New Clause 1

HC Deb 24 May 1968 vol 765 cc1118-33

RESTRICTIONS RELATING TO FINANCIAL ASSISTANCE TO COMPANIES

The Board shall not make any loan or grant to or acquire shares in a company unless that company observes and undertakes to observe trade union terms, rates and conditions in respect of all persons employed by them.

The Board shall not make any loan or grant to or acquire shares in a company which carries on or proposes to carry on any business or undertaking in any part of the Highlands and Islands which is or is likely to be in competition with any similar business or undertaking operating in that part of the Highlands and Islands unless such loan or grant is made or such shares acquired at the commercial rates then prevailing.—[Sir C. Black.]

Brought up, and read the First time.

Sir Cyril Black (Wimbledon)

I beg to move, That the Clause be read a Second time.

Mr. Speaker

With the new Clause we are to discuss the following Amendments:

Amendment No. 1, page 1, line 8 after 'the', insert 'fully paid'.

Amendment No. 3, in page 1, line 9 after 'a', insert 'public'.

Amendment No. 4, in page 1, line 12 at end insert: '(with the consent of the Company). Amendment No. 6, in page 1, line 20, at end insert: (3) In exercising the powers specified in paragraph (c) of subsection (1) of this section the Board shall first offer the holding, or the part thereof to be disposed of, at a fair price to the person from whom such holding or part was acquired and if such person shall decline such offer or if within six weeks he neglects to signify his desire to accept such offer the Board shall offer the holding or the part of the holding, as the case may be, at a fair price to the members of the Company. Amendment No. 7, in page 1, line 27, at end insert: 'in the event of the Company being unable to repay the loan in cash on the due date'.

Sir C. Black

I want today to observe a self-denying ordinance in view of the time of the House which has already been not lost but consumed as a result of previous business. There are three main issues raised by this series of Amendments, and I will briefly deal with them one by one.

First, the first part of the new Clause lays it down that the Highlands and Islands Development Board shall not make any loan or grant to, or acquire shares in, a company unless that company observes and undertakes to observe trade union terms, rates and conditions. I do not imagine that there is likely to be any difference of opinion or controversy about this. We are all familiar with the fact that Government and local government contracts usually contain what is called a fair wages clause, which imposes the condition on contractors that they observe trade union conditions and pay trade union rates. It seems quite proper that we should secure that position by making this provision.

The second issue arises from the latter half of the new Clause. There may be some room for a difference of opinion about this, because it lays down that the State shall not provide assistance and funds to assist one business, either an existing business or a proposed new business which will be in competition with any similar business or undertaking operating in that part of the Highlands and Islands, unless such loan or grant is made, or such shares acquired, at the commercial rates then prevailing.

12.45 p.m.

I see no objection to the Board's assisting a company which may be in competition with another company carrying on a similar business in the same area if the financial assistance accorded to the first is on ordinary commercial terms. If the first company borrows money from the Board at the rate of interest which it would have to pay to a finance house or bank, that is a normal business transaction. If the Board subscribes for shares on the same terms and conditions as the commercial world would be willing to subscribe for them, that, too, is a perfectly normal commercial transaction. What seems unfair and objectionable would be a condition in which there were two businesses in competition in the same area, or one business with a new business proposed to be started in competition with it, when the State provided assistance on less than commercial rates to one, so that the other was not thus assisted. That would be a distortion of that normal fair competition which is very desirable between businesses, particularly businesses in the same area, carrying on the same line of business.

I come now to Amendment No. 6 and Amendment No. 7 to both of which I am one of the signatories. Amendment No. 6 is a very important provision. The Bill lays down that the Board may sell in whole or in part any equity shares which it has acquired or for which it has subscribed in a business in the Highlands and Islands which it desires to assist. I am not in any way challenging the main purpose of the Bill, but I suggest that it would be reasonable, if the Board decided to sell its shareholding in whole or in part, that in the first instance it should offer those shares back to the original owner, and that if the original owner was unable or unwilling to acquire them, they should be offered at the same fair price to other members of the company in which the shares are held.

There might otherwise arise the position that the Board had a shareholding which held the balance between two elements of shareholders, and it might have a decisive voting effect on the company, and those shares might be acquired by one of the two other groups of shareholders, or by some competitor in the same area, and that might prove to be to the disadvantage of a minority shareholding, a minority which may be a family holding in a family business which has been carried on as a family business for many years.

If we assume, as I assume in the Amendment, that the price at which the shares are to be sold is a fair price, it is not unreasonable to safeguard the position to the extent of giving the original vendor the first chance to buy them back, and, if he does not do so, to offer them to the other shareholders before offering them to the general public.

I now come to Amendment No. 7. One has to bear in mind that a loan may be made by the Board to a company with the right to convert the loan at some future time into share capital. I see no objection to that in principle. If a point is reached at which the loan is repayable and the company is unable to repay, in that event by all means give the option to the Board to convert the loan into equity capital, but if when the loan conies up for repayment the company is able, willing and anxious to repay the tax, then it should have the right to repay in cash before any question of conversion into equity capital arises.

I have been brief. I hope I have said enough to make my points clear, and with a view to getting on with the business I shall certainly conclude what I had to say.

Mr. Robert Maclennan (Caithness and Sutherland)

At each stage of the progress of my Bill I have tried to make clear that its purpose is only to extend in certain respects powers conferred on the Highlands and Islands Development Board by Sections 6 and 7 of the parent Act. New Clause 1, in my view, would import entirely new conditions into the Bill, conditions which are quite outside the range of provisions which Parliament put in the 1965 Act. Both parts of the new Clause, the trade union part and the second part, are restrictive.

Turning to the trade union part, I see no need at all for it. Indeed, I would regard it as positively disadvantageous for the Highlands and Islands Development Board to enter into the delicate field of industrial relations. Speaking with experience of a Highlands constituency, I have no evidence which leads me to think that there is a special problem in the area to justify the exceptional course proposed by this Clause. If the hon. Member has such evidence, then I would suggest that he ought to pass it on to the appropriate quarter. I cannot accept that the Board should be asked to inquire into the history of companies' labour relations, or that it should set itself up as the arbiter of whether or not a company is a good company or a. bad company in trade union terms. Such an obligation is not laid upon the Board of Trade which has similar rights and operates a similar scheme.

With regard to the second part of the new Clause it would effectively emasculate the power of the Board to make loans at flexible rates of interest. Any company to which the Board makes a loan is likely to be in competition with other concerns. The idea of giving grants at uncommercial rates is certainly a new one to me.

The purpose of the 1965 Act was not to set up the Board to make grants and loans at commercial rates of interest. It was to encourage the development of the Highlands area in the widest and best sense, and for this reason the Board was given a unique range of powers and duties, with a certain flexibility in the power to make loans and grants, and that has always been an important feature of the Board. I cannot honestly believe that hon. Members would wish to see this go.

I would urge the House most strongly to reject the new Clause.

Turning to Amendments No. 6 and No. 7, to which the hon. Member referred, I think the point should be made that, since the interests of those who sell shares to the Board are already protected as those of willing sellers, I do not think that there is any need for amendment in the way the hon. Member suggests.

As to Amendment No. 7, I have stressed in all my speeches on this Bill that its main purpose is to give greater flexibility to the Board in providing financial assistance, and I believe that the Amendment would seriously erode that. The hon. Member concedes that there will be cases in which the interests of the Board do not coincide exactly with the interests of a company. I accept that, but if a company is to seek the help of having public funds at its disposal the Board must continue to have power to impose conditions on the loans.

Therefore I would ask the House to reject the two Amendments likewise.

Mr. Joseph Hiley (Pudsey)

When I read the Bill I thought that the proposer of it was seeking to protect a first company as distinct from companies which might come later. I am wondering whether that is the intention. If I may dare say so as a Sassenach, the Bill is rather treating industry in the Highlands and Islands—indeed, in Scotland generally—far too generously, and unfairly so by comparison with industry established in other parts of the country. There is a general tendency nowadays, I believe, to diminish the forms of protection. I speak nationally now. It would appear that, if an industry is established in Scotland and is to be protected in such a way that no one else can go into the area except on different conditions and at different rates, we are giving industries already there extremely unfair advantages over others. Surely, as much as is required has already been given to them in the form of regional employment premiums, and through the Selective Employment Tax changes. I may be completely wrong about this, but I should like clarification either from the Minister or from the sponsor of the Bill.

Mr. Malcolm MacMillan (Western Isles)

I shall be unaccustomedly brief on this occasion as there are other Bills to come which I expect most hon. Members want to support and debate, and so I shall make this speech as quickly as possible, but there are one or two points which raise considerations of very considerable importance. I do not know whether my hon. Friend the Member for Caithness and Sutherland (Mr. Maclennan) could be accused of having dismissed them altogether, in replying on the Amendment, but perhaps he did refer a little lightly to one or two of them in passing.

What the hon. Member for Pudsey (Mr. Hiley) said was a most interesting extension of the argument which I heard from one hon. Member for a Border constituency a week or two ago—and on this Bill and in this House—who said that Border firms are disadvantaged because of the very favourable terms which are offered by the Highlands and Islands Development Board to firms setting up in the Highlands and Islands. That was also the hon. Member's point of view today. It is indeed interesting evidence that the Board and the Government and their policies have been so extremely effective that hon. Members from other parts of the country feel that firms going to the Highlands and Islands today are going to the best possible place in which to develop, because of the conditions which the Government and their Act and the Board have created and made possible. It is an extremely good advertisement for the Government's policy, and of the Act and of the Board, and I am glad to take the compliment, however obliquely, from the hon. Member.

Mr. Hiley

Will the hon. Member not concede that, they having gained so much success in their attempts, it may now be asked, why should they pursue them to the disadvantage of industry in other parts of the country?

Mr. MacMillan

Of course, the hon. Member is speaking as an Englishman, and as an Englishman I quite agree that he has a point, but nowadays there is an emphasis on regional interests and policies and on regional development. For many years I have argued for differential subsidies and incentives, weighted heavily in favour of firms, prepared or officially pressed to set up and invest in areas of less obvious commercial attraction in the Highlands and Islands.

In those areas there should be substantial inducements offered to firms who come into them, to compensate them one way or another, since they face exceptionally difficult conditions and prospects. I do not think it is an unreasonable point of view, and I think the hon. Member will agree that some assistance to effect an equalisation of costs might be desirable in the case of firms coming into especially difficult areas.

1.0 p.m.

This might, indeed, apply in the Highlands and Islands region as a whole, if for no other reason than that there has been, over generations, little accumulation of local capital, for reasons which are well understood. That region has suffered grave neglect under many Governments, while depopulation and emigration went on and there was a sterilisation of possible development by those who owned the land, who took it largely as their own private paradise, to be developed for sport to the neglect of industry and almost everything else. Consequently, there was no industrial development and to this day many landlords give it little encouragement.

Therefore, the Development Board having been created, it should be given the greatest possible freedom of action and the right to offer the greatest reasonable inducements to make up for those years of neglect, during which there was no possible accumulation of capital for industrial development and the purposes which the Bill is designed to assist. The hon. Member made his point reasonably —one has often heard it put more harshly —but I hope that he and other hon. Members from England who feel the same way will make allowance for the great backlog created by these arrears of neglect in the Highlands and Islands and give the Board the greatest possible help to assist firms which are struggling in the area or those willing to enter it but requiring assistance in this or some other form.

My hon. Friend mentioned the advantage of grouping firms for marketing and other purposes. I hope that the Board will be able to approach firms with like interests pursuing the same kind of business to get them to come together. This would make it, in some cases, a better proposition for the taxpayer and the Board to help.

I support the spirit of the first part of the Amendment. It is particularly important that employers in the Highlands and Islands should be expected and pressed to observe trade union terms, simply because union organisation is so much more difficult in an area where the working population is so widely scattered. Rates and conditions are both very important matters. After all, we expect a Government contractor to observe the fair wages Clause and we make sure that he does.

It is not enough to say that the Board of Trade is not specifically and statutorily expected and enjoined to lay down to all to whom it advances money that they should observe trade union terms, rates and conditions. There is, moreover, a final point at which the observation of those wage rates and terms by the companies concerned as employers is of the greatest importance. That is, when a man or woman becomes unemployed. Then, through the operation of conditions governing the social services, the wage stop has to operate in direct relation to the level of the applicant's normal wage. That means that what a person gets when he most needs it, when unemployed and distressed, must be determined largely by the rates and conditions under which he or she had normally been working.

I accept that this new Clause is well-intended and it has a great deal of sense. I hope and believe that, whatever is finally written into the Bill, the Board will in practice ensure that every point in the first part at least is observed. I am not quite so happy about the second part of the Amendment and my hon. Friend covered the point, saying that, in practice, there need be no fear about the Board's activities in this field and that it will be conscious of any danger of going into unfair competition with existing firms, which is the last thing we would want it to do.

I therefore hope that it will not be necessary to press the new Clause but I welcome the spirit, especially, of the first part.

Mr. Russell Johnston (Inverness)

Faced with the impressive picture of the hon. Member for the Western Isles (Mr. Malcolm MacMillan) overcome by the virtues of brevity, I too must be brief.

The main arguments for and against the new Clause have been rehearsed. The hon. Member for Caithness and Sutherland (Mr. Maclennan) said that if it were accepted with the Amendments, it would have a restrictive effect and would introduce new elements which were not part of the main object of the Bill.

While talking about the objects of the Bill, I would refer to the Standing Committee debates and remind the Minister of State, who is about to speak, that the hon. Member for Caithness and Sutherland expressed himself then as dissatisfied with this wording and its ultimate effect. He said: … I had hoped the scope of the Bill to be substantially wider than that which is before us today. But he found it very difficult to do anything about it, for procedural reasons. Replying to him, the Minister of State said: We on the Government side will certainly give him what assistance we can in trying to meet his objectives … Therefore, I take the procedural point about this, even though it involves widening the scope of the Bill at some later stage."—[OFFICIAL REPORT, Scottish Standing Committee A; 8th May 1968, c. 10, 11, 12.] This is "some later stage", but, although the Order Paper is well distributed with Amendments—it is highly gratifying to note the interest which certain hon. Members have suddenly taken in the economics and development of the Highlands, which we hope will continue and will not flag—I see no Government Amendments, despite that reference by the Minister of State. Is he thinking of making some Amendments when the Bill goes to another place?

Mr. Gordon Campbell (Moray and Nairn)

My hon. Friend the Member for Wimbledon (Sir C. Black) will be aware that, in Section 8(2) of the 1965 Act, the parent Act, it is stated: On making a grant or loan … the Board may impose such conditions as they think fit … The Board has therefore been given fairly wide discretion. This Bill seeks to clarify a particular point in relation to its powers which was not, I fear, clear from the 1965 Act. It is an important point, which requires careful thought about the circumstances which can arise.

The first part of the new Clause concerns industrial relations. In some cases, industrial relations in general could be a matter of concern to the Board. It is one of the many factors which the Board will have to take into account before giving its assistance. In the Highland area, it is not necessary to spell out precisely what my hon. Friend has suggested, but he has drawn attention to one of the important points. I can think of one or two cases in the last 20 years of firms in the Highlands where, unfortunately, industrial relations have not been very good. It is a situation which has caused trouble with certain enterprises. The instances have been few, but they have occurred.

My hon. Friend the Member for Pudsey (Mr. Hiley) expressed doubt and disagreement about the proposals for grants and loans to the Highlands and Islands. At present, only about 10 per cent. of the jobs in the Highland area are in manufacturing industry. The area is paying a much bigger proportion per job of Selective Employment Tax which, in the form of refunds and premiums, has been handed out to industrial areas such as that represented by my hon. Friend. I know that he dislikes the Selective Em- ployment Tax and the way in which it works, just as I do, but it should be pointed out that the Highland area has been suffering and positively contributing per job in the form of S.E.T. money which has then been redistributed in industrial areas in Scotland, England and Wales.

Mr. Hiley

I appreciate my hon. Friend's point, but there is a distinction between new industry in an undeveloped part and industry in Scotland which has been long established. The working of the present regulations is very unfair when one compares established industries of that sort with similar industries in the non-development areas.

Mr. Campbell

My hon. Friend has opened up a wide subject, and I do not want to discuss development areas as a whole. There are some where there is a great deal of manufacturing industry. I am concentrating on the seven crofting counties which, administratively, make up the area of the Highlands and Islands. The amount of manufacturing industry there represents a very small proportion of the total.

The effect of taxation in the last two years has been to hand out more in the way of refunds and premiums to areas where there is a large proportion of manufacturing industry. As a result, the Highlands have suffered, and that fact must be put in the balance against the special help which is now suggested.

Mr. Malcolm MacMillan

Perhaps I might qualify the broad regional picture which the hon. Gentleman is painting with a rather narrower example. Taking the labour exchange area in my constituency, 24 or 25 per cent. of the employees registered are in manufacturing. The proportion in service industries is about a third. There are areas of that kind as well which benefit very much from the Selective Employment Tax premiums.

1.15 p.m.

Mr. Campbell

The hon. Gentleman has made a point of which I am very much aware. When the tax was announced as a surprise in the Budget on 3rd May, 1966, a number of us immediately began to check on such matters as whether cottage and crofters' weaving would count as manufacturing industry. When we found that it did, those with a large; percentage in our constituencies were greatly relieved, as were those, like myself, who are concerned about the Highlands and Islands in general. However, even counting weaving and distilleries, which, I am glad to say, also qualify as manufacturing, the latest figures indicate that only 10 per cent. of the employment in the area of the Highlands and Islands as a whole is in manufacturing industry, qualifying for refunds and premiums. The great majority of jobs have to pay the full amount of tax to which, except in the case of hotels, it is now proposed to make additions. I would not like my hon. Friend the Member for Pudsey to feel that the area was just receiving benefits from Government policies, because that is not the case.

The Highlands and Islands present very special problems, and special help to prime the pump is needed. When the pump has been primed for the kind of industry which can take root and flourish in the Highlands, it can make use of resources in the Highlands which will make their contribution in the future, repay the loan, and generally help Britain by making a proper contribution to the economy.

One very good example is the winter sports development. If the pump had not been primed, this rapidly growing part of the tourist industry in Scotland might never have been created. But it was from private contributions producing the first £40,000 or £50,000 to start the first chair-lift in Strathspey, that this very high risk operation began. I had a part in the first Government grant to the winter sports industry in Strathspey eight years ago. Since then, the Government have given further help, and no doubt the industry will be a flourishing one in the future and will repay all the pump-priming given to it, not only by providing excellent holidays for those who otherwise would not have been able to participate in winter sports, but by contributing to the economy in that part of Britain.

I turn now to Amendment No. 7. The hon. Member for Caithness and Sutherland (Mr. Maclennan) replied to the suggestion invoking flexibility. The suggestion of my hon. Friend the Member for Wimbledon (Sir C. Black) seemed a very reasonable point to add to this part of the Bill. Judging by the anxiety expressed by both sides in Committee and on Second Reading, it is a point about which hon. Members representing Scottish constituencies have been concerned. In view of the assurances which the hon. Gentleman gave in Committee, it appears that he would expect the object of my hon. Friend's Amendment to be fulfilled in most cases, and it is merely to retain flexibility that he does not want the words written into the Bill.

I believe that the intention is excellent. If the Board does its job properly, it will wish to get its loans repaid. Only if a firm was in difficulties and could not repay its loan would the Board want to seek to impose this condition. The permission of the Secretary of State is required for the taking up of an equity shareholding. I am sure that he would not wish the Board continually to be taking up equity shares in firms which could not repay their loans, because if those firms then failed, the Board would find itself holding shares in them.

I am sure that the House is indebted to my hon. Friend the Member for Wimbledon for raising these points, because he has drawn attention to situations which might arise. However, I doubt whether we shall need these additions in the Bill.

The Minister of State, Scottish Office (Dr. J. Dickson Mabon)

I particularly welcome the closing remarks of the hon. Member for Moray and Nairn (Mr. G. Campbell). I agree that the Amendments, and particularly the new Clause, while they highlight some points of question, need not be incorporated in the Bill. I welcomed the statement of the hon. Member for Wimbledon (Sir C. Black) that he did not wish to spend a lot of time on the new Clause, but that it was important that matters should be clear.

The comments of my hon. Friend on Amendments Nos. 6 and 7 and the two points made on new Clause No. 1 were good and do not need stressing by me. I accept the point of my hon. Friend the Member for the Western Isles (Mr. Malcolm MacMillan) that it is important that the Board should seek to encourage the activities of companies in connection with their industrial relations. I do not know of any evidence that firms which have been given assistance since the Board was established have not observed that. Like my hon. Friend the Member for Caithness and Sutherland (Mr. Maclennan), I should like to have any evidence to that effect. The Board is a particularly enlightened body. One of its members was formerly a very active trade unionist. I should be surprised if he were party to any arrangement whereby a firm in receipt of loan or grant from the Board behaved unfairly towards trade unionists and their interests.

I presume from what the hon. Member for Moray and Nairn said that he was talking historically of evidence and not of the time during which the Board has been in operation.

Mr. G. Campbell indicated assent.

Dr. Mabon

I am glad to have that confirmed.

I do not wish to comment on the second leg of the new Clause. I should like to underline what has been said on Amendment No. 6. The hon. Member for Moray and Nairn asked about Amendment No. 7. I accept his view that we must balance the flexibility of circumstance with a regard for the Board. The Board's primary purpose is the welfare of the Highlands and Islands. But its secondary purpose is to protect the taxpayer. I am sure that that is the concern of the hon. Member for Wimbledon.

There is nothing in the Bill to compel a company to accept a convertible loan, but once it has accepted such a loan the responsibility for deciding how it is to be discharged must clearly rest with the Board. The decision must be taken in the light of the prevailing circumstances and of the original purposes of the Board in agreeing to the loan. This matter is debatable in the House. Questions can be asked about it. We can discuss any doubt which may arise when we debate the annual report of the Board presented to Parliament. I hope that the sponsors of new Clause No. 1 and Amendments Nos. 6 and 7 will not press them to a Division.

The hon. Member for Pudsey (Mr. Hiley), whom I, too, welcome to our deliberations, has perhaps misunderstood one or two points about the functions of the Board. The Board tries to help, not only new industry, but existing industry. As the hon. Gentleman has learned from exchanges across the Floor of the House, existing industry has some advantages under legislation. I should like to give one or two examples of existing industries having prospered by receiving assistance through the Board without which they would have been unable to expand in an area in which it is not highly profitable for private enterprise to operate.

Mr. Hiley

I take it that the hon. Gentleman is distinguishing between the whole of Scotland and the Highlands and Islands?

Dr. Mabon

In this specific instance, I am distinguishing the Highlands and Islands from the rest of the country. We might debate this matter on another occasion. I do not think that it would be in order to do so now. The hon. Gentleman can rest assured that his comments will not go unnoticed in some parts of Scotland. I am glad that he is not anxious to press the point. He and one of his hon. Friends are co-authors of the two Amendments on which we have not touched very much.

We should not like to see Amendments Nos. 3 and 4 made. They would interfere with the object of achieving the flexibility in the Board's operations which we need. That is the purpose of the Bill. I can give the assurance that there is no question of the Board interfering in the affairs of a private company against its wishes. My hon. Friend the Member for Caithness and Sutherland made this point on Second Reading and, I believe, in Committee. There is no good reason why private companies, if they wished assistance from the Board in the form hinted at in Amendment No. 3, should be denied the opportunity of getting it.

I assure the House that if such a situation as is hinted at in Amendment No. 4 arose—it is a hypothetical situation, but, nevertheless, it is a possibility—we should hope that the Board would be free to decide the matter without hindrance. The Board must be allowed to go into all the circumstances of the company concerned so that it can make the right decision, given the primary and secondary purposes which I mentioned.

Turning to the point made by the hon. Member for Inverness (Mr. Russell Johnston), when my hon. Friend the Member for Caithness and Sutherland raised it in Standing Committee, as he did on Second Reading, it was in connection with proceedings in another place. I hope that my hon. Friend will be able to persuade some of his colleagues in another place to pursue the point. Depending on what the other place says, perhaps we shall be able to debate the matter later, but at this juncture I cannot say more than what was said on Second Reading and in Committee and underline the fact that we shall not be unsympathetic to my hon. Friend's intentions later if he gets the concurrence of another place.

Question put and negatived.