Redwood attacks cash for industry: Labour says minister is undermining the Welsh economy

JOHN REDWOOD, the Secretary of State for Wales, was described yesterday as 'inviting martyrdom' as he appeared to re-enter the ideological struggle within the Cabinet with an attack on the industrial grants system.

Government grants have played an important part in the revival of the Welsh economy. Last year the Welsh Office spent more than pounds 77m through its main business support schemes.

But in a speech yesterday, Mr Redwood said grants could become a kind of 'reverse Darwinism', taking money away from successful companies through taxation to give to less successful ones. 'The grant system can reinforce failure rather than success,' Mr Redwood said at the opening of a business park in Llandarcy, West Glamorgan.

The speech was reported in advance by a Welsh daily paper, the Western Mail, and other media as heralding a fundamental overhaul of the grants system. Subsequently, copies of the speech, which had been packed for distribution in London, were withdrawn and a revised copy issued.

In the second version, Mr Redwood said: 'Grants are useful in encouraging footloose business to locate in more disadvantaged areas. It is for that reason that we offer them in parts of Wales. I have no plans to make further changes in the grants system.'

A Welsh Office spokesman said he had no knowledge of whether the denial of changes was in the earlier draft. However, Ron Davies, Labour's Welsh affairs spokesman, was certain it had been 'tacked on'.

Mr Davies said: 'I have no doubt that Mr Redwood was trying to engage in the debate that Michael Portillo (Secretary of State for Employment) has been having over support for industry with Michael Heseltine (President of the Board of Trade).' In July Mr Portillo, then Chief Secretary to the Treaury, upbraided Mr Heseltine for failing to propose radical cuts in state aid for industry.

Mr Davies said he believed the speech had been toned down at the behest of Downing Street, government whips or the Department of Trade and Industry.

'None the less, it creates an aura of uncertainty and undermines the fragile economy of Wales,' he said. 'John Redwood is inviting martyrdom and if he hasn't got the courage of his convictions to resign from a government whose policies he does not support, then John Major ought to oblige him.'

Mr Redwood said the four motors that could power the Welsh economy to growth were a talented, well-trained people; a decent supply of land and buildings - the 'single most important task' of the Welsh Development Agency was to clear and reclaim more land; a good transport system; and access to money. Most of the money should come from the private sector.

'The idea that Wales's economy is a vulgarised Keynes-by-the-Sea propped up by grants on the pier and subsidies in the amusement arcades is a myth which does not survive scrutiny,' he said. The Welsh economy was on the move because it could adapt.

Mr Redwood said the depressing thing about so much public debate was how some people emphasised money at the expense of other things that often mattered more. 'One company's grant is another company's subsidised competition,' he said.