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24 Feb 2003 : Column 63—continued
Mr. Lansley: Of course, the fact that evaluations are not presented in the annual report does not mean that they do not occur. I have no recollection of recent evaluations but I know that they occurred in the later part of the 1980s. It is important to get the evaluation into the public domain, however, as a scheme in which everybody succeeds is probably not necessary because the loans were probably going to be successful in any case, and the additional benefit of the guarantee is probably limited. A scheme in which too many fail, however, is probably equally misjudged. Somewhere in the Department of Trade and Industry, there will probably be a target for the proportion of guarantees to such loans that fail. The point is that it is not in the public domain or in the annual report.
Dr. Cable: I am sure that the hon. Gentleman is right. It ought to be in the public domain, and there are different mechanisms for ensuring that. The Trade and Industry Committee, on which he sits, may be one forum in which these programmes can be analysed properly, and the National Audit Office is another. However it is done, it should be done. I remember seeing some of the evaluations of the wool textile assistance schemes, going back to the 1970s, which were very sophisticated economic evaluations justifying the substantial amount of public money put into the industry. We have nothing comparable in this case; if it does exist, it is bottled up in the DTI, as the hon. Gentleman points out, and we are not privy to it, which is clearly wrong.
My next point is on the same theme. A lot of the funding has gone into what one might call adjustment assistance schemes for redundant steel workers and coal miners and for Rover. In principle, that is admirable. It is surely right to provide funding to help workers to adjust to other activities and to assist the process of change, rather than simply to provide open-ended subsidies. If agriculture had been helped in the same way as industry, many of the problems with the CAP would no longer be with us. However, I have questions about accountability and about where the money went, and I have no idea what the answers will be.
I notice, for example, that one of the big schemes provided for under section 8 was the £129 million programme of adjustment assistance for Rover. That was one of the big schemes launched by the former Secretary of State for Trade and Industry at a time of crisis for the company. As far as I can tell from the last
annual report, in 2001–02 only £1 million of that £129 million was spent. What happened to the other £128 million? Was it not spent? Could not the company find a use for it? Perhaps I have missed it somewhere. Can we have an explanation of what happened to the Rover package?Similarly, in the coal industry, about £76 million was spent up to the last financial year for which accounts are available, and then another £62 million was made available, so the industry has received about £138 million of special help. I do not want to criticise that. I am sure that after the battering that the industry has had, help with adjustment must be welcome. However, I question how much of that money has gone to the coal miners to help them to adjust and how much has simply provided an open-ended subsidy to UK Coal, which subsequently closed those mines. We need an economic evaluation of where that money has gone and what value the community has got from it.
Mr. Bellingham: I think that I can provide the hon. Gentleman with an answer. When the Government announced that £129 million, it was provided as regional selective assistance, under section 7. However, it took some work to discover that because it was not clear, and the hon. Gentleman is right to make the point about accountability.
Dr. Cable: That is my closing point. I am willing to be persuaded that most of this funding is useful, that it is welcomed in industry and that it raises productivity, but I have no proof of that. There appears to have been precious little effort to provide us with evidence to help us to support what the Government are doing.
When the Minister sums up, will he tell us how the Government intend to account for the money that is spent and to ensure that that is done on a rigorous and consistent basis? Do they intend to report to the NAO, the Trade and Industry Committee or to another forum where we can judge the usefulness of the funding? I support the proposal that Parliament should be asked to review these measures every couple of years. Providing open-ended funding for long periods in large sums for which there is no identified use seems to me very dangerous in principle, and this process should be subject to a good deal more parliamentary scrutiny.
6.3 pm
Mr. Michael Fallon (Sevenoaks): I am grateful for the chance to speak on the Bill, and I declare the business interests recorded in the register. I welcome the chance to follow the hon. Member for Twickenham (Dr. Cable). I assume from what he said that he will support our amendment in the Lobby, because he shares some of our reservations about accountability.
This is a short Bill, but it is substantial and it has something of a history. The Minister referred to its origins in the Industry Act 1972. It is always good to hear a Labour Minister taking forward progressive Conservative legislation. There is no reason that he should know that the Act was one of the great tipping points of the Heath Government. It was one of the events that led to the resignation of a junior Industry Minister, and he may care to bear that in mind as the Bill unfolds.
The Bill cannot simply be dated to what the Minister called the period of tank tops and flares—it goes further back. It comes almost exactly 70 years after John Maynard Keynes wrote his famous four articles for The Times on "The Means to Prosperity". In the first, "An Argument for Action", he set out the current basis for industrial development policy. He made the case for state expenditure, including loans, to promote industrial and commercial activity, and he rested that case on the indirect employment benefits of subsidised employment on the higher yield in taxation that resulted and on the consequently reduced expenditure on the dole. That was a locus classicus of industrial development policy, and it was the first time that it was set out.
Those arguments were followed a year later by a further series of articles in The Times entitled "Places With No Future", which called attention to the plight of the Durham coalfields and the problems of south Lanarkshire, south Wales and Cumbria. Those in turn were the origin of Baldwin's special areas and the foundation of regional development policy, which is covered by a different section of the Industrial Development Act 1982.
Here we are, some 70 years after modern industrial development policy, as run by the Government, was launched. This is an appropriate time to take stock. We could first reflect, as the hon. Member for Luton, North (Mr. Hopkins) did, that there are regions that still require the assistance available under the Act. It is ironic, and I ask the Minister and Labour Members to reflect on the fact that 70 years after that Government action started, almost exactly the same areas still require special assistance—the north-east, parts of Scotland, south Wales and Cumbria. Indeed, with this Bill, it is the legacy of the same old industries of steel, shipbuilding and coal that we are assisting. We cannot argue that industrial development policy, whatever else it is, has been a dynamic force for modernising our economy.
Mr. Hopkins: The hon. Gentleman seems to be making a case that such assistance may be a necessary condition for solving those problems, but not a sufficient one. Would not the situation be much worse if there had been no assistance?
Mr. Fallon: It might have been. That is the argument that is always put forward when state expenditure is involved. I shall try to answer that question a little later. It is perfectly reasonable for the hon. Gentleman to pursue it. On regional employment, the doctrine according to Keynes has been followed by all Governments since the '30s, some with more success than others, and as I shall explain, some of these instruments have been more successful than others. I simply ask the hon. Gentleman to reflect on the point that 70 years on we are still looking after the same areas. We do not seem to have cracked the problem of regional industrial regeneration in the way that other countries have.
Keynes fatally over-estimated Governments' ability, as did the Governments themselves, to pick out the particular schemes that are likely to be effective and to promote the necessary change within a region or an industrial sector. Too many schemes had precisely the opposite effect; they fossilised innovation and they continued to subsidise unproductive, inefficient
practices. They prevented the kind of change that a more market-oriented economy, without any intervention, might, with great pain—the hon. Gentleman was right to draw attention to the pain, such as rapid increases in unemployment—have delivered by a different route. I suggest that there were follies in regional aid, and in the most extreme cases it got captured by political lobbies in the regions. Some of those cases of regional selective assistance are well documented. However, the failures of national selective assistance, with which the Bill is concerned, are equally profound. Time and again, Ministers have backed the older industries rather than promoting the newer ones. There were no schemes in the '70s or '80s to promote the new technologies as there were to subsidise the old technologies.Governments have inevitably seen aid in quantitative terms, as we have discussed. Ministers like to take credit for the total—the millions, the hundreds of millions, the billions—rather than the value that is added in the regions or in particular industrial sectors. In addition, successive Governments and Ministers have deployed aid according to the most perverse criteria. When we came into office back in 1979, aid was capital intensive. Huge grants went to industry. Well known national companies—the BPs and ICIs of this world—received grants to build their massive petro or oil complexes. They might have employed only a handful of extra men, but they qualified for grants under section 8.
We changed the balance a little in the mid-1980s by making the criteria specifically job intensive. That sounded more reasonable. Surely the object of industrial development policy should be to reduce unemployment, but that carried with it its own internal fallacy because head count became all. Someone only had to show that a project would create new jobs to get a grant or loan. Almost immediately, of course, the job test was corrupted. Jobs were defined not simply as jobs created but, as they still are today, as jobs created or safeguarded. Even today, no inward investment project is complete without at least four or five different local agencies trumpeting in their press releases how the money has safeguarded x number of jobs. I have never seen a rigorous analysis of whether jobs that are claimed to be safeguarded by a Government grant actually have been safeguarded; nor do I know how long they have been safeguarded or how the risk to those jobs was measured in the first place.
Conservative Governments were no better at that than Labour Governments. Indeed, sometimes they were worse. We had our aluminium smelters in curious parts of the country and our politically sited steelworks. We paid good money for unreliable Celtic votes just as the Minister may have done with Atlantic Telecom. But the object of industrial development policy should not be to increase either capital or jobs, although both of those are important. In the end, the test should be whether that money stimulates enterprise and wealth creation, and that should always be measured against the other instruments available at the Government's disposal, some of which were mentioned by my hon. Friend the Member for North-West Norfolk (Mr. Bellingham), notably lower taxes and less regulation.
It was also true that the head-count approach to job creation was flawed by a terrible bias towards bigger industry. Some £1 million given in grant to create 100 jobs in one place was always more appealing to Ministers and local Members of Parliament than 10 times £10,000 to create 10 jobs in 10 places. One might argue that it is odd to have a policy that constantly pitches the Department of Trade and Industry against the Treasury. It seems that the DTI gives companies money for creating as many jobs as possible while the Treasury encourages the same companies to be as productive as possible with as few jobs as possible.
All the schemes over the years have been biased towards the older technologies, declining businesses, labour-intensive processes and, with one or two exceptions, larger, medium-sized or established companies. The newer processes, the smaller companies and, above all, the processes that add value have been neglected. It is no accident that the best schemes are those that have helped the self-employed or very small businesses. My hon. Friend mentioned the small business loan guarantee scheme, which continues to flourish. It was introduced a little earlier than he suggested and filled a serious gap when the banks had a poor record on backing small new companies, both regionally and by sector. However, that small scheme also needs the critical analysis that is so lacking in the Department.
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