Welsh Development Agency (Hansard, 18 February 1980)

§ 2. Mr. Knox
asked the Secretary of State for Wales when he intends to meet the chairman of the Welsh Development Agency.

§ Mr. Nicholas Edwards
I meet the chairman frequently.

§ Mr. Knox
At my right hon. Friend's next meeting with the chairman will he be discussing the investment programme of the Agency, in the light of the failure of Leiner? How much will the company's crash cost the Agency?

§ Mr. Edwards
I have had discussions with the Agency about its investment programme and we have indicated that we think it right that, out of the reduced sums available to the Agency, it should concentrate primarily on the small business sector. The Agency made a £2 million investment in Leiner on 2 February 1979, and at that time it was owed about £800,000 for services. Since then the amount outstanding for services has continued to rise and, although the company has gone into receivership and one hopes that there will be some recovery, there is a possibility that the agency will face a substantial loss.

§ Mr. John
Does the right hon. Gentleman agree that the Leiner problem must be judged by two criteria, namely, the maintenance of employment and manufacturing capacity and the safeguarding of public expenditure? When he meets the WDA, will he ask about what seems to be an extraordinary decision to call in £500,000 from the company at six hours' notice, thereby forcing it into receivership, when the WDA knew that a contract signed with Romania a month ago would have given £1 million profit to the company and that the sale of the encapsulation plant, which has been interrupted, was nearing fruition? What hope can the right hon. Gentleman give to those working at the plant, who are so diligent that they won the Queen's Award to Industry three years running?

§ Mr. Edwards
The company made substantial losses before the investment took place, and since then there has been 5 a large over-capacity in the industry. The situation was deteriorating and the bank had first charge on the moneys from the American deal. I have made clear to the WDA that it would have complete discretion over the way in which it handled the difficult and deteriorating situation.

§ Sir Raymond Gower
While there must be the most detailed and careful examination and investigation of this serious matter, may I ask whether my right hon. Friend agrees that it is not one in which a hasty judgment should be reached, because many companies have been placed under great pressure by economic and industrial events all over the world, and the Leiner company has had a splendid record for a quarter of a century?

§ Mr. Edwards
The company had had a good record, though at the time that the investment took place the losses made in the previous year ensured that the money put in went simply to meet those losses and was fully absorbed by that. I repeat that I have made clear to the chairman and chief executive of the WDA that they must have complete discretion in how they handle the difficult situation facing them.

§ Mr. Rowlands
When the Secretary of State meets the chairman will he apologise for the shameful attempts that he has been making to fob off on to the Agency responsibility for the suspension of all derelict land schemes in Mid-Glamorgan as a result of the petty-minded public expenditure cuts that the right hon. Gentleman has imposed on the Agency? Does not he consider that action to be a grave offence to a county with an enormous amount of derelict land, with communities such as my own, from which the idea of derelict land clearance originally stemmed?

§ Mr. Edwards
The WDA initially allocated about £6 million to derelict land clearance in its budget for this year, as against expenditure last year of about £7 million. In doing so it took account of the need for priority expenditure on advance factory programmes There was a massive continuing commitment which it had to meet before launching into new schemes. It is clear that as a result of the additional sums that I have made available in connection with the 6 steel closures in South Wales there will be more money available for derelict land clearance where it is linked to the preparation of sites for industrial development.

§ Mr. Wigley
Reverting to the Leiner decision, and in view of what the hon. Member for Pontypridd (Mr. John) said, will the right hon. Gentleman confirm that because of the Romanian deal, the sale of the capsule side and the willingness of the family to give up its holding in the company, the bank was not going to press its rights, and that if the WDA had not pressed the company it could have continued for a considerable time?

§ Mr. Edwards
The bank had prior charges, and the substantial service debts were mounting steadily. We have not yet seen the audited accounts for the previous financial year, which may indicate that losses were even greater than was thought when the investment was made. I have made it clear that the WDA must look at the situation on a day-to-day basis and make decisions in the light of the information available to it, after discussions with the bank, on the proper way forward. I understand that that has happened.

§ Mr. Hooson
Is my right hon. Friend satisfied that the WDA has instituted financial control systems that will adequately protect public money from this sort of loss in future?

§ Mr. Edwards
I have instituted tighter guidelines for this sort of investment, and I have great confidence in the new chairman whom I have appointed and who takes over an extremely difficult situation.

§ Mr. Alec Jones
Does not the right hon. Gentleman agree that from some of the comments made in the House today, and from certain press reports of the past week, there seems to have been an over-hasty judgment in the Leiner case? I should make clear that the Opposition want the WDA to succeed in all its activities. Its investment activity is essential to preserve and create jobs in Wales. Is the right hon. Gentleman aware that I look forward to an early statement from him or the WDA on this issue?

§ Mr. Edwards
I shall certainly draw to the attention of the chairman the right hon. Gentleman's desire for a statement, 7 but I do not believe that his suggestion about over-hasty action is true. The situation has been deteriorating. The WDA has been considering it for many weeks and has been engaged in discussions with the banks and other interested parties. Other negotiations that have been taking place have been relevant and have had to be taken into account in decision making. I told the chairman a week or so ago that I must leave it to him to decide what course of action he, the chief executive and the board choose to pursue.