WELSH DEVELOPMENT AGENCY (No. 2) [MONEY] (Hansard, 26 June 1975)

HC Deb 26 June 1975 vol 894 cc803-13 803

§ Queen's Recommendation having been signified—

§ Motion made, and Question put,

§ That, for the purpose of any Act of the present Session to establish a Welsh Development Agency and a Welsh Industrial Development Advisory Board, and for connected purposes, it is expedient to authorise—

§ (1) subject to the prescribed limit—

(a) the payment out of money provided by Parliament of the expenses of the Secretary of State in making payments to the Welsh Development Agency;
(b) the payment out of the National Loans Fund of sums required for making loans to the Welsh Development Agency;
(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 £150 million imposed by the said Act of the present Session on the aggregate amount outstanding otherwise than by way of interest in respect of—

(i) the general external borrowing (as defined in the Act) of the Welsh Development Agency and their wholly owned subsidiaries;
(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;
(iii) sums paid to the Agency by the Secretary of State less repayments to the 804 Secretary of State by the Agency and less sums paid in respect of the administrative expenses of the Agency; and
(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;

§ (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 Session 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. Harper.]

§ Mr. Speaker
I think the Ayes have it.

Hon. Members
No.

§ Sir Anthony Meyer (Flint, West)
On a point of order, Mr. Speaker. It would be wrong for the Money Resolution——

§ Mr. Speaker
Order. I said I think the Ayes have it.

Hon. Members
No.

§ Mr. Speaker
If there is any doubt about the matter, I have always ruled in favour of further discussion. Sir Anthony Meyer.

§ 10.15 p.m.

§ Sir Anthony Meyer
I am obliged to you, Mr. Speaker. It would surely be wrong that a sum of money such as the one under discussion should be agreed to on the nod, without any debate. Here is a matter of £100 million which is to be expended in pursuance of objects which have not been all that clearly defined. We have had a very long debate during which a large number of hon. Members have spoken in the most general terms in favour of the Bill, and most of them have spoken as if, by some wave of a wand, every possible benefit would be conferred upon Wales. But we have heard very little mention of the very large sums of money which will be needed to bring these benefits. Those sums of 805 money have to be raised, and they will be raised very largely by impositions on the very firms which have to provide the employment which the Bill sets out to provide.
We do not know enough about how the money is proposed to be expended. However, we know that the Money Resolution contains a provision whereby the £100 million may be increased to £150 million, and, as I said earlier, that increase may come a lot sooner than anyone at present supposes.
Anyone who takes the trouble to refer to the back of the Bill will discover that it now costs 42p. When it was first printed less than two months ago, it was priced at 29p. As I said earlier, that represents a current rate of inflation of 270 per cent. based on the Healey formula. If we are to have inflation at that rate of advance, it will be only four months at the outside before the Government have to ask for the increase to £150 million provided for in the Money Resolution.
We need a great deal more information, and I am sure that others of my hon. Friends will want to press the Government on this matter. Frankly, we do not know enough.

§ 10.20 p.m.

§ Sir Raymond Gower (Barry)
I second what my hon. Friend the Member for Flint, West (Sir A. Meyer) said. Our judgment of the value of the amount appropriated depends largely on the approximate timetable. I hope that the Government spokesman will tell us how the money will be spent and over what period, as that is a matter of uncertainty. We have been told that it may be spent over an indefinite period and that the sum may be increased from £100 million to £150 million. We have no idea of the timetable. The Government spokesman should indicate the approximate timetable.
Considerable amounts are involved. I appreciate that the rate of inflation is increasing so rapidly that the £100 million will have lost its value so that £150 million will soon be required. That is the strange state of affairs with which we are faced. I hope that the Government will elucidate those points.

806

§ 10.22 p.m.

§ Mr. Nigel Lawson (Blaby)
I think that the points which have been raised by my hon. Friends are of considerable importance. I am extremely surprised that when the Money Resolution was put to the House a few moments ago no Government spokesman sprang up from the Government benches to give us the Government's explanation of the points which are involved in it. That is a lighthearted way in which to treat the House during its consideration of the expenditure of £150 million. It was lighthearted of the Government to expect this measure to go through without any debate or explanation from the Government.
I have been present for part of this debate, although most of the time I have been attending a Standing Committee which has been considering a financial matter. I shall not go into detail, but I have been here as much as I could. I was present when the Minister, in winding up, said that there was no time limit on expenditure and that it was impossible to predict exactly when the money would be expended, and so on. But that was not good enough.
Last night there was a debate on the provision of £300 million for the Scottish Development Agency. When we pressed the Minister we were told that it was impossible to say exactly how much would be spent this year, but that the Chancellor of the Exchequer had taken account of all this and that it came within the contingency reserve which is mentioned in the Public Expenditure White Paper. I have looked that up. Admittedly, it is expressed in different terms. Nevertheless the sum for the contingency reserve for the current year is £300 million. That takes into account the resource costs of the Scottish Development Agency, the Welsh Development Agency, the child endowment scheme, the National Enterprise Board, and many other schemes. We should therefore like to know roughly how much is contained in the contingency reserve for this year of the £150 million mentioned in the Money Resolution which we are discussing.
I should like to go into more detailed points concerning the Money Resolution. Paragraph (1)(iii) mentions sums paid to the Agency by the Secretary of State less repayments to the Secretary of State by the Agency and less sums paid in respect of the administrative expenses of the Agency. 807 There is no mention of payments made by the agency in consideration of receiving public dividend capital. Public dividend capital is involved here. Yet it was excepted in the equivalent resolution in respect of the Scottish agency. Why, then, has it not been excepted in the case of the Welsh agency? I refer to the point in the Scottish Money Resolution concerning repayments made by the agency in consideration of receiving public dividend capital.
Again, according to Schedule 3 of the Bill, the Welsh Development Agency is able to borrow money in certain circumstances—not by means of temporary loans—from the Commission of the European Communities or the European Investment Bank. The Minister said something in passing about the relationship with the Community institutions. Nevertheless, nothing of that kind was included in the Money Resolution involving the Scottish Development Agency. Why the difference? We should like to know more about borrowing intentions from the Commission of the European Communities and the European Investment Bank.
But, above all, this is a vast sum of money. How much of the £150 million is expected to get a commercial rate of return? How much is for social purposes and is not expected to get a commercial rate of return? Of the amount that is expected to get a commercial rate of return, what is the target rate of return which the Treasury set for the Welsh Development Agency?
The pound today is at an all-time low, and has been falling steadily. At a time when uncertainty is the worst thing for confidence in the pound, and when public expenditure is at the heart of our economic crisis, we need to know precisely how much public expenditure is involved this year and how much is involved in subsequent years.
I hope that the Minister will address himself to these few questions. There are many more I could ask but I am sure that my hon. Friends will wish to pursue the matter.

§ 10.26 p.m.

§ Mr. John Nott (St. Ives)
I am sure the whole House is grateful to my hon. Friends the Members for Flint, West (Sir 808 A. Meyer), Barry (Sir R. Gower) and Blaby (Mr. Lawson) for raising these important matters on the Money Resolution. We do not apologise for raising this matter at this late hour because the House is increasingly failing to pay proper attention to its traditional Supply rôle. I apologise for not being here throughout the debate, but I have been in Standing Committee. However, I heard the Secretary of State's speech and the winding-up speeches on the Bill.
Not enough has been said about the expenditure proposed. Either the £150 million will be spent—in which case we are right to ask for more information about how it will be spent and how quickly—or it will not be spent. It may be that a small proportion only will be spent because the Chancellor of the Exchequer cuts back expenditure within the new few weeks or because the Treasury withholds its consent for particular schemes, which is much more likely. In that case the £150 million mentioned would be a deception on the people of Wales. If the Chancellor cuts back on expenditure or if no schemes materialise, the Bill will prove to be a public relations exercise and not an exercise of substance.
In winding up the Second Reading debate the Minister spoke in brave language about the Bill being a landmark in the history of Wales. He said that the Bill paid a debt to generations past. The Money Resolution is part and parcel of the Bill. Only time will tell whether the money covered by the Money Resolution is forthcoming.
Last night when the Minister of State wound up the debate on the Second Reading of the Scottish Development Association (No. 2) Bill he said that the amount which may be spent in the current year would depend on when we could establish the agency and how successful it was in its early stages in identifying useful ways of spending the money which is available to it. That is a strange way of going about the matter in the economic conditions which we face.
My hon. Friend the Member for Blaby referred to the contingency reserve. We all know that the contingency allowance in successive White Papers has proved to be inadequate. We understand from Press reports of what was said in the Expenditure Committee proceedings 809 recently that within a few weeks after the publication of the figure for the contingency reserve it was shown that the British Leyland project alone had taken up far more than was expected a few weeks before. It is not good enough to say that the contingency reserve will meet the additional payments under the Money Resolution.
As far as I understand from what the Secretary of State said, about £60 million a year is being spent on selective assistance, regional development grants and the regional employment premium, and about £8 million or £9 million has been included in this year's Financial Statement as expenditure by the agency. That £8 million or £9 million applies only to part of the year, because the agency will not be established for the whole of the financial year.
It is reasonable for my hon. Friend the Member for Flint, West and others to ask more about how the £100 million is to be broken down over time before an order comes forward proposing the additional £50 million. We can understand that the pace at which opportunities will arise cannot be precisely determined. But we have had the Chancellor of the Exchequer making speeches at the Dispatch Box and making innumerable speeches in the country in the last few months in which he said that it was essential to establish limits on the amount that was being paid out of the public exchequer. Yet, within a few days, we have had two measures, one for £300 million and the other for £150 million, which, in terms of time, are completely open ended. At one moment we have the Chancellor saying that we have to establish limits on public expenditure and a few days later we have amounts totalling £450 million coming before the House without any time limit being placed on them. This is going on the whole time.
All the Treasury spokesmen on this side of the House, with names like Howe and Howell, derive from the Principality. My name does not sound Welsh, but my family, too, comes from the Principality. Therefore, we fully understand the needs of Wales. None of us feels that it is the job of Treasury spokesmen or Treasury Ministers to interfere in the specific details of expenditure in the Principality. However, we suggest that what is proposed in this Money Resolution and what was 810 proposed in the one last night cannot be in conformity with what the Chancellor has said in the past few days.
I shall not delay the House much longer, but I must give two examples of the kind of thing that is happening day by day. I hope that the Secretary of State, or whoever is to answer the questions which have been asked, will pay attention to these short, specific examples which I want to mention.
The Secretary of State will know and be proud of the Royal Mint building in Llantrisant. I have seen it and been round it several times. It was only a very few years ago that the Royal Mint at Llantrisant was completed at a cost of £6.24 million. Yet only a few months ago—in fact, in April—the Royal Mint was turned into a trading fund. When the trading fund measure came before the House, that same building, which had cost £6.24 million to erect, was included in the opening accounts of the Royal Mint Trading Fund at £2.4 million. Therefore, in only a very few years, approximately £3.8 million has been written off and nobody has said a word about it. It has all disappeared and been paid for by the taxpayer.
I should like to know whether the Welsh Development Agency would have financed the building of the Royal Mint at Llantrisant or whether the money would have been forthcoming from other funds. In a way, the Royal Mint was a development project. It was built at Llantrisant to provide employment in the Principality. How is it possible that in only a few years the taxpayer has had to meet a loss of £3.8 million?
I take my second and final example——

§ The Secretary of State for Wales (Mr. John Morris)
It is frivolous.

§ Mr. Nott
The Secretary of State says that this is a frivolous example. That is a perfect case of the total lack of interest and understanding on the part of Socialist spending Ministers in the financial state of this country. The Secretary of State, from a sitting position, said that it was a triviality that £3.8 million had been written off a project in only a few years. That is the kind of attitude that the people of Wales will not understand.

811

§ Mr. John Morris
The hon. Gentleman has been a Treasury Minister and he should make his representations to the House on relevant grounds. He should not raise matters that have no connection with the Bill and deal with an example that has little relevance in this context. He should know better.

§ Mr. Nott
I can understand that the Secretary of State is embarrassed about the example that I have put before the House, and I shall not follow him down that road. I have made my point. Why has that amount of money been written off in only a few years?
I come to my final example. I hope that the Under-Secretary of State will answer this point. We notice that it will cost £2½ milion to run the agency when it is fully established and that 150 million extra people will be required—

§ Mr. John Morris
No, 150.

§ Mr. Nott
Even given the rate at which people are being taken on in the public sector, I agre that the million was a minor exaggeration. I want to say that we know that 150 additional staff will be taken on to run the agency. Why are they needed over and above the stall now involved in dealing with selective assistance? I understand that a total of 300 posts is involved at the present time.
We have not delayed the House for very long, given the amount that is involved. I hope that this short debate has taken place in a good spirit. I speak as one Celtic representative to another. I shall not go into what I think about the discrepancy between what Wales receives and what my own part of the country receives. The disparity is really quite disgraceful, but I leave the matter there. Perhaps the Under-Secretary of State will answer the points that have been raised by my hon. Friend and myself.

§ 10.37 p.m.

§ The Under-Secretary of State for Wales (Mr. Barry Jones)
Welsh Office Ministers are always glad to come to the Dispatch Box at this time of night. I fully take the point of the hon. Member for St. Ives (Mr. Nott), that he is as good a Celt as I am. I understand that he is trying to establish his credentials as a former Treasury Minister in order to make his point about the agency.
812 I appreciate the point raised by the hon. Members for Flint, West (Sir A. Meyer), Barry (Sir R. Gower) and Blaby (Mr. Lawson), the hon. Member for Blaby not having been present for the previous debate. I am thoroughly aware that the Bill will be considered in Committee and that various matters can be explored in detail.
The hon. Member for Blaby referred to public dividend capital. I believe that that subject was first mooted by my right hon. Friend the Secretary of State for Defence when he had a position in a previous administration. A similar point was raised last night when the Scottish agency was being discussed.

§ Mr. Lawson
Is the public dividend capital to be in addition to the £150 million borrowing or is it to be counted within that sum?

§ Mr. Jones
I am grateful for that helpful intervention. The hon. Member for Blaby can be assured that the Welsh will do as the Scots do. We shall consider an amendment parallel with action taken by the Scots to cover the point of public dividend capital. I thank the hon. Gentleman for raising the point, which at a later stage we can consider thoroughly.
I wish to deal with the point raised by the hon. Member for Barry and the hon. Member for Flint, West. It is hard to predict how the Welsh Development Agency will need to draw on financial resources. This will depend on factors such as the need of Welsh industry for investment finance and the availability of land and labour to carry out environmental projects, as well as the speed with which the agency can devise plans and implement schemes. The inflation of building costs will be a factor. Although the Government had in mind an initial five-year programme of work for the agency, its funds are not limited to any period, and after the initial tranche of £100 million a further £50 million will be available on the order of the Secretary of State, subject to the approval of the House.

§ Mr. Lawson
Before the Minister concludes, could he answer the point about borrowing from the European Investment Bank and other European institutions?

813

§ Mr. Jones
The hon. Member has raised a number of points about borrowing powers. After further consideration, I can inform him that the public dividend capital will be within £150 million.

§ Question put and agreed to.

§ Resolved, That, for the purpose of any Act of the present Session to establish a Welsh Development Agency and a Welsh Industrial Development Advisory Board, and for connected purposes, it is expedient to authorise—

§ (1) Subject to the prescribed limit—

(a) the payment out of money provided by Parliament of the expenses of the Secretary of State in making payments to the Welsh Development Agency;
(b) the payment out of the National Loans Fund of sums required for making loans to the Welsh Development Agency;
(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;

(i) the general external borrowing (as defined in the Act) of the Welsh Development Agency and their wholly owned subsidiaries;
(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;
(iii) sums paid to the Agency by the Secretary of State less repayments to the Secretary of State by the Agency and less sums paid in respect of the administrative expenses of the Agency; and
(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;

§ (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.