HC Deb 25 June 1975 vol 894 cc593-610

Queen's Recommendation having been signified—

Motion made and Question proposed: That, for the purposes of any Act of the present Session to establish a Scottish Development Agency; to provide for the appointment by the Secretary of State of a Scottish Industrial Development Advisory Board; to make provision for assistance in connection with air services serving the Highlands and Islands; and for connected purposes, it is expedient to authorise—

(1) subject to the prescribed limit—

  1. (a) the payment out of money provided by Parliament of the expenses of the Secretary of State in making payments to the Scottish Development Agency;
  2. (b) the payment out of the National Loans Fund of sums required for making loans to the Scottish Development Agency;
  3. (c) the payment out of the Consolidated Fund of sums required for fulfilling any guarantee given by the Treasury in respect of sums borrowed by that Agency;
and in this paragraph of this Resolution "the prescribed limit" means the limit of £300 million imposed by the said Act of the present Session on the aggregate amount outstanding, otherwise than by way of interest, in respect of—
  1. (i) the general external borrowing (as defined in the Act) of the Scottish Development Agency and their wholly owned subsidiaries;
  2. (ii) sums issued by the Treasury in fulfilment of guarantees in respect of sums borrowed by the Agency from a person other than the Secretary of State;
  3. (iii) sums paid to the Agency by the Secretary of State less repayments to the Secretary of State by the Agency (other than payments made by the Agency in consideration of receiving public dividend capital) and less sums paid in respect of the administrative expenses of the Agency; and
  4. (iv) loans guaranteed by the Agency otherwise than in the exercise of powers conferred on the Secretary of State by section 7 of the Industry Act 1972 and exercisable by the Agency by virtue of the said Act of the present Session and loans guaranteed by a wholly owned subsidiary of the Agency;

(2) the payment out of money provided by Parliament of any expenses of the Secretary of State incurred by him in consequence of any provision of the said Act of the present Sessioc—

  1. (a) enabling him to assist persons providing or proposing to provide air services serving the Highlands and Islands; and
    2. 594
  2. (b) enabling him to pay compensation in respect of the loss of office of any person who suffers such loss in consequence of the said Act;

(3) the payment out of money provided by Parliament of any administrative expenses of the Secretary of State incurred by him in consequence of any provision of the said Act.

And that it is expedient to authorise any payment into the Consolidated Fund or the National Loans Fund under the said Act of the present Session.—[Mr. Coleman.]

10.14 p.m.

Mr. Hector Monro (Dumfries)

We have listened to the Minister of State, Scottish Office, indicating that money is no object at all, but we are in the midst of a major financial crisis and it is up to the Government to tell us a little more about where the finance is coming from and about how it is to be spent.

I am very keen indeed that money should be spent wisely in the creation of jobs and the promotion of industry in Scotland, but we are talking in terms of £300 million, and the Minister of State, in winding up, disowned, perhaps, his Press hand out of January that the money would be spent over five years.

It is only right that the Treasury Minister who will reply to this debate should give some indication of how much per year is likely to be spent, certainly in the initial two years. I agree that it is impossible to say what will happen in the future, but the Government must have some idea of the amount of money that will be spent in the coming year and the year after.

Also in terms of the Money Resolution I think that it would be beneficial to the House to know some of the breakdown of the money which is to be provided to air services in Scotland. How much is to go to Logan Air and how much to British Airways? I wish both services well, but in my view the House is entitled to know how the money is to be spent and where it is going in relation to the air services mentioned in the Money Resolution.

Finally, from my point of view, the House would like to know a little more about the cross-entry arrangement between Section 7 of the Industry Act 1972 and the powers of the SDA. How much money do the Government expect will be transferred in the first year from work which might be done under Section 7 of the Industry Act to the SDA? This will give the Committee some help in knowing the apportionment of the money under the 1972 Act.

Overall, we have had extraordinarily little information from the Government in relation to the Money Resolution, especially about where the money is to come from and how it is to be spent. Earlier, I asked whether the money was sacrosanct in relation to the package deal which the Prime Minister has promised next month. If we pass this Money Resolution of £300 million, are we likely to find it cut to £200 million or £100 million next month under the economic crisis proposals?

I believe that we are entitled to more information, and that is what I seek.

10.17 p.m.

Mr. Nicholas Fairbairn (Kinross and West Perthshire)

We are discussing a Money Resolution which is an endless commitment. We start with £300 million, and the Minister of State announced proudly that he had increased it from £200 million to £300 million as if it were coming out of his own pocket.

Secondly, we are asked to authorise the payment of money provided under any provision of this legislation. Under Clause 5, the commitment is bottomless. The agency may borrow, lend, hire, sell and do anything else that it wishes, and the Secretary of State must repay it. That is outside the £300 million of the first requirement.

The third matter is that of expenditure. A number of questions seem to arise from the absurd explanatory notes in the Bill. We are to have an additional 250 to 300 persons. It is said that the administrative expenses of the agency are difficult to estimate with precision—I am sure that they are—but that they may build up to a level of about £3.5 million per annum. Will that be the expense of employing 205 to 300 people? What is more, does the figure take any account of inflation? If so, what is the estimate for the year with which we are dealing, and what is the estimate five years hence? It is misleading the House to ask it to approve an annual sum of £3.5 million, with inflation as it is, as if that will be the figure for five or eight years to come.

The Minister of State would like to give the impression that all the money will be spent immediately. He said that there was enough money to give the agency a good start, as if it were a present being given to a child going to school. We are entitled to know from where the money is to come. Will it be raised from taxes? Will it be raised from rates? Will it be printed? Will it be raised in Scotland, in England or even in Northern Ireland? How is it to be raised?

Mr. James Hamilton (Vice-Chamberlain of the Household)

From rich people like the hon. and learned Gentleman.

Mr. Fairbairn

I am infinitely richer than the hon. Gentleman in all qualities except money.

Every day the Chancellor of the Exchequer and the Prime Minister tell us that we must cut the commitment which this House makes to expenditure, especially undescribed expenditure. It is all very well to talk in terms of £300 million. We have the expenses, and we have the commitment under Clause 5, which is bottomless.

Every night this House is asked to approve further expenditure. That is national deception and national schizophrenia. I should like the Treasury to answer these questions. What will be the estimated extra borrowing requirement of Parliament, how far has inflation been taken into account in expenditure and commitments, and what proposals are there for raising this sum of money? If the Treasury does not answer these questions, it is pretending that it gives by night and threatens to take away by day.

10.21 p.m.

Mr. Gordon Wilson (Dundee, East)

I should like to follow up comments made during the preceding debate on whether this sum is adequate in view of the grievous needs of Scotland at present.

The hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn) asked where this money would come from. The intention is, as can be seen from the Money Resolution, to take it from the Consolidated Fund or the National Loans Fund. However, it is equally clear to those of us who have read the Petroleum and Submarine Pipe-Lines Bill that excesses on the oil account will be paid into the Consolidated Fund.

Therefore, we may well find—and this is accepted by all hon. Members—that even if there is no nexus, a large percentage of these funds will come from the revenues that will accrue from the development of oil in the North Sea. If this is so, we should examine the allowance for the agency in a more generous fashion than has been suggested so far. For example, I shall take a period of 10 years and assume that the agency started from its full commitment. We could find in the region of about £400 million or £500 million during that 10-year period, provided that the Secretary of State came back to Parliament for more funds.

To put the situation into perspective, by the early 1980's the Government's estimates of revenues from the Scottish sector of the North Sea will be in the region of £3,000 million. Therefore, the Government could be more generous.

I ask for an assurance from the Government that there is no intention of using other cut-backs, which may be announced during the budgetry statement which has been promised by the Prime Minister in two or three weeks' time, because already there are rumours that Govan shipbuilders are being put under pressure not to spend on modernisation and re-equipment the £20 million that had been promised to them over that period.

Therefore, if it is the Government's intention, on the one hand, to subtract from existing assistance to industry in Scotland and, on the other hand, to give assistance in the form of this Money Resolution, we may be dealing with a net situation where savings are being made on other essential and necessary forms of investment in Scotland in order to give an appearance of being generous.

The overall situation indicates that, far from Scotland being generously treated by the Government, we shall get back only a small sum of what is really and truly ours. I, therefore, ask the Government to reconsider the terms of the Money Resolution and to consider allowing an amendment to be tabled in Committee to increase the sum.

10.23 p.m.

Mr. Nigel Lawson (Blaby)

My hon. and learned Friend the Member for Kinross and West Perthshire (Mr. Fairbairn) and my hon. Friend the Member for Dumfries (Mr. Monro)—who initiated this debate on the Money Resolution—have clone the House a service in the best tradition of Scottish good housekeeping.

It is intolerable that the Government should expect that a Money Resolution involving considerably more than £300 million should go through on the nod. This is intolerable at any time, but, above all, at a time when we are, as everyone knows, in the gravest economic crisis and when the amount of the Government's official borrowing requirement of £9,000 million—and the public sector borrowing requirement is likely to be considerably more than that—is, in the Chancellor's own admission, one of the major elements in our crisis, with which he knows he has to deal. Yet here we have a further £300 million plus, which the Government expected to go through on the nod.

I am glad that the Secretary of State for Scotland is present, not merely because this is obviously an important measure affecting Scotland but also because he, in his time, has questioned Money Resolutions and I am sure that he would agree that that is a proper thing for the House of Commons to do. Incidentally, I am also glad to see the newly-appointed Minister of State at the Treasury, the hon. Member for Llanelli (Mr. Davies). I hope that he will be replying to the debate on behalf of the Treasury. If not, I certainly hope that we shall have a Treasury Minister replying. It would be an intolerable affront to the House if no Treasury Minister replied to the debate, especially with the vast sums of money involved.

I should like to raise one or two matters and ask some questions. First, as has been pointed out, there is nothing that says how much is to be spent in providing the air services serving the Highlands and Islands. Indeed, there is just the bland statement in the Explanatory and Financial Memorandum to the Bill that It is not possible to provide an estimate of expenditure to be incurred under Clause 19"— which is the Clause at issue— since this will be a matter for negotiation. That is not good enough. We must be given some idea of the limit and of how much will be involved. I cannot for a moment believe that the Treasury has given a blank cheque for this measure. Therefore the House should be told what is involved.

Secondly, we must know how much of the £300 million will fall in the current financial year, 1975–76. This will have an effect on the public sector borrowing requirements in this year of crisis. We must have this information.

We should also like an estimate for the following financial year, the year in which the Chancellor of the Exchequer has said that public expenditure cuts are to be introduced, 1976–77. If the Chancellor can look ahead for cuts in that year, we can also be told what the expenditure is expected to be in that year on the SDA. But certainly we must know what expenditure on the agency will be in the current financial year.

Again, the £300 million does not include any interest payments. Interest payments, at this time of inflation and with interest rates at an almost usurious level, are a very substantial sum. The Government should say how much they expect to fall due in interest payments and, indeed, to whom these payments are to be made. Schedule 2 of the Bill, which is the main part relating to the Money Resolution, states: For the purposes of the exercise of any of their functions, the Agency may borrow money from the Secretary of State and may, with the consent of the Secretary of State given with the approval of the Treasury, borrow money, whether in sterling or otherwise, from any other person or body, whether in the United Kingdom or elsewhere. How much of the money is to be borrowed within the United Kingdom on the gilt-edged market, and how much is to be borrowed from overseas? Our overseas indebtedness is already another major factor in our crisis. Confidence in sterling is low. That must be accepted on all sides of the House. Confidence in the pound is reducing. How much of this money will be borrowed from the Arabs or whoever else it is overseas who is lending us money at present, and lending it to sustain Socialist follies of one kind or another?

How much is the interest charge? Interest at 15 per cent. on £300 million is about £45 million a year. A great deal of money is involved. Interest payments are qiute over and above the £300 million which is the prescribed limit in the Money Resolution.

We need to be told a great deal more about the administrative costs. What are they and how are they to be divided between wages and salaries and other expenses, such as rents for office buildings, and so on? This may be a small amount compared with the £300 million we have been talking about, but we all know that there is an enormous amount of waste in the public sector, and one of the main ways in which we shall deal with this economic crisis is by cutting out that waste in a range of small ways. Control of the proliferation of administration is one. When control of this sort of expenditure is totally lost, the cost escalates and the problem of inflation grows. I hope that we shall have the benefit of a Treasury Minister to answer these important questions.

10.32 p.m.

Mr. David Howell (Guildford)

It was a good idea to have this short debate on the cost of this proposal and I am sure that Ministers will be the first to agree that it is important in these critical times to cast an eye over the finances and the cash and resource costs of major new projects. Whether we agree with them or not we all have a responsibility in these critical times to study carefully the spending of sums of this kind.

We are dealing here with £300 million which is a substantial sum. It must be found from somewhere—from the taxpayer, from the saver, or, and I hope that this will not be the case, from the printing presses. I hope that a Treasury Minister will explain that this last course will not be adopted.

My hon. Friends have raised important points and I am only sorry that Labour back benchers have not entered into the debate because the money will have to come from somewhere. It will have to come from cutting other programmes. It is a part of the Parliamentary process that we need to strengthen to hear the views of hon. Members about their priorities. If they want money spent on the SDA which schemes do they want the Government to cut to provide the cash? We have not heard from Labour Members on that point. They have had a busy day debating the Bill, of course. Perhaps they think that £300 million is not important.

Mr. Frank Hooley (Sheffield, Heeley)

The highest priority for this country is the encouragement of industrial investment, and that is precisely what the Bill seeks to do.

Mr. Howell

Some would say that the bar to industrial investment is the high rate of inflation. That comes from excessive Government spending and high pay, and that could prove to be a circular argument.

It is important to follow up one or two of the questions which have been posed about finances. The Bill proposes a figure of £200 million to start with. That sum would have been approved on the nod but for our desire to debate it. A further £100 million is to be approved by the affirmative resolution procedure. The Secretary of State confirmed, I think with some pride, that this was a 1½hours procedure, and that timescale works out at £66 million an hour, or a little over £1 million a minute as the rate at which the Government hope the House will approve the expenditure.

There must be some clarity, too, on the pace at which it is planned that this expenditure should be "unfolded". This is serious because it is critical for the public sector deficit and the public sector borrowing requirement that we should know just how much of that expenditure will be incurred in year one. The Press release, which the Minister of State said was no longer relevant to the situation that the Government now foresaw, mentioned a period of 5 years which means £40 million a year for the £200 million. The Secretary of State, in brisk form, said that he wanted the money used up as quickly as possible. Presumably that means that if he could find the outlets for it he would like the whole £300 million to be pushed through in the current financial year. If that is so it makes a considerable difference to the Government's finances and to the very fine balance which the Chancellor is trying to strike on the public sector deficit.

We are so near the precipice that the tolerances are very fine. If we are suddenly to have an additional £300 million. or £260 million on top of the £40 million originally envisaged—if that is what was envisaged—pushed up into this year, it is an important consideration. We want to know exactly what the spread will be.

The Minister of State said that he wanted the money to last as long as the agency had an effective job to do, which sounds more like the even-spread approach. If the Secretary of State's view prevails, and the cry will be "Spend the money as quickly as possible", that is a serious matter from the point of view of public finances.

We need to know the strategy—if such precision is possible—because it has important implications for the overall borrowing requirement at a critical time, when inflation is through the roof and our finances are in a sadly deteriorated condition.

My hon. Friend asked how much would be borrowed from abroad. The agency has powers under the appropriate schedule to borrow from abroad. We shall be grateful if the Minister will tell us how the borrowing will be organised, and whether it will be carried out under the procedures authorised in the previous Finance Act, which included a new section governing statutory corporations' overseas borrowings. Are the procedures to be those governed by that section, or will there be different procedures?

Descending from those vast figures, which are very important, to the small ones, I agree with my hon. Friends that the House should do more than just to glance at the considerable figure of £3½ million a year for running the agency's office or offices. That figure is presumably in today's pounds and will be much more when they come into existence. The sum of £3½ million is a great deal for running an office or offices. It is a great deal if there are 750 persons involved. Even if every man, woman and boy in the office were paid £60 a week, that would not come to anywhere near £3½ million. It is nearer £2¼ million, leaving £1¼ million for the rental and other expenses.

If the money covers 250–300 people, we are dealing with substantial sums. At £60 a week, 300 would cost £900,000. If they were paid the same as we are paid—£90 a week—the total would be £1,350,000, leaving over £2 million for the rental and other matters. This seems to be office planning on a very generous scale. It may be peanuts compared with the £200 million, but if we multiply this approach to office expenses by the whole bureaucracy of Government we have our problem on the plate before us. If the Chancellor of the Exchequer could get a grip of excess administrative costs of the kind we are talking about here, many of his difficulties would be removed, together with some of the furrows on his brow.

We must know where that odd £1 million or £2 million is going in this office operation, how many extra people will be in the office, what that figure of £3,500,000 represents, and whether it is in some future projection of money terms or in 1974 survey prices. These are important matters. They are not just candle ends. If we can get these issues right we shall yet save our public finances and enable the economy to proceed without making all the drastic expenditure cuts—though we are bound to have some—which Labour Members fear very much.

If we cannot get these things right, if we let this sort of money through on the nod without serious analysis, if we let this sort of administrative expense through without careful examination, we shall be winking the green light for a further slide in the whole of our public finances, and for further increases in the astronomical borrowing requirement. It is now officially running at £9 billion, in 1975 pounds, but is probably much higher. Many people think that it will be £12 billion or £13 billion before we are through. We are winking the green light for a further agonising round of increased inflation, lower investment, lower profits and fewer jobs for the people of Scotland. It is important that the facts should be correctly put. May we have some answers?

10.40 p.m.

Mr. James Sillars (South Ayrshire)

The carping reluctance of the approach of the Conservative Party to the Bill and the money to be provided with which to back the Scottish Development Agency will not go unnoticed in Scotland.

It is remarkable that three technical monetary questions should have been asked by a member of the Conservative Party. When we asked questions about the amount of money to be committed by the Conservative Government under the Industry Act 1972 we were told that that amount depended on how successful we were in attracting investment. We were told that the more investment there was the more grants and expenditure there would be. There was an open cheque attitude to investment under the Industry Act 1972.

Tht £300 million allocated to the Scottish Development Agency is not enough. If the Scottish Development Agency spends up to the limt of £300 million in the first two years of its life it will be a highly successful operation. The Government will be able to claim an enormous investment success in the rehabilitation of land north of the border. We shall have proved our case for further Government assistance. I am happy to agree with the prescribed limit of £300 million.

There has been no mention by the Opposition of the fact that this is a year of crisis for the working people of Scotland. A financial crisis faces the country. The unemployed, their families and the young people pouring out of schools on to a labour market which is already severely depressed face a time of crisis. They look to the Government for action. The Money Resolution will enable the Government to take adequately backed action in the next two years.

The Opposition complained that no Government supporters seemed to be concerned about the amounts to be spent. That is why I speak. When the Minister makes a decision on the voluntary timetable I hope that he will bear in mind that the Tory Party has had a fair crack of the whip. In the other place, for which there are no elections, the Scottish Tories are better represented than in any other part of the Palace of Westminster. Those Tories have knocked our Bill about a considerable amount. Will the Minister discuss with the Leader of the House, the Chief Whip, and through the usual channels, the possibility of a generous, timetable motion being introduced so that the Bill becomes law and the £300 million is spent on employment in Scotland?

10.43 p.m.

The Minister of State, Scottish Office (Mr. Bruce Millan)

I should first like to answer the point made by my hon. Friend the Member for South Ayrshire (Mr. Sillars) as it is relevant to the amount of money which we shall be able to spend this year. We are anxious to put this Bill on to the statute book at the earliest possible date. We shall be taking steps to achieve that end. I know that we will have the support not only of my hon. Friends but also of the people of Scotland. However, there may be a few dissenters here and there. We can deal with them when we come to them. We shall put this Bill on to the statute book as soon as possible. However, until we do so it is impossible for me to give figures for one year.

The Bill was drafted on the basis that we would provide an amount—not an annual amount. The amount has no time limit attached to it. The amount which may be spent in the current year will depend on when we can establish the agency and how successful it is in its early stages in identifying useful ways of spending the money which is available to it. As we proceed along that road we shall give the information to the House in the usual way. I cannot now say how much is likely to be spent in the current year. It is provided for in the Government's public expenditure calculations.

Mr. Lawson

I am glad that the right hon. Gentleman said that. As a sum has been provided for in the Government's calculations for this year, why will he not reveal to the House what that sum is?

Mr. Millan

For the simple reason that it is impossible to make the calculation at present. If the hon. Gentleman—who I know follows these matters with great care—will look at the public expenditure White Papers, he will see that there is always a fairly generous amount allowed for developments that may take place during the year, contingencies and so on. We are not entering into this undertaking lightly, with no idea of the financial consequences and with no regard for the difficult public expenditure considerations we face in the current year. This is public expenditure which is specifically directed towards maintaining and expanding, and therefore improving, the productive capacity of Scotland. It is not, as the hon. Gentleman seems to suggest, public money which will be wasted. To suggest that is to misread what we are trying to do.

Similarly, I am unable to provide a breakdown between the various functions of the agency and say that so much of the £300 million will be spent on one and so much on another function. Again, we have specifically and deliberately drawn the expenditure limits in a way which does not provide for a division of the expenditure. We want to allow the agency the maximum flexibility in determining its priorities and the emphasis it puts at any time on one or other of its functions. It follows from what I said in winding up the Second Reading debate that it is a primary purpose of the Government to provide maximum flexibility, so that a co-ordinated approach to Scotland's industrial problems can be made by the agency.

As to where the money will come from, it is never the practice of a Money Resolution to hypothecate particular revenues to particular expenditure. There is nothing peculiar about this Money Resolution, which is in the standard form. In paragraph 1(a) we use the standard formula of authorising— the payment out of money provided by Parliament Hon. Gentlemen will have the opportunity to cast an eagle eye over the Estimates when they come along and we look forward, when we debate them, to hearing other illuminating remarks, for example from the hon. Member for Blaby (Mr. Lawson), about the Scottish Development Agency.

Similarly, paragraph 1(b) refers to: the payment out of the National Loans Fund", and paragraph 1(c) to: the payment out of the Consolidated Fund". Those are the sources which are always described in Money Resolutions, and in that respect this Money Resolution is no different from any other.

Mr. Lawson

I give the right hon. Gentleman credit for reading well. The Money Resolution is cast in the conventional form but the purpose of the debate is for the House to be given a little more information than is contained in the Money Resolution.

Mr. Millan

I might just be able to do that if the hon. Gentleman will allow me to develop my speech.

The hon. Member for Dumfries (Mr. Monro) mentioned air services. There is a special reason why I do not want to put a figure on that sum of money in the current year. We are dealing with one company—Loganair—and not with British Airways. We have decided that no subsidies will be paid to British Airways. A proposal is under discussion at the moment and there is a figure in mind, but it is considered inappropriate and lacking in proper regard for the need to preserve the public purse to put a figure in the Explanatory Memorandum. If these negotiations are completed—as I hope they will be—within a week or two, I shall be happy to give the figure. The hon. Gentleman will realise that in the middle of the negotiations it would have been inappropriate for us to include in the Money Resolution a figure which Loganair would have been able to identify immediately as the figure we had in mind. That would have been prejudicial to the negotiations.

I am sorry that I am unable to give that figure, but I hope to be able to give it soon with other details of the services that we intend to subsidise. The House will know that last week I gave certain information about Shetland internal services in answer to the right hon. Member for Orkney and Shetland (Mr. Grimond).

I was asked about inflation and whether the figures were at current rates. They are. The Explanatory and Financial Memorandum follows the normal pattern. It is never the practice under any Government in any legislation to allow for future inflation. The figures in the Explanatory and Financial Memorandum are expressed at rates which pertain at the time that the Bill is published. It is obvious that if there is a continuation of a high rate of inflation the money under this or any other Bill will run out sooner than expected. I should not hide that fact. It is an ineluctable consequence.

I was asked about the staff. The figures are given on page v of the Explanatory and Financial Memorandum. The total is expected to reach 750. However, we must remember that a fair number of staff, about 470, are already employed by the Scottish Industrial Estates Corporation and by the Small Industries Council for the Rural Areas of Scotland. Therefore, the additional numbers will be quite limited.

I confirm that the figure of £3½ million is not just for the additional persons. It takes account of the present expenditure for the SIEC and the SICRAS. If we take account of the SIEC and SICRAS current administrative expenditure and of the administrative expenditure for the extra 250 to 300 people, it will be seen that £3½ million is a fair estimate of what the administrative expenses are likely to be.

I confirm that the £300 million does not include interest payments. Those are specifically excluded in Clause 13 where the £300 million is mentioned. The agency is rather different from the NEB in this regard, because, whilst having an industrial rôle which is analogous to the rôle of the NEB, it will have an environmental and factory-building rôle, and so on, which will not be subject to the same financial targets guidelines as the specifically industrial rôle, which is not meant to be run at pub-lice expense, but to pay its way. We are dealing not with assistance to industry so much as an entrepreneurial function which is meant to pay its way. That makes it difficult to define the financial guidlines on which the agency will work. When we publish these guidlines, as we will, it will be seen that we shall fix additional targets for the different functions of the SDA as to whether they should be self-financing or money which cannot, in the short term at least, provide a normal financial return.

A decision will have to be taken at some time as to how much of the borrowing of the agency might be done by public dividend capital. That will make a difference to interest payments, and so on.

Mr. Lawson

These are important aspects of the situation which the Minister is considering and I hope he will give more information later. In the meantime, can he give some rough indication of how the £300 million is broken down between that which is expected to produce a commercial rate of return and that which is not, and what is the kind of commercial rate of return on the tranche which is expected to produce one?

Mr. Millan

We shall tell the House later, but it is too early to do that. The hon. Member for Blaby will appreciate that before introducing guidelines we have to discuss this with the agency. If his hon. Friends from Scottish constituencies would stop obstructing the Bill, we might get it through and could then give those answers, but we are at present prevented from doing so because of the obstructive tactics of his hon. Friends.

The other matter the hon. Gentleman raised was overseas borrowing, and this is provided for under Schedule 2 of the Bill. I can confirm that it will be done under the normal arrangements, because if the hon. Member looks at Schedule 2(3) he will find that borrowing powers are subject to the consent of the Secretary of State, given with the approval of the Treasury. Therefore I can say that, as with other public agencies, it will be subject to whatever guidance, guidelines, or constraints operate at the time.

There will be no special arrangement as I understand the position; but, if I am wrong, I will provide an alternative answer in due course. The borrowing will come under the normal provisions, as I understand it, for public agency borrowing and those are under the ultimate control of the Treasury, as we would all accept.

The question of North Sea oil which has been raised is not provided for in the Money Resolution. Perhaps I did not say so in my Second Reading speech, but I should have said that there will be no hypothecation of North Sea oil revenues to the development agency.

I have answered most of these points and I know that the House is anxious to approve this necessary money which will yield such a magnificent return for the people of Scotland through the agency.

Question put and agreed to.

Resolved, That, for the purposes of any Act of the present Session to establish a Scottish Development Agency; to provide for the appointment by the Secretary of State of a Scottish Industrial Development Advisory Board; to make provision for assistance in connection with air services serving the Highlands and Islands; and for connected purposes, it is expedient to authorise—

(1) subject to the prescribed limit—

  1. (a) the payment out of money provided by Parliament of the expenses of the Secretary of State in making payment., to the Scottish Development Agency;
  2. (b) the payment out of the National Loans Fund of sums required for making loans to the Scottish Development Agency;
  3. (c) the payment out of the Consolidated Fund of sums required for fulfilling any guarantee given by the Treasury in respect of sums borrowed by that Agency;
and in this paragraph of this Resolution "the prescribed limit" means the limit of £300 million imposed by the said Act of the present Session on the aggregate amount outstanding, otherwise than by way of interest, in respect of—
  1. (i) the general external borrowing (as defined in the Act) of the Scottish Development Agency and their wholly owned subsidiaries;
  2. (ii) sums issued by the Treasury in fulfilment of guarantees in respect of sums borrowed by the Agency from a person other than the Secretary of State;
  3. (iii) sums paid to the Agency by the Secretary of State less repayments to the Secretary of State by the Agency (other than payments made by the Agency in consideration of receiving public dividend capital) and less sums paid in respect of the administrative expenses of the Agency; and
  4. (iv) loans guaranteed by the Agency otherwise than in the exercise of powers conferred on the Secretary of State by section 7 of the Industry Act 1972 and exercisable by the Agency by virtue of the said Act of the present Session and loans guaranteed by a wholly owned subsidiary of the Agency;

(2) the payment out of money provided by Parliament of any expenses of the Secre tary of State incurred by him in consequence of any provision of the said Act of the present Session—

  1. (a) enabling him to assist persons providing or proposing to provide air services serving the Highlands and Islands; and
  2. (b) enabling him to pay compensation in respect of the loss of office of any person who suffers such loss in consequence of the said Act;

(3) the payment out of money provided by Parliament of any administrative expenses of the Secretary of State incurred by him in consequence of any provision pit the said Act.

And that it is expedient to authorise any payment into the Consolidated Fund or the National Loans Fund under the said Act of the present Session