secretary, the hon. Member for South Ribble (Mr. Atkins) and said that Crosby Valve has been in Market Harborough for three generations. I told him that the proposed move had been influenced by the availability of £600,000-worth of RDG in neighbouring Corby. He wrote hack very promptly — he always writes back very rapidly, although he sometimes writes rather unhelpful letters—saying that there was no money available, and adding: I would not wish to influence the company's consideration in any way. The company has been influenced in its decision by the grant that operates at present. It is because of the damaging influence of regional development grants that this tragedy has come about, and what is by no means a dormitory town is likely to become more so in the near future.

Photo of Mr William Powell Mr William Powell , Corby

My hon. Friend makes his point precisely and well, and I agree with him, even though it is the land in my constituency that may benefit if the company relocates and the land in his constituency that may lose. Many people have played a considerable part in the recovery of Corby, not least my hon. Friend the Minister, who, at a time when the town desperately needed friends wherever it could find them, played a notable part in the early stages of getting the regeneration going. The point that my hon. Friend makes on behalf of his constituents will be well received by mine.

Photo of Mr John Farr Mr John Farr , Harborough

I am grateful to my hon. Friend; he is a personal friend as well as being a friend in the House. His kind words do not disguise the fact that the loss of a thriving and enterprising company cannot be replaced by kind words.

I have tried to give the House a common-sense approach. I did not bring in the rate of exchange more than I had to. To my mind, the debate is all about the RDG. The sooner the Bill is passed the better.

5pm

Photo of Alan Beith Alan Beith Shadow Spokesperson (Treasury)

I am glad that the hon. Member for Harborough (Sir J. Farr) raised that issue. It is a familiar story for many of us in other parts of the country. The Bill claims to be selective but it does not enable the Minister to be selective in such situations as the one described by the hon. Member for Harborough, and to bring assistance to companies so that they can stay in locations that are sensible for them—

Several hon. Members:

rose

Photo of Alan Beith Alan Beith Shadow Spokesperson (Treasury)

I have not finished dealing with the hon. Member for Harborough. Like him, I receive many letters from the Under-Secretary of State who is coming to look at a similar situation in my constituency in a week or two. He has not yet been persuaded that the root of the problem is that the map is set in concrete and never modified to take account of changes that occur in places such as Corby and its neighbouring areas. The hon. Members for Corby (Mr. Powell), for Darlington (Mr. Fallon) and for Amber Valley (Mr. Oppenheim) tried to intervene a moment ago. I shall not give myself the difficult task of choosing between them, so instead I shall turn to the Bill.

I cannot avoid mentioning in passing the sequence of letters that I received from the Under-Secretary of State. Recently they have taken a strange turn. The last one, no doubt under instruction from the Secretary of State in another place, had had its royal arms removed and replaced by some republican hieroglyphic, which was meant to convey the new thrusting, enterprising spirit of the Department. I find that puzzling. The Secretary of State embarked on a political career that leads him to believe that he is heading for even dizzier heights than he thought when the chairmanship of the Conservative party was in question. When the royal arms disappears from the notepaper of a Department of State, I begin to worry where the authority lies in the Administration.

We should remind ourselves that regional development grants have been a successful part of regional policy and have led to the creation of a large number of jobs, although nothing like enough jobs to replace those that have been lost by major structural changes, but certainly more than 600,000 jobs have been created. In at least one report, the Government have endorsed and recognised that, despite the criticisms from some Conservative Back Benchers, the regional development grant has proved important. The automatic grants must have been a significant part of that.

The Government must take account of the real fears that the ending of automatic grants will reduce incentives. Those fears have been expressed by organisations and individuals with day-to-day experience of trying to persuade industry to move into regions. The Northern Development Company which has been commended by Ministers is a good example of a region trying to help itself. Dr. John Bridge expressed precisely that fear, and it has been expressed by other people in other regions about inward investment and investment from overseas.

In the north-east, we have made particular efforts, with some success, to attract Japanese investment into the region. That policy has had some notable success, and I believe that it should continue, as it brings not only specific companies but a great deal of fresh air to the region. It brings new approaches to industrial working methods into the region, it gives a new approach to tackling some of our industrial problems. It has at last forced the British motor industry to look at all of its working practices and methods. That inward investment is invaluable to our region and to the country.

There are real fears that it would be less feasible to carry out such operations against the competition of other countries with automatic and generous forms of grant aid. Throughout the regions which get assistance, there is the fear that the end result will be a reduction in the amount of grant available.

Photo of Mr Timothy Devlin Mr Timothy Devlin , Stockton South

I noticed that the hon. Gentleman spoke about automatic or generous systems of grant. Is it not the case that generous systems of grant will continue after the Bill has passed?

Photo of Alan Beith Alan Beith Shadow Spokesperson (Treasury)

How do we know that we will get generous assistance in future, given that there are many voices in the Conservative party which are hostile to the very idea of regional development grant, and given the many pressures for the reduction of that expenditure? It is very hard to imagine that there will be as high a level of grant expenditure in future. Indeed, we have seen the cuts in overall grant expenditure that have taken place so far. All the signs are that the level of grant expenditure will reduce, which will be severely to the detriment of the regions.

I would be happy to be proved wrong about that in a year or two. If I am shown the figures that show that, in real terms, the Government have given as much assistance to the regions as hitherto, and directed that investment more effectively, I shall be happy to congratulate them on that achievement. I shall be very surprised indeed if that happens. I fear that the new pattern will lead to a lower level of grant.

Another worry is what precisely will he the nature of ministerial involvement in those grants. There have been newspaper stories about what level of grant decision will involve Ministers personally. That gives rise to the question what considerations and what criteria will apply and to what extent political or other considerations will enter into decisions to give out grants. It would be helpful in today's debate if Ministers would reiterate very firmly that only industrial considerations will apply and that there will be no question of grants going to particular areas because they are thought to be marginal constituencies or areas in which the Government want to attract some political advantage.

Indeed, I thought that the Prime Minister's attitude to the inner cities was expressed in a depressingly vivid way on election night. When the results came in from some parts of the country, it suddenly dawned on her that there was a problem in the inner cities. I am glad that she discovered that. Indeed she has a problem in the inner cities.

That leads to the assumption that the policy was conceived in political terms. Selective assistance grants must not be given simply to parts of the country where the Government need to curry favour and gain success. Selective assistance grants must be given on industrial criteria or criteria related to industrial rejuvenation of the economy, and not on political criteria. The opportunities for ministerial intervention in the process that we are to have give rise to that particular worry.

Photo of Alan Beith Alan Beith Shadow Spokesperson (Treasury)

I have already given way to the hon. Member for Stockton, South (Mr Devlin). He has intervened in many hon. Member's speeches and he has reached a stage where he might formulate his thoughts into a useful if brief speech later in the debate.

Another reason why we should not support the legislation is that it is not part of any wider review. The measure does not form part of a wider review of regional policy or involve any commitment to give regions greater control over their own affairs. The Bill must be seen against a background in which local authorities are becoming less able to take any part in the affairs of their regions or make any decisions about the affairs of their regions. The Government have made no attempt to introduce any regional machinery that will enable decisions to be taken within the regions affected.

The Bill leads to the opposite of the Government's proclaimed objective of letting the regions help themselves. If the regions are to help themselves, decisions must be made within the regions. If everything ultimately goes to civil servants in London or in the supposedly regional centres who are ultimately responsible to other civil servants and Ministers in Lon don, that is not regional decision-making and is not a process by which self-help can be encouraged.

The legislation also must be seen against the background of the Government's refusal to review the map. It seems a natural part of a piece of legislation which will change the system that the map should be reconsidered. Over the years, many of my hon. Friends have drawn attention to the defects of the map. My hon. Friend the Member for Truro (Mr. Taylor) and his late predecessor, David Penhaligon, spoke of the anomolies that arose in his constituency in Cornwall becaue the map was not up to date. The matter was also raised by Conservative Members.

I have referred time and again to the anomaly in the Alnwick and Amble area in my constituency, where there is consistently higher unemployment than many assisted areas and which has been denied development aid. Not only has it lost the grants referred to in the Bill but it has also been denied European aid which also hinges on the assisted areas' maps.

Under the Bill, if it is passed, the same thing will happen. People who want to start new businesses or to expand their businesses will be advised, in the same way as the hon. Member for Harborough's constituents, that they would be better off if they moved into assisted areas.

People have come to my surgeries in the last fortnight saying that they went to Government officials for advice about grants and were told, "Yes, you can have grants if you move into the assisted area"—and that in an area with consistently high unemployment. Recorded unemployment in Amble is over 20 per cent., with over one adult in three out of work. Yet people are being told that if they move down the road they can receive either the current automatic grants or the selective grants under the Bill.

That also applies to firms that are experiencing success, and want to expand and build new factory accommodation. There are grant opportunities for them too, if they move down the road into an assisted area.

Photo of Mr William Powell Mr William Powell , Corby

The hon. Gentleman makes an extremely powerful point. Sooner or later, Ministers will have to come to terms with it. At present, unemployment in my constituency is lower than in any other assisted area in the country by several percentage points, and it will become considerably lower, but, according to ministerial statements, we can expect no redrawing of the map until well into the next decade.

Photo of Alan Beith Alan Beith Shadow Spokesperson (Treasury)

I could receive no better testimony or support than that—an hon. Member representing an assisted area saying, in effect, that the grant system has done its job, and it is time that the map was changed to reflect the facts as they now are.

Refusal to face the realities of change seems extraordinary from a Government who are trying to argue that the regional grant system needs change—that it must be more selective. The selectivity that the Bill confers does not enable the Minister to say, "A grant is not necessary here. I will therefore go outside the assisted area, find another black spot where unemployment is even higher and give a grant to a company there." Indeed, one route that he could have taken to obtain that power would have been a review of the map.

Photo of Mr Philip Oppenheim Mr Philip Oppenheim , Amber Valley

My constituency, which is in the north midlands, does not form part of an assisted area, although unemployment is still quite high in parts of it. In the past five years, I have seen jobs move out of my area into areas that have received regional assistance.

Is the hon. Gentleman aware that, under the rule changes that came into force in 1985, it is much harder for companies merely to shuffle jobs from one part of the country to another, because the Minister has discretion to ensure that, unless there is a substantial net increase in jobs, factories cannot be moved from non-assisted to assisted areas? I think that that has been of some assistance, although I accept many of the points that the hon. Gentleman has made.

Photo of Alan Beith Alan Beith Shadow Spokesperson (Treasury)

It has not solved the problem that I face in my part of the world. My experience is not primarily of companies attempting that sort of thing, although I can think of one or two cases. It is of companies that genuinely wish to expand, want more space so that they can do so, need to spend a good deal of money to create that space and know that they could obtain grants if they moved into an assisted area. Under the Bill, they will not know with certainty, although no doubt they will be able to negotiate and make the decision to move on the basis that they will be offered a selective grant. The problem will still be there, and it also applies to those starting new businesses.

It is extraordinary to invite the House to carry through legislation that makes one change—possibly damaging—in the whole structure of regional grants, without tackling other fundamental problems that affect the grant system, and without ensuring that the system can meet the needs of areas where unemployment is very high.

The area in my constituency to which I have referred has the third highest unemployment of the non-assisted areas without development status. There are a number of such places around the country, which ought to have received attention before these measures were put into the Bill. The northern region and a number of others are working hard to help themselves, but time and again they come up against barriers created for them by Government. Those barriers have not been removed in the legislation, and fresh difficulties have been created. I therefore do not believe that the legislation should be given a Third Reading.

Photo of Mr Anthony Coombs Mr Anthony Coombs , Wyre Forest 5:14 pm, 10th March 1988

In welcoming the Bill, let me say first that the abolition of regional development grant and the subsequent changes in regional policy are long overdue. I say that not only because I come from the west midlands, which had to undergo its industrial restructuring without any benefit of regional development grant, but because regional development grants generally have not managed—in the words of the hon. Member for Fife, Central (Mr. McLeish) in Committee—to equalise opportunities for our firms and businesses so that some day they can take part in the great enterprise culture which seems to be sweeping the nation".—[Official Report, Standing Committee D, 16 February 1988; c. 25.] Too often in the past, they have been inefficient and wasteful, and have distorted the regional economies and damaged the job prospects of precisely the people they were designed to help.

That the grants have been costly is beyond doubt. Over the past 20 years, the 600,000 jobs have been bought at the cost of some £35,000 per job. Even the Labour-controlled city council in Birmingham, through its job creation scheme, spends a maximum of £10,000 per job. An average enterprise agency would not consider spending more than £5,000 per job, and the French system of regional assistance mentioned by the hon. Member for Great Grimsby (Mr. Mitchell) in Committee spends about £5,000 per job.

The costliness of our sort of regional policy is evident for all to see. It is small wonder that the Public Accounts Committee said in 1987 that there were serious questions about the cost-effectiveness of this kind of assistance.

Photo of Mr Richard Holt Mr Richard Holt , Langbaurgh

It is not only a matter of the cost per job. On Teesside, we have had a negative cost per job, in that, the more that millions of pounds have been poured into ICI and British Steel, the more tens of thousands of jobs have been lost.

Photo of Mr Anthony Coombs Mr Anthony Coombs , Wyre Forest

That is a very good point. I am coming on to that. The costs have been higher not only in financial but in economic terms. That is basically unsurprising, given that regional policy is based on the false premise that the extent of wealth depends on its distribution.

Not only has regional policy too often raised company costs artificially by artificial relocations on a very footloose basis, which has damaged certain regions where they have relocated, but it has raised costs by making links with the original suppliers more difficult, taking them further away from their original pools of skilled labour and making their management more diffuse. There is also the ridiculous position that the midlands, which lost 200,000 jobs over 10 years in the motor industry and related industries, had no regional development grant to help it with its restructuring. Under the Labour Government before 1979, it was actually prevented by the industrial development certificates from the restructuring that was so vital to its future.

Too often in the past, as recent research for the Regional Studies Association has shown, new firms that receive regional development grants have been condemned to marginalisation. By definition, they accept lower rates of return than normal, because of the grant that they are receiving. Too often they go into capital-intensive rather than labour-intensive projects, and too often they go into areas without an adequate prior analysis of the kind of market, the potential local excess capacity and the effect of existing local firms that they may have. Because the grant has been open-ended, automatic and not subject to viability, it has too often been ineffective and wasteful. In many instances, it has not even been effective in determining investment decisions.

Photo of Richard Caborn Richard Caborn , Sheffield Central

Can the hon. Gentleman give us any evidence from any independent, or, indeed, Government, report to substantiate his argument?

Photo of Mr Anthony Coombs Mr Anthony Coombs , Wyre Forest

As the hon. Member for Sheffield, Central (Mr. Caborn) said in Committee, according to the PIEDA consultants' report, only one third of firms receiving RDG said that the grants were critical for their investment decisions. One third said that they had no effect whatever on those decisions, and 71 per cent. said that they had no effect on their location decisions.

The second problem that regional policy has caused is that at least until 1984 it affected the larger traditional industries, which were less dynamic, less entrepreneurial and more monopolistic.

In Committee, the hon. Member for Great Grimsby supported that policy. He said: We want giants. It is a battle of the big battalions." —[Official Report, Standing Committee D, 18 February 1988; c. 54.] But that ignores the fact that in Japan—to which the hon. Gentleman referred as part of his argument—three quarters of the jobs created in manufacturing industry are in firms with fewer than 300 employees, and in the United States, 75 per cent. of the 14 million jobs that have been created over the past 10 years are in smaller firms.

Photo of Austin Mitchell Austin Mitchell , Great Grimsby

It may he impossible to enlighten the hon. Gentleman's economic ignorance, but it is possible to correct his quotations. I did say that the battle of international trade was a battle of the giants. It is a fact that 94 per cent. of small firms in Britain do not export. In the Japanese economy, the ones that do export are the big corporations — the Sonys, Yamahas, Nissans and Datsuns—not the small suppliers about which he is talking.

Photo of Mr Anthony Coombs Mr Anthony Coombs , Wyre Forest

That may or may not be so, but we are talking about the regeneration of employment in the regions and the smaller firms have been at the forefront in creating employment, wherever they be. Too often, regional development policy not only encouraged the effective colonisation of many regions, but, in doing so, suppressed the talents of local entrepreneurs which most needed to be harnessed to create local jobs.

The third problem with regional development aid and grants is that, even if they sought to create capital investment where it was most needed, they went in the wrong direction. Between 1979 and 1986, the north-west increased its proportion of gross domestic fixed capital formations by 9 to 10 per cent. and it received 19·7 per cent. of regional development grant. The northern area had 6 per cent. of gross domestic fixed capital formations, and that was rising. It also received 19·7 per cent. of regional development grant. Yet the midlands, which had 7 per cent. of capital formations — and that was declining—received no regional development grant.

In practice, the regional development grant damaged local enterprise by subsidising imported competition. It ensured that industry in the regions was footloose. Indeed, it has been shown that in the northern region 80 per cent. of manufacturing firms are owned from outside. Most important, it ignored the basic fact that company formations and employment depend not on the region but on the sector of the economy in which they act. Indeed, according to "Business Trends", between 1980 and 1985 and the growth and contraction rates of employment in different industries, company formations are uniform, irrespective of the area, showing exactly what I have just been describing.

The new policy will, rightly, concentrate principally on market opportunities, and, by increasing the design, marketing and production skills, it will enable entrepreneurial firms to take advantage of those opportunities. That is the correct policy. It is little wonder, as the Minister said in Committee, that there have already been 30,000 inquiries on the enterprise initiative.

I suspect that, just as we saw with business improvement grants, 70 per cent. of the inquiries on the enterprise initiative, when it gets up and running, will come from the north and the regions where there is the enterprise and initiative waiting to be channelled in an entrepreneurial way in order to create the jobs that they so badly need and to make them, as they were at one time, the engine room of the economy.

I want to make four further short points. First, if a market economy is working efficiently, regional policy should be redundant. Complementary to the reforms of regional policy in the Bill are the reforms of the rating system, the housing market — which will make the labour supply more mobile—and, most important of all, the reforms that will make sure that wages in the regions reflect local labour markets.

It is crazy that East Anglia has an unemployment rate of only 8 per cent. and the northern region has an unemployment rate, on average, of 15 per cent., yet between the two there is a difference of only £3 per week in weekly earnings. Until bargaining is done at a genuine regional and plant level, irrespective of whether it is through councils, the Government or nationalised industries, or even large private industries, our regional policy will be less effective than it should be.

Secondly, the enterprise document which has been released by the Department of Trade and Industry talks about the difficulties of attracting private investment to improve the industrial infrastructure. It mentions that it was to rely on English Estates, particularly for its managed workshops. That really is not necessary. If taxation allowances are given for industrial buildings which are kept in active management, the private sector will come in and do that in addition to the English Estates. That is a course of action that I shall urge on the Government.

Photo of Mr Christopher Gill Mr Christopher Gill , Ludlow

Is my hon. Friend contending that regional development grants have exhausted industry in his area, the black country, Birmingham and surrounding places, and that, because of that, the private enterprise culture has not been able to do its proper job, and that by ending regional development grants those reverse incentives will also be ended and the private sector economy will be able to re-establish itself?

Photo of Mr Anthony Coombs Mr Anthony Coombs , Wyre Forest

Indeed I am.

The third argument which I think has some substance is that recent changes in the operation of the European regional development fund, which mean that 80 per cent. of it will go to poorer regions, will mean that, if the United Kingdom is to keep its 70 per cent. proportion, it must have somewhere in the region of 75 per cent. of the remaining 20 per cent. allocated to it.

A large portion of that will come through integrated operations of the kind that has recently given Birmingham, where I come from, £113 million from the European regional development fund over the next five years. Applications are presently in from Manchester, Strathclyde and Leeds, and the Government should give those their maximum support.

Fourthly, the enterprise initiative and grant system need to be made more accessible. I am sure that that is one objective that my hon. Friend the Minister has in mind. I found it slightly sobering recently to visit a major engineering firm in my constituency, which has doubled its productivity since 1979 but which did not have a clear idea of either the engineering initiative or the youth training scheme. I appreciate that the number of Department of Trade and Industry offices will be increased to carry the message to industry, but enterprise agencies and chambers of commerce have an excellent opportunity to play their role, through their local contacts and sponsorships, by spreading the message and acting as conduits for the enterprise initiative. In that way, the thrust of the policy, making Government aid more focused, accessible arid effective, especially for smaller firms, will be carried out.

In my experience business people do not expect Government loans for loss makers on an open-ended basis, as the regional development grant allowed. They are perfectly happy to prove the viability of their projects, despite the fact that the Opposition would say that that increased uncertainty. They do not expect Government help just because they are Mancunians, Geordies or Brummies, but because they have the drive and ideas to make a success of their particular industries. That is the thrust of the Government's policy and that is why I support it.

Photo of Mr David Young Mr David Young , Bolton South East 5:29 pm, 10th March 1988

I congratulate the Government on the consistency of their policies for regional development and for the health of citizens in the northern regions. Nobody would argue that grants are the only effective system. Development grants are very important for my region, which in 1979 had 7·1 per cent. unemployment and in 1986 had 15·7 per cent. unemployment. It has had the highest drift of population and has lost 500,000 manufacturing jobs. Bolton received marginally more than it will lose from the package, but it is dependent upon the health of the north-west. If the north-west region loses, my town loses with it, because we are a part of the region.

We face a difficulty in attracting people, and also a communications difficulty. The Government established the third London airport in the south, not in the north, and British Rail is cutting off the night sleepers to Manchester, which will affect business men and the attraction of new investment. The regional grant is important to firms wishing to come to the area, so that they can plan according to how much grant they will receive. That certainty has been taken away by the legislation. Where will the firms go? This is part of the cheque-book approach of the Government. The firms will no longer come to the north, the midlands or the north-east, but will concentrate in the south, so we will lose the opportunity to attract investment.

Photo of Mr Christopher Gill Mr Christopher Gill , Ludlow

Does the hon. Gentleman accept that when business men make decisions on where to locate their premises or factories they have more regard for commercial considerations, such as the proximity of their markets, the availability of labour, the cheapness of premises and the land on which they are built, than for the bribes that they have had in the past?

Photo of Mr David Young Mr David Young , Bolton South East

The hon. Gentleman has made my case for me, because that is why the north has been disadvantaged. The Government have placed all their eggs in the south. The Government represent, not the north-west, but the south. We want to attract industry to the north. We would not have a problem in attracting industry if we did not have a Conservative Government, because Labour would see to it that we had a communications system, a health system and the ability to attract investment.

The grant system should be reformed, first by reelecting the Labour Government. I am not saying that we cannot reform the present grants system. I am saying that the Government are taking away items that would attract industry to the north and putting nothing in their place. The tendency is to pool everything in the south and to leave the north as an industrial deserted village. If the Government believe in the north, they should transfer some Government Departments from the south, as Labour did when it was in power. That would be an indication of good will.

The Government are not helping unemployment in the north or helping to attract firms. In many areas of economic and social policy, the Government are making an all-out attack on the people of the north.

Photo of Michael Fallon Michael Fallon , Darlington 5:35 pm, 10th March 1988

The Bill deserves a warm welcome from Conservative Members and from industry, and I was amazed to hear the hon. Member for Great Grimsby (Mr. Mitchell) say that industry has not welcomed the change. Obviously he has not read last week's CBI News, which said: The new rules will ensure that money spent on industrial investment projects, in all but the very smallest firms, will go to where there is a demonstrable need of public assistance. Both of these aspects make for prudent managment of the public purse and have resulted in generally favourable reactions to the new proposals. It would seem, therefore, that the era of automatic handouts is behind us forever. The proposals have been warmly welcomed in the northeast region. I have not had a single letter from a company in the north-east opposing the abolition of regional development grants.

Photo of David Clelland David Clelland , Tyne Bridge

I am listening with incredulity to what the hon. Member is saying about the reaction to the measure in the north-east, because I have here a copy of the minutes of the Northern Development Company, of which the CBI is an important part. The company's head of overseas operations has reported that the likely effects of RDG termination on inward investment … would make the task of attracting Japanese investment more difficult in the face of strong European competition … In Hong Kong the Far East Liaison Office felt that companies from Taiwan and Korea etc. who have not yet invested in Europe may be inclined to go the easy route and accept automatic grants from European competitors. In the United States RSA was considered complicated and time-consuming.

Photo of Michael Fallon Michael Fallon , Darlington

I shall be interested to hear the hon. Gentleman put that case when he captures your eye, Mr. Deputy Speaker. The Northern Development Company has not made those points to me, and I have no reason to belive that the task of attracting investment to the region will be any more difficult because of the changes that are being made, with the additional emphasis that will be placed on selective investment.

Photo of Mr Philip Oppenheim Mr Philip Oppenheim , Amber Valley

Does my hon. Friend not find it astonishing that Labour Members are keen to attract footloose and fancyfree multinationals, when only yesterday during Question Time on trade and industry we heard those companies referred to in the most insulting terms? Is it not far better that local, indigenous manufacturing industries should grow up, rather than that they should attract multinational companies which may decide to move out of the area after four or five years?

Photo of Michael Fallon Michael Fallon , Darlington

In some parts of the north-east the local culture is known in business terms as being so hopeless that we have to help it by trying to attract companies from the far east to provide jobs.

No region has suffered more than the north-east from the straitjacket of regional development grant and its limitations, because it is indiscriminate and automatic.

During my first two or three years in the House, I received the quarterly list of grants from the Department of Trade and Industry for the northern region. Time and again I found that those grants went to the same companies. On Teesside, as my hon. Friend the Member for Langbaurgh (Mr. Holt) is well aware, the grants went to ICI and the British Steel Corporation. They did not simply go to the two largest companies; they went to the two companies that were shedding labour instead of creating new jobs.

Photo of Mr Richard Holt Mr Richard Holt , Langbaurgh

I want to know where the money really went. It seems to me that the area as a whole received the grant, but the equipment that was purchased often came from overseas and there was no economic gain to the region. There were simply improved profits for ICI, based on handouts from central Government and fewer jobs in the region.

Photo of Michael Fallon Michael Fallon , Darlington

I do not know whether my hon. Friend can confirm this, but I have received no communications from ICI or BSC about the effects of this legislation.

Photo of Mr Richard Holt Mr Richard Holt , Langbaurgh

I have heard from the British Steel Corporation, urging me to get on with the denationalisation of that industry.

Photo of Michael Fallon Michael Fallon , Darlington

My hon. Friend has made his point.

It is no accident that the region that has enjoyed the largest share of regional development grants over the past 10 years is also the region with the smallest and poorest development of small businesses. There must be a relationship between our over-dependence on that kind of automatic, indiscriminate, non-job effective assistance and the stunted growth of the small business sector in the north-east. Small businesses will cheer the Third Reading of the Bill.

Photo of Mr Richard Holt Mr Richard Holt , Langbaurgh

Does my hon. Friend accept that one of the major reasons for the lack of investment in the north-east has been the twin enemies of industry and commerce and enterprise—local authorities and trade unions? Is it not a fact that in his constituency there is a private enterprise plan which does not require any grant and which would create 10,000 jobs in Darlington, but it has been refused by Durham county council?

Photo of Michael Fallon Michael Fallon , Darlington

That is typical of Durham county council's attitude to enterprise and business ever since the council was formed.

Small businesses will cheer the ending of the huge automatic grants to large companies. They will also welcome the changes in selective assistance. Where small businesses have reasonable projects, with reasonable prospects of job expansion, for the first time they will be eligible for selective assistance under the changes being made to the scheme. There will be a broad welcome in the north-east for the Bill.

I have two very small reservations which I want to address to my hon. Friend the Minister. The first relates to the remaining distinction in our regional aid structure between development areas and intermediate areas. By removing regional development grants, my right hon. and learned Friend the Chancellor of the Duchy of Lancaster has reduced that element of discrimination. The intermediate areas are in a less disadvantaged position in relation to the development areas. However, the disadvantage will remain, because there will be differing rates of grant and new proposals for selective assistance.

When my right hon. and learned Friend next reviews regional policy, will he look again at the necessity, especially in regions such as the north-east, for different types of financial assistance between, for example, Aycliffe and Darlington, or between Darlington and Teesside? Such a distinction is not sensible and is not consistent with the removal of discrimination embodied in these major proposals.

My second reservation was admirably made by the hon. Member for Berwick-upon-Tweed (Mr. Beith). The map is set a little too much in concrete. We are told that it is impossible to review the map other than through primary legislation, yet there is no doubt that events move on in the development world. That is why we are abolishing Aycliffe and Peterlee development corporation and Washington development corporation, and setting up Teesside and Tyneside development corporations. The emphasis changes.

I remember that the hon. Member for Berwick-upon-Tweed and I had intermediate areas prior to the 1984 review, and that we had the same rates of unemployment in our travel-to-work areas, of about 16 per cent. The Darlington area was kept on the map, but the Alnwick and Amble area was not. Four years later, unemployment in Darlington has dropped from 16 to 12 per cent., but the unemployment rate has remained unchanged in Alnwick and Amble.

When we next consider regional policy, we should make the various instruments by which the map is set up a little more flexible, so that where circumstances change the Minister can come to the House and make variations in the difference between assisted and non-assisted areas, and between development and intermediate areas.

Those two reservations aside, I welcome the Bill. I deplore the Opposition's attitude to the measure. Throughout the proceedings on the Bill, Opposition Members have confused spending on the regions with spending in the regions. Of course it is true that there has been a substantial increase in regional spending that is not part of the Department of Trade and Industry budget. There has been a dramatic growth in spending on training and retraining, and a dramatic increase in spending on environmental work in the region in clearing away the old industrial landscape and providing the new estates and factories necessary for new investments. It is wrong to consider regional aid simply in terms of regional assistance from the Department of Trade and Industry.

Photo of Henry McLeish Henry McLeish , Central Fife 5:45 pm, 10th March 1988

I am pleased to participate in this evening's debate after spending fruitless hours debating the issue with the Government. Tonight's debate has been characterised by the same arrogance, complacency and contempt for the regions that we see most evenings when we discuss anything that is unrelated to the financial economy which the Government so enjoy discussing.

This Bill is bad. It is also very simple, in that it terminates regional development grants. In doing that, it removes an area of certainty in terms of investment in a world that is very uncertain about attracting jobs, industries and companies to create wealth on which the country must depend in future. More importantly, the Government tend to forget that much of the manufacturing base is located in the regions.

The future of the United Kingdom's economy depends on that, despite discussions in Committee, when there was no positive suggestion that that was the case. Tonight's speeches have been characterised by the simple notion that what is good for the paper economy, the financial economy of the south-east and of the City, will in some way solve all the problems of the depressed regions that are still depressed after nine years of the Government badly beating manufacturing.

Apart from the fact that the Bill removes regional development grant, it is symbolic for many other significant reasons. It must be seen in the context of the Government's industrial strategy. I use the word "strategy" knowing full well that, with regard to the present Government, the term is used rather loosely.

We are considering the language of enterprise. In Committee we referred to the DTI paper which is the language of enterprise and the rhetoric of the market. It also reflects the Government's complacency as they are not in touch with ordinary people north of Watford or in touch with industrial concerns or needs.

Crocodile tears are shed over small businesses. The Government claim that they must help. After eight or nine years of this Government, it is obvious that small business have not benefited in the north or in the north of Scotland. Once again, the White Paper rhetoric only mirrors what we have seen over the past eight or nine years.

In the context of industrial strategy, it is no good for Ministers to stand up and claim that the economy is on the right lines and therefore the benefits will spill over. Countries such as Japan, the United States, France, Germany and Scandinavia have a civilised view of the wealth-creating, job-creating, manufacturing base. Not this Government; they are obsessed by what I have described as the money economy. Obviously, the Opposition must at least put on the record the concerns of those whom we represent. We still have high unemployment and shaky investment levels.

The Government talk about their policies being embraced by the CBI. I remind them that the CBI in most of its comments has embraced out of sheer relief the decision to scrap regional development grant. The CBI had thought that the whole of industrial policy would be abandoned. [Interruption.] If the hon. Members for Darlington (Mr. Fallon) and for Amber Valley (Mr. Oppenheim) would like to see my information, I shall send it to them; I hope that they will read it with interest.

Clearly, we are witnessing not just the termination of regional development grant but the abandonment of any serious semblance of regional industrial strategy. This is a step-by-step process. The Government know from experience and, as my hon. Friends appreciate, they do not do things overnight. Step by step, we are seeing the abandonment of any policy for effective regional aid. It is a "steady as the ship sinks" policy. We are used to that in the regions in Scotland and in Wales.

The Government's policy can best be summed up by describing it as a "let them eat cake" policy, a phrase coined by Marie Antoinette. Those of us from the regions interpret Ministers and Conservative Back Benchers as saying that the regions can eat cake. After the election, referring to the inner cities, the Prime Minister said, "We want to win them next time." Clearly, it is a matter of no votes, no help. As with the inner cities, in the regions the Government's policies do not match the genuine industrial employment needs in the areas that my hon. Friends and I represent.

I should like to highlight what surrounds the debate and what obviously must be the context within which anyone assesses the effectiveness, or otherwise, of abandoning regional development grants. Despite what the Minister of State said, there has been a significant cut in the Government's regional industrial assistance, especially for the period after 1991. Parliamentary questions on this matter have been tabled, but the Government are not willing to speculate on the financial assistance that will be provided when RDG disappears off the face of the industrial map. [Interruption.] The Minister need not shake his head, because his Department is the very one that will not provide the figures. Until we can find out what will happen post-1991, clearly the Government's measure must be interpreted as a massive cut in regional assistance.

Photo of Henry McLeish Henry McLeish , Central Fife

Rubbish? We shall await 1991, when the figures come before us in public expenditure statements and another Department of Trade and Industry paper.

As was mentioned in Committee, there has been a massive redistribution of regional development aid within the regional industrial strategy. Scotland will lose £100 million-worth of aid from the 1986–87 figures. At the same time, the Government, with their friends in marketing consultancy firms, have decided — [Interruption.] The Minister may laugh, but this is a fact and I do not mind laughter when the facts are on our side. I may be obsessed, but, if the truth hurts, let it hurt a little more. Over the next three years, £274 million will be invested in what the Government call the business development initiative.

Photo of Mr Philip Oppenheim Mr Philip Oppenheim , Amber Valley

What is wrong with that?

Photo of Henry McLeish Henry McLeish , Central Fife

The Government are proud of that, and I hope that that is on the record.

At the same time as the hard, direct cash for each region has been cut, the support for marketing consultants has mushroomed on a United Kingdomwide basis. It is not even a matter of the £274 million being injected into assisted areas. It is a United Kingdomwide initiative. As was conceded in Committee, 40 per cent. will go to the south-east.

Photo of Henry McLeish Henry McLeish , Central Fife

When that was conceded in Committee, the Minister justified it by saying that the area had 40 per cent. of the population and 40 per cent. of the economic activity. It is bad enough for the regions to have cuts, but there is a double difficulty when the money is transferred to areas where, we feel, it is not entirely necessary on the basis of simple industrial and employment needs.

The subject of the taxation of regional selective assistance has not been addressed. The Opposition asked whether that would continue, because RDG is not taxed. Clearly, if RSA is to be the only investment that we can expect in the regions, there will be another difficulty if it is taxed.

The Government constantly urge flexibility —"flexibility" being the buzz word for the market. Everything is flexible because the market is about supply and demand. Clearly, the Department of Trade and Industry paper and the scrapping of RDG put the regions in a straitjacket. An amount of £274 million is earmarked for a United Kingdomwide initiative. How much will go to Scotland? The general thrust of the Government's thinking is away from the regions and on the United Kingdom. We do not believe that there is flexibility. The flexibility that surrounds RSA worries us, because, instead of automaticity in grants, civil servants will be allowed to tackle applications. I am afraid that the proper decisions will not be taken and that this is a way of hiding further Treasury cuts in regional assistance in the run-up to 1991.

The discussions in Committee and in the House have been about disinvestment, disengagement, deskilling of our manufacturing base and, most appalling of all, lack of interest in anything that cannot be measured in terms of stocks and shares, the value of the pound and the amount of investment going out of the country.

Photo of Henry McLeish Henry McLeish , Central Fife

I shall not give way. I want to finish. There have been some truly hopeless interventions in this very short debate, and I should like to speak.

The Minister of State was charitable enough to refer to some comments that I made to the press. It is an appalling indictment of the fact that the Scottish Office has surrendered Scotland's industrial interests to the Department of Trade and Industry that organisations such as the Scottish Council (Development and Industry), the Scottish CBI, the Scottish TUC and local authorities are concerned about the future.

I made a point about any debate on the cuts being academic, because the Government smash all the legislation through the House regardless of facts, emotions and needs. In Scotland, as in the north-east, the northwest, Yorkshire and Humberside, people will want to get together because of their concern that the changes will not be distributed fairly. The south-east and East Anglia will cream off a large amount of the new investment which is going to business consultancy services.

The Scots — either the industrial or the political community — will not sit idly by without a fight. We need much more from the Scottish Office than we are getting. Scotland needs industrial leadership. In view of the appalling debacle over the South of Scotland electricity board and British Coal, the need for industrial leadership from the Scottish Office has become more acute. Such leadership has not been forthcoming. If we enter into this new phase of regional industrial policy without firm guidelines and assurances that Scotland will get its fair share, the Bill will have added significance in the years ahead.

Photo of David Clelland David Clelland , Tyne Bridge 5:59 pm, 10th March 1988

This Bill is a classic case of missed opportunity. It is more significant for what it leaves out than for what it includes. While I should be the first to acknowledge that the present system of regional aid is anything but perfect and would welcome meaningful proposals to amend and extend the system, I believe that the proposals before us are entirely negative. The Bill does nothing to allay the fears of many of us in the regions that the termination of regional development grant will be followed not by an improvement but by a deterioration in regional assistance.

In Committee, we tried to introduce some constructive amendments to improve the Bill and the system of regional aid. Our proposals would also have complied with many of the Government's stated objectives outlined in the Department of Trade and Industry White Paper "DTI—Department for Enterprise". The proposals in that White Paper, which preceded the Bill and of which the Bill is an integral part, make much of helping people to help themselves, cutting red tape and encouraging inward investment. Yet the Government have refused to take the opportunity in this Bill to give effect to those objectives. Indeed, some of the provisions will have the opposite effect.

Not surprisingly, I made a special plea in Committee for the northern region to be excluded from the Bill and for more local autonomy in the distribution of regional development grant. I would not paint as bleak a picture of the northern region as the Government have done, but it has to be recognised that the region still has its problems and that it is the duty of national Government to represent the interests of all parts of the country and not just of those where that Government have or hope to win support.

The policies adopted by the Government give little room for optimism. Contrary to the comments of the hon. Member for Darlington (Mr. Fallon), total regional assistance to the northern region has been falling steadily under this Government and the proportion of Government regional assistance is now just half what it was before the Government came to office. Regional development grant in particular was £75 million less in real terms in the last financial year than in 1979–80 and a massive £135 million less than in 1978–79, the last year of the Labour Government.

Our suspicion that the Bill has more to do with saving money than with assisting the regions was to some degree confirmed by the Chancellor of the Duchy of Lancaster on Second Reading. He said: We are replacing automatic grants because they are becoming steadily more expensive and wasteful".—[Official Report, 25 January 1988; Vol. 126, c. 43–44.] Our suspicions were further confirmed yesterday when the Under-Secretary responded to a question that I had tabled: My Department's planned level of expenditure on the main regional assistance measures in the years 1988–89 to 1990–91 is £330 million, £304 million and £265 million respectively. The House will note that the figure is decreasing. Total regional assistance in the last year for which figures are available—1986–87—was £409 million.

Therefore, even according to the Government's own figures, the amount of regional assistance is declining. Furthermore, the figures given are all at present-day prices, so that when one takes into account inflation over the next few years matters are even worse. The end of the Minister's reply confirmed the fears of my hon. Friend the Member for Fife, Central (Mr. McLeish). He said: In accordance with normal practice, plans for 1991–92 have not been made."—[Official Report, 9 March 1988.] We do not yet know what the fate of regional development grant will be after 1991. Ministers may argue that regional development grant has fallen off in the north not because of reductions by the Government but because firms were not taking up the grant. I have already pointed out that total regional assistance has been falling and, according to the Government's figures, will continue to fall. However, the northern region faces one major problem that does, indeed, affect the take-up of grant, which is the shortage of larger industrial units, to which my hon. Friend the Member for Sedgefield (Mr. Blair) referred. That shortage has already cost the region jobs and it must be corrected as a matter of urgency.

I look forward to hearing from the Minister that his right hon. and noble Friend the Secretary of State for Trade and Industry will be able to accept the invitation that he has recently received to meet the northern group of Labour MPs to discuss this problem. After all, it is the Government's abolition of Tyne and Wear county council and the winding-up of the new towns in the region that have led to the strains being put on the budget of English Estates. That has led to the use of the increased allocation to make up for the deterioration and to fill the gap.

All this has resulted in an inability to provide the sought-after accommodation. Opposition Members believe that there is an urgent need to discuss regional arid industrial policy and attempted in Committee to open up the debate on the Bill to the wider issues to which it gives rise.

The termination of regional development grant will mean the ending of the automatic system that applied to assisted areas, and therefore the special status of assisted areas is also threatened by its abolition. Indeed, that prospect has been welcomed by some Conservative Members. The fact is that the ending of automatic grant will also mean the ending of the certainty of help, which has attracted new business to the north and elsewhere. The total reliance on regional selective assistance with its form filling, question answering, and uncertainty — the very red tape that the DTI White Paper says it wants to cut through — is sure to place the assisted areas at a disadvantage in relation to areas in the European countries that retain an automatic grant system. I pointed out to Ministers in Committee that the north's job-hunting agencies had already said as much, and remained concerned that the new system will be less attractive.

As I said, the existing system is not perfect and sometimes grant moneys have not been used as effectively as they might. However, the majority of anomalies in this regard concerned grants to existing business; one of the main benefits of the system was looked upon as its tendency to be attractive to prospective investors. Why could the automatic system not be retained for new business? Such an amendment to the Bill would have removed many of the anomalies while retaining the advantages. Ministers could not bring themselves to accept even that point.

The Bill and the White Paper are only part of the Government's wider regional strategy. On Monday we saw the launching of yet another glossy brochure promising action in the cities — many of which are located in assisted areas. In that brochure, as in all the Government's pronouncements on this subject, there is much talk of "the people".

In the foreword, the Prime Minister herself refers to giving the people "more opportunities", "greater freedom and choice" a bigger stake in their communities and even goes so far as to say that the Government are resolved to work in partnership with the people". Yet when the reader moves on from the foreword and through the 32 pages of the document, he finds not one reference to, or suggestion of, consulting the people in the cities about what they want.

There is not even a reference to making those who will impose their ideas on the areas accountable to the people. Everything is to be in the hands of Government appointees—those who will not be so much interested in what is good for the people as in what is good for business or what is in line with Tory dogma. As with regional development grant, accountability is to be terminated and replaced by a system in which Ministers or their agents will decide who gets what and what goes where. So much for partnership with the people.

If the Government want an example of partnership, they need only look to the work being done by local authorities up and down the country—in partnership with business and sometimes with the Government—but with those authorities always accountable for their actions, either through the ballot box or by virtue of the consultation processes that accompany development proposals — consultation processes which the Government see as obstacles to enterprise, barriers to be removed.

If the termination of regional development grant was to make way for a new system in which those partnerships could be encouraged and helped, it might have been more welcome. If the northern region was to be given its own development agency, on the Scottish model, accountable to an elected regional assembly, we would be talking imaginative action. Although the northern group of Labour Members have drafted a bill to provide just such a structure, that is not exclusively a Labour party view.

As I pointed out in Committee, the Tory Reform Group, of which the Chancellor of the Duchy of Lancaster is a patron, has recently produced a paper that argues strongly and unequivocally for a development agency for the northern region. In the recent article in The Guardian, the right hon. Member for Henley (Mr. Heseltine) gave some positive views about regional government.

The Northern Regional Assembly Bill, which the northern Labour group has introduced, is a positive and progressive proposal, whereas the abolition of RDG is negative and regressive. What will the abolition of regional development grant do to promote a shift in development from the overcrowded south to the attractive regions of opportunity in the north? I read in the Financial Times the other day that there is an acute shortage of engineering skills in the south-east. It is surely nonsense that we cannot organise our affairs better, when the north is bristling with skills and labour that is not being used, and is suffering all the financial and other hardships of unemployment, while at the other end of the same land people are working so much overtime that they are exhausted at the end of the week. Nothing in the Bill addresses that situation.

The Government's policies have been disastrous for the regions. In Committee, the Minister spoke with pride of the fall of unemployment in the Newcastle travel-to-work area to 14·7 per cent. I had to remind him that that is still double the rate that applied prior to his Government coming to office and more than twice the rate in the southeast of England. There will be no room for self-congratulation until the rate falls below the 1979 level. What confidence can we in the north have that the region will be better off when Ministers who have presided over such a catastrophic situation will allocate grant based on their wisdom, rather than the automatic system currently operating?

Regional policy is of vital importance. The separate and distinct identities of local communities must be preserved and local people must be allowed to develop their own economies and cultures and not have solutions imposed upon them from above. That means a degree of local autonomy, directly influenced by the people themselves. Everything that this Government do is against that principle and more and more centralist.

By refusing to accept our arguments, which would have given the power to distribute grants to regional agencies rather than abolishing them, by merely terminating the system but not looking to improve it, the Government have yet again increased the powers of Ministers and reduced the attractiveness of the assisted areas.

The grants that came automatically to the assisted areas will no longer exist, but the problems faced by those areas will not go away quite so easily. If the Government run true to form, more emphasis will be placed on the free market—"Let private enterprise decide".

That philosophy will not help the regions, which are in need of help, and it will not help the people who live in the developing south either. It is they who will suffer, and are suffering already, the overcrowding and congestion which result from the uncontrolled free market development which this Government are so attached and which this Bill will further encourage.

Photo of Mr Christopher Gill Mr Christopher Gill , Ludlow 6:12 pm, 10th March 1988

Much of the Opposition's case is founded on what I regard as a misconception—that Governments create jobs. In truth, Governments alone cannot possibly create jobs—not real, lasting jobs. Jobs are created by entrepreneurs who recognise a market, set out to satisfy that market, and do so at a profit which enables them to reinvest in the business and employ people. The other misconception of Opposition Members is that they delink wealth creation from people's prosperity. The two go absolutely hand in glove.

In effect, regional policy has moved many of this country's jobs around the country. Much regional policy has not created new jobs. If one looks at the west midlands and especially the black country, one sees the dereliction and depression that have resulted from jobs being exported from what was once the workshop of the world to other areas where grants have been available, such as the development areas and the enterprise zones. Our jobs have been exported. I feel that keenly as someone who prides himself on having been born and bred a Wulfrunian and having run a business in the black country.

I now represent a rural constituency and can see the effects of regional policy on Shropshire. Why on earth should people running a business—or attempting to run a business—in the remote parts of west Shropshire be disadvantaged simply because people at the other end of the road—across the border in Wales—have been able to get grants which mean that they have an unfair advantage?

I leave the House with one thought for the day. As a result of regional policy, we have in Britain some of the longest production lines in Europe in terms of time. Hon. Members need only consider the motor industry to know that I am right.

Photo of Alun Michael Alun Michael , Cardiff South and Penarth 6:14 pm, 10th March 1988

It is complete nonsense for the hon. Member for Ludlow (Mr. Gill) to talk about an unfair advantage in Wales. What we in Wales seek is not an unfair advantage, but merely a fair balance between the regions. If there is an unfairness anywhere in the system, an improvement in the system of regional development grants is called for — not the provisions in the Bill, which is a narrow measure proposing the abandonment of regional development grants.

The one thing I welcome in the debate is the presence of a lone Conservative Member representing Wales— the hon. Member for Cardiff, Central (Mr. Grist) who is the Under-Secretary of State for Wales. I hope that he will join the debate and not demonstrate his membership of the Trappist tendency in the Tory party. In the long hours in Committee, we asked many questions about the effect that the Bill would have in Wales. We provided detailed argument and evidence and took apart the sham figures with which the Secretary of State for Wales has sought to mislead the Welsh public. It is a pity that during that extended debate, no Welsh Office Minister and not a single Conservative Member representing a Welsh constituency was present to face up to the examination and debate.

Photo of Mr Ian Grist Mr Ian Grist , Cardiff Central

The hon. Gentleman knows perfectly well that I was, and indeed still am, serving in Committee on the community charge Bill and therefore was unavailable for this Committee. My hon. Friend the Minister of State, Welsh Office, has been serving in the Committee on the Education Reform Bill. Therefore, neither of us was available, as the hon. Gentleman knows perfectly well.

Photo of Alun Michael Alun Michael , Cardiff South and Penarth

The Minister has not explained where the Secretary of State for Wales has been. This is a matter of regional development and is important to Wales so perhaps the right hon. Gentleman might have been persuaded to help out his colleagues. The Under-Secretary's remarks do not explain the absence of every single Conservative Member representing Wales from those discussions. To be blunt, the Secretary of State for Wales has been exposed as a visiting salesman, with no goods in his carpet bag. Experience in Committee proved that his London and Scottish colleagues are no better.

The one plus is that the lack of Welsh Office representation in the Committee has created a new unity between the regions. We thought that the right hon. Member for Worcester (Mr. Walker) was the only Minister whose tactics were to use aggressive public relations and hyperbole to sell a so-called bag of goodies that is attractive on the outside, but empty on the inside. We now know that that is a deliberate policy adopted by the Government, including the English and Scottish Ministers who joined the Committee. Indeed, this week the Prime Minister has given that squalid technique her personal blessing.

In opening the debate, the Minister claimed that we had misunderstood the Government's policies and confused regional policy with regional development grants He is wrong. We would welcome a new look at regional development policy and any real improvement in regional development schemes. However, the Government has not come up with new policies or resources. The Government has come up with a PR package on the one hand, but on the other has taken away the certainty of regional development grants, without putting anything in their place. I should be grateful if the Hansard writers would note that I used the singular there, because the Government is operating as a mindless singular entity and I should like my grammar kept right.

The Government is trying to pretend that nothing will be lost as a result of the Bill. However, I challenge the Minister to deny that the Welsh Office expects a major reduction in regional expenditure as a result of the changes being introduced. Due to the greater difficulties in obtaining the regional selective assistance grant, it is expected that a lower percentage of expenditure will be made. Perhaps a £100 million spend on regional development grants will become a £40 million spend on RSA. I imagine that I shall hear from the Minister if what I have said is wrong.

A quotation was given earlier from the journal of the Confederation of British Industry, I think by the hon. Member for Darlington (Mr. Fallon). I should point out that the hon. Gentleman was not reading from a policy statement made by the CBI, but from the briefing included in its journal. The briefing also included the sentence that the end of regional development grant will give the Government complete discretion over its purse strings. That is what this mean little Bill is about. It legalises the theft of resources from the hardest-hit areas of Wales, and other regions. It legalises such theft from the oldest industrial areas on which Britain's prosperity depended; from the valleys and industrial areas where massive unemployment continues to bear witness that those areas and communities are paying the price for the restructuring of British industry, which was and is vital for all of us.

The Bill, in common with so many other items of Government legislation that are being steamrollered through, is about squeezing expenditure without regard to need or the opportunity costs of introducing changes. In Committee we were accused of painting a bleak picture. We did not paint such a picture of our regions, about which each of us spoke with pride and care. We have painted a black, bleak uncaring picture of the Government, and it is true.

In Committee we made a number of positive suggestions to lessen the impact of the Bill in the worst-off areas of Britain, to meet the criticisms of the existing system and to target our attention on small firms in development areas. We had no positive response to those suggestions. Conservative Members on the Committee had obviously been told, "Put your heads down and bash on, boys. Don't listen to any sensible argument." The Conservative party ceased long ago to be a democratic party. In Committee it refused to listen to the Labour party. We can continue to claim the positive role as the party of enterprise in both the public and the private sector. Debates in Committee and on the Floor of the House have exposed the Conservative party as more concerned about the packaging than the contents of regional policy.

Despite any faults, the RDG system has proved to be simple and effective. Industrialists know where they are, know where they can start up in order to qualify for the grant and exactly how much the Government will contribute. That element of certainty has helped to bring jobs to the development areas and that help has been directed at the worst-off areas of the country, including the valleys and the rural areas of Wales. As a result of the Bill those areas will lose out.

What have the Government put in place of RDG? Nothing. The valleys initiative introduced by the Secretary of State is about to enter the "Guinness Book of Records" as the Government initiative that has been launched on a record number of occasions without any real information being given. However, we are aware that no extra money will be available for Wales and the Minister is doing no more than moving the money around in the hope that no one will notice.

Photo of Mr Christopher Gill Mr Christopher Gill , Ludlow

Will the hon. Gentleman give way?

Photo of Alun Michael Alun Michael , Cardiff South and Penarth

No.

The Government are simply spreading the money around in even thinner layers. It is obvious that the worst-off areas of the country will be hit hardest.

Wales, in common with other regions, needs a coherent regional strategy. The Government have given us glossy pamphlets, an effective publicity campaign, but that is all. We welcome steps to bring jobs to Wales, but until the Secretary of State for Wales can produce a viable alternative we are adamant that RDG should continue.

During this debate I have been surprised by Conservative Members' lack of knowledge of industrial development. Over the years the Opposition have been working to redevelop our local economies in partnership with industrialists, investors, local authorities, foreign investors and local people who want to start up in business. We know what we are doing, but Conservative Members have demonstrated tonight an appalling mixture of impracticality and prejudice. Their support must have embarrassed even the Minister.

Photo of Mr Bob Cryer Mr Bob Cryer , Bradford South 6:22 pm, 10th March 1988

Play has been made about the support for the Bill from various Tory front organisations, such as chambers of commerce and the CBI. I should like to quote from Library research note No. 382, page 6, which contains a quote from the Association of British Chambers of Commerce—an association that I suspect has rather more Conservative members than Labour party members. It said about the Bill: We will press for adequate transitional provisions and assurances about the increased availability of selective assistance in the regions. Also, the new policy does not represent a coherent response to the wider problem of overheating in the South and spare resources in the North. We will look for a clearer response from all Government Departments on regional policy. Therefore, the Bill is condemned by the very organisation that normally pays fulsome tribute to the Government.

The Bill removes automatic regional aid and I wonder whether the Minister has been applying the Bill already. In my constituency a firm, the National Breakdown Club of Low Moor, made an application for regional grant but was refused on the basis that the firm was already successful and would go ahead and build its extension anyhow. That is a peculiar approach to adopt, especially when organisations such as Shell and ICI have also been receiving assistance. The criteria to judge whether they should receive such assistance appear to be somewhat different from those used for that firm.

The Minister should bear in mind that he does not have the legal authority to act in such a manner. I am aware that, these days, the Government regard this place as little more than a rubber stamp, but Ministers are not supposed to do things without the authority of Parliament. It is called "illegality". It may well be that the Minister acted in a perfectly proper manner, but I seek an assurance that he has in no way anticipated the legislation that we are discussing. The Minister should note that my constituents made representations to me concerning their bitter disappointment at failing to receive regional assistance.

Since 1979, under this Tory Government, 2 million jobs in manufacturing have been lost. They have not been replaced in the service sector and almost 3 million people are still on the dole. Some 130,000 of those jobs have been lost in Yorkshire and Humberside. Several thousand jobs in textiles and engineering have been lost in Bradford.

The automatic grant was an assured and positive contribution from central Government. Repeatedly industrial representatives have said that they prefer security and certainty in the pattern of regional assistance rather than variation. However, the Government have certainly introduced a number of variations.

In an intervention during the speech of my hon. Friend the Member for Great Grimsby (Mr. Mitchell) I said that the Bill will place a greater onus on civil servants to make judgments. I am not talking about most civil servants, who do a decent job. However, it is a fact that permanent secretaries and deputy secretaries at the Department of Trade and industry move swiftly out of their jobs to boards of companies. [AN HON. MEMBER: "It is a conspiracy."] It is not a conspiracy; it is a fact of life. Very few of those senior civil servants join charities when they retire on luxurious pensions or become advisers to the trade union movement. How many of those civil servants are lining up jobs when they are negotiating with companies and while they are employed on behalf of the public, supposedly keeping such firms at arm's length?

I was at the Department of Industry for two years and I know what went on. Consider what happened when the industrial development advisory board was considering GEC. When Sir Kenneth Bond left that board for five minutes, it granted GEC, of which he was vice-chairman, £1·2 million in grants. John Lippitt disappeared to GEC. He was not supposed to have any dealings with that company, but he had been having secret meetings with it.

On occasion relationships between senior civil servants — I emphasise that category — and companies become too intimate. The removal of the automatic grant status means that something that is dealt with by civil servants in a routine manner has diminished. Therefore, the opportunity for wining and dining, with promises of inducements and membership of the boards of companies, is enhanced. I am concerned about that, especially as the Government are so keen to draw the Civil Service and industry closer together. To maintain a scrupulous relationship, they should be at arm's length to ensure that every firm is dealt with on a fair basis.

The Bill sabotages industrial and service developments —it covers the service sector—in the north in towns and cities such as Bradford. The burden of unemployment in Bradford has massively increased under the Tory Government. Indeed, an inner-city project across the Bradford rail link has been sabotaged by the Property Services Agency. A Mr. D. Jones has said that the Courthouse proposal for the Bradford Exchange station site and the rail link cannot be accommodated. The man in Whitehall has told the passenger transport authority that he knows best.

It is the same with the Bill. Whitehall is telling the regions that Whitehall knows best, whereas the regions are saying, "We still need jobs; we still need development." Factories are still empty, and anyone travelling through Yorkshire, Humberside, Wales and the north-east will still see the deserts where once there were scores of productive factories where thousands of people were employed in a productive capacity. That situation has not been remedied by the Government.

The Minister said that automatic grant was a waste of public resources, but it gave security of application to firms moving to the regions in the knowledge that they would receive the money and they could calculate their investment on that basis. The Government are spending almost £2 billion on Sizewell B. Last night, we passed an order to make it easier to give planning approval for nuclear power stations so as to get Hinkley B into construction. There is a political will for nuclear power generation and the lack of safety and the nation's technological inability to deal with nuclear waste are cast to one side.

There is a political will to spend billions of pounds of public money on nuclear power stations, yet a relatively small amount of money is spent on providing proper jobs in the manufacturing and service industries in the regions. This pettifogging little Bill will remove even that degree of support and certainty from the regions. The Government are once more attacking ordinary men and women and the manufacturing industries which have already been so badly cut by the vicious attitudes of the Tory Government.

Photo of Mr Rhodri Morgan Mr Rhodri Morgan , Cardiff West 6:31 pm, 10th March 1988

It is always a pleasure to follow my hon. Friend the Member for Bradford, South (Mr. Cryer). I believe that he would have made a good auditor. I want to refer to the National Audit Office and its report on the regional development grant and regional selective assistance system.

Auditors are often described, sometimes unfairly, as people who go round the battlefield when the battle is over bayoneting all the wounded, with a particular predilection for bayoneting those on their own side. The auditors who work for the National Audit Office have produced a comprehensive report, published recently in an up-to-date manner, on the RDG and RSA scheme. Paragraph 4.13 of the report states: The study by consultants of industry's early reaction to the revised regional incentive scheme was confined to RDG2"— that is what is being abolished tonight, although we are also dealing with the tail end of RDG I , going back to 1984— and was completed in August 1986. I found that, overall, the new scheme was being well received by the business community and was an important factor in the investment decision making process. However, although less than one quarter of the companies surveyed said that RDG2 had no influence on their investment decisions only one-third considered that it had been a critical factor. The report also stated that RDG2 influenced the qualitative aspects of projects. Paragraph 4.14 stated: While the Department of Trade and Industry did not cover the revised RSA in the 1986 evaluation, they had commissioned a similar study on the original RSA and RDG schemes which was published in 1986. The findings of both schemes were remarkably similar and about 20 per cent. of the companies rated the two forms of grant as having no influence on their decision to invest in the project under consideration and a little over half rated them as important or crucial to the decision. We must ask ourselves whether regional development grant is being abolished because it was a bad scheme or because it was too successful. Let us consider the figures published in last year's White Paper on public expenditure, and let us take Wales as a typical example. Next year, the Government expected to spend £27·6 million on regional development grant. Their more up-to-date figure given for next year's expenditure on RDG is £63 million, so the scheme will cost the Government 130 per cent. more than they had estimated. Does that make it a bad scheme or a successful scheme? Opposition Members contend that that is the sign of a successful scheme. Although there have been peripheral problems of fraud in the service industries, which are extremely difficult to monitor, they could have been tackled by tighter monitoring and a minor amendment.

However, the Government are terminating the scheme because, in Wales, it is costing them 130 per cent. more than they had estimated and evidently, the Treasury does not like that. There are therefore two reasons for scrapping the scheme — first, the minor aspect of fraud in the service industries, and, secondly, the excessive costs in Treasury terms. RSA can be made cash-limited, but RDG1 and RDG2 cannot. That is the key to the issue. The scheme is being scrapped because it is too successful, but we who represent assisted areas in the outlying regions will fight for the scheme, as we have fought for it from the beginning. We still consider it an act of hypocrisy on the Government's part to terminate RDG and to pretend that they will make so much more money available under RSA that it will make up the difference. We know that that is not true.

In the absence of any Government estimates, I have attempted to produce my own estimates as to how much RDG and RSA would have cost the Treasury in Wales. Hon. Members can attempt to make their own estimates by converting the figures for other assisted areas. I have calculated that the scrapping of RDG will save the Government in Wales about £8 million in the next financial year. It will build up to £19 million in 1990–91 and to £26 million in 1991–92. In all, it will save the Government £53 million in Wales. I cannot provide an equally accurate estimate for assisted areas throughout the United Kingdom, but I estimate that the Government will save about £300 million in all.

We are finally obtaining a large amount of investment in manufacturing, almost back up to 1979 levels, which would be entitled to regional development grant. The faster the pace of investment, the greater would be the number of firms likely to move into the region from the overcrowded regions of the south-east. There is also evidence of considerable inflation, at least in building costs, due to the lack of skilled labour. As 20 per cent. of the costs of investment are usually associated with buildings, that will add substantially to costs. That would have been another concern for the Treasury if the scheme had not been scrapped.

Let the Government come clean with the House and say that they could not monitor or amend the scheme because it was so prone to fraud, especially among the service industries. I estimate that, by scrapping the scheme, they will save over £300 million for the whole country over the next three years. I hope that they will not try to tell the country that less regional assistance really means more regional assistance.

Photo of Richard Caborn Richard Caborn , Sheffield Central 6:37 pm, 10th March 1988

The debate clearly outlines the fears of many Opposition Members for the deprived regions of our nation. It is unfortunate that the debate relates to a single part of the Government's White Paper, presented to the House a few weeks ago, and to the White Paper on the inner cities, about which we had to force the Government to make a statement earlier this week. We are dealing with the problems of our regions and of urban regeneration in a piecemeal fashion. Unfortunately, we are now dealing with the major part of the issue in isolation from the full debate.

I wish to place on record our dissatisfaction with the contemptible and offhand way in which the Government have treated the House, the regions, Scotland and Wales with regard to the issue. Hon. Members could have guessed the Government's position on the White Paper only by listening to the debate in the House of Lords or reading Hansard of 19 February, when Lord Young opened the debate on the Department of Trade and Industry's White Paper. Alternatively, they could have listened to the evidence submitted by the noble Lord to the Select Committee on Trade and Industry.

The Bill clearly shows the Government's attitude to the regions and the major changes of direction upon which they have now embarked. This directed policy has no support from independent assessment or analyses or from the Government's own reports. Conservative Members have shown complete ignorance of the problems of the regions and of our manufacturing industries. I shall submit two pieces of evidence to enlighten the Minister.

First, I refer to the independent assessment report, which said in conclusion: 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 on employment in service industries". The Secretary of State made great play of that in another place. "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 … making a grand total of … 630,000".

Even more devastating was the Government's own report on regional incentives and the investment decisions of the firm. It said in conclusion, answering the point made by the Minister today: In short, our evidence shows that a mixture of automatic and selective assistance, taken together, provides a powerful package. It appears that the regular receipt of RDG encourages firms to become 'regional incentive conscious' and there is an increased likelihood that they will examine the range of other possible assistance available to them, including RSA. It is important to emphasise again in this context that a successful application for RSA forms an important part of a learning process for the company. The importance of the `automatic' nature of RDG as applied during our Study period suggests that any changes in the scheme should retain, as far as possible, clear and predictable eligibility criteria. That is the evidence.

A previous Secretary of State for Trade and Industry, the right hon. and learned Member for Richmond, Yorkshire (Mr. Brittan) said when the White Paper was introduced on 12 January: Will my right hon. and learned Friend also accept that, although there is nothing sacrosanct about previous methods of assistance, there were real advantages in a system whereby 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 or Ministers asking for discretion to be exercised?"—[Official Report, 12 January 1988; Vol. 125, c. 151.] So much for what has happened inside the United Kingdom. Internationally, almost all our major industrial competitors support their poor and deprived regions, many of them automatically — for example, Italy, the Federal Republic of Germany and Denmark. Every Minister seems to have been off to look at Boston in the United States, but the one thing that never emerges clearly when they return, although they bring back a number of examples of it, is that the major regeneration of that city has been public sector-led, and the rate of success has been proportionate to that development.

We cannot ignore the example of France. In Committee, we discussed what was happening in northern France, and I single it out because the development around Pas de Calais has serious implications for the United Kingdom. When the Channel tunnel comes on stream, which is likely in the early 1990s, the type of development in that area of France, which was spelt out to the House several times during the passage of the Channel Tunnel Bill, shows the tremendous advantage of the new investment there.

The argument will not be about whether to go into the northern regions or the south-east of the United Kingdom — it will be between northern France and the United Kingdom. The removal of regional development grant will have a profound effect on the attitude of those who would have invested in the north, and the Channel tunnel development could be a major drain on the resources that should be invested in the north of England.

I want to answer some of the criticisms that have been levelled and show the Government's hypocrisy. In Committee we accepted that there might be a need for some revision of RDG and we challenged the Government by tabling an amendment saying that RDG should be applied only to companies employing fewer than 250 people. The argument about BSC and ICI does not really apply, because those companies do not come under the second phase of RDG. But what if the Government agreed to give automatic grant to small and medium-sized businesses which do not have the financial structure to be able to carry out the sort of investigation and form filling that is necessary for RSA? The Government gave us no answer when we tried to ensure that RDG should discriminate in favour of small and medium-sized businesses. That shows the Government's hypocrisy about such businesses.

When we last discussed the changes to be made in RDG, the Government at least had the courtesy to go out and consult industries in the regions. More than 500 representations were made about alterations to RDG. On this occasion, however, it is being abolished with no consultation with the regions, industries or local authorities. So what is the Government's regional policy? The booklet accompanying the White Paper contains 25 pages, of which only two or three deal with regional policies. Twenty pages adopt the blanket approach and extol the virtues of the consultancies. They have been dealt with adequately in the debate already. Over the next three years, £370 million will be spent on those consultancies, an amount equal to the annual pay-out of regional selective assistance during 1986–87. Most of that money will go to the south-east

This is not regional policy; it is making business more efficient and effective. We are not against that or against the consultancies in the south, but the regions should not be robbed to pay for it. If consultancies are needed, that is fine—we want to ensure that businesses are more efficient and productive. Ministers have told us that the extension of regional selective assistance is to be streamlined. But when challenged, Ministers from the DTI could not tell us how they would move a fivefold increase of capital from RDG into regional selective assistance, or what mechanism they would use to do that. Much has been said this evening about certain aspects of the efficiency of the DTI team in administering RSA, which is now to increase fivefold—if the Government are on target. I do not think Ministers have even convinced their Back Benchers. They have certainly not convinced us.

This is a cynical move by the Government, to ensure that RSA now comes under the diktat of the DTI. The Treasury will now dictate when to turn on and off the financial tap. I challenge the Government to tell us whether they will maintain the same sort of expenditure on the regions under RSA as they have under the two grants that have operated hitherto. We do not believe that they will, and we shall say, "We told you so," in three years' time, when the regions will be so much the poorer.

The Opposition have to look at the real situation in the regions, and we did that in Committee. We must encourage and not discourage the partnerships that have developed in the major urban conurbations and in the major cities. We need to look seriously at the areas of high unemployment and target RDG to them. That was rejected by the Department of Trade and Industry team in the Committee. In a speech only yesterday, the right hon. Member for Henley (Mr. Heseltine) challenged the Government on that very point. I hope that if the right hon. Gentleman is in the House he will vote with us, because the removal of RDG goes to the centre of the very points that he made in that speech.

There is no doubt that the Bill will have an adverse effect on inward investment. The hon. Member for Pudsey (Sir. G. Shaw) has much experience of this subject. He said: 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." — [Official Report, 25 January 1988; Vol. 126, c. 71.] That was said by an hon. Member who was in the Department of Trade and Industry. Will the Government say to him, "Come hack, all is forgiven"? The need to move Government Departments out of London was also suggested. At least such a development has started, but its slowness shows the national and multinational companies that they do not have to move their headquarters in that direction.

We asked for a positive Government approach to the regions, but that was dismissed in every single amendment that we tabled about it. We challenged the Government, on all the reasons that they advanced for the abolition of the regional development grant, and they entirely rejected our arguments. The Committee has been a sham. We put an alternative strategy and tried to develop a new policy. The Government should at least have looked at that.

My hon. Friend the Member for Bassetlaw M r. Ashton) asked a question about manufacturing. He said that a manufacturing trade surplus of £5 billion in 1978 was reduced to a deficit of £7 billion last year. He asked the Minister how the Government proposed to improve that situation. The startling reply by the Secretary of State for Trade and Industry which I gather has been carried (extensively) on radio was: "Because I am not concerned with manufacturing industry as such." That was what the Secretary of State for Trade and Industry told the Select Committee.

The regions and manufacturing industry have a bleak future. The Government have no policies for the regions. They are bankrupt and have no vision for the future. The Bill should be decisively defeated.

Photo of Mr Robert Atkins Mr Robert Atkins , South Ribble 6:52 pm, 10th March 1988

We have heard an uncharacteristic and churlish attack by the hon. Member for Sheffield, Central (Mr. Caborn) on many Conservative Members. He suggested that only the Labour party speaks for the regions. That attack was particularly unfortunate, as the debate was opened by my hon. Friend the Minister of State, Scottish Office, who is clearly a Scottish Member. I am a Lancashire Member. We have had contributions from my hon. Friends the Members for Langbaurgh (Mr. Holt), for Stockton, South (Mr. Devlin) and for Darlington (Mr. Fallon), to name but three. That is surely an indication that there is a good Conservative representation in the debate from the north-east of England.

We heard from the hon. Member for Great Grimsby (Mr. Mitchell) who his hon. Friend the Member for Cardiff, South and Penarth (Mr. Michael) said in Committee was the man who put "grim" into Grimsby. [Interruption.] I did at least do the hon. Gentleman the credit of telling him that he invented it. The hon. Member for Great Grimsby rehearsed tired old canards and I shall deal with them only briefly because I am conscious of the pressure of time.

The first matter is consultation. Consultation was exhaustive in 1984 when the map was considered. That point was made clear in Committee. Some hon. Members referred to the map. I reiterate that it is not set in concrete. There is a need for an element of stability for the purposes of future investment, and we have said that we are not prepared to consider changes during this Parliament. There are always matters to be considered and my hon. Friend the Member for Darlington spoke about one such matter in relation to development areas and intermediate areas. I give the undertaking that we shall consider those when the map is reviewed.

Hon. Members also spoke about the funding for regional development grants. There is an increase in funding from £694 million to £900 million over the period up to 1990–91. In addition, there is a further £274 million over the whole of the country for consultancies. By definition, the contribution of two thirds rather than 50 per cent. in assisted areas and urban improvement areas will mean that the regions will get a higher proportion than could perhaps be expected in normal circumstances. I emphasise again that this funding is additional and not a substitute for action.

Photo of Mr Robert Atkins Mr Robert Atkins , South Ribble

I shall not give way, because, as the hon. Gentleman knows, I am under some pressure of time.

Some hon. Members spoke about the published criteria. I spoke about that in Committee to the hon. Member for Gordon (Mr. Bruce), who I notice is not in his place.

Photo of Mr Robert Atkins Mr Robert Atkins , South Ribble

I do not seek to provoke hon. Members. I merely record the fact that the hon. Member for Gordon raised the matter in Committee. The criteria have been published and have been available for many years, and business men know that.

I emphasise again that only decisions involving £500,000 or more will be referred to Ministers, and that is nothing new. The vast majority of the decisions involve amounts of under £500,000. Indeed, most of them are under £100,000 and those matters will be considered by the regional industrial development boards whose members include active and retired business men as well as a fair sprinkling of active trade unionists in the regions. All those people are involved in industry on a daily basis.

The other consideration mentioned was the speed at which applications should be considered. That is a fair point and some hon. Members will recall that I mentioned it in Committee. It is improving radically, but it is always in need of further improvement and I reiterate a commitment to improvement.

The fifth point was about inward investment. It is our understanding from countries throughout the world that are interested in investing in Britain, that it is not just regional development grants such as those that we are discussing that matter. Other factors such as infrastructure, a low rate of corporation tax, good communications, and a successful and booming economy. Not least, our culture and, above all, our English language are important.

The hon. Member for Tyne Bridge (Mr. Clelland) spoke about a letter that he had written to the Secretary of State. I have checked on that and I understand that the letter arrived this morning. Perhaps he knows that the Secretary of State is presently in Japan, but I undertake to draw it to his attention and to make sure that the hon. Gentleman receives a reply as soon as my right hon. Friend returns.

My hon. Friend the Member for Harborough (Sir J. Farr) spoke about a constituency matter. I am grateful to him for his comments, because he was kind enough to say that the DTI had dealt with it as quickly as possible, although I know that it was not dealt with to his entire satisfaction. My hon. Friend's point adds weight to the Government's case.

My hon. Friend the Member for Wyre Forest (Mr. Coombs) spoke knowledgeably and eloquently on matters about which he knows a great deal. I am grateful to him for his comments and I think that the House will appreciate that he speaks with knowledge, as does my hon. Friend the Member for Ludlow (Mr. Gill), who spoke in a similar vein.

The hon. Member for Cardiff, South and Penarth made an uncharacteristic attack on Welsh Ministers. It was answered in part by my hon. Friend the Member for Cardiff, Central (Mr. Grist). I repeat that the Secretary of State for Wales is committed to the regions and, as my hon. Friends from Welsh constituencies know, he is committed to the valleys initiative that is shortly to be announced. That is evidence of his commitment to the Principality.

The hon. Member for Bolton, South-East (Mr. Young), who has probably rushed to catch a train, spoke about the problems as he perceived them in Bolton. I am to visit Bolton tomorrow, and I can tell him that my hon. Friends the Members for Bolton, North-East (Mr. Thurnham) and for Bolton, West (Mr. Sackville) have made an entirely different case about the success of Bolton. A similar success is to be seen in Preston. They are both now boom towns in the north-west and the hon. Member for Bolton, South-East does his town and his region a disservice by suggesting that somehow things are bad in Bolton. Of course there is always room for improvement, but both towns are doing well at the moment.

I emphasise again that under the Bill spending in the regions will continue to be as it has been in the past. Good projects coming forward from the north, the west or any other part of the country will get attention as they have before. The emphasis must be on viability, cost-effectiveness and whether the project merits approval.

I conclude by suggesting to Opposition Members that they do what their own campaign has suggested, which is to listen. Only recently, the TUC, in its statement on regional development and planning, spelled out that, to make regional and local planning bodies effective, The amount of selective assistance … would be progressively increased until all assistance became selective. Opposition Members should hear what the TUC says and vote with us for the Bill

Question put:

The House divided: Ayes 246, Noes 174.

Division No. 211][7 pm
AYES
Amess, DavidBuck, Sir Antony
Arnold, Jacques (Gravesham)Burns, Simon
Atkins, RobertBurt, Alistair
Baker, Nicholas (Dorset N)Butler, Chris
Baldry, TonyButterfill, John
Banks. Robert (Harrogate)Carrington, Matthew
Bennett, Nicholas (Pembroke)Chapman, Sydney
Biffen, Rt Hon JohnChope, Christopher
Biggs-Davison, Sir JohnChurchill, Mr
Boscawen, Hon RobertClark, Dr Michael (Rochford)
Bottomley, Mrs VirginiaColvin, Michael
Bowis, JohnConway, Derek
Braine, Rt Hon Sir BernardCoombs, Anthony (Wyre F'rest)
Brandon-Bravo, MartinCoombs, Simon (Swindon)
Brazier, JulianCouchman, James
Brown, Michael (Brigg & Cl't's)Cran, James
Bruce, Ian (Dorset South)Critchley, Julian
Currie, Mrs EdwinaJones, Robert B (Herts W)
Curry, DavidKellett-Bowman, Dame Elaine
Davis, David (Boothferry)Key, Robert
Day, StephenKing, Roger (B'ham N'thfield)
Devlin, TimKing, Rt Hon Tom (Bridgwater)
Dickens, GeoffreyKnapman, Roger
Dorrell, StephenKnight, Dame Jill (Edgbaston)
Dover, DenKnowles, Michael
Dunn, BobKnox, David
Durant, TonyLamont, Rt Hon Norman
Dykes, HughLang, Ian
Eggar, TimLatham, Michael
Evans, David (Welwyn Hatf'd)Lee, John (Pendle)
Fairbairn, NicholasLeigh, Edward (Gainsbor'gh)
Fallon, MichaelLightbown, David
Farr, Sir JohnLilley, Peter
Favell, TonyLloyd, Peter (Fareham)
Field, Barry (Isle of Wight)Lord, Michael
Fookes, Miss JanetLyell, Sir Nicholas
Forman, NigelMcCrindle, Robert
Forsyth, Michael (Stirling)MacKay, Andrew (E Berkshire)
Forth, EricMaclean, David
Fowler, Rt Hon NormanMcLoughlin, Patrick
Fox, Sir MarcusMcNair-Wilson, M. (Newbury)
Franks, CecilMajor, Rt Hon John
Freeman, RogerMalins, Humfrey
French, DouglasMans, Keith
Gale, RogerMaples, John
Gardiner, GeorgeMartin, David (Portsmouth S)
Garel-Jones, TristanMates, Michael
Gill, ChristopherMaude, Hon Francis
Glyn, Dr AlanMawhinney, Dr Brian
Goodhart, Sir PhilipMayhew, Rt Hon Sir Patrick
Goodlad, AlastairMellor, David
Goodson-Wickes, Dr CharlesMeyer, Sir Anthony
Gorman, Mrs TeresaMiller, Hal
Gow, IanMiscampbell, Norman
Greenway, Harry (Ealing N)Mitchell, Andrew (Gedling)
Greenway, John (Ryedale)Moate, Roger
Gregory, ConalMontgomery, Sir Fergus
Griffiths, Peter (Portsmouth N)Moore, Rt Hon John
Grist, IanMorrison, Hon Sir Charles
Ground, PatrickMoss, Malcolm
Grylls, MichaelMoynihan, Hon Colin
Hamilton, Hon Archie (Epsom)Needham, Richard
Hamilton, Neil (Tatton)Neubert, Michael
Hanley, JeremyNicholls, Patrick
Hannam. JohnNicholson, David (Taunton)
Hargreaves, Ken (Hyndburn)Nicholson, Emma (Devon West)
Harris, DavidOnslow, Rt Hon Cranley
Haselhurst, AlanOppenheim, Phillip
Hawkins, ChristopherPage, Richard
Hayhoe, Rt Hon Sir BarneyPaice, James
Hayward, RobertPatnick, Irvine
Heathcoat-Amory, DavidPatten, Chris (Bath)
Heddle, JohnPatten, John (Oxford W)
Heseltine, Rt Hon MichaelPattie, Rt Hon Sir Geoffrey
Hicks, Mrs Maureen (Wolv' NE)Pawsey, James
Hicks, Robert (Cornwall SE)Peacock, Mrs Elizabeth
Higgins, Rt Hon Terence L.Porter, David (Waveney)
Hill, JamesPortillo, Michael
Hind, KennethPowell, William (Corby)
Hogg, Hon Douglas (Gr'th'm)Price, Sir David
Holt, RichardRaffan, Keith
Hordern, Sir PeterRaison, Rt Hon Timothy
Howard, MichaelRathbone, Tim
Howarth, Alan (Strat'd-on-A)Redwood, John
Howarth, G. (Cannock & B'wd)Renton, Tim
Howell, Ralph (North Norfolk)Rhodes James, Robert
Hughes, Robert G. (Harrow W)Rhys Williams, Sir Brandon
Hunt, David (Wirral W)Riddick, Graham
Hunt, John (Ravensbourne)Ridley, Rt Hon Nicholas
Hunter, AndrewRidsdale, Sir Julian
Irvine, MichaelRoe, Mrs Marion
Irving, CharlesRossi, Sir Hugh
Jack, MichaelRost, Peter
Jackson, RobertRowe, Andrew
Janman, TimRyder, Richard
Johnson Smith, Sir GeoffreySackville, Hon Tom
Jones, Gwilym (Cardiff N)Sainsbury, Hon Tim
Sayeed, JonathanThurnham, Peter
Scott, NicholasTownend, John (Bridlington)
Shaw, David (Dover)Tracey, Richard
Shaw, Sir Michael (Scarb')Tredinnick, David
Shelton, William (Streatham)Twinn, Dr Ian
Shephard, Mrs G. (Norfolk SW)Waddington, Rt Hon David
Shepherd, Colin (Hereford)Waldegrave, Hon William
Shepherd, Richard (Aldridge)Walker, Bill (T'side North)
Shersby, MichaelWaller, Gary
Sims, RogerWalters, Dennis
Skeet, Sir TrevorWard, John
Smith, Sir Dudley (Warwick)Wardle, Charles (Bexhill)
Smith, Tim (Beaconsfield)Watts, John
Speed, KeithWells, Bowen
Spicer, Sir Jim (Dorset W)Wheeler, John
Squire, RobinWhitney, Ray
Stern, MichaelWiddecombe, Ann
Stewart, Allan (Eastwood)Wiggin, Jerry
Stewart, Andy (Sherwood)Wilshire, David
Stewart, Ian (Hertfordshire N)Winterton, Mrs Ann
Stokes, JohnWood, Timothy
Stradling Thomas, Sir JohnWoodcock, Mike
Sumberg, DavidYeo, Tim
Summerson, HugoYoung, Sir George (Acton)
Taylor, John M (Solihull)
Tebbit, Rt Hon NormanTellers for the Ayes:
Thompson, D. (Calder Valley)Mr. Mark Lennox-Boyd and
Thorne, NeilMr. Kenneth Carlisle.
NOES
Allen, GrahamFields, Terry (L'pool B G'n)
Alton, DavidFlannery, Martin
Archer, Rt Hon PeterFlynn, Paul
Armstrong, HilaryFoot, Rt Hon Michael
Ashley, Rt Hon JackFoster, Derek
Banks, Tony (Newham NW)Fraser, John
Barnes, Harry (Derbyshire NE)Galbraith, Sam
Battle, JohnGalloway, George
Beckett, MargaretGarrett, John (Norwich South)
Beith, A. J.Garrett, Ted (Wallsend)
Benn, Rt Hon TonyGeorge, Bruce
Bermingham, GeraldGolding, Mrs Llin
Bidwell, SydneyGordon, Mildred
Blair, TonyGould, Bryan
Boateng, PaulGriffiths, Nigel (Edinburgh S)
Boyes, RolandGriffiths, Win (Bridgend)
Bradley, KeithGrocott, Bruce
Bray, Dr JeremyHarman, Ms Harriet
Brown, Gordon (D'mline E)Hattersley, Rt Hon Roy
Brown, Nicholas (Newcastle E)Healey, Rt Hon Denis
Brown, Ron (Edinburgh Leith)Heffer, Eric S.
Buckley, George J.Henderson, Doug
Caborn, RichardHinchliffe, David
Campbell, Ron (Blyth Valley)Holland, Stuart
Campbell-Savours, D. N.Hood, Jimmy
Clarke, Tom (Monklands W)Howarth, George (Knowsley N)
Clay, BobHowell, Rt Hon D. (S'heath)
Clelland, DavidHughes, John (Coventry NE)
Clwyd, Mrs AnnHughes, Roy (Newport E)
Cohen, HarryHughes, Sean (Knowsley S)
Cook, Frank (Stockton N)Hughes, Simon (Southwark)
Cook, Robin (Livingston)Illsley, Eric
Cousins, JimJanner, Greville
Cox, TomJohn, Brynmor
Cryer, BobJones, Barry (Alyn & Deeside)
Cummings, JohnJones, Martyn (Clwyd S W)
Dalyell, TamKinnock, Rt Hon Neil
Davies, Ron (Caerphilly)Kirkwood, Archy
Davis, Terry (B'ham Hodge H'l)Lamond, James
Dixon, DonLeadbitter, Ted
Dobson, FrankLeighton, Ron
Doran, FrankLestor, Joan (Eccles)
Duffy, A. E. P.Litherland, Robert
Dunnachie, JimmyLivsey, Richard
Eastham, KenLloyd, Tony (Stretford)
Evans, John (St Helens N)Lofthouse, Geoffrey
Ewing, Harry (Falkirk E)Loyden, Eddie
Fatchett, DerekMcAvoy, Thomas
Faulds, AndrewMcCartney, Ian
Field, Frank (Birkenhead)Macdonald, Calum A.
McFall, JohnRoberts, Allan (Bootle)
McKay, Allen (Barnsley West)Robertson, George
McLeish, HenryRobinson, Geoffrey
McNamara, KevinRooker, Jeff
McWilliam, JohnRuddock, Joan
Madden, MaxSedgemore, Brian
Mahon, Mrs AliceSheerman, Barry
Marek, Dr JohnSheldon, Rt Hon Robert
Marshall, Jim (Leicester S)Short, Clare
Martin, Michael J. (Springburn)Skinner, Dennis
Martlew, EricSmith, Andrew (Oxford E)
Meacher, MichaelSmith, C. (Isl'ton & F'bury)
Meale, AlanSnape, Peter
Michael, AlunSoley, Clive
Michie, Bill (Sheffield Heeley)Spearing, Nigel
Michie, Mrs Ray (Arg'l & Bute)Speller, Tony
Millan, Rt Hon BruceSteel, Rt Hon David
Mitchell, Austin (G't Grimsby)Steinberg, Gerry
Moonie, Dr LewisStott, Roger
Morgan, RhodriStrang, Gavin
Morley, ElliottStraw, Jack
Morris, Rt Hon J, (Aberavon)Taylor, Mrs Ann (Dewsbury)
Mowlam, MarjorieTaylor, Matthew (Truro)
Mullin, ChrisThompson, Jack (Wansbeck)
Murphy, PaulTurner, Dennis
Nellist, DaveVaz, Keith
Oakes, Rt Hon GordonWalley, Joan
O'Brien, WilliamWarden, Gareth (Gower)
O'Neill, MartinWelsh, Andrew (Angus E)
Orme, Rt Hon StanleyWelsh, Michael (Doncaster N)
Parry, RobertWilliams, Rt Hon Alan
Patchett, TerryWise, Mrs Audrey
Pendry, TomWorthington, Tony
Pike, Peter L.Young, David (Bolton SE)
Prescott, John
Quin, Ms JoyceTellers for the Noes:
Radice, GilesMr. Frank Haynes and
Randall, StuartMr. Ray Powell.
Richardson, Jo

Bill accordingly read the Third time, and passed.