HC Deb 27 June 1989 vol 155 cc833-40 3.31 pm
Mr. Donald Dewar (Glasgow, Garscadden)

(by private notice): To ask the Secretary of State for Scotland, if he will make a statement on the closure of the Wang corporation's electronics plant at Stirling and on his Department's recent negotiations with the company.

The Secretary of State for Scotland (Mr. Malcolm Rifkind)

I am deeply concerned at the decision by Wang Laboratories to close its Stirling plant. The decision appears to have been forced on the company by commercial pressures worldwide and in no way reflects on the excellent work force at Stirling.

My immediate concerns are to ensure continuity of employment for the work force and to ensure that the skills and facilities which have been developed at the plant are not lost to Scotland. I have had discussions with senior representatives of the company with a view to achieving this end. The Government stand ready to co-operate with the company and others in seeking the productive use of this plant and of its fine work force.

Mr. Dewar

Will the Secretary of State accept that the closure of the Wang plant is a bitter blow, particularly because it was so flamboyantly advertised by Ministers as a showpiece of the new technology built into the Stirling campus and promising at least 700 jobs that will now not materialise? Does this not underline the importance of attracting industry which has decision-making power and is based on substantial research and development capacity?

Will the right hon. and learned Gentleman note that, while we accept that risks are inherent in the attraction of inward investment, it is equally important that we learn what went wrong in this case? Will he answer the following questions? What public funds have gone to Wang, and in particular what funding has been sunk in the £3.5 million extension for which he cut the first sod only in March 1987? When was the last instalment paid and what steps are being taken to recover the money? Are steps being taken to alter the system, given the similar and harrowing experience that we had with the Caterpillar company?

Judging from the right hon. and learned Gentleman's press statements, the Scottish Office learned of the closure only a week ago. That suggests either a failure in monitoring what was happening in a company in receipt of substantial funds or a lack of frankness on the part of Wang. Will he give his views on that?

Will the right hon. and learned Gentleman say more about the prospects of the plant being sold as a going concern, so saving the jobs? Has Wang given any assurances that it will take a realistic and helpful view of the transfer of the plant, if there is such a possibility?

I come to possibly the most discouraging aspect of the matter. Wang has chosen to concentrate its European operations in Limerick and not in Stirling. Can the Secretary of State throw any light on the reasons why that decision was taken? Are we not entitled to an explanation, given that the Secretary of State was quoted, when inaugurating the recent extension, as urging Scots to have as much faith in their country as Americans"— and particularly Wang— had in it as an ideal location in which to invest"?

Mr. Rifkind

I shall deal with the specific points raised by the hon. Gentleman. On his final point, the explanation given by Wang is that its plant in Limerick is much larger than its Stirling plant—which it undoubtedly is—and has excess capacity. Because of its poor global economic position, it intends to concentrate its activities at one European plant, and it has chosen the larger plant at Limerick, which has excess capacity and can absorb a certain amount of the work done at Stirling.

Wang has said that it intends to be extremely helpful in seeking an alternative user for the plant. It is in its interests to do so, and I have every reason to assume that that will be a priority. We shall obviously keep in close contact with Wang on that matter.

A total of £3.7 million has been paid to Wang since 1982, and the last payment was due in February of this year. Under the rules that operated in 1982, no company is bound by the offer letter to repay grant, but in specific circumstances there may be grounds to seek to reclaim money paid, and we are studying that.

On the question of any change in the system, I have to inform the hon. Gentleman that, when the negotiations with Wang took place in 1982, the system then in force was that applied under the previous Labour Government. Since then we have changed the rules, and all offers of regional selective assistance on applications submitted since November 1984 have specific clauses to ensure that the Government can reclaim part or all of any money paid in the event that the recipient company runs into difficulties within three years of the final payment. In addition, since 1984 any sums paid to a company investing in the United Kingdom are related not to the capital that that company has invested but to the number of jobs created as opposed simply to the number of jobs that it had promised to create.

I can assure the hon. Gentleman and the House that since 1984 the rules applied have been much stricter and enable clawback. Had the current rules been in force at the time of the original negotiation with Wang, every penny paid to it could have been required to have been repaid to the Government in the circumstances that have now developed.

Mr. Allan Stewart (Eastwood)

Does my right hon. and learned Friend agree that the sad decision by Wang was made because worldwide it has been laying off employees because of the advance of workstation networks in the market at the expense of mini-computers? Does he further agree that the electronics industry in Scotland remains in extremely good health, as has been shown by Compaq's recent announcement at Renfrew? Has not by far the most important decision relating to the Scottish economy during the last few days been the announcement of a plan for a £1,000 million additional investment and 35,000 new jobs in Strathclyde?

Mr. Rifkind

New investment coming into Scotland is encouraging, both in the electronics industry and elsewhere. Not only are there the 500 additional jobs announced by Compaq at Erskine in the electronics industry, but there has recently been a decision by Sun Microsystems to establish a plant at Linlithgow. In the non-electronics sphere, only this morning the Crusader company announced its intention to relocate 380 jobs, most of which will be transferred from Reigate to Greenock in the enterprise zone in Inverclyde.

Scotland clearly remains a very attractive place for investment, both for the electronics industry and for other industries. The electronics industry in Scotland employs some 43,000 people, so the investment by Wang—useful and important though it was—represents only a tiny proportion of the total.

Mr. Martin O'Neill (Clackmannan)

Is the Secretary of State aware that my constituency abuts the Stirling plant and that the travel-to-work area of Alloa has an employment rate of 20 per cent? Is he further aware that it is especially disappointing for the Central region that Wang was the only electronics firm that has ever been attracted to it'? Does not the difficulty that the region has experienced in securing such employment make it doubly difficult for us to believe that there will be any great enthusiasm on the part of any other company to come to the region? Will not the right hon. and learned Gentleman make full use of all the assistance and attraction that he can provide to prevent future employment draining off to the new towns, which seem to be obtaining the bulk of hi-tech employment in Scotland?

Mr. Rifkind

I am not sure that the hon. Gentleman will have the agreement of all his colleagues on that observation. The Wang plant in Stirling remains a very attractive building, with an existing, trained, highly qualified work force. I do not share his inherent pessimism as to the ability to attract a company to use the excellent work force and the excellent plant in Stirling. Of course, none of us can guarantee what the outcome will be, but I think that the hon. Gentleman would do a service to his constituents if he sought to maximise the attractions of Stirling rather than to suggest the opposite.

Mr. Kenneth Warren (Hastings and Rye)

Is it not reprehensible that the management of Wang did not consult Her Majesty's Government before it took its precipitate decision, bearing in mind that the Government are a substantial investor in the company? May I be assured that the Secretary of State for Trade and Industry will try to make sure that clauses are built into all investments to ensure that consultation takes place before such decisions are made and that payback will be required at all times?

Mr. Rifkind

It is certainly desirable that there should be maximum consultation with Government when decisions of this kind are contemplated. I assure my hon. Friend that in all offers of regional selective assistance since 1984 the possibility of clawback has been written into the conditions of offer. That is a substantial improvement on the position that existed for a good number of years before that.

Mr. James Wallace (Orkney and Shetland)

The Government have set great store by their inward investment policy. The decision must come as a great blow to them. What implications for the future of that policy does the Minister think the announcement has, following the decision of Caterpillar? In regard to future projects, what will be done to try to ensure that they have some research and development and design component, together with managerial functions, so that we do not become vulnerable to branch factory closures?

Mr. Rifkind

There have been a vast number of decisions on inward investment into Scotland over the years and only a tiny fraction have withdrawn subsequently.

As to the second part of the hon. Gentleman's comments, I have seen suggestions, both in his question and elsewhere, that we should be disinterested in possible investment that is only of an assembly plant nature. I countenance strongly against that. If one considers the experience in Scotland, one sees that many plants that began as assembly plants go on to much greater things. IBM began as an assembly plant, as did Digital and Hewlett-Packard, but in each case we see the company as a major operation going far beyond pure assembly; they are production centres and sources of research and development in Scotland at present. So the fact that a company may be first attracted to Scotland or any other part of the United Kingdom for a limited purpose s in itself not a reason for dissuading it. I assure the hon. Gentleman that many other parts of Europe would be only too happy to step into the breach if we showed disinterest in possible investment on such grounds.

Mr. Spencer Batiste (Elmet)

Does my right hon. and learned Friend agree that the announcement b} Wang underlines the inherent unreliability of a system which, by use of cash grants of public money, encourages companies to set up business in places that they might not otherwise choose, with that business, on any downturn, becoming the most vulnerable? How would he react to what must be the inevitable conclusion to be drawn from the criticisms of the hon. Member for Glasgow, Garscadden (Mr. Dewar)—that the practice should be discontinued in future?

Mr. Rifkind

I certainly think that the old system was less satisfactory because it did not explicitly and directly tie any grant to the number of jobs created and it did not allow for a specific right of clawback if within a certain period the jobs ceased to exist or the economic activity ceased. Clearly that made it easier in the past for companies to consider withdrawal from the United Kingdom in the event of any problems developing. That is why the Government decided to address themselves to the problem and in 1984 changed the rules substantially, which makes withdrawal much less likely in future.

Mr. Harry Ewing (Falkirk, East)

Is the Secretary of State aware that I have reason vividly to remember Wang coming to Stirling because I happened to be the Member of Parliament for Stirling when the company was attracted there? Whatever the Secretary of State says about the old system employed by the Labour Government, the fact is that his predecessor, now the Secretary of State for Defence, negotiated the deal in 1982, three years after his Government came to power, under the terms and conditions that prevailed at that time. The Tones had three years to change the system if they were worried about it, but they did not lift a finger.

I deeply resent what Wang has done to my former constituents over the last few days and the disgraceful way in which the people of Stirling have been treated. [Interruption.] Why should the Secretary of State be surprised? I have a 1982 Scottish Office press notice in which his predecessor, the then Secretary of State, said: We offer investors a climate in which they can make money supplying a Europe-wide market, keep it out of the hands of the tax collector and repatriate it at will". That is exactly what Wang has done, and the Tories are as culpable as Wang.

Mr. Rifkind

I thought that the hon. Gentleman was going to conclude his question by saying that the Tories are as culpable as the last Labour Government. When my right hon. Friend made that announcement in 1982, the hon. Gentleman was the first to welcome it. [Interruption.] The hon. Gentleman was the first to welcome it. He went on record at the time, saying how delighted he was that Wang had been persuaded to go to Stirling, and he congratulated the Government on what they had achieved. The hon. Gentleman must not apply double standards. He should acknowledge that the Government came to their conclusion about five years ago, under my right hon. Friend who was then Secretary of State for Scotland, and that the terms under which these matters have been negotiated, both under the previous Government and in the first few years of this Administration, were too lax in respect of the requirements they expected from overseas investors. That is why that has been changed, and that is why it should be applauded by the hon. Gentleman.

Mr. Phillip Oppenheim (Amber Valley)

Surely it is obvious that there can be no guarantee that grant-aided plants will succeed, which is why we welcome putting in the provision for clawback in the 1984 legislation. That was never done by previous Governments. Will my right hon. and learned Friend remind Opposition Members of the closure of Linwood, into which huge sums of money were pumped by the previous Labour Government? They got virtually none of it back when a multinational replaced it a few years ago.

Mr. Speaker

Order. I ask the hon. Members to stick to the main question. We have a heavy day in front of us.

Mr. Rifkind

We would all take the view, as my hon. Friend implies, that it was sensible to introduce the changes that were announced in 1984. They ensure that, in certain circumstances, public funds that have gone to a company can be returned to the public Exchequer if the basis on which they were granted does not turn out to have been fulfilled.

Mr. Jim Sillars (Glasgow, Govan)

Does the Secretary of State appreciate that, after a long effort with the electronics industry in Scotland, only one tenth of employed people are employed by indigenous Scottish companies and the other 90 per cent. are controlled by external capital? Does that not lead him, along with the Scottish Development Agency and Locate in Scotland, to look for a fundamental review of strategy in the electronics industry? The Wang episode is only one example; there are other potentials along the line. The right hon. and learned Gentleman must know that I am telling the truth.

In the review, will the Secretary of State consider the clawback, not only in relation to Government money but the enhanced capital asset of the plant, so that the clawback should rightly go back to the people of Scotland? It would be much easier to find an alternative tenant for the Wang factor if Wang were not selling the factory on the open market at a price dictated by it.

Mr. Rifkind

I note what the hon. Gentleman says. If the Scottish National party is hostile to 90 per cent. of the electronics industry in Scotland, which he says is controlled from outside Scotland, he has just suggested signing the death warrant for about 40,000 jobs. If that is the view and objective of his party, I am sure that very few people in Scotland will be prepared to agree with it.

Mr. Ernie Ross (Dundee, West)

The Secretary of State cannot ignore the fact that, for Wang, he is the public representative of the taxpayer and the people of Scotland. Why, once again, was he caught with his trousers down? He is our public representative. He should tell us why Wang could take its decision with so much Government money in the plant and why he did nothing about it. He will be unable to do anything about it once it has been made.

Mr. Rifkind

The hon. Gentleman obviously lives in a totally different world from that of the rest of the British public if he believes that a Government can forbid an overseas company from deciding to withdraw its investment. As the hon. Gentleman is presumably now well aware, under the conditions that were introduced by this Government, any decision announced since 1984 has an automatic right to clawback of any public funds. On Wang, there may indeed be grounds to seek to reclaim moneys paid, and we are studying them at present.

Several Hon. Members


Mr. Speaker

Order. I am bound to have regard to the business for today. We have an important debate ahead of us in which many right hon. and hon. Members wish to take part. I shall take two questions from each side of the House.

Mr. John Marshall (Hendon, South)

Does my right hon. and learned Friend agree that the Government have had substantial success in attracting new companies into the Scottish economy and that that task could be made more difficult by the crusade against multinational companies by Opposition Members? Is my right hon. and learned Friend aware of the possibility that that company may have decided to concentrate its European production at Limerick because of the excessive subsidies given by the Irish Government—

Mr. Speaker

Order. That is not the point. The hon. Gentleman should stick to the question. This is not a debate.

Mr. Marshall

I had hoped that I was sticking to the question, Mr. Speaker. I was talking about Wang concentrating its European production at Limerick and asking my right hon. and learned Friend to ensure that that was not due to excessive subsidies, and, if it was, whether he will make representations to Sir Leon Brittan.

Mr. Rifkind

I understand that the company's main consideration was to concentrate its European activities in one plant. If the company had decided to concentrate its European activities in Stirling, major new investment would have been required. However, by concentrating it at Limerick, the company has been able to use the unused capacity in its plant in that country.

Mr. Dennis Canavan (Falkirk, West)

What was the size of the payment that the Government made to the Wang corporation in February this year? Why do the Government try to claim all the credit when companies such as Wang come to Scotland and yet try to disclaim virtually all responsibility when they pull out? Is not this case indicative of a basic failure in the Government's industrial strategy, whereby billions of pounds of public money can be handed out to multinational companies which are here today and gone tomorrow precisely because the Government refuse to impose stringent conditions to make multinational companies accountable to their work forces and to the communities in which they are located?

Mr. Rifkind

The sum paid at the beginning of this year —the last tranche—was approximately £250,000, but I shall check that figure. In answer to the hon. Gentleman's final remarks, this Government, unlike his own, have begun to introduce the sort of stringent conditions that the last Labour Government did not think were necessary.

Mr. Christopher Gill (Ludlow)

Does my right hon. and learned Friend agree that it is not the role of Government to try to pick winners and that this case demonstrates the hazards of trying to do that? Will he remind the House of the Government's successful history in creating the climate and environment for investment which alone can lead to permanent, sustainable jobs? In so doing, will he remind the House that one man's grant is another man's tax bill?

Mr. Rifkind

Regional selective assistance is not paid automatically to any applicant. Before any grant is paid, an application would normally have had to be considered and approved by the Scottish Industrial Development Advisory Board or by the similar boards that serve England and Wales. Therefore, an assessment of the viability of a project is made by an independent body that gives advice to the Secretary of State and to the Government Department concerned.

Mr. Tam Dalyell (Linlithgow)

As one with dismayed constituents working at Wang and who has visited the factory on two occasions, may I say that it is difficult to have good foresight in an industry in which investment decisions may be extremely tricky and where products change. I express certain sympathy with the company; it may well have done its best. May I ask two factual questions?

Mr. Speaker

Just one, please.

Mr. Dalyell

Since October of last year, how much Government money has gone into Wang and—this is a related issue—why did Wang give the Scottish Office only one week's notice of what it was going to do? It must have known that there would be difficulty because it was receiving considerable sums of public money.

Mr. Rifkind

In answer to the first part of the hon. Gentleman's question, since October or November of last year, just the final tranche of the sum originally agreed in 1982 has been paid. That was the sum to which I referred in answer to the hon. Member for Falkirk, West (Mr. Canavan). On the question of a period of notice, I agree with the hon. Gentleman that it would have been desirable if direct contact had been made at an earlier stage. The company has apologised to the Scottish Office for that. It is a most regrettable fact that that did not happen. Naturally, I must accept its apology, but it would have been better if it had not been needed in the first place.

Several Hon. Members


Mr. Speaker

I am sorry that I have been unable to call the three hon. Gentlemen, but I shall certainly bear in mind their claims when we return to the matter.

Mr. Edward Leigh (Gainsborough and Horncastle)

On a point of order, Mr. Speaker.

Mr. Speaker

It is a very heavy day.

Mr. Leigh

If this country created more jobs than the rest of the EEC together, how much parliamentary time would there be available to discuss other issues if every time 300 jobs were lost at a factory you, Mr. Speaker, allowed 25 minutes to discuss it?

Mr. Speaker

The granting of a private notice Question is a matter for the Chair, as the hon. Gentleman well knows.