Clause 1.—(POWER OF BOARD TO MAKE ADVANCES, AND GRANTS IN RESPECT OF INTEREST ON ADVANCES.) (Hansard, 6 May 1963)

§ Mr. Bruce Millan (Glasgow, Craigton)
I beg to move, in page 1, line 11, to leave out from "above" to "shall" in line 12.

The Deputy-Chairman
I think that it would be convenient to discuss this Amendment together with the second Amendment, in page 1, line 16, at end insert: (3) Interest on sums advanced under subsection (1) above and accruing before 1st January 1967 shall be charged at a rate of 51 per cent. per annum. Such interest accruing after the aforementioned date shall be charged at such rates, varying according to the net profits of the Company arising from the operation of the pulp and paper mills in respect of which the advances have been made, as may be agreed upon between the Board and the Company.

§ Mr. Millan
The Bill provides in Clause 1 that the sums to be advanced by the Government to Wiggins, Teape and Company Limited for the purpose of constructing the pulp and paper mill shall be advanced at an interest rate of 5½ per cent. per annum. That is a fixed rate of interest. The purpose of the Amendments is to delete the fixed rate and to substitute a rate of interest which would vary according to the net profits of the company in the operation of the mill. I think the purpose of the Amendments is fairly clear, even though, technically speaking, there may be certain defects in the drafting.
If this Amendment were accepted, it would be fair to say that the new pulp 168 and paper mill at Fort William would, in the fullest sense of the term, be a joint undertaking of private and public enterprise. It is important to point out that the Amendment does not seek to import into the Bill anything very startling in the way of principle because this is, in any case, a joint public and private enterprise.
10.30 p.m.
Quite apart from the pulp and paper mills themselves, the vast majority of the timber coming to these mills will come from the Forestry Commission. The local authorities will be concerned along with the Commission in the construction of roads, and the local authorities will be concerned with the construction of other services, water, local authority housing, and the like. Fortunately, we shall also have British Railways involved in the provision of transport facilities. If, as was pointed out on Second Reading, this project had been delayed just a little longer the chances would have been that the railways would not have been there at all. In the direct financing of the mills themselves the Government are a major participant, because it is provided in the Bill that the Government may provide finance to the extent of some £10 million out of the total sum involved in the construction. The Parliamentary Secretary to the Board of Trade quoted that in his Second Reading speech as £19 million. So that the Government are participating in financial terms on something like a 50 per cent. basis.
The Government are not, however, participating in the equity of this enterprise. As the Bills stands, and if the Amendment is not accepted, the Government are simply providing the loan capital. I know that the Government have a prejudice against public enterprise, a prejudice which is not sustained in the face of economic reality. I think it is recognised even by the Government that in the Highlands, to take only one example, nothing very fruitful will come without a large measure of public participation.
One interesting question about this enterprise, a question which was raised on Second Reading, but which was not satisfactorily answered, is whether the Government prejudice against public enterprise would have been maintained if the circumstances had arisen that no 169 private firm in Britain had been willing to proceed with the project. After all, only one firm, Wiggins, Teape—and a great deal of credit is due to it, and I say it now without qualification—was willing to proceed with this project but there was doubt up to the last minute whether the project would proceed at all, because discussion about this started no less than ten years ago. If Wiggins, Teape had called off, would the Government have abandoned the project altogether? From their past performance and past prejudices one would assume that they would, and yet without Government participation of one sort or another, either to the extent of 50 per cent., or perhaps, as it might have been in other circumstances, to the extent of more than that, this project would not have come to the Highlands at all.
One would have hoped that the Government would explicitly have recognised what is implicit in so much of their actions in the Highlands, that without a large measure of public enterprise we shall never be able to solve the problems of the Highlands. Anyone who reads the Highland Panel's Report on the visit to Norway in September, 1961, will be impressed by the lesson he can draw from that, that without public participation areas like the Highlands can have very little future ahead of them. In Norway, not only the Government of Norway participate in the equity of undertakings of private enterprise, but even local authorities are enabled to do that. When my hon. Friend the Member for Fife, West (Mr. W. Hamilton) tried to introduce a similar provision for local authorities in Scotland, he was opposed by hon. Members opposite.
In the face of facts the Government maintain their prejudice against public enterprise in developments of this kind. I should like to have seen this project setting an example for the fullest kind of joint public and private enterprise in the Highlands. I ask the Parliamentary Secretary whether the Government ever asked Wiggins, Teape & Co. if it would be willing to proceed on that kind of basis or whether all the discussions took place on the kind of potential agreement now described in the Bill. Did the Government ever make the kind of proposal in this Amendment—that they should participate fully in the enterprise 170 as far as the provision of equity capital was concerned?
According to the hon. Member's speech on Second Reading, the Board of Trade investigated the economics of the project very thoroughly and satisfied itself that it was potentially a profit maker before it agreed to the scheme going ahead. He told us that it was expected that the company would repay the Government's share of the finance over a period of only ten years, starting from 1968. This seems to indicate that the potent al profits will be quite substantial.
I appreciate that if the Government were to shale in the equity of the undertaking, if Mere were to be a rate of interest which was to vary with the net profits of the company, that might well mean that the rate of interest, if things did not go as profitably as expected, could be leis than the 5½ per cent. laid down by tie Bill. The Government should have; been willing to take this kind of risk. I appreciate that if the Government were to take the chance of sharing in the profits they should also have to be willing to hear their share of any losses incurred. Therefore, this Amendment would imply, in certain circumstances, a lower rate of interest as well as a higher.
There is also the question of control. It is difficult to know exactly what this Agreement is to be. The Bill tells us practically nothing. It is only when we get the copy of the Agreement, when it will be virtually too late for us to do anything, that we shall be able to see exactly what the arrangements between the Government and the company are.
The implication of an Amendment like this would be that the Government would have a greater share in the control of the enterprise, in policy generally as well as financial participation. That is very desirable. There was a very ursatisfactory situation some months ago in connection with another Government 'financed enterprise, the Greenock dry dock. The dredging contract which some of us thought strongly ought to go to a Scottish firm was placed with a London firm. The unsatisfactory feature of that was that although the Government were providing two thirds of the money they had no share in decisions of that sort.
171 One hopes that this kind of situation will not arise in the case of Wiggins, Teape. I do not want to appear to be in any way churlish about the company's participation in this tremendous venture, because on this side of the House we welcome it unreservedly. But when Government money to the extent of £10 million is put up there is a principle involved. It is the principle that the Government should have some control over the policy of the enterprise with regard to the placing of contracts and perhaps with regard to employment policy. It is extremely unsatisfactory that, as far as one can see, they are not going to have it.
When tackled about it on Second Reading, the Parliamentary Secretary offered the very feeble excuse that he did not think that the fact that the Government were supplying £l0 million was any ground for seeking to play a permanent part in the company's affairs which covered a very much wider field than the Fort William mill. This could have easily have been a separate enterprise, a separate company financed jointly by Wiggins, Teape & Co. and by the Government. I have no information about it, but I imagine that the company may be setting up a special subsidiary to run the enterprise. The hon. Gentleman's excuse was a very feeble one, and it seems to me that there is a very strong case for direct Government participation in the equity of the undertaking. I hope that the Government will, even now, look very carefully at the Amendment.

§ Mr. Archie Manuel (Central Ayrshire)
I say at once, as I did on Second Reading, that we are delighted that this project is to come, but I feel that we should have the utmost freedom to speak with great candour on the sort of set-up which we think should be established. I am myself convinced that it will be less of a venture than a great success. I do not think that there is a great risk. The sort of money involved here will not, I believe, allow otherwise, and I am quite sure that the business interests behind Wiggins, Teape & Co., Ltd. have made certain that it will be a successful venture. Nevertheless, we as a Committee must recognise that there is a quite large expenditure of public money involved, and not only expenditure by the Government. We are here concerned not only with taxpayers 172 as such but with ratepayers, too, and we must consider carefully how the public interest generally can be safeguarded.
The local authorities, the Inverness County Council and the Burgh of Fort Williams, will have quite heavy expenditure to meet in the provision of the necessary roads. Do the Government intend to make special arrangements about that? Furthermore, in the provision of housing and other essential social services such as water supply, sewerage, electricity and so forth, large sums will have to be spent by local authorities which have not great rate-yielding opportunities.
There is no new principle in what we suggest. I have in mind the Highlands and Islands shipping services. I am pleased to see present the former Secretary of State for Scotland, the right hon. Gentleman for Renfrew, West (Mr. Maclay) and my near neighbour in Renfrew, because he spoke at great length in the debate at the time when he nationalised those ships. We were discussing the Undertaking between the then Secretary of State and David MacBrayne Ltd., a draft of which had been laid before the House on 27th November, 1961.
10.45 p.m.
I am not saying that the case which I am instancing is on all-fours with the Fort William project, but it is on this matter of rate of interest. The former Secretary of State for Scotland said on that occasion: I have said that the grant has to allow for interest on the capital which the company employs in its business. We have considered carefully what the appropriate rate of interest should be, and have come to the conclusion that the company's capital should be remunerated at the same rate as if it were made available to the Government as a ten-year loan. The rate, which is provided in Clause 17 (1), is accordingly 61⅝per cent. which was the appropriate rate prevailing at the date on which the agreement was provisionally concluded with the company. This is the rate that the Government would have had to pay if they had had to borrow the capital needed to run the services themselves for ten years. There will be a change in the fifth year. There is to be a general financial review, as explained in Clause 20 but special provision, outwith the general review, is also made in Clause 17 (2) for the interest rate. For the second five years, the company has agreed that it should follow the appropriate Government borrowing rate prevailing on 1st January 1967, as determined by the Treasury. Perhaps the right hon. Gentleman has forgotten what he said in 1961.
173 His view was endorsed by the Under-Secretary, who is now assiduously studying his notes and who said: The rates of interest under Clause 14 will depend upon when the money is finally made available to the company, and the rate of interest then pertaining, but I think that the hon. Gentleman will appreciate that this does not really matter very greatly as this is really only a cross entry, and if a high rate of interest is paid then my rigfht hon. Friend will just have to make the subsidy that much bigger."—LOFFICtAL REPORT, 11th December, 1961; Vol. 651, c. 102–164.] All I am doing in quoting that is showing that there are substantial grounds for the same Government as then agreeing that the same rate of interest should not run over the whole period. That door, at any rate, is open and whether the interest rate can be manipulated in the way suggested by my hon. Friend the Member for Glasgow, Craigton (Mr. Millan) is a matter for serious consideration.

§ Mr. Cyril Bence (Dunbartonshire, East)
This is a unique Measure and my hon. Friend the Member for Glasgow, Craigton (Mr. Millan) is more justified in bringing forward this proposal for State participation in this enterprise than has been the case with any State-aided enterprise since Disraeli acquired shares in the Suez Canal. The pulp works at Fort William will use raw material developed by the State over the last thirty or forty years by the provision of forests in the Highlands. In the forests of the Highlands there is to situated an enterprise called Wiggins, Teape and Co. Ltd., or more probably Wiggins, Teape and Company (Scotland) Ltd., just as we have had B.M.C. (Scotland) Ltd. and Rootes (Scotland) Ltd. —

§ Mr. Manuel
MacWiggins.

§ Mr. Douglas Jay (Battersea, North)
Scottish Pulp (Development) Company.

§ Mr. Bence
The Scottish company will be responsible. The money will be loaned to Wiggins, Teape & Co. Ltd. and, as the holding company, it will be responsible and liable. I take it that, as the holding company, it will be liable, for example, for any debts. I take it that, equally, it will be responsible for the gathering of profits.
As I see it, this £10 million will be in the form of a debenture. The 174 Amendment, on the other hand, asks that it should be, a participating share in the Scottish company, I heartily support that request. I do so because the company will be the one customer for the type of timber that goes into its pulp mill. There will have to be price fixing. I presume that the mill will pay the world price, but will it? Since it will be the only customer, we are entitled to know if the world timber price will be paid.
The mill may, to begin with, import timber from Canada, Norway or elsewhere to supplement perhaps a short-fall from the Scottish forests. But I imagine that it is the; view of the Board of Trade that there will be ample timber in the Highlands to keep the mill running, perhaps three shifts a day. Will there be sufficient raw material? We must remember that we have the position of a monopoly consumer of a Scottish product. Despite being in this monopoly position, it will be able to import timber —quite freely, apparently—from abroad.

Mr. Deputy-Chairman
I am sorry to interrupt the hon Member. I appreciate that he is advancing 'arguments concerning participation, but he is getting wide of the subject of the Bill.

§ Mr. Bence
I have been making this point because I believe that, because of the freedom the mill will have in acquiring its raw material, the Government should have a certain amount of right to participate in the management of what will be a subsidiary company of Wiggins, Teape & Co. Ltd. I understand that a Scottish company will be set up. The Government are providing £10 million as a debenture and the Amendment merely asks that the Government should participate in the profits of the company.
I believe that the potential for making profits is terrific. The paper industry is today one of the most profitable. The Canadian and Swedish companies are doing extremely well and I have no doubt that the new Scottish firm will do equally well. I see no reason, therefore, why the Amendment should not be accepted. The Government are already pledged to make a payment of not exceeding £1.3 million to offset the interest charges of 5½ per cent. against the loan. Surely the Board of Trade should accept that in a case like this—probably 175 the most clear cut case of its type—the State should participate in the shares and in the running of what will be an enterprise paid for out of the taxpayers' money; public money joined up with the know-how and technique of Wiggins, Teape & Co. Ltd. No banking company or insurance corporation in Britain would make an advance of £10 million to any group of scientists or technologists without having a nominee on the board. I am sure that a banking institution or an insurance corporation would insist on having the right to take up participating shares. I hope that the Government will accept these reasonable Amendments.

§ The Parliamentary Secretary to the Board of Trade (Mr. David Price)
The speeches which we have heard, particularly that by the hon. Member for Dunbartonshire, East (Mr. Bence), tempt me to make a Second Reading speech, but I should be out of order if I did that.
The Amendments relate to Clause 1 (2). If they were accepted their effect would be two-fold—first, to make the Board of Trade responsible for negotiating the rate of interest to be paid on the loan after the initial period, during which it is likely to be interest-free—before 1st January, 1967. Secondly, they would make the Board of Trade responsible for relating that rate of interest to the profits deriving from the mills.
As the Committee can see, and as the hon. Member for Glasgow, Craigton (Mr. Millan) fairly pointed out, the Amendments are contrary to the arrangements in the Bill as drafted. I remind the House what they are. Subsection (2) fixes the rate of interest on the loan at 5½per cent. a year and enables the Board of Trade to agree the other terms of the loan with the company. A rate of 5½per cent. is broadly in line with the current Government rate —for example, Treasury borrowing on a ten-year basis—and as such was regarded as acceptable to the Government and to the company. Furthermore, by arrangements to be made under the Bill the company will start repaying the loan at the end of 1968 at the 5½per cent. interest rate. As I told the House on Second Reading, repayment will be made over ten years, in ten 176 equated instalments of capital and interest starting on 31st December, 1968. If we adopted the Amendments there would be no certainty as to the return which the nation would get from its loan to the company. The hon. Member fairly conceded that that would be one of the consequences.
This proposal would have the added disadvantage if we adhered to the current period of repayment—ten years —that any financial benefits which might accrue to the taxpayer would be limited to the period of the repayment of the loan, which is likely to be the period of the least profitability of the enterprise, because it includes the earlier years when it is getting into full production and is having teething troubles. Inevitably one expects far lower rates of return on the investment in the earlier years than when the concern is fully established.

Mr. Milan
But if it were a varying rate of interest there would not be the ten-year repayment period from 1968. It was impossible to put down an Amendment to that effect because that is in an agreement which is not before us.

§ Mr. Price
I think that the hon. Member is agreeing with me on this point. He said that these Amendments are a method of acquiring an equity interest in the project by the back door. I do not object to that. It is probably the only way in which he could achieve it under the rules of order.
On Second Reading both my right hon. Friend the Secretary of State for Scotland and I indicated why the Government decided not to take an equity interest in the project but preferred to lend the money as a prior charge on the company's profits. As this is the issue before us, I should like to give one or two of these reasons.
The Fort William project is only one of the Wiggins, Teape group's many activities, and the Government would hardly be justified in participating in the equity of the whole group. Hon. Members I think accepted this. In considering what sort of subsidiary company Wiggins, Teape propose to run, it may be of interest to the Committee to learn that the Scottish Pulp (Development) Company, which was established to investigate this project, will be wound 177 up. It was originally formed jointly with the other companies which at the time were to participate in it. The project will be operated jointly by two firms which are within the Wiggins, Teape group of companies. The reason is that there are two specialities coming in—the pulp side and the paper mill side —but it will just be part of the Wiggins. Teape group as a whole—

§ Mr. Manuel
The hon. Gentleman should make it quite clear that when he talks of the Wiggins, Teape group of companies, the Government are devoting £10 million for a period of years to the Fort William project alone, within that group. If there is separate accounting there, he cannot have it both ways.

§ Mr. Price
The hon. Gentleman is perfectly right in saying that the money is for the Fort William project as such, but the company with which the agreement will be made is the Wiggins, Teape group as a whole. Furthermore, if, in the early years of the project, the Fort William project is not making a profit —after the early years when we come to waive the interest by a further interest-free loan—from 1967 onwards we will have a call on the profits of the group as a whole to repay the interest and capital. It is a considerable advantage to the taxpayer that the prior charge is on the profits of the group as a whole, and not just on this project—

§ Mr. H. Rhodes (Ashton-under-Lyne)
The Minister is himself showing the strength of my hon. Friend's argument. If this project is part of the Wiggins, Teape organisation, what is to stop Wiggins, Teape from going on for many years without showing a profit at all? In that case, what happens to the Government's loan, except coming on to the whole of the group. If this, in addition, is a development district and the company is getting 25 per cent. for buildings and 10 per cent. for capital outlay on the machinery, and is able to write off at 130 per cent., as the Chancellor told us this evening, surely there should be a Government nominee on the board to look after the Governments interests?

§ Mr. Price
The taxpayer's position is very much more preserved by the fact 178 that the security is not merely on the project itself but on the profitability of the whole Wiggins, Teape group, which is, as it wore, standing to guarantee repayment. Speaking in commercial terms, this is in the nature of a debenture, as a prior charge.
I know teat hon. Members are under the disadvantage that the agreement is not before the Committee, but the agreement cannot be before the Committee because we cannot conclude the agreement until the Bill has had the Royal Assent—

§ Mr. Jay
Can the Parliament Secretary elucidate one point? Will the Wiggins, Teape group be able, in relation to this project, to claim the free depreciation under the Finance Bill, and the other benefits under the Local Employment Bill, in addition to this agreement?

§ Mr. Price
I understand so— —

§ Mr. Manuel
The Parliamentary Secretary has explained that if the Fort William project did not prove to be successful there would be the ability of the rest of the companies in the group to guarantee repayment. But if the reverse were to happen—if there were a failure in the other Wiggins, Teape projects and the Fort William one were successful—the weight of the others would pull it down. That could happen.

§ Mr. Price
If I might correct my reply to the right hon. Gentleman's intervention, I understand that Wiggins, Teape would have the free depreciation, but not the building grant.
We were dealing with the broad point of the possibility of getting an equity in the project. The firm has asked only for relatively short-term financial assistance. One hon. Member opposite admitted that, in the light of this sort of project, the ten-year repayment period could be regarded as short term.
We feel that the taxpayer's interest is most suitably safeguarded by taking a prior charge on the Fort William assets. The hon. Member for Central Ayrshire (Mr. Manuel) asked what would happen if the other' part of Wiggins, Teape got into the near red. He asked what guarantee the taxpayer had. The taxpayer's guarantee will be the whole of the assets at Fort William. I understand the difficulty hon. Members are in because the agreement is not before the Committee. 179 They will equally understand that we can- not enter into agreement before the Bill receives the Royal Assent.

§ Mr. Bence
The hon. Gentleman has just said that the debenture will be a prior charge on the Fort William assets. I understood him to say earlier that the debenture will be a prior charge on all the assets of the parent company.

§ Mr. Price
It is fairly clear. The whole of the Wiggins, Teape trading profits are available to pay back loan at the interest rate of 5½ per cent., but if the worst really happened and Wiggins, Teape were as a group to run into great financial difficulty the prior charge which the public would have on Wiggins. Teape, if the whole thing were wound up, would be a prior charge on the assets of the Fort William project.

§ Mr. William Ross (Kilmarnock)
It is a great pity that the hon. Gentleman did not consult the former Secretary of State for Scotland, the right hon. Member for Renfrew, West (Mr. Maclay). He would have found that when we dealt with the Highlands and Islands Shipping Act and the North Islands of Orkney Act we had before us at the same time drafts of the agreements referred to therein.

§ Mr. Price
There is the further fact that in the short term, at least, there are commercial risks involved in establishing this project. Therefore we feel that it is right that the company and not the taxpayer should be asked to bear these risks and that in asking the House to approve the use of public funds to assist this project we should be able to make it quite clear what return we should be receiving.
While a rate of interest varying with the profitability of the enterprise might result in increased payments to the Revenue if everything went as we hoped, in the event of the venture not proving successful in this limited period it could involve a considerable loss to the Exchequer, and this might be more likely to happen in the earlier years.
Apart from the issue of principle, to relate the rate of interest to the net profits of the company, that is Wiggins, Teape, the holding company, arising from the operation of the pulp and paper 180 mills, would lead to practical difficulties. Our intention is that the Fort William project should be operated jointly by two of the subsidiaries of the company and will represent only a part of their activities. The net profits of the parent company as a result of the project will depend entirely on the policies adopted by the group both for charging intercompany transactions, that is purchase of raw materials and sales of finished products, and also for payments of dividends or other transfer of profits between the subsidiaries and the parent.
Any provision with regard to relating interest to profits would have to be included in the original agreement between the Board and the company and the whole project might be defeated by the difficulty of obtaining agreement between the parties. It would cause an impossible situation if agreements regarding the rate of interest had to be negotiated from year to year when profits, if any, were ascertained, because this might also lead to an impasse and the whole project might get into administrative difficulties with wrangling going on with the Board of Trade.
It is only fair from the point of view of somebody trying to manage an industrial project that if there is a prior charge on the trading profits one should know the rate of interest one has to service. I think that this is reasonable and there for hon. Members will not be surprised to know that I cannot ask the Committee to accept the Amendment.

§ Mr. Jay
We all wish to see this joint venture go forward and succeed quickly. Indeed, it is a joint venture in which the State is putting up more than half the capital, and, allowing for the other concessions, such as the free depreciation, I should think that when it is worked out it is more than half the capital. But we are not by any means satisfied with the form in which the Government are presenting this venture to us. The hon. Gentleman cannot expect us to be bound by this ten-year repayment agreement. This is not in the Bill. We must argue tonight on the basis of what is in the Bill, and we must propose Amendments on that basis. It is unsatisfactory that we have quoted at us an agreement which we have not seen and which will not be laid before the House until some time in the future.
181 Under the proposals which the Government are now putting before us the situation is this. If the venture is not sufficiently successful for the interest to be fully paid by the company in the early years, what happens is that in the early years the Wiggins, Teape group gets this large amount of capital interest-free, and in the later years when it pays interest the interest cannot rise above 5½ per cent. The loan is then repaid over a period.
In effect, therefore, the State is taking a very large measure of the risk and it cannot get in return more than a rate of 5½ per cent. for some of the period of the loan. That does not seem a very satisfactory situation. In addition, it is taking the risk without getting any control. There is no representation on the board. There is no shareholding. It cannot, therefore, exert pressure to see that the money is used in the most economical and profitable manner, which one would have thought anybody lending this large amount of money would wish to do.
But suppose that instead of that alternative the Government had adopted the sort of proposal which my hon. Friend has put forward. Suppose the Treasury had taken either a direct equity share in this venture or suppose there had been a joint subsidiary formed, of what part equity was held by Wiggins, Teape & Co. Ltd. and the other half was held by the Government. In those circumstances, if the venture had not turned out very successful there would have been very little or no profits either for the Government or for Wiggins, Teape & Co. Ltd. If, on the other hand, it had, as we hope, proved highly successful, the company would have done well and the taxpayer might have earned more than 5½ per cent. I should have thought that would be a much more happy arrangement. This is how private enterprise would have arranged it.
To take two other examples from development districts, in the case of British Nylon Spinners at Pontypool, what did I.C.I. and Courtaulds do? They formed a joint subsidiary and took an equal risk and an equal share in the profits. The hon. Gentleman knows even more than I about I.C.T. and he will know these facts. At Grange-mouth, British Petroleum and British 182 Distillers formed British Petro-Chemicals and it has been highly successful. Indeed, the ironic fact is that the Government have a 52 per cent. interest in B.P., and B.P. has a major share in British Petro-Chemicals.

§ Mr. J. T. Price (Westhoughton)
Further than that, in the steps that have been taken to protect the taxpayer's interest they have accepted the appointment of Government nominees on the board of directors of that company, the same as Iranian Oil has a large equity shareholding.

§ Mr. Jay
And this is due not to the foresight of Disraeli but to the right hon. Member for Woodford (Sir W. Churchill). I do not see that the Parliamentary Secretary has advanced any reasons for preferring the system which he is putting forward in which the Government will have to pay a subsidy and will not get any control or share of the profits if the venture is particularly successful. It seems to me that the Government are rejecting what would be the sensible course to take, not only in the interests of the taxpayers, but as a business arrangement. They are acting out of purely political and ideological desires. The arrangements before the Committee mean that, so far as the private firm is concerned, it is a case of heads you win, tails I lose. We do not think that that is satisfactory.

§ Mr. Rhodes
I should like to ask one or two questions. First, what guarantee have the Government after they have advanced the funds mentioned in the Bill? If the company does not make a profit, will the Government be recompensed in the long term? If this company which is being established at Fort William is a subsidiary of Wiggins, Teape there is surely nothing to stop Wiggins, Teape from "milking" the profits of the company and continually delaying the payment of interest on the capital which has been advanced. After hearing of the benefits which have accrued—134 per cent. being able to be written off from taxpayers' money, for example—and after the very flimsy way in which the guarantees are drawn, and in the absence of arrangements which we say should have been made, we cannot give a complete judgment on the matter.
183 All that we can do is to guess. It would seem that the company will be in a very advantageous position and, up to a point, I do not quarrel with that because we have to do something about the job in hand. Yet, on the other hand, there is surely no need for the Government to go beserk with the taxpayers' money to this extent. Without the Committee having reasonable knowledge so that hon. Members might try to form some estimate of how things will turn out, I would ask the Parliamentary Secretary to make a few comments on this question of guarantees; something a little more responsible and fuller than just saying that in the event of the company making a profit the responsibility for paying interest will rest on Wiggins, Teape as a whale but that, if it fails, the only recompense which the Government will have is on the assets of the venture at Fort William.
It seems that the Government have missed an important opportunity on grounds of dogma. This doctrinaire policy is wrong. The Government ought to have stepped out of the rut a little and gone in with Wiggins, Teape. Can the Parliamentary Secretary explain a little more fully some of these points?

§ Mr. Millan
I found the reply of the Parliamentary Secretary completely unsatisfactory. I must say that I thought it particularly ironic that he should have argued against the Amendment on grounds of complexity when the kind of agreement he has attempted to explain could not have been more complicated. This, of course, only demonstrates the unsatisfactory procedure we are following —the almost futile procedure—in discussing something which we have not got before us.
This Government do not often learn their lessons, but I hope that the Parliamentary Secretary might learn this lesson. It would be more satisfactory for the Committee to have this type of agreement before it should any similar occasion arise in the future.
The only point I want to press the Parliamentary Secretary to answer is this. I ask him the question specifically. Did the Government consider an alternative arrangement to the kind in my Amendment, or did they think only of simply advancing the money by way of loan? 184 Did they consider taking an equity participation? That is what I should like the Parliamentary Secretary specifically to answer.

§ Mr. J. T. Price
These points certainly deserve a fuller reply than they have received up to now. I rise to put a point of view I would normally hesitate to put here on Scottish business—

§ Mr. Ross
It is not Scottish business.

§ Mr. Price
—because I have been a Member long enough to know that we leave things north of the Border to our Scottish colleagues—

§ Mr. Manuel
This is not only a Scottish matter.

§ Mr. Price
—but this is a matter which transcends purely Scottish considerations to me, this is a fundamental matter of principle. [HON. MEMBERS: "Hear, hear."] It has been freely agreed in all parts of the Committee that the establishment of this new industry at the head of Loch Linnhe is a bold and imaginative venture which commands support on general lines from most of us who are anxious to see a revival of the affairs of the Highlands and better standards of living for the people who still live there.
Hon. and right hon. Gentleman opposite, as my hon. Friend the Member for Ashton-under-Lyne (Mr. Rhodes) said, are so preoccupied with ideological considerations—I am not saying we on this side are completely immune from them either—and pride themselves, and posture on public platforms, as being keen business men, and talk down to us bleary-eyed idealists— [Interruption.] Did I say "bleary-eyed"? I am not bleary-eyed even at this time of night. That was perhaps a Freudian slip I correct at once. I meant starry-eyed. Nevertheless, hon. Members opposite have talked often of the inability of us on this side to observe business considerations when we were the Government, and they say we would not observe them if we became the Government again, but the point is that no prudent director of a commercial undertaking would have entered into an agreement of this kind without better safeguards than the Government have so far shown they have.
I remind the Parliamentary Secretary of what may be ancient history but is germane to this issue. Some years ago, 185 in the period when Attlee's Government were in charge of the affairs of this country, we were very heavily criticised for the collapse of the groundnut scheme in Africa. My right hon. Friend asks, why bring that up? Because I was prepared to face the criticism of the groundnut scheme. It was a scheme which was initiated in the first place, if I am correctly informed, by the Lever combine, and when it got too big for it, it traded it off to the British Government—the Labour Government, who went into it with enthusiasm but without the technical skill and "know-how" to make it succeed. It failed. We heard in this Chamber about the groundnut scheme for ten years afterwards. We were prodded and chided about it. I am not complaining. We have got to be pretty thick skinned here to endure all the criticism—

§ Mr. Rhodes
I never heard the groundnut scheme mentioned after Suez.

§ Mr. J. C. Jennings (Burton)
The hon. Member has now.

§ Mr Price
I was trying to keep my speech within reasonable limits.

The Deputy-Chairman
Order. The hon. Gentleman is entitled to use the groundnut scheme as an example briefly for comparison, but we cannot discuss its connection with Suez.

§ Mr. Price
I have no wish to transgress the rules of Order, Sir Robert. I illustrate my theme briefly by comparing the experience with the groundnut scheme with what might be the future experience of the Highlands development scheme under this Bill. We hope that it will succeed. I wish it the greatest success technical skill can provide. Nevertheless we are not sure that it will succeed. As far as I have been able to discover in reading the documents and in listening to the speeches on behalf of the Government, I see no guarantee that the taxpayer will be protected against the consequences if the scheme fails.
Unashamedly and without apology, I say that it is quite improper for a responsible Minister of the Crown to ask us to pass a Bill on the nod when the essential document which embodies the terms of contract is not before us. I ask you, Sir Robert, since this document has been mentioned by the Parliamentary Secretary, whether we are not entitled to have 186 it laid on the Table. I had always understood it to be the procedure that where a document was mentioned which was germane to a Bill we were entitled to see it. My right hon. and hon. Friends are entitled to press this point. I do not want to be unreasonable. My right hon. and hon. Friends have right on their side and until the Parliamentary Secretary can give an adequate explanation I do not think we should pass this Bill.

§ Mr. Manuel
The Parliamentary Secretary should be more forthcoming about the salient points of the agreement. I do not doubt that he knows the outlines of it. Something has been drafted but he is not telling us. Why? We should have seen at least a draft. The Under-Secretary of State for Scotland seems quite happy, so I presume the agreement has his approval. I ask the Parliamentary Secretary to try to tell us about it.
I take it that when the agreement does come before us eventually we shall be able to pray against it but that is not a satisfactory way of securing a debate on it, and it would only be a brief debate. Tonight is the time to do it. Parliament ought not to be limited in this way. We should have a fair opportunity of knowing the basis of the agreement, considering that a great deal of the taxpayers' money is at stake.
If we are deliberately, and with good will, allocating £10 million of public money to this project—which I believe will help revive the Highlands—it should be tied to that project and not to other assets of Wiggins, Teape. If we are to have no representation on the board however, we could not be sure of this. The agreement may protect us, but if the hon. Gentleman says that then he is contradicting what he said earlier—that it would be difficult to extricate the various accountancies of the. various holdings of the parent company. There should be separate accountancy for each project. As he must know, that happens in much bigger companies than Wiggins, Teape. If this is so, why not have separate book-keeping and accountancy for the Fort William project alone? We could then give it all the help we want and ensure its success, without a nagging fear that it may be pulled down because of inefficiency in other projects with which we have no connection and of which we have no knowledge.

§ Mr. D. Price
The most convincing argument in favour of the way we suggest to the Committee that the project should be financed was put by the hon. Member for Westhoughton (Mr. J. T. Price), who went a great deal further than I or any member of the Government would go in suggesting that, at least in the early years, the project might not be all that profitable. We have no intention that this should be a groundnut scheme. The hon. Gentleman gave a good cautionary tale to show, in terms of protecting the public purse, why it is right that the project should be financed as we propose, namely, at fixed interest and with a prior charge in the nature of a debenture on the assets.

§ Mr. J. T. Price
I know that the hon. Gentleman wants to be fair, and he usually is in debate, but he must remember that, when I gave, quite voluntarily, that comparison with the groundnut scheme, I had not forgotten that, just as the British Government planted the trees and plants which were to produce the crops out in Africa, so the British Government have planted the State forests in the Highlands of Scotland on which this factory will draw. This is germane to the issue.

§ Mr. D. Price
I do not think that that in any way alters the argument. If there were not the Fort William project, there would still be the problem of selling the trees which are already planted and which have already been financed. Indeed, in many ways, this project is of very great benefit to the State forests because it will make it very much easier to sell not only the timber required for the construction industry but the thinnings and so on. The hon. Gentleman asked me to be fair to him. He must be fair to us. His intervention was irrelevant to the general question.
The hon. Member for Glasgow, Craig-ton (Mr. Millan) asked me a direct question: did the Government consider other ways? Of course, we looked into all the permutations. There are many variations. But the Government came to the view that, in these circumstances, this was the most appropriate way of doing it.
I recognise the difficulty of hon. Members in the Committee tonight. 188 Obviously, it would be very much easier if we had the agreement before us. But the agreement has to be negotiated in detail, and my Department is not in a position to enter into negotiations until we get the authority of Parliament through the Bill. It would be out of order if I went further and discussed what is in Clause 1(4), but the hon. Member for Central Ayrshire (Mr. Manuel) made a passing reference to it, so that point is before the Committee. It is hoped that, if we get the Bill through all its stages in both Houses in reasonable time, the agreement will be available for the House before the Summer Recess.

§ Mr. Ross
The agreement, of course, is all-important, and it is tied to this subsection because our decision will affect repayment, and repayment is covered by the agreement. The agreement is to be referred to both Houses of Parliament. There are three different ways in which such an agreement can be laid. It can just be laid on the Table and no more. One can ask for it, read it and inwardly digest it, and do nothing about it. A Question could be put to the Secretary of State, and, if we were lucky, the present position is such that we would have one opportunity for an answer before the Summer Recess, and the chances are that anyway, if it was the Secretary of State who was answering, the answer would not be very satisfactory. The second way is by moving a Prayer. The third way is by the Government bringing the agreement before the House for its approval.
All that is provided in the Bill is that the agreement shall be laid before both Houses, and I fancy, by the smile on the Parliamentary Secretary's face, that if he gets the Bill tonight, he will have no trouble with the agreement because it will not be debated. If he likes, he can be generous and say that the Committee has shown tremendous interest in the agreement and that he will therefore take steps to ensure that it is laid before the House for approval.
I probably misled the Committee when I spoke about the Highlands and Islands Shipping Act. We discussed that as an Act, but we did not then discuss the agreement although we later had a full-scale debate on it. We had a similar debate about a month ago when we had to provide £10,000 to finance a couple of 189 wee ships for the south islands of Orkney. According to the terms of the Act, a draft agreement had to be produced for approval and the House debated it, and we even had the attention of the Liberal Party which, for some reason, does not seem very interested in the Highlands of Scotland tonight.
The point is that for £10,000—and this applies to MacBraynes if £10,000 has to be advanced in any one year-a draft agreement has to be produced and the Secretary of State for Scotland—or, more likely, one of his Under-Secretarys—has to satisfy us about the agreement. The agreement is about four times the size of this Bill and includes things like the stipulation that labour shall be employed according to trade union conditions, the payment of directors, and so forth.
We are not asking for anything new. The case of British Petroleum in 1912 has been mentioned. There was even a question of a new company being set up when we nationalised the shipping services in the north islands of Orkney. The first Measure passed after the last election, which was fought by hon. Gentlemen opposite on "No more nationalisation", was a nationalisation Measure. The Secretary of State formed a new company and he appointed the directors.
It is probably right to say that real stake is the £1.3 million to cover accrued interest before 1st January, 1967, but we are making a loan of up to £10 million. There is more in this, however, than just getting our money back. If there were any danger of our not getting our money back Wiggins, Teape & Co. would never have ventured upon this enterprise. The Parliamentary Secretary himself said on Second Reading that the long-term commercial prospects were good.
I hope that they are, for we have far more at stake than just £10 million. We have generations of investment in forestry, both public and private. We have investment in the power to be used for the construction of this enterprise and even in the railways services.

The Deputy-Chairman
The hon. Member for Kilmarnock (Mr. Ross) is going a bit far. I have been fairly lenient on the question of participation, but I think that the hon. Member is going too far now.

§ Mr. Ross
I was saying, Sir Robert, that I was not unwilling to stake the money. I was pointing out that the fact that we have already staked a very much greater sum and the fact that Dr. Beeching has said that the railway will be kept open for another twenty years despite the amount of money which may be lost show what we are prepared to stake to get this industry started. The Amendment should be accepted. After all—and despite the complexities—nothing ham been so finalised that the Government could not wait a few weeks longer and reconsider and negotiate this admittedly complex matter with the company.
Had we waited just a couple of days longer we might have known a little more about Wiggins, Teape & Co. Ltd. Its annual statement is expected to be published in two days' time and we could have seen how things have been going for the company during the past year. The timing in bringing forward the Bill tonight, is, shall we say, convenient? There is not a lot between us. We are merely asking the Government to do something that is by no mean revolutionary.
If the Government are confident of the success of this venture they should be prepared to put this matter forward in their negotiations with the company. It must be remembered that Wiggins, Teape & Co. Ltd. has been aware of the possibilities of Highland timber for a long time. In an excellent document produced by the company hon. Members are told that four or five years ago it first made a approaches on this subject.
I suppose, from what has been said by hon. Gentlemen opposite, that my hon. Friends and I are not going to get far with our suggestion tonight. I regret this because, as we have one of the newer and younger hon. Members opposite in charge of the Bill, I thought that we might have got some forward thinking. The Government must realise, after all, that they are not the first organisation with whom Wiggins, Teape & Co. Ltd. has joined forces. The company has all sorts of agreements, including one for photographic paper with British-American Tobacco Company Ltd. What would be wrong with the British Government sharing an interest in something which is costing them, or the taxpayer, about 191 £12 million a year-the Forestry Commission? Had we had some participation we might have ensured that there were safeguards for the user on the subject of prices. Hon. Members opposite are often concerned on this aspect.
I hope that the Government will think again about this. Scotland's stake in this matter is extremely high. As my hon. Friend the Member for Central Ayrshire (Mr. Manuel) pointed out, local authorities in Scotland are to spend a great deal of money in connection with the Bill. An Answer I received from the Secretary of State last week showed that they plan to spend £2½ million on providing services for the mill. Inverness County Council will get 64 per cent. of its rate-borne expenditure paid by Exchequer equalisation grant. That is apart, of course, from the housing subsidies which, I presume, will be paid in respect of houses built by Inverness and Fort William Councils.
I hope that hon. Members opposite are not thinking that we are being doctrinaire about this. The community concerned will be dependent on this private enterprise plan which has been applauded, supported and approved by everyone. I am sure that nothing in any agreement will cover the possibility of shut-down and withdrawal. The worst argument the Government could have used was to say, "In the early years there might not be a profit." It might happen that in those early years the Government will not have advanced all of the £10 million, because the first stage does not start until 1965. What will happen in the early, unprofitable years if it is decided to shut down the plant? That is another important reason why the Government should participate in this venture; and I do not, of course, mean the day-to-day running of the company.
11.45 p.m.
Because we want this project so much and approve so much of it, we shall not vote on this issue tonight. But we do not want the matter to go by default if we permit the Amendment to be nega- 192 tived. I hope that the hon. Member will not take a negative attitude towards it or take it that he need do no more thinking along these lines. He still has time to think about it. After two days. after we hear about the bright sunshine of Wiggins, Teape & Co. and all their fifty-five various enterprises, we might learn that they are prepared to join the British Government in partnership.

§ Mr. Jay
The Parliamentary Secretary might answer the precise question whether the agreement. when it comes before the House, will be something against which the House can pray.

§ Mr. D. Price
I understand that it is not necessary for this to have an affirmative Resolution, but it is an issue on which the House can ask Questions. It can be debated on the Board of Trade Vote and, of course, on the Adjournment.