I am grateful for this opportunity to raise the subject of the future of the north-east Lancashire enterprise zone. I am pleased to see my hon. Friend the Member for Pendle (Mr. Lee) and the hon. Member for Burnley (Mr. Pike). I welcome the support for the application to extend the zone that was given by my hon. Friend the Member for Pendle who, from the outset, has been an enthusiastic supporter of the concept of enterprise zones, and who has taken a deep and continuing interest in the north-east Lancashire zone. I also welcome the support of the hon. Member for Burnley, who has worked extremely hard in pressing for the zone to be extended.
The north-east Lancashire enterprise zone is one of the second round enterprise zones and was designated in December 1983. It consists of a total of seven sites in the boroughs of Hyndburn, Rossendale, Pendle and Burnley, with a total of 282 acres.
When the idea of enterprise zones was first suggested by the Government, there was much unfavourable comment nationally from the Labour and Liberal parties. They were a gimmick, we were told, and not a serious attempt to deal with unemployment. What was true nationally was true locally and the Labour party on Hyndburn council was certainly less than enthusiastic about our application for an enterprise zone.
How wrong Opposition parties have proved to be. I now welcome the all-party support for the north-east Lancashire enterprise zone. It has that support because of the obvious success that it has had in attracting new investment to the area. The enterprise zone's financial incentives have triggered off a new, substantial burst of development activity.
A survey of firms in Hyndburn's enterprise zone in 1987 revealed that the majority of firms regarded the financial incentives and the available capital taxation allowances as being important to their location decision. The high level of investment has created a large number of new jobs—almost 500 in Hyndburn alone. These are permanent new jobs. A high proportion of these jobs has been taken up by local people. There has also been direct employment in the various development projects in the zone.
All of this has played an important part in reducing unemployment in the borough and in the area. I welcome the reduction of unemployment in Hyndburn, and in north-east Lancashire generally, over the past 18 months. I acknowledge the part that the enterprise zone has played in that. I congratulate the Government on introducing the concept of enterprise zones. They were right, and their critics were wrong. My request to the Government is that they will now listen to local opinion, despite the decision in December that a general extension of the enterprise zone experiment is not desirable.
That the Government do listen can be seen clearly from yesterday's announcement that the Blackburn southern bypass will be designed as a dual lane motorway, even though it will cost £9 million more than the scheme for a trunk road. The Government listened to our pleas on that issue and they gave us what we asked for. I hope that they will listen tonight and react equally sympathetically to the local views on our enterprise zone.
We believe that the enterprise zone is one of the best and most effective ways of tackling the economic problems of the area. We face in north-east Lancashire a particularly localised set of economic problems. Despite improvements made in the 1980s, there is still a lack of modern industrial floor space. The older industrial stock is strongly associated with textiles and consists of multi-storey spinning mills and single-storey northlight weaving sheds.
As the cotton industry has declined, many mills have been sub-divided. They are often in poor condition and unsuited to modern industrial methods, and situated on cramped and inadequate sites. Difficulties with internal layout, as well as access and loading, all serve to restrict efficient functioning and growth potential.
In Hyndburn, 72 per cent. of industrial premises were not purpose-built; some 64 per cent. of them were built before 1914. The extension of the enterprise zone will continue to provide modern and purpose-built premises and help to alleviate the problem of inadequate accommodation. That is still faced by a large sector of industry in north-east Lancashire.
There is a continuing need for a steady flow of investment into north-east Lancashire if we are to tackle our economic difficulties. There is an inadequate amount of suitable industrial land for potential users, but development depends ultimately on the initiative and energies of the private sector.
The rate of new development depends to a large extent on the financial returns generated. In north-east Lancashire, returns on investment are not as substantial as in the south-east, and the enterprise zone has been a major factor in persuading firms to set up in north-east Lancashire.
Most of the land in the zone has now been developed. That development has so far involved a substantial private sector capital investment and resulted in the creation of 1,501 new jobs, the third highest level of total employment amongst the second generation zones, and the second highest in the proportion of manufacturing jobs involved. Of the 115 companies in the enterprise zone, 38 are completely new start-ups and 20 have plans for future expansion.
The zone has been extremely cost-effective in the creation of new jobs. In Hyndburn, for example, the overall public sector cost of the enterprise zone, in terms of rate allowances and capital investment, has been in the region of £1·4 million, or £3,200 per job, and in terms of expenditure on infrastructure, £813,000, or £1,860 per job.
Those figures suggest that an extension of the enterprise zone would represent good value for money given that the estimated national cost per additional job created on designated zones is £8,500. Almost 40 per cent. of the land identified for inclusion in the proposed extension is immediately available for development. Designation as an enterprise zone would lead to a considerable amount of new development, thus making full use of the infrastructure provided in the past years. That would maximise the return on existing public investment, surely something that the Government support.
For all the reasons that I have outlined, I hope that the Government will look again at the decision not to create further enterprise zones. An extension of the enterprise zone really is the best way to help the economic recovery in north-east Lancashire to continue. It is the one measure that helps Burnley, Hyndburn, Pendle and Rossendale. All other measures do not.
Assisted area status benefits only Hyndburn and Rossendale, as does the derelict land grant rolling programme, not Burnley or Pendle. The urban programme and the inner-city programme benefit only Burnley, not Hyndburn, Pendle or Rossendale. We have all benefited from the enterprise zone, not least Pendle, which has made worthwhile progress as a result.
Like the Under-Secretary of State for Employment, my hon. Friend the Member for Pendle, who has worked so hard to deal with and help alleviate unemployment in Pendle, I believe that much of the momentum resulting from the enterprise zone will be lost unless we are allowed to extend it or further Government support is available in one form or another.
I urge the Minister to take account of the representations made to him, not least by Hyndburn, and I give him a friendly warning. Because of the massive 18 per cent. rate rise imposed by Lancashire county council, the Conservative party expects to gain control of Hyndburn in the local elections. That being so, I warn my hon. Friend that the new leader of the council, councillor Mrs. Betty Court, who is as determined, single-minded and persuasive as Mother Theresa and my right hon. Friend the Prime Minister put together, will be on her way to see him, before the returning officer has recovered from announcing the result, to support the request that I have made, and it may on balance be wise to reconsider the matter tonight.
First, I want to thank the hon. Member for Hyndburn (Mr. Hargreaves) for allowing me to take part in the debate. This is an important matter to the people of north-east Lancashire. Like him, I appreciate the presence of the Under-Secretary of State for Employment, the hon. Member for Pendle (Mr. Lee), who has responsibility for tourism. I know that he has actively supported the case that we are debating. Indeed, I was fortunate to have three minutes at the end of the Consolidated Fund debate when I said that the case that I was making briefly at that time had the support of those two hon. Members.
It is also significant that the four authorities are united in the belief that one of the most important things for the economic recovery and regeneration of north-east Lancashire would be for the Government to agree an extension of the enterprise zone.
As the hon. Member for Hyndburn has said, we welcome yesterday's announcement that the M65 is to be linked by a road of motorway standard to the main national motorway network. The Minister could make it an extremely good week for north-east Lancashire tonight if he were able to say that the Government and his Department were prepared to reconsider this enterprise zone extension bid. Crowned with the Burnley football team reaching Wembley tonight, that would make it an extremely good week for the area.
Another factor should commend itself to the Government. The Government often talk of problems being tackled by local and national Government and the public sector working together. Conservative Members say that that is the way to solve many of the problems that face the country. Those three sectors have worked exceptionally well within the enterprise zone to make it a success. Its success should commend itself to the Government.
In The Daily Telegraph on 30 March of this year there was an article by Trevor Bates on Burnley and Pendle. It refers to three industrial estates in those boroughs that face similar problems, as do Hyndburn and Rossendale. It says:
The designation of three industrial estates as having enterprise zone status has been another significant factor in winning manufacturing and high-tech companies to the area, including a number from abroad.
In addition, Texas Eastern has set up a factory in Burnley that was recently opened by the chairman of the Conservative party. At the opening ceremony, the company made it very clear that one of the reasons for going to Burnley was the enterprise zone. Archie Thompson, the executive vice-president of Texas Eastern, has stressed the importance of communications in moving into the area.
Another company, Vekaplast, has also moved into the enterprise zone. Its managing director, Peter Abbott, has said that the existence of the enterprise zone and the available pool of good quality workers attracted the company to the area.
I refer also to a company in the Pendle constituency, Bodycare Toiletries, that recently moved to the Lomeshaye industrial estate. A letter I have received from Pamela Bishop of the Burnley and Pendle development association says:
The company conducted an exhaustive search for industrial premises stretching from North Wales to Carlisle. However, the Development Association managed to persuade them that Pendle and Lomeshaye Industrial Estate would be an ideal place for them.
That is in the enterprise zone, but that zone is nearly full. If we are to overcome the problems to which the hon. Member for Hyndburn referred and about which we could speak at great length, an extension of the enterprise zone is vital. It would represent good value for money. Therefore, the Government should accept the case that we are making.
I congratulate my hon. Friend the Member for Hyndburn (Mr. Hargreaves) on his success in the ballot and on the assiduous and effective way in which he presented his case. I am pleased to see that his hard work is supported by the hon. Member for Burnley (Mr. Pike) and by my hon. Friend the Member for Pendle (Mr. Lee). They will understand why I am replying to the debate, in view of the ministerial responsibilities of my hon. Friend the Member for Rossendale and Darwen (Mr. Trippier) whose constituency also embraces the north-east Lancashire enterprise zone. It is of course not the first time that I have responded to a debate on this subject, as it was raised by the hon. Member for Burnley in the Consolidated Fund debate on 10 March, to which he has referred.
The enterprise zone experiment was one of the first steps the Government took in 1979 towards lifting burdens on business and enterprise. They have led the way along the path of deregulation that has stimulated the entrepreneurship that has characterised our economic recovery. I am cheered by the evidence that enterprise zones have helped the regeneration of many localities which were widely believed to be beyond the point of no return in their economic fortunes. We know the commonly quoted examples—the Isle of Dogs, Corby, Hartlepool and Telford.
But, as the hon. Member for Hyndburn has reminded us, the north-east Lancashire zone has also been a success story. It was designated in December 1983 with a total area of 114 hectares spread over seven sites in the towns of Burnley, Accrington, Rossendale and Nelson. The sites were little developed. To those sites were given freedom from rates, 100 per cent. capital allowances to be set against tax, and a much simplified planning regime.
Today, those sites are no longer vacant. At the end of 1986—the latest date for which we have information—the Department's annual monitoring report, published last December, revealed 87 business establishments—a 135 per cent. increase since designation—occupying 106,000 sq m of floor space—a 158 per cent. increase—and offering 2,400 jobs, a staggering 224 per cent. increase.
All that has not happened without considerable effort. Hon. Members representing that area have been fully involved. My hon. Friend the Member for Pendle played a major role in ensuring the establishment of the enterprise zone. The fruits of his hard work are well known. As we all know, he is an assiduous Member, dedicated to the regeneration of north-east Lancashire and to the interests of his constituents.
The hon. Member for Burnley has brought me to the Dispatch Box before. While I may not always live up to the aspirations that he has for his constituents, it will not be for want of recognising his commitment. In passing, I congratulate Burnley on reaching Wembley this evening.
The substantial contribution of my hon. Friend for Rossendale and Darwen also cannot go unmentioned. His ministerial position, similar to that of my hon. Friend the Member for Pendle, constrains him from addressing the House this evening. However, there are few hon. Members of whom it could be equally appropriately said that his actions on behalf of his constituents speak louder than words. He deserves the congratulations of this House for his commitment to economic growth and progress in north-east Lancashire.
In addition to those hon. Members and my hon. Friend the Member for Hyndburn, the local business community and the local authorities have also been united in their active support for the zone. The local authorities—both as planning authorities and sometimes as landowners—have been positive in their promotion and management of the zone. The success of the zone—in terms of new private investment, new work space to diversify what is locally available, new jobs of which many have been taken by local people—is largely to their credit.
However, such success means that the zone will soon be fully developed. And, as my hon. Friend has said, notwithstanding the growth within the zone and the impact that it has made on the area, it has not, and indeed never could, in itself overcome entirely north-east Lancashire's economic problems. Therefore, it was natural that the question of an extension to the zone should be raised. The success of so many of the enterprise zones has led other localities to exactly the same point of wanting to extend existing zones or establish new ones. At the end of 1987, some 26 such applications were to hand for England alone.
As I explained at the start, enterprise zones were established as an experiment in deregulation. In 1986, we decided that it was timely to review their progress and decide whether, and on what terms, to continue the experiment. To assist us in that task, we commissioned an evaluation by consultants of the performance, having regard both to costs and effectiveness, of the existing zones. Their work explored fully such questions as whether investment, construction and employment on the zones was additional to what might have happened in the locality in the absence of the zone, what effects—both positive and negative—the zones were having on their surrounding areas, and what level of public cost was attached to the new jobs. With the benefit of their analysis, we reviewed the zone experiment and my right hon. Friend the Secretary of State made a statement of policy to this House on 17 December last. We published the report by the consultants.
The essence of my right hon. Friend's statement was that there would be no general extension of the enterprise zone experiment. The zones had been successful in varying degrees in regenerating areas which had hitherto been in steady decline. However, those achievements must be set against the cost to the public purse, which totalled just under £300 million up to the end of 1986. There was now a variety of measures to stimulate development in areas adversely affected by changes in the local economy, which will often be more cost effective than an enterprise zone. Nevertheless, there will still be exceptional circumstances that could justify a new enterprise zone or the extension of an existing zone, including the nature and severity of the local economic problem, the likely cost-effectiveness of an enterprise zone in contributing to its solution, in particular in comparison with other measures available, and the capacity of the authorities and agencies concerned to ensure a zone's success.
Against those new, severer tests, we examined all the outstanding bids for new zones and extensions and found them wanting. All were therefore rejected at the time of the policy statement. There were also the tests applied to the proposal from north-east Lancashire which was submitted in February, subsequent to the new policy statement. My right hon. Friend the Secretary of State concluded that that proposal should likewise be rejected.
Given the experience of the first five years of the existing zone, there could be no doubt about the capacity and competence of the zone authorities to make the zone a success. The evidence on that was quite clear. The decision turned more on the nature and severity of the economic problems of north-east Lancashire and the comparative cost-effectiveness of an enterprise zone extension in tackling them.
We must agree that the problems of north-east Lancashire are not as bad as those prevailing in many other areas which have faced industrial restructuring over the last decade. The economic circumstances of north-east Lancashire are just not exceptional enough to justify—in the terms of our stated policy—being answered by a further enterprise zone.
In assessing cost-effectiveness, we must consider both sides of the equation. The success and effectiveness of the existing north-east Lancashire zone is evident in what has been said tonight. However, although the zone may be nearly full, the total cost of the measures will continue to grow. For example, the cost of the rates exemption for the zone was £400,000 in 1985–86, the figure that was taken into account by the consultants; in 1986–87, it had risen to £700,000 and last year exceeded £900,000. These payments have nearly five more years to run.
There is other assistance on offer to north-east Lancashire that is making a steady, and more cost-effective, contribution to economic recovery—measures which, I think, are too lightly dismissed by the north-east Lancashire enterprise zone authorities in their submission to my right hon. Friend the Secretary of State for an extension to the enterprise zone.
In 1986, Burnley became an urban authority invited to submit inner area programmes to my Department. The council had an allocation of £1 million for urban programme projects in 1987–88. That has been substantially increased this year to £1·8 million—an 80 per cent. increase and the largest in the country. Those resources enable the council to carry out a range of economic, environmental, social and housing projects to tackle its inner-city area problems.
Moreover, Burnley, as one of the 57 target areas, will have a chance to benefit from many of the dozen new initiatives announced in the "Action for Cities" paper launched by my right hon. Friend the Prime Minister on 7 March. There is extensive spending on training, enterprise and o employment schemes by the Department of Employment and the Manpower Services Commission, and local firms will be eligible for higher rates of grant under the Department of Trade and Industry's new enterprise initiative. Private developers in Burnley can apply to my Department for the new city grant which comes into operation on 2 May. The city grant will provide support to private sector capital projects for industrial, commercial and housing schemes which benefit rundown areas and which cannot proceed without grant aid.
The Department of Trade and Industry's new enterprise initiative, launched in January, brought together new and existing measures of support. Industry and commerce throughout north-east Lancashire may benefit from the marketing, design, quality, manufacturing, business planning and financial information systems initiatives. They provide a comprehensive range of consulting assistance in the key management functions.
Regional selective assistance is available to assist with the costs of investment projects undertaken by firms in the assisted areas, which include the Accrington and Rossendale travel-to-work areas.
The British Overseas Trade Board provides a wide range of help and guidance to assist firms and businesses with their exporting and overseas market activities.
The business education initiative seeks to promote clearer working links between industry and education at all levels—from schools to colleges, and universities. For example, the north-west's Regional Technology Centre, hosted by NIMTECH at St. Helens, will facilitate the exchange of technical expertise between industrial and academic centres of expertise within the region.
The research and technology initiative provides financial assistance, guidance and expertise to assist the development of new technologies, new processes and new services.
Simplified planning zones—SPZs—are another new Government initiative designed to quicken the pace of development in areas where it is most needed. They are modelled on the planning arrangements which have been successful in enterprise zones and offer the same scope for stimulating investment and regeneration by simple and positive planning. Those zones are particularly well-suited to the older urban areas where they can be used to bring rundown industrial land back into productive use. I hope that the local planning authorities in north-east Lancashire will be designating some SPZs.
The EEC also addresses the problems of this area. All four enterprise zone authorities are eligible to receive non-quota European regional development fund assistance. This aims to develop new economic activities in areas adversely affected by the restructuring of the textile and clothing industries.
Projects estimated to cost some £2·25 million are being considered for grant aid. A decision is expected in early June. In addition, Hyndburn and Rossendale are also eligible for ERDF quota assistance. Grant is generally 50 per cent. of the eligible costs of schemes which provide basic services or communications for existing and future industry and commerce. Again I would urge the authorities to take full advantage of these facilities.
The hon. Member and my hon. Friends will know that much has already been achieved in north-east Lancashire through the derelict land grant rolling programme in which Lancashire county council, Hyndburn borough council, and Rossendale borough council jointly participate. This programme has enabled the local authorities not only to restore derelict land to beneficial use, but to foster commercial and industrial development. A further £1 million of grant is promised for the area in 1988–89 on top of the £3 million spent in 1986–87 and 1987–88. In addition, a new DLG rolling programme covering the whole of the Leeds-Liverpool canal corridor has just been announced with a project spend of £750,000 in its first year.
All these measures and the substantial resources being provided by the Government present clear opportunities for both the public and private sectors to grasp to bring about growth and prosperity in this part of Lancashire.
There is a fundamental point here. Enterprise zones were, as I have reminded hon. Members, always intended as an experiment. Their benefits are also time limited to 10 years from designation. The hope was that a zone, if successful, would provide a stimulus to the local economy, not a continuing prop. There are now signs, in north-east Lancashire and elsewhere, of this effect. We must build on and exploit what the enterprise zone has done for the local economy to sustain its recovery.