§ 2.50 p.m.
§ Order of the Day for the House to be put into Committee read.
§ Moved, That the House do now resolve itself into Committee.—(Lord Rhodes.)
§ On Question, Motion agreed to.
§ House in Committee accordingly.
§ [The EARL OF LISTOWEL in the Chair]
§ Clause 1:
§ Machinery and plant
§ 1.—(1) Subject to the provisions of this section, the Board of Trade (hereafter in this Act referred to as "the Board") may make to any person carrying on a business in Great Britain a grant towards approved capital expenditure incurred by that person in providing new machinery or plant for use in Great Britain—,
- (a) for carrying on a qualifying industrial process in the course of that business; or
- (b) for carrying on in the course of that business scientific research relating to a qualifying industrial process whether carried on in the course of that business or not.
(2) For the purposes of this section a qualifying industrial process is a process for or incidental to any of the following purposes, that is to say—
(b)the searching for or, without prejudice to the foregoing paragraph, the extracting or getting, or the preparation for sale, of coal, oil or other minerals, brine, peat or natural gas;
(3) For the purposes of this section—
shall each be treated as a process incidental to that purpose, but, save as aforesaid, repair, maintenance, storage or packing shall not be treated as a process incidental to any of the purposes mentioned in subsection (2) of this section.
§ (7) No grant shall be made under this section to any of the bodies mentioned in Schedule 2 to this Act unless the machinery or plant in question is provided for use for carrying on a process for or incidental to the purpose mentioned in subsection (2)(a) or (d) of this section, being a process the carrying on of which does not in the opinion of the Board form part of the principal or main functions of that body.
LORD DRUMALBYN moved, in subsection (1), to leave out "may" and insert "shall". The noble Lord said: I beg to move the first Amendment standing in my name and in the name of noble Lords on this side of the Committee. Perhaps I might suggest that we take Amendments Nos. 34, 35 and 53 together with this Amendment. The Bill starts by saying:
Subject to the provisions of this section, the Board of Trade…may make to any person carrying on a business in Great Britain a grant towards approved capital expenditure"—
and so forth. This Amendment seeks to alter the word "may" to the word "shall". It is fairly common to move such an Amendment, and I would submit to your Lordships that there are very good reasons for moving it in this case. Indeed, it goes to the heart of the administration of the Bill, and the way in which this Bill will be regarded.
§ In legislation, of course, "may" is sometimes tantamount to "shall", or at least to "will". If it is not a statement of what a Government Departmentmust do, it is at least a promise of what they will do. But in this case it looks as though there is no such promise. The Bill con- 1216 fines grants to "qualifying industrial processes". There are added, in Clauses 2 and 3, computers and hover vehicles, and the Bill also covers research relating to qualifying industrial processes. Machinery and plant to be used in carrying on any such qualifying process or research should be entitled to receive grant, and the Board of Trade, I submit, should have a duty to pay it if asked for it.
§ There is a genuine doubt as to the intentions of the Board of Trade and the intentions of this Bill. I must put this to the noble Lord. Do they intend to exclude some qualifying processes? Do they intend to exclude some types of machinery and plant for use in carrying on those qualifying processes? That is the first question I should like to ask. Of course, there will be marginal cases, and the question is: who is to decide? If you confer a right, you normally provide a way in which that right can be asserted, which means some form of appeal procedure. It is obviously possible to establish such a procedure, and the purpose of Amendments Nos. 35 and 53 is simply to indicate one way of doing so. Therefore, it certainly cannot be said that this would be impossible in this case; it is certainly possible. As the Bill stands, the Board of Trade are entirely judges of their own actions. There is no appeal except from the servants of the President to the servants of the President who will advise the President.
§ The next point is this. We are here providing for selective investment grants, and not discretionary investment grants. The selective investment grants are grants for the purposes selected by Parliament. But in the way that they are being worked out they turn out to be entirely discretionary investment grants. If we are to encourage investment, surely it is essential that the investor should know where he stands as to grant. Is it worth his while to buy plant or machinery in a particular case or is it not? The question of the amount of grant that he may receive may influence the answer either way. Of course, one way of dealing with this problem would be to schedule and define in the Bill the machinery and plant or the qualifying processes attracting grant. In that case it would be necessary to enable them to be varied by Order, and one would expect that, in the early stages, that power would be used 1217 fairly frequently. If this is not done—and I can quite see that there are good reasons for not doing it; and if the Bill is properly drafted it should not be necessary—everything coming within the definition of "qualifying process" should qualify; therefore, if the word "may" is being used in the normal sense in which "may" is used in legislation, that is virtually a promise that a grant will be forthcoming.
§ It is not, is it, really a question for the Board of Trade to pronounce upon what comes within the term "qualifying process"? That is a technical matter, and that is why in Amendment No. 53 we have provided that the Tribunal should consist of a legal chairman, together with somebody appointed by the Board of Trade from a panel of persons nominated by the Confederation of British Industry, and one other member appointed by the Minister of Technology. That would appear to give the right kind of balance, and to ensure that the appeal was not being made to the same people who made the original decision. That is why the constitution of the appeal committee was arranged in that way.
§ There seem to be three questions to be answered in deciding whether or not a grant is to be made. The first is: Is the process a qualifying one? The second is: Is the machinery or plant for use in a qualifying process in Great Britain and by the applicant? The third is: Does the applicant carry on business in Great Britain? All these are questions of fact, and if the Board of Trade happen to be wrong in fact there should be a right of appeal against their decision. But if the answers to all the questions are "Yes", then the person should get his grant, and the appropriate word is "shall" and not "may". There is no room for discretion. If there is, there is something wrong with the drafting of the Bill.
§ It seems to me that if the Board of Trade insist that it is necessary to be able to refuse grant to persons who are qualified, they should say quite clearly now in what circumstances they intend to use that discretion to refuse. Therefore, if I am right in thinking that the Board of Trade are using this word "may" in its true sense, and not in the sense that it is so often used in legislation—that is, as giving them a 1218 discretion—it seems to me that they must make out a clear case for that discretion and say why it is essential that they should have it, and why it is impossible for them to administer the Bill in any other way. If not, I feel certain that Parliament should decide in principle—and the principle should be adhered to—the persons and the purposes for which the grants should be given, and that the Board of Trade should carry out that decision. I beg to move
Page 1, line 8, leave out ("may") and insert ("shall").—(Lord Drumalbyn.)
§ LORD SHEPHERD
A formidable group of noble Lords have placed their names to the Amendment. I was rather anticipating the impish humour of the noble Lord, Lord Erroll of Hale, in moving this Amendment, and not the rather responsible attitude of the noble Lord, Lord Drumalbyn, because in practice this Amendment comes at least within my own definition of a wrecking Amendment. As the noble Lord has himself said, it strikes at the very heart of the Bill. I will try to answer all the points the noble Lord has made, and I think they rest upon the question why have the Government drafted this Bill as they have done.
First of all, I think the House recognises that we have to make a major effort in the years to come to see that a greater percentage of our gross national product is invested in the manufacturing industries. I will not remind the House of the figures I gave last Thursday of the comparison between ourselves and other European countries. I think there is a general recognition that we must get more of our investment into the manufacturing industries. The Government took the view that at the outset £275 million was the amount to be aimed for, and this is the amount we expect will be provided by grants to the manufacturing and extractive industries who take up the offers of grants for new machinery.
I would ask the Committee to consider for a few moments the results of the previous system of giving incentives to industry. The noble Lord, Lord Erroll of Hale, with his experience both at the Board of Trade and at the Treasury, will be aware of the many difficulties that 1219 arose over investment allowances. I think I am right in saying that when we had initial allowances there was little difficulty, because the allowances arose on the revenue account, but in the case of investment allowances, particularly when traders realised that they could get up to 130 per cent. of the cost of their equipment, they started to put in claims on materials and equipment—if one could use the word "equipment"—well beyond what I think the Government of the day had in mind when it started the investment allowances scheme. Because of various cases that were taken by the court we had the extraordinary situation where woodworkers' vices, levels with tripod, brick-hods, listo saw, beaters, steel tapes, blow-lamps, rulers, ladders and electric heaters all came within investment allowances for capital equipment. On the other hand, rubber pails pick-heads and shafts, wheelbarrows, saw blades, drills and bits, chisels and tea-urns, which were rather similar to those within the investment allowances, were excluded; and I think it could be said that if the Commissioner had been changed he could well then have come to quite a different result.
It is quite clear that under the old scheme, which was mandatory, the area for which these grants became available went much wider than the Government of the day intended. The noble Lord mentioned that this could be met by drafting. It is perfectly true. We had an experience not so long ago when we were giving investment allowances and we were trying to help in the field of transport vehicles. The Government of the day took the view that motor cars should be excluded. I think most would agree that that should be so. But we found in terms of drafting, particularly when legal opinion was sought, that we had also excluded light vans from the investment allowances. This is one of the difficulties when you lay down a mandatory claim, because you then have to lay down very tight schedules and very tight definitions.
The Government took the view that we wanted a scheme which was as flexible as possible. Perhaps one sign of that flexibility is Clause 13(1), where we look at the definition of businesses. It says:and references to a person carrying on a business include, except where the context 1220 otherwise requires, references to a person proposing to carry on a business.I think most people recognise that there are new processes that could play a very major part in our national export effort. Many of those processes in the past have not come to fruition because the necessary aid was not there. In this particular case the Board of Trade have taken power so that where there is, in their view, a worthwhile venture that could play a considerable part, or perhaps a minor part, in economic development, it should not be a requirement that the firm should be in existence; that the grant should be available to it before it commences business. This, I would suggest, can be done only where you have a degree of flexibility within the Bill, and the Amendment which the noble Lord, Lord Drumalbyn, has moved would, in my view, and certainly on the advice of my advisers, remove this flexibility.
I think we must get quite clear in our minds that this Bill is in no way a tax relief. It is a new system under which we are going to make grants to help industry, particularly manufacturing industry and extractive industries. The noble Lord, Lord Drumalbyn, asked me whether there are any of the articles and materials in subsection (2) which the Board of Trade intend to omit. My understanding is that if any plant, equipment or machinery comes within this particular definition then the businesses will receive their grants. I would repeat the words of my right honourable friend the President of the Board of Trade on May 24, the first day of the Committee. I think these words are very important:The Board of Trade has no intention to discriminate between firms because it likes this firm and not that firm, or to make moral judgments or any judgments of that kind. It can discriminate only according to the type of process carried out or item of equipment or plant which it is considering.I should have thought that those words were sufficient to indicate to noble Lords how this discrimination, if we use the phrase, will be used. The purpose of the Bill is to give as much inducement as possible to manufacturers and the extractive industries to press on with the re-equipment of their factories and their works. We believe that this type of way of doing it, bearing in mind all the difficulties and the considerable waste of 1221 money on giving allowances to unimportant items, is a much better way of saying that the public will get what they deserve for their money.
§ 3.10 p.m.
§ LORD ERROLL OF HALE
We on this side of the Committee have listened with great interest to the explanation, or shall I say the defence, given by the noble Lord, Lord Shepherd, against the Government accepting our most reasonable proposal. I should like to reassure the noble Lord that I may not be able to be impishly humorous to-day but I will do my best, because this is a matter to which we attach the greatest importance. This is in no sense of the term a wrecking Amendment. This is a provision which we should like to see inserted in the Bill, which would command the widest support and respect throughout British industry. It is the one thing they want. It is the lack of certainty which causes so much distress among industries when they contemplate the Bill. We on this side do not in fact like the new system—
§ LORD SHEPHERD
What does the noble Lord mean by "lack of certainty" in industry? Is it in the field that equipment might not be included or that firms may be excluded from these provisions? I should like to know what is meant by "lack of certainty".
§ LORD ERROLL OF HALE
Well, I was going to come to that point when looking in rather more detail at Amendment No. 34 which is being taken with Amendment No. 1. The system as at present proposed by the Government is to allow the Board of Trade to make grants or not, at their discretion, and to vary both the size of the grants and the assets which can attract grant. In defence of this, the noble Lord, Lord Shepherd, pointed out some of the difficulties, which I admit arose in the case of investment allowances in the past. But the examples he quoted were in a relatively narrow field. They were concerned mainly with loose tools, pails and buckets and canteen equipment. It is quite possible to deal with matters of that sort. Indeed, steps have been taken in the Bill to deal with this particular point by limiting the value of an individual asset to a certain figure below which it does not attract grant. So it is no defence of the new system to pray in aid the marginal diffi- 1222 culties of the old system of investment allowances.
The area of uncertainty is clearly shown up if noble Lords study Amendment No. 34, which shows the grounds on which a person can appeal to the tribunal, if this Amendment is accepted. These are all matters on which there is lack of certainty at present and which ought to be settled decisively one way or another by a tribunal and not just by varying moods of officials, however hardworking and conscientious they may be.
In Amendment No. 34 the grounds upon which the aggrieved person can make an appeal are the refusal by the Board to make a grant, which can arise quite possibly as between one firm and another; the amount of grant paid; the failure to make a grant within nine months of the application; and from the experience of some people who have been trying to get investment grants in the old development districts this may quite often arise, if the new system is to be in any way like the old system. Then another ground is:a decision on the part of the Board that a condition imposed under Section 8(1) of this Act has not been fulfilled.There should be a right of appeal against this. And, finally,a requirement that any grant should be repaid in full or in part.There is complete uncertainty as to how the Board will act. Indeed, they may act differently in regard to different cases, and the aggrieved party at present has no right of appeal at all, except a right of appeal through his Member of Parliament.
The noble Lord, I must point out to your Lordships, has not been a Member of another place, and therefore has not had to act as Members of another place have to do, as a post office between the aggrieved person and the Minister, and with the endless and time-wasting correspondence which can go on through the aggrieved person pursuing what he believes to be a grievance through his Member of Parliament, through to the Minister, with meetings, and perhaps ending up with an Adjournment Debate. That is not a satisfactory way of dealing with appeals on matters of this sort. A tribunal is a much simpler and clearer way, and works extremely effectively in other Departments, particularly Departments dealing with pensions, 1223 war pension cases and other pensions matters, where the decision of the tribunal is binding both on the Department and on the individual; and that settles the matter. It settles it independently and with complete certainty.
This is why we are putting forward this proposal. It is one which will go a long way, if it is accepted, towards meeting the understandable objections to this Bill raised by industry in all parts of the country. I do urge the noble Lord to see his way to accepting it, or to give an undertaking to consider it between now and the Report stage. The Board will have no difficulty in varying grants. It already has such power under Clause 7 of the Bill. As I say, we have taken great trouble to make this a constructive Amendment, and I hope that, before the Question is put, the noble Lord will give some sympathetic consideration to it.
THE EARL OF SELKIRK
Do I understand correctly that the noble Lord says that the Board of Trade are, subject to the overriding position of the Bill, going to have complete discretion in dispensing this £275 million; that that is subject only to the Minister saying that he does not intend to discriminate? On the other hand, is he asking Parliament to have complete freedom as to whether he spends any or all of this sum? If I am right about that, is it not desirable that this expression of view, that there should be no discrimination, should indeed find some reflection in the Bill?
§ LORD SHEPHERD
The power of the Minister is in fact severely restricted under Clause 1(1). He is limited as to whom he may make a grant and for what purposes this grant will be used. The figure that I have given of £275million is the figure that we anticipate to be the amount of the grants to be paid each year. I do not understand Lord Erroll of Hale's point, except to the extent that when we have a new system of grants or provision of services there must always be an element of doubt as to how it will work. But, whilst this is a new method of giving grants to the manufacturing and extractive industries, it is not something new for Government. The noble Lord will himself be aware of this. I think he was Financial Secretary 1224 at the Treasury, and I should have thought he played an important part in discussions on the Cotton Industry Act. There we have the phraseThe Board of Trade may pay"—exactly the words that we now have in this Bill.
Then there were the Agriculture Acts, which have been operating since 1947, under which the Ministry of Agriculture has paid out millions upon millions each year in grants to the agricultural industry, in much the same way as we shall be doing under this Bill. I never heard it said on the other side, during the passage of that Bill and subsequent Bills, that there should be a mandatory requirement. When noble Lords opposite passed their own Agriculture Act in 1958 such a provision was not put in. I therefore, do not see why noble Lords opposite should say that it is vital and necessary for industry, and for Parliament and Members of Parliament, that a mandatory rule should be put into this Bill. I have gone into this matter most carefully and I am quite convinced that industry would lose infinitely if we had to make this mandatory, harshly discriminatory, because we should have to define clearly and should have to make exclusions.
I appreciate the fact that there may be doubt in people's minds when one embarks on a new piece of legislation, but remembering the Agriculture Acts, other Board of Trade Acts, and no doubt other pieces of legislation under which Governments have made grants in the past, my researches in this matter show that all these grants have been permissive and, to the best of my knowledge, there have been no mandatory powers in relation to any of them.
Before we leave this Amendment, may I ask the noble Lord whether it will be possible for would-be grantees to approach the Board of Trade in order to ask whether a certain project is going to qualify for grant, otherwise the wide discretion which he is claiming will be given will make for enormous confusion?
§ LORD SHEPHERD
The Board of Trade intend—and this will be a continuing process—that there should be lists of processes and machinery and plant connected with those processes 1225 which are subject to the grant system. I can give to the noble Lord, Lord Hawke, the undertaking that as soon as such a list is avalable I will see that it is placed in the Library; and I will also undertake to see that it is widely circulated throughout industry so that industry may be aware of what is available. There is no point in having a Bill like this, which provides for grants for purposes we all support, if industry does not know about them.
Arising out of that, the noble Lord has clarified to some degree the process of getting a grant, but the word "incidental", in line 19, brings into the Bill a huge element of doubt. I believe that it will be quite impossible for the noble Lord to produce any list of processes incidental to any process which could possibly cover the details manufacturers want to know. They must be able to go to the Board of Trade in advance and ask, "If we buy this expensive piece of machinery, which is not part of a process but is incidental to a process, will you give us a grant?"
§ LORD SHEPHERD
That is why I stressed the word "flexibility". Incidentally, there is continuing growth in these matters, with novel production machines coming into being, and it would not be possible so far as industry is concerned to lay down a clear, hard and fast definition. New methods may come forward which are incidental to the main manufacturing process. If they are part and parcel of that manufacturing process or incidental to it, a grant will become available. That is why we oppose the Amendment moved by noble Lords opposite, because if one includes the word "shall" it would make it mandatory, and one would lose all that degree of flexibility which the Government want to see in the Bill.
Could the noble Lord answer me as to whether the manufacturer could apply to the Board of Trade for a ruling in advance of ordering his equipment?
§ LORD SHEPHERD
§ LORD OGMORE
My noble friends and I hope that the Government will strongly resist this Amendment and will not he led astray by any of the arguments which we have heard to-day. One hopes 1226 that one day—although I suppose we shall never see it in our lifetime—industry will stand on its own feet, and will not expect large sums from the Treasury. Ever since I have been a Member of this House various industrial organisations, through their spokesmen, have come here like a lot of plutocratic Oliver Twists with their begging bowls always asking for more from taxpayers, most of whom are in far less of a position to give it than the people who are demanding it. Therefore, I hope that this will be regarded as the very limit to which the Government will go. In fact, I was going to press the Government the other way. I am not at all sure that the clause as it stands is not too widely drawn.
Is the inefficient company or business going to get the same grant or hand-out under this Bill as an efficient one? We heard in yesterday's very interesting debate and in the earlier debate on Thursday about the importance of businesses and industrial enterprises becoming more efficient. Noble Lord after noble Lord got up, particularly my noble friend Lord Reay, and instanced cases of where certain parts of industry—not all by any means—and certain firms were highly inefficient. As I read this clause, the weak and inefficient are going to get the same amount as the efficient. One might say, "If that is going to make them more efficient, why shouldn't they?" But is it going to make them more efficient? Is inefficient management going to be encouraged by getting a large sum of money to get new machinery? It may not. If one has a bad driver with a big car does one give him an even bigger car? If so, will he therefore be any better as a driver? It does not seem to follow that a bad company will do any better with new machinery than it did with old machinery.
The Committee ought to know more about this matter, in view of these vast sums of public money which are being extended. The Committee ought to be assured by the noble Lord that in the discretion of the Minister the question of efficiency will rank very high. I appreciate in the clause the words "approved capital expenditure". It may be said that that is "approved" in the sense that the machinery or the object of it is approved. It does not mean that the efficiency of the firm enters into the question of the approbation. I do not know 1227 what noble Lords behind the noble Lord, Lord Shepherd, feel about this, but I can assure him that my noble friends and I feel very strongly on the point of efficiency.
§ LORD SHEPHERD
I am grateful for the support of the noble Lord, Lord Ogmore, in resisting the Amendment put down by noble Lords opposite. However, I am afraid I could not agree with him in his recommendation that there should be even more discrimination or selectivity in the treatment of the manufacturing and extractive industries. The Government would be in a very difficult situation if they had then to say which firms should receive grants and which should not. Should it be based on the balance sheet, on export performance, or on import saving? There would be many computations to be taken into account, and I am quite sure that whoever was involved would be in very great difficulty. We have taken the view that we want this degree of flexibility; we believe it is essential to the manufacturing and extractive industries, and will in the end be the best for the country. This can be achieved only in the way the Bill lays down as drafted, and I hope that the Committee will reject this Amendment, if it is pressed.
§ LORD OGMORE
Before the noble Lord sits down, as he has asked me a question I would reply that that is exactly what I would agree to. I would not give any grant to a firm except on its balance sheet and on the expectation that it was going to use the grant properly. The noble Lord has said, apparently, that any inefficient firm could get this grant from public funds. I think that in these days, when production is so important, it is extraordinary that a Minister on a Front Bench, when speaking for the Government, can make such a ridiculous assertion as that.
§ LORD DRUMALBYN
It is an interesting situation that the reason why the noble Lord, Lord Ogmore, is siding with the Government is that he is against the whole principle of the Bill. What this part of the Bill is doing is following up the withdrawal of the investment allowances, which only gave advantages against profits made, and substituting grants; and what we are here con- 1228 sidering is whether, having taken that decision, it is right for the Government to exercise discretion between different applicants, or to have power to do so which the word "may" certainly gives them.
§ LORD SHEPHERD
Did the noble Lord say that we wanted to take power to discriminate between one applicant and another?
§ LORD DRUMALBYN
I did not say that the Government wanted to take power. What I said was that this Bill would give them the right to do so. Perhaps I should go on from that simply to say that, as the Bill stands, it would be possible if the Government so wished to do what the noble Lord, Lord Ogmore, has said. But if in place of a system of investment allowances we are putting a system of grants, it seems to us on this side that it should be absolutely plain to industry what they are entitled to and what they are going to get.
The noble Lord, Lord Shepherd, said that he was convinced that industry would lose infinitely if the Amendment were carried. I am bound to put this question to him. Is this the opinion of industry? It seems to me that, if that is his view, he should test it against the opinion of industry. He should consult industry. I should be quite content if industry said that they would rather not have a mandatory system, and would rather leave it permissive. But will the noble Lord, between this stage and the next stage, consult with industry and find out whether that is industry's view? Because it makes a very great deal of difference. I hope that the noble Lord will do that.
There is another point which I should like to make before leaving this matter. As it is at present drafted, the Bill gives the Government power to make conditions. That is, in itself, a discretionary power. But I ask your Lordships to consider this point: that the discretion can be so used that whole chunks of industry can be left out of the operation of this Bill. Let me give an example from Clause 4 dealing with hired assets. That clause lays down that grants maybe given to a person hiring goods to another person and carrying on the business of hiring. In the course of the Committee stage in another place, along came 1229 the President and said that the Government were going to operate that provision in such a way as virtually to exclude the whole of the construction industry. By exercising his discretion, and laying down that in the normal way the hiring period shall be for not less than three years, he is actually cutting out the whole of the construction industry. He said that this was what he wanted to do, because the periods of hiring in the construction industry were often very short. This is where we get if we allow this complete discretion to the Minister, and we say that is not right. All these points ought to be covered in the Bill, and in the course of its passage we shall be moving a number of Amendments to tighten it up and to make certain that people will know what their rights are under the Bill.
I do not propose to press the noble Lord on this Amendment to-day, because he is right in saying that this word "may" is the usual word to use. I put down "shall" because I wanted to make clear—and this has often happened before—that when "may" is used "shall" is intended. The noble Lord has not gone so far as that to-day, but he has gone a long way in saying that the Board of Trade are going to lay down their own rules and will stick to them, and no doubt they will make known to industry the rules that they are laying down. But that still leaves two points—and we shall come to appeals in due course—whether the Board of Trade should be entirely judges in their own case; and, secondly, whether industry agree with the noble Lord in thinking that it will be very greatly to their advantage that the word "may" is treated as completely discretionary, or very largely discretionary, or whether they would much prefer that when "may" is used in this connotation it is used in the way that is usual in Acts of Parliament. That would mean giving the Minister power to act, on the understanding that he exercises that power with complete fairness and complete clarity, and lets everybody know exactly what he is doing.
§ LORD SHEPHERD
If the noble Lord will respond by withdrawing his Amendment, I will give him a firm, categorical statement on his last few words. The answer is, Yes. That is how the Minister intends to operate that particular word in that clause.
§ LORD DRUMALBYN
I have invited the noble Lord to have consultations with industry between now and the next stage. I am sure that this is something which he will be willing to do, and on that understanding—I think I see him nodding his head—I beg leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ 3.37 p.m.
LORD NUGENT OF GUILDFORD: moved to add to subsection (1):
() for carrying on the business of a hotel, a restaurant, licensed premises or other like establishment".
§ The noble Lord said: This Amendment would have the effect of including the hotel and restaurant industry within the scope of these grants. I feel that your Lordships should have some further discussion on this very important point, although it was discussed in another place, because in the interval we have heard what the President of the Board of Trade has offered to the industry and, furthermore, some interest was shown in this point in the Second Reading debate.
§ The main reason why we have singled out this industry from many service industries who are going to suffer under this Bill by losing the investment allowances is that it is the basis of our foreign tourist trade in this country and, also, that the industry very urgently needs more capital for modernisation. The 1964 figures tell us that the foreign exchange earned from foreign visitors coming to this country was over £300 million in that year. Of course, this included the income from travel by air and sea as well, but obviously nobody would come here unless they could find comfortable hotels when they arrived. Some 2 million visitors then came to this country, and the British Travel Association tell us that by 1970 that figure will have doubled to 4 million. In fact, the tourist industry is the great growth industry of Europe and the Western World and, heaven knows! we want Britain to be in on it. These extra visitors will not materialise, nor indeed will the present number be maintained, unless we can provide here accommodation and food standards which will compare favourably, both in price and in quality, with those in other European countries.
§ Nowadays it is the package holiday which attracts most people, and this is worked out by the tourist agencies in 1231 this country and in other countries. They are extremely discriminating in deciding where it is best to arrange their tours. They look very closely at the accommodation and the value which hotels offer. We can learn from the experience of France in the last decade or so, where the hotel trade has lost very badly by their, so to speak, pricing themselves out of the holiday market some years ago.
§ There has been a big tendency for European visitors to go to Italy and Spain—although, of course, many still go to France—and so on, as alternatives on the Mediterranean. On the other hand, I have noticed, as I am sure your Lordships have, that over the last ten or fifteen years there has been a most noticeable improvement in the standards of hotels and restaurants in Italy, both large and small. I can remember ten or fifteen years ago when it was quite difficult to find a restaurant in any Italian town, large or small, where it was possible to get a decent meal. But nowadays in even quite small towns invariably it is possible to find at least one or two good restaurants where the premises are the same, but the kitchen has been completely gutted and fitted up with modern equipment. The same applies in the hotels, even quite small hotels, where one can get good accommodation with showers and baths. I do not pretend to know the fiscal system in Italy which has enabled this to be achieved, but we know that the numbers of tourists going to Italy probably exceeds those going to any other European country.
§ These are lessons from which we can learn and I have heard—perhaps noble Lords opposite can confirm whether this is true—that the Michelin Company was invited to draw up a Michelin Guide for our country for the convenience of tourists, and the company expressed itself as unable to do so because of the difficulty of classifying our hotels. The fact is, as I am sure your Lordships will know, that outside the luxury class hotels, of which we have a good number in London, which are probably as good as, or better than, those anywhere else in the world, and a few in the provinces, our average middle-range hotel is not up to the same standard as European hotels reach today.
§ Increasingly, not only American visitors, and Canadian and Australian visitors as 1232 well, but European visitors expect to find a bedroom with either a shower or bathroom attached. All these things cost a lot of money. Our hoteliers say when tackled about this that they simply have not the cash to modernise their hotels as they would like to do. In the past ten years or so there has been a big improvement in some of our hotels, particularly I should say in the Trust Houses, which are pre-eminent in the profession. They have built a few new hotels and modernised some of the old ones, but there is still a long way to go before we get our hotels and restaurants up to the standard which would compete as effectively as I should like to see.
§ This Industrial Development Bill actively discourages the hotel industry. It cuts off the investment allowances and under the Bill hoteliers will not get grants. The loss of investment allowances plus the effect of S.E.T. will, I am told, raise prices for the hotels by no less than 5 to 10 per cent. This is a very steep increase. It will add to their costs by something of the order of £20 million to £25 million a year.
The President of the Board of Trade—this is a point to which I particularly wish to refer—has implemented the statement of the Prime Minister on what the Government are prepared to do to help the hotel industry. I welcome any evidence that Her Majesty's Government recognise the importance of this industry, but the loan scheme which the President of the Board of Trade has announced gives woefully little help to the industry. The British Hotels and Restaurants Association has reacted with these words: that the loan scheme,
is doing no more than offering to lend a crumb from the loaf which the Government has taken away".
We have the example of the Trust Houses, one of the pre-eminent firms in the hotel industry, especially in the provinces, which say that they will lose no less than £320,000 a year by the loss of investment allowances and that the selective employment tax will cost them about £1½ million. These are very big sums. Sir Geoffrey Crowther, the Chairman of Trust Houses, estimated that the value to the whole hotel industry of this new loan scheme of £5 million worth of loans for 15 years at Exchequer rates of interest was about
£60,000 a year; yet here is this one firm which is losing £300,000 a year on investment allowances alone. No doubt this was the reason why Sir Geoffrey Crowther described the new loan scheme as a cut-price alibi for the Government for the damage they have done to one of the country's largest currency earners.
§ I am sure that noble Lords opposite do not intend to do this to the hotel industry, which is immensely important to the Government. It is an industry which is short of capital. It is, incidentally, hard hit by the corporation tax as well, because of its particular financial structure, and this loan scheme is to be applied only to those hotels which can show significant new or increased earnings from overseas visitors. Surely this will apply to few hotels, and how on earth they will show that I shall be interested to hear. I urge your Lordships that the industry must be treated as a whole. The standards throughout need raising for both food and lodging, first to attract visitors and earn foreign currency, and, secondly—this is not unimportant—to provide for our own people when they go on holiday. Year by year in increasing numbers they like to get away from home to the seaside and elsewhere for a holiday, and they also want improved standards. As I said earlier, there is far too big a gap between the luxury hotel and the average hotel.
§ I am quite sure that unless our hotels are able to become more attractive, not only shall we fail to attract foreign visitors, but our own holidaymakers will be off to Europe in increasing numbers which will cost us more and more in foreign exchange. I feel sure that noble Lordsopposite want this industry to prosper, to expand and to modernise itself. I hope, therefore, in the light of this very cogent case and because of the marginal help which the new loan scheme will give, that the Government will be willing to accept this Amendment.
Page 1, line 17, at end insert the said paragraph.—(Lord Nugent of Guildford)
§ THE MINISTER WITHOUT PORTFOLIO (LORD CHAMPION)
My Lords, for the purpose of hearing the Statement, I beg to move that the House do now resume.
§ Moved, That the House do now resume.—(Lord Champion.)
§ On Question, Motion agreed to, and House resumed accordingly.