HC Deb 25 November 1987 vol 123 cc314-22

Not amended, considered.

Order for Third Reading read.

Motion made, and Question proposed,That the Bill be now read the Third time.—[Mr. Lang]

7.15 pm
Mr. John Maxton (Glasgow, Cathcart)

I assume that the Minister has moved the Third Reading formally because he wishes to respond to the points that hon. Members will make as the debate unfolds, although I do not think it will take too long. Indeed, had the Government Whips acted with any flexibility or sense of responsibility, the whole thing would have been over a long time ago. But they insisted on moving the closure on Second Reading, thus taking the debate into a second day and running it on much longer than was necessary. It was entirely the fault of the Government Whips and had nothing to do with the Opposition.

This debate gives us an opportunity to repeat some important points about the Scottish Development Agency. There is still a question in the minds of many Scottish people and in the Scottish press about regional aid in Scotland and its relationship to the SDA. At the recent forum organised by the Scottish Council at Gleneagles, when all the great and the good were present—

Mr. Alex Salmond (Banff and Buchan)

Where was the hon. Gentleman?

Mr. Maxton

I was not present.

Mr. Salmond

I was there.

Mr. Maxton

The hon. Gentleman may be included among the great and the good in Scotland, but I am not. My hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) was there, and although 1 offered to replace him, he did not accept my offer.

Following that conference, there was confusion between what the Department of Trade and Industry believes and what the Scottish Office believes is happening about regional aid in Scotland. Neither on Second Reading nor during the Committee stage of the Bill did Ministers clarify who is responsible for regional aid policy in Scotland. The Secretary of State for Scotland insisted that he was in charge. Lord Young, the Secretary of State for Trade and Industry, rightly insists that he, and no one else, is in charge of regional aid in Scotland.

Is a review of regional aid being undertaken? The Secretary of State for Scotland and the Minister of State say that there is no review, but Lord Young said clearly at Gleneagles: I am examining from the ground up all our regional aid. He intends to examine everything that is done in his Department, so there must be a question mark over the future of regional aid in Scotland. There is also a question mark over the amount of money that is being spent by the SDA. The Minister must give us a commitment about the extra £24 million which the Secretary of State boasted he will spend on regional policy in Scotland. Some of us believe that that £24 million is merely roll-over from underspend in this financial year and has nothing to do with new money, but the Minister may wish to dispute that. We shall be interested to see how he intends to spend the money.

Regional development grant is not the way in which to spend money now, because it is difficult to obtain it quickly. The Minister should allocate that £24 million between the Scottish Development Agency and the Highlands and Islands Development Board. That would allow a much better use of the £24 million than might otherwise be the case. I hope that the Minister will clear up that matter and, even at this late stage, make it clear that we should be spending more money on the Scottish Development Agency.

Many hon. Members have commented during our various debates on the cuts in real terms that have been made in the money that is provided by the Government to the SDA. The Minister's reply has always been that the SDA has been receiving more money from its investments, so it is generating its own income and we should not interfere with it. It is marvellous that the SDA is generating its own finance, but that should allow it to do more, because the Government should allocate increasing amounts of money to keep pace with inflation; then the SDA will generate more money, which will allow more money to be invested in the Scottish economy to create jobs. That is what the SDA should be about.

The Government seem to take a different line. They are schizophrenic about the SDA. They want it to generate some jobs so that they can boast about them but, at the same time, the SDA runs contrary to all their views on the free market economy. So they want to push it into the background and downgrade it as much as possible, while using its facilities to create what jobs they can.

In conclusion, I want to quote from articles in The Scotsmanand the Glasgow Heraldthat have appeared in the past two weeks. They concern the future of the Scottish Development Agency under its new director, Mr. Iain Robertson. According to Mr. Alf Young, who is a respected and unbiased economics journalist in Scotland, and who wrote a long article in the Glasgow Heraldon Monday about the SDA, there is speculation in the SDA about which the Government should say something to the House. Staff in the SDA headquarters in Glasgow are worried about whether they will continue in their jobs. As an hon. Member representing a constituency in Glasgow, I am concerned about any loss of jobs from the area, although I accept that there may be a need for some devolution of SDA functions outwards to other parts of Scotland. I do not believe that anyone would object to such a devolution of power to other parts of Scotland to allow SDA decisions on investment to be taken at more local levels than they are now. However, if the other rumours are correct, we are right to express concern about them. One of the articles says: But, coming as it does in the wake of the Treasury/ Scottish Office review into the work of the SDA, a root-and-branch restructuring will inevitably raise fears that the agency's role, in a Thatcherite economic climate, is again going to change. Those who claim to detect within the SDA a power struggle between old-style interventionists, loyal to the ethos which led to it being set up in 1975, and a market-orientated faction, committed to the Mathewson view that the SDA should work with the grain of market forces, will be watching closely for signs of which side emerges in the ascendancy. Others, who believe that battle was won some time back by the free-marketeers, will be looking for evidence of any hidden agenda that Robertson, a career civil servant before he came to Bothwell Street, might be hatching in collaboration with the Scottish Office to push the SDA further into the arms of the private sector. It would concern us greatly if there were any movement to put the SDA yet further into the hands of the private sector. Later in the article, speaking of the investment department of the SDA, Alf Young writes: Investment, even when its own portfolio of £26.2m invested in 127 companies is boosted by the £2m a year the agency puts into small businesses, may not have a long-term place in Robertson's scheme of things. It has, arguably, become much more risk averse since the days of the Stonefield Vehicles saga (although the SDA's exposure in the receivership of Livingston-based Integrated Power Semiconductors runs to £2m). The investment division's guidelines now hardly distinguish it from many private sector sources of finance, and there is open talk in Bothwell Street that it might be privatised, either as an operational unit or by progressively liquidating its portfolio. If the investment side should liquidate its portfolio, or hand it over in some way to the private sector, the money that that investment portfolio generates to allow the SDA to invest in our companies will no longer exist. There will therefore be a general cutback in the SDA's ability to carry out its functions. I hope the Minister will take this opportunity to put our minds at rest about the article's implications, and make it clear that any restructuring of the SDA will be an internal one, perhaps to improve the managerial structure of the organisation. There is no doubt that parts of it have grown, like Topsy, all over the place, and it needs tightening up. but the Minister should not allow parts of it to be privatised, or allow it to liquidate its entire portfolio, and he should give us a commitment that the SDA will be able to use its money directly for investing in industry and developing jobs. Far from retaining it in its present form, we hope that the Minister might now see that the SDA has been a success since 1975 through its intervention in the economy, and it requires more money and greater expansion so that it can create yet more jobs in the Scottish economy—because under this Government they are badly needed.

7.27 pm
Mr. Alex Salmond (Banff and Buchan)

This is an opportunity to reiterate some of the points from our earlier proceedings on the Bill, which the Minister has still to answer effectively.

My first point — it leads on from what the hon. Member for Glasgow, Cathcart (Mr. Maxton) said—is that there is no real question of who is in charge of regional policy in Scotland. Undoubtedly, Whitehall is in charge of it, and not the Secretary of State for Scotland. The real point about regional aid policy over the past 10 years is not who is in charge, but the remarkable decline in the regional aid budget to less than half what it was 10 years ago. I accept that part of that decline occurred before the Government came to office in 1979. It has been paralleled by the decline in the SDA's own budget.

Whatever is said about the SDA's overall budget, the Minister must acknowledge — it is in a parliamentary answer — that the SDA's contribution from the Government has declined in real terms from £104 million when the Government came to power to £89 million this year. That represents a real decline of 15 per cent. In Committee, the Minister described that as a sign of success. No doubt he also considers it a sign of success that, as the hon. Member for Cathcart said, the Government and Scottish Office have underspent by £20 million on regional development grant this year. Does the Minister want to square the circle and explain how an underspend in regional development grant fits the picture that he paints of the Scottish economy moving forward with plenty of investment and investors wanting to take up regional development grant?

As has rightly been said, the Secretary of State for Scotland has been claiming widely that he has gained another £24 million for next year's regional development grant budget. However, that is merely a roll-over from the underspend of last year. The Secretary of State for Scotland must be the first person ever to get into serious trouble through picking his own pocket!

The vision of the Scottish economy that the Government seek to portray does not square with the facts. In terms of overall industrial production, the Scottish economy is still performing at a lower level than in 1980 and its unemployment level is the second highest on the British mainland. Even in the review of the Scottish Development Agency carried out by the Industry Department for Scotland and the Treasury, which strove desperately to say nice things about the Scottish economy under this Government—the best they could offer was that things were no better, they were much the same. Page 22 says: In 1984 gross domestic product per head (in Scotland) was 96 per cent. of the United Kingdom average compared with 97 per cent. in 1975". when the SDA was established.

The reality is that Scotland is last out of the recession in the United Kingdom, and instead of being increased to combat these problems, the SDA budget is declining in real terms, as are the regional development grants. The Government have completely missed the economic opportunity of which the Scottish Development Agency was established 10 years ago to take advantage.

My second point is a recurring theme in the contributions to debates such as this by the Scottish National party. It is about the direction of SDA funding. Surely the saddest thing in the review of the SDA, about which I have spoken, was the revelation that over the past 10 years the net proportion of the SDA budget in equity risk investment in the Scottish economy has declined from 25 per cent. to a mere 2 per cent. I should like the Minister to explain how, with a net expenditure on investment of about £2 million, the SDA can seriously expect to regenerate the Scottish economy. There seems to be no real reason for decline, because the analysis of the effectiveness of SDA investment gave the agency more or less a clean bill of health.

Even on the tiny investment budget that can be deployed by the Scottish Development Agency, the review calculated that, between 1981 and 1985, the agency successfully created about 10,000 net jobs at a cost per job of about £1,000. That is a remarkable bargain, and surely it is an argument for a vast expansion in the SDA budget so that it can take the opportunity offered by the sectors of growth in the Scottish economy that it has been doing so much work to identify.

My third point deals with the direction of Government economic policy in Scotland. Despite what the Minister said on Second Reading about turning the emphasis to developing indigenous companies, the reality is that the only thrust of Government economic policy in Scotland is to attract mobile inward investment from overseas. In part that is welcome, and nobody would seriously deny that inward investment can bring great benefits to an economy. However, it is all a matter of proportion and many people in Scotland know to their cost that an economy that is totally dependent on mobile inward investment is especially vulnerable when the winds of international recession blow.

We would like to see from the Minister a real commitment to developing indigenous companies in Scotland. There are some signs that his words on Second Reading will not be carried through into practice. He may well remember that on Second Reading many hon. Members expressed concern about the PRIDE and DRAW schemes. These are important schemes in the rural areas of Scotland. They have small budgets, but have proved important for rural workshops and for giving grants to rural businesses. Elsewhere, the Minister said that the schemes were to be refinanced, and announced a budget of £5 million over three years. My understanding is that, far from being enhanced, the grant element in the schemes is to be drastically cut. I should like some assurance from the Minister that that will not be the case.

If the hon. Member cannot give that assurance, at least he should give some hope to the many small businesses in Scotland which applied under the previous scheme. They were left in the lurch because of the exhaustion of resources and had the rug pulled from under them. The Minister has said that those businesses will get priority in the application of funds for the new scheme. Can he also give us an assurance that they will get treatment on no worse terms than they would have received under the previous grant element in the scheme?

My final comment is about a wider matter than those that are dealt with in the Bill.

Mr. Deputy Speaker (Mr. Harold Walker)

Order. The hon. Gentleman cannot refer to wider matters. On Third reading we must restrict ourselves to what is in the Bill. I hope that the hon. Gentleman will confine himself to what is in the Bill.

Mr. Salmond

I am grateful for your guidance, Mr. Deputy Speaker, and I shall certainly do so. Sixty-two Scottish Members would like to see a substantial increase in the Scottish Development Agency budget. As a public sector body, the agency should have a prime role in leading Scotland out of the recession. To do that it needs an adequate budget, and that means a vast increase in its present budget. Despite the support of the vast majority of Scottish MPs, we cannot bring our views to bear upon the Government or the Minister.

It may be that the Minister will have a remarkable conversion, such as he has had in the past on the Scottish Development Agency. He was converted to the inward investment role of the agency that he now trumpets although in 1980 he once was very much against it. Until Scottish MPs can provide the answer to the question of how we can bring our majority will to bear on the Government upon the subject of the Scottish Development Agency, or any other Scottish subject, we will not be successful in bringing about the revival of the Scottish economy that we so desperately want to see.

7.37 pm
Mr. Tam Dalyell (Linlithgow)

I should like to raise one matter that has possibly not been covered as it might have been. It is the matter of the boundaries on which grants are given. I shall give a concrete example concerning the huge and successful Uniroyal tyre factory at Newbridge in the constituency of my hon. Friend the Member for Livingstone (Mr. Cook). The bulk of the work force in that factory comes from my constituency. The problem is whether grants should be given on the basis of geographical position or whether some leeway should be given in a case where the work force comes from an area where there is considerable unemployment—a scheduled area such as Linlithgow.

There is a related problem, and perhaps the Scottish Office could look at it. It concerns discussions with the Department of Transport about the very serious Community directive on tyre tread depths. I put down a question on 24 November in which I asked the Secretary of State for Transport what research his Department has done on accident incidence relative to tyre tread depth.

Mr. Deputy Speaker

Order. I find it very difficult to relate the hon. Gentleman's remarks to the Third Reading of this Bill.

Mr. Dalyell

They relate to the question of help for a factory such as that of Uniroyal. There is a way out of this problem and it is by asking the Department of Transport to reconsider its attitude to the European directive on tyre tread depth. The problem would be solved if the depth was brought up to the 2 mm that every Government Department asks of its own vehicles. No Minister's car has a tyre tread depth of less than 2 mm. If that was done it would be a great help to factories such as that of Uniroyal and to the tyre-making industry in Britain. Other matters — such as road safety — would be out of order in discussing this Bill.

There is a problem here and the Department of Transport knows about it. I believe that the Scottish Office knows about it and it has arisen this week in acute form. I do not ask for a reply now, because that would be unreasonable, but perhaps the Scottish Office would consider the matter. It will receive a letter from me in the morning about this and I hope that it will reflect on it.

7.39 pm
The Minister of State, Scottish Office (Mr. Ian Lang)

This small technical Bill has now reached its final stages in the House and as envisaged in 1981 when the Government amended the original provisions in the Scottish Development Agency Act 1975, it has given hon. Members the opportunity to examine and discuss the activities of the agency in some detail.

Over the years, the agency has shown its value as a flexible and responsive instrument for encouraging essential changes in the Scottish economy and significant improvements to the environment of Scotland. In the light of recent publicity in the Scottish press about the reports of possible changes to the organisation of the agency, it is not surprising that that should be raised by the hon. Member for Glasgow, Cathcart (Mr. Maxton). The hon. Gentleman will appreciate that that is primarily a matter for the agency, as it is an administrative matter.

I can assure the hon. Gentleman that Ministers generally welcome and endorse the principles behind the changes to the structure proposed by Mr. Robertson, the chief executive. The Scottish Office will be liaising with the agency on the implementation of the changes and subject to clarification on some points of detail, we see no reason why the changes should not fulfil the desired aims of bringing the agency's structure more in line with its corporate strategy and so improve its delivery mechanism.

I want to elaborate on one or two of the ways in which the changes will be made. The hon. Member for Cathcart supported what he saw as the devolution of some services in order to improve their delivery. That is a desirable development and it has been said that a number of regional offices will be set up in Scotland. The agency intends to create new directorates for enterprise development to pull together the agency's sectoral work on industry and on higher value added services. It also intends to set up a directorate for urban renewal. Those are useful and worthwhile initiatives.

No staff redundancies are planned. There should be improved lines of responsibility, less bureaucracy and, I hope, more job fulfilment and a greater feeling that each individual employed by the agency is contributing personally and directly to its success. That is part of the purpose of the chief executive's plans which I understand he proposes to develop in more detail when he announces his proposals later this week.

Far from implying change in the agency's role, the changes in administration respond to change in the agency's current work and the balance of its priorities and the allocation of its budget. There is no hidden agenda. There is a sharpening up of effectiveness which will bring it closer to its customers as it is a commercial customer-driven organisation.

The hon. Member for Cathcart attempted to lead me into a discussion on regional aid. Bearing in mind your strictures about sticking strictly to the Bill, Mr. Deputy Speaker, although I generously sought to respond to the hon. Gentleman's inquiries in Committee and on Second Reading, on this occasion I will let the issue of regional aid pass. For the same reason, sadly, I will not be able to comment on the queries raised by the hon. Member for Linlithgow (Mr. Dalyell), although his points will have been noted in Hansard.

Mr. Maxton

Before the Minister leaves this point about the restructuring of the agency carried out by Mr. Iain Robertson, will he assure us that there will be no privatisation of the investment department either through direct privatisation by selling it off, or by running down its portfolio of investment?

Mr. Lang

I assure the hon. Gentleman that we have no such plans at present to do that. The administration and organisation of the agency is a matter for the agency itself.

Mr. Maxton

I accept that selling the agency off through direct privatisation would not have anything to do with the agency, as it could not do that without legislation. However, presumably the agency could sell off its portfolio without direct Government involvement or legislation.

Mr. Lang

The hon. Gentleman is putting ideas into my head. Certainly the agency can dispose of its investments as it thinks fit in the light of prevailing market circumstances. That point brings me to the statistics about the budget and investment.

The agency has been disposing of its investments in increasing numbers. This point may underline the difficulty expressed by the hon. Member for Cathcart over the agency's gross and net budget. At the risk of boring the House, however briefly, I want to repeat the figures. In 1986–87 figures, the gross net budgets in 1978–79, the last years for which the Labour party was responsible for the administration of the agency, were £124.9 million and £102.9 million respectively. In 1986–87, the figures were £130.9 million and £89.2 million respectively. That represents an increase of 4–8 per cent.

It is also significant to explain — this answers the point about the figures raised by the hon. Member for Banff and Buchan (Mr. Salmond) — that the self-financing element of the agency's expenses, in other words the difference between the gross and net figures, has increased from 20 per cent. in 1978–79 to 40 per cent. this year. Not only has gross budget funding increased, but we are also getting very much better value for money in the use of the receipts and the recirculation of funds.

Mr. Salmond

In the figures that he has just given, does the Minister accept that the Government's contribution to the SDA has declined by 15 per cent?

Mr. Lang

I have not quoted the figure, but the net budget was £99.9 million in 1985–86 figures and those were the figures used by the hon. Member for Banff and Buchan. The figure is £86.6 million in 1986–87. Far from "admitting" that, I am proclaiming it. That underlines the growing success of the agency's use of resources which has led to that achievement.

I want to provide one or two investment figures to help the hon. Member for Banff and Buchan. The hon. Gentleman is worried about the fact that, as he alleges, the proportion of the agency's budget going to investment has decreased from 25 per cent. to 2 per cent. The plain fact is that the figures that he used for 1976 were the provision for investment. The actual outturn was very much less than that. In 1986–87, the outturn, taking account of the reinvestment, of receipts was very much higher. I do not know where the hon. Gentleman got his figure of 2 per cent. from. It bears no relation to the actual investment figures.

I want to describe the present trend of investment over the past three years. The amount invested over the past three years has been £6.3 million, £6.2 million and £7.96 million respectively and that has catalysed investment from the private sector of £30.9 million, £72.54 million and £106.7 million. Investment created or protected 4,483 jobs in 1984–85, 5,344 in 1985–86 and 5,619 in 1986–87. That is a remarkable and encouraging story. The agency now holds investments in 820 companies most of which is in the form of relatively small sums because they are investments placed by the agency's small business division.

I believe that I had better not bore the House with more statistics as they have been well ventilated over the past few weeks. The value of agency expenditure can be seen anywhere in Scotland by looking at areas which were once derelict and have now been brought back into constructive use, by new factories occupied by profitable firms, by the existence of high technology industries attracted through the efforts of Locate in Scotland and by our steadily increasing small business sector which has benefited from the agency's advice and assistance.

Over and above this, there is the change of attitude in Scotland which the agency, in accordance with the broad strategic guidance laid down by this Government, has helped to bring about. I refer to the increasing involvement of the private sector in areas which have previously been considered to be the preserve of the public sector; to the increasing realisation by the private sector that the agency is a partner rather than a leader, and to the improvement in Scotland's image abroad as a place which, because of its environment and the skills of its work force, merits major investment.

In order to continue with these important tasks and to complement fully the effects of both the Governments nationwide economic policy and their regional policy it is, of course, necessary to provide the statutory basis for the continued funding of the agency. That is the purpose of the Bill. Although, as I have previously said, the Bill does not determine the annual budget of the agency, which is established separately and in the light of the Government's overall spending priorities, it is essential in order to provide a basis of funding from which those budgets can be met. I am happy to commend the Bill to the House.

Question put and agreed to.

Bill accordingly read the Third time, and passed.