§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Andrew Mitchell.]10.30 pm
§ Mr. Bill Walker (Tayside, North)
My debate this evening is about the Keathbank mill project in Blairgowrie. It is also about how public funds are used to assist tourist capital projects schemes in Scotland and Tayside.
My hon. Friend the Under-Secretary will know that, in 1990, the Enterprise and New Towns (Scotland) Bill passed through Parliament. Part I of that Bill, now an Act, created Scottish Enterprise and local enterprise companies. He will also know that, from 1 April 1994, Scottish Enterprise was given responsibility for business development activities in the tourist industry; thus, Scottish tourist board activities under the section 4 scheme of capital assistance were transferred to Scottish Enterprise.
In a Scottish Office press release of 29 June 1993, the Under-Secretary of State, my hon. Friend the Member for Edinburgh, West (Lord James Douglas-Hamilton), states:
I shall be looking to the Enterprise Network to contribute to the formulation of the national tourism strategy and to integrate its training and business supportive activities into the new framework.During the passage of the Bill to create Scottish Enterprise, and at the time of the transfer of responsibility for capital grants for tourist projects from the STB to Scottish Enterprise, Ministers assured myself and other hon. Members that projects in the pipeline would not lose out because of the change in the agency with responsibility for grants.
I submit that the Keathbank project, which is vital to tourist activity in east Perthshire, has lost out. Scottish Enterprise Tayside accepts that there have been continuing negotiations between the Scottish Development Agency, the STB and Scottish Enterprise Tayside, that the project has been in three phases and that some of the officials involved have worked for the SDA and Scottish Enterprise Tayside, thus giving continuity of contact.
On 13 March 1995, in answer to a question about what changes had been made to the statutory provision for public support towards tourist-related capital projects with the transfer of responsibility from the Scottish tourist board to Scottish Enterprise, the Under-Secretary of State, my hon. Friend the Member for Kincardine and Deeside (Mr. Kynoch), replied, "None."
So now we know. Scottish tourist board powers have been transferred to Scottish Enterprise and Scottish Enterprise Tayside, and there have been no changes in the statutory provision. We also know that the STB, following the practice initiated by the Highlands and Islands development board, allowed work to start on projects where another Government body was giving assistance; in the case of the Keathbank project, it was at that time the SDA. The letter dated 25 March 1991 from the STB, signed by Anne McGinnis, of the investment and planning division, states:The Board has no objection to work starting on the project as the majority of this relates to assistance offered by the Scottish Development Agency. I understand that there might be some intrusion into the areas which are being considered by my Board but this will not"—119 this is important—
prejudice your application for financial assistance.There is also the fact that another project was in hand at the time called PRIDE, the programme for rural initiatives and development. It is interesting to note that, in a letter, Gordon Langlands, who was head of business development for the Scottish Development Agency at the time—he transferred to Scottish Enterprise Tayside later—said:It was also agreed that as a short-term measure, it might be possible to undertake some essential works which enable M and W Stephens Limited to relocate the Keathbank Mill and this would have the effect of buying some time to consider these particular points.Of course, PRIDE at that time made it quite clear that an eligible project had to meetPRIDE's employment and income objectives; involve the development of property; is within an eligible area as shown in the accompanying map.Keathbank met all those requirements. PRIDE also stated:Projects which involve property development to accommodate manufacturing, service, commercial, or crafts activities can be considered.Keathbank met all those requirements. I suggest that the project was an SDA initiative: it began with the SDA. In 1985, Keathbank mill was advertised for sale by Thomas Thompson of Blairgowrie, and in that year there was a report on Blairgowrie for Tayside region by Mackay Consultants, which recommended that the mill should be developed for tourism. That was agreed by the SDA, TRIO, Perth and Kinross district council and the Blairgowrie area development association.
In 1987, Art Enterprises Ltd. was approached by Bob Bruce of the Blairgowrie area development association who asked if it would be interested in purchasing Keathbank mill with help from the Scottish Development Agency because the SDA's feasibility study had concluded that a private developer was required for Keathbank mill. The SDA commissioned architects to design a visitor attraction for a £3 million-plus development. Bob Bruce approached Mr. Peter Stewart-Blacker to take over the project with a promise of Government and SDA help as private sector capital was required. Peter Stewart-Blacker agreed to put in that capital.
In 1988, there was an initial appraisal and broad agreement to fund the purchase and carry out the conversion of the mill by the SDA and the Scottish tourist board. Perth and Kinross district council had responsibility for a car park, landscaping, signposting and enhancement of banks of the river with help from the Countryside Commission for Scotland. Architects and quantity surveyors were appointed.
In 1989, the mill was bought by Art Enterprises on the strength of letters of support from L. and R. Consultants, which proposed the business plan with the architects, the quantity surveyors, the Scottish tourist board and the SDA. Several meetings took place. In March, the sale from Perth and Kinross district council was concluded. At that time, funding was still being discussed with the SDA.
On 1 November, Gordon Langlands stated that land and buildings included in the PRIDE guidelines were eligible for expenditure. The car park and bridge were completed 120 during the winter, but no signposting or further improvements on the far bank were carried out by the district council or the Countryside Commission.
In 1990, a letter from the SDA, which I have sent to my hon. Friend the Minister and from which I have quoted, said that a start would not prejudice the grant application. The go-ahead for phase 1, workshops and offices, was given and was completed by July 1990. This was all carried out in negotiation with Mr. Gordon Langlands of the SDA, who is now with Scottish Enterprise Tayside.
On 17 October, an application was made to the Scottish tourist board. Accounts were awaited and there was still no agreement on the grant. In January 1991, the Scottish tourist board asked for more details, but it had spoken to the SDA and agreed a £38,000 grant. In March, the SDA draft offer of grant was sent to Art Enterprises and was revised by both solicitors. In March 1991, phase 2 began and there were problems with the quantity surveyors, who rewrote the whole bill of quantities. It became apparent that phase 2 would exceed the budget. That led to the letter from Anne McGinnis of the Scottish tourist board from which I have already quoted. Building completion was delayed from 15 June to 1 July to 1 August and the eventual handover was on 15 August 1991. This work was intended to make the building wind and watertight.
On 15 August, the mill opened with free admission due to the lack of fitting-out. It closed two weeks later. In September, £98,000 was paid by Scottish Enterprise Tayside conditional on the STB paying it £38,000, which was never received. There were negotiations with quantity surveyors and architects regarding the underestimate of capital costs.
Gordon Langlands of SET was kept informed and he said that SET would look at phase 3 grants with the STB, but that it needed new projections in the light of the £100,000 overspend and the obvious profit and loss implications affecting profitability. In September 1992, discussions took place with architects, quantity surveyors and Scottish Enterprise Tayside on the increased cost of phase 2. The STB requested a new feasibility study as capital costs had risen dramatically. There were increases of about £150,000 which affected the profitability of the project. Again, there were problems with the accounts. One partner was in hospital and eventually retired. His assistant left due to a reported nervous breakdown. These were the accountants working for Peter Stewart-Blacker of Scottish Enterprise.
In August, there was a meeting with the Scottish tourist board which was not prepared to look at grant aid for the project because of increased costs unless Art Enterprises could show viability, taking into account increasing depreciation due to the additional capital costs. Contact was maintained with Scottish Enterprise Tayside which was prepared to continue to look at grant aid once accounts were forthcoming and the final bills of the building phase settled.
Responsibility for section 4 funding at this point transferred from the Scottish tourist board to SET, but the project was told that no cash was available. On 19 March 1993, Mr. John Gardiner requested the Art Enterprises accounts for 1992. According to another member of SET, Jack Martin, SET had to look at grants or investments as Mr. John Gardiner was the investment analyst. Art Enterprises was approached again by Gordon Langlands and it was proposed that it be included as part of the 121 financial management service pilot scheme as it had a history of lateness in delivering accounts which would affect its grant application. The scheme started shortly afterwards. Art Enterprises entered an agreement to have accounts.
The matter goes on; I shall not bore the House further other than to say that I could continue to relate the saga at length. On 18 November 1994, Mr. David Gosling, the divisional director, and Mr. Bryan Barbour, the regional director of the Edinburgh Woollen Mill visited the mill and were impressed. However, they were worried about the car park, the general lack of interpretative facilities and the unfinished state of the mill, particularly the steam engine and the water wheel. They felt, however, that the location was ideal, provided improvements were carried out in time for the season beginning in April 1995.
I have a long list of telephone calls from 1992 to 1995. I shall not bore the House with all of them, but I shall let my hon. Friend the Minister have copies. I believe that I have demonstrated clearly that the project, in three phases, has been adversely affected by the change from the Scottish Development Agency to Scottish Enterprise and then to Scottish Enterprise Tayside, and by the change from the STB to Scottish Enterprise and Scottish Enterprise Tayside.
All I ask is that Blairgowrie be treated equally with everywhere else in Scotland and particularly with Dundee. I ask that Keathbank be seen, as I believe it is, as the Discovery centre of east Perthshire; after all, it is the only covered attraction that is likely to be available in east Perthshire in the foreseeable future. I ask for the pledges given by Ministers during the passage of the Enterprise and New Towns (Scotland) Bill—I have copies of the pledges given on Second Reading, in Committee, on Report and on Third Reading—to be implemented and I ask for the pledges given in written answers and in debates on the structure of the tourist industry and activity in Scotland to be implemented. The Art Enterprises projections which have been given for 1995, 1996 and 1997, which I understand are acceptable to Scottish Enterprise Tayside, demonstrate that the project will go from a net profit of £35,867 in the first year to £56,118 in the second year to £85,596 in the third year.
This is a viable project which certainly merits consideration and support. If nothing else, I hope that my hon. Friend the Under-Secretary will recognise that these are important matters and they cannot simply be brushed aside because the matter has been, I think, adversely affected by the changeover. I am not saying that Art Enterprises cannot be accused of making some mistakes—it probably has, but that is not what is important. What is important is whether we are to have a viable, worthwhile project in east Perthshire to meet tourists' needs. We ought to have such a project.
I have given my hon. Friend some written questions which he has passed on to the chairman of Scottish Enterprise and I shall be pressing for answers to them. In addition, I expect that the statement by the Under-Secretary of State, my hon. Friend the Member for Edinburgh, West, on 29 June about the change should apply equally to Blairgowrie and Dundee. On that basis, I hope that my hon. Friend will be able to say that this project should receive proper and adequate consideration in the near future.
§ The Parliamentary Under-Secretary of State for Scotland (Mr. George Kynoch)
I begin by congratulating my hon. Friend the Member for Tayside, North (Mr. Walker) on securing the debate. I know that he has a long-standing interest in encouraging tourism and economic development in his constituency and the surrounding area. I also pay a significant tribute to his tenacity in pursuing this case on behalf of one of his constituents. I thank him for the courteous and helpful way in which he has put forward his arguments. In my response, I shall deal with two particular points about the Keathbank mill project: the viability of the project and the question of the retrospective aid. I shall then touch on some of the other points that my hon. Friend has made.
I must tell my hon. Friend that viability has, of course, yet to be established. It is a substantial project with costs made up from a number of separate elements. My hon. Friend will appreciate that, while I have been made aware of the costs and sums of money involved, I have not thought it appropriate to go into those in detail tonight. Scottish Enterprise Tayside has indicated to Mr. Stewart-Blacker that it may be prepared to provide a significant sum, by way of grant, towards the cost of the project subject to its satisfaction, which it must ensure, as to the overall viability and confirmation of the availability of other funding. Mr. Stewart-Blacker has indeed been asked where that other funding will come from and, as I understand it, has yet to provide a satisfactory answer. My hon. Friend may well have acknowledged in his speech that something may have come in at the 11th hour.
Specifically on the question of viability, the chief executive of Scottish Enterprise Tayside wrote to Mr. Stewart-Blacker on 9 March pointing out that before a decision could be made on the viability of the further development of the mill, Mr. Stewart-Blacker needed to provide a response to 10 points detailed in the letter. Those points, as I understand it, have not yet been answered. Mr. Stewart-Blacker may have submitted his responses to those points in the past 24 hours, in which case, of course, they will be duly considered. Until the information is available, Scottish Enterprise Tayside cannot be satisfied that the project is commercially viable.
I turn to the issue of retrospection, which is slightly more difficult, and whether the works already undertaken on the mill should be considered for financial assistance. I should point out that this is at present a secondary consideration and that unless and until it can be established that the further development of the mill is a commercially viable project, there can be no question of any financial assistance being made available. Scottish Enterprise Tayside has told Mr. Stewart-Blacker that the provision of assistance in respect of expenditure already incurred would be contrary to the operating guidelines laid down by Scottish Enterprise. I confirm that that is certainly the case. It reflects the general principle that financial assistance for economic development should make something happen that would not otherwise happen.
§ Mr. Bill Walker
My hon. Friend will recall that I said that the Scottish tourist board and the Highlands and Islands development board, in relation to tourist-related projects in particular, allowed that to happen.
§ Mr. Kynoch
If my hon. Friend will be patient, I will try to refer to the question of the application, or whether there was an application, to the Scottish tourist board.
123 As I said, the general principle is that financial assistance for economic development should make something happen which would not otherwise happen. It would obviously be a misuse of funds—as I am sure my hon. Friend the Member for Tayside, North would agree—and of public expenditure to provide assistance for a project that would have gone ahead without such assistance.
Where an individual or company has gone ahead with a project before assistance has been secured, the view taken normally is that that demonstrates that the assistance was not essential to the project going ahead and that therefore it should not be eligible for consideration.
However, my hon. Friend quite rightly referred to the assurances given to Mr. Stewart-Blacker in 1991. With regard to the point that my hon. Friend raised about the history of the project pre-1991, Scottish Enterprise Tayside gave Mr. Stewart-Blacker a grant of £92,000, fulfilling a promise made by the SDA which was, of course, for phase 1 of the project. I know that my hon. Friend accepts that.
My hon. Friend referred to the fact that Mr. Stewart-Blacker received assurances from the Scottish tourist board in 1991 that work on the mill at that time would not prejudice the application for financial assistance that he made or was considering making to the STB. However, no properly completed application was ever made to the tourist board. I am aware that an application was made in 1990, but it was recognised by everyone concerned at the time that the necessary supporting information was not available. That information was sought on several subsequent occasions, but it was never received.
In 1993, responsibility for capital assistance to tourism-related projects was transferred from the Scottish tourist board to the Scottish Enterprise and Highlands and Islands enterprise networks. There was no change in the statutory position: it was simply announced in answer to a parliamentary question—which I had tabled—that the Scottish tourist board would no longer accept applications for such assistance and that support for business development activities would be consolidated in the enterprise networks.
The Scottish tourist board transferred all outstanding applications for assistance to the relevant enterprise company on 29 June 1993. That did not include Mr. Stewart-Blacker's application for assistance, as the Scottish tourist board had received no further information and thus, understandably, two and a half years after the application was originally submitted, it considered that no outstanding application was present. In those circumstances, it took the view that any such application should be considered as lapsed.
In those circumstances, any assurances given by the Scottish tourist board in relation to the provision of its financial assistance cannot be held to apply to the different financial assistance regime operated by Scottish Enterprise Tayside. No commitment was ever made by Ministers on that point. Indeed, no such commitment was ever needed, as no complaints were made to the Department about the impact on individual cases of the transfer of responsibility from the tourist board to the enterprise networks.
124 I should now like to deal briefly with the suggestion that Scottish Enterprise Tayside was in some way responsible for Mr. Stewart-Blacker's failure to provide the financial information to support his 1991 application for assistance, because of the unsuccessful financial management service pilot which Scottish Enterprise Tayside helped to fund. My hon. Friend has not referred to that in the numerous letters with which he has understandably and rightly bombarded my officials and my Department.
As my hon Friend is aware, Scottish Enterprise Tayside provided very substantial sums in financial assistance for the initial development of the mill. I have already referred to the £92,000. One of the conditions of that assistance was that Mr. Stewart-Blacker provide regular annual accounts to Scottish Enterprise Tayside. Unfortunately, he failed to do that.
§ Mr. Bill Walker
I recommend that my hon. Friend the Minister look at the agreement. The onus also lay with Scottish Enterprise Tayside to ensure that that happened.
§ Mr. Kynoch
I hear what my hon. Friend says, but I suspect that Scottish Enterprise Tayside has had some difficulty. I know that my hon. Friend will give many excuses and explanations for the failure of the company to produce those accounts. The long and the short of it is that, sadly, the information has not been forthcoming.
As a result of his difficulties in producing accounts, Mr. Stewart-Blacker was offered the opportunity to participate in a pilot scheme whereby he received consultancy assistance at the expense of Scottish Enterprise Tayside. The scheme was not successful for three reasons. My hon. Friend has touched on some of them.
First, the three staff assigned by Mr. Stewart-Blacker to work with the consultant left the business and valuable time was lost in retraining new staff. Secondly, once the 15 consultancy days which Scottish Enterprise Tayside had agreed to fund were used up, Mr. Stewart-Blacker did not fulfil his part of the agreement to retain the consultant at his own expense to conclude the project. Thirdly, there were problems with computer hardware, but it was replaced by hardware suppliers at their own cost.
So there were significant delays, but my hon. Friend is not necessarily right in pointing the finger of blame at Scottish Enterprise Tayside for the failure of Mr. Stewart-Blacker to produce proper accounts. Indeed, I have to say that Scottish Enterprise Tayside has gone out of its way to assist Mr. Stewart-Blacker with his financial monitoring systems.
My hon. Friend has touched, certainly in correspondence, on the Discovery quay project in Dundee. It has been suggested that Scottish Enterprise Tayside may have given more favourable treatment to Discovery quay than to Keathbank mill. I have to tell my hon. Friend that that is not the case. However, the two separate projects were competing for public expenditure resources. The Discovery quay project was fully appraised and investigated before Scottish Enterprise Tayside agreed to provide financial support. The actual and potential economic benefits of Discovery quay are considered by Scottish Enterprise Tayside more than to justify its intervention.
125 I should also remind my hon. Friend that Scottish Enterprise Tayside is not a centrally directed organisation which simply carries out the Government's bidding.
§ Mr. Ernie Ross (Dundee, West)
May I remind the Minister that the concept of Discovery quay was aimed at regenerating the city of Dundee? It was not one simple project to be given assistance. It was for the regeneration of a city that was in decline following the decline of the jute industry. There is hardly a comparison.
§ Mr. Kynoch
I hear what the hon. Gentleman says. I do not entirely disagree with him. The point that I was trying to make was that a project was submitted which was properly financially appraised. For that reason, it received funding.
I have no reason to believe that the location of Keathbank mill in Blairgowrie is a factor which affects adversely the consideration by Scottish Enterprise Tayside of the application for financial assistance. I assure my hon. Friend that I believe that Scottish Enterprise Tayside has tried hard to look at all areas within its area of responsibility. I attended the opening, which I know that my hon. Friend attended, just the other day of the Acorn business centre in Perth. It is certainly outwith Dundee and it was clearly for the benefit of a different part of that area.
It would be inappropriate for me to let this occasion pass without referring to the boost given to the tourist industry in Perthshire by the achievement of European Union objective 5b status for the area. I know that my hon. Friend—this is a little wind-up—considers that this additional European finance is simply a reimbursement of our national contribution to Europe. Nevertheless, the change in status for Perthshire must represent good news for the tourist industry, which will now be eligible for additional assistance.
§ Mr. Kynoch
I do not have much time left. I should like to complete my speech so that I can respond to my hon. Friend's points. I know that the hon. Member for Moray (Mrs. Ewing) has a great interest in tourism, but with respect I should like to concentrate on this issue.
My hon. Friend may wish to note that one of the projects which Scottish Enterprise Tayside has submitted for objective 5b funding involves expenditure of more than £200,000 for a landscaped walkway by the River Ericht in Blairgowrie from Keathbank mill bridge—surprise, surprise—which is adjacent to the project at the centre of this debate, to the Blairgowrie bridge. So I do not think that the area is being neglected.
I am grateful to my hon. Friend for initiating the debate. I hope that I have outlined the current position to him. The provision of assistance to small businesses is always a difficult matter, particularly when the business in question believes that it is entitled to more support than it is offered. Nevertheless, I am satisfied that Scottish Enterprise Tayside has acted reasonably and constructively in this matter and that it will continue to promote the interests of tourism in the whole of Perthshire.
As for Keathbank mill, Scottish Enterprise Tayside stands ready to provide substantial sums of assistance to the project once the information necessary to support the application for assistance has been submitted. My hon. Friend says that the information has been submitted. I hear what he says, but if the information has not been submitted, I hope that my hon. Friend will pass the message that I have given him to his constituent and urge him to submit all the information available at the earliest time. I hope that it will be given fair wind and that it will be proved to be a viable proposition. Of course, that is up to Scottish Enterprise Tayside, not to me.
§ Question put and agreed to.
§ Adjourned accordingly at one minute to Eleven o'clock.