§ 4.5 p.m.
§ The Chancellor of the Duchy of Lancaster (Lord Cockfield)
My Lords, with permission, I will repeat a Statement made in another place by my right honourable friend the Secretary of State for Trade and Industry. The Statement is as follows:
"With permission, Mr. Speaker, I should like to make a Statement on the Government's review of regional economic policy.
"I have today laid before the House a White Paper entitled Regional Industrial Development, and my department will publish shortly a factual background paper on the effectiveness of regional policy and other regional issues.
"The Government remain firmly committed to an effective regional policy.
"Although the economic case for regional industrial policy today is not clear-cut, and the economic costs of such policies must be set against the benefits, there remains a social case for regional industrial policy to reduce regional imbalances in employment opportunities.
"The Government believe that there is scope to increase the effectiveness of regional policy and to achieve better value for money in the regions with less adverse effects on the economy as a whole.
"The White Paper sets out a new structure for regional industrial incentives involving major changes to the regional development grants scheme.
"At present regional development grants over-concentrate on capital intensive projects and on manufacturing industries. In future we propose regional development grants should be aimed more precisely at job creation.
"The new regional development grant scheme will be widened in scope to cover parts of the service sector in addition to manufacturing. However, regional development grants will in future be 119 payable only towards projects which provide or modernise capacity, and simple replacement investment will not qualify for regional development grant.
"Grant will be payable as a proportion of capital expenditure, or as an amount for each new job created by a project, whichever is the more advantageous to the investor; but where grant is paid in respect of capital expenditure, it will be limited by a cost per job ceiling.
"For the sake of simplicity small firms will be exempt from this limit.
"These changes shift the payment of automatic grant assistance to projects which create jobs.
"In addition, the importance of selective assistance relative to regional development grants will be increased; and re-location projects which offer no net increase in jobs will not normally be eligible for regional selective assistance.
"Industry attaches great importance to the automatic and predictable nature of the regional development grant scheme. Therefore, grant will continue to be paid at standard rates and by reference to published criteria.
"To avoid disruption or uncertainty arising from these changes there will be a twelve-month transition period from the introduction of the scheme before they take full effect. For projects which have already been offered selective assistance, regional development grant will continue to be paid under the old rules, not the new.
"The old rules, not the new, will apply for projects for which application has already been made, or is made before 31st January 1984, provided an offer is made before changes to the legislation are brought into effect. The regional investment role of the British Technology Group—which does not relate to its primary task of encouraging the transfer of technology—will be discontinued.
"The White Paper invites views on a number of issues: in respect of grant, which activities should qualify for regional development grant, what the rates of grant should be, and what the balance should be between automatic and selective assistance. On the assisted area map, views are invited on both the criteria for designation and on map coverage.
"The Government also welcome views on whether special measures should be taken in the assisted areas to encourage innovation and new-firm formation. I would welcome written submissions, before the end of May 1984, in order that they may be considered before decisions are reached.
"Consultation has its price. A number of important decisions about regional policy will remain to be taken until after the consultation period. In particular, it is not possible now to announce the future geographical coverage of regional assistance or the amount of future regional expenditure.
"So far as coverage is concerned, the new map when it is published will be based upon more up-to-date data concerning travel-to-work areas now 120 becoming available from the 1981 census returns. The Government will introduce legislation as soon as possible to provide for the new scheme of regional development grants outlined in the White Paper. Once the consultation process is complete and the remaining decisions taken, the Government propose to lay the necessary orders, implementing all the changes simultaneously in Autumn 1984.
"In short, the new policy will ease the present unjustified bias against service industries; it will end the unjustified payment of expensive aid to projects which create few jobs in the assisted areas; it will minimise mere job shifting at taxpayers' expense; and it will concentrate on better value for money in job creation in the areas of greatest need.
"I am confident that the new framework will provide a firm basis for a more cost-effective regional industrial policy, benefiting the assisted areas more effectively with less adverse effects elsewhere".
My Lords, that completes the Statement.
§ 4.14 p.m.
§ Lord Stoddart of Swindon
my Lords, the House will be grateful to the noble Lord the Minister for repeating this very important Statement. Is it not the fact that the background against which this White Paper must be set is the economic problem that we have faced since 1979? Unemployment has more than doubled, more than 40,000 firms have gone into liquidation in England and Wales alone, and the equivalent of about one-fifth of our manufacturing industry has completely disappeared. A number of our regions have been very badly hit over the last few years. One of them, the West Midlands, in particular, formerly one of the most prosperous areas in Britain, has been appallingly badly hit.
In fact, industry there has been decimated. Indeed, it might be said that the Government's tepid attitude to a regional policy results from the fact that their policies have brought major unemployment problems to every region—not just to one but to every region in the country—including the southern region where the unemployment rate has more than doubled over the last four and a half years.
Can the Minister let us have assurances that the Government do not intend to reduce the current levels of regional aid expenditure; that is, of the total expenditure? They are hardly adequate at the present time. Given the present state of the economy, anything less would be a serious blow to our already hard hit industry. Clearly we are not opposed to the White Paper's aim to get better value for money spent; but we do not want less money spent and, indeed, to relate regional aid to job creation. But, without any indication of resources, we are really faced by a kind of "Hamlet without the prince".
The factual background paper promised in the Statement would have assisted us today in assessing the policy changes foreshadowed in the White Paper. What role do the Government envisage for local government enterprise boards and local government generally in job creation? May I ask the Minister, finally, to give us an assurance that the consultation promised in the Statement will be real consultation, 121 that the Government have not taken final decisions and that when they get the views of local government and other organisations they will take these views very seriously into account before announcing their final decision?
§ Lord Ezra
My Lords, we welcome from these Benches this review of regional economic policy. We also welcome the publication of the White Paper, look forward to studying it, and appreciate the time given for consultation. We also welcome the greater emphasis being put on job creation and the extension of such aids as may be available to the service sector as well as to the manufacturing sector. I should like to put to the noble Lord the Minister a question for elucidation. First of all, he mentioned that regional development grants will in future be payable only towards projects which provide for modernised capacity and that simple replacement investment will not qualify. We feel that this could be a very subjective judgment as to what is replacement and what is new investment. We consider that if there is a good replacement project which will maintain, or possibly even improve, employment prospects in a given area, this also should rate for grant.
Secondly, we agree entirely with the view expressed by industry that the procedures in future should be predictable so that industry can plan ahead. We would like an assurance that, quite apart from the transitional areas to which the noble Lord referred, the final outcome of these deliberations will be that there will be a very clearly determined set of criteria upon which business and industry can judge their future investment plans. Thirdly, we should like to draw attention to the particular problem of the rural areas. We feel that certain rural areas which might be remote from the designated areas suffer particularly from unemployment. We feel that special regard should be paid to the problem of those areas; and we should like some assurance on that point.
Fourthly, there is the question of additionality as applied to the social grants from the European Community. This is a subject which has been raised in debate in this House before and my noble friend, Lord Banks, raised it in a debate on 30th June 1982. In view of the great importance of assisting these difficult areas, we feel that a reappraisal of the policy towards additionality should be stated. We consider that, in addition to what the Government may be prepared to make available from British resources, anything that can be obtained from the Community should be additional. We put that proposal to the Minister.
Finally, I should like to associate myself with the point raised by the noble Lord, Lord Stoddart, in saying that, although at this stage the Government clearly cannot indicate what the total amount of regional grant may be after the deliberations and consultations proposed, nevertheless we should like to have an assurance that, whatever may be the outcome, the amounts available will not be less than they are at present.
§ 4.20 p.m.
§ Lord Cockfield
My Lords, I am grateful to both the noble Lord, Lord Stoddart, and the noble Lord, Lord Ezra, for their general welcome to the Statement and 122 the publication of the White Paper. I do not think it is appropriate at this stage to debate with the noble Lord, Lord Stoddart, the general question of the Government's economic policy. The simple truth of the matter is that the world as a whole has been very seriously affected by the recession and in addition the roots of our present economic difficulties go back a very long way. Those of your Lordships who have been privileged to listen to the speeches of the noble Lord, Lord Kaldor, will fully appreciate how very far back our difficulties in fact do go.
One of the reasons why a review of regional policy is essential is the nature of the very big changes which have taken place in this country, not only in recent years but over a considerable period of time. The object of the White Paper is to set down the Government's views on this and to invite consultation. Perhaps I might give both the noble Lord, Lord Stoddart, and the noble Lord, Lord Ezra, a clear assurance that the process of consultation is a very genuine one and the fact that the new assisted areas map cannot be produced until the autumn of next year means that the period available for consultation and for consideration of the representations that are made is longer than normally might be the case. This will contribute to a very clear and thorough examination of all these problems.
So far as the level of expenditure is concerned, the position was made quite clear by my right honourable friend—and I just quote these words because they were in the original Statement:It is not possible now to announce the future geographical coverage of regional assistance or the amount of future regional expenditure".I must stand by that statement. The reason in fact is perfectly simple. The object of the White Paper is to set up a new structure for regional assistance. What we want to do at this stage is to get that structure right and to ensure that better value for money is obtained. The actual level of expenditure is one of those issues which are decided year by year in the public expenditure survey.
The noble Lord, Lord Stoddart, also referred to areas of particular economic difficulty and, as an example, he mentioned the West Midlands. He will find this particular issue discussed in detail in paragraph 40 et seq. of the White paper. And, among others, there are two issues which are specifically set down as matters for consultation. One of them concerns the criteria to be adopted in deciding the areas, and the other one is the actual decision on what areas should be included in what categories. So there will be full consultation on these matters and the particular issue of the West Midlands is specifically touched upon in the White Paper in that connection.
The noble Lord also raised the question of local government's job in the role of job creation. That again is a matter that I do not want to follow too far because regrettably the position is that in some areas the excessive increase in rates has led to job destruction and not to job creation. But obviously any help that genuinely results in a better level of job creation is something to be welcomed. We have collaborated with various local bodies, and particularly bodies which are representative of various private sector industries, to try to improve matters in particular areas.
123 The noble Lord, Lord Ezra, raised the question of simple replacement expenditure not qualifying for grant. I agree with him that the definition of exactly what simple replacement expenditure is does raise considerable problems. In fact, the European Community rules require us not to pay grants on simple replacement expenditure. But the question of the definitions to be applied is a matter that can be covered by the consultations. I entirely agree with him—and this has been set down very clearly in the Statement—that so far as regional development grant itself is concerned the criteria need to be set out very clearly, because it is one of our objectives to ensure that industrialists will know in advance exactly where they stand. Selective assistance is rather a different matter because that has to be decided by reference to the facts of the individual case.
The noble Lord also raised the question of rural areas. That, of course, is also tied up with the assisted areas map and at this stage I do not think I can do more than say I note the point he has made. He also raised the, frankly, very difficult issue of additionality. The Government's policy on this has been explained on many occasions. The receipt of grants of this sort from the European Community, which are very much welcomed of course, is one of the factors taken into account in determining the level of Government expenditure. Therefore, the grants are reflected in what expenditure the Government think can be devoted to particular objectives. But there is no question, once the level of expenditure has been set, of their simply adding a grant from the European Community, because that would be covering the same point twice.
Finally, may I say this. The White Paper will, of course, be available in the Printed Paper Office. It covers the issues raised in very considerable detail and we welcome any views that may be expressed on it either by your Lordships or by a wider public outside this House.
§ Lord Glenkinglas
My Lords, will my noble friend agree with me that a Statement which is as important and complicated as the one he has made, and which some of us have not had the privilege of reading beforehand, is difficult to understand at one go? May I ask him whether he is certain that supporting the service industries (which is something with which I very much agree) will not to some extent conflict with the problem of getting enough jobs in many of these areas on the map? Is not one of the problems the fact that one does not want to back failure? On the other hand, the service industries, which have been the great success of the last ten years, have employed mainly women.
§ Lord Cockfield
My Lords, I note the points made by my noble friend. I agree with him that it is very difficult to absorb a Statement of this complexity in the few minutes which are available while it is being made. The important thing is the publication of the White Paper, which people will be able to study at leisure.
So far as the service industries are concerned, there has been a widespread feeling that the present system 124 is biased against them, and it is that kind of bias that we wish to correct. I would not want to enter into a discussion at this particular point about the merits of providing job opportunities for men as opposed to providing them for women. If I embarked on that matter I am sure that I should get into difficulties with various Members in your Lordships' House. May I make just this one comment: all job creation, of course, is a good thing, and to the extent that we can help the service industries that must be a net gain.
§ Lord Ross of Marnock
My Lords, will the Minister tell us exactly what effect this will have on the likes of the Scottish Development Agency and the Welsh Development Agency? Will he tell us—he was asked, and he did not give a reply—what effect this will have on the enterprise zones, and whom he will consult in relation to the redrawing geographically of the assisted areas map? I do not know how long he has been at this subject, but I have lived with it since 1946, and every time we have had a depression the areas that have been hardest hit have always been those that were needing assistance in the first place. They come out of a recession even worse than any other place. So I should like to know whom he will consult about this.
Also, does this mean that Section 7 of the Industry Act and Section 8—Section 7 is selective assistance, and Section 8 is more automatic assistance—are both to be scrapped?—because as I see it, one of the important things for anyone trying to attract industry is that industrialists will know what they will get and that a package can be prepared, be it by the local authority or the SDA. But we just do not know. It is like buying a pig in a poke. We do not even know the size of the poke until we find out which areas are to be assisted. It will not be as simple as it has been, and simplicity is required here.
Lastly, can the Minister tell me whether there has been consultation to ensure that this does not conflict with EEC policy? He will remember that the most important aspect of regional policy for a long time, directly related to jobs, was the regional employment premium, and that had to be scrapped because of the EEC.
§ Lord Cockfield
My Lords, the whole purpose of publishing the White Paper, in which these proposals are set out in some detail, is to enable consultation to take place on the widest possible basis. Nobody is precluded from making his views known, and, in fact, there is a general invitation in the White Paper to all people interested to write to the Secretary of State expressing their views. So it is a very wide-ranging consultation. It is perfectly clear from the Statement that the regional grants and the selective grants will both be continued. The important question will be the precise rules which will apply to each, and these, again, are matters for consultation. As to the precise impact of this on the Scottish Development Agency and the Welsh Development Agency, I am frankly not in a position to answer that question immediately, but I will write to the noble Lord and deal with it.
§ Lord Cockfield
My Lords, the enterprise zones are, of course, an entirely separate project with rules of their own. They are beginning to show important advantages. It is impossible yet to measure the degree of success, but we hope there will be an important degree of success emerging from them.
§ Lord Taylor of Gryfe
My Lords, I very much look forward to this clear definition of what is modernisation and what is replacement of plant. This will certainly be carefully examined by all industrialists who try to get some assistance from the new regional fund. May I ask the Minister whether it is the intention, in calculating job creation, to calculate simply the actual investment? Is he aware that some very large investments are in themselves very expensive in terms of support? Nevertheless, they create jobs for three to five years in the construction industry by the building of these factories. I have one in mind by Hoffman La Roche in Ayrshire. Also, local suppliers have benefited very considerably from this particular investment, although it is not a direct result of the investment.
Will the Minister assure us that in securing inward investment, which is critical to the bringing in of new advanced industries, the new regional policies will not in any sense prejudice or jeopardise the prospects of inward investment, compared with many of our competitors who are looking for this kind of support? Finally—this is a point made by the noble Lord, Lord Ross of Marnock—shall we have to harmonise this policy with EEC policy, or is there any possible conflict in our new-look regional policy and the conventions governing the EEC at the moment?
§ Lord Cockfield
My Lords, I note what the noble Lord says about the difficulty of distinguishing between modernisation and replacement and this is one of the areas which will require a very great deal of consideration. I note also what he says about the indirect benefits that flow from schemes involving substantial capital investment. But of course he will be aware, just as I am, of cases which have attracted great criticism because substantial amounts of grant have gone to projects which have involved very high expenditure but virtually no job creation at all. Therefore, the precise criteria are a matter which need the most careful consideration.
On the question of inward investment, our aim is to secure a proper balance between inward investment and domestic investment. Inward investment will qualify in exactly the same way as domestic investment for the regional development grants. It will also be considered in the same way as domestic investment for selective assistance. It is quite wrong to try to introduce a bias either in favour of inward investment against domestic investment, or in favour of domestic investment against inward investment. Both of them create jobs and both of them, therefore, are welcome on that account. On the question of harmonising with EEC policy, I entirely agree that this is an important point. We have had it very much in mind and some of the changes that we are proposing are, in fact, to ensure that we keep in line with EEC requirements.
§ Lord Renton
My Lords, can my noble friend say to what extent it will be possible for regional development grants to be used for the restoration of derelict land, urban or rural? This is something which can sometimes be done when other purposes of development grants are being fulfilled and can therefore be taken in their stride.
§ Lord Cockfield
My Lords, I can only say to my noble friend that I shall be happy to have that point looked into and I will write to him.
§ Lord Northfield
My Lords, the noble Lord said—and I strongly agree with him—that consultation has its price. The price is delay now in concrete changes to the system of regional assistance. So will it not be something like a year before there are any real changes to announce? If I am right about that, I wonder whether the noble Lord would care to comment on, and at least convey to his right honourable friend, the problems of this interim period.
If we take the areas just outside the present assisted areas—the ones that very often have higher unemployment levels than inside the assisted areas—these are the ones that need some flexibility in this interim period if they are not to suffer even worse and if they are to receive some help. In particular, would he care to comment on whether in this interim period the discretionary grants under Section 8 of the Industry Act will be more flexibly administered to take care of these areas outside the assisted areas that are suffering?
Secondly, could the sort of arm-twisting—if I may put it in that way without offence—that goes on to direct incoming industry from abroad into the assisted areas be slightly slowed down if some of these suffering areas have some chance of getting it? At the moment, if a non-assisted area gets a foreign investment in prospect, the noble Lord's department or the Department of Trade and Industry does its best to persuade that investment to go to the assisted areas instead, and very often that really is quite wrong in view of the high unemployment level in these areas. Thirdly, could we not submit changes in the map to the EEC, so that we show that areas wider than the assisted areas are suffering and should not be caught by the present £5 million limit on projects for which grants can be given within the EEC rules? If we submitted a different map, it would be possible for the EEC to let through without comment some of the projects into non-assisted areas which deperately need them.
§ Lord Belstead
My Lords, may I suggest that after my noble friend replies to the noble Lord, Lord Northfield, perhaps the House would wish to pass on to next business.
§ Lord Cledwyn of Penrhos
My Lords, I am obliged to the noble Lord, Lord Belstead, for what he has just said but this is a Statement of the utmost importance. It is one that affects virtually everyone in the country, and no opportunity has yet arisen for a question to be asked about Wales. I most earnestly beseech the noble Lord to relax on that point at least.
§ Lord Belstead
My Lords, I am in the hands of the House, but the Companion is quite clear that, when we have Statements, it is not desirable to hold up the business of the House for longer than necessary. On the other hand, of course, Wales always has preponderance in these matters and I feel sure that my noble friend will wish to answer one question about Wales, because I know that the noble Lord, Lord Prys-Davies, wants to get in. I believe that the House would then wish to pass on to next business.
§ Lord Diamond
My Lords, is it not the case that the importance of the way in which we run our affairs—which is much to be respected—is that the senior representative on the Government Front Bench has to interpret the wishes of the House because, of course, the business is in the hands of your Lordships and not in the hands of the Government?
On an important Statement such as this when—although I may be quite wrong—there seems to be no evidence that there are people on this side of the House who are anxious to return to the previous business but who, on the other hand, are very anxious to deal with a most important and very long Statement, would it not be open to the noble Lord, Lord Belstead, to reconsider his interpretation of the wishes of the House?
§ Lord Belstead
My Lords, at the risk of wearying the House, I have made it quite clear that the Government—and that means myself on behalf of the Government—are in the hands of the House. I have also reminded your Lordships that the Companion to Standing Orders is explicit on this matter. I feel sure that, after we have taken the question on Wales which I feel sure the House would wish to take, then will be the moment to go on to next business.
§ 4.42 p.m.
§ Lord Cockfield
My Lords, I wonder whether I may make a general comment which I hope will be helpful. We have published a White Paper dealing with the matters in some detail, and that is because we realise that it is quite impossible to deal adequately with all the points which are likely to be raised in the compass of a Statement. The White Paper itself specifically invites comments and is open to consultation on a large number of very important matters—some of which are quite specifically set out.
In other words, the White Paper is not trying to gloss over those important issues. In many instances, it does in fact set them out in the form of questions; we feel it is important that we should know people's reactions and how they feel about those questions. It is quite genuinely an exercise in what might be described as government by consultation.
§ Lord Diamond
My Lords, the Statement has already made it clear that there will be no alteration in the attitude which the noble Lord, on behalf of the Government, has already taken up in giving no 128 indication whatever of whether this is an attempt to save the Treasury money or whether it is an attempt to improve regional grant procedure. He has given no indication of the level of grant. Therefore, we are unable to come to any conclusion by considering the Statement further, and we need to press the Government at Question Time or on this occasion.
§ Lord Cockfield
My Lords, I hope that the noble Lord, Lord Diamond, will forgive me if I say that the most important point is to go through the White Paper itself, where many of the issues are specifically spelt out. In fact, the issue of the level of grant is one specifically set down in the White Paper as a question of consultation.
The noble Lord, Lord Diamond, has immense experience in these matters and he will realise that consideration of policy of this sort does tend quite genuinely to fall into two areas. There is, first, the shape of the policy—that is, the framework into which the policy falls. Secondly, there is the amount of money which one puts into that framework. Those are both immensely important questions. and I am not in any way trying to avoid the issue. The long-standing practice has been that one deals with the framework in a document of this sort—which is what we are trying to do—and then the question of the expenditure which is incurred in a particular year is dealt with as part of the Government's annual public expenditure survey, the detailed results of which are published each year at approximately the time of the Budget. That explains the Statement made by my right honourable friend the Secretary of State on the question of cost.
In making the general comments that I did, I was genuinely trying to be helpful in spelling out the extent to which we have set out the proposals in considerable detail in the White Paper itself. As the Statement indicates, there will be a further background paper, which will also be published. Most of the specific questions raised by the noble Lord, Lord Northfield, really related to the assisted areas map. There is a very real problem there. There have been big changes in the travel-to-work areas, and they are one of the major determinants of the map itself.
The Department of Employment is currently working on the results thrown up by the 1981 census, so that we can draw up a new map on the basis of known, factual information. I believe it would be wrong—let alone impossible—to make changes in the map ad interim. Frankly, I do not consider that the period of time between now and next Autumn, when we think that the proposals will be brought clearly into their specific form, is an undue length of time to wait.
§ Lord Prys-Davies
My Lords, ever since the 1920s the case for regional investment in an area such as South Wales has always rested on an admixture of economic and social reasons. Indeed, the steel plant was located in Ebbw Vale in the 1930s primarily for social reasons. But South Wales is today faced with the very difficult task of rebuilding its economic foundations. Therefore, we shall be grateful if the noble Lord the Minister will assure the House that the new criteria will pay proper regard to social considerations as well as economic considerations; and, secondly, that the Government accept that they have a continuing 129 responsibility for the old ninteenth century growth areas wherever they may be in this country. Those communities cannot themselves alone rebuild the basis of their life.
Although I agree very much with the need to harmonise our regional policies with those of the EEC, because it is often the case that their problem is our problem, will the review also consider to what extent we are effectively integrating in the regions the EEC policies, the United Kingdom policies, and the local authority policies? Finally, when the noble Lord the Minister considers how the review will influence areas such as Wales and Scotland, and the Welsh Development Agency, and when he writes to my noble friend, will he also be good enough to send a copy of his letter to me?
§ Lord Cockfield
My Lords, I am grateful to the noble Lord for his comments. I believe it is accepted that regional policy has in general been very successful in Wales. We have made it absolutely clear that the social considerations are extremely important. In fact, the view could be taken that the social considerations may in some instances be more important than the economic ones; considerable doubts have been raised from time to time on the effectiveness of regional policy in economic terms, but it certainly has a most important social role to play.
The Government are fully committed to the maintenance of an effective regional policy. That comes out very clearly in the Statement that I repeated, made by my right honourable friend the Secretary of State. The precise impact of the policy on Wales depends, first, on the assisted areas map—I am sorry to continually come back to this, but it is the crucial element in the whole of this. That is one of the reasons why in paragraphs 40 to 45 of the White Paper we have specifically set down that there are two crucial issues which need to be answered. The first is what criteria are to be applied, and the second, what is the effect of applying those criteria on individual areas. This is clearly of first line importance in the case of Wales. I am grateful, therefore, for the contribution the noble Lord has made. We will, of course, keep a very firm eye on EC policies in this as indeed in other areas.