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7 Apr 2003 : Column 64—continued
Mr. Bercow: Given the desirability of avoiding the incentivisation of the subsidy junket, has my hon. Friend made any assessment of the displacement effect of the financial assistance in deterring other productive investment? Does he agree that, in the next few years, we should be more effective in the private sector at reacting to the changing economy in terms of employment patterns and new investment? We should not continually need such a function to be carried out by the state.
Mr. Lansley: My hon. Friend makes a good point. Ministers have always professed to aim for a competitive market economy free of subsidies, which distort the markets to which they are provided and the businesses from which the money is taken. We examine the latter point too rarely. The Bill's object is to enable the Government to spend £3,700 million on pretty much
whatever they like. The distorting effect of taking £3,700 million out of the pockets of British industry in the shape of one company to spend it on another is rarely taken into account. The opportunity cost and industrial disruption that high taxation causes are becoming increasingly apparent to business. [Interruption.] As my hon. Friend the Member for Blaby (Mr. Robathan) says from a sedentary position, business knows that well this week because of the way in which the process affects pay packets and employers' costs.The Government may claim that the national insurance increases are to pay for the national health service. Perhaps they will tell us precisely out of which business taxation the £3,700 million will come. Business representatives could then make a more balanced judgment about the merit and amount of expenditure under the schemes, as compared with the disruptive, distorting and damaging effects of the taxation to gain the money. My hon. Friend the Member for Buckingham (Mr. Bercow) happily distracted me from my purpose and I shall therefore revert to my more mundane task of trying to ascertain the origin and destination of the figures.
On Second Reading and in Committee, the Minister tried to explain that the Government simply took the cumulative total expenditure of £2,700 million under the 1982 Act and rolled it forward, with a gross domestic product deflator for 20 years. The number of years is arbitrary. The Government have simply decided that, since the 1982 Act lasted for 20 years, the Bill might as well last for the same time. Does it make sense simply to roll forward a previous figure? Is the figure in the Bill an accurate reflection?
I confess that I am not a mathematician and I have not had the time or the opportunity to go away and consider carefully the effect of a 2.5 per cent. GDP deflator on £2.7 billion. The Minister implied in some of his remarks that £2.7 billion, deflated by 2.5 per cent. for 20 years, equals £6.1 billion. I am not sure that that is correct. The figure is more likely to be £4.5 billion. If I did a net present value calculation, a figure of approximately £4.5 billion would be right.
The Minister will correct me if I am wrong, but I believe that the Government have taken the figure of £2,700 million, discounted it for the 20 years of inflation ahead, reached the figure £4,500 million, decided that it was too large and that the period before Parliament had to reconsider it would be too long, and therefore discounted it to £3,700 million. They then added the £800 million left over to what would otherwise be tranches of £400 million and were in excess of the figure that they had reached. A net present value of £200 million is more or less the same as a discounted figure of £400 million in 20 years.
Ministers are not only asking us to endorse the effective doubling of the cumulative total for the benefit of inflation so that it can all be spent in the next 20 years, but are offering us four additional tranches, which have been added to the sum. In 20 years, the money that has been spent will be significantly more in real terms than the sum for which the Bill provides.
I confess that my comments are complicated and that I should have done my mathematics before I arrived, but I suspect that I have accurately outlined what has happened. In a sense, it is neither here nor there, because
the calculations refer to funny money. They are statistical calculations, but the point is that the Government plans mean spending the substantial sum of £3,700 million in the next 20 years. That is £170 million a year and means maintaining the current rate of spend for the whole 20 years. There is no suggestion of any substance that the Government believe that it might be desirable, over time, to reduce expenditure.The Government show no recognition of the necessity to move to more competitive markets over time. For example, £450 million will be spent on the urban post office reinvention programme—I know, before I am reminded, that it should be called the urban post office closure programme.
Mr. Andrew Robathan (Blaby): The figure is £210 million.
Mr. Lansley: It always used to be £450 million; presumably the figure has decreased.
6.15 pm
Mr. Robathan: The figures are: £210 million for urban reinvention; £450 million for rural post offices; and £15 million for urban deprived post offices.
Mr. Lansley: My hon. Friend is always reliable. I cannot remember which figure applies to the section 8 money. I presume that it is that for the urban post offices closure programme. The Government cannot keep spending the money year after year. When they have spent the section 8 money on the urban post offices once, the process is completed, and they cannot close post offices all over again. Perhaps the Government can; they close hundreds of post offices every year.
There must be a limit to the number of industries on whose restructuring or closure the Government propose to spend section 8 money. Governments have used such legislation for 30 years and they propose to use it for another 20 years. If they want to do something substantively different from introducing a measure whose purpose is not to allow Ministers to spend what they like on restructuring industries, but to promote research and development in industry or small business regeneration, they should do that. Such a measure should be tighter and more directed towards the effect that it wishes to achieve.
I am tempted to make comments that are better expressed on Third Reading. I shall therefore avert later to the way in which the money is spent and the range of the DTI schemes, of which section 8 schemes form a part. The Government continue to fail to provide us with information about restructuring section 8 and other DTI schemes, yet we are asked to support the Bill.
I urge hon. Members to accept that simply rolling forward the measure for 20 years is untenable. Ten years is a far better basis on which to expect a return to Parliament for primary legislation. Four or five years—early in the next Parliament—is a better point at which it would be right for Ministers to secure the ability to add to their expenditure powers. The total amount of money is £4,644 million. Even my amendment would allow nearly £1,750 million to be added to the amount that Ministers will spend. That is a more modest and
responsible amount of additional empowerment for expenditure than the £3,700 million that the Government propose.
Mr. Hopkins: I welcome and warmly support the Bill and I oppose the amendments tabled by the hon. Member for South Cambridgeshire (Mr. Lansley). The hon. Gentleman is trying to tie my hon. Friend the Minister's hands, and I want to give him a freer hand. The hon. Gentleman suggests that the amounts involved should be halved and that the timing for introducing new tranches should be constrained. Therefore, in a crisis, if my hon. Friend wanted to release more money more quickly, he might be unable to do so, and we would regret that at such a time.
Mr. Bercow: Given that the Department of Trade and Industry has accepted the principle of the sunset clause to the extent that it included such a clause in the Electronic Communications Act 2000 during the previous Parliament, what objection does the hon. Gentleman have, in principle, to the incorporation of such a clause in this piece of legislation? If the case is strong enough, surely the Government can come back and get a decent hearing from Parliament. Of what is the hon. Gentleman afraid?
Mr. Hopkins: I thank the hon. Gentleman for his intervention. My hon. Friend the Minister will answer for the Government and the Department of Trade and Industry, but I am happy to take a much more relaxed approach to these matters. I would not necessarily have a sunset clause in legislation such as this. I would like to see Governments given a freer hand in relation to the extent to which they can provide assistance to industry at times of industrial modernisation or economic difficulty. I could be described as a more old-fashioned socialist than some of my more modern friends.
Mr. Lansley: Further to the point made by my hon. Friend the Member for Buckingham (Mr. Bercow), the whole point is that, when this legislation began, it had a sunset clause. It was all going to stop at the end of December 1977, yet we are debating it now, some 26 years on, and the sunset clause was done away with.
Mr. Hopkins: The hon. Gentleman mentioned that the original legislation was meant to last for a transitional period during our entry to the European Union, or the Common Market or whatever it was called at that time. I was very pleased that the Labour Government of the 1970s sprung the legislation forward and took what was a good idea and carried it on. That is what we are doing now. The hon. Gentleman laughs, but it was a Conservative Government who brought forward the legislation in the first instance. I suspect that that Government did not have quite the same political flavour as the present Conservative Opposition, but they were certainly called a Conservative Government. I welcomed the Bill then, I welcomed the Labour legislation that followed it, and I welcome this Bill now.
The Government have done a good job in skirting round the constraints of the European Union, because state aids are now very tightly circumscribed by
European legislation. When there is scope to use appropriate state aids, I believe that the Government should do so. They have, indeed, carried on with the Bill. I understand that it was at the Berlin European Council that they negotiated the scope for continuing such state aids until at least 2006.I have two reasons for believing that the Bill is important now. First, it is clear that, in spite of my right hon. Friend the Chancellor's optimism about our economy—one hopes that it is well founded—world conditions are certainly more difficult at the moment. We are looking at something of a downturn in the world economy. In those circumstances, Governments have to have instruments with which they can at least assist their own economies in such difficult times. One hopes that times will not be too difficult for this country. Indeed, we are better placed to face the future than almost any other developed country in the world, and one hopes that these happy circumstances will continue. The world economy is bound to have an effect on our own economy, however, and we want to give our Ministers and our Government as much scope as possible for providing appropriate assistance to our economy during such times.
The other concern that I have—the reason that I am against the amendments—is that we cannot predict the consequences of the enlargement of the European Union. At the moment, we receive certain payments from the EU in respect of structural funds, but, inevitably, with the accession to membership of the EU by many countries that are much poorer than ours, there is bound to be a major shift in the fiscal transfers across the EU. It is probable—indeed, I would say certain—that we will be net losers at that point. I think that that is appropriate, in that we are one of the richer countries of the European Union, and there will inevitably be some transfers to poorer nations.
At that time, such transfers might have an impact on our economy and our industries, particularly in those regions that currently receive structural fund assistance, and we will need more scope for Government intervention to assist those regions and the businesses in those regions. The Bill will provide a basis for doing that. It is, therefore, a good thing that we are introducing the scope to provide substantially greater sums to assist the needy parts of our economy. Indeed, I believe that we could go further.
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