HC Deb 17 January 1985 vol 71 cc526-606
Mr. Speaker

Before we proceed with this important debate on regional policy I should inform the House, in relation to it, that, because of the number of hon. Members who wish to speak, I intend to apply the time limit on speeches of 10 minutes agreed to by the House on 31 October last. On this occasion I shall apply the limit to hon. Members called between 6 o'clock and ten minutes to 8 o'clock and not between 7 o'clock and ten minutes to 9 o'clock as on previous occasions. The resolution of the House on 31 October authorised both these methods of limitation. It would be useful for the House to gain experience of how each method works.

4.44 pm
The Secretary of State for Trade and Industry (Mr. Norman Tebbit)

I beg to move, That this House takes note of the Government's statement on 28th November announcing changes in regional industrial incentives; welcomes the closer alignment of the new Assisted Areas map to areas' relative needs for increased employment opportunities; agrees that it is right at a time of high unemployment to relate assistance more directly to jobs; and notes with approval that the increased cost-effectiveness of regional assistance will enable the burden upon taxpayers to be substantially reduced.

Today's debate provides an opportunity for the House to give consideration and, I hope, approval to the changes in the thrust of regional policy—the change of emphasis away from automatic subsidy of capital expenditure towards incentives for employment—and the changes to ensure that our spending is undertaken in the areas that are most seriously afflicted by the combination of unemployment, industrial decline and structural change.

The new policy also does away with the unjustifiable discrimination against service industry, which now provides a growing proportion of jobs. None of these changes comes as a surprise to the House. They were foreshadowed in the White Paper "Regional Industrial Development" which was published in December 1983, debated to some extent during the passage of the Cooperative Development Agency and Industrial Development Act and set out in greater detail in the statement made by my hon. Friend the Minister of State on 28 November last year, together with the supporting documentation that was made available at that time. I shall, however, refer later to one aspect of the implementation of the policy which will be new to the House.

The House will recollect that the 1983 White Paper boldly faced up to the question of the justification of regional industrial incentives, regional policy for short, and concluded that there is no longer a clear-cut economic case for such a policy. I realise that that outrages the more conservative—with a small "c", I hasten to add—Socialists on the Opposition Benches, but I do not think they should become over-excited about it since we can, I believe, stand on the common ground of the justification of this policy primarily on social grounds. By that I mean that the Government accept the need to do what we can —and Government are not omnipotent in this matter—to reduce the imbalance between the prosperous and the most hard hit areas of Britain. There is, of course, a price tag, a cost, to such a policy and it would be foolish indeed to count only the benefit and not the cost, or vice versa.

Again, whatever views we might take about the scale of benefit or the cost that might be afforded, I hope we might, again, agree to stand on the common ground that the cost-benefit ratio should be as favourable as possible. There will be people who have to pay for this policy—the generality of taxpayers and, let it not be forgotten, also those whose businesses or jobs suffer subsidised competition; there will be people, too, who gain from the policy. I am sure we would agree that so far as possible the recipients should be in those areas that are most hard hit and that these should be established on sound criteria.

I hope, though it is only a hope, that one day we might agree that not every part of the kingdom can be a beneficiary area. In the White Paper we argued: The incentives must be made more cost effective…with greater emphasis on job creation and selectivity and less discrimination against service industry". That major change won widespread support. Nor should that come as a surprise since examples abound of substantial grant payments that have been made as incentives to companies which would have located the investment in an assisted area in any event. In some cases those companies were themselves hardly pressed for cash and the investment produced few jobs, but the test, surely, for support for any project should be: what does it do for jobs, how many jobs and at what cost?

In some other cases, high rates of grant encouraged projects of marginal viability to concentrate in the assisted areas with the enhanced risk of multiple collapses during difficult times. Thus, past policies left the assisted areas particularly vulnerable during hard times. Perhaps, there is more than a little truth in the suggestion that major companies—not least multinationals—shopped around for the highest grant rates for their branch operations and that the assisted areas then suffered from the tendency for such companies to cut back on the more remote branches of their operations during recessions. At the same time, geographically mobile service industries which might have been attracted were denied incentives available to manufacturing industry to encourage their location in assisted areas.

I believe that these problems can be mitigated by the new policies. First, in most cases, the automatic grant will be related to jobs. The grant per job limit will avoid what one might call the Sullom Voe syndrome of high subsidy and disproportionately few long-term jobs. Even worse were the high automatic subsidies paid to investments which created no new jobs, or even reduced jobs, or merely shuffled jobs from one assisted area to another. Some have argued that automatic assistance should continue for job protection. I believe that that is best dealt with on a case-by-case basis.

In the past the abuses extended over a wide range. For example, a printing company could gain automatic RDG when it bought new plates to print a different book from the book it had been printing during the previous week. That was hardly related to job creation or even to job protection. Under our new policy, therefore, selective aid will continue to be available for the particularly desirable modernisation projects. Selective aid will also enable us to continue to compete effectively for internationally mobile projects.

The second major change is the fact that we have revised the geographical coverage of the assisted areas and moved from a three-tier system to a two-tier system. I am sure that there will be discussion today and later tonight on whether we have included a sufficiently large percentage of our working population in the assisted areas.

I believe that we have included as many as can be afforded. It would have been difficult to persuade the European Commission that a larger percentage would not have taken the policy from one of assistance to less-favoured areas to one of illegal general subsidy.

Mrs. Elaine Kellett-Bowman (Lancaster)

I am sure my right hon. Friend appreciates that the fact that the Lancaster travel-to-work area with its high unemployment of 15.3 per cent. ceased to be an assisted area was a great disappointment to the area. We hope very much that my right hon. Friend will mitigate the damage that would otherwise by caused to us and will make the area a derelict land clearance area. If that is done, we can reasonably continue with the progress we have been making during our time as an assisted area.

Mr. Tebbit

I can understand my hon. Friend's disappointment at the fact that Lancaster fell on the wrong side of the line we drew. I understand that my hon. Friend the Under-Secretary of State for the Environment—the hon. Member for Sutton and Cheam (Mr. Macfarlane) —has written to my hon. Friend and some other hon. Members. I hope that my hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman) will receive that letter either this evening or tomorrow telling her that Lancaster has been granted status as a derelict land clearance area.

Mr. John Prescott ( Kingston upon Hull, East)

What does that have to do with logic?

Mr. Tebbit

The hon. Gentleman clearly does not understand logic or he would understand the purpose of those clearance areas and the subsidies granted to them. I regret the fact that the hon. Gentleman opposes the grant of such subsidies to Lancaster. No doubt the Labour candidate for the area at the next election will be asked about his party's attitude.

Mr. Prescott

And that is what it is about.

Mr. Tebbit

If the hon. Gentleman makes a speech tonight I hope that he will make a point about the percentage of Tory-held seats and the percentage of Labour-held seats which are beneficiaries of regional aid. That would dispose of any suggestions of bias —[Interruption.] Having had this debate delayed once by unruly behaviour, I hope that will not be delayed again by unruly behaviour by the Opposition Front Bench.

The rapid restructuring of the economy had made a nonsense of the old map. Who could argue that the core of the west midlands, with unemployment rates of up to 21 per cent., should be excluded from benefits received by, say, Darlington with 15.2 per cent. unemployment, Durham with 14 per cent. unemployment or Oldham with 13.8 per cent. unemployment? Of course, current unemployment rates cannot be the sole criterion for inclusion in the assisted areas, but the west midlands stood out as an unfair exclusion.

Sir Reginald Eyre (Birmingham, Hall Green)

How many applications for grants have been received in the west midlands area, including Birmingham, since the proposals incorporated in the scheme were first announced?

Mr. Tebbit

I cannot give my hon. Friend a precise answer, but I know that the level of interest expressed has been high. The last time I inquired there had been well over 2,500 inquiries and well over 100 applications were being processed. I believe that my Department has arranged more than 40 seminars for interested parties in the Birmingham-west midlands area to examine the opportunities opened up by the new status of the area. I hope that that will be helpful to the city.

Mr. George Park (Coventry, North-East)

Will the right hon. Gentleman try to satisfy the House about the scheme's flexibility? The right hon. Gentleman just answered a question about land clearance from the hon. Member for Lancaster (Mrs. Kellett-Bowman). An application for land clearance was made in my constituency, in some parts of which there is 30 per cent. unemployment. We received a reply stating that, looking at the city as a whole, there was no justification for granting land clearance status. Could the scheme be more flexible and more selective and take such aspects into account?

Mr. Tebbit

I am sure that the hon. Gentleman will want to take up that matter with my right hon. Friend the Secretary of State for the Environment, who is responsible for that scheme. I am not responsible for it —[Interruption.] The hon. Gentleman must take account of the fact that I am often aware of what goes on, even in other Departments, but I cannot take responsibility for the schemes they draw up.

Dr. Keith Hampson (Leeds, North-West)

Does my right hon. Friend agree with the answer that has been given in the newspapers, that there is a case for task forces, especially for cities with needs that do not fall within the prescribed assisted areas criteria, to pull together the various activities of Departments such as the Department of Trade and Industry and the Department of the Environment? I assume that my right hon. Friend's Department will have a major role to play in such task forces.

Mr. Tebbit

My hon. Friend puts a good point. I am not sure that we would necessarily create task forces as such. We seek to achieve much greater co-ordination between the regional offices and the Departments that operate in these areas, where several schemes of urban aid and regional industrial assistance overlap.

Mr. Tony Favell (Stockport)

Will my right hon. Friend give way?

Mr. Tebbit

This might be the last intervention I shall accept, or my speech will be rather long.

Mr. Favell

My right hon. Friend pointed out earlier that many well-run Conservative authorities have been excluded from the map. Is there not a problem with this policy in regarding development status as a reward to the prodigal son? Let us take the case of Manchester and Stockport. There is not a blade of grass between the two. Manchester city employs twice as many people per head of population as Stockport. Manchester thereby drives employment out of Stockport. Stockport is faced with the difficulty of Manchester city being aided to a large extent and Stockport not receiving that aid.

Mr. Tebbit

I can understand how my hon. Friend feels because I know that the local authority at Stockport has been assiduous in running a tight ship and giving good value to its ratepayers, which is more than can be said for a good many of the others nearby. But inevitably there are problems across boundaries of discrimination one way and another, and inevitably there are occasions when those who have looked after their financial affairs find themselves called upon to give help to those who have wilfully not done so. That is an inevitable consequence of some of these schemes.

In redrawing the map we have taken into account total unemployment, long-term unemployment, growth in labour supply, industrial and occupational structure, activity rates, peripherality and inner city problems. Even then we felt it necessary to take into account the relationships between neighbouring areas and, indeed, one might wax eloquent about what have become known as doughnut effects, where one small area is left unaided with a whole circle of aided areas round it. No doubt some hon. Member will touch on that later this evening.

Of course, we gave careful consideration to the many representations made to us. We have increased coverage to 35 per cent. of the working population and that will give us maximum access to the European regional development fund. Without that funding we could not have given such wide coverage. Thus we have been able to increase the areas eligible for regional selective assistance, too.

Within that wide coverage we have drawn a tighter group of inner tier areas, covering some 15 per cent. of the working population, on which to focus resources where they are most needed. In this inner tier we are concentrating assistance: not only ERDF and regional selective assistance, but the automatic RDG assistance. I realise of course that the former SDAs, whose 22 per cent. grants will go down to 15 per cent., will complain, but we are not setting out to give handouts to companies and in many cases it was simply not necessary to go to that level of subsidy to secure the jobs. I for one see no reason why we should add to the profitability of companies that were already adequately profitable and could have been induced to go on 15 per cent. or perhaps even less.

One consequence of these changes, as I have said, is that some areas will be downgraded or excluded from assistance. That will be a source of dissatisfaction. To minimise the pain, therefore, there will be transitional arrangements more generous than any offered before. These were described in detail by my hon. Friend the Minister of State last November.

That brings me to one matter that was not foreshadowed in earlier statements; nor is it so much a regional policy issue as a public expenditure issue that had to be faced by my right hon. Friends the Secretaries of State for Scotland, for Wales and myself. We agreed upon an approach—

Mr. Donald Stewart (Western Isles)

"We agreed"?

Mr. Tebbit

Yes, we agreed upon an approach, which normally would have been announced at the time of the publication of the public expenditure White Paper. But my right hon. Friends and I thought it would be wrong for the House to debate these matters in ignorance of decisions that had been taken and that would shortly be public knowledge.

As I have explained, the transitional provisions protecting the decisions made on the basis of the old map and the old scheme will overlap the new policy and the new area coverage. In effect, two schemes will be running side by side with considerable overlap.

In 1983 we estimated that spending on regional industrial incentives in the year 1985–86 would be just under £500 million. It is now clear that, with the new policy and the transitional arrangements, that expenditure would have increased to well over £600 million and that bulge of expenditure simply could not be afforded.

We are therefore introducing today a four-month moratorium on the payment of the old style RDGs.

Mr. Dick Douglas (Dunfermline, West)

rose—

Mr. Tebbit

If the hon. Gentleman will relax for a moment, I am sure that he would want to hear what the moratorium is and how it will operate. It means that there will be a four-month gap between the approval of an application and the payment and this will apply to the old RDGs until further notice. It will not apply to properly completed applications for grant which were either received or postmarked before midnight tonight; nor will it apply to the new RDG scheme. The moratorium will ensure that next year we spend no more on regional industrial incentives than we forecast in 1983.

Mr. A. J. Beith (Berwick-upon-Tweed)

Will the right hon. Gentleman give way?

Mr. Jack Ashley (Stoke-on-Trent, South)

Will the right hon. Gentleman give way?

Mr. Dafydd Wigley (Caernarfon)

rose—

Mr. Tebbit

It does not mean that there will be any substantive reduction in spend next year compared to the 1983 forecasts, nor will any grants be "lost"—they will only be delayed. So, while there may be some savings from the new policy as soon as 1986–1987, we still do not expect there to be any significant saving in regional policy spending until 1987–88, when we would have spent some £700 million if we had made no policy changes.

Mr. John Smith (Monklands, East)

Does the Secretary of State appreciate that extensive undertakings were given during the passage of the legislation about the transitional provisions, and assurances were given to those affected by regional development policy that great care would be taken? The result of the Secretary of State's announcement, although he claims that it makes no real difference to the national accounts—one wonders, therefore, why it is made—will mean that companies that have undertaken to purchase equipment and entered into contracts for it will be left with four months in which to find the money, and they will probably have to borrow it at the new rates of interest that the Government have introduced.

Mr. Tebbit

In the event that that is so, I do not think that there would be any great difficulty in the company being able to borrow the money against the security. The amount that we are discussing is something like 4 per cent. on the 15 per cent. grant so it is not a major element of the cost involved. I have to remind the House that overall the expenditure in the coming year is expected to be the same expenditure as would have been undertaken on the basis of our 1983 estimates. I think that the right hon. and learned Gentleman has slightly missed the point, and I am not trying to be funny at his expense. I want to make it absolutely clear that—

Mr. Ashley

Will the right hon. Gentleman give way?

Mr. Speaker

Order. The right hon. Gentleman can see that the Secretary of State is not giving way. I think that he may give way later, but not now.

Mr. Tebbit

I want to make it absolutely clear so that we can understand each other that there will be two policies, in effect running side by side during the transitional period. Therefore, in order to maintain expenditure at the level which had been forecast in the 1983 White Paper we have used a moratorium on the RDGs on the old system. The new system will go ahead untouched. That is the way in which we avoid the bulge of public expenditure. I can understand right hon. and hon. Gentlemen not liking it—I can understand companies not liking it—but on the other hand it may be rather more popular with taxpayers as a whole.

Mr. Wigley

On this point, will not the right hon. Gentleman appreciate that the cash flow problems for companies are as great as, if not greater than, the cash flow problems for Government? In these circumstances, can he give an assurance not only that a letter of intent will be issued to the companies to help them in getting the liquidity that they might need, but that the Government will consider reimbursing any interest costs in the interim period, given the current high rate of interest?

Mr. Tebbit

Let me take the hon. Gentleman's points one by one. First, there are many companies whose cash flow problems are considerably less than those of Governments—we would all like to be in the position of, for example, GEC, with a cash flow. Many companies do not have cash flow problems. The position of industry as a whole—its profitability and its liquidity—has vastly improved in the last year or so, and I believe that in general this would not be an unduly onerous burden.

Secondly, where a company's application is approved, a letter will be issued to it which will say, "Yes, you qualify for the grant. It will be paid, and it will be paid in four months from now," as opposed to today. I imagine that such a letter could be used in an application to a bank.

Thirdly, it would not be right for the taxpayer to carry the cost of the interest involved.

Mr. Ashley

Is the Secretary of State aware that his colleague announced a reduction in regional aid? The Secretary of State is now announcing a freeze on that reduction. Given the increase in unemployment and the fact that regional aid ensures equity, he is announcing an unfair policy that will hit those areas suffering high unemployment.

Mr. Tebbit

The right hon. Gentleman hardly expected me to come to the House today to announce an increase in expenditure on regional aid. For next year, expenditure will be maintained at the level that we forecast in 1983, but, because of the changes in policy, that expenditure will be more effective than it would have been under the old policy.

Mr. Churchill (Davyhulme)

The fact that the new regional development grants will be unaffected by this moratorium and that the overall volume is unaffected for the coming year is much appreciated. May I thank my right hon. Friend on behalf of my constituents in Greater Manchester for the fact that Trafford Park has been included in the regional assistance status area?

Mr. Tebbit

I am glad that that has happened. I should perhaps trespass upon the relatively quiet response that I have so far had and say that in 1987–88 there will be significant savings of about £300 million a year on what would have been spent under the old policy. I emphasise that that is justified because the money that will be spent will be spent much more effectively. The Chancellor will be happy, but not yet.

Mr. Beith

rose—

Mr. Tebbit

Others of differing political views may want to be miserable, but I would advise them not to be miserable yet. I would counsel them against misery in any case.

Mr. Beith

Does the Secretary of State recognise that he is delivering a double blow to areas such as Amble in Northumberland, which he has excluded from regional development aid? Firms in those areas are seizing the last chance to obtain some help from the scheme. Those firms are now being told that plans that they have had to bring forward to come within the scheme will not be paid for another four months.

Mr. Tebbit

I understand that, but there has been a reasonable time during which people could apply for grants. We could not have told them in advance that there was going to be a moratorium or its purpose would have been frustrated. That is one of the consequences of changing the shape of the map and the policy.

Mr. Michael Grylls (Surrey, North-West)

While of course the moratorium may, as the Secretary of State has readily recognised, cause some problems to some firms, does he accept that the vast majority of British industry is much more interested in supporting him in keeping the general level of public expenditure under control because its greatest interest is in ensuring that inflation does not take off again? He has a great deal of support for trying to control public expenditure.

Mr. Tebbit

I am grateful to my hon. Friend. It is appropriate that the case for the generality of the population—the taxpayers—should also be heard in a debate when, not unnaturally, we hear a great deal about the case for those who are in assisted areas or who would wish to be.

Mr. John Prescott (Kingston upon Hull, East)

They are taxpayers.

Mr. Tebbit

Yes, they are taxpayers, but they are beneficiaries, whereas the others are not.

Mr. Douglas

rose—

Mr. Tebbit

Mr. Speaker, this is a short debate. I should have been able to give way to the hon. Gentleman had we not suffered from the vilely rude behaviour of some of his colleagues.

Regional policy should not be judged good if it costs a lot and bad if it costs rather less. It should be judged on what it achieves. Bluntly, past policies were not completely successful in the regions that they sought to help. In addition, they damaged some other areas, and the west midlands felt that strongly. They were expensive, thus causing a more general negative effect in the economy.

It has been estimated that the cost per net additional job created in the assisted areas in the 1970s was about £35,000 at 1982 prices. Many of those jobs would otherwise have come into being elsewhere in the country.

It will be some time before we know the cost per job of the new policy because such estimates must take into account the total effect not just on the firms that receive assistance but on their suppliers and competitors. Of course, new long-term stable jobs do not come into being overnight. I am confident that the new policy will be much more cost-effective than the old. However cost-effective the policy, it will still be a burden on the taxpayer. The new policy is expected to cost nearly £400 million a year in 1987–88. [Interruption.] The cost of the policy is imposed on industry. It is the wealth-producing industry of this country that provides the money to do it.

This is a considerable lightening of the burden on the country as a whole—a reduction of nearly £300 million from what would have been spent under former policies, and I make no apology for that.

The policies that I have outlined give the hardest hit areas the most help. They concentrate on job creation and not on how much taxpayers' money can be given away, sometimes to prosperous companies to subsidise them to do what they would have done anyway. The policy is to minimise job shuffling within assisted areas.

Mr. Douglas

The Secretary of State has said that three times.

Mr. Tebbit

I am sorry that I have had to say it three times, but it is possibly still not understood by the hon. Gentleman, and I might have to say it again.

The policies recognise more fully the role of the service industries as a provider of jobs. We look to better value for money and more jobs per pound of expenditure, because we recognise that regional policy has adverse effects on those who pay but do not receive, and their jobs matter too.

The Government do not turn their back on the problems of the regions, but we believe that as the traditional policy which has been followed for almost 40 years has not achieved what it should, new, more effective and less expensive policies are overdue. To suggest, as the Opposition amendment does, that the policy of spending some £480 million in 1985–86, £610 million in 1986–87 and £390 million in 1987–88 is destructive of regional policy is just plain silly. To deplore, as the amendment does, the changes — by calling them restrictions — to make that spending more cost-effective, is to support spending for the sake of spending and to oppose cost-effective policies.

As ever, the longer that the Opposition are out of office the fewer there are of them who remember what responsibility even felt like. The more distant their prospect of returning to office, the more ridiculous and irresponsible they become with this type of amendment. If there are credible alternatives to our policies they are not to be found in any of the Oppositions' policies. I commend the Government's policies to the House.

Mr. Speaker

I must announce to the House that I have selected the amendment which stands in the name of the Leader of the Opposition.

5.20 pm
Mr. John Smith (Monklands, East)

I beg to move, to leave out from "House" to the end of the Question and to add instead thereof: but deplores the destruction of regional development policy at a time of record high unemployment and steep industrial decline in the regions and nations of the United Kingdom, condemns the massive cut of £300 million each year in regional industrial assistance, the abolition of special development areas, and the new reductions and restrictions on regional aids and urges a programme of national economic recovery to rebuild the industrial base in which positive regional development is given a crucial role.

Before embarking on the debate on the policy changes, I must express the deep concern of hon. Members on this side — and, I suspect, in other parts of the House, although they have not yet revealed it — about the sudden announcement by the Secretary of State today of the moratorium on regional development payments.

As the right hon. Gentleman well knows, the effect will be to damage many projects which are dependent on regional assistance for their viability. Even if the grants are paid at the first opportunity — I do not know whether that, in all cases, can be guaranteed—there will be an obvious effect on the cash flow of the companies concerned.

After all, many of those companies will have entered into binding contracts with suppliers on the basis that they thought they had a genuine undertaking and guarantee from the Government that the money to which they were entitled would be paid on the date on which it was due. They may in some cases be able to borrow to cover the difficulty of receiving their money four months late, but those which do that will have to pay interest, and they will have to pay at a higher interest rate as a result of the Government's recent financial policies.

The Secretary of State has treated this matter far too lightly. He says airily that many companies will be able to face this problem. But many companies will not, and to those that will not the Government merely shrug their shoulders and say, "That is too bad."

It emerges, however—from the way in which the right hon. Gentleman explains the national accounts—that not much is involved. The explanation we are given is that there really is no change; the same money will be spent. If so, why on earth are we having a damaging moratorimum. The Secretary of State cannot have it both ways. If there is no real change in this magical creative accounting—in which I am not surprised the right hon. Gentleman is an expert—there should be no need for this moratorium.

Mr. Tebbit

rose—

Mr. Smith

I am happy to give the right hon. Gentleman another shot at it, if he would like one.

Mr. Tebbit

I could not have made myself clear, although I hoped that I had. The combination of bringing in the new policy would have increased spending next year. By bringing in the moratorium, we have brought spending back on to the line that had been forecast in 1983. That means that we have a more effective policy for the same money.

Mr. Smith

The money must be paid anyway. It is clear however, that it will be paid next year instead of this year. It is being shifted from one set of accounts to another. That fact prompts me to take the point further. One would have thought that this resulted from some unexpected development that threw the Government off course. But that has not been the case. It results precisely from the way in which the Government have gone about it.

The Government were warned throughout the passage of the preceding legislation that there would be a need for proper transitional arrangements. When they announced reductions in regional development grants—there had been a shrewd suspicion by many people that they would — there was a bunching of applications. When the Government then, in the last Budget, changed the capital allowances, there was a further incentive for people to get on with their projects as soon as possible. Therefore, there was a bunching of applications, and that apparently threw the Government accounts out of line for this year.

Instead of bringing forward a Supplementary Estimate to deal with that entirely predictable problem, the Government are trying to move the money into the next year's accounts. That seems funny accounting to those who are trying to understand it, and certainly the public will be puzzled by it.

However, that is not so much the problem. People who have undertaken contracts and made purchases will be left in the lurch as a result of this change by the Government, and it is on their behalf that we complain today.

Mr. Douglas

My right hon. and learned Friend will recall that one of the bull points made by the Minister of State when introducing the transitional arrangements was that they would be extremely beneficial in helping to alleviate the problems of firms which wanted to go ahead under the existing scheme. Now, by this moratorium, the Government are welshing on that promise.

Mr. Smith

I am grateful to my hon. Friend for making that point. Perhaps, like me, the Secretary of State is at a slight disadvantage in not having taken part in the proceedings on the Bill.

Mr. Tebbit

Not at all.

Mr. Smith

I was being charitable to the right hon. Gentleman. If he chooses to reject my charity, another side of my attitude towards him may develop during my remarks.

My hon. Friend raises the important point that Ministers concerned with the matter at the time gave one assurance after another that there would be generous transitional arrangements and promised that the scheme would last for a year in respect of applications in transit. One understood why that was done. Indeed, I understand that a provision to that effect appears in the commencement order. Now we have a sudden change which will mean a four-month delay. For a company which may be struggling for its very existence, regional development assistance is essential to its investment decisions. All its calculations are being thrown off balance.

Mr. Barry Henderson (Fife, North-East)

Does the right hon. and learned Gentleman not think that industry will feel that the careful consultation and consideration which has been given to these changes—[Interruption.]—and the two to three-year transitional arrangements compare favourably with the sudden ending, at a stroke, of regional employment premium by the Government of which he was a member?

Mr. Smith

If the hon. Gentleman thinks that today's sudden announcement is an example of careful consideration and consultation with companies, he has an odd view of consultation. I am not surprised that companies find that they are often not adequately represented by Conservative Members who, if a Labour Government were in office, would be telling tales of woe about companies being in terrible trouble, saying that my hon. Friends and I do not understand the realities of business, do not know how companies are run, and the rest of it.

We have in office a party which claims to speak for manufacturing industry and management, yet not one Conservative Member rose while the Secretary of State was speaking to complain on behalf of the managements of those companies and the difficulties into which they are being put by the Government. Tory Members should be ashamed of themselves for being such party political sheep that they put their prejudices—[Interruption.] We have a volunteer.

Mr. James Couchman (Gillingham)

Is the right hon. and learned Gentleman suggesting that companies would have entered into firm, binding contracts before having their applications for grant acceded to by the Department? If so, that would be curious commercial sense. If not, I understood my right hon. Friend to say that applications which had already been agreed would not be affected by the moratorium.

Mr. Smith

The Secretary of State had better have a word with the hon. Member for Gillingham (Mr. Couchman), who clearly did not understand the argument. It is applications already granted in respect of which payment will be delayed. Almost by definition, therefore, the contracts on which they depend were entered into previously.

Mr. Tebbit

So that the right hon. and learned Gentleman does not give the wrong impression—I know that he would not want to do so—let me deal with that question which arises on the moratorium. I am anxious to be careful in the words I use because I want to get it absolutely right. The moratorium will not apply to properly completed applications for grant received or postmarked before midnight tonight. Let us be clear about that.

I believe that the other reason why there was not quite so much outrage from the Government Benches as there was from the Opposition Benches was that my hon. Friends may have done their arithmetic more quickly than the right hon. and learned Gentleman and his hon. Friends and will have considered that on a £100,000 project with a rate of 15 per cent. grant, those concerned with the project would be looking for £15,000, and the 4 per cent.—assuming they were paying that sort of interest rate—that it would cost over four months would not he a catastrophic amount. If they were caught for that amount of money, perhaps they were unwise to go in for the project in the first place.

Mr. Smith

We hear harrowing tales of woe whenever there is an increase in local authority rates. We are told that sometimes a company's whole viability is at risk In fact, local authority rates have a much smaller impact. The right hon. Gentleman had better be careful lest the response that he has just made is quoted against him. In effect, he said, "There is not much to worry about in the vast majority of cases." If it is that unimportant, why go to the fuss of making the announcement that the right hon. Gentleman has made today?

The Government are caught, on the one hand, by saying that there is no change of any consequence and we should not be particularly concerned about what is being done; but, when we look at it from the point of view of companies, we find every reason for them to be deeply concerned. That shows that the Secretary of State's announcement is so serious that we must protest profoundly and vigorously not only at the change that has been made, but at the sudden manner in which it has been made, which is all too typical of the lurching way in which Government policy develops from day to day.

The Secretary-of State sought to persuade the House that what was involved in regional policy changes was not really major departure of principle, but merely a wise redistribution of resources and an exercise in value for money, trying to hone regional development policy techniques to be a more perfect way of delivering the goods. That simply will not wash when, at a stroke, £300 million has been taken out of a budget of £700 million not just this year but for every year that the policy runs. In three years or so, that will mean £1 billion being taken away that would otherwise have been available for the regions. That is a crippling attack on regional policy as a whole. It is not the first attack. There were cuts in 1979 and in 1982. Between 1974 and 1979 regional development expenditure was £6.4 billion. From 1979 to 1984 it was reduced to £4.1 billion. In other words, there has already been a reduction of £2.3 billion, or 35 per cent., compared with the amount spent by the Labour Government.

The further slashing cut of £300 million makes it clear that the Government's purpose is not to deploy resources more efficiently, but to reduce the financial commitment to regional indistrial assistance. Indeed, that was openly stated by the Minister of State in a speech in Birmingham shortly after the policy statements were made. The press release sent out by the Department tells us that regional policy savings should be "welcomed" according to the Minister of State in a stout defence of the Government's regional policy". Press officers at the Department are becoming somewhat deferential in relation to ministerial pronouncements. In that "stout defence" of Government policy the Minister went on to make a most surprising statement. He argued that the cuts were quite a good thing in public expenditure terms, but he then had some difficulty reconciling that view with any belief in regional development policy. He went on to say: What I am sure about is that lower public expenditure will help to create jobs. It is not Government spending money but Government not spending that creates jobs.

One wonders about the sanity of Ministers capable of uttering statements like that. The Minister of State is a perfectly intelligent person—[Interruption.] Perhaps I am being too generous. He is a reasonably intelligent person. His difficulty is that, like so many other folk in this country, he wants to keep his job. I dare say that he also hopes to improve his position. That is why he has to say these things. If it is not Government spending but Government not spending that creates jobs, there should have been a great leap forward in employment under a Government so dedicated to cutting public expenditure. Moreover, unemployment means higher public expenditure. If the result of Government policy is to put more people on the dole, and thus to increase public expenditure, one wonders at the logic of their statements. From the Minister's statement, that cutting £300 million from a £700 million budget will create more jobs, it follows logically that the total abolition of any regional development policy should be the greatest job creation exercise ever.

The Minister of State, Department of Trade and Industry (Mr. Norman Lamont)

Does the right hon. and learned Gentleman not think that £300 million in extra taxes also destroys jobs?

Mr. Smith

Perhaps some day the Minister will explain to me why £300 million not being spent creates jobs, but £400 million being spent destroys jobs. I find that difficult to understand when the £400 million is being used to create and finance projects which in turn create jobs and wealth. I am beginning to think that hon. Members who begin their political life as reasonably intelligent people should have the benefit of a Government health warning in their dispatch boxes to the effect, "Thatcherism damages the brain", as that is clearly what has happened to Ministers at the Department of Trade and Industry. If the Minister of State is right in his assumptions, we should be destroying regional development policy entirely.

Towards the end of the same speech in Birmingham, when his audience of business men must already have been fairly mystified, the hon. Gentleman realised that he had to justify the £400 million that was still to be spent, so he said that some areas had considerable problems and still needed assistance. He did not make it clear why the £400 million was good for those areas when taking away £300 million was good for other areas. At that point, one begins to lose sight of the logic that drives the Government on.

Mr. Tebbit

I was waiting to see whether the right hon. and learned Gentleman would either clean his spectacles or stumble across the truth along the way, but clearly I shall have to help. He seems to have forgotten that the prime justification for the regional spending policy is a social justification—[HON. MEMBERS: "Oh!"] That is what the White Paper says. [Interruption.] If hon. Members will just relax, I shall explain. Within the total of jobs in the economy, what that spending achieves is, not least, that jobs will be created in one place rather than another. The right hon. and learned Gentleman then confused that with the point that my hon. Friend the Minister of State was making in relation to the aggregate of jobs in the economy.

Mr. Smith

The Secretary of State is now having to come to grips with things and to listen to arguments that are probably not often articulated in the Cabinet. Debates of this kind can be an educative experience for Ministers, and I hope that they will learn something today.

The Secretary of State now says that regional development policy is merely a matter of shifting jobs from one area to another—the very reason for which he condemned Labour Government policy. He is now saying, "I have changed that wicked policy, but in fact that is all that one can ever do with regional development policy." That follows from his statement that regional development policy is merely social policy. He clearly does not appreciate the economic case for regional development policy—to stimulate growth in the regions and to create new industrial enterprises that would not otherwise have been created. Far from merely moving jobs from one part of the country to another, it is a matter, as much as anything, of generating new jobs.

That is the basic fallacy of the Government's approach, and it arises due to a number of forces. The first is the need to slash public expenditure, and there have been all too many victims of that. Because of the mounting bill for unemployment on the Government's back, they are forced to cut other programmes — and regional development policy has been one of the victims.

I am especially sorry for the special development areas —the areas of highest need. As Ministers well know, the highest grants went to those areas because they had the biggest problems. If we are redefining the tools of regional development policy, what sense does it make to take away the specialist operations of the special development areas? That gives the lie to the claim that there is a re-honing of the techniques involved.

Let me deal with the argument that this was justified because of the very large projects upon which a great deal of regional money was spent. We have heard endlessly about the Sullom Voe oil terminal. The money spent upon that was spent many years ago. I suppose that the Government have in mind the Moss Morran project, the grants for which were, I believe, sanctioned by the present Administration. There is a very simple answer. The Government claim credit for the support that they gave to the Moss Morran project when it suits them, but they try to run away from it when it does not suit them in the House of Commons. The Government know, as does the House, that if that is the problem, there is a very simple way of dealing with it—one declassifies some of those projects from the range of regional development assistance or makes them subject to ministerial discretion of some kind.

The Secretary of State knows that certain types of industry are unable to benefit from regional development assistance and that decisions have to be made as to which industries qualify for such assistance. One can easily move an industry from one column to another. However, that is no justification for raiding regional development funds for public expenditure reasons that the Secretary of State has advanced today.

These changes, and also the Budget changes, will be very much to the disadvantage of certain industries which are struggling to survive. Those Conservative Members who take their constituency responsibilities seriously know that many companies, some of them old-established companies, are struggling to survive. They are struggling to survive on low profits and against the heavy tide of imports. Their only hope for survival is to invest heavily in new products and processes. I should have thought that any intelligent Government would wish in particular to give as much assistance as possible to companies which are situated in high unemployment areas. I fear that the consequences of these so-called job-directed changes and of the changes made in the Budget to capital allowances will hit precisely those industries and companies. They will suffer greatly from the present and continuing decline.

As the Secretary of State revealed in his intervention, the truth is that the Government do not believe there is an economic case for regional industrial policy. The White Paper is in line with the Chancellor of the Exchequer's famous and fatuous remark, that unemployment is a social, not an economic, problem. That is at the same intellectual level as the Chancellor's other famous observation, that the trend of future employment is not so much low-tech as no tech. What an ambition for the Chancellor to have for the people of this country. The Government have deluded themselves into believing that regional development policy is a social matter which verges on charity: that they must be quite nice to those who live in disadvantaged areas and give them a handout from time to time in order to keep the social fabric in good repair. That is a departure from the policy followed by previous Conservative as well as Labour Governments.

Thatcherism does grave damage by inculcating the inability to grasp the point that unemployment is a waste of resources, both physical and human. Failure to deploy those resources in our regions will condemn us to economic and national decline. If we persist in this waste, we shall fail to create the wealth which can truly guarantee the social fabric of this country. I regret that that decline is well advanced in many regions of the country, but it has spread more widely than the areas which are traditionally defined as being in need of assistance.

The Secretary of State has today had the sauce to try to claim some credit for bringing the west midlands into the range of reginal industrial assistance. He has got hold of the wrong end of the stick. The Government should be condemned for causing such destruction to the once great industrial powerhouse of the west midlands. Since 1979 the Government have brought the west midlands to its knees — to the condition that fulfils the criteria for regional industrial assistance. However, when the Government seek to assist such regions, they give to difficult areas within areas like the west midlands—for instance, the centre of Birmingham — far too little assistance.

Miss Betty Boothroyd (West Bromwich, West)

Four hundred thousand jobs have been lost.

Mr. Smith

My hon. Friend speaks eloquently of the problem in that area. As the Secretary of State knows, it is not an area with which previous Governments had to deal as a matter of policy.

Mr. Kenneth Hind (Lancashire, West)

rose—

Mr. Smith

The hon. Gentleman can leave, if he wishes, but I am not going to give way to him.

What will be the effect of all these changes in policy? Inevitably, they will accelerate both job losses and industrial decline in the hard-pressed areas. Scotland will lose £100 million, Wales will lose £60 million and England nearly £150 million in each year of the operation of this policy. It is not as though these areas have not been suffering. Since 1979, Wales has lost 83,000 jobs, the north 100,000, the north-west 250,000, Yorkshire and Humberside 162,000 and Scotland 150,000. On top of that there has now been the chopping almost in half of regional development industrial assistance. In every area where there has been a reduction in assistance as a result of this policy, from the south-west of England to the north of Scotland, there will be added the almost direct stimulation of unemployment. For those reasons we condemn the changes that have been introduced.

May I remind the House of what the Conservative party has said. I can do no better than to quote the words of the present Prime Minister during the 1979 general election campaign. Speaking in Bolton on 1 May 1979, she said: Of course, we will continue with regional aid. We have always given special help to the regions". That was a regional development policy of much greater extent and capability than the one we are discussing today.

In case there is any doubt about the intentions of the Conservative party, on 16 April 1979, in Coventry the Prime Minister said: Labour's latest smear suggests that the next Conservative Government would cut off all state help for industry and the regions—and thus destroy jobs. This is a wicked lie … We are committed to the maintenance of a strong and effective regional policy. Hon. Members who seek to try to escape from the consequences of that quotation by referring to all the help that has been given must bear in mind that the Prime Minister said: We are committed to the maintenance of a strong and effective regional policy. The Prime Minister did not say, "We shall have to take the interests of the taxpayer into account." Anybody who describes these changes as making regional policy stronger and more effective does not understand what the policy is about.

At the heart of this matter there is a fundamental problem, namely that the Government cannot see the economic case for it. If we continue to neglect the economic case, the creation of wealth in this country will depend only upon the more prosperous areas in the south. The rest of Britain will be relegated to competing with low-wage countries for routine assembly type production. That can never be a proper policy for the whole of this country which Parliament has to represent. Parliament represents those areas which are well off as well as those areas which are not so well off.

The great opportunity to redesign our regional development policy in the context of the recession has been missed by the Government. They have perverted it into a cost-cutting exercise. No attempt has been made to integrate regional industrial assistance with other forms of social help and assistance and with the range of policies that the Government ought to be pursuing. They have made cuts there, too. In recent years local authorities have taken much more interest in the economic development of their areas. Many have been pressed to do so because this is the most important problem that faces their citizens.

There have been many imaginative developments. The enterprise boards are often able to create more jobs at a greatly reduced cost than the present Government or previous Governments have been able to create through their regional development policies. They are certainly very much cheaper than jobs created in enterprise zones. The Government are frightened to tell us how much they cost. I am not the only Member who has put down questions asking about the cost of jobs in enterprise zones. We have all received the same answer: the Government do not know. They prefer to use it as a technique of policy, but they do not know what such jobs cost, or they are frightened to say what they cost. Such a job is estimated to cost £50,000. We hear very little about the value of money in the context of the enterprise zone argument.

We have seen local authorities, many of them Labour-controlled, seeking to fill the vacuum created by the Government's withdrawal from action on and concern for economic development in their areas. There has been no new thinking and there is no new approach in this regional development policy. It is the same old story from the Government. The Government do not build for themselves; they destroy the work of others—not just the work of Labour Governments, but of Tory Governments in the past.

What is frightening is that the Government appear to be impervious to the damage that they are causing. As the economic storm clouds gather over Britain and become more serious every day, the Government plunge blindly on destroying as they go. When they are finally called to account, the missed opportunities and wanton destruction of regional development policy will, I hope, be high on the indictment.

5.50 pm
Mr. David Mudd (Falmouth and Camborne)

I hope that the right hon. and learned Member for Monkland, East (Mr. Smith) will accept that as I am not following him into the Division Lobby tonight I shall not follow the argument that leads him there, although he may find a certain identity of views on one or two aspects of the philosophy of failed regional policy. To reassure my right hon. Friend the Secretary of State and my hon. Friends, I shall not be following them into the Lobby either in support of this regional aid package.

However, I welcome two particular aspects of the policy relating to Cornwall. First, I welcome the tidying up of development areas in the extreme west of the county, even though that means a downgrading, and equally, I welcome the recognition for the first time of mining activities as qualifying for regional policy and grant aid.

Having said that, I must make the blunt point that regional aid in its original form, its modified form, its updated form, its improved form and now its new-look form has completely failed to serve the economic needs of the west country, particularly the far west of Cornwall, even at a time when parts of my constituency enjoyed special development area status.

If the present regional policy has succeeded, why do I have 2,500 men out of work in Falmouth—27.2 per cent. unemployment—1,500 registered as unemployed in Redruth, and 2,000 people registered as unemployed in Camborne, despite that being a small area that should be the industrial heartland and growth area of west Cornwall?

Falmouth, Camborne and Redruth, having failed to gain any benefit from special development area status, now find — surprise, surprise — that they have been relegated to development area status. We are entitled to ask what is the merit, value and point of that. What good will that do the unemployed in my constituency?

I must admit that I am not merely saying that it is Government regional policy, as embodied in the statement of 28 November, that is at fault. There is a shopping basket of failed Government regional policy that has impeded the regeneration of economic activity in west Cornwall.

The Department of the Environment would not allow Carrick district council to use £2.5 million of the £7 million that it had made in selling council properties to extend a new building programme that would help the elderly, the handicapped, single-parent families and young married people. That was Carrick's own money, brought about by its own judicious activities. As a result, the unemployed remain unemployed. Those who require housing have to wait still longer and a local authority is denied the ability to levy rent and rates on its own bricks and mortar. I criticise that policy and the effect it has on parts of my constituency.

It is the policy of the Department of Trade and Industry resolutely to refuse even to consider for one moment the possibility of the introduction of legislation on mineral rights. That would ease the way to the exploration and exploitation in the Cornish minerals industry in what happens to be the one growth industry in Cornwall in terms of an increased work force.

The Treasury has now come up with a wonderful scheme effectively to reduce VAT collection in west Cornwall. Nobody likes VAT. Nobody likes having to pay it. But Cornish business men and small shopkeepers will now have to wait a long time for advice or will have to make costly phone calls which in no way assists the survival of the economy of west Cornwall.

Mr. David Harris (St. Ives)

Will my hon. Friend confirm that both he and I and other hon. Members from Cornwall have written to the Minister and the Treasury on that point and that, despite our letters, we have been given no costings of the savings that the Minister claims will be made by this reorganisation?

Mr. Mudd

I gladly agree with my hon. Friend but that is a point that he will no doubt wish to pursue with Treasury Ministers rather than with the Department of Trade and Industry within the context of this debate.

The Government's policy wastes resources and effort by attracting the footloose into the far west of Cornwall —firms which may close quickly with no notice whatever in response to the faintest quiver of economic change, which may well founder as a result of new and changed technology and any changed pattern of economic activity. Those are the firms that I describe as the footlose or the bounty hunters. They have made the decision to come to Cornwall from afar. From the moment that they arrive they do not identify with the local communities and needs. Their particular interest in coming to Cornwall is purely an attempt to take advantage of such regional aid as their accountants assure them will be necessary and beneficial to them.

I have no doubt that the real way forward is to switch support to indigenous undertakings in Cornwall, including tourism; to remove the inhibitions that prevent local government from using its resources in the interests of its communities, and to look carefully and closely at one aspect of Government policy that I admit has succeeded in Cornwall—the community programme.

The community programme has genuinely introduced hope where it did not exist. It has helped to develop new skills, and above all it has created a new pride in community effort and activity. Steps should now be taken by the Government within the context of regional policy seriously to consider extending the scheme to something on the lines of a regional, county or district task force undertaking long-term projects such as the construction of houses, hospitals, roads, schools and other environmental works.

Although the community programme has succeeded, before long it will be seen as having been nothing more than a great deal of effort and generated activity. In the process of time the weeds will return to the churchyard that have now been cleared. The walls that have been restored will fall down again and our ponds and village streams will once more have the clutter of supermarket trolleys, pram bodies and mattresses. It will have been a good scheme which harnessed a great potential, but to no avail whatever.

As the Government consider what they should be doing for the regions, they should consider some way of harnessing the community programme to create long-term employment by creating community works of value to the infrastructure. In that way, even at this late stage, the Government's regional policy could, while helping the unemployed, give positive and lasting value to the industries, firms, businesses and people of our hard-pressed and neglected regions.

5.58 pm
Mr. Norman Miscampbell (Blackpool, North)

I speak on behalf of an area which has lost its assisted area status and where there is now in Blackpool 20.2 per cent. unemployment. Taking an average over the last year from January to January, that is 17.8 per cent.

I understand the Government's difficulties, but neither I nor my right hon. Friend the Member for Blackpool, South (Sir P. Blaker) can support the Government in the Lobby tonight, for the following reasons. I used, the figures for the local authority area, but the Government have based their decision on the travel-to-work area.

The controversy between us is central to Blackpool's problem. On the criterion used by the Government—the travel-to-work area — we are linked with Lytham St. Anne's and between Blackpool and Lytham St. Anne's there is very little relationship. The latter is a wealthy retirement area. Most of those who work are in businesses in the north-west of Lancashire or travel to Manchester. The unemployment rate is about 9 per cent. These facts mean that the criterion, when rigidly applied, drags Blackpool down below the level at which it will qualify for assisted status.

I am not arguing for a black spot policy. I understand that one cannot have a piecemeal approach, but Blackpool itself would pass every criterion and every test to be a travel-to-work area on its own. We have 60,000 people working in the town and 70 per cent. of them work in the area of Blackpool local authority. On that basis, Blackpool constitutes one of the largest areas in the north-west of England, far larger than many travel-to-work areas that have been granted assisted area status. My right hon. Friend the Member for Blackpool, South and I are saying that Government policy should be more flexible than it has been.

The problem does not end there. Over the past year, there has been a steady decline in our town. The figures for the future are ominous. Taking the town of Blackpool alone—the local authority area—over the past year there has been an increase of 1.8 per cent. in unemployment. The travel-to-work area has shown an increase of 1.3 per cent. Unfortunately, that rate is well ahead of the Lancashire rate, which is running at 0.7 per cent., while in the United Kingdom as a whole it is 0.6 per cent.

Among the criteria that are used, do the Government take into account the fact of rapid deterioration and the fact that the figures show an ominous future ahead of us unless changes come? It is not as if Blackpool has been slow in facing up to competition. The tourist industry is now our main industry because our small manufacturing industries have suffered over the past 20 years. The tourist trade has been faced with fierce competition from the Costa Brava and other resorts in Europe. We have done our best, and we have done well. If British industry as a whole had done as well as Blackpool's tourist industry, we would be telling a different story tonight. We have changed in part from small boarding houses to self-catering flats. There have been massive changes and improvements in our hotel accommodation. We have embarked on leisure complexes of great size, some of them the biggest in Europe. We have done all that we can and, in doing so, we were among the prime areas attracting EEC money.

One of the biggest complexes is being built in the constituency of my right hon. Friend the Member for Blackpool, South. Hon. Members will not be surprised to hear that, it being Blackpool, the area is called the Sandcastle. That rather odd name disguises a complex with £16 million of leisure facilities which will bear comparison with anything in Europe and many other places in the world. It has already attracted £1.6 million of EEC money, and we are grateful for that. However, that is only part of what we could and should be getting and what we shall lose.

For these reasons, and because of the lack of flexibility, we feel that we cannot support the Government. One thing has been said by everyone concerned, and that is that there should be a constant review of the problems that areas such as ours face. There certainly needs to be a review. I hope that it will be assiduous and careful, and in the end will help Blackpool.

6.5 pm

Mr. Bruce Milian (Glasgow, Govan)

Even before today's announcement of the moratorium, we in Scotland had plenty to complain about regarding the Government's record on regional policy over recent months. On 28 November the Minister made an announcement about the new assisted areas and the new rate of grant of 15 per cent., compared with the 22 per cent. enjoyed in special development areas and 20 per cent. in ordinary development areas. When the new rules were introduced under the Co-operative Development Agency and Industrial Development Act 1984, there was an explosion of anger in Scotland at the loss of assistance to Scottish industry amounting to about £100 million a year out of the £300 million that the Government wanted to save. The announcement of a moratorium is simply twisting the dagger in Scotland's wound.

I have made speeches before about the new system of development assistance, and the move away from automatic grants to greater reliance on selective grants and dealing with matters on a project basis rather than on a straight capital expenditure basis. Tonight I do not have time to repeat the criticisms that I have made on a number of occasions, both in the House and in the Scottish Grand Committee. The new policy is fundamentally misconceived. The purpose of the policy is to save money, but it will also cause more bureaucracy and argument between Government officials and the individuals applying for project assistance. Once the new scheme is properly in operation, and industrialists who enjoy the benefits of the existing scheme see the implications of the new scheme—particularly the exclusion from the new scheme of modernisation and replacement projects—there will be another explosion in Scotland among many companies and individuals who are traditional supporters of the Conservative party and Government.

We have made these points on many occasions, and my right hon. and learned Friend the Member for Monklands, East (Mr. Smith), in his excellent speech, has developed the case for regional policy as a whole. We base our case not simply on social grounds, but on economic grounds, and my ri