The
Committee consisted of the following
Members:
Chairman:
Mrs.
Joan
Humble
Ainger,
Nick
(Carmarthen, West and South Pembrokeshire)
(Lab)
Baron,
Mr. John
(Billericay)
(Con)
Burt,
Lorely
(Solihull)
(LD)
Byers,
Mr. Stephen
(North Tyneside)
(Lab)
Campbell,
Mr. Ronnie
(Blyth Valley)
(Lab)
Cousins,
Jim
(Newcastle upon Tyne, Central)
(Lab)
Cruddas,
Jon
(Dagenham)
(Lab)
Gardiner,
Barry
(Brent, North)
(Lab)
Gerrard,
Mr. Neil
(Walthamstow)
(Lab)
Hendry,
Charles
(Wealden)
(Con)
Howard,
Mr. Michael
(Folkestone and Hythe)
(Con)
McFadden,
Mr. Pat
(Minister for Employment Relations and Postal
Affairs)
McGovern,
Mr. Jim
(Dundee, West)
(Lab)
Öpik,
Lembit
(Montgomeryshire)
(LD)
Seabeck,
Alison
(Plymouth, Devonport)
(Lab)
Spink,
Bob
(Castle Point)
(Con)
Spring,
Mr. Richard
(West Suffolk)
(Con)
David
Weir, Committee
Clerk
attended the Committee
Sixth
Delegated Legislation
Committee
Tuesday 17
July
2007
[Mrs.
Joan Humble
in the
Chair]
Draft Financial Assistance For Industry (Increase of Limit) Order 2007
4.30
pm
The
Minister for Employment Relations and Postal Affairs (Mr.
Pat McFadden):
I beg to
move,
That the
Committee has considered the draft Financial Assistance For Industry
(Increase of Limit) Order
2007.
The order
concerns an increase in the financial ceiling for the exercising of
powers under the Industrial Development Act 1982. Section 8 of that Act
contains the Governments principal power to give financial
assistance to industry when such assistance is not exclusively within
an assisted
area.
For
the avoidance of doubt, I would like to make it clear at the beginning
of the debate that increasing the section 8 financial ceiling does not
in itself authorise any extra expenditure. Hon. Members might know that
we need to raise the financial ceiling, mainly because of the
Governments announced funding for the Post Office. However,
financial assistance to industry in respect of any one project, such as
the proposed payment to the Post Office, cannot exceed £10
million unless it has been authorised by a resolution of the House of
Commons. Therefore, we have laid a measure specifically relating to the
proposed Post Office payments. That will be subject to separate
consideration by the House, but not
today.
I shall explain
how the financial ceiling works and why the Government want the order
to be agreed. The ceiling provides a limit on total cumulated
expenditure under section 8 of the 1982 Act. The Act contained a limit
of £1.9 billion and a provision to increase that limit by order,
and with the consent of the Treasury, by a sum not exceeding
£200 million on not more than four occasions. By 2003, the four
uplifts had been exercised, so the Act was amended to replace the
original initial ceiling of £1.9 billion with a new ceiling of
£3.7 billion, and the maximum amount by which the initial
ceiling could be raised with each of the four uplifts was increased
from £200 million to £600
million.
Since the Act
was amended in 2003, the financial ceiling has not been raised.
However, there is today only £440 million of headroom left under
the ceiling, which is not large enough to accommodate recent spending
proposals, including the Governments plans to support the Post
Office change programme. We have thus tabled the order to increase the
section 8 financial ceiling, but, as I have stressed, increasing the
ceiling does not authorise expenditure. This is simply a legal vehicle
for the provision of financial assistance to industry outside assisted
areas. We have laid a measure specifically relating to the proposed
Post Office payments, which will be considered by the House on another
day.
4.33
pm
Charles
Hendry (Wealden) (Con): It is a pleasure to serve under
your chairmanship, Mrs.
Humble.
I thank the
Minister for setting out the position with such clarity. I imagine that
his speech was wheeled out by his predecessors on the four previous
occasions when increases were required. Perhaps his winding-up speech
will be similar to those in previous
debates.
Broadly, we
welcome what the Minister has announced, and we are happy with the
direction in which the Government are moving. However, I have a number
of questions, particularly about the regularity with which the fund has
had to be increased. The first increase of £200 million was made
in 1996. A further £200 million was required in 2000 and again
in 2002 and 2003. Since then, the fund has increased by
£1 billion, so it is rising by £250 million a
year. We are now told that an additional £600 million is
needed.
Can the
Minister give any further explanation of what factors have led to the
rapidly expanding size of the fund, and a bit more detail about the
sort of schemes that he wants to help? What proposed big schemes does
he have in mind? Could he give the Committeenot today, but in
writing, so that we have it on recorda comprehensive breakdown
of the schemes that have been supported to date? Very significant
amounts have been spent in this
way.
We think that the
money has overwhelmingly been valuably spent, but it would be useful to
have a precise understanding of what schemes have been helped, and in
what way. Can the Minister give us a regional breakdown so that we will
know which parts of the country have benefited most? Will he let us
know what he believes the impact on employment has been? We understand
that he cannot be absolutely precise about that, but an approximate
figure of how many jobs he believes have been either created or saved
would be useful for our understanding of how the Governments
priorities have been working. Can he also give us some explanation of
what types of businesses have been helped the
most?
Will the
Minister tell us how this scheme compares with other such schemes that
are operating elsewhere in the European Union? Will he clarify how the
scheme operates under European Union funding guidelines? Will he say
whether such schemes in other countries are comparatively similar in
size, given the size of their economies, or whether they are smaller or
larger, so that we can have a better understanding of the way in which
support has been given through the
scheme?
I understand
that the Minister will not have comprehensive answers to my questions
today, but we would be grateful if he would respond to them by writing
to members of the Committee. In general, we understand why the
Government are seeking to make this increase, and we support them in
doing
so.
4.36
pm
Lorely
Burt (Solihull) (LD): I welcome you, Mrs.
Humble, to your chairmanship of what I believe might be a short yet
very important
debate.
When I was
looking into the background of the order so that I could make what I
hope will be a useful comment, I tried to come to terms with what the
fund
was actually for. My initial thought, which I suppressed immediately,
given that it had overtones of being not quite right, was that it was
some sort of slush fund through which everyone could dip a hand into
the pot when that was needed. I came up with the better expression of a
honey pot: something which can be made available whenever money is
needed for industry.
Schemes such as the
small firms loan guarantee scheme are very welcome and have provided a
great deal of help for small firms. In my area of the west midlands,
the Rover taskforce accrued £7 million from the fund, although
questions have been asked about how effectively that £7 million
has been spent.
If I
may elaborate on what the hon. Member for Wealden said, I am sure that
all hon. Members would appreciate and find useful a little more
information regarding accountability and transparency, such as about
the criteria that are used whenever money is requested from a fund. We
would also like some information on exactly how the spending has been
broken down. I asked the Library about that, admittedly at short
notice, but it was not able to provide me with a shopping list of
exactly where it had all gone.
Most importantly, there should
be a review of post-implementation success. For example, there were a
number of queries about whether the money for Rover was effectively
spent. Can the Minister reassure me that time, energy and resources are
allocated following implementation to ensure that the money has been
spent effectively and that any lessons learned as a result of problems
that have been encountered are used to make things better in the
future?
The
Ministers predecessor, the right hon. Member for Barking
(Margaret Hodge), initiated a Government consultation: the simplifying
business report. Will the Minister comment on how he feels that that
will have an impact on the requirement for such funding in the future?
It seems that the amount of money allocated has risen exponentially
over the past few years. As guardians of the public purse, we are all
concerned about authorising an additional £600 million for the
total fund today. When does the Minister envisage that the next tranche
will be
due?
4.40
pm
Mr.
McFadden:
The hon. Member for Wealden asked several
questions about increases in the fund and what it is used for, so it
might help the Committee if I go over some of its uses. It is intended
to benefit the UK economy or any part or area of the UK. It is to be
used in the national interest and when assistance cannot appropriately
be provided in any other way. It can be used for the promotion or
modernisation of an industry, for addressing an industrys
efficiency, for expanding or sustaining productive capacity, or for the
reconstruction, reorganisation or conversion of an
industry. It can also be used to encourage the growth of an industry,
or, indeed, arrangements for ensuring an industrys orderly
contraction.
I was
asked about the rate of increase. This is the first time that we have
increased the ceiling since 2003, so it has not gone up exponentially.
As I explained, we need to increase it now to fund our commitments to
the Post Office, including covering some of the losses in the network
and paying sub-postmasters who are leaving under the change programme.
Other uses of the fund over the years have been the UK Coal operating
aid scheme, the small firms loan guarantee scheme and regional venture
capital funds.
The
hon. Member for Solihull mentioned the effectiveness of the funds for
Rover. The whole governmental and regional effort after Rovers
closure has been a success story. Some 6,000 job losses were announced,
yet I understand that only about 200 of those people are still out of
work two years on. Most have found employment or training, or another
productive activity. I do not claim that that is all due to the fund,
but there has been a success story as part of the overall efforts of
the Government and locally.
The hon. Member for Wealden
asked for figures on jobs. I hope that the Rover example helps him
somewhat, but there are others. I might write to him about
that.
Lorely
Burt:
I do not want to dwell on Rover, but I dispute the
Ministers comment that only 200 of the people affected are
without jobs. A large proportion of people have not found jobs at a
similar level or pay rate to what they had before. There have been a
number of problems. Has there been a specific post-implementation
analysis of the cost-effectiveness of the different ways in which money
was spent to help those workers and to generate additional business in
the west midlands to help them to obtain jobs, or become
self-employed?
Mr.
McFadden:
The regional development agency has done a lot
of work on that, and it would argue that the figure of 200 is correct.
Peoples salaries will always change when they change
jobssome will go up and some will not. Let me stress that we
are discussing not a scheme, as such, but a legal vehicle for
expenditure for different purposes across Government. A specific reason
why we want to raise the amount is to do with the Post Office, but
there are other purposes for it across Government. I do not see this as
a honey pot; the money will have various uses. I reiterate that this is
the first time that we have had to increase the fund for some years. It
is for a specific use, which I am sure will be supported across the
House, given the value of the post office network to the
country.
Question
put and agreed
to.
Committee
rose at fifteen minutes to Five
oclock.