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24 Feb 2003 : Column 72—continued
Mr. Hopkins: The hon. Gentleman mentions East Germany. I hoped that he would mention West Germany, which in the post-war era had the strongest and most successful economy, and the most managed economy, in western Europe.
Mr. Field: I am glad that the hon. Gentleman raises that matter. Indeed, I also spent a day in Essen and a day in Bonn. Bonn was, of course, the home town of Konrad Adenauer, whose Finance Minister in the first few years of the history of West Germany was Ludwig Erhard. He realised that one of the reasons why Germany thrived and why the economic miracle of the 1950s occurred was that planning did not work. That was the key insight of Ludwig Erhard and the CDU in Germany during that period.
The economy may have been managed at a macro level, but not at a micro level. I expect that that comes to a number of the points that the hon. Gentleman made. Planning was not the way forward. That was the lesson of West Germany, which has largely been forgotten in dealing with large-scale expansion of that territory following reunification. I fear that it is one of the reasons why that country now has 4.6 million unemployed which, as I am sure the Minister will be happy to confirm, compares unfavourably, even in proportional terms, with the UK.
The Bill is a further, albeit small, example of a trend towards market distortion and political interference by means of political risk. Every business man in the UK, especially in the areas likely to be affected by the money, will have to second-guess before making investment decisions. Stamp duty rises and exemptions, a refusal to end stamp duty on shares as a whole, caps on stakeholder pensions, and windfall taxes on the oil industry and pension funds are all examples of large-scale and high-profile distortions, but the Bill will introduce a range of other distortions and political interference. Trade associations, chambers of commerce and regulators will need to have an eye not just to the market, but to the super-regulator in the form of the Minister and his right hon. Friend the Chancellor of the Exchequer. That will lead to uncertainty, above all, and to ever more form-filling and second-guessing, which will affect business growth and confidence today and have a negative effect on profits tomorrow.
6.38 pm
Mr. Michael Weir (Angus): In introducing the debate, the Minister gave a thorough and useful exposition of the various sections of the Bill and the parent measure. On the face of it, the Bill should be unreservedly welcomed—after all, any measure that gives financial assistance to industry and, hopefully, prevents job losses or increases employment would be wholly welcome. However, we in the Scottish National party and Plaid Cymru have some reservations about what the Bill will achieve, as we believe, contrary to the argument of the hon. Member for Cities of London and Westminster (Mr. Field), that it will have the effect of widening the already apparent north-south divide.
As has been pointed out, the Bill will raise the ceiling on the limit of selective financial assistance from £1.9 billion to £3.7 billion, in effect doubling it, although as the Minister observed, the original ceiling has long since been overtaken, and will raise the maximum amount of each increase from £200 million to £600 million, in effect trebling it.
On the face of it that is welcome, but I remind hon. Members of the wording of section 8 (1) of the original act, which states:
- "For the purposes set out in subsection (2) of section 7 above the Secretary of State may, with the consent of the Treasury, provide financial assistance where, in his opinion—
(a) the financial assistance is likely to benefit the economy of the United Kingdom, or any part or area of the United Kingdom".
Section 7 of the 1982 Act—which we are not discussing today—deals with region-specific financial assistance. That has been referred to many times in this debate, as though the two kinds of assistance were interchangeable. They are not. Section 8 was originally intended to provide general selective assistance on a national or industry-specific basis. That is where we perceive a problem. The danger of the Bill is that, by granting increases in overall national assistance funds, it will consolidate a shift that is already evident from specific regional assistance of the type referred to by the hon. Member for Luton, North to a system of more national assistance.
My hon. Friend the Member for East Carmarthen and Dinefwr (Adam Price) has asked a series of questions about the payment of regional selective assistance between 1990 and 2001. Indeed, such questions were regularly asked by the present Chancellor when he was in opposition. The figures revealed that, in present-day cash terms, there has been a dramatic decline in the amount paid during that period. In Scotland, the figure has fallen from £150.9 million—in today's terms—in 1990–91 to £71.5 million in 2001–02. In effect, the amount has halved during the period. If we look at the figures for Wales, we see a similar picture, with a drop from £72.4 million to just £38.1 million—again, effectively half the amount. The total amount of regional selective
assistance payments in 1997–98, when Labour came to power, was £295 million—two and a half times the amount estimated for 2002–03.
Adam Price (East Carmarthen and Dinefwr): If we turn the clock back even further, to the last year of the last Labour Government—1978–79—we see that the figure for regional selective assistance was more than £3 billion in today's terms. That is more than 15 times the £200 million total. Notwithstanding the scepticism expressed by the hon. Member for Sevenoaks (Mr. Fallon), that was a period of significant convergence in the growth rates of the regions of the UK, compared with the divergence that we have seen over the last six years.
Mr. Weir: That is very true. The hon. Member for Sevenoaks, who is not here at the moment, could well be haunted—as could the Scottish Conservatives—by his quip about unreliable Celtic boats. He may remember that, after the work-in at Upper Clyde Shipbuilders, the assistance given to the company resulted in the survival of the shipbuilding industry on the Clyde. It would not be there to build aircraft carriers today, had it not been for the assistance that it received back in the 1970s.
Getting back to my point about the decline of regional selective assistance, and to show that I am not being entirely parochial, I should point out that the figures for England also show a marked decrease, from £214.5 million to £112.6 million. The clear message from all these figures is that there has been a steady move away from regional selective assistance during the time of the previous Conservative Government and of the present Government. As I said earlier, the total regional selective assistance payments in 1997–98, when Labour came to power, was £295 million—two and a half times the amount estimated for the current year.
The whole purpose of the concept of regional selective assistance was to create a level playing field. There has been a move away from that, however, and the effect of the Bill will increase that, since, if the intention is to give the same assistance to all areas, it will intensify and increase the already apparent divide between the north and south. The present Chancellor has in the past been a strong supporter of regional policy. We believe that aid should be redirected towards the areas that require assistance, rather than being provided in the form of blanket coverage. I was interested to note that the Minister said that the powers could be exercised by Scottish Ministers or Ministers in the National Assembly for Wales, but that the money would come out of the settlement for those areas. We have to wonder exactly what the benefit is of having the operation of those powers in Scotland and Wales, if there is no increase in the funds available. I would be interested to hear what the Minister has to say about that.
It is also interesting to note how section 8 has been used to provide assistance, because there seem to be cases in which, in the words of the section, it has been used to assist specific areas. Mention has been made—and the research paper from the Library gives details—of the example of the Rover taskforce set up when BMW announced the closure of the Longbridge plant. There was some discussion about the difficulty of finding out where the money for that came from, but page 18 of the research paper makes it clear that the Government
converted promised regional selective assistance of £129 million into more general relief under the auspices of section 8. So it can be used for specific areas, and, as the Minister has confirmed, those can be geographical areas in the UK as well as being industry-based areas.This is of particular interest to many of us who represent areas with strong fishing links. The Minister will be aware that, in the north-east of Scotland, we have been hit by a crisis in the fishing and fish-processing industries, which are immensely important to the economy of Scotland, and in particular of the north-east of Scotland. These are not assisted areas. The Scottish Executive have come up with a package worth up to £50 million, but it is specifically targeted at the catching sector. In this House and in the Scottish Parliament, however, Ministers have said that any onshore aid would be provided through the regional development agencies. In Scotland, that is the Scottish Enterprise network. I appreciate that direct aid to the fishing industry is complicated by European considerations, but I would like the Minister to clarify whether it would be permissible to provide assistance similar to that given to the Rover taskforce for general work in the Longbridge area, or to the UK coal operating aid scheme, which provided Government support for the UK coal industry that was designed to allow mines with viable futures to overcome short-term market problems. Those conditions apply equally in the onshore fish-processing industry and other associated industries. If the political will existed, could some of the extra funds being proposed in the Bill be utilised for a specific aid package to assist onshore industries in getting through this difficult time? It would be interesting to see where the money for that would come from, in the case of Scotland.
I would like to take up some of the points made about the use of section 8. It has uses in many areas. The hon. Member for North-West Norfolk (Mr. Bellingham) mentioned Atlantic Telecom, and I intervened on him to explain some of the difficulties involved in it. I am surprised that the Conservatives made this point, because Atlantic Telecom's circumstances illustrate how relatively small amounts of money can be used to make a real difference. In my constituency—and in the Dundee and Aberdeen areas in particular—the collapse of Atlantic Telecom caused huge problems for many small businesses, because they were threatened with the loss of their telephone service.
It is a feature of the modern economy that many small businesses rely a great deal on business received over the telephone. They rely on contact by telephone, and by e-mail and other forms of electronic communication. One of the difficulties associated with the collapse of Atlantic Telecom was that many of those businesses had produced leaflets and had entries in Yellow Pages, and their only means of contact with their customers was by telephone. If assistance had not been given to allow the continuation, for a relatively short period, of their Atlantic Telecom telephone numbers, many of those businesses would have been uncontactable by their customers, because they would not have had the time or, perhaps, the money quickly to change all their promotional material, such as their entries in Yellow Pages.
That is a small example, but it is a good example of how even small amounts of assistance can make a great deal of difference. The Minister said that he was not going to announce any new schemes, but if he is thinking about it I should like to put in a bid for the fisheries. According to the Library research paper, in 1993 specific aid was given to areas that lost assisted area status when the aid map was redrawn. That is not a one-off problem, in that when the aid map was redrawn again in 2000, many other areas lost assisted area status, including Arbroath in my constituency, which was just recovering from a serious economic downturn. At the time, that withdrawal of assisted area status was graphically described as being a bit like driving a lawnmower over the green shoots of economic recovery. If the assistance had been in place when the fishing crisis hit our town, we might not be faced with our current difficulties, having to scramble around trying to find out where assistance might be available. When I had a meeting with the Scottish Enterprise Network, it was clear that although it can give minimal assistance no new money is available.
The Department, in conjunction with the devolved Administration, needs to consider how to deliver the money through the regional development agencies in England, and the Scottish Enterprise Network in Scotland, so as to ensure that it makes a real difference. We are talking about huge sums of money, but many areas are seeing little benefit from it at the moment. If the Government are, as we suspect, moving away from specific regional selective assistance to more general assistance, they must give serious thought to how that is to be delivered on the ground in Scotland, in Wales and in areas of north-east England.
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