HL Deb 02 August 1966 vol 276 cc1240-300

4.5 p.m.

House again in Committee.

THE DUKE OF ATHOLL

I rise to support my noble friend Lord Nugent of Guildford on Amendment No. 2 to this Bill. As an ex-member of the Scottish Tourist Board I know only too well how much money should be spent on the hotels in Scotland—and also, I imagine, hotels in England, which are little better off. It is extremely difficult for hotels to finance themselves in their modernisation schemes, especially when so many hotels in the more rural areas of Scotland and England have extremely short seasons of, say, four months of the year. This makes it almost impossible for them to put aside enough from their profits to be able to launch into much-needed modernisation schemes. They also find it extremely difficult to borrow from the banks. The scheme which was produced last week by the Prime Minister in his Statement will hardly help in the problem at all, because I think the hotels had to show that they were getting a large amount of foreign tourist trade; and this is going to be very difficult for most hotels who are not yet of the standard to attract the sort of foreign visitors that I imagine the Prime Minister was referring to in his Statement. Much of the money that he was proposing in that Statement to loan to the hotel industry will presumably go to the hotels in industrial towns where a lot of business people are staying.

I am putting my plea particularly for the hotels in rural areas, in seaside resorts, in the Highlands of Scotland, in the Borders and in other parts of the country well known for their holiday attractions. The noble Lord, Lord Shepherd, said in reply to the first Amendment that he thought nearly everyone agreed that we invested too much of our gross national product in the service industries and not enough in the manufacturing industries. It is probably true that everyone is agreed on that; but I think it is unfair to penalise this particular industry for the faults of the service industries as a whole. It will be extremely difficult for this industry to spend very much money which would qualify them under this Bill, even if this Amendment were accepted. On the whole the hotel and restaurant industry suffers from requiring a very high labour content in its undertakings. Therefore it is going to be much more severely hit by the selective employment tax than others.

I feel that if the Government could accept this Amendment it would help the industry to modernise themselves, possibly to save a little labour and thereby avoid a certain amount of the disaster of the selective employment tax. It will also encourage them to feel that Her Majesty's Government are not biased against the hotel industry; for there is definitely a feeling that the present Government do not like hotels. I do not quite know why that is so; but this feeling exists. By taking away their investment allowances and not allowing them cash grants the Government are going to encourage that feeling, which I am sure is unjustified. I would ask the noble Lord to look at this matter again to see whether he cannot persuade his colleagues to accept the Amendment or some Amendment on similar lines.

LORD BLYTON

I did not intend to enter into this debate until I read the Amendment to be made to Clause 1. I have listened to the special pleadings of the noble Lord, Lord Nugent of Guildford, for the hotel industry. He asked that the begging bowl should be given to these people; but some of their balance sheets that I have seen in the past do not seem to justify the arguments that have been put forward.

If there is a case for the hotels, I wonder why the Amendment includes licensed premises. Surely the brewers are not hard up. Their balance sheets show any amount of money in reserves. They can build public houses in modern style all over England. Their balance sheets show that they make fabulous profits. And they are not slow in trying to beat the Budget by putting beer up a penny a pint, if only the Chancellor of the Exchequer puts it on. If the argument is for hoteliers, who I do not believe for one moment are hard up, I am surprised that it should be suggested that the brewers should receive a 20 to 40 per cent. grant in development areas when these fabulous profits are being shown in their balance sheets.

When I come to the words "or other like establishment" I wonder whether they mean night clubs in London, where people can gamble and drink all night. Are we going to give subsidies to this kind of business within the meaning of the Bill? As a member of a workingmen's club in Durham, I should like to ask: Does this phrase "other like establishment" cover a workingmen's club, not to attract tourists, but to serve the needs of the manual workers? Are they to get these grants? I do not believe for one moment that the noble Lord, Lord Nugent of Guildford, was activated by any kindness for workingmen's clubs in proposing this Amendment. I believe that he means clubs for tourists in the Metropolis and in Scotland, but I do not believe that this would apply to Durham and Northumberland, where the workmen's club movement is strong.

Notwithstanding all the money the brewers have in their reserves and the fabulous places they are building to entice people in—and I like a drink of beer—we are asked here to give 20 to 40 per cent. grant to this kind of business. I hope that our Front Bench are not going to accept this Amendment. It is argued that our own people go on holiday and capital is needed to make holiday accommodation better. Surely this is a terrible indictment of private enterprise. I thought that it was efficient and dynamic and could provide for everything that happens and that it is only when we nationalise an industry that it decays. But to-day we are being asked that the brewers—poor souls!—should be given a 20 per cent. grant within the meaning of this Bill.

I want to conclude by saying this. I think that these people are doing very well even to get a loan and I am surprised that the Government would offer them even that, because if the Government had looked into their balance sheets they could easily have seen that they have plenty of money themselves to make this industry efficient and do not need to come and ask us for money.

4.14 p.m.

BARONESS HORSBRUGH

I do not wish to detain your Lordships very long, but I would say one or two words in support of this Amendment. I will not enter into the subject to which the noble Lord who spoke last referred because I have no experience of night clubs in London and cannot speak about what is permitted there and their benefits and whether or not they should have subsidy. But I wish to follow my noble friend the Duke of Atholl in speaking of how this matter affects Scotland.

I believe that there are many small hotels in rural areas in Scotland that could do a great deal of business if they had more help to develop their businesses. It may be said that if they cannot make the place pay, why not cut their losses and get out? But I believe that we could greatly increase receipts of foreign currency if we could make the small rural hotels—I would say, perhaps being prejudiced, particularly in Scotland—more ready to receive visitors from overseas. As I go about I meet people who say that they would like to visit this country, but they have been told that if they go into country areas there is practically no good accommodation for them. It seems to me that this is an opportunity to change that situation. We are now to have no more than £50 in British currency to take out of the country. We had better look around to see what we can provide for our own people in our own country. If we can make the people so satisfied with what they can get in hotels here, then when things are better, as we all hope and pray will be not too far ahead, and our people go again to other countries, they are going to tell those whom they meet what can be obtained in this country.

Over and over again I have heard people on the Continent saying how they enjoy certain hotels because the service is so good and the cooking is so good and they find difficulty in getting services of this kind in Britain. Our own people who have enjoyed good service in this country would be the best ambassadors for our hotels when they go on holiday abroad. I am not speaking of the large luxurious hotels to which big business people go—I know this is unnecessary—but of the small hotels in rural areas which could build up a far bigger clientele than they have now.

It might be asked why private enterprise must ask the taxpayer to help it. My reply is this. As we are so anxious at present to get more export trade and more foreign currency, I believe that this is a field we have not tapped sufficiently. it has not been thought of as important. If you choose to go abroad, you may take only £50. How many £50s would be spent on a holiday in this country? That question has not been thought of sufficiently, and I would ask the Minister who is going to reply to consider it carefully.

In Scotland, we are building up a prolonged winter season by attracting skiers to the Scottish Highlands, and enterprising people are building hotels to provide all the amenities for ski-ing. This is the right form of enterprise to encourage. It could go further but, as my noble friend the Duke of Atholl has said, the difficulty is the shortness of the season. I find when I go on holiday on the Continent that the holiday period there is extending, as it is here, and we should try to provide good accommodation from May onwards, so that it became known that people could have a quiet, comfortable holiday here, in spite of all that has been said about amenities—and, I was going to say, noise. I believe that even now there is an enormous number of people who would like to know of a quiet place in beautiful country—and we in Scotland can provide this—where they have good, if not luxurious, accommodation, and if we could provide this we should find many more people coming to this country than do so at present.

LORD AUCKLAND

I rise, as one who for a short time in the late 'forties, after leaving the Army, worked in a hotel, to give qualified support to this Amendment. I worked in various departments of a small hotel in Hertford-shire and had the opportunity of seeing and using some of the equipment. I should like to see this Amendment slightly redrafted to cover hotel equipment, particularly catering equipment, rather than such things as curtains and fabrics.

One of the problems of the hotel industry is that people cannot get a meal late in the evening. I am quite sure—and I have talked to hoteliers about this—that this is often due to old equipment, which means that cooking takes a far longer time than it would if new equipment were provided. Here I believe the Government can help in discretionary cases.

I should not like this to be regarded as an Amendment for carte blanche help to every hotel. I think the hotels concerned should be made to substantiate their claims. I should like to support my two noble friends who have mentioned Scotland. I know the Moray Firth area particularly well, and a lot of development under the Highland Development Act is going on there. This is an important case in point, particularly to the small family hotels. I therefore believe, from the catering side particularly, that some kind of help under this Bill could quite readily be given.

LORD WOLVERTON

I, too, should like to support this Amendment. The hotel industry has had a double body-blow. They have lost their investment allowances, and now they are faced with the selective employment tax. A great deal of work has been done in the last ten years in modernising hotels by means of the investment allowance claim. I have seen some of this in the Eastern counties, especially in the Trust Houses there, where they have done a marvellous job in places to which Americans go. They have put on extra wings to the lovely hotels there. They have brought their kitchens up-to-date and put in bath- rooms. At New market they have built a new wing and provided another ten or twelve bedrooms with private bathrooms. And there is another with which I am acquainted at Bury St. Edmunds, to which tourists go, which has also been modernised. Now the investment allowance has been withdrawn, and I think something ought to be put in its place. Therefore, I support the Amendment.

When all is said and done, the hotel and restaurant industry is a large dollar-earner, and the hotel tourist industry is about the third or fourth largest earner of dollar exchange in this country. I think that every help should be given to them, and I hope that the Government, even if they cannot accept this Amendment in its entirety, may accept the main theme of the Amendment.

LORD ROYLE

I will not detain your Lordships for more than a couple of minutes on this Amendment. I have listened with a great deal of care to the noble Baroness, Lady Horsbrugh, making her appeal for the smaller hotels in the rural areas, and even in seaside resorts. But that is not what this Amendment is dealing with. If the noble Baroness is prepared to put down an Amendment at a later stage which deals with the small hotels, and is prepared to define to what kind of hotel she desires to give help, she would get a great deal of sympathy from me on such an Amendment. But I agree with my noble friend Lord Blyton when he talks about the vast amount of hotel accommodation which would be involved in this help if the Amendment went through.

BARONESS HORSBRUGH

If the noble Lord will allow me to interrupt, perhaps I did not make myself clear. I felt that the big hotel, and the hotel that was probably thought of at first for those coming to this country for business reasons and so on, had been covered by other noble Lords, and I did not want to repeat what had already been said. But I wanted to put my own point of view, that the small hotels in the rural areas should be remembered.

LORD ROYLE

The noble Baroness agrees with her noble friends that it is not just the small hotels about which she is concerned, but she is ready to give help to the new Hiltons and others that are being built in this country. Is the noble Baroness prepared for the taxpayers' money to be poured out to institutions and organisations of that kind? I have a great deal of sympathy with my noble friend Lord Blyton when he talks about the gambling dens of this country, which could easily come within the terms of this Amendment. It does not seem to me a very good thing that noble Lords should be getting up in this Committee and, in effect, decrying British hotels at this moment. The words that we have heard uttered in this Chamber this afternoon will not have done a power of good to the hotels of Britain when this story gets out. I should think that it is a dangerous procedure to talk about our hotels as though they are below the class of anything on the Continent.

I should like to say one other thing to the noble Lord, Lord Nugent of Guildford. He did not make it quite clear in his opening speech, when he talked about the wonderful hotels in Italy, as compared with those in this country, whether they were getting industrial development grants to aid hotels throughout the country. Let us get right back to the Amendment, which says: for carrying on the business of a hotel, a restaurant, licensed premises or other like establishment. Where on earth does that finish?

LORD SHEPHERD

Perhaps I may intervene and give some noble Lords a little information, because one of the things that has dismayed me in the course of this short, interesting debate is that noble Lords opposite clearly have not done their homework. This is one of the things that they must learn to do if they are going to take part in Committee, particularly when they are in Opposition—and they are going to be in Opposition for a long time.

First of all, I would agree with my noble friend Lord Royle that there are in this country good hotels and bad hotels. This applies throughout the world—and I suppose I have travelled as much as anybody, and maybe even more than most. I agree that we have our share of bad hotels, but the number of good hotels that are to be found here, if people will go out of their way and exercise their discrimination, is quite considerable. My experience is that a bad hotel would not be improved by the mere making of a grant. A good hotel depends upon the ability of the management of the hotel. I am quite convinced that pouring out millions of pounds, which is what appears to be advocated, would not provide the hotel service that we should like to see, unless a major effort were made in the field of management and staff training. But that is well beyond what we are discussing this afternoon. I think it would be wrong for this Committee to start giving the impression to the world that we have not our share of very good hotels.

BARONESS HORSBRUGH

I apologise for interrupting the noble Lord, but would he not agree that there is a difference between a good hotel that is not modernised, and the good hotel that would become more modern in all it could offer if it had more capital to spend? I think there is a profound difference between the two.

LORD SHEPHERD

Would the noble Lady allow me to develop my point? She has had her opportunity, and now I should like, if I may, to put my point. If my memory is right, the noble Lord, Lord Nugent of Guildford, who moved this Amendment—it is some time since he spoke—devoted himself entirely to hotels. He made the case for the hotel industry in terms of overseas visitors.

LORD NUGENT OF GUILDFORD

May I interrupt the noble Lord for one moment? I also made the point with regard to restaurants. In particular I referred to the outstanding improvement in the last ten years in the small Italian restaurants you find in the towns throughout the country, in the re-equipment of their kitchens.

LORD SHEPHERD

I thank the noble Lord for reminding me of that, but the Amendment goes infinitely further. It certainly includes boarding houses, and it could include pubs, as my noble friend Lord Blyton informed the Committee. It could well include, and certainly will include, transport cafés, and I am quite sure my noble friend Lord Blyton would think they would rank equally with some of the pubs.

THE DUKE OF ATHOLL

The French transport cafés are well known for their excellence. It might not be due to the fact that they have Government assistance. It would probably be a good thing if this did include transport cafés.

LORD SHEPHERD

Let us get a little sanity into this debate. This Bill is designed to help manufacturers and the extractive industries, and in the Second Reading of the Bill and in its passage in another place we have deliberately excluded from it the general principle of services. We are now talking about the possible inclusion of one particular service.

The noble Lord, Lord Nugent of Guildford, referred to hotels and, he reminds me, to restaurants. I was developing the question of the size, scale and scope of what this Amendment would embrace if it were passed, and I believe that the taxpayers of this country (who, I think legitimately, complain about the rate of tax) would complain bitterly if they thought that your Lordships' House was advocating that their money should be put into transport cafés, and the like. Let us be frank. Overseas visitors spend over the year about £190 million, and only about 10 per cent. of the output of our hotels and catering trade is concerned with overseas visitors. Therefore, the vast majority of our hotels and non-residential catering establishments see little of overseas visitors.

It is perfectly correct that the investment allowance has been removed. I believe the noble Lord, Lord Wolverton, mentioned initial allowances; it is the investment allowance. But he will also know that the old initial allowance of 10 per cent. has now been increased to 30 per cent. The noble Lord is now aware of that. Therefore, in the Finance Bill and in this Bill we have made a major improvement in the initial allowances. I gather that the noble Duke lives in a developing area, and not in a depressed area. If a hotel can show that it will be creating additional employment—and I presume that it would—it would then be eligible for a 25 per cent. building grant, and there may be tailor-made loans approved by the Board of Trade Advisory Committee.

As the Committee will know, the Government are giving assistance through the British Travel Association. I think it was the noble Lord, Lord Nugent of Guildford, who referred to the effects of the corporation tax and the loss of investment incentives. The noble Lord may be interested in this, because I thought some of his fears were exaggerated. If you take the 40 per cent. corporation tax, the total cost to hoteliers and caterers of the loss of their 30 per cent. investment allowance, assuming their investment expenditure to be at the same level as 1964—that is, about £16 million on plant and equipment and about £4 million for vehicles—comes to something of the order of £2½ million. In the first year, however, the loss will be cushioned to the extent of over £1½ million by the increase in initial allowances to 30 per cent. Therefore the net loss that the hotel and catering trades will sustain through the loss of these investment grants will be £1 million.

On the other hand, the noble Lord, Lord Nugent of Guildford, drew our attention to the statement made by the President of the Board of Trade in another place on July 26, that on a selective basis special loans up to £5 million will be made to the hotel industry where it is clear that the establishments would be able to play a significant part in attracting overseas visitors. The Government are very conscious of the part that the hotel industry plays, not only in attracting overseas visitors but also in attracting—if that is the right word—our own people to remain in this country and, if possible, to enjoy some of our sunshine. But let us be quite clear. At this stage the Government believe that we should confine this Bill to the manufacturing and extractive trades and industries. We believe that it would be wrong and would create an anomaly to bring in one of the services. Therefore, while recognising the importance of this industry, I would ask the House not to accept this Amendment.

LORD NUGENT OF GUILDFORD

May I thank the noble Lord, Lord Shepherd, for the full and informative answer which he has given us? I will certainly study with interest the little piece of arithmetic which he so kindly did for us with regard to the incidence of the corporation tax. I cannot say that at this moment I have absorbed the full implications, but I hope it will console me when I do.

I realise that this is a moment, in the middle of August, when we would sooner be using hotels than debating them, and I will make my remarks very brief. I would say this to the noble Lord, Lord Blyton, who made such an entertaining contribution to this debate, although he did not agree with me. I was at one time a very small shareholder in Trust Houses, and I can assure him that the return for a shareholder was a very low one—something of the order of 4 per cent. They have very valuable capital assets, but their revenues are small, and they really have not an easy financial position to finance the modernisation that is needed. They have, I believe, a wonderful record in what they have done, but they need all the help they can get.

LORD BLYTON

Is the noble Lord aware that the Trust Houses in the county of Durham are doing wonderfully well?

LORD NUGENT OF GUILDFORD

I am very glad, and I am sure that it the noble Lord continues to visit them they will do even better. I hope that one day I shall meet him there. The

Resolved in the affirmative, and Amendment agreed to accordingly.

point we have been trying to make from this side is that this industry is hard pressed. Most of it has a long way to go. Our luxury hotels probably can manage, but the average hotel, which was particularly referred to by my noble friend, Lady Horsbrugh—the hotels in the country and the provincial hotels—does need help. This is not an industry holding up a begging bowl, but they carry a very heavy weight of taxation, and are about to have an even heavier one imposed on them with the selective employment tax. We are asking that they should be allowed a little something back. In the circumstances, despite the excellent answer given by the noble Lord, Lord Shepherd, I feel that we must ask the Committee to take this Amendment to a Division.

4.44 p.m.

On Question, Whether the said Amendment (No. 2) shall be agreed to?

Their Lordships divided: Contents, 54; Not-Contents, 53.

CONTENTS
Aberdeen and Temair, M. Falkland, V. Long, V.
Ailwyn, L. Ferrier, L. Luke, L.
Albemarle, E. Foley, L. Mersey, V.
Alport, L. Forster of Harraby, L. Milverton, L.
Atholl, D. Fortescue, E. Nugent of Guildford, L.
Auckland, L. Gage, V. Oakshott, L.
Balerno, L. Glendevon, L. Redmayne, L.
Blackford, L. Goschen, V. [Teller] St. Aldwyn, E. [Teller.]
Boston, L. Grenfell, L. St. Helens, L.
Brooke of Cumnor, L. Gridley, L. Sempill, Ly.
Brooke of Ystradfellte, Bs. Grimston of Westbury, L. Somers, L.
Carrington, L. Harlech, L. Strange of Knokin, Bs.
Conesford, L. Hawke, L. Strathclyde, L.
Cullen of Ashbourne, L. Horsbrugh, Bs. Swanborough, Bs.
Daventry, V. Howard of Glossop, L. Tweedsmuir, L.
Drumalbyn, L. Howe, E. Vivian, L.
Dudley, L. Iddesleigh, E. Windlesham, L.
Erroll of Hale, L. Lambert, V. Wolverton, L.
NOT-CONTENTS
Addison, V. Granville-West, L. Rowley, L.
Archibald, L. Haire of Whiteabbey, L. Royle, L.
Attlee, E. Hall, V. Rusholme, L.
Beswick, L. Henderson, L. Sainsbury, L.
Blyton, L. Hilton of Upton, L. [Teller.] Segal, L.
Bowles, L. [Teller.] Latham, L. Shackleton, L.
Brockway, L. Leatherland, L. Shepherd, L.
Campbell of Eskan, L. Lindgren, L. Silkin, L.
Champion, L. Longford, E. [L. Privy Seal.] Stocks, Bs.
Chorley, L. Macpherson of Drumochter, L. Stonham, L.
Citrine, L. Maelor, L. Summerskill, Bs.
Collison, L. Morris of Kenwood, L. Taylor of Mansfield, L.
Cooper of Stockon Heath, L. Moyle, L. Wedgwood, L.
Crook, L. Pargiter, L. Wells-Pestell, L.
Darwen, L. Phillips, Bs. Williamson, L.
Douglas of Barloch, L. Plummer, Bs. Winterbottom, L.
Gaitskell, Bs. Popplewell, L. Wootton of Abinger, Bs.
Gardiner, L. [L. Chancellor.] Rhodes, L.

4.52 p.m.

LORD DRUMALBYN moved, after subsection (1), to insert: () The Board may by order prescribe a minimum value below which no grant will be made for any one asset under subsection (1) of this section, so however, that nothing in the order shall prevent the Board, where it appears to the Board to be appropriate, from treating two or more assets as one asset for the purposes of determining the value of the asset.

The noble Lord said: I beg to move the Amendment standing in the name of myself and my noble friend Lord Erroll of Hale. This Amendment effects two things: the first is to enable the Board to prescribe a minimum value below which no grant will be made, and secondly it enables the Board to treat two or more assets as one asset. I think I have expressed the view already that if the Bill says that grants for certain types of investment are available then they should be available for all such investment, whether it costs £10 or £1,000, whether it costs £24 or £26, unless the Bill provides, or allows the Minister to provide, otherwise.

In another place, I think the President of the Board of Trade himself indicated that the Board intended to exercise their discretion not to give grants for assets of less than £25 in value. Some may think that £25 is quite a small value for an asset and that therefore the noble Lord, Lord Shepherd, when he said that grants would not be given for small assets, was perhaps not quite in line with the intentions of the Board of Trade. On the other hand, it can easily happen that there may be expendable parts in a machine, of which you may have to buy a considerable number and the value of which is small, but yet they are necessary for the running of the machine; and there is no reason why the Board of Trade in that case should not treat a number of assets as one asset.

This is what this Amendment seeks to do. It seeks to allow the Board of Trade to prescribe the minimum value in the Bill rather than to determine it simply in the discretion outside the Bill. I am sure that it is desirable that the minimum value should be prescribed in the Bill. If that is done it will be necessary to give power to vary that value, and that is done in Amendment No. 31. If I may refer to that Amend- ment now, possibly it is convenient to deal with the two Amendments together. By dealing with them together, it will be possible for the Board of Trade to vary the minimum values below which grants cannot be given. I am sure we should all agree that there must be a minimum value below which grants cannot be given, especially in view of the decision your Lordships have just come to regarding grants for plant and machinery to hotels and the catering industry. That being so, we feel that the minimum value ought to be stated in the Bill, and for that reason there should be power to vary the minimum value. But, for the reason I have stated, we consider that there should be cases where, if they think fit, the Board of Trade should treat a number of assets as one asset so as to bring the collection of assets into the bracket above the minimum value established.

These are the purposes of the Amendment. I do not think we are in any disagreement at all on what should be done. In this Amendment we are considering only the way in which it would be done. We consider that this will give all the flexibility that is necessary, unless you are going to be deliberately unfair between one applicant and another. But you can only be fair if there is a minimum value, which all know and which is stated in the Bill. The narrow point is: should this minimum value be established by Order or should it be simply a figure upon which the Board of Trade decides in its discretion and publishes? I have no doubt that it ought to be established by Order. It will give a much more complete Bill. It will give Parliament more control over what is happening. I beg to move.

Amendment moved— Page 1, line 17, at end insert the said subsection.—(Lord Drumalbyn.)

LORD PARGITER

The noble Lord, Lord Drumalbyn, referred to parts of machinery which would require to be renewed. As I understand the Bill at present, it refers to new machinery. The question of the replacement of a part or a number of parts surely would not be covered in this Bill, so far as investment grants or any allowance of any kind are concerned. That is the normal depreciation of machinery. You replace the machine in total. If you merely take a piece out of it, surely there is no limit to what you can do. I do not think it was the intention that the Bill should cover such things.

LORD DRUMALBYN

I wonder whether the noble Lord would reflect on the industry with which the noble Lord, Lord Rhodes, is particularly associated. He will see there the sort of part which is indispensable to the running of the machine and of which a quantity are required and are really part of the machine. This is what I had in mind.

LORD PARGITER

They are not replacing the machinery; they are replacing parts of a machine.

4.59 p.m.

LORD RHODES

The noble Lord, Lord Drumalbyn, is quite right. I know quite a lot about this matter, because I have had a lifetime in that industry. I must say that I agree with much that he has said, and also with the Opposition in another place when they said that a low limit was necessary. Discussions having taken place, it has been agreed within the industry that this should happen. And why not? It is not only because this Bill is a departure, on a discriminatory ground, from what has been happening hitherto, following upon the ridiculous state into which the investment allowances had got.

I will enlighten the Committee on some of the aspects of this particular issue. Before the Finance Act 1954 under which the investment allowances were introduced, it was the custom for a business which was ploughing back its profits and building up to be for ever looking at what it could get written off against revenue although they might really have been capital assets. I have done it time and time again myself, because if I had the use of those assets afterwards and I had not had to pay income tax because they showed in the profits, it was a legitimate and proper thing to do. I had a meticulous accountant—and thank goodness I had—who used to look after my affairs. When he put his pencil through something that was going to revenue and said, "No, that must go to capital", it used to make me feel very upset and disappointed. Many a time I thought in terms of changing my accountant, but I never did. It is a good thing to have a good, honest accountant.

After 1954, what happened? We all tumbled over each other to take advantage of the investment allowance, because the investment allowance was a grant on top of it. But do your Lordships know what we all started doing then? We started putting the things against investment allowance which we used to put against revenue—of course we did. People like myself who have had to forge a business in their life have to do it out of revenue, for it is revenue that counts. Can anybody put his hand up who has forged a business and who has not done it? I do not see anybody. This Amendment would mean that expendable items which normally could be written off from revenue would be included for grant. If that is what the House of Lords wants, let it have another Division now.

LORD DRUMALBYN

I hope the noble Lord will forgive my interrupting him, but I think he will agree that the Amendment has left the discretion with the Board of Trade. It will be for the Board of Trade to say whether it appears to be appropriate or not.

LORD RHODES

If the noble Lord will look at Hansard to-morrow, he will find that he specifically used the word "expendable". That is precisely what I was replying to.

LORD DRUMALBYN

But the Board of Trade—

LORD RHODES

I will give the noble Lord an opportunity afterwards. We have discretion to set a minimum value for individual items below which investment grants will not be paid under our general power to approve expenditure on qualifying assets for grants. I hope that that is the answer which the noble Lord seeks. I explained on Second Reading that initially this lower limit will be set at the low figure of £25. Accordingly no grants will be paid on individual assets costing less than this amount. It is universally agreed that this is a low figure and should be a low figure. It would not be appropriate for the lower limit to be laid down by Statute since we need to preserve maximum flexibility in operating it. For instance, it might be found later on that it is better that it should be higher. We need this flexibility because if it were under our discretion to raise it we should be able to do it, but if it were to be written in the Bill that it was to be £25, it would not be so easy without subsequent alteration.

We have made it quite clear at every stage since the publication of the White Paper that it was not the Government's intention to pay grants on loose tools and small, short-lived items. The first Amendment is intended to give the Board of Trade power to pay on such items, despite the existence of a de minimis limit, provided enough of them were bought at once. We already have power to do this under our general discretion, but, as I have explained, we do not propose to exercise it, since paying grants on small individual items in these circumstances would defeat the purpose of having a lower limit at all. I ask the Committee to reject the Amendment.

LORD DRUMALBYN

I think the noble Lord has over-argued his case. He picked on an example which I gave and pinned most of his case on that example. My example may have been wrong, but it does not vitiate the principle. If the Board of Trade do not wish to treat two or more assets as one asset, they do not have to do so. This is left entirely to their discretion under the Amendment. But what the Amendment does not do, and what the noble Lord said it did, is to write a figure into the Bill. It precisely does not do that.

LORD RHODES

I never said it did.

LORD DRUMALBYN

I heard that quite distinctly.

LORD RHODES

You will see to-morrow.

LORD DRUMALBYN

With certain qualifications, that is what I heard. I would say that this is precisely what it does not do: it does not write the figure into the Bill. I wrote the words down as the noble Lord said them. What it does is to allow the Board of Trade to prescribe the minimum value and a subsequent Amendment allows them to exercise the flexibility for which he asks.

I do not think the noble Lord has devoted his argument to this Amendment at all. I do not think that it is one we should press at this time, because it may be that if the noble Lord does not feel strongly about the second part of the Amendment we shall want to put down the Amendment again containing the first part only and combined with Amendment No. 31. It seems to me that he has made no case whatsoever for not taking power in the Bill to prescribe a minimum value and power to vary that minimum value. I think we can leave the matter there at this stage. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

5.8 p.m.

THE DUKE OF ATHOLL

moved, in subsection (2)(b), to leave out "coal, oil or other". The noble Duke said: I was wondering whether the words "coal, oil or other" when they apply to minerals are necessary in this context. I have always been brought up to believe that coal and oil are minerals. The National Coal Board does not qualify anyway, so the only body which would benefit is the small mine at Brora. It seems surprising to see "coal, oil or other minerals" when one would have thought that coal and oil were included in the word "minerals". I was wondering why the Government have done this.

LORD RHODES

May I ask if we might take into consideration Clause 1, page 2, line 6, and Clause 6, page 6, line 10? Are we discussing Amendment No. 6?

THE DUKE OF ATHOLL

I thought we were discussing Amendment No. 5, which comes before Amendment No. 6; it seems logical to discuss it first. If the noble Lord, Lord Rhodes, would like me to discuss Amendment No. 6 first, I should be delighted to co-operate with him.

LORD REA

May I suggest that the Amendment referred to is really No. 25, not No. 6?

LORD ERROLL OF HALE

If the noble Lord has it in mind to link Amendment No. 5 with my Amendment No. 25, I have no objection. I must say that the standard of the Board of Trade has deteriorated since my time. They would never have let me slip up like that.

LORD RHODES

I would remind the noble Duke that there are other people who can count beyond six. What I would say in answer to the noble Duke's probing Amendment, in regard to deleting specific references to coal and oil in the list of substances contained in the definition of extractive processes, is that it may well be that these two words are not strictly necessary. But we thought it useful to include them as two major examples of the class of minerals covered by the definition. The reference to oil also helps to show that minerals in a liquid form are covered. Even in the noble Lord's day at the Board of Trade they went to considerable trouble to explain the difference between definitions like that.

THE DUKE OF ATHOLL

Of course, I shall be only too delighted to withdraw this Amendment. I put it down purely for exploratory purposes.

Amendment, by leave, withdrawn.

5.12 p.m.

THE DUKE OF ATHOLL

moved, in subsection (2)(b), after "brine," to insert "sea-weed,". The noble Duke said: This Amendment raises a very small point. There is a thriving sea-weed industry in this country. Surprising though it may seem, it exports 70 per cent. of its products directly and no doubt much of the remaining 30 per cent. is exported when it has been processed by other people. Presumably the actual manufacturing of the sea-weed into the powder which it is sold as would qualify under paragraph (a) of subsection (2) of this clause, but I was wondering whether the collection and drying of the sea-weed would also qualify. At the moment it is largely collected by hand, but I suppose that in the future a machine might be invented for doing this, as it is getting more and more difficult to get the labour to collect it. But having been collected, the sea-weed then goes into small factories which are mostly in the Western Islands of Scotland and the Orkney Islands, where it is dried before being sent to the major factories on the mainland. I wondered whether these factories and the equipment were, in fact, covered for grants under this clause. I beg to move.

Amendment moved— Page 2, line 3, after ("brine,") insert ("sea-weed,").—(The Duke of Atholl.)

THE EARL OF SELKIRK

I should like to support the noble Duke. I know that sea-weed sounds awfully funny, but in point of fact it is really quite an interesting harvest which has a number of interesting chemicals, which I am told are unique though they have not yet been put to the fullest possible use. I am not pretending that this is a big subject, but there is an enormous quantity of sea-weed on the west coast of Scotland, particularly, and if it can be used it will be of some considerable value.

LORD RHODES

I found the discussion about sea-weed very interesting and I propose to treat this matter very seriously, because what it does, what it is used for and the value which it has are very important. I can assure the noble Duke that the need for assistance to firms engaged in harvesting sea-weed was very carefully considered when the Bill was being drafted. However, the conclusion reached was that this was an activity which really had to do much more with agriculture than with a manufacturing process or the extraction of minerals. There was also felt to be no general need to offer assistance under the terms of the Industrial Development Bill for the gathering of seaweed. However, as I said, it is an important subject and it is important for many parts of Scotland, and the machinery and plant used for a manufacturing process based on sea-weed will, of course, attract grants at 40 per cent. if carried on in Scotland, or for that matter in any other development area.

If it was found to be desirable to go further and give assistance for the collection of the sea-weed, this could be done in the area concerned under the provisions of the Highlands and Islands Development (Scotland) Act. It would be more appropriate to use these powers to give any necessary assistance to sea-weed collection, than to amend the Bill to include a process which lies rather outside the sort of activity with which it is generally concerned. I hope that with the assurance about the 40 per cent., and my remarks about the agricultural aspect of the matter, the noble Duke will consent to withdraw his Amendment.

LORD HAWKE

In the course of discussion on this interesting subject, neither my noble friend the Duke nor the noble Lord opposite has given us any clue as to what the sea-weed is used for. The uses for sea-weed of which I know are that the Japanese eat it; I believe some sort of a period medicine is made out of it, and iodine is brewed out of it in some way. But why is there this coyness about telling the House for what purpose the sea-weed is required, because without this information we cannot possibly pass judgment on this Amendment.

THE DUKE OF ATHOLL

Perhaps I could say briefly why I disagree with the noble Lord, Lord Rhodes, that seaweed is more allied with agriculture than with industry. It is, in fact, used as a stabiliser. If noble Lords will cast their minds back to the end of the war they will recall that when they bought a bottle of orange squash all the solids sank to the bottom and there was a rather nasty-coloured liquid on top. Nowadays, thanks to the addition of 1 per cent. alganate acid, which is what the sea-weed is processed into, the solids should be suspended more or less levelly throughout one's bottle of orange squash. If one took the same bottle of orange squash up to a very high altitude, the solids would rise to the top because the mixture would then be over-stabilised. It is also used in ice cream for the same purpose, and it has many other uses of that sort. Therefore, I do not know why the noble Lord, Lord Rhodes, said that he thinks sea-weed is allied with agriculture. But on the strength of his assurances that in development areas they will be able to get the 40 per cent. cash grant under this Bill, I am of course only too pleased to withdraw this Amendment. That was what I wished to discover.

Amendment, by leave, withdrawn.

5.19 p.m.

LORD DRUMALBYN moved to add to subsection (2): (f) the extraction of timber and works ancillary thereto."

The noble Lord said: If your Lordships so desire, I suggest that we take with this Amendment, Amendments Nos. 22 and 39. I regard this as an important Amendment. As the Bill is drafted, it seems that timber extraction is excluded from the qualifying industrial processes entitling machinery and plant used in those qualifying processes to a grant. The position of timber extraction, as it emerges from the Bill as now drafted, is that the present investment allowance of 30 per cent. on timber extraction plant and machinery is lost, and the 10 per cent. initial allowance which at present exists will be raised to 30 per cent. I need hardly say to your Lordships that it would be wrong to assume from these bald figures that the effect of this is that allowances are reduced by only one-quarter.

The main case for extending this grant to timber extraction is that the purpose of this Bill is to encourage modernisation. I am informed that there is more scope for increasing production and lowering costs through the employment of modern and up-to-date equipment and machinery in the extraction of timber than in any part of the process of changing growing trees into sawn timber. The costs of felling, extraction and haulage to the sawmill, which is generally all done "on the premises", as the Bill describes it—it would very often be within one estate, within the forest area—often exceed the value of the trees before felling. I am told that this country is far behind other countries in the mechanisation of extraction. Mechanisation could reduce the cost of timber delivered into sawmills; it could also help to solve one of the main problems of private forestry—the economic handling of second-class hardwoods.

Timber is something on which the Highlands of Scotland depend very greatly indeed, and the reason why I was very glad that the Amendment moved by my noble friend Lord Nugent of Guildford was carried was because, as I said on Second Reading, the three main industries of the Highlands are agriculture, forestry and tourism. In the interests of the Highlands, it is perhaps as important that forestry should be encouraged as that anything else should be, now that there is this great new Fort William venture. It is essential, if this industry is to flourish, that it should be competitive and that the degree of mechanisation and modernisation for the extraction of timber in this country should be at least as high as it is in other countries which compete with us in the supply of timber to our paper mills and the like. In my view, the encouragement of investment in plant and machinery could also help to raise the living standards and status of forest workers, which, it seems perfectly clear, are too low at the present time to attract labour into areas such as the Highlands, which most need to retain population. There is a shortage of forest workers, in spite of the fact that there are, generally, empty houses for forest workers. Mechanisation could certainly increase the efficiency of timber extraction, and by making British timber more competitive could reduce imports and so improve the balance of payments.

I think there is a very strong case indeed for including the extraction of timber in the qualifying processes under the Bill, and I hope very much that the noble Lord will either be able to say that it is already covered, as in my view it could be covered under "the making of an article"—because there is no doubt that a log as delivered to a sawmill is different in form from a growing tree, and it may be the Government will want to interpret it in that way—or, if they do not want to so interpret it, and think that that is in any way stretching the definition, will accept this Amendment. I beg to move.

Amendment moved—

Page 2, line 10, at end insert— ("(f) the extraction of timber and works ancillary thereto.")—(Lord Drumalbyn.)

LORD RHODES

I was very interested when the noble Lord mentioned the new paper works at Fort William and all that has been done in the way of assisting industry in those parts. I was very sympathetic when I first saw this Amendment, and I thought we might possibly be able to fit it in—but we cannot. The effect of the Amendment would be to make the extraction of timber a qualifying industrial process for plant and machinery grants; to extend to timber extraction equipment the special arrangements in Clause 4 for short-term leasing of constructional plant; and to provide, in the definition of eligible works vehicles, for those constructed or adapted for timber extraction. However much we have thought around this one, we cannot bring it in.

The scope of the present Bill is, broadly, to provide investment incentives for industry in the sense of manufacture, construction and mining. The Bill is not designed to provide incentives for agriculture, horticulture or forestry, which might be described as the cultivation and harvesting of crops. Now we made it quite clear in the White Paper on Investment Incentives that separate arrangements are being made for agriculture as a key sector of economic activity. Provision for investment grants for agriculture and horticulture is made in another Bill which is at present before the House of Commons and will in due course come before the House of Lords. It is on that Bill that attention as regards this particular subject, which comes outside the scope of this present Bill, should be focused.

LORD DRUMALBYN

The noble Lord has made an important statement on this subject. He has said that it is in the other Bill. I was going to ask him whether he can assure us that it is within the scope of that Bill.

LORD RHODES

I do not know that my statement was very important at all. If it was, so much the better. What I am saying is that if this is being considered in a Bill which is before the House of Commons, and it has its place there, where it can legitimately be put in, then this present Bill is not the one in which to pursue it. That is all I was saying. If the noble Lord has any more comment on that, I am quite willing to give way again.

I was saying that provision for investment grants for agriculture and horticulture is made in another Bill which is at present before the House of Commons and will in due course come before the House of Lords. The arrangements for agriculture are different in a number of important respects from those contained in the present Bill for the manufacturing, extractive and constructional industries. I accept that the Amendments we are considering relate to the extraction of timber rather than to the cultivation of our forests, and that forestry is not covered in the other arrangements to which I have referred.

It is true that what I have described as the "mining" processes of the present Bill covers the extraction of peat and brine, which are not minerals, but we consider that the extraction of these materials is essentially similar to the mining of minerals. This is rather a degree away. The extraction of timber, as I have suggested, is more akin to the harvesting of a crop, and in this case a very long-term crop. The times I have sat in the House of Commons when the question of a forestation has been discussed and the times I have heard Scottish Members referring to the "harvesting of timber" are almost innumerable.

Now it is true that forestry makes an important contribution towards import saving. We import approximately 90 per cent. of our needs in timber and timber products and spend large sums abroad each year in imported timber, timber products and paper. But the application of investment incentives for forestry equipment—whether for cultivating or for tree felling—would not, in the Government's view, have any immediate effects on the balance of payments. It is many years before trees planted can make any contribution to the economy, and the rate at which timber can be extracted depends on when the forest was planted. Moreover, most private foresters operate on a modest scale and do not buy enough plant and machinery to attract large investment grants. For the industry as a whole the amount at stake, I understand, is not large.

The Government considered very carefully whether forestry should be given a scheme comparable to the special scheme under the Agriculture Bill which will provide the new investment incentives for agriculture. Agriculture is in a different position from forestry in that it makes a valuable short-term contribution to the balance of payments and, moreover, the agriculture scheme—for the short-term; I spoke of the long-term before—will assist in mechanisation which will release agricultural labour for productive work elsewhere. So far as saw-milling is concerned, that is in a different position altogether. The noble Lord understands that quite well. Where trees are sawn into planks and further processed—that is to say, where new articles are manufactured from logs and so on—there is no question about it, there will be eligibility for grant. But the felling of trees, extraction and similar operations carried out in the woods will not qualify. I must ask the Committee to reject the Amendment. I hoped that I should never be involved in anything to do with arguments on agriculture. The only thing I ever did properly in agriculture was to grow a bit of grass. I do not know anything about trees, but I know about this Bill, and I am hoping the Committee will reject this particular Amendment.

LORD SOMERS

I wonder whether the noble Lord is really right in classing forestry with agriculture. It is slightly different, to my mind, because trees are the raw material for manufactured goods only, for anything that is made of wood, from housing to pencils—and, of course, paper of which we are needing more every day as bureaucracy grows upon us. I should have said that forestry comes under the heading of raw materials for manufactured goods rather than of agriculture.

LORD DRUMALBYN

I think we ought not to attach too much importance to the mere use of words. We should rather now direct our minds to the actual facts and processes. It is true that people talk about "harvesting timber"; it is also true that they talk about "harvesting the seas"; but from that it does not follow that fishing is agriculture or is particularly closely allied to it.

A NOBLE LORD

It comes under the same Ministry.

LORD DRUMALBYN

That is a question of administration only.

I think the noble Lord also got rather confused in explaining that he would regard forestry as a long-term business. We have nothing to do with the long-term aspects of forestry. We must consider, when the trees are mature, that at that point it then becomes a short-term business to fell them.

LORD RHODES

That is what I was saying.

LORD DRUMALBYN

I understood the noble Lord to be saying that forestry had to be distinguished because it was a long-term activity. So it is, if you take it from the point of planting; but we are not taking it from that point. We are taking it from where the trees mature. The problem is then of getting the trees to a sawmill at the least possible cost. Once you have the trees mature, it seems to me that there is an exact counterpart with mining, much more than with agriculture. For that reason, and because the noble Lord has not answered the arguments I have adduced, we will press this Amendment to a Division if necessary.

LORD SHEPHERD

May I ask the noble Lord one thing. He has greater experience and longer service than I in Government. Is it not a fact that the Ministry of Agriculture has been paying out grants consistently over many years for the future development of the forestry industry? Is the noble Lord now saying that yet another Department—merely because the noble Lord wants this Amendment in the Bill—shall become partly responsible for the growth of this particular industry? I really cannot believe that the noble Lord is suggesting that two Ministeries should become responsible for one industry.

LORD HAWKE

We are dealing with Her Majesty's Government. It matters little to us which particular Department

administers this particular Bill. It is to Her Majesty's Government that we are proposing our arguments.

THE DUKE OF ATHOLL

Furthermore, the noble Lord, Lord Rhodes, has already said that sawmills qualify. This is a part of the forestry industry which heretofore has been looked after by the Ministry of Agriculture. The noble Lord shakes his head. I run two sawmills in Scotland. We send our returns from them to the Ministry of Agriculture, or, at least, to the Forestry Commission who presumably pass them on, because the Forestry Commission is run by the Ministry. I cannot see the logic of his argument.

5.40 p.m.

On Question, Whether the said Amendment (No. 7) shall be agreed to?

Their Lordships divided: Contents 68; Not Contents 51.

CONTENTS
Ailwyn, L. Erroll of Hale, L. Mersey, V.
Airedale, L. Falkland, V. Milverton, L.
Albemarle, E. Ferrier, L. Mowbray and Stourton, L.
Alport, L. Fleck, L. Nugent of Guildford, L.
Amulree, L. Foley, L. Oakshott, L.
Atholl, D. Forster of Harraby, L. Rea, L.
Balerno, L. Fortescue, E. St. Aldwyn, E. [Teller.]
Boston, L. Glendevon, L. St. Helens, L.
Brecon, L. Goschen, V. [Teller.] Salisbury, M.
Bridgeman, V. Grenfell, L. Sandford, L.
Brooke of Cumnor, L. Gridley, L. Selkirk, E.
Brooke of Ystradfellte, B. Grimston of Westbury, L. Sempill, L.
Carrington, L. Harlech, L. Sherfield, L.
Coleraine, L. Hawke, L. Somers, L.
Conesford, L. Horsbrugh, B. Strang, L.
Coutanche, L. Howard of Glossop, L. Strange of Knokin, B.
Cullen of Ashbourne, L. Jessel, L. Strathclyde, L.
Daventry, V. Killearn, L. Tweedsmuir, L.
Devonshire, D. Kinnoull, E. Vivian, L.
Drumalbyn, L. Lambert, V. Wedgwood, L.
Dudley, E. Long, V. Windlesham, L.
Dudley, L. Luke, L. Wolverton, L.
Emmet of Amberley, B. Merrivale. L.
NOT-CONTENTS
Addison, V. Gaitskell, B. Phillips, B. [Teller.]
Archibald, L. Gardiner, L. (L. Chancellor.) Plummer, B.
Attlee, E. Granville-West, L. Popplewell, L.
Beswick, L. Hall, V. Rhodes, L.
Blyton, L. Henderson, L. Rowley. L.
Bowles, L. [Teller.] Hilton of Upton, L. Royle, L.
Boyd-Orr, L. Latham, L. Rusholme, L.
Brockway, L. Leatherland, L. Sainsbury, L.
Campbell of Eskan, L. Lindgren, L. Shackleton. L.
Champion, L. Lloyd of Hampstead, L. Shepherd, L.
Chorley, L. Longford, E. (L. Privy Seal.) Silkin, L.
Collison, L. Morris of Kenwood, L. Sorensen, L.
Cooper of Stockton Heath, L. Morrison, L. Stocks, B.
Crook, L. Moyle, L. Stonham, L.
Darwen, L. Pargiter, L. Strabolgi, L.
Summerskill, B. Wells-Pestell, L. Winterbottom, L.
Taylor of Mansfield, L. Williamson, L. Wotton of Abinger, B.

Moved accordingly, and, on Question, Motion agreed to.

Resolved in the affirmative, and Amendment agreed to accordingly.

5.47 p.m.

LORD ERROLL OF HALE moved to add to subsection (2): () the production of daily or weekly newspapers;".

The noble Lord said: I beg to move the Amendment standing in my name. The purpose of this Amendment is to seek clarification from the Government and to make quite certain that the production of daily or weekly newspapers is included under the heading, "the making of any article" which is the bottom line on page 1 of the Bill. In any event, I should prefer to see the Amendment included so that there may be no possible exclusion of newspapers from the purview of the Bill later on under the very wide discretionary powers that the Board will have. In any case, I should like to hear what the Government have to say.

Amendment moved—

Page 2, line 10, at end insert— ("() the production of daily or weekly newspapers;").—(Lord Erroll of Hale.)

LORD RHODES

After the very exciting contest we have just had we come now to slightly calmer places. I understand that this is a probing Amendment and I take it that by "probing" the noble Lord, Lord Erroll of Hale, means that he wants to know how the Government stand on this matter. I will try to tell him. The Amendment really is not necessary to achieve what the noble Lord seems to have in mind. The printing of newspapers or periodicals or any other printed matter is covered by the definition, "the making of the article" in Clause 1(2)(a). That definition deliberately goes very wide to cover all kinds of manufacturing processes. Plant or machinery which is used for printing, or certain incidental activities such as the storing or the handling of paper within a printing works, will therefore be eligible for grant. I would remind the Committee that the Government have made clear, in the White Paper and subsequently that grants will not be given for office machinery, even if it is used in connection with some qualifying process. The equipment used on the editorial side of newspapers will therefore not normally be eligible for grant. I think, however, that the main point at which the Amendment is aimed is fully covered in the Bill as it stands, and I hope that the Amendment will be withdrawn.

THE DUKE OF ATHOLL

May I ask the noble Lord, Lord Rhodes, before he finishes whether such things as Rota-prints would be covered, and duplicating machines which, although in some offices they might be regarded as office machinery, are in some printing works definitely part of the printing machinery? It is a small point and I do not wish to press the noble Lord at the moment if he does not know the answer. But I should be interested to know the answer at some time before the next stage of the Bill.

LORD RHODES

If it has to do with the office, no; if to do with the making of the article, yes.

THE DUKE OF ATHOLL

But the same machine can be used either for office work or for the work of outside customers.

LORD RHODES

I am getting a bit too deep now.

LORD ERROLL OF HALE

This, I think, just serves to demonstrate one of the many absurdities of this Bill. If one puts a duplicating machine on the factory floor one can run off all the office circulars in the factory, and that is the sort of thing that will go on, if most business firms have the kind of business morality the noble Lord, Lord Rhodes, ascribed to himself at an earlier stage of the discussion this afternoon when he changed items from a capital nature to revenue in order to suit his own pocket. According to the noble Lord that is the very thing he did.

LORD RHODES

Withdraw!

LORD ERROLL OF HALE

I shall be glad to withdraw, if necessary, to-morrow when I have looked at Hansard. In the meantime I should like to ask whether all the machinery connected with the production of a newspaper, such as photographic cameras used for making blocks, is included and not just the linotype machines and the like. I was rather worried when he started to make exclusions on a rather broad scale, and perhaps he might restate exactly what is excluded and exactly what is included.

LORD HAWKE

Would the noble Lord also state if card tables in the printing room come into the same category?

LORD ERROLL OF HALE

Is the noble Lord not going to give me any reply?

LORD RHODES

Is it to a suggestion about my putting items into revenue, because I want to pursue this? The noble Lord harked back to a previous Amendment, when I said that it was customary to put articles through for revenue and then after 1954 to try to put them through for capital equipment. Everybody did it; it was not just myself. If the noble Lord is making the suggestion that I was acting dishonestly, he is tackling the wrong man and he must make a withdrawal.

LORD ERROLL OF HALE

There is no question of dishonesty. I am sorry the noble Lord is so touchy about this. I was just pointing out that what he and other business men used to do, according to him—switching from one method to another—would doubtless be employed in the case of printing of duplicated sheets by keeping the duplicator on the factory floor instead of in the office. I can see that happening. But I am particularly interested to know whether he is going to reply to the other point I made.

LORD RHODES

May I ask the noble Lord which question it was?

LORD ERROLL OF HALE

It is really a poor performance on the part of Her Majesty's Ministers, if they cannot even note down the points we are making from this side of the House. I was upset because he was imposing some reservations on plant and equipment used for the production of newspapers, and I asked him if block making equipment and other ancillary machinery were included or excluded, because very often it is situated in the office part of the premises, or is the Government proposing to allow only the grants for the actual printing presses?

LORD RHODES

The truth is that I do not know, but the Board of Trade has discretion to decide whether it will or will not be excluded. I have answered the noble Lord quite straight and truthfully that the main provisions in this Amendment are covered. I will let him know what the views of the Board of Trade are on this particular little point.

LORD ERROLL OF HALE

I think that this small point is important. The noble Lord has said that he spent a good deal of time studying the Bill, and it is apparent from the excellent advice given to us earlier this afternoon that he has, but even with all this acute study of the Bill and the benefit of the advice of the officials who have drafted it, he does not know whether certain important pieces of plant and machinery used in the production of newspapers qualify or not for a grant of as much as 40 per cent. of the total cost. How are people in the newspaper industry to know, if the noble Lord does not know?

LORD RHODES

They will get to know when they put in their applications.

LORD ERROLL OF HALE

Would it not be much better if they knew before applying? Why make a lot of unnecessary applications? In the circumstances, so that we can get on with the business, I withdraw my Amendment, but I do so with complete dissatisfaction.

Amendment, by leave, withdrawn.

5.57 p.m.

LORD ERROLL OF HALE had given Notice of his intention to move to add to subsection (2): ("() land based freight and passenger handling plant and equipment in docks and harbours;").

The noble Lord said: In moving this Amendment, may I inform your Lordships that I made a minor change and submitted it to the Public Bill Office, and in order to avoid the expense of reprinting the Board of Trade has been notified of the change. Perhaps I may inform your Lordships that the alteration consists of the insertion of "the provision and use of" before "land based freight and passenger handling plant and equipment in docks and harbours". This is a material alteration. If this Amendment were carried, it would mean that persons who provide docks with the equipment mentioned in the Amendment would attract the 20 per cent. grant. We have heard so much of the importance of expanding exports and of modernising our docks and harbours that it seems reasonable that equipment of this sort should not be included. If ever there was an article which had an export value, it is handling plant and equipment in docks and harbours. I beg to move.

Amendment moved—

Page 2, line 10, at end insert— ("() the provision and use of land based freight and passenger handling plant and equipment in docks and harbours;")—(Lord Erroll of Hale.)

LORD SHEPHERD

I must contain myself. The noble Lord is living up to the description I gave him at the beginning. Having been an exporter for many years, I agree that it was a tragedy that the docks had reached the state they were in when we took over after thirteen years—

A NOBLE LORD

Of Tory misrule!

LORD SHEPHERD

All those who have had anything to do with exports and imports know the state the docks were in when we took over. Returning to the Amendment, I wonder whether we could include No. 37 in our consideration?

LORD ERROLL OF HALE

I think that would come more appropriately with No. 10.

LORD SHEPHERD

Plant and equipment in docks and harbours could fall into two categories. First of all, they could be connected, for example with the steel industry, with the conveyance of iron ore and the like material from a port to the manufacturing plant. This type of equipment would receive grant under Parts I and II of the Bill. However, in regard to what one might call the general service of exporting capability in the docks perhaps I could refresh the noble Lord's memory. In section 12 of the Harbours Act 1964 there is a 20 per cent. grant for this class of improvement. Therefore, both aspects of dock development are covered either by this Bill or by the Harbours Act 1964. I hope that the noble Lord, having got this information, will be willing to withdraw the Amendment.

LORD ERROLL OF HALE

I should be grateful if the noble Lord could explain if the 1964 Harbours Act covers privately owned docks and harbours and publicly owned docks and harbours.

LORD SHEPHERD

Yes.

LORD ERROLL OF HALE

I am grateful for that assurance. May I remind the noble Lord that the 1964 Act was one of those many Acts that was passed during what he calls the thirteen wasted years? Since he chooses to go on using that dreary phrase, may I point out that Her Majesty's Government have only added two more wasted years to the thirteen that they claim were wasted?

LORD SHEPHERD

Before the noble Lord withdraws, may I assure him that it is not only the statutory harbour bodies which receive the grant, but also all persons taking part in the operation of these docks. I am glad that at the very last hours of the last Administration they did something about the docks. But, by heaven, it was late!

LORD ERROLL OF HALE

In view of that most helpful explanation, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

6.1 p.m.

LORD ERROLL OF HALE moved to add to subsection (2): () freight containers for use on ship, rail or road transport.

The noble Lord said: I beg to move Amendment No. 10 and, with your Lordships' permission, I should like to deal now with No. 37 as well. Scarcely a day passes but we read in the newspapers of some new port or harbour scheme or shipping scheme which involves the use of containers; and an ugly new word has been coined—namely, "containerisation" and "containerisation" techniques. This is the most noticeable form of development in freight containers, but they are being increasingly used for the roll-on, roll-off services and the like between Great Britain and the Continent, and are being developed between Great Britain and Northern Ireland. Further, substantial development in the use of containers applies to sending components or partly finished goods from one factory for completion in another factory. This is essentially part of the manufacturing process. There are, as well, the containers which we hope to see in use in ever-increasing numbers on liner-trains when they are eventually operated to the fullest possible extent.

It seems right, therefore, that freight containers and returnable containers (which is another category the details of which I will not burden your Lordships with) should be regarded as part of the manufacturing process, on the one hand, and as essential items for the more efficient export of our goods, on the other hand. I hope, therefore, that the Government will see their way to accepting these Amendments. I beg to move.

Amendment moved— Page 2, line 10, at end insert the said paragraph.—(Lord Erroll of Hale.)

LORD SHEPHERD

I should first of all like to deal with Amendment No. 37 and to explain why it is unnecessary. The Amendment to page11, line 41, would have the effect of making a definition of machinery or plant in Clause 13 refer specifically to any returnable container. These additional words would not, however, make any difference to the scope of machinery or plant as that term is used in the Bill. This is because the Bill covers all machinery and all plant other than the items which are expressly excluded. Returnable containers are not excluded, and are undoubtedly covered by the term "machinery or plant", except in any case—and I think I should stress this—where they might constitute a basic part of a vehicle.

Having dealt with Amendment No. 37, I now turn to the substantive Amendment No. 10. I have indicated that, as a matter of definition, containers are properly to be regarded as machinery or plant, and it follows that the Bill does not prevent containers which are to be used for a qualifying process from receiving grants like other items of machinery or plant. I can, however, offer no hope that the Board of Trade will give grants in respect of these items in the great majority of cases where the containers are no more than a covenient means of transporting goods or materials from one place or another. The Government do not consider the transporation of goods to need the same investment priorities as manufacturing, construction or extraction equipment at the present time. For this reason, they have decided that transport equipment should not in general receive grants.

When I saw that in the brief I thought that I should be tackled as to what was the investment rate of transport generally and freight transport, and that of the manufacturing industries. I am informed that during 1960 and 1964 the total investment in road transport increased at the rate of 8 per cent., while investment in manufacturing only increased by 2.4 per cent. So my earlier comment on investment into the general services as being higher than in manufacturing was correct.

The Government's position on internal transport is simple and has been made quite clear on a number of occasions. This applies not only to private road but also to British nationalised transport undertakings. They will not receive any grant at all. I think that generally we have recognised limited resources. It might well be that there is a case for the container packaging business to be developed, but at the present stage we feel that this Bill should be related purely and simply to the manufacturing and extractive industries.

It may well be (and the noble Lord might bear this in mind) that in the not too far distant future we shall see a Transport Bill in which the whole field of transport development, both in the docks and throughout the country, will be dealt with. I agree with the noble Lord that this is an important point, well worth consideration, but I should have thought that that would be the occasion, when dealing with transport as a whole, for this class of Amendment to be considered. I should hope that, since we wish to keep this Bill as close as possible to the manufacturing and extractive industries, the noble Lord might see fit to withdraw the Amendment.

LORD ERROLL OF HALE

I am grateful to the noble Lord for his explanation in regard to Amendment No. 37, which is of considerable value to all those concerned. I am sorry he cannot see his way to accept Amendment No. 10. However, as the time is passing, I do not wish to continue an argument which can have only one conclusion—namely, the Government's refusal to be moved by anything that we say on this side. Therefore, I beg leave to withdraw the Amendment.

LORD BARNBY

Before the Amendment is withdrawn, could the noble Lord, Lord Shepherd, explain this? Would it not be difficult to distinguish the difference between manufacturing and extractive, and other kinds of freight? Is there not also a distinction between expendable and returnable containers?

LORD SHEPHERD

I am not sure what the noble Lord is getting at. What we are considering here is whether a container is part and parcel of a manufacturing or extractive process. What the noble Lord must keep in mind is that it is the definition of the use—the purpose of the industry for which the ancillary or incidental equipment is used. Earlier I was discussing this with the noble Lord, Lord Hawke, and I agreed that there needs to be this flexibility. This is what we are seeing as we go through this Bill: some matters which appear to be not strictly related to production, but on reflection are clearly incidental and helpful to it. Therefore, we feel that where we can we should give grants to that kind of use.

LORD BARNBY

I gathered that the noble Lord indicated that they were attracted only in the case of containers used for the manufacturing and extractive industries. What I ventured to suggest was that it would seem that there would be a difference in distinguishing between the two, and it would make more work rather than less.

LORD ERROLL OF HALE

I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

6.10 p.m.

LORD DRUMALBYN moved, in subsection (3), after paragraph (c) to insert: () the provision of a pipeline for the transportation of any article to any place where it is to be subjected to any such process,".

The noble Lord said: I beg to move this Amendment, which is largely a probing Amendment. Perhaps I might take it in stages. The first obvious use of the pipeline is within premises and I take it that, so long as the pipeline is strictly within the premises, going from one section of a works to another, it would be entitled to grant. It would then be on very much the same terms as vehicles specially constructed or adapted for the conveyance or haulage of loads about private premises.

The second use, of course, is where the pipeline has to go outside the actual premises, but links premises occupied by the same person. It might have to run across a road. On the other hand, it might have to go to the other end of the town. Obviously that kind of transportation is to be encouraged, because you avoid obstructing the streets, the double handling, and so forth. In general, this is a forward-looking form of transport which plainly should be encouraged where possible. If you can transport goods from one point to another with less labour, that is fine and to he encouraged. If you can transport them with no labour at all in the course of transportation that is better still. So, in principle, transportation by pipeline is a good thing.

What I am really asking is how far the Government can extend this. I would suggest that it would clearly be right within premises and between premises occupied by the same person, certainly in the same locality. I would go further and say that in a complex group, even though the two premises are not under the same ownership, it would be desirable that if one factory is supplied in the same locality by a pipeline from another factory, this also should be entitled to grant. Of course, one can take this further, and it is quite possible to have pipelines over considerable distances. These are the two types of transportation. One is a general form of distribution, which I apprehend would not be entitled to grant because it would be in competition with other forms of transportation, and the other is the linking over the longer distance of two processes in manufacture. As I say, this is a probing Amendment, and I beg to move it in order that the Government can say exactly how far grant can be given for pipelines.

Amendment moved— Page 2, line 24, at end insert the said new paragraph.—(Lord Drumalbyn.)

LORD SHEPHERD

When the noble Lord, Lord Drumalbyn, started by making a particular point, and then followed with another particular point, I thought I should be in a position to answer him fairly briefly with, "Yes" or "No". But he went further and asked for an explanation of how the Government intend to operate this part of the clause, and I think perhaps I should deal with it and, if I may, keep fairly closely to my brief. Clause 1(3) provides expressly that repair and maintenance, storage and packing activities carried on by a firm in the course of its own business (but not otherwise) shall be treated as processes incidental to the qualifying industrial purposes listed in Clause 1(2). Some short pipelines, for instance, linking an oil refinery with a storage tank nearby, will be regarded as incidental to this purpose of the refinery and to be eligible for grants. The Amendment, however, goes wider and would cover any pipeline used for conveying materials for further processing, regardless of the ownership of the pipeline or the various processing plants to which it is connected.

I think I should make it quite clear that the Government would regard this type of pipeline as being within a transport service, and at this stage we do not believe that it would warrant a grant. I know that this question of transport is a matter for debate between us. As the noble Lord, Lord Drumalbyn, said, I think we have to consider the question of competition between rail and road, and other forms of coastal transport. The Pine-lines Act 1962 has some point in this matter, but it is not in itself relevant to the question of grants it is a control on the use of it. The noble Lord will he interested to know that pipelines from the North Sea oil or gas deposits to a mainland treatment point will normally be eligible if they are owned by the company producing the oil or gas, or by the company treating it for sale. This is, the noble Lord should bear in mind, so long as it is not a nationalised undertaking, because he will appreciate that in the Bill we have excluded nationalised undertakings from receiving grants when they are conducting things which come within their normal province.

I think that covers fairly well the question of pipelines. Obviously pipeline in a complex group of buildings where there is one owner would receive a grant. As I see it, the only exclusion is where the pipeline is clearly part of a general transport service. Other than that, I should think that a grant would be available.

LORD DRUMALBYN

I am very much obliged to the noble Lord for his explanation, and beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

6.17 p.m.

LORD ERROLL OF HALE moved, after subsection (3), to insert: () Notwithstanding the foregoing provisions of this section, machinery or plant provided by a company, which carries on a business in Great Britain and which is a member of a group or of a consortium of companies, for use in Great Britain by another company in the group or consortium of companies in the course of the business of that other company for or incidental to any of the purposes mentioned in paragraphs (a) to (e) of subsection (2) of this section shall be deemed to be provided by the first-mentioned such company for carrying on a qualifying industrial process in the course of its business.

The noble Lord said: In moving this Amendment, I should like to suggest that it might be for the convenience of your Lordships if we took Amendment No. 43 at the same time. This is a relatively small but complicated point, and one of importance to those concerned. The situation is arising now with increasing frequency whereby two, three or four large companies are grouped together on a single site—companies wholly or partially owned by other companies, such as a large chemical concern which may have a subsidiary company and which wants to team up with two or three other firms, perhaps in the chemical or allied fields, to form a single industrial complex on a more or less continuous site. These three or four companies may well deem it to be to their advantage if they set up a common subsidiary for the purpose of providing them with services, such as repair facilities, for their plant and equipment, or cleaning and transport activities, which can be best and most economically done by one common company, rather than that each of the three large concerns should have to set up their own separate units for this purpose. If they were to set up their own separate units, the plant and equipment for them would attract a grant at the appropriate rate, since it would be part of the manufacturing process of the making of articles. But if they choose the more efficient way of doing it, namely, setting up this separate servicing company, the plant which that separate servicing company uses will not, I am informed, attract a grant.

This matter was raised in another place, and the Amendment, I am sorry to say, was resisted on the grounds that it could be got round; that one of the three principal companies could acquire an asset and then lend it to the servicing company, who could then repay it over a period, or some other arrangement such as hiring the asset could be organised. But this surely seems entirely the wrong way to go about it. It is accepted, I think, by Her Majesty's Government that this method of having common service companies covering activities for three or four companies is a more efficient way of doing things, but they refuse to make the paper work simpler so that it can be a perfectly straightforward transaction. The Amendment is prepared by those most concerned with this type of activity. I submit this to noble Lords with confidence, and hope that Her Majesty's Government will accept it, or at least the principle behind it. I beg to move.

Amendment moved— Page 2, line 28, at end insert the said subsection.—(Lord Erroll of Hale.)

LORD SHEPHERD

I certainly would wish to help the noble Lord, but here again after very careful examination of this by the Board of Trade this week I very much fear that I have got to say no to the general principle, but perhaps the noble Lord will understand why in a few moments. I think we must repeat once again that the grants will be available for machinery and plant for manufacture and for extraction. If a machine performs a dual purpose in the sense that it both manufactures and can be used for repair, then the fact that it has a dual purpose will still mean that it will receive the grant as though it were purely manufacturing.

The noble Lord has suggested that there might well be, and I recognise that there are, a number of groups of companies who have got together and have found that it is more efficient from their point of view to have one service depot. I think the noble Lord, Lord Erroll of Hale, will agree that if we were to open the grant to this particular service operation, no matter how valuable it might be to the organisations concerned, it would be very difficult, if not impossible, to draw a line right through the general servicing business. We do not wish to see this extended at the present moment. We want to see all the monies available for investment go into manufacturing and extraction. If this group of companies wish to make use of this joint organisation it is not beyond the bounds of arrangement, I would have thought, internally, and I would not have thought there would be anything improper in this so long as they could satisfy the Board of Trade that the equipment for which they needed the grant would be for manufacture as well as repair. Then the question of ownership would be something for which the organisation could become responsible. The owner of the equipment, shall we say the holding company, would become the hirer of the equipment. You could have an internal book arrangement for recovering the capital cost of the equipment.

There are many ways in which organisations carry out administrative arrangements for the group. I think we have got to stand on this one point: that we must not at this very important stage open the field of grants in any way to the service industries, even though I recognise there are certain aspects of the service industry of considerable importance to industry generally. But in this matter once you let the dam wall break it would be very difficult to resist other, perhaps quite legitimate, claims. At this present stage I fear we cannot say any more in regard to this matter but that it is well taken note of.

LORD ERROLL OF HALE

Would it be possible for the Board of Trade under its very wide discretionary powers to admit this class of company by order or simple fiat from the Minister?

LORD SHEPHERD

The powers certainly exist in Clause 7, but I think I would be very wrong to attempt in any way to mislead the noble Lord by saying that at this stage we intend to use those powers. At the moment we have fought this Bill right through this Committee stage and in another place on the exclusion of what we call the service side of industry, for the very reason that the money we have we feel should be diverted into the manufacturing and extractive industries. But this is a point on which no doubt in the course of time, and perhaps with improvement in our trading position and the like, we might consider the power that is there. But I would not like to mislead the noble Lord by saying that we intend to use it, certainly in the very near future.

On Question, Amendment negatived.

6.27 p.m.

LORD NUGENT OF GUILDFORD moved, after subsection (5), to insert: () Machinery or plant provided for use by a person carrying on a business in Great Britain which consists substantially of the maintenance or repair of assets used in a qualifying industrial process by another person carrying on a business in Great Britain shall be deemed to be provided by the first mentioned such person for the purpose of carrying on a qualifying industrial process in the course of his business and the Board of Trade's power to make a grant to that person under this section shall apply accordingly.

The noble Lord said: I beg to move Amendment No. 13, which deals with a very similar point to that which my noble friend has just moved unsuccessfully, and which has been answered so persuasively by the noble Lord, Lord Shepherd. It makes it rather difficult for me to move my Amendment, but I feel there is a point here which I should bring to your Lordships' attention. It concerns the specialist maintenance firm which has grown up in recent years, especially in post-war years, and it is a trend in advanced industrial countries which I should have thought on the whole is a trend to be welcomed because it is a trend of efficiency. The trend is for manufacturing firms to give up doing their own maintenance and repair services, especially with particularly sophisticated machinery, and to employ the specialist maintenance firm.

On the one hand, the growing complexity and sophistication of machinery and plant requires ever more highly trained maintenance experts, at the same time carrying, of course, more and more expensive plant and machinery in order to do the work. And as manufacturing firms find themselves with this development on hand, it is increasingly difficult for them to keep this specialist maintenance staff and specialist maintenance equipment fully and continuously employed within their own factories without their maintenance costs being excessively high. This is where the specialist maintenance firm has come in, because they have built up their teams, they have equipped them with the most modern plant and equipment for doing the work of maintenance and repair; and because they are continuously employed throughout the year servicing this, that or the other factory they have been able to reduce costs considerably, to the advantage of everybody concerned.

As the noble Lord has just explained, as the Bill is now drafted, if this kind of maintenance and repair equipment is owned by a manufacturing firm then they get the grant, although the machinery and plant is used for maintenance purposes. It seems rather an anomaly to draw the line there, and my Amendment is directed to bringing within the scope of the Bill equipment and plant of that kind. A very typical one, with which I am sure the noble Lord, Lord Rhodes, will be familiar, is the maintenance service provided in the textile industry, where it is common for mills to have their looms or machinery reconditioned by specialist firms who remove whole sets of machinery, take them to their own workshops, do the maintenance and reconditioning and bring them back to the mills. This is all a most efficient process which I am sure your Lordships on both sides of the Committee welcome, and I hope that the noble Lord may feel that this is something to which his sympathy can be directed. It really would discourage this desirable development, if they are excluded, and I should be grateful if the noble Lord could think of any way of including them. I feel that it would be to the benefit of industry generally. I beg to move.

Amendment moved— Page 2, line 42 at end insert the said subsection.—(Lord Nugent of Guildford.)

LORD SHEPHERD

I am quite sure that the noble Lord, Lord Nugent of Guildford, after what I said on a previous Amendment, would not expect a great deal further from me. I have a great deal of sympathy with the case that has been made, but once you have laid down a principle for a Bill it is most dangerous to create a precedent or an anomaly. One might say that one already has an anomaly in the Bill in that, having said that services should be excluded, we are prepared to pay grant to what is a service within a particular factory or manufacturing unit. But we feel, at this stage, that it would be most dangerous further to break this principle. I will certainly see that the words of the noble Lord are conveyed to the President of the Board of Trade. I know that my noble friend Lord Rhodes shares my sympathy. In one way and another we have both been in industry, and we see the advantages of specialisation. I think this is really a question where, if we were to break this principle, we should then be in an intolerable position. But certainly the words of the noble Lord will not have been wasted upon the Front Bench.

LORD NUGENT OF GUILDFORD

I must thank the noble Lord, Lord Shepherd, for his persuasive reply, and although it cannot satisfy me I must nevertheless withdraw my Amendment.

Amendment, by leave, withdrawn.

6.33 p.m.

LORD DRUMALBYN

moved, in subsection (7), after "use" to insert "solely". The noble Lord said: The purpose of this Amendment is to ensure that machinery or plant provided by any of the nationally-owned bodies listed in Schedule 2 for a process outside its main functions will receive grant only if the asset is to be used solely for that process. The reason for the Amendment is that if it is right to exclude these nationally-owned bodies from grant, then it would surely be wrong to allow grants for an asset which was to be used by them in the course of their normal or principal functions.

There is another reason. Suppose in a development area plant in use worth £10,000 were provided by such a body, they would receive grant on that of £4,000. Suppose it were used, equally, for the undertaking which was not part of the nationally-owned body's principal functions, and for the principal functions of that body: then the net effect would be to give a grant of not 40 per cent., but of 80 per cent., because you would be giving a grant of £4,000 on a £5,000 value to the ancillary undertaking. Plainly, this would be unfair to competitors who could get only a 40 per cent. grant if in a development area, or a 20 per cent. grant elsewhere. I beg to move.

Amendment moved— Page 3, line 5 after ("use") insert ("solely").—(Lord Drumalbyn.)

LORD RHODES

I think we are really in agreement on this particular point. It would certainly be our intention to establish, in the case of a claim made by one of the public corporations listed in Schedule 2, that the activity for which the equipment was required was not one of the main statutory functions of the corporation. We should, where necessary, consult with the Department concerned—for instance, the Ministry of Power. In most cases the activities are quite separate—the National Coal Board's brickworks are different in character from the coal mines—and there would be no real risk of an asset being used partly for one activity and partly for the other. There may, however, be some marginal cases where there could be a small element of mixed use, and the Amendment would compel us to identify such cases and refuse grants.

I think that if the word "solely" were inserted it would be too rigid and would be more restrictive than what is proposed for private firms generally under this clause. We recognise that some private firms may occasionally use a piece of plant for some non-qualifying purpose. For example, a machine tool used mainly for making new items may sometimes be used to repair an old one. We cannot be so meticulous as all that. But the noble Lord can take it from me that we are in agreement on this matter and therefore I hope he will withdraw his Amendment.

LORD DRUMALBYN

I think the noble Lord has replied to me in an extremely reasonable way, and I certainly should not wish to press the Amendment. I think he is quite right in saying that if a private industry can be permitted to use a machine or plant for a particular purpose outside the purpose for which the grant was made, without any repayment or without being considered to have infringed the conditions, then it would be reasonable to treat the nationalised industries in the same way. In those terms, I think it would be reasonable to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

6.38 p.m.

LORD DRUMALBYN moved to add to the clause: () Any person carrying on a business in Great Britain may furnish in writing to the Board details of the nature, purpose and cost (including an estimate of any expenditure on or incidental to installation) of new machinery or plant for use in Great Britain which he intends to acquire and of the place in which he intends to install it and the Board shall, within twenty-eight days of receipt of such information, issue a certificate to that person that a grant in accordance with the provisions of subsection (6) of this section will or will not, as the case may be, be made in respect of expenditure in relation to the provision by that person of the said machinery or plant if installed in the said place and operated for the said purpose, and shall specify the conditions, if any, which it would impose under section 8 of this Act.

The noble Lord said: I beg to move this Amendment, the object of which is to enable a company to know for certain before investing in plant or machinery whether or not it will get a grant on it. This Amendment would not mean that every potential investor would first write to the Board of Trade before ordering an asset. It is devoutly to be hoped that the guidance to be given by the Board of Trade will be given quite soon after the Bill becomes law. It is also to be hoped that the guidance will be sufficiently clear to permit firms, in the vast majority of cases, to know with absolute certainty whether or not they will get grant, and not just that they will be likely to get grant.

This Amendment would apply to the small residual number of marginal cases not covered in the guidance. I should have thought that it would not therefore impose a heavy burden on the Board of Trade. Indeed, I should have thought that it might be of real assistance to them for enabling cases which they had overlooked—and they are bound to overlook some—or cases of a type which they had not sufficiently considered, to be brought to their attention, so enabling them to avoid serious, and possibly justified, criticism later on.

I appreciate that since grant is payable on any expenditure incurred on or after January 17, 1966, if I correctly understand subsection (5) of Clause 13, the Board of Trade will receive a considerable number of applications as soon as the sluice gates, so to speak, are open. It might be that the speed with which the Board dealt with the first flood would be slightly slowed down by the Amendment, but there might well be compensating advantages. We know that the Board intend not to make payments too quickly, and that in order to avoid an excessive burden on the Exchequer in the first year or two of the new scheme where investment allowances will still be outstanding they will not want to deal with these too quickly for that reason. Somewhere in between a middle course has to be found.

It has been made abundantly plain in the course of to-day's proceedings that we feel very strongly that the more that can be done to make it absolutely certain that the investor will know, before he actually lays out his money, whether he is going to get the grant or not, the better. The best way, if it is practicable—and I see no reason why it should not be—is for anybody to be able to apply to the Board of Trade before he lays out the money and to be told with certainty that if he lays out this money he will, or will not, get the grant. That is the purpose of the Amendment, and I should not have thought that in the case of a Department so efficient as the Board of Trade it was asking too much to ask them to do that in 28 days.

Amendment moved— Page 3, line 14, at end insert the said subsection.—(Lord Drumalbyn.)

LORD RHODES

I am afraid this Amendment is like the Negro parson who told them what he was going to tell them and then told them, and then after he told them, he told them what he told them. This Amendment is making very heavy weather of it, for there is no question that the Board of Trade mean business on this question of guidance. And whereas the Negro parson was addressing his remarks to an unsophisticated audience, in this case this will be addressed to a very sophisticated audience, an audience that knows what it is doing and knows what it wants, and is not a child in arms. I know one industry in particular which will not take many months to settle quite clearly what is and what is not eligible for grant. As the noble Lord who is sitting just behind me will bear out, firms in that industry will know in a few months' time precisely what they are entitled to. That being the case, when custom and tradition has been built up I do not see any difficulty whatever.

To include an Amendment like this, by which one asked in advance whether the item was eligible or not, could do nothing more than increase the number of people employed to deal with that. We have been criticised about the number of people who may be running the administration. At the worst, the Amendment could double the number of people whom we shall need to employ to carry out the Bill's provisions: it could double it, since cases in which applicants for grants exercised their right to demand a forecast of the Board's decision would have to be dealt with twice. But first the Board would have to give an opinion on the probable decision on the case; and then they would have to process the application in the normal way when it was received, in order to check that the details were in fact as originally stated and that the asset qualified for a grant. Nothing would be gained, since under Clause 1 it is in most cases not the nature of the asset itself which determines its eligibility for an investment grant, but the purpose for which it is to be used.

If one of the noble Lord's machines were taken outside and used for something else, it would not come under the eligibility for that machine. The applicant should have a fairly good idea of whether he is carrying on a qualifying industrial process or not. Much might be lost, however, since either more staff would be needed in the offices to cope with the extra flow of work, or the general process of dealing with applications would be held up and firms would not get their money so quickly.

The noble Lord may have in mind the analogy of the Board of Trade's handling of applications for loans and grants under the Local Employment Acts. This is not a parallel case, because before remitting applications for assistance under the Acts to the Board of Trade Advisory Committee for detailed examination the Board merely certify that an application is appropriate for such consideration on the basis of the cost of the project per job. I am sure I need not go into this any further. The noble Lord knows all this as well as I do. On the explanation I have given, I would ask the noble Lord to withdraw his Amendment.

LORD DRUMALBYN

I am obliged to the noble Lord for his explanation, but I must say that I do not find it wholly convincing. Of course, if every application has to be made twice, if there was first of all a reference to the Board as to whether grant would be made and then later on it had to be processed, that would double the amount of work. It might even more than double it, because one would get some applications for which people would be told they would not get grant and therefore would not make further application. I wonder how much work is going to be involved in the initial stages for the Board of Trade in bringing industries to this state of informed opinion on what will and will not get grant. It seems to me that there will be a good deal of work to do on that and that this Amendment would not add very much to it, and that it would in fact provide just that additional certainty. I do not want to press this matter further. I personally am sure that the Board of Trade will do their utmost to enable firms to know with as near certainty as possible that they will get grant if they satisfy the other requirements.

I should very much have preferred a procedure of this kind to be provided for, but I do not feel it would be right to press the Board to have this procedure if they feel they cannot operate it without very greatly enhanced staff. It is difficult for us on this side to judge what the effect of an Amendment would be, and we must rely to some extent on the judgment of the Board of Trade in a matter like this. All I would say is that I regard this as the ideal method, but if the ideal cannot be attained I beg leave to withdraw the Amendment.

LORD RHODES

Before the noble Lord sits down, may I thank him for his remarks on this? I must say that some time ago I myself had doubts about the speed of dissemination of information and knowledge about the eligibility of machinery. But I have none now, and I am quite confident that within a few months every industry will know precisely where it stands.

LORD DRUMALBYN

I am much obliged to the noble Lord. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 1, as amended, agreed to.

Clause 2:

Computers.

2.—

(2) Subject to any order under section 7 of this Act, the amount of any grant under this section shall be twenty per cent. of the expenditure in respect of which it is made, except that in the case of a computer as respects which the Board are satisfied that it is provided solely or primarily—

  1. (a) for integration with machinery or plant which is or is to be used for carrying on a qualifying industrial process within the meaning of section 1 of this Act; or
  2. (b) for carrying on such research as is mentioned in subsection (1)(b) of that section,
the amount shall be forty per cent. of the said expenditure so far as it qualifies as development area expenditure in accordance with Schedule 1 to this Act.

(3) For the purposes of this section, a computer shall be treated as provided for integration with machinery or plant in any case in which the Board are satisfied that it is to be used for controlling, or recording or analysing data as to, the operation of the machinery or plant and is to be linked with the machinery or plant by a device for the automatic transmission of signals.

6.52 p.m.

LORD ERROLL OF HALE

moved, in subsection (2), to leave out the words after "except that" down to and including paragraph (b). The noble Lord said: It might be to the convenience of the Committee if we take Amendments Nos. 17, 18 and 19 together. Clause 2 deals with the provision of a grant for computers and, as I understand it, they will attract a grant of 20 per cent. However, this grant is not increased to 40 per cent. when the computer is situated in a development area, unless it is a computer of a particular type—namely, one which is tacked on to a machine or group of machines, so that it is in a sense almost part of the machine or group of machines.

The purpose of my Amendment is to provide a grant not at the rate of 40 per cent. but at the rate of 30 per cent. for computers not of the qualifying type set up in development areas, so as to encourage them to be set up there and not necessarily, automatically, in the South and Midlands of England. The type of computer which at present would not attract a 40 per cent. grant is one of those large ones which store up a great deal of information and which can be dumped more or less anywhere in the country and connected up by telephone wire to a number of places around the country and used centrally. They can perfectly well be in London or in Birmingham or in a development area, and my plea is that there ought to be some inducement for organisations thinking of setting up computers of this type to site them well into the development areas.

It may be urged that this would not have much effect on employment, but it could have an effect on a particular form of employment—namely, the skilled people who can run these monster computers. Many of these people have their homes in the North of England, but they often come South for their training and would dearly like to go to computers in the North of England if only the computers were there. But they find that they are stuck in the South of England for ever and a day, because the computers are sited in the South of England as there is no inducement to put them in the North.

I do not think it would be practicable for a grant of 40 per cent. to be made in those cases, because a computer is such an expensive item of equipment and that would represent a very large additional sum of money to be paid out for each computer. All I am suggesting is that there should be some inducement, and that is why I suggested in Amendment No. 18 that the inducement should be of the order of 10 per cent. greater for a computer installed in a development area than for one installed outside a development area. I hope that the noble Lord who will be answering will see the reasonableness of my case, and be able to tell me that the Government have seen fit to accept the Amendment. I beg to move.

Amendment moved— Page 3, line 23, leave out lines 23 to 29.—(Lord Erroll of Hale.)

LORD ROYLE

So that my noble friend will not have to speak twice, I should like to ask now whether football pools come within the meaning of a business in this sense.

LORD SHEPHERD

On Second Reading my noble friend asked me about building societies, and I then gave him an answer. In regard to football pools, speaking completely "off the cuff", they are a business just as building societies are a business, and I should have thought that a football pool organisation which used a computer would receive a grant. Computers are being included in a Bill covering the manufacturing and extractive industries because in many cases they could be regarded as a service. But we also decided to include computers in this Bill because we believe that the computer industry needs a tremendous stimulus. I am not now harking back to the wasted years, but it is a poignant thought that it is not so many years ago that we were the largest user of computers in the world, though, admittedly, there were not many then. But now, if my memory is right, we are even below little Austria in our use of computers. We are well down the league table in the use of computers and, clearly, we must make up for that. It is for that reason that we decided under this Bill to make grants available to the users of computers.

The reason why there is a national grant of 20 per cent. is that one does not necessarily need to be close to a computer to use it. Some months ago I was at the I.C.I. plant in the North-East, and they had a computer there which was in touch with branches throughout the country. Calls were coming in by tele-printer and the messages were being stored, but if an inquiry from one of the branches was "priority" it was dealt with immediately. However, the branch was then charged a higher rate for the service of the computer. If, shall we say, a Scotsman who was manager of the I.C.I. branch in Bristol decided to save some money because his inquiry was not too important, he could pay the night rate for the use of the computer, which is a lower charge than for a call made during the day time. Therefore, one can use computers over long distances.

We did not think there was any particular advantage in giving a special rate of grant to the users of computers in development areas because, as the noble Lord said, they do not in themselves create employment. But it was represented to us by industry—and we decided to accept this advice—to make two exceptions. First, there is what is known as the on-line computer to which the noble Lord, Lord Erroll of Hale, referred as being tacked on. This is where the computer is an integral part of manufacture.

I think there is going to be, and I hope there will be, a growing use of computers. Certainly they facilitate a much higher standard of production and even higher productivity. In fact, if I may refer to this again, although I know it is rather late, the I.C.I. computer engineer up in the North-East was telling me that, having brought in the computer to do this operation in place of skilled men, they had obtained a less than 1 per cent. increase in productivity, but that in fact this increased productivity, although it was so very small, paid for the computer within eighteen months. That gives an idea of the way in which a small increase in productivity, through the use of a computer, can earn considerable dividends for a company. Then there is the other computer, which is used for research purposes. Both these types of computer, if they are within a development area, will receive a grant of 40 per cent.

I do not think there would be any gain—in fact, I think, rather the reverse—if we were to accept the suggestion of the noble Lord, Lord Erroll of Hale, to (shall we say?) average out the grant throughout the country. Certainly those industries which we hope to see using computers tacked on to a production process would suffer. I hope that, with those words—we have looked at this question very carefully—the noble Lord will not think we are being obstinate, and will withdraw his Amendment.

LORD ERROLL OF HALE

I am grateful to the noble Lord for his explanation. Would he be prepared to consider the Amendment if it were cast in a slightly different form, still granting the 40 per cent. for the on-line computers in development districts, but having this intermediate rate of 30 per cent. for the other types of computer, and 20 per cent. for all computers outside development areas? That might eliminate the averaging principle, which the noble Lord seems to find distasteful.

LORD SHEPHERD

Certainly I should be prepared to have a look at that, but may I say to the noble Lord—this has a bearing on our attitude to many of the Amendments moved at this Committee stage of the Bill—that we have in fact had consultation with industry, and this decision as to the rate of grant for online computers, having been discussed, is, to the best of my knowledge, acceptable to industry. At this stage I do not think I can give any possible hope that this view will be changed. Certainly the point which the noble Lord has made will be considered, but I would be less than honest if I were even to hint that it is likely we shall see a change in the grant rate—in this Bill, at least. Of course, the noble Lord is aware that Clause 7 gives a degree of flexibility, but here again we have no intention of using it as at this moment.

LORD ERROLL OF HALE

In view of what the noble Lord has said, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 2 agreed to.

Clause 3:

Hover vehicles.

3.—(1) Subject to the provisions of this section, 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 a new hover vehicle for use, whether or not in Great Britain, for the purposes of that business.

7.4 p.m.

LORD ERROLL OF HALE moved, in subsection (1), after "new" to insert: civil aircraft manufactured in the United Kingdom, or a new".

The noble Lord said: I am far from clear why, of all types of transport, only one should have been favoured by this Bill—namely, the hovercraft. It is, I know, an interesting and exciting invention. It has attracted world-wide interest, if not world-wide sales, and its prospects still lie very much in the future. I should have thought that, if hovercraft are to qualify for grant, there is also a particularly strong case for civil aircraft manufactured in the United Kingdom.

If the noble Lord is unable to accept an Amendment cast in such wide terms, I should be very glad to consider offering him various alternatives—perhaps limiting it to passenger aircraft, to aircraft over a particular size or to aircraft under a particular size, so as to further the development of executive aircraft and the smaller passenger-carrying aircraft. But if there is a case for hovercraft—and the case, I imagine, must be based on the fact that this is a British development and a British industry—surely there is an equally strong case for a similar grant in respect of civil aircraft manufactured in the United Kingdom. I beg to move.

Amendment moved— Page 3, line 42, after ("new") insert ("civil aircraft manufactured in the United Kingdom, or a new").—(Lord Erroll of Hale.)

LORD SHEPHERD

The reason why hovercraft are in the Bill is because they are an outstanding technological development and the Government want to see them develop. That is the simple reason for their inclusion. If I may say it to the noble Lord, Lord Erroll of Hale, his Amendment to include civil aircraft raises some difficulty. First of all, we once again get embroiled in this problem of services. If the Amendment were accepted, B.O.A.C. and B.E.A. would themselves become subject to the grant. Yet we have made it a clear provision of the Bill that the nationalised industries, when they are carrying out their statutory duties, shall not receive the grant. This would mean that while B.O.A.C. and B.E.A. would not be eligible for the grants because of this exclusion, their competitors would be—and I should have thought that most noble Lords would regard that as being unfair.

The general view of the Government has been that internal means of transport should not receive the grant. That is quite consistent and I think has been generally accepted so far as rail and road are concerned. I think, therefore, that that exclusion should apply to air. But, if I may say so to the noble Lord, Lord Erroll of Hale, the Amendment raises a very dangerous, although, I must admit, in some ways attractive, proposition in suggesting that this grant should be available to civil aircraft manufactured in the United Kingdom. If we were to accept that—and the noble Lord, Lord Erroll of Hale, I think now knows what I am going to say—we should be immediately involved in serious difficulties with our EFTA partners, and it certainly would be a contravention of GATT. In the circumstances, I am afraid the Government cannot accept the Amendment. The noble Lord is aware that the airline operators do receive, and will continue to receive, the initial allowances, so to that extent they are receiving Government support.

LORD SOMERS

The noble Lord said earlier that hovercraft are included because they are an interesting British invention and the Government want to see them succeed. Surely he would not say that the Government do not want to see our aircraft industry succeed.

LORD SHEPHERD

The noble Lord must not presume any such thing. I never said that. What I said was that hovercraft are a British technological development, which means that their development is at a very early stage. The aircraft industry has been with us for some time, and the noble Lord must he aware, even from the announcement made this afternoon about B.E.A., that the Government have very much in mind the development and the welfare of the British aircraft industry. As I have said, hovercraft were put in for one specific reason, but the fact that they are in and aircraft are out does not mean that we are not very concerned with the aircraft industry. I may say to the noble Lord that the aircraft industry itself receives grants for its equipment. What I am really discussing with the noble Lord. Lord Erroll of Hale, is the provision of a grant to an operator to buy aircraft. In other words, the noble Lord, Lord Erroll of Hale, is asking us to move away from the area of manufacturing and into the servicing area—and that, as I have explained, we are not able to do.

LORD ERROLL OF HALE

While thanking the noble Lord for his exposition and his determination not to breach the barrier in the Bill to a servicing area, as he calls it, I should like to mention to him that I was aware that my Amendment, if accepted, would put the United Kingdom in breach of GATT and thereby precipitate a special row with EFTA. I thought this Government did not pay much attention to international obligations. They have already been severely in breach of GATT and have had a first-class row with EFTA; so I thought it would be perfectly in order to put down the Amendment in this form. Having made my point, I beg leave to withdraw my Amendment.

Amendment by leave, withdrawn.

LORD SHEPHERD

I have a feeling that what I am now going to suggest will be received with some warmth by the noble Lord, Lord Erroll of Hale. Whether it will be more conducive to speedier business after supper, I do not know. We have made some good progress and I have a feeling that if we had a break for, say, one hour—though I am in the hands of the Committee—we could complete this stage to-night. I am aware, as I indicated, that we could have a second day on Thursday. I wondered, as noble Lords were in such full flow, whether they might like to complete it. If it is the wish to adjourn, I am willing to respond.

LORD ERROLL OF HALE

The noble Lord, Lord Shepherd, has made an interesting suggestion. I was becoming gay once again with the early prospect of leaving for the night. Having a look at the Amendments we have already covered—and we are practically halfway through—and bearing in mind that many of the remaining Amendments have already been taken since they are consequential, I was going to suggest at the appropriate time that if we went on for perhaps another ten minutes we could complete the business on Thursday. This would give us a chance of looking at the remaining Amendments a little more carefully, rather than having a very late night to-night. I hope that the noble Lord will see fit to fall in with this reasonable suggestion.

LORD SHEPHERD

Yes, let us carry on.

LORD ERROLL OF HALE

I am grateful to the noble Lord.

LORD ERROLL OF HALE

This is a small but important point. I understand that hovercraft increasingly require to land at specialised landing places only because landing on a beach, particularly if the sea is at all squally, can be very dangerous and lead to trouble and navigational difficulty. Specialised landing places normally consist of a concrete landing stage. If the hovercraft is to attract a grant it seems only right that the specialised landing place should equally qualify. I beg to move.

Amendment moved— Page 3, line 42, after ("vehicle") insert ("and specialised landing place").—(Lord Erroll of Hale.)

LORD SHEPHERD

The effect of the Amendment would be to make grants available to any specialised landing place. The noble Lord in moving this Amendment referred to specialised landing places as being purely and simply for hovercraft. To that extent the Amendment is defective. But we will not debate that point. As I understand it, a specialised landing place which could be used by hovercraft would also include industrial buildings in some form, such as repair shops and the like. In this case, if the specialised landing place was in a development area it would receive a 25 per cent. building grant. If elsewhere in the country, it would receive a 15 per cent. initial allowance. I gather that this would be little different from the previous grants that were available to industrialised building, where there was a 50 per cent. investment allowance and a 5 per cent. initial allowance. I think the point the noble Lord has made will be covered within the definition of an industrial building.

LORD ERROLL OF HALE

I wonder whether the noble Lord would be good enough to look at this matter again between now and Thursday; because specialised landing places will not necessarily have repair facilities as part of the same unit. I apologise for the Amendment being defective; but the noble Lord has accepted the argument in the terms that I put forward. It is not right to confuse an initial allowance with an investment grant. An initial allowance is merely a temporary, interest-free loan; in other words, one pays more tax towards the end of the life of the asset and rather less in the beginning. An investment grant is a payment of cash at the beginning of the life of the asset so that the recipient has to put up less money than he would otherwise have to do. He still gets back by way of tax allowance only the remaining 80 per cent. So it is not fair to say: "Oh, the chap will not be so badly off. He gets the 15 per cent. initial allowance"—when he is not getting a 20 per cent. investment grant. The noble Lord may like to look at this point again. It is an important matter for the hovercraft operators.

LORD SHEPHERD

I will look at the matter without any particular commitment.

LORD ERROLL OF HALE

I beg leave to withdraw my Amendment.

Amendment by leave withdrawn.

LORD SHEPHERD

I think in all the circumstances this is the moment when we could adjourn the considerations of the Committee stage. I beg to move that the House do now resume.

House resumed.