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24 Feb 2003 : Column 59—continued
The Deputy Speaker (Sir Michael Lord): I appreciate that the Bill is about the financing of businesses, but I do not want the debate to develop into a general debate on the economy as a whole.
Mr. Bellingham: I apologise, Mr. Deputy Speaker—but, with respect, I thought that it was important to set the Bill in its wider economic context.
The Opposition feel strongly that, if the Government are to listen to business—as they say that they will—they will have to consider the burdens on business. They will have to reconsider their work-life balance agenda. They
will have to consider carefully the agency workers directive and the equal treatment at work directive. Above all, the Government should start to listen to business. It is time to stop the avalanche of burdens. It is time for the Government to take business seriously.5.44 pm
Mr. Kelvin Hopkins (Luton, North): I wish to express my very strong support for my hon. Friend the Minister and his Bill, and I urge all hon. Members to vote for it later this evening.
I speak because I have some knowledge of these matters from my previous employment. In the 1970s, I worked in the TUC's economic department and was responsible for regional policy. During that time, I undertook some modest research to show the effect of regional policy over economic cycles, and with and without regional selective assistance, and I concluded that it had a very beneficial effect, particularly in reducing regional inequalities. Although we are talking about selective assistance to certain firms, perhaps helping them through difficult times, such policies have a very beneficial macroeconomic effect. However, they are no substitute for developing a growing economy and reducing unemployment.
It is rather surprising that that measure of intervention has survived through some decades of attachment to the neo-liberal dogma—I do not share it myself—that the free market is all and Government intervention is to be eschewed. I very strongly support such measures and am glad that they have survived; and they have done so for historical reasons. Even as far back as Sir Edward Heath's Government in the early 1970s, there were attempts to promote the rigorous free market agenda. Most hon. Members are probably too young to remember Selsdon man, but I remember Selsdon man very well in the form of Sir Nicholas Ridley, Sir John Eden and various others.
That Conservative Government panicked when there was great resistance to those policies and reverted to an interventionist approach, which was a very wise thing to do. Indeed, Sir Edward Heath was negotiating Britain's membership of the European Union and it was known that, if we wanted to get into the EU, we would need some regional policy measures as a counterbalance to the very unfair burden of the common agricultural policy, which would have had no benefit whatever to Britain. Even with a regional policy approach and with the later structural funds, we still had to negotiate a rebate, and I am glad that we still have it in place today.
In 1979, Mrs. Thatcher's Government had a very rigorous approach to the economy, which led to unemployment rising to 3 million in two years. No doubt, many people thought that a splendid idea—a bit of rigour and the cold draught of competition. I thought it disastrous, and eventually even Mrs. Thatcher thought it slightly worrying, because her Government introduced the 1982 legislation to which reference has already been made.
I remember that time extremely well, and Labour had an enormous public opinion lead shortly before the Falklands war, which rather changed the balance of public support. Nevertheless, there was a reaction to the initial period of rigorous free market policies, part of which involved the 1982 legislation. So we carried on with that approach for a long period.
We cannot solve the macroeconomic problems of low growth and investment and high unemployment simply by such selective measures, but they are still absolutely vital to underpin development in the regions, especially those that are more vulnerable—unlike the south-east—where older industries have declined and we have needed to help small companies to sustain employment. That has been very successful, and I very much welcome the fact that the Government have chosen to increase the amount of money that will be available. It is possible that we are running into some serious economic difficulties now, which are not necessarily of our making, and the world economy will be in difficulty, especially if there is a war. In such times, the Government will need to keep as much of a measure of intervention as they can to assist our industries to survive through difficult times to emerge on the other side, when we can all breathe again in a growing economy.
At the end of the last period of serious economic decline, between 1990 and 1992—the disastrous period of the exchange rate mechanism, the failure of which I predicted and wrote about before it started—unemployment had risen to enormous levels. Everyone who supported that policy said that depreciation and getting out of the ERM would cause massive inflation, would not bring down unemployment and would be economically disastrous. In fact, what happened was that there was a substantial depreciation straight after the ERM collapse, unemployment started to fall, and the inflationary surge did not happen until considerably later.
I hope that we will keep such measures as part of the Government's armoury for running the economy for the foreseeable future and that we will raise the amounts available to appropriate levels as time goes on. I would like more vigorous intervention in the economy to assist our manufacturing sector in particular. Without doubt, the manufacturing sector is currently suffering, to which Opposition Members have drawn attention. A major factor in that is the overvaluation of the pound, which cannot be solved by these measures. The pound has depreciated somewhat in recent weeks and months, and that is very welcome, but there is still a competitive disadvantage for Britain in the manufacturing sector. The balance of trade deficit is evidence of that. We must consider macroeconomic measures as well as supply side measures to solve our economic problems, and particularly to bring manufacturing back to the strength that we should expect.
We still have major economic problems to solve, our investment levels are still too low, and measures in which the Government get involved directly in the economy to promote investment are precisely what we want. I am very happy to support the Bill and I look forward to voting for it later this evening.
5.53 pm
Dr. Vincent Cable (Twickenham): The Minister introduced the Bill with his usual flair and clarity, but I am not persuaded. I share many of the concerns of the Conservative spokesman, both in respect of the necessity of this legislation and in relation to the issue of parliamentary accountability.
First, we are talking about very large sums of money, as the intervention by the hon. Member for Sevenoaks (Mr. Fallon) made clear. We are progressing at one step from a commitment to £2.7 billion, which is the current total, to £6.1 billion. An increased commitment of £3.4 billion is very substantial, even if, as the Government say, it is spread over a 20-year time horizon. Is it really necessary? In 2001–02, which is the last year on which we have any kind of report on section 8, there was spending of £113 million. At that level of expenditure, it would take 30 years to use up the proposed sum. In addition, many of the schemes that have absorbed substantial amounts in the past—for shipbuilding and coal—have been brought to an end. That raises the question of what this funding is for.
Clearly, there are occasional useful and necessary purposes, of which Atlantic Telecom, as the hon. Member for Angus (Mr. Weir) reminded us, was a very good example. As I recall, however, that intervention was very small—it involved only £500,000. Concerns exist about the enormous imbalance between very small, very useful activities and the enormous sums of money for which provision has been made. To my mind, the two do not gel, unless there is a clear statement about how accountability will be provided for the big jumps that will no doubt take place.
A great danger exists that if there is a giant slush fund of this kind—essentially, that is what we are talking about—means will be found of spending it. If we look at some of the recent initiatives to spend section 8 money, we find that that raises some awkward questions about what the Government are trying to do. The biggest, latest initiative is the urban reinvention programme in the Post Office. That has nothing to do with industry or innovation—we have debated the Post Office frequently on the Floor of the House. Of course, some of us welcome some elements of the reinvention programme—there is a necessary consolidation—but it essentially provides emergency funding for redundancy money for a lot of postmasters who have been forced to close down as a result of the automated credit transfer programme. It has nothing whatever to do with industrial restructuring. I suspect that schemes of that kind, which are far removed from the original purposes of the Bill, may be wheeled in to use up the funding that is provided.
I would feel more reassured if there were a little more evidence and more of an attempt to explain to us how productive the funding was. I am prepared to believe that all these schemes for small business are brilliant and enormously useful, but we have no evidence to show whether they are. The only document that I have found—I may be missing something—is the annual report, the latest of which ends in March 2002. Those reports largely provide a description of what is being spent and are not presented on any kind of comparable basis. There is no explanation of the costs and benefits of the different schemes or of the cost-effectiveness from the taxpayer's point of view. Those are legitimate questions that we need to put.
Let us take the most important of these schemes—the small firm loan guarantee scheme. The Conservative spokesman gave that a rousing endorsement, and he may be right. I am sure that many small businesses find it very useful. There are certain questions, however, that I would ask. How many of the companies that have been
helped under the scheme are still in business? How many have expanded their business? How does their performance compare with companies in the same sector and the same region that have not had the benefit of that assistance? Those are the kinds of questions to ask to judge whether the scheme has been a success. It may be a brilliant success, but no attempt whatever is being made to justify it, explain it or give its history.Similarly, many of us would want to know how much of every £1 that is allocated to this and other small business schemes actually reaches the small business. Many of the costs are absorbed in overheads, and we need an evaluation of that simply to provide accountability.
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